/raid1/www/Hosts/bankrupt/TCR_Public/011227.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Thursday, December 27, 2001, Vol. 5, No. 252
Headlines
360NETWORKS: Court Extends Lease Decision Period Until March 26
ACINDAR INDUSTRIES: S&P Slashes Ratings to Junk and D Levels
ACT MANUFACTURING: Case Summary & Largest Unsecured Creditors
AMERALIA INC: Fails to Comply with Nasdaq Listing Requirements
AVADO BRANDS: Makes Interest Payment on 9-3/4% Senior Notes
BETHLEHEM STEEL: Connectiv Bidding Protocol Hearing Today
BRIDGE INFO: Proposes First Amended Joint Plan of Liquidation
BURLINGTON: Court Okays Ernst & Young as Independent Auditors
CHIQUITA BRANDS: Court Approves Interim Compensation Procedures
COHO ENERGY: Appaloosa & Mr. Tepper Dispose of About 1.8M Shares
CYBEX INTL: Bank Lenders Extend Facility Until December 31, 2003
E-SYNERGIES: Working Capital Deficit Burgeons to Over $4 Million
ENRON CORPORATION: Bringing In Batchelder as Financial Advisors
ENRON: Eco-Tankship Wants to Block Auction of Trading Assets
EXIDE: Names L.R. Hilts VP of Planning & Logistics for EXCELL
GRAHAM-FIELD: Appoints Michael Joffred as CEO & Board Chairman
GRAHAM-FIELD: Sells Former Headquarters in NY for $4.4 Million
GUILFORD MILLS: Fails to Meet NYSE Continued Listing Standards
HAYES LEMMERZ: Wants More Time to File Schedules & Statements
HEARME: Sells Substantially All Remaining Assets to Paltalk
ICG COMMS: Unveils Joint Chapter 11 Plan & Disclosure Statement
IMPERIAL METALS: CCAA Protection in Canada Extended to March 15
IMPSAT FIBER: S&P Drops $225 Million Senior Unsecured Notes to D
INDYMAC: S&P Drops Trust 1998-2 Sub B-2 Class Rating to D
INTERFACE: Expected Weak Financial Results Spur S&P Downgrades
J2 COMMUNICATIONS: Faces Delisting From Nasdaq SmallCap Market
LA PETITE ACADEMY: Offering $145 Million Debt-for-Debt Swap
LODGIAN INC: Cash Collateral Heating Scheduled for January 9
LORAL CYBERSTAR: Gets Noteholders' Nod for Debt-for-Debt Swap
LORAL CYBERSTAR: S&P Rates $675M 10% Sr. Unsecured Notes at B
MARINER POST-ACUTE: Omnicare Pitches Initial Bid for APS Unit
MARTIN INDUSTRIES: Primary Lender Extends Financing to March '02
NATIONSRENT INC: Gets Interim Okay to Access $20MM DIP Financing
NETIA HOLDINGS: Defaults On Swap Payment with JP Morgan
ONLINE GAMING: HCI Intends to Swap Convertible Debt for Equity
PACIFIC GAS: Court Okays Innifree's Engagement as Voting Agent
PACIFIC GAS: Court Okays Payment of Obligations Owed to Calpine
PANTHER TELECOMMS: Liquidity Insufficient to Continue Operations
PHARMACEUTICAL FORMULATIONS: Misses Payment on 8% Convertibles
PIXTECH INC: Falls Short of Nasdaq Continued Listing Criteria
POLAROID CORP: Tapping Arthur Andersen for Advice on Tax Matters
PROBE EXPLORATION: Kicking Horse Closes Leduc Assets Acquisition
RELIANCE GROUP: Committees Intend to Take Discovery of Debtors
SOLECTRON CORP: S&P Concerned About Weakening Credit Measures
TELESYSTEM: Will Repay Debenture Holders in Sub. Voting Shares
UNIFORET INC: CCAA Protection in Canada Extended to February 4
VALEO ELECTICAL: Wants More Time to File Schedules & Statements
WARNACO GROUP: Obtains Okay to Hire Gavin Anderson as PR Advisor
WINSTAR COMMS: WorldCom Agrees to Continue Telecomms Services
XEROX: Completes Partial Sale of Assets to Flextronics for $118M
* DebtTraders' Real-Time Bond Pricing
*********
360NETWORKS: Court Extends Lease Decision Period Until March 26
---------------------------------------------------------------
360networks inc., and its debtor-affiliates seek the Court's
authority to further extend the period in which they must assume
or reject all unexpired leases of nonresidential real property
for an additional 120 days to April 25, 2002.
Alan J. Lipkin, Esq., at Willkie Farr & Gallagher, in New York,
New York, reminds the Court that the Debtors have been analyzing
and pursuing the resolution of real property leases since the
Petition Date. To date, Mr. Lipkin says, the Debtors have filed
three rejection motions pursuant to which the Court approved the
Debtors' rejection of nearly 50 nonresidential real property
leases.
Despite that, Mr. Lipkin relates, the Debtors remain party to
numerous unexpired leases of nonresidential real property that
have neither been assumed nor rejected. "These unexpired leases
may be valuable assets of the Debtors' estates and/or integral
to the Debtors' continued operations," Mr. Lipkin notes.
But in order to determine which of the Unexpired Leases should
be assumed or rejected, Mr. Lipkin explains, the Debtors would
need an extension of time to evaluate the need for these
locations in the context of a long-term business plan to be
finalized and a plan of reorganization to be negotiated.
Without an extension, Mr. Lipkin tells the Court, the Debtors
would be forced to choose between losing valuable locations and
assuming leases that should ultimately be rejected.
Mr. Lipkin asserts that granting this motion would not prejudice
the lessors under the unexpired leases because:
(a) to the best of their knowledge, the Debtors are or
shortly will be current on their post-petition rent under
the unexpired leases;
(b) the Debtors have sufficient liquidity and the intent to
continue to perform timely all of their obligations under
the Unexpired Leases as required by section 365(d)(3) of
the Bankruptcy Code; and
(c) in all instances, individual lessors may, for cause
shown, ask the Court to fix an earlier date by which the
Debtors must assume or reject an unexpired lease.
Nonetheless, Mr. Lipkin says, the Debtors reserve all of their
rights respecting their leases, including, but not limited to,
the right to determine whether or not the Unexpired Leases are
in fact true leases.
Violet Realty Objects
Violet Realty, Inc., is the landlord of the commercial building
known as Main Place Tower at 350 Main Street in Buffalo, New
York, wherein 360networks is the tenant of Suite No. 100 and a
portion of the 2nd Floor known as the Cage.
Edmond P. O'Brien, Esq., at Stempel Bennett Claman & Hochberg
PC, in New York, New York, reminds Judge Gropper that Violet
Realty earlier objected to the Debtors' first motion to extend
the lease decision period because 360networks failed to comply
with its pre-petition and post-petition lease obligation -- to
have kept Violet Realty's property free from mechanic's liens.
To date, Mr. O'Brien reports, the Debtors have failed to
discharge any of the liens notwithstanding the Court order
permitting the Debtors to resolve such liens.
Since the mechanic's liens have not been discharged, Mr. O'Brien
notes, the 120-day extension requested is just "too long". At a
maximum, Mr. O'Brien suggests, the Court should grant the
Debtors an extension of 60 days within which to assume or reject
certain leases. "At the same time, the Debtors should be
directed by the Cour to comply with its obligations under its
lease to discharge the mechanic's liens by negotiating with the
lienors to cure the lien defaults," Mr. O'Brien adds.
Furthermore, Mr. O'Brien insists that the Debtors should be
required to report back to the Court that it is diligently
working to cure its lien defaults during the running of the 60-
day period.
Accordingly, Violet Realty asks the Court to grant the Debtors'
motion only upon the condition that (in addition to paying all
post-petition rent in a timely fashion, and otherwise timely
performing its other obligations) it be required to promptly
effect a discharge of the mechanic's liens.
Debtors Respond
The Debtors dispute Violet Realty's assertion that certain
mechanic's liens filed post-petition against the leased premises
by the contractors that the Debtors employed create obligations
under the lease that are required to be discharged under section
365(d)(3) of the Bankruptcy Code. "The Court has ample
discretion to grant the motion regardless of Violet Realty's
contention concerning the discharge of the mechanic's liens,"
Mr. Lipkin argues.
According to Mr. Lipkin, the status of post-petition lease
obligations is but one of multiple factors to be considered in
deciding whether to grant an extension. Furthermore, Mr. Lipkin
asserts that the Debtors are paying for the use of the leased
premises and minimizing any damage to Violet Realty by being
current on all known, undisputed payments due under the Lease.
Meanwhile, Mr. Lipkin says, the potential for the holders of the
Mechanic's liens to seek to enforce their liens is minimal due
to the automatic stay.
"Also, given the complexity of these cases, the Debtors have not
had sufficient time to evaluate all of their leases," Mr. Lipkin
relates. For example, Mr. Lipkin explains, many leased sites
act as "hubs" through which the Debtors connect various routes.
Thus, Mr. Lipkin emphasizes, each connected route must be
evaluated before the decision to assume or reject a lease can be
made.
Moreover, Mr. Lipkin continues, the issue of whether the Debtors
are fulfilling their post-petition lease obligations regarding
the Mechanic's Lien is in dispute and, therefore, unresolved.]
Thus, the Debtors reiterate their request for a 120-day
extension of the lease decision period.
* * *
After Violet Realty's objection was resolved at the hearing,
Judge Gropper extends the Debtors' lease decision period for
only 90 more days, instead of the 120 days originally requested.
Thus, the Debtors must assume or reject the unexpired leases on
or before March 26, 2002.
The Court reminds the Debtors to timely comply with the
obligations under the Unexpired Leases pending assumption or
rejection of such Unexpired Leases. (360 Bankruptcy News, Issue
No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ACINDAR INDUSTRIES: S&P Slashes Ratings to Junk and D Levels
------------------------------------------------------------
Standard & Poor's lowered its foreign and local currency
corporate credit ratings on Acindar Industria Argentina de
Aceros S.A. to 'D' from triple-'C'. Standard & Poor's also
lowered its rating on Acindar's $100 million senior unsecured
notes due 2004 to double-'C' from triple-'C'.
The downgrade reflects Acindar's decision to stop fulfilling its
financial obligations as a means of preserving liquidity to
continue operating. The company has already missed payments on
local bank debt and some of its obligations with the IFC. In
addition, Acindar has announced its intention to enter into
negotiations with financial creditors to restructure the terms
of existing indebtedness to make it more adequate to its current
cash generation ability. The $100 million notes will remain
double-'C' until a payment is actually missed. Standard & Poor's
believes it is very unlikely that Acindar will make the next
coupon payment due on February 15, 2002.
Acindar is an Argentine-based producer of nonflat steel
products. The company's strong reliance on the domestic
construction industry and the unfavorable pricing scenario in
the international markets have resulted in a continued
deterioration of the company's business and financial profile
over fiscal 2001. In addition, lower margins on exports, which
doubled as a percentage of sales in 2001, were not sufficient to
compensate for the significant weakening of the domestic market,
which also experienced a 10.2% decline in prices. Although cost-
cutting measures helped maintain relatively stable EBITDA
margins, increased financial costs resulted in a fall in
EBITDA interest coverage and funds from operations to total debt
to 0.8 times and negative 7.7%, respectively, for the 12 months
ended September 2001. Coupled with high short-term debt
exposure, and expensive and scarce credit in the domestic
market, these disappointing credit protection measures led to
Acindar's current ordeals.
Standard & Poor's will reassess the credit quality of the
company once the restructuring process is finalized.
ACT MANUFACTURING: Case Summary & Largest Unsecured Creditors
-------------------------------------------------------------
Lead Debtor: ACT Manufacturing, Inc.
2 Cabot Rd.
Hudson, MA 01749
Bankruptcy Case No.: 01-47641
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
CMC Industries, Inc. 01-47642
ACT Manufacturing US
Holdings, LLC 01-47643
ACT Manufacturing
Securities Corporation 01-47644
Type of Business: Provider of Value-Added Electronics
Manufacturing Services.
Chapter 11 Petition Date: December 21, 2001
Court: District of Massachusetts (Worcester)
Judge: Joel B. Rosenthal
Debtors' Counsel: Richard E. Mikels, Esq.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo
One Financial Center
Boston, MA 02111
617-542-6000
Total Assets: $374,160,000
Total Debts: $231,214,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
State Street Bank Bond Debt $100,000,000
Ken Rink
225 Franklin Street
Boston, MA 02110
Tel: 617 662 1684
Arrow Electronics Trade $6,236,777
David Corcoran
25 Hub Drive
Melville, NY 11747
Tel: 631 847 2147
Tyco Electronics Trade $3,126,659
Kass Croll
12501 Research Blvd.
Austin, TX 78759
Tel: 800 526 5090
Avnet Electronics Trade $2,918,581
Dennis Losik
3030 Salt Creek Lane
Arlington Heights, IL
60005
Tel: 847 797 7401
Testa, Hurwitz & Legal Fees $1,452,476
Thilbeault, LLP
John Meltaus
125 High Street
Boston, MA 02110
Tel: 617 248 7262
Fax: 617 248 7100
Mindspeed Technologies Trade $1,363,292
Pam Sides
239 Littleton Road
Suite 4D
Westford, MA 01886
Tel: 978 367 3213
Heiland Electronics Trade $1,001,210
Sandra Larson
58 Jonspin Road
Wilmington, MA 01887
Tel: 800 800 1666
Tyco Printed Circuit Trade $997,797
System
Ron Martin
117 Stoneway Trail
Madison, AL 35758
Tel: 256 830 5021
Heller Lease Equipment $899,695
Joe Williams
500 West Monroe Street
Chicago, IL 60661
Tel: 312 928 8726
Teradyne Trade $825,909
Jane Ready
321 Harrison Avenue
PO 3644
Boston, MA 02241
Electro-Mecahnical Trade $746,733
Solutions
Pay Bryan
80-B Eisenhower Drive
Westbrook, ME 04092
Tel: 207 856 0073
Applied Micro Circuits Trade $699,264
Mike Kilcommins
100 Everett Street
Westwood, MA 02090
Tel: 781 329 3454
MEMEC Trade $668,837
Joe Mazzini
296 Concord Road
Billerica, MA 01821
Tel: 978 439 4500
EOI Electronics Trade $630,991
Frank
226 Sherwood Avenue
Farmingdale, NY 11735
Tel: 516 752 8550
Ruwel Werke Trade $601,612
Dorothee Reinhard
Merberger Strasse
65D-35083
Wetter/Hes Germany
Tel: 011 6423 81289
Smart Modular Technologies Trade $601,068
Patty Tanona
Semitech Solutions
9 Acton Road
Chelmsford, MA 01824
Tel: 978 256 8885
Pioneer Standard Electric Trade $465,967
Anne Rothwell
299 Balalrdvale Street
Wilmington, MA 01887
Tel: 800 255 8344
Shappard Riley Coughlin Trade $447,054
Insurance Co.
Michael Feinberg, Sr. VP
99 High Street
Boston, MA 02110
Tel: 617 348 1954
Reptron Electronics, Inc. Trade $386,180
Deb Johnson
20 Blanchard Road
Burlington, MA 01803
Tel: 877 877 2400
Fleet Capital Lease Equipment $382,949
Renary McLeish
Mail Stop RI DE 03708C
One Financial Plaza
Providence, RI 02903
AMERALIA INC: Fails to Comply with Nasdaq Listing Requirements
--------------------------------------------------------------
On December 18, 2001, AmerAlia, Inc. (Nasdaq: AALA) received a
Nasdaq staff determination indicating that AmerAlia fails to
comply with the net tangible assets and stockholders' equity
requirements for continued listing set forth in Marketplace Rule
4310c(2) (B) as well as notification of non payment of certain
fees to Nasdaq required by Marketplace Rule 4310c13. The Nasdaq
staff advised AmerAlia that its common stock is subject to
delisting from the Nasdaq SmallCap Market. Nasdaq staff took
this action after addressing with AmerAlia the stockholders'
equity concerns raised by the staff. The unpaid fees are a
current invoice.
AmerAlia will file a notice of appeal and request a hearing
before a Nasdaq Listing Qualifications Panel to review the staff
determination. There can be no assurance that the panel will
grant AmerAlia's request for continued listing. The hearing has
not yet been scheduled although AmerAlia anticipates it will be
held within 45 days of filing its appeal notice. AmerAlia has a
plan to be in compliance with the listing requirements by the
hearing date.
AVADO BRANDS: Makes Interest Payment on 9-3/4% Senior Notes
-----------------------------------------------------------
Avado Brands, Inc., (OTC Bulletin Board: AVDO) announced that it
has made its $5.7 million semi-annual interest payment to
holders of its 9-3/4% Senior Notes. The interest payment was
originally due on December 1, 2001 and as the Company indicated
earlier, the payment was made within the 30 day, no-default
period provided for under the terms of the Indenture.
