/raid1/www/Hosts/bankrupt/TCR_Public/011219.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Wednesday, December 19, 2001, Vol. 5, No. 247
Headlines
ANC RENTAL: Wants Okay to Assume 3 Amended Vehicle Lease Pacts
AINSWORTH LUMBER: S&P Rates Proposed $95MM Notes Due 2007 at B-
ALLIANCE HOLDINGS: Fitch Slashes Sr. Note Rating to Junk Level
AMERICAN SKIING: Says High Leverage Hurting Liquidity
B/E AEROSPACE: Results Swing-Down to $106MM Net Loss in Q3
BHN III: Fitch Junks Series 1997-2 Following Argentina Downgrade
BARNEYS NEW YORK: Amends Credit Facility with Senior Lenders
BREAKAWAY SOLUTIONS: Sells Certain Assets to Totality Corp.
BURLINGTON: Deadline for Filing Schedules Extended to Feb. 13
CHIQUITA BRANDS: Signs-Up Blackstone Group as Investment Banker
COLONIAL DOWNS: Sets Special Shareholders' Meeting for Jan. 10
COMDISCO INC: Hearing On Wachtell's Success Fee Set for Tomorrow
COVAD COMMS: Taps Morris Nichols as Local Bankruptcy Counsel
DANKA BUSINESS: Appoints CEO P. Lang Lowrey Chairman of Board
ENRON: Wants LeBoeuf to Continue Services as Special Counsel
ETHYL CORP: Considers Selling 1.06M Enchira Shares Over Time
EXODUS COMMS: Seeks Approval of Settlement Pact with marchFIRST
FEDERAL-MOGUL: Schedules & Statements Might Appear on Dec. 20
FLEETWOOD ENTERPRISES: Raises $150MM from Securities Offering
GULFMARK OFFSHORE: S&P Puts Credit and Debt Ratings at BB-
HAYES LEMMERZ: Will Be Paying Prepetition Shipping Charges
HENRY CO: S&P Affirms Junks Ratings, Keeping Negative Outlook
HUGHES ELECTRONICS: S&P Hatchets Ratings Down to Low-B Level
INTEGRATED HEALTH: Selling Real Property in Maryland for $1.5MM+
JFK ACQUISITION: Asks Court for More Time to Complete Schedules
KELLSTROM INDUSTRIES: Misses Interest Payment on 5-1/2% Notes
LTV CORP: Colin Blaydon & Vincent Sarni Steps Down From Board
LAIDLAW INC: Bringing In Dresdner Kleinwort as Investment Banker
MTS INC: Net Loss Balloons to $11 Million After Debt Workout
MARINER POST-ACUTE: Overview of Joint Plan of Reorganization
METALS USA: Gets Okay to Access Up to $139MM of Cash Collateral
NATIONSRENT: S&P Drops Ratings To D After Missed Payment
OGLEBAY NORTON: S&P Concerned About Stressed Financial Profile
OGLEBAY NORTON: Appoints Julie A. Boland as VP, CFO & Treasurer
OPTICARE HEALTH: Inks Debt Restructuring Agreement with Palisade
PEGASUS SATELLITE: S&P Junks $250MM Sr. Unsecured Notes Due 2010
PICCADILLY CAFETERIAS: Gets Foothill $20MM Sr. Credit Facility
PINNACLE HOLDINGS: Taps Gordian for Financial Advisory Services
PLANVISTA: Lenders Extend Time to Complete Debt Restructuring
PORTOLA PACKAGING: Shareholders' Equity Deficit Stands at $27.9M
REPUBLIC TECHNOLOGIES: Firms-Up Tentative Agreement with Union
SERVICE MERCHANDISE: Wants to Grant St. Paul Adequate Protection
SUN HEALTHCARE: Asks Court to Further Extend Lease Decision Time
TELIGENT: ECI Unit Selling Assets to Summit Acquisition for $60M
TIMMINCO LIMITED: Inks Forbearance Pact with Bank of Nova Scotia
VISKASE: S&P Slashes Ratings to D After Missed Payment On Notes
WESTAR FINANCIAL: Ends Q2 with Upside-Down Balance Sheet
WESTERN POWER: Defaults on Financial Covenants Under Credit Pact
WHEELING-PITTSBURGH: Taps King Capital as Financial Consultant
* Meetings, Conferences and Seminars
*********
ANC RENTAL: Wants Okay to Assume 3 Amended Vehicle Lease Pacts
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ANC Rental Corporation, and its debtor-affiliates seek entry of
an order:
A. authorizing the Debtors to amend, and assume as amended, a
Motor Vehicle Lease Agreement dated July 8, 1997 with
Mitsubishi Motor Sales of America, Inc.;
B. authorizing Spirit Rent-A-Car, Inc., to assume Spirit to
assume a Motor Vehicle Lease Agreement dated July 2, 2001
with Rosedale Dodge Inc.; and
C. authorizing Alamo Rent-A-Car, LLC to accept an assignment of
and assume a Motor Vehicle Lease Agreement dated July 2,
2001 with Rosedale and then to assume such contract.
Mark J. Packel, Esq., at Blank Rome Comisky McCauley LLP in
Wilmington, Delaware, informs the Court that the Debtors
typically hold vehicles in their daily rental fleet for up to 12
months and as a result, the Debtors have a constant need for new
vehicles. The Debtors obtain vehicles in one of two ways, either
by:
A. entering into a lease with a manufacturer or supplier for a
designated period of months and at designated monthly
rates, or
B. their special purpose non-debtor subsidiaries can purchase
the vehicles either outright or pursuant to a manufacturer
repurchase program.
However, Mr. Packel states that all vehicles that are purchased
must be financed, which the Debtors' special purpose non-debtor
subsidiaries have primarily done through asset-backed financing
agreements. At present, the Debtors and their special purpose
subsidiaries have very limited access to the asset-backed
financing market. In addition, all financed vehicles require 13
percent over-collateralization in the form of cash. Mr. Packel
submits that vehicles leased directly from manufacturers or
their dealer suppliers have smaller capital requirements and are
a much more cost effective means of acquiring vehicles but there
is a limited number of manufacturers who have offered to lease
vehicles to the Debtors.
As a result of the Debtors' chapter 11 filing, Mr. Packel claims
that the Debtors' ability to obtain and finance additional new
vehicles under its existing contracts with vehicle manufacturers
and suppliers has been put in jeopardy. The Debtors are in the
process of negotiating with these various vehicle manufacturers
and fleet financing entities with respect to continuing to
obtain and finance new vehicles on a going forward basis.
However, at this time, Mitsubishi and Rosedale are the only
entities willing to lease a significant number of vehicles to
the Debtors. The contracts are:
A. Mitsubishi Contract - The Debtors have reached an agreement
to amend the Mitsubishi Contract, which will permit the
Debtors to obtain up to 19,000 new vehicles and to retain
certain existing vehicles for a longer period of time.
Generally, the monthly lease rate for each additional
vehicle leased will be the applicable rate contained in the
Mitsubishi Contract, plus an additional $20 per vehicle per
month charge. In addition, the Debtors may retain the new
vehicles obtained for 120 days longer than was allowed
under the Mitsubishi Contract and the allowable mileage for
these new vehicles in service at least 270 days will be
increased up to 6,500 miles more before additional use fees
are incurred. In order to help maintain the number of
vehicles in the Debtors' fleet, the Debtors may also retain
until a date in the first quarter of 2002 approximately
5,920 vehicles already leased and in the Debtors'
possession, which the Debtors were required to return to
Mitsubishi in the fourth quarter of 2001.
B. Rosedale Contract - The Debtors lease vehicles from Rosedale
pursuant to the Spirit Contract and the Alamo Contract and
currently have approximately 2,280 vehicles in their
possession under such contracts. The Debtors are dependent
upon the Rosedale Contracts to obtain new rental vehicles
to fill short-term "spot" needs or to obtain niche,
specialty vehicles, such as vans.
Mr. Packel submits that the Rosedale Contracts are particularly
important to the Debtors in that they have been able to obtain
vehicles on an as-needed basis on economically favorable terms
and without the requirement of posting capital. Moreover, the
Debtors' dependence on this source of vehicles may grow if the
Debtors are unable to obtain additional new vehicles under other
existing contracts with other automobile manufacturers and
suppliers.
Similarly, Mr. Packel contends that the Mitsubishi Contract is
especially valuable and economical to the Debtors at this time
primarily because it provides for the lease, and not purchase,
of vehicles. This leasing arrangement in the Mitsubishi Contract
effectively limits the Debtors' responsibilities and liabilities
with respect to the leased vehicles and removes the burden of
the Debtors having to sell the vehicles at the end of their
useful term. Even if the Debtors could purchase a similar number
of vehicles from other manufacturers and assuming an average
purchase price of $20,000 per vehicle, Mr. Packel points out
that the Debtors would have to obtain $380,00,000 in asset-
backed financing plus an additional $49,400,000 in cash over-
collateralization. In contrast, assuming an average monthly
lease payment of $310 per vehicle, the one-year cost to the
Debtors would be $70,000,000.
Mr. Packel contends that the Debtors are not currently in
default under the Contracts but in connection with the
assumption of these contracts, the Debtors intend to pay pre-
petition amounts, which have been incurred as they come due.
Under the Mitsubishi Contract, the Debtors are obligated to make
periodic lease payments and to pay various charges associated
with the return of vehicles and for non-returned vehicles. Mr.
Packel explains that those amounts are accounted for and
adjusted periodically by the parties in the ordinary course and
at any given time there is expected to be a balance owing. The
Debtors estimate that pre-petition amounts owing under the
Mitsubishi Contract for unpaid lease payments to be between
$110,000 and $1,108,000 and that pre-petition amounts owing
under the Mitsubishi Contract for non-lease payments to be
between $1,000,000 and $3,023,000, which will be reviewed,
reconciled and/or adjusted, as applicable, in accordance with
the Mitsubishi Contract in the ordinary course of business. The
total amount incurred but not yet due under the Spirit Contract
is approximately $132,000.
Mr. Packel asserts that the ability of the Debtors to obtain new
vehicles and to retain vehicles already in the Debtors'
possession is essential to the Debtors' business going forward
and to the successful resolution of these chapter 11 cases. In
light of the already diminished number of vehicles in the
Debtors' fleet, which is eroding the Debtors' ability to service
customers, and the rapidly approaching holiday season, it is
imperative that the Debtors have the ability to immediately
obtain new and to retain existing vehicles. Unless the Debtors
are able to immediately obtain new and to retain existing
vehicles under the Mitsubishi and Rosedale Contracts, Mr. Packel
believes that the Debtors will be unable to serve their
customers effectively, which could have a catastrophic effect on
the Debtors' ability to continue as a going concern and to
successfully reorganize. Moreover, because of the terms and
conditions of such contracts, the Debtors would be forgoing an
opportunity to acquire and retain much needed vehicles on
favorable economic terms.
The Debtors also request an expedited hearing on December 5,
2001 on this Motion in order to meet the market demands and have
sufficient cars during the upcoming holiday season. Mr. Packel
relates that the Debtors need the Mitsubishi cars delivered
immediately while Mitsubishi is prepared to deliver 3,000 cars
upon approval of the Assumption Motion and an additional 9,000
cars within the next week. Due to the exigent circumstances
facing the Debtors, Mr. Packel says that delaying consideration
of the Assumption Motion until the next omnibus hearing on
December 17, 2001, will cause irreparable harm to the Debtors'
business operations as it will not have sufficient vehicles to
meet the market demand generated by the peak winter rental
season in certain Southern states which runs from December 15th
to March 5th, and the Debtors will lose valuable revenues which
cannot be recaptured. (ANC Rental Bankruptcy News, Issue No. 4;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
AINSWORTH LUMBER: S&P Rates Proposed $95MM Notes Due 2007 at B-
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Standard & Poor's raised its corporate credit and senior secured
debt ratings on Ainsworth Lumber Co. Ltd. to single-'B'-minus
from triple-'C'-plus. At the same time, Standard & Poor's
assigned its single-'B'-minus rating to Ainsworth's proposed
US$95 million senior secured notes due 2007. The outlook is
stable.
The upgrade is contingent on the completion of the proposed
financing. Should the proposed financing not occur or should it
be materially different, the rating will revert to triple-'C'-
plus.
The proposed notes will be secured by the company's interest in
its new oriented strandboard (OSB, a plywood substitute)
facility located in High Level, Alta; current assets; and non-
OSB facilities. Proceeds from the offering will be used to repay
outstanding bank indebtedness under existing credit facilities,
with the remainder used for working capital needs.
The ratings on Ainsworth reflect the company's below average,
but improving, business risk profile; a very aggressive
financial structure; and recovery from recent liquidity
problems.
The combination of a heavy capital expenditure program and
extremely weak pricing in its core business of OSB caused
Ainsworth to miss its Jan. 15, 2001, interest payment on its
rated US$186.5 million notes, although the default was remedied
within the 30-day grace period permitted by the note indenture.
Generally weak prospects for OSB prices, stemming from weak
economic conditions and industry-wide capacity additions, will
likely constrain the company's credit parameters over the near
term.
Ainsworth, a small forest products company engaged in the
production of OSB and other wood products, is expanding the
capacity of its panel operations by more than 25% this year. The
company has constructed an OSB plant with capacity of 860
million square feet, which is equally owned by Ainsworth and
Grant Forest Products Inc. This is the largest OSB plant in the
world, which should result in significant economies of scale.
Although currently in the ramp-up phase, the improved cost
position has led to stronger cash flow and higher margins
despite currently depressed markets. Nevertheless, the mill
is only expected to begin making a significant contribution to
EBITDA in 2002.
Ainsworth's business mix is narrowly focused on OSB and other
cyclical wood products, such as lumber and plywood. OSB
accounted for 77% of the company's 2000 sales, and this should
increase with the High Level facilities beginning production.
This reliance on OSB, the prices for which are widely variable,
increases the volatility of the company's profitability and
credit measures. For example, EBITDA interest coverage dropped
to 0.5 times in 1997 during a trough in OSB prices, but
recovered to 3.1x in 1999 as prices rebounded. With the recent
pricing pressure on OSB combined with the company's heavy debt
load, EBITDA interest coverage over the past four quarters has
been less than 1.3x. Nevertheless, this weak interest coverage
is offset somewhat by the modest capital expenditure
requirements on the company's very modern assets.
The company's cost position, the most important success factor
in this commodity market, is about average, although this should
improve with the economies of scale associated with the size of
the High Level mill. Ainsworth currently has somewhat lower
exposure to price volatility than its pure-OSB peers because of
a strategy that promotes niche markets and somewhat specialized
products.
Ainsworth's financial profile remains very aggressive, as pro
forma debt to capitalization will be around 80% after the
issuance of the US$95 million senior secured notes in December
2001. Nevertheless, the issue provides the company with much
needed liquidity and improves financial flexibility in the short
term. Key credit parameters, including profitability and cash
flow protection, will improve as the High Level mill reaches
capacity. Furthermore, very strict covenants on Ainsworth's
US$95 million senior secured notes ensure that a large portion
of free cash flow will be used to redeem outstanding debt.
Outlook: Stable
At currently weak OSB prices, Ainsworth will generate modest
free cash flow, which may be used for debt reduction. A recovery
in OSB prices, combined with improving volumes, would enable the
company to generate good cash flow and ease its debt burden.
ALLIANCE HOLDINGS: Fitch Slashes Sr. Note Rating to Junk Level
--------------------------------------------------------------
Fitch downgrades one tranche of the liabilities of Alliance
Holdings International II Ltd. (Alliance Holdings) and removes
that tranche from Rating Watch Negative. This transaction is
backed by high yield bonds and emerging market corporate and
sovereign debt. Alliance Capital Management LP manages Alliance
Holdings.
This rating action is being taken after reviewing the
performance of the portfolio amidst increased levels of defaults
and deteriorating credit quality of the underlying assets. Given
the current quality of the portfolio, Fitch believes the credit
risk is no longer consistent with the liability ratings.
Alliance Holdings has been failing its second priority senior
notes overcollateralization test of 115.4% since July 1999 and
its senior notes overcollateralization test since January 2000.
Alliance Holdings is also failing its WACR test. To date, the
deal has had a total of $47.8 million in defaults, with $20.1
million in defaults still outstanding.
As a result of our findings, Fitch downgrades the following
class of notes:
- $36,233,600 second priority senior notes to 'CC' from 'B+'.
Fitch will continue to monitor this transaction. Deal
information and historical data is available on Fitch's Web site
at http://www.fitchratings.com
AMERICAN SKIING: Says High Leverage Hurting Liquidity
-----------------------------------------------------
Real estate revenues of American Skiing Company decreased by
$24.4 million in the current quarter compared to fiscal 2001,
from $27.2 million to $2.8 million. Last year the Company
recognized $15.6 million in revenue from closings at the
Steamboat Grand Hotel. This project went on line during the
first quarter of fiscal 2001 and most of the revenues recognized
were from pre-sales activities. In the first quarter of fiscal
2002 American Skiing recognized $1.5 million in revenues from
closings at this project. Real estate revenues in the first
quarter last year also included $4.4 million from the sale of
option rights to certain real estate land adjacent to Heavenly
gondola. There were no such land sales in the first quarter of
fiscal 2002. The Company was $5 million behind last year in
closings of quartershare units at the Grand Summit Hotel at The
Canyons, as the Company recognized $5.3 million in revenues
during the first quarter of fiscal 2001, compared to $0.3
million this year. Last year's results also included $0.4
million and $0.3 million, respectively, from sales of units at
the Sundial Lodge at The Canyons and the Locke Mountain
Townhomes at Sunday River. Both of these projects were fully-
sold whole ownership condominium facilities for which American
Skiing has no comparable revenues in this current fiscal
quarter.
Loss from real estate operations increased by $5.3 million, from
$1.1 million in the first quarter of fiscal 2001 to $6.4 million
in fiscal 2002. The largest factor in this increase was the $3.3
million gain that was recognized last year from the sale of
option rights to land at Heavenly, for which there was no
comparable gain this year. Also recognized was approximately $1
million less in Real Estate EBITDA from sales at The Canyons and
Steamboat Grand Summit hotels due to the lower volume of
revenues on those projects alluded to above. The Company says it
believes that EBITDA is an indicative measure of a resort
company's operating performance and is generally used by
investors to evaluate companies in the resort industry.
The results of resort operations for the first quarter of Fiscal
2002 include the impact of Company strategic restructuring
program that was implemented in the fourth quarter of fiscal
2001. Despite increased revenues from the new Steamboat hotel
and Heavenly gondola, resort revenues decreased 1% as a result
of the softening economy and the impact of the events of
September 11th on the travel and leisure business. Resort
operating expenses (including marketing, general and
administrative costs) for the first quarter of fiscal 2002 were
$1.3 million lower than last year, primarily as a result of the
cost restructuring initiatives implemented in the fourth
quarter of fiscal 2001. The Company also incurred $1.6 million
in other non-recurring charges related to the implementation of
its strategic restructuring plan. These costs consisted mainly
of organizational restructuring costs and legal, consulting and
financing costs incurred in connection with its credit facility
amendments and capital infusion from Oak Hill. Excluding these
restructuring charges, Resort earnings before interest, taxes
and depreciation, or EBITDA, loss was $1.1 million lower than
the same period last year. Due to the seasonality of the ski
industry, Ameerican Skiing typically experiences losses related
to resort operations during its first and fourth fiscal
quarters.
The Company's high leverage significantly affects its liquidity.
As a result of its leveraged position, it has significant cash
requirements to service interest and principal payments on
debt. Consequently, cash availability for working capital needs,
capital expenditures and acquisitions is significantly limited,
outside of any availability under the senior credit facility.
Furthermore, its senior credit facility and the indenture
governing its Senior Subordinated Notes each contain significant
restrictions on Company ability to obtain additional sources of
capital and may affect its liquidity. These restrictions include
restrictions on the sale of assets, restrictions on the
incurrence of additional indebtedness and restrictions on the
issuance of preferred stock.
B/E AEROSPACE: Results Swing-Down to $106MM Net Loss in Q3
----------------------------------------------------------
B/E Aerospace, Inc., (Nasdaq:BEAV) announced financial results
for the third fiscal quarter ending November 24, 2001 and
confirmed the earnings outlook for both the current and next
fiscal years.
