/raid1/www/Hosts/bankrupt/TCR_Public/011204.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, December 4, 2001, Vol. 5, No. 236
Headlines
360NETWORKS: EBITDA Results Swing-Down to $164MM Loss in Q3
ANC RENTAL: Secures Injunction Against Utility Companies
AIR CANADA: S&P Ratchets Sr. Unsecured Debt Ratings Down a Notch
AMERICA WEST: S&P Cuts Senior Unsecured Debt Rating to C from CC
APPLETON PAPERS: S&P Rates $250M Senior Subordinated Notes at B+
ARGUSS COMMUNICATIONS: Shareholder Group Seeks to Replace Board
AT HOME: Court Terminates Contract with Charter Communications
AT HOME: Charter Comms. Transfers Customers to Charter Pipeline
AT HOME: AT&T Begins Migration of Customers to New Network
AVADO BRANDS: Will Defer Interest Payment on 9-3/4% Senior Notes
BURLINGTON: Court Allows Payment of $5.8M Critical Vendor Claims
CHILDTIME LEARNING: Operating Losses Burgeon to $3.3MM in Q2 '02
CHIQUITA BRANDS: Seeks to Pay Non-Noteholder Creditors' Claims
CLARION COMM'L: Will Make Liquidating Distribution on Dec. 19
COMDISCO: Appoints J. MacCoy as Senior Vice-Pres. & Treasurer
CRYOCON: Working Capital Runs Out, with Deficit of $3.8 Million
DYNASTY COMPONENTS: Deloitte Appointed CCAA Monitor in Canada
DYNASTY COMPONENTS: J. Marc Brule Replaces G. Economo as New CEO
EDISON: Fitch Changes Funding Rating Watch Status To Positive
ENRON: Describes Dynegy's Evil Acts for the Bankruptcy Court
ENRON CORP: S&P Says Credit Derivative Exposure Stands at $6.3BB
ENRON CORP: AEGON Confirms Gross Exposure of $300 Million
ENRON CORP: Arranges $1.5 Billion Debtor-In-Possession Financing
EXODUS COMMS: Court Okays Bingham Dana as International Counsel
EXODUS: Strikes Deal to Sell Assets to C&W for $755 Million
EXOTICS.COM: Working Capital Deficit Doubles in Third Quarter
FMAC LOAN: Fitch Downgrades Three Trust 1998-A Class Series
FEDERAL-MOGUL: Unsecured Committee Taps Bayard as Co-Counsel
FOCAL COMMS: Morgan Stanley Discloses 10.46% Equity Holding
FRUIT OF THE LOOM: Resolves Kansas CERCLA Claims with the EPA
GALAXY ONLINE: Commission Lifts Cease Trading Order on Nov. 30
HEXCEL CORP: Heightened Liquidity Concerns Spur S&P Downgrades
HUNTSMAN CORP: Taps Dresdner to Negotiate Debt Restructuring
INTEGRATED HEALTH: Seeks Approval to Divest 4 Facilities in PA
LTV CORP: Sends Modified Labor Pact to Steel Loan Board & Banks
LAIDLAW: Names John Grainger as CEO of Education Services Unit
LERNOUT & HAUSPIE: Reaffirms Selection of ScanSoft in Auction
LOEWEN GROUP: Stay Lifted to Resolve $6.3MM Construction Dispute
LYONDELL CHEMICAL: S&P Rates $350MM Senior Secured Notes at BB
MALDEN MILLS: Firms-Up Deal with Lenders for $20MM DIP Financing
MAXICARE HEALTH: HMO Unit Assigns Contracts to Care 1st & Molina
METALS USA: Seeking Injunction Against Utility Companies
PEACE ARCH: Expects to Finalize Refinancing of Subordinated Debt
PEN HOLDINGS: Moody's Junks Senior Notes Over Liquidity Concerns
PENN SPECIALTY: Accepting Bids for All Assets Until Dec. 7
POLAROID: Court Approves Proposed Interim Compensation Protocol
POLAROID: Plans to Sell ID Systems Assets to Digimarc for $56.5M
USG CORP: Committee Gets Okay to Retain Stroock as Lead Counsel
*********
360NETWORKS: EBITDA Results Swing-Down to $164MM Loss in Q3
-----------------------------------------------------------
360networks, a fiber optic network services provider that is
restructuring under creditor protection in Canada and the United
States, announced its financial results for the periods ended
September 30, 2001.
Revenue for the first nine months of 2001 was $48 million,
compared with $353 million for the same period in 2000. Revenue
for the three months ended September 30, 2001 was $31 million,
compared with $119 million for the same period in 2000.
The decrease in revenue is a result of the renegotiation of
existing contracts in the second quarter of 2001, the continued
downturn in the sector and customers' reluctance to make
purchase commitments during the company's restructuring process.
Gross loss was $168 million for the first nine months of 2001,
compared with a gross profit of $138 million for the same period
in 2000. Gross loss was $14 million for the third quarter of
2001, compared with a gross profit of $51 million in the third
quarter of 2000.
Selling, general and administrative expenses were $129 million
for the first nine months of 2001, compared with $56 million for
the same period in 2000. The increase is due primarily to the
addition of sales, product and network services personnel in
late 2000 and early 2001 as the company's business shifted from
constructing networks and selling dark fiber to providing
network and other services. Sales, general and administrative
expenses were $17 million for the third quarter of 2001,
compared with $20 million for the same period in 2000.
Earnings before interest, taxes, depreciation, amortization,
stock-based compensation and minority interest (EBITDA) was a
loss of $464 million for the first nine months of 2001, compared
with a gain of $82 million for the same period in 2000. EBITDA
for the third quarter of 2001 was a loss of $35 million,
compared with a gain of $31 million in the third quarter of
2000.
Net loss was $5.3 billion for the first nine months of 2001,
compared with $200 million for the same period in 2000. The
higher loss in 2001 is due primarily to an asset impairment
provision, lower sales, the renegotiation of revenue contracts,
bad debt allowances and reorganization costs. Net loss was $164
million for the third quarter of 2001, compared with $51 million
in the third quarter of 2000.
"During the restructuring period, we have revised our business
plan, reduced our cash needs and accelerated our progress toward
cash flow break even," said Vanessa Wittman, chief financial
officer of 360networks. "Our cash balance on November 23
exceeded $165 million, compared with our initial projected
budget of less than $85 million for the companies under creditor
protection."
"Working closely with our creditors and advisors, we continue to
make progress on our reorganization," Wittman noted. "We are
currently negotiating with several potential acquirers and
investors, and have developed a stand-alone plan that requires
no additional investment. Based on these developments, we expect
to make a recommendation to our key creditors by early next
year."
"Given that any potential transaction or reorganization would
not occur before early 2002, we intend to seek a six-month
extension to the orders providing us creditor protection in
Canada and the United States, which are scheduled to expire in
late December. We believe our lenders will support the extension
applications," Wittman added.
360networks offers optical network services to
telecommunications and data communications companies in North
America. The company's optical mesh fiber network spans
approximately 36,000 kilometers (22,000 miles) in the United
States and Canada.
On June 28, 2001, the company and several of its operating
subsidiaries voluntarily filed for protection under the
Companies' Creditors Arrangement Act (CCAA) in the Supreme Court
of British Columbia. Concurrently, the company's principal U.S.
subsidiary, 360networks (USA) inc., and 22 of its affiliates
voluntarily filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York. In October 2001, four operating
subsidiaries that are part of the 360atlantic group of companies
also voluntarily filed for protection in Canada. Insolvency
proceedings for several subsidiaries of the company have been
instituted in Europe and Asia.
ANC RENTAL: Secures Injunction Against Utility Companies
--------------------------------------------------------
In the normal course of their businesses, ANC Rental
Corporation, and its debtor-affiliates use electricity, gas,
water, telephone, waste management, telecommunication, and other
utility services provided by utility companies.
The Debtors seek an order prohibiting the Utility Companies from
altering, refusing or discontinuing services on account of
pre-petition claims; determining that the Utility Companies are
adequately assured of payment; and establishing procedures for
determining requests for additional adequate assurance.
More specifically, the Debtors move the Court for immediate
entry of an order providing that:
A. the Utility Companies are prohibited from altering, refusing
or discontinuing services on account of prepetition claims;
B. the Utility Companies are adequately assured of payment;
C. the following procedure for determining requests for adequate
assurance shall be established:
a. within 5 business days of entry of an order granting
this Motion, the Debtors will mail a copy of this
Motion and the Order approving this Motion to the
Utility Companies by first class mail;
b. within 30 calendar days from the date of the Order, or
for a utility company that was omitted, within 30 days
after service of the Order, any Utility Company may
notify any of the Debtors and counsel to the Debtors,
in writing, that the Utility Company objects to the
adequate assurance granted by the Order and requests
additional adequate assurance. The request shall
include a summary of the Debtors' payment history
relevant to the affected account(s), a list of
security held by each utility company to secure
payment of utility services for the affected
account(s), and the average monthly charge per the
affected account(s); and
c. if a Utility Company Notice is sent and the Debtors
believe such request is unreasonable, the Debtors will
promptly file a Motion for Determination of Adequate
Assurance of Payment and shall set such motion for a
hearing at the Court's discretion;
D. if a Determination Motion is filed or a Determination Hearing
is scheduled, such Utility Company will be deemed to have
adequate assurance of payment until the entry of a final
order finding that the Utility Company is not adequately
assured of future payment, without the need for payment of
additional deposits or other securities until an order of
the Court is entered in connection with such Determination
Motion or Determination Hearing; and
E. any Utility Company that does not timely request additional
adequate assurance will be deemed to have adequate
assurance.
Mark J. Packel, Esq., at Blank Rome Comisky & MCCauley LLP in
Wilmington, Delaware, contends that the utility services are
essential to the ability of the Debtors to sustain their
business operations while these chapter 11 cases are pending,
and any extended interruption of utility service during the
pendency of their cases could severely disrupt the Debtors'
business operations. Mr. Packel informs the Court that Debtors'
continued business operations rely to a great extent on
continued electric service for the operation of the Debtors'
computerized systems for making reservations and monitoring
vehicle inventory. In addition, the Debtors rely upon
electricity for lighting, power and general office use and as
such, the Debtors' business operations would be severely
disrupted by an extended disruption of electric service. The
Debtors also rely upon other utility services, including
telephone, water, waste management and gas.
In the aggregate, Mr. Packel estimates that the Debtors' utility
bills average approximately $4,500,000 per month. If the Debtors
were required to provide even a one month deposit to all the
Utility Companies, they would be required to expend a
significant amount of money in an unproductive and unnecessary
way, at a time when working capital is much more usefully
deployed in the operation of the Debtors' businesses.
The Debtors believe the relief requested is supported by the
fact that the Debtors have had an excellent payment history with
respect to the Utility Companies prior to the Filing Date. Other
than certain bills for the most recent billing cycle, the
Debtors believe they are completely current with respect to all
of the Utility Companies. The Debtors also believe the
administrative expense priority and the protections provided by
the Bankruptcy Code constitute adequate assurance for payment,
and no deposit or other security is required. Mr. Packel assures
the Court that the Debtors have, or will continue to have,
sufficient funds from operations to make timely payments for all
post-petition utility services.
* * *
Judge Walrath prohibits the utilities from altering, refusing or
discontinuing services or requiring a deposit on account of
pre-petition claims, pending a hearing on the motion on
December 5, 2001 and objections due on November 28, 2001. (ANC
Rental Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AIR CANADA: S&P Ratchets Sr. Unsecured Debt Ratings Down a Notch
----------------------------------------------------------------
Standard & Poor's downgraded its senior unsecured debt rating
for Air Canada to 'B' from 'B+', reflecting reduced asset
protection for unsecured creditors and application of revised
criteria for "notching" down of such debt ratings based on the
proportion of secured debt in a company's capital structure. The
rating remains on CreditWatch with negative implications.
The rating actions do not indicate a changed estimate of default
risk, but rather poorer prospects for recovery on senior
unsecured obligations if the affected airlines were to become
insolvent. Accordingly, no corporate credit ratings or other
types of debt are affected; airport revenue bonds, though often
senior unsecured debt in a legal sense, are related to a
specific airport facility that has value in a bankruptcy
reorganization, and ratings of such bonds are not affected. Bank
loan ratings are affected where those facilities are unsecured.
Airlines worldwide increasingly rely on aircraft and other
asset-backed financings, rather than unsecured debt, to finance
capital expenditures, a trend that accelerated since the Sept.
11 terrorist attacks in the U.S. and resulting damage to airline
revenues.
Senior Unsecured Debt Rating Lowered;
Remain On CreditWatch Negative
To From
Air Canada (B+/Watch Neg/--) B B+
AMERICA WEST: S&P Cuts Senior Unsecured Debt Rating to C from CC
----------------------------------------------------------------
Standard & Poor's downgraded its senior unsecured debt rating
for America West Airlines Inc., to 'C' from 'CC', reflecting
reduced asset protection for unsecured creditors and application
of revised criteria for "notching" down of such debt rating
based on the proportion of secured debt in a company's capital
structure. The ratings remain on CreditWatch with negative
implications.
The rating actions do not indicate a changed estimate of default
risk, but rather poorer prospects for recovery on senior
unsecured obligations if the America West was to become
insolvent. Accordingly, no corporate credit rating or other
types of debt are affected. Bank loan ratings are affected where
those facilities are unsecured.
Senior Unsecured Debt Rating Lowered;
Remain On CreditWatch Negative
To From
America West Airlines Inc. (CCC-/Watch Neg/--) C CC
APPLETON PAPERS: S&P Rates $250M Senior Subordinated Notes at B+
----------------------------------------------------------------
Standard & Poor's assigned its single-'B'-plus rating to
Appleton Papers Inc.'s $250 million senior subordinated notes
due 2008 to be issued under Rule 144A with registration rights.
At the same time, Standard & Poor's existing ratings on the
company are affirmed. The outlook is stable.
Proceeds from the debt issue, together with available cash, will
be used to redeem in full a senior subordinated note due 2008
issued to Arjo Wiggins Appleton (AWA) when the company was
recently acquired by its employees. AWA still retains a $140
million payment-in-kind seller note that accretes to $305
million over eight years.
The ratings reflect Appleton's leading positions in niche
specialty paper markets, a fairly stable cost base, limited
product diversity, and an aggressive financial profile.
Appleton is the world's largest manufacturer of carbonless
paper, which is used in multi-part forms such as invoices,
credit card receipts, and packing slips. The industry is
modestly cyclical and very concentrated. Mead Corp., a larger,
diversified forest products company, is the company's primary
competitor. Volumes in the U.S. have been declining about 9% a
year because of the development of substitute technologies, and
these declines are expected to continue. The company expects to
offset them with increased sales in the growing thermal paper
market (point of sales receipts, labels, tickets, etc.), where
it is also the industry leader, and with new product
applications.
Appleton's competitive cost position stems from an on-going
focus on manufacturing efficiencies and process improvements,
limited exposure to raw material price volatility, meaningful
pulp integration, and cost-effective on-machine coating
capabilities. Product pricing is relatively stable, although
there has been some recent pressure in commodity thermal paper
pricing due to capacity additions. Geographic diversity is
limited, with only about 10%-12% of sales outside the U.S.,
however, the company has strong positions in the growing Latin
American carbonless market. Appleton has strong customer
relationships with diverse end users, but is subject to some
customer concentration risk.
Appleton's balance sheet is stretched, with debt to capital of
80% and total debt to EBITDA of 3.6 times. However, the
company's financial profile should strengthen during the next
few years because free cash flow will be primarily applied
toward debt reduction (no dividend payments or acquisitions are
expected). Total debt to EBITDA is expected to average about 3x
with debt to capital declining to between 50% and 60%,
appropriate measures for the ratings. Operating margins (before
depreciation and amortization) should remain in the low-20% area
aided by further shifts to higher margin products, increased
integration, and cost containment measures. Appleton should
generate meaningful levels of free cash flow driven by strong
operating performance, moderate capital expenditures, and
minimal tax payments due to an advantageous corporate structure.