The Company also reiterated its intention to make the semi-
annual interest payment due to holders of its 11 3/4% Senior
Subordinated Notes, which was originally due on December 15,
2001, within the 30 day no-default period provided for under the
terms of that Indenture.
Avado Brands owns and operates three proprietary brands,
comprised of 14 Canyon Cafe restaurants, 131 Don Pablo's Mexican
Kitchens and 74 Hops Restaurant * Bar * Breweries.
BETHLEHEM STEEL: Connectiv Bidding Protocol Hearing Today
---------------------------------------------------------
Bethlehem Steel Corporation, and its debtor-affiliates propose
that the land, easements and Emission Reduction Credits be sold
to Conectiv Mid-Merit, Inc., pursuant to the terms of their
Agreement, but subject to higher or better offers.
George A. Davis, Esq., at Weil, Gotshal & Manges LLP, in New
York, announces the Debtors' plan to conduct an auction of the
property at the offices of Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York 10153 on December 26, 2001, at 10:00
a.m. (EST). The auction will be conducted on these terms and
conditions:
(1) Bids for the property must:
(a) be in writing;
(b) at a minimum, exceed the purchase price by $350,000;
and
(c) be received by:
(i) the attorneys for the Debtors, Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York
10153, (Attn: George A. Davis, Esq.);
(ii) the attorneys for Conectiv, Kirkpatrick &
Lockhart LLP, 240 North Third Street,
Harrisburg, Pennsylvania 17101 (Attn: R. Timothy
Weston, Esq.);
(iii) the attorneys for the Debtors' pre-petition and
post-petition lenders, Davis Polk & Wardwell,
450 Lexington Avenue, New York, New York 10017
(Attn: Donald Bernstein, Esq.), and Sidley
Austin Brown & Wood LLP, Bank One Plaza, 10
South Dearborn Street, Chicago, Illinois 60603
(Attn: Lawrence J. Nyhan, Esq.); and
(iv) the attorneys for the Committee, Kramer Levin
Naftalis & Frankel LLP, 919 Third Avenue, New
York, New York 10022 (Attn: Thomas M. Mayer,
Esq.), by no later than 12:00 noon (EST) on
December 24, 2001.
Parties not submitting bids by the bid deadline will not
be permitted to participate at the auction.
(2) To submit a higher or better offer, a party (other than
Conectiv) must provide evidence satisfactory to the
Debtors of such party's financial wherewithal to close
upon the sale within the same time-frame and upon
substantially the same terms and conditions contemplated
by the Agreement, and such party's ability to otherwise
satisfy the terms and conditions of the sale.
(3) Each bidder (other than Conectiv) must provide a deposit
of $175,000 by certified check or other form of
immediately available funds to the Debtors prior to the
auction in order to be deemed a qualified bidder.
(Conectiv has previously provided an equivalent deposit
under the terms of the Agreement).
(4) The minimum initial overbid must be at least $350,000 more
than the $9,562,798 purchase price set forth in the
Agreement. The initial overbid, and any subsequent
overbids, must be on an "all cash" basis and on
substantially the same terms (as determined by the Debtors
in their sole discretion) as the terms of the Agreement.
If a qualifying overbid is made for the property, Conectiv
shall have the right, in its sole discretion, to submit
its own higher or better offer in compliance with the
procedures set forth herein.
(5) Any subsequent overbid, to qualify as a higher or better
offer, must be at least $100,000 higher than the previous
qualifying bid.
(6) The Debtors shall determine in good faith whether any
particular overbid meets the qualifications described
herein and whether it constitutes the highest or best
offer for the property. The highest or best offer, as
determined by the Debtors in their sole discretion, will
be submitted to the Court for approval at the hearing.
(7) All offers from parties other than Conectiv shall remain
irrevocably open and subject to acceptance by the Debtors
until a closing takes place. In the event a closing does
not take place with respect to an offer accepted by the
Debtors, the Debtors reserve the right to accept any offer
deemed by them to be the highest or best offer at that
time.
(8) Each bidder will be responsible for, and will indemnify
the Debtors and The Enterprise Development Company
against, any and all claims for consultant's, broker's,
and auctioneer's commissions (other than any fees,
commissions, or expenses payable to Enterprise), where the
basis of the claim by such other consultant, broker,
and/or auctioneer is their asserted engagement by such
bidder.
Judge Lifland will decide whether or not to approve these
procedures in a hearing scheduled for December 27, 2001.
(Bethlehem Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
BRIDGE INFO: Proposes First Amended Joint Plan of Liquidation
-------------------------------------------------------------
Bridge Information Systems, Inc., and its debtor-affiliates
present the Court with their First Amended Joint Plan of
Liquidation.
Under this amended Plan, there are no more provision for claims
under post-petition credit agreement, distributions of cash,
delivery of distributions and undeliverable distributions,
disposition of unclaimed final distributions, time bar to cash
payments, minimum distributions. The procedures for resolving
and treating disputed claims now only have two provisions: (i)
no distribution pending allowance, and (ii) estimation. The
resolution of disputed claims, reserve account for disputed
claims, investment of disputed claims reserve, allowance of
disputed claims, and release of funds from disputed claims
reserve provisions have been deleted from the Plan.
The Lessor Group waives any right to assert or pursue any
unsecured Claim against the Debtors, the Estates, the
Liquidating Trust, and their respective property and assets.
The amended Plan shall be funded from:
(a) Cash Collateral on the Effective Date,
(b) Available Cash on the Effective Date, and
(c) Cash available after the Effective Date, from among other
things, the Chapter 11 Administrative Expense Claim
Reserve, the Priority Tax Claim Reserve, the liquidation
of the Debtors' remaining assets, the prosecution and
enforcement of causes of action of the Debtors, and any
release of funds from the Disputed Claims Reserve after
the Effective Date.
There are only two conditions that are precedent to the
Effective Date of the amended Plan:
(1) The Bankruptcy Court shall have entered the Confirmation
Order confirming this Plan (that is satisfactory to the
Debtors and the Committee); and
(2) The Confirmation Order shall have become a Final Order.
The record date for voting on the Plan was the close of business
(St. Louis time) last December 14, 2001. This means that only
the holders of claims in the voting classes as of the Record
Date are entitled to vote to accept or reject the Plan.
The Bankruptcy Court will hold the hearing regarding the
confirmation of the Plan at 10:00 a.m. (St. Louis time) on
February 13, 2002 at the United States Bankruptcy Court, 111
South Tenth Street, 7th Floor, in St. Louis, Missouri 63102,
before Judge McDonald. At the confirmation hearing, the
Bankruptcy Court will:
(i) determine whether the requisite vote has been obtained for
each of the voting classes,
(ii) hear and determine objections, if any, to the Plan and to
confirmation of the Plan that have not been previously
disposed of,
(iii) determine whether the Plan meets the confirmation
requirements of the Bankruptcy Code, and
(iv) determine whether to confirm the Plan.
The Debtors urge all holders of claims in the voting classes to
accept the Plan. The Debtors also reserve the right to cram
down the Plan on non-accepting classes of claims and equity
interest. Under the "cram down provisions", upon request of a
plan proponent, a bankruptcy court will confirm a plan despite
the lack of acceptance by an impaired class or classes if the
bankruptcy court finds that:
(i) the plan does not discriminate unfairly with respect to
each non-accepting impaired class,
(ii) the plan is fair and equitable with respect to each non-
accepting impaired class, and
(iii) at least one impaired class has accepted the plan.
According to Bridge Information Systems Executive Vice-President
Zachary Snow, there are certain risks that distributions will be
less than estimated by the Debtors. "The Debtors project that
the Claims asserted against them will be resolved in and reduced
to an amount that approximates their estimates and may seek an
order or orders from the Bankruptcy Court estimating the maximum
dollar amount of allowed claims and Disputed Claims in Class 5
or otherwise determining and fixing the amount of the Disputed
Claims Reserve for such Class," Mr. Snow tells the Court. Then,
Mr. Snow continues, there's also the possibility that the Plan
will not be confirmed and consummated. "If a chapter 7
liquidation were to occur, there is a substantial risk that the
holders of Allowed Claims in Class 5 would receive materially
less than they will receive under the Plan," Mr. Snow notes.
Furthermore, Mr. Snow says, the Debtors ability to make
distributions described in the Plan depends on the liquidation
of the Debtors' assets. The Debtors cannot guarantee either the
timing or the amount of distributions under the Plan. As the
Liquidating Trust pursues certain claims, Mr. Snow also
observes, the Liquidating Trust will have to bear the costs of
litigation. "Moreover, there can be no assurances that the
Liquidating Trust will prevail in such litigation, so the
distribution projected by the Debtors may be significantly
reduced," Mr. Snow warns.
After careful review of the estimated recoveries in a chapter 7
liquidation scenario, the Debtors conclude that this Plan
maximizes the recovery to holders of Claims. "Thus, the Plan
offers the best prospect of recovery for the holders of Claims
against the Debtors. Accordingly, holders of Claims should vote
to accept the Plan," Mr. Snow asserts.
The Court will convene a hearing on the Debtors' disclosure
statement for the first amended joint plan of liquidation at
1:00 p.m. on January 8, 2002. Objections must be filed and
served on or before 11:00 a.m. of December 28, 2001. (Bridge
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
BURLINGTON: Court Okays Ernst & Young as Independent Auditors
-------------------------------------------------------------
Burlington Industries, Inc., and its debtor-affiliates desire to
retain and employ Ernst & Young LLP as independent auditors and
tax accountants in these chapter 11 cases. Ernst & Young has
provided auditing and related financial advisory services to
numerous Fortune 500 and other large business entities, John D.
Englar, Senior Vice President of Burlington Industries, Inc.,
tells Judge Walsh. According to Mr. Englar, Ernst & Young is
widely recognized as one of the world's leading providers of
auditing and accounting services. The firm has substantial
expertise in providing auditing and related financial advisory
services to troubled companies in connection with in- and out-
of-court reorganizations, Mr. Englar adds.
Moreover, Ernst & Young provided various auditing, accounting
and other financial services to the Debtors pre-petition, Mr.
Englar reports. As a result, Mr. Englar claims, Ernst & Young
is well acquainted with the Debtors' accounting and financial
systems and related financial reporting issues. Accordingly,
Mr. Englar concludes, Ernst & Young has developed significant
relevant experience and expertise that will assist it in
providing effective and efficient services in these Chapter 11
cases.
The Debtors anticipate that Ernst & Young will render various
tax and audit services to the Debtors as requested throughout
the course of these chapter 11 cases, including:
(1) Audit Services and Accounting Assistance
(a) auditing and reporting on the consolidated financial
statements of the Debtors for their fiscal years ended
September 29, 2001 and September 28, 2002;
(b) preparing an opinion of fairness of the presentation
of the consolidated financial statements in conformity
with accounting principles generally accepted in the
United States;
(c) reviewing unaudited financial statements and other
financial information necessary for filings with the
Securities and Exchange Commission;
(d) auditing the 2001 and 2002 financial statements of
various employee benefit plans in accordance with the
applicable federal rules and regulations; and
(e) providing such other accounting services as requested
by the Debtors;
(2) Tax Advice
(f) assisting and advising the Debtors in their bankruptcy
restructuring objectives and post-bankruptcy
operations by determining the optimal tax strategy in
connection with those objectives, including, as
needed, non-legal research and analysis of Internal
Revenue Code sections, treasury regulations and other
relevant tax authority that could be applied to
business valuation and restructuring models;
(g) assisting and advising the Debtors regarding
availability, limitations, preservation and
maximization of tax attributes, such as net operating
losses and alternative minimum tax credits;
minimization of tax costs in connection with stock and
asset sales, if any; and assisting with tax issues
arising in the ordinary course of the Debtors'
businesses;
(h) assisting and advising the Debtors with settling tax
claims and obtaining refunds of reduced claims
previously paid by the Debtors for various taxes; and
(i) assisting and advising the Debtors in assessing the
validity of tax claims;
(3) Expatriate Tax Services
(j) assisting and advising the Debtors with expatriate tax
matters and global expatriate management services,
including calculation and preparation of income tax
returns of employees currently or previously on
international assignment and employer resource needs
for employee transfer and relocation matters;
(4) U.S. Customs Cost Submissions
(k) assisting and advising the Debtors with customs and
trade matters, including collecting and analyzing data
and documentation required to complete U.S. Customs
cost submissions, analyzing relevant customs cost data
findings and preparing certain customs related
reports;
(5) Tax Return Compliance Services
(l) assisting and advising the Debtors with a requested
tax refunds based upon a net operating loss incurred
during the Debtors' taxable year ended September 30,
2001, including reviewing the Debtors' U.S. Corporate
Income Tax Refund for the year ended September 30,
2001.
J. Andrew Betts, a partner in Ernst & Young, discloses that the
Debtors made payments to Ernst & Young aggregating approximately
$1,269,258 during the year immediately preceding the Petition
Date on account of fees and expenses incurred by the firm on
matters relating to the Debtors. Pursuant to engagement letters
dated November 14, 2001, Mr. Betts relates further, Ernst &
Young intends to:
(i) charge for its services on an hourly basis in accordance
with its ordinary and customary hourly rates in effect on
the date services are rendered,
(ii) seek reimbursement of actual and necessary out-of-pocket
expenses, and
(iii) charge for the filing of certain tax returns on a fixed
fee basis.
Mr. Betts sets forth the hourly rates that Ernst & Young will
use to calculate its fees for accounting and auditing services:
Partners and Principals $491 - $562
Senior Managers 354 - 460
Managers 266 - 311
Seniors 176 - 211
Staff 127 - 146
Ernst & Young's hourly rates for bankruptcy tax consulting
services, expatriate tax consulting services and customs and
trade matters consulting services differ slightly. Mr. Betts
thus outlines the applicable rates for these services:
Partners and Principals $449 - $607
Senior Managers 380 - 479
Managers 296 - 386
Seniors 229 - 266
Staff 151 - 169
The firm's fee for advising and assisting the Debtors with
expediting the requested tax refund will be a flat fee of
$15,000, plus expenses, Mr. Betts notes.
"To the best of my information and belief, Ernst & Young does
not represent any interest adverse to the Debtors and will not
represent any entity other than the Debtors in connection with
these chapter 11 cases," Mr. Betts assures Judge Walsh. The
Debtors have many creditors and other parties in interest, Mr.
Betts points out, and so Ernst & Young may have:
(i) rendered in the past, may render presently, or may render
in the future, accounting, tax and/or consulting services
to certain of these creditors or parties in interest, or
(ii) been involved in matters in which attorneys for these
creditors or parties in interest have been, are, or were
also involved.
Ernst & Young will not accept any engagement which would require
Ernst & Young to represent an interest adverse to the Debtors in
any way relating to the matters in connection with which Ernst &
Young is to be engaged in these chapter 11 cases, Mr. Betts
promises the Court. "Ernst & Young is a 'disinterested person,'
as defined in section 101(14) and as required by section 327(a)
of the Bankruptcy Code," Mr. Betts affirms.
In a supplemental affidavit, Mr. Betts reports that based upon
review of their internal billing records - the firm was owed
$3,500 in respect of expatriate tax services provided during the
pre-petition period. "To the extent that Ernst & Young is
retained to provide services to the Debtors during the post-
petition period, we will waive our rights to the $3,500," Mr.
Betts says.
Mr. Betts also clarifies that Ernst & Young(France), Ernst &
Young(Mexico), Ernst & Young(Bermuda), and Ernst & Young(India)
provide services to certain of Burlington's foreign
subsidiaries, which are not in bankruptcy. These firms are
members of Ernst & Young International, a Cayman Islands limited
liability company that has no shareholders and no capital, Mr.
Betts explains. "Ernst & Young International is a network of
correspondent accountant firms that have agreed to conduct their
individual practices in accordance with Ernst & Young
International's Articles of Association," Mr. Betts adds. From
time to time, Mr. Betts tells the Court, the Debtors and its
subsidiaries routinely engage other members of Ernst & Young
International, including Ernst & Young(Germany), to perform
audit and tax services. Mr. Betts makes it clear that member
firms of Ernst & Young International and Ernst & Young LLP are
independent legal entities with no common ownership.
According to Mr. Betts, Ernst & Young(Germany) has two
outstanding invoices with Burlington Industries totaling 4,145
Euros for pre-petition tax services. Moreover, Mr. Betts
admits, Ernst & Young(Mexico) incorrectly billed Burlington
Industries on November 13, 2001 for $4,600 regarding assistance
with regulatory filings. "These services will be re-billed to
Casa BurlMex, S.A. de C.V., a non-bankrupt subsidiary of the
debtor. In addition, Mr. Betts discloses that Ernst & Young LLP
currently provides audit and tax services to Mafalial Burlington
Industries Limited, a joint venture involving the Debtors.
