/raid1/www/Hosts/bankrupt/TCR_Public/011207.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, December 7, 2001, Vol. 5, No. 239
Headlines
ANC RENTAL: Court Okays Donlin Recano as Debtors' Claims Agent
AGERE SYSTEMS: Will Further Reduce Workforce by 950 Employees
ALGOMA STEEL: Files 2nd Amended Plan of Arrangement Under CCAA
AMES DEPT: Will Start Closing 54 Store Locations on December 30
BETHLEHEM STEEL: Thinks Schedules Can be Filed by Jan. 14
BURLINGTON: Taps Richards Layton as Bankruptcy Co-Counsel
CANADA 3000: PwC Opens Web Site & Hotline for Claimants
CHIQUITA BRANDS: Schedule Filing Deadline Extended to January 27
COMDISCO INC: Goldman Sachs Seeks Okay of $8.25M Transaction Fee
COMDISCO: Slashes Staff by 10% as Part of Cost-Cutting Efforts
CONTINENTAL AIRLINES: S&P Cuts Sr. Unsecured Debt Rating to B
DELTA AIR: S&P Lowers Ratings on Two Synthetic Transactions
ELOT INC: Court Okays Transfer of Network 60 Back to Management
ENRON CORP: Brings in Togut Segal & Segal as Conflicts Counsel
ENRON CORP: S&P Says Ratings Won't Likely Affect U.S. Insurers
ENRON CORP: S&P Drops Yosemite 2000-A Notes Ratings to D
ENRON CORP: NewPower Ends Commodity Supply & Forward Contracts
ENRON GLOBAL: Case Summary & 20 Largest Unsecured Creditors
ENRON INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors
ENRON NET: Case Summary & 20 Largest Unsecured Creditors
EXODUS: Gets OK to Obtain $200MM in Postpetition DIP Facility
FEDERAL-MOGUL: Secures Approval of Gilbert Heintz's Engagement
FLEETWOOD ENTERPRISES: Revises Covenants Under Credit Agreement
GROWTHEXPERTS: Files An Assignment Into Bankruptcy in Canada
HOMELAND GROCERY: Hilco Commences GOB Sales at 16 Locations
ICG COMMS: Seeks Further Extension of Exclusive Periods
INTEGRATED HEALTH: Allocation of Value Under Rotech Reorg. Plan
MCMS INC: Wants More Time to Transfer Prepetition Lawsuits
MRS. FIELDS: S&P Revises Outlook on Low-B Ratings to Negative
METALS USA: Court Extends Schedule Filing Deadline to Jan. 23
MIDWAY AIRLINES: Will Fly Again After Pilots' Contract Revision
MISSISSIPPI CHEMICAL: Fitch Affirms Low-B Debt Ratings
NORTHLAND CRANBERRIES: Sets Shareholders' Meeting for January 30
NORTHWEST AIRLINES: S&P Knocks Senior Debt Ratings Down to B+
OUTSOURCING SERVICES: S&P Concerned About Increased Debt Levels
OWENS CORNING: Intends to Transfer Assets to Advanced Glassfiber
PACIFIC GAS: Court Sets Schedule to Address Preemption Issues
PHOTRONICS: Violates Covenant Under $125MM Revolving Credit Pact
PLANET ENTERTAINMENT: Files for Chapter 11 Protection in NY
PLANET ENTERTAINMENT: Chapter 11 Case Summary
POLAROID CORP: First Creditors' Meeting Rescheduled to Dec. 18
PROBE EXPLORATION: Kicking Horse To Close Transaction by Dec. 20
SAFETY-KLEEN: Intends to Reject Zachry Pact on Manati Facility
SUN HEALTHCARE: Signs-Up Bloom Borenstein as Special Counsel
SUN HEALTHCARE: Plans to Divest More Facilities Under Portfolio
SUNSTAR HEALTHCARE: Parent's Oversight in Reporting Under Fire
VENTAS: Seeks Refinancing to Pay Down Debt Under Credit Pact
W.R. GRACE: Court Okays Kleet as Equity Panel's Local Counsel
WILLIAMS CONTROLS: Charles G. McClure Resigns as Director
WINSTAR: Strikes Agreement with AT&T to Grant Adequate Assurance
* BOOK REVIEW: George Eastman: Founder of Kodak and the
Photography Business
*********
ANC RENTAL: Court Okays Donlin Recano as Debtors' Claims Agent
--------------------------------------------------------------
ANC Rental Corporation, and its debtor-affiliates sought and
obtained an order from the Court authorizing the retention and
employment of Donlin & Recano & Company, Inc., as the claims,
noticing and balloting agent for the Clerk and as custodian of
official court records and to perform such other services as may
be required by the Debtors.
The Debtors estimate there may be more than 10,000 creditors
holding claims against the Debtors' estates. Furthermore, the
Debtors believe that there are in excess of that number of
creditors, former employees, and other parties-in-interest who
require notice of various matters, and in particular, the
deadline for filing proofs of claim. Upon information and
belief, the Office of the Clerk is not adequately equipped or
staffed to provide notice of the bankruptcy filing and other
notices to all of the creditors, or to docket and maintain
effectively the large number of proofs of claim that may be
filed in these chapter 11 cases.
The Debtors believe that the most effective manner in which to
maintain the list of creditors, to effect the noticing that may
be required in these cases, and to process the receipt,
docketing, maintenance, photocopying and transmittal of proofs
of claim in these chapter 11 cases is for the Debtors to engage
an independent third party to act as the noticing and claims
processing agent for the Court. Bonnie Glants Fatell, Esq., at
Blank Rome Comisky & McCauley LLP in Wilmington, Delaware,
submits that the Court is empowered to utilize outside agents
and facilities for such purposes, provided that the costs of
these facilities and services are paid for out of the assets of
the Debtors' estates. The Debtors are informed and believe that
the Clerk prefers an outside claims agent in cases as large as
these.
The Debtors understand that Donlin has performed substantially
identical services for debtors in other large chapter 11 cases,
including the cases of Salant Corporation; Bradlees Stores,
Inc.; Maxwell Communications Corp.; JWP Inc.; Alliance
Entertainment Corp.; Rockefeller Center, Inc.; Levitz Furniture
Inc.; Bill's Dollar Stores; Rickel Home Centers, Inc., and
NutraMax Products, Inc., among others. Based upon Donlin's
experience and knowledge, the Debtors believe that Donlin is
well qualified for this engagement.
As agent for and custodian of the records of the Clerk, Ms.
Fatell states that Donlin will maintain the list of the Debtors'
creditors and will maintain a proof of claim docket which shall
reflect in sequential order the claims filed in these chapter 11
cases, specifying:
A. the claim number,
B. the date such claim was received by the Clerk's Office,
C. the name and address of the claimant and the agent, if
any, that filed such proof of claim,
D. the amount of the claim, and
E. the classifications of such claim.
Carole G. Donlin, President of Donlin Recano & Company, Inc.,
states that the service the Firm will render to the Debtors as
Claims, Noticing and Balloting Agent of the Bankruptcy Court,
the services my firm proposes to render to-the office of the
Clerk of the Bankruptcy Court for the District of Delaware and
the Debtors include:
A. Prepare and serve required notices in these chapter 11 cases,
including:
a. Notice of commencement of these chapter 11 cases and the
initial meeting of creditors under section 341 (a) of
the Bankruptcy Code;
b. A notice of the claims bar date;
c. Notices of objections to claims;
d. Notices of any hearings on a disclosure statement and
confirmation of a plan of reorganization; and
e. Such other miscellaneous notices as the Debtors or the
Court may deem necessary or appropriate for an orderly
administration of these chapter 11 cases;
B. Within five business days after the service of a particular
notice, file with the Clerk's Office an affidavit of
service that includes a copy of the notice served, an
alphabetical list of persons on whom the notice was served,
along with their addresses, and the date and manner of
service;
C. Maintain copies of all proofs of claim and proofs of interest
filed in these cases;
D. Maintain official claims registers in these cases by
docketing all proofs of claim and proofs of interest in a
claims database that includes the following information for
each such claim or interest asserted:
a. The name and address of the claimant or interest holder
and any agent thereof, if the proof of claim or proof
of interest was filed by an agent;
b. The date the proof of claim or proof of interest was
received by Donlin Recano and/or the Court;
c. The claim number assigned to the proof of claim or proof
of interest; and
d. The asserted amount and classification of the claim;
e. Implement necessary security measures to ensure the
completeness and integrity of the claims registers;
f. Transmit to the Clerk's Office a copy of the claims
registers on a weekly basis, unless requested by the
Clerk's Office on a more or less frequent basis;
g. Maintain a current mailing list for all entities that
have filed proofs of claim or proofs of interest and
make such list available to the Clerk's Office or any
party in interest upon request;
h. Provide access to the public for examination of copies
of the proofs of claim or proofs of interest filed in
these cases without charge during regular business
hours;
i. Record all transfers of claims pursuant to Bankruptcy
Rule 3001(e) and provide notice of such transfers as
required by Bankruptcy Rule 3001(e);
j. Comply with applicable federal, state, municipal and
local statutes, ordinances, rules, regulations, orders
and other requirements;
k. Provide temporary employees to process claims, as
necessary;
l. Promptly comply with such further conditions and
requirements as the Clerk's Office or the Court may at
any time prescribe;
m. Provide balloting and solicitation services, including
preparing ballots, producing personalized ballots and
tabulating creditor ballots on a daily basis; and
n. Provide such other claims processing, noticing,
balloting and related administrative services as may
be requested from time to time by the Debtors.
In addition, Donlin Recano will assist the Debtors with:
A. the preparation of their schedules, statements of financial
affairs and master creditor lists, and any amendments
thereto;
B. if necessary, the reconciliation and resolution of claims;
and
C. acting as solicitation and disbursing agent in connection
with the chapter 11 plan process. (ANC Rental Bankruptcy
News, Issue No. 3; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
AGERE SYSTEMS: Will Further Reduce Workforce by 950 Employees
-------------------------------------------------------------
Agere Systems (NYSE: AGR.A) announced it will further reduce its
workforce by approximately 950 employees. Wednesday's
announcement is part of Agere's ongoing actions to reduce its
cost structure and lower its quarterly breakeven level from $900
million to $700 million.
Agere previously announced plans this year to eliminate
approximately 6,000 jobs as a result of a significant downturn
in industry demand for semiconductors. The additional jobs
announced Wednesday are primarily management positions within
Agere's product groups, worldwide sales organization, and
corporate support functions. Upon completion of the action
announced today, Agere will have a workforce of approximately
11,300 employees.
Agere is implementing these actions to align its business with
current market conditions, to sharpen its strategic focus and
leverage its expertise in systems integration.
"We sincerely regret the need to further reduce our workforce
and the unfortunate impact it will have on our people," said
John Dickson, president and CEO, Agere Systems. "However, it is
critical that we continue to move forward with our plans to
lower our cost structure and direct our resources to those areas
that will best support our return to profitable growth. This
includes a stringent review of our product portfolio to ensure
strategic fit and a rigorous look at our manufacturing capacity
to align it with customer demand. We are making strong progress
on our restructuring initiatives."
Earlier this year, Agere announced a restructuring plan that
included manufacturing consolidation, workforce reductions and
asset impairment charges. In November, Agere discontinued
operations at its plant in Madrid, Spain, a month ahead of
schedule. It expects to complete the sale to BP, a leading
energy supplier, over the next few weeks. In addition this
month, Agere expects to complete the workforce reductions
announced earlier this year. Agere also has realigned its
product offerings to better leverage its leadership in
optoelectronics and integrated circuits forming two new business
units -- Infrastructure Systems and Client Systems.
"This has been an extremely difficult year for our customers,
our business and our people," said Dickson. "I am encouraged,
however, by the progress we have made in quickly executing
against our plan. We will continue to work diligently to restore
the health of our business."
The majority of employees included in Wednesday's announcement
are located in New Jersey and Pennsylvania. They are expected to
leave Agere's payroll over the next several months.
Agere Systems is the world's No. 1 provider of components for
communications applications with leadership in optical
components and integrated circuits. This dual capability
uniquely positions Agere to deliver integrated solutions that
form the building blocks for advanced wired, wireless, and
optical communications networks. Agere also designs and
manufactures a wide range of semiconductor solutions for
communications-related devices used by consumers such as
cellular phones, modems, and hard disk drives for personal
computers and workstations. In addition, the company supplies
complete wireless computer networking solutions through the
ORiNOCO product line. More information about Agere Systems is
available from its Web site at http://www.agere.com
* * *
The August 31, 2001, edition of the Troubled Company Reporter
related that Standard & Poor's lowered its corporate credit and
senior secured bank loan ratings on Agere Systems Inc. to
double-'B'-minus from triple-'B'-minus, and removed the ratings
from CreditWatch, where they were placed July 24, 2001. The
action reflects, Standard & Poor's said, the agency's belief
that the company's operating profitability will remain
substantially depressed for the near to intermediate period, due
to ongoing weak markets for its communications semiconductors
and optical communications components.
ALGOMA STEEL: Files 2nd Amended Plan of Arrangement Under CCAA
--------------------------------------------------------------
Algoma Steel Inc. (TSE: ALG) announced that it has filed a
second amended and restated Plan of Arrangement and
Reorganization with the Court under the Companies' Creditors
Arrangement Act (CCAA).
The amended Plan provides for contributions from stakeholders
that will significantly reduce costs and improve cash flow in
future years. The contributions will enable Algoma to continue
to operate as a viable North American steel company.
The amended Plan is conditional upon changes in collective
bargaining agreements to achieve annual savings of $65 million
for 2002 (of which $10 million will be returned to employees on
June 30, 2004), $53 million for 2003 (of which $10 million will
be returned to employees on June 30, 2005), and $35 million
thereafter.
The interest rate on the US$125 million new notes to be issued
to existing noteholders has been increased to 9.5%. The new
notes will be redeemable after January 1, 2006 at a declining
premium. The interest rate on the US$62.5 million convertible
notes has been reduced to 1% and the minimum price at which
these notes can be converted into new common shares has been
reduced to CDN$10.00 per share. Interest will be paid on the
later of the scheduled payment dates and the date on which the
new credit facilities are repaid or refinanced.
The obligations of Algoma under the ongoing pension plans for
active employees, in excess of the assets thereof and up to $100
million, will be secured by a charge on Algoma's fixed assets
subordinate to the security for the new notes and new credit
facilities until the termination of the new credit facilities.
The amended Plan must be approved by each of the classes of
creditors of Algoma. The amended Plan, along with materials for
the meetings, including proof of claim forms, is posted on
Algoma's web site. The meetings are to be held in Sault Ste.
Marie on Friday, December 7, 2001.
Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is
Canada's third largest integrated steel producer. Revenues are
derived primarily from the manufacture and sale of rolled steel
products, including hot and cold rolled sheet and plate.
DebtTraders reports that Algoma Steel's 12.372% bond due 2005
(ALGOMA) trades from 24 to 26. For real-time bond pricing,
see http://www.debttraders.com/price.cfm?dt_sec_ticker=ALGOMA
AMES DEPT: Will Start Closing 54 Store Locations on December 30
---------------------------------------------------------------
Ames Department Stores, Inc. (OTC: AMESQ) announced that it will
close 54 store locations. The stores will begin liquidation on
December 30, 2001 and are expected to close in February or March
of 2002.
"Ames is focused on an aggressive plan to emerge from
reorganization as promptly as possible. To achieve that goal,
and provide continued opportunity for more than 24,000
associates moving forward, we have to demonstrate performance
that will ensure Ames access to capital. This last round of
closings gives us the financial profile we need," said Joseph R.
Ettore, Ames' Chairman & CEO.
The company indicated that its analysis of store sales volumes,
local demographics and market potential demonstrated that as a
result of closing this group of stores, reported sales per
square foot for the remaining 333 Ames locations would be 22
percent higher than the current chain average.
"Closing stores is a difficult decision," Ettore added. "But
Ames will continue to have a strong presence in the majority of
these markets. More importantly, we will also be able to offer
many of the impacted associates an opportunity to work in a
nearby store location."
Ames Department Stores, Inc. is a regional, full-line discount
retailer with annual sales over $3 billion. With stores in the
Northeast, Mid-Atlantic and Mid-West, Ames offers value-
conscious shoppers quality, name-brand products across a broad
range of merchandise categories. For more information about
Ames, visit www.AmesStores.com or www.AmesStores.com/espanol.
To find the location of the Ames store nearest you, dial 1-800-
SHOP-AMES.
Store Closing List:
Delaware (1)
Wilmington--3600 Miller Rd
Maryland (2)
Baltimore--3450 Annapolis Rd
Lutherville Timonium--2145 York Rd
Maine (2)
Sanford--1364 Main St
Falmouth--251 US Route 1
New Hampshire (1)
Tilton--630 West Main St
New Jersey (1)
Somerdale--711 Evesham Ave
New York (4)
Canandaigua--3225 E Lake Rd, State Rte 364
Carthage--500 W End Ave
Niagara Falls--2429 Military Rd
Monticello--4050 Rte 42
Ohio (14)
Ashtabula--2466 West Prospect Rd
Austintown--6000 Mahoning Ave
Brooklyn--11111 Memphis Ave
Canal Winchester--6035 Gender Rd
Chillicothe--985 N Bridge St
Columbus--2189 Eakin Rd
Lancaster--1601 River Valley Circle N
Mentor--8485 Market St
Middletown--2535 S Breiel Blvd
New Philadelphia--400 Mill Ave SE
Niles--5791 Warren Youngstown Rd
Piqua--987 E Ash St
Whitehall--3955 East Broad St
Youngstown--476 Boardman-Canfield Rd
Pennsylvania (18)
Belle Vernon--8000 Rostraver Rd
Berwick--Us Rte 11, 2015 West Front St
Bethel Park--5775 Baptist Rd
Bristol--Route 413 & Route B
Edinboro--12511 Edinboro Rd
Erie--2711 Elm St
Fairless Hills--520 Lincoln Hwy
Kittanning--19 Franklin Village Mall
Grove City--11 Pine Grove Square
Harrisburg--5005 Jonestown Rd
Lancaster--1300 Lititz Pike
McMurray--4009 Washington Rd
Phoenixville--100208 Schuylkill Rd & Hollingsworth
Philadelphia--703 E Hunting Ave
Reading--3215 N 5th Street Hwy
Sayre--500 N Elmira St
Tyrone--RD #5, Rte 220
Pittsburgh--4801 McKnight Rd
Rhode Island (1)
Middletown--878 West Main Rd
Virginia (4)
Christiansburg--1500 Roanoke Rd
Lynchburg--2110 Ward Rd
Norfolk--207 E Little Creek Rd
Roanoke--3971 Brambleton Ave
West Virginia (6)
Bluefield--RR 460
Bridgeport--1190 West Main St
Charleston--100 Kanawha Mall
Buckhannon--100 Buckhannon Mall
Dunbar--991 Dunbar Village Plaza
Lyburn--US Rte 10 S
BETHLEHEM STEEL: Thinks Schedules Can be Filed by Jan. 14
---------------------------------------------------------
The current deadline for Bethlehem Steel Corporation and its
debtor-affiliates to file their respective schedules of assets
and liabilities, schedules of executory contracts and unexpired
leases, and statements of financial affairs expires on
December 13, 2001.
