/raid1/www/Hosts/bankrupt/TCR_Public/011115.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, November 15, 2001, Vol. 5, No. 224
Headlines
360NETWORKS: Putting Excess Equipment on the Auction Block
ANC RENTAL: Canadian Units Not Included in Bankruptcy Filing
AAVID THERMAL: Sales Fall, EBITDA Negative & Liquidity Strained
ACME METALS: Debtor-Affiliates Will File Separate Reorg. Plans
ALPNET INC: Pursuing Transactions to Remedy Financial Crunch
AMERICA WEST: Applies for $400MM in Federal Loan Guarantees
AMES DEPT: Gets Okay to Return Pre-Petition Goods to Vendors
BAU HOLDING: S&P Rates Corporate Credit Rating at BB
BETHLEHEM STEEL: N.Y. Court OK's Interim Compensation Procedures
BRIDGE INFO: Court Allows Debtor to Assign 856 Pacts to Reuters
CAPITOL COMMUNITIES: Adopts Plan to Resolve Outstanding Debts
CEDARA SOFTWARE: Talks to Settle Defaulted Notes Underway
CLASSIC COMMS: Case Summary & 20 Largest Unsecured Creditors
COMPLETEL EUROPE: S&P Puts Junk & B- Ratings on Watch Negative
COVAD COMMS: Inks Pact for $150M SBC Loan to Fund Business Plan
CROWN CRAFTS: Completes Refinancing of $25MM in Debts in Q2
DIVERSIFIED CORPORATE: Violates Covenants Under Credit Agreement
EXODUS COMMS: Taps Hilco Industrial to Handle Asset Dispositions
FEDERAL-MOGUL: Gets Okay to Pay Prepetition Foreign Obligations
FIELDS AIRCRAFT: Court Confirms Plan of Reorganization
GENERAL CHEMICAL: Posts Net Loss of $2M on Sales of $73M in Q3
GLOBALSTAR: May File for Chapter 11 Protection to Restructure
HEALTH RISK: Harpeth Capital Completes Sale of Two Subsidiaries
IASIAWORKS: Debt Restructuring Talks with Major Lenders Continue
IBEAM: Faces Nasdaq Delisting Following Chapter 11 Filing
INSILCO HOLDING: Third Quarter Net Loss Drops to $17 Million
KRYSTAL CO.: S&P Cuts Ratings Over Weak Financial Performance
LUND INT'L: Restructures Financial Covenants Under Loan Pacts
METALS USA: Files for Chapter 11 Reorganization in Texas
PACIFIC GAS: Court Sets Disclosure Hearing for December 19, 2001
PINNACLE HOLDINGS: Violates Covenants Under Bank Loan Agreement
POLAROID CORPORATION: Sets-Up Reclamation Claim Procedures
PSINET INC: Cisco Seeks Adequate Protection of Lease Payments
SI TECHNOLOGIES: Inks Pact to Amend Principal Credit Agreement
SERVICE MERCHANDISE: Insurance Carriers Get Adequate Protection
SIMULA: Closes Refinancing of Senior Secured Notes & Term Debt
SPINNAKER INDUSTRIES: Files Chapter 11 Petition in Dayton, Ohio
SPINNAKER INDUSTRIES: Chapter 11 Case Summary
STATIA TERMINALS: Sells Assets to Kaneb Pipe for $307M + Debts
TRANSFINANCIAL: Inks Pact to Sell Financial Services Businesses
TRI-STATE OUTDOOR: Sees Default on Senior Debt & Hires Jefferies
USG CORP: Plan Filing Exclusive Period Extended to May 1, 2002
VANGUARD AIRLINES: Financing Options Talks with Lenders Underway
W.R. GRACE: Wins Final Okay to Pay $34MM of Critical Trade Debt
WACKENHUT CHILE: Inks Standstill Agreement with Bank Group
WINSTAR COMMS: Wants to Reject SFO Lease & Abandon Equipment
* DebtTraders' Real-Time Bond Pricing
*********
360NETWORKS: Putting Excess Equipment on the Auction Block
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360networks inc. and its debtor-affiliates ask for Court's
permission to sell certain excess equipment free and clear of
liens, claims and encumbrances, pursuant to the terms of an
Exclusive Auction Agreement with DoveBid, Inc.
The equipment consists of backup generators, switches and other
equipment that the Debtors no longer need due to their recent
elimination of certain telecommunications routes pursuant tot
heir revised business plan, Shelley C. Chapman, Esq., at Willkie
Farr & Gallagher, in New York, relates. Because of the
administrative costs associated with carrying the equipment, and
in light of a continuing trend of declining prices for
telecommunications equipment generally, Ms. Chapman explains,
the Debtors have determined that the highest recoveries for the
equipment could be obtained only if it is sold quickly.
The best bid secured by the Debtors' own marketing efforts
involved a proposed cash purchase price of approximately
$1,300,000. Ms. Chapman narrates that when DoveBid suggested
that the Debtors could obtain a better price for the equipment
through a public auction process, the Debtors did not want to
lose the certainty of the $1,300,000 offer they had received
and, accordingly, advised DoveBid that they were inclined to
decline its services. At that point, Ms. Chapman continues,
DoveBid offered to guarantee the Debtors a minimum aggregate
recovery for the equipment, in exchange for a share of the
amount of any aggregate recovery exceeding the guaranteed
amount. The Debtors found this offer attractive, Ms. Chapman
recounts, and thus commenced negotiating with DoveBid regarding
the terms of an auction sale, which culminated in the Auction
Agreement.
The Auction Agreement guarantees the Debtors a cash recovery of
at least $1,100,000 for the equipment, Ms. Chapman tells Judge
Gropper. Additional recoveries from the auction would be
subject to offset for DoveBid's expenses, but DoveBid would not
begin to share in the auction recoveries until the net proceeds
exceeded $1,300,000, Ms. Chapman adds.
According to Ms. Chapman, certain other key terms of the Auction
Agreement include:
(a) Advance Payment of Guaranteed Amount -- The guaranteed
amount shall be paid by DoveBid within the first 30 days
after approval of the Auction Agreement by the Court.
(b) Auction Allowance -- Subject to the Debtors' receipt of
the guaranteed amount, DoveBid's reasonable expenses in
connection with its conduct of the auction shall be
deducted from the gross proceeds of the auction.
(c) Buyer's Premium -- There shall be a buyer's premium
ranging from 10% to 13% (depending on method of payment)
associated with any sale conducted under the Auction
Agreement, to be divided between DoveBid and the
Debtors.
(d) Application of Proceeds -- Gross proceeds of sales
conducted pursuant to the Auction Agreement shall be
paid, to the extent realized, in this manner:
(1) $1,100,000 shall be paid to DoveBid to reimburse it
for the prepaid guaranteed amount;
(2) an amount equal to the auction allowance shall be
paid to DoveBid to reimburse it for its auction-
related expenses;
(3) the Debtors shall retain gross proceeds after
payment of the guaranteed amount and auction
allowance, up to gross proceeds of $1,300,000;
(4) gross proceeds over $1,300,000 shall be divided
equally between DoveBid and the Debtors, up to gross
proceeds of $2,200,000; and
(5) as to all amounts over $2,200,000, 80% shall be paid
to the Debtors, and 20% shall be paid to DoveBid.
(e) Lien and Super-Priority Claim Against Equipment and
Proceeds -- The equipment, as well as the proceeds of
any sales conducted under the Auction Agreement, shall
secure the Debtors' obligation to reimburse DoveBid for
its prepayment of the guaranteed amount out of proceeds
of the sale of the equipment.
The Debtors are convinced that the Auction Agreement represents
the best available opportunity for the Debtors to maximize their
recovery for the equipment. Ms. Chapman maintains that the sale
of the equipment pursuant to the Auction Agreement will enable
the Debtors to:
(i) obtain a guaranteed return on the equipment that
approaches the highest offer otherwise obtainable by the
Debtors; and
(ii) retain significant upside potential if the aggregate
proceeds of sales under the Auction Agreement exceed the
guaranteed amount.
Moreover, Ms. Chapman contends, a prompt sale of equipment will
cut off unnecessary administrative expenses associated with
securing and preserving the equipment and will protect the
Debtors against a further softening of the market for
telecommunications equipment.
In addition, to facilitate the sale of the equipment, the
Debtors request authority to sell the equipment free and clear
of any and all liens, claims, encumbrances, and interests that
may be asserted. According to Ms. Chapman, the only
encumbrances against the equipment are the liens of the Debtors'
secured pre-petition bank lenders. The Bank Group has consented
to the sale, Ms. Chapman informs Judge Gropper. The proceeds of
sales of the equipment will be applied in accordance with the
Cash Collateral Stipulation, Ms. Chapman adds.
The Auction Agreement was negotiated at arm's length and in good
faith, Ms. Chapman swears.
Wagner Equipment Company Objects
Wagner Equipment Company supplies electric generators and
related switches and equipment installed at certain of the
Debtors owned and leased locations. Prior and subsequent to the
Petition Date, Wagner filed mechanic's liens in the county where
the project requiring the particular equipment was installed.
In the sale motion, Eric J. Snyder, Esq., at Pryor & Mandelup,
LLP, in Westbury, New York, relates, the term "Equipment"
includes "backup generators and switches." Mr. Snyder is
concerned that the definition could conceivably include the
generators and related equipment installed at the various
locations upon which Wagner is asserting a mechanics lien.
These generators are fixtures under New York State law, Mr.
Snyder tells the Court. As fixtures, Mr. Snyder asserts, they
are part of the real property and are not property of the
Debtor's estate.
Therefore, Mr. Snyder contends, the Debtors cannot sell these
generators. Unless the generators supplied by Wagner are
excluded from the definition, Wagner objects to the relief
sought in the sale motion.
If this Court should determine that the generators in question
are not fixtures, Mr. Snyder continues, then, in any event,
Wagner has a lien in the generator to the same extent it had in
the real property. This is true even if the generator is never
installed, Mr. Snyder notes. Insofar as the sale motion seeks
to grant to DoveBid a superpriority lien against the equipment,
Mr. Snyder claims, the sale of these assets would impair
Wagner's state lien law rights.
Thus, Wagner asks Judge Gropper to deny the Debtors' motion.
(360 Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ANC RENTAL: Canadian Units Not Included in Bankruptcy Filing
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National Car Rental (Canada) Inc. and Alamo Rent-A-Car (Canada)
Inc. announced they are continuing normal business operations in
Canada.
Earlier Wednesday, ANC Rental Corporation Inc., the indirect
parent company of National and Alamo Canada announced that it
had filed voluntary petitions for reorganization under Chapter
11 of the U.S. Bankruptcy Code.
"We have no plans to follow ANC's actions in Canada. While we
are a wholly owned subsidiary, our key operations in Canada are
separate from those of our U.S. parent company," said Paul
Hemmert, President of National Car Rental (Canada) Inc. "We are
confident that we will continue to have the support of our
suppliers, employees, customers and lenders in Canada. With that
continued backing, we can further build our business in this
country."
ANC's Chapter 11 filing includes ANC's U.S. operations only, and
does not include its Canadian or international operations.
"It is business as usual for us in Canada. We continue to
provide rental cars and trucks and honour all existing and
future reservations at all of our National and Alamo locations,"
said Mr. Hemmert. "Our customers will continue to receive the
superior service that they have come to expect from National and
Alamo."
Financially, National and Alamo have just had their best year
ever in Canada and are building market share with the addition
of new locations to their network of more than 300 rental
locations throughout Canada, he said.
National Car Rental operates one of Canada's largest car and
truck rental businesses under the brand names National Car
Rental, National Location d'Autos and Alamo Rent-A-Car. National
has 80 corporate-owned rental locations and 221 licensed outlets
operated by 72 licensees throughout Canada. Alamo operates nine
corporate locations in this country.
AAVID THERMAL: Sales Fall, EBITDA Negative & Liquidity Strained
---------------------------------------------------------------
Aavid Thermal Technologies, Inc., a leading provider of thermal
management solutions and developer of computational fluid
dynamics software, announced preliminary operating results for
its third quarter ended September 29, 2001. For the quarter,
total sales were $46.5 million or 12.8% lower than the $53.3
million reported in the prior quarter, and represented a $22.4
million decrease from the $68.9 million in sales reported for
the third quarter of 2000. Sales for the Company's software
subsidiary, Fluent, were $14.4 million, or 12.3% lower than the
$16.4 million in sales reported for the second quarter of 2001,
and an 11.6% increase over third quarter 2000 sales of $12.9
million. Third quarter sales for the thermal management group,
Aavid Thermalloy, totaled $32.1 million or 13.0% lower than the
prior quarter's sales of $36.9 million and 42.7% lower than the
$56.0 million in sales reported for the third quarter of 2000.
The Company's Adjusted EBITDA (adjusted earnings before
interest, taxes, depreciation and amortization, non-cash charges
and non-recurring charges) for the third quarter of 2001 was a
loss of $ 2.3 million. This represents a $12.6 million decrease
from the $10.3 million of Adjusted EBITDA for the third quarter
of 2000 as well as a $ 6.3 million decrease from the $4.0
million reported in the second quarter of 2001.
Aavid Thermal Technologies, Inc. is a leading provider of
thermal management solutions for dissipating potentially
damaging heat from digital and industrial electronics, and
computational fluid dynamics (CFD) software, which permits
computer modeling and flow analysis of products and processes
that would otherwise require time-consuming and expensive
physical models and the facilities to test them.
Aavid serves a highly diversified range of markets, principally
in North America, Europe and the Far East. Additional
information on Aavid Thermal Technologies is available on the
World Wide Web at http://www.aatt.com
At September 29, 2001, Aavid's current liabilities exceeded
current assets by $41 million.
ACME METALS: Debtor-Affiliates Will File Separate Reorg. Plans
--------------------------------------------------------------
Alpha Tube and Acme Packaging have now determined to seek to
promulgate, confirm and consummate their own, stand-alone plans.
Alpha Tube and Acme Packaging now file a motion to the United
States Bankruptcy Court for the District of Delaware extending
their Exclusive Proposal Period through December 28, 2001 and
Exclusive Solicitation Period through February 28, 2002.
The facts and circumstances of both Alpha Tube's and Acme
Packaging's Chapter 11 cases are both appropriate and necessary
to afford the Debtors sufficient time to propose (in the case of
Alpha Tube) and develop (in the case of Acme Packaging) their
plans of reorganization.
Alpha Tube and Acme Packaging and those remaining Acme Debtors
(particularly Acme Steel) have now determined that they can exit
chapter 11 more expeditiously and effectively if they promulgate
their own "stand alone" plan or plans independently of the other
Debtors. As a result, Alpha Tube and Acme Packaging now seeks a
modest extension of their Exclusive Periods so that they may
promulgate and confirm their own plan or plans of
reorganization.
Recent developments that have led Alpha Tube and Acme Packaging
to reach this determination include:
(i) the sale of substantially all of Alpha Tube's assets to AK
Tube LLC for about $30 million and the concomitant
creation of a special account to fund plan distribution to
creditors
(ii) the decision by the Acme Debtors to discontinue their
steel making operations, and
(iii) the related decision by Acme Packaging to continue its
steel fabricating operations.
Accordingly, Alpha Tube's and Acme Packaging's current Exclusive
Proposal Period and Exclusive Solicitation Period are due to
expire on November 14, 2001 and January 14, 2001, respectively,
together with those of the remaining Acme Debtors.
Acme Metals filed for chapter 11 bankruptcy protection in
September 28, 1998. The company's petition listed assets of $813
million and liabilities of $541 million.
ALPNET INC: Pursuing Transactions to Remedy Financial Crunch
------------------------------------------------------------
ALPNET, Inc. (OTC Bulletin Board: AILP), a leading provider of
multilingual information management solutions to Global 1000
companies, announced unaudited results for the quarter ended
September 30, 2001. Sales of services for the quarter were
$10.8 million with a net loss of $1.6 million, compared with
sales of services of $13.2 million with a net loss of $687,000
for the third quarter of 2000. For the nine months ended
September 30, 2001, sales of services were $35.0 million with a
net loss of $3.5 million compared to sales of services of $38.9
million with a net loss of $2.0 million for the nine months
ended September 30, 2000.
Sales for the first nine months of 2001 compared with 2000 have
been negatively impacted by three key factors:
1) The global economy slowdown with its general difficult
economic conditions and negative market changes particularly
affecting key US, Europe and Japan-based industries and clients
served by the Company. The terrorist activities in the US on
September 11, 2001 and thereafter have had a further negative
effect on the Company's clients and prospects;
2) Foreign currency exchange rates in the approximate
amount of $1.4 million; and
3) Operations disposed of or closed in connection with the
Company's November 2000 restructuring plan in the approximate
amount of $2.0 million.
Gross margins in the three and nine months ended September 30,
2001 were approximately 3% lower than in the three and nine
months ended September 30, 2000 primarily because of the
decreased level of sales in 2001 in relation to certain fixed
costs for facilities, telecommunications capabilities and other
production costs that the Company has not been able to reduce in
its restructuring plans.
Comments from ALPNET Executives:
"The Company's current clients and key US, Europe and Japan-
based industries that were expected to be the source of
continuing sales levels as well as new sales have experienced
the effects of the global economy slowdown with its general
difficult economic conditions and negative market changes. The
terrorist activities in the US on September 11th and thereafter
have added to the difficulty. This economic situation is having
a significant negative effect on the localization sector and on
ALPNET, and our working capital is under significant pressure,"
commented John Wittwer, CFO of ALPNET.
Comments from Mike Eichner, Chairman and Acting CEO of ALPNET:
"As a result of the current economic environment, the Company's
operating results, and debt obligations which will come due in
the fourth quarter of 2001, the Company is facing a significant
and continued deterioration in its financial condition.
Management has determined that the Company requires a short-term
cash infusion of approximately $2 million to cover operational
requirements in the fourth quarter of 2001 as well as additional
funding to cover debt obligations in the fourth quarter of 2001
and operational requirements in 2002. On November 13th, the
Company finalized a financing transaction with a private Utah
corporation. The direct loan for up to $2 million is repayable
in full, along with accrued interest at 8%, on May 13, 2002.
The Company has received $1 million and up to an additional $1
million may be loaned in the future at the sole discretion of
the lender. The loan is secured by the Company's common stock
in its Canadian subsidiary and upon funding of the second $1
million, certain proprietary software."
Mr. Eichner continued, "Management has also determined that it
is necessary for ALPNET to find an acceptable immediate
transaction that will strengthen the Company's financial
condition and provide additional financing in order to have
sufficient funding to meet its working capital needs, meet its
scheduled debt repayments and satisfy future operational and
development costs in 2002. Accordingly, the Company is actively
pursuing transactions that will allow the Company to remedy its
serious financial condition."
ALPNET is one of the world's largest, publicly-owned, dedicated
providers of complete multilingual information management
solutions, with a worldwide network of offices and resources. A
pioneer in its industry, ALPNET helps corporations deploy into
international markets faster and more efficiently, through
intelligent use and reuse of multilingual informational assets.
ALPNET offers an extensive range of services, based on
innovative, proven technologies, including strategic InfoCycle?
consulting, as well as Web, software and document localization
and publishing, in all business languages and formats.
Additional information about ALPNET is available at
http://www.alpnet.com
ALPNET, Inc. and its subsidiaries, at the end of September,
recorded total current liabilities of $16.7 million as opposed
to total current assets of 12.5 million, around $9 million of
which fall under cash and net trade accounts receivable.
AMERICA WEST: Applies for $400MM in Federal Loan Guarantees
-----------------------------------------------------------
America West Airlines (NYSE: AWA) filed an application for $400
million in federal loan guarantees under the Air Transportation
Safety and System Stabilization Act, citing its success as a
post-deregulation carrier, its solid financial and competitive
position prior to the tragedies of September 11 and a business
plan that clearly demonstrates the airline's ability to repay
the loan. The requested government assistance would be the
catalyst for nearly $1 billion in financial support negotiated
by America West conditioned on the availability of the loan
guarantees.
"America West Airlines is the success story of deregulation and
an integral part of our nation's commercial aviation system,"
said W. Douglas Parker, chairman, president and chief executive
officer. "On September 10, America West was confidently
positioned to compete through a difficult economic downturn. We
had an established and successful strategy and a history of
demonstrated financial success, our operating performance had
improved dramatically and our relative earnings performance had
returned to be among the industry leaders. Most importantly, we
had arranged for a liquidity facility that was sufficient to
weather the most severe of projected economic downturns.