U.S. Trustee Objects
Acting United States Trustee Donald F. Walton for the District
of Delaware does not believe Ernst & Young holds no interest
adverse to the Debtors' estate.
Julie L. Compton, Esq., on behalf of the United States Trustee,
relates that Ernst & Young performs auditing and tax advisory
services for Unifi, Inc., one of the Debtors' largest creditors.
According to Ms. Compton, Unifi and the Debtors are parties to a
joint venture known as Unifi Textured Polyester, LLC, of which
Unifi owns 85% and the Debtors own 15%. "Ernst & Young also
provides auditing and accounting services for the Joint
Venture," Ms. Compton adds.
Furthermore, Ms. Compton tells the Court that Ernst & Young has
informed the United States Trustee that services rendered to the
Debtors also include auditing and tax advisory services relating
to the Joint Venture. At the same time, Ms. Compton notes, the
Debtors' counsel and a representative of Unifi have indicated to
the United States Trustee that all or a portion of the debt owed
to Unifi by the Debtors arose as a result of the Joint Venture
relationship. "It seems that there currently exists a dispute
as to the amount owed under the terms of the Joint Venture," Ms.
Compton observes.
And so, Ms. Compton argues that in light of Ernst & Young's
representations of Unifi, the Debtors, and the Joint Venture --
Ernst & Young cannot meet the requirements set forth in section
327(a) of the Bankruptcy Code, which provides that the Debtors
may only employ those professionals "that do not hold or
represent an interest adverse to the estate".
In addition, Ms. Compton notes that the application to retain
Ernst & Young also discloses certain payments made to the firm
prior to the bankruptcy filing. "Upon further inquiry by the
United States Trustee regarding the nature of these payments, it
appear that a portion of the payments made, in the amount of
$22,500 was made within 90 days prior to the bankruptcy on
account of antecedent debt," Ms. Compton says.
Thus, the United States Trustee asks the Court to deny the
relief requested.
* * *
After due deliberation, Judge Walsh concedes that the Debtors'
employment of Ernst & Young is in the best interests of their
estates. Thus, Judge Walsh gives the Debtors permission to
retain and employ Ernst & Young as independent auditors and tax
accountants, nunc pro tunc as of the Petition Date.
To offset certain pre-petition payments made by the Debtors to
Ernst & Young and in accordance with the parties' agreement,
Judge Walsh instructs Ernst & Young to:
(i) credit $22,500 against the firm's fees and expenses
incurred for post-petition services to the Debtors, which
credit shall be reflected in Ernst & Young's first monthly
invoice submitted to the Debtors and its first interim fee
application filed with the Court in these chapter 11
cases; and
(ii) waive any claim that it may have against the Debtors or
their estates for the pre-petition fees and expenses
underlying this credit.
Furthermore, Judge Walsh directs Ernst & Young to file a
supplemental affidavit with the Court:
(a) representing that no employee of Ernst & Young providing
services to the Debtors shall also provide services to
Unifi, Inc. or Unifi Textured Polyester, LLC; and
(b) explaining the types of services provided by Ernst & Young
to Unifi, Inc. and Unifi Textured Polyester, LLC.
(Burlington Bankruptcy News, Issue No. 5; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CHIQUITA BRANDS: Court Approves Interim Compensation Procedures
---------------------------------------------------------------
Chiquita Brands International, Inc., sought and obtained a Court
order establishing certain compensation and expense
reimbursement procedures for the professionals and committee
members.
Briefly stated, Kim Martin Lewis, Esq., at Dinsmore & Shohl LLP,
in Cincinnati, Ohio, relates the procedures require each
Professional to present to the Debtor, the Debtor's bankruptcy
counsel, the United States Trustee and counsel to the Committee
(once appointed) a detailed statement of services rendered and
expenses incurred by such Professional for the prior month. If
there is no timely objection, Ms. Lewis says, the Debtor would
pay 85% of the amount of fees incurred for the month and 100% of
expenses for the month. However, Ms. Lewis emphasizes that
these payments would be subject to the Court's subsequent
approval as part of the normal interim fee application process,
approximately every 120 days.
Specifically, the monthly payment of compensation and
reimbursement of expenses of the Professionals is structured as:
(a) On or before the 20th day of each month following the
month for which compensation is sought, each Professional
will serve a monthly statement, by hand or overnight
delivery, on:
(i) Chiquita Brands International, Inc.
250 East Fifth Street
Cincinnati, Ohio 45202
Attn: General Counsel;
(ii) Counsel to the Debtor:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: Matthew N. Kleiman;
(iii) Co-counsel to the Debtor:
Dinsmore & Shohl LLP
1900 Chemed Center, 255 East Fifth Street
Cincinnati, Ohio 45202
Attn: Kim Martin Lewis;
(iv) Counsel to any official committee of creditors
appointed by the United States Trustee; and
(v) The Office of the United States Trustee
Neal J. Weill
2030 CBLD Center, 36 East Seventh Street,
Cincinnati, Ohio 45202,
for interim approval and allowances pursuant to section
331 of the Bankruptcy Code for professional services
rendered and reimbursement of expenses incurred during the
relevant compensation period.
(b) Each person receiving a statement will have 20 days after
its receipt to review it and, in the event that he or she
has an objection to the compensation or reimbursement
sought in a particular statement, to serve upon the
Professional whose statement is objected to, and the other
Service Parties, a written "Notice of Objection to Fee
Statement" setting forth the precise nature of the
objection and the amount of fees of expenses at issue.
(c) If no objection is served in accordance with paragraph
(b), at the expiration of the 20-day period, the Debtor
shall promptly pay 85% of the fees and 100% of the
expenses identified in each monthly statement.
(d) If the Debtor receives an objection to a particular
statement, it shall withhold payment on that portion of
the fee statement to which the objection is directed and
promptly pay the remainder of the fees and expenses.
(e) Similarly, if the parties to an objection are able to
resolve their dispute following the service of Notice of
Objection to Fee Statement, then the Debtor shall promptly
pay, in accordance with paragraph (c), that portion of the
fees statement that is no longer subject to an objection.
(f) In the event that an objection is timely filed, served and
received and such objection is not otherwise resolved, or
the Court otherwise schedules a hearing in respect to a
fee statement, a hearing shall be held not less than 20
days following the Objection Deadline in respect of said
fee statement or such other date as the Court may fix.
(g) The first such fee statement shall be filed by each
Professional and served upon the Service Parties by
January 20, 2002 and shall cover the period from such
commencement of this case through December 31, 2001.
(h) The service of an objection in accordance with paragraph
(b) shall not prejudice the objecting party's right to
object to any fee application made to the Court in
accordance with the Bankruptcy Code on any ground whether
raised in the objection or not. Furthermore, the decision
by any party not to object to a fee statement shall not be
a waiver of, or any kind or prejudice to, that party's
right to object to any fee application subsequently made
to the Court in accordance with the Bankruptcy Code.
(i) Any Professional who fails to file a statement seeking
approval of compensation and expenses previously paid
under this Order when due shall be ineligible to receive
further monthly payments of fees or expenses as provided
herein until such statement is filed.
(j) The pendency of an application or a Court order that
payment of compensation or reimbursement of expenses was
improper shall not disqualify a Professional from the
future payment of compensation or reimbursement of
expenses, unless otherwise ordered by the Court.
(k) Neither the payment of, the failure to pay, nor the
failure to object, in whole or in part, monthly
compensation and reimbursement as provided herein, shall
bind a party-in-interest or the Court with respect to the
allowance of applications for compensation and
reimbursement of any Professional.
The Court further authorizes the Debtor to limit sending notice
of hearings to consider interim applications to the Service
Parties and all parties who have filed a notice of appearance
with the Clerk of the Court and requested such notice. Ms.
Lewis convinced Judge Aug that such notice should reach the
parties most active in these cases and will save the expense of
undue duplication and mailing.
Moreover, the Court permits each member of the Committee (if
appointed) to submit statements of expenses and supporting
vouchers to counsel for the Committee (if appointed), who will
collect and file such requests for reimbursement in accordance
with the procedures for monthly and interim compensation and
reimbursement.
"These procedures will enable all parties to closely monitor
costs of administration," Ms. Lewis observes. The Debtor will
also be able to maintain more level cash flow availability and
implement efficient cash management procedures, Ms. Lewis adds.
(Chiquita Bankruptcy News, Issue No. 3; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
COHO ENERGY: Appaloosa & Mr. Tepper Dispose of About 1.8M Shares
----------------------------------------------------------------
Appaloosa Management L.P. and Mr. David A. Tepper beneficially
own 3,384,936 shares of the common stock of Coho Energy, Inc.,
representing 18.09% of the total outstanding common stock of
Coho. The Manager of Appaloosa Management L.P. and Mr. Tepper
hold sole voting and dispositive powers over the stock held.
During the past sixty days, Appaloosa Management and Mr. Tepper
have sold the following shares of Coho's common stock, all in
open market transactions:
Sale Date Number of Shares Per Share Sale Price
--------- ---------------- --------------------
December 12, 2001 1,650,000 $0.01609
December 13, 2001 135,000 $0.0110
December 14, 2001 100,000 $0.0110
Coho Energy, Inc. is a Dallas based oil and gas producer
focusing on exploitation of underdeveloped oil properties in
Oklahoma and Mississippi. In November, the company announced
that it would continue negotiations to sell certain of its
assets to remedy its borrowing deficiency. The sale was
considered as one of the options to shun events of default under
its credit agreement.
CYBEX INTL: Bank Lenders Extend Facility Until December 31, 2003
----------------------------------------------------------------
Cybex International, Inc. (AMEX: CYB) a leading exercise
equipment manufacturer, today reported that it has finalized an
agreement with its banks which, among other things, extends the
maturity date of the facility to December 31, 2003, waives any
defaults, and amends certain financial covenants and principal
repayment terms.
John Aglialoro, Chairman and Chief Executive Officer, stated:
"Cybex International is pleased to have a long-term banking
facility established. This agreement demonstrates the
recognition of Fleet and First Union Banks of the progress that
has been made in 2001 and their confidence in the future of
Cybex. This new financing agreement will enable Cybex to meet
its aggressive schedule of new product introductions in 2002."
Cybex International, Inc. is a leading manufacturer of premium
exercise equipment for consumer and commercial use. Cybex and
the Cybex Institute, a training and research facility, are
dedicated to improving exercise performance based on an
understanding of the diverse goals and needs of individuals of
varying physical capabilities. Cybex designs and engineers each
of its products and programs to reflect the natural movement of
the human body, allowing for variation in training and assisting
each unique user -- from the professional athlete to the
rehabilitation patient -- to improve their daily human
performance. For more information on Cybex and its product line,
please visit the company's web site at http://www.eCybex.com
E-SYNERGIES: Working Capital Deficit Burgeons to Over $4 Million
----------------------------------------------------------------
e-Synergies provides technology-based e-marketing services that
enable companies to deliver customized online marketing
messages. e-Synergies provides marketers with an Application
Service Provider (ASP) e-marketing solution that is fully
integrated, affordable and user friendly to help clients grow
market share, increase customer revenue and improve customer
retention. e-Synergies' comprehensive suite of tools will
analyze customer behavior, deliver targeted and personalized e-
marketing campaigns and measure customer response for use in
future campaigns. These solutions enable marketers to optimize
all of their marketing programs including rich media e-mail,
site personalization, direct mail and other promotional
activities.
The Company was incorporated on February 29, 2000 and reported
no sales for the fiscal year 2000. Its revenues for the fiscal
year ended August 31, 2001 totaled $2,503,404.
Net loss for the year ended August 31, 2001 was $1,634,442,
compared to a net loss of $26,661 for the same period last year.
The net loss is attributable to expenses incurred by the
subsidiaries the Company acquired during the fiscal year and
commencement of operations.
At August 31, 2001, e-Synergies had a working capital deficit of
$4,090,159, as compared to a working capital deficit of $710 for
the prior year. The difference is attributed to the acquisition
of subsidiaries and the commencement of operations.
Net cash flows from operating activities was $1,643,442. Net
cash flows from operating activities amounted to $22,917 for the
year ended August 31, 2000. The difference is attributed to the
acquisition of subsidiaries.
The Company indicates that its current cash, cash equivalents
and cash generated from operations are not sufficient to meet
its obligations as they come due. Accordingly, it will require
an additional substantial cash infusion to continue operations.
e-Synergies is considering an asset sale or other comparable
transaction as part of a financial restructuring. If it is
unsuccessful in completing a strategic transaction, it may be
required to cease operations, and its common stock may have no
value. In addition, potential investors in Company securities
should consider the risk that, even if it is successful in
completing a strategic transaction, its common stock may
nonetheless have minimal value.
Due to concerns regarding its ability to continue operations,
customers and vendors are likely to decide not to conduct
business with the Company, or may conduct business with it on
terms that are less favorable than those customarily extended by
them. In that event, its net sales would further decrease, and
its business will suffer significantly.
The audit reports accompanying e-Synergies' financial statements
for the years ended August 31, 2001 and 2000 contain a
qualification that certain conditions indicate that it may not
be able to continue as a going concern. The financial statements
indicate that substantial operating losses account for this
uncertainty. Many investment bankers and investors view
companies with a "going concern" qualification as less desirable
for investment. Accordingly, e-Synergies will have a more
difficult time raising equity capital or borrowing capital at
all on favorable terms. The Company has said that its suppliers
might be less willing to extend credit, its potential customers
might be less willing to purchase its products and services if
they believe that the company will not be viable enough to
provide service, support, back-up, and follow-on products when
needed. Furthermore, it might be disadvantaged in recruiting
employees who might be concerned about the stability of
employment with it. Therefore, the company is concerned that the
"going concern" qualification can have severe adverse
consequences on it.
ENRON CORPORATION: Bringing In Batchelder as Financial Advisors
---------------------------------------------------------------
The promulgation of a reorganization plan by Enron Corporation,
and its debtor-affiliates, will require extensive work with
operating management and financial personnel, analysis of
enterprise valuation, debt capacity and the types of equity
securities to be issued as part of that reorganization plan.
For that reason, the Debtors have employed Batchelder &
Partners, Inc. as financial advisors in connection with their
chapter 11 cases, subject to Court approval.
Melanie Gray, Esq., at Weil, Gotshal & Manges LLP, in New York,
cites Batchelder's extensive experience in matters involving
complex financial and operating restructurings. "Batchelder is
a preeminent financial and restructuring advisor, with a
reputation for creativity in complex situations," Ms. Gray tells
Judge Gonzalez. Batchelder and/or its principals have been
involved as restructuring or bankruptcy advisors to a diverse
group of distressed companies, debtors and creditors, Ms. Gray
adds.
An engagement letter negotiated by the Debtors provides that
Batchelder will render these professional services:
(a) Advise the Debtors concerning the preservation and
enhancement of enterprise value;
(b) Advise the Debtors as to effective corporate governance
practices;
(c) Assist the Debtors in identifying opportunities for
equity financing;
(d) Assist the Debtors in internal financial matters to
support recapitalization, restructuring or
reorganization effects;
(e) Assist in the evaluation of the Debtors' businesses and
prospects;
(f) Assist in the development of the Debtors' long-term
business plan;
(g) Assist in the development of financial data and
presentations to the Debtors' Board of Directors,
various creditors, any official committees formed in a
Chapter 11 proceeding, and other third parties;
(h) Provide strategic advice with regard to restructuring or
refinancing the Debtors' obligations;
(i) Evaluate the Debtors' debt capacity and alternative
capital structures;
(j) Assist in the arranging of financings, including
identifying potential sources of capital, assisting in
the due diligence process, and negotiating the terms of
any proposed financing, as requested;
(k) Assist the Debtors in evaluating and executing a
transaction, including identifying potential buyers or
parties in interest, assisting in the due diligence
process, and negotiating the terms of any proposed
transaction, as requested;
(l) Provide testimony in any Chapter 11 case concerning any
of the subjects encompassed by the other financial
advisory services, if appropriate and as required;
(m) Assist and advise the Debtors concerning the terms,
conditions and impact of any proposed transaction; and
(n) Provide such other advisory services as are customarily
provided in connection with the analysis and negotiation
of any of the transactions contemplated in the
agreement, as requested and mutually agreed.
Ms. Gray notes that services provided by Batchelder are not
duplicative in any manner with the services provided by The
Blackstone Group, L.P., another of the Debtors' proposed
financial advisors.
Prior to the filing of these cases, Ms. Gray relates, the
Debtors paid to Batchelder approximately $1,275,000 for pre-
petition services rendered and related expenses. Ms. Gray
clarifies that this fee was not a retainer against which
services will be charged, although the Debtors do not begin
paying Batchelder's monthly fee until January 2, 2002.