As a result, funds from operations to total debt should range
between 25% and 30%, with cash interest coverage in the 5x-6x
range over the intermediate term. Financial flexibility is
adequate with the company's $75 million revolving credit
facility expected to remain substantially undrawn.
Outlook: Stable
A relatively heavy debt burden and the challenges of a declining
market limit upside ratings potential. The company's leading
market shares, stable operating margins, and modest required and
discretionary cash outflows cushion against downside risks.
Rating Assigned
Appleton Papers Inc.
$250 million senior subordinated notes due 2008 B+
Ratings Affirmed
Appleton Papers Inc.
Corporate credit rating BB
Senior secured bank loan BB
ARGUSS COMMUNICATIONS: Shareholder Group Seeks to Replace Board
---------------------------------------------------------------
Ronald D. Pierce and Kenneth R. Olsen, shareholders of Arguss
Communications, Inc. (NYSE: ACX) announced that, in an effort to
preserve and protect the remaining shareholder value in the
Company, they have filed a preliminary consent solicitation
statement with the Securities and Exchange Commission seeking to
replace the Company's current Board of Directors with a new
slate of directors composed of Messrs. Pierce and Olsen, James
D. Gerson, Stephen G. Moore, Dennis Nolin, Michael Sparkman and
George Tamasi.
The group's Nominees consist of former directors or officers of
the Company or its subsidiaries, former owners of
telecommunications construction companies acquired by the
Company and executive officers of telecommunications companies.
Together they would bring over 100 years of management
experience to the Arguss Board. They believe that with fresh
leadership and new direction, the Company can be turned around
and restored to profitability.
Mr. Pierce, noting the Company's recent dismal performance,
stated, "We are convinced that unless changes are made right
now, the value of the Company will continue to erode. Seeking to
replace the entire board of a New York Stock Exchange company is
not an everyday thing for me, and we do not take these steps
lightly. We are confident that our nominees possess the
experience, intelligence and ingenuity required to lead Arguss
out of its current difficulties".
Mr. Pierce is the largest shareholder of the Company. He and Mr.
Olsen together beneficially own approximately 8.6% of the
Company's outstanding shares. The balance of the director
nominees beneficially own approximately 3.9% of the Company's
outstanding shares. They have retained Innisfree M&A
Incorporated to assist them in soliciting shareholder consents.
Through its subsidiaries, the Company is engaged in the
construction, reconstruction, maintenance, engineering, design,
repair and expansion of communications systems, cable television
and data systems, including providing aerial, underground,
wireless and long-haul construction and splicing of both fiber
optic and coaxial cable to major telecommunications customers.
The Company also manufactures and sells highly advanced,
computer-controlled equipment used in the surface mount,
electronics circuit assembly industry.
For the nine months ended September 30, 2001, the Company's net
sales decreased 26% and the Company had a loss of $5.3 million
as opposed to net income of $9 million for the comparable period
in 2000. As of September 30, 2001, the Company was in default of
financial covenants in its credit agreement and on November 7,
2001 entered into a forbearance agreement with its lenders which
reduces the Company's borrowing availability by $50 million,
prohibits LIBOR based borrowing and requires the payment of a
$165,000 forbearance fee to the lenders and all of the lenders'
out-of-pocket expenses.
AT HOME: Court Terminates Contract with Charter Communications
--------------------------------------------------------------
Excite@Home, the network provider through which Charter
Communications delivers high-speed Internet access to about 20%
of its customers, filed for bankruptcy on September 28, 2001 in
the Northern District of California and asked for permission to
terminate service to Charter's customers. To ensure that @Home
did not discontinue high-speed Internet service immediately
after the bankruptcy announcement, Charter made a significant
advance payment to @Home. Despite round-the-clock negotiations
to continue the service through an orderly transition, today,
the Bankruptcy Court ordered Excite@Home to turn off its service
to all customers.
The following statement should be attributed to Dave Barford,
Executive Vice President and Chief Operating Officer for Charter
Communications:
"We are very disappointed that the Court ignored the impact
of its decision on our customers who use @Home for high-speed
Internet access. Particularly during the holidays, it is
important for customers to be able to stay connected to their
families and friends and this abrupt termination will
inconvenience millions of people.
"Anticipating that @Home service could end, Charter's
technical and customer care team has been working around the
clock in order to offer Charter's own high-speed Internet access
service, Charter Pipeline?. Thanks to their hard work, we can
now provide Charter Pipeline to 90% of our Charter@Home
customers.
"We regret that we cannot provide Charter Pipeline to all
of our customers at this time. We will continue to work as
quickly as possible to restore service to those customers for
whom Charter Pipeline is not yet available.
"Because of its advanced network and because Charter
Pipeline will soon feature content from MSN, Charter is well-
positioned to provide our customers with the best in high-speed
data service and look to a long relationship with our customers
in providing this fabulous service."
Key Customer Information: Charter will be better able to assist
customers conversion from @Home to Charter Pipeline if customers
either run the CD-ROM sent to their homes or download software
from the website at www.charter.com/installer before calling for
help. Customers should reboot their computers once they have
installed the Charter Pipeline software.
Charter@Home
-- 145,000 customers nationwide
-- @Home contracts inherited as part of acquisitions
-- 20% of Charter's high-speed Internet customers
-- 90% of @Home customers now have access to Charter
Pipeline
-- 25,000 customers completed transition
-- Conversion to Charter Pipeline done through web download
or CD-ROM
-- Customer communications done via first class mail, e-
mail and telemarketing
-- Primary e-mail address converts to charter.net. Address
book is preserved
-- Outside call centers hired to help take customer calls
-- 10% of Charter@Home customers currently do not have
access to alternative cable modem service through
Charter
-- In communities without cable modem service, VIP list
provides fast, free Charter Pipeline installation once
service is restored
-- Customers who lose cable modem service receive two free
days of service for every day without once Charter
Pipeline is available.
AT HOME: Charter Comms. Transfers Customers to Charter Pipeline
---------------------------------------------------------------
On November 30, 2001, the Northern District of California
Bankruptcy Court agreed to allow Excite@Home to turn off its
customers. @Home provided service to about 20% of Charter
Communications (NASDAQ:CHTR) high-speed Internet customers.
In anticipation of the Court's decision, Charter created a plan
to transition all of its Charter@Home customers to its own high-
speed Internet service, Charter Pipeline. Once the Court's
decision was handed down, Charter began the process of
converting customers to Charter Pipeline.
The following statement should be attributed to Dave Barford,
Executive Vice President and Chief Operating Officer for Charter
Communications:
"We know our customers value high-speed Internet service so
they can stay connected to friends and family that's why we made
every effort to provide a seamless transition from @Home to
Charter Pipeline. Our technical teams have worked around the
clock for the past two months in preparation and for the actual
cutover from the @Home network to Charter's network. At the same
time we were providing additional training to our customer
service representatives and hiring as many outsourced
representatives as possible to handle customer questions.
"Through a great team effort, we have successfully
transferred more than 90% of our Charter@Home customers to
Charter's own Pipeline network. Crews worked through the night
to make the transition with minimal disruption to customers. We
are still working on some minor issues, but the process went
even better than we had hoped. This network now provides us the
foundation to offer superior service to our customers and to
grow our offerings to business customers in the near future.
"We look forward to quickly transferring our remaining
customers from Charter@Home to Charter Pipeline once circuits
are provided to us by the phone company. As soon as high-speed
Internet service is restored in those areas, which will be
within a week to four weeks depending on the community, we will
notify customers.
"In the meantime, we ask our customers who may have any
difficulties to run the conversion CD-ROM they received in the
mail and reboot their computer before calling us. This will
ensure that their service is up and running in the shortest time
possible. If they have not received the CD, they can pick one up
at their nearest Charter customer service office."
AT HOME: AT&T Begins Migration of Customers to New Network
----------------------------------------------------------
AT&T Broadband has moved about 86,000 customers in Oregon and
the Vancouver area of Washington from the Excite@Home network to
the new AT&T Broadband Internet network, the company said.
In addition, in the next two to 10 days, the company will move
its Broadband Internet customers in Chicago, Dallas, Denver,
Hartford, Pittsburgh, Sacramento, Salt Lake City, Seattle, the
Bay Area, some Michigan markets, and its Rocky Mountain region
in the mountain West, to the new network. Customers may
experience temporary service disruption during the migration.
The action follows Friday's decision in U.S. Bankruptcy Court to
cancel the Master Distribution Agreements between cable
companies and the At Home Corporation, and the subsequent shut
down of the Excite@Home network to AT&T Broadband users
following sporadic Excite@Home service disruptions.
AT&T continued negotiations with At Home Corporation late into
Friday evening and early Saturday morning only to see the
Excite@Home service cut off.
AT&T moved its Oregon and Vancouver, Wash., Broadband Internet
customers to the new high-speed network during a six-and-a-half
hour period overnight and is working to migrate the balance of
its customers to the new network in the coming days. Customers
benefiting from last night's network migration represent more
than 10 percent of AT&T Broadband's base of Excite@Home
customers. At the end of the third quarter, AT&T Broadband had
1.4 million Broadband Internet customers. Of those, about
850,000 were served by the Excite@Home network.
AT&T Broadband has communicated with all of its high-speed cable
Internet customers during the past few weeks to help them
prepare for these developments.
The company will automatically issue credits to any customers
who experience an interruption of service. Credits will be
issued at the rate of two days free service for every day of
interruption. In cases where the temporary outage is a bit
longer, customers will receive free dial-up service from AT&T
Broadband until they are restored to a high-speed network.
All affected customers will see these changes as part of their
new service:
- Email domain names will automatically change from
(username)@home.com to (username)@attbi.com. User names will
stay the same;
- AT&T Broadband Internet will feature AT&T WorldNet High
Speed service content;
- Upstream and downstream speeds will be managed to provide
a faster and more consistent broadband service.
Customers formerly served by MediaOne will remain on a
separately operated network. The markets encompassing those
customers include Ann Arbor, Mich.; Atlanta; Jacksonville; Los
Angeles; New England; Richmond, Va.; and St. Paul, Minn. In
addition, a group of several thousand AT&T Broadband Excite@Home
customers in Boston and Chamblee, Ga., - who had been acquired
as part of recent cable system acquisitions - today are being
migrated to that separately operated network.
For the group of customers in the markets being served by this
separately operated network, the service will be re-branded as
AT&T Broadband Internet. For the majority of customers in these
markets, the network, Internet service connectivity, email
domain names, and data transmission speed won't be affected. The
only change these customers will see is new content provided by
Yahoo! To access this new content, customers can direct their
browsers to http://home.attbroadband.com
AT&T Broadband cable and local telephone service won't be
affected by these developments. Uncertainty around the future of
the Excite@Home service, coupled with service interruptions
necessitating migration of customers to the new high-speed
network, is expected to negatively impact growth in the
company's number of Broadband Internet customers and revenue
generating units.
AT&T Broadband, a business unit of AT&T, is the nation's largest
broadband services company, providing television entertainment
services to about 14 million customers across the nation. The
company also provides advanced services, such as digital cable,
high-speed cable Internet services and competitive local phone
service. More information on AT&T Broadband services can be
found at www.attbroadband.com. AT&T (NYSE:T) is the world's
leader in telecommunications services and technology.
AVADO BRANDS: Will Defer Interest Payment on 9-3/4% Senior Notes
----------------------------------------------------------------
Avado Brands, Inc. (OTC Bulletin Board: AVDO) announced that it
intends to delay the payment of the semi-annual interest due
December 1, 2001 to holders of its 9-3/4% Senior Notes, but
plans to make the interest payment within the 30 day no-default
period provided for under the terms of the Senior Notes'
Indenture.
Additionally, the Company intends to delay the payment of the
semi-annual interest due December 15, 2001 to holders of its 11-
3/4% Senior Subordinated Notes, but plans to make the interest
payment within the 30 day no-default period provided for under
the terms of that Indenture as well.
Avado Brands owns and operates three proprietary brands,
comprised of 14 Canyon Cafe restaurants, 131 Don Pablo's Mexican
Kitchens and 74 Hops Restaurant - Bar - Breweries.
BURLINGTON: Court Allows Payment of $5.8M Critical Vendor Claims
----------------------------------------------------------------
Judge Walsh authorizes Burlington Industries, Inc., and its
debtor-affiliates, in their sole discretion, to pay Critical
Vendor Claims in the aggregate amount of up to $5,850,000. The
Court also allows the Debtors to condition the payment of any
Critical Vendor Claim wherein the vendor must agree to continue
to supply goods and services to the Debtors post-petition on
reasonable credit terms.
Judge Walsh emphasizes that the payment of claims should not be
construed as: (a) an admission as to the validity of any claim
against the Debtors; (b) a waiver of the Debtors' rights to
dispute any claim; or (c) an approval or assumption of any
agreement, contract or lease, pursuant to section 365 of the
Bankruptcy Code. (Burlington Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
CHILDTIME LEARNING: Operating Losses Burgeon to $3.3MM in Q2 '02
----------------------------------------------------------------
Childtime Learning Centers, Inc.'s general and administrative
expenses increased $1.1 million to $2.8 million for the second
quarter 2002 from $1.7 million for the second quarter 2001. Of
this increase, $0.3 million was due to costs associated with
establishing four new regional offices during first quarter
2002, $0.2 million represented travel, lodging and training
costs applicable to the implementation of the new center level
management information software system, $0.2 million was noncash
stock compensation expense and $0.2 million represented the
reversal in second quarter 2001 of previously recorded accruals.
Year to date 2002 general and administrative expenses increased
$1.1 million to $5.7 million over year to date 2001. This
increase was primarily attributable to $0.5 million associated
with opening four new regional offices in Fiscal 2002, $0.2
million represented travel, lodging and training costs
applicable to the implementation of the new center level
management information software system, $0.2 million in higher
legal, audit and professional fees and $0.1 million in
consulting fees paid to Jacobson Partners.
In conjunction with certain restructuring activities implemented
at the end of Fiscal 2001, the Company during the second quarter
2002 accrued additional legal and estimated settlement reserves
of $1.0 million related primarily to lease termination costs. In
addition, during the second quarter 2002, the Company accrued
$1.3 million in estimated noncapital environmental remediation
costs based upon an evaluation of currently available facts with
respect to each individual Learning Center.
As a result of the foregoing changes, operating losses of $3.8
million for the second quarter 2002 compares to operating
earnings of $0.8 million for the second quarter 2001. Year to
date operating losses of $1.4 million for Fiscal 2002 compares
to operating earnings of $3.2 million for Fiscal 2001.
As a result of the foregoing changes, net loss decreased to a
net loss of $2.4 million for the second quarter 2002 from $0.3
million in net earnings for the second quarter 2001. For year to
date 2002, the Company posted a net loss of $1.0 million,
compared to net earnings of $1.4 million for year to date 2001.
Childtime Learning Centers provides care for children from six
weeks to 12 years of age. The company offers full-time and part-
time childcare and preschool services for more than 30,000
children year-round, five days a week, at about 300 Childtime
Children's Centers in 23 states and Washington, DC. Most
facilities are in suburban areas, but about 50 are on or near
company work sites. It has closed all 10 of its Oxford Learning
Centers of America, which offered tutoring and enrichment
programs for children ages 5 to 14, and is concentrating on
improving existing Childtime Children's Centers before opening
others. Two investment firms headed by chairman George Kellner
own about 70% of the company.
Childtime Learning's balance sheet, as of July 20, showed that
the company sustained strained liquidity, with its total current
liabilities exceeding total current assets by over $2 million.
CHIQUITA BRANDS: Seeks to Pay Non-Noteholder Creditors' Claims
--------------------------------------------------------------
A seamless transition into and through bankruptcy will preserve
the value on which Chiquita Brands International, Inc.'s
prepackaged Plan of Reorganization is predicated, Robert W.