"Unfortunately, the tragic events of September 11 have had a
significant, adverse impact on our financial performance and
liquidity position," Parker added. "As the direct result of the
terrorist attacks, the arranged liquidity facility will not be
completed and, under prevailing economic conditions, other
private financing alternatives are not available. Congress and
the Administration included the Air Carrier Loan Guarantee
Program in the Stabilization Act to assist viable airlines, such
as America West, which have suffered financial challenges as a
result of September 11. The loan guarantees would make
available approximately $1 billion of financial support for
America West."
America West has negotiated a $426 million loan and is
requesting Air Transport Stabilization Board loan guarantees in
the amount of $400 million to secure a loan tranche in that
amount. The guarantee would be supported by an at-risk $26
million loan tranche, $135 million of additional aircraft
financing and an additional $450 million in concessions,
financing and assistance from key constituents. The
Stabilization Board would participate in the success of America
West through a guarantee fee structure that increases as the
airline becomes more profitable.
America West's loan application includes a detailed and well-
documented seven-year business plan. Highlights of the business
plan include:
Value creation through concessions and contributions. The
plan includes approximately $600 million of concessions,
financing and contributions from key constituents of America
West, including aircraft lessors, manufacturers, creditors,
vendors, key state and local governments, shareholders and
employees, the majority of which are contingent upon the loan
guarantee.
Conservative economic rebound assumptions. The plan
assumes the economic rebound is slow and gradual. America
West's industry revenue assumptions are below current Wall
Street consensus estimates.
A clear demonstration of America West's ability to repay
the guaranteed loan. The concessions and contributions are
designed to allow America West to weather the slow economic
recovery and conserve cash. As the economy rebounds, the loan
would be repaid ratably from 2005 to 2008 while the company
retains comfortable cash balances.
"America West remains a successful, competitive and well-managed
airline," said Parker. "We provide transportation to 20 million
passengers every year. As the nation's largest low-cost hub and
spoke carrier, America West provides marketplace discipline to
larger, higher cost airlines throughout the United States and,
as a result, we deliver low price competition, choice and
hundreds of millions of dollars of benefits annually to
consumers.
"We have a proven business strategy and a demonstrated ability
to outperform our competitors," Parker reiterated. "But with
the dramatic changes in the economic environment following the
terrorist attacks, proven strategies and outperforming
competitors is not enough. A loan guarantee under the new
legislation, coupled with the additional financial assistance
that we have negotiated, is the most effective solution to
America West's post-September 11 liquidity challenges. We
believe that the approval of America West's loan guarantee
application is in the best interests of the airline industry,
the traveling public and the economy, and we look forward to
working with the Stabilization Board over the next few weeks to
complete the process."
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.
AMES DEPT: Gets Okay to Return Pre-Petition Goods to Vendors
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In the ordinary course of business, Ames Department Stores,
Inc., and its debtor-affiliates receive shipments of goods from
numerous vendors, including those vendors. Based on the
Debtors' books and records, the Vendors hold, in the aggregate,
pre-petition general unsecured claims against the Debtors'
estates in the amount of $14,400,000. Prior to the Commencement
Date, the Vendors shipped movie and music videos, DVDs and music
compact discs and tapes. The Goods are no longer considered to
be current and marketable titles and their presence in the
product mix not only will require substantial markdowns, it will
also give the customer the impression that the selection is a
dated one, and thus discourage the customer the Debtors need to
cultivate.
As certain Goods become dated and are no longer actively
selling, the Debtors would return such Goods to their respective
vendors which, in turn, would credit the Debtors' account and
ship new merchandise to the Debtors. Accordingly, the Debtors
seek an order authorizing them to continue their pre-petition
course of business and return up to $3,200,000 of the Goods to
the Vendors in exchange for a reduction of each Vendor's
respective Pre-petition Claim. The Vendors will then ship new
merchandise to the Debtors, which is needed to keep the Debtors'
stores well stocked with current titles. The vendors concerned
are:
A. 20th Century Fox ($2,723,841.19)
B. MGM Home Entertainment ($440,944.15)
C. Warner Home Video ($2,282,825.68)
D. BMG ($1,386,369.51)
E. EMI ($1,447,864.43)
F. Sony ($1,238,289.87)
G. Wea ($2,647,411.64)
H. Northeast One Stop ($221,859.61)
I. Koch International ($92,277.90)
J. Columbia Tri-Star ($1,906,724.36)
Frank A. Oswald, Esq., at Togut Segal & Segal, LLP, in New York,
New York, contends that the Debtors have met all the
requirements of section 546(g) as the Goods were shipped to the
Debtors prior to the Commencement Date and the Vendors have
consented to the return of the Goods and a corresponding dollar-
for dollar reduction in their respective Pre-petition Claims.
Moreover, Mr. Oswald relates that the return of Goods provides a
clear benefit to the Debtors' estates as the Vendors have
advised the Debtors that they will no longer ship goods to the
Debtors unless the Debtors agree to return the Goods. Mr. Oswald
adds that the return of the Goods will reduce the amount of
general unsecured claims in these cases, resulting in a
concomitant increased return to all general unsecured
claimholders and the Debtors will receive new saleable goods
from each of the Vendors, which goods are not easily obtained
from other sources and the value of which represents increased
monies for the estates.
Further, Mr. Oswald submits that the return of the Goods to the
Vendors will not reduce the cap established under section 6.23
of the GE Credit Agreement, which provides a cap on the amount
of pre-petition indebtedness which may be reduced on account of
returned goods and the amount of payments which may be made by
the Debtors on account of reclamation claims. The Lenders under
the GE Credit Agreement have agreed that the return of the Goods
to Vendors will not reduce the cap established under the Credit
Agreement.
For the foregoing reasons, Mr. Oswald asserts that the return of
the Goods for a full credit against the Pre-petition Claims is
consistent with the Bankruptcy Code and is in the best interests
of the Debtors, their estates, creditors, and all parties in
interest.
* * *
Finding that the relief requested is necessary and in the best
interest of the Debtors and their estates, creditors and other
parties-in-interests, Judge Gerber orders that the Debtors are
authorized to return the Goods to the Vendors; and further
orders that the Vendors are directed and required to offset the
full amount of the purchase price paid by the Debtors for the
Goods returned to such Vendors against the pre-petition general
unsecured claims such Vendor has against the Debtors, as
applicable; and that, upon the return by the Debtors of the
Goods to the Vendors and subject to the offset by such Vendors
of the full amount of the purchase price paid by the Debtors for
the Goods against their respective general unsecured claims, the
Vendors shall be deemed to have waived any and all claims, of
any type, kind, or priority, against the Debtors, their assets,
and their properties solely with respect to the Goods. (AMES
Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
BAU HOLDING: S&P Rates Corporate Credit Rating at BB
----------------------------------------------------
Standard & Poor's assigned its double-'B' long-term corporate
credit ratings to Austria-based engineering and construction
company Bau Holding Strabag AG (BHS). The outlook is positive.
The ratings on BHS, which had an output of EUR3.1 billion in
2000, are based on:
The company's fairly strong market positions in various
segments of the construction industry, notably in Austria, and
in several Eastern European countries;
* Geographical diversification;
* Integrated, low-cost operations; and
* Moderately aggressive financial policies.
These factors are offset by:
* The cyclical, low-margin, and capital-intensive nature of
the industry;
* The modest size of the company's domestic market;
* The company's exposure to politically and economically
less stable markets in Eastern Europe;
* Significant capital expenditure requirements, reflected in
historically limited free cash flow generation;
* Above-average debt usage; and
* Risks associated with closer links to German-based
subsidiary Strabag AG.
A planned noncash transaction will allow BHS to increase its
stake in Strabag to 65% from 15%; this should be fully
consolidated for accounting purposes by 2002. A full legal
merger is planned as soon as EU laws for cross-border mergers
will allow. BHS expects that this will be feasible by 2004.
Although the proposed merger will increase the scale and
geographical diversity of the group, and simplify the
organizational structure, it will nevertheless increase exposure
to the structurally weak German construction market. With
outputs in 2000 of EUR3.1 billion and EUR2.1 billion,
respectively, BHS and Strabag, when combined, will rank as one
of Europe's 10 largest construction companies.
BHS is currently Austria's largest construction group, covering
most segments of the engineering and construction industry, with
the exception of the residential construction segment. Outside
Austria, BHS commands leading positions in Hungary, the Czech
Republic, and Slovakia. It boasts relatively low-cost,
vertically integrated operations, with well-located asphalt
mixing plants and gravel quarries. The cyclical nature of the
construction industry is mitigated by the company's geographical
diversity, relatively broad product mix, and high degree of
recurring revenues.
Strabag is Germany's fifth-largest construction company, with a
strong market position, particularly in road construction. It
also has a significant presence in the Benelux countries.
BHS has achieved decent but volatile operating margins over the
past few years, reflecting the construction industry's
intrinsically cyclical nature. Operating cash flow generation
has been sufficient to cover capital expenditures at the level
of depreciation, and leverage is above average. Strabag is
profit making despite the weak German construction market, which
has been in recession for the past six years, plagued by
structural overcapacity and high fragmentation. Strabag was net
cash positive at the end of 2000; therefore, a merger should not
add any additional leverage to BHS.
Outlook: Positive
BHS' fairly solid business position, combined with satisfactory
profitability and cash flow generation, is expected to support
the ratings in the near future. The outlook reflects Standard &
Poor's expectation that BHS will improve its credit protection
measures over time, and that the merger with Strabag will be
completed as planned. The ratio of funds from operations to
gross debt (adjusted for operating leases and nontrade-related
guarantees) is expected to increase to more than 30%. Adjusted
gross debt to EBITDA is expected to fall below 3 times in the
medium term.
BETHLEHEM STEEL: N.Y. Court OK's Interim Compensation Procedures
----------------------------------------------------------------
Bethlehem Steel Corporation and its debtor-affiliates seek to
establish an orderly, regular process for payment of
compensation and reimbursement for attorneys and other
professionals whose services are authorized by this Court
pursuant to sections 327 or 1103 of the Bankruptcy Code. Such
professionals will be required to file applications for
allowance of compensation and reimbursement of expenses pursuant
to sections 330 and 331 of the Bankruptcy Code. In addition,
the Debtors also seek entry of an order establishing a procedure
for reimbursement of reasonable out-of-pocket expenses incurred
by members of any statutory committee.
Jeffrey L. Tanenbaum, Esq., at Weil, Gotshal & Manges LLP, in
New York, New York, explains that there are two categories of
professionals required to submit interim and final applications:
(1) separately retained chapter 11 professionals, and
(2) the ordinary course professionals, to the extent their
fees and expenses exceed $30,000 per month.
Specifically, the Debtors propose that the payment of
compensation and reimbursement of expenses of Professionals be
structured as:
(a) On or before the 20th day of each month following the
month for which compensation is sought, each Professional
seeking compensation under this Motion will serve a
monthly statement, by hand or overnight delivery on the
Debtors, the Debtors' counsel, the United States Trustee,
counsel for the Debtors' pre-petition secured lenders and
post-petition lenders, and counsel for any statutory
committee appointed in these cases;
(b) The monthly statement need not be filed with the Court and
a courtesy copy need not be delivered to the presiding
judge's chambers since this Motion is not intended to
alter the fee application requirements outlined in Secs.
330 and 331 of the Bankruptcy Code and since Professionals
are still required to serve and file interim and final
applications for approval of fees and expenses in
accordance with the relevant provisions of the Bankruptcy
Code, the Federal Rules of Bankruptcy Procedure and the
Local Rules for the United States Bankruptcy Court for the
Southern District of New York;
(c) Each monthly fee statement must contain a list of the
individuals and their respective titles (e.g. attorney,
accountant, or paralegal) who provided services during the
statement period, their respective billing rates, the
aggregate hours spent by each such individual, a
reasonably detailed breakdown of the disbursements
incurred (no Professional should seek reimbursement of an
expense, which would otherwise not be allowed pursuant to
the Court's Administrative Orders dated June 24, 1991 and
April 21, 1995 or the United States Trustee Guidelines for
Reviewing Applications for Compensation and Reimbursement
of Expenses Filed under 11 U.S.C. Sec. 330 dated January
30, 1996), and contemporaneously maintained time entries
for each individual in increments of 1/10 of an hour;
(d) Each entity receiving a statement will have at least 15
days after receipt to review it and, in the event that the
entity has an objection to the compensation or
reimbursement sought in a particular statement, such
entity shall, by no later than the 35th day following the
month for which compensation is sought, serve upon the
Professional whose statement is objected to, and the other
entities designated to receive statements in paragraph
(a), a written "Notice Of Objection To Fee Statement,"
setting forth the nature of the objection and the amount
of fees or expenses at issue;
(e) At the expiration of the 35-day period, the Debtors shall
promptly pay 80% of the fees and 100% of the expenses
identified in each monthly statement to which no objection
has been served in accordance with paragraph (d);
(f) If the Debtors receive an object ion to a particular fee
statement, they shall withhold payment of that portion of
the fee statement to which the objection is directed and
promptly pay the remainder of the fees and disbursements
in the percentages set forth in paragraph (e);
(g) If the parties to an objection are able to resolve their
dispute following the service of a Notice Of Objection To
Fee Statement and if the party whose statement was
objected to serves on all of the parties listed in
paragraph (a) a statement indicating that the objection is
withdrawn and describing in detail the terms of the
resolution, then the Debtors shall promptly pay, in
accordance with paragraph (e), that portion of the fee
statement, which is no longer subject to an objection;
(h) All objections that are not resolved by the parties, shall
be preserved and presented to the Court at the next
interim or final fee application hearing to be heard by
the Court;
(i) The service of an objection in accordance with paragraph
(d) shall not prejudice the objecting party's right to
object to any fee application made to the Court in
accordance with the Bankruptcy Code on any ground, whether
raised in the objection or not. Furthermore, the decision
by any party not to object to a fee statement shall not be
a waiver of any kind or prejudice that party's right to
object to any fee application subsequently made to the
Court in accordance with the Bankruptcy Code;
(j) Approximately every 120 days, but no more than every 150
days, each of the Professionals shall serve and file with
the Court an application for interim or final (as the case
may be) Court approval and allowance, pursuant to sections
330 and 331 of the Bankruptcy Code, of the compensation
and reimbursement of expenses requested;
(k) Any Professional who fails to file an application seeking
approval of compensation and expenses previously paid
under this Motion when due shall:
(1) be ineligible to receive further monthly payments of
fees or expenses as provided herein until further
order of the Court, and
(2) may be required to disgorge any fees paid since
retention or the last fee application, whichever is
later;
(l) The pendency of an application or a Court order that
payment of compensation or reimbursement of expenses was
improper as to a particular statement period shall not
disqualify a Professional from the future payment of
compensation or reimbursement of expenses as set forth
above, unless otherwise ordered by the Court;
(m) Neither the payment of, nor the failure to pay, in whole
or in part, monthly compensation and reimbursement as
provided herein shall have any effect on the Court's
interim or final allowance of compensation and
reimbursement of expenses of any Professionals; and
(n) Counsel for any Committee may, in accordance with the
foregoing procedure for monthly compensation and
reimbursement of Professionals, collect and submit
statements of expenses, with supporting vouchers, from
members of the Committee such counsel represents;
provided, however, that such Committee counsel ensures
that these reimbursement requests comply with the Court's
Administrative Orders dated June 24, 1991 and April 21,
1995.
Mr. Tanenbaum contends that these suggested procedures will
enable the Debtors to closely monitor the costs of
administration, maintain a level cash flow, and implement
efficient cash management procedures. Moreover, Mr. Tanenbaum
adds, these procedures will also allow the Court and the key
parties-in-interest to ensure the reasonableness and necessity
of the compensation and reimbursement sought pursuant to such
procedures.
* * *
Finding the Debtors' request is appropriate, Judge Lifland
grants the Debtors' motion. Judge Lifland further directs the
Debtors shall to all payments to Professionals on their monthly
operating reports. It must be detailed so as to state the
amount paid to each of the Professionals, Judge Lifland
emphasizes. (Bethlehem Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
BRIDGE INFO: Court Allows Debtor to Assign 856 Pacts to Reuters
---------------------------------------------------------------
After considering the Debtors' motion, the arguments and
statements of counsel at the hearing, the evidence presented and
the record in these proceedings, Judge McDonald grants Bridge
Information Systems, Inc.'s motion to assume and sign contracts
to Reuters in all respects.
Of the 907 contracts designated by the Debtors, Judge McDonald
authorizes the Debtors to assume and assign 856 of them to
Reuters. The assumption of the designated contracts and the
assignment thereof to Reuters shall only be effective on or
after the closing as to those parties the Debtors send an
assignment notice, Judge McDonald rules. (Bridge Bankruptcy
News, Issue No. 20; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
CAPITOL COMMUNITIES: Adopts Plan to Resolve Outstanding Debts
-------------------------------------------------------------
Capitol Communities Corporation (OTC Bulletin Board: CPCY)
announced its Board of Directors has adopted a new business
strategy designed to resolve outstanding debt issues and
maximize shareholder value.
The first part of the strategy is to try to bring resolution to
the bankruptcy of Capitol's wholly owned subsidiary, Capitol
Development of Arkansas, Inc. Capitol Development filed a
voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code with the United States Bankruptcy Court
for the Eastern District of Arkansas, Little Rock Division on
July 21, 2000.
A key component of this phase of the strategy is completion of a
recently announced sale of approximately 88 acres of land
Capitol owns in Maumelle, Arkansas. The Company disclosed the
sale price to be approximately $1,760,000 or $20,000 per acre.
Most of the proceeds will be applied to outstanding mortgage
debt. Concurrent with the planned sale, Capitol is seeking
$5,000,000 of new financing to pay off its remaining secured
debt and to provide working capital. If the Company is
successful in obtaining new financing and receives Court
approval, it intends to make appropriate filings for Capitol
Development to become a separately traded public company. "With
the potential to build up to 4,000 new homes, the Maumelle land
is an ideal core asset around which a diversified real estate
company can be built," said Michael G. Todd, President of
Capitol Communities.
The second phase of the strategy is to try to bring resolution
to Capitol's outstanding obligation to 176 holders of its
promissory notes. Capitol is indebted to its note holders for
approximately $6.5 million plus accrued interest. Capitol
Communities anticipates forming the Capitol Preferred Trust.
Note holders would become beneficiaries of the Trust. Capitol
plans initially to contribute $650,000 in cash to the Trust.
Those funds would be derived from a private placement of its
securities and is expected to be completed by December 31, 2001
and available for distribution to note holders shortly
thereafter. Additionally, Capitol would issue convertible
redeemable preferred stock backed by its ownership of Capitol
Development to Capitol Preferred Trust. The Company would then
continue to seek additional financings or a sale of its Capitol
Development interest to make redemptions of the preferred stock
and subsequent distributions to its beneficiaries. Wilbert F.
Schwartz, CFA, a former president of Grubb & Ellis and a former
trustee of the Liquidating Trust for Executive Life Insurance,
has agreed to serve as Trustee of the Capitol Preferred Trust.
In that capacity, he will oversee the liquidation of the Trust
to effect repayment to Capitol's note holders and to maximize
the Trust's remainder value for the benefit of Capitol's
shareholders. "Will Schwartz has requisite experience to help
the Company achieve its key objective of repaying our note
holders," Todd said. "Furthermore, his past position of
prominence on the national real estate scene will prove most
valuable for the future of Capitol Development," Todd added.
The third phase of the strategy is to redirect the business
activity of Capitol Communities Corporation. Management and
directors of the Company are presently reviewing acquisition
opportunities that are focused on producing stable streams of
cash flow. "If Capitol Development is spun off as an operating
real estate company, then Capitol Communities intends to pursue
a diversification strategy consistent with the skills and
talents of its directors and management. In today's market, we
are drawn to technology, especially its application to the
medicine, energy, and financial service sectors," said Todd.
Capitol Communities Corporation, through its subsidiary, owns
approximately 1,000 acres of residential property in the master
planned community of Maumelle, Arkansas. Maumelle is a planned
city with about 12,000 residents. It is located directly across
the Arkansas River from Little Rock. Maumelle contains a full
complement of industrial and commercial development, parks,
lakes, green belts, jogging trails, and other lifestyle
amenities.
CEDARA SOFTWARE: Talks to Settle Defaulted Notes Underway
---------------------------------------------------------
Cedara Software Corp. (TSE:CDE, NASDAQ:CDSW) announced results
for its fourth quarter and fiscal year ended June 30, 2001.