Joel L. Reed, president of Batchelder, tells Judge Gonzalez that
in consideration of the financial advisory services provided by
Batchelder, the Debtors have agreed to pay:
(a) a retainer fee of $1,250,000 that was paid prior to the
Petition Date, plus a Monthly Advisory Fee in the amount
of $375,000, due and payable on the first business day
following the first day of each month during our
engagement, commencing January 1, 2002.
(b) an Equity Financing fee, equal to 0.5% of the amount of
the equity financing, whether common stock, preferred
stock or any securities convertible into or including
rights to acquire common stock or preferred stock, by
means of capital infusion, conversion or exchange of
existing indebtedness, restructuring, reorganization or
otherwise.
(c) upon the consummation of a transaction, a transaction
fee equal to 0.25% of the incremental transaction equity
value that results if a transaction is consummated above
$9.00 and below $11.40 per Enron common share, plus
0.50% on such incremental transaction equity value above
$11.40 per Enron common share.
(d) if the Debtors do not consummate a transaction and
receive a Break Fee, Batchelder shall be due 10% of such
Break Fee.
(e) notwithstanding the foregoing, the aggregate fees
payable by the Debtors to Batchelder shall be limited to
$15,000,000, except that fees paid solely pursuant to
(a) shall not be subject to this limitation.
(f) indemnification pursuant to the Batchelder Agreement and
reimbursement of all reasonable out-of-pocket expenses
incurred during this engagement, including but not
limited to travel and lodging, direct identifiable data
processing and communication charges, courier services,
working meals, reasonable fees and expenses of
Batchelder's counsel and other necessary expenditures,
due upon rendition of invoices setting forth in
reasonable detail the nature and amount of such
expenses.
Mr. Reed acknowledges that Batchelder may have in the past
represented, may currently represent, and likely in the future
will represents, parties-in-interest of the Debtors in
connection with matters unrelated to the Debtors and their
chapter 11 cases. Nevertheless, Mr. Reed assures the Court,
Batchelder holds no interest adverse to the Debtors, their
estates, their creditors, or any other party in interest herein,
or their respective attorneys, in the matters for which
Batchelder is to be retained. "Batchelder is a 'disinterested
person,' as defined in section 101(14) and as required by
section 327(a) of the Bankruptcy Code," Mr. Reed concludes.
(Enron Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ENRON: Eco-Tankship Wants to Block Auction of Trading Assets
------------------------------------------------------------
South Carolina based Eco-Tankship, Inc., is contemplating a bid
to oppose the auction of Enron Corp's "enrononline" trading
division.
The auction, approved last week by Southern District of New York
bankruptcy court judge Arthur Gonzales, has been scheduled for
January 10th 2002.
Alexander Schizas President and CEO of Eco-Tankship has notified
counsel for the creditors committee, the debtors in possession
and the US trustees of Eco's interest in moving to oppose the
sale.
The particulars of the opposition surround Schizas' request for
full disclosure by Enron regarding the auction.
"Schizas' group contends that Enron must disclose that they
do not have proprietary rights to the Internet based trading of
Liquefied Natural Gas in its physical form and as futures and
options on futures.
"LNG is natural gas which is cleaned and cooled in order to
reduce the volume 600 times for shipment on specialty tankers.
Once the liquid is transferred to the receiving facility, it is
regasified and used as feedstock for power generation.
"Schizas' group owns the LNGHUB.COM website which was
established in March for the purpose of trading LNG.
"With the increased interest in the utilization of this
clean burning fuel for power generation the world over, Schizas
is seeking to ensure that "if and when" the Enron trading
division resumes operations, that he and Eco-Tankship will not
find themselves in a protracted legal battle over who has rights
to trade this commodity and the financial contracts.
"Schizas claims that he individually filed a utility patent
application covering the trading of LNG in June of 2001.
"In light of the debacle surrounding Enron and the
disclosure issues therein, I believe that full disclosure in
this regard will protect the prospective bidders in addition to
our own interest.
"We are waiting to hear from counsel and trust that they
will see the need for an expedient resolution to this issue."
EXIDE: Names L.R. Hilts VP of Planning & Logistics for EXCELL
-------------------------------------------------------------
Exide Technologies (NYSE: EX), the global leader in stored
electrical-energy solutions, has named Lorne R. Hilts as Vice
President of Planning and Logistics for the company's European
Transportation related business. In this new position, Hilts
will work closely with Robert B. Weiner, Senior Vice President
Global Manufacturing and Engineering, to bolster the company's
recently established EXCELL (Exide's Customer Focused Excellence
Lean Leadership System) program that focuses on removing waste
in all business and operational processes company wide. He also
will oversee the distribution and planning organizations
throughout Exide's European transportation operations.
"Lorne's wealth of talent and experience in manufacturing
processes make him the ideal leader for Exide's European
transportation related logistics and planning team," said
Weiner. "Currently, he and his group are evaluating and
changing our logistics and planning operations to maximize
efficiency in Europe, and he will play an integral role as we
develop Exide into one of the world's premier logistics and
manufacturing organizations."
Hilts has been with Exide since 1988 and was instrumental in
integrating and restructuring the Canadian operation when Exide
acquired Battronics in 1995. He has held various positions
within the organization, the most recent as President and
Director-Exide Canada. In this role, he was responsible for
manufacturing, logistics, sales, marketing, quality, and all
support functions for Exide's Canadian operations. Prior to
this, he also served as Vice President of Operations and
Director of Manufacturing and Distribution.
Before joining Exide Technologies, Hilts was the Vice President
of Logistics for Boot's Drugs, the world's largest retail
pharmacy chain. In that position, he led the logistics
organization as well as the company's integration and
restructuring of logistics systems for numerous acquisitions
throughout North America and England.
"The EXCELL process touches every part of Exide's business,
helping to shape the way we think about manufacturing and all
other business processes," said Hilts. "We are using EXCELL to
benchmark best planning and logistics practices to create world-
class production and delivery of products to our customers."
Exide Technologies is the world's largest industrial and
transportation battery producer and recycler with operations in
89 countries.
Industrial applications include network-power batteries for
telecommunications systems, fuel-cell load leveling, electric
utilities, railroads, photovoltaic (solar-power related) and
uninterruptible power supply (UPS) markets; and motive-power
batteries for a broad range of equipment uses, including lift
trucks, mining vehicles and commercial vehicles.
Transportation uses include automotive, heavy-duty truck,
agricultural, marine and other batteries, as well as new
technologies being developed for hybrid vehicles and new 42-volt
automotive applications. The company supplies both aftermarket
and original-equipment transportation customers.
Further information about Exide Technologies, its financial
results and other information can be found at
http://www.exide.com
* * *
DebtTraders reports that Exide Technologies' 10.000% bonds due
in 2005 (EXIDE2) are trading between 25 and 28. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=EXIDE2for
real-time bond pricing.
GRAHAM-FIELD: Appoints Michael Joffred as CEO & Board Chairman
--------------------------------------------------------------
On Friday, November 16, 2001 Graham-Field elected a new board of
directors and appointed a new CEO.
As part of its strategic rebuilding plan and with the support of
its Creditors, Graham-Field accepted the resignations of Tom
Opladen, Chairman of the Board and CEO, along with the other
board members. The new board elected Michael Joffred as CEO and
Chairman of the Board. Mr. Joffred has held the post of CFO
throughout the restructuring process. As CEO he brings
consistency to the role along with his unrelenting commitment
and focus to making Graham-Field an efficient and profitable
company.
The new board was named and consists of the senior management
team of Michael Joffred, Michael Crouch, Vicki Ray and Cherie
Antoniazzi. The decision to place them on the board
unequivocally endorses the creditors' belief in the capabilities
of the senior management team.
Mr. Wyane Cersey, formerly Director of Finance, will assume the
post of CFO. In addition Mr. Cersey will be taking on the
responsibility of the IT department.
Headquartered in Atlanta, GA, Graham-Field is one of the world's
leading manufacturers and distributors of medical products in
the health care industry, offering more than 4,000 medical,
rehabilitation, long-term care and homecare products. Its
offering is comprised of quality brands such as Everest &
Jennings and LaBac wheelchair and seating products; Lumex
ambulatory, bath safety, pressure management and specialty
seating products; Smith & Davis and Simmons beds and
institutional equipment; John Bunn respiratory equipment;
Labtron diagnostic equipment; and Grafco exam treatment
products.
Graham-Field Health Products helps patients get around, but
needs some assistance itself. A leading maker of wheelchairs,
the medical supply manufacturer filed for Chapter 11 bankruptcy
in 1999 after unsuccessful attempts to sell itself. The company
also distributes medical and surgical supplies made by such
manufacturers as Bayer, Proctor & Gamble, and Smith & Nephew.
Graham-Field, which has suffered from slow sales and problems
integrating previous acquisitions, has received infusions of
capital from First Union subsidiary Congress Financial and from
the sale of its Prism Technologies subsidiary to the unit's
management.
GRAHAM-FIELD: Sells Former Headquarters in NY for $4.4 Million
--------------------------------------------------------------
Graham-Field Health Products, Inc. has sold its former corporate
headquarters in Bay Shore, N.Y., for $4.4 million.
As part of its ongoing reorganization plans, Graham-Field will
put the money from the sale back into the company's
restructuring efforts. The sale of this owned asset completes
Graham-Field's move to Atlanta, Ga., where it is now
headquartered.
Headquartered in Atlanta, GA, Graham-Field is one of the world's
leading manufacturers and distributors of medical products in
the health care industry, offering more than 4,000 medical,
rehabilitation, long-term care and homecare products. Its
offering is comprised of quality brands such as Everest &
Jennings and LaBac wheelchair and seating products; Lumex
ambulatory, bath safety, pressure management and specialty
seating products; Smith & Davis and Simmons beds and
institutional equipment; John Bunn respiratory equipment;
Labtron diagnostic equipment; and Grafco exam treatment
products.
GUILFORD MILLS: Fails to Meet NYSE Continued Listing Standards
--------------------------------------------------------------
Guilford Mills, Inc. (NYSE: GFD) announced that the New York
Stock Exchange has informed the Company that the Company is not
in compliance with certain NYSE continued listing standards.
Specifically, the average closing price of the Company's common
stock has fallen below $1.00 per share, and the Company's market
capitalization has fallen below $15 million, over a consecutive
30 trading day period.
Pursuant to NYSE rules, the Company intends to submit to the
NYSE in early January, 2002 a business plan designed to
demonstrate that the Company's common stock will return to
compliance with listing requirements before the NYSE's stated
deadlines. If, on May 7, 2002, the Company's common stock does
not trade above $1 per share and have a $1 average share price
over the preceding 30 trading days, then the Company's common
stock will be subject to suspension and delisting. If the NYSE
accepts the Company's business plan, then the Company will have
up to 18 months (subject to periodic monitoring by the NYSE for
compliance with the plan) to meet the minimum market
capitalization requirement. Based upon the number of shares of
Company common stock currently outstanding, if the Company
satisfies the minimum per share price rule, then the Company
will have already satisfied the minimum market capitalization
requirement. If the NYSE does not accept the Company's business
plan, then the Company's common stock will be subject to
suspension and delisting. Moreover, notwithstanding the general
NYSE rules permitting an issuer to cure a non-compliance with
listing standards, the NYSE also maintains the discretion to
suspend and delist a security under appropriate circumstances,
even if the relevant cure or grace period has not expired. For
instance, the NYSE has advised the Company that a security which
trades at an abnormally low level, as determined by the NYSE,
would be subject to immediate suspension and delisting without
regard to the cure periods typically offered to issuers.
If the Company's common stock were delisted from the NYSE,
trading of the Company's common stock would thereafter have to
be conducted in the over-the-counter market, e.g., either on the
OTC Bulletin Board or in "The Pink Sheets."
Guilford Mills is an integrated designer and producer of value-
added fabrics using a broad range of technologies. The Company
is one of the largest warp knitters in the world and is a leader
in technological advances in textiles, including microdenier
warp knits and wide width circular knits of cotton blended with
LYCRAr. Guilford Mills serves a diversified customer base in
the home furnishings, apparel, automotive and industrial
markets. Through its Guilford Home Fashions subsidiary, the
company produces bedding products, window treatments and shower
curtains for the retail market.
HAYES LEMMERZ: Wants More Time to File Schedules & Statements
-------------------------------------------------------------
Hayes Lemmerz International, Inc., and its debtor-affiliates ask
the Court to extend the deadline by which they must prepare and
file comprehensive schedules of assets and liabilities,
schedules of executory contracts and unexpired leases and
statements of financial affairs as required by 11 U.S.C. Sec.
521(1).
Grenville R. Day, Esq., at Skadden Arps Slate Meagher & Flom
LLP, says that due to the complexity and diversity of Hayes
Lemmerz's operations, the Debtors anticipate that they will be
unable to complete their Schedules and Statements within the
first 30 days of their chapter 11 cases. To prepare the
required Schedules and Statements, Mr. Day explains that the
Debtors must compile information from books, records and
documents relating to a multitude of transactions at numerous
locations. Collection of the necessary information requires an
expenditure of substantial time and effort on the part of the
Debtors' employees. Given the significant burdens already
imposed on the Debtors' management by the commencement of these
chapter 11 cases, the Debtors request additional time to
complete and file the required Schedules and Statements.
Mr. Day assures the Court that the Debtors have mobilized their
employees and professionals to work diligently on the assembly
of the necessary information. At the present time, the Debtors
anticipate that they will need until January 31, 2002 to
complete their Schedules and Statements, or 57 days from the
Petition Date. (Hayes Lemmerz Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
HEARME: Sells Substantially All Remaining Assets to Paltalk
-----------------------------------------------------------
HearMe (OTCBB:HEARZ.OB) announced that it has sold substantially
all of its remaining intellectual property assets to PalTalk
Holdings, Inc., a subsidiary of A.V.M. Software, Inc., which
owns Paltalk.com, a provider of Internet-based voice/video
communications. The assets sold to Paltalk consist of certain
software, technology, patent rights, trademarks, domain names
and equipment and include substantially all of HearMe's
remaining technology and intellectual property assets.
HearMe (OTCBB:HEARZ.OB) developed VoIP application technologies
that deliver increased productivity and flexibility in
communication via next generation communications networks.
Communications services supported or enhanced by HearMe
technology include VoIP-based conferencing, VoIP Calling, and
VoIP-enabled customer relationship management (CRM). Founded in
1995, HearMe is located in Mountain View, Calif.
HearMe's Board of Directors and stockholders have approved a
Plan of Liquidation and Dissolution, pursuant to which HearMe
has ceased the conduct of its business and is in the process of
liquidating its assets and settling its obligations. HearMe
intends to distribute any remaining assets to its stockholders
of record as of November 26, 2001, the date on which HearMe
filed its Certificate of Dissolution with the Secretary of State
of the State of Delaware and closed its stock transfer books.
ICG COMMS: Unveils Joint Chapter 11 Plan & Disclosure Statement
---------------------------------------------------------------
ICG Communication, Inc., and its subsidiary debtors unveil their
Joint Plan of Reorganization to wipe more than $2 billion of
debt from the Company's balance sheet, transfer ownership of the
Company to prepetition unsecured creditors and emerge from
bankruptcy as an on- going Internet access provider.
During the Chapter 11 Cases, CEO Randall E. Curran explains, the
Debtors pursued two parallel paths in an effort to maximize the
value:
* First, the Debtors, assisted by its investment banker,
Dresdner Kleinwort & Wasserstein, Inc., explored opportunities
for a sale of all or part of the Company, and scouted for new
investors. Despite these efforts, no third party made any
committed proposal for a purchase, investment, or other
transaction that the Debtors believed reflected the fair value
of their businesses.
* Second, during the Chapter 11 Cases, the Company
significantly restructured its operations, refocused its
business strategies, restructured arrangements with key third
parties in the industry, and eliminated expenses.
"As a result of this operational restructuring, coupled with the
restructuring of Claims and Interests contemplated by the Plan,
the Company believes its will be well positioned to compete
successfully in its industry in the future," Mr. Curran says.
The Business Plan
The Chapter 11 Plan is premised upon a Strategic Business Plan
for the Debtors going forward prepared by ICG's management and
financial advisors. That Strategic Business Plan projects :
ICG Communications, Inc.
Projected Statement of Operations
2002 2003 2004 2005
---- ---- ---- ----
Revenue $556,953,000 $638,979,000 $747,024,000 $891,212,000
Operating
Costs 329,209,000 390,860,000 454,101,000 515,335,000
------------ ------------ ------------ ------------
Gross Profit 227,744,000 248,119,000 292,923,000 375,877,000
SG&A 120,168,000 140,344,000 161,891,000 185,567,000
------------ ------------ ------------ ------------
EBITDA 107,576,000 107,775,000 131,032,000 190,310,000
Depreciation 66,938,000 83,726,000 102,008,000 125,333,000
Interest 22,455,000 22,013,000 22,224,000 23,308,000
Other Income (4,580,000)
------------ ------------ ------------ ------------
Net Income $22,763,000 $2,036,000 $6,800,000 $41,669,000
============ ============ ============ ============
Valuation
Dresdner Kleinwort & Wasserstein, Inc., based, in part, on
information provided to it by the Debtors, has evaluated the
enterprise value of the Debtors. DrKW's professionals are
prepared to testify at confirmation that Reorganized ICG is
worth, as a going-concern, between $350,000,000 and
$500,000,000. For purposes of the Chapter 11 Plan, the Debtors
and DrKW pinpoint Reorganized ICG's value at $375,000,000, as of
December 31, 2001.