Olson, the Company's Senior Vice President, General Counsel and
Secretary tells Judge Aug. It is important, Mr. Olson is
convinced, to minimize disruption on an operational level and to
maintain and develop the Company's relationships with vendors,
suppliers, customers and consultants. "The perception and
understanding of this chapter 11 proceeding by these parties is
vital to the success of the Company's reorganization," Mr. Olson
said.
To create certainty and preserve important relationships, the
Debtor asks Judge Aug for permission to pay, in full, in cash,
all undisputed unsecured prepetition claims (other than
Noteholder claims, of course) in the ordinary course of business
as and when they become due.
Kim Martin Lewis, Esq., at Dinsmore & Shohl LLP, indicates that
the Company estimates that, excluding Employee Obligations,
approximately $500,000 is owed to non-noteholder prepetition
creditors -- a paltry sum in the context of the Debtor's capital
structure. Moreover, the prepackaged Plan calls for the payment
of all General Unsecured Claims in full, in cash, in the
ordinary course of business. Thus, this request is nothing more
than an extension of the treatment provided for in the Plan,
which has been accepted by the Noteholders who signed the Lock-
Up Agreement.
James H.M. Sprayregen, Esq., at Kirkland & Ellis, tells Judge
Aug that the Company fears that a prompt conclusion of the
Debtor's chapter 11 case may be jeopardized if disruption ensues
as a result of the Debtor's inability to pay General Unsecured
Claims before confirmation of the Plan. Not surprisingly, Mr.
Sprayregen suggests, the commencement of this bankruptcy
proceeding will cause many creditors to reevaluate their
business and credit relationships with Chiquita. Some of these
concerns may filter down and adversely impact the non-debtor
operating subsidiaries. Allowing Chiquita to pay General
Unsecured Claims will assuage creditors' natural fears, Mr.
Sprayregen argues.
Mr. Sprayregen provides Judge Aug with the legal framework under
which the Debtor makes its request to prefer the General
Unsecured Creditors over others: 11 U.S.C. Sec. 105 provides
that "the court may issue any order, process, or judgment that
is necessary or appropriate to carry out the provisions of this
title." Moreover, it is well-settled that a bankruptcy court
may authorize the payment of prepetition obligations where
necessary to facilitate the chapter 11 process. In re Just For
Feet, Inc., 242 B.R. 821, 826 (Bankr. D. Del. 1999) (holding
that a debtor must show that payment of the prepetition claim of
a vendor is critical to its survival in reorganization); In re
Eagle-Picher Indus., Inc., 124 B.R. 1021, 1023 (Bankr. S.D. Ohio
1991) ("[T]o justify a payment of a prepetition unsecured
creditor, a debtor must show that the payment is necessary to
avert a serious threat to the chapter 11 process.").
Under the "necessity of payment doctrine," courts have
recognized that the payment of certain prepetition obligations
of a debtor is permissible when such payments are necessary to
preserve the business of the debtor and the failure to pay
prepetition obligations posed a real and significant threat to a
debtor's reorganization. See, e.g., Miltenberger v. Logansport
Railway, 106 U.S. 286 (1882) (payment of pre-receivership claim
prior to reorganization permitted to prevent "stoppage of . . .
[crucial] business relations"); In re Lehigh & New Eng. Ry., 657
F.2d 570 (3d Cir. 1981) (payment of claims of creditors
authorized under "necessity of payment" doctrine); Dudley v.
Mealy, 147 F.2d 268 (2d Cir.), cert. denied, 325 U.S. 873
(1945).
The Debtor makes it clear that it will only pay undisputed
claims. Moreover, the Debtor's request is for permission, not
direction, to pay General Unsecured Claims. (Chiquita Bankruptcy
News, Issue No.1; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
CLARION COMM'L: Will Make Liquidating Distribution on Dec. 19
-------------------------------------------------------------
Clarion Commercial Holdings, Inc. (NYSE: CLR) announced that its
second liquidating distribution pursuant to the company's plan
of liquidation and dissolution will total $2.00 per share. The
distribution will be payable on December 19, 2001 to
shareholders of record on December 12, 2001.
As previously communicated, shareholders approved the
liquidation and dissolution of the company on May 31, 2001.
Clarion Commercial Holdings, Inc. is a specialty finance company
that focuses on investments in commercial real estate assets.
COMDISCO: Appoints J. MacCoy as Senior Vice-Pres. & Treasurer
-------------------------------------------------------------
Comdisco, Inc. (NYSE:CDO) announced that Jeffery McCoy, 36, has
been named to the position of senior vice president and
treasurer, which was previously held by Ronald C. Mishler, who
was named senior vice president and chief financial officer of
Comdisco on September 24, 2001. The appointment is effective
immediately.
In his new position, Mr. McCoy, who will report to Mr. Mishler,
will have direct responsibility for Comdisco's global treasury
operations. Mr. McCoy re-joined Comdisco in April 2000, as the
vice president, Finance and Accounting, with Comdisco's
telecommunication leasing business. Prior to joining Comdisco,
he was vice president, Corporate Finance, with Deutsche
Financial Services Corporation, where he served in a variety of
officer level positions during a seven-year tenure. Mr. McCoy
has extensive experience with the establishment of various types
of corporate debt offerings, including securitization of various
classes of financial assets. In addition, Mr. McCoy has
participated in a number of acquisition and divestiture projects
within the financial services sector from a financial analysis
perspective. He began his career at Comdisco in 1990 as a senior
tax accountant. He holds a B.A. degree in Finance from Loras
College and is a Certified Public Accountant (CPA).
Comdisco, Inc. and 50 domestic U.S. subsidiaries filed voluntary
petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code in the U.S. Bankruptcy Court for the Northern District of
Illinois on July 16, 2001. The filing allows the company to
provide for an orderly sale of some of its businesses, while
resolving short-term liquidity issues and enabling the company
to reorganize on a sound financial basis to support its
continuing businesses.
Comdisco's operations located outside of the United States were
not included in the chapter 11 reorganization cases. All of
Comdisco's businesses, including those that filed for chapter
11, are conducting normal operations. Comdisco is continuing to
pursue other strategic alternatives to create value for its
stakeholders, including the potential sale of its leasing
businesses, as well as the restructuring of its Ventures group.
The company has targeted emergence from chapter 11 during the
first half of 2002.
Comdisco -- http://www.comdisco.com -- provides technology
services worldwide to help its customers maximize technology
functionality and predictability while freeing them from the
complexity of managing their technology. The Rosemont, (IL)
company offers leasing and financial management services to key
vertical industries, including semiconductor manufacturing and
electronic assembly, healthcare, telecommunications,
pharmaceutical, biotechnology and manufacturing. Through its
Ventures division, Comdisco provides equipment leasing and other
financing and services to venture capital backed companies.
CRYOCON: Working Capital Runs Out, with Deficit of $3.8 Million
---------------------------------------------------------------
Cryocon Inc.'s losses for fiscal year 2001 are $6,609,229.
These losses are attributable to start-up and operational costs,
market development penetration costs incurred in capital
acquisition and asset expenditures. Unusually high capital
outlays include $700,000 for shop equipment, land and building;
approximately $313,274 in equipment (computers and printers),
approximately $275,000 for the purchase of the Cryo-Accurizing
patent and related equipment and $282,937 in advertising.
Cryocon Utah commenced operations on January 3, 2000. Since
start of operations January 2000, Cryocon has realized $190,310
in gross sales and has $10,975 in Net Accounts Receivable.
Cryocon had gross sales in the quarter ending September 30, 2001
of $8,269. Cryocon's cumulative operating loss through September
30, 2001 is $9,948,665. The loss is attributable to pre-
organizational, start-up and operating costs of its subsidiary
Cryocon Utah, and costs incurred in Cryocon's financing efforts.
These costs include $1,248,110 assessed for options granted
below market value, $1,907,569 assessed for common stock for
services, $514,050 assessed as additional expenses on
convertible debentures, impairment of Goodwill and loss of fixed
assets of $646,586.
Cryocon's operation to date has consumed substantial amounts of
cash. As of September 30, 2001, Cryocon had a working capital
deficit of $3,817,745, which includes the current portion of all
notes payable including the debt on the building. Since
inception the net cash loss from operations is $3,380,596 and is
expected to continue; however it is anticipated that these
losses may increase in the foreseeable future.
Because Cryocon is still in the development stage, it has
limited working capital and limited internal financial
resources. Cryocon's limited cash flows have prevented Cryocon
from borrowing funds from conventional lending institutions.
Since the Cryocon has not been able to secure funding from
commercial lenders, Cryocon has relied on private investments
from third-parties, including Cryocon's management, to meet its
current obligations. As of October 1, 2001, Cryocon reportedly
did not have sufficient cash on hand to fund another month of
operations at the current run rate; however, management says it
is confident of being able to obtain operational funds through
various means. These facts create substantial doubt as to the
Company's ability to continue as a going concern.
DYNASTY COMPONENTS: Deloitte Appointed CCAA Monitor in Canada
-------------------------------------------------------------
Dynasty Components Inc. (TSE:DCI) announced that, as part of its
previously announced corporate restructuring, the Company has
sought and obtained an Order for protection under the Companies'
Creditors Arrangement Act ("CCAA") before the Ontario Superior
Court of Justice. Deloitte and Touche Inc. has been appointed
the monitor. The effect of the Order is to stay the Company's
current obligations to creditors and suppliers. In addition,
DCIenable Inc. has filed an assignment for bankruptcy.
Mr. J. Marc Brule, Chief Executive Officer of DCI said, "This is
the responsible course of action to take in our circumstances.
The Order will enable our ongoing business to continue while we
negotiate a restructuring plan with our stakeholders. We will
endeavour to maximize the recovery to stakeholders in our
restructuring plan. It is impossible to predict the final
details that will be presented for their approval or to
speculate on any other actions that might be taken. Today we are
initiating a process and the outcome will be the subject of
discussions with our stakeholders."
Dynasty Components Inc., headquartered in Kanata, Ontario, is a
leader in connecting suppliers with customers. DCI has been
developing enduring value added relationships between customers
and suppliers in the IT industry since 1985. Recently DCI has
embarked on a bold new business strategy focused entirely on the
provision of specialized procurement and logistics management
services to the Information Technology (IT) industry across
North America. DCI's growth going forward will be driven by its
leading-edge Interactive Parts Ordering System (IPOS)
technology, a proprietary internet-based logistics management
solution. DCI trades on The Toronto Stock Exchange under the
symbol "DCI". For more information visit our web site at
http://www.dcicorporate.com
DYNASTY COMPONENTS: J. Marc Brule Replaces G. Economo as New CEO
----------------------------------------------------------------
Dynasty Components Inc. (TSE:DCI) announced the appointments of
J. Marc Brule as its new Chief Executive Officer, and Jon W.
Hansen as its new President. Former CEO & President, Gary
Economo, resigned from these positions for personal reasons and
to concentrate on business development efforts on behalf of the
Company. Mr. Economo will also fill the role of Vice-
President, Business Development and remain a member of DCI's
Board of Directors. In addition, Mr. Ed Lumley resigned this
week from DCI's Board of Directors. These Management changes are
subject to regulatory approval.
Mr. Brule joined DCI in early 2000 as Vice-President and Chief
Financial Officer. A former partner at KPMG LLP, Mr. Brule,
brought 26 years of financial and auditing experience in the
high technology, service and distribution industries to DCI. Mr.
Brule with his financial and professional services experience,
is ideally suited to guide the Company through its next stage of
development. Mr. Brule will also continue in his present role as
the Company's Chief Financial Officer.
Mr. Hansen, as a founder and former CEO and President of Parts
Logistics Management Corp., has over 18 years of experience in
the high technology sector. Mr. Hansen's initiatives throughout
these years have generated substantial revenues. Featured on
CBC's Venture program in 1996 for his development of an
innovative Employee Purchase Program, Mr. Hansen is a proven
performer who excels in the development and implementation of
logistics solutions. Mr. Hansen is also the architect of the
Company's patent pending Interactive Parts Ordering System
(IPOS) software that is the engine of our PLM logistics
outsourcing business.
"We are pleased to announce the appointments of Mr. Brule and
Mr. Hansen to these new positions on our Management team,"
commented former DCI President & CEO, Gary Economo. "Marc and
Jon have brought great value to DCI and each of them has
important attributes that are key to the success of DCI's
restructuring. I believe that their leadership combined with the
abilities and dedication of DCI's employees will offer all DCI
stakeholders increasing future value."
DCI further announced that it's wholly-owned subsidiary Parts
Logistics Management Corp., has been awarded a 12 month contract
to provide parts disposition and logistics management services
for a major Canadian OEM provider of computer systems. Under the
agreement, PLM will undertake on-line parts disposition and
logistical support for IT service parts utilizing its
proprietary internet-based IPOS Software. A second contract,
with another significant client who has completed on-site
training, is still pending with final agreement documentation
scheduled for mid-December to the end of January.
"In addition to the above, PLM has an established client base
that will fuel future growth," comments DCI President Jon
Hansen. "Marc, Gary and I are committed to building a strong
revenue stream that is based on a solid business strategy."
The Company's proprietary Logistics Management Solution provides
a computerized and centralized system for managing the e-
procurement, delivery and tracking of mission-critical IT spare
parts at lower cost with shorter delivery cycles. Focused on the
indirect purchasing requirements of major IT service providers
and OEM customers, the PLM group provides a complete logistics
management solution which keeps IT infrastructures running at
peak performance. The engine of DCI's Logistics solution is its
proprietary Interactive Parts Ordering System (IPOS) which is
accessed by clients over the internet on a 7/24 basis.
Dynasty Components Inc., headquartered in Kanata, Ontario, is a
leader in connecting suppliers with customers. DCI has been
developing enduring value added relationships between customers
and suppliers in the IT industry since 1985. Recently DCI has
embarked on a bold new business strategy focused entirely on the
provision of specialized procurement and logistics management
services to the Information Technology (IT) industry across
North America. DCI's growth going forward will be driven by its
leading-edge Interactive Parts Ordering System? (IPOS?)
technology, a proprietary internet-based logistics management
solution. DCI trades on The Toronto Stock Exchange under the
symbol "DCI". For more information visit our web site at
http://www.dcicorporate.com
EDISON: Fitch Changes Funding Rating Watch Status To Positive
-------------------------------------------------------------
Fitch changed Edison Funding Co.'s (EFC) Rating Watch Status to
Positive from Negative following similar actions taken by Fitch
for Southern California Edison Co. (SCE) and Edison
International (EIX). The senior debt rating for EFC remains
'CC'. EFC's commercial paper rating has been withdrawn as all
outstandings under this program have been repaid. This program
was previously rated 'C'.
Following the recent announcement that the California Public
Utilities Commission (PUC) reached a settlement resolving
Southern California Edison's (SCE's) Filed Rate Doctrine
lawsuit, Fitch changed the Rating Watch designation of SCE and
its parent, Edison International (EIX), to Positive from
Negative.
The settlement agreement provides price certainty for SCE
through at least 2003 and locks-in currently prevailing lower
power supply costs, including the California Department of Water
Resources (DWR) revenue requirements. Together these factors
are expected to provide surplus revenue for the repayment of
unpaid SCE debt resulting from unrecovered power procurement
costs.
Edison Funding Co. is an indirect, wholly-owned, non-regulated
subsidiary of Edison International. EFC invests in the
infrastructure sector - mostly energy related - and affordable
housing where many of the investments are tax-advantaged. EFC's
focus is on large-scale power generation, with leveraged lease
and limited partnership investments in cogeneration,
hydroelectric, nuclear, coal, natural gas, and renewable energy
projects. EFC has selectively invested in transportation-related
assets and has global infrastructure finance programs in Latin
America, Asia, and Europe.
ENRON: Describes Dynegy's Evil Acts for the Bankruptcy Court
------------------------------------------------------------
Seeking (i) no less than $10 billion in damages against Dynegy
Inc. and Dynegy Holdings, Inc., for their wrongful termination
of the merger agreement dated November 9, 2001; (ii) a
declaration that Dynegy breached the Merger Agreement through
that unlawful termination; and (iii) a declaration that Dynegy
and certain affiliates have no right to exercise a purported
option to buy control of the Northern Natural Gas pipeline,
Enron Corp., Enron Transportation Services Co., CGNN Holding
Company, Inc., and MCTJ Holding Co. LLC, as plaintiffs,
commenced a lawsuit in the U.S. Bankruptcy Court for the
Southern District of New York.