In the fourth quarter of fiscal 2001, the Board of Directors
approved a formal plan to dispose of the Surgical Navigation
Specialists ("SNS") business segment, which included the
disposal of Cedara's wholly owned subsidiary Surgical Navigation
Specialists, Inc. and its subsidiaries. As a result, the
Surgical Navigation business segment is presented as
discontinued operations in the accompanying financial
statements. Prior years' financial statements of Cedara have
been restated to conform to discontinued operations treatment.
Revenues from continuing operations were $13.9 million for the
fourth quarter of fiscal 2001 compared to $8.0 million in the
same period in fiscal 2000. The net loss from continuing
operations for the fourth quarter of fiscal 2001 was $11.9
million compared to a net loss of $3.9 million for the same
period last year.
In the fourth quarter, direct costs and research and development
expenses included charges of approximately $1.2 million and $1.4
million respectively in connection with a large-scale fixed-
price development contract for a major customer. The project was
renegotiated subsequent to year-end and is now cash flow
positive and expected to yield an overall positive return over
the next three years. In the fourth quarter of fiscal 2001,
Cedara also recorded severance costs of $1.4 million, an unusual
bad debt write-off of $2.5 million, and a write-off of financing
costs of $1.0 million associated with the private placement of
$7.1 million unsecured promissory notes.
The net loss from the discontinued SNS operations for the fourth
quarter of fiscal 2001 was $33.6 million compared to a net loss
of $3.5 million for the same period last year. Cedara has
recorded a $22.6 million charge in the fourth quarter of fiscal
2001 for the estimated loss on the disposition of the SNS
business segment.
Including the loss from the discontinued SNS operations, Cedara
recorded a net loss of $45.5 million in fourth quarter of fiscal
2001, compared to a net loss of $7.3 million in the same period
last year.
For fiscal 2001, revenues from continuing operations were $46.7
million compared to $44.1 million in fiscal 2000. The net loss
from continuing operations for fiscal 2001 was $26.4 million
compared to net income of $3.3 million for fiscal 2000. The cash
used in continuing operating activities in fiscal 2001 was $4.8
million compared to cash provided by continuing operating
activities of $2.8 million in fiscal 2000.
For fiscal 2001, direct costs and research and development
expenses included charges of approximately $4.2 million and $0.5
million respectively in connection with a large-scale fixed
price development contract for a major customer as previously
mentioned. In addition to the other fourth quarter charges
listed above, Cedara also recorded severance costs of $2.0
million and a non-recurring foreign exchange loss of $0.9
million in fiscal 2001.
The net loss from the discontinued SNS operations for fiscal
2001 was $41.4 million compared to a net loss of $10.0 million
for fiscal 2000.
Including the loss from the discontinued SNS operations, Cedara
recorded a net loss of $67.8 million in fiscal 2001, compared to
a net loss of $6.7 million.
"The financial performance of the Company during fiscal 2001,
and in particular our fourth quarter, were negatively impacted
by a number of significant and unusual events," said Fraser
Sinclair, Chief Financial Officer and Corporate Secretary. "We
have more work to do to return the Company to profitability.
However, as these numbers demonstrate, a number of tough
decisions have been taken, and we believe that we are on the
right track."
"During this calendar year, we cut our overall payroll by
approximately 35 percent, most of which occurred after year-
end," said Arun Menawat, President and Chief Operating Officer.
"Since the end of fiscal 2001, we renegotiated the fixed price
contract for engineering services so that it is now cash-flow
positive, we have ceased operations in SNS' international
subsidiaries, SNS has withdrawn from the end-user business, and
the SNS workforce has been reduced by approximately 85 percent."
Michael Greenberg, Chairman and Chief Executive Officer, stated,
"We have taken and continue to take the necessary steps to put
Cedara on solid financial footing. As we move forward, we will
continue to manage our cash position and seek finance
opportunities. But our over-riding task is to re-establish
profitability."
Cedara Software Corp., based in the greater Toronto area, is a
leading independent medical imaging software developer. Cedara
serves leading healthcare solution providers and has long-term
relationships with companies such as Cerner, GE, Hitachi,
Philips, Siemens, and Toshiba. Cedara offers its OEM customers a
rich array of end-to-end imaging solutions. The Cedara Imaging
Application Platform (IAP) is the medical industry's leading
imaging development environment supporting Windows and Unix.
Cedara offers tools, components and applications that address
all medical imaging modalities and aspects of clinical workflow,
including: advanced 2D and 3D imaging and post- processing;
volumetric rendering; imaging solutions for Cardiology; and
streaming DICOM for web-enabled imaging. This continuously
enhanced imaging software is embedded in 30% of MRIs sold today.
Cedara Viewing and Reading (VR) solutions for picture archiving
and communications systems (PACS) are sold via systems
integrators and distributors around the world. Through its
Dicomit Dicom Information Technologies Inc. subsidiary, Cedara
provides ultrasound and DICOM connectivity solutions to OEM
customers such as Acuson.
At June 30, 2001, Cedara Software's current liabilities exceeded
its current assets by nearly $30 million, while total
stockholders' equity deficit amounted to around $100 million.
The company's auditors say that the company's consolidated
financial statements have been prepared on a "going concern"
basis in accordance with Canadian generally accepted accounting
principles ("GAAP"), which assumes the Company will continue in
operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities and commitments in the
normal course of business. The use of the going concern
assumption may not be appropriate as the Company has incurred a
significant loss for the year, has a significant working capital
deficiency and has a shareholders' deficiency of $9,005. On
August 14, 2001, the Company's discontinued subsidiary, Surgical
Navigation Specialists, Inc. ("SNS") obtained an order for
protection under the Companies' Creditors Arrangement Act
("CCAA").
In addition to the above:
i) The Company has been notified by certain of the holders
of its Promissory Notes that it is in default of the terms of
the notes. These holders are requesting payment of all
obligations outstanding; and ii) Amounts owing under the
Company's agreement with Carl Zeiss, Inc. have not been paid.
The Company has been and is presently in negotiations
to settle the payments due to the note holders. In addition, the
Company is in negotiation with Zeiss to reduce the amounts owing
under the agreement and to postpone the payment due dates.
Finally, the Company is in negotiation with its bank lender to
secure an operating line of credit. There can be no assurance
the Company will be successful in these efforts.
The Company's ability to continue as a going concern is
dependent on its ability to return to profitable operations and
secure adequate financing for these operations. There can be no
assurance management will be successful.
CLASSIC COMMS: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Lead Debtor: Classic Communications, Inc.
6151 Paluxy Road
Building A
Tyler, TX 75703
Bankruptcy Case No.: 01-11257
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Classic Cable, Inc. 01-11258
Friendship Cable of
Arkansas, Inc. 01-11259
Friendship Cable of
Texas, Inc. 01-11260
Universal Cable Midwest,
Inc. 01-11261
Universal Cable of
Beaver, Oklahoma, Inc. 01-11262
Universal Cable
Communications, Inc. 01-11263
Universal Cable Holdings,
Inc. 01-11264
Correctional Cable TV, Inc. 01-11265
CallCom24, Inc. 01-11266
Classic Cable of Oklahoma,
Inc. 01-11267
Classic Telephone, Inc. 01-11268
WT Acquisition Corporation 01-11269
WK Communications, Inc. 01-11270
Television Entreprises,
Inc. 01-11271
Classic Cable Holding, Inc. 01-11272
Type of Business: The Company is a cable operator focused on
non-metropolitan markets in the United
States. As of September 30, 2001, debtors'
collective system serves approximately
352,596 basic subscribers, 20,858 premium
subscribers and 37,777 digital subscribers.
Chapter 11 Petition Date: November 13, 2001
Court: District of Delaware
Debtors' Counsel: Brendan Linehan Shannon, Esq.
Young, Conaway, Stargatt & Taylor
The Brandywine Bldg.
1000 West Street, 17th Floor
PO Box 391
Wilmington, DE 19899-0391
Tel: 302 571-6600
Fax: 302 571-1253
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Tel: 212 728-8000
Fax: 212 728-8111
Winstead Sechrest & Minick
1201 Elm Street, Suite 5400
Dallas, Texas 75470
Tel: 214 745-5400
Fax: 214 745-5390
Total Assets: $711,346,000
Total Debts: $641,869,000
Debtor's 20 Largest Unsecured Creditors:
Entity Claim Amount
------ ------------
General Instrument $3,323,541
840 S. Canal St. 3rd
PO Box 91640
Chicago, IL 60693
Tel: 215 323-1011
Showtime Networks, Inc. $1,062,252
PO Box 730240
Dallas, TX 75373-0240
MTV Networks Affiliate Sales $574,363
PO Box 70619
Chicago, IL 50673-0619
Home Box Office $393,174
1100 Avenue of the Americas
Room G7-05
New York, NY 10035
212 512-5560
USA Network $574,632
USA Cable
1230 Avenue of the Americas
New York, NY 30020-1513
Broadband Services, Inc. $495,000
PO Box 7247-8935
Philadelphia, PA 19170-8935
888 427-1144
RPR Construction Company, Inc. $474,773
Tyler, TX 75792
903 592-4166
MTV Networks Affiliate Sales $422,402
PO Box 70619
Chicago, IL 60673-1679
Entergy $420,311
PO Box 52917
New Orleans, LA 70152-2917
501 329-4527
Lifetime Entertainment Service $365,632
Lifetime Television for Women
309 West 49th Street
New York, NY 10019
CSG Systems, Inc. $327,350
PO Box 3366
Omaha, NE 66176-0720
Weather Channel $309,794
PO Box 101580
Atlanta, GA 30302-1580
$309,794
TXU Electric Service Division $254,286
PO Box 910104
Dallas, TX 75391-0104
Mississippi Valley Corn Inc. $250,733
605 Concannon, PO Box 1010
Moberly, MO 65270
660 263-6300
Pegasus Capital Advisors, L.P. $234,203
Fox Sports Southwest $232,561
Protel Ind., Inc. $229,293
Martell Cable Services, Inc. $215,067
Reliant Energy $207,715
Fox News Network $204,185
O'Melveny & Myers LLP $198,550
Harmonic Inc. $195,638
Cal-Tex Communications Inc. $179,656
Cable Connection $176,017
Consumer News & Business Channel $172,659
COMPLETEL EUROPE: S&P Puts Junk & B- Ratings on Watch Negative
--------------------------------------------------------------
Standard & Poor's placed its ratings on communications services
provider CompleTel Europe N.V. on CreditWatch with negative
implications, following the company's announcement of weak
results for the second consecutive quarter and its lack of
progress in securing additional financing.
Although CompleTel recorded encouraging growth in its retail
business in the third quarter of 2001, higher network costs and
continued weakness in the carrier activity and in the ISP dial-
up business have led to disappointing operating results for the
second quarter in a row. CompleTel's EBITDA loss slightly
increased to EUR24.7 million in the third quarter (compared with
EUR23.9 million in the second quarter), and the company has once
again lowered its forecasts for full-year revenues and earnings.
Furthermore, Completel now does not expect to reach breakeven at
the EBITDA level before the first half of 2003, compared with a
previous forecast of second-half 2002.
While a 50% reduction in capital expenditures--to EUR26 million-
-between the second and third quarters of 2001 enabled the
company to reduce its cash burn rate to EUR72 million, from
EUR100 million, CompleTel's current cash balances are likely to
be insufficient to enable the company to achieve EBITDA and cash
flow breakeven.
CompleTel's EUR175 million of cash at end-September 2001 is only
likely to fund the company's operations for another two to three
quarters. Management's lack of progress in securing additional
financing since the beginning of the year, coupled with adverse
conditions in the financial markets, creates considerable
uncertainties as to whether the company will have sufficient
liquidity to fund its operations beyond the next six to nine
months.
Standard and Poor's expects to resolve the CreditWatch status
shortly, after evaluation of CompleTel's operating and financial
prospects and of its funding situation.
Ratings Placed On Creditwatch
With Negative Implications
Rating
CompleTel Europe N.V.
Corporate credit rating B-
Senior unsecured debt CCC+
Secured debt B-
COVAD COMMS: Inks Pact for $150M SBC Loan to Fund Business Plan
---------------------------------------------------------------
Covad Communications (OTCBB:COVD), the leading national
broadband services provider utilizing DSL (Digital Subscriber
Line) technology, announced the signing of a loan agreement and
the restructuring of its resale and marketing agreement with SBC
Communications Inc. (NYSE:SBC). The agreements, valued at $150
million, are expected to provide a cash infusion to Covad and,
by adding to Covad's existing available cash, will provide the
funding Covad expects it will need to finance growth to cash
flow positive operations targeted by the second half of 2003.
This new agreement will not increase SBC ownership in Covad,
which is currently at approximately five percent. The agreement
allows SBC to offer a more diverse portfolio of DSL products to
customers inside and outside SBC's traditional 13-state region.
The new agreements include four elements:
-- A one-time $75 million prepayment, secured by Covad
assets, that SBC can use toward the purchase of Covad services
during the next 10 years. The agreement does not limit the
amount of services that SBC can purchase.
-- A $50 million four-year loan secured by Covad assets.
Interest payments will be deferred for two years.
-- Payment to Covad of a $10 million restructuring fee in
exchange for Covad eliminating SBC's revenue commitments under
the original resale and marketing agreement.
-- The elimination of a $15 million co-op-marketing fee,
which was required in the previous resale and marketing
agreement, owed by Covad to SBC.
The payments under the agreements are subject to customary
closing conditions and are also conditioned on the bankruptcy
court's approval and the consummation of Covad Communications
Group's plan of reorganization. The funding would occur on the
same day that the reorganization plan becomes effective, which
is expected by January 2002.
"This infusion of capital will be one of the final steps in our
plan toward financial stability for Covad," said Charles E.
Hoffman, Covad CEO and president. "It provides us with the
financial freedom and cash cushion that we anticipate will get
us to profitability without further dilution. It also
strengthens our alliance with SBC, allowing us to reap the
economic benefits now while continuing to meet SBC's in-region
and out-of-region broadband needs going forward."
The $150 million agreements replace the $600 million in six-year
graduated payments for services from the previous resale and
marketing agreement that was announced with SBC in September
2000.
"We benefit by receiving the prepayment when the cash is needed
and not waiting until the previous graduated payment plan pays
out," said Hoffman. "The change in the resale and marketing
agreement does not change both companies' commitment to provide
the best broadband services to businesses and consumers in the
nation."
Adding SBC's payments to Covad's cash on hand will put Covad in
an even stronger financial position. Covad recently announced
that due to several cost reduction initiatives implemented
during the first nine months of this year, the company projects
that it has enough cash to get it into the third quarter of
2002, even without the SBC funding package. Covad's third
quarter cash usage averages less than $25 million a month,
resulting in a cash balance at the end of the third quarter 2001
of approximately $460 million. Covad expects to continue to
reduce its monthly cash usage. The third quarter amount includes
the cash reserved for the anticipated settlement of claims in
the parent company's pre-negotiated bankruptcy proceeding that
would eliminate $1.4 billion in bond financing.
Covad has previously stated that, as of June 30, 2001, it was
pre-overhead recurring cash flow positive (before corporate
overhead allocation) in 28 out of its 50 regional markets in the
U.S. Covad expects to be pre-overhead recurring cash flow
positive in 40 markets by the end of the year, or 80 percent of
its markets.
"The business model for Covad works region by region," said
Hoffman. "When this transaction is completed, we will have the
cash that we believe will get the company to cash flow positive
by the latter half of 2003. We are doing this by adding both
small business and residential subscribers to our network and
providing new services such as TeleSoho DSL to complement our
basic DSL services. Additionally, we will continue our efforts
to drive costs down and efficiency up from our line-shared and
self-install service for residential customers. Our parent
company's pre-negotiated bankruptcy is on track, and we plan to
emerge free of $1.4 billion in debt by January 2002. We expect
our continuing efforts will result in a successful, ongoing
business."
Covad's fully funded business plan announcement is commented on
by some of Covad's leading Internet Service Provider partners.
Harry M. Taxin, President & CEO, MegaPath Networks said, "This
is an exciting announcement for the future of the DSL industry
in general, and for our partnership with Covad. Many of
MegaPath's potential customers have been waiting for a clear
signal that the financial troubles of the upstream carriers are
resolved. We foresee strong growth in the small/medium business
and distributed enterprise marketplaces for this extremely cost-
effective technology, and Covad's demonstrated leadership and
reliability to deliver DSL circuits will fuel that growth. We
should have a clear runway ahead of us."
"EarthLink applauds Covad on this significant achievement. This
clearly shows there is great strength in our industry," said
Mike Lunsford, executive vice president of strategic brand
marketing for Earthlink. "We are proud of our partnership with
Covad and together we are dedicated to making our customers'
broadband experience the best of the best."
TeleSoho(SM) DSL is Covad's recently introduced service designed
for small businesses, businesses with remote locations and
corporate teleworkers. It combines the high download speeds and
multiple PC support often required for businesses with the lower
cost, convenience and fast installation of a line-shared DSL
connection with a self-install kit.
Covad is the leading national broadband service provider of
high-speed Internet and network access utilizing Digital
Subscriber Line (DSL) technology. It offers DSL, IP and dial-up
services through Internet Service Providers, telecommunications
carriers, enterprises, affinity groups and PC OEMs to small and
medium-sized businesses and home users. Covad services are
currently available across the United States in 94 of the top
Metropolitan Statistical Areas (MSAs). Covad's network currently
covers more than 40 million homes and business and reaches
approximately 40 to 45 percent of all US homes and businesses.
Corporate headquarters is located at 4250 Burton Drive, Santa
Clara, CA 95054. Telephone: 1-888-GO-COVAD. Web Site:
http://www.covad.com
CROWN CRAFTS: Completes Refinancing of $25MM in Debts in Q2
-----------------------------------------------------------
Crown Crafts, Inc. (OTC Bulletin Board: CRWS) announced
financial results for the fiscal 2002 second quarter, which
ended September 30, 2001. Net income for the second quarter was
$2.1 million before an extraordinary gain of $25.0 million
related to refinancing the Company's debt. For the six months
to date, the net loss before the extraordinary item was $0.7
million. In the previous year, Crown Crafts reported losses of
$11.4 million in the second quarter and $22.3 million for the
six months which ended October 1, 2000, including a loss of
$10.8 million on the sale of the Wovens Division.
Sales decreased significantly due to the sale of the adult
bedding and bath business to Design Works on July 23, 2001 as
well as the sale of the Wovens division to Mohawk Industries on
November 14, 2000. Following these divestments, Crown Crafts is
primarily in the infant and juvenile consumer products business.
Second-quarter net sales decreased 61.9 percent to $31.3 million
in fiscal 2002 from $82.2 million in the second quarter last
fiscal year. For the first six months of fiscal 2001, net sales
declined 50.1% to $70.0 million compared to $140.4 million in
fiscal 2001's first half.
Commenting on the results, E. Randall Chestnut, Crown Crafts'
Chairman, President and Chief Executive Officer, stated, "We
are extremely proud to report Crown Crafts' first profitable
quarter since December 1998. This proves that the
restructuring, which reduced the Company's debt from $125.6
million on April 2, 2000 to $44.8 million on September 30, 2001,
has been successful. Although we face a challenging retail
environment due to the slowing economy, we are optimistic that
the improvements are sustainable. We would especially like to
thank our customers, suppliers, associates and other partners
for their support during the difficult period of the
restructuring."
E. Randall Chestnut will host a conference call for investors on
Friday, November 16, 2001 at 1 PM EST. The dial in number is 1-
800-709-3816.
Crown Crafts, Inc. designs, markets and distributes infant &
juvenile consumer products including bedding, blankets, bibs,
bath and accessories, and luxury hand-woven home decor. Its
subsidiaries include Hamco, Inc. in Louisiana, Crown Crafts
Infant Products, Inc. in California, Churchill Weavers in
Kentucky and Burgundy Interamericana in Mexico.
DIVERSIFIED CORPORATE: Violates Covenants Under Credit Agreement
----------------------------------------------------------------
Diversified Corporate Resources, Inc. (Amex: HIR) released a
discussion of company initiatives and reported the 3rd quarter
financial results.
Mr. J. Michael Moore, Chairman and CEO of Diversified Corporate
Resources, Inc., stated, "The economic conditions that have
existed in the past year, coupled with costs incurred for
restructuring efforts and certain event-driven effects, have
significantly affected the company's earnings during the first
nine months of 2001. As a result, we have retained Roth Capital
Partners, Inc. to act as our financial advisor in assisting us
in evaluating our strategic options to maximize shareholder
value and to provide ongoing assistance in pursuing those
options."