Highlights:
-- Facility consolidation program underway
-- Recorded restructuring charges, primarily non-cash, for
a number of facility consolidations
-- Company expects to return to profitability in first
quarter of next year with strong growth in
profitability beginning in third quarter
"Our airline customers continue to face very difficult operating
conditions," said Mr. Robert J. Khoury, President and Chief
Executive Officer of B/E Aerospace. "Air travel has not yet
recovered from the aftermath of the tragic events of September
11. Airlines' operating losses for the full year 2001 will
likely be the largest ever recorded. As announced in October, we
are responding by aggressively reducing our costs, facilities
and workforce to levels consistent with projected demand.
"After putting considerable effort into our facility
consolidation plan, we now have better visibility on the
earnings outlook," Mr. Khoury said. "We expect to earn about
$0.85 per share for our next fiscal year (March 2002 to February
2003), with the second half of the year providing about $0.60
per share of the projected earnings." Earnings expectations for
fiscal 2003 exclude transition costs associated with the
facility consolidation program, most of which will impact the
balance of this year and the first half of next year.
Third Quarter Overview
For the third fiscal quarter ended November 24, 2001, B/E
Aerospace reported a net loss of $106.2 million compared to net
earnings of $7.9 million for the third quarter a year ago. The
net loss reported includes approximately $100 million of costs
associated with the facility consolidation program. Excluding
these costs, as well as acquisition-related expenses, net
earnings for the third quarter of fiscal 2002 were $0.5 million.
Putting the third quarter results into perspective, Mr. Khoury
stated: "Approximately $84 million of the $100 million of
facility consolidation costs were non-cash, affecting net income
but not cash flow."
Net sales for the third quarter were 3 percent higher compared
to the same quarter last year. However, pro forma sales
decreased 16 percent compared to a year ago, reflecting
substantially lower demand from airline customers in the current
difficult environment. Pro forma sales exclude revenues from
acquisitions completed after the third quarter of last year.
"Airlines worldwide are feeling the combined effects of the
aftermath of the September 11 attacks and a weak economy," said
Mr. Khoury. "It appears that U.S. carriers' domestic revenues
were down 35-40 percent for the months of October and November
compared to a year ago. High labor costs and fixed costs are
compounding their financial pressures.
"Airlines are stringently conserving cash," Mr. Khoury said. "As
we've stated in the past, this is adversely affecting demand for
our cabin interior products."
Facility Consolidation Update
Consistent with the outlook for reduced demand, in October 2001
B/E announced plans to close five facilities and reduce its
workforce by about 1,000 people. This plan is intended to
reconfigure operations to generate substantially higher
profitability in both the near term and the longer term. In
connection with these actions, the company recorded the
following charges in the third quarter:
-- cash charges of $15.6 million associated with workforce
reductions and facility closures,
-- non-cash charges of $63.9 million to write down
property, equipment and inventory which were impaired as a
result of industry conditions and the facility closures, and
-- non-cash charges of $20.4 million related to the
impairment of related intangible assets.
"We are moving aggressively to size our organization consistent
with expected demand," said Mr. Khoury. "These actions are
extremely painful and directly impact many loyal and long-
standing employees. However, the actions are necessary to
position B/E for solid profitability at the current lower level
of demand and to generate substantially greater relative
profitability when demand recovers."
To further reduce costs, B/E's senior executive management
personnel have agreed to accept reductions in compensation
ranging from 35 percent to 50 percent for this year.
Third Quarter: Other Factors
Gross profit margin in the third quarter was 35.9 percent,
compared to 38.0 percent a year ago.
B/E reported EBITDA (earnings before interest, taxes,
depreciation and amortization) of $28.4 million for the third
quarter, excluding facility consolidation and acquisition-
related expenses.
B/E's backlog was approximately $520 million as of the end of
November 2001, down from $635 million as of the end of August
2001. "Our backlog declined due to lower bookings during the
past quarter, combined with order cancellations and/or deferrals
to uncertain periods in the future," Mr. Khoury said.
Shares outstanding increased to 35.2 million shares at the end
of the third quarter, reflecting the May 2001 common stock
offering and shares issued in connection with the acquisition of
M&M Aerospace Hardware, Inc.
Nine-Month Review
For the nine months ended November 24, 2001, B/E recorded a net
loss of $98.9 million compared to net earnings of $17.1 million
a year ago. The net loss includes approximately $100 million of
facility consolidation costs. Excluding such costs, as well as
acquisition-related expenses and extraordinary debt
extinguishment costs, earnings for the nine months ended
November 2001 were $17.2 million.
Net sales for the nine-month period were 6 percent higher
compared to the same period last year. However, pro forma sales
decreased 7 percent compared to a year ago, reflecting
substantially lower demand from airline customers. Pro forma
sales exclude revenues from acquisitions completed after the
third quarter of last year. B/E's gross margin was 37.3 percent,
up from 37.1 percent last year.
Cash Exceeds $135 Million, Bank Facility Amended
B/E had cash on hand of $135.7 million as of November 24. Net
debt was $719.6 million, or 84 percent of total capital, at the
end of the third quarter. Interest coverage for the twelve
months ended November was 2.4 times, excluding the
aforementioned charges. B/E's bank credit facility, which
requires no principal payments until 2006, was recently amended
to provide additional flexibility in its financial covenants.
Outlook: Fiscal 2002
Consistent with B/E's prior public statements made shortly after
the September 11 attacks, B/E expects sales of approximately
$700 million for the full fiscal year ending in February 2002,
and approximately break-even net earnings for the second half of
the fiscal year excluding previously announced charges and
transition costs associated with facility consolidations.
Outlook: Fiscal 2003
"After putting considerable effort into our facility
consolidation plan, we now have better visibility on our
earnings outlook," Mr. Khoury said. Confirming previous
guidance, expected financial results for B/E's next fiscal year
ending in February 2003 are:
-- revenues of about $650 million, down from projected
revenues of $700 million for fiscal 2002, and down approximately
20 percent from fiscal 2001 pro forma revenues including
revenues from all acquired businesses in both periods,
-- earnings of about $0.85 per share excluding
approximately $10-12 million of transition costs associated with
facility consolidations, most of which will impact the first and
second quarters of fiscal 2003, and
-- EBITDA of about $135 million excluding the
aforementioned charges.
The second half of the year should provide about $0.60 per share
of the projected $0.85 per share full year earnings forecast,
driven primarily by margin improvements from facility
consolidations. Operating profit margin is expected to expand
substantially over the course of the year.
Consistent with guidance furnished in October, expected
financial results for fiscal 2003 include estimated benefits
from implementing Financial Accounting Standard 142 regarding
amortization of intangible assets as of the beginning of fiscal
2003.
"While it appears that airline spending on both new aircraft and
aftermarket programs will be constrained for the foreseeable
future, several factors will aid us in this environment," Mr.
Khoury said. "Our senior management team has successfully
steered B/E Aerospace through difficult times in the past,
including the adverse industry conditions of the early 1990s.
This is the same management team which has so successfully
consolidated multiple facilities in the past. Our current
organizational structure reflects the earlier elimination of 17
facilities and related headcount reductions of approximately
3,000 persons.
"Over 60 percent of our costs are variable, providing
substantial financial flexibility. Our bank facility requires no
principal payments until maturity in 2006, and our publicly
traded debt requires no principal payments until 2008. Our sales
mix is favorable, and when airline spending rebounds, it is
likely to begin with aftermarket investments in existing fleets.
Finally, prospects for our Business Jet Group remain positive.
"We remain confident that we will eventually see a resurgence in
the growth drivers of our business," he said. "At present,
airlines are deferring retrofits and refurbishments of cabin
interiors. Pent-up demand should cause aftermarket sales of
B/E's products to rebound well before new aircraft deliveries.
This is significant for our outlook because the aftermarket --
cabin interior retrofits and refurbishments -- provided 60
percent of our sales last year.
"When demand returns to more normal levels, we expect to have
greatly enhanced earnings power, producing more output with
fewer facilities and lower fixed costs. In fact, after closing
five principal facilities, our reconfigured capacity should
still be sufficient to generate revenues 50 percent greater than
next year's expected level. The productivity improvements are a
direct result of lessons learned through the initiatives of the
last 2 or 3 years which were so important to our recent
financial performance -- lean manufacturing, continuous
improvement and the leveraging of our information technology
investments," Mr. Khoury concluded.
B/E Aerospace, Inc. is the world's leading manufacturer of
aircraft cabin interior products, and a leading aftermarket
distributor of aircraft component parts. The company serves
virtually all the world's airlines and aircraft manufacturers.
B/E designs, develops, manufactures, sells and services a broad
line of passenger cabin interior products for both commercial
aircraft and business jets and provides interior design,
reconfiguration and conversion services to its customers
throughout the world. For more information, visit B/E's web site
at http://www.beaerospace.com
* * *
As reported in the Troubled Company Reporter on October 29,
Standard & Poor's revised its outlook on B/E Aerospace Inc.'s
low-B ratings to negative from stable, following the firm's
assessment of the impact on its business in the aftermath of the
September 11 terrorist attacks against the U.S. At the time the
report was made, the firm expected volume to be down about 30%,
leading to lower earnings and cash flow generation and weaker
credit protection measures.
BHN III: Fitch Junks Series 1997-2 Following Argentina Downgrade
----------------------------------------------------------------
Fitch has downgraded the BHN III Mortgage Trust series 1997-2
class A1 and A2 bonds to 'CCC' from `B'. The rating remains on
Rating Watch Negative.
The rating revision follows Fitch's downgrade on December 3,
2001 of Argentina's issuer rating to 'DDD' from 'C' and the
lowering of Argentina's country ceiling to 'CC' from 'CCC+'. The
Argentine government recently instituted a series of controls
designed to halt capital flows out of Argentina. According to
the government decree, usage of local bank deposits for private
sector external debt service will henceforth require
authorization from Argentina's central bank. Furthermore, the
government placed limitations on cash withdrawals from Argentine
financial institutions.
Fitch has previously commented that the imposition of controls
raises doubts about the ability of institutions to make foreign
currency payments abroad. The BHN III transaction has a three-
month liquidity reserve available to cover transfer and
convertibility controls. Fitch has received notice that the
master servicer, Banco Hipotecario, has begun authorization
procedures with the Argentine central bank in order to continue
making timely payments. Fitch will monitor the transaction on an
ongoing basis and provide comment as the situation in Argentina
develops.
BARNEYS NEW YORK: Amends Credit Facility with Senior Lenders
------------------------------------------------------------
Barneys New York, Inc., announced results for the third quarter
and nine months ended November 3, 2001 and the amendment of its
credit facility with its senior lenders, led by Citibank, N.A.
For the three months ended November 3, 2001, net sales declined
18.9% to $89.4 million from $110.2 million in the quarter ended
October 28, 2000. Comparable store sales declined 19.6%.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was negative $1.0 million compared to $10.9 million for
the same period a year ago. Net loss was $8.4 million compared
with net income of $3.3 million in the corresponding period last
year.
For the nine months ended November 3, 2001, net sales decreased
7.7% to $268.6 million from $291.1 million in the year ago
period. Comparable store sales declined 9.2%. EBITDA was $6.8
million compared to $21.1 million for the same period a year
ago. Net loss was $15.6 million compared with a net loss of
$1.2 million in the year ago period.
Howard Socol, Chairman, President and Chief Executive Officer,
said, "There is no question that retailing in general, and the
luxury sector, specifically, have been negatively impacted by a
slowing economy and the tragic events of September 11th. While
sales fell significantly in September, we are encouraged by an
improving sales trend in the ensuing months." Mr. Socol added,
"Throughout the year, we have aggressively reduced expenses and
believe we are well positioned today and for when the economic
climate improves. We, like other luxury retailers, have taken
more markdowns earlier and deeper than normal. These strategies
have enabled us to bring our stock levels in line with our sales
results. Our present inventory levels allow us to continue
bringing in fresh merchandise in December and throughout the
spring season. We continue to be aggressive at driving sales
through key merchandising programs, and are evaluating other
profit levers to maximize our earnings potential."
The Company also reported that the amendment of its credit
facility establishes new covenant levels and interest rates,
modifies other provisions of the credit agreement, and provides
the Company with sufficient liquidity for the balance of fiscal
2001 and fiscal 2002 in order to meet the ongoing needs of the
business. Currently, the Company has approximately $30 million
of availability under its credit facility. Commenting on the
amendment, Mr. Socol said, "Barneys appreciates the support of
our senior lenders in reaching this agreement and the confidence
this demonstrates in the Company. We have been fortunate
throughout the year to have the continued backing of our senior
lenders and our principal investors, Bay Harbour Management and
Whippoorwill Associates, Inc." David A. Strumwasser, a Managing
Director of Whippoorwill Associates, Inc. added, on behalf of
the principal investors, "We believe the Company has done an
excellent job in all areas during these difficult times.
Management has taken very positive steps to drive sales, reduce
expenses and control inventories while focusing on growth
opportunities and enhancing Barneys' unique brand. We continue
to be supportive of the Company and its business strategies."
Barneys New York is a luxury retailer with flagship stores in
New York City, Beverly Hills, and Chicago. In addition, the
Company operates four regional full price stores, twelve outlet
stores and two semi-annual warehouse sale events. Barneys also
maintains corporate offices in New York City, and an
administrative and distribution center in Lyndhurst, New Jersey;
the Company has approximately 1,400 employees.
BREAKAWAY SOLUTIONS: Sells Certain Assets to Totality Corp.
-----------------------------------------------------------
Totality Corp., a leading provider of Application &
Infrastructure Management (AIM) services for e-businesses,
announced the acquisition of specific assets of Breakaway
Solutions, a Pennsylvania-based company that implemented and
operated e-businesses. Breakaway Solutions filed for bankruptcy
in September 2001.
Through this acquisition Totality adds 15 customers to its fast-
growing client base, including two Fortune Global 500 companies
(a provider of hardware, software, service, and support
solutions, and a manufacturer of imaging and information
products), lightxchange (a business-to-business e-marketplace
established by OSRAM GmbH and Philips Lighting B.V.), and
HigherMarkets, Inc. (an e-commerce solutions provider for higher
education). In addition to adding customers and key technical
personnel, the Breakaway acquisition enhances the company's
presence in the Northeast and Windows NT platform expertise.
All Breakaway clients transitioning to Totality as a result of
the acquisition are undergoing a four-to-eight week process, on
average, to fully transition site management and operations to
Totality. The business and platform synergies of Breakaway and
Totality, coupled with Totality's deep expertise in managing
large-scale, transactional e-businesses, will help to ensure
that Breakaway clients receive high quality of service and
uninterrupted site support during the transition. Totality will
perform a range of site operations services for its new
customers, from 24x7 monitoring to problem resolution and
ongoing change management.
"We strongly believe that Totality offers HigherMarkets the best
site management solution available, with expertise in all the
base services and technologies we require to ensure flawless
operations," said Paul Salsgiver, HigherMarkets President and
CEO. "Totality's broad range of services addresses many aspects
of our ongoing site operations."
Totality has a solid track record in building and operating
large-scale sites including some of the fastest growing e-
businesses such as Martha Stewart Living Omnimedia, American
Airlines, The Sharper Image and Hotwire.
"We are delighted to announce the addition of these key
customers and look forward to providing them the high levels of
service that they received through their previous partnership
with Breakaway Solutions," said Michael Carrier, CTO and acting
CEO of Totality. "Through this transition phase, Totality is
paying particular attention to their primary needs, including a
smooth migration, uninterrupted site operations, and superior
site reliability."
Additional customers transitioning to Totality as a result of
the Breakaway Solutions acquisition include: Analine
Technologies, Engage Software's Onyx platform, Engage Software
customers Metro Creative Graphics, Inc. and La Opinion, First
National Financial Services, 4anything.com E-commerce Sites,
Interactive Plus One, StarCite, Inc., World Oil, and Yantra
Corporation.
Totality is a leading provider of Application & Infrastructure
Management (AIM) services for high performance e-business sites
requiring mass customization. Totality clients include Global
2000 companies and fast growing Internet companies. Totality
provides a range of services from infrastructure development to
ongoing site management and operations. Totality combines deep
expertise in a variety of technologies, robust operational
processes and service automation to deliver a high quality of
service at lower operational costs. Totality's offering,
comprised of its BuildWare and ManageWare services, includes the
design and development of a site's infrastructure followed by
24X7 site management and operations. The San Francisco-based,
privately held company was founded in September 1999. The senior
management team and founders include executives from Fort Point
Partners, AOL/Netscape, IBM, Viant, Oracle and Sun Microsystems.
For more information, visit http://www.totality.com
NOTE: Totality, the Totality logo, AuditWare, TurboWare,
BuildWare, ManageWare Premium, ManageWare Plus, Application &
Infrastructure Management (AIM), and Totality Service Automation
Platform are trademarks or servicemarks of Totality Corporation.
BURLINGTON: Deadline for Filing Schedules Extended to Feb. 13
-------------------------------------------------------------
Finding sufficient cause to grant the motion of Burlington
Industries, Inc., and its debtor-affiliates, Judge Walsh extends
the time within which the Debtors must file the Schedules and
Statements by an additional 60 days, through and including
February 13, 2002. (Burlington Bankruptcy News, Issue No. 4;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
CHIQUITA BRANDS: Signs-Up Blackstone Group as Investment Banker
---------------------------------------------------------------
Chiquita Brands International, Inc., seeks the Court's authority
to employ and retain the Blackstone Group as its investment
banker in this Chapter 11 case.
Robert W. Olson, the Debtor's Senior Vice-President, General
Counsel and Secretary, tells the Court that Blackstone has a
wealth of experience in providing investment banking services in
reorganization proceedings and has an excellent reputation for
the services it has rendered in chapter 11 cases on behalf of
Debtor and creditors throughout the United States.
The Debtor will look to Blackstone to:
(a) review financial and other data provided by the Debtor;
(b) analyze the Debtor's liquidity position and financing
requirements;
(c) assist in the evaluation of the Debtor's businesses and
prospects;
(d) develop valuation, debt capacity and recovery analyses
in connection with developing and negotiating a
potential restructuring;
(e) evaluate alternative capital structures for the Debtor,
as appropriate;
(f) develop a negotiating strategy and assist in
negotiations with the Debtor's creditors and other
interested parties with respect to a potential
restructuring;
(g) make presentations to the Debtor's Board of Directors,
creditor groups or other interested parties, as
appropriate;
(h) any such other financial advisory services which may be
customarily rendered in connection with the
restructuring; and
(i) provide expert witness testimony, if required.
According to Mr. Olson, the types of transactions contemplated
in the retention of Blackstone include, but are not limited to:
(i) a merger or acquisition,
(ii) a recapitalization,
(iii) a stock repurchase or joint venture,
(iv) a transaction that materially reduces the Debtor's
balance sheet indebtedness, or
(v) a transaction in which a reorganization plan is
confirmed pursuant to the Bankruptcy Code.
At the request of the Debtor, Mr. Olson adds, Blackstone may
provide additional investment banking services deemed
appropriate or necessary to the benefit of the Debtor's estate.
"Blackstone will carry out unique functions and will coordinate
with the Debtor's other retained professionals to avoid any
unnecessary duplication of services," Mr. Olson assures the
Court.
In exchange for these services, Debtor has agreed to pay
Blackstone:
(a) a monthly advisory fee in the amount of $200,000, payable
in advance, and
(b) a restructuring fee based on the size of a transaction or
restructuring.
Mr. Olson explains that the Restructuring Fee is 1% of the total
face value of any indebtedness of the Debtor that is
restructured, refinanced, modified or amended as a part of this
chapter 11 case. Mr. Olson informs Judge Aug that the
Restructuring Fee can be earned upon:
(i) a sale of all or a significant portion of the assets of
the Debtor,
(ii) a merger, acquisition or other similar transaction by the
Debtor,
(iii) an equity investment in or other recapitalization by the
Debtor, or
(iv) the execution of legally binding agreements providing for
a Transaction.
However, Mr. Olson emphasizes that Blackstone will not earn the
Restructuring Fee in the event the Transaction does not include
the restructuring of, or amendment or modification to, any
indebtedness of the Debtor. "Blackstone further agreed to
credit against the Restructuring Fee 50% of the monthly fees it
earned after May 2, 2001," Mr. Olson adds.
Mr. Olson relates that the Restructuring Fee became payable in
early November, when the Lock-Up Agreements were executed.
Pursuant to an oral agreement among the parties, Mr. Olson says,
the Debtor and Blackstone agreed that the Restructuring Fee
would not exceed $8,000,000. Accordingly, on November 15, 2001,
pursuant to the terms of the Blackstone Agreement, Mr. Olson
tells the Court, the Debtor paid Blackstone approximately
$7,300,000, which reflected a credit of $700,000 for the 50% of
the monthly fees Blackstone earned after May 2, 2001. "Although
Blackstone will not earn any additional fees for its services in
this chapter 11 case, as Blackstone has been paid in full under
the Blackstone Agreement, the Debtor will reimburse Blackstone
for any of its actual out-of-pocket expenses incurred while
representing the Debtor during the pendency of this chapter 11
case," Mr. Olson explains.