By this motion, the Debtors seek an extension of the deadline
for an additional 30 days, until January 14, 2001, without
prejudice to the Debtors' ability to request additional time
should it become necessary.
George A. Davis, Esq., at Weil, Gotshal & Manges, LLP, in New
York, New York, tells the Court that while the Debtors have
mobilized their employees to work diligently and expeditiously
on the preparation of the Schedules, resources are strained.
Mr. Davis advises the Court that the Debtors may not be able to
properly and accurately complete the Schedules by the current
deadline in view of the amount of work entailed in completing
the Schedules and the competing demands upon the Debtors'
employees to assist in efforts to stabilize business operations
during the initial post-petition period.
But Mr. Davis relates that the Debtors have made significant
strides in gathering the required information and completing the
Schedules. The Debtors assert that ample cause exists to grant
the short extension in view of the:
(a) size of the Debtors' cases,
(b) amount of information that must be assembled and
compiled,
(c) location of such information, and
(d) significant amount of employee time that must be devoted
to the task of completing the Schedules. (Bethlehem
Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
BURLINGTON: Taps Richards Layton as Bankruptcy Co-Counsel
---------------------------------------------------------
Subject to the Court's approval, Burlington Industries, Inc.,
and its debtor-affiliates wish to employ Richards, Layton &
Finger, P.A. in Wilmington, Delaware, as their bankruptcy co-
counsel to perform the extensive legal services that will be
necessary during the Debtors' chapter 11 cases.
John D. Englar, Senior Vice President of Burlington Industries,
Inc., explains that although the Debtors have sought to retain
the law firm of Jones, Day, Reavis & Pogue, it is essential for
the Debtors to employ co-counsel in these cases because the
Debtors are required to retain Delaware counsel. Mr. Englar
tells the Court that Jones Day and Richards Layton have
discussed a division of responsibilities regarding
representation of the Debtors and will make every effort to
avoid duplication of effort in these cases.
According to Mr. Englar, the Debtors have selected Richards
Layton as their co-counsel because of:
(i) the firm's extensive experience and knowledge in the field
of debtors' and creditors' rights and business
reorganizations under chapter 11 of the Bankruptcy Code,
(ii) its expertise, experience and knowledge practicing before
this Court,
(iii) its proximity to the Court, and
(iv) its ability to respond quickly to emergency hearings and
other emergency matters in this Court.
Moreover, Mr. Englar adds, since Richards Layton has rendered
legal services and advice to the Debtors with respect to the
preparation of these cases, the firm has acquired knowledge of
the Debtors' businesses, financial affairs and capital
structure. Thus, the Debtors believe that Richards Layton is
both well qualified and uniquely able to represent them in these
chapter 11 cases in a most efficient and timely manner.
The services of Richards Layton under a general retainer are
necessary to enable the Debtors to execute faithfully their
duties as debtors in possession and to develop, propose and
consummate a chapter 11 plan, Mr. Englar explains. The firm
will be required to render these professional services:
(a) to advise the Debtors of their rights, powers and duties
as debtors and debtors in possession;
(b) to take all necessary action to protect and preserve the
Debtors' estates, including:
(1) the prosecution of actions on the Debtors' behalf,
(2) the defense of any actions commenced against the
Debtors,
(3) the negotiation of disputes in which the Debtors are
involved, and
(4) the preparation of objections to claims filed
against the Debtors' estates;
(c) to prepare on behalf of the Debtors all necessary
motions, applications, answers, orders, reports, and
papers in connection with the administration of the
Debtors' estates;
(d) to negotiate and prepare on behalf of the Debtors a plan
of reorganization and all related documents; and
(e) to perform all other necessary legal services in
connection with the Debtors' chapter 11 cases.
Daniel J. DeFranceschi, a director of the firm, identifies the
principal professionals and paraprofessionals designated to
represent the Debtors and their current standard hourly rates:
Daniel J. DeFranceschi $350
John H. Knight 275
Paul N. Heath 200
Rebecca L. Booth 150
Monica A. Molitor 115
Richards Layton intends to apply to the Court for allowance of
compensation in accordance with its customary hourly rates, as
well as reimbursement of all expenses incurred in connection
with the Debtors' cases.
Prior to the Petition Date, Mr. DeFranceschi reports, the
Debtors paid Richards Layton a $100,000 retainer. According to
Mr. DeFranceschi, $17,685 remains unapplied, after Richards
Layton billed the Debtors $82,315 for posted and estimated
unposted professional fees and charges and disbursements
incurred through the Petition Date. The Debtors propose that
the retainer amounts paid to Richards Layton and not expended
for pre-petition services and disbursements be treated as a
retainer paid in contemplation of services to be rendered by
Richards Layton as bankruptcy co-counsel.
Mr. DeFranceschi tells Judge Walsh that Richards Layton has in
the past represented, currently represents, and/or may in the
future represent, in matters wholly unrelated to this case,
certain potential parties in interest. However, Mr.
DeFranceschi assures the Court, Richards Layton will not
represent any of these entities in any facet of the Debtors'
cases.
"Based upon the information available to me, neither I, Richards
Layton, nor any director or associate thereof, insofar as I have
been able to ascertain, holds or represents any interest adverse
to the Debtors or their estates in the matters upon which
Richards Layton is to be employed," Mr. DeFranceschi declares.
Thus, Mr. DeFranceschi concludes, Richards Layton is a
"disinterested person" as defined in section 101(14) of the
Bankruptcy Code. (Burlington Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
CANADA 3000: PwC Opens Web Site & Hotline for Claimants
-------------------------------------------------------
PricewaterhouseCoopers Inc., trustee in bankruptcy for Canada
3000 Airlines and its associated companies, has begun the
process of handling claims on behalf of all Canada 3000
creditors, including ticket holders and passengers, travel
agents and tour operators, employees, trade creditors and
shareholders.
On December 4, 2001, a web site was opened and served as the
primary source of information related to the claims and
bankruptcy proceedings of Canada 3000 and its associated
companies. The site includes information for all creditors on
how to initiate a claim, and provide answers to frequently asked
questions. Thus, creditors are encouraged to visit
http://www.pwcglobal.com/brs-canada3000 Information on the web
site will be updated as it becomes available to keep all
creditors informed.
To start the claims process, ticket holders are asked to call
their travel agents or the toll free Information Hotline (1-877-
973-3000), which will be open effective December 4, 2001.
The claims process could be a long and complex one. Creditors
are encouraged to be patient as the process unfolds.
CHIQUITA BRANDS: Schedule Filing Deadline Extended to January 27
----------------------------------------------------------------
Pursuant to section 521 of the Bankruptcy Code, Bankruptcy Rule
1007 and Local Bankruptcy Rule 1007-1(b)(2), Chiquita Brands
International, Inc., is required, within 15 days from the
Petition Date, to file with the Court:
(i) schedules of assets and liabilities,
(ii) a statement of financial affairs,
(iii) schedules of current income and expenditures,
(iv) a schedule of executory contracts and unexpired leases,
(v) a schedule listing separately those creditors whose
claims are contingent, unliquidated, or disputed,
including a statement of why each claim is considered
contingent, unliquidated or disputed, and
(vi) a list of equity security holders.
By Motion, the Debtor asks Judge Aug for an order extending the
time it is required to file its Schedules and Statements.
Specifically, the Debtor asks for an extension to January 27,
2002. Of course, the Debtor reserves its right to seek further
extension from the Court, if the need arises.
In addition, the Debtor also seeks complete relief from the
requirement under Local Bankruptcy Rule 1007-1(b)(2) to file a
schedule listing separately those creditors whose claims are
contingent, unliquidated, or disputed including a statement of
why each claim is considered contingent, unliquidated or
disputed.
Kim Martin Lewis, Esq., at Dinsmore & Shohl LLP, in Cincinnati,
Ohio, explains that under the Debtor's proposed Plan of
Reorganization, its general unsecured creditors are unimpaired.
This means that there will be no prejudice to them by the
requested extension and waiver, Ms. Lewis assures the Court.
Ms. Lewis notes that the only impaired voting classes of claims
under the Plan are those in which holders of Notes have been
classified. "These parties have been represented by counsel and
financial advisors throughout the restructuring process," Ms.
Lewis states. Moreover, Ms. Lewis adds, it is not likely there
will be a significant dispute regarding the claims of such
parties, which are deemed allowed as set forth under the Plan.
Noting that requests of this nature are routinely granted in
large chapter 11 cases, Judge Aug extended the deadline by which
the Debtor must file its comprehensive Schedules and Statements
to January 27, 2002. (Chiquita Bankruptcy News, Issue No. 2;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
COMDISCO INC: Goldman Sachs Seeks Okay of $8.25M Transaction Fee
----------------------------------------------------------------
Comdisco, Inc.'s Engagement Letter with Goldman, Sachs & Co.
provides that if all or a portion of the assets of the
Availability Services Division are sold, Goldman shall be
entitled to a transaction fee equal to 1% of the aggregate
consideration paid in such a transaction.
With this in mind, Allan S. Brilliant, Esq., at Milbank, Tweed,
Hadley & McCloy LLP, in New York, tells Judge Barliant that
Goldman's mergers and acquisitions services have been
instrumental to the transaction. Since the Petition Date, Mr.
Brilliant says, Goldman has:
(i) contacted and had discussions with numerous potential
bidders for the Availability Services Division;
(ii) worked with the Debtors and their counsel to approve
interested parties as qualified bidders and facilitated
bidders' due diligence;
(iii) assisted the Debtors in setting up the data room for the
due diligence as well as scheduling data room visits,
management presentations and site visits to certain
facilities;
(iv) participated in management presentations and question
and answer sessions with potential bidders regarding the
assets and operations of the Availability Services
Division;
(v) assisted the Debtors in negotiating and finalizing the
agreement with the first potential buyer of the
Availability Services Division and in preparing for and
conducting the auction of such division's assets;
(vi) after the auction resulted in a higher and better offer
for the Availability Services Division, advised the
Debtors and otherwise assisted the negotiation of an
agreement with respect to such transaction; and
(vii) continued to advise the Debtors regarding the sale
process and assist the Debtors in their negotiations
with competing bidders in the final stages of the sale
process.
As a result of Goldman's services in all aspects of the
Availability Services Division transaction, the Debtors' estates
have benefited substantially, Mr. Brilliant contends.
Based on the closing price for the Availability Services
Division transaction, Mr. Brilliant places the Transaction Fee
at approximately $8,250,000, subject to:
(1) adjustments under the asset purchase agreements, and
(2) credits for monthly fees, all in accordance with the
Goldman Letter of Engagement.
Mr. Brilliant reminds the Court that the Goldman Letter of
Engagement was entered into by the Debtors and Goldman after
arms' length negotiations and was approved by the Court at the
time of Goldman's retention. And it is on this agreement that
Goldman based its request for compensation, Mr. Brilliant points
out. Mr. Brilliant argues that the compensation requested is
reasonable based upon:
(a) the time and labor required in connection with the
transaction,
(b) the complexity of the issues presented,
(c) the skill necessary to perform the services properly,
(d) preclusion of other employment,
(e) the customary fees charged to clients in non-bankruptcy
situations for similar services rendered,
(f) time constraints required by the exigencies of the case,
and
(g) the experience, reputation and ability of the
professionals rendering the services.
The services Goldman has rendered to the Debtors have been
necessary and in the best interests of the Debtors and their
estates and creditors, Mr. Brilliant insists.
Thus, Goldman requests the Court to enter an order:
(1) approving and allowing on an interim basis Goldman the
Transaction Fee related to the sale of the Availability
Services Division, and
(2) authorizing the Debtors to pay Goldman the Transaction
Fee in accordance with the Goldman Letter of Engagement
within 3 business days after Court approval of this
application.
But The Equity Committee Doesn't Like It
The Official Committee of Equity Security Holders objects to the
allowance of the Transaction Fee sought on the grounds that
Goldman Sachs possessed an adverse interest to the estate with
respect to the services for which it now seeks compensation.
This is in contravention of the requirements of section 327 and
328 of the Bankruptcy Code, Carmen H. Lonstein, Esq., at Bell,
Boyd & Lloyd LLC, in Chicago, Illinois, emphasizes. In
addition, Ms. Lonstein claims, Goldman Sachs breached its duty
to disclose all relevant "connections" to the Debtors pursuant
to Bankruptcy Rule 2014. "The law is clear," Ms. Lonstein says,
"the existence of conflicts of interest and the failure to make
proper disclosure are each independent grounds for the denial of
compensation."
According to Ms. Lonstein, Goldman Sachs failed to disclose the
fact that throughout its negotiations with Hewlett-Packard to
sell the Technology Services Division, Goldman Sachs was
simultaneously representing Hewlett-Packard in connection with
Hewlett-Packard's acquisition of Compaq Corporation, and stood
to receive tens of millions of dollars from Hewlett-Packard for
those services. "This simultaneous representation posed a clear
conflict of interest with respect to the Debtors' estates," Ms.
Lonstein contends.
"It is entirely conceivable that Hewlett-Packard, understanding
its economic leverage over Goldman Sachs, concluded that it
would be able to play fast and loose with the Procedures Order
and would not be called to task by Goldman Sachs," Ms. Lonstein
reflects. As a consequence of Hewlett-Packard's bad faith, Ms.
Lonstein notes, the Debtors' estates were forced to bear
significant litigation costs related to the three-day contested
Sale Hearing. "That damage might have been avoided if a
disinterested professional had been engaged to represent the
Debtors in negotiations with Hewlett-Packard," Ms. Lonstein
says.
Accordingly, the Equity Committee also asks Judge Barliant to
reconsider the Order retaining Goldman Sachs and providing for
the Transaction Fee. "In light of Goldman Sachs' misconduct in
failing to disclose the existence of material conflicts of
interest, and in misrepresenting to the Court its economic
relationships with its investment banking client Hewlett-Packard
Company, the Court should modify the Retention Order to deny
compensation to Goldman Sachs," Ms. Lonstein asserts.
Furthermore, the Equity Committee objects to application on the
grounds that Goldman Sachs cannot take credit for the
$825,000,000 price that was ultimately received in the sale of
the Technology Services Division. Ms. Lonstein tells Judge
Barliant that the price received from Goldman Sachs' efforts
would have been substantially lower if not for the actions of
other parties in these cases. "It would be highly inequitable
to award Goldman Sachs its requested fee of 1% of the full
$825,000,000," Ms. Lonstein says.
The Equity Committee believes it would be much better to defer
this application until the end of these chapter 11 cases when
Goldman Sachs' compensation can be evaluated in light of the
compensation awarded to others.
Thus, the Equity Committee asks Judge Barliant to deny Goldman
Sachs' application.
Goldman Sachs Says Objection is Ridiculous
But Mr. Brilliant insists that Goldman Sachs made full and
adequate disclosure of its numerous connections and potential
connections to the Debtors and other parties-in-interest arising
from its substantial and diversified client base.
According to Mr. Brilliant, the Goldman Sachs affidavits
disclose all of Goldman Sachs' connections with the Debtors and
parties-in-interest, to the extent known, and they disclose
that:
(i) Goldman Sachs had connections to many potential
purchasers of the Debtors' assets, and
(ii) Hewlett Packard was one such purchaser.
To allege that Goldman Sachs failed to properly disclose its
connections to the Debtors is "disingenuous", Mr. Brilliant
observes. Based on the disclosure Goldman Sachs provided, Mr.
Brilliant maintains, any reasonable party was clearly on notice
that Goldman Sachs had connections with parties on the Potential
Parties List and specifically with potential purchasers, such as
Hewlett-Packard. Such disclosure is not "boilerplate," Mr.
Brilliant insists. Goldman Sachs precisely tailored its
disclosure to provide full and adequate disclosure without
revealing the inherently confidential nature of its client base
and particular nonpublic assignments, Mr. Brilliant explains.
Goldman Sachs submits this disclosure was carefully tailored and
was sufficient to allow the Court and all parties in interest to
understand the nature and scope of Goldman Sachs' connections to
the Debtors and to make an informed judgment as to Goldman
Sachs' disinterestedness.
At the time of Goldman Sachs' retention, Mr. Brilliant points
out, no party-in-interest objected to Goldman Sachs' retention
or sought additional information. Mr. Brilliant argues it is
not too late -- after Goldman Sachs has completed its work on
the transaction and earned its fee -- for the Equity Committee,
which had months to review Goldman Sachs' disclosure, to argue
that its is not specific enough because it does not disclose
specific client engagements.
In approving the retention of Goldman Sachs, the Court found
that it is "satisfied that Goldman Sachs is 'disinterested' and
represents no interest adverse to any of the Debtors' estates
with respect to the matters upon which it is to be employed."
Mr. Brilliant observes the Equity Committee is now attempting to
attack the Court's prior order by alleging that Goldman Sachs'
failure to file a supplemental affidavit disclosing Goldman
Sachs' retention by Hewlett-Packard in connection with its
merger with Compaq. It would be unfair at this time for the
Court to retroactively determine that disclosure of such
engagements was necessary, Mr. Brilliant adds.
Moreover, Mr. Brilliant admits that Goldman Sachs' fees for
performing the services for any individual client are important
to the company. However, Mr. Brilliant declares, the fees for
any individual engagement are not material to the financial
condition of Goldman Sachs. Mr. Brilliant tells the Court that
Goldman Sachs listed net revenues of $16.59 billion in its 2000
Annual Report. "The Equity Committee's allegation that Goldman
Sachs' affidavit was materially misleading based on Goldman
Sachs' statement that none of the engagements individually are
material to the financial condition of Goldman Sachs is wrong,"
Mr. Brilliant contends.
Goldman Sachs' provision of services to Hewlett-Packard was on
matters completely unrelated to the Debtors or their chapter 11
cases, Mr. Brilliant continues. Such provision of services on
unrelated matters does not render Goldman Sachs not
disinterested, Mr. Brilliant claims. In fact, Mr. Brilliant
reminds Judge Barliant, courts regularly approve retention of
professionals in chapter 11 cases where the professional has
connections to parties-in-interest in matters unrelated to the
chapter 11 cases.
Moreover, Mr. Brilliant describes as "ridiculous" the Equity
Committee's allegation that Hewlett-Packard's actions were
influenced by its relationship to Goldman Sachs. It strains
credulity to assert that Goldman Sachs' presence in the
transaction negotiations somehow allowed Hewlett-Packard to take
actions it otherwise would not have taken in the context of a
public, high profile auction, Mr. Brilliant remarks.
Finally, Mr. Brilliant asserts that Goldman Sachs is entitled to
the Transaction Fee as a matter of law. The Transaction fee is
reflected in the Agreement between the Debtors and Goldman Sachs
and approved by the Court in the Retention Order, Mr. Brilliant
points out.