"The week of September 11 resulted in a significant disruption
of our permanent and specialty placement business," continued
Mr. Moore. "Many post-event interviews were canceled or
postponed and hiring decisions repealed. While we recorded an
increase of our contract service revenue during the 3 months and
9 months ended September 30, 2001 over the previous period, the
increase did not offset the significant decline in permanent
placement revenues."
Mr. Moore further commented, "Given the short-term economic
outlook, we began the process of evaluating our strategic
options by retaining Roth Capital Partners, Inc. and will
continue the process of evaluating both our operating structure
and market strategies and expect to adjust cost structures going
forward. For example, we recently completed lease negotiations
for downsizing our Dallas office whereby, beginning January 1,
2002, our monthly rent expense will be reduced by 40%, for an
annualized savings of approximately $0.08 per share."
James E. Filarski, President said, "Initiatives begun in August
2001 with a Senior Management reorganization will continue to be
implemented. Operating initiatives include a comprehensive
review of our business processes, development and communication
of operating metrics designed to provide enhanced business
decision making and the creation of a more efficient,
responsibility based organization structure. The object of
these initiatives is to increase our management leverage and
reduce our operating costs. I expect significant progress to be
made by January 2002 and substantial completion by the end of
the first quarter 2002."
Mr. Filarski continued, "Initiatives related to our market and
business strategies include a sharp definition of our core
competencies, the development our overall corporate vision and
related mission statements and the creation of an associated
brand identity. The objective of these initiatives is to create
increased awareness about our company capabilities in our client
and applicant communities. Substantial progress toward these
goals will be measurable by the mid point of 2002."
Mr. Anthony G. Schmeck, Chief Financial Officer and Treasurer,
stated, "The 2001 economic downturn coupled with the paralyzing
effect on our business of the September events have had negative
impact on our balance sheet and financial liquidity. We are
currently not in compliance with certain financial covenants
contained in our credit agreement with our Primary lender and
have been unable to meet the October 2001 obligation due to the
former owners of certain of our subsidiaries. Mr. Schmeck
continued, "Discussions with all parties are underway and we
expect to satisfactorily conclude these talks soon."
"We believe we are at or near a cyclical low for the demand for
our primary services," Mr. Moore commented. Mr. Filarski, named
President and elected to the Board of Directors in August 2001,
stated that "This is the right environment to position the
Company for what many experts and industry watchers believe will
be an upturn in the cyclical staffing business sometime during
2002."
Financial Results and Comments
Three Months
Net service revenues decreased 19% to $17.6 million in 3Q 2001,
compared to $21.6 million during the same period last year.
Revenues from contract and specialty placements increased 4%;
while revenues from permanent placements decreased 56%.
For the quarter, contract and specialty placements accounted for
80% of the Company's net service revenues, up from 62% for the
same period last year.
For the quarter ended September 30, 2001, the total gross margin
decreased $4.4 million. All of this decline is due to the
decline in revenue derived from permanent placements.
Operating expenses were $7.3 million, down $2.4 million as
compared to the same period last year. Variable sales expenses
declined $2.0 million, primarily due to the reduction in
permanent placements, while general and administrative expenses
also declined $0.4 million, or 10% primarily related to
reductions in administrative staff personnel. Depreciation and
amortization expenses for the quarter were $0.5 million, the
same as in the previous year period.
As a result of the decline in revenue from permanent placements,
the Company reported a net loss for 3Q 2001 of $0.8 million
versus net income for 3Q 2000 of $0.4 million.
Nine Months
Net service revenues decreased 4% to $57.4 million for the nine
months ended September 30, 2001, compared to $59.5 million
during the same period last year. Revenues from contract and
specialty placements increased 18%; while revenues from
permanent placements decreased 36%.
For the nine months ended September 30, 2001, contract and
specialty placements accounted for 73% of the Company's net
service revenues, up from 60% for the same period last year.
For the nine months ended September 30, 2001, the total gross
margin decreased $7.5 million. All of this decline is due to
the decline in revenue derived from permanent placements.
Operating expenses were $25.9 million, down $2.7 million as
compared to the same period last year. Variable sales expenses
declined $3.3 million, primarily due to the reduction in
permanent placements, while general and administrative expenses
amounted to $11.7 million, the same as in the previous year
period. Depreciation and amortization expenses for the nine
months ended September 30, 2001 were $1.4 million compared to
$1.3 million for the same period last year. This increase is
attributable to amortization of goodwill associated with the
Datatek acquisition completed last year.
As a result of the decline in revenue from permanent placements
and after the inclusion of severance related expenses totaling
$0.4 million the Company reported a net loss for the nine
months ended September 30, 2001 of $1.6 million versus net
income for the same period last year of $1.4 million.
Conference Call
On Friday November 16, 2001, at 11:00 am EST, the public will
have the opportunity to listen to the third quarter and nine
months earnings conference call. To listen to the call live,
call 1-800-218-0713 and enter the participant code number
416046. A replay of the conference call will be available via
phone at 1-800-405-2236 pass code 416046 starting November 16,
2001 at 6:00 pm CST through November 23, 2001.
Diversified Corporate Resources, Inc. is an human capital
services firm that provides a range of professional technology,
engineering and technical personnel on a contract and permanent
placement basis to high-end specialty employment markets, with a
focus on the information technology (IT), telecommunication and
engineering industry niches. The Company currently operates a
nationwide network of offices to support its Fortune 500 and
other client companies.
Additional information regarding Diversified Corporate
Resources, Inc. can be found on the Company's Web site at
http://www.dcri.net
EXODUS COMMS: Taps Hilco Industrial to Handle Asset Dispositions
----------------------------------------------------------------
Exodus Communications, Inc. presents to the Court an application
for entry of an order authorizing the employment and retention
of a joint venture composed of Hilco Industrial, LLC and Henry
Butcher International as their asset disposition agent, nunc pro
tunc to October 8, 2001.
The Debtors seek to retain the Hilco Joint Venture as their
exclusive asset disposition agent with respect to the IDC assets
because:
A. Hilco and HBI and their principals have an excellent
reputation for providing high quality asset disposition
services to debtors and creditors in bankruptcy
reorganizations and other debt restructurings,
B. Hilco and HBI have demonstrated an extensive knowledge of the
Debtors' IDC assets and how to maximize their value and
C. the Hilco Joint Venture is capable of providing the Debtors
with asset disposition services in all countries where the
Debtors intend to close IDCs as part of their
reorganization strategy.
Prior to retaining the Hilco Joint Venture, Adam W. Wegner, the
Debtors' adviser on corporate and legal affairs, tells the Court
that the senior management of the Debtors interviewed senior
personnel of and considered proposals from other asset
disposition firms. The Debtors evaluated each firm on a number
of criteria, including the overall experience of each firm and
their professionals; the overall capabilities of such firm with
respect to assisting the Debtors in implementing their IDC
closure strategy and maximizing the value of the associated
assets; their geographic scope of services; their creativity in
devising fee structures that met the Debtors' needs; their
familiarity with the chapter 11 process; the likely attention of
the senior personnel of the firm; and the compensation to be
charged. After due consideration of the above and in an exercise
of their business judgment, the Debtors concluded that the Hilco
Joint Venture was best qualified to provide asset disposition
services to the Debtors and at a reasonable level of
compensation. The Debtors believe that the Hilco Joint Venture
is eminently qualified to serve them in these chapter 11 cases
and that, accordingly, the employment of the Hilco Joint Venture
by the Debtors is in the best interests of the Debtors and their
estates and creditors.
If this Application is approved, Mr. Wegner informs the Court
that the professional services that the Hilco Joint Venture will
be required to render to the Debtors are expected to include:
A. Review with the Debtors their strategic objectives with
respect to each IDC that the Debtors select to close and
advise the Debtors on how best to implement such strategy;
B. Review the IDC assets located at each IDC that the Debtors
select to close and identify to the Debtors those IDC
assets at such site that can be sold at the IDC, or removed
from the IDC and sold at a separate location, in a manner
that will yield net sale proceeds in excess of the removal
and disposition expenses of such assets;
C. Provide the Debtors for each selected IDC a removal and
disposition budget for the IDC assets;
D. Consult with the Debtors on any other assets that the Debtors
desire to dispose and how best to maximize the value of
such assets;
E. Coordinate for the Debtors the retention of mechanical,
electrical and other contractors to provide the necessary
services in connection with the closing of each selected
IDC to remove the IDC assets from the IDCs and prepare the
IDCs, if leased, for turnover to the landlord pursuant to a
budget approved by the Debtors and a protocol for the
removal of assets;
F. Develop for each selected IDC site a timetable for the sale
or removal of the relevant assets from each IDC and implement
that closure timetable with the contractors;
G. Market and sell the IDC assets and the additional assets by
private or public sales or auctions at the IDCs or at other
locations selected by Agent;
H. Provide the Debtors with mutually agreed upon reporting of
the progress of all asset sales and expenses versus budget;
I. Provide such other related services necessary or prudent
under the circumstances.
To the best of the Debtors' knowledge, information and belief,
Mr. Wegner submits that the Hilco Joint Venture has no
connection with, and holds no interest adverse to, the Debtors,
their creditors or any other party in interest, or their
respective attorneys or accountants, or the Office of the United
States Trustee or any person employed in the Office of the
United States Trustee, in the matters for which the Hilco Joint
Venture is proposed to be retained, except that:
A. HBI has performed asset disposition and appraisal services
for Morgan Stanley Dean Witter, a major bondholder of the
Debtors, in matters unrelated to the Debtors.
B. HBI has performed asset disposition and appraisal services
for Bank of Tokyo Mitsubishi Ltd., and Barclays Bank Plc,
both secured lenders of the Debtors, in matters unrelated to
the Debtors.
C. HBI has performed asset disposition and appraisal services
for AT&T in matters unrelated to the Debtors while Marsh Risk
Insurance provides HBI with insurance services. Both AT&T
and Marsh are major trade creditors of the Debtors.
D. HBI has worked with PricewaterhouseCoopers, Deloitte &
Touche, DLA (UK), and KPMG, all of which are ordinary course
professionals of the Debtors, in matters unrelated to these
cases.
E. Hilco and certain of its affiliates have performed asset
disposition and appraisal services to Chase Manhattan Bank
and HSBC Bank USA, both of which are bond trustees of the
Debtors, in matters unrelated to the Debtors.
F. Hilco and certain of its affiliates have performed asset
disposition and appraisal services to Wells Fargo Bank, a
secured lender of the Debtors, in matters unrelated to
these cases. In addition, Wells Fargo provides Hilco with a
revolving line of credit.
G. Hilco and certain of its affiliates have been represented by
Latham & Watkins; Brown Rudnick Freed & Gesmer; Gibbons Del
Deo Dolan Griffinger & Vechionne; and Long Aldridge &
Norman LLP, all of whom are ordinary course professionals
of the Debtors, in matters unrelated to these cases.
H. Joint ventures in which certain Hilco affiliates have been
members have been represented by Wachtell Lipton Rosen &
Katz, an ordinary course professional of the Debtors, in
matters unrelated to these cases.
I. Jeff Linstrom, SVP and General Counsel of Hilco Trading Co.,
Inc., was a counsel with Skadden Arps Slate Meagher & Flom,
a counsel to the Debtors.
J. Deloitte & Touche, an ordinary course professional of the
Debtors, are Hilco's auditors.
The Debtors submit that the appointment of the Hilco Joint
Venture on the terms and conditions set forth herein is in the
best interests of the Debtors, their creditors and all parties
in interest.
As compensation for its services, the Hilco Joint Venture shall
be entitled to the following compensation:
A. with respect to the IDC Guaranteed Assets, the Additional
Assets and the Miscellaneous Assets, a commission equal to
5% of Proceeds plus a buyer's premium of 10% of Proceeds,
both due and payable at the time of sale of such assets and
to be paid out of Proceeds;
B. with respect to the IDC Guaranteed Assets, but not the
Additional Assets, on an IDC by IDC basis, an amount equal
to 40% of the amount by which the Net Sale Proceeds for
such IDC exceed the sum of any Agent Disposition Expenses
and Overstay Charges for such IDC, which amount shall be
due and payable at the time of sale of such assets and to
be paid out of Proceeds.
Mr. Wegner informs the Court that the "IDC Guaranteed Assets"
are those assets that the Agent guarantees to the Debtors that
the net sales proceeds of such assets will exceed the budgeted
cost of removal and disposal for such assets. Mr. Wegner states
that the Hilco Joint Venture will back such guaranty by fronting
the costs and expenses of removing and selling such assets from
the IDCs and taking the risk that such costs and expenses may
exceed the proceeds that the Joint Venture is able to generate
from the sale of such assets. The Debtors also have agreed to
indemnify the Hilco Joint Venture and certain related persons in
accordance with the indemnification provisions set forth in the
Agreement. The Hilco Joint Venture and the Debtors believe that
these provisions also are customary and reasonable for asset
disposition engagements, both out-of-court and in chapter 11.
Because the Hilco Joint Venture's compensation is based on a set
formula and specified percentages achieved through the sale of
the assets, without regard to hours worked or services rendered,
the Debtors submit that there is no need for the Hilco Joint
Venture to file fee applications. The Debtors propose that the
Joint Venture's fees be paid directly out of proceeds generated
from the sale of the assets in accordance with the Agreement and
without further order of this Court, which is customary under
the circumstances given the proposed method of compensation.
The Debtors believe that the fee structure and indemnification
provisions set forth in the Agreement are reasonable terms and
conditions of employment and should be approved. (Exodus
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FEDERAL-MOGUL: Gets Okay to Pay Prepetition Foreign Obligations
---------------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates sought and
obtained an order from the Court authorizing, but not directing,
them to pay certain pre-petition obligations incurred in the
ordinary course of business to non-affiliated creditors doing
business with the Kontich Facility and the Taiwan Facility in an
amount up to $800,000.
Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones,
P.C., in Wilmington, Delaware, states that the relief requested
is essential not just to the Debtors and their estates, but to
preserving the value of the Debtors' affiliates in continental
Europe that have not filed petitions in these cases. The Debtors
have approximately 91 affiliates in 15 countries in continental
Europe, which conduct manufacturing operations and other aspects
of the Debtors' business in those countries. If the Kontich
Facility were to suspend operations due to the refusal of its
creditors to perform services on behalf of or supply goods to
it, Ms. Jones fears that the Debtors' affiliates in continental
Europe would be unable as a practical matter to either ship out
the products they manufacture for distribution or to receive
shipments of raw materials necessary to the manufacture of their
products.
While the automatic stay purports to protect the assets and
operations of the Debtors, whether located in the United States
or abroad, Ms. Jones says that it is conceivable that a Belgian
court or other court asserting jurisdiction might not give
effect to the stay, or might do so only after considerable
delay. The Debtors believe that, in the event that the stay were
not promptly given effect by the Belgian courts, their
operations at the Kontich Facility would be disrupted by vendors
taking action against such facility, or by legal actions brought
against the Debtors in Belgium, absent payment of the pre-
petition vendors supplying the Kontich Facility. Ms. Jones
contends that the Debtors would be at risk that Foreign
Creditors would seize or impound assets within their
jurisdictions and possibly seek to invoke civil and/or criminal
penalties against the Debtors and their employees and agents in
the area, raising the possibility of severe disruption in the
operations of the Kontich Facility. Ms. Jones adds that even
full recognition and prompt enforcement of the stay would do
little to prevent creditors from ceasing to do business with the
Debtors going forward on account of unpaid pre-petition
balances, forcing the Debtors to obtain replacement suppliers at
significant cost and delay.
Ms. Jones informs the Court that a substantial majority of the
claims against the Debtors on account of its operation of the
Kontich Facility are those of shippers related to costs incurred
by the Debtors in shipping goods to and from the Kontich
Facility. If their pre-petition claims are not paid, Ms. Jones
submits that those shippers who are holding goods for which the
Debtors are responsible for the freight charges are expected to
assert possessory liens in such goods under applicable law
and/or hold such goods until their claims are paid. While the
Debtors do not concede that such claims would necessarily be
valid, Ms. Jones contends that the prospect that the shippers
would be found to have enforceable liens, together with the
expense and delay that would be required to determine the
validity or invalidity of such potential liens, warrants the
Debtors' payment of the shippers' pre-petition claims in this
case. Furthermore, payments made by the Debtors pursuant to an
order granting this Motion would be in satisfaction of secured
or potentially secured claims and would thus not deplete the
pool of funds available to general unsecured creditors.
Moreover, Ms. Jones believes that payment of these amounts would
help to ensure the timely delivery of such shipments in transit.
The Debtors believe that all of the Taiwan Facility's accounts
payable are fully paid as of the Petition Date, and include it
in this Motion solely as a precaution to ensure that they have
authority to pay small amounts that might be allocable to the
pre-petition period, such as portions of utilities bills or
shipping costs, for which non-payment might result in a
disruption in the facility's business.
The Debtors estimate that the pre-petition amounts owing to the
Foreign Creditors as of the Petition Date will not exceed
$800,000, which is de minimis in the context of these cases,
where the Debtors' aggregate liabilities total approximately
$8,860,000,000. Ms. Jones tells the Court that authorization to
make payments under this Motion shall not obligate the Debtors
to pay any particular claim, and the Debtors shall retain
discretion to condition the payment of pre-petition claims of
Foreign Creditors upon such other terms as the Debtors deem in
the best interests of their estates, including but not limited
to conditioning payment on:
A. the provision of goods and services to the Kontich Facility
or the Taiwan Facility in the future on terms at least as
favorable to those on which a given Foreign Creditor had
historically provided goods and services pre-petition and
B. terms that are consistent with the parties' ordinary course
of business during the pre-petition period.
The Debtors also obtained authority to continue utilizing their
bank accounts in Belgium and Taiwan, which are used exclusively
for the Kontich Facility and Taiwan Facility. Ms. Jones explains
that closing bank accounts and dishonoring checks issued pre-
petition would undermine the relief sought in this motion, which
is to avoid the disruption that could occur in a foreign country
where Foreign Creditors can take action against the Debtors and
their assets that would otherwise be prohibited by the automatic
stay.
Ms. Jones states that the relief obtained from the Court is
necessary for the Debtors to preserve the stability of their
businesses in continental Europe and the Pacific Rim, to enable
the Debtors to effect an orderly transition into chapter 11, and
to maximize the value of the Debtors' estates. (Federal-Mogul
Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FIELDS AIRCRAFT: Court Confirms Plan of Reorganization
------------------------------------------------------
Fields Aircraft Spares (OTC:FASIQ) announced that the United
States Bankruptcy Court for the Central District of California
has signed the Confirmation Order of the Company's Plan of
Reorganization, and that funding of the Plan has been completed.
The signing of the Confirmation Order and funding of the Plan
were the last hurdles to overcome for the Company to emerge from
bankruptcy, and it is now expected that Fields will formally
emerge on Nov. 19, 2001.
As part of the plan, the Company received $2.35 million of new
debt and equity financing from private investors. The private
investors will receive shares representing controlling interest
in the reorganized Company and 100% of the shares of Skylock
Industries. The existing shareholders will retain equity equal
to 5% of the reorganized company with the Company's Bondholders,
Unsecured Creditors and Employees retaining the balance.
Alan Fields, the Company's CEO, stated, "The funding of our plan
and the signing of the Confirmation Order by the court is a
major milestone for our company, customers and suppliers. Our
customers can now be confident that Fields will be here to
provide the level of service and support that they have depended
on for the last 15 years. The new financing provides the Company
with the financial resources needed to continue to provide
comprehensive Just-in-Time support for many of the world's major
airlines."
Fields Aircraft Spares, Inc., through its wholly owned
subsidiaries, is a leading distributor of aircraft cabin
interior replacement products and is a redistributor for a wide
variety of factory new parts applicable to the majority of
commercial aircraft models and manufacturers.
GENERAL CHEMICAL: Posts Net Loss of $2M on Sales of $73M in Q3
--------------------------------------------------------------
The General Chemical Group Inc. (OTC Bulletin Board: GNMP)
reported a third-quarter net loss of $2.0 million on sales of
$73.2 million for the three-month period ended Sept. 30, 2001.
For the corresponding period of 2000, the company's net loss was
$2.5 million excluding a $7.7 million ($5.8 million net of tax)
gain on the sale of the company's Amherstburg, Ontario quarry.
Earnings before interest and taxes for the third quarter
increased to $1.7 million compared with $1.3 million for the
same period of 2000. The improved results in the quarter reflect
higher calcium-chloride prices and lower operating costs
resulting from the April 2001 idling of synthetic soda-ash
operations, partially offset by higher energy costs and a weak
Canadian dollar.