Furthermore, Mr. Olson says, Blackstone will maintain reasonably
detailed records of any actual and necessary costs and expenses
incurred in connection with the aforementioned services.
Accordingly, Mr. Olson notes, the Debtor requests authorization
to reimburse Blackstone for its actual, out-of-pocket expenses,
without further order of the Court, upon the submission of
invoices by Blackstone to the Debtor summarizing the expenses
for which reimbursement is sought.
Moreover, the Blackstone requests that the indemnification
provisions of the Blackstone Agreement be approved, subject to:
(a) the Debtor is authorized to indemnify, and shall
indemnify, in accordance with the Blackstone Agreement,
Blackstone for any claim arising from, related to or in
connection with Blackstone's pre-petition performance of
the services described in the Blackstone Agreement;
(b) the Debtor is authorized to indemnify, and shall
indemnify, Blackstone in accordance with the Blackstone
Agreement, for any claim arising from, related to or in
connection with the Financial Advising Services but not
for any claim arising from related to or in connection
with Blackstone's post-petition performance of any
services unless such post-petition services and
indemnification therefore are approved by the Court;
(c) notwithstanding any provision of the Blackstone
Agreement to the contrary, the Debtor shall have no
obligation to indemnify Blackstone or to provide
contribution or reimbursement to Blackstone, for any
claim or expense that is either:
(1) judicially determined (the determination having become
final) to have arisen solely from Blackstone's gross
negligence or willful misconduct, or
(2) settled prior to a judicial determination as to
Blackstone's gross negligence or willful misconduct
but determined by this Court, after notice and a
hearing, to be a claim or expense for which Blackstone
should not receive indemnity, contribution or
reimbursement under the terms of the Blackstone
Agreement; and
(d) if, before the earlier of:
(i) the entry of an order confirming a chapter 11 plan in
these cases (that order having become a final order
no longer subject to appeal), and
(ii) the entry of an order closing this chapter 11 case,
Blackstone believes that it is entitled to the payment of
any amounts by the Debtor on account of the Debtor's
indemnification, contribution and/or reimbursement
obligations under the Blackstone Agreement including
without limitation the advancement of defense costs,
Blackstone must file an application therefor in this
Court, and the Debtor may not pay any such amounts to
Blackstone before the entry of an order by this Court
approving payment. This subparagraph (d) is intended only
to specify the period of time under which the Court shall
have jurisdiction over any request for fees and expenses
by Blackstone for indemnification, contribution or
reimbursement and not to limit the duration of the
Debtor's obligation to indemnify Blackstone.
Arthur B. Newman, leading Blackstone's engagement, assures the
Court that:
(a) Blackstone is a "disinterested person" within the meaning
of section 101(14) of the Bankruptcy Code, and as required
by section 327(a) of the Bankruptcy Code, and holds no
interest adverse to the Debtor or its estate for the
matters for which Blackstone is to be employed; and
(b) Blackstone has no connection to the Debtor, its creditors
or its related parties except as disclosed in his
affidavit.
Mr. Newman further informs Judge Aug that Blackstone will
conduct an ongoing review of its files to ensure that no
conflicts or other disqualifying circumstances exist or arise.
"If any new facts or relationships are discovered, Blackstone
will supplement its disclosure to the Court," Mr. Newman swears.
(Chiquita Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
COLONIAL DOWNS: Sets Special Shareholders' Meeting for Jan. 10
--------------------------------------------------------------
A special meeting of shareholders of Colonial Holdings, Inc.
will be held at 1:00 p.m. on Thursday, January 10, 2002, at
Colonial Downs Racetrack, 10515 Colonial Downs Parkway, New
Kent, Virginia, for the following purposes:
1. To consider and vote upon a proposal to approve an
Agreement and Plan of Merger, dated June 11, 2001, as
amended November 16, 2001, among Colonial, Gameco, Inc.,
a Delaware corporation, Gameco Acquisition, Inc., a
Virginia corporation and wholly owned subsidiary of
Gameco, and Jeffrey P. Jacobs, the Chairman of the Board
of Directors, Chief Executive Officer and principal
shareholder of Colonial; *
2. In the event it becomes necessary, to consider and vote
upon a motion to adjourn the Special Meeting to another
time and/or place for the purpose of soliciting
additional proxies or allowing additional time for the
satisfaction of conditions to the Agreement and Plan of
Merger.
3. To transact such other business as may properly come
before the special meeting or any adjournment thereof.
Only shareholders of record at the close of business on
November 26, 2001 are entitled to notice of, and to vote at, the
special meeting.
* The merger agreement provides for the merger of Gameco
Acquisition with and into Colonial as a result of which Colonial
will become a privately held, wholly owned subsidiary of Gameco.
Gameco is privately owned by Jeffrey P. Jacobs and the Richard
E. Jacobs Revocable Trust, a trust controlled by Richard E.
Jacobs, father of Jeffrey P. Jacobs. Gameco may have publicly
registered debt securities at a future date but expects to be
privately owned for the forseeable future. Pursuant to the
merger agreement, each outstanding share of Colonial's common
stock (other than treasury stock and shares owned by any
subsidiary of Colonial, Gameco, Gameco Acquisition or CD
Entertainment, Ltd., an affiliate), will be canceled and
converted into the right to receive cash in the amount of $1.12
per share. The $1.12 per share price is $3.19 less than the per
share book value of $4.31 of Colonial as of September 30, 2001.
Pari-mutuel wagering on horse racing is the centerpiece of
Colonial Holdings' (formerly Colonial Downs) business, which
includes the operation of a thoroughbred and harness racetrack
in New Kent, Virginia -- the only pari-mutuel track in the
state. It also operates four off-track betting facilities in
Virginia and conducts wagering from all five locations on races
held at New Kent, as well as on simulcast races from other
tracks. Colonial Downs failed in an attempt to build a racetrack
in northern Virginia. As of June 30, 2001, the company's
balance sheet showed a working capital deficiency of over $5
million.
COMDISCO INC: Hearing On Wachtell's Success Fee Set for Tomorrow
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of Comdisco Inc.,
reminds the Court that Chaim Fortgang, Esq., and Richard Mason,
Esq., were the attorneys at Wachtell responsible for the
representation of the Committee. But now, William J. Barrett,
Esq., at Gardner, Carton & Douglas, in Chicago, Illinois,
informs Judge Barliant that Mr. Fortgang is no longer with the
Wachtell firm and presently practices as a sole practitioner.
However, Mr. Barrett says, the Committee still desires to
continue the services of Mr. Fortgang and conclude the services
of Wachtell effective upon the entry of a requested Amendment
Order. According to Mr. Barrett, Mr. Fortgang will file a
separate application seeking approval of his retention by the
Committee.
Mr. Barrett relates that the Committee and Wachtell agree that
the law firm shall be compensated for its services on an hourly
basis (plus expenses) for the period of July 26, 2001 through
the date of the Amendment Order. The Committee and Wachtell
also agree that any Monthly Payments made to Wachtell shall be
treated as a retainer against such fees and expenses, Mr.
Barrett adds.
Thus, the Committee asks Judge Barliant for an order amending
the Retention Order to provide that:
(i) Wachtell shall be retained as counsel for the Committee
for the period of July 26, 2001 through the date of entry
of the Amendment Order, inclusive,
(ii) subject to the submission of a final fee application,
Wachtell shall receive compensation for its services on a
time-incurred basis and shall receive reimbursement for
its expenses, and
(iii) any amount, including Monthly Payments, paid by the
Debtors to Wachtell prior to approval of Wachtell's final
fee application shall be held by Wachtell as a retainer
against its fees and expenses.
Previously, the Court set a hearing on Wachtell's success fee
for December 20, 2001. (Comdisco Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
COVAD COMMS: Taps Morris Nichols as Local Bankruptcy Counsel
------------------------------------------------------------
Covad Communications Group, Inc., desires to retain and employ
Morris Nichols Arsht & Tunnell as its attorneys in this Chapter
11 case effective November 12, 2001.
Debra Buhring, the Debtor's Vice president and Associate General
Counsel, contends that the relief requested is warranted by the
extraordinary circumstances presented by this case. The
complexity, intense activity and speed that have characterized
this case has necessitated that the Debtor and its
professionals, including Morris Nichols, focus their immediate
attention on time-sensitive matters. Ms. Buhring explains that
these matters required the Debtor and its professionals to
devote substantial resources to the representation of the Debtor
and to begin service as soon as possible. Further, given the
extremely short period that has elapsed, the Debtor believes
that no creditor or other party in interest will be prejudiced
by the nunc pro tunc approval of the Application.
Ms. Buhring relates that the Debtor selected Morris Nichols
because of the firm's extensive experience, knowledge and
resources in the fields of debtors' and creditors' rights and
business reorganizations under Chapter 11 of the Bankruptcy
Code, and because of Morris Nichols' expertise, experience, and
knowledge in practicing before this Court, its proximity to the
Court, and its ability to respond quickly to emergency hearings
and other matters in this Court. In addition, in connection with
its engagement by the Debtor, Morris Nichols has become familiar
with the Debtor's business and affairs and is accordingly, well
qualified to deal effectively with the potential legal issues
and problems that may arise in the context of this Chapter 11
case.
Ms. Buhring assures the Court that because of Pachulski and
Morris Nichols' respective well-defined roles as counsel to the
Debtor, they will not duplicate the services that they provide
to the Debtor. Subject to the Court's approval, Morris Nichols
will render professional services to the Debtor as necessary in
connection with this Chapter 11 case with respect to certain
matters as to which Pachulski may have a conflict, including
providing the Debtor with advice concerning its rights and
duties as debtor-in-possession, and preparing all necessary
documents, motions, applications, answers, orders, reports and
papers in connection with those matters on behalf of the Debtor.
William H. Suddell, Jr., Esq., a partner at the firm Morris
Nichols Arsht & Tunnell, informs the Court that the Firm will
charge the Debtor its customary hourly rates in effect, plus
reimbursement of actual, necessary expenses incurred on the
Debtor's behalf. The following are Morris Nichols' customary
hourly rates for work of this nature:
Partners $310 to $450
Associates $160 to $290
Paraprofessionals $110 to $145
File Clerks $70
During the twelve months prior to the Petition Date, Mr. Suddell
informs the Court that Morris Nichols received approximately
$5,049 from the Debtor for legal services rendered and expenses
incurred representing the Debtor.
Mr. Suddell contends that none of Morris Nichols' partners,
counsel or associates hold or represent any interest adverse to
the Debtor's estates, and is Nichols is a disinterested person
in these cases. The firm, however, discloses that General
Electric Capital Corporation is a current client of the firm in
unrelated matters. While Morris Nichols has undertaken, and
continues to undertake, efforts to identify connections with the
Debtor and other parties in interest, Mr. Suddell believes that
it is possible that connections with some parties in interest
have not yet been identified. Should Morris Nichols, through its
continuing efforts or as this case progresses, learn of any new
connections of the nature described above, Morris Nichols will
so advise the Court. (Covad Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
DANKA BUSINESS: Appoints CEO P. Lang Lowrey Chairman of Board
-------------------------------------------------------------
Danka Business Systems PLC (Nasdaq:DANKY) announced that P. Lang
Lowrey, Chief Executive Officer, will also assume the role of
Chairman of Danka's Board of Directors effective January 13,
2002. Michael B. Gifford, the current Chairman, will remain as a
Director of Danka following January 13, 2002.
Although a London based PLC, Danka's combination of the role of
Chairman and Chief Executive Officer follows common practice in
the United States and will provide Danka with a senior
management structure that is more familiar to, and more easily
understood by, Danka's predominantly U.S. security holders,
financiers, trading partners and customers.
Lowrey commented: "I would like to thank Michael Gifford for his
many recent contributions to Danka, both as interim Chief
Executive Officer and Chairman. He stepped in at a very
difficult time for the Company and was instrumental in leading
Danka up to its recent financial restructuring. I am proud that
he, and the rest of the Board, have given me their vote of
confidence to serve as Chairman."
Danka also announced the appointment of Dr. Kevin C. Daly to its
Board of Directors also effective January 13, 2002. Daly is
currently the Chief Technical Officer for the Storage Solutions
Group of Quantum Corporation. Daly had been President and Chief
Executive Officer of ATL Products from its formation in 1991 to
its recent integration into the Quantum Corporation. The company
is a leading supplier of data protection systems for computer
networks and serves more than one-half of today's Fortune 500
Companies. Prior to forming ATL, Daly was the Chief Technical
Officer at Odetics, Inc. of Anaheim, CA. He has also held
positions with Charles Stark Draper Laboratory in Cambridge, MA,
and as an Adjunct Professor at MIT.
Lowrey added, "Danka has taken a major step forward with the
appointment of Kevin Daly to its Board of Directors. Kevin's
capabilities, experience and intellect will be critical to
Danka's growth initiatives. His technological background and
systems knowledge will significantly enhance Danka's goal of
being more than a seller and supplier of office imaging
equipment products, but a provider of document solutions and new
technologies to its clients. We are thrilled about Kevin's
decision to join the Board."
Danka Business Systems, PLC, headquartered in London, England,
and St. Petersburg, Florida, is one of the world's largest
providers of office imaging solutions, related services and
supplies. Danka provides office products and services in
approximately 30 countries around the world. For additional
information about copier, printer and other office imaging
products from Danka, visit our web site at: http://www.danka.com
or call 1-800-OK-DANKA (800-653-2652).
ENRON: Wants Leboeuf to Continue Services as Special Counsel
------------------------------------------------------------
Prior to Petition Date, LeBoeuf, Lamb, Greene & MacRae, LLP,
represented and advised Enron Corporation, and its debtor-
affiliates on matters such as asset sales and acquisitions,
federal and state regulatory matters, general business and
transactional matters, as well as other miscellaneous retentions
including representation of the Debtors as creditors in
bankruptcy cases of Pacific Gas & Electric Company and the
California Power Exchange.
The Debtors want LeBoeuf to continue these services during the
pendency of these chapter 11 cases. Thus, the Debtors seek the
Court's approval of LeBoeuf's retention as their special
counsel.
John G. Klauberg, a partner of LeBoeuf, Lamb, Greene & MacRae,
LLP, assures Judge Gonzalez that the firm does not have any
connection with, or interest adverse to, the Debtors, their
creditors, the United States Trustee or any of its employees, or
any other parties-in-interest, except as disclosed with the
Court. The firm promises to file additional disclosure as
necessary, Mr. Klauberg says.
Jeffrey McMahon, Executive Vice President and Chief Financial
Officer for Enron Corporation asserts that LeBoeuf's retention
must be approved. Otherwise, Mr. McMahon says, the Debtors will
be unduly prejudiced by the time and expense necessary to engage
and familiarize another firm with the intricacies of the
Debtors' business operations.
According to Mr. McMahon, the Debtors will compensate LeBoeuf
for its serves at the firm's regular hourly rates for legal and
non-legal personnel. The Debtors will also reimburse LeBoeuf
for all reasonable and necessary expenses pursuant to the
provisions of section 330 and 331 of the Bankruptcy Code, Mr.
McMahon adds.
The firm's customary hourly rates for the attorneys with primary
responsibility for this retention are: $385 to $650 for
partners, and $200 to $425 for associates and counsels.
Satisfied that LeBoeuf holds no interest adverse to the Debtors,
Judge Alvarez grants the Debtors' application on an interim
basis. The Court will convene the Final Hearing on January 7,
2002 at 2:00 p.m. to consider the entry of a Final Order on the
Debtors' request. (Enron Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ETHYL CORP: Considers Selling 1.06M Enchira Shares Over Time
------------------------------------------------------------
Ethyl Corporation now holds 1,064,742 shares of the common stock
of Enchira Biotechnology Corporation (formerly known as Energy
BioSystems Corporation) owned by Ethyl Corporation. Ethyl has
reported the holding to the SEC due to the distribution of
common stock of Enchira Biotechnology to Ethyl Ventures, Inc., a
wholly-owned subsidiary of Ethyl and the sole limited partner of
Gryphon Ventures II, Limited Partnership, in connection with the
dissolution of Gryphon Ventures. Ethyl has not changed its
intention to divest the common stock as a result of Enchira's
change in the focus of its business. Ethyl has sole voting and
dispositive powers over the stock, which amount represents 11.7%
of the outstanding common stock of Enchira Biotechnology. Ethyl
Corporation is in the petroleum additives business and produces
fuel additives and lubricant additives.
The common stock was acquired by Ethyl for investment purposes.
Ethyl has changed its investment intent with respect to the
common stock as a result of Enchira's change in the focus of its
business. In connection therewith, on September 28, 2001, Ethyl
converted its 160,000 shares of Series B Convertible Preferred
Stock of Enchira into 477,328 shares of common stock. In
connection with this conversion, Enchira paid to Ethyl cash for
the dividends accumulated from November 1998 to the date of
conversion. Ethyl intends to dispose of its shares of common
stock over time in an orderly manner.
Ethyl Corporation has undergone a debt reduction program through
the sale of its assets. In July, Standard & Poor's ratcheted its
corporate credit rating down to 'double-B-minus'.
EXODUS COMMS: Seeks Approval of Settlement Pact with marchFIRST
---------------------------------------------------------------
Andrew Maxwell, the Trustee overseeing the liquidation of the
chapter 7 cases involving marchFIRST, Inc., asks the U.S.
Bankruptcy Court for the Northern District of Illinois to enter
an order resolving any and all administrative claims of Exodus
Communications, Inc. and certain remaining matters with
divine/Whittman-Hart, inc. (DWH) under the HostOne Business
Preservation Agreement dated as of June 27, 2001.
John J. Vorhees, Jr., an attorney for the Chapter 7 Trustee,
relates that the Debtors were provider of certain pre-petition
and post-petition services to DWH pursuant to multiple
agreements relating to, or which were entered into in connection
with the existing or contemplated business of HostOne, including
but not limited to master services agreements dated February 5,
1998 and September 26, 2000, service orders and other
agreements. Upon approval of the sale of the Debtors' HostOne
operations to DWH, the Debtors and DWH entered into the HostOne
Business Preservation Agreement, under which the Debtors sought
and obtained an extension of time to assume or reject the 1998
Agreement and DWH agreed to pay for the services utilized under
that agreement. The 2000 Agreement was rejected in June 2001 by
operation of law 60 days after the conversion of DWH's Cases to
Chapter 7.
On October 10, 2001, Mr. Vorhees states that Exodus filed a
motion in DWH's Cases requesting payment of an administrative
claim in the amount of approximately $2,300,000 and also filed a
proof of claim requesting payment of the same amount on an
administrative basis. Since the consummation of the sale of the
HostOne business, DWH, Exodus and the Trustee have negotiated
the resolution of the post-petition amounts owed to Exodus.
The Settlement Agreement would resolve Exodus' claims and the
status of the 1998 Agreement with these stipulations:
A. Any and all of Exodus' administrative priority claims,
including, but not limited to, those based on the Exodus
Agreements, would be released in their entirety.
B. The 1998 Agreement would be rejected effective November 1,
2001.
C. DWH would pay the Debtor $8,121.04 which is the 5% premium
over out-of-pocket operating costs that DWH agreed to pay
to the Debtor pursuant to the HostOne Business Preservation
Agreement for the period subsequent to the consummation of
the sale of the HostOne assets to DWH.
D. The Settlement Agreement does not resolve the pre-petition
claim asserted against the Debtor by Exodus and the Trustee
and Exodus reserve all of their rights, claims and defenses
with respect to such claim.
Under the Settlement Agreement, Exodus, the Trustee and their
officers, directors, employees, agents, shareholders, successors
and assigns, effective upon DWH's payment of the amounts
provided for under the agreement would also:
A. forever release, waive and discharge all claims against DWH
and its past, present and future affiliates, parents and
subsidiaries and each of its past, present and future
officers, directors, employees, agents, shareholders,
successors and assigns related to claims under or related
to the Exodus Agreements and the HostOne Business
Preservation Agreement; and
B. forever release, waive and discharge all claims against
Exodus and its past, present and future affiliates, parents
and subsidiaries and each of its past, present and future
officers, directors, employees, agents, shareholders,
successors and assigns under or related to the Exodus
Agreements and the HostOne Business Preservation Agreement,
related to the period from and after April 16, 2001.