Rather than acting in good faith to make the merger deal happen,
Dynegy "concocted reasons to terminate and took affirmative
action to weaken Enron," the Debtors complain to the Bankruptcy
Court.
Martin J. Bienenstock, Esq., Greg A. Danilow, Esq., and Brian S.
Rosen, Esq., at Weil, Gotshal & Manges LLP, lay-out the story
for the Bankruptcy Court from Enron's perspective:
Dynegy agreed to the merger, Enron says, with full knowledge of
Enron's well-publicized financial crisis and after conducting
two weeks of extensive due diligence. Dynegy knew that Enron was
in a precarious financial condition, was on the verge of
dropping to a non-investment grade credit rating, and was in no
small measure dependent on the successful completion of the
Merger for its very survival. In executing the Merger Agreement,
Dynegy obligated itself to complete the Merger. In exchange,
Dynegy obtained the ability to acquire Enron, including its
premier energy trading operations that Dynegy desperately
coveted, at a steep discount to historical value, and precluded
Enron from pursuing other alternative transactions.
Dynegy Knew What it Was Getting Into
As Dynegy understood and publicly acknowledged, Enron continues,
its ability to terminate the Merger Agreement was severely
circumscribed. Indeed, as Dynegy itself has stated, its ability
to terminate even due to a so called "material adverse change"
was very limited and could only be invoked in the event of a
"substantial, substantial material change." In fact, certain of
the limitations on Dynegy's ability to terminate were dictated
by the credit rating agencies in order to assure that Dynegy
lived up to its bargain.
As Dynegy was aware, Enron's ability to preserve its energy
trading business was dependent on Enron's credit ratings not
being downgraded to "below investment grade." Dynegy further
understood that the agencies who assign such ratings -- Moody's,
Standard & Poor's, and Fitch -- only agreed to maintain Enron's
ratings at an above investment grade level based on Dynegy's
assurances that the Merger would come to fruition and agreement
to contractual concessions limiting Dynegy's ability to
terminate the Merger Agreement.
Dynegy Takes Advantage
Then, Enron complains, after signing the Merger Agreement and
obtaining an option on Enron's valuable Northern Natural Gas
Pipeline assets, Dynegy consistently took advantage of Enron's
precarious condition to further its own business goals.
Enron charges that by terminating the Merger Agreement, Dynegy
sought to put an end to Enron as a competitive force. Enron
points to an admission by Dynegy's Chief Executive Officer,
Chuck Watson, that "since Dynegy and Enron are competitors,
Enron's problems have created an opportunity for Dynegy to seize
the market share of its largest and most successful competitor."
Dynegy Created Marketplace Uncertainty
Enron is convinced that Dynegy, in violation of its contractual
obligations, took affirmative action, through on the record and
off the record comments, to create substantial doubt and
uncertainty concerning its willingness to consummate the Merger.
Enron believes that Dynegy then created further uncertainty by
proposing, and later reneging, on a series of amendments to the
Merger Agreement. Enron notes that Dynegy went so far as to
draft and circulate a press release concerning these amendments
and affirming Dynegy's commitment to the Merger, only to renege
at the last minute after Dynegy tried to threaten Enron's
lenders into agreeing to further concessions, and after the
ratings agencies had been informed that the amendment was
imminent.
"As Dynegy fully understood and anticipated, its refusal to
proceed with the promised amendments caused the rating agencies
to further reduce Enron's credit rating," Enron complains.
Enron alleges that Dynegy's announcement that it had terminated
the Merger Agreement falsely cited to Enron's alleged "breaches
of representations, warranties, covenants and agreements in the
[M]erger [A]greement, including the material adverse change
provision." Because it had no good faith basis for terminating
the Merger Agreement, Dynegy did not point to a single specific
misrepresentation or other contractual breach by Enron. In
public comments, however, Dynegy's Chairman and Chief Executive
Officer, Chuck Watson, has stated that Dynegy is relying on the
claim that Enron failed to disclose prior to the execution of
the Merger Agreement the acceleration of a repayment obligation
with respect to a $691 million note payable, which obligation
was triggered by a ratings event. This assertion by Dynegy
cannot have been made in good faith. In fact, as Dynegy well
knows, the ratings downgrade which triggered the repayment
obligation occurred after the Merger Agreement was signed, and
the rating event itself did not constitute a material adverse
event under the Merger Agreement.
Dynegy Had No Basis to Back Out
Stated simply, Enron says that Dynegy had no contractual basis
to terminate. Further, the only adverse changes to the business
suffered by Enron were caused in large part by Dynegy itself, as
a result of the uncertainty that Dynegy created as to whether it
was truly bound and legally committed to the Merger. As a
result, Dynegy is precluded from relying on any such changes as
a basis for terminating the Merger Agreement. "The reasons
offered by Dynegy for its termination of the Merger Agreement
were mere pretexts to provide legal and public relations cover
for its decision to renege on a binding contractual obligation,"
Dynegy says . . . and Dynegy's "conduct has torn a hole in
Enron's business and caused Enron to suffer billions of dollars
in damages."
Didn't Dynegy Invest $1.5 Billion?
Not ignoring the fact that Dynegy sunk $1.5 billion real dollars
into the Enron enterprise, Messrs. Bienenstock, Danilow and
Rosen relate how that transaction arose:
Because of the severity of Enron's liquidity problems, the
lawyers explain, at the time the agreement was executed, Dynegy
agreed to immediately invest $1.5 billion in equity in Enron in
the form of preferred stock in an Enron subsidiary which owned
the Northern Natural pipeline. The preferred stock carried the
right, under certain circumstances, including in the event that
Dynegy properly terminated the Merger Agreement, to acquire all
of the ownership interests in an entity which indirectly owns
all of the common stock of Northern Natural. In an effort to
seize these valuable assets from Enron, immediately after Dynegy
wrongfully terminated the Merger Agreement, Dynegy Holdings also
purported to exercise the right to acquire Northern Natural,
setting a closing date of December 12, 2001.
However, Enron's lawyers advise, since Dynegy's termination of
the Merger Agreement was wrongful and in breach of the
Agreement, Dynegy Holdings has no right to acquire the stock of
Northern Natural.
Dynegy's Conduct Was Wrong . . . And They Know It
Enron complains that by leading the credit rating agencies and
Enron's trading partners to believe it was walking away from the
Merger Agreement, Dynegy created severe uncertainty in the
markets, which, in turn, deterred counterparties from trading
with Enron and provided the excuse for Dynegy's announcement
that it was terminating the Merger Agreement and exercising the
Northern Natural "option."
Immediately after the Merger Agreement was signed, Enron says,
Dynegy's senior management acknowledged to the marketplace that
the Merger "injects confidence and credibility into the energy
marketplace . . . ." Soon after entering into the Merger
Agreement, Dynegy began to falsely imply that it had a "due
diligence" out of the Merger Agreement. Dynegy's management also
began to create the illusion that it had entered into a one way
option with no downside and had the legal right to walk away
from the Merger owning Enron's Northern Natural pipeline for the
discounted price of $1.5 billion it already had paid to Enron.
Dynegy also knew that its own energy trading business, which
already was benefiting from traffic that previously would have
gone to Enron, stood to gain dramatically if Dynegy could push
Enron into a collapse. Thus, by creating instability for Enron,
Dynegy seized on the opportunity to grab a substantial portion
of the enormous market share of Enron as the company was
incapacitated by its ongoing liquidity problems.
Dynegy thus began to tell reporters that it was conducting due
diligence, including the review of information set forth in
Enron's final Form 10-Q for the three months ended September 30,
2001, filed with the SEC on November 19, 2000, even though there
was no such concept in the Merger Agreement. To the contrary,
Dynegy was bound and had no due diligence out. Nevertheless, its
spokesman's repeated statements in response to media inquiries
that it was conducting due diligence led the market to believe
that Dynegy had the ability to terminate the Merger Agreement if
it learned new information that was not true (absent
circumstances constituting a Material Adverse Event). By doing
so, Dynegy unsettled the market, because it created the concern
that Dynegy would walk away from the deal.
On November 21, 2001, in order to maximize the uncertainty in
the market among Enron's counterparties, and thus undermine the
safety net the Merger was supposed to provide to Enron, Dynegy
issued a press release that reiterated the falsehood that Dynegy
was conducting due diligence, and that the information in
Enron's Form 10-Q was part of that due diligence. The press
release and oral statements by Dynegy on this subject were
misleading because those statements suggested that the Merger
contained a due diligence out. In truth, however, Dynegy's due
diligence was completed before the Merger Agreement was
executed. These statements also were misleading because they
created the impression that the Merger Agreement provided Dynegy
with a termination right that was not contained in the Merger
Agreement.
Dynegy's Tactics Worked
Dynegy's tactics worked because the market was fully aware that
if Dynegy terminated the Merger Agreement, Enron's ability to
continue as a going concern was in doubt. As stated by Fitch,
one of the credit rating agencies, "If Dynegy steps away
entirely from the merger, Enron's credit situation seems
untenable with a bankruptcy filing highly possible."
Enron's financial condition and daily results continued to
deteriorate as a result of Dynegy's misleading statements; thus,
Enron's stock price also continued to slide. This created an
expectation in the market that the parties would renegotiate the
Exchange Ratio to reduce the stock that Dynegy would have to pay
to acquire Enron.
Having created this situation, Dynegy jumped in with both feet,
Enron's legal team says. Dynegy opened negotiations with Enron
to amend the Merger Agreement in a situation where Enron knew
that, if Dynegy raised any greater doubts about the Merger being
completed, the ratings agencies would downgrade Enron's debt and
Enron could be forced into bankruptcy.
The parties, along with Enron's leading banks, commenced almost
around the clock negotiations that continued throughout the
Thanksgiving holiday and subsequent weekend. Each time Enron and
the banks succumbed to Dynegy's demands, Dynegy would demand
more.
Dynegy created further uncertainty in the market -- and thus
increased financial pressure on Enron -- by, Enron charges,
"leaking to the press that it was seeking amendments to the
Merger Agreement, which created the expectation of a new deal
being announced." Enron says that it and the banks were so
confident that they had a deal with Dynegy that they met with
the ratings agencies to convince them to maintain Enron's
essential investment grade credit rating. By going to the
ratings agencies, and working to gain their acceptance of the
proposed amendments, only to have those proposals taken off the
table by Dynegy at the last moment, Enron lost an enormous
amount of credibility with those agencies.
Dynegy's conduct was wrong, Enron says. Dynegy should pay
damages and the Court should block Dynegy's ability to exercise
the now-tainted option to acquire the Northern Gas Pipeline at a
bargain price. (Enron Bankruptcy News, Issue No. 1; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ENRON CORP: S&P Says Credit Derivative Exposure Stands at $6.3BB
----------------------------------------------------------------
Standard & Poor's has reviewed a number of credit derivative
transactions in which Enron appears and found exposure to the
company in three different types of these transactions. Divided
among these deals, direct Enron credit exposure potentially
could total $3.3 billion.
"Although much attention has been focused on Enron in relation
to loan exposures, the energy sector, and the commodities
markets, it is also a named source of credit risk in many credit
derivatives transactions," said Nik Khakee, director of Standard
& Poor's Structured Finance Derivatives group.
"In addition, Enron had an overall derivatives market strategy
that included credit derivatives. Thus Enron is not only a
source of credit risk in derivatives transactions, it is a
source of risk to derivatives transactions as it could possibly
cause termination events in swaps that Enron has contracted,"
Mr. Khakee continued.
On a global basis, Enron appears in 50 transactions as a
reference entity or reference obligation in pooled credit
derivative transactions, meaning that Enron is a credit
exposure. Two counterparties transact a swap in which the
default of Enron, as defined by specified credit event language
defined in the swap documentation, would lead to potential loss
to one counterparty, the floating-rate payer.
This loss is defined by a valuation process whereby a settlement
value for the potential Enron exposure is determined. This value
can often be the result of a bidding process in the market where
dealers are solicited. This bidding process is commonly referred
to as cash settlement. Alternatively, physical settlement may be
selected as the settlement mechanism whereby an Enron fixed
income instrument is exchanged for the notional value of the
Enron exposure in the overall pool.
These transactions total $79 billion in total notional amount.
The potential Enron exposure in the deals in aggregate totals
$3.3 billion or 0.75% of total notional exposure. It is
important to note that these transactions are primarily
investment grade credit derivative collateralized debt
obligations in which credit support to rated noteholders
typically averages 2%-4%. Therefore, a default of Enron and low
recovery on Enron post-default would significantly erode this
credit support.
"Standard & Poor's is currently reviewing all transactions in
which Enron is a named reference entity for possible rating
actions," Mr. Khakee said.
Enron may also appear in this same type of credit derivative
transaction but as part of a small pool, rather than a large
pool of overall credit exposure. In this case, Enron may
potentially be the single reference source of credit risk in a
credit derivative transaction, irrespective of the credit risk
posed by the actual counterparty risk in these transactions
(which is not addressed in the estimated exposures identified
above).
Enron appears as a reference credit in six transactions with
potential total notional exposure to Enron of $2.7 billion in
these single-name risk or small basket credit derivative
transactions.
In addition, in December 2000, Enron began acting as the
counterparty in swap transactions without also being the
reference entity. As such, its counterparties are vulnerable to
potential default by Enron as counterparty, even if it is not a
reference source of credit exposure in a transaction.
In these transactions, any default by Enron as counterparty
under the swap contract would initiate a process whereby
termination of the swap contract is possible. The nondefaulting
counterparty would have the option to replace Enron with a new
counterparty in the swaps. This could be done on the whole swap
notional amount of credit exposure or the portfolio could be
carved up into pieces in order to distribute the risk across
various counterparties.
Whether transferred to one counterparty or many, this process,
called assignment, leads to a mark-to-market valuation. That
mark is either in favor of Enron or the counterparty Enron
faces. Thus, after an Enron default, the counterparty could be
exposed to a liquidity risk because it would have to make a
mark-to-market payment to Enron. Conversely, if Enron has to
make a mark-to market payment to the counterparty, the
counterparty may not be receiving the payment, especially if
insolvency proceedings commence.
Enron has secured ratings on three such credit derivative
transactions in which a total notional amount of $3 billion of
credit derivative exposure was traded.
To give some perspective on this number, Mr. Khakee explained
that Standard & Poor's credit derivatives analysts in New York
who review pools of credit exposure have reviewed transactions
with a total notional amount of $23 billion in the year to date.
"The notional amount of $3 billion relative to Enron represents
a larger percentage of overall rated credit derivative
transactions than would be expected of an entity that is not a
traditional broker-dealer, investment bank, or insurer," he
said.
ENRON CORP: AEGON Confirms Gross Exposure of $300 Million
---------------------------------------------------------
AEGON (NYSE: AEG) confirmed that its gross loan exposure to
Enron and affiliated entities amounted to approximately US$300
million.
As customary, AEGON will charge defaults to its established
default reserves. At this time, specified losses have not been
determined.
ENRON CORP: Arranges $1.5 Billion Debtor-In-Possession Financing
----------------------------------------------------------------
Enron Corp. (NYSE: ENE) announced that, in connection with its
Chapter 11 filings, it has arranged up to $1.5 billion of
debtor-in-possession (DIP) financing. The financing, arranged
by Citigroup and JP Morgan Chase, will be syndicated and is
secured by substantially all of the company's assets.
Upon Court approval, which the company expects to receive
shortly, $250 million of the new funding will become available
on an interim basis to supplement Enron's existing capital and
help the company fulfill obligations associated with operating
its business, including its employee payroll and payments to
vendors for goods and services provided on or after yesterday's
filing.