"Going forward into 2002, General Chemical is poised to benefit
from decreasing energy prices and from improvements in soda-ash
industry capacity utilization, which creates a favorable
environment for soda-ash pricing," said Paul M. Montrone,
chairman of General Chemical Group Inc. "Additionally, we have
made significant strides in improving our operating efficiency."
Earnings before interest, taxes, depreciation and amortization
(EBITDA) totaled $5.4 million for the third quarter of 2001
compared with $5.9 million for the third quarter 2000, excluding
the gain on the sale of assets. Excluding depreciation and
amortization attributable to the 49 percent minority interest in
General Chemical (Soda Ash) Partners, adjusted EBITDA was $3.8
million for the third quarter of 2001 compared with $4.3 million
for the third quarter of 2000.
For the first nine months of 2001, General Chemical's net loss
was $9.5 million excluding an after-tax restructuring charge of
$1.7 million recorded in the second quarter. For the
corresponding period of 2000, the company's net loss was $3.6
million excluding the gain on the sale of assets. Results for
the first nine months of 2001 reflect higher energy costs,
partially offset by higher calcium-chloride prices and lower
operating costs.
General Chemical Group is a leading producer of soda ash serving
worldwide markets, and of calcium chloride serving North
American markets. Additional information about the company is
available online at http://www.genchem.com
At the end of September, General Chemical's balance sheet shows
a stockholders' equity deficit of $95.6 million.
GLOBALSTAR: May File for Chapter 11 Protection to Restructure
-------------------------------------------------------------
Globalstar (NASDAQ:GSTRF), the global mobile satellite telephone
service, released its results for the quarter ended September
30, 2001.
The company also announced that it is finalizing a new business
plan aimed at ensuring uninterrupted service for Globalstar
customers. Globalstar has been discussing this plan with its
principal creditors, with the objective of achieving a
negotiated financial restructuring in the near future.
Financial Results
A full discussion of Globalstar's financial performance for the
third quarter can be found in the company's Quarterly Report on
Form 10-Q, to be filed shortly with the U.S. Securities and
Exchange Commission. Highlights are as follows:
-- Globalstar recorded a total of 7.4 million minutes of
use (MOUs), including both mobile and fixed service, in the
third quarter, representing a 37% increase in traffic over the
previous quarter.
-- The estimated number of mobile and fixed subscribers at
the end of September was 58,600, an increase of 14% from the
previous quarter.
-- The company's operating expenses (excluding depreciation
and amortization) were $19.7 million for the third quarter, a
decline of 57% compared to $45.9 million for the same quarter in
2000. As a result, Globalstar ended the third quarter with $68
million cash on hand, well ahead of earlier projections, and
expects to finish the year with approximately $45 million cash.
"Globalstar has made substantial progress in building a more
viable business for the future through a combination of more
aggressive and targeted marketing and a dramatic reduction of
operating expenses," said Olof Lundberg, acting chief executive
officer of Globalstar. "The next step now is to finalize our
business plan with our creditors, which we expect to do in the
very near future. Together, these steps should reassure
customers of our determination to provide them with
uninterrupted, leading-edge global satellite telephone service."
Globalstar, L.P. reported a net loss applicable to ordinary
partnership interests for the quarter of $129 million, down 10%
from the previous quarter's loss of $144 million. The current
quarter's loss is equivalent to $1.98 per partnership interest,
which converts to a loss of $0.33 per share of Globalstar
Telecommunications Limited.
Although minutes of use continued to climb in the third quarter,
service revenue, net of discounts and promotions, declined 18%
from the previous quarter to $1.4 million. This decrease was due
in large part to the introduction of a revised, aggressive
wholesale pricing scheme. Net revenue, including royalty income
from phone sales, and less discounts and promotions, was $1.5
million, down 20% from the previous quarter.
To further reduce operating costs, Globalstar has reduced its
headcount significantly over the course of this year. By mid-
November, the company expects to bring its headcount level down
to 125 employees, which will still allow Globalstar to maintain
basic operations in conjunction with the consolidation of
service provider operations called for in its new business plan.
Restructuring Plan
Globalstar and its partners have been developing a new business
plan that is intended to form the basis for restructuring the
company's finances and to ensure uninterrupted service for
Globalstar customers. This plan assumes the conversion of
Globalstar debt obligations into equity in a new Globalstar
company, along with the consolidation of certain Globalstar
service provider operations into this new company. The aim of
the service provider consolidation is to bring further
efficiencies to the operation of the Globalstar network and to
allow for increased coordination in the company's service
offerings and pricing. Globalstar also intends to continue to
offer its services through independent gateway operators in
regions not included in the consolidation.
Because the company has been able to reduce its operating
expenses more rapidly than originally planned, Globalstar
expects to begin 2002 with approximately $45 million cash on
hand. If Globalstar's restructuring plan is agreed upon and put
into effect, and if the new company receives the revenues
currently projected under the plan, Globalstar believes it can
achieve cash flow breakeven operations with far less additional
funding than would have been required under the company's
earlier business model. The company is currently in discussions
with a number of possible investors to meet this requirement.
Globalstar has been discussing its new business plan with its
principal creditors, with the objective of achieving a
negotiated financial restructuring plan. Assuming Globalstar is
able to successfully conclude these discussions, the company and
certain of its affiliates will commence voluntary Chapter 11
cases and seek to confirm a Chapter 11 plan which both
implements the terms agreed with its creditors and binds all of
Globalstar's creditors. Globalstar will likely decide to seek
voluntary protection under the federal bankruptcy laws even
without a pre-negotiated settlement with its principal
creditors. Moreover, its creditors may, at anytime, initiate
involuntary bankruptcy proceedings against Globalstar.
In any financial restructuring, all partnership interests will
likely be severely diluted, in which event they will have little
or no value, or be eliminated entirely. This would apply to
equity held by all of Globalstar's partners, including
Globalstar Telecommunications Limited, the NASDAQ-listed entity.
As announced in January, in order to have sufficient funds
available to pursue continued progress in its marketing and
service activities, Globalstar has suspended indefinitely
principal and interest payments on all of its funded debt,
including its credit facility, vendor financing agreements and
Senior Notes, as well as dividend payments on its preferred
stock. Suspension of these payments remains in effect, and, as a
result of these actions, defaults have now occurred with respect
to some of Globalstar's debt.
Sales and Marketing Operations
In the third quarter, businesses, individuals, and government
organizations around the world continued to turn to Globalstar
to provide not only basic business communications but also
emergency telecoms services. Use of Globalstar service rose
strongly during the quarter in several high-potential markets,
including China (up 78%), Canada (up 120%), Russia (up 203%),
and Korea (up 157%). Major milestones of the quarter include:
-- In the wake of the tragic events of September 11 in the
U.S., Globalstar offered its support to a variety of companies
and both government and private organizations involved in the
recovery effort. In addition, the company saw a significant rise
in sales and usage of service. Globalstar continues to receive
inquiries from companies and organizations as they now re-
evaluate their future telecommunications needs, particularly in
the area of emergency communications. Many major media
organizations also made extensive use of Globalstar's service in
providing coverage of events.
-- In late October, Qualcomm held a public demonstration of
its MDSS Globalstar communications system, which can provide
high-capacity data, voice and video communications to and from
commercial aircraft for security and avionics applications.
-- The Brazilian civil aviation authority certified
Globalstar do Brasil and Avionics, a Sao Paulo-based aviation
services company, to sell and install Globalstar equipment on
executive jets in Brazil for both voice and data services. The
two companies are now working towards further approvals for
similar use aboard commercial aircraft.
-- The Italian Navy is in the process of installing
Globalstar fixed phone units on all major vessels in its entire
fleet. The phones will be used to provide secure, reliable
communications from virtually anywhere the ships may be
operating. Phones are also now being installed across the entire
fleet of Sea River, a major U.S. maritime tanker fleet operator.
Globalstar fixed units on these vessels will be used by Sea
River crews for general communications.
-- Globalstar phones were used extensively between
September and November by American military troops temporarily
stationed in Egypt for personal calls back to their homes in the
U.S.
System Update
The satellite constellation continues to perform exceptionally
well with continued very high rates of call retention and call
completion. Although three of the company's 48 operational
satellites experienced anomalies earlier this year and were
taken out of service, one of the affected satellites has been
restored to service, the second was replaced in early October by
an on-orbit spare, and the third will be replaced in early
December. With only one satellite out of operation, service
outages are now very brief and infrequent, affecting only a
small number of customers and only in certain non-temperate
regions. When the third satellite is replaced in the next few
weeks, outages will disappear completely.
Globalstar L.P. is a partnership of the world's leading
telecommunications service providers and equipment
manufacturers, including co-founders Loral Space &
Communications and Qualcomm Incorporated; Alenia; China Telecom
(HK); DACOM; DaimlerChrysler Aerospace; Elsacom (a Finmeccanica
Company); Hyundai; TE.SA.M (a France Telecom/Alcatel company);
Space Systems/Loral; and Vodafone Group Plc. Globalstar
Telecommunications Limited (GTL), which is also a partner in
Globalstar L.P., is a NASDAQ-listed company, which allows public
equity investment in Globalstar L.P. For more information, visit
Globalstar's web site at http://www.globalstar.com
HEALTH RISK: Harpeth Capital Completes Sale of Two Subsidiaries
---------------------------------------------------------------
Harpeth Capital Atlanta, LLC, an Atlanta-based mid-market
investment banking firm, announced that it has completed the
sale of assets by Health Risk Management, Inc. (OTC:HRMI). The
sales of two divisions: HRM Claim Management, Inc. and other
corporate assets which comprise HRM's "4YourCare" third-party
administration (TPA) business, and the Institute for Healthcare
Quality, Inc., which provides products and services under the
name "Quality First" were approved by the United States
Bankruptcy Court for the District of Minnesota on November 7,
2001. Health Risk Management, Inc. and three subsidiaries filed
for Chapter 11 Bankruptcy on August 7, 2001 in the United States
Bankruptcy Court for the District of Minnesota.
"Harpeth Capital is pleased to represent the Debtors' in
maximizing the proceeds from these two operating companies. We
were able to complete these sales in just 72 calendar days,
which is a testimony to the expedited process requested and
approved by the Bankruptcy Court and the cooperation of
management, creditors and advisors," commented Jeffrey C.
Villwock, Harpeth Capital Atlanta's Managing Partner.
HRM's TPA business provides claim adjudication, excess risk
underwriting and care management services for approximately
290,000 employees representing 640,000 members. It administers
800 medical and 350 dental plans, for 85 entities. Unlike most
TPAs that have regional customer bases, 4YourCare's clients are
Fortune 500 companies, self-insured employers, unions,
government entities, insurance companies, and preferred provider
organizations that are located across the United States. This
business unit was acquired by CBCA Inc., of Oakland, CA. CBCA
and its subsidiaries are administrators of health benefit plans
for self-insured employers.
The IHQ subsidiary is an information management company that
designs, develops, and markets healthcare content to businesses
servicing the at-risk healthcare market. This subsidiary has
developed a PC-based medical risk management system to support
treatment and resource medical management decisions for a
specific diagnosis. IHQ provides the most current scientific
evidence-based clinical content in an easy to use format to
ensure that healthcare consumers receive the right care, at the
right time, for optimal outcomes. IHQ was acquired by McKesson
Health Solutions, LLC., a subsidiary of McKesson Corporation
(NYSE:MCK).
Harpeth Capital is a Nashville, TN based middle-market
investment banking firm formed in March, 2000. It's healthcare
investment banking affiliate, Harpeth Capital Atlanta ("HCA"),
was formed in January 2001 by Jeffrey C. Villwock (former head
of healthcare research for The Robinson-Humphrey Company. HCA's
Atlanta based partners include Geoffrey Faux (former president
of Orthodontic Centers of America and head of southeast
investment banking for Prudential Securities). HCA specializes
in healthcare banking, including mergers and acquisition
advisory and capital raising assignments. HCA has recently
completed assignments for Health Risk Management, Inc.,
Surginet, Iasis Healthcare, HealthMont, Le@P Technology and the
Tenet Shareholder Committee. Harpeth Capital is affiliated with
Clayton Associates, LLC, a private equity firm with over $70
million of capital committed for investing in southeastern based
companies.
IASIAWORKS: Debt Restructuring Talks with Major Lenders Continue
----------------------------------------------------------------
iAsiaWorks, Inc. (Nasdaq:IAWK), a provider of mission-critical
Internet hosting in Taiwan, reported revenues for the third
quarter of 2001 of US $3.4 million, a 57 percent decrease over
the third quarter of 2000, and a decrease from $7.9 million in
the second quarter of 2001.
The Company recorded a non-recurring operating charge of $7.5
million in the third quarter of 2001. This charge included the
accrual of amounts owed to the Company's former subsidiary in
Hong Kong of $6.1 million as third party liabilities upon its
deconsolidation from the group in July 2001, $0.4 million in
asset impairment and a $1.0 million charge related to severance
obligations.
The Company had an adjusted net loss of $8.4 million for the
third quarter of 2001 (excluding the impact of depreciation,
amortization of goodwill, stock-based compensation and non-
recurring operating expenses). This compares to an adjusted net
loss of $17.0 million in the second quarter of 2001.
Net loss for the third quarter of 2001 was $18.1 million. This
compares to a net loss for the second quarter of 2001 of $103.0
million.
Nick Pianim, iAsiaWorks' CEO, commented, "At the end of the last
quarter, we stated that we would further reduce our cost
structure, work with all of our major creditors in an effort to
restructure our debt, and explore the sale of certain assets to
provide funding for continuing operations. As part of this
restructuring effort, we sold our Korea data-center and Korea
leased-line business, including associated customer bases, to
Korea Internet Data Center (KIDC) and DACOM for total
consideration of approximately $30.8 million. Proceeds from this
sale will be primarily used to settle outstanding obligations as
well as to fund our operating activities. We now only serve
customers in Taiwan, where we own and operate our IDC.
"Over the last several months we have further reduced our
headcount from more than 100 employees to approximately 40
employees today.
"Finally, we continue to reduce our cost structure, work with
all of our major creditors on restructuring our debt, and
explore various strategic alternatives to raise funds for
operations. We have been in discussions with a number of parties
about selling assets and pursuing strategic partnerships that
would provide us with additional capital. Our objective is to
raise enough capital to satisfy our creditors and provide cash
to grow the business in Taiwan.
"We still believe that we have the premier Internet data center
facility in Taiwan and that, assuming we are able to raise new
capital and complete our debt restructuring, long term demand
for our hosting services will be strong."
iAsiaWorks (Nasdaq:IAWK), an Asia-Pacific Internet data center
(IDC) company in Taiwan.
IBEAM: Faces Nasdaq Delisting Following Chapter 11 Filing
---------------------------------------------------------
iBEAM Broadcasting Corp. (Nasdaq:IBEMQ), a leading provider of
streaming communications solutions, announced that it has
received written notice from Nasdaq's Listing Qualifications
Department that the company's stock no longer warrants listing
on The Nasdaq Stock Market. The notice states that Nasdaq's
determination was based on the company's filing under Chapter 11
of the U.S. Bankruptcy Code and associated public interest
concerns as set forth under marketplace Rules 4450(f) and
4330(a)(3), concerns regarding the residual equity interest of
the existing listed securities holders, and the company's
failure to demonstrate its ability to sustain compliance with
all requirements for continued listing on The Nasdaq Stock
Market. The notification further states that the company may
appeal Nasdaq's determination and that if no appeal is timely
filed, the company's stock will be delisted at the opening of
business on November 15, 2001. The company does not intend to
file an appeal.
iBEAM Broadcasting Corp. (Nasdaq:IBEMQ), founded in 1998, is a
leading provider of streaming communications solutions. iBEAM's
end-to-end solutions for enterprise and media customers include
interactive webcasting, streaming advertising insertion,
syndication and pay-per-view management, and secure, licensed
download and geographical identification applications. iBEAM
currently delivers more than 100 million audio and video streams
per month across its intelligent distribution network. Several
hundred innovative companies use iBEAM's global services
including enterprise customers IBM/Lotus, Bristol-Myers Squibb,
and Merrill Lynch, and media leaders CNBC and MTVi. iBEAM is
headquartered in Sunnyvale, Calif.
INSILCO HOLDING: Third Quarter Net Loss Drops to $17 Million
------------------------------------------------------------
Insilco Holding Co. (OTCBB:INSL) reported sales and operating
results for its third quarter and nine months ended September
30, 2001.
The Company reported the following results on a pro forma basis
to include the results of acquisitions as if they occurred at
the beginning of the relevant period and to exclude impairment
and amortization of goodwill, depreciation, interest, taxes, and
nonrecurring items in an effort to provide a better
understanding of the changes in its operating results.
The Company reported pro forma third quarter sales of $56.5
million compared with $114.2 million recorded last year. The
decline reflects weak demand for our customers' end market
products as a result of a weakening global economy and
reductions in telecom capital spending. Pro forma EBITDA from
ongoing operations for the current quarter was $0.9 million
compared with $24.6 million recorded last year, reflecting the
weak sales volume.
For the first nine months of 2001, the Company reported pro
forma EBITDA of $9.8 million, on pro forma sales of $194.9
million, compared to pro forma EBITDA of $67.4 million, on pro
forma sales of $330.3 million, reported in the comparable period
a year ago.
David A. Kauer, Insilco President and CEO said, "While we
continue to see weakness across the board, both in the economy
and in particular the telecom sector, we are beginning to see
increased quote and order activity, albeit on an uneven pattern
in our non-telecom markets. We have and continue to respond to
these weak conditions by taking actions to 'right-size' our
organization to meet the lower demand level. In fact, since late
September, we have eliminated another 104 direct and 92 indirect
personnel representing nearly $6.0 million in annualized wages
and fringes and have plans to reduce ancillary annualized costs
by an additional $2.0 million. Moreover, we have generated cash
of more than $27 million from net working capital reductions in
accounts receivable, inventories and accounts payable since
December of last year, and had nearly $39 million of liquidity
at the end of the third quarter, despite the substantial sales
decline."
Kauer continued, "We are encouraged by increased order activity
from consumer, cable and networking customers for our Passive
Components product line, and in particular for our MagJack
product line. We also have several precision stamping projects
in development that, once placed into production, will provide
as much as $6.0 to $8.0 million in annualized revenues. We do,
however, continue to experience weak demand from telecom
customers for our custom assembly products and do not see any
near-term improvement in demand from these customers.
Conversely, we are seeing steady volumes from our automotive
customers in this segment."
"Although visibility is still quite limited, thereby making it
difficult to provide a precise short-term forecast, our strict
financial management and the $15 million cash infusion from our
equity sponsor in August has allowed us to maintain sufficient
liquidity to meet our obligations and we are cautiously
optimistic that certain of our markets may now have bottomed."
The net loss for the Company's current quarter was $17.4 million
compared to net income of $19.2 million recorded a year ago in
the third quarter. Third quarter 2000 results included after-tax
income of $21.5 million from discontinued operations. The loss
available to common shareholders for the third quarter of 2001
was $19.4 million versus income of $17.4 million available to
common shareholders for the 2000 third quarter. The net loss for
the Company's current nine months was $135.5 million compared to
net income of $60.5 million recorded in the same period last
year, which included after tax income and gains of $69.5 million
from discontinued operations. The loss available to common
shareholders for the first nine-months of 2001 was $141.4
million. For the comparable period in 2000, the Company recorded
net income available to common shareholders of $55.4 million.
Insilco Holding Co., through its wholly-owned subsidiary Insilco
Technologies, Inc., is a leading global manufacturer and
developer of a broad range of magnetic interface products, cable
assemblies, wire harnesses, fiber optic assemblies and
subassemblies, high-speed data transmission connectors, power
transformers and planar magnetic products, and highly
engineered, precision stamped metal components.
Insilco maintains more than 1.4 million square feet of
manufacturing space and has 23 locations throughout the United
States, Canada, Mexico, China, Northern Ireland, Ireland and the
Dominican Republic serving the telecommunications, networking,
computer, electronics, automotive and medical markets. For more
information visit our sites at http://www.insilco.comor
http://www.insilcotechnologies.com
At the end of September, Insilco reported an upside-down balance
sheet, with stockholders' equity deficit totaling around $329
million.
KRYSTAL CO.: S&P Cuts Ratings Over Weak Financial Performance
-------------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
unsecured debt ratings on The Krystal Co. to single-'B' from
single-'B'-plus and lowered its senior secured bank loan rating
to double-'B'-minus from double-'B'. All ratings were removed
from CreditWatch, where they had been placed August 16, 2001.