Mr. Vorhees contends that the Settlement Agreement is well
within the range of reasonableness and is in the best interest
of the Debtor's estates. Specifically, if the Court grants the
Trustee's Motion, the administrative priority claim in the
amount of approximately $2,300,000 that has been asserted by
Exodus will be eliminated in its entirety strengthening the
prospect that a distribution will be made in the DWH's case to
general unsecured creditors. Mr. Vorhees adds that the
rejection of the 1998 Agreement should also be approved as part
of the Settlement Agreement as it is no longer needed to ensure
the consummation of the sale of the HostOne assets to DWH and
Exodus, the counterparty to the 1998 Agreement, agrees to its
rejection effective as of November 1, 2001. (Exodus Bankruptcy
News, Issue No. 10; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
FEDERAL-MOGUL: Schedules & Statements Might Appear on Dec. 20
-------------------------------------------------------------
As previously reported, Federal-Mogul Corporation, and its
debtor-affiliates ask the Bankruptcy Court to extend the time
within which they must file their Schedules of Assets and
Statements of Financial Affairs through December 20, 2001.
Judge Farnan scheduled a hearing on this Motion for Dec. 7, but
that hearing was cancelled after the Debtors' cases were
transferred to Judge Wolin. With the chapter 11 cases now
before Judge Newsome, a new hearing date will be set.
By application of Local Bankruptcy Rule 9006-2, because the
Debtors' motion to extend the deadline was filed before the
original expiration date, the deadline is automatically extended
until the Court acts on the motion. (Federal-Mogul Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
FLEETWOOD ENTERPRISES: Raises $150MM from Securities Offering
-------------------------------------------------------------
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 raised
$150 million following the closing of its previously announced
offering of new convertible trust preferred securities. The
pending exchange offer of a separate class of convertible trust
preferred securities for up to $86.25 million liquidation amount
of existing convertible trust preferred securities is still
scheduled to terminate on January 4, 2002.
The convertible trust preferred securities sold Friday in the
cash offer will have a distribution rate of 9.5 percent per year
and will be convertible into Fleetwood Common stock at a
conversion premium of 15 percent over Tuesday's closing stock
price of $9.01 a share (resulting in a conversion price of
$10.36 per share).
"We were pleased to be able to close the cash offering less than
two weeks after we commenced it, in an amount three times
greater than the originally announced deal size, and on terms
more favorable to Fleetwood," said Nelson W. Potter, president
and chief executive officer. "Completing this offering improves
our liquidity and operational flexibility."
In accordance with the Company's agreement with its senior
secured lenders, up to $62 million of the convertible trust
preferred securities will be used to pay down outstanding
borrowings under the Company's revolver and term loan. The
balance of the proceeds, after allowing for expenses of the
offerings and taxes expected to be incurred in the exchange
offer, will be used for general corporate purposes.
GULFMARK OFFSHORE: S&P Puts Credit and Debt Ratings at BB-
----------------------------------------------------------
Standard & Poor's affirmed its double-'B'-minus corporate credit
and senior unsecured debt ratings on GulfMark Offshore Inc. and
removed them from CreditWatch where they were placed with
negative implications on May 31, 2001.
The outlook is negative.
Ratings reflect GulfMark's niche position in the volatile and
cyclical offshore support vessel industry, high debt leverage,
and an aggressive growth strategy. The speculative nature of
GulfMark's new-build program (two of four vessels scheduled for
delivery in 2002 and four vessels in 2003--all having no
charters and a lack of contract coverage beyond 2002) raises
concern about future revenue visibility and adequate liquidity
in 2003 when it must pay construction costs for the final four
vessels.
GulfMark faces very volatile rates for its vessels, which cause
substantial variance in operating profits and cash flow.
Although the recent recovery in rates will help generate
estimated EBITDA of more than $50 million for 2001, in a down
year this may be 25% to 35% lower. In its main North Sea market,
average day-rates for the nine months ended Sept. 30 ranged from
$8,992 in 2000 to $10,417 in 2001. Utilization rates in the
North Sea region for the same time period were 89.3% for 2000
and 97% for 2001. GulfMark's niche position in the deep water
and harsh environment markets provides some stability in vessel
utilization, opportunities for long-term charters, and presents
barriers to entry from less technologically advanced and less
expensive vessels.
Debt leverage, in the mid-50% area through 2002, remains
aggressive, and deleveraging will largely depend on
noncontracted revenue for improvement. Funds from operations to
total debt is estimated to be in the mid-20% area for 2001 and
2002. However, in a down cycle, this could drop to less than
20%. Obtaining favorable rates on new charters will be critical
to maintaining adequate liquidity during the coming period of
high capital outlays. Although current financial resources are
sufficient through 2002, liquidity could be thin in 2003 if
industry conditions worsen considerably and the company does not
take steps to augment its capital resources.
Outlook: Negative
The negative outlook reflects the lack of contract coverage
beyond 2002, historical volatility of day rates, and the future
demands of the new-build program. High contract coverage through
2002 (67% overall and 85% in the North Sea) gives some
confidence in GulfMark's ability to meet the costs of its new-
build program in 2002. Nevertheless, a lack of contract coverage
through 2003 raises concerns that falling day rates coupled with
the costs of the new-build program could weaken credit quality.
HAYES LEMMERZ: Will Be Paying Prepetition Shipping Charges
----------------------------------------------------------
Hayes Lemmerz International, Inc., and its debtor-affiliates
sought and obtained authority to pay pre-petition shipping and
import expenses, including customs duties, general order
penalties, ocean freight, air freight, trucking charges,
brokerage fees, detention and demurrage fees, surety bond
premiums, amounts owed to Paying Agents consolidation and
deconsolidation charges, as the Debtors determine may be
necessary or appropriate to obtain goods in transit and to
satisfy the liens, if any, in respect thereof. The Court also
authorizes the Debtors to pay certain warehousing charges
relating to warehouses supporting their distribution system. The
Debtors estimate that their payments for pre-petition Shipping
Claims, Import Obligations and Warehousing Obligations will not
exceed approximately $1,600,000.
The Court also orders that all banks and other financial
institutions, on which checks with respect to Shipping Claims
and Warehousing Obligations that have been or may be drawn, be
authorized to receive, process, honor, and pay any and all such
checks, whether presented prior to or after the Petition Date,
upon the receipt by each such bank of notice of such
authorization. Finally, the Court directs that any payment made
to a third party on account of the pre-petition claims be
subject to disgorgement in the event that such third party does
not continue to provide services to the Debtors during the
pendency of these cases on the same terms as existed prior to
the Petition Date.
The main categories of shipping charges and import expenses
ordered to be paid are:
A. Imported Goods - Debtors purchase goods, materials, products,
supplies, and related items from outside the country where
Debtor has its primary operations, often at prices
significantly lower than the cost of comparable domestic
goods. As of Petition Date, the Debtors have already become
indirectly obligated to pay for certain Imported Goods not
yet received, because such goods were either overseas, in
transit, or awaiting U.S. Customs clearance. Payment of the
Import Obligations is necessary to obtain possession of the
Imported Goods, without which, Debtors' customs brokers and
the Customs Service may assert a lien against such goods.
Payment of the Import Obligations will benefit the Debtors'
estates because:
a. the Debtors' manufacturing operations might otherwise be
interrupted,
b. the eventual sale of the products so imported will
generate substantial gross income,
c. forfeiture of goods for which the Debtors have already
become indirectly obligated will be avoided, and
d. important customer goodwill, based upon the availability
of advertised products, will be protected.
B. Shipping And Distribution - Debtors incur certain fees and
charges to commercial common carriers and independent
regional distributors to ship, transport, store, and
deliver goods, materials, products, supplies, and related
items. The Debtors seek to pay the pre-petition Shipping
Claims for these reasons:
a. Many independent Shippers and Distributors may refuse to
perform additional services for the Debtors, who will
have to incur additional expenses to replace these
Shippers and Distributors, which amounts will likely
exceed the amount of unpaid pre-petition Shipping
Claims that the Debtors request to pay.
b. Any delays in delivery with respect to goods that may be
in the possession of Shippers, Warehousemen, Customs
Brokers, and/or Distributors as of the commencement of
these cases will likely result in the assertion of
possessory liens upon the Debtors' property and could
disrupt the Debtors' inventory distribution network to
the detriment of the Debtors' operations.
c. Failure of the Debtors to receive some of the goods can
cause temporary shutdowns of the Debtors'
manufacturing facilities, which could have global
ramifications for the automotive industry.
C. Paying Agent Fees - Debtors utilize third party paying
agents, to pay the majority of the Debtors' shipping charges
who collect invoices in connection with various Shipping
Claims, reconcile such invoices against the Debtors'
records and then periodically bill the Debtors for amounts
owed to the Shippers. Once payment from the Debtors is
received, the paying Agents cut checks on the Debtors'
behalf in payment of such Shipping Claims.
D. Warehousing Obligations - Debtors' operations utilize several
third-party warehouses, which store and distribute raw
materials and other products. The third-party operators and
owners of the warehouses may place liens on the goods in
their possession to secure the expenses incurred in
connection with the storage of the goods. Storage fees
owing to the third-party operators and owners of the
warehouses average approximately $70,100 per month.
Mark S. Chehi, Esq., at Skadden Arps Slate Meagher & Flom LLP in
Wilmington, Delaware, submits that paying the Shipping Claims
and Warehousing Obligations is critical to maintaining the value
of the Debtors' business as Debtors' ability to sustain their
current operations and reorganize their business depends upon
the maintenance of their distribution network and providing
appropriate levels of service and a steady supply of goods to
their customers. The Debtors believe that the order will ensure
the continuous supply of Goods that are vital to the Debtors'
continuous operations and integral to their successful
reorganization. Absent the order of the Court, Mr. Chehi points
out that the Debtors would be required to expend substantial
time and resources convincing Shippers, Distributors, and
parties holding goods that they should not assert a lien on or
hold goods in transit. The disruption to the continuous flow of
goods to the Debtors would likely result in a shortage of goods
used by the Debtors in their operations.
The Court also authorizes the implementation of a procedure
whereby any third party who accepts a payment pursuant to the
order granting this Motion will be deemed to have accepted the
terms of such order. By accepting payment pursuant to the order,
Mr. Chehi explains that the applicable party agrees to continue
to provide post-petition services to the Debtors on ordinary and
customary trade terms as in effect prior to the Petition Date.
If any third party accepts payment and subsequently fails or
refuses to continue to provide goods and/or services on
Customary Terms during the pendency of these cases:
A. any payment received on account of a pre-petition Shipping
Claim will be deemed to be a post-petition transfer and,
accordingly, recoverable by the Debtors in cash upon
written request, and
B. upon recovery by the Debtors, any such pre-petition Shipping
Claim will be reinstated as if the payment had not been
made. (Hayes Lemmerz Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
HENRY CO: S&P Affirms Junks Ratings, Keeping Negative Outlook
-------------------------------------------------------------
Standard & Poor's affirmed its ratings on Henry Co., and removed
the ratings from CreditWatch. The current outlook is negative.
The actions reflect the company's securing of new credit
facilities, the absence of near-term debt maturities, and
moderating petroleum-based raw material costs.
Henry Co.'s credit quality also incorporates its leading
position in products for roofing, sealing and driveway
applications, offset by a modest revenue base (under $200
million annually), a narrow product offering, depressed
operating margins, weak cash flow protection measures, and very
aggressive debt leverage.
Support for Henry's business position is provided by well-
established brand names, manufacturing capabilities across North
America, and sales through multiple distribution channels.
Roofing products are sold mostly under the Henry brand name,
where its primary focus is the western U.S., and Monsey,
with its strongest markets in the eastern U.S. and Canada.
However, results are seasonal and dependent on weather
conditions, because many of Henry's products are used to fix
damaged roofs. As a consequence, sales of roofing products tend
to increase in areas that have experienced severe weather. The
industry is mature and highly competitive, and earnings are also
sensitive to the variable costs of key raw materials based on
petrochemicals. The impact of weaker economic periods is
tempered by the major percentage of sales directed to the repair
of existing commercial roof structures.
After experiencing substantial deterioration in 2000 because of
higher asphalt costs, operating income appears to be on the
mend. Lower asphalt costs, modest selling price increases and an
improved cost structure are aiding the financial progress.
However, near-term sales prospects are lackluster, and operating
margins remain very low in the area of 4%.
The combination of Henry and Monsey Products Inc. in 1998 has
provided some operating and market synergies. However, sales
growth has been well below expectations, in part reflecting
limited success in the penetration of the Henry brand name in
certain major home center retailers in the eastern U.S.
Consequently, the debt load incurred to fund the Monsey
acquisition continues to severely penalize credit quality ratios
and limit financial flexibility. Total debt to EBITDA remains
very aggressive at roughly 13 times, and EBITDA interest
coverage remains under 1x. The modest-size financial base makes
these credit ratios vulnerable to swings.
Capital expenditures are at much reduced levels, aiding
discretionary cash flows. The company appears to have the
necessary availability under its bank credit facilities, and
there are no meaningful debt maturities during the next several
years.
Outlook: Negative
The company appears to have little capability over the
intermediate term to reduce its huge debt load and thus
strengthen fragile credit quality. Moreover, its vulnerability
to seasonal weather conditions remains a concern. The ratings
could be lowered without an improvement in cash flow protection
and debt leverage measures.
Ratings Affirmed and Removed from CreditWatch
Henry Co. Ratings
Corporate credit rating CCC+
Senior secured bank loan rating CCC+
Senior unsecured debt CCC
HUGHES ELECTRONICS: S&P Hatchets Ratings Down to Low-B Level
------------------------------------------------------------
Standard & Poor's lowered its ratings on Hughes Electronics
Corp., and Hughes' 81%-owned subsidiary PanAmSat Corp. These
ratings remain on CreditWatch with negative implications.
In addition, Standard & Poor's ratings on EchoStar
Communications Corp., and its subsidiary Echostar DBS Corp., and
its corporate credit rating on EchoStar Broadband Corp. (an
intermediate holding company), remain on CreditWatch with
developing implications. EchoStar has a definitive agreement to
merge with Hughes Electronics in a transaction valued at about
$26 billion.
Standard & Poor's single-'B' rating on EchoStar Broadband
Corp.'s senior unsecured notes remains on CreditWatch, but the
implications have been revised to positive from developing. The
positive CreditWatch listing reflects Standard & Poor's
expectation that the combined debt of EchoStar DBS and its
immediate parent, Echostar Broadband, will achieve a debt to
operating cash flow level of 8 times in the near term. According
to transaction terms, this would require Echostar DBS to
exchange the Echostar Broadband 10 3/8% senior notes for a new
class of notes issued by Echostar DBS, thereby eliminating any
structural subordination.
The downgrade of PanAmSat reflects the fact that its ratings
would be constrained by the ratings on EchoStar, which will
control PanAmSat, despite PanAmSat's stronger business and
financial profile. Under any of the scenarios that could
transpire, the corporate credit rating on EchoStar would not be
higher than double-'B'-minus.
The downgrade of Hughes is based on Standard & Poor's
determination that the stand-alone company would not be
investment grade if the transaction is not approved. Under this
scenario, EchoStar would be required to purchase PanAmSat for
$2.7 billion, assume its debt, and pay a $600 million break-up
fee to Hughes. Hughes would also receive an additional $1.7
billion of cash from the expected refinancing of an intercompany
loan to PanAmSat. Although this cash infusion would
significantly strengthen Hughes' balance sheet, the company
still has significant capital spending requirements and needs to
demonstrate a consistent and profitable operating track record.
Upside rating potential exists for EchoStar if the company
finances the Hughes transaction with a large equity component.
Downside rating risk exists given the integration challenges and
heavy debt leverage that EchoStar faces. However, the most
likely corporate credit rating for EchoStar will be single-'B'-
plus.
The emergence of another bidder has not been explicitly factored
into the current rating actions. Standard & Poor's will discuss
the transaction details with the respective management teams and
monitor the progress of the transaction as it proceeds through
the regulatory and financing process.
Ratings Lowered and Remaining on CreditWatch Negative
Hughes Electronics Corp. TO FROM
Corporate credit rating BB+/B BBB-/A-3
Commercial paper B A-3
PanAmSat Corp.
Corporate credit rating BB-/B BBB-/A-3
Senior unsecured debt BB- BBB-
Commercial paper B A-3
Ratings Remaining on CreditWatch Developing
EchoStar Communications Corp. RATING
Corporate credit rating B+
Subordinated debt B-
Echostar DBS Corp.
Corporate credit rating B+
Senior unsecured debt B+
EchoStar Broadband Corp.
Corporate credit rating B+
Rating Placed on CreditWatch Positive
EchoStar Broadband Corp.
Senior unsecured debt B
DebtTraders reports that Echostar DBS Corp.'s 10.375% bond due
2007 (ECHOST2) trades slightly above par, between 106 and 107.
See http://www.debttraders.com/price.cfm?dt_sec_ticker=ECHOST2
for real-time bond pricing.
INTEGRATED HEALTH: Selling Real Property in Maryland for $1.5MM+
----------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates seek
to sell approximately 24.5 acres of unimproved land owned by
Debtor IHS Land Acquisition - Highlands Park, Inc., (Seller) in
Baltimore County, Maryland. Prior to the Petition Date, the
Seller acquired the Property which is proximate to the Debtors'
office headquarters. Now, the Debtors no longer require the
Property and believe the Property to be of significant value to
third parties.
The Seller and Highlands Park LLC (HPLLC) have entered into the
Agreement, pursuant to which HPLLC agreed to purchase the
Property at a purchase price of $1,500,000, subject to higher
and better offers and the approval of the Court. If the Property
is sold to HPLLC for the Purchase Price of $1,500,000, the
Seller expects to receive net sales proceeds of $1,440,000 after
paying the real estate Commissions earned by the real estate
broker, TriAlliance Commercial Real Estate Services, LLC in the
amount of four percent thereof (i.e., $60,000).
The Agreement provides for a downpayment by HPLLC in the amount
of $150,000 which will be returned if HPLLC is not the
successful bidder at the Auction.
By separate motion, the Debtors seek the Court's approval for
establishing bidding procedures and a $50,000 breakup fee and
scheduling the Auction for the sale of the Property for February
6, 2002 at 12:00 noon (EST).
At the Sale Hearing on February 7, 2002, at 11:30 a.m., the
Debtors will request that the Court enter the Sale Order:
(a) approving the Agreement, modified as necessary to reflect
the contents of the winning bid;
(b) authorizing the sale of the Property free and clear of the
Excluded Liens pursuant to the terms of the Agreement, and
(c) approving the results of the Auction if one is conducted;
(d) designating the successful bidder as the Purchaser of the
Property under the Agreement.
(e) requiring, in the event that the successful bidder is
someone other than HPLLC, that the successful bidder shall
be deemed to have assumed and will be bound by the terms of
the Agreement as modified;
(f) requiring that the Closing Date occur on the 12th business
day after the date upon which Sale Order is entered, time
being of the essence, or such earlier date to which the
parties may agree;
(g) finding that the successful bidder, as a good-faith
purchaser, is entitled to the protection set forth in
Section 363(m) of the Bankruptcy Code, and that the sale to
the successful bidder of the Property shall be free and
clear of all claims, liens, encumbrances and other interests
(except for the Restated Declaration (as defined in the
Agreement) and the "Excluded Liens"), pursuant to Sections
363 (b) and (f) of the Bankruptcy Code;
(h) stating that HPLLC or successful bidder, as the case may be,
is entitled to the benefits of Section 1146(c) of the
Bankruptcy Code with respect to any transfer taxes,
recordation taxes or documentary stamp taxes payable in
connection with the transfer of the Property by the Seller.
Given the recent developments in the Baltimore County area where
the Property is located, the Debtors believe that they will
receive the most value if they sell the Property at this time.
The Debtors submit that the formation of the Agreement is the
culmination of extensive marketing effort undertaken by the
Seller and the broker, and the implementation of the proposed
Bidding Procedures, if approved, reflect a reasonable and
diligent attempt to obtain the highest and best available offer
for the Property.
The Debtors believe that the proposed sale will maximize the
value of the Property for the benefit of the Debtors' estates
and their creditors, and sound business reasons exist to sell
the Property and enter into the Agreement.
Excluded Liens
The Debtors seek approval for the Property to be sold, conveyed,
transferred and delivered to HPLLC or the successful bidder at
the Auction, free and clear of all Excluded Liens, pursuant to
section 363(f) of the Bankruptcy Code, with any and all Excluded
Liens, if any, being deemed transferred to and attached to the
net proceeds of such sale with the same force, effect and
asserted priority as such Excluded Liens had against the
Property. The "Excluded Liens" which the Sale will be free and
clear of, do not cover interests and encumbrances of the
Restated Declaration or any exceptions to title or encumbrances
as set forth in Exhibit B to the Agreement. The Property will
remain subject to such interests and encumbrances of the
Restated Declaration and subject to exceptions as set forth in
Exhibit B.