Thus, Goldman Sachs requests that the Court:
(i) overrule the Equity Committee's objection in the entirety
with prejudice, and
(ii) approve and allow Goldman Sachs compensation as requested
in its application. (Comdisco Bankruptcy News, Issue No.
16; Bankruptcy Creditors' Service, Inc., 609/392-0900)
COMDISCO: Slashes Staff by 10% as Part of Cost-Cutting Efforts
--------------------------------------------------------------
Comdisco, Inc. (NYSE: CDO) announced that as part of its ongoing
cost reduction efforts the company will cut its workforce by
approximately 10 percent, or 128 positions. Impacted employees
are being notified this week, and will be released over the next
30 to 60 days. Just over half of the employees affected work in
Comdisco's facilities in the greater Chicago area, primarily in
operations functions. Others are located throughout company
operations worldwide.
"While we've made considerable progress in our chapter 11
restructuring efforts, such as the sale of our Availability
Solutions business on November 15, 2001, and the ongoing sales
evaluation process for our Leasing businesses, it's clear that
we need to continue to cut costs and improve our efficiency,"
said Norm Blake, Comdisco's chairman and chief executive
officer. "This is a very difficult decision that impacts many
talented and hardworking people. We are committed to treating
our employees fairly and compassionately, while we continue to
focus on our cost reduction efforts."
Comdisco employs 1,272 people worldwide and approximately 680 in
Illinois. Affected employees will be given severance, training
workshops, and on-site placement assistance.
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 all or some 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 other financial management services
to key vertical industries, including semiconductor
manufacturing and electronic assembly, healthcare,
telecommunications, pharmaceutical and biotechnology. Through
its Ventures division, Comdisco provides equipment leasing and
other financing and services to venture capital-backed
companies.
CONTINENTAL AIRLINES: S&P Cuts Sr. Unsecured Debt Rating to B
-------------------------------------------------------------
Standard & Poor's downgraded its senior unsecured debt ratings
for Continental Airlines Inc., to 'single-B' from 'single-B-
plus', 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 the 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 affected airlines was 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. Although such instruments, particularly enhanced
equipment trust certificates in the U.S., have cost advantages,
they have encumbered, either through leases or secured debt a
substantial proportion of the asset base of many airlines (those
shown below have Standard & Poor's senior unsecured debt
ratings; figures shown are estimated as of Sept. 30, 2001, for
all but Japan Air Lines Co. Ltd., which is the fiscal year ended
March 31, 2001; in some cases subsequent secured debt and lease
transactions are included as well in the calculation): Airlines
with senior unsecured debt ratings: Secured debt and leases %
total owned and leased assets Qantas Airways Ltd. 18% Southwest
Airlines Co. 28% Japan Airlines Co. Ltd. 29% Delta Air Lines
Inc. 36% Air Canada 37% AMR Corp. 44% AmTran Holdings Inc. 47%
British Airways PLC 50% Northwest Airlines Corp. 50% UAL Corp.
53% Continental Airlines Inc. 68% America West Holdings Inc. 69%
In addition, Standard & Poor's criteria for rating senior
unsecured debt have been revised to incorporate more directly
the effect of leases on asset protection for unsecured
creditors. The criteria recognize that certain industries,
because of the ease of financing their revenue assets, can carry
higher proportions of secured debt and leases and the criteria
accordingly allow for higher thresholds before notching down of
senior unsecured debt is warranted due to reduced asset
protection for those creditors. Still, the high and rising
proportions of secured debt and leases at many airlines
indicate that a distinction between the corporate credit rating
and senior unsecured debt rating is justified. Standard & Poor's
has not defined specific, separate thresholds for airlines, but
examines asset protection based on their individual
characteristics and relative to industry norms and standard
notching criteria. Speculative-grade companies can have their
senior unsecured debt rated one or two notches below the
corporate credit rating, depending on the proportion of secured
debt and leases, while investment-grade companies can have their
senior unsecured debt rated at most one notch below the
corporate credit rating.
The sharp deterioration in airline financial performance since
Sept. 11 has increased reliance on secured debt as the principal
form of airline debt funding. Even Southwest Airlines, the
highest rated airline, used enhanced equipment trust
certificates (EETC), the company's first, in October. Excepting
Southwest, all U.S. airlines that had unsecured bank revolving
credit facilities have either provided collateral to the banks
or are repaying borrowings. Although the federal loan guarantee
program may provide unsecured loans for some U.S. airlines (the
exact terms of the borrowings will vary from case to case and
remain to be determined), most borrowing is expected to take the
form of leases or secured debt for the foreseeable future.
Accordingly, senior unsecured creditors are likely to continue
to be in a disadvantaged position as regards asset protection at
many airlines due to the relatively high proportion of secured
debt and leases on their balance sheets.
Senior Unsecured Debt Rating Lowered;
Remain On CreditWatch Negative
To From
Continental Airlines Inc. (BB-/Watch Neg/--) B B+
DELTA AIR: S&P Lowers Ratings on Two Synthetic Transactions
-----------------------------------------------------------
Standard & Poor's lowered its ratings on two synthetic
transactions related to Delta Air Lines Inc. (Delta). In
addition, the ratings on both transactions remain on CreditWatch
with negative implications, where they were placed September 20,
2001.
The lowered ratings on the synthetic transactions reflect the
lowered senior unsecured debt ratings for nine airlines,
including Delta, reflecting reduced asset protection for
unsecured creditors. That downgrade occurred November 29, 2001.
The synthetic issues below are swap-independent synthetic
transactions that are weak-linked to the underlying collateral,
Delta Airlines Inc. debt. The new ratings reflect the credit
quality of the underlying securities of Delta Airlines Inc.
Corporate Backed Trust Certificates Series 2001-6 Trust
$53.091 million corporate-backed trust certs
Class Rating
To From
A-1 BB/Watch Neg BB+/ Watch Neg
Corporate Backed Trust Certificates Series 2001-19 Trust
$25 million corporate-backed trust certs
Class Rating
To From
A-1 BB/Watch Neg BB+/Watch Neg
ELOT INC: Court Okays Transfer of Network 60 Back to Management
---------------------------------------------------------------
eLOT, Inc. (OTC Bulletin Board: ELOT) announced that the
bankruptcy court has approved the transfer of the Network 60
business back to the original Network 60 management group in
exchange for cash, the return of the 3,500,000 eLOT shares
issued in the original acquisition and settlement of a dispute
between the parties related to the acquisition.
In addition, eLOT announced that it received a U.S. Patent for
its system that facilitates Internet sales of state lottery
tickets with a screening and a verification function on the
Internet.
Specifically, U. S. Patent No. 6,322,446 covers the eLOT system
and method that
1) enables lottery players to receive player and ticket
information,
2) screens and verifies that the lottery players satisfy
state eligibility criteria,
3) stores player and ticket information, and
4) upon receipt of winning numbers from the state,
determines winning tickets and notifies winning players.
"We believe that the present legislative climate in Washington
appears very favorable to exempting state lotteries from any
prospective Internet gambling legislation. Therefore, when one
combines our Internet technology with this new patent, we will
be able to offer lotteries in the United States the best Web-
based e-commerce solutions," said eLOT's President and CEO,
Edwin McGuinn.
eLOT, Inc. is a leading application service provider of Internet
marketing and advertising technology for state and international
lotteries. The company and its eLottery Inc. subsidiary filed
for reorganization under Chapter 11 of the federal Bankruptcy
Code on October 15, 2001, and hope to file a complete
reorganization plan by the end of the calendar year.
eLOT, Inc. -- http://www.elottery.com-- is a leading
application service provider of Internet marketing and
advertising technology for lotteries. The company offers online
transaction and information systems to lottery operators,
including the Jamaica Lottery. The Company's eLottoNet unit
keeps players informed of lottery results with a free e-mail
notification service.
ENRON CORP: Brings in Togut Segal & Segal as Conflicts Counsel
--------------------------------------------------------------
Enron Corporation, and its debtor-affiliates anticipate that
they may encounter certain matters that cannot be appropriately
handled by their counsel Weil, Gotshal & Manges LLP because of
potential conflicts of interest. Thus, the Debtors seek
authority to engage Togut Segal & Segal LLP as co-counsel to
assist Weil Gotshal in the prosecution of these chapter 11
cases.
According to Melanie Gray, Esq., at Weil, Gotshal & Manges LLP,
in New York, Togut's retention will avoid unnecessary litigation
and reduce the overall expenses of administering these cases.
Ms. Gray assures Judge Gonzalez that Togut Segal and Weil
Gotshal will carefully coordinate their efforts and clearly
delineate their duties to prevent any duplication of effort.
Rather than resulting in any extra expense to the Debtors'
estates, Ms. Gray claims, the efficient coordination of efforts
of counsel will greatly add to the effective administration in
these chapter 11 cases.
Albert Togut, the senior member of the Togut firm, advises the
Court that the firm will charge:
Partners $465 to $580 per hour
Paralegals and Associates $100 to $365 per hour
"To the best of my knowledge, after due inquiry, Togut Segal &
Segal LLP is not connected with the Debtors, their creditors,
other known parties-in-interest or the United States Trustee,"
Mr. Togut tells Judge Gonzales. Mr. Togut acknowledges that he
or his form may have represented certain creditors if the
Debtors in other cases but emphasizes that they "do not
represent any such creditors in these cases." As such, Mr.
Togut concludes, Togut Segal & Segal is "disinterested" as
defined in section 101(14) of the Bankruptcy Code.
Mr. Togut further assures the Court that the firm has had
considerable experience in matters of this nature, and has acted
in a professional capacity in numerous Chapter 11 cases,
representing the interests of debtors, creditors' committees,
trustees, and individual secured and general creditors. (Enron
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ENRON CORP: S&P Says Ratings Won't Likely Affect U.S. Insurers
--------------------------------------------------------------
The direct exposure of U.S. insurers' asset portfolios to
securities issued by Enron Corp., and its affiliates, estimated
at more than $3.5 billion as of this date, is not likely in
itself to have a negative impact on ratings of those insurers,
Standard & Poor's said.
The exact total of insurers' asset exposure will take some time
to resolve, because many insurers liquidated some or all of
their holdings in the weeks preceding Enron's bankruptcy filing
of Dec. 2, 2001, but Standard & Poor's estimates that most of
this asset exposure, about $2.6 billion, was with life insurance
companies at year-end 2000, primarily in fixed-income
investments. Among the life insurers making early announcements
of their exposure was John Hancock Life Insurance Co., which
reported a net investment exposure of $320 million, for which it
would be taking a fourth-quarter charge of up to $125 million.
The portfolio management discipline of domestic insurers in
their asset management has become ever more sophisticated in
recent years, and for most, a key tenet was the avoidance of
excessive exposure to any one credit. This, combined with the
maintenance of strong capital redundancies at most companies,
has left most U.S. insurers with ample capital cushions to
absorb any net losses likely to result.
The insurance industry also has substantial holdings of asset-
backed securities, specifically collateralized-debt obligations
(CDO), some of which may include Enron-related debt in their
underlying assets. Although a number of synthetic CDOs may
undergo downgrades as a result of Enron's collapse (while the
impact on ratings assigned to cash-flow CDOs is expected to be
minimal), any exposure of insurance companies by this means is
believed to be relatively small, and any impact on the overall
quality of insurance assets to be minimal.
However, whatever the effects of this particular credit event on
insurance companies' asset portfolios, Standard & Poor's
cautions that it occurs in an environment of generally
deteriorating credit quality across numerous industries. The
cumulative effects of that environment could eventually have
adverse rating consequences for individual insurance companies
with proportionately greater exposure to the securities of
industries with the most severely affected credit quality.
As yet undetermined is the property/casualty insurance
industry's exposure to Enron through issuance of performance
bonds in connection with forward-purchase contracts sold by
Enron and its affiliates. Although a few insurers, most notably
Chubb Corp. (with an announced exposure of $220 million), have
publicly stated their exposure to such liabilities, the large
majority have yet to make public announcement of their exposure.
Standard & Poor's continues to research this matter to determine
more definitive conclusions and is examining other potential
insurance exposures.
* * *
S&P announced that it will hold a teleconference today on Enron
Corp.'s Credit Derivative, at 10 a.m. EST or 3 p.m. UK. On this
teleconference, Nik Khakee, director of Standard & Poor's
Structured Finance Derivatives group, will discuss Standard &
Poor's review of Enron Corp.'s exposure to a number of credit
derivative transactions. On Sunday, December 2, Enron Corp.
filed for Chapter 11 bankruptcy protection. On the following
day, Standard & Poor's lowered Enron Corp.'s corporate credit
and debt ratings to 'D'. On a global basis, Enron appears in 50
transactions as a reference entity or reference obligation in
pooled credit derivative transactions, with a total exposure of
about $3.3 billion.
Live Dial in Number: +1-706-679-5243
U.K.: 44-1452-560-299
The call will begin promptly at the time indicated. Please call
at least 15 minutes before the scheduled start of the call to
complete the pre-call registration process. The Conference ID is
"2590354". There is no charge to participate other than long-
distance telephone charges, if applicable. Participants will be
asked to provide their name, company affiliation, and phone and
fax numbers. The entire call will last approximately one hour,
and after brief presentations by the analysts, participants will
be able to ask questions directly about this topic. You may also
fax or email questions in advance.
Replays: Recorded replays of the call are made available about
two hours after the call concludes. This recording is available
at no charge to U.S. and Canadian callers (other callers will
pay long distance toll charges) until Friday, December 14, 2001.
Callers will be asked for their name, company, phone and fax
number or e-mail address.
Replay Number: +1-706-645-9291
RealAudio Available from Standard & Poor's World Wide Web Site:
The call will also be available live in "listen-only" mode from
the Standard & Poor's Home Page for listeners worldwide with PCs
equipped with the Real Player? software, sound card, and
speakers. Point your web browser at
http://www.standardandpoors.com and follow the link for
"Events." The RealAudio on-demand playback is available until
Friday, January 4, 2001.
If you have any questions about the conference call, please send
Internet electronic mail to: eleconferences@standardandpoors.com
Please send any address corrections via e-mail to
seminars@standardandpoors.com or via fax to +1-212-438-6698.
ENRON CORP: S&P Drops Yosemite 2000-A Notes Ratings to D
--------------------------------------------------------
Standard & Poor's lowered its rating on the GBP200 million 8.75%
series 2000-A linked Enron obligations issued by Yosemite
Securities Co. Ltd. to 'D' from 'B-'. The rating was removed
from CreditWatch with developing implications.
The lowered rating reflects the Dec. 3, 2001 rating action taken
by Standard & Poor's on Enron Corp. following Enron's Dec. 2,
2001 filing for Chapter 11 bankruptcy protection.
Yosemite Securities Co. Ltd. is a synthetic issue that utilizes
a credit default swap referencing Enron Corp. The rating on the
credit-linked notes reflects the current senior unsecured rating
of Enron Corp.
A copy of the related press release, dated Dec. 3, 2001, can be
found on Standard & Poor's Web-based credit analysis system, at
http://www.ratingsdirect.com
ENRON CORP: NewPower Ends Commodity Supply & Forward Contracts
--------------------------------------------------------------
NewPower Holdings, Inc. (NYSE: NPW), the parent company of The
New Power Company, announced that as a result of the bankruptcy
filing of Enron Corp., NewPower has terminated all of its
commodity supply and forward contracts with Enron and its
affiliates. NewPower expects to replace supply with other
providers without missing delivery to customers or suffering any
material economic loss.
H. Eugene Lockhart, Chairman and CEO of NewPower Holdings, said,
"We expect NewPower's economic position, liquidity and
operational capabilities to be substantially unaffected by the
termination of these contracts. Because of the required
accounting treatment for the liquidation of these contracts, we
believe our prospects for further margin expansion in 2002 and
beyond are enhanced. We do not anticipate any credit exposure to
Enron resulting from its filing for bankruptcy."
With the termination of all of its forward commodity contracts
with Enron, NewPower is required to calculate its net gain or
loss of being released from these contracts. Such calculation
will include the difference between the current market price and
the contractual price with Enron, as well as other costs
associated with entering into new trades. The current collateral
NewPower has posted with Enron, approximately $110 million, of
which $70 million is in cash with the balance secured by
inventories and receivables of NewPower, is an approximation of
the settlement amount due to Enron. NewPower will present the
settlement amount in a manner that permits the release of the
existing lien that has secured Enron's interests in the
Company's receivables and inventory. It is NewPower's intent to
adhere to its policy of hedging its customer supply obligations
over time as market conditions permit. NewPower expects to
suffer no material economic loss because the accelerated
settlement to Enron should be matched or exceeded over time by
NewPower's ability to secure supply for customers at lower
commodity prices.
The Company is in the process of determining the net settlement
amount resulting from its termination notice, as well as the
appropriate accounting treatment under SFAS 133. We anticipate
that the provisions of SFAS 133 will require the Company to
expense the mark-to-market difference between the terminated
contracts and the replacement cost of these contracts as a non-
recurring charge in the fourth quarter of 2001.
NewPower continues to believe that, as previously announced, it
will meet its metrics for the fourth quarter of 2001 on
recurring operations, and will expense the non-recurring charges
related to employee severance and the AOL contract. In addition,
NewPower estimates that the non-recurring charge for terminating
the Enron contracts in the fourth quarter of 2001 will be in the
range of $110 million based on recent market prices. The impact
of these changes is expected to result in an increase, as
compared to previous guidance, in the margin contribution in
subsequent periods, primarily 2002 and 2003, provided that
commodity prices do not substantially increase prior to NewPower
replacing hedges that have been terminated. Revised guidance for
2002 is currently being evaluated.
"NewPower remains fully committed to this business", said
Lockhart. "We are particularly encouraged that we can
demonstrate our ability to remain operational, independent of
Enron, with no material adverse economic impact on the
business".
NewPower Holdings, Inc. (NYSE: NPW), through its subsidiary, The
New Power Company, is the first national provider of electricity
and natural gas to residential and small commercial customers in
the United States. The Company offers consumers in restructured
retail energy markets competitive energy prices, pricing
choices, improved customer service and other innovative
products, services and incentives.
ENRON GLOBAL: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Enron Global Markets LLC
1400 Smith Street
Houston, Texas 77002
Bankruptcy Case No.: 01-16076-ajg
Type of Business: Enron Global Markets LLC pursues global
market opportunities in crude and products,
coal, emissions, insurance, weather,
currency, equity trading, interest rate and
agricultural trading.