The Reorganized Company will take on approximately $213,000,000
of new debt as it emerges from chapter 11.
DrKW concludes that the value of the New Common Shares to be
issued under the Plan, in the aggregate, falls between
$136,500,000 and $286,500,000, (which is derived by subtracting
from the Debtors' enterprise value the projected funded debt on
the pro forma balance sheet for the Debtors on the Effective
Date) and, for pinpointing a for plan purposes, the value of the
New Common Stock is $162,000,000.
Liquidation Analysis
And Best Interests Test
The Debtors are convinced that the Plan delivers greater value
to creditors than they would receive if the Company were
liquidated under chapter 7. At the Confirmation Hearing, Zolfo
Cooper's professionals will testify, to comply with the so-
called best interests of creditors test under 11 U.S.C. Sec.
1129(a)(7), that a liquidation of the estate would generate, at
most, $294,700,000 of gross liquidation proceeds. After payment
of the Senior Lenders' Secured Claims, chapter 7 and 11
administrative expenses, and priority claims, $19,500,000 would
be left to satisfy unsecured creditors' claims, yielding a 0.7%
dividend -- and, more likely than not, unsecured creditors
would get nothing.
Substantive Consolidation
The Plan provides for substantive consolidation of the Debtors
only for purposes of the Plan; that is, for voting, confirmation
and distribution purposes. The Plan does not contemplate the
merger of any Debtor entity or the transfer or commingling of
any asset of any Debtor. Substantive consolidation under the
Plan will not effect a transfer or commingling of any assets of
any Debtors, and all assets (whether tangible or intangible)
will continue to be owned by the respective Debtors.
Specifically, under the Plan, on the Effective Date, (a) all
assets and liabilities of the Debtors shall be deemed merged or
treated as though they were merged into and with the assets
and liabilities of ICG.; (b) no distributions shall made under
the Plan on account of Intercompany Claims among the Debtors;
(c) no distributions shall be made under the Plan on account of
Subsidiary Interests; and (d) all guarantees of the Debtors of
the obligations of any other Debtor shall be deemed eliminated
so that any claim against any Debtor and any guarantee thereof
executed by any other Debtor and any joint or several liability
of any of the Debtors shall be deemed to he one obligation of
the consolidated Debtors. Such substantive consolidation (other
than for purposes related to the Plan) shall not affect (i) the
legal and corporate structures of Reorganized ICG, subject to
the right of the Debtors or Reorganized ICG to effect
Restructuring Transactions; (ii) Intercompany Claims, (iii)
Subsidiary Interests, and (iv) pre and post Commencement Date
guarantees that are required to be maintained (x) in connection
with executory contracts or unexpired leases that have been or
will be assumed, or (y) pursuant to the Plan.
Generally, substantive consolidation of the estates of multiple
debtors in a bankruptcy case effectively combines the assets and
liabilities of the multiple debtors for certain purposes under a
plan. The effect of consolidation is the pooling of the assets
of, and claims against, the consolidated debtors; satisfying
liabilities from a common fund; and combining the creditors of
the debtors for.
The Debtors say they believe that the facts and circumstances
surrounding the historical business operations of ICG and the
subsidiary Debtors support substantive consolidation in these
Chapter 11 cases for the limited purposes of voting,
confirmation and distributions. Many trade creditors view the
Debtors as a single economic unit. ICG and its subsidiary
Debtors generally have common officers and directors, and have
shared key employees and outside professionals. In addition,
the Debtors' network operations are highly intertwined and
dependent upon each other. Most importantly, the Debtors and
their advisors have analyzed the myriad of issues that would
have to be resolved relating to Intercompany Claims were the
Plan not premised upon substantive consolidation. The Debtors
have concluded that resolving all such issues would be a
monumental task, would be extremely time consuming, and would
have highly uncertain results. Moreover, the Debtors do not
believe that recoveries to most creditors are significantly
impacted under substantive consolidation. Accordingly, the
Debtors believe that substantive consolidation for the limited
purposes of voting, confirmation and distributions is warranted
in light of the criteria established by the courts in ruling on
the propriety of substantive consolidation in other cases.
Compensation and Benefit Programs
Except and to the extent previously assumed or rejected by an
order of the Bankruptcy Court on or before the Confirmation
Date, all employee compensation and benefit programs of the
Debtors, including programs subject to sections 1114 and
1129(a)(13) of the Bankruptcy Code, entered into before or after
the Petition Date and not since terminated, shall be deemed to
be, and shall be treated as though they are, executory contracts
that are assumed under the Plan except for:
(i) executory contracts or plans specifically rejected
pursuant to the Plan (to the extent such rejection does not
violate sections 1114 and 1129(a)(13) of the Bankruptcy Code);
and
(ii) executory contracts or plans as have previously been
rejected, are the subject of a motion to reject or have been
specifically waived by the beneficiaries of any plans or
contracts; provided, however, that the Debtors' obligations, if
any, to pay all "retiree benefits" (as defined in section
1114(a) of the Bankruptcy Code) shall continue.
In addition, shortly after the Effective Date of the Plan,
management and the designated employees of Reorganized ICG and
the other Reorganized Debtors shall receive stock options which
are more specifically described in the Management Option Plan.
The purpose of the Management Option Plan is to:
(1) attract and retain the services of participants whose
judgment, interest and special efforts will contribute to the
success of, and enhance the value of, the Company;
(2) provide incentive compensation that is comparable to
the Company's competitors; and
(3) align participants' personal interests to those of
the Company's other stockholders.
Specifically, the Management Option Plan authorizes the grant of
stock options related to an aggregate of approximately 1,760,000
New Common Shares, which is approximately 15% percent of the New
Common Shares to be issued and outstanding on the Effective
Date. Approximately 89% of the Management Stock Options will be
granted 90 days after the Effective Date to individuals
determined by the Company, and as designated in the Management
Option Plan:
Individual Position Options
---------- -------- -------
Randall E. Curran CEO 565,000
Richard E. Fish, Jr. EVP & CFO 60,000
Michael E. Kallet EVP -- Operations 115,000
Bernard L. Zuroff EVP & General Counsel 50,000
18 Other Executives 630,000
7 Other Executives 140,000
Approximately 11% of the Management Stock Options shall be
reserved for future awards by the Board of Reorganized ICG.
The exercise price of the Initial Stock Options will be the
lesser of (i) the implied reorganization equity value midpoint
divided by the number of New Common Shares outstanding on the
Effective Date, or (ii) the average of the closing price for the
New Common Shares on the principal securities exchange on which
the New Common Shares are traded for the five business days
preceding the Initial Grant Date. All Initial Stock Options
shall vest one-third on the date that is 275 days after the
Initial Grant Date, and one-third on each of the next second
and third anniversaries of the Effective Date. The Management
Option Plan will be administrated by a committee appointed by
Reorganized ICG's Board. The Compensation Committee will be
comprised of at least two non-employee directors. The
Compensation Committee may grant to employees incentive stock
options, non-qualified stock options or a combination thereof.
Company employees eligible to participate in the Management
Option Plan include officers and employees of the Company,
including employees who are members of the Board. (ICG
Communications Bankruptcy News, Issue No. 14; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
IMPERIAL METALS: CCAA Protection in Canada Extended to March 15
---------------------------------------------------------------
Imperial Metals Corporation (TSE: IPM.) announces that the
Supreme Court of British Columbia has extended to March 15, 2002
the order giving Imperial protection to allow it to reorganize
its business by way of a Plan of Arrangement under the Company
Act of British Columbia and the Companies' Creditors Arrangement
Act.
It is now expected that the Plan will be presented to a meeting
of the shareholders and debtholders of the Company at the end of
February 2002 for formal approval. Implementation of the Plan
will be subject to court and regulatory approval.
The Plan will include Imperial and two of its wholly owned
subsidiaries, Mount Polley Mining Corporation and Mount Polley
Holding Company Limited.
IMPSAT FIBER: S&P Drops $225 Million Senior Unsecured Notes to D
----------------------------------------------------------------
Standard & Poor's lowered its rating on Impsat Fiber Networks
Inc.'s $225 million senior unsecured notes due 2008 to 'D' from
single-'C'. At the same time, the corporate credit rating on the
company was lowered to 'D' from double-'C'. These ratings were
removed from CreditWatch.
In addition, Standard & Poor's double-'C' rating on Impsat's
$125 million senior unsecured guaranteed notes due 2003 and its
single-'C' rating on the company's $300 million senior unsecured
notes due 2005 remain on CreditWatch with negative implications.
These ratings will be lowered when an effective default occurs.
The downgrade of the $225 million senior unsecured notes to 'D'
follows the company's decision to not make the interest payment
due on Dec. 17, 2001, to preserve cash as part of a financial
restructuring process that will reduce its high debt burden.
Because, in Standard & Poor's view, the missed payment and the
restructuring process imply a general insolvency, the corporate
credit rating was also lowered to 'D'. The company has retained
the investment-banking firm Houlihan Lokey Howard & Zukin
Capital as an advisor for a restructuring process, which is
expected to end in the next few weeks.
Impsat provides private network, integrated data, and voice
telecommunications services in Latin America. The company
operates in Argentina and Colombia, which, combined, represent
about 55% of total revenues, and in Venezuela, Mexico, Ecuador,
and Brazil. Very weak cash generation and profitability as well
as the increased hurdles posed by its highly leveraged financial
structure are ImpSat's main challenges. The company also faces
uncertainties regarding the market opportunity and growth
potential in its target countries due, in part, to the
increasing risk and economic volatility in many regions in Latin
America. As a result, Impsat's cash flow protection measures
have deteriorated significantly, with negative funds from
operations and fractional EBITDA interest coverage for 2000 and
the nine months ended September 2001. EBITDA margins for the
first nine months of 2001 were only 3.1%, compared with 11.7%
for the same period of 2000. In addition, during the three
months ended September 2001, the company recorded a $234.6
million non-cash asset impairment charge to bring its
telecommunications infrastructure down to its fair value.
Standard & Poor's will reassess the credit quality of the
company once the restructuring process is finalized.
INDYMAC: S&P Drops Trust 1998-2 Sub B-2 Class Rating to D
---------------------------------------------------------
Standard & Poor's lowered its rating on the subordinate B-2
class of IndyMac Manufactured Housing Contract Pass-Thru Trust
1998-2 (IndyMac 1998-2) to 'D' from triple-'C' and removed it
from CreditWatch negative, where it was placed on May 4, 2001.
The ratings on the senior class A (A-2, A-3, and A-4), mezzanine
class (M-1 and M-2), and class B-1, remain on CreditWatch with
negative implications, where they were also placed on May 4,
2001.
The lowered rating reflects the likelihood of the investor
receiving timely interest, and the ultimate repayment of
original principal investment. Indymac 1998-2 reported an
outstanding liquidation loss interest shortfall in the amount of
$60,717.87 for the B-2 class on the November 2001 payment date.
The rating default of the B-2 class is indicative of the poor
performance of the underlying pool of manufactured housing
contracts and high projected cumulative net losses. After 40
months of performance, IndyMac 1998-2 displays a cumulative net
loss rate and a repossession inventory rate that significantly
exceed expectations at 7.07% of the original pool balance and 6%
of the current pool balance, respectively. In addition, recovery
rates on liquidated collateral continue to be very low (21.50%
cumulative recovery rate for October 2001) and the percentage of
the collateral pool that consists of receivables that are 90-or-
more days delinquent is significant at 8.03%. In the third
quarter of 1998, IndyMac 1998-2 announced that it was exiting
the manufactured housing originations business. This has
negatively affected its dealer network relationships, and
consequently, its ability to liquidate repossessed collateral at
reasonable recovery levels.
Standard & Poor's previously downgraded the four subordinate
classes in October 2000, while placing the senior classes on
CreditWatch negative. At that time, the B-2 class was downgraded
to single-'B'-minus from double-'B'. In May 2001, Standard &
Poor's downgraded all IndyMac 1998-2 classes due to worse-than-
expected credit performance, at which time, the B-2 class was
downgraded to triple-'C' with CreditWatch negative implications
from single-'B'-minus.
High losses during the last year have reduced the transaction's
overcollateralization ratio to zero and have resulted in the
write down of the B-2 class from its original balance of
$10,327,900.00 to its current amount of $7,318,256.90. The
future liquidation of repossession inventory in conjunction with
IndyMac 1998-2's low recovery rate is expected to further effect
this credit support negatively. Standard & Poor's will continue
to monitor the ratings associated with the remaining classes.
INTERFACE: Expected Weak Financial Results Spur S&P Downgrades
--------------------------------------------------------------
Standard & Poor's lowered its long-term corporate credit and
senior unsecured debt ratings for Interface Inc. to double-'B'
from double-'B'-plus. At the same time, the subordinated debt
rating was lowered to single-'B'-plus from double-'B'-minus. The
mixed shelf registration rating was also lowered to preliminary
double-'B'/single-'B'-plus from preliminary double-'B'-
plus/double-'B'-minus.
The outlook is negative.
Total rated debt is about $425 million (including shelf debt).
The downgrade reflects Standard & Poor's expectation that
operating results and credit protection measures for fiscal 2001
and 2002 will be much weaker than previously anticipated.
Revenue and margin pressures across all business segments,
particularly the commercial interiors and office
furniture markets, are expected to negatively impact operating
results and related financial measures for the fourth quarter
and full year 2001. Because of the under-absorption of fixed
costs and higher energy costs during the year, operating margins
are under pressure. Although management has taken steps to re-
align its cost structure by rationalizing its U.S. broadloom and
access flooring operations, and exiting the unprofitable
European broadloom business, Standard & Poor's does not expect
significant improvements in credit protection measures in the
near term. However, longer-term, these challenges are mitigated
by Interface's strong market positions, geographic diversity,
and functionally diverse commercial and institutional customer
base.
Interface is the world's largest manufacturer of modular carpet,
with about a 40% share of the worldwide market. It also has
leading positions in the high-quality, designer-oriented segment
of the U.S. broadloom carpet market. In addition, the company is
a leading supplier of interior fabrics and upholstery products,
raised/access flooring and other specialty products, as well as
a provider of carpet installation and maintenance services
through its own domestic dealer network, Re:Source Americas.
International activities accounted for about 31% of sales in
2000; this includes about 16% of sales from the U.K.
For the fiscal year ended December 31, 2001, Standard & Poor's
expects the operating margin (before depreciation and
amortization) to decline to about 11%, EBITDA to interest
between 2.5 times - 3.0x, and total debt to EBITDA in the 4.5x
to 5.0x range. If the economy does not improve in fiscal 2002,
Standard & Poor's expects credit measures will remain in this
range.
Outlook: Negative
Standard & Poor's expects Interface to be challenged in stemming
its sales and margin declines in the current weak operating
environment. If the company is unsuccessful in improving its
credit measures over the intermediate term, the ratings could be
lowered.
J2 COMMUNICATIONS: Faces Delisting From Nasdaq SmallCap Market
--------------------------------------------------------------
J2 Communications (Nasdaq: JTWO) announced that, on December 21,
2001, the Company received notification from Nasdaq indicating
that the Company failed to comply with the requirements for
continued listing on the Nasdaq SmallCap Market. The
notification was made pursuant to Nasdaq Marketplace Rule
4310c(2)(B) for failure to meet the quantitative listing
requirements contained in such rule and Rules 4350(e) and
4350(g) for failure by the Company to hold its annual meeting
for the year 2000 within the time limits required under such
rules. Accordingly, Nasdaq has notified the Company that its
securities are subject to delisting from the Nasdaq SmallCap
Market. The Company intends to request a hearing before the
Nasdaq Listing Qualifications Panel to appeal Nasdaq's
determination and the delisting will be stayed pending the
Panel's decision. However, there can be no assurance that the
Company's appeal for continued listing will succeed.
J2 Communications (Nasdaq: JTWO), which owns National Lampoon,
one of the leading brands in comedy, is an internet-based,
interactive entertainment company. Nationallampoon.com , its
newest comedy creation, employs cutting-edge technology to
deliver its own brand of biting humor on a highly interactive
comedy network created for the Internet. Showcasing hilarious
new characters and features, the site debuted in 1999. The
Company also sells advertising and merchandise on the site.
National Lampoon is also active in a broad array of
entertainment activities, including feature films, television
programming, interactive entertainment, home video, comedy audio
CD's and book publishing.