The outlook is stable.
The downgrade is based on Krystal's weakened operating and
financial performance, as the company has experienced negative
comparable-store sales and receding operating margins over the
past two years. Intense competition from stronger industry
players, and higher food and paper costs have negatively
impacted results. Comparable-store sales at company-owned stores
declined 1.4% for the nine months ended Sept. 30, 2001,
following a decrease of 4.4% in 2000.
Operating margins declined to about 10.0% for the nine months
ended September 30, 2001, and all of 2000, from about 12.5% in
1999. As a result, credit measures have weakened, with EBITDA
coverage of interest at only 1.6 times for the 12 months ended
Sept. 30, 2001. Krystal's debt levels are high, with total debt
to EBITDA at about 6.2x compared with 4.0x in 1999. Financial
flexibility is limited to a $25 million revolving credit
facility, of which only $9.7 million was available as of
September 30, 2001.
The ratings reflect Krystal's participation in the highly
competitive quick-service segment of the restaurant industry,
its relatively small size, weak credit measures, and a highly
leveraged capital structure. These factors are somewhat offset
by the company's regional brand recognition in the Southeast.
Although the company has a long operating history in the South
and an established brand identity, Krystal is a small player in
the quick-service segment of the restaurant industry. Standard &
Poor's expects competition in the fast-food industry to remain
aggressive due to promotional activity from larger operators,
such as McDonald's and Burger King.
Chattanooga, Tennessee-based Krystal operates 247 and franchises
155 quick-service restaurants, with concentrations in Florida,
Georgia, Alabama, and Tennessee.
Outlook: Stable
Standard & Poor's does not expect credit measures will
deteriorate further despite the challenging competitive
environment.
LUND INT'L: Restructures Financial Covenants Under Loan Pacts
-------------------------------------------------------------
Lund International Holdings, Inc. (OTC:LUND) announces results
of operations for the third quarter ended September 30, 2001.
Net sales from continuing operations for the third quarter of
2001 were $37,794,000, compared to $37,014,000 for the same
period in 2000. This increase is primarily attributable to
price adjustments and market share gains. On a year-to-date
basis for the nine-month period ended September 30, 2001, net
sales were $107,577,000 compared to $117,396,000 for the same
period last year. The Company has experienced softness in
demand for its products impacted in part from volatility in the
cost of fuel and general economic uncertainty.
Operating income from continuing operations was $3,790,000 in
the third quarter of 2001, compared to operating income from
continuing operations of $2,818,000 for the same period in 2000.
The increase is primarily the result of improved gross margins
due to both price adjustments and cost reductions. On a year-to-
date basis, operating income from continuing operations declined
to $8,750,000 from $9,265,000 due to lower sales volumes.
On October 2, 2001, Lund International announced its intention
to divest its Smittybilt tubular steel and Trailmaster
suspension accessories business units. Earlier the Company had
announced its intention to dispose of its 330,000 square foot
facility in Anoka, Minnesota. To date, the Company has only had
informal discussions with prospective buyers for the tubular and
suspension operations, and the Anoka facility remains listed for
sale.
Lund International recorded a net loss of $20,957,000 for the
third quarter of 2001, compared to a net loss of $1,399,000 in
the third quarter of 2000. Included in the third quarter loss
is a charge for discontinued operations of $22,305,000 compared
to $1,415,000 included in the same period in 2000. Income from
continuing operations improved to $1,348,000 compared to $16,000
for the same period in 2000.
For the nine month period ended September 30, 2001, the Company
recorded a net loss of $24,759,000, compared to a net loss of
$1,939,000 for the same period in 2000. The year-to-date
results in 2001 also include interest and consulting fees of
$768,000 incurred as a result of the Company restructuring its
loan agreements' financial covenants, and restructuring charges
of $1,691,000 related to the relocation of the Company's Anoka,
Minnesota distribution center to Lawrenceville, Georgia. The
year-to-date results in 2000 include consulting fees and
restructuring charges of $946,000, a $225,000 loss, net of tax
benefit, on the early extinguishment of debt, and a $410,000
loss, net of tax benefit, from the cumulative effect of an
accounting change.
Dennis W. Vollmershausen, President and Chief Executive Officer,
stated that, "Our third quarter sales increase for continuing
operations of 2% over the prior year reverses the trend of four
consecutive quarters of decline. Demand for light truck and
automotive accessories as well as heavy truck accessories has
finally stabilized. Unfortunately the events of September 11,
2001, will most likely cause some destabilization of these
improved market conditions for the short term. As evidenced by
the third quarter improvement in operating income and the modest
decline in operating income year-to-date of only $515,000 on
reduced sales of $9,819,000, our efforts to significantly
improve the financial performance of our Company's continuing
operations are producing encouraging results. These year-to-
date improvements are especially satisfying given significant
non-recurring expenses incurred for relocation of our warehouse
from Minnesota to Georgia, and for consulting expenses related
to strategic alternatives for discontinued operations."
Lund International is a leading designer, manufacturer and
marketer of a broad line of accessories for the automotive
aftermarket. Its products are sold under the trade names
"Lund", "Deflecta-Shield", "Deflecta-Shield" Aluminum,
"Autotron", "Belmor", "Trail Master", "Auto Ventshade", and
"Smittybilt". The corporate headquarters are at 3700 Crestwood
Parkway, N.W., Suite 1000, Duluth, Georgia 30096.
At the end of September, Lund International's current
liabilities amounted to $109 million as compared to current
assets totaling $55 million.
METALS USA: Files for Chapter 11 Reorganization in Texas
--------------------------------------------------------
Metals USA, Inc. (NYSE: MUI) announced that it has filed a
voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code in the U. S. Bankruptcy Court in the
Southern District of Texas (Houston Division).
Despite cost reduction and asset rationalization efforts to
improve profitability as well as the company's initiatives to
sell non-core assets, the company was not able to overcome the
difficulties of a troubled metals market, a recessionary
manufacturing economy, and overall uncertainties in the
marketplace. This filing is a necessary component of the
Company's strategy to create a sustainable capital structure,
increase its liquidity position and improve its profitability.
J. Michael Kirksey, Chairman and CEO, stated, "While the
decision to file a Chapter 11 petition was a very difficult one,
we believe that it was the best means to obtain the necessary
time to stabilize the Company's finances and to implement a
strategic plan to ensure the long term viability of Metals USA
for its constituents."
The Company intends to continue its business operations without
interruption during the Chapter 11 process. Metals USA has
sufficient cash flow and cash reserves to fund ongoing
operations. The Company's key supplier relationships remain
intact and the Company will continue its commitment to deliver
quality products and just-in-time service to its customer base.
The U.S. Bankruptcy Code allows a company that is subject to a
Chapter 11 filing to continue to operate its business as usual
and provides special protections for vendors, suppliers,
employees and others who provide goods and services to that
company after the filing.
"Chapter 11 provides us a process and framework where we can
continue to conduct business operations while reorganizing our
finances to put Metals USA on a sound footing for the future,"
added Mr. Kirksey. "Our employees have demonstrated their
support to get Metals USA through these difficult times. We
sincerely appreciate their loyalty and dedication."
Metals USA, Inc. is a leading metals processor and distributor
in North America. With a customer base of more than 65,000,
Metals USA provides a wide range of products and services in the
Carbon Plates and Shapes, Flat-Rolled Products, and Building
Products markets. For more information, visit the Company's
website at http://www.metalsusa.com
PACIFIC GAS: Court Sets Disclosure Hearing for December 19, 2001
----------------------------------------------------------------
Judge Dennis Montali will convene a hearing to consider approval
of the Disclosure Statement filed by Pacific Gas and Electric
Company on December 19, 2001 at 9:30 a.m.
Pursuant to Rule 3017(a) of the Federal Rules of Bankruptcy
Procedure, November 27, 2001 is fixed as the last day for filing
and serving written objections to the Disclosure Statement.
A status conference regarding the Disclosure Statement will be
held on December 4, 2001, at 1:00 p.m., at which the Plan
Proponents, the Official Committee of Unsecured Creditors, the
United States Trustee and any party in interest that files an
objection to the Disclosure Statement are directed to appear.
(Pacific Gas Bankruptcy News, Issue No. 17; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PINNACLE HOLDINGS: Violates Covenants Under Bank Loan Agreement
---------------------------------------------------------------
Pinnacle Holdings Inc. (Nasdaq: BIGT) reported financial results
for its third quarter ended September 30, 2001. Revenues for
the third quarter were $46.5 million, versus $45.3 million for
the same period last year. Earnings before interest, taxes
(other than real estate), depreciation and amortization, and
non-cash charges for the impairment of assets held for sale as
well as the non-cash charge for the impairment of long-lived
assets or EBITDA, as adjusted for the effects of certain other
non-cash and non-recurring charges totaling approximately $11.3
million in the third quarter of 2001 was $20.5 million. This
compares to EBITDA, as adjusted for the effects of certain non-
cash and nonrecurring items totaling $10.4 million, in the same
period a year-ago of $20.4 million.
Steve Day, CEO of Pinnacle commented, "Our core business of
leasing space on communication sites remains a fundamentally
sound business with high levels of recurring cash flow. Since I
assumed the CEO role in July, we have been transitioning the
Company to an operations focused Company from one that was
previously more focused on making acquisitions. To accomplish
this, we have reorganized the Company's management to better
focus the Company on growing EBITDA and increasing our return on
capital. These changes have affected our tower operations as
well as our sales and marketing organization and with the
addition of Bill Freeman as our CFO, our finance and accounting
groups. I believe that there are significant opportunities for
us to improve our tower level cash flows in the future through a
more strategic focus in our selling efforts and more efficient
tower operations, and the changes we have made are designed to
take advantage of these opportunities."
Mr. Day went on to add, "Another major focus of ours over the
past several months has been on providing the Company with
short-term liquidity and on seeking a more permanent solution to
our capital structure. In this regard, we have evaluated the
sale of assets we consider to be non-core, and have generated
interest and purchase offers for certain of those assets. We
are working diligently on an amendment to our senior secured
credit facility, which is intended to provide the Company with
greater financial flexibility, and on completing the sale of our
St. Louis Colocation facilities. Both of these activities are
designed to alleviate near term liquidity issues. On a longer-
term basis, we have been working to create options to bring
additional capital into the Company. Negative developments in
our national economy have been disruptive to an already
difficult capital market and this necessitates that we be
methodical in pursuing the process of determining the optimal
long-term capital structure solution."
3rd Quarter Operating Results
For the quarter ended September 30, 2001, Pinnacle added 214 new
tenants to its portfolio of 3,684 revenue-producing sites at the
beginning of the quarter, at an overall initial average rent
rate of $1,112. The Telephony customer segment contributed
approximately 50% of new run rate revenue added, with an average
initial monthly lease rate for new installations of $1,620. In
addition, leases were signed with Government agencies for high
altitude deployments at an average initial monthly lease rate of
$2,175, comprising approximately 15% of the new run rate revenue
added during the quarter. Including the incremental run rate
revenue from leases escalated and amended or renegotiated during
the quarter, the resulting gross broadband equivalent leaseup
rate was 0.32 on the 2,075 sites owned at the beginning of the
quarter, excluding 331 microwave sites.
The Company experienced higher than normal churn during the 3rd
quarter, primarily related to two paging customers which had
filed for bankruptcy and subsequently rejected certain of the
Company's leases, and a third customer which defaulted on their
leases. In addition, the Company experienced churn of $167,000
of monthly revenue related to customers previously located on
the World Trade Center site. The Company continues to
rationalize its portfolio relative to underperforming sites,
which also contributed to the increased churn.
Non-recurring Charges
Noncash and nonrecurring charges in the Company's third quarter
of 2001 included a $1.5 million reduction of revenues and $9.8
million in items classified as general and administrative
expenses. The $1.5 million noncash reduction to revenue
resulted from an adjustment to the straight-line revenue
recognition required for customer leases which contain
escalators. The non-recurring selling, general and
administrative charges during the 3rd quarter included $7.4
million incremental provision for doubtful accounts, a $2.0
million provision related to a disputed service contract, $0.2
million related to severance for the Company's former Chief
Executive Officer and $0.2 million related to expenses
associated with the Company's ongoing SEC investigation.
Bill Freeman, CFO of Pinnacle noted, "Over the course of the 3rd
quarter, the Company has witnessed increasing financial
difficulties being experienced by certain wireless
communications customers. We have seen several of our customers
declare bankruptcy and have seen increasing concern among
analysts and ratings agencies relative to the financial
stability of many wireless communications companies. While we
value our customers highly and believe most of the companies in
our customer base will remain financially viable in the long
term as a result of their recurring cash flows, we do believe
that given the state of the capital markets and the economy, it
is appropriate to be conservative as to our accounts receivable
from this sector. The incremental reserve we are taking
reflects this view."
During the third quarter, as part of the ongoing effort to
address near-term liquidity issues, the Company reclassified to
assets held for sale its investment in Pinnacle Towers Ltd., the
Company's UK subsidiary, and certain non-core land parcels. In
connection with the decision to dispose of these assets and in
reevaluating the carrying value of its Colocation facilities,
which were reclassified in the quarter ended June 30, 2001, the
Company recorded a write down of $13.0 million.
Additionally, in light of continuing negative developments this
year in the U.S. economy as a whole, the significant decline in
valuation multiples for the tower sector, generally, and for
Pinnacle specifically, as well as the financial difficulties
which are being experienced by several of our customer segments,
the Company has reassessed the carrying value of its assets
under Statements of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". In connection with this
evaluation, the Company recorded a pretax $254.3 million write-
down to the carrying value of its tower assets.
Noncash and nonrecurring cost totaling $10.4 million in the
Company's third quarter of 2000 included $8.7 million related to
aborted construction and acquisition cost, $1.3 million related
to an abandoned equity offering and $0.4 million related to the
Company's ongoing SEC investigation.
Liquidity and Capital Resources
As of September 30, 2001, the Company had $16.1 million in cash
before the payment of its third quarter interest payment on its
Senior Secured Credit Facility on October 1, 2001 totaling $7.7
million. The Company is out of compliance with several of the
financial covenants under its Senior Secured Credit Facility as
of September 30, 2001. As previously mentioned, the Company is
currently working with its bank group to amend this facility and
obtain a waiver of noncompliance. In addition, the Company is
seeking the banks' approval and collateral release related to
the sale of its St. Louis colocation facilities and the other
assets reclassified to assets held for sale during the 3rd
quarter. The proceeds from these sales, if approved, will
primarily be used to repay bank debt including payment of the
Company's fourth quarter scheduled amortization payment. To
allow the Company adequate time to structure an amendment with
its bank group, the Company is also seeking a short-term
forbearance with respect to its third quarter noncompliance. As
a result of not having an amendment, the Company has
reclassified all of its outstanding borrowings from long term
liabilities to current liabilities.
Fourth Quarter 2001 Outlook
The Company currently expects fourth quarter revenue to range
between $46.7 million and $48.2 million. These estimates assume
the Company closes on the sale of its St. Louis Colocation
facilities in mid-November of 2001, reflects the loss of the
Company's World Trade Center site, and further rationalization
of under performing sites. The Company expects EBITDA in its
fourth quarter to range between $19.5 million and $20.5 million.
Full Year 2002 Outlook Revised
The company expects 2002 Total Revenues to range between $190
million and $200 million. Tower Cash Flow is projected to be
between $114 million and $123 million, with combined selling,
general and administrative and corporate development expenses
ranging between $31 to $34 million. The Company expects EBITDA
for 2002 to range between $82 and $90 million. Total CAPEX is
expected to range between $20 million and $27 million. The
Outlook for 2002 reflects the loss of the Company's World Trade
Center site, rationalization of underperforming sites during
2001 and 2002, and assumed sale of the Company's St. Louis
colocation facilities during 2001.
SEC Investigation
The Company has and will continue to cooperate with the SEC
staff on its ongoing investigation of Pinnacle. Management is
hopeful that this investigation will be resolved soon.
Change in Board of Directors
The Company announced that Robert J. Wolsey resigned from the
Board of Directors. In addition, Mr. Wolsey will no longer
serve as Senior Advisor to the CEO. Mr. Wolsey served as CEO of
Pinnacle from its inception in 1995 until July 2001.
Pinnacle is a leading provider of communication site rental
space in the United States. To date, Pinnacle has completed
over 570 acquisitions and owns or manages in excess of 5,000
sites. Pinnacle is headquartered in Sarasota, Florida. For
more information on Pinnacle visit its web site at
http://www.pinnacletowers.com
POLAROID CORPORATION: Sets-Up Reclamation Claim Procedures
----------------------------------------------------------
Polaroid Corporation and its debtor-affiliates request Judge
Walsh for an order:
(i) confirming the grant of administrative expense status to
obligations arising from the post-petition delivery of
goods and authorizing payment for such goods in the
ordinary course;
(ii) authorizing the return of unwanted goods;
(iii) confirming administrative expense treatment, at a minimum,
for certain holders of valid reclamation claims, and
(iv) prohibiting third parties from reclaiming goods or
interfering with the delivery of goods to the Debtors.
Confirmation of Administrative Status
In the ordinary course of business, numerous vendors provide the
Debtors with raw materials, equipment and related items. Neal
D. Goldman, EVP and Chief Administrative Officer of Polaroid
Corporation, tells Judge Walsh that certain vendors may be
concerned that delivery or shipment of goods after the Petition
Date pursuant to an outstanding order will make such vendors
unsecured creditors. Mr. Goldman is concerned that these
vendors may decline to ship, or may instruct their shippers not
to deliver goods destined for the Debtors unless:
(a) the Debtors issue substitute orders post-petition, or
(b) obtain a Court order confirming that all obligations of
the Debtors arising from outstanding orders, delivery of
which occurs post-petition, are to be granted
administrative expense status.
Timothy P. Olson, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Chicago, relays the Debtors' belief that they have the
authorization to make payment for goods received post-petition,
irrespective of the time the orders were first placed. However,
Mr. Olson tells Judge Walsh, confirmation of that authority is
highly desirable.
In Mr. Goldman's words: "The Debtors' relationships with their
vendors are so essential that it is important to give vendors
the utmost reassurance that their valid claims for goods
delivered post-petition will be given administrative expense
status and be paid by the Debtors in the ordinary course of
business."
Return of Goods
According to Mr. Olson, the Bankruptcy Reform Act permits a
debtor to return goods shipped by the creditors before the
commencement of the case, for credit against the creditor's pre-
petition claim, provided that the Court determines that such
return is in the best interests of the estate.
The Debtors are convinced that an order approving returns to
vendors for credit against their pre-petition claims is in the
best interests of the Debtors' estates because such relief will
enable the Debtors to:
(i) obtain trade credit and merchandise return rights that
will make it possible for the Debtors to obtain proper
credit for otherwise unsellable damaged merchandise, cost-
effectively and without undue financial risk, and
(ii) effectively manage inventory, enhancing the Debtors'
financial performance, the value of the assets of the
estate and the prospects of a successful reorganization
herein.
Treatment of Reclamation Claims
Mr. Goldman brings to the Court's attention the possibility that
certain vendors will attempt to assert their right to reclaim
goods delivered to the Debtors shortly before or soon after the
Petition Date. To ensure the proper categorization of
reclamation demands, Mr. Goldman says, the Debtors will
institute an internal system to ensure that they appropriately
date and time stamp reclamation demands as they are received.
All reclamation demands should be filed, at the latest, 20 days
after the Petition Date, Mr. Olson elaborates. The Debtors will
then attempt to quantify the aggregate amount of reclamation
claims that they believe are valid, Mr. Olson continues. After
they have done so, Mr. Olson informs the Court, the Debtors
intend to make a comprehensive proposal for treatment of
reclamation claims to all parties that delivered reclamation
demands as well as to the creditors' committee appointed in
these cases, the Debtors' pre-petition and post-petition
lenders, and ultimately this Court. In that connection, Mr.
Olson says, the Debtors will inform all parties that serve
reclamation demands of the Debtors' position with respect to
whether and to what extent each of such parties have valid
reclamation claims.
The Debtors contend that the proposed reclamation procedures
will provide administrative expense treatment to the claims of
any vendor who has a valid reclamation claim under otherwise
applicable law. According to Mr. Olson, such relief will
facilitate the continued operation of the Debtors' business and
should obviate any vendor's perceived need to initiate legal
action to preserve its rights. Having to administer and analyze
reclamation claims during the first few weeks of these cases,
Mr. Olson adds, would seriously distract the Debtors' management
and professionals at a critical period in these cases.