Chapter 11 Petition Date: December 4, 2001
Court: Southern District of New York (Manhattan)
Judge: Arthur J. Gonzalez
Debtor's Counsel: Melanie Gray, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
-and-
Brian S. Rosen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Total Assets: $72,493,893
Total Debts: $42,624,799
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
RJ Brown Deepwater Trade Debt $847,710
P.O. Box 890113
Dallas, TX 75389-0113
Telephone: 713 596 4300
Fax: 713 596 4350
Entrix, Inc. Trade Debt $276,089
P.O. Box 300025
Dallas, TX 75303-0025
AT Kearney Consulting Fees $250,000
P.O. Box 96796
Chicago, IL 60693
Telephone: 312 648 0111
Sun Microsystems Inc. Trade Debt $227,637
Risk Management
Solutions Inc. Trade Debt $181,770
URS/Dames & Moore Trade Debt $134,658
Greg Curran Employee Expenses $35,979
Ray & Berndtson, Inc. Trade Debt $31,667
H Mitchell Harper Consulting Fees $30,000
Cingular Wireless Trade Debt $23,548
RBB Public Relations Trade Debt $23,466
P E Lamoreaux &
Associates Inc. Trade Debt $21,627
Sonoma Mission Inn & Spa Trade Debt $19,505
Analysis Inc. Trade Debt $19,491
Christopher Kravas Employee Expenses $17,642
Oceanic Consulting Corp. Trade Debt $17,300
Stacy Weatherly Employee Expenses $16,198
The Adcetera Group Trade Debt $13,773
Jeffrey Hammad Employee Expenses $9,924
Larry Snyder Employee Expenses $9,507
ENRON INDUSTRIAL: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Enron Industrial Markets LLC
1400 Smith Street
Houston, Texas 77002
Bankruptcy Case No.: 01-16080-ajg
Type of Business: Enron Industrial Markets LLC develops a
wholesale trading and risk management
business in forest products and steel
products.
Chapter 11 Petition Date: December 4, 2001
Court: Southern District of New York (Manhattan)
Judge: Arthur J. Gonzalez
Debtor's Counsel: Melanie Gray, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
-and-
Brian S. Rosen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Total Assets: $33,935,353
Total Debts: $8,702,372
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Pro Business Trade Debt $1,009,754
201 Spear St., 2nd Floor
San Francisco, CA 94105
Accenture LLP Trade Debt $539,120
2929 Allen Parkway, #2000
Houston, TX 77019
Telephone: 713-837-1400
Corestaff Services Trade Debt $11,174
4400 Post Oak Parkway
Suite 2000
Houston, TX 77027
Dave Hillman Trade Debt $7,921
Jaakko Poyry Engenharia Trade Debt $6,250
LTDA
Intertec Publishing Trade Debt $3,000
ICG Nikonet Inc Trade Debt $2,643
Doubletree Hotel Trade Debt $2,507
Liberty Suburban Chicago Trade Debt $1,800
Newspapers
Scott F. Griffin Trade Debt $1,704
Cingular Wireless Trade Debt $1,064
Binding Systems Inc Trade Debt $885
Birkitt Environmental Trade Debt $825
Svcs Inc.
Crowne Plaza Trade Debt $577
Cingular Wireless Trade Debt $573
Mike Duhon Productions Inc Trade Debt $527
Arch Wireless Trade Debt $360
Skytel Trade Debt $348
ASAP Software Express Inc Trade Debt $308
Pacific Northwest Trade Debt $290
Newspaper
ENRON NET: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------
Debtor: Enron Net Works L.L.C.
1400 Smith Street
Houston, Texas 77002
Bankruptcy Case No.: 01-16078-ajg
Type of Business: Enron Net Works LLC is engaged primarily in
the business of providing services related to
the development, operation and maintenance of
electronic trading platforms and other
e-commerce initiatives.
Chapter 11 Petition Date: December 4, 2001
Court: Southern District of New York (Manhattan)
Judge: Arthur J. Gonzalez
Debtor's Counsel: Melanie Gray, Esq.
Weil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
-and-
Brian S. Rosen, Esq.
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Total Assets: $397,544,351
Total Debts: $388,106,335
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Pro Business Trade Debt $3,238,767
Comerica Bank-California
201 Spear St., 2nd Floor
San Francisco, CA 94105
Diamond Cluster Intl Inc. Trade Debt $1,464,472
3881 Eagle Way
Chicago, IL 60678-1388
Alstom ESCA Corporation Trade Debt $1,074,396
P.O. Box 34825
Seattle, WA 98124-1825
KPMG LLP Trade Debt $1,066,200
P.O. Box 120001
Dept. 0691
Dallas, TX 75312-0691
AT&T Trade Debt $1,047,283
55 Corporate Drive
Bridgewater, NJ 08807
MCI Worldcom Trade Debt $853,731
3 Ravinia Drive
Atlanta, GA 30346
Accenture LLP Trade Debt $810,551
2929 Allen Pkwy. #2000
Houston, TX 77019-7107
Sun Microsystems Trade Debt $719,370
2550 Garcia Avenue
Mountain View, CA 94043
Richardson Electronics Ltd. Trade Debt $617,897
P.O. Box 77-5169
Chicago, IL 60679-5169
Compaq Computer Corp. Trade Debt $600,484
13430 Northwest Fwy.
Houston, TX 77040
Telerate, Inc. Trade Debt $432,961
P.O. Box 95052
Chicago, IL 60694-5052
Clayton Biltmore & Trade Debt $309,801
Company LLC
P.O. Box 22084
Houston, TX 77227-2084
Dun & Bradstreet Trade Debt $291,914
P.O. Box 75434
Chicago, IL 60675-5434
Sigma Internet Inc Trade Debt $269,391
732 N. Diamond Bar
Blvd #112
Diamond Bar, CA 91765-1024
Network Appliance, Inc Trade Debt $262,464
P.O. Box 39000
San Francisco, CA 94139-3060
Valtech Technologies Trade Debt $255,638
5080 Spectrum Drive
Suite 1010 W
Addison, TX 75001-4661
Corestaff Services Trade Debt $227,118
IPASS Inc. Trade Debt $165,824
Reuters America Inc Trade Debt $157,064
Lodestar Corp Trade Debt $140,777
EXODUS: Gets OK to Obtain $200MM in Postpetition DIP Facility
-------------------------------------------------------------
Judge Robinson orders the DIP Financing Motion of Exodus
Communications, Inc., and its debtor-affiliates approved and all
objections overruled.
Thus, the Debtors obtained:
A. authorization to access post-petition secured financing and
other financial accommodations, up to an aggregate
principal amount not to exceed $200,000,000 on
substantially the terms set forth in the Senior Secured,
Super-priority Debtor-in-Possession Credit Agreement to be
entered into among certain of the Debtors, General Electric
Capital Corporation, and a syndicate of lenders; and such
other ancillary documents related thereto and at any time
executed in connection therewith;
B. authorization to use the proceeds of the DIP Facility
for the purposes set forth in the DIP Loan Documents
including working capital and general corporate purposes,
subject to the limitations set forth in the Order;
C. authority to grant the DIP Lenders first priority senior
security interests in substantially all of the Debtors'
presently owned and after-acquired property, other than
Chapter 5 causes of action and proceeds thereof, to secure
the Debtors' obligations under the DIP Loan Documents, as
set forth in greater detail in the Order and the DIP Loan
Documents, subject only to prior perfected liens held by
third parties, liens and encumbrances permitted in the DIP
Loan Agreement, and the Carve-Out;
D. a grant of super-priority claim status to the DIP Lenders
senior to any and all administrative expenses of every
kind other than the Carve-Out;
E. modification of the automatic stay in certain respects in
connection with the DIP Financing; and
F. authority to implement any cash management practices
required by the DIP Loan Agreement. (Exodus Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
FEDERAL-MOGUL: Secures Approval of Gilbert Heintz's Engagement
--------------------------------------------------------------
Federal-Mogul Corporation, and its debtor-affiliates sought and
obtained authorization from the Court to employ and retain
Gilbert Heintz & Randolph LLP to serve as its special bankruptcy
and insurance counsel. Specifically, the Debtors anticipate that
Gilbert Heintz will advise the Debtors related to issues that
draw upon Gilbert Heintz's extensive experience with insurance
disputes and mass tort bankruptcy cases, particularly asbestos
related cases.
James J. Zamoyski, Esq., the Debtors' Senior Vice President and
General Counsel, relates that Gilbert Heintz has been the
Debtors' counsel for many issues related to the Debtor's
insurance coverage since the Firm's formation at the beginning
of 2001. Prior to that time, a number of the Gilbert Heintz
partners represented various of the Debtors in insurance matters
since the early 1990s. Mr. Zamoyski adds that Gilbert Heintz
partners also have extensive experience with mass tort
bankruptcy cases, particularly asbestos related bankruptcy
cases.
Scott D. Gilbert, a partner at Gilbert Heintz & Rendolph LLP,
informs the Court that the Firm will provide the legal and
litigation support required by the Debtors in connection with
their asbestos-related bankruptcy and insurance matters
including advising and representing the Debtors with respect to
these matters:
A. assisting, advising and representing the Debtors in
connection with actions to preserve and protect the Debtor's
estates in coordination with the Debtor's general bankruptcy
counsel, as appropriate;
B. assisting and advising the Debtors in connection with the
negotiation and formulation of a plan of reorganization and
the plan confirmation and implementation process;
C. assisting, advising and representing the Debtors in
connection with insurance coverage matters, including but not
limited to negotiations, mediations, arbitrations, lawsuits
and other proceedings in which one or more of the Debtors are
seeking or in the future may seek to secure insurance
recoveries for claims, losses, liabilities or expenses;
counseling the Debtors regarding insurance coverage
matters; and providing strategic advice and assistance to
the Debtors with respect to the pursuit of insurance-
related assets;
D. advising and representing the Debtors concerning certain
strategic issues related to asbestos-related bodily injury
claims, liabilities and litigation;
E. reviewing and analyzing insurance-related and asbestos
liability-related applications, orders, operating reports,
schedules, and other materials filed and to be filed with
this Court by the Debtors or other interested parties in
these chapter 11 cases, and advising the Debtors as to the
necessity and propriety of the foregoing;
F. representing the Debtors at hearings to be held before this
Court and communicating with the Debtors regarding the
insurance-related and asbestos-liability-related issues
raised and heard before this Court, as well as the
insurance-related and asbestos-liability-related decisions
and considerations of this Court;
G. assisting the Debtors in preparing appropriate insurance-
related and asbestos-liability-related legal pleadings and
proposed orders as may be required in support of positions
taken by the Debtors, as well as preparing witnesses and
reviewing documents relevant thereto; and
H. rendering such other services as may be in the best interests
of the Debtors in connection with any of the foregoing, as
agreed upon by GHR and the Debtors.
Over the last several years, Mr. Zamoyski submits that Scott
Gilbert and other attorneys now at Gilbert Heintz have
represented the Debtors in connection with a variety of their
asbestos-related insurance work. Through their representation of
the Debtors, Mr. Gilbert and his colleagues have become uniquely
and thoroughly familiar with the Debtors' business affairs,
liability exposures and their related insurance policies and
coverage. Mr. Zamoyski contends that the partners, counsel and
associates of Gilbert Heintz who will represent the Debtors in
connection with the matters upon which Gilbert Heintz is
retained to represent the Debtors have extensive knowledge and
expertise in all aspects of insurance work and mass tort
bankruptcy cases, including asbestos-related liability and
insurance issues and the treatment of such issues in the context
of a chapter 11 bankruptcy. The Debtors believe that Gilbert
Heintz's continued representation in connection with their
insurance policies and asbestos personal injury claims is
essential to the Debtors' successful reorganization and will
provide a substantial benefit to the Debtors and their estates.
Subject to this Court's approval, Mr. Gilbert relates that the
Firm Gilbert Heintz will charge the Debtors for its legal
services on an hourly basis in accordance with its ordinary and
customary rates for matters of this type in effect on the date
such services are rendered and for reimbursement of all costs
and expenses incurred in connection with these cases. Gilbert
Heintz' current range of billing rates are:
Attorneys $165 to $500 pre hour
Paraprofessionals $ 80 to $ 95 per hour
Scott Gilbert and Craig Litherland, who will be the partners
primarily responsible for this representation, currently have
billing rates of $500 per hour.
Mr. Gilbert informs the Court that Gilbert Heintz has received
$120,000 in retainers in connection with Gilbert Heintz's
representation of the Debtors in various pre-petition
insurance-related matters. A portion of the retainers have been
applied to outstanding balances prior to the Petition Date and
the estimated remaining balance of its retainer as of the
Petition Date will be $10,000, which shall constitute a retainer
in respect of future services to be rendered and future
disbursements and charges to be incurred in connection with the
Debtors' chapter 11 cases.
Mr. Gilbert assures the Court that neither Gilbert Heintz, its
members, counsel and associates do not represent or hold any
interest adverse to the Debtors or their estates with respect to
the matters upon which Gilbert Heintz is to be employed, and is
a "disinterested person" as defined by 101(14) of the code. The
Firm, however, have these relationships with various parties in
these cases:
A. Active banking relationship with First Union National Bank
and Wachovia Bank N.A., both of which are institutional
lenders to the Debtors;
B. Active unrelated representation in a variety of insurance
matters to Genuine Parts Company, one of the Debtors' major
customers;
The Debtors believe that it is necessary and in the best
interests of their estates and creditors to employ and retain
GHR as their special bankruptcy and insurance counsel to render
professional services on their behalf in connection with various
bankruptcy and insurance matters. (Federal-Mogul Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FLEETWOOD ENTERPRISES: Revises Covenants Under Credit Agreement
---------------------------------------------------------------
Fleetwood Enterprises, Inc. (NYSE: FLE), the nation's largest
manufacturer of recreational vehicles and a leading producer and
retailer of manufactured housing, announced that it has
successfully reached an agreement with its loan syndicate to
amend its credit facility dated July 27, 2001.
Among the modifications to the credit agreement, the EBITDA
(earnings before interest, taxes, depreciation and amortization)
covenant has been replaced with a Free Cash Flow covenant, which
takes into consideration a range of additional factors,
including capital expenditures, service on junior subordinated
debt and certain new capital proceeds. In addition, the entire
credit facility has been permanently reduced to its current
commitment level of $220 million.
The amendments are effective as of October 28, 2001, and
therefore the results of the Company's second quarter, ended
October 28, fall under the revised covenants. Final results for
the second quarter will be announced on December 10, 2001,
followed by a conference call on the same day at 10:00 a.m. PST.
Interested parties may listen to the live Webcast of the call by
accessing http://www.streetevents.comor
http://www.companyboardroom.com The call will also be
accessible from the Company's Website, http://www.fleetwood.com
An archive of the call will be available for 10 days.
"We are pleased with the results of our negotiations with Bank
of America and our loan syndicate," said Nelson W. Potter,
president and chief executive officer. "The covenants included
in the amended agreement allow us to focus on improving
operating results. We believe that the revised requirements
provide us with greater flexibility to adjust other factors in
our business plan in case of a shortfall in operating results."
GROWTHEXPERTS: Files An Assignment Into Bankruptcy in Canada
------------------------------------------------------------
ASPi Europe, Inc., (OTCBB:ASPQ) announced that its wholly-owned
operating subsidiary, GrowthExperts Group Inc., has filed an
assignment into bankruptcy under the Bankruptcy and Insolvency
Act.
Mackay & Company Ltd. has been named as the trustee in the
bankruptcy proceedings. Where necessary, appropriate action is
being taken to protect GrowthExperts' assets.
Accordingly, ASPi is taking steps to conserve its remaining cash
reserves by substantially curtailing its own operations. ASPi
believes it has sufficient working capital to fund current
minimum operations through December 2001, and is evaluating new
business prospects and opportunities as they become available.
HOMELAND GROCERY: Hilco Commences GOB Sales at 16 Locations
-----------------------------------------------------------
Hilco Merchant Resources, LLC has been appointed by the U.S.
Bankruptcy Court for the Western District of Oklahoma to dispose
of inventory and merchandise for 16 Homeland Grocery Stores
located in Oklahoma and Texas.
"These store closings will give the general consumer an
opportunity to stock up on grocery and staple items," stated
Cory Lipoff, Executive Vice President of Hilco Merchant
Resources. "All general merchandise and specialty items must go
and will be priced to sell!"
Hilco Merchant Resources is the foremost industry expert in the
liquidation of retail merchandise. Hilco, a Chicago based firm
with offices in Boston, Toronto and London, is a broad-spectrum
financial resource with unparalleled asset knowledge and
expertise. Hilco is composed of the top people in the fields of
inventory, machinery, equipment and real estate appraisal
services, machinery & equipment auction services, real estate
services, merchant resources for the redeployment of inventory,
acquisition of receivables and junior secured debt financing.
This senior management team has an average of 20 years in their
respective business area and Hilco has done in excess of $25
billion in transactions.
Homeland Grocery Stores Closing List
Address City State
------- ---- -----
9320 N Penn OKC OK
2235 E 61st Tulsa OK
1110 S Denver Tulsa OK
12011 S Memorial Bixby OK
12572 E 21st Tulsa OK
400 Plaza Court Sand Springs OK
6402 E Pine Tulsa OK
575 N 25th W Ave Tulsa OK
708 S Aspen Broken Arrow OK
2351 E Kenosha Broken Arrow OK
3405 S Georgia Amarillo TX
230 W First Dumas TX
4111 Plains Amarillo TX
3505 NE 24 Amarillo TX
202 N 23rd Canyon TX
535 N 25 Mile Ave Hereford TX
ICG COMMS: Seeks Further Extension of Exclusive Periods
-------------------------------------------------------
ICG Communications, Inc., and its subsidiaries and affiliate
Debtors ask Judge Walsh for an order further extending the
exclusive periods during which the Debtors may file a
reorganization plan and solicit acceptances of such plan. By
this Motion, the Debtors request entry of an order further
extending the Plan Proposal Period and the Solicitation Period
for approximately three months (through and including March 8,
2002, and May 7, 2002, respectively), without prejudice to the
Debtors' right to seek further extensions of the Exclusive
Periods.
David S. Kurtz, Esq., at Skadden, Arps, Slate, Meagher & Flom,
explains that the Bankruptcy Code provides for: (a) an initial
120-day period after the Petition Date within which the Debtors
have the exclusive right to file a reorganization plan or plans
in their cases; and (b) an initial 180-day period after the
Petition Date within which the Debtors have the exclusive right
to solicit and obtain acceptances of any reorganization plan or
plans the Debtors file during the Plan Proposal Period. The
Exclusive Periods are intended to afford chapter 11 debtors a
full and fair opportunity to rehabilitate their business and to
negotiate and propose a reorganization plan without the
deterioration and disruption of their business that might be
caused by the filing of competing plans of reorganization by
nondebtor parties. Although the Debtors have made significant
progress towards rehabilitation since the Petition Date, given
the complexity of their cases, the Debtors are seeking a three
month extension of their Exclusive Periods to afford the Debtors
additional time to formulate, negotiate, and file a plan and
solicit acceptances of that plan.
In determining whether cause exists to extend the Exclusive
Periods, this Court should examine, among others, the following
factors:
(a) The size and complexity of the Debtors' cases;
(b) The Debtors' progress in resolving issues facing
their estates; and
(c) Whether an extension of time will harm the Debtors'
creditors.