LA PETITE ACADEMY: Offering $145 Million Debt-for-Debt Swap
-----------------------------------------------------------
La Petite Academy, Inc. and LPA Holding Corporation are offering
$145,000,000 10% Series B Senior Notes Due 2008. The 10% Series
B Senior Notes due 2008 (referred to in the Company's
prospectus) were issued by La Petite Academy and its parent
company, LPA Holding Corp., in 1998 in exchange for their
previously outstanding 10% Senior Notes due 2008.
In the current offering La Petite Academy will pay interest on
the notes semi-annually on May 15 and November 15 of each year.
The notes will mature on May 15, 2008. The Company may redeem
the notes, in whole or in part, after May 15, 2003. In addition,
it may redeem up to 35% of the notes with the net proceeds of
one or more public equity offerings. Upon the occurrence of a
change of control, each holder of notes may require the Company
to repurchase all or any part of the notes.
The notes are unsecured senior indebtedness and are effectively
subordinate to all La Petite's existing and future secured
indebtedness. The notes rank equally with all its existing and
future senior indebtedness and senior to all its subordinated
obligations. Each of its existing subsidiaries fully and
unconditionally guarantees the notes on a senior basis. LPA
Holding Corp. and its existing subsidiaries have guaranteed La
Petite's secured credit agreement and they are all jointly and
severally liable on a senior basis. At October 20, 2001, the
Company had $198.7 million of senior indebtedness outstanding,
of which $53.7 million is secured.
The company is the nation's #2 for-profit operator of preschool
and childcare facilities, behind KinderCare Learning Centers. La
Petite Academy operates about 725 centers that enroll some
70,000 children ranging in age from six-week-old infants to 12-
year-olds. The academies are located across the country in 36
states and Washington, DC. Founded in 1968, La Petite provides
both full- and part-time childcare, educational and
developmental programs, workplace childcare, and Montessori
schools. J.P. Morgan Partners owns a controlling interest in the
company. As of October 20, 2001, the company reported an upside-
down balance sheet, with total stockholders' equity deficit of
over $140 million.
LODGIAN INC: Cash Collateral Heating Scheduled for January 9
------------------------------------------------------------
Lodgian, Inc., and its debtor-affiliates have executed more than
100 hotel mortgages in favor of more than 15 separate lenders or
lender groups. Generally, the cash generated by the Debtors'
hotels constitutes "cash collateral" in which various of the
Debtors' secured lenders assert an interest. Prior to the
bankruptcy filing, the Debtors held talks with Morgan Stanley
Senior Funding, Inc., and obtained Morgan Stanley's consent to
use cash collateral that secures $189,625,000 owed under the
MSSF Prepetition Credit Agreement. By this Motion, the Debtors
ask the Court to put its stamp of approval on the deal worked-
out with Morgan Stanley and authorize the Debtors to impose that
same deal on every other lender whose loans are secured by cash
collateral.
"In order to operate their business, the Debtors require the use
of all of the cash generated from their Hotel Properties," Adam
C. Rogoff, Esq., at Cadwalader, Wickersham & Taft, tells Judge
Lifland. Without Court permission to use the Lenders' cash
collateral, the hotels will shut down.
The Debtors tell the Court that they are able to (and do) track
the cash generated from each of their Hotel Properties.
However, for the most part, all cash is commingled. The Debtors
explain that they've been evaluating various financial models
for their ongoing business, and have carefully analyzed the
financial performance of each of their Hotel Properties. The
Debtors now categorize their Hotel Properties into two groups:
* High Leverage Hotels with a debt to EBITDA ratio
exceeding 6:1
Hotel Name Location Mortgagee
---------- -------- ---------
Clarion Hotel Raleigh, NC Roundabout Partners
Clarion Central Omaha, NE GMAC/Orix
Marriott Courtyard LaFayette, LA Capital Corporation
Marriott Courtyard Tulsa, OK Capital Corporation
Crowne Plaza Macon, GA Fidelity Investments
Fairfield Inn Augusta, GA Capital Corporation
Fairfield Inn Colchester, VT Capital Corporation
Fairfield Inn Jackson, TN Capital Corporation
Fairfield Inn Merrimack, NH Capital Corporation
Four Points Omaha, NE GMAC/Orix
Four Points Des Moines, IA GMAC/Orix
Hilton Sioux City, IA GMAC/Orix
Holiday Inn Augusta, GA GMAC/Orix
Holiday Inn Bloomington, IN Local Federal
Holiday Inn Cincinnati, OH Capital Corporation
Holiday Inn Clarksburg, WV Capital Corporation
Holiday Inn Fairmont, WV Capital Corporation
Holiday Inn Florence, KY Capital Corporation
Holiday Inn Fort Mitchell, KY Capital Corporation
Holiday Inn Hamburg, NY Capital Corporation
Holiday Inn Memphis, TN Capital Corporation
Holiday Inn Morgantown, WV Capital Corporation
Holiday Inn North Miami, FL Capital Corporation
Holiday Inn Richfield, OH GMAC/Orix
Holiday Inn Syracuse, NY Capital Corporation
Holiday Inn Wichita, KS GMAC/Orix
Marriott Denver, CO Capital Corporation
Mayfair Hotel Miami, FL Capital Corporation
Quality Inn Council Bluff, IA GMAC/Orix
* Low Leverage Hotels where the debt to EBITDA ratio
is less than 6:1
The distinction between Low Leverage Hotels and High Leverage
Hotels is a distinguishing factor in the Debtors' formulation of
their cash collateral protocol and how they propose to
"adequately protect" the interests of the secured lenders.
The Debtors propose that:
(A) Each Debtor be authorized to use cash in which a Prepetition
Mortgage Lender claims an interest only to:
(1) pay its own Designated Expenses, meaning that Debtor's:
(a) property level operating expenses (including, without
limitation, payroll, utilities, food and beverage,
taxes, and supplies);
(b) capital expenditures;
(c) pro rata share (based upon its last month's revenue
as a percentage of the Debtors' total revenue) of
actual Lodgian corporate overhead expenses for that
month; and
(d) pro rata share (based upon its last month's revenue
as a percentage of the Debtors' total revenue) of the
Debtors' actual reorganization expenses, for that
Month; but .
(e) EXCLUDING any prepetition expenses or interest on
any prepetition indebtedness unless authorized by the
Bankruptcy Court;
(2) pay the Designated Expenses of any other Debtor in its
collateral pool (i.e., any Debtors whose properties serve
as collateral for each other's secured loans); or
(3) make Limited Intercompany Advances, meaning a cash
advance which meets each of these criteria:
(a) the Debtor making the advance is the owner of a Hotel
Property;
(b) the Debtor receiving the advance is a Low Leverage
Debtor;
(c) the cash so advanced is only used to pay Designated
Expenses;
(d) the cash so advanced constitutes a chapter 11
administrative priority claim secured by a lien on
all of the Debtor/borrower's property subject and
junior to the Carveout from the DIP Lenders Lien;
(e) the Debtor/borrower shall be charged interest at the
DIP Rate on cash advanced to such Debtor from the
date of advance to the date of repayment; and
(f) the cash so advanced may be repaid by the
Debtor/borrower at any time without penalty and shall
be repaid on the effective date of any plan of
reorganization for the Debtor/borrower or upon the
sale of the Debtor/borrower's Hotel Property.
(B) As "adequate protection" for any diminution in a Prepetition
Mortgage Lender's interest in a particular Debtor's property
(including cash collateral) resulting from such Debtor's use
of such property during its Case,
(1) such Prepetition Mortgage Lender shall be granted a
replacement lien on all of the prepetition and
postpetition property (including, without limitation, all
postpetition hotel revenue and other charges) of such
lender's Debtor/borrower(s), which lien shall be junior
only to (x) any DIP Priming Lien on such property, (y)
any Qualified Prepetition Liens on such property and (z)
the Carve-out;
(2) such Prepetition Mortgage Lender shall be granted a
replacement lien on all of the prepetition and
postpetition property (including, without limitation, all
postpetition hotel revenue and other charges) owned by
the Debtors, which lien shall be pari passu with other
General AP Liens granted to other lenders on such
property, but subject and junior to the Carve-out, but
only if a DIP Priming Lien has been granted with respect
to such property, and the following liens: (v) any DIP
Priming Lien on such property, (w) any Qualified
Prepetition Liens on such property and any Sec. 506(c)
charges assessed against such liens, (x) any Primed
Lender AP Lien on such property, (y) any Specific I/C
Lien on such property; and (z) any liens granted to the
DIP Lenders under Sec. 364(c) of the Bankruptcy Code on
such property, but only if such property is owned by a
Low Leverage Debtor.
(3) the Mortgage Lenders do not need to re-record their
replacement liens; and
(4) the Debtors shall provide to each Prepetition Mortgage
Lender a monthly statement of operating results and
sources and uses of cash with respect to such lender's
Hotel Property, no later than 30 days after the end of
each calendar month.
Finding that the Debotrs have an immediate need to use cash
collateral to operate their business, and, that absent the
ability to use cash collateral, the Debtors will not be able to
operate their business and the Debtors, their creditors and
estates will suffer irreparable harm as a result of the loss of
the Debtors' going concern value, Judge Lifland grants the
Debtors interim authority to access and use their Secured
Lenders cash collateral on the terms and conditions proposed,
except cash collateral in which Capital Corporation of America
asserts an interest. Judge Lifland will convene a hearing on
January 9, 2002, to sort out CCA's cash collateral interests and
determine whether the Debtors can make their case to show that
CCA's interests are adequately protected on an interim basis.
Judge Lifland will convene a Final Cash Collateral Hearing on
January 23, 2002, to consider entry of a Permanent Cash
Collateral Order and to entertain objections interposed by any
of the Debtors' Secured Lenders. (Lodian Bankruptcy News, Issue
No. 1; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LORAL CYBERSTAR: Gets Noteholders' Nod for Debt-for-Debt Swap
-------------------------------------------------------------
Loral Space & Communications (NYSE: LOR) announced that the
exchange offers and consent solicitations initiated on November
23 by its wholly owned subsidiary, Loral CyberStar, Inc.,
expired at midnight Thursday night, as planned.
Holders of more than 90 percent in the aggregate of the senior
notes due 2007 and the senior discount notes due 2007 accepted
the offers, satisfying Loral's requirement that holders of a
minimum of 85 percent of the outstanding notes accept the
offers. Loral CyberStar will now proceed to complete the
exchange. Further details will be available at the closing,
expected to occur before the end of 2001.
The interest rate on the new notes will be 10%, a reduction from
the 11.25% interest rate on the existing senior notes and the
12.5% rate on the existing senior discount notes. As a result of
the lower interest rate and the approximately $225 million
reduction in debt, Loral's annual cash interest payments will be
reduced by at least $38 million.
Loral CyberStar's existing notes not tendered in the exchange
will remain outstanding, retaining their original maturities and
interest rates, but will lose the benefits of substantially all
of their covenant protections. The new notes will be guaranteed
by Loral and mature on July 15 2006, while the existing notes
are non-recourse to Loral. As part of this exchange Loral will
issue to the new note holders approximately $6 million five year
warrants to purchase Loral Space & Communications common stock
(approximately 1.8% of the company's outstanding stock) at a
price of $2.37 per share.
The lead manager and lead solicitation agent for the transaction
is Dresdner Kleinwort Wasserstein. In addition, Banc of America
Securities LLC, JPMorgan and Lehman Brothers Inc. are serving as
co-managers and solicitation agents.
Loral Space & Communications is a high technology company that
concentrates primarily on satellite manufacturing and satellite-
based services. As of June 30, 2001, the company sustained
strained liquidity, as its current liabilities exceeded current
assets by over $84 million. For more information, visit Loral's
web site at http://www.loral.com
LORAL CYBERSTAR: S&P Rates $675M 10% Sr. Unsecured Notes at B
-------------------------------------------------------------
Standard & Poor's assigned its single-'B' rating to Loral
CyberStar Inc.'s proposed $675 million 10% senior unsecured
notes due 2006, guaranteed by Loral Space & Communications Ltd.
(Loral). The outlook on these notes is negative. These notes are
being exchanged for the company's existing 11.25% senior
unsecured notes and 12.5% senior unsecured discount notes.
At the same time, Standard & Poor's lowered its outstanding
ratings on CyberStar, reflecting the subpar exchange offer, and
placed these ratings on CreditWatch with negative implications.
If the exchange is completed, Standard & Poor's will lower the
existing CyberStar ratings to 'D' and subsequently withdraw
them.
CyberStar is a wholly owned subsidiary of an intermediate
holding company of Loral (B/Negative/--). As part of the
exchange, CyberStar will transfer its data businesses to another
subsidiary of Loral, in exchange for retirement of a portion of
an intercompany loan to Loral. The notes are unsecured but
are the only material debt in the new capital structure. They
will rank ahead of the remaining $30 million intercompany loan
to Loral, which is subordinated and non-cash pay. Although there
is no senior debt, the new indenture permits $100 million of
vendor financing subject to a 5 times debt incurrence test.
CyberStar leases transponder capacity on a wholesale basis to a
variety of customers over its three satellites: Telstar 10, 11,
and 12. The elimination of the retail data business from
CyberStar, which has been EBITDA negative, makes CyberStar a
pure fixed-satellite service provider (FSS). CyberStar's three
satellites are a subset of the Loral Global Alliance Fleet,
which currently has a total of 10 operational satellites (three
of the 10 are not wholly owned). CyberStar's satellite leasing
business has performed well in 2001, but has operated under a
highly leveraged capital structure. The FSS business is a
relatively stable business characterized by high margins and
long-term contracts. Demand for satellite space is mixed across
different regions and frequencies, but the company is
experiencing general price stability. Capacity utilization
across the three satellites is about 68%, providing some room
for organic growth. The satellite coverage areas are the
transatlantic, North American, and European regions.
If the exchange is competed, the total debt of CyberStar will be
about $685 million, resulting in annual cash interest expense of
$68 million. EBITDA of CyberStar during the nine months ended
Sept. 30, 2001, was $65 million, including $14 million of losses
related to the data business. Excluding these losses, which will
no longer be part of the company, and assuming modest
improvements in capacity utilization, Standard & Poor's expects
debt to EBITDA to be in the 7x area in 2002.
Under the new capital structure, CyberStar is expected to
generate positive free cash flow over the next few years. Excess
cash will remain at CyberStar and be used to fund the
construction of a new satellite, which will be used to replace
Telstar 11 when its useful life comes to an end, which is
expected in the 2005 time frame.
If the exchange is completed, Standard & Poor's will view the
CyberStar debt, assets, and cash flow on a consolidated basis
with Loral. The negative outlook on CyberStar's proposed $675
million 10% senior unsecured notes reflects the negative outlook
on Loral.
Rating Assigned
Loral CyberStar Inc. Rating/Outlook
$675 mil. 10% senior unsecured
notes due 2006 B/Negative
Ratings Lowered and Placed on CreditWatch Negative
Loral CyberStar Inc. TO FROM
Corporate credit rating CC CCC
Senior unsecured debt C CCC
MARINER POST-ACUTE: Omnicare Pitches Initial Bid for APS Unit
-------------------------------------------------------------
Omnicare, Inc. made an initial overbid to purchase the Assets of
Mariner Post-Acute Network, Inc.'s APS subsidiary at a purchase
price consisting of an initial cash payment of $52,000,000 and
total "Earnout Payments" of $18,000,000.
An auction of the Transferred Assets was conducted at the
offices of Ashby & Geddes, 222 Delaware Avenue, Wilmington,
Delaware 19899. The Debtors then determined the highest and best
bid by applying "Bid Review Standards" as defined in the Sale
Procedures Order and sought and obtained the Court's approval of
the Sale pursuant to the Asset Purchase Agreement by and among
MPAN, MHG, Omnicare, Inc. (Parent) and APS Acquisition LLC., a
wholly-owned subsidiary of Parent (Purchaser).
Pursuant to the Asset Purchase Agreement, Purchaser will pay to
Sellers (a) the amount of $97,000,000 (the Initial Cash) less
the Current Assets Holdback at the Closing, and (b) the Earnout
Payments.
The Earnout Payments will be made as follows:
(1) The amount of $6,000,000 not later than 30 days following
the first anniversary day of the Closing Date, subject to
downward adjustment if the Average Monthly Revenues are
less than $10,500,000;
(2) The amount of $6,000,000 not later than 30 days following
the second anniversary day of Closing, subject to downward
adjustment if the Average Monthly Revenues are less than
$9,900,000;
(3) The amount of $6,000,000 not later than 30 days following
the third anniversay day of Closing, subject to downward
adjustment if the Average Monthly Revenues are less than
$9,400,000. (Mariner Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
MARTIN INDUSTRIES: Primary Lender Extends Financing to March '02
----------------------------------------------------------------
Martin Industries, Inc. (OTCBB:MTIN), a manufacturer of premium
gas fireplaces and home heating appliances, has received an
extension on its current line of credit through March 31, 2002,
from its primary lender. The $7.5 million line was scheduled to
expire at the end of this year.