"With this financing in place, Enron can continue to do business
and move forward to implement the first steps of its
reorganization. We appreciate the support of our lenders and
are fully committed to meeting our obligations to our creditors
as best we can," said Kenneth L. Lay, Enron chairman and CEO.
An additional $250 million will be made available to Enron as
soon as the company provides the lenders with a satisfactory
business plan. The $1 billion balance of the facility will be
available to the company upon the satisfaction of certain
conditions, including the entry of a final order and the
successful completion of syndication. The remaining $1 billion
balance of the facility will be used in part to repay $550
million of existing indebtedness of Transwestern Pipeline.
Enron Corp. markets electricity and natural gas, delivers energy
and other physical commodities, and provides financial and risk
management services to customers around the world. Enron's
Internet address is http://www.enron.com The stock is traded
under the ticker symbol "ENE".
EXODUS COMMS: Court Okays Bingham Dana as International Counsel
---------------------------------------------------------------
Exodus Communications, Inc., and its debtor-affiliates obtained
Court authority to retain and employ Bingham Dana LLP as
international co-counsel in these chapter 11 cases to provide
strategic advice and assistance with respect to international
contingency planning matters.
Bingham will render international bankruptcy and restructuring
legal services to the Debtors as needed throughout the course of
these cases, all of which will be tailored to assisting the
Debtors in various foreign fora, for example:
A. advising the Debtors of the international aspects of their
rights, powers and duties as debtors and debtors-in-
possession continuing to manage their businesses and
properties under chapter 11 while simultaneously continuing
to operate in various foreign countries;
B. assisting the Debtors in the formulating and approval of
bankruptcy protocols, agreements or concordats, where
appropriate, between the U.S. Bankruptcy Court and various
foreign courts in which insolvency proceedings involving
the Debtors may commence;
C. advising and assisting the Debtors with respect to their
seeking recognition and relief in various foreign countries
and foreign insolvency proceedings;
D. where needed, preparing on behalf of the Debtors all
necessary and appropriate applications, motions, draft
orders, other pleadings, notices, schedules and other
documents, and reviewing all financial and other reports to
be filed in these chapter 11 cases and in any related foreign
countries or foreign proceedings;
E. advising the Debtors concerning, and preparing responses to,
applications, motions, other pleadings, notices and other
papers that may be filed and served in these chapter 11
cases in connection with foreign proceedings initiated,
including by the Debtors;
F. counseling the Debtors in connection with the formulation,
negotiation and promulgation of a plan or plans of
reorganization and any substantially similar schemes,
compromises or plans which the Debtors may seek to propose
in foreign insolvency proceedings; and
G. performing all other necessary or appropriate legal services
in connection with these chapter 11 cases for or on behalf
of the Debtors consistent with the limited role as
international counsel. (Exodus Bankruptcy News, Issue No. 8;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXODUS: Strikes Deal to Sell Assets to C&W for $755 Million
-----------------------------------------------------------
Exodus Communications, Inc., the premier managed hosting
provider for enterprises with mission-critical Internet
operations, announced it has entered into a definitive agreement
to sell a substantial portion of its business and assets to
Cable & Wireless plc, the global telecommunications group, for
approximately US$575 million in cash, plus the assumption of
certain liabilities totaling approximately $180 million.
Under the agreement, Cable & Wireless, and certain of its wholly
owned subsidiaries have agreed to acquire substantially all of
Exodus' and certain of its foreign subsidiaries' businesses,
including U.S., Japanese and European customer contracts,
employees, selected corporate and Internet Data Center (IDC)
assets, know-how, intellectual property, including the Exodus
brand, and other resources required to support customers and
grow the business.
The selected physical assets identified in the agreement, which
has been approved by the Exodus Board of Directors, include 30
Exodus IDCs, 26 in the U.S., one each in Tokyo and Frankfurt,
and two in London.
"Our goals with our financial reorganization have always been to
continue to provide our customers with the high quality service
and support they expect from Exodus, and to ensure we emerge
from the reorganization process with a solution that provides
Exodus customers, employees and other stakeholders with maximum
value," said L. William Krause, Exodus chairman and CEO. "We,
and our board, believe this combination with Cable & Wireless
enables us to meet both of these goals."
Exodus filed voluntary petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code on September 26, 2001.
The agreement with
Cable & Wireless is subject to approval of the federal
bankruptcy court in Wilmington, Delaware, where Exodus Chapter
11 case is pending. The motion for approval of the sale will be
filed with the bankruptcy court today. The agreement provides
for the approval of bidding procedures to allow other qualified
bidders to submit higher or better bids for the Exodus assets.
The company will request the bankruptcy court to approve the
bidding procedures and termination fees on December 13. The
company intends to seek final court approval of the transaction
in January 2002.
Completion of the transaction is also subject to customary
closing conditions, including receipt of required regulatory
approvals.
Exodus Communications, Inc., is the leading provider of managed
hosting services for enterprises with mission-critical Internet
operations. The company offers sophisticated system and network
management solutions along with professional services to provide
optimal performance for customers' Internet infrastructures.
Exodus manages its network infrastructure via a worldwide
network of Internet Data Centers (IDCs) located in North
America, Europe and Asia Pacific. More information about Exodus
can be found at http://www.exodus.net
* * *
DebtTraders reports that Exodus Communications' 11.625% bonds
due 2010 (EXDS3) are trading between 24 and 25. Go to
http://www.debttraders.com/price.cfm?dt_sec_ticker=EXDS3 for
real-time bond pricing.
EXOTICS.COM: Working Capital Deficit Doubles in Third Quarter
-------------------------------------------------------------
As of September 30, 2001, the Company's has a working capital
deficit of $2,226,486 and has incurred substantial losses for
the nine months ended September 30, 2001 and the year ended
December 31, 2000, totaling $2,579,252 and $1,246,382,
respectively.
The Company is seeking additional equity financing. There can be
no assurances that sufficient financing will be available on
terms acceptable to the Company or at all. If the Company is
unable to obtain such financing, the Company will be forced to
scale back operations, which could have an adverse effect on the
Company's financial condition and results of operation. These
factors raise substantial doubt about the Company's ability to
continue as a going concern.
At December 31, 2000, the Company had a working capital deficit
of $1,431,036. At September 30, 2001, the working capital
deficit increased to $2,226,486, primarily due to an increase in
accounts payable and accrued expenses, from $532,509 at
December 31, 2000 to $1,417,868 at September 30, 2001. The
current liabilities at September 30, 2001 included $756,789 due
to a related party which was settled by the issuance of stock
subsequent to the quarter.
Results of Operations
The acquisition of Exotics.com-Delaware was completed during the
third quarter so its results are reflected in the Company's
consolidated financial statements.
Total revenues during the quarter ending September 30, 2001 were
$341,945, less costs of sales of $45,386 for a gross profit of
$296,559. Current revenue sources consist primarily of fees
from Exotics.com-Delaware licensees, including initial licensing
fees, ongoing monthly fees based on advertising revenues from
each city, and monthly service fees. Exotics.com- Delaware is
currently planning an aggressive national campaign which will
generate national advertising revenue for ads displayed over
its international network of sites. It has also entered into
affiliate programs with a number of sites offering merchandise
that appeal to its viewers. The Company expects this to
increase revenues over the coming months.
During the quarter, operating expenses of $2,852,704 comprised
of salaries and employee benefits of $192,885, professional and
other consulting fees of $1,849,300 and general and
administrative expenses of $810,519. Of the amount listed for
professional and consulting fees, $1,500,000 was paid by the
issuance of 500,000 shares at $3.00 per share and $277,000 was
paid by the issuance of 100,000 shares at $2.77 per share.
Net loss during the quarter was $2,579,252.
FMAC LOAN: Fitch Downgrades Three Trust 1998-A Class Series
-----------------------------------------------------------
Fitch has downgraded three FMAC Loan Receivables franchise loan
transactions and one Captec franchise loan transaction.
The FMAC transactions remain on Rating Watch Negative, while the
Captec transaction is being placed on Rating Watch Negative.
Fitch downgrades Captec Grantor Trust 2000-1 class C to 'A- '
from 'A', class D to 'BB' from 'BBB', class E to 'B' from 'BB'
and class F to 'CCC' from 'B'. In addition, all classes are
being placed on Rating Watch Negative. The rating actions are a
result of $4.5 million of collateral write-downs over the last
two months, which has eroded credit enhancement to just under
the original levels. Currently, approximately 10% of the pool is
in default status and Fitch expects additional losses on
collateral as loan work-outs are completed.
Fitch downgrades FMAC Loan Receivables Trust 1997-A class E to
'B+' from 'BB' and class F to 'CCC' from 'B'. Classes D, E and F
will remain on Rating Watch Negative. The rating actions are a
result of collateral write-downs in the trust as defaulted loans
have completed workouts. The pool currently has five loans
either delinquent greater then 60 days or defaulted with an
unpaid principal balance of approximately $7.5 million. The
current credit enhancement remains above original levels for all
classes except classes E and F.
Fitch downgrades FMAC Loan Receivables Trust 1997-C class B to
'BBB-' from 'A', class C to 'B-' from 'BB+' and class D to 'D'
from 'CCC'. All classes will remain on Rating Watch Negative.
The downgrades are a result of recent write-downs in the pool,
due largely to the liquidation of a large borrower. The
collateral remaining in the pool appears to be pretty clean as
only $700,000 remains in default and there hasn't been a loan
delinquent more then 30 days in seven months.
Fitch downgrades FMAC Loan Receivables Trust 1998-A class C to
'B' from 'BB' and class D to 'D' from 'CC' with all classes
remaining on Rating Watch Negative. The rating action is due to
recent write-downs in the pool. The pool currently has $30
million in default with over half of that being represented by
one borrower. This borrower is a convenience and gas operator
who has filed bankruptcy. The collateral on the loan is mostly
leasehold mortgage and enterprise value, which can significantly
limit recoveries.
FEDERAL-MOGUL: Unsecured Committee Taps Bayard as Co-Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors of Federal-Mogul
Corporation, and its debtor-affiliates presents to the Court an
application for employment and retention of The Bayard Firm as
its co-counsel nunc pro tunc to October 23, 2001, in the
Debtors' chapter 11 cases.
Neil Subin, Esq., attorney for Aspen Advisors LLC, the Committee
chairperson, informs the Court that the Committee has selected
Bayard because or its attorneys' experience and knowledge and
because of the absence of any conflict of interest. Bayard has
advised the Committee that Bayard may have in the past
represented or opposed, may currently represent or oppose, and
may in the future represent or oppose, in matters totally
unrelated to the Debtors' pending chapter 11 cases, entities
that are claimants of the Debtors or other parties in interest
in these chapter 11 cases. Mr. Subin assures the Court that
Bayard has not and will not represent any such parties, or any
of their affiliates or subsidiaries, in relation to the
Committee, the Debtors, or these Chapter 11 cases. The Committee
believes Bayard is qualified to represent the Committee in the
Debtors' chapter 11 cases.
The services Bayard has rendered and may be required to render
for the Committee include, without limitation:
A. providing legal advice with respect to its powers and duties
as an official committee appointed under bankruptcy Code
section 1102;
B. assisting in the investigation of the acts, conduct, assets,
liabilities and financial condition of the Debtors, the
operation of the Debtors' businesses, and any other matter
relevant to the case or to the formulation of a plan of
reorganization or liquidation;
C. preparing on behalf of the Creditors Committee necessary
applications, motions, answers, orders, reports and other
legal papers;
D. reviewing, analyzing and responding to all pleadings filed by
the Debtors and appearing in court to present necessary
motions, applications and pleadings and to otherwise
protect the interests of the Committee; and
E. performing all other legal services for the Creditors
Committee in connection with these chapter 11 cases.
Subject to the Court's approval and in accordance with sections
330 and 331 of the Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure, and the Local Rule and orders of this
Court, the Committee requests that Bayard be compensated on a
hourly basis, plus reimbursement of the actual and necessary
expenses that Bayard incurs, in accordance with the ordinary and
customary rate which are in effect on the date the services are
rendered. The primary attorneys and paralegals expected to
represent the Committee, and their respective hourly rates are:
Charlene D. Davis $375 per hour
Ashley B. Stitzer $250 per hour
Eric M. Sutty $225 per hour
Heidi Snyder (paralegal) $125 per hour
In addition, other attorneys and paralegals will render services
to the Committee as needed, whose current hourly rates are:
Directors $300 to $415 per hour
Associates $175 to $260 per hour
Paralegals $115 to $125 per hour
The Committee submits that Bayard's customary hourly rates in
effect from time to time, as set forth in the Davis Affidavit,
are reasonable.
Charlene D. Davis, a Director of The Bayard Firm, relates that
neither Bayard nor any of its members, counsel or associates has
had or presently has any connection with the Debtors, their
creditors, equity security holders, or any other party in
interest, or their respective attorneys, accountants, the United
States Trustee, or any person employed in the Office of the
United States Trustee, in any matters relating to the Debtors or
their estates, except that:
A. Past or current clients of The Bayard Firm in matters
unrelated to the Debtors' Chapter 11 Cases:
1. The Bank of New York - prior, unrelated representation
of The Bank of New York in the capacity as indenture
trustee in Centennial Coal bankruptcy case; prior
representations of agents for bank syndicates in which
The Bank of New York had an interest in unrelated
cases.
2. Bank of America - prior and current representation of
the Bank of America as agent bank or lender in several
unrelated bankruptcy cases in the District of Delaware
including the Owens Corning and the W.R. Grace
bankruptcy cases.
B. Past or current parties that The Bayard Firm may be
currently, or in the past may have been, adverse to General
Electric Capital Corporation and affiliates in matters
unrelated to the Debtors' Chapter 11 Cases.
Ms. Davis asserts that Bayard has not received any retainer from
the Debtors, the Creditors Committee, or any other entity in
this case.
Mr. Subin relates that it is the carefully considered view of
the Creditors Committee that, considering the size and
complexity of this case and the various interests involved,
representation of the Creditors Committee by Bayard is
necessary, advisable and in the best interests of the Creditors
Committee. (Federal-Mogul Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FOCAL COMMS: Morgan Stanley Discloses 10.46% Equity Holding
-----------------------------------------------------------
Morgan Stanley Dean Witter & Co. own, in the aggregate,
18,052,268 shares of the outstanding common stock of Focal
Communications Corporation. The investment firm exercises sole
voting power over 13,998,530 of those shares, and shared
dispositive power over the entire 18,052,268 shares. The
holding represent 10.4613% of the outstanding common stock of
Focal Communications.
Focal Communications gets right to the point: The competitive
local-exchange carrier (CLEC) provides local and long-distance
voice services over more than 500,000 access lines in more than
20 US metropolitan markets. Targeting large corporations, it
also offers such data services as Internet access and remote
access to LANs, ISPs, and value-added resellers. Focal owns and
operates switches and leases transport capacity; it typically
provides its services over T1 lines. Nearly 70% of Focal's lines
are used for data traffic, and the company has rolled out
broadband digital subscriber line (DSL) service. Focal also
offers equipment colocation for ISPs. Investment firm Madison
Dearborn owns 35% of the company.
As reported in the Troubled Company Reporter, S&P dropped last
month Focal Communications' senior rating to D following its
recapitalization, while Fitch junked its senior notes and bank
facility.
FRUIT OF THE LOOM: Resolves Kansas CERCLA Claims with the EPA
-------------------------------------------------------------
Union Underwear and Union Yarn Mills, wholly owned subsidiaries
of Fruit of the Loom, ask the Court for permission to enter an
agreement settling a dispute with the United States
Environmental Protection Agency.
Daniel J. Guyder, Esq., of Milbank, Tweed, Hadley & McCloy,
tells Judge Walsh that the EPA alleges that Union Underwear and
Union Yarn Mills are each a "potentially responsible party"
within the meaning of Section 122(g)(i) of the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
("CERCLA"). Fruit of the Loom allegedly generated or
transported materials contaminated with hazardous substances
that were sent to PCB Treatment, Inc. (along with its
subsidiaries and affiliates,) for proper disposal. PCB Treatment
operated two buildings to treat and store polychlorinated
biphenyls ("PCBs"), which are alleged to be hazardous substances
under CERCLA. PCB Treatment operated at 2100 Wyandotte Street,
Kansas City, Missouri, from 1982 through 1987 and at 45 Ewing
Street, Kansas City, Kansas from 1984 through 1987. The EPA
site spill ID Numbers are 07RJ and 07RK.