In evaluating these factors, bankruptcy courts are afforded
maximum flexibility to review the particular facts and
circumstances of each case. Most importantly perhaps, the Court
should consider whether the Debtors have had a reasonable
opportunity to (a) negotiate an acceptable plan with their
creditor constituencies and other interested parties and (b)
prepare adequate financial and non-financial information
concerning the ramifications of that plan for disclosure to
creditors.
The Debtors submit that an additional three month extension of
the Exclusive Periods is fully justified in these cases,
because, among other things:
(a) The Debtors' cases are large and complex;
(b) The Debtors have made significant progress in
resolving the many complex issues facing their
estates; and
(c) Extension of the Exclusive Periods will facilitate
reorganization of the Debtors and not prejudice any
party in interest.
The Debtors' Cases Are Large and Complex
The Debtors are one of the largest competitive
telecommunications companies in the United States. One of the
largest cases filed in 2000, the Debtors' petitions for relief
list assets totaling over $2.7 billion and total debts of over
$2.8 billion. As of year-end 1999, the Debtors' extensive
network assets provided nationwide data services to an estimated
700 cities, and had in service over 730,000 customer lines and
data access ports. As of year-end 1999, the Debtors had over
10,000 business customers and approximately 550 Internet service
provider customers. Clearly, the sheer size of the Debtors'
cases and the concomitant difficulty in finalizing a going
forward business plan and negotiating a reorganization plan
constitutes cause to further extend the Exclusive Periods.
The Debtors' cases are not only large, but also complex. Indeed,
the Debtors have a highly complex corporate structure, and as a
result of certain practices prior to the Petition Date, there
are significant, complicated claims and issues between the
various Debtors. These issues, among others, must be resolved
before a consensual reorganization plan is possible in these
cases.
In light of the sheer size and enormous complexity of these
cases, the Debtors submit that their request for a further three
month extension is modest and consistent with extensions granted
in other large reorganization cases.
The Debtors Have Made Good Faith Progress
Toward Proposing a Successful Plan
The Debtors' reorganization efforts have been proceeding
aggressively toward the plan filing and solicitation process.
Indeed, the Debtors have made tremendous progress with respect
to stabilizing their businesses and streamlining their
operations, and have taken significant steps toward resolving
the many difficult issues that necessarily must be addressed
during these chapter 11 cases. At this juncture, the Debtors
have commenced plan negotiations with the Creditors' Committee,
and are hopeful that within the additional time requested, a
reorganization plan can be fully negotiated and filed.
Among many other things accomplished to lay the groundwork for
consensual emergence from chapter 11, of particular note, the
Debtors have:
(i) negotiated and obtained this Court's approval of a
settlement with Qwest Communications Corporation, which
settlement is a key component to the ability to propose a
consensual plan;
(ii) negotiated and obtained this Court's approval of a
settlement resolving disputes regarding, and assuming, the
Debtors' corporate headquarters, another key settlement
necessary for the Debtors to be able to propose a consensual
plan;
(iii) rejected numerous unnecessary executory contracts
and leases of nonresidential real property;
(iv) analyzed the Debtors' numerous capital leases and
begun substantive negotiations with large lessors/sellers under
the capital leases;
(v) negotiated and obtained this Court's authority to
provide a due diligence reimbursement in connection with the
Debtors' efforts to obtain exit financing; and
(vi) begun negotiations with critical vendors such as
Cisco Systems, Inc. and Lucent Technologies, Inc. regarding
settlement of claims and disposition of telecommunications
equipment.
Importantly, the Debtors have completed a thorough analysis of
complex intercompany (and thus intercreditor) claims and issues,
and provided this analysis to the Creditors' Committee. Reaching
consensus on these issues is key to any plan in these cases that
can be consensual. The Creditors' Committee's review of these
issues is ongoing.
In addition, the Debtors have largely completed their long term
business plan. That plan has been shared with the Creditors'
Committee. Moreover, the Debtors and their professionals have
begun drafting a plan of reorganization and disclosure
statement.
To be in a position to seek to implement what the Debtors hope
will be a consensual plan, the Debtors' request for a three
month extension of the Exclusive Periods should be granted.
Extension of the Exclusive Periods Will
Facilitate Reorganization of the Debtors And Not
Prejudice Any Party In Interest
Since the Petition Date, the Debtors have labored tirelessly to
work with and assure their vendors and customers, among others,
that the Debtors fully intend to meet their ongoing business
commitments during these cases. Similarly, the Debtors have gone
to great lengths to cooperate with their various creditor
constituencies in efforts to maximize the value of the estates
for the benefit of all creditors. A further extension of the
Exclusive Periods will facilitate these efforts by affording the
Debtors the time needed to formulate and finalize a plan that
fairly and efficiently treats the claims of the estates'
creditors and provides for the greatest possible distributions
of value on account of such claims. In contrast, termination of
the Exclusive Periods and the uncertainty that would result from
the prospect of competing reorganization plans undoubtedly would
result in lesser values available for distribution to creditors.
Finally, the requested extension of the Exclusive Periods will
not prejudice the interests of any creditor; the Debtors have
timely met, and continue to timely meet, their postpetition
obligations in these cases. This fact, alone, strongly militates
in favor of the Court granting the Debtors' requested extension
of the Exclusive Periods. (ICG Communications Bankruptcy News,
Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900)
INTEGRATED HEALTH: Allocation of Value Under Rotech Reorg. Plan
---------------------------------------------------------------
The largest claims against the Rotech Debtors consist of the
Senior Lender C1aims (Class 3). With minor exceptions, the
Claims in Class 3 are guaranteed by substantially all of the
subsidiaries of Integrated Health Services, Inc., (including
substantially all of the Rotech Debtors) and are secured by a
pledge of all of the stock of substantially all of IHS'
subsidiaries (including the stock of substantially all of the
Rotech Debtors), security interests in "upstream" debt of each
subsidiary to its parent, and certain intellectual property
rights.
(I) Recovery Analysis for Classes 4, 5 and 6 in the Absence of a
Consensual Restructuring
There is not enough enterprise value remaining in the businesses
of the Rotech Debtors to provide a full recovery to unsecured
creditors. In the absence of a consensual restructuring,
distributions to Classes 3, 4, 5 and 6 would be on a pari passu
basis, and the distribution otherwise payable to holders of
Claims in Class 6, which are contractually subordinated to the
Claims in Class 3, would be paid directly to the holders of the
Senior Lender Claims and the holders of Claims in Class 6 would
receive no distribution. Additionally, the holders of the Senior
Lender Claims would enforce the IHS' Debtors' intercompany claim
against the Rotech Debtors in the approximate amount of $495
million.
Because of the magnitude of the Senior Lender Claims and the
claims collaterally assigned to them, the distribution of Cash
to Classes 4 and 5 would be significantly lower than provided
under the Plan, and Classes 4 and 5 likely would receive debt
and equity securities, as compared to the Cash distribution
contemplated by the Plan.
Estimated Recovery In The Absence
Of A Consensual Restructuring
Value or Claim
--------------
Rotech Enterprise Value (midpoint) $1,000,000,000
less payment of administrative
expenses, priority claims and
working capital needs 17,800,000
--------------
Distributable Value for unsecured claims $982,200,000
Total Amount of Claims in
Classes 3, 4, 5 and 6 $2,406,333,803.05
IHS intercompany claim against
Rotech Debtors $495,000,000.00
-----------------
Total unsecured claims $2,901,333,803.05
Pro Rata Recovery for Claims
in Classes 3, 4 and 5 33.85 %
($982,200,000 / $2,901,333,803.05) x 100
Estimated Amount Estimated Value
of Unsecured of Pro Rata
Claims (By Class) Recovery ($)
----------------- ---------------
Class 3 $2,822,838,803.05 $955,530,934.83
(including enforcement of
subordination rights and
rights to intercompany claims)
Class 4 $ 48,000,000.00 $16,248,000.00
(assumed; not including
unliquidated prepetition
amounts for which proofs
of claim were filed)
Class 5 $ 30,000,000.00 $10,155,000.00
(II) Recovery Analysis Under the Plan/Compromise and Settlement
with Classes 3, 4 and 5
As a result of negotiations among the Debtors, the Creditors'
Committee, and the Unofficial Senior Lenders' Working Group, the
holders of the Senior Lender Claims have agreed in connection
with consummation of the Plan to
(1) release their liens on intercompany accounts to support a
settlement between the Rotech Debtors and the IHS Debtors;
(2) give up a portion of the Cash distribution they would
receive in a pro rata distribution and take a substantial
portion of their distribution in the form of New Common
Stock, and, if necessary, Senior Subordinated Notes, in
order to allow the holders of Claims in Classes 4 and 5 to
receive all-Cash distributions;
(3) release their guaranty claims against the Rotech Debtors to
facilitate a substantive consolidation of the Rotech
Debtors;
(4) under certain circumstances set forth herein and in the
Plan, provide a portion of the value to which they would
otherwise be entitled to holders of Claims in Class 6.
The treatment of those Classes in the Plan of Reorganization
accordingly is not an admission by the holders of the Senior
Lender Claims that Class 6 would otherwise be entitled to any
recovery.
Distributions For Classes 3, 4, 5 And 6
Class Percentage Recovery under Plan Form of Distribution
------- ------------------------------ --------------------
Class 3 43% 21.5% New Common
Stock
21.5% Cash and/or
Senior
Subordinated
Notes
Class 4 100% of settled amount Cash
(includes liquidated and
unliquidated prepetition and
postpetition claims)
Class 5 33.3% Cash
Class 6 10.0% Cash
(Integrated Health Bankruptcy News, Issue No. 23; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
MCMS INC: Wants More Time to Transfer Prepetition Lawsuits
----------------------------------------------------------
MCMS, Inc., asks for the Court's approval to allow them more
time within which they may file notices of removal of related
proceedings through March 21, 2002.
The Debtors moves to enlarge their time to determine which civil
actions and proceedings must be removed asserting that it is
just and prudent to do so. The Debtors are unable to determine
whether they need remove any pending claims or civil actions at
this time. The Debtors attest that they have been very busy
focusing their efforts on stabilizing their operations,
minimizing disruptive effect of the filing of their business,
employees and vendors and providing information to parties
interested in participating their sale auction.
MCMS, Inc., a global leading provider of advanced electronics
manufacturing services to original equipment manufacturers filed
for Chapter 11 protection on September 18, 2001 in the U.S.
Bankruptcy Court for the District of Delaware. Eric D. Schwartz,
Esq. and Donna L. Harris, Esq. at Morris, Nichols, Arsht &
Tunnell represent the Debtors in their restructuring effort.
When the company filed for protection from its creditors, it
listed $173,406,000 in assets and $343,511,000 in debt.
MRS. FIELDS: S&P Revises Outlook on Low-B Ratings to Negative
-------------------------------------------------------------
Standard & Poor's revised its outlook on Mrs. Fields Original
Cookies Inc. to negative from stable.
At the same time, Standard & Poor's affirmed its single-'B'-plus
corporate credit and senior unsecured debt ratings on the
company.
The outlook revision is based on declining operating
performance, which has led to weakened credit measures.
Operating performance has been affected by the general economic
downturn that was exacerbated by the events of Sept. 11, and led
to a decrease in mall traffic (most of the company's stores are
located in shopping malls). Comparable-store sales decreased
5.1% in the third quarter of 2001 following a decline of 5.0% in
the second quarter. Operating margins declined to 37.5% for the
12 months ended Sept. 30, 2001, from 38.2% in 2000, despite
management fee revenue from TCBY only contributing to results in
the second half of 2000. As a result, credit measures weakened,
with 12-month EBITDA coverage of interest at only 1.8 times for
the period ended Sept. 30, 2001. Moreover, leverage is high,
with total debt to EBITDA at 4.6x. Financial flexibility is
limited to a $10 million revolving credit facility, of which
only $2.6 million was available as of Sept. 30, 2001.
Salt Lake City, Utah-based Mrs. Fields operates 430 stores and
franchises 957 stores in the U.S. and several other countries.
Stores sell freshly baked cookies, brownies, pretzels, and other
food products through six specialty retail chains.
Outlook: Negative
The outlook reflects the expectation that in the current
economic environment Mrs. Fields will be challenged to stem its
sales decline. Heavier traffic in shopping malls during the
holiday shopping season normally accounts for about 30% of the
company's annual sales. If credit measures continue to weaken
due poor operating performance the ratings could be lowered.
METALS USA: Court Extends Schedule Filing Deadline to Jan. 23
-------------------------------------------------------------
Judge Greendyke orders that the 15-day deadline for Metals USA,
Inc., and its debtor-affiliates to file their Schedules and
Statements is extended until January 23, 2002. (Metals USA
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
MIDWAY AIRLINES: Will Fly Again After Pilots' Contract Revision
---------------------------------------------------------------
After declaring bankruptcy in August and ceasing operations
following the September 11 terrorist attacks, Midway Airlines is
poised to return to the skies in part due to a revised pilot
contract. Negotiators from the Air Line Pilots Association,
International, which represent Midway's pilots, and airline
management commenced talks for revising the pilots' contract on
November 13, after the airline was promised federal funding via
the government's airline aid bill.
Captain Mark Stewart of the Midway unit of ALPA, noted the
significance of the revised contract, stating: "Although parts
of the agreement are concessionary in nature, many of the
concessions are temporary and 'snap back' to the original
agreement no later than October 1, 2002. We feel these
provisions, combined with the government aid, will provide the
company with the necessary operational capital to get Midway
Airlines up and running again. After all, our common goal from
the outset of these talks was to bring Midway Airlines'
"Carolina Service" back to our hometown of Raleigh-Durham."
The new contract is a revised version of the four-year agreement
effective April 1, 2000. As both the company and the pilots look
forward to improving economic conditions, this revised contract
will allow Midway to restart service as soon as December 19,
2001 with four 737 aircraft. The airline expects to hire 52
pilots by March 1, 2002.
Founded in 1931, ALPA is the world's oldest and largest pilots
union, representing 67,000 crewmembers at 46 airlines in the
U.S. and Canada. Visit the ALPA website at:
http://www.alpa.org
MISSISSIPPI CHEMICAL: Fitch Affirms Low-B Debt Ratings
------------------------------------------------------
Fitch affirmed Mississippi Chemical's senior secured debt rating
of 'B+' and affirmed the company's senior unsecured debt rating
of 'B-'. The senior secured debt rating of 'B+' applies to the
company's $200 million senior secured bank facility due 2002 and
the senior unsecured debt rating of 'B-' applies to the
company's $200 million of outstanding senior unsecured notes
due 2017. The Rating Outlook is Negative.
The current ratings reflect recent financial performance as well
as the long-term value of the company's current assets, domestic
fixed assets and Trinidad-based assets. The Rating Watch
Negative status was recently removed; however, there is still
the potential for noteholders to be negatively impacted by
restrictions associated with the senior secured credit facility
that would be triggered by continued unfavorable commodity
market volatility. In the near term, if Mississippi Chemical
does not remain in compliance with certain financial covenants
associated with the senior secured credit facility, the credit
facility could be downsized from $200 million to $150 million.
This event could result in Mississippi Chemical's having to sell
assets, using the proceeds to repay bank debt.
Positive developments in the diammonium phosphate (DAP) market
are likely to result in incremental EBITDA generation in the
near term. Mississippi Chemical markets DAP through PhosChem, an
export association that counts IMC Global, Potash Corporation of
Saskatchewan, and Mississippi Chemical as members. PhosChem
recently announced that it has contracted to sell 2.4 million
tons of DAP to China. China has joined the World Trade
Organization (WTO), as a result China is likely to agree to
import DAP according to a Tariff Rate Quota system that would
allow imports of 5.4 million tons of DAP in 2002.
Mississippi Chemical experienced unusually poor operating
margins in the quarter ended June 30, 2001, due to volatile
natural gas costs, weak sales volumes and weak product prices.
For the most recent quarter ended Sept. 30, 2001, Mississippi
Chemical managed to generate EBITDA of $1.8 million (including a
small gain on the sale of assets).
The company's total debt as of Sept. 30, 2001, was approximately
$365 million, down from $386 million at June 30, 2001. The
company had $2 million in cash and $35 million available under
the secured credit facility ($37 million in liquidity), down
from $74 million in liquidity at June 30, 2000. Inventory
builds and weak sales volumes have contributed to higher debt
levels than would have been expected if working capital had been
reduced seasonally. Weak earnings have also contributed to
negative cash flow and debt addition.
The Negative Rating Outlook reflects the continued uncertainty
faced by both secured and unsecured creditors. While DAP market
conditions appear to be improving, on balance nitrogen market
supply fundamentals remain unfavorable. As a result, Mississippi
Chemical's free cash flow, before the impact of working capital
and asset sales, could be negative in 2002. An unfavorable free
cash flow situation is a concern in the context of modest
availability under the senior secured credit facility.
It is important to note that there are some positive factors
working to improve Mississippi Chemical's profitability in 2002.
Continued lower natural gas prices are a potential source of
better margins and improved cash flow in the coming planting
season. Ultimately product pricing will determine how much of
the raw material savings generated by lower natural gas costs
are kept by nitrogen producers.
According to DebtTraders, Mississippi Chemical's 7.250% bond due
2017 (MISCHEM1) trades between 35 and 37. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MISCHEM1 for
real-time bond pricing.
NORTHLAND CRANBERRIES: Sets Shareholders' Meeting for January 30
----------------------------------------------------------------
Northland Cranberries, Inc.'s 2002 annual meeting of
shareholders will be held on Wednesday, January 30, 2002 at 3:00
p.m. at 5200 Town Center Circle, Suite 470, Boca Raton, Florida.
Stockholders will be voting on the following matters:
1. election of six directors;
2. a proposal to approve an amendment to the Articles of
Incorporation to increase the number of authorized
shares of Class A Common Stock, $.01 par value, from
60,000,000 to 150,000,000;
3. a proposal to approve an amendment to the Articles of
Incorporation which would, generally speaking, allow
for certain actions to be taken by written consent of
less than all of the shareholders; and
4. any other business that may properly come before the
annual meeting.
Northland Cranberries rode a different wave to get its fruit to
market. Started by former Ocean Spray members, Northland made a
splash with its 100% fruit juice blends (versus Ocean Spray's
sweetened cranberry cocktails). On its marshes in Massachusetts
and Wisconsin, Northland grows berries for the bags of fresh
cranberries and cranberry juice blends sold under its namesake
brand; it also sells Seneca, TreeSweet, and Awake juices
(including apple, grape, and citrus). In addition to its
consumer products, Northland supplies fruit and juice to
industrial and wholesale customers. Hurt by a surplus of
cranberries, the company is fending off creditors and has sold
its private-label unit to Cliffstar Corporation.