In addition, the amount available to Martin under the line,
which varies based on the value of certain assets securing the
line, has been increased by $500,000. In consideration of this
increase in the borrowing base, Martin has granted the lender an
additional security interest in the Company's equipment.
The Company is pursuing a more permanent form of financing as it
continues its restructuring and product development efforts.
Martin Industries designs, manufactures and sells high-end, pre-
engineered gas and wood-burning fireplaces, decorative gas logs,
fireplace inserts and gas heaters and appliances for commercial
and residential new construction and renovation markets, and do-
it-yourself utility trailer kits known as NuWay.
Additional information on Martin Industries and its products can
be found at its website: http://www.martinindustries.com
NATIONSRENT INC: Gets Interim Okay to Access $20MM DIP Financing
----------------------------------------------------------------
Finding good cause for the relief requested, Judge Walsh grants
an interim order authorizing NationsRent Inc., and its debtor-
affiliates to borrow and reborrow up to $20,000,000 under the
DIP facility to enable them to continue operating their
business. A Final DIP Financing Hearing will be held on January
18, 2002 and any objections are due by January 16, 2001.
(NationsRent Bankruptcy News, Issue No. 2; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
NETIA HOLDINGS: Defaults On Swap Payment with JP Morgan
-------------------------------------------------------
Netia Holdings S.A. (Nasdaq: NTIA, WSE: NET), Poland's largest
alternative fixed-line telecommunications services provider
announced that an "event of default" occurred as of the close of
business Friday under the cross-currency swap agreement between
Netia's subsidiary Netia Holdings III B.V. and JP Morgan Chase
Bank entered into on January 18, 2001.
Netia also announced that, the event of default under the swap
may have triggered the cross-default provisions of the
indentures governing the 10-1/4% Senior Dollar Notes due 2007 of
Netia Holdings B.V., the 11-1/4% Senior Discount Dollar Notes
due 2007 of Netia Holdings B.V., the 11% Senior Discount DM
Notes due 2007 of Netia Holdings B.V., the 13% Senior Dollar
Notes due 2009 of Netia Holdings II B.V., the 13 1/2% Senior
Euro Notes due 2009 of Netia Holdings II B.V. and the 13 3/4%
Senior Euro Notes due 2010 of Netia Holdings II B.V. and, as a
result, an "event of default" may have occurred as of the close
of business under the indentures governing those notes.
Netia is engaged in discussions with JP Morgan as to the
renegotiation of the swap. Netia is engaged also in discussions
with its bondholders concerning a consensual reorganization of
its balance sheet to reduce its debt and interest burdens.
In addition, Netia announced that on December 20, 2001, its
Supervisory Board adopted a resolution authorizing its
Management Board to commence the procedures necessary to convene
a meeting of shareholders of Netia to, among other matters,
approve a capital increase to allow Netia to issue shares if
required in connection with its reorganization of its balance
sheet and possibly to raise additional equity capital. Netia
also announced that certain existing shareholders and third
parties have given indications of investment interest in Netia,
although Netia cannot give any assurance that such indications
will result in the investment of additional capital or the
provision of financial support to the Company. To date, no
formal agreements have been reached with any existing
shareholder or third party concerning additional funding.
Netia is the leading alternative fixed-line telecommunications
provider in Poland. Netia provides a broad range of
telecommunications services including voice, data and Internet-
access and commercial network services. Netia's American
Depositary Shares are listed on the Nasdaq National Market
(NTIA), and the Company's ordinary shares are listed on the
Warsaw Stock Exchange. Netia owns, operates and continues to
build a state-of-the-art fiber-optic network that, at September
30, 2001, had connected 343,634 active subscriber lines,
including 93,713 business lines. Netia currently provides voice
telephone service in 24 territories through Poland, including in
six of Poland's ten largest cities.
ONLINE GAMING: HCI Intends to Swap Convertible Debt for Equity
--------------------------------------------------------------
Online Gaming Systems, Ltd., (OTC Bulletin Board: OGAM)
announced that Hosken Consolidated Investment Limited has
announced its intention to convert a portion of its ownership of
the Company's convertible debt into common stock of the Company,
and to amend certain terms of the remaining notes. Additionally,
HCI informed the Company of its intention to provide additional
funding of up to $1 million. HCI is the largest shareholder of
the Company.
The Company has previously disclosed HCI's intention of
converting the notes to common stock, in its recent annual
report Form 10-KSB and subsequent Quarterly Reports. As of
September 30, 2001, HCI and affiliates owned about $6.4 million
of convertible notes. During the fourth quarter, affiliates of
HCI have loaned to the Company an additional $650,000. The
conversion price was set at $.06, the closing price of OGAM
common stock on November 27, 2001. HCI intends on converting
$3.6 million of the convertible notes into 60,000,000 shares of
common stock. As of September 30, 2001 the Company had
34,296,268 shares outstanding. Prior to the conversion, HCI
owned 18,698,120 shares or about 55 percent of the outstanding
common stock of the Company. Pro forma the conversion of the
debt, HCI will own 78,698,120 shares or about 83 percent of the
common stock of the Company.
HCI also agreed to amend the terms of its debt, extending the
maturity of the remaining notes to December 31, 2003. The
previous maturity date on the notes was December 31, 2001 and
the Company had been in default on the notes. The Company will
no longer be in default on the notes.
HCI also informed the Company of its intention of additional
funding of up to $1 million. This funding will also come in the
form of convertible notes. "We are satisfied that OGS continues
to make progress on the execution of its business plan, and
believe that the Company can become profitable within the next
year," said Johnny Copelyn CEO of HCI.
HCI is a South Africa-based investment holding company that
focuses its activities in telecommunications and information
technology, media and broadcasting, interactive gaming and
entertainment and financial services.
Online Gaming Systems, Ltd. -- http://www.ogsltd.com-- develops
and markets Internet and private network transaction based
products that it only offers to licensed gaming operators in
regulated jurisdictions. These products include Internet Casino
Extension (ICE), a growing suite of casino games, webSports, a
sports wagering system, Lotto Magic a lottery system for
private, government and fund raising purposes, and Bingo Blast a
multi-player system for charity and private organization use.
The Company also offers wireless and portable gaming devices
through Excel Design.
PACIFIC GAS: Court Okays Innifree's Engagement as Voting Agent
--------------------------------------------------------------
Pursuant to Section 327(a) of the Bankruptcy Code and Rule
2014(a) of the Federal Rules of Bankruptcy Procedure, Pacific
Gas and Electric Company sought and obtained the Court's
authority to employ Innisfree M&A Incorporated as its voting
agent, nunc pro tunc to October 1, 2001 to handle the following
tasks in connection with its proposed plan of reorganization:
(1) consultation regarding solicitation and voting procedures,
(2) distribution of voting and non-voting materials to
creditors, security holders and parties in interest,
(3) responding to telephone inquiries related to the Plan and
voting issues,
(4) collecting and conducting the tabulation of votes,
(5) providing testimony as required at the confirmation hearing
as to the solicitation and tabulation of votes, and
(6) related matters.
Based on Innisfree's preliminary review, it is estimated that
there are approximately: (i) 60,000 creditors, (ii) 1200
registered holders of publicly-traded debt who will be entitled
to receive Plan documents.
PG&E believes that Innisfree's services as voting agent are
essential in order for PG&E to proceed with the Plan
confirmation process in a timely and efficient manner,
considering the sheer number of parties involved in PG&E's case,
combined with the notice and voting requirements of the chapter
11 plan process, necessitates the services of a voting agent. In
addition, the number of equity and debt security holders
involved in PG&E's case creates a host of special issues,
including the need for Innisfree's advice and assistance in
formulating specialized voting procedures as well as its
expertise in handling securities held in street name.
PG&E believes that Innisfree is well-qualified to act as voting
agent in this case. In addition to its expertise in proxy
solicitation procedures, Innisfree has a specialty practice
focusing on chapter 11 voting solicitations, particularly in
cases involving public securities. Jane Sullivan heads the
practice and has specialized in bankruptcy matters since 1991,
including work on over 40 chapter 11 solicitations, many of
which involved a large number of bond issues. In addition to Ms.
Sullivan's expertise, a number of other individuals at Innisfree
have specialized experience in bankruptcy solicitations and
proxy solicitations. PG&E is convinced that Innisfree has the
staff and infrastructure necessary to competently perform the
voting agent tasks in a case of this size.
The nunc pro tunc employment is necessitated because PG&E
requested limited services from Innisfree before the parties
were able to finalize and execute the Contract. These services
consisted of assisting PG&E with its creditor lists for purposes
of sending notice of the hearing on the disclosure statement.
Innisfree has informed PG&E that it is not currently employed by
any known creditor or party in interest in this case. PG&E is
aware that Innisfree was previously employed by Duke Energy
International, which may be an affiliate of a creditor, on a
wholly unrelated matter that concluded in 1999. PG&E is informed
and believes that Innisfree has no connection with PG&E, PG&E's
creditors, shareholders or any other parties in interest, or
their respective attorneys and accountants. In addition, to the
best of PG&E's knowledge, Innisfree has no connection with the
United States Trustee or any person employed in the office of
the United States Trustee. Based upon its own information and
knowledge, and the statements set forth in Declaration by Ms.
Sullivan, PG&E believes that Innisfree does not hold or
represent any adverse interests and is a disinterested person
under Section 101(14) of the Bankruptcy Code.
Fee Structure
Pursuant to the contract between PG&E and Innisfree, Innisfree
will be compensated for its services as follows:
(1) Fees for Distribution of Plan Documents
- Innisfree will charge a project fee of $25,000 covering the
distribution of voting materials, plus $2,000 for each
issue of public securities entitled to vote on the Plan or
$1,500 for each issue of public securities not entitled to
vote on the Plan but entitled to receive non-voting
documents, subject to a cap of $150,000 for all project
fees.
(2) Labor Charges for Distribution of Plan Documents
- For the mailing to creditors and record holders of
securities, Innisfree's labor charge shall not exceed $2.25
per package, the exact price depending on the complexity of
the mailing.
(3) Charges for Receiving and Responding to Telephone Calls
- Innisfree will charge $3,250 to take up to 500 telephone
calls from creditors and security holders. If more than 500
calls are received, additional calls will be charged at
$6.50 per call.
(4) Ballot Tabulation Charges
- Innisfree will charge $100 per hour for the tabulation of
ballots and master ballots, plus set-up charges of $1,000
for each tabulation. Innisfree has agreed to a cap of
$25,000 for its set-up charges.
(5) Consulting Fees
- Innisfree will bill for consulting services at its standard
hourly rates listed below. Consulting services may include
the review and development of Plan-related materials,
including the voting procedures, the ballots and master
ballots, any special balloting procedures, as well as any
issues that arise during the balloting or tabulation
process, services related to the preparation of testimony
and attendance at Court hearings if necessary, and the
preparation of affidavits, certifications, fee
applications, invoices and reports:
Managing Director: $325 per hour
Practice Director: $250 per hour
Account Executive: $210 per hour
Staff Assistant: $150 per hour
(6) Labor Charges for Notice Mailings
- For all notice mailings to creditors and registered record
holders of securities, Innisfree's labor charge shall not
exceed $0.65 per holder, and for all notice mailings to
holders of public securities, Innisfree's labor charge
shall be $350 per CUSIP.
(7) Expenses
- Innisfree will charge separately for all out-of-pocket
expenses. Expenses will be charged in conformity with the
Court's Guidelines for Compensation and Expense
Reimbursement of Professionals.
(8) Maximum Contract Price
The Contract provides that PG&E's total obligation for all
work performed under the Contract, including any reimbursable
expenses, shall not exceed $1.6 million.
All fees incurred and expenses to be reimbursed shall be subject
to approval by the Court, in accordance with the Bankruptcy
Code, the Guidelines and any other applicable rules or orders.
However, PG&E has obtained authority to pay Innisfree in advance
for large expenses, such as postage costs to be incurred in
connection with large mailings, subject to disgorgement should
any such expense be subsequently disallowed by the Court.
PG&E has agreed to a limited indemnity in favor of Innisfree
against any loss, damage, expense, liability or claim arising
out of Innisfree's fulfillment of the Contract (except for any
loss, damage, expense, liability or claim resulting from
Innisfree's own negligence or misconduct). Any liability of PG&E
under the indemnification provision is limited to the maximum
contract price.
Judge Montali makes it clear that the Bankruptcy Court will
retain exclusive jurisdiction over any controversy or claims.
(Pacific Gas Bankruptcy News, Issue No. 18; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Court Okays Payment of Obligations Owed to Calpine
---------------------------------------------------------------
Calpine Corporation (NYSE: CPN), the San Jose, Calif.-based
independent power company, confirmed that the Bankruptcy Court
for the Northern District of California approved on December 21
an order which authorized Pacific Gas and Electric Company
(PG&E) to pay all of its outstanding payables owed to Calpine
Corporation's qualifying facility (QF) affiliates (Calpine) for
power deliveries made to PG&E during the period of December 1,
2000 through April 6, 2001. PG&E owes Calpine approximately
$265 million, plus interest.
The order calls for PG&E to make monthly payments of principal
and interest to Calpine beginning December 31, 2001 and
extending through the earlier of November 30, 2002, or the date
when PG&E's plan of reorganization becomes effective. In a
separate transaction that is pending completion of
documentation, the company intends to sell this receivable.
This sale is expected to generate cash proceeds to Calpine in
2001.
Calpine sells power to PG&E under the terms of long-term QF
contracts at eleven facilities, representing nearly 600
megawatts of electricity for northern California power
customers.
Based in San Jose, Calif., Calpine Corporation is dedicated to
providing customers with reliable and competitively priced
electricity. Calpine is focused on clean, efficient, natural
gas-fired generation and is the world's largest producer of
renewable geothermal energy. Calpine's projects are located in
29 states in the United States, three provinces in Canada and in
the United Kingdom. The company was founded in 1984 and is
publicly traded on the New York Stock Exchange under the symbol
CPN. For more information about Calpine, visit its website at
http://www.calpine.com
PANTHER TELECOMMS: Liquidity Insufficient to Continue Operations
----------------------------------------------------------------
Panther Telecommunications Corporation began active operations
in September 2000. Effective May 31, 2001, New Century Capital
& Consulting Corp., a public held "shell" corporation acquired
Panther Com Enterprises Inc. Concurrent with the acquisition,
New Century, the legally surviving parent company, changed its
name to Panther Telecommunications Corporation. For accounting
purposes, the acquisition has been treated as a reverse
acquisition with Panther Com as the accounting acquirer.
Accordingly, the Company's consolidated financial information
includes the accounts of Panther Telecommunications Corporation
and its wholly-owned subsidiary Panther Com except for the
result of operations and cash flows prior to May 31, 2001, which
are those of Panther Com. In its initial year ended August 31,
2001, the Company had a net loss of $161,087.
Revenues in its initial year ended August 31, 2001 were
$5,862,582, including $2,090,771 in the last quarter. The
monthly average revenues in the initial nine months ended May
31, 2001 were $419,090. The monthly average revenues in the
last quarter of its initial year ended August 31, 2001 were
$696,924. The monthly revenue increase of $277,834 or 66% in the
last quarter of its initial year ended August 31, 2001 was due
to the addition of customers, as well as an increase in the
number of phone cards distributed. In the last quarter of its
initial year ended August 31, 2001, the Company introduced phone
cards specifically branded to Peru, Nicaragua, Haiti, Argentina
and Colombia.
Wholesale revenues in its initial year ended August 31, 2001
were $3,892,847, including $1,218,408 in the last quarter. The
monthly average revenues in the initial nine months ended May
31, 2001 were $297,160. The monthly average revenues in the
last quarter of its initial year ended August 31, 2001 were
$406,136. The monthly revenue increase of approximately
$108,976, or 37%, in the last quarter of its initial year ended
August 31, 2001 was due to the addition of distributors, as well
as an increase in the number of phone cards distributed.
Retail revenues in the Company's initial year ended August 31,
2001 were $1,969,735, including $872,363 in the last quarter.
The monthly average revenues in the initial nine months ended
May 31, 2001 were $121,930. The monthly average revenues in the
last quarter of its initial year ended August 31, 2001 were
$290,788. The monthly revenue increase of approximately
$168,857, or 138%, in the last quarter of its initial year ended
August 31, 2001 was due to the addition of retail outlets, as
well as an increase in the number of phone cards distributed.
On average, Panther Telecommunications serviced approximately
400 retail outlets in the initial nine months ended May 31, 2001
when compared to approximately 1,200 retail outlets in the last
quarter of its initial year ended August 31, 2001.