According to the EPA, PCB Treatment did not properly store the
PBCs, resulting in the release or threat of release of PCBs at
the sites. As a result of this potential release at the Sites,
the EPA conducted response actions under CERCLA. In performing
the Response Actions, the United States of America, through the
EPA, has incurred $2,000,000 in costs. The EPA estimates that
an additional $35 million will be incurred in performing further
response actions at the Sites. More specifically, the EPA
estimates that approximately $16,000,000 will be incurred
performing further response actions at the Wyandotte location
and $19,000,000 incurred at Ewing Street. Pursuant to CERCLA,
the EPA alleges that it may bring legal action against any
potentially responsible party, including, in this case, Fruit of
the Loom, for reimbursement of the Costs incurred by the EPA for
Response Actions related to the Sites.
Fruit of the Loom and the EPA have reached agreements regarding
a consensual resolution of the Potential Legal Actions related
to the Sites, the terms of which are set forth in the Consent
Orders. The Consent Orders provide that Fruit of the Loom is
eligible for de minimis settlements pursuant to Section
122(g)(i)(A) of CERCLA.
Accordingly, the EPA gave Fruit of the Loom the option of
settling their proportionate share of the Costs for the payment
of (i) a 50% premium with a cost overrun reopener if the removal
costs exceed $60 million, or (2) a 100% premium with no cost
overrun reopener. In the best interests of their estates, Fruit
of the Loom agreed to option 2, which requires settlement
payments of $74,332.61 for Union Underwear and $9,374.86 for
Union Yarn Mills in exchange for the agreement with the EPA that
there will be no reopener to the settlement. The Settlement
Payments are to be made within 30 days of the Consent Orders'
Effective Dates (as defined in the Consent Orders).
The Consent Orders provide that, without admitting any
wrongdoing, the Fruit Parties and the United States of America,
including the EPA, will be subject to certain covenants not to
sue, among other things. The Consent Orders are expressly
conditioned on Fruit of the Loom obtaining Bankruptcy Court
approval of its terms and conditions.
The Consent Orders, relating to EPA Docket No. CERCLA-072001-
0008, are attached to the filing. They are substantially
identical with one applying to Union Underwear and the other to
Union Yarn Mills. The Consent Orders originated from the EPA
office in Region VII, 901 North Fifth Street, Kansas City,
Kansas, 66101. (Fruit of the Loom Bankruptcy News, Issue No. 43;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GALAXY ONLINE: Commission Lifts Cease Trading Order on Nov. 30
--------------------------------------------------------------
The Temporary Cease Trading Order dated September 27, 2001,
extended on October 11, 2001 was rescinded on November 30, 2001,
the company being up to date in its filings.
IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (the "Act")
AND
IN THE MATTER OF
GALAXY ONLINE INC.
ORDER
-----
(Section 144)
WHEREAS the securities of GALAXY ONLINE INC. (the "Corporation")
currently are subject to a Temporary Order (the "Temporary
Order") made by the Manager, Corporate Finance (the "Manager")
on behalf of the Ontario Securities Commission (the
"Commission"), pursuant to paragraph 2 of subsection 127(1) and
subsection 127(5) of the Act, dated September 27, 2001, as
extended by a further order (the "Extension Order") of the
Manager, dated October 11, 2001, on behalf of the Commission
pursuant to subsection 127(8) of the Act, that trading in the
securities of the Corporation cease until the Temporary Order,
as extended by the Extension Order, is revoked by a further
Order of Revocation;
AND UPON the Corporation having applied to the Commission
pursuant to section 144 of the Act for an order revoking the
Cease Trade Order;
AND UPON the Corporation having represented to the Commission
that:
1. The name of the Corporation is Galaxy OnLine Inc.
2. The Corporation was incorporated pursuant to the provisions
of the Ontario Business Corporations Act on August 21, 1992
under the name U-Can Brew Corporation.
3. By way of Articles of Amendment certified effective July 23,
1993, the Corporation changed its name to Brew Kettle
Corporation.
4. By way of Articles of Amendment certified effective August
28, 1995, the Corporation changed its name from Brew Kettle
Corporation to Lago Resources Ltd.
5. By way of Articles of Amendment certified effective December
31, 1996, the Corporation changed its name from Lago Resources
Ltd. to Rux Resources Inc.
6. By way of Articles of Amendment certified effective December
8, 1999, the Corporation changed its name from Rux Resources
Inc. to Galaxy OnLine Inc.
7. By way of Articles of Continuance certified effective
January 31, 2000, the Corporation was continued pursuant to the
provisions of the Business Corporations Act (Yukon).
8. The authorized capital of the Corporation consists of:
a. an unlimited number of common shares of which 86,332,612
common shares are issued and outstanding as fully paid and non-
assessable;
b. an unlimited number of First preferred shares of which
none are issued and outstanding;
c. an unlimited number of Second preferred shares of which
none are issued and outstanding.
9. The Corporation is a reporting issuer in Alberta, British
Columbia, Ontario and Yukon Territory.
10. The common shares of the Corporation were listed for trading
on Canadian Dealers Network ("CDN") under the symbol RUX.
Arrangements were made to list the Corporation's shares for
trading on the Canadian Venture Exchange ("CDNX") under the
symbol "YGO". Trading commenced on Tier 3 of CDNX on October 2,
2000. As a consequence of the Cease Trade Order issued on
September 27, 2001, CDNX halted trading effective September 27,
2001.
11. The interim financial statements for the six-month period
ended June 30, 2001 were not filed by August 29, 2001. As a
result, a Management and Insiders Cease Trade Order was imposed
on September 14, 2001. Statements were filed on September 18,
2001.
12. As these statements were not in accordance with the Act,
staff of the Commission imposed an Issuer Cease Trade Order on
September 27, 2001. The Order was extended on October 11, 2001.
The amended statements were filed on November 15, 2001.
13. To the knowledge of the directors of the Corporation, no
shareholder owns, directly or indirectly, or exercises control
or direction over securities of the Corporation carrying more
than 10% of the voting rights attached to the common shares of
the Corporation.
14. The financial statements for the three month period ended
March 31, 2001 and six month period ended June 30, 2001 were
filed late due to delays caused by the termination of all
employees of the Corporation and its subsidiary Moby Dark Inc.
resulting in a break in the continuity of knowledge in the
Corporation's accounts.
15. The Corporation is not considering and is not involved in
any discussions relating to a reverse take-over transaction.
AND WHEREAS the Temporary Order and Extension Order were each
made on the basis that the Corporation was in default of certain
filing requirements;
AND WHEREAS the undersigned Manager is satisfied that the
Corporation has remedied its default in respect of the filing
requirements and is of the opinion that it would not be
prejudicial to the public interest to revoke the Temporary Order
as extended by the Extension Order;
NOW THEREFORE, IT IS ORDERED, pursuant to section 144 of the
Act, that the Temporary Order and Extension Order be and they
are hereby revoked.
DATED at Toronto this 3Oth day of November, 2001.
(signed)
--------------------------
MANAGER, Corporate Finance
HEXCEL CORP: Heightened Liquidity Concerns Spur S&P Downgrades
--------------------------------------------------------------
Standard & Poor's lowered its ratings on Hexcel Corp. and
maintained them on CreditWatch with negative implications, where
they were placed on Sept. 21, 2001.
The downgrade reflects prospects for continued weak operating
performance and heightened liquidity concerns. A sharp downturn
in commercial aerospace demand following the Sept. 11 terrorist
attacks and a softer economy could lead to net losses in the
intermediate term, following net losses for the nine months
ended Sept. 30, 2001. The initial impact on Hexcel will be
evident later this quarter and in the early part of 2002, as
airplane manufacturers start to adjust inventories ahead of
reduced production rates. The adverse effect on the firm should
be partly mitigated by a recently announced restructuring
program aimed at further cutting costs.
As a result of subpar financial performance and high debt
levels, credit protection measures are very thin. Moreover,
liquidity is tight, with limited cash balances and availability
under the senior secured credit facility, and sizable interest
payments due in early 2002 on rated subordinated notes. Although
Hexcel was in compliance with the financial covenants (as
amended in May 2001) under its credit facility in the third
quarter ended Sept. 30, the company will have to approach the
banks this (fourth) quarter to request further modifications to
the covenants. Ratings will likely be affirmed and removed from
CreditWatch, if the firm is successful in its negotiations with
the banks.
Hexcel is the world's largest manufacturer of advanced
structural materials, with considerable diversity of revenues
and end use applications. An expected fairly prolonged decline
in the commercial aerospace market, accounting for about 50% of
the company's revenues, and continued weakness in the electronic
materials business will overshadow positive trends in some of
the firm's smaller markets, such as military aircraft and wind
energy.
Standard & Poor's will monitor ongoing developments to assess
the impact on credit quality.
Ratings Lowered And Remaining On CreditWatch
With Negative Implications
To From
Hexcel Corp.
Corporate credit rating B BB-
Senior secured (bank loan) debt B BB-
Subordinated debt CCC+ B
HUNTSMAN CORP: Taps Dresdner to Negotiate Debt Restructuring
------------------------------------------------------------
Peter R. Huntsman, President and CEO of Huntsman Corporation,
said that Huntsman Corporation and Huntsman Polymers
Corporation, an operating subsidiary of Huntsman Corporation,
have determined not to make interest payments due under their
bonds on January 1, 2002 and December 1, 2001, respectively.
Huntsman Corporation and Huntsman Polymers, with the assistance
of their financial advisor Dresdner Kleinwort Wasserstein, will
seek to initiate discussions with their bondholders to
restructure debt and improve overall financial flexibility.
Mr. Huntsman noted that the previously announced bank financing
commitment for up to $150 million, will provide additional
liquidity to allow Huntsman Corporation and Huntsman Polymers to
continue to operate their businesses safely and efficiently, and
continue to pay their trade creditors in a timely manner.
Proceeds from the proposed new financing are to be used for
ongoing operational cash needs and not for payment of interest
on Huntsman Corporation or Huntsman Polymer bonds.
Moreover, Mr. Huntsman said he believes that a financial
restructuring, together with improving industry conditions and
the major benefits realized from ongoing cost optimization
initiatives, will enable Huntsman to emerge a stronger, more
competitive business to the benefit of all stakeholders. "This
is part of our overall strategy to enhance the maximum value of
the business," Mr. Huntsman stated.
Brussels-based Huntsman International Holdings, which
constitutes the largest share of the Huntsman family's business
interests, has not seen the same extreme financial difficulties
as Huntsman Corporation and has continued to show strong
operating profits. Huntsman International and Huntsman
Corporation are separate legal and financial entities and
Huntsman International provides no credit support to Huntsman
Corporation.
The combined Huntsman companies constitute the world's largest
privately held chemical company. The operating companies
manufacture basic products for a variety of global industries
including chemicals, plastics, automotive, footwear, paints and
coatings, construction, high-tech, agriculture, health care,
textiles, detergent, personal care, furniture, appliances and
packaging. Originally known for pioneering innovations in
packaging, and later, rapid and integrated growth in
petrochemicals, Huntsman-held companies today have revenues of
approximately $8.5 billion, more than 14,000 employees and
facilities in 44 countries.
INTEGRATED HEALTH: Seeks Approval to Divest 4 Facilities in PA
--------------------------------------------------------------
In 2000, Integrated Health Services, Inc., and its debtor-
affiliates asked the Court for authority to assume four leases
pertaining to four facilities in Pennsylvania. The Debtors and
the Lake Ariel landlords, comprised of Lake Ariel Associates,
Ltd., Plymouth House Health Care Center, Inc., Mill Hill
Associates, Chateau Associates, and Winthrop House Associates
Limited Partnership, Debtors-in-possession in a chapter 11 case
in the Eastern District of Pennsylvania, were contending over
the assumption/rejection of the leases.
After about a year, the Debtors sought and obtained the Court's
authority, pursuant to section 363(b), and Bankruptcy Rule 6004,
for divestiture of the following four skilled nursing facilities
located in Pennsylvania:
(1) Integrated Health Services at Plymouth;
(2) Integrated Health Services of Bryn Mawr at the Chateau;
(3) Integrated Health Services at Julia Ribaudo;
(4) Integrated Health Services of Pennsylvania at Marple.
The Debtors have determined to divest of the four Facilities
because these are not profitable. The aggregate pro-forma
annualized earnings before interest, taxes, depreciation and
amortization was negative $2,102,355.00 and cash flow after
capital expenses is negative $2,431,105.00.
The leases pertaining to the four facilities all expired and
Debtor IHS-Penn operated the Facilities as a holdover tenant
before the divestiture.
Pursuant to the Transfer Agreements, each Facility's operations
will be transferred to its respective New Operator when such New
Operator obtains its license and complies with all additional
governmental and regulatory requirements. The Transfer
Agreements grant each New Operator the option of taking
assignment of its Facility's Medicare md Medicaid Provider
Agreements. If a New Operator elects to take assignment of its
Facility's Provider Agreement(s), such New Operator is obligated
to cure any and all defaults existing in connection with the
Provider Agreements, and shall have no right to seek
indemnification or contribution from the Debtors' estates in
connection with curing such defaults. To the extent that the New
Operator elect not to take assignment of the Provider
Agreement(s), the Debtors will reject them.
Specifically, the landlords to the leases are as follows:
(1) the Plymouth Lease: Morris Manor Associates and
Plymouth House Health Care, Inc. (collectively, the
Plymouth Landlord/lessor)
(2) the Chateau Lease: Chateau Associates (the Chateau
Landlord/lessor);
(3) the Julia Lease: Lake Ariel Associates, Ltd. (the Julia
Landlord/lessor);
(4) the Marple Lease: Broomall Associates (the Marple
Landlord/lessor). (Integrated Health Bankruptcy News,
Issue No. 22; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
LTV CORP: Sends Modified Labor Pact to Steel Loan Board & Banks
---------------------------------------------------------------
The LTV Corporation (OTC Bulletin Board: LTVCQ) submitted to
National City Bank, KeyBank and the Emergency Steel Loan
Guarantee Board (ESLGB) the text of the Amended Modified Labor
Agreement (AMLA) which was negotiated by the Committee of
Unsecured Creditors and the United Steelworkers of America. The
Company also submitted a financial analysis of the AMLA that was
developed by Deloitte Consulting, financial consultants to the
Committee of Unsecured Creditors.
"We are submitting the proposed new labor agreement and the
Committee's financial analysis of the agreement to the ESLGB
because we feel that the employees of LTV Steel, their families
and their communities deserve the chance to ask their government
for the help their company needs beyond that which they
themselves can offer. We hope you will agree that this
situation falls within the core purpose that led to the
establishment of the Emergency Steel Loan Guarantee Program,"
said John D. Turner, executive vice president and chief
operating officer.
The LTV Corporation is a manufacturing company with interests in
steel and metal fabrication. LTV's Integrated Steel segment is
a leading producer of high-quality, value-added flat rolled
steel, and a major supplier to the transportation, appliance,
electrical equipment and service center industries. LTV's Metal
Fabrication segment consists of LTV Copperweld, the largest
producer of tubular and bimetallic products in North America.
LAIDLAW: Names John Grainger as CEO of Education Services Unit
--------------------------------------------------------------
Laidlaw Inc., (TSE:LDM; OTC:LDWIF) announced that, effective
immediately, John R. Grainger, president and chief executive
officer of Laidlaw Inc., has been appointed president and CEO of
Laidlaw's Education Services operations. Education Services is
Laidlaw's largest operating division and the largest provider of
school bus transportation services in North America. It
currently carries more than 2.3 million students every school
day. Pending recruitment of his successor, Mr. Grainger will
continue to serve as president and CEO of Laidlaw Inc., where he
has played an important role in the Company's financial
restructuring.