NORTHWEST AIRLINES: S&P Knocks Senior Debt Ratings Down to B+
-------------------------------------------------------------
Standard & Poor's downgraded its senior unsecured debt ratings
for Northwest Airlines Corp., and Northwest Airlines, Inc. to
'single-B-plus' from 'double-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 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 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. Although such instruments, particularly enhanced
equipment trust certificates in the U.S., have cost advantages,
they have encumbered, either through leases or secured debt a
substantial proportion of the asset base of many airlines (those
shown below have Standard & Poor's senior unsecured debt
ratings; figures shown are estimated as of Sept. 30, 2001, for
all but Japan Air Lines Co. Ltd., which is the fiscal year ended
March 31, 2001; in some cases subsequent secured debt and lease
transactions are included as well in the calculation): Airlines
with senior unsecured debt ratings: Secured debt and leases %
total owned and leased assets Qantas Airways Ltd. 18% Southwest
Airlines Co. 28% Japan Airlines Co. Ltd. 29% Delta Air Lines
Inc. 36% Air Canada 37% AMR Corp. 44% AmTran Holdings Inc. 47%
British Airways PLC 50% Northwest Airlines Corp. 50% UAL Corp.
53% Continental Airlines Inc. 68% America West Holdings Inc. 69%
In addition, Standard & Poor's criteria for rating senior
unsecured debt have been revised to incorporate more directly
the effect of leases on asset protection for unsecured
creditors. The criteria recognize that certain industries,
because of the ease of financing their revenue assets, can carry
higher proportions of secured debt and leases and the criteria
accordingly allow for higher thresholds before notching down of
senior unsecured debt is warranted due to reduced asset
protection for those creditors. Still, the high and rising
proportions of secured debt and leases at many airlines indicate
that a distinction between the corporate credit rating and
senior unsecured debt rating is justified. Standard & Poor's has
not defined specific, separate thresholds for airlines, but
examines asset protection based on their individual
characteristics and relative to industry norms and standard
notching criteria. Speculative-grade companies can have their
senior unsecured debt rated one or two notches below the
corporate credit rating, depending on the proportion of secured
debt and leases, while investment-grade companies can have their
senior unsecured debt rated at most one notch below the
corporate credit rating.
The sharp deterioration in airline financial performance since
Sept. 11 has increased reliance on secured debt as the principal
form of airline debt funding. Even Southwest Airlines, the
highest rated airline, used enhanced equipment trust
certificates (EETC), the company's first, in October. Excepting
Southwest, all U.S. airlines that had unsecured bank revolving
credit facilities have either provided collateral to the banks
or are repaying borrowings. Although the federal loan guarantee
program may provide unsecured loans for some U.S. airlines (the
exact terms of the borrowings will vary from case to case and
remain to be determined), most borrowing is expected to take the
form of leases or secured debt for the foreseeable future.
Accordingly, senior unsecured creditors are likely to continue
to be in a disadvantaged position as regards asset protection at
many airlines due to the relatively high proportion of secured
debt and leases on their balance sheets.
Senior Unsecured Debt Rating Lowered;
Remain On CreditWatch Negative
To From
Northwest Airlines Corp. (BB/Watch Neg/--) B+ BB
Northwest Airlines Inc. (BB/Watch Neg/--) B+ BB
OUTSOURCING SERVICES: S&P Concerned About Increased Debt Levels
---------------------------------------------------------------
Standard & Poor's lowered its ratings on Outsourcing Services
Group Inc. and placed them on CreditWatch with negative
implications.
Total debt at the company was about $170 million on Sept. 29,
2001.
The downgrade and CreditWatch placement are based on Outsourcing
Services Group's limited financial flexibility resulting from
weaker-than-expected operating performance, and increased debt
levels from the company's acquisition strategy. Furthermore,
despite the loosening of financial covenants in an August 2001
amendment to the company's credit agreement, Outsourcing
Services Group is again in discussions with its bank group to
loosen certain future financial covenants, as it does not expect
to be in compliance for the quarter ending Dec. 31, 2001.
Standard & Poor's expects that fiscal 2001 credit measures
(adjusted for operating leases) will be below expectations with
total debt to EBITDA likely to be in the 6 times area, while
EBITDA interest coverage is expected to be less than 2x.
Availability under the company's revolving credit facility is
considered adequate with about $15 million unused at Sept. 29,
2001.
Standard & Poor's will continue to monitor developments,
including negotiations with senior lenders, and meet with
Outsourcing Services Group's management to discuss its ongoing
business and financial strategies.
Outsourcing Services Group is a full-service contract
manufacturer providing product conceptualization, formulation,
manufacturing, filling, and packaging services largely to the
North American health and beauty aid market. The company also
provides materials procurement, warehousing, and distribution of
finished goods.
Ratings Lowered And Placed On CreditWatch
With Negative Implications
Outsourcing Services Group Inc. To From
Corporate credit rating B B+
Senior secured debt B+ BB-
Subordinated debt CCC+ B-
OWENS CORNING: Intends to Transfer Assets to Advanced Glassfiber
----------------------------------------------------------------
Owens Corning, and its debtor-affiliates move the Court for the
entry of an Order authorizing them to:
A. transfer of certain assets to Advanced Glassfiber Yarns LLC
(AGY) pursuant to the terms of an equipment sublease
agreement; and
B. exercise a purchase option pursuant to the terms of a certain
equipment lease agreement.
Norman L. Pernick, Esq., at Saul Ewing LLP in Wilmington,
Delaware, relates that on December 31, 1996, the Debtors and
Pitney Bowes Credit Corporation (PBCC) entered into a master
lease agreement for certain production equipment, which PBCC
subsequently transferred, assigned and delivered to John Hancock
all of PBCC's right, title and interest in the 1996 Lease
Agreement. Thereafter, the Debtor, as sublessor, and AGY, as
sublessee, entered into an equipment subleasing agreement dated
September 30, 1998 for approximately 40% of the Equipment. Under
the Agreement, Mr. Pernick states that the Debtors have the
right at the end of the Term to purchase all, but not less than
all of the Equipment at the Purchase Option Price. If the
Debtors exercise its Purchase Option, AGY also becomes obligated
to purchase all of the Debtor's right, title and interest in
all, but not less than all, of the Sublease Equipment at the
same price and on the same terms and conditions as the Debtor
shall have paid for such Sublease Equipment.
Following the Petition Date, Mr. Pernick tells the Court that
the Debtors undertook the task of evaluating its various
equipment lease agreements to determine whether each agreement
constituted a true lease of personal property or a financing
agreement under which a secured lender may be entitled to
adequate protection. Pending the Debtors' evaluation of the
1996 Lease Agreement and a determination of the extent, priority
and validity of PBCC's and John Hancock's security interests in
the Equipment, the Debtors, PBCC and John Hancock entered into a
letter agreement dated May 23, 2001 by which the Debtor agreed
to pay John Hancock all sums due and owing under the 1996 Lease
Agreement from the Petition Date through and including May 31,
2001 and, by amendment to the Standstill Agreement, agreed to
continue to make monthly payments of $353,794.84 through and
including July 31, 2001. By agreement among the parties, the
Debtor continues to make current monthly payments of $353,794.84
under the terms and conditions of the Standstill Agreement. In
accordance with the Sublease Agreement, the Debtor invoices AGY
for the use and operation of the Sublease Equipment, and AGY has
remitted all payments due and owing to the Debtors.
Pursuant to a letter dated November 26, 2001, Mr. Pernick
submits that AGY expressed its desire to purchase the Sublease
Equipment at a date prior to the Termination Date for the amount
of $4,229,671.85, which amount is equivalent to the pro rated
Purchase Option Price. The Debtor believes that allowing AGY to
purchase the Sublease Equipment is beneficial to the Debtor's
estate as the Sublease Equipment confers no direct benefit to
the Debtor's estate. The Sublease Equipment is no longer
utilized in the Debtor's business operations and is located at
the AGY facility in Aiken, South Carolina.
Mr. Pernick explains that AGY's purchase of the Sublease
Equipment will be effectuated by means of the transfer of title
and the other rights to the Sublease Equipment directly from
John Hancock and/or PBCC to TransAmerica Equipment Financial
Services Corporation, Equipment Finance and Lease Division
(TEFS), which will then lease the Sublease Equipment to AGY
pursuant to the terms of a master lease agreement. Because the
1996 Lease Agreement requires the Debtor, as lessee, to purchase
all of the Equipment in the event the Purchase Option is
exercised, John Hancock and PBCC, as a condition to their
consent to the sale of the Sublease Equipment, have required
that the Debtor agree to exercise its Purchase Option under the
1996 Lease Agreement for the remaining 60% of the Equipment no
later than the Termination Date. Mr. Pernick adds that the
exercise of such Purchase Option will obligate the Debtors to
pay the sum of $5,795,224.01 to John Hancock on or before March
31, 2002, or such other amount agreed by the Debtors, John
Hancock and PBCC, if the Purchase Option is exercised prior to
March 31, 2002, in exchange for title and the other equivalent
rights to the Remaining Equipment.
The Debtor believes that the exercise of the Purchase Option for
the Remaining Equipment is in the best interest of the Debtor's
estate. Mr. Pernick informs the Court that the Remaining
Equipment consists of various specialty production equipment
located in certain of the Debtors' production facilities while
the Remaining Equipment is primarily specialty equipment for a
glass furnace related continuous process and is unique in the
market place. Replacement of the Remaining Equipment would be
prohibitive and time consuming due to the complex nature of the
equipment and the time required for the removal and replacement
of the Remaining Equipment and would also require the
expenditure of an amount far in excess of the Purchase Option
amount and such Remaining Equipment is not readily available.
Moreover, it is the Debtor's belief that the value of the
Remaining Equipment is in an amount in excess of the Purchase
Option amount.
On November 26, 2001, Mr. Pernick says that AGY confirmed its
obligation to purchase the Sublease Equipment under the Sublease
Agreement for the amount of $4,229,671.85 conditioned upon a
closing on or before December 31, 2001 and the Debtor's ability
to deliver the Sublease Equipment free and clear of any liens,
claims or encumbrances. Subject to Court approval and the
consent of John Hancock and PBCC, the Debtor shall transfer all
of the proceeds from the sale of the Sublease Equipment to John
Hancock as a pre-payment against the Purchase Option Price and,
in consideration therefor, John Hancock and PBCC shall release
their respective liens on the Sublease Equipment and transfer
title and the other equivalent rights to the Sublease Equipment
directly to TEFS or AGY and/or its assigns. Thereafter, Mr.
Pernick relates that the Debtors' monthly payments due and owing
to John Hancock for the Remaining Equipment pursuant to the 1996
Lease Agreement shall be reduced to $214,465.58, the monthly
payment due under the September 30, 1997 Note Purchase Agreement
shall similarly be reduced to $214,465.58, and by March 29,
2002, the Debtors shall exercise the Purchase Option and pay the
OC Purchase Option Amount to John Hancock in exchange for free
and clear title to the Remaining Equipment. In compliance with
the terms of the Sublease Agreement, the Debtor has arranged,
subject to Court approval, to transfer the Sublease Equipment to
AGY and/or its assigns without a bidding process.
The essential terms of the first portion of this transaction are
as follows:
A. The sale is subject to approval by the Court;
B. The Debtor must deliver title and the other equivalent rights
to the Sublease Equipment satisfactory to TEFS and AGY;
C. The gross purchase price for the Sublease Equipment is
$4,229,671.85 payable within 1 day of Court approval of the
instant motion; and
D. Closing shall be no later than December 31, 2001.
The essential terms of the second portion of this transaction
are:
A. The exercise of the Purchase Option is subject to approval by
the Court;
B. The exercise of the Purchase Option is conditioned upon the
closing on the sale of the Sublease Equipment to TEFS or
AGY and/or its assigns;
C. John Hancock and/or PBCC must deliver title and the other
equivalent rights to the Remaining Equipment;
D. The gross purchase price for the Remaining Equipment is the
OC Purchase Option Amount payable on or before March 29,
2002;
E. Closing shall be no later than March 29, 2002; and
F. PBCC's consent to the transaction is conditioned on its
receipt from John Hancock of a release of all obligations
and liabilities arising under the September 30, 1997 Note
Purchase Agreement and all other documents, instruments and
agreements executed in connection therewith.
Mr. Pernick asserts that it is the Debtor's business judgment
that the sale of the Sublease Equipment to AGY and/or its
assigns and the subsequent acquisition of the Remaining
Equipment is in best interests of creditors and the Debtor's
estate. (Owens Corning Bankruptcy News, Issue No. 23; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Court Sets Schedule to Address Preemption Issues
-------------------------------------------------------------
At a status conference Tuesday, the U.S. Bankruptcy Court
established the following schedule to determine the adequacy of
Pacific Gas and Electric Company's disclosure statement and to
address the preemption issues raised by the California Public
Utilities Commission (CPUC) and several state agencies and
departments:
December 19, 2001 -- PG&E to file amended plan of reorganization
and disclosure statement
January 8, 2002 -- CPUC and state agencies to file briefs on
preemption and sovereign immunity issues
January 14, 2002 -- Hearing on the adequacy of disclosure
statement (not including preemption and sovereign immunity
issues)
January 22, 2002 -- PG&E to file responses to briefs on
preemption and sovereign immunity issues
January 25, 2002 -- Oral arguments on preemption issues
The Court also denied a request by the CPUC, Attorney General,
and other parties to initiate adversary proceedings.
The schedule allows the issues of preemption and sovereign
immunity, which the CPUC and state officials were going to raise
at some point, to be addressed at the beginning of the case, so
that they can be resolved and allow the confirmation process to
move forward.
PHOTRONICS: Violates Covenant Under $125MM Revolving Credit Pact
----------------------------------------------------------------
Photronics, Inc. (Nasdaq: PLAB), a leading worldwide
manufacturer of photomasks, reported net sales and operating
results for the fourth quarter and fiscal year ended October 31,
2001.
Net sales for the quarter were $93.8 million compared with $96.7
million for the fourth quarter of 2000. Sequentially, net sales
increased 10% from the $85.0 million in the third quarter of
fiscal 2001, primarily as a result of acquisitions in the
quarter, as well as market share gains. Revenues from 0.18
micron and below photomask technologies represented
approximately 18% of net sales, a sequential revenue increase of
65% over the third quarter of 2001. Net income was $2.0
million, compared with $8.8 million for the same period last
year and $1.8 million in this year's fiscal third quarter.
Net sales for fiscal year 2001 were $378.0 million, up 14%,
compared to $331.2 million for fiscal 2000. Net income,
excluding consolidation, restructuring and related charges,
decreased 12% to $22.1 million compared to $25.0 million in the
year ago period. The Company recorded a charge in the second
quarter of fiscal 2001 in connection with its consolidation of
facilities in California, Florida and Germany. After giving
effect to the consolidation, restructuring and related charges,
the Company incurred a net loss of $4.0 million for fiscal 2001
compared with net income of $10.2 million in fiscal 2000.
In commenting on the Company's fiscal year and fourth quarter
operating results, Constantine S. Macricostas, Chairman and CEO,
stated, "We are proud of [Wednes]day's report indicating that
Photronics has become the photomask industry's largest supplier
on the basis of the most recent reported quarterly results.
This milestone was achieved through our Company's ability to
implement an aggressive business strategy to gain market share
through technology leadership and worldclass customer service.
These accomplishments are particularly notable because they were
achieved during one of the most severe cyclical downturns the
global semiconductor industry has ever experienced in my more
than 40-year career. More recently, we believe our customers
have seen their businesses stabilize from the period of rapid
deterioration experienced during the summer months. Throughout
this time, the performance of the entire Photronics team has
been outstanding. We will continue to improve our operating
efficiency at every level, tightening an already intense focus
on controlling costs and generating higher returns on our
assets." He added, "The adversity of cyclical downturns has
created numerous opportunities for Photronics over its 32 year
history. Our focus on advanced technology, customer service,
and regional investment programs is strengthening Photronics'
competitive position to grow as semiconductor manufacturing
technologies transition to 130 nanometer and 90 nanometer
technologies."
At the end of the fourth quarter of fiscal 2001, Photronics was
not in compliance with the covenant in its $125 million
revolving credit agreement that requires it to maintain a
minimum interest coverage ratio for a trailing four-quarter
period. This non-compliance was largely attributable to the
well-publicized worldwide downturn in the demand for
semiconductor products, including photomasks. Photronics
intends to repay all outstanding loans under the revolving
credit agreement, which totaled $49.5 million on December 4,
2001, and then expects to terminate this agreement. After
termination, Photronics would seek to replace the revolving
credit agreement.
If Photronics were unable to obtain the funds to effect this
repayment, it will seek a waiver from the lenders for the
existing non-compliance and an amendment to the covenant
requirements for future periods. If it is unable to obtain this
waiver and amendment, the lenders could refuse to extend
additional loans and/or could require Photronics to immediately
repay all outstanding loans. In that case, Photronics would
seek to replace the revolving credit agreement or take other
steps to obtain alternative funding.
A conference call with investors and the media can be accessed
by logging onto Photronics' web site at
http://www.photronics.com/internet/investor/investor.htm, then
clicking on the Conference Calls button. The call is scheduled
for 8:30 a.m. Eastern Standard Time on Thursday, December 6th
and will be archived on the web site for instant replay access
until the Company reports its fiscal 2002 first quarter results
in February 2002.
Photronics is a leading worldwide manufacturer of photomasks.
Photomasks are high precision quartz plates that contain
microscopic images of electronic circuits. A key element in the
manufacture of semiconductors, photomasks are used to transfer
circuit patterns onto semiconductor wafers during the
fabrication of integrated circuits. They are produced in
accordance with circuit designs provided by customers at
strategically located manufacturing facilities in Asia, Europe,
and North America. Additional information on the Company can be
accessed at http://www.photronics.com
PLANET ENTERTAINMENT: Files for Chapter 11 Protection in NY
-----------------------------------------------------------
Planet Entertainment Corporation (NASD:PNEC) announced that on
November 30, 2001, the Company and its wholly-owned subsidiary
filed voluntary petitions for relief under Chapter 11 of the
United States Bankruptcy Code with the U.S. Bankruptcy Court for
the Northern District of New York pursuant to a Plan of
Reorganization proposed by the Company.
Planet Entertainment Corporation is involved in various areas of
the recorded music industry. The Company's principal business,
primarily through its wholly-owned subsidiary, Northeast One
Stop, Inc., is the wholesale distribution of pre-recorded music
in the form of compact diskettes (CDs), cassette tapes, and
other entertainment related products such as video tapes,
Digital Video Diskettes (DVDs) and, to a much lesser extent,
music or entertainment related apparel, such as t-shirts.
The Company's business activities also include the acquisition,
licensing, production, marketing and distribution of high
quality recorded music.
PLANET ENTERTAINMENT: Chapter 11 Case Summary
---------------------------------------------
Debtor: Planet Entertainment Corp., Inc.
7 Simmons Lane
Menands, NY 12204
Bankruptcy Case No.: 01-17517
Type of Business: Planet Entertainment Corporation is involved
in various areas of the recorded music
industry.
Chapter 11 Petition Date: November 30, 2001
Court: Northern District of New York (Albany)
Judge: Robert E. Littlefield, Jr.