The Restated Declaration refers to the Amended and Restated
Declaration of Protective Covenants dated November 9, 2000 made
by and between Integrated Health Services at Highlands Park,
Inc., Seller and Eric J. Donaghey, as Trustee under a
Declaration of Trust dated as of July 31, 1997, made by State
Street Bank and Trust Company of Connecticut, National
Association and Hico Park Limited Partnership. Exhibit B
provides that the Purchaser will take title to the Premises
subject to, among other things, the Restated Declaration which
is intended to be fully executed and recorded in the land
Records of Baltimore County ... and which shall be deemed prior
in lien to the Deed. Exhibit B also states, among other things,
that the transfer of title is subject to covenants,
restrictions, reservations, easements and agreements of
record in addition to those specifically set forth in Exhibit B
provided that this does not prohibit the development and use of
the Premises to the full extent as may otherwise be permitted
pursuant to the Restated Declaration.
Exemption From Transfer Taxes
Section 1146(c) of the Bankruptcy Code provides that: [t]he
issuance, transfer, or exchange of a security, or the making or
delivery of an instrument of transfer under a plan confirmed
under section 1129 of [the Bankruptcy Code], may not be taxed
under any law imposing a stamp or similar tax. It is well
settled that a transfer which is "necessary to consummation of a
plan" is a transfer made under a plan within the meaning of
section 1146(c) of the Bankruptcy Code.
The Debtors submit that consummation of a sale of the Property
to the successful bidder at the Auction is clearly essential to
the preparation and consummation of a chapter 11 plan in the
Debtors' cases. It is anticipated that the proceeds ultimately
will be used to maximize the value of the estates as working
capital and/or to be distributed to creditors under a plan.
Given these circumstances, the Debtors submit that the sale of
the Property to the Purchaser (whether HPLLC or another
successful bidder) is "under a plan" within the meaning of
section 1146(c) of the Bankruptcy Code. (Integrated Health
Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
JFK ACQUISITION: Asks Court for More Time to Complete Schedules
---------------------------------------------------------------
J.F.K. Acquisition Group will not be able to file a complete set
of Schedules on or before December 26, 2001, as required by the
U.S. Bankruptcy Code. The Debtor filed an emergency chapter 11
petition after failing to reach a settlement with its union and
its secured creditor. The Debtor is in the process of
completing its Schedules of Assets and Liabilities and Statement
of Financial Affairs. In addition, the Debtor is attempting to
work out an agreement with respect to the use of cash collateral
with the mortgagee of the Hotel. At this point, the Debtor say
that a three-week extension through January 18, 2002, will
afford them ample time to finish the Schedules.
J.F.K. Acquisition Group filed for chapter 11 protection on
December 10, 2001 in the U.S. Bankruptcy Court for the Southern
District of New York. Cott S. Markowitz, Esq. at Todtman,
Nachamie, Spizz & Johns, P.C. represents the Debtor in their
restructuring effort. When the Company filed for protection from
its creditors, it listed an estimated assets of $10 million to
$50 million and estimated debts of $10 million to $50 million.
KELLSTROM INDUSTRIES: Misses Interest Payment on 5-1/2% Notes
-------------------------------------------------------------
Kellstrom Industries, Inc. (Nasdaq:KELLE) announced that it did
not make the December 15, 2001 interest payment due on its
outstanding 5-1/2% Convertible Subordinated Notes due June 15,
2003.
Kellstrom's Senior Lenders are continuing to fund the Company's
operations on an interim basis and the Company is working on
more permanent financing arrangements. If the Company is unable
to secure permanent financing, the Company would be forced to
adopt an alternative strategy that may include actions such as
restructuring its indebtedness, seeking additional capital,
selling assets or seeking protection under the bankruptcy laws.
Kellstrom has also announced that it expects its common stock
will be delisted from The Nasdaq National Market effective close
of business on December 18, 2001. As previously reported,
Kellstrom received a Nasdaq Staff Determination on November 19,
2001 that its common stock was subject to delisting from The
Nasdaq National Market for failure to meet certain Nasdaq
listing requirements. Kellstrom has elected not to appeal the
Nasdaq Staff Determination of delisting as it has determined
that it cannot meet such listing requirements at this time.
Kellstrom's common stock will trade on the Pink Sheets, a
quotation service that collects and redistributes market maker
quotes in over-the-counter securities.
Kellstrom is a leading aviation inventory management company.
Its principal business is the purchasing, overhauling (through
subcontractors), reselling and leasing of aircraft parts,
aircraft engines and engine parts. Headquartered in Miramar, FL,
Kellstrom specializes in providing: engines and engine parts for
large turbo fan engines manufactured by CFM International,
General Electric, Pratt & Whitney and Rolls Royce; aircraft
parts and turbojet engines and engine parts for large transport
aircraft and helicopters; and aircraft components including
flight data recorders, electrical and mechanical equipment and
radar and navigation equipment.
LTV CORP: Colin Blaydon & Vincent Sarni Steps Down From Board
-------------------------------------------------------------
The Board of Directors of The LTV Corporation (OTC Bulletin
Board: LTVCQ) accepted the resignations of directors Colin
Blaydon and Vincent Sarni. In other actions, the Board advised
persons trading its common stock that the Corporation believes
its shares are worthless. LTV common stock is posted on the
Over-the-Counter Bulletin Board (LTVCQ). The Company does not
expect that common shareholders will receive any value through
the implementation of the bankruptcy court-approved Asset
Protection Plan or through a Plan of Reorganization under
chapter 11 of the U.S. Bankruptcy Code.
"We are concerned that there is speculation in LTV common stock
in the Over-the-Counter market. We do not understand the
continued purchase of these shares as there is no set of
circumstances, in our opinion, in which common shareholders will
receive any value through the bankruptcy proceedings," said
Glenn J. Moran, chairman and chief executive officer.
The Company also said that it did not expect sufficient value to
be generated by the sale of assets to provide a recovery for
common shareholders. It noted that this fact was recognized when
the U.S. Trustee disbanded the LTV Equity Committee on November
28, 2001.
LTV said that it had requested from the Securities and Exchange
Commission relief from financial reporting requirements of
Section 13(a) of the Securities Exchange Act of 1934, as related
to the Company's intention to cease filing of Annual Reports on
Form 1OK and Quarterly reports on Form 10Q. The Company also
communicated its desire to terminate the registration of its
securities under the Exchange Act.
On December 7, 2001 the U.S. Bankruptcy Court, Northern District
of Ohio, Eastern Division, approved implementation of LTV's
Asset Protection Plan (APP). The APP provided for the cessation
of production, hot idling of steelmaking facilities, sale and
liquidation of the integrated steel assets. The APP also
approved LTV's plan to sell the assets of LTV Copperweld, its
metal fabrication subsidiary.
The Board then elected Frank E. Filipovitz a director of The LTV
Corporation. Mr. Filipovitz is the Company's general manager of
personnel.
LAIDLAW INC: Bringing In Dresdner Kleinwort as Investment Banker
----------------------------------------------------------------
Laidlaw Inc., and its debtor-affiliates ask Judge Kaplan for an
order:
(i) authorizing them to retain and employ Dresdner Kleinwort
Wasserstein, Inc., as successor in interest to Wasserstein
Perella & Co., as financial advisor and/or investment
banker in these chapter 11 cases; and
(ii) approving Dresdner Kleinwort's proposed fee structure.
Early January this year, Wasserstein Perella became an indirect,
wholly-owned subsidiary of Dresdner Bank AG and part of Dresdner
Kleinwort Wasserstein - the investment banking division of
Dresdner Bank AG. Seven months later, Dresdner Bank AG became a
subsidiary of Allianz AG, an entity engaged in diverse financial
services businesses in Europe and throughout the world.
Garry M. Graber, Esq., at Hodgson Russ LLP, in Buffalo, New
York, tells the Court that the Debtors chose Dresdner Kleinwort
because the firm has substantial expertise in advising troubled
companies with in and out-of-court reorganizations. Dresdner
Kleinwort is also experienced in debt restructuring and related
issues, Mr. Graber adds. On top of that, Mr. Graber relates,
Dresdner Kleinwort is also familiar with the Debtors'
businesses, assets and financial affairs and is well qualified
to provide the investment banking services required by the
Debtors. Prior to the Petition Date, Mr. Graber informs Judge
Kaplan that the Debtors engaged Wasserstein Perella to provide
investment banking services in connection with the Debtors'
attempts to complete a sale or other restructuring transaction.
In providing pre-petition services to the Debtors in connection
with these matters, Mr. Graber notes, it is only natural for
Dresdner Kleinwort's professionals to become well acquainted
with the Debtors' businesses, the value of the Debtors' assets,
the markets in which the Debtors operate, the Debtors' business
and operational difficulties and related matters. Accordingly,
Mr. Graber continues, the firm has developed significant
relevant experience and expertise regarding the Debtors and the
other Laidlaw Companies that will assist it in providing
investment banking services in these cases.
The Debtors anticipate that Dresdner Kleinwort will render these
investment banking and related advisory services:
(A) General Investment Banking Services - Dresdner Kleinwort
will:
(i) to the extent it deems necessary, appropriate and
feasible, familiarize itself with the business,
operations, properties, financial condition and
prospects of the Laidlaw Companies; and
(ii) if the Laidlaw Companies determine to undertake a
Restructuring, Financing and/or Sale, advise and
assist the Laidlaw Companies in structuring and
effecting such a transaction or transactions, subject
to the terms and conditions of the Engagement Letter;
(B) Restructuring Services - If the Laidlaw Companies pursue a
Restructuring, Dresdner Kleinwort will:
(i) provide financial advice and assistance to the Laidlaw
Companies in developing and obtaining approval of a
Restructuring plan, which may be either an out-of-
court restructuring or plan under chapter 11 of the
Bankruptcy Code or Plans of Arrangement under the
Canadian Companies' Creditors Arrangement Act (as the
same may be modified from time to time);
(ii) in connection therewith, provide financial advice and
assistance to the Laidlaw Companies in:
(a) advising the Laidlaw Companies on capital structure
and debt capacity; and
(b) structuring any new securities to be issued under
the Restructuring Plan;
(iii) if requested by the Laidlaw Companies, assist the
Laidlaw Companies and/or participate in negotiations
with entities or groups affected by the Restructuring
Plan; and
(iv) if requested by the Laidlaw Companies, participate in
hearings before the bankruptcy court with respect to
the matters upon which Dresdner Kleinwort has provided
advice, including, as relevant, providing testimony in
connection therewith;
(C) Financing Services - If the Laidlaw Companies pursue a
Financing, Dresdner Kleinwort will:
(i) provide financial advice and assistance to the Laidlaw
Companies in structuring and effecting a Financing,
identify potential Investors and, at the Laidlaw
Companies' request, contact such Investors;
(ii) if Dresdner Kleinwort and the Laidlaw Companies deem it
advisable, assist the Laidlaw Companies in developing
and preparing a memorandum to be used in soliciting
potential Investors, it being agreed that:
(a) the Financing Offering Memorandum shall be based
entirely upon information supplied by the Laidlaw
Companies,
(b) the Laidlaw Companies shall be solely responsible
for the accuracy and completeness of the
Financing Offering Memorandum, and
(c) other than as contemplated by subparagraph
1(c)(ii) of the Engagement Letter, the Offering
Memorandum shall not be used, reproduced,
disseminated, quoted or referred to at any time
in any way, except with Dresdner Kleinwort's
prior written consent; and
(iii) if requested by the Laidlaw Companies, assist the
Laidlaw Companies and/or participate in negotiations
with potential Investors; and
(D) Sale Services - If the Laidlaw Companies pursue a Sale,
Dresdner Kleinwort will:
(i) provide financial advice and assistance to the Laidlaw
Companies in connection with a Sale, identify potential
acquirers and, at the Laidlaw Companies request,
contact such potential acquirers;
(ii) at the Laidlaw Companies' request, assist the Laidlaw
Companies in preparing a memorandum, to be used in
soliciting potential acquirors, it being agreed that:
(a) the Sale Memorandum shall be based entirely upon
information supplied by the Laidlaw Companies,
(b) the Laidlaw Companies shall be solely responsible
for the accuracy and completeness of the Sale
Memorandum, and
(c) other than as contemplated by subparagraph I(d)(ii)
of the Engagement Letter, the Sale Memorandum shall
not be used, reproduced, disseminated, quoted or
referred to at any time in any way, except with
Dresdner Kleinwort's prior written consent; and
(iii) if requested by the Laidlaw Companies, assist the
Laidlaw Companies and/or participate in negotiations
with potential acquirors.
In exchange for its services, Dresdner Kleinwort intends to
charge for its services on these terms and conditions:
(a) a monthly advisory fee of $50,000 for each month of its
engagement beginning on July 1, 2001;
(b) with respect to any Restructuring that is consummated
during the term of Dresdner Kleinwort's engagement or
within 15 months thereafter a transaction fee, contingent
upon the consummation of a Restructuring that does not
take advantage of the "cram-down" provisions of section
1129(b) of the Bankruptcy Code with respect to the
Debtors' lending banks and bondholders, will be payable at
the closing thereof, equal to $3,000,000, against which
will be credited the first six Monthly Advisory Fees paid
which credit shall not exceed $300,000;
(c) with respect to any Sale for which an agreement is entered
into and consummated during the Fee Period, a transaction
fee, contingent upon the consummation of such Sale and
payable at the closing thereof, equal to 1% of the
Aggregate Consideration to be paid in connection with such
Sale. To the extent Dresdner Kleinwort agrees to provide
the Debtors with a written fairness opinion relating to a
Sale, the Debtors agree to pay Dresdner Kleinwort a
separate fairness opinion fee mutually agreed upon by the
Debtors and Dresdner Kleinwort, which fee will be credited
against any Sale Transaction Fee; and
(d) monthly reimbursement of:
(i) reasonable out-of-pocket expenses incurred by
Dresdner Kleinwort in connection with its services
in these cases (including all reasonable fees and
expenses of counsel and other professionals
retained by Dresdner Kleinwort in connection with
its services in these cases); and
(ii) any sales, use or similar taxes incurred by
Dresdner Kleinwort in connection with its
engagement as financial advisor and/or investment
banker to the Debtors.
Furthermore, Mr. Graber will indemnify and hold harmless
Dresdner Kleinwort and if affiliates, its respective directors,
officers, agents, employees and controlling persons, and each of
its respective successors and assigns, to the full extent
lawful, from and against all losses, claims, damages,
liabilities and expenses incurred by them that:
(a) are related to or arise out of statements made or any
statements omitted to be made by the Debtors or actions or
alleged actions taken or omitted to be taken by any
Indemnified Person with the Debtors' consent or in
conformity with the Debtors' actions or omissions, or
(b) are otherwise related to or arise out of Dresdner
Kleinwort's activities under its engagement;
provided, however, that the Debtors will not be responsible for
any losses, claims, damages, liabilities or expenses pursuant to
clause (b) which are finally judicially determined to have
resulted primarily from the gross negligence or willful
misconduct of the person seeking indemnification.
In addition, Mr. Graber says, the Engagement Letter also
includes certain provisions limiting Dresdner Kleinwort's
liability for special, indirect or consequential damages
relating to its engagement by the Debtors, as well as Dresdner
Kleinwort's total liability for any action, claim, loss or
damage arising out of the performance of its services for the
Debtors, subject to limitations imposed by applicable law.
Moreover, Mr. Graber continues, if the Debtors determine during
the Fee Period to effect one or more Financings, Dresdner
Kleinwort will be offered the right, but will not be obligated
to act as:
(1) co-manager with respect to a public offering of equity
securities,
(2) sole or lead agent of any private placement of equity
securities, or
(3) sole or lead manager or sole or lead agent of any public
offering or private placement of debt securities or
obligations.
Mr. Graber informs Judge Kaplan that the Debtors or Dresdner
Kleinwort may terminate the Engagement Letter at any time upon
30 days' prior written notice to the other party. Upon any
termination of the Engagement Letter by the Debtors, however,
Mr. Graber clarifies that the Debtors will remain obligated to
pay:
(a) any accrued Monthly Advisory Fees as of the effective date
of the termination; and
(b) any Restructuring Transaction Fees and Sale Transaction
Fees owed.
Also, Mr. Graber makes it clear that termination of the
Engagement Letter by either party will not affect the Debtors'
reimbursement and indemnification obligations under the
Engagement Letter with respect to activities occurring prior to
the Termination Effective Date.
Mr. Graber assures the Court that Dresdner Kleinwort will
maintain detailed records in support of any actual and necessary
costs and expenses incurred in connection with the rendering of
its services in these cases. "Although Dresdner Kleinwort does
not charge for its services on an hourly basis, Dresdner
Kleinwort nevertheless will maintain detailed, contemporaneous
records of time spent by its professionals in connection with
the rendering of services for the Debtors by category and nature
of the services rendered," Mr. Graber says.
The Debtors assert that the proposed Fee Structure is fair and
reasonable because it reflects the nature of the services to be
provided by Dresdner Kleinwort. "The Debtors believe that the
Fee Structure creates a proper balance between fixed monthly
fees and contingency fees based on the successful consummation
of a Restructuring Transaction or a Sale Transaction," Mr.
Graber relates.
Dresdner Kleinwort advises that Court that it may from time-to-
time utilize the services and expertise of individuals who are
employed by partners in or otherwise affiliated with Dresdner
Kleinwort. The firm intends to charge all fees and expenses
incurred as a result of the activities of the Affiliated
Professionals will be charged in accordance with the Engagement
Letter.
Mr. Graber also discloses to the Court that during the year
immediately preceding the Petition Date, the Debtors made these
payments to Dresdner Kleinwort:
Date of Payment Amount of Payment
--------------- -----------------
11/16/00 $345,480
01/18/01 210,000
01/22/01 220,000
03/06/01 407,518
05/02/01 229,947
05/07/01 203,650
06/05/01 207,592
------------------
TOTAL: $1,824,187
"These Pre-Petition Payments represent the Monthly Advisory Fees
under the Engagement Letter (prior to its amendment) for the
first 9 months of Dresdner Kleinwort engagement, plus the
reimbursement of related out-of-pocket expenses. These payments
were taken out of the Debtors' operating cash," Mr. Graber
explains.
The Debtors ask Judge Kaplan that the retention and employment
of Dresdner Kleinwort be made effective as of the Petition Date.
However, Mr. Graber tells the Court that this Application has
been delayed because of the uncertainty regarding the exact
nature and scope of Dresdner Kleinwort's role in these cases.
"Because of the tremendous progress in the Debtors'
restructuring efforts since Dresdner Kleinwort was originally
retained, the Debtors have less of a need for financial advisor
and/or investment banking services than was contemplated in
October 2000," Mr. Graber notes. That's why the Debtors felt it
was appropriate to renegotiate the terms of Dresdner Kleinwort's
retention, leading to the amendment of the Engagement Letter in
October 2001, Mr. Graber explains. Pursuant to the amendment,
Mr. Graber relates that the Monthly Advisory Fee was reduced
from $200,000 to $50,000 - resulting in substantial savings to
the Debtors' estates.
Martin F. Lewis, managing director of Dresdner Kleinwort
Wasserstein Inc., informs Judge Kaplan that the firm has no
connections with the Debtors, their creditors, the U.S. Trustee
or any other party with an actual or potential interest in these
chapter 11 cases, except:
(a) Dresdner Kleinwort and its affiliates that are part of the
Investment Banking Division are not and have not been
employed by any entity other than the Debtors in matters
related to these chapter 11 cases.
(b) Prior to the Petition Date, Dresdner Kleinwort performed
certain investment banking services for the Debtors. The
Debtors do not owe Dresdner Kleinwort any amount for
services performed prior to the Petition Date.
(c) From time to time, Dresdner Kleinwort and Affiliates have
provided services, and likely will continue to provide
services, to certain creditors of the Debtors and various
other parties adverse to the Debtors in matters unrelated
to these chapter 11 cases. However, Dresdner Kleinwort has
undertaken a detailed search to determine, and to
disclose, whether it or its Affiliates are performing or
have performed services for any significant creditors,
equity security holders, insiders or other parties in
interest in such unrelated matters.
(d) Dresdner Kleinwort and Affiliates have worked with,
continue to work with and share mutual clients with
certain law firms and accounting firms that represent
Interested Parties in matters unrelated to these chapter
11 cases.