In summary, the Debtors are convinced that the relief requested
in their motion will ensure the continuous supply of goods that
are vital to the Debtors' operations and integral to their
successful reorganization. Otherwise, Mr. Olson claims, the
Debtors would be required to expend substantial time and
resources:
(i) convincing the vendors of the Debtors' authority to make
certain payments,
(ii) reissuing the outstanding orders, and
(iii) establishing the Debtors' right to retain the goods.
* * *
Successfully persuaded by the Debtors, Judge Walsh rules that:
(1) The vendors shall have administrative expense priority
claims for undisputed obligations arising from outstanding
orders for products and goods received and accepted by the
Debtors on or after the Petition Date.
(2) The Debtors are authorized to:
(a) pay their undisputed obligations arising from the
post-petition shipment or delivery of goods by the
vendors and acceptance thereof by the Debtors,
pursuant to their customary practice in the ordinary
course prior to the Petition Date, and
(b) pay for goods in transit but delivered to the Debtors
on or after the Petition Date.
(3) The Debtors are permitted to return goods shipped to the
Debtors by the suppliers prior to the commencement of the
case, with the consent of the supplier, for credit against
the supplier's pre-petition claims, subject to the
limitations imposed by any orders of the Court.
(4) Vendors shall be entitled to administrative expense claims
for the value of goods received and accepted by the
Debtors, if and to the extent that any such vendor has
made a valid, written reclamation demand for such goods,
but only to the extent that such vendor proves the
validity of its demand and the amount of its claim.
(5) Vendors and all other parties are prohibited from
reclaiming or interfering in any way with the post-
petition shipment or delivery of goods to the Debtors
without first obtaining relief from this order. (Polaroid
Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PSINET INC: Cisco Seeks Adequate Protection of Lease Payments
-------------------------------------------------------------
Cisco Systems Capital Corporation, together with affiliates,
submits a new motion seeking the Court's authority under 11
U.S.C. section 363(e) for adequate protection of its interests
in certain equipment in the possession of PSINet pursuant to a
Master Lease and corresponding Equipment Schedules. Cisco filed
a motion to allow Cross-Motion for adequate protection and
opposition to the Debtors' motion to stay obligations under
certain agreements. The current Motion replaces that portion of
the pleading for Adequate Protection, while leaving the
opposition on file.
In the current motion, Cisco seeks an order from the Court
requiring Debtors to make adequate protection payments to Cisco
on a monthly basis in an amount equal to the stated rent under
the Master Lease and Equipment Schedules, or in such amount as
the Court finds appropriate, pursuant to agreements between
Cisco and Debtors for the Debtors' acquisition of certain high-
technology telecommunications equipment.
The Equipment Schedules were executed over a period of several
years, beginning with the first Equipment Schedule dated as of
October 10, 1997. Under the Master Lease and Equipment
Schedules, Cisco is currently entitled to receive $3,181,407.57
in rental payments for each month from the petition date (such
amount decreasing pro tanto upon the expiration of any of the
Equipment Schedules).
Cisco asserts it has a constitutional right to receive adequate
protection payments as compensation for the loss in value to its
collateral during the course of this bankruptcy case, regardless
of the outcome of the adversary proceeding in which the Debtors
seek to recharacterize Cisco's leases as financing arrangements.
Cisco draws the Court's attention to the position taken by the
Debtors in that adversary proceeding, that Cisco's hightech
equipment is declining in value at a pace so rapid that the
value of the equipment will have been completely exhausted by
the end of the contracts' three year terms. Based on this, Cisco
asserts that the monthly payments contained in the contracts -
which represent this true decline in value over the three year
period of the contracts - represents the appropriate measure for
adequate protection payments.
Cisco points out that, on a motion for adequate protection, the
movant has the burden of proving the validity and extent of its
liens, while the debtor has the burden of proof on the issue of
adequate protection. 11 U.S.C. section 363(o).
To satisfy its burden of proof, Cisco tells the Court that its
liens in the equipment are fully perfected, as evidenced by
copies of its lease and protective lien documents, as well as
documents of its protective UCC-1's in all fifty states plus the
District of Columbia. Cisco recognizes that some of the UCC-1's
were filed within 90 days prior to the Petition Date. However,
this does not limit their effect, Cisco argues, because a
financing statement that pertains to a state-to-state transfer
of collateral, but is filed within ninety days prior to the
debtor's bankruptcy case, is not a preference. Moreover, Cisco
argues, whether or not the UCC-1 filings carried out by Cisco in
the states to which the Debtors may have moved equipment were
filed within four months of such move is irrelevant to these
proceedings, as such rules have no impact upon whether or not
Cisco's security interest remains fully perfected as against the
Debtors. The point is, the perfection of its security interests
in all states to which Cisco delivered equipment under the
Leases, Cisco asserts. To the extent that the Debtors moved some
of Cisco's Equipment outside of the original states of delivery,
Cisco's security interests remain fully perfected as: (1) the
Debtors gave Cisco no notice of such move; and (2) the UCC-1's
filed in the remaining states date back to the original
perfection date.
Cisco asserts that the Debtors can satisfy their burden of
adequately protecting Cisco by paying to Cisco nothing less than
the contractual monthly payments owed by Debtors under the
Master Lease and Equipment Schedules.
Cisco notes that, as an alternative to the "objective" valuation
method approved by the courts, the court could apply a
subjective test by examining the Equipment's fair market value
and the Debtors' current use of the Equipment. In this regard,
Cisco supplies valuation testimony from its expert witness, Wael
Yared, principal of Cambridge Strategic Management Group.
In his declaration, Mr. Yared explains that there are two
standard methods that can be used to value equipment as of the
Petition Date: the Liquidation Value Method and the In-place
Value Method.
(1) The In-Place Value Method
The In-place Value Method combines the liquidation value of
the equipment with a premium for inclusion of the equipment
as an operational system. Based upon this method, Mr. Yared
concluded that the Cisco Equipment had a Petition Date value
of $34.9 million. This number excludes equipment covered by
the Master Lease, but already subject to a sale of Canadian
assets, as well as all equipment covered by lease schedules
nos. 1, 2 and 3.
(2) The Liquidation Value Method
The Liquidation Value Method determines the market value of
the Equipment based on recent transactions for comparable,
used equipment. Based upon this method, Mr. Yared concluded
that the Cisco Equipment had a Petition Date value of $29.3
million. This number also excludes equipment covered by the
Master Lease, but already subject to a sale of Canadian
assets, as well as all equipment covered by lease schedules
nos. 1, 2 and 3.
(3) The Decline in Value
Mr. Yared presents the Court with a chart (Chart E) showing
that the Equipment has declined from the value of $6.7
million as at petition, will continue to decline on a
monthly basis and is projected to worth about $1.1 million
in December 2001, whether the In-place Value Method or the
Liquidation Value Method is employed. Cisco asserts that if
the Court opts to base monthly adequate protection payments
upon factors such as fair market value, rather than monthly
lease payments, then the chart shows that Cisco should be
awarded adequate protection payments ranging from $880,794
to $1,120,053 for the period June, 2001 to December, 2003.
Reminding the Court that the Debtors, by their own account, are
holding over $300 million of unencumbered funds and will be
receiving much more as the result of the divestiture of
significant assets while the value of Cisco's equipment is
declining, Cisco requests that the Court order Debtors to
commence immediate monthly rental payments to Cisco at the
contract rate or other appropriate rate to be determine by the
Court, as well as a lump sum payment representing the decline in
value since the Petition Date.
Hearing on this motion will be conducted on December 13, 2001 at
9:45 a.m. The objection deadline is November 27, 2001 at 4:00
p.m. (PSINet Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
SI TECHNOLOGIES: Inks Pact to Amend Principal Credit Agreement
--------------------------------------------------------------
SI Technologies, Inc. (Nasdaq:SISI), which designs, manufactures
and markets high-performance industrial sensors, weighing and
factory automation equipment and systems, reported operating
results for FY2001.
Primarily reflecting previously announced restructuring and
goodwill impairment charges, the Company reported a net loss of
$7.1 million in the fiscal year ended July 31, 2001, on net
sales of $36.3 million. In the previous fiscal year, the
Company earned $351,000 on revenues of $41.3 million.
The majority of the FY2001 loss resulted from $3.8 million in
restructuring charges and $2.0 million in goodwill impairment
charges. Only $300,000 of the $5.8 million in combined charges
reflected incremental cash expenses, with the balance consisting
of non-cash transactions. Excluding the restructuring and
goodwill impairment charges, the Company's net loss for the year
approximated $1.3 million.
For the three months ended July 31, 2001, the Company reported a
net loss of $1.6 million on net sales of $8.4 million. These
results compared with a net loss of $34,000 on net sales of $9.6
million, in the fourth quarter of the previous year. The net
loss for the quarter ended July 31, 2001, included (1) $364,000
in restructuring charges associated with the disposition of
fixed assets and employee severance, and (2) an income tax
provision of $1.0 million. On a pretax basis, the Company's
loss totaled ($581,000) in the fourth quarter of FY2001, versus
a pretax loss of ($106,000) in the quarter ended July 31, 2000.
"While declining industrial capital spending, in particular, and
a manufacturing recession, in general, resulted in lower sales
and an operating loss for Fiscal 2001, we believe that our
decision to restructure and downsize the Company's operations
will significantly benefit future results," commented Rick
Beets, President and Chief Executive Officer of SI Technologies,
Inc. "If restructuring and goodwill impairment charges are
excluded, we reduced our fourth-quarter pretax loss to $217,000,
compared with a pretax loss of $516,000 in the third quarter.
For the full year ended July 31, 2001, we generated EBITDA of
$2.5 million, excluding restructuring and asset impairment
expenses.
"Since it is very difficult to predict when capital spending
trends within the manufacturing sector of the world economy will
improve, we have focused upon restructuring our operations and
positioning the Company to be profitable and cash-flow positive
at lower revenue levels. While we have already reserved for the
anticipated costs of our restructuring plan, its full
implementation will not be completed until April 30, 2002. The
consolidation of the Company's core Revere Transducers and
SI/Allegany (sensor and weighing products) businesses into one
operating unit in California should be completed by January 31,
2002. We are currently in negotiations regarding an early
termination of the Tustin, California, facility lease, which
will allow us to move into a smaller, more cost-effective
facility. Our strategy of outsourcing the production of certain
products, primarily higher-volume load cells and scale
components, is proceeding well, and we have been very pleased
with the progress made in developing our strategic outsource
manufacturing partners.
"While the initial financial benefits of the restructuring plan
will be partially offset by certain incremental expenses that
may not be included in the restructuring charge, we expect
future expense savings and gross profit improvement from the
implementation of the restructuring plan to approximate $2.2
million annually," concluded Beets.
As previously reported, as of April 30, 2001, the Company was in
violation of certain of its debt covenants with its primary
lender, US Bank. Since that time, the Company has been working
with the bank to renegotiate these covenants and otherwise bring
its financial position in alignment with bank expectations.
In November 2001, the Company signed a term sheet to amend its
principal credit agreement with its bank. The Company's lender
has not yet received all required internal approvals and is
therefore not yet bound by the term sheet. There can be no
assurance that the Company will satisfactorily resolve its
credit arrangement with the bank. The proposed terms provide for
a revolving line of credit up to a maximum of $6.5 million, with
interest at prime plus 2.75%. Monthly payments on the line would
be interest only, with principal due November 30, 2002. The new
credit agreement would provide a new term note for $1.5 million,
with interest at prime plus 3.25%. Monthly payments on the new
term note would be $25,000 plus interest, with principal due
November 30, 2002. Monthly payments on the existing note payable
would be reduced to $66,000, plus interest at prime plus 1.75%,
with the remaining terms of the existing note unchanged. The
line and both notes are secured by substantially all of the
Company's assets and are cross-collateralized and subject to
cross-default provisions.
As of July 31, 2001, the Company's cash position was $380,000,
compared with $112,000 on July 31, 2000. Cash available in
excess of that required for general corporate purposes is used
to reduce borrowings under the Company's line of credit. Working
capital decreased to a deficit of $5,177,000 as of July 31,
2001, compared with positive working capital of $8,224,000 on
July 31, 2000. This significant change in working capital was
principally caused by the Company's being in violation of
certain debt covenants on July 31, 2001, which required that all
long-term debt be classified as short-term debt.
SI Technologies, Inc. is a leading designer, manufacturer and
marketer of high-performance industrial sensors/controls and
engineered equipment and systems. Its proprietary products enjoy
leading positions in their respective markets, while sharing
common technologies, manufacturing processes, and customers.
Recent acquisitions have diversified the Company's revenue base
and positioned SI Technologies as an integrator of technologies,
products and companies that are involved in the handling,
measurement and inspection of goods and materials. SI
Technologies' products are used throughout the world in a
variety of industries, including aerospace, aviation, food
processing and packaging, forestry, manufacturing, mining,
transportation, warehousing/distribution, and waste management.
The Company is headquartered in Tustin, California, and its
common stock is traded on Nasdaq under the symbol "SISI."
SERVICE MERCHANDISE: Insurance Carriers Get Adequate Protection
---------------------------------------------------------------
While the Court allows Service Merchandise Company, Inc. and its
debtor-affiliates to provide adequate protection to the
Insurance Carriers, Judge Paine makes it clear that if the
Debtors fail to return the Carriers' collateral levels to their
original amount -- the Carriers shall have an administrative
expense priority with respect to the difference between the
Carriers' allowed secured claims (if any) and the value of the
Carriers' remaining collateral, including any letters of credit.
The Court further rules that such administrative claim shall not
be subject to any bar date or similar deadline without the
consent of the Carriers or further order of the Court, on prior
notice to the counsel for the Carriers. (Service Merchandise
Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
SIMULA: Closes Refinancing of Senior Secured Notes & Term Debt
--------------------------------------------------------------
Simula Inc. (AMEX:SMU) reported revenues for the quarter ended
September 30, 2001 of $27.1 million, compared to $24.2 million
for the third quarter of 2000.
Excluding a prior year boost to revenues of $3.4 million in
proceeds from a license payment and legal settlement, core
operating revenue increased approximately 30% from the prior
year third quarter.
Pro-forma net income and net income per share for the quarter
ended September 30, 2001 was $506,587, which excludes an
extraordinary charge of $2.2 million, net of tax, to write off
the unamortized balance of deferred financing fees attributable
to early extinguishment of debt and also excludes costs
associated with employee severance, default interest and the
reversal of a building repair accrual. The actual net loss for
the quarter was $2,033,960. This compares to actual net income
and net income per share for the quarter ended September 30,
2000 of $2,338,771, which included the effect of $3.4 million in
a one-time license payment and legal settlement referenced above
offset partially by $1.9 million in executive severance.
During the quarter, Simula closed a $25 million senior secured
notes credit facility maturing December 31, 2003. The proceeds
were used to refinance its existing $15 million senior secured
notes and $5 million term debt maturing October 1, 2001. In
connection with the financing the Company also modified its
existing $17 million revolving line of credit facility to
increase the Company's credit availability.
"The strong revenue growth we have achieved this quarter from
our continuing lines of business bodes well for our ability to
begin producing sustainable positive earnings going forward.
Operating income before special items increased 57% during the
third quarter compared to last year. With the restructuring
behind us, we hope that the underlying strength of our core
business will begin to achieve better visibility with our
shareholders," said Brad Forst, President and CEO of Simula.
The Company also announced the sale of substantially all of the
assets of Simula Artcraft Industries Inc., its commercial
airline seat soft goods manufacturing business in Atlanta,
Georgia which contributes less than 5% in corporate revenues.
Artcraft was one of the remaining non-core businesses and had
operating losses through the third quarter of 2001 totaling
$549,144. Estimated sale proceeds of approximately $1.14
million, after reduction of assumed liabilities, will be applied
against the Company's revolving line of credit. In June and
September 2001, the Company recorded a charge against the
realizable value of the assets of this business and no further
write down is expected.
"We are pleased to announce the completion of the restructuring
effort that has been ongoing for the last year. With the sale of
our Atlanta division, the Company has now been able to divest
itself of all targeted non-performing divisions. With the
refinancing of our senior debt during the quarter, we have the
financial resources in place to completely focus on the growth
of our core business," said Forst.
"We have substantially completed our turnaround and do not
anticipate any additional restructuring charges or write-downs
in the fourth quarter or beyond," said Forst.
Simula designs and makes systems and devices that save human
lives. Its core markets are aerospace and defense systems, and
automotive safety systems. Simula's core technologies include
inflatable restraints, energy absorbing seating systems,
advanced polymer materials, transparent and opaque armor
products, personnel protective equipment and parachutes, and
crash sensors. More information is available at
http://www.simula.com
Notes:
-- Pro forma adjustment in third quarter 2001 includes
charges to operating income for severance of $0.5 million ($0.3
million after taxes) related to the realignment of senior
management and reduction of management personnel at a commercial
business held for sale, and an additional reserve required to
reflect the net commercial assets held for sale at their
estimated realizable value.
-- Third quarter 2001 includes a reversal of $0.3 million
($0.2 million after taxes) related to a $0.4 million lease
termination reserve for building repair costs recorded in the
fourth quarter 2000. During the third quarter 2001, the Company
settled the building repair claim with the previous lessor and
obtained a settlement and release.
-- In the third quarter 2001, the Company incurred default
interest of $0.4 million ($0.3 million after taxes) related to
it's Senior Secured Notes which were refinanced September 25,
2001.
-- In the third quarter 2001, the Company recorded a loss
of $2.2 million, net of $1.6 million tax benefit on early
extinguishment of debt related to the refinancing of it's Senior
Secured Notes.
-- Second quarter 2001 includes the affect of approximately
$1.0 million ($0.6 million after taxes) in Cockpit Airbag System
(CABS) development revenue with no significant related costs as
they had been expenses in prior years while CABS was under
development. The recognition of development revenue was due to
the award of the CABS manufacturing contract which included a
component for development.
SPINNAKER INDUSTRIES: Files Chapter 11 Petition in Dayton, Ohio
---------------------------------------------------------------
Spinnaker Industries, Inc. (Amex: SKK) announced that it has
commenced voluntary proceedings under Chapter 11 of the U.S.
Bankruptcy Code for the purpose of facilitating and accelerating
the financial restructuring it previously disclosed it was
pursuing. The Company filed its petition in the United States
Bankruptcy Court for the Southern District of Ohio, Western
Division, in Dayton. The Chapter 11 filing includes Spinnaker
Coating, Inc. and certain other affiliates.
The Company also announced that it has reached agreement,
subject to Court approval, with its existing lenders, led by
Transamerica Business Capital Corporation, to provide up to $30
million in debtor-in possession (DIP) financing. This funding
will allow the Company to continue operating its Spinnaker
Coating and other business units in their ordinary and customary
manner.
Louis A. Guzzetti, Jr., Chairman & CEO, stated, "Over the course
of this year, we have taken a number of difficult, decisive and
important steps to change the strategic direction of the
Company, including closure of our Maine operation. As a result
of these actions, our Spinnaker Coating operations in Ohio are
today positioned to be a profitable and leading provider of
pressure sensitive roll and sheet products to small and mid-
sized printers and distributors who value tailored business
solutions and industry leading personalized customer service.
"We have made it clear over the past several months that the
final critical step in the strategic repositioning of the
Company was the need to retool our capital structure. In a step
in that direction, in October we chose not to make an interest
payment on our 10-3/4% Senior Notes and initiated discussions
with our senior secured lenders and the Senior Noteholders
regarding a financial restructuring. While those discussions
continue, the parties believe that the Chapter 11 filing is
necessary both to facilitate and accelerate the process.
"We are particularly pleased that Transamerica has elected to
continue its long relationship with the Company by leading the
DIP financing that will enable us to proceed with business as
usual at Spinnaker Coating. We know we can also count on the
support of our loyal customers, vendors and employees; they, in
turn, will have the total commitment of our management team to
complete this process quickly and equitably. As a result of all
these factors, we are confident that Spinnaker Coating will
emerge as early as possible in 2002 as a financially sound and
strategically focused company that is positioned, in partnership
with our suppliers, to provide even greater value and service to
our customers in the years ahead."
The Company also reported that its common stock (including its
Class A common stock) no longer meets the continuing listing
requirements of the American Stock Exchange. Consequently, the
Company intends to seek to have the American Stock Exchange
delist its common stock as soon as practicable; if delisted, the
Company will then apply to the Securities and Exchange
Commission to terminate the registration of the common stock
under the Securities Exchange Act of 1934. With fewer than 300
holders of record, if the common stock is delisted and its
registration terminated, the Company will no longer be required
to disclose publicly the financial and other information that it
now must provide under the Exchange Act. In such case, it is
likely that there will be no active public trading market for
the common stock.