Debtor's Counsel: Hodgson, Russ, Andrews, Woods, Et Al
Three City Square, Third Floor
Albany, NY 12207
518-465-2333
POLAROID CORP: First Creditors' Meeting Rescheduled to Dec. 18
--------------------------------------------------------------
The United States Trustee notifies the Court that the meeting of
creditors of Polaroid Corporation, and its debtor-affiliates
under section 341(a) of the Bankruptcy Code has been
re-scheduled for December 18, 2001 at 1:00 p.m. in the J. Caleb
Boggs Federal Building at the 2nd Floor, Room 2112 at 844 King
Street in Wilmington, Delaware. (Polaroid Bankruptcy News, Issue
No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PROBE EXPLORATION: Kicking Horse To Close Transaction by Dec. 20
----------------------------------------------------------------
Kicking Horse Resources Ltd. and PricewaterhouseCoopers Inc.,
Receiver-Manager of Probe Exploration Inc., have mutually agreed
to close the acquisition of the Leduc oil and gas assets on or
before December 20, 2001. Kicking Horse has placed deposits with
PricewaterhouseCoopers totaling $9.5 million.
Kicking Horse is a public oil and gas company trading under the
stock symbol "KHL" on the Canadian Venture Exchange. The Company
presently produces approximately 1,000 boe per day (10:1) or
1,400 boe per day (6:1). Following the closing of the
acquisition of the Leduc assets and concurrent resale of a 10%
interest in the property, it is expected that the Company's
production will be in excess of 4,800 boe per day (10:1) or
6,400 boe per day (6:1).
SAFETY-KLEEN: Intends to Reject Zachry Pact on Manati Facility
--------------------------------------------------------------
Safety-Kleen Corp. and certain of its subsidiaries and
affiliates, Debtors, represented by David S. Kurtz and J.
Gregory St. Clair of the Chicago office of Skadden, Arps, Slate,
Meagher & Flom LLP (Illinois) as lead counsel, and Mark A. Fink
and Gregg M. Galardi of the Wilmington office of that firm as
local counsel, ask Judge Peter Walsh for entry of an order
authorizing rejection of an executory contract by and between
Safety-Kleen Envirosystems Company of Puerto Rico, Inc. and
H.B. Zachry Company (International), dated on or about September
29, 1999, which the Debtors have determined is burdensome or
otherwise not beneficial to SKE's or the Debtors' current or
future business operations.
In connection with their ongoing efforts to reduce postpetition
administrative costs the Debtors recently have completed a
thorough review of SKE's business relationship with HBZ and the
economic impact on SKE's estate of a continuation of that
relationship. As a result of this review, and in an exercise of
their sound business judgment, the Debtors have determined that
it is in the best interests of SKE, the Debtors and their
estates, their creditors, and all parties-in-interest for SKE to
reject the Contract.
The Contract
SKE owns and operates a recycling facility in Manati, Puerto
Rico. The Manati Facility specializes in the recycling of
industrial solvents used by businesses in and around Puerto Rico
and the Caribbean. The Manati Facility also accepts chemical
byproducts, intermediates, off-specification, leftover, and/or
surplus materials, and certain other miscellaneous items usable
as components or ingredients in supplemental fuels. SKE's fuels
blending operation produces a specification fuel suitable for
use as supplemental fuel in the production of cement or in
boilers and industrial furnaces.
HBZ is an independent construction contractor. On or about
September 29, 1999, HBZ and SKE entered into the Contract
pursuant to which SKE retained HBZ to construct a dyke and
related improvements around the Manati Facility. Prior to the
Petition Date, in accordance with the terms of the Contract, HBZ
essentially completed physical construction of the dyke and
related improvements. Upon SKE's commencement of its chapter 11
case, however, HBZ unilaterally suspended its performance under
the Contract, refusing to complete and deliver to SKE the
certified "as-built" drawings and construction survey for which
SKE had contracted and which are necessary in order to obtain a
use permit from the Authority for Regulation and Permit
Enforcement, the Puerto Rican authority with jurisdiction over
these matters.
On or about October 17, 2000, HBZ filed a proof of claim against
SKE, asserting a prepetition balance due to HBZ for services
rendered under the Contract in the amount of $1,829,782.45. The
Debtors believe that the amount due to HBZ for work completed
prior to the Petition Date is substantially less than the
claimed amount and they expect to object to HBZ's proof of claim
in the course of their claims reconciliation process.
On or about May 25, 2001, HBZ filed a motion in this Court
seeking an order compelling SKE to immediately assume or reject
the Contract. After several months of negotiations, the parties
entered into a stipulation and agreed order, approved by the
Court on October 22, 2001, pursuant to which SKE agreed that (i)
not later than November 30, 2001 it would notify HBZ of its
intent to assume or reject the Contract and (ii) shortly
thereafter it would file an appropriate pleading with the Court.
HBZ agreed, in turn, to withdraw the HBZ Motion on or before
December 3, 2001, if SKE had, in fact, filed such a pleading. In
accordance with the stipulation, by letter dated November 29,
2001, the Debtors notified HBZ of their intent to seek authority
for SKE to reject the Contract.
Accordingly, by this Motion the Debtors seek authority for SKE
to reject the Contract. By rejecting the Contract, SKE will
avoid incurring any unnecessary administrative expense
obligations with no corresponding benefit to its estate.
Rejection of the Contract thus is in the best interests of SKE,
the Debtors, their estates, their creditors and all parties-in-
interest.
Mr. Fink reminds Judge Walsh that a debtor's determination to
reject an executory contract is governed by the "business
judgment" standard. The "business judgment" standard is
satisfied when a debtor determines that rejection will benefit
the estate. Further, a debtor's decision to reject an executory
contract must be summarily affirmed unless it is the product of
"bad faith, or whim or caprice."
Here, Mr. Fink says that the Debtors have satisfied the
"business judgment" standard for rejecting the Contract. For
several months, the Debtors' legal department and operations and
engineering personnel have been working with other engineering
firms and the ARPE to resolve all outstanding issues with
respect to the Manati Facility. Further, the Debtors have been
able to procure from other engineering firms, at substantially
reduced costs and without the need for any further assistance
from HBZ, the remaining services that HBZ was to provide
pursuant to the Contract. Specifically, the Debtors have
obtained from other engineering firms the certified "as-built"
drawings and construction survey which are necessary in order to
obtain a use permit from the ARPE. Thus, the Debtors remain in
compliance with all applicable laws and regulations governing
their operation of the Manati Facility. SKE's rejection of the
Contract therefore is an exercise of the Debtors' sound business
judgment and should be approved by the Court. (Safety-Kleen
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
SUN HEALTHCARE: Signs-Up Bloom Borenstein as Special Counsel
------------------------------------------------------------
Sun Healthcare Group, Inc., and its debtor-affiliates seek the
Court's authority to employ and retain Bloom Borenstein & Savage
PC as special counsel to commence and prosecute certain
avoidance actions.
Russell C. Silberglied, Esq., at Richards, Layton & Finger, PA,
in Wilmington, Delaware, tells the Court that Bloom Borenstein
is being retained as substituted counsel in Avoidance Actions
originally commenced by Gazes & Associates LLP. Mr. Silberglied
explains that the representation of the Debtors by Bloom
Borenstein as special counsel is necessary because the Debtors
have determined that it is more cost effective to prosecute all
but certain of the largest of their avoidance actions on a
contingency fee basis. While Richards, Layton & Finger has
agreed to prosecute certain of the larger avoidance actions at
its ordinary hourly rate, Mr. Silberglied notes that neither of
the Debtors retained professionals - Richards, Layton & Finger
or Weil, Gotshal & Manges - has agreed to prosecute the
remaining avoidance actions on a contingency basis.
Accordingly, Mr. Silberglied says, the Debtors need to retain
Bloom Borenstein with respect to those remaining avoidance
actions.
"The Debtors chose Bloom Borenstein as special counsel because
they are experienced practitioners in the filing of multiple
avoidance actions in large bankruptcy cases," Mr. Silberglied
relates. In addition, Mr. Silberglied informs Judge Walrath,
Denise L. Savage, Esq., now a member of Bloom Borenstein, was
the lead attorney for Sun Healthcare while employed by Gazes &
Associates. Ms. Savage was also responsible in drafting and
commencing all of the Adversary Proceedings, Mr. Silberglied
adds.
Subject to Court approval, the Debtors will look to Bloom
Borenstein to represent them as special counsel to commence and
prosecute certain avoidance actions that are not commenced by
Richards, Layton & Finger. Mr. Silberglied assures the Court
that the Debtors will take appropriate steps to avoid
unnecessary and wasteful duplication of legal services among
Bloom Borenstein and Richards, Layton & Finger.
Denise L. Savage, Esq., a member of Bloom, Borenstein & Savage,
tells Judge Walrath that the firm intends to apply to the Court
for allowance of compensation for professional services rendered
and reimbursement of expenses incurred.
"Subject to the Court's approval, Bloom Borenstein will be
compensated at and receive a contingency-based fee of 33 1/3% of
the gross settlement amounts (inclusive of interest and any
credits paid to defendants pursuant to and consistent with the
plan of reorganization, if any, filed by the Debtors) collected
from such defendants to pursue these avoidance actions," Ms.
Savage relates. In addition to this fee, Ms. Savage says, it is
the firm's policy to charge its clients for disbursements and
expenses incurred in the rendition of services. According to
Ms. Savage, these disbursements and expenses include, among
other things, costs for telephone and facsimile charges,
photocopying, travel, business meals, computerized research,
messenger, couriers, postage, witness fees, and other fees
related to trials and hearings.
At this time, Ms. Savage says, Bloom Borenstein has no agreement
with any other entity to share any compensation received.
However, Ms. Savage informs Judge Walrath, Bloom Borenstein will
be retaining local counsel and intends to compensate such
counsel from its fees awarded in this case consistent with and
pursuant to Rule 2016 of the Bankruptcy Rules.
Furthermore, Ms. Savage assures the Court that the members and
associates of Bloom Borenstein:
(i) do not have any connection with the Debtors or their
affiliates, their creditors, or any other party-in-
interest, or their respective attorneys and accountants,
(ii) are "disinterested persons" as that term is defined in
section 101(14) of the Bankruptcy Code, and
(iii) do not hold or represent any interest adverse to the
estates.
To verify the firm's "disinterestedness", Ms. Savage informs
Judge Walrath that she researched the firm's client database to
determine whether the firm had any relationships with the
Debtors and their affiliates; Debtors' officers and directors;
20 largest unsecured creditors of each Debtor; parties to
significant litigation with the Debtors; accountants and other
professionals that the Debtors have employed in these chapter 11
cases; material secured lenders; and material unsecured
noteholder lenders. After completing the survey, Ms. Savage
concludes, Bloom Borenstein does not represent any entity in
matters related to these Chapter 11 cases, nor has the firm
represented or currently represent these entities on matters
unrelated to these chapter 11 cases.
"Moreover, neither I, nor any member or person employed by the
firm, as far as I have been able to ascertain, holds or
represents any interest adverse to the Debtors or their
respective estates in the matters for which Bloom Borenstein is
proposed to be retained," Ms. Savage adds.
Ms. Savage further relates that the Debtors have already
notified Gazes & Associates through a letter last October 15,
2001, that it would be substituting Bloom Borenstein as special
counsel and requested that all of the Debtors' files be prepared
for delivery to Bloom Borenstein.
Gazes & Associates Responds
Gazes & Associates LLP does not object to the approval of the
Debtors' Application to the extent that Bloom Borenstein &
Savage is retained by the Debtors to prosecute the Avoidance
Actions, according to Laurie Selber Silverstein, Esq., at Potter
Anderson & Corroon LLP, in Wilmington, Delaware. "Neither does
Gazes object to the substitution of Bloom Borenstein for Gazes
as counsel of record in the Avoidance Actions," Ms. Silverstein
adds. In fact, Ms. Silverstein reminds the Court, Gazes seeks
(in part) similar relief.
However, Ms. Silverstein explains, Gazes wants to preserve its
retaining lien on the Avoidance Action files and its charging
lien on the proceeds of the Avoidance Actions. Ms. Silverstein
further clarifies that Gazes does not seek a determination as to
the validity of these liens at this time, but merely seeks a
clarification that any order entered by the Court approving the
retention of Bloom Borenstein will not affect Gazes' liens.
Accordingly, Gazes asks Judge Walrath to direct that any order
authorizing the Debtors' to employ Bloom Borenstein is without
prejudice to Gazes' retaining lien, if any, on the Avoidance
Action files and charging lien, if any, on the proceeds of the
Avoidance Actions. (Sun Healthcare Bankruptcy News, Issue No.
27; Bankruptcy Creditors' Service, Inc., 609/392-0900)
SUN HEALTHCARE: Plans to Divest More Facilities Under Portfolio
---------------------------------------------------------------
During the three months ended September 30, 2001, Sun Healthcare
Group, Inc. divested 13 skilled nursing facilities with 978
licensed beds. The Company did not receive any cash
consideration from the skilled nursing facility divestitures.
The aggregate net operating losses of these skilled nursing
facilities were approximately $0.1 million for 2000.
The Company is actively reviewing its portfolio of facilities
and intends to divest those properties that it believes do not
meet acceptable financial performance standards or do not fit
strategically into the Company's operations. This process is
expected to be ongoing throughout its bankruptcy cases. The
Company is pursuing the disposition of certain non-core
businesses, including the sale of its SunCare respiratory
therapy supply business. No assurance can be given that these
operations will be sold or that, if they are sold, the Company
will not experience a material loss on the sales.
Due to the number of Inpatient Service facilities being divested
during the time periods being compared, three months ended
September 30, 2001 and the three months ended September 30,
2000, a "same store" basis is also included for comparison
purposes. A same store basis is where only facilities operated
for the full three months of each year are included in the
comparison of the operations activity.
Net revenues, which include revenues generated from therapy and
pharmaceutical services provided at the Inpatient Services
facilities, decreased approximately $43.0 million from $427.8
million for the three months ended September 30, 2000 to $384.8
million for the three months ended September 30, 2001. On a
same store basis, net revenues increased approximately $14.9
million from $364.0 million for the three months ended September
30, 2000 to $378.9 million for the three months ended September
30, 2001, a 4.1% increase. This increase is primarily the result
of enhanced Medicare and Medicaid rates in certain states in
which the Inpatient Service facilities operate.
Net revenues from rehabilitation and respiratory therapy
services decreased 13.0% from approximately $48.5 million for
the three months ended September 30, 2000 to approximately $42.2
million for the three months ended September 30, 2001. Revenues
from services provided to affiliated facilities decreased 12.2%
from approximately $27.1 million for the three months ended
September 30, 2000 to approximately $23.8 million for the three
months ended September 30, 2001. Revenues from services provided
to nonaffiliated facilities decreased approximately $3.1
million, or 14.4%, from approximately $21.5 million for the
three months ended September 30, 2000 to approximately $18.4
million for the three months ended September 30, 2001. These
revenue decreases were due to the rehabilitation therapy
service's determination to discontinue services to customers
deemed to be credit risks.
There were 1,150 affiliated and nonaffiliated contracts as of
September 30, 2000 compared to 936 affiliated and nonaffiliated
contracts as of September 30, 2001. Additionally, the Company's
respiratory therapy supplies business is classified as an asset
held for sale which has negatively impacted operating results.
Net revenues from pharmaceutical and medical supply services
decreased 18.3% from approximately $76.6 million for the three
months ended September 30, 2000 to approximately $62.6 million
for the three months ended September 30, 2001. Affiliated
pharmacy revenues decreased 32.9% from $21.6 million for the
three months ended September 30, 2000 to $14.5 million for the
three months ended September 30, 2001, due to the Company's
inpatient facility divestitures. In 2001, the Company's
pharmaceutical revenues from nonaffiliated contracts decreased
when sales personnel left the Company and certain of their
customers ceased doing business with the Company. The decrease
in affiliated revenues is a result of a decrease in sales to the
Company's Inpatient Services segment from the Company's
pharmaceutical services division and due to the discontinuation
of revenue from the Company's medical services division which
was sold in January 2001.
There were no revenues or expenses from international operations
for the three months ended September 30, 2001 due to the
divestitures of operations in Germany and Australia during 2001.
The Company sold its remaining international operations in
Germany and Australia in April 2001. The Company recorded a
charge of approximately $141.1 million in the first quarter of
2000 to reduce the carrying value of its international
operations to its estimate of selling value less costs to sell.
The net loss for the three months ended September 30, 2001 was
$10.6 million compared to a net loss of $135.3 million for the
three months ended September 30, 2000. The net income before
considering reorganization costs, net, loss or gain on sale of
assets, loss on impairment and income taxes was $8.2 million for
the three months ended September 30, 2001 compared to a net loss
of $10.6 million for the three months ended September 30, 2000.
The contractual interest expense that was not paid or accrued
for the three months ended September 30, 2001 was approximately
$35.8 million.
* * *
Net revenues, which include revenues generated from therapy and
pharmaceutical services provided at the Inpatient Services
facilities, decreased approximately $0.12 billion from $1.30
billion for the nine months ended September 30, 2000 to $1.18
billion for the nine months ended September 30, 2001. On a same
store basis, net revenues increased approximately $0.04 billion
from $1.08 billion for the nine months ended September 30, 2000
to $1.12 billion for the nine months ended September 30, 2001, a
3.7% increase. This increase is primarily the result of enhanced
Medicaid rates partially offset by decreased Medicare rates.
Net revenues from rehabilitation and respiratory therapy
services decreased 16.8% from approximately $159.2 million for
the nine months ended September 30, 2000 to approximately $132.4
million for the nine months ended September 30, 2001. Revenues
from services provided to affiliated facilities decreased from
approximately $88.1 million for the nine months ended September
30, 2000 to approximately $75.7 million for the nine months
ended September 30, 2001, a decrease of 14.1%. Revenues from
services provided to nonaffiliated facilities decreased
approximately $14.5 million, or 20.4%, from approximately $71.2
million for the nine months ended September 30, 2000 to
approximately $56.7 million for the nine months ended September
30, 2001. Downward pressure on revenues was due to the
continuing examination by the rehabilitation therapy division of
the credit worthiness of its customers and determinations in
some cases to discontinue providing service to certain customers
deemed to be credit risks. There were 1,150 affiliated and
nonaffiliated contracts as of September 30, 2000 compared to 936
affiliated and nonaffiliated contracts as of September 30, 2001.
Net revenues from pharmaceutical and medical supply services
decreased 15.7% from approximately $231.2 million for the nine
months ended September 30, 2000 to approximately $194.8 million
for the nine months ended September 30, 2001. Affiliated
pharmacy revenues decreased 28.8% from $66.9 million for the
nine months ended September 30, 2000 to $47.6 million for the
nine months ended September 30, 2001, due to the Company's
inpatient facility divestitures. In 2001, the Company's
pharmaceutical revenues from nonaffiliated contracts decreased
when sales personnel left the Company and certain of their
customers ceased doing business with the Company. The decrease
in affiliated revenues is a result of a decrease in sales to the
Company's Inpatient Services segment from the Company's
pharmaceutical services division and due to the discontinuation
of revenue from the Company's medical supply services
business, which was sold in January 2001.