(e) Dresdner Kleinwort and Affiliates have over 8,000
employees. It is possible that certain of these
individuals hold interests in mutual funds or other
investment vehicles that may own debt or equity interests
in the Debtors.
(f) In the ordinary course of its business, Dresdner Bank AG
has, directly or through one of its subsidiaries or
affiliates, extended loans or provided financing to
certain Interested Parties. In each case, these loans
represent a de minimis amount of the outstanding principal
amount of all outstanding loans made by Dresdner Bank AG
and its subsidiaries and affiliates.
(g) Dresdner Bank AG, in the ordinary course of its business
and unrelated to these cases, may hold the securities or
liabilities of certain Interested Parties in accounts on
behalf of its customers or in proprietary accounts for its
sales and trading activities.
(h) In order to maintain an investment strategy that tracks
the Standard & Poor's 500 Index, Dresdner Bank AG holds
shares of certain Interested Parties that are listed on
the Standard & Poor's 500 Index.
(i) Dresdner Bank AG, unrelated to these cases, may have held
in the past, may currently hold or may hold in the future
de minimis amounts of securities of certain Interested
Parties other than the Debtors or their affiliates.
(j) In the ordinary course of its business and unrelated to
these cases, Dresdner Bank AG, in connection with its
sales and trading business, has trading relationships with
certain Interested Parties that include short-term credit
exposure related to the clearance of trades.
(k) In the ordinary course of its business, and unrelated to
these cases, Dresdner Bank AG, in connection with its
commercial lending business, acts as an agent for and
participates in commercial loan syndicates for certain
Interested Parties.
To check and clear potential conflicts of interest in these
cases, Mr. Lewis says:
(1) Dresdner Kleinwort and Affiliates that are engaged in
investment banking activities researched their respective
client databases for the past five years, and
(2) Dresdner Kleinwort issued general inquiries to all of its
officers and all professionals in Dresdner Kleinwort's
restructuring group to determine whether Dresdner
Kleinwort or the Affiliates have any relationships with
these Interested Parties:
* the Debtors and their nondebtor affiliates;
* the Debtors' directors and officers and certain of their
major business affiliations;
* the Creditors' Committee and its professionals;
* the Bank Group and its professionals;
* the Debtors' post-petition lender and its professionals;
* the Noteholders' Committee, its professionals and other
pre-petition noteholders and indenture trustees.
* the Laidlaw Companies' primary bonding and insurance
companies;
* the Debtors' 20 largest unsecured creditors on a
consolidated basis, as identified in the Debtors'
chapter 11 petitions;
* other material trade creditors of the Debtors;
* parties to significant litigation with the Debtors and
their non-debtor affiliates;
In addition, Mr. Lewis relates, Dresdner Kleinwort has requested
Dresdner Bank AG and each of its subsidiaries engaged in or
providing banking, private equity and investment management
business or services determine whether they currently have any
material relationships with any Interested Parties. "Dresdner
Kleinwort has also checked whether any members of the Executive
Committee of the Investment Banking Division have any material
connection with the Debtors," Mr. Lewis adds.
After a thorough search, Mr. Lewis concludes that the firm has
not discovered any material relationships. But if Dresdner
Kleinwort becomes aware of such relationship, Mr. Lewis assures
the Court that the firm will file a supplemental affidavit
immediately. Mr. Lewis asserts that Dresdner Kleinwort is a
"disinterested
Thus, the Debtors urge the Court to grant the relief requested.
(Laidlaw Bankruptcy News, Issue No. 11; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
MTS INC: Net Loss Balloons to $11 Million After Debt Workout
------------------------------------------------------------
In its quarterly report on Form 10-Q filed with the Securities
and Exchange Commission, MTS, Incorporated dba Tower Records,
the world's largest independent retailer of packaged
entertainment software reported net revenues for the three
months ended October 31, 2001 of $226.7 million compared to
$255.4 million for the three months ended October 31, 2000. The
company attributed the 11% decrease in revenue primarily to the
closure of unprofitable stores, fundamental to the company's
worldwide restructuring plan implemented in fiscal 2001, and to
a decline in store traffic following world events of September
11, 2001.
The company also reported a net loss of $11.2 million for the
quarter ended October 31, 2001, compared to a net loss of
$732,000 for the same quarter ended October 31, 2000, which was
mainly attributed to the impact of decreased revenues and $3
million related to the restructuring charges.
Tower Records' President and CEO, Michael Solomon commented on
the results, "This past quarter represents significant progress
for Tower and not withstanding the impact of events of September
11, indicates that the worst is behind us. We implemented our
business plan earlier this year and have rigorously addressed
performance and profitability, both domestically and
internationally. Despite a slowing economy, we continue to hold
our own. Everyday we're working diligently to bring our
customers the best in entertainment discovery. At this time more
than ever, we are committed to serving our customers and local
communities as we have done for the last 41 years."
As part of its strategy for future development, the company
recently opened two new retail locations in the US market, a
14,000 square foot store in Desert Ridge, Phoenix, AZ and a
33,000 square foot west coast flagship store in Sherman Oaks,
CA. Regarding the new store openings, Michael Solomon said, "We
believe Tower is now back on track, and that we are entering a
new strategic phase in the company's growth. Already our Sherman
Oaks store is proving to be one of our top performing stores on
the west coast, and we intend to increase sales and continue to
improve performance throughout 2002."
Since 1960 Tower Records has been recognized and respected
throughout the world for its unique brand of retailing. Founded
in Sacramento CA, by current Chairman Russ Solomon, the
company's growth over four decades has made Tower Records a
household name.
Tower Records owns and operates 175 stores worldwide with 57
franchise operations in seven countries. The company opened one
of the first Internet music stores on America Online in June
1995 and followed a year later with the launch of Tower.com.
The site was named "Best Music Commerce site" by Forrester
Research in Fall 2000.
The recent founding of Tower Records own exclusive and
independent record label, 33rd Street Records, has enabled the
retailer to release popular and niche hit driven music, while
placing great emphasis on both marketing and artist development.
Tower Records' commitment to introducing its customers to the
latest trends in new product lines is paramount to the
organization's retail philosophy. Tower forges ahead with the
development of exciting shopping environments, espousing diverse
product ranges, artist performance stages, personal electronics
departments, and digital centers. Tower Records maintains its
commitment to providing the deepest selection of packaged
entertainment in the world merchandised in stores that celebrate
the unique interests and needs of the local community.
MARINER POST-ACUTE: Overview of Joint Plan of Reorganization
------------------------------------------------------------
The Plan was negotiated with and is supported by Mariner Post-
Acute Network, Inc. Committee, the MHG Committee, the MPAN
Senior Credit Facility Claim Holders, and the MHG Senior Credit
Facility Claim Holders, who along with the Debtors recommend
that creditors support the Plan and vote in favor of the Plan's
confirmation.
The purpose of the Plan is to, among other things,
(1) restructure, compromise, and discharge creditors' Claims
against and stockholders' Equity Interests in the Debtors,
(2) reorganize the Debtors' financial affairs, and
(3) permit the Debtors to emerge from the Chapter 11 Cases as
ongoing businesses.
As a result of the Plan's implementation, the amount of the
Debtors' aggregate outstanding indebtedness will be reduced
substantially.
The Plan provides for the substantive consolidation of the MPAN
Debtors' estates, and for the separate substantive consolidation
of the MHG Debtors' estates. Following the Effective Date, MHG
and the Debtor Affiliates will be direct or indirect
subsidiaries of Reorganized MPAN, as set forth in the Corporate
Restructuring Program. Notwithstanding the substantive
consolidation of the Estates for purposes of the Plan, the
Debtors intend that after the Effective Date each of the Debtors
will remain a separate legal entity, except to the extent that
certain entities are to be merged, acquired, or dissolved in
connection with the Corporate Restructuring Program.
If the Plan is confirmed, the Debtors' principal prepetition
secured lender groups (the Senior Credit Facility Claim Holders)
will become the majority owners of Reorganized MPAN, receiving
in the aggregate distributions of approximately [96.12%] of the
Primary Effective Date Shares of New MPAN Common Stock as of the
Effective Date, in addition to the Debtors' Available Cash, and,
if alternative financing cannot be obtained, Lender Notes.
Most Project Lenders will receive:
(i) a Cash payment in an amount necessary (if any) to
provide them a loan-to-collateral-value ratio of 80%
("Cash Pay Down"), and
(ii) a New Project Lender Note in an amount equal to the
balance of their Allowed Secured Claims after the Cash
Pay Down.
The collateral of certain Project Lenders may be returned to
them in satisfaction of all or part of their Allowed Secured
Claims.
Most other creditors holding Allowed Secured Claims will be
unimpaired, paid in full, or have their collateral returned to
them in satisfaction of their Allowed Secured Claims. Holders of
Allowed Priority Tax Claims and Allowed Other Priority Claims
will be paid in full.
General unsecured creditors of the MPAN Debtors will receive on
account of their Allowed MPAN General Unsecured Claims Pro Rata
distributions from the MPAN General Unsecured Claims
Distribution Fund, which will consist of
(i) 1.94% of the Primary Effective Date Shares of New MPAN
Common Stock, and
(ii) New MPAN Warrants to purchase in the aggregate an
additional 1.91% of the fully diluted shares of New MPAN
Common Stock as of the Effective Date.
Holders of Allowed MPAN Subordinated Note Claims that qualify as
Consenting Class UP-2 Holders will receive Pro Rata
distributions from the MPAN Subordinated Note Distribution Fund,
which also will consist of 1.94% of the Primary Effective Date
Shares of New MPAN Common Stock and New MPAN Warrants to
purchase in the aggregate an additional 1.91% of the fully
diluted shares of New MPAN Common Stock as of the Effective
Date.
General unsecured creditors of the MHG Debtors and holders of
Allowed MHG Third Party Subordinated Note Claims that qualify as
Consenting Class UM-2 Holders will receive on account of their
Allowed Claims Pro Rata distributions from the MHG Unsecured
Claims Distribution Fund, which will consist of Cash in an
amount equal to the lesser of (i) $7.5 million, or (ii) such
amount as may be necessary to fund a 5% distribution to the
foregoing holders of Allowed Claims.
Holders of Punitive Damage Claims and Securities Damages Claims
will receive no distributions under the Plan on account of such
Claims.
Existing stockholder interests in MPAN holding Old MPAN Common
Stock and options and warrants to acquire the same will be
cancelled. The new stockholders of Reorganized MPAN after the
Effective Date initially will consist of certain of the Debtors'
prepetition creditors, specifically the MPAN Senior Credit
Facility Claim Holders, the MHG Senior Credit Facility Claim
Holders, general unsecured creditors of the MPAN Debtors, and
(to the extent such holders do not oppose the Plan OR otherwise
qualify as Consenting Class UP-2 Holders) holders of MPAN
Subordinated Note Claims.
Only creditors that have valid "Allowed Claims" against the
Debtors will receive consideration under the Plan. The Plan
groups most creditors and stockholders into various "Classes" of
secured, priority, and unsecured Claims and Equity Interests and
provides for the treatment of each Class. Certain creditors,
such as holders of Administrative Expenses arising after the
commencement of the Chapter 11 Cases and holders of Allowed
Priority Tax Claims, are not grouped in any Class, but
nonetheless will be affected by and receive payment under the
Plan.
Dissolution Of Committees
The Committees will cease to exist as of the Effective Date.
Notwithstanding this, the Committees will have standing to be
heard with respect to the allowance of Administrative Expenses
requested by the Committees' professionals and by Committee
members to the extent such Administrative Expenses relate to
such members' service on the Committees.
Effective Date Of The Plan
The Effective Date of the Plan will occur on the first Business
Day (a) on which no stay of the Confirmation Order is and
remains in effect, and (b) all of the conditions to the
Effective Date as set forth in the Plan are satisfied or waived
to the extent permitted by the Plan. Notwithstanding the
foregoing, the Debtors may defer the Effective Date for a period
of no more than 30 days in their discretion.
Retention Of Jurisdiction
Section VII of the Plan generally provides for the retention of
jurisdiction by the Bankruptcy Court for the purposes of, among
other things, (i) determining disputes relating to
Administrative Expenses, Claims, and Equity Interests, (ii)
hearing adversary proceedings, contested matters, and other
proceedings relating to Avoiding Power Causes of Action, the
assumption or rejection of executory contracts and unexpired
leases, and other matters affecting the Chapter 11 Cases, the
Plan, and the administration of the Debtors' estates, (iii)
enforcing the Debtors' discharge, and (iv) all other issues
presented by or arising under the interpretation,
implementation, or enforcement of the Plan or the Confirmation
Order. (Mariner Bankruptcy News, Issue No. 21; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
METALS USA: Gets Okay to Access Up to $139MM of Cash Collateral
---------------------------------------------------------------
Kyung S. Lee, Esq., Diamond McCarthy Taylor & Finley LLP in
Houston, Texas, submits that the warehoused steel subject to the
cash collateral motion has never been Metals USA, Inc.'s
property either on a pre-petition or post-petition basis.
Therefore, Debtors cannot grant a security interest or obtain
cash collateral on property that they do not own. Consequently,
Ms. Lee submits that the cash collateral order should carve out
Precision's property from any liens or a security interest
granted in favor of the Bank Group.
Ms. Lee relates that Precision is filing this motion to insure
that any pre-petition liens, which had been granted by Debtors
to the Bank Group, and any liens granted by the Court for the
use of cash collateral do not affect or attach Precision's
property. Precision requests that any final order approving the
use of cash collateral carve out Precision's property from the
liens and security interest granted in favor of the Bank Group
and that the Debtors be ordered to segregate the warehoused
steel.
* * *
With Bank of America on board for the time being, Judge
Greendyke put his stamp of approval on an Agreed Second Interim
Cash Collateral Order allowing the Debtors access to up to
$139,799,000 of the Bank Group's cash collateral through
December 19, on which date the Court will hopefully convene a
final cash collateral hearing and put an agreed permanent cash
collateral order in place.
It is clear, Judge Greendyke said, that the Debtors must have
access to the Bank Group's Cash Collateral "to avoid immediate
and irreparable harm to their estates."
Subject to no more than a 10% deviation, the Debtors use of the
Bank Group's Cash Collateral is limited to expenditures itemized
in a Budget the Company delivered to Bank of America:
Metals USA, Inc.
Cash Flow Projections
November 15, 2001 through December 19, 2001
Sales $123,279,000
Cash Flows:
-----------
Collections $139,799,000
Operating Disbursements:
------------------------
Inventory Material 111,922,000
Payroll & Benefits 16,876,000
Materials & Supplies 1,964,000
Facilities, Utilities 2,203,000
Insurance 400,000
Freight Out 4,121,000
Outside Sales Commissions 345,000
Advertising 100,000
Travel 421,000
Telephone 396,000
Property taxes 885,000
Legal 241,000
Other 3,915,000
Capital Expenditures 448,000
-------------
Total Operating Expenditures 144,237,000
-------------
Operating Cashflow (4,438,000)
Restructuring Disbursements 300,000
Debt Service on IRB's 49,000
Interest & Bank Fees 70,000
-------------
Net Cashflow ($4,857,000)
=============
Judge Greendyke grants the Bank Group dollar-for-dollar
replacement liens on all post-petition acquired inventory and
post-petition earned receivables to the extent that the Debtors
dip into the Bank Group's Cash Collateral.
Michael R. Farquhar, Esq., at Winstead Sechrest & Minick P.C.,
serves as counsel to Bank of America in the Debtors' chapter 11
cases. (Metals USA Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NATIONSRENT: S&P Drops Ratings To D After Missed Payment
--------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
secured debt ratings for NationsRent Inc. to 'D' from double-
'C'. At the same time, the ratings were removed from CreditWatch
where they were placed Nov. 14, 2001. In addition, Standard &
Poor's lowered its subordinated debt rating on the company to
single-'C' from double-'C'. The subordinated debt rating remains
on CreditWatch with negative implications.
A $790 million bank credit facility and $175 million of long-
term debt securities are affected.
The rating actions follow the company's failure to make its
$53.7 million principal payment on its term loan, which was due
on Dec. 1, 2001. NationsRent's onerous debt burden, lack of
liquidity, and poor operating results during current difficult
economic conditions make it highly unlikely that NationsRent
will be able to service its subordinated debt obligations. In
addition, while the company remains out of compliance with its
bank covenants, the senior lenders may prohibit NationsRent from
servicing its subordinated debt. The ratings on the subordinated
notes will be lowered to 'D' should the company fail to make its
$9.1 million interest payment due on December 15, 2001. Standard
& Poor's will monitor developments as they unfold.
NationsRent has experienced significant earnings and cash flow
pressures during the past year, which has resulted in
constrained liquidity. NationsRent has suffered from poor
operating performance due to the weak economy, slower-than-
expected rental revenue growth, and ongoing operational issues
at several of its branches. As of September 30, 2001, credit
measures were very weak, with EBITDA interest coverage of about
1.2 times and total debt to EBITDA of about 8.5x.
OGLEBAY NORTON: S&P Concerned About Stressed Financial Profile
--------------------------------------------------------------
Standard & Poor's revised its outlook on Oglebay Norton Co. to
negative from stable. All ratings on the company are affirmed.
The outlook revision is the result of heightened concerns
regarding the persistence of the economic recession and its
negative impact on Oglebay's key end markets, which could stress
the company's already weak financial profile.
The ratings on Oglebay Norton Co. incorporate its below-average
business position and its aggressive debt levels. Oglebay
supplies minerals and aggregates to a range of highly cyclical
and competitive markets, from building materials and home
improvement to the environmental, energy, and metallurgical
industries. The company recently revised its organizational
structure and will continue to operate in three segments: Great
Lakes Minerals, Global Stone, and Performance Minerals.
Oglebay's Great Lakes minerals segment includes its lime and
limestone operation, which is the fifth-largest producer in the
fragmented and competitive U.S. market. This business is exposed
to the steel sector (approximately 20% of shipments), which has
adversely affected profitability and cash flow, given difficult
steel industry conditions. However, the company should benefit
from increasing demand, given the role that lime and limestone
have in environmental applications (currently about 30% of
shipments) as well as from its strategically located properties.
The Great Lakes minerals segment also includes the company's
marine transportation division, which operates in the highly
concentrated Great Lakes market. The top-four competitors
(including Oglebay) each have approximately 20% of the market.
The company benefits from protection under the Jones Act, which
requires cargo moving between U.S. ports to be carried in a
vessel that is at least 75%-owned by U.S. citizens or
corporations, and from steady shipping rates. Nonetheless,
Oglebay faces the challenges posed by excess shipping capacity
and potential fluctuations in demand and the unpredictable
nature of the weather, which can affect the number of sailing
days and the amount of cargo shipped. In an attempt to reduce
its risk exposure to the steel industry, the company has cut its
iron ore and limestone shipments to insolvent steel
manufacturers, including LTV Corp. and Bethlehem Steel Corp.
Oglebay's performance minerals segment includes its industrial
sands division. This division is the fourth-largest U.S.
producer in a somewhat concentrated market. The company benefits
from some product diversification and steady prices and demand.
The division's high exposure to the oil industry (fracturing
sand constitutes 30% of shipments) has positively affected the
division's financial performance in the past year, due to higher
drilling expenditures. Although rapidly declining oil and gas
prices are expected to cause drilling rates to decline in the
near term, demand for fracturing sand is expected to drop at a
slower rate, as this product is used in shallow drilling and
more of the drilling cut backs have been in deep drilling
applications.
Ultimately, each segment has been affected by softness in demand
due to the weak economy. EBITDA for the quarter ended Sept. 30,
2001, was $21.1 million compared with $29.5 million in the third
quarter of 2000 and slipped to $54.5 million for the first nine
months ended Sept. 30, 2001, from $64.3 million in the first
nine months of 2000. In order to mitigate the effects of these
difficult market conditions, the company recently recorded a
one-time, non-cash restructuring charge of approximately $13
million to create a more centralized structure to enhance
operating efficiencies between previously decentralized business
units. After implementation of the plan, the company anticipates
2002 results will increase EBITDA by $3 to $4 million.
Additional annual cash savings and EBITDA improvement of $4 to
$5 million each are expected in 2003.
However, benefits from these actions could be more than offset
by the adverse affects of a prolonged recession. The company has
more than doubled its revenues since 1997 because of several
debt-financed acquisitions. In the near-to intermediate-term,
Oglebay is expected to reduce its spending levels and use its
modest excess cash flows to reduce debt. As a result, EBITDA
interest coverage should remain in the weak 1.8 times to 2.2x
range as lower profitability levels should be offset by reduced
interest costs. Debt leverage is aggressive at approximately 76%
at Sept. 30, 2001. Financial flexibility was meaningfully
reduced recently (down to $38 million of availability at Sept.