Peter N.T. Widdrington, Chairman of the Board of Laidlaw Inc.,
stated: "The Board is extremely pleased to have John concentrate
on the operations of its largest division. John's operational
background and his unparalleled knowledge of the education
services business will allow him to solidify the core operations
of Education Services in tandem with the completion of Laidlaw
Inc.'s financial restructuring. During John's prior tenure at
Education Services, the operating division achieved record
revenue and earnings growth."
Mr. Grainger has been president and CEO of Laidlaw Inc. since
December 1999 and a director since August 1997. Prior to
becoming president and CEO, he served as executive vice-
president and chief operating officer from September 1997. He
also served as the president of Laidlaw Transit, Inc., Laidlaw's
passenger services group that includes the Education Services
business, from May 1992 until September 1997.
Laidlaw Inc. is a holding company for North America's largest
providers of school and inter-city bus transportation, public
transit, patient transportation and emergency department
management services.
LERNOUT & HAUSPIE: Reaffirms Selection of ScanSoft in Auction
-------------------------------------------------------------
On November 29, 2001, SpeechWorks International, Inc. issued a
press release challenging the results of the auction conducted
on Monday, November 26, 2001 by Lernout & Hauspie Speech
Products NV (OTC: LHSPQ) for the sale of its speech and language
technology assets.
Lernout & Hauspie Speech Products NV affirms the fairness of the
sale auction process, which was conducted under the supervision
of a court-appointed trustee and representatives of the Official
Committee of Unsecured Creditors, and intends to fully support
the selection of ScanSoft, Inc. (Nasdaq: SSFT) as the highest or
otherwise best bidder at the auction. A hearing before the
United States Bankruptcy Court for the District of Delaware to
approve the sale to ScanSoft is scheduled for December 4, 2001.
L&H is a global leader in advanced speech and language solutions
for vertical markets, computers, automobiles,
telecommunications, embedded products, consumer goods, and the
Internet. The company is making the speech user interface (SUI)
the keystone of simple, convenient interaction between humans
and technology. The company provides a wide range of offerings,
including: customized solutions for corporations; core speech
technologies marketed to OEMs; end user applications for
continuous speech products in vertical markets; and document
creation and linguistic tools. L&H's products and services
originate in the following basic areas: automatic speech
recognition (ASR), text-to-speech (TTS), search and retrieval
and audio mining. For more information, please visit L&H on the
World Wide Web at http://www.lhsl.com
L&H, the L&H logo, RealSpeak, Nothing But Speech (NBS), Say It
Your Way and Dragon NaturallySpeaking are either registered
trademarks or trademarks of Lernout & Hauspie Speech Products
N.V. or its affiliates, in the United States and/or other
countries. All other product names or trademarks referenced
herein are trademarks of their respective owners.
LOEWEN GROUP: Stay Lifted to Resolve $6.3MM Construction Dispute
----------------------------------------------------------------
As previously reported, in 1998, Debtor Ridgewood Cemetery, Inc.
entered into an agreement with Construction Resource Group, Inc.
for the construction of a new mausoleum at Ridgewood Cemetery
(the Project). The Agreement provided that Ridgewood would pay
CRG a total of $6,309,338.00, subject to certain adjustments, to
complete the Project. The Contract Sum was to be paid to CRG in
periodic payments reflecting the progress made by CR0 with
respect to the Project.
In the months preceding the Petition Date, in light of the
Debtors' financial difficulties and evolving market conditions,
Ridgewood determined that the construction of the Project as
contemplated by the Agreement would prove too costly.
Consequently, Ridgewood exercised its right under the Agreement
to suspend the Project. As of the Suspension Date, CRG had
completed approximately 10 percent of the Project.
The Agreement was later rejected pursuant to The Loewen Group,
Inc.'s motion as granted by the Court.
The parties disputed the amount of payment in connection with
the project. Ridgewood had remitted payments to CRG in respect
of approved pay applications numbered 1 through 8 and pay
application number 12B totaling approximately $617,917.45. CRG
asserts Ridgewood still owes it certain amount in connection
with the project. Accordingly, CRG filed proofs of claim
numbered 4095, 4096 and 4097, each asserting claims in the
amount of $319,845.23 against the chapter 11 estates of Loewen
Group International, Inc. (LGII), Loewen Group, Inc. (LGI) and
Ridgewood, respectively. Subsequently, CRG amended the Original
Prooft of Claim by filing proofs of claim munbered 9191, 9192
and 9193 each in the amount of $871,860.57 (the Amended Proofs
of Claim). CRG agrees that the cumulative amount allowable under
the Proofs of Claim does not exceed $871,860.57. The Debtors
dispute the total amount of CRG's claim based on their
assessment of the nature and extent of the work performed by CRG
in connection with the Project.
CRG asserts that its claims against the Debtors are fully
secured pursuant to a mechanics lien on the property of the
Project. The Debtors dispute this contention.
The Agreement provides for Dispute Resolution Procedures for the
resolution of such dispute, which may be referred to the
Architect for a decision, or by mediation or arbitration.
The Debtors and CRG wish to resolve the matter and accordingly
sought and obtained the Court's approval of a Stipulation and
Order which provides, among other things as follows:
(1) The automatic stay imposed by section 362 of the Bankruptcy
Code will be modified solely to the extent necessary to
permit the parties to resolve the disputes in accordance
with the Dispute Resolution Procedures. The Debtors are not
required to expend any amounts to satisfy the Amended Proofs
of Claim other than pursuant to a plan or plans of
reorganization approved by the Court but the Debtors may
remit to CRG payment to the extent necessary to satisfy
CRG's mechanics lien (if any) without further order of the
Court.
(2) The parties agree that their dispute should proceed to
mediation as soon as practicable, without need for an
additional submission to the Architect. Accordingly, the
mediation of this dispute shall commence no later than
November 30, 2001, unless otherwise agreed to in writing by
the Debtors and CRG. (Loewen Bankruptcy News, Issue No. 52;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
LYONDELL CHEMICAL: S&P Rates $350MM Senior Secured Notes at BB
--------------------------------------------------------------
Standard & Poor's assigned its double-'B' rating to Lyondell
Chemical Co.'s proposed $350 million senior secured notes due
2008, which will be sold pursuant to Rule 144A with registration
rights. At the same time, Standard & Poor's affirmed its
existing ratings on Lyondell Chemical Co. The outlook is stable.
The proposed notes are rated the same as the corporate credit
rating and the firm's existing secured debt in view of the
shared collateral supporting the company's substantial debt
obligations, and minimal subordinate cushion. Security consists
of domestic personal property (including receivables and
inventory) of Lyondell, stock of subsidiaries, a pledge of joint
venture distributions and certain property, plant, and
equipment. This collateral is likely to provide only a measure
of protection to note holders in the event of default or
bankruptcy, based on Standard & Poor's simulated default
scenario. Proceeds from the notes offering will be used to
refinance outstanding bank debt.
The ratings on Lyondell Chemical Co. reflect high debt levels
stemming from the 1998 acquisition of ARCO Chemical Co., which
overshadow the firm's average business profile as a leading
North American petrochemical producer.
Lyondell is the world's largest producer of propylene oxide
(PO), a key intermediate for urethanes and an array of
industrial chemicals. That strong market position is bolstered
by large-scale and cost-efficient operating facilities. Long-
term prospects for PO profitability remain relatively good,
although variations in the pricing of oil-based feedstocks and
the level of economic activity can affect short-term results.
Recently PO demand has diminished due to economic conditions but
should continue to increase 3%-5% annually over the cycle. The
concentration of global production capacity among relatively few
producers should limit oversupply conditions. Consequently,
pricing and product margins should remain less volatile than
those of most other petrochemical products. Business attributes
are generally less attractive for PO process co-products:
styrene and methyl tertiary butyl ether (MTBE). The styrene
sector is fragmented and more dependent on construction activity
and export demand, and wide swings in cyclical performance are
typical. MTBE is an important gasoline additive whose long-term
prospects are clouded by regulatory uncertainties, although
recent profitability has been good. Given the diversity and
flexibility of Lyondell's production base, a significant phase-
out of MTBE use in the U.S. is not expected to meaningfully
diminish the firm's cash flow generation. (However, any
conversion of existing MTBE units for the production of other
gasoline blending components would result in incremental capital
outlays.)
The company, through its 41% interest in Equistar Chemicals
L.P., is a major participant in the petrochemicals and plastics
markets (the second-largest North American producer of ethylene,
a key chemical building block, and the region's third-largest
manufacturer of polyethylene, the most widely used plastic).
Low-cost operations support its financial performance, but
earnings and cash flows are subject to notable swings due to
cyclicality. In the near term, the partnership's financial
performance is likely to remain depressed due to unfavorable
supply and demand dynamics associated with recent capacity
additions and lower demand. Standard & Poor's regards Lyondell's
59% interest in LYONDELL-CITGO Refining L.P., which operates
North America's largest extra-heavy crude coking refinery, as a
nonstrategic asset that could be monetized or divested to raise
funds for debt reduction. Following a scheduled turnaround in
late 2001, operating results should continue to provide
consistent contribution due to efficient operations and
contractual arrangements that promote steady refining margins.
Credit protection is aided by Lyondell's ability to generate
cash flow in excess of working capital and investment spending
needs, although the severity of the current trough could result
in some revolver utilization. The reduction of debt by more than
$2 billion with the proceeds from the March 2000 divestiture of
its polyols business has eased financial strains when most of
its businesses are experiencing somewhat-weaker-than-expected
profitability and cash flows due to continued cyclical
pressures. Importantly, the company recently amended
restrictive financial covenants in order to ensure satisfactory
financial flexibility until business conditions improve.
The ratings incorporate expectations that a near-term recovery
in business conditions and moderate capital spending (including
EPA mandated spending for NOx reduction) will lead to
strengthened credit protection measures. (Standard & Poor's
incorporates a proportionate share of Lyondell's joint venture
debt and operating profits in ratios used to assess Lyondell's
financial risk.) EBITDA interest coverage and debt to EBITDA
should improve from currently weak levels to about 2.5 times and
3.0x, respectively, within several years. To that end, common
stock buybacks and debt-financed acquisitions are expected to be
limited until the financial profile is meaningfully improved.
Outlook: Stable
Ratings stability is supported by the firm's commitment to
improve its financial profile and maintain adequate financial
flexibility, and the expectation that business conditions will
begin to recover during 2002.
Ratings Affirmed
Lyondell Chemical Co.
Corp credit rating BB
Senior secured debt BB
Subordinated debt B+
* * *
According to DebtTraders, Lyondell Chemical's 10.875% bond due
in 2009 (LYOCH3) is trading from 94 to 96. Go to
http://www.debttraders.com/price.cfm?dt_sec_ticker=LYOCH3 for
real-time bond pricing.
MALDEN MILLS: Firms-Up Deal with Lenders for $20MM DIP Financing
----------------------------------------------------------------
Malden Mills Industries, Inc., the world famous innovative
developer, manufacturer and marketer of the internationally
recognized Polartec family of performance fabrics, finalized a
deal with its lenders to fund its operations while it works to
assure its future vitality through a Chapter 11 reorganization.
Malden Mills filed for reorganization under Chapter 11 at court
in Worcester, Massachusetts.
"This reorganization allows Malden Mills to emerge from the
challenges we have faced since the catastrophic fire that nearly
destroyed our company in late 1995," said President and CEO
Aaron Feuerstein. "Today begins a new chapter in Malden Mills'
95 year history as a stronger, more highly focused and
profitable company. Our internationally renowned brand name, our
pioneering research and development arm, coupled with our strong
customer base and our dedicated workforce, will keep Malden
Mills at the forefront of the industry for many years to come."
The Mill was devastated by an industrial fire on December 11,
1995. Feuerstein received national recognition for immediately
rebuilding in Lawrence, MA while continuing to pay his workers
during the process. The new Polartec building was the first mill
built in New England in more than 100 years.
The filing was necessitated by the cost of servicing bank debt.
A number of factors contributed, including a sluggish retail
market, the high costs associated with rebuilding and the
closure of the company's upholstery division after a significant
market share loss as a result of the fire. Malden Mills, a
privately-held company, worked with its lenders and strategic
advisors and determined that a Chapter 11 filing was the best
way to reorganize the company for continuing operations and for
building on its unique position as a recognized brand innovator.
Malden Mills' patented manufacturing processes create high-tech,
branded Polartec fabrics for all outdoor activities -- from rock
climbing to kayaking to U.S. military maneuvers in the mountains
of Afghanistan. The company has received tremendous support from
their customers worldwide. "Made in the United States of
America' and based in Lawrence, Massachusetts, the Mill is the
sole source for Polartec fabrics used for cold weather gear for
the U.S. Army, Marine Corps, and Special Operations Command.
"I commend Malden Mills and the creditors for reaching this
agreement. I'm confident that the company will overcome its
current problems and continue to make a vital contribution to
the local economy and the nation's security in the future," said
Senator Edward Kennedy. "This agreement is a giant step toward
achieving that important goal."
"This is great news for anybody who cares about responsible
corporate citizenship in America," said Senator John Kerry.
"Aaron Feuerstein put the survival of his company on the line
when he decided to take care of his workers and rebuild in
Lawrence and Methuen. I appreciate the willingness of the
creditors who helped structure this agreement and am hopeful
that this announcement represents the beginning of a new chapter
of growth for the workers at Malden Mills."
"I am pleased that Malden Mills will continue to supply not only
our Armed Forces with Polartec but the greater Lawrence
community with good jobs. Malden Mills is providing our
military, particularly those soldiers and Marines who are
stationed in and around Afghanistan, with the best possible cold
weather gear. I am confident today's announcement will ensure
that our men and women in uniform will continue to receive this
important equipment. Moreover, it is clear that Malden Mills
will continue to play an important role in the economy of
Lawrence, the Merrimack Valley, and Massachusetts," said
Congressman Marty Meehan, a senior member of the House Armed
Services Committee.
"This is wonderful news for Malden Mills and wonderful news for
their workers," said Gov. Jane Swift. "In this time of economic
uncertainty it is reassuring when lenders and companies can
reach agreements that protect jobs and allow companies to
operate. I'm sure that this is the beginning of a successful new
phase for Aaron Feuerstein and his world-renowned Polartec
fabrics."
Malden is fully operational and conducting business as usual.
Gorlitz Fleece GmbH, a wholly owned subsidiary of Malden Mills
Industries, Inc., based in Gorlitz, Germany, will continue
operations unaffected by the U.S. filing. Customers worldwide
will continue to receive product, without interruption, from
both facilities. The U.S. Customer Service Center in Lawrence,
MA and the European Customer Service Center in Maastricht, The
Netherlands, will also continue to operate as usual and serve
customers' needs.
"Malden Mills is in an enviable position in the marketplace,"
said Feuerstein, "and with this infusion of capital, we will
continue to grow the business and retain our preeminent status
in the industry. Our customers, employees, and vendors will all
be the beneficiaries of this reorganization plan which allows us
to focus on our very positive outlook for the future."
Founded in 1906 and based in Lawrence, Massachusetts, Malden
Mills Industries, Inc. is the worldwide producer of high-quality
branded fabric for apparel, footwear and home furnishings.
Malden Mills and Polartec are trademarks registered in the
United States and in other jurisdictions for fabrics available
only from Malden Mills Industries, Inc.
MAXICARE HEALTH: HMO Unit Assigns Contracts to Care 1st & Molina
----------------------------------------------------------------
Maxicare Health Plans, Inc. (OTCBB:MAXIQ) announced that its
California HMO subsidiary has completed the assignment of its
Medi-Cal contracts.
The Los Angeles County Medi-Cal contract was assigned to Care
1st Health Plan for $15.0 million and the Sacramento Geographic
Managed Care Medi-Cal contract was assigned to Molina Healthcare
of California for $900,000.
Effective December 31, 2001, Maxicare will cease offering its
commercial products and has begun to allow employer groups that
wish to do so to terminate their contracts immediately.