Revenues from international operations decreased approximately
$187.0 million, or 88.7%, from approximately $210.9 million for
the nine months ended September 30, 2000 to approximately $23.9
million for the nine months ended September 30, 2001. The
decrease was due to the sale of the United Kingdom operations in
January 2001 and the divestitures of its operations in Germany
in April 2001 and in Australia in July 2001.
The net loss for the nine months ended September 30, 2001 was
$48.4 million compared to a net loss of $332.4 million for the
nine months ended September 30, 2000. The net income before
considering reorganization costs, net, impairment loss,
loss(gain) on sale of assets, net, legal and regulatory costs
and income taxes was $2.3 million for the nine months ended
September 30, 2001 compared to a loss of $38.4 million for the
nine months ended September 30, 2000. The contractual interest
expense that was not paid or accrued for the nine months ended
September 30, 2001 was approximately $107.2 million.
SUNSTAR HEALTHCARE: Parent's Oversight in Reporting Under Fire
--------------------------------------------------------------
The American Federation of State, County, and Municipal
Employees (AFSCME) is releasing a letter, mailed to shareholders
of National Home Health Care Corp. (Nasdaq: NHHC). The letter
raises concerns regarding National Home Health's financial
control and reporting mechanisms and the company's conduct
toward some of its employees. Public employee pension funds,
which are invested for the retirement benefits of thousands of
AFSCME members, own over 25,000 shares of National Home Health
Care Corp. common stock.
The company has had three different auditors since July 7, 1999
and has restated its financial statements numerous times over
the last seven fiscal years.
SunStar Healthcare, Inc., a former subsidiary of National Home
Health, has had its insurance operations liquidated by the state
of Florida's Insurance Department. National Home Health and
three of its directors are currently defendants in a shareholder
lawsuit alleging securities fraud at SunStar.
The Company has failed to reach a collective bargaining
agreement with nearly 1,700 of its employees one and a half
years since a vote on union representation. We believe the
Company has moved the location of its annual meeting at the
eleventh hour in an attempt to avoid addressing the concerns of
these employees next week.
Michael R. Zucker, director, AFSCME Office of Corporate Affairs
sent the following letter to National Home Health Care Corp.
shareholders:
"I am writing to you on behalf of the American Federation
of State, County and Municipal Employees ("AFSCME"). AFSCME is
the largest public service union in the United States with some
1.3 million members. A number of public employee pension funds,
which are invested for the retirement benefits of thousands of
AFSCME members, own over 25,000 shares of National Home Health
Care Corporation stock.
"As the Company's annual meeting is fast approaching, we
thought this would be a good time to inform you of our concerns
regarding National Home Health's financial control and reporting
mechanisms, and the Company's conduct toward some of its
employees.
"The company has had three different auditors since July 7,
1999 and has restated its financial statements numerous times
over the last seven fiscal years.
"On June 7, 1999, National Home Health dismissed Richard A.
Eisner & Company LLP as its independent public accountants and
replaced it with Holtz Rubenstein & Co. This change in auditors
was never put to a vote of shareholders. Less than two years
later, on June 22, 2001, the Company dismissed Holtz Rubenstein
and replaced it with BDO Seidman, LLP.
"We are concerned about the high turnover of auditors
because our Company occasionally seems to have a particularly
difficult time producing accurate financial statements. In the
Company's most recent 10-K report, it restated fiscal year 2000
results in two places, moving some costs from general &
administrative to cost of revenue, and reclassifying a portion
of accounts receivable as a liability. This year's restatements
continue a troubling history where financial statements have
undergone changes, highlighted by the filing of two amended 10-K
reports for fiscal year 1995 and at least nine corrections in
the 1997 and 1996 10-Ks.
"We believe the necessity for restating financial results
and the frequent changes in auditors call for much tighter
director scrutiny of auditing functions and that more frequent
meetings of the audit committee are appropriate at this time.
"SunStar Healthcare, Inc., a former subsidiary of National
Home Health, has had its insurance operations liquidated by the
state of Florida's Insurance Department. National Home Health
and three of its directors are currently defendants in a
shareholder lawsuit alleging securities fraud.
"We are extremely concerned about the conduct of some of
our directors in their oversight of SunStar Healthcare, Inc.
Frederick H. Fialkow, Steven Fialkow, and Bernard Levine, all
current directors of our Company, became directors of SunStar in
December 1995. They resigned in April 1999, the same month that
Florida's Insurance Department was informed that SunStar was in
an impaired financial condition.
"In February 2000, the Insurance Department began to
liquidate SunStar's insurance operations. During that same
month SunStar shareholders filed the lawsuit mentioned above,
alleging that the defendants made a variety of
misrepresentations of material facts, including understating
liabilities and manipulating claims processing to overstate the
level of reserves.
"In January 2001, the Insurance Department sued SunStar's
auditors, KPMG Peat Marwick, alleging that they failed to see
"red flags" and "blatant accounting irregularities" that would
have revealed the insurance operations' true financial
condition.
"We would like our Directors to disclose their role in
SunStar's difficulties and provide us with as much detail as
possible as to how the accounting practices and oversight
systems in SunStar were different from those currently in place
at our Company.
"The Company has failed to reach a collective bargaining
agreement with nearly 1,700 of its employees one and a half
years since a vote on union representation. We believe the
Company has moved the location of its annual meeting at the
eleventh hour in an attempt to avoid addressing the concerns of
these employees next week.
"An election for union representation was held for certain
of National Home Health's employees in June 2000, and a local
affiliate of AFSCME was certified as the collective bargaining
representative for these employees in May, 2001. The AFSCME
affiliate and the Company are in negotiations for a union
contract, but have not reached agreement on even basic issues.
Unfair labor practice charges have been filed against the
Company with the U.S. National Labor Relations Board. Employees
are seeking affordable health insurance and wage increases that
would bring all of them above federal poverty income levels.
"We plan to continue our investigation into these matters
and will update you with additional information in the future."
VENTAS: Seeks Refinancing to Pay Down Debt Under Credit Pact
------------------------------------------------------------
Ventas, Inc., announced that its wholly-owned subsidiary, Ventas
Specialty I, LLC, has priced and received commitments to
purchase $225 million principal amount of investment-grade
commercial mortgage-backed securities collateralized by 40
multi-state skilled nursing facilities owned by the Company.
All-in blended pricing on the bonds is LIBOR plus 206 basis
points (inclusive of upfront fees and expenses amortized over
the life of the bonds). The bonds mature in December 2006 and
amortize on a 25-year schedule.
Net proceeds from the refinancing, if consummated, will be used
to pay down debt under the Company's Amended Credit Agreement,
which has an outstanding principal balance of $846.3 million.
The purposes of the CMBS transaction are to lower the Company's
costs of debt, remove the dividend restriction contained in its
Amended Credit Agreement and ensure that the Company will have
no debt maturities before December 31, 2005.
The CMBS refinancing transaction is expected to close in
December and is subject to normal and customary closing
conditions. There can be no assurance regarding the timing or
completion of the CMBS transaction due to world events, material
adverse change or other factors. The bonds have not been
registered under the Securities Act of 1933, as amended, and may
not be offered or sold in the United States without such
registration or an applicable exemption from registration
requirements.
Ventas is a healthcare real estate investment trust whose
properties include 44 hospitals, 216 nursing homes and eight
personal care facilities in 36 states. Its website can be found
at http://www.ventasreit.com
W.R. GRACE: Court Okays Kleet as Equity Panel's Local Counsel
-------------------------------------------------------------
The Official Committee of Equity Holders of W. R. Grace & Co.,
and its debtor-affiliates obtained Judge Farnan's authority to
retain nunc pro tunc Klett Rooney Lieber & Schorling, PC, as
local counsel, effective as of October 26, 2001.
The specific services Klett is to render the Committee are:
(a) Render legal advice with respect to the powers and
duties of the Equity Committee and the other participants in the
Debtors' cases;
(b) Assist the Equity Committee in its 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 Debtors' cases, as and to the
extent such may affect the Debtors' creditors;
(c) Participate in negotiations with parties-in-interest
with respect to any disposition of the Debtors' assets, plan of
reorganization and disclosure statement in connection with such
plan, and otherwise protect and promote the interests of the
Debtors' creditors;
(d) Prepare all necessary applications, motions, answers,
orders, reports and papers on behalf of the Equity Committee,
and appear on behalf of the Equity Committee at court hearings
as necessary and appropriate in connection with the Debtors'
cases;
(e) Render legal advice and perform general legal
services in connection with the foregoing; and
(f) Perform other necessary legal services in connection
with these chapter 11 cases. (W.R. Grace Bankruptcy News, Issue
No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WILLIAMS CONTROLS: Charles G. McClure Resigns as Director
---------------------------------------------------------
The board of directors of Williams Controls, Inc., reports that,
effective November 9, 2001, Charles G. McClure has resigned his
position as a Director of Williams Controls, Inc. Mr. McClure's
position as President and Chief Operating Officer of Federal
Mogul Corporation, a company which has filed for Chapter 11
protection, requires his full attention and precludes him from
continuing to serve on the board of Williams Controls, Inc.
The company's biggest business is making electronic throttles,
exhaust brakes, and pneumatic controls for trucks and other
heavy equipment. Other operations include microcircuits, cable
assemblies (Aptek Williams), and global positioning systems
(GeoFocus -- which Williams Controls is selling). The company
also makes plastic parts (Premier Plastic Technologies, which is
being sold) and compressed natural gas conversion kits for cars
(NESC Williams). Major customers include Freightliner, Navistar,
and Volvo. Former CEO Thomas Itin owns 30% of Williams Controls,
which has put itself up for sale.
As of June 30, 2001, Williams Controls reports an upside-down
balance sheet, with shareholders' equity deficit of about $8
million.
WINSTAR: Strikes Agreement with AT&T to Grant Adequate Assurance
----------------------------------------------------------------
AT&T Corporation and Winstar Communications, Inc., and its
debtor-affiliates met and conferred and entered into a
stipulation in an effort to resolve disputes concerning the
terms under which AT&T will continue to render telecommunication
services to the Debtors. The parties seeks the Court's approval
in approving the stipulation and proposed order, salient
provisions of which are:
A. Adequate Assurance Deposit/Catch-up Payment - To provide
adequate assurance of payment to AT&T for the Debtors'
continued access to and use of AT&T's Services, the Debtors
shall make the following payments:
a. Immediately upon the approval by the Bankruptcy Court of
the settlement of the litigation between the Debtors
and AT&T pending in the U.S. District Court for the
Eastern District of Virginia, AT&T shall offset the
sum of $1,100,000 representing the Debtors estimate of
post-petition arrears for services rendered from the
Petition Date through and including November 30, 2001
for AT&T services provided to the Debtors against the
remaining $1,700,000 owed to the Debtors pursuant to
the settlement of the Virginia Litigation. The Debtors
and AT&T reserve their respective rights with respect
to the disputed post-petition arrears and agree to
confer by January 15, 2002 to reconcile any such
disputes.
b. Immediately upon the approval by the Bankruptcy Court of
the settlement of the Virginia Litigation, AT&T shall
apply part of the balance of the sums owed by AT&T to
the Debtors after the offset to provide AT&T with a
security deposit in the amount of $120,000, which
represents 2 weeks of Services provided by AT&T to the
Debtors.
c. Immediately upon the approval by the Bankruptcy Court of
the settlement of the Virginia Litigation, AT&T shall
apply part of the balance of the sums owed by AT&T to
the Debtors after the offset to provide AT&T with a
prepayment in the amount of $120,000, which represent
payment in advance for AT&T services to be provided
during the two weeks following the date of each such
payment.
d. Promptly following the application of the sums set
forth, AT&T shall pay to the Debtors, via wire
transfer, the sum of $360,000, representing the
balance of the Virginia Settlement Proceeds.
e. Commencing no later than December 14, 2001, and
continuing on every second Friday thereafter, the
Debtors shall pay AT&T a total of $120,000 which
represent payment in advance for AT&T services to be
provided during the two weeks following the date of
each such payment. Additionally, the bi-weekly
prepayment shall be adjusted on a retrospective basis
to reflect actual usage.
f. Payments to AT&T, including bi-weekly Prepayments, shall
be made on each account via wire transfer, shall be
directed in the manner prescribed in written
instructions which AT&T shall provide to the Debtors,
and shall be accompanied by a contemporaneous written
notice.
B. Reconciliation/Adjustments - AT&T and the Debtors agree that
from lime to time, but in any event not later than the 15th
day of each month beginning on January 15, 2002, that the
Parties shall confer in order to reconcile and adjust the
amounts payable pursuant to this Stipulation and Order.
C. Default - If the Debtors fail to make airy of the bi-weekly
prepayment on a Payment Date or any other payments provided
for in this Stipulation and Order, or otherwise fail to
comply with any other term contained herein, or in any
agreement between the Debtors and AT&T, or the tariffs
filed by AT&T with the FCC or other regulatory bodies with
respect to the Debtors post-petition obligations as set
forth herein, then AT&T is authorized to suspend or
terminate all Services rendered by AT&T to the Debtors
unless, within 5 business days after AT&T provides written
notice of such default to the Debtors, the Debtors cure
such default. Any such notice of default given by AT&T to
the Debtors shall be directed to the Debtors' counsel.
Should the Debtors fail to cure their default within the
Cure Period after receipt of such notice, the automatic
stay is hereby lifted, without further notice or judicial
proceedings, to permit AT&T to immediately suspend or
terminate all Services rendered and to offset against any
deposit or Bi-Weekly Prepayment held by AT&T with respect
to post-petition obligations only.
D. Term - The term of this Stipulation and Order shall expire
automatically on the earlier of the following:
a. the Debtors have committed a payment default not cured
by the expiration of the Cure Period,
b. the entry of a Court order converting any of the Debtors
cases to a chapter 7 liquidation and consensual
arrangements for continued Services are not made
between AT&T and the chapter 7 trustee,
c. any of the Debtors' case is dismissed, or
d. an order is entered confirming the Debtors' chanter 11
plan or authorizing a sale of substantially all of the
Debtors' assets, and such order does not provide for
the assumption and cure of all material executory
contracts between the Debtors and AT&T.
E. Modification of the Automatic Stay - Upon the occurrence of
an event listed in this Stipulation, the automatic stay is
lifted, without further notice or judicial proceedings, to
permit AT&T to immediately suspend or terminate all
services rendered and to offset against any deposit or
Bi-Weekly Prepayment held by AT&T with respect to
post-petition obligations only.
F. Confirmation of Plan/Cure/Return of Security Deposit - Upon
entry of an order confirming the Debtors chapter 11 plan or
authorizing a sale of substantially all of the Debtors'
assets, and further providing for assumption and cure of
all executory contracts between the Debtors and AT&T, AT&T
shall apply the security deposit to the Debtors' next
invoice to the extent no post-petition arrears exist.
G. Reservation of Rights/Assignment - Except as expressly
provided herein, AT&T reserves and preserves all rights
under applicable agreements, the Bankruptcy Code and
applicable law, including tariffs.
H. New Services. The Parties agree that, upon execution of this
Stipulation and Order and payment of the amounts set forth,
AT&T shall use commercially reasonable efforts to process
and honor the Debtors' requests for new services, except
for New Services that are not available on AT&T's network
provided that for any such new services, the Debtors shall
pay AT&T in full for the nonrecurring charges for such New
Services in advance of the provisioning of the New
Services, and shall pay AT&T bi-weekly in advance the
amount of the recurring charges for such New Services,
pursuant to the payment and true-tip terms set forth above.
For New Services not available on AT&T's network, the
Debtors and AT&T shall agree on mutually acceptable terms
of payment for such Services before AT&T shall be required
to provide such services. (Winstar Bankruptcy News, Issue No.
19; Bankruptcy Creditors' Service, Inc., 609/392-0900)
* BOOK REVIEW: George Eastman: Founder of Kodak and the
Photography Business
-------------------------------------------------------
Author: Carl W. Ackerman
Publisher: Beard Books
Softcover: 522 Pages
List Price: $34.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at:
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
George Eastman was a Bill Gates of his time. This biography of
Eastman (1854-1932) provides a fascinating look at the
inventions, management style, interests, causes, and
philanthropies of one of America's finest scientist-
entrepreneurs. Eastman's inventions transformed photography into
a relatively inexpensive and enormously popular leisure
activity. His company, Eastman Kodak, was one of the first U.S.
firms to mass-produce a standardized product. Along with Thomas
Edison, he ushered in the age of cinematography.
Eastman was born in Waterville, New York. At the age of 23,
while working as a bank clerk, Eastman bought a camera and set
in motion a revolution in photography. At the time,
photographers themselves mixed chemicals to make light-sensitive
emulsions and covered glass plates (called "wet plates") with
the emulsions, taking photographs before the emulsions dried. It
was an awkward, messy and time-sensitive undertaking. Eastman
developed a process using dry plates and in 1884 patented a
machine to produce coated dry plates. He began selling
photographic plates made using his machines, as well as leasing
his patent to foreign manufacturers.
With the goal of reducing the size and weight of photographic
equipment, Eastman then began investigating possibilities for a
flexible firm. He and William E. Walker developed the first such
film, cut in narrow strips and wound on a roller device patented
by Eastman. The Eastman Dry Plate and Film Co. began producing
the film commercially in 1885. In 1888, Eastman patented the
hand-held Kodak camera, designed specifically for roll film and
initially priced at $25. (He made up the word "Kodak" using the
first letter of his mother's maiden name, Kilbourne.)
In 1889, Eastman began working with Thomas Edison, inventor of
the motion picture camera. Edison's increasingly sophisticated
models required a stronger, more flexible transparent film,
which Eastman was able to deliver. He founded Eastman Kodak Co.,
in 1892 and began mass-producing a range of photographic
equipment.
Eastman was an astute businessman. He dealt shrewdly with
competitors and sometimes fell out with former collaborators.
Indeed, some of them filed and won patent infringement lawsuits
against him. He was tireless in his inventing and
entrepreneurial endeavors. In the early days, he often slept in
a hammock at the factory and cooked his own food there. His
mother regularly showed up and insisted that he go home for a
good meal and full night's sleep! Eastman demanded much of his
employees, but no more than de demanded of himself. "An
organization," he said, "cannot be sound unless its spirit is.
That is the lesson the man on top must learn. He must be a man
of vision and progress who can understand that one can muddle
along on a basis in which the human factor takes no part, but
eventually there comes a fall."
This book draws on the contents of 100,000 letters to and from
Eastman's friends, family, investors, competitors, employees,
and fellow inventors, along with Eastman's records and notes on
his various inventions. The result is a meticulously detailed
account of Eastman's myriad interests and hands-on management
style, as well as the evolution of photography and a major 20th-
century corporation.
*********
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Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
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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
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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