30, 2001, from $62 million at June 30, 2001), as there was a $25
million reduction in the company's revolving credit facility
incurred with the recent waiver of its bank covenants.
Outlook: Negative
The ratings will likely be lowered if weakness in Oglebay's
markets persists or if its financial flexibility declines
further.
Ratings Affirmed
Oglebay Norton Co. Ratings
Corporate credit rating B+
Senior secured bank loan rating B+
Subordinated debt B-
OGLEBAY NORTON: Appoints Julie A. Boland as VP, CFO & Treasurer
---------------------------------------------------------------
Oglebay Norton Company (Nasdaq: OGLE) announced the appointment
of Julie A. Boland as vice president, chief financial officer
and treasurer effective January 1, 2002. Ms. Boland will assume
responsibility for all corporate financial operations, including
corporate treasury, accounting, budgeting, financial reporting,
planning and analysis for Oglebay Norton Company. She will
report to John N. Lauer, chairman and chief executive officer.
"Julie brings outstanding experience and a track record of
achievement in the field of finance to Oglebay Norton at a time
when we are focused on refinancing the company. She has proven
herself to be an excellent leader and team builder and will be a
complement to our senior management team. She will have the
lead role ensuring that we have the solid financial foundation
to support profitable growth," said Lauer. "We are excited to
have Julie join us."
Boland joins Oglebay Norton from Goldman Sachs International,
London, where she most recently served as vice president and
business unit manager for the credit risk management and
advisory group. Prior to that, she spent several years with
J.P. Morgan & Co. in various finance and investment banking
positions, including vice president, fixed income and loan
capital markets. She began her career in 1988 with Price
Waterhouse as a Certified Public Accountant in the general audit
division.
Ms. Boland received her Bachelor of Science degree from the
University of Vermont in business and accounting and her MBA in
finance and statistics from the University of Chicago Graduate
School of Business. She and her family reside in Shaker
Heights, Ohio.
Oglebay Norton Company, a Cleveland, Ohio-based company,
provides essential minerals and aggregates to a broad range of
markets, from building materials and home improvement to the
environmental, energy and metallurgical industries. Building on
a 147-year heritage, our vision is to become the premier growth
company in the industrial minerals industry. The company's
website is located at http://www.oglebaynorton.com
OPTICARE HEALTH: Inks Debt Restructuring Agreement with Palisade
----------------------------------------------------------------
OptiCare Health Systems, Inc. (Amex: OPT) reported that it
entered into a restructure agreement with Palisade Concentrated
Equity Partnership, L.P. Although subject to significant
contingencies, the agreement would, if consummated, enable
OptiCare to restructure its senior secured debt, reducing it by
almost $10 million, and result in Palisade holding approximately
70% of the voting equity of OptiCare. Palisade is currently a
holder of approximately 16% of OptiCare's common stock.
Among the significant contingencies in the restructure agreement
is a condition that Palisade reach agreement, satisfactory to
Palisade in its sole discretion, with OptiCare's senior secured
bank lender regarding the type and amount of credit support to
be provided by Palisade for OptiCare's restructured indebtedness
to this lender. After lengthy discussions, Palisade and
OptiCare's senior secured bank lender have been unable to reach
agreement on this issue and have made minimal progress in
reaching agreement. Additionally, a letter of intent providing
for OptiCare's senior secured bank lender to settle its
outstanding debt from OptiCare at a discount expired on Friday,
December 14, 2001 and was not extended. There is no assurance
that Palisade and OptiCare's senior secured bank lender will
reach any agreement. If Palisade has not reached an agreement
with OptiCare's senior secured bank lender, either Palisade or
OptiCare may terminate the restructure agreement at any time.
"We appreciate Palisade's expression of continued support," said
Dean J. Yimoyines, MD, President and CEO of OptiCare, "and we
hope Palisade and our senior secured bank lender reach agreement
because this transaction would be in the best interests of
OptiCare's stockholders."
The closing of the restructure agreement is also subject to the
satisfaction of a number of other closing conditions, including
obtaining shareholder consent to the purchase of OptiCare's
voting preferred stock and warrants by Palisade, and increasing
OptiCare's authorized common stock to a number sufficient to
cover all warrants and convertible preferred stock to be issued
in the restructuring. The restructure agreement is also
contingent upon OptiCare, with Palisade's credit support,
consummating a new credit facility with CapitalSource Finance,
LLC, to provide funds for the cash portion of the proposed
settlement with OptiCare's senior secured bank lender and for
future operating funds for OptiCare.
OptiCare Health Systems, Inc. is an integrated eye care services
company focused on managed care and professional eye care
services. It also provides systems, including internet-based
software solutions, to eye care professionals.
PEGASUS SATELLITE: S&P Junks $250MM Sr. Unsecured Notes Due 2010
----------------------------------------------------------------
Standard & Poor's assigned its triple-'C'-plus rating to the
proposed $250 million senior notes due 2010 of Pegasus Satellite
Communications Inc., which will be issued under Rule 144A with
registration rights. Proceeds will be used to redeem the 12.5%
senior subordinated notes due 2005 of Pegasus Media &
Communications Inc. and for bank debt repayment. The rating on
the 12.5% notes has been withdrawn. All ratings on Pegasus and
related entities are affirmed. The outlook is stable.
The ratings on Pegasus continue to reflect high financial risk
from aggressive, debt-financed DirecTV franchise and subscriber
acquisition activity, which is responsible for negligible
interest coverage, highly negative discretionary cash flows, and
significant capital demands. Tempering factors include the
company's growing satellite direct-to-home television (DTH)
subscriber base, its position as the largest franchisee of
DirecTV services in rural areas, and recent steps taken to
improve profitability.
Pegasus resells DirecTV service to almost 1.5 million
subscribers. The company has exclusive rights to offer this
product to approximately 7.5 million households, which represent
about 80% of DirecTV's National Rural Telecommunications
Cooperative (NRTC) affiliate territories. Pegasus also operates
10 television stations serving six small-to mid-size markets,
providing a nominal amount of cash flow diversity and potential
financial flexibility.
Competition, particularly from Echostar Communications Corp.,
has fueled high subscriber acquisition costs (SAC). Deeper
penetration into a somewhat less creditworthy subscriber base
has contributed to churn. Still, Pegasus benefits from weaker
cable competition in rural areas. In an effort to reduce SAC and
churn, the company is emphasizing direct sales of minimum
service commitments secured by credit card payment and equipment
rental. With rental, Pegasus maintains title to the equipment
and can reuse it in the event of subscriber churn, lowering
equipment costs. Rental also helps control piracy of service by
reducing availability of set-top boxes to non-paying viewers. As
a result, SAC and churn have fallen on a year-over-year basis in
the 2001 third quarter. Nevertheless, Pegasus' long-term
business position and relationship with DirecTV, as governed by
the NRTC's agreement with DirecTV, remains unclear. Echostar's
proposed purchase of DirecTV's parent, Hughes Electronics Corp.,
raises further questions about Pegasus' status.
Pegasus' subscriber growth has slowed and the company now
generates very modest EBITDA. However, interest coverage is at a
low fractional level. A September 30, 2001, cash balance of $89
million and some bank borrowing availability provide liquidity
to fund discretionary cash flow deficits. Financial pressure
will increase in 2002 when cash dividends are required on the
12.75% debt-like, exchangeable preferred stock. The company's
13.5% discount notes become cash-pay in 2004.
Outlook: Stable
Pegasus' interest coverage is expected to remain fractional
through the intermediate term. Positive operating momentum,
including control of churn and SAC, and continuing access to
external capital will be important to rating stability as cash
interest and dividend requirements increase.
Rating Assigned
Pegasus Satellite Communications Inc. Rating
$250 mil. senior unsecured notes CCC+
Ratings Affirmed
Pegasus Communications Corp. Rating
Corporate credit rating B
Preferred stock CCC
Pegasus Satellite Communications Inc.
Corporate credit rating B
Senior unsecured debt CCC+
Subordinated debt CCC+
Pegasus Media & Communications Inc.
Corporate credit rating B
Senior secured bank loan rating B+
PICCADILLY CAFETERIAS: Gets Foothill $20MM Sr. Credit Facility
--------------------------------------------------------------
Piccadilly Cafeterias, Inc. (NYSE:PIC) announced that it
completed a three-year, $20 million senior credit facility with
Foothill Capital Corporation, a wholly-owned subsidiary of Wells
Fargo & Company (NYSE:WFC). Approximately $11 million of the
senior credit facility will be used to support commercial
letters of credit, and the remainder will be available to
provide working capital and for other corporate purposes. The
new senior credit facility matures in December 2004 and replaces
a smaller $14.4 million senior credit facility with commercial
banks. The Company has no outstanding borrowings under the new
facility.
For its second quarter ending December 31, 2001, the Company
expects to record extraordinary charges of approximately $0.5
million for the unamortized financing cost of the replaced
senior credit facility.
Mark Mestayer, Chief Financial Officer, stated, "Compared with
the working capital facility we replaced, the new facility
substantially improves our liquidity by increasing our borrowing
availability, extends the maturity to December 2004, and
provides a financial covenant package that better accommodates
our strategic business plan. We expect that our operating cash
flow, together with the borrowing availability of this facility,
will be sufficient to meet our anticipated operating and cash
flow needs for the foreseeable future."
Piccadilly currently operates 215 cafeterias, located primarily
in the southeastern and mid-Atlantic regions of the United
States. For more information, visit the Company's website at
http://www.piccadilly.com
Foothill Capital Corporation is a leading provider of asset-
based financing to middle market companies throughout North
America. In addition, Foothill Capital has successfully
completed financings for many innovative, "non-traditional"
secured lending transactions. Foothill Capital is a subsidiary
of Wells Fargo & Company, a $298 billion diversified financial
services company providing banking, insurance, investments,
mortgage and consumer finance through more than 5,400 stores,
the Internet (wellsfargo.com) and other distribution channels
across North America and elsewhere internationally. For more
information, visit Foothill Capital on the Internet at
http://www.foothillcapital.com
PINNACLE HOLDINGS: Taps Gordian for Financial Advisory Services
---------------------------------------------------------------
Pinnacle Holdings Inc. (Nasdaq: BIGT) announced that it has
engaged Gordian Group, L.P., a New York investment banking firm,
to provide financial advisory services with respect to
Pinnacle's efforts to address various capital structure-related
activities, including the various potential activities
previously announced by Pinnacle on December 13, 2001.
Pinnacle is a leading provider of communication site rental
space in the United States. To date, Pinnacle has completed over
570 acquisitions and owns, manages, or has rights to, in excess
of 5,000 sites. Pinnacle is headquartered in Sarasota, Florida.
For more information on Pinnacle visit its Web site at
http://www.pinnacletowers.com Information provided on its web-
site is not incorporated into Pinnacle's SEC filings or this
press release.
PLANVISTA: Lenders Extend Time to Complete Debt Restructuring
-------------------------------------------------------------
PlanVista Corporation (NYSE: PVC) announced that its lenders
have given the Company until January 31, 2002 to complete a
refinance or restructure of its existing credit facility, the
term of which expired on August 31, 2001 and was previously
extended until December 15, 2001. The Company is currently
negotiating with its lending group to restructure its credit
facility and believes it will complete the restructure in
accordance with the terms of the Forbearance Agreement.
According to PVC Chairman and Chief Executive Officer Phillip S.
Dingle, "We appreciate our lenders' patience as we work through
complicated issues, and believe our ongoing efforts will soon
result in a significant reduction of our debt. Once we have
addressed the balance sheet issues that have been our focus
during the past several months, we also believe we can
demonstrate the full capabilities of our business. In spite of
the numerous challenges, we expect to have achieved revenue
growth of over 20% for year end 2001. We look forward to 2002
as our breakout year."
PlanVista Solutions is a leading health care technology and
product development company, providing medical cost containment
for health care payers and providers through one of the nation's
largest independently owned full- service preferred provider
organizations. PlanVista Solutions provides network access,
electronic claims repricing, and claims and data management
services to health care payers and provider networks throughout
the United States. Visit the company's website at
http://www.planvista.com
PORTOLA PACKAGING: Shareholders' Equity Deficit Stands at $27.9M
----------------------------------------------------------------
Portola Packaging, Inc., reported results for its first quarter
of fiscal 2002, ended November 30, 2001. Sales were $54.2
million compared to $50.6 million for the same quarter of the
prior year, an increase of 7.1%. The Company recorded operating
income of $2.7 million for the first quarter of fiscal 2002,
compared to an operating loss of $0.1 million for the first
quarter of fiscal 2001. Portola reported a net loss of $0.6
million for the first quarter of fiscal 2002 compared to a net
loss of $1.9 million for the same period of fiscal 2001. During
the first quarter of fiscal 2001, the Company incurred pretax
restructuring charges of $1.9 million and realized a pretax gain
of $1.2 million from the sale of real estate located in San
Jose, California.
Effective September 1, 2001, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and
Other Intangible Assets". SFAS No. 142 established accounting
and reporting standards for acquired goodwill and other
intangible assets. Upon adoption of SFAS No. 142, the Company's
goodwill is not subject to amortization. The effect of the
adoption was to eliminate goodwill amortization expense in the
first quarter of fiscal 2002 of $0.7 million. The Company
recorded $0.7 million in goodwill amortization expense in the
first quarter of fiscal 2001.
Gross profit increased $1.9 million to $12.3 million for the
first quarter of fiscal 2002 compared to $10.4 million for the
first quarter of fiscal 2001. As a percentage of sales, gross
profit increased from 20.6% for the first quarter of fiscal 2001
to 22.7% for the same quarter in fiscal 2002.
EBITDA increased 21.3% to $7.4 million in the first quarter of
fiscal 2002 as compared to $6.1 million in the first quarter of
fiscal 2001. Excluding the $1.9 million restructuring charges
and the $1.2 million gain from the sale of the real estate in
San Jose, EBITDA was $6.8 million in the first quarter of fiscal
2001.
Portola Packaging is a leading designer, manufacturer and
marketer of tamper evident plastic closures used in dairy, fruit
juice, bottled water, sports drinks, institutional food products
and other non-carbonated beverage products. The Company also
produces a wide variety of plastic bottles for use in the dairy,
water and juice industries, including five-gallon polycarbonate
water bottles. In addition, the Company designs, manufactures
and markets capping equipment for use in high speed bottling,
filling and packaging production lines as well as manufactures
and markets customized five-gallon water capping and filling
systems. The Company is also engaged in the manufacture and sale
of tooling and molds used in the blowmolding industry.
As of November 30, 2001, the company reported an upside-down
balance sheet, with total shareholders' equity deficit standing
at $27.9 million.
REPUBLIC TECHNOLOGIES: Firms-Up Tentative Agreement with Union
--------------------------------------------------------------
Republic Technologies International LLC, the nation's leading
supplier of special bar quality steel, announced that it has
finalized a tentative agreement with the United Steelworkers
union. Pending Union review and ratification and other
required approvals, Republic expects to implement the contract
by January 1.
Although terms will not be released until the agreement is
ratified, Republic expects the contract to facilitate lower
costs, enhanced operational flexibility, improved financial
performance and an emergence from Chapter 11 bankruptcy
protection.
"This agreement addresses critical issues Republic and the union
brought to the table," said Joseph F. Lapinsky, Republic's
president and chief executive officer. "The agreement we're
announcing today demonstrates the commitment of both negotiating
teams to the survival of this company."
With the amendments, the contract would last through April 2006.
It is currently scheduled to expire in October 2003. The
agreement would cover more than 3,500 hourly employees at
Republic plants in Canton, Massillon, and Lorain, Ohio; Beaver
Falls, Pa.; Chicago and Harvey, Ill.; Gary, Ind.; Lackawanna,
N.Y.; and Hamilton, Ont.
The agreement follows Republic's December 3 announcement that it
had secured an amendment to its debtor-in-possession financing
which permitted it to finalize the agreement with the union.
Republic also recently secured an extension of its exclusive
right to file a reorganization plan.
"These labor contract modifications represent another important
step in Republic's reorganization process," Lapinsky said. "It
is not the final step. We will need the support of our
customers, our banks, our suppliers, our government leaders and
our salaried employees to develop and implement a successful
plan of reorganization. We remain confident that we will secure
this support and emerge from Chapter 11 stronger than ever."
Republic Technologies International, based in Fairlawn, Ohio, is
the nation's largest producer of high-quality steel bars. With
4,300 employees and 2000 sales of nearly $1.3 billion, Republic
was included in "Forbes" magazine's 2001 and 2000 lists of the
largest U.S. private companies. Republic operates plants in
Canton, Massillon, and Lorain, Ohio; Beaver Falls, Pa.; Chicago
and Harvey, Ill.; Gary, Ind.; Lackawanna, N.Y.; Cartersville,
Ga.; and Hamilton, Ont. The company's products are used in
demanding applications in the automotive, agricultural,
aerospace, off-highway, industrial machinery and energy
industries.
* * *
The United Steelworkers of America (USWA) announced that the
union bargaining team from Republic Technologies International
LLC (RTI) has reached a tentative agreement with management that
it hopes will stabilize jobs and bring the company back to
healthfulness during the on-going crisis in the American steel
industry.
USWA members who work for RTI will review and vote on the
proposed changes in the union contract in December. The
agreement would cover more than 3,500 hourly employees at
Republic plants in Canton, Massillon, and Lorain, Ohio; Beaver
Falls, Pa.; Chicago and Harvey, Ill.; Gary, Ind.; Lackawanna,
N.Y.; and Hamilton, Ont.
"This agreement will allow the company to emerge from bankruptcy
as a viable supplier to the market," said David McCall, the
union's chief negotiator with RTI and director of the USWA's
Ohio District 1. "The contributions RTI workers are willing to
make to keep the company alive is an example of their commitment
to securing their future and that of their families and the
communities where they live."
Management has stated that the tentative agreement would reduce
operating costs and improve financial performance for the
troubled company. Union workers are seeking assurances that
their contributions will be returned when the company regains
its footing in the industry.
The American steel industry continues to suffer from very low
prices brought about by what the union terms "failed trade
policies" and large amounts of illegally dumped steel by foreign
steel firms into the domestic market. Twenty-nine steel
companies have filed for bankruptcy, and more than 30,000
Steelworkers have lost their jobs since the crisis began.
The USWA and large integrated steel manufacturers are calling on
the Bush Administration to immediately curb illegally dumped
steel, provide emergency loans guarantees to ailing companies,
and provide assurances that some 600,000 steel retirees,
surviving spouses and dependents will not be stripped of their
health insurance coverage due to the failure of U.S. trade
policies.
Last week USWA members and allies from steel communities across
the country set up a tent city near the Commerce Department in
Washington, D.C., hoping to rally support for this vital
American industry before it is too late.
SERVICE MERCHANDISE: Wants to Grant St. Paul Adequate Protection
----------------------------------------------------------------
Service Merchandise Company, Inc., and its debtor-affiliates
seek to provide adequate protection to The St. Paul Companies,
Inc., St. Paul Fire and Marine Insurance Company, and St. Paul
Surety and several of their related companies and affiliates.
According to Beth A. Dunning, Esq., at Bass, Berry & Sims PLC,
in Nashville, Tennessee, St. Paul issues surety bonds on behalf
of the Debtors needed to:
(a) secure utility service,
(b) comply with workers' compensation laws,
(c) obtain and continue the Debtors' sales and use tax
licenses, and
(d) comply with other ongoing business requirements.
Ms. Dunning relates that a Court order dated May 2000 authorized
the Debtors to enter into a New Indemnity Agreement and New
Collateral Agreement with St. Paul pursuant to which certain
surety bonds were issued on behalf of the Debtors and secured by
certain collateral.
By this motion, the Debtors request permission to grant adequate
protection to St. Paul by adjusting from time to time, the level
of collateral that secured the Debtors' obligations to St. Paul
upon St. Paul's request. According to Ms. Dunning, this
arrangement allows the Debtors to maintain efficient liquidity
levels.
Ms. Dunning assures Judge Paine that no party in interest will
be prejudiced because the Debtors do not request authority to
grant St. Paul more collateral than it currently possesses. St.
Paul holds collateral to secure its exposure in the form of a
letter of credit in the amount of approximately $4,064,184, Ms.
Dunning notes.
In light of the Debtors' estimated surety liability, Ms. Dunning
tells Judge Paine, the Debtors and St. Paul have agreed to
reduce St. Paul's collateral levels to the amount of
approximately $3,481,216. St. Paul has agreed to this
reduction, Ms. Dunning adds, provided that the Debtors agree to
return St. Paul's collateral level to the current level upon St.