Spinnaker Coating is a leading supplier of pressure sensitive
paper stock for labels. It is also the largest producer of paper
stock for pressure sensitive U.S. postage stamps, proudly
serving as the sole supplier for the "United We Stand" special
issue.
SPINNAKER INDUSTRIES: Chapter 11 Case Summary
---------------------------------------------
Lead Debtor: Spinnaker Industries, Inc
518 E Water St
Troy, OH 45373
Tax ID: 06-0544125
Bankruptcy Case No.: 01-38066
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Spinnaker Coating Inc 01-38069
Spinnaker Coating-Maine Inc 01-38072
Chapter 11 Petition Date: November 13, 2001
Court: Southern District of Ohio (Dayton)
Judge: John E. Hoffman Jr.
Debtors' Counsel: Ronald S. Pretekin, Esq.
600 IBM Building
33 West First St
Dayton, OH 45402-1235
937-223-8177
Michael B. Solow, Esq.
311 S Wacker Dr
62nd Flr
Chicago, IL 60606
312-583-2300
STATIA TERMINALS: Sells Assets to Kaneb Pipe for $307M + Debts
--------------------------------------------------------------
Marine terminal operator Statia Terminals Group N.V. (Nasdaq:
STNV) announced that it has entered into a definitive agreement
under which Kaneb Pipe Line Partners, L.P. (NYSE: KPP) will
acquire the stock of Statia's three subsidiaries, including
Statia Terminals International N.V., for a purchase price of
approximately $307 million, including estimated cash on hand and
the assumption of approximately $107 million of Statia debt.
The shareholders of Statia, a Netherlands Antilles company, will
be asked to approve the sale of the subsidiaries (which
constitute substantially all of the assets of Statia), an
amendment to the articles of incorporation implementing a
distribution mechanism for the proceeds of the sale, and the
subsequent liquidation of the Company, at an extraordinary
meeting of shareholders to be held as soon as permissible.
After giving effect to the proposed amendment to the articles of
incorporation, the class A shareholders will receive, in the
aggregate, $108.2 million, or $18.00 per class A share in the
transaction, a premium of 39.5% to the closing price of Statia
class A shares on November 12, 2001. Approximately 6.01 million
class A shares are currently outstanding. Holder's of Statia's
3.8 million class B shares will receive, in the aggregate, $62.3
million, or $16.40 per class B share, and holders of Statia's
38,000 class C shares are expected to receive, in the aggregate,
approximately $8.1 million. In addition, holders of options to
purchase class A shares will be paid an aggregate of $13.9
million out of the sale proceeds in consideration for the
surrender of such options.
The transaction was approved unanimously by the Board of
Directors of Statia, which also unanimously resolved to
recommend that the holders of its class A and class B shares
amend the articles of incorporation, approve the sale of the
subsidiaries and approve the liquidation of the Company. Statia
Terminals Holdings N.V. has granted Kaneb an irrevocable
commitment to vote their approximately 39% ownership stake in
Statia in favor of the transaction, assuming the class A
shareholders approve the amendment to Statia's articles in a
separate class vote. The transaction is expected to close in
the first quarter of 2002.
James G. Cameron, President and Chief Executive Officer of
Statia, stated "This is a very attractive transaction for our
public shareholders, for our dedicated employees and for our
customers. Kaneb is a world-class organization, and we can look
forward to a future with them that holds great promise."
"The sale of Statia to Kaneb reflects the considerable progress
we have made in recent years and offers our shareholders an
opportunity to receive premium value for their shares. Statia
today is one of the world's leading independent marine
terminaling companies with world-class assets, strong financial
results and a solid balance sheet. These achievements are a
credit to our people, who have consistently demonstrated the
experience and commitment necessary to capitalize on the
potential of our assets. I look forward to working with the
Kaneb management team to complete this transaction and
successfully integrate our two companies."
In addition to shareholder approval, the transaction is subject
to regulatory approvals and other customary conditions. Statia
expects to mail definitive proxy materials to its shareholders
in the near future.
Merrill Lynch & Co. served as financial advisor to Statia and
Houlihan Lokey Howard & Zukin opined on the fairness of the
transaction to the class A shareholders of Statia.
Statia provides storage, blending, processing, and other marine
terminaling services for crude oil, refined products and other
bulk liquids to crude oil producers, integrated oil companies,
traders, refiners, petrochemical companies, and others at its
facilities located on the island of St. Eustatius, Netherlands
Antilles, and at Point Tupper, Nova Scotia, Canada. The
Company's facilities, with their deep-water ports, can
accommodate substantially all of the world's largest oil
tankers. In connection with its terminaling activities, Statia
also provides value-added services, including delivery of bunker
fuels to vessels, other petroleum product sales, emergency and
spill response services, and ship services.
TRANSFINANCIAL: Inks Pact to Sell Financial Services Businesses
---------------------------------------------------------------
TransFinancial Holdings, Inc. (AMEX: TFH), a holding company
with continuing operations in financial services, reported it
has rescheduled its annual meeting of shareholders for January
22, 2002, in Lenexa, Kansas.
The meeting was previously scheduled for October 19, 2001, but
negotiations have continued with interested parties in the sale
of the financial services business. As a result, a new
definitive agreement has been signed for the sale of the
financial services businesses and certain related assets.
The Board of Directors of TFH has unanimously approved this
transaction and will recommend such to the TFH shareholders.
This agreement is subject to approval by a majority of
outstanding TFH shares at a meeting to be held after preparation
and mailing of proxy material.
Bill Cox, Chairman and CEO, stated: "Under the previously
announced plan of liquidation, the company will sell all of its
assets, and after paying off its debts and setting aside
required reserves, will distribute the remaining proceeds as one
or more 'liquidating dividends' within the next several months.
As a result of this new agreement, preliminary estimates of the
total distribution under the plan range from $2.50 to $3.00 per
share."
TRI-STATE OUTDOOR: Sees Default on Senior Debt & Hires Jefferies
----------------------------------------------------------------
Tri-State Outdoor Media Group, Inc. announced that the Company's
results of operations for the third quarter have been adversely
affected by the downturn in demand for advertising both before
the terrorist attacks of September 11, 2001 and an acceleration
of that trend after September 11, 2001 and an increase in amount
of delinquent accounts receivable. The Company's financial
performance for the third quarter will cause the Company to be
in breach of certain covenants of its senior secured lending
facility.
The Company will not be able to make draw downs on this facility
to make the next interest payment due November 15, 2001 on its
11% Senior Notes due 2008. The Company is otherwise meeting its
obligations as they currently exist. The Company will report its
complete third quarter results on November 14, 2001. The Company
is working on a plan to address the defaults under its senior
secured lending facility and the anticipated default under its
Senior Notes and will be presenting such plan to its senior
secured lender and Senior Note holders when it is completed.
The Company has engaged Jefferies & Company, Inc., to assist the
Company in exploring strategic alternatives. The Company has
entered into a forbearance agreement with its senior secured
lender whereby such lender has agreed, under certain
circumstances, to forego exercising any remedies contained in
the senior secured lending facility until March 1, 2002.
The Company is a leading highway directional outdoor advertising
company, operating over 12,000 advertising displays, including
approximately 10,500 bulletins and approximately 1500 posters,
in 27 states in the eastern and central United States at
September 30, 2001. Essentially all of the Company's billboards
are located along interstate highways and primary and secondary
roads outside of urban areas.
USG CORP: Plan Filing Exclusive Period Extended to May 1, 2002
--------------------------------------------------------------
Judge Newsome granted USG Corporation's request for a six-month
extension of their Exclusive Periods so that Debtor and its
debtor-affiliates can preserve their right to make a meaningful
plan of reorganization in these cases. Specifically, Judge
Newsome:
-- extended the period in which the Debtors have the exclusive
right to file a plan or plans of reorganization through and
including May 1, 2002, and;
-- extend the period during which the Debtors have the
exclusive right to solicit acceptances of that plan through
and including July 1, 2002. (USG Bankruptcy News, Issue No.
12; Bankruptcy Creditors' Service, Inc., 609/392-0900)
VANGUARD AIRLINES: Financing Options Talks with Lenders Underway
----------------------------------------------------------------
Vanguard Airlines, Inc. (Nasdaq: VNGD) announced third quarter
results.
The Company's net loss for the three months ended September 30,
2001, was $3.6 million compared to a net loss of $4.7 million in
the third quarter 2000. Total operating revenues for the third
quarter 2001 decreased eight percent to $32.8 million from $35.5
million in third quarter 2000. Total operating expenses
decreased seven percent to $37.2 million from $39.8 million in
third quarter 2000. Vanguard's net loss includes a $2.3 million
benefit from $4.6 million of federal assistance provided during
the third quarter to offset direct and indirect losses resulting
from the events of September 11.
For the third quarter of 2001, load factor increased 8.0 points
to 67.0 percent compared to 59.0 percent in the third quarter of
2000. Passenger traffic increased 17 percent to 290.6 million
Revenue Passenger Miles versus 248.5 million in third quarter
2000. Capacity increased three percent to 433.6 million
Available Seat Miles from 421.4 million in the third quarter of
2000.
Scott Dickson, Chairman, CEO and President of Vanguard Airlines,
said, "Considering the disruption caused by the events of
September 11, we are very pleased with these results. In
particular, we are gratified to see the validation of our
business plan with the tremendous growth in Vanguard's load
factor year-over-year and the increase in Vanguard's yields
during the course of 2001. Year-over-year, Vanguard's yields
have been impacted by the change in route structure completed in
March of this year and the resulting substantial increase in
average length of flight. However, despite industry-wide fare
discounting and the events of September 11, between the second
and third quarters of 2001, Vanguard's yields actually increased
approximately six percent.
"While the results are very encouraging, they do not eliminate
the need for the airline to take strong action to preserve its
financial condition as a result of the September 11 terrorist
attacks. Our capital resources remain tight. We are discussing
financing alternatives with several lenders and seek to utilize
the federal loan assistance authorized by recent federal
legislation. The federal loan assistance is intended to allow
airlines such as Vanguard to regain access to the capital
markets after the events of September 11.
"One of the factors that the Government will consider in
reviewing applications for loan assistance is the extent of
self-help an airline undertakes in order to improve its
financial position. Vanguard is actively considering several
self-help measures to improve its financial condition, including
the restructuring of aircraft leases and vendor payables. We
also anticipate the issuance of shares of new equity in
connection with a government-assisted financing package, and
such issuance may dilute the interests of existing stockholders.
To free up equity for issuance, we are considering a stock
combination, although the ratio for such split has not been
finally determined. We do not have any significant long-term
debt (other than deferral notes related to our aircraft leases),
so further restructuring indebtedness is not necessary.
"It is management's hope and firm intention that these measures
can be implemented by agreements with creditors, lessors and
shareholders outside of any court process with the expectation
that this would result in a speedier, less burdensome result for
all stakeholders," added Dickson. "The events of September 11
have sent shockwaves throughout the country and the airline
industry. At Vanguard, we intend to survive these events;
however, survival will require cooperation by our employees,
vendors and shareholders, pulling together to overcome this
tragedy. We are guardedly optimistic about Vanguard's prospects
for obtaining new financing involving the federal credit
assistance. We have received strong indications of interest
from several potential investors and are working to develop a
loan and restructuring package for submission to the Air
Transportation Stabilization Board.
"If and when received, this new financing, combined with the
anticipated restructuring, will put Vanguard on a sturdy
financial base from which it can grow its Kansas City
operations. Coupled with our successful restructuring of
Vanguard's business strategy, distribution methods and service
performance completed earlier this year, Vanguard will be
soundly positioned for the new economy. We are very pleased
with the current level of Vanguard's bookings and the rapidity
with which our customers have returned to fly Vanguard."
Separately, the Company stated that it had received notification
from Nasdaq that the Company's shares were subject to delisting
as a result of the Company failing to meet Nasdaq's minimum
capitalization requirements. The Company anticipates that, upon
delisting, its common stock would continue to trade in the over-
the-counter market.
Vanguard Airlines, Kansas City's Hometown Airline, provides
convenient all-jet service to 14 cities nationwide: Atlanta,
Austin, Buffalo/Niagara Falls, Chicago-Midway, Dallas/Ft. Worth,
Denver, Fort Lauderdale (beginning Dec. 10), Kansas City, Las
Vegas, Los Angeles, New Orleans,
New York-LaGuardia, Pittsburgh and San Francisco. The airline
offers low fares with no advance-purchase requirements, advanced
seat assignment and extra legroom on all flights with a fleet of
eight Boeing 737s and five Boeing MD-80-series aircraft, which
feature SkyBox? Business Class service. For more information or
to make reservations online, visit Vanguard's Web site at
http://www.flyvanguard.com
At the end of the third quarter, Vanguard Airlines had total
current liabilities of $52 million, as opposed to total current
assets amounting to $14 million. Stockholders' equity deficit
stood at $24 million.
W.R. GRACE: Wins Final Okay to Pay $34MM of Critical Trade Debt
---------------------------------------------------------------
Chase Manhattan Bank, acting as Agent, represented by Stephen H.
Case, Nancy L. Lazar, and David D. Tawil of the New York firm of
Davis Polk & Wardwell, as lead counsel, and Mark D. Collins of
Richards Layton & Finger as local Wilmington counsel, enter into
a Stipulation with W. R. Grace & Co. and its debtor-affiliates,
represented by James W. Kapp III and James H. M. Sprayregen of
the Chicago firm of Kirkland & Ellis to resolve this dispute.
After agreeing that the Court, in the Order granting the
Debtors' Motion, directed that total payments to vendors were
not to exceed a cap of $34,300,000 without further Order, and
thereafter the Debtors paid a total of $5,623,729 in "critical
vendor" payments. Chase and the Debtors advise that they have
engaged in negotiations to resolve this, and that the Official
Committee of Unsecured Creditors supports the resolution set out
in this Stipulation.
The parties agree that the provision in the prior Order setting
a cap on payments to critical vendors is removed in its entirety
from the Order, but that otherwise the Order remains in full
force and effect. The Debtors agree that their payments to
critical vendors, including natural gas vendors, will not exceed
the amount previously disbursed, plus the additional sum of
$4,938,669, plus the total of all prepetition deposits returned
to the Debtors in excess of any applicable setoffs.
The Debtors agree that the automatic stay of creditor action is
modified to the extent necessary to permit the holders of trade
claims (including natural gas vendors) to set off up to an
aggregate amount of $8,006,046 of prepetition deposits against
prepetition trade claims.
However, the terms of this Stipulation are entered into without
prejudice to or waiver of the rights of any party to recover
prepetition payments as preferential transfers. Upon Judge
Farnan's approval of this Stipulation, and the finality of that
approval, Chase's Motion is withdrawn with prejudice. (W.R.
Grace Bankruptcy News, Issue No. 14; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WACKENHUT CHILE: Inks Standstill Agreement with Bank Group
----------------------------------------------------------
Wackenhut Chile S.A., the Chilean affiliate of The Wackenhut
Corporation (NYSE: WAK WAKB), announced that it has executed a
standstill agreement with a consortium of banks regarding
substantially all of its unsecured loans (approximately $11
million, including performance bonds issued by the same Chilean
lenders).
The terms of the standstill agreement with the lending
institutions provide Wackenhut Chile with deferral of interest
payments for 90 days with all accrued and unpaid interest and
principal due in 180 days.
Philip L. Maslowe, chairman of the board of Wackenhut Chile,
said, "The company's core physical security business is the
market leader in Chile. The agreement with the banks will
enable Wackenhut Chile's management team to dedicate themselves
to customer service and continued growth in the security-
related businesses. The deferral of interest and principal, as
agreed upon with the lending institutions, will provide
Wackenhut Chile with sufficient time to execute its
restructuring strategy, which includes the selling of non- core
businesses and should generate sufficient proceeds to repay all
unsecured debt obligations."
Banco Sud Americano, an affiliate of the Bank of Nova Scotia, is
the lead bank in the standstill agreement and has been
instrumental in structuring the arrangement which involves
thirteen lending institutions. An affiliate of Banco Sud
Americano, Banco Sud Americano Asesorias Financieras, has been
engaged by Wackenhut Chile to assist in the sale of the
company's non-core businesses.
Wackenhut Chile S.A. is an outsourcing company engaged in
physical security, cash-in-transit, contract cleaning, temporary
staffing, food service, forestry and postal services in Chile,
with headquarters in Santiago. It is an affiliate of The
Wackenhut Corporation, and revenues in 2000 for Wackenhut Chile
S.A. were approximately US$95 million.
The Wackenhut Corporation -- http://www.wackenhut.com-- is a
leading domestic and international provider of outsourcing and
privatization services. Its principal business lines include
security-related services; correctional facilities and services;
and flexible staffing services, and it has operations in 50
countries, on six continents.
The Wackenhut Corporation trades on the New York Stock Exchange
under two symbols, the Series A Common Stock (WAK) and the
Series B Common Stock (WAKB). The Series B Common Stock has no
voting rights, but in all other respects is the same as the
Series A Common Stock.
WINSTAR COMMS: Wants to Reject SFO Lease & Abandon Equipment
------------------------------------------------------------
Winstar Communications, Inc., seeks an order rejecting the Lease
with The Cambay Group for the premises located at 200 Paul Ave.,
San Francisco, California, effective as of the date of this
Motion, except that the Debtors shall continue to pay rent under
the Lease until they vacate the Premises. The Debtors also seeks
authorization to abandon the equipment to Lucent Technologies,
Inc. located in the rejected leased premises.
Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP,
in Wilmington, Delaware, tells the Court that the Debtors have
determined that the Premises are not necessary to the Debtors'
ongoing operations. In the business judgment of the Debtors, it
is no longer in the Debtors best interests to maintain the
Lease, which constitutes an unnecessary drain on the Debtors'
cash flow. Ms. Morgan submits that the Debtors intend to vacate
the Premises on or before October 31, 2001 and seek approval to
abandon the Equipment at the Premises. By rejecting the Lease,
the Debtors can minimize unnecessary administrative expenses.
Ms. Morgan relates that the Debtors also do not believe that
they would be able to obtain any value for the Lease by
assignment to third parties and accordingly, believes that
rejection of the Lease is in the best interests of the Debtors'
estates, creditors and interest holders.
Ms. Morgan informs the Court that the equipment proposed to be
abandoned is comprised of a switch, web-hosting equipment and
related components, which are not yet fully, operational. The
Debtors paid approximately $22,700,000 for the Equipment but
under current market conditions, the Equipment is virtually
unmarketable. Additionally, given the secured claims currently
asserted by Lucent, the Debtors would receive no residual
benefit for the Equipment even if they were able to find an
interested buyer because Lucent would have a security interest
in all of the sale proceeds. Furthermore, Ms. Morgan explains
that the Equipment currently sits in the Leased Premises where
the Debtors continue to accrue administrative rent obligations
in the amount of $150,000 per month and continue to incur
substantial costs in maintaining and storing the Equipment. Ms.
Morgan asserts that abandonment of the Equipment will enable the
Debtors rid themselves of the Equipment and any related expenses
incurred in maintaining this unmarketable asset. (Winstar
Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Weekly
Issuer Coupon Maturity Bid - Ask change
------ ------ -------- --------- ------
Crown Cork & Seal 7.125% due 2002 62 - 64 +5
Federal-Mogul 7.5% due 2004 11 - 13 +1
Finova Group 7.5% due 2009 38 - 40 +5
Freeport-McMoran 7.5% due 2006 69 - 72 +1
Global Crossing Hldgs 9.5% due 2009 14 - 15 -3
Globalstar 11.375% due 2004 7 - 9 +1
Levi Strauss & Co 11.625% due 2008 71 - 73 0
Lucent Technologies 6.45% due 2029 67 - 69 +2
Polaroid Corporation 6.75% due 2002 5 - 7 -2
Terra Industries 10.5% due 2005 73 - 76 +1
Westpoint Stevens 7.875% due 2005 32 - 35 0
Xerox Corporation 8.0% due 2027 46 - 48 0
Source: DebtTraders is a specialist in global high yield
securities, providing clients unparalleled services in the
identification, assessment, and sourcing of attractive high
yield debt investments. For more information on institutional
services, contact Scott Johnson at 1-212-247-5300. To view our
research and find out about private client accounts, contact
Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available
at http://www.DebtTraders.com/
*********
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is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.DebtTraders.com/
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For copies of court documents filed in the District of Delaware,
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*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
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Copyright 2001. All rights reserved. ISSN: 1520-9474.
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