Maxicare Health Plans, Inc., headquartered in Los Angeles, is a
managed healthcare company, with operations in California.
Maxicare, (the California HMO subsidiary) filed for Chapter 11
bankruptcy protection on May 25, 2001.
METALS USA: Seeking Injunction Against Utility Companies
--------------------------------------------------------
Metals USA, Inc., and its debtor-affiliates present to the Court
a motion seeking the entry of an order to determine adequate
assurance of payment for future utility services and restrain
utility companies from discontinuing, altering or refusing
services to the Debtors.
Zack A. Clement, Esq., at Fulbright & Jaworski LLP in Houston,
Texas, tells the Court that the Debtors currently operate many
manufacturing and storage facilities and obtain electricity,
natural gas, water and telephone services from various utility
companies. If utility services were to be disrupted, the
Debtors, operations would be severely disrupted and could grind
to a halt, which could result in losses and shattered confidence
of the Debtors' employees and vendors and jeopardize the
Debtors' reorganization efforts.
Prior to the commencement of these cases, Mr. Clement contends
that the Debtors timely paid all of their utility bills and
there have been no defaults or arrearages of any kind with
respect to these bills. The Debtors submit that there is
adequate assurance of payment for future services without the
need to post additional deposits or other security because the
availability of cash collateral will provide the Debtors with
sufficient funds to pay post-petition utility expenses and
because of the administrative expense priority afforded for
post-petition utility services.
Debtors believe that utility companies currently have adequate
assurance of payment for post-petition services. The Debtors
also request the Court order that as long as the Debtors' remain
current on their post-petition utility payments, the utility
companies are restrained from discontinuing, altering or
refusing services to the Debtors and if the Debtors default on
such payments, the utility companies may discontinue, alter or
refuse services to the Debtors only after notice and hearing and
entry of a final order by the Court permitting such
discontinuance, alteration or refusal of services. (Metals USA
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PEACE ARCH: Expects to Finalize Refinancing of Subordinated Debt
----------------------------------------------------------------
Peace Arch Entertainment Group Inc. (AMEX: "PAE"; TSE: "PAE.A",
"PAE.B") announced that it expected to finalize a refinancing of
its subordinated debt by last weekend.
In September, Peace Arch entered into a forbearance agreement
with its subordinated lenders managed by Mercantile Bancorp,
that required the Company to either repay its subordinated debt
or cure a breach under its Loan Agreement by November 30, 2001.
In accordance with this agreement, $2.2 million of the Company's
subordinated debt was repaid during September and October 2001,
reducing the total outstanding to $5.7 million.
Peace Arch Entertainment Group Inc. creates, develops, produces
and distributes proprietary television programming for worldwide
markets. The Company is headquartered in Vancouver, British
Columbia, and its stock trades on the American Stock Exchange
under the symbol "PAE"; and on the Toronto Stock Exchange under
the symbols "PAE.A" and "PAE.B".
PEN HOLDINGS: Moody's Junks Senior Notes Over Liquidity Concerns
----------------------------------------------------------------
Moody's Investors Service downgrades Pen Holdings, Inc. and
keeps ratings under review for possible further downgrade
reflecting the company's poor operating and financial results in
the quarter ended September 30, 2001, and its limited liquidity
as a result of development delays at its Fork Creek property,
litigation payments made to Cheyenne Resources, Inc., and
recently-concluded amendments to its credit facility. There is
approximately $100 million of debt securities that are affected
Moody's kept the ratings under review for possible downgrade
pending clarity about Pen's liquidity and strategic options. The
operating difficulties that Pen has experienced at its Fork
Creek mine, as well as numerous external factors could impact
the company over the next several months negatively, affecting
also its ability to obtain an attractive price for its assets. A
sale of all or substantially all of the company appears to be
its plan at this time.
Pen Holdings, Inc. is engaged in the mining, preparation,
marketing, and leasing of coal from mines located in the Central
Appalachian region of southern West Virginia and eastern
Kentucky. The company headquarters is in Brentwood, Tennessee.
Rating Action
Pen Holdings TO FROM
* $100 million of 9.875% guaranteed Caa2 B3
senior notes, due 2008
* senior implied rating Caa1 B2
* senior unsecured issuer rating Caa2 B3
PENN SPECIALTY: Accepting Bids for All Assets Until Dec. 7
----------------------------------------------------------
United States Bankruptcy Court District of Delaware issued a
Summary Notice of Penn Specialty Chemicals' auction procedures,
auction date, and sale hearing:
Regarding Penn Specialty Chemicals, Inc., Debtor, Chapter 11
Bankruptcy Case No.: 01-2254 (JJF). PLEASE BE ADVISED that on
November 19, 2001, the United States Bankruptcy Court for the
District of Delaware entered an Order approving auction
procedures in connection with the proposed sale by Penn
Specialty Chemicals, Inc. of all of its assets to one or more
bidders, which procedures are summarized herein.
Any bidder desiring to submit a bid at the auction shall send a
letter indicating its interest in bidding addressed to the
Debtor, its counsel, and its financial advisor, Berwind
Financial L.P., 3000 Centre Square West, 1500 Market Street,
Philadelphia, Pennsylvania 19102, Attn: J. Scott Victor, Esq.,
and shall be qualified by the Debtor upon signing a
confidentiality agreement and providing documentation and other
information evidencing satisfactory financial qualifications.
Qualified bidders shall deliver their bids in writing to Berwind
with copies to various parties such that the bid is actually
received not later than December 7, 2001 at 10:00 a.m.
The auction will be conducted at the offices of Dechert, 4000
Bell Atlantic Tower, 1717 Arch Street, Philadelphia,
Pennsylvania 19103, on December 17, 2001 at 10:00 a.m. or at
such other date, time, and/or location as shall be timely
disclosed by the Debtor to all qualified bidders.
The court has scheduled December 20, 2001, at 12:00 p.m. as the
date for a hearing on matters relating to the sale of the
assets. The Debtor may (i) amend the procedures or impose
additional terms and conditions at or prior to the auction, (ii)
extend the deadlines set forth and/or adjourn the auction by
further notice or by announcement at the auction, (iii) adjourn
the hearing on the sale by further notice or by an announcement
in court, and (iv) withdraw from sale any of the assets at any
time prior to or during the auction and make subsequent attempts
to market the same.
POLAROID: Court Approves Proposed Interim Compensation Protocol
---------------------------------------------------------------
Polaroid Corporation, and its debtor-affiliates sought and
obtained the Court's authority to establish procedures for
compensation and reimbursement of court-approved professionals
on a monthly basis. This will permit the Court and other
parties-in-interest to more effectively monitor the professional
fees incurred in these chapter 11 cases, according to Eric W.
Kaup, Esq., at Skadden, Arps, Slate, Meagher & Flom, in Chicago,
Illinois.
The Court-approved interim compensation procedures are:
(1) No earlier than the 25th day of each month following the
month for which compensation is sought, each professional
will prepare a monthly statement of all fees and costs
incurred during the preceding month and a summary statement
of the status of prior compensation requests. The Monthly
Fee Application shall comply with the Bankruptcy Code, the
Federal Rules of Bankruptcy Procedure, applicable Third
Circuit law and the Local Rules of this Court. The Monthly
Fee Application shall be filed with this Court and shall be
served on these parties:
(a) Polaroid Corporation, 784 Memorial Drive in Cambridge
Massachusetts 02139 (Attn: Neal D. Goldman, Esq.);
(b) counsel for the Debtors: Skadden, Arps, Slate, Meagher &
Flom, 333 West Wacker Drive in Chicago, Illinois (Attn:
David S. Kurtz, Esq.) and Skadden, Arps, Slate, Meagher
& Flom LLP, One Rodney Square, P.O. Box 636 in
Wilmington, Delaware (Attn: Gregg M. Galardi, Esq.);
(c) Mark S. Kenny, Esq., Office of the United States
Trustee, Room 2312, 844 North King Street in Wilmington,
Delaware;
(d) counsel to the Agent for the Debtors' pre-petition
lenders: Davis Polk & Wardwell, 450 Lexington Avenue in
New York, New York (Attn: John Fouhey, Esq.);
(e) counsel to the Agent for the Debtors' proposed post-
petition Debtor-in-possession lenders: Morgan, Lewis &
Bockius, 101 Park Avenue in New York, New York (Attn:
Robert Scheibe, Esq.); and
(f) counsel to the Committee(s).
(2) Each Notice Party will have 20 days after service of a
Monthly Fee Application to object. Upon the expiration of
the Objection Deadline, each Professional may file a
certificate of no objection or a certificate of partial
objection with the Court, whichever is applicable, after
which the Debtors are authorized to pay each professional an
amount equal to the lesser of:
(i) 80% of the fees and 100% of the expenses requested in
the Monthly Fee Application, or
(ii) 80% of the fees and 100% of the expenses not subject to
an objection.
(3) If any Notice Party objects to a Professional's Monthly Fee
Application, it must file a written objection with the Court
and serve it on the Professional and each of the Notice
Parties so that it is received on or before the Objection
Deadline. Thereafter, the objecting party and the
Professional may attempt to resolve the objection on a
consensual basis. If the parties are unable to reach a
resolution of the objection within 20 days after service of
the objection, then the Professional may either:
(x) file a response to the Objection with the Court, together
with a request for payment of the difference, if any,
between the Maximum Payment and the Actual Interim
Payment made to the affected Professional; or
(y) forego payment of the Incremental Amount until the next
interim or final fee application hearing, at which time
the Court will consider and dispose of the Objection if
requested by the parties.
(4) Beginning with the 3-month period ending December 2001,
at three-month intervals or at such other intervals
convenient to the Court, each of the professionals must file
with the Court and serve on the Notice Parties an interim
fee application for compensation and reimbursement of
expenses sought in the Monthly Fee Applications filed during
such period.
In addition to the service requirement, each professional
shall serve notice of its interim fee application request on
all parties that have entered their appearance pursuant to
Bankruptcy Rule 2002.
Each professional must file its Interim Fee Application
Request within 45 days after the end of the Interim Fee
Period for which the request seeks allowance of fees and
reimbursement of expenses.
Each professional must file its first Interim Fee
Application Request on or before February 15, 2002. It
should cover the Interim Fee period from the Petition Date
through and including December 31, 2001. Any professional
that fails to file an Interim Fee Application Request when
due will be ineligible to receive further interim payments
of fees or expenses under these procedures until such time
as a further Interim Fee Application request is submitted by
the Professional.
(5) The Debtors shall request that the Court schedule a hearing
on the Interim Fee Applications Request at least once every
6 months, or at such other intervals as the Court deems
appropriate. Upon allowance by the Court of a
professional's interim fee application, the Debtors shall be
authorized to promptly pay such professional all fees
(including the 20% holdback) and costs not previously paid
pursuant to the Monthly Statements.
(6) The pendency of an objection to payment of compensation or
reimbursement of expenses will not disqualify a professional
from the future payment of compensation or reimbursement of
expenses.
(7) Neither the payment of, or the failure to pay, in whole or
in part, monthly interim compensation and reimbursement of
expenses, nor the filing of or failure to file an objection
will bind any party-in-interest or the Court with respect to
the allowance of interim or final applications for
compensation and reimbursement of expenses of Professionals.
(8) All fees and expenses paid to Professionals are subject to
disgorgement until final allowance by the Court.
Mr. Kaup assures Judge Walsh that these compensation procedures
will enable all parties to closely monitor costs of
administration. It will also permit the Debtors to maintain a
more level cash flow availability and implement efficient cash
management, Mr. Kaup adds.
In addition, Judge Walsh also permits each member of the
Committee(s) in these cases to submit statements of expenses
(excluding Committee member counsel fees and expenses) and
supporting vouchers to counsel for the Committee(s), who shall
collect and file such requests for reimbursement in accordance
with these procedures for monthly and interim compensation and
reimbursement of professionals.
Judge Walsh further reminds the Debtors to include all payments
to Professionals in their monthly operating reports, detailed so
as to state the amount paid to each Professional. (Polaroid
Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
POLAROID: Plans to Sell ID Systems Assets to Digimarc for $56.5M
----------------------------------------------------------------
Polaroid Corporation announced that it plans to sell the assets
of its Identification Systems Business Division to Digimarc
Corporation (Nasdaq: DMRC) of Tualatin, Ore., for $56.5 million
in cash. The Honorable Judge Peter J. Walsh approved the sale
at a hearing this morning in U.S. Bankruptcy Court in
Wilmington, Del., in connection with the court's oversight of
Polaroid's voluntary Chapter 11 filing (Case Number 01-10864).
The sale is scheduled to close within 45 days.
Digimarc, a leader in digital watermarking technology, won the
right to purchase the Polaroid ID business at an auction held on
Friday, November 30, and Saturday, December 1, in New York City.
Also participating in the auction were PIDS Holding, Inc., a
Polaroid management group with financing from Hampshire Equity
Partners; VIDS Acquisition, a subsidiary of Viisage Technology,
Inc., of Littleton, Mass.; and PhotoID Acquisition, Inc., a
subsidiary of Vyyo Ltd. of Cupertino, Calif.
Polaroid's Identification Systems Business Division has annual
revenues of approximately $60 million and employs about 300
people, primarily in Bedford, Mass., and Ft. Wayne, Ind.
"This is a major step forward in our plan to sell assets that
are not part of our core instant imaging business. We're
pleased with the results of the auction and that the
participants clearly recognized the value of the Polaroid ID
business," said Gary T. DiCamillo, Polaroid chairman and chief
executive officer.
Polaroid received financial advice regarding the sale of its ID
business from Dresdner Kleinwort Wasserstein and legal advice
from both Skadden, Arps, Slate, Meagher & Flom LLP and Riemer &
Braunstein LLP.
Polaroid Corporation is the worldwide leader in instant imaging.
Polaroid supplies instant photographic cameras and films;
digital imaging hardware, software and media; secure
identification systems; and sunglasses to markets worldwide.
Additional information about Polaroid and its reorganization is
available on the company's web site at www.polaroid.com.
"Polaroid" is a registered trademark of Polaroid Corporation,
Cambridge, Mass. 02139
USG CORP: Committee Gets Okay to Retain Stroock as Lead Counsel
---------------------------------------------------------------
The Official Committee of Unsecured Creditors of USG Corporation
obtained Court permission to retain Stroock & Stroock & Lavan
LLP as counsel to the Committee, to perform these services:
- advise the Committee with respect to its right, duties and
powers in these chapter 11 cases;
- assist and advise the Committee in its consultations with
the Debtors relative to the administration of these cases;
- assist and advise the Committee in its consultations with
the Asbestos Claim Committee;
- analyze and advise the Committee as to intercompany
claims, and claims or causes of action by or against one
or more of the Debtors, their non-debtor domestic and
foreign subsidiaries and affiliates, and other third
parties;
- assist the Committee in analyzing the claims of the
Debtors' creditors, and in negotiating with the Debtors
creditors and equity security holders;
- assist with the Committee's investigation of the acts,
conduct, assets, liabilities, and financial condition and
prospects of the Debtors and of the operation of the
Debtors' businesses, including negotiations with the
Debtors, the Asbestos Claims Committees, and all third
parties concerning the terms of a plan of reorganization
for the Debtors and matters related thereto;
- assist and advise the Committee as to its communications
to the general creditor body regarding significant matters
in these cases;
- represent the Committee at all hearings and other
proceedings;
- review and analyze all applications, orders, statements of
operations and schedules files with the Court and advise
the Committee as to their propriety;
- assist the Committee in preparing pleadings and
applications as may be necessary in furtherance of the
Committee's interests and objectives; and
- perform such other legal services as may be required and
are deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties as set
forth in the Bankruptcy Code.
Stroock will bill the Debtors' estates for services rendered to
the Committee based on its customary hourly rates:
- Partners: $425 to $675 per hour
- Associates/Special Counsel: $160 to $450 per hour
- Legal Assistants/Aides: $ 75 to $200 per hour
(USG Bankruptcy News, Issue No. 13; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
*********
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For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
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C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
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