Paul's request. According to Ms. Dunning, the Debtors
anticipate increasing the collateral levels by issuing
supplemental or replacement letters of credit, the terms and
conditions of which would be consistent with the original letter
of credit.
The Debtors believe that the determination to return St. Paul to
the current collateral level represents an ordinary course of
business decision, and so Court approval is unnecessary.
Nevertheless, Ms. Dunning remarks, the Debtors are seeking
approval of the adequate protection arrangement as a matter of
full disclosure, in an abundance of caution, and at the request
of St. Paul.
Ms. Dunning maintains that the relief requested by the Debtors
is necessary and appropriate and in the best interests of the
Debtors' estates because the contemplated reduced collateral
levels will enhance the Debtors' liquidity by approximately
$582,968. (Service Merchandise Bankruptcy News, Issue No. 22;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SUN HEALTHCARE: Asks Court to Further Extend Lease Decision Time
----------------------------------------------------------------
As of Petition Date, Sun Healthcare Group, Inc., and its debtor-
affiliates were parties to more than 650 unexpired non-
residential real property and facility leases. Most of the
unexpired leases are directly related to the operation of the
Debtors' healthcare facilities while the rest are primarily
leases for office spaces from which they provide administrative
services necessary to their business. By this motion, the
Debtors request that the Court extend further their time to
assume or reject their unexpired leases to the earlier of:
(a) March 13, 2002 or to a date that is approximately three
months from December 13, 2001 and,
(b) the date on which an order is entered confirming a
reorganization plan for the Debtors.
Michael J. Merchant, Esq., at Richards, Layton & Finger, in
Wilmington, Delaware, tells the Court that the unexpired leases
relating to the care facilities are critical assets of the
Debtors' and are integral to their reorganization. The Debtors
are parties to many unexpired leases and the complexity of such
leases makes the task more daunting and time consuming. These
unexpired leases also cover real estate properties nationwide
which are subject to different state laws. The Debtors, as
providers of long-term care services, are subject to an
extensive regulatory framework that affects any assumption or
rejection decisions. Intensive negotiations with various
government agencies and various state Medicaid agencies are
still going on. And as operators of long-term care facilities,
the Debtors must avoid any forced closure of a facility that
could adversely affect the health and welfare of the residents.
While the extensions granted by prior extension orders have
provided additional time, the Debtors believe a further
extension is necessary since inadequate time may result in an
unplanned rejection of a valuable lease or a premature
assumption of an unworthy lease which may lead to substantial
administrative expense obligations.
By application of Del.Bankr.LR 9006-2, the current deadline is
automatically extended through the conclusion of the January 3,
2002 hearing. (Sun Healthcare Bankruptcy News, Issue No. 28;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
TELIGENT: ECI Unit Selling Assets to Summit Acquisition for $60M
----------------------------------------------------------------
On November 30, 2001, Executive Conference, Inc., a wholly owned
subsidiary of Teligent, Inc., entered into an Asset Purchase
Agreement with Summit Acquisition LLC. Under the terms of the
Agreement, Summit has agreed to purchase substantially all of
ECI's assets for a purchase price of $60 million in cash. ECI
is a provider of teleconferencing services.
Based in Vienna, Virginia, Teligent, Inc. (NASDAQ:TGNT) is a
provider of broadband communication services offering business
customers local, long distance, high-speed data and dedicated
Internet services over its digital SmartWave(TM) local networks
in major markets throughout the United States. Teligent filed
for reorganization under Chapter 11 of the U.S. Bankruptcy Code
in the Bankruptcy Court for the Southern District of New York.
TIMMINCO LIMITED: Inks Forbearance Pact with Bank of Nova Scotia
----------------------------------------------------------------
Timminco Limited (TSE: TIM) -- the world leader in manufacturing
and supplying engineered magnesium extrusions and an
international leader in the production and marketing of
specialty magnesium, calcium and strontium metals and alloys --
today announced that it has entered into a forbearance agreement
with its principal lender, The Bank of Nova Scotia.
Under the terms of the forbearance agreement, the Bank will not
enforce its rights arising from certain defaults under the loan
agreement while the Corporation actively pursues strategic
alternatives to maximize shareholder value. The strategic
alternatives may include a direct investment, strategic
alliance, refinancing or a sale of all or a part of its
operations.
The forbearance agreement will remain in effect until April 30,
2002 subject to the Corporation maintaining certain financial
covenants, reporting requirements, and a schedule of certain
activities relating to the strategic alternatives that must be
carried out through the period of the agreement.
Consistent with the objective of maintaining its existing credit
facilities, the Corporation will have with the Bank revolving
credit lines of CDN$2.0 million and US$5.0 million, and non-
revolving credit lines aggregating US$24.9 million. Management
believes that these revolving lines are sufficient for the
Corporation to continue to operate while it pursues the
strategic alternatives. The credit facilities are to be reduced
by any capital asset sales outside the normal course of
business.
On November 28, 2001, the Special Committee of the Board of
Directors engaged CIBC World Markets Inc. to act as its
financial advisor to organize a process for identifying,
approaching and conducting discussions with third parties. It is
expected that a confidential information memorandum will soon be
prepared and circulated to interested third parties.
VISKASE: S&P Slashes Ratings to D After Missed Payment On Notes
---------------------------------------------------------------
Standard & Poor's lowered its corporate credit and senior
unsecured debt ratings on Viskase Companies Inc. to 'D'. At the
same time, the ratings were removed from CreditWatch, where they
were placed July 2, 2001.
The downgrade follows the company's announcement that it failed
to pay the interest and $163.1 million principal due on its
10.25% senior unsecured notes that matured on December 1, 2001.
Viskase is still continuing its negotiations with noteholders
regarding a restructuring plan.
Viskase is a leading producer of cellulosic food casings used
for processed meats. The company's business has been hampered by
unfavorable industry fundamentals, which include a fierce
pricing environment, low volumes, and increased raw material
costs. In addition, Viskase has been hindered by an onerous debt
burden and its revolving credit facility expired in June 2001.
Ratings Lowered, Removed from Creditwatch
Viskase Companies Inc. TO FROM
Corporate credit rating D CC
Senior unsecured debt D C
WESTAR FINANCIAL: Ends Q2 with Upside-Down Balance Sheet
--------------------------------------------------------
Westar Financial Services Incorporated (OTC:WEST) reported its
fifth consecutive quarter of record profits for its second
fiscal quarter of 2002, ended September 30, 2001. Second quarter
revenues were up 146% to $147 million. Second quarter profits
increased to $2.2 million, more than double that of the
immediate prior quarter, and $3.8 million more than the second
quarter a year ago. In the second quarter a year ago, the
company generated revenues of $60 million and a net loss of $1.5
million as the company invested heavily in executing its Private
Label marketing program. In the first six months of fiscal 2002,
revenues increased 202% to $293 million generating net income of
$3.1 million. In the first half of fiscal 2001, revenues were
$97 million, and net losses were $3.8 million.
Gross margin was 3.32% in the second quarter of fiscal 2002
compared to 2.32% in the first quarter of 2002 and 0.71% in the
second quarter for 2001. For the first half of 2002, gross
margin was 2.82% compared to 0.01% in the like period a year
ago.
Overhead expenses increased to $2.4 million in 2Q02, a 6%
increase from 1Q02 and a 43% increase from a year ago, when the
company moved into its new facility. Operating expenses were
1.6% of 2Q02 revenues compared to 2.8% of 2Q01 revenues. For the
first half of the year, general and administrative expenses
totaled $4.6 million or 1.6% of revenues compared to $3.2
million or 3.34% of revenues in the first half a year ago.
The company earlier reported that it was unable to fund
continued lease originations and that it was seeking strategic
alternatives. On November 7, 2001, Westar was notified by Bank
One (NYSE:ONE) of an alleged event of default on its credit
facility on the basis that Westar had failed to complete a term
securitization within the timeframe demanded by Bank One.
Pursuant to this declaration of default Bank One terminated its
obligation under the credit facility to make further loans to
Westar. The securitization attempt was complicated by unexpected
difficulties qualifying the residual value insurance policy and
its issuing company for a term securitization. The effects of
the 9/11 terrorist attacks on the capital markets and the
insurance industry added to the difficulty of completing a
securitization on the schedule set by Bank One.
Despite Westar's profitable operations and the quality of its
lease production, Bank One has expressed no interest in
continuing to purchase automobile leases originated by Westar
and is attempting to transfer servicing from Westar to a third
party servicer. As a result of Bank One's actions, Westar has
ceased originating automobile leases and is actively seeking
alternative strategic relationships to fund lease originations
and either purchase or identify a purchaser of lease portfolios
originated by the Company. Management believes they may have to
offer a substantial equity stake in Westar's common stock to
attract such a relationship. There can, however, be no assurance
that such a relationship, financing source or buyer will be
found. Should management's efforts be unsuccessful in the near
future it is likely that Westar may be forced to seek protection
under the bankruptcy laws or to cease operations entirely.
"Our tasks now are three-fold," said R. W. Christensen, Jr.,
Westar's president. "First, to protect the value of intellectual
and intangible assets of the firm. Second, to position the
company to monetize those values for the benefit of its
creditors, shareholders and team members. Third, to seek redress
to compensate Westar for the harm done it. Westar will pursue
each with the same dedication, aggressiveness and tenacity with
which it was known for the pursuit of its business goals."
As of the second quarter ended September 30, 2001, the company's
balance sheet recorded a net deficit of common stock equity of
$12.2 million.
WESTERN POWER: Defaults on Financial Covenants Under Credit Pact
----------------------------------------------------------------
Western Power & Equipment Corp. (Nasdaq:WPEC), a dealer of
construction and industrial equipment, reported revenues of
$28.5 million for its first fiscal quarter ended October 31,
2001 compared to $37.8 million in revenues for the prior year
period.
The company's net income of $0.36 million for the first quarter
compared with $0.46 million in the prior fiscal year's first
quarter. The first quarter of the prior fiscal year included a
non-recurring pre-tax gain of $0.59 million for the conversion
of capital leases to operating leases.
Gross margin for the first quarter was 14.4 percent, an increase
from the 12.9 percent margin in the first quarter of the prior
year. Margins were up due mainly to a higher concentration of
higher margin parts and service revenue and higher gross margins
on equipment sales.
Selling, general, and administrative expenses for the first
quarter were 9.0 percent of sales, an increase over the 8.7
percent in the same period a year ago reflecting ongoing costs
of store consolidations and significantly lower overall revenue.
First quarter interest expense was $1.26 million compared to
$1.68 million in the prior year quarter. The decrease was the
result of lower interest rates during the quarter on the
Deutsche Financial Service (DFS) credit facility as well as
lower interest bearing inventory levels. As of October 31, 2000,
the company and DFS signed an amendment to the existing loan and
security agreement. The amendment waived all prior defaults
under the agreement and established revised financial covenants
to be measured at the company's second and fourth quarters. In
addition, the amendment included several, periodic mandatory
reductions in the credit limit. The amended DFS facility matures
December 28, 2001. The company is currently in default of the
existing credit facility financial covenants and is in
negotiations with DFS to extend or renew the credit facility.
Western Power & Equipment Corp. sells, leases, rents, and
services construction and industrial equipment for Case
Corporation and over 30 other manufacturers. The company
currently operates 16 facilities in Washington, Oregon, northern
Nevada, California, and Alaska.
WHEELING-PITTSBURGH: Taps King Capital as Financial Consultant
--------------------------------------------------------------
Represented by Michael E. Wiles and Richard F. Hahn of the New
York firm of Debevoise & Plimpton as lead counsel, and James M.
Lawniczak and Scott N. Opincar of the Cleveland firm of Calfee,
Halter & Griswold LLP as local counsel, Debtor and debtor-in-
possession Pittsburgh-Canfield Corporation, and its affiliated
and subsidiary debtors and debtors-in possession in these cases,
asks Judge Bodoh to authorize and approve Wheeling-Pittsburgh
Steel Corporation's employment of Scott C. King of the King
Capital Group, LLC, effective as of October 29, 2001, to provide
financial consulting services to WPSC.
Mr. King's specific services to WPSC are:
(a) reviewing and analyzing existing financial
projections, cash forecasts, and bank documents;
(b) assisting the Debtors in maintaining their favorable
banking relationships with Citibank, N.A., and other
financial institutions part to the Debtor-in-
Possession Credit Agreement;
(c) acting as a liaison for the Debtors with the Bank
Group and assisting the Debtors in responding to
information requests received from the Bank Group;
(d) assisting James G. Bradley, President and CEO of
WPSC, and Paul J. Mooney, Executive Vice President
and CFO of WPSC, in responding to third-party
requests for information;
(e) assisting or participating in negotiations with the
parties-in-interest in these Chapter 11 cases;
(f) advising and attending meetings of third parties and
the Official Committees;
(g) participating in hearings before this Court and
providing relevant testimony with respect to these
hearings; and
(h) rending such other financial consulting services as
may be mutually agreed upon by the Debtors and Mr.
King.
Mr. Lawniczak explains that in essence Mr. King's involvement
will be to lend support to the internal WPSC financial
department and in particular, to handle the additional demands
on that department caused by the Chapter 11 process.
The Debtors propose that Mr. King be compensated for these
services at his ordinary billing rate of $260 per hour. The
Retention Letter also provides that Mr. King is to receive a
retainer in the amount of $20,000 to be applied against the time
charges and expenses specific to the engagement.
In support of the Application, Mr. King avers that he is the
Managing Director of King Capital Group LLC in Pittsburgh,
Pennsylvania. Within a one-year period prior to the Petition
Date, Mr. King states that he rendered no services to and
received no compensation from any of the Debtors, and is not
owed any obligation incurred prior to the Petition Date.
Mr. King discloses that he has provided, and likely will
continue to provide, services to certain parties-in-interest of
these estates, but not in any matters which could impact the
parties' rights in the Debtors' cases. Mr. King concludes that
he and King Capital are disinterested parties within the meaning
of the Bankruptcy Code on the matters for which approval of his
employment is sought. Even though one of the raison d'etre for
employing Mr. King is to improve the relationships with the Bank
Group, Mr. King does not disclose any prior relationships with
any of those parties. Indeed, although Mr. King includes long
lists of parties in interest in his declaration, each entry is
followed by the words "None found" to describe his relationship.
Judge Bodoh grants the Application and approves Mr. King's
employment on the terms stated. (Wheeling-Pittsburgh Bankruptcy
News, Issue No. 14; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
* Meetings, Conferences and Seminars
------------------------------------
January 31 - February 1, 2002
American Conference Institute
Chapter11 Bankruptcy
The Four Seasons Hotel in Dallas, Texas
Contact: 1-888-224-2480 or
www.americanconference.com/conferences/bankruptcy/
January 31 - February 2, 2002
American Bankruptcy Institute
Rocky Mountain Bankruptcy Conference
Westin Tabor Center, Denver, Colorado
Contact: 1-703-739-0800 or http://www.abiworld.org
January 11-16, 2002
Law Education Institute, Inc
National CLE Conference(R) - Bankruptcy Law
Steamboat Grand Resort, Steamboat Springs, Colorado
Contact: 1-800-926-5895 or
http://www.lawedinstitute.com
February 25-26, 2002
American Conference Institute
Chapter11 Bankruptcy
Hyatt Regency in Los Angeles, California
Contact: 1-888-224-2480 or
www.americanconference.com/conferences/bankruptcy/
February 28-March 1, 2002
ALI-ABA
Corporate Mergers and Acquisitions
Renaissance Stanford Court, San Francisco, CA
Contact: 1-800-CLE-NEWS or http://www.ali-aba.org
March 3-4, 2002
Association of Insolvency and Restructuring Advisors
Business Valuation Conference (Held in conjunction with
The Norton Bankruptcy Litigation Institute I)
Park City Mariott, Park City, UT
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
March 3-6, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Norton Bankruptcy Litigation Institute I
Park City Marriott Hotel, Park City, Utah
Contact: 770-535-7722 or Nortoninst@aol.com
March 7-8, 2002
RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP
Third Annual Conference on Healthcare Transactions
The Millennium Knickerbocker Hotel, Chicago
Contact: 1-800-726-2524 or ram@ballistic.com
March 8, 2002
American Bankruptcy Institute
Bankruptcy Battleground West
Century Plaza Hotel, Los Angeles, California
Contact: 1-703-739-0800 or http://www.abiworld.org
March 14-15, 2002
American Conference Institute
Commercial Loan Workouts
The New York Marriott Marquis in New York City
Contact: 1-888-224-2480 or
www.americanconference.com
March 20-23, 2002
TURNAROUND MANAGEMENT ASSOCIATION
Spring Meeting
Sheraton El Conquistador Resort & Country Club
Tucson, Arizona
Contact: 312-822-9700 or info@turnaround.org
April 11-14, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Norton Bankruptcy Litigation Institute II
Flamingo Hilton, Las Vegas, Nevada
Contact: 770-535-7722 or Nortoninst@aol.com
April 18-21, 2002
American Bankruptcy Institute
Annual Spring Meeting
J.W. Marriott, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
April 25-27, 2002
ALI-ABA
Fundamentals of Bankruptcy Law
Rittenhouse Hotel, Philadelphia
Contact: 1-800-CLE-NEWS or http://www.ali-aba.org
May 13, 2002 (Tentative)
American Bankruptcy Institute
New York City Bankruptcy Conference
Association of the Bar of the City of New York
New York, New York
Contact: 1-703-739-0800 or http://www.abiworld.org
May 15-18, 2002
Association of Insolvency and Restructuring Advisors
18th Annual Bankruptcy and Restructuring Conference
JW Mariott Hotel Lenox, Atlanta, GA
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
May 26-28, 2002
International Bar Association
International Insolvency 2002 Conference
Dublin, Ireland
Contact: Tel +44 207 629 1206 or member@int-bar.org
or http://www.ibanet.org
June 6-9, 2002
American Bankruptcy Institute
Central States Bankruptcy Workshop
Grand Traverse Resort, Traverse City, Michigan
Contact: 1-703-739-0800 or http://www.abiworld.org
June 20-21, 2002
RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP
Fifth Annual Conference on Corporate Reorganizations
The Millennium Knickerbocker Hotel, Chicago
Contact: 1-800-726-2524 or ram@ballistic.com
June 27-30, 2002
NORTON INSTITUTES ON BANKRUPTCY LAW
Western Mountains, Advanced Bankruptcy Law
Jackson Lake Lodge, Jackson Hole, Wyoming
Contact: 770-535-7722 or Nortoninst@aol.com
July 11-14, 2002
American Bankruptcy Institute
Northeast Bankruptcy Conference
Ocean Edge Resort, Cape Cod, MA
Contact: 1-703-739-0800 or http://www.abiworld.org
July 17-19, 2002
Association of Insolvency and Restructuring Advisors
Bankruptcy Taxation Conference
Snow King Resort, Jackson Hole, WY
Contact: (541) 858-1665 Fax (541) 858-9187 or
aira@airacira.org
August 7-10, 2002
American Bankruptcy Institute
Southeast Bankruptcy Conference
Kiawah Island Resort, Kiawaha Island, SC
Contact: 1-703-739-0800 or http://www.abiworld.org
October 9-11, 2002
INSOL International
Annual Regional Conference
Beijing, China
Contact: tina@insol.ision.co.uk or
http://www.insol.org
October 24-28, 2002
TURNAROUND MANAGEMENT ASSOCIATION
Annual Conference
The Broadmoor, Colorado Springs, Colorado
Contact: 312-822-9700 or info@turnaround.org
December 5-8, 2002
American Bankruptcy Institute
Winter Leadership Conference
The Westin, La Paloma, Tucson, Arizona
Contact: 1-703-739-0800 or http://www.abiworld.org
April 10-13, 2003
American Bankruptcy Institute
Annual Spring Meeting
Grand Hyatt, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
December 3-7, 2003
American Bankruptcy Institute
Winter Leadership Conference
La Quinta, La Quinta, California
Contact: 1-703-739-0800 or http://www.abiworld.org
April 15-18, 2004
American Bankruptcy Institute
Annual Spring Meeting
J.W. Marriott, Washington, D.C.
Contact: 1-703-739-0800 or http://www.abiworld.org
December 2-4, 2004
American Bankruptcy Institute
Winter Leadership Conference
Marriott's Camelback Inn, Scottsdale, AZ
Contact: 1-703-739-0800 or http://www.abiworld.org
The Meetings, Conferences and Seminars column appears in the
Troubled Company Reporter each Wednesday. Submissions via
e-mail to conferences@bankrupt.com are encouraged.
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
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Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
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client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
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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*** End of Transmission ***