The Company had income from operations of $6,788 and a net loss
of $161,087 for its initial year ended August 31, 2001.
Liquidity and Capital Resources
As of August 31, 2001, Panther Telecommunications had current
assets of approximately $345,000, current liabilities of
approximately $459,000 and net working capital deficiency of
approximately $114,000.
The independent auditors' report on the Company's audited
financial statements as of and for its initial year ended August
31, 2001 included an explanatory paragraph stating that its
deficiencies in working capital and stockholders' equity raise
substantial doubt about its ability to continue as a going
concern. The Company has retained the services of Venture Fund
Management LLC of Palm Beach, Florida to act as a nonexclusive
placement agent to assist it in securing debt or and/or equity
financing to provide it with liquidity to meet its current and
future needs. Venture Fund Management LLC is entitled to a
finder's fee of up to 10% of funding. There can be no assurance
that the Company will be able to obtain such financing on
reasonably commercial terms, or otherwise, or that it will be
able to otherwise satisfy its short-term needs from other
sources in the future.
PHARMACEUTICAL FORMULATIONS: Misses Payment on 8% Convertibles
--------------------------------------------------------------
Pharmaceutical Formulations Inc., did not make the December 15,
2001 interest payment due under its 8% Convertible Subordinated
Debentures Due 2002. It is the Company's intention to make such
payments within the 30 day period allowed before such nonpayment
would become an event of default under the debenture indenture.
The company makes about 80 types of over-the-counter generic
drugs, including pain relief (ibuprofen accounts for more than
one-fourth of sales), cough and cold, sinus and allergy, and
gastrointestinal relief products. The firm sells to drugstores,
supermarkets, and mass merchandisers; its largest customers
include Costco Wholesale (13% of sales) and CVS (also 13%). The
company has a joint venture with privately-owned contract
packager APG to make and sell such health care products as anti-
fungal aerosol sprays and cough and cold liquids. Pharmaceutical
Formulations is approximately two-thirds owned by ICC
Industries.
PIXTECH INC: Falls Short of Nasdaq Continued Listing Criteria
-------------------------------------------------------------
PixTech, Inc. (Nasdaq:PIXT)(EASDAQ: PIXT) announced it received
a Nasdaq Staff Determination on December 19, 2001 indicating
that as of September 30, 2001 the company did not comply with
the minimum $4,000,000 net tangible assets or the minimum
$10,000,000 stockholders' equity requirements set forth in
Marketplace Rule 4450(a)(3), and that its securities are,
therefore, subject to delisting from the Nasdaq National Market.
PixTech has requested a hearing before the Nasdaq Listing
Qualifications Panel to review the Staff Determination. There
can be no assurance the Panel will grant the company's request
for continued listing. A hearing date has not yet been
determined.
PixTech is currently in discussions with possible strategic
partners regarding investments to fund the future operations of
the company. PixTech has engaged an investment bank to assist
with these strategic discussions.
PixTech, Inc. is an advanced flat-panel display company
dedicated to commercializing its high-quality field emission
display ("FED") technology. PixTech operates a flat-panel
display pilot manufacturing and a research and development
facility in Montpellier, France, and has offices in Santa Clara,
Calif., and Rousset, France. To manufacture PixTech's FED
products, the company works with a contract manufacturer, AU
Optronics. In addition to various design wins for the 5.2-inch
monochrome display in both the medical and automotive
industries, PixTech recently announced the completion of the
first phase of the 7-inch Color Display FED and is currently
focused on volume production and penetration of new markets for
its color displays. More information is available from the
company's web site at http://www.pixtech.com
POLAROID CORP: Tapping Arthur Andersen for Advice on Tax Matters
----------------------------------------------------------------
Polaroid Corporation, and its debtor-affiliates want to retain
and employ Arthur Andersen LLP, as their tax advisors with
respect to certain audit defense and sales and use tax recovery
matters.
Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom
LLP, in Wilmington, Delaware, explains that the Debtors have
chosen Arthur Andersen because of the firm's diverse experience
and extensive knowledge in the fields of audit defense and tax
recovery services as evidenced by:
(i) their prior experience with Polaroid's business and its
sales and use tax filings, and
(ii) their work on more than 10 tax refund projects in the
last three years with aggregate refunds in millions of
dollars.
The Debtors expect Arthur Andersen to:
(a) review the audit work papers and final audit
determination report;
(b) research statutes sections, regulations, and court
cases relating to underpayment issues;
(c) begin the examination of all transactions to identify
erroneous payments;
(d) prepare portions of the documentation to be presented
to the Department of Revenue regarding the audit
defense;
(e) accomplish the research and documentation for the audit
and defense;
(f) file a brief with the Department of Revenue, and
represent the Debtors at the administrative hearing and
in settlement discussions with the Department of
Revenue;
(g) for tax recovery services, the Debtors require Arthur
Andersen to complete their review of transactions that
occurred between July 1991 and December 1996 to
identify erroneous payments, and find documentation to
substantiate overpayments.
Mr. Galardi relates that when Arthur Andersen did a preliminary
analysis, they came up with a reasonable expectation that the
Debtors will recover at least 50% of the amount in dispute
through a combination of reductions in the audit assessment and
refunds of amount determined to be overpaid.
Arthur Andersen's retention and compensation will be governed by
their agreement with the Debtors. However, Mr. Galardi says, it
has been modified to include a limitation of liability, which
read as:
Polaroid Corporation shall indemnify and hold harmless
Arthur Andersen and its personnel from and against any
damages, liabilities, costs and expenses (including, without
limitation, attorney fees) resulting from third party claims
at any time brought against Andersen and in any way arising
out of or relating to Andersen's services under this
agreement, except to the extent the loss or injury is
finally determined to have resulted from the gross
negligence or willful misconduct of Andersen.
For Andersen's audit defense and tax recovery services, Mr.
Galardi tells the Court that the firm will be compensated a
success fee of 25% of the total benefit received by the Debtors
- which includes refund of sales and use taxes, audit
adjustments made by taxing authorities, and any related interest
or penalty reductions. Since the Debtors and Arthur Andersen
have a contingency fee agreement, Mr. Galardi explains, the fee
payments will be due and payable only once the Debtors claim is
accepted and paid out by an auditor or local tax official.
According to Karl A. Frieden, a partner of the Arthur Andersen
firm, Andersen is not a creditor, equity security holder, or an
insider of the Debtor, and does not represent any interest
adverse to the Debtor or their estates, except for cases
wherein:
(i) Andersen has provided tax advisory and preparation
services to the Debtor prior to the filing of Debtor's
bankruptcy cases;
(ii) if Andersen is retained, they will continue to provide
the Debtor with the audit defense and tax recovery
services;
(iii) Andersen has performed professional services for certain
secured lenders including Fleet National Bank, Morgan
Guarantee Trust Company of New York, ABN Amro Bank N.V.,
Transamerica Business Credit Corporation, Foothill
Capital, Deutsche Bank AG, Mellon Bank, Wachovia Bank,
N.A., The Sumitomo Bank, Limited, Textron Financial
Corporation, PNC Bank, and Erste Bank. However, its
services to these parties were not for the purpose of
assisting such parties in respect of the Debtors
bankruptcy, thus, do not create a conflict of interest;
(iv) Andersen has performed professional services for certain
of the underwriters and premium finance providers,
including ABN Amro incorporated, ABN Amro Chicago
Corporation, Credit Lyonnais Securities, Ins., Deutsche
Bank Securities, Inc., First Chicago Capital Markets,
Inc., J.P. Morgan Securities, Inc., and Lehman Brothers,
Inc. Andersen's services to these parties were not for
the purpose of assisting such parties in respect of the
Debtors bankruptcy and do not create a conflict of
interest;
(v) Andersen has performed professional services for the
Debtors' bond trustee, State Street Bank and Trust
Company. Andersen's services to this party was not for
the purpose of assisting such party in respect of the
Debtors bankruptcy and does not create a conflict of
interest;
(vi) Andersen has performed professional services to certain
professionals who may have (and in many cases have)
provided services to the Debtor, including Merrill Lynch
& Co., Dresdner Kleinwort Wasserstein, and KPMG Beat
Marwick LLP. Andersen's services to these parties were
not for the purpose of assisting such parties in respect
of the Debtors bankruptcy and do not create a conflict
of interest;
(vii) Andersen has performed professional services for certain
of the top 50 unsecured creditors, including State
Street Bank and Trust Company, Enron Energy Services,
Dupont Teijin Films US LP, Leo Burnett Company, Inc.,
Rock-Tenn Co., Inc., Concord Camera HIC Limited, Xirlink
Inc., Eastman Kodak Co., Fuji Photo Film Co. Ltd.,
McKinsey & Company, Inc., Siemens Business Services,
Inc., 8F7t Entertainment, Information Resources, Inc.,
Porter/Novelli, Inc, Safety-Kleen, PPO Industries, Inc.,
Sigma Systems, Inc., and Westvaco Corp. Andersen's
services to these parties were not for the purpose of
assisting these parties in respect of the Debtors
bankruptcy and do not create a conflict of interest.
(viii) Andersen, and/or other practice entities of the Andersen
Worldwide organization, are and may continue to be
involved as a party or witness in court and
administrative proceedings and other matters requiring
the retention of legal counsel. Legal counsel retained
by Andersen, or by the other practice entities of the
Andersen Worldwide Organization, in respect of matters
unrelated to the Debtor's bankruptcy, may also now or in
the future represent parties in interest in the Debtors
bankruptcy. Mr. Frieden is not aware of any of the
legal counsel identified to Andersen, including Skadden,
Arps, Slate, Meagher & Flom LLP, Bingham Dana LLP, and
Simpson Thacher & Bartlett have been retained by
Andersen or by the other practice entities of the
Andersen Worldwide Organization.
Thus, Mr. Frieden asserts that Arthur Andersen is a
"disinterested person" as defined in section 101(14) of the
Bankruptcy Code.
Accordingly, the Debtors ask Judge Walsh for an order
authorizing them to retain Arthur Andersen as tax advisors.
U.S. Trustee Objects
Donald F. Walton, the Acting United States Trustee for Region 3,
is not amenable to the Debtors' motion.
Mark S. Kenney, Esq., a trial attorney for the U.S. Trustee,
explains that:
(a) Andersen's Engagement Letter requires the Debtors to
indemnify the firm for any claims except, if it is
determined to have resulted from the gross negligence or
willful misconduct of Andersen. That agreement prevents
the Court to review any request for indemnification or the
circumstances surrounding any such request. Mr. Kenney
explains that any indemnification should be permitted only
after application to the Court and with notice to all
parties in interest. The Court and parties in interest
should be given the opportunity to examine the specific
circumstances giving rise to the request for
indemnification.
(b) Another reason for the Trustee's opposition is the
agreement between the Debtors and Andersen that declares
Andersen's maximum liability on any claim arising from its
services will be limited to the charges actually paid to
them for their services. Liability for any consequential,
special, incidental or punitive loss, damage or expense is
specifically excluded. Mr. Kenney believes that this
provision holds Andersen to a low standard of performance,
which waives in advance claims for all future acts and
omissions. A provision such as this is not appropriate
for a professional person employed to assist a bankruptcy
trustee or a debtor-in-possession in performing its
duties.
Thus, the U.S. Trustee asks the Court to deny the Debtors'
motion. (Polaroid Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PROBE EXPLORATION: Kicking Horse Closes Leduc Assets Acquisition
----------------------------------------------------------------
Kicking Horse Resources Ltd. (CDNX: KHL) announces that it has
closed the acquisition of the Leduc oil and gas assets with
PricewaterhouseCoopers in escrow. The closing documents have
been placed in escrow pending finalization and registration of
financing, security and other documentation.
In connection with the acquisition, the Company sold a total 20%
beneficial interest in the acquired assets to two companies: 16%
to Tullaree Oil and Gas Ltd., a wholly-owned subsidiary of
Tullaree Capital Inc. (CDNX: TUL) and 4% to a private Alberta
company.
As previously announced, Exall Resources Limited retains an
option to acquire a 10% beneficial interest in the Leduc oil and
gas assets until January 31, 2002.
Independent engineering completed on the assets estimates
established reserves to be 5.3 million barrels of crude oil and
natural gas liquids and 29.3 billion cubic feet of gas. Current
daily production from the Leduc assets is approximately 4,200
boe per day (10:1). Also included in the acquisition are 61,283
net acres (71,825 gross acres) and proprietary 3D seismic data
covering approximately 36,000 acres.
Kicking Horse is a public oil and gas company trading under the
stock symbol "KHL" on the Canadian Venture Exchange. The Company
currently produces approximately 1,000 boe per day (10:1) or
1,400 boe per day (6:1). Upon closing of escrow on this
acquisition and assuming that Kicking Horse retains 80% of the
Leduc assets, the Company's production will be approximately
4,360 boe per day (10:1) or 5,400 boe per day (6:1). In the
event that Exall exercises it's option to acquire 10% of the
Leduc assets, the Company's production will be approximately
3,940 boe per day (10:1) or 4,900 boe per day (6:1).
RELIANCE GROUP: Committees Intend to Take Discovery of Debtors
--------------------------------------------------------------
The Official Unsecured Creditors Committee and the Official
Unsecured Bank Committee of Reliance Group Holdings, Inc.,
submit a memorandum of law in support of their motion, pursuant
to Rule 2004, for an order authorizing them to take discovery.
Specifically, the Committees want more information on the acts,
conduct, assets, liabilities and financial conditions of RGH and
RFS.
Laurie S. Dix, Esq., of Orrick, Herrington & Sutcliffe and
Andrew Denatale, Esq., of White & Case, tell Judge Walsh that
the purpose of the discovery is to investigate the causes of
action that might be asserted for the benefit of unsecured
creditors. Also, discovery is necessary to investigate the
Debtors' financial condition, and the nature and extent of the
Debtors' potential liabilities to, among others, RIC.
D&O Discovery
The attorneys assert that basic bankruptcy law gives the
Creditor's committees power to "investigate the acts, conduct,
assets, liabilities and financial condition of the debtor, the
operation of the debtor's business . . . and any other matter
relevant to the case or to the formulation of a plan." 11 U.S.C.
1103(c)(2). This includes investigating potential causes of
action asserted for the benefit of unsecured creditors. See In
re Handy Andy Home Improvement Centers, Inc., 199 B.R. 376, 379
(Bankr. N.D. Ill. 1996). The scope of this investigation is
governed by Federal Rule of Bankruptcy Procedure 2004, which
provides that "the court may order the examination of any entity
on motion of any party in interest." Id.
Bankruptcy Rule 2004 permits very broad discovery. The scope of
examination Bankruptcy Rule 2004 allows can legitimately be in
the nature of a "fishing expedition." See In Re Vantage
Petroleum Corp., 34 B.R. 650, 651 (Bankr. E.D.N.Y. 1983); see
also, In re Bakalis, 199 B.R. 443, 447 (Bankr. E.D.N.Y. 1996)
(stating that a Rule 2004 examination can be a broad "fishing
expedition").
The attorneys suggest that there are valuable causes of action
against the Debtors' Directors and Officers related to RHG's
financial collapse. These include claims for multiple breaches
of the fiduciary duties of loyalty and care, corporate waste and
mismanagement, negligence, gross negligence, constructive fraud
under New York law prohibiting fraudulent conveyances, negligent
misrepresentation and violations of Section 10(b) of the
Securities and Exchange Act of 1934.
More specifically, the Committees allege the following:
1. Excessive Compensation to RGH/RFS Officers:
Public records reflect that RGH's officers, particularly Saul
and Robert Steinberg, received excessive compensation and perks.
This largesse was excessive compared to executives of other
insurance firms and well out of proportion to RGH's performance.
In 1998, according to a Business Insurance survey, total cash
compensation (including salary and bonuses) for the average
insurance industry executive was approximately $2.04 million
(and Hank Greenberg of AIG made $6 million for running a highly
successful company with 400 times the market capitalization of
RGH), Saul Steinberg's income from RGH and its subsidiaries was
approximately $10 million. In 1999, when RGH was in financial
crisis and the average industry executive earned $2.19 million,
Saul Steinberg's income was approximately $3.6 million. As late
as June 2000, when RGH was on the brink of financial collapse,
Robert Steinberg received a $10 million severance package and a
$2.25 million annual retainer as a consultant.
2. Improper Payment Of Dividends:
With their large holdings in RGH stock, Saul Steinberg (owned
31.3% as of March 31, 2000) and Robert Steinberg (owned 10.3% as
of March 31, 2000), benefited extraordinarily from RGH cash
dividends. Analysts estimate that, during the 1986-1999 period,
Saul Steinberg received approximately $100 million in cash
dividends and other members of the Steinberg family received
another $50 million. Ms. Dix and Mr. Denatale tell Judge
Gonzalez that as RGH's financial condition deteriorated, the
fiduciary duties of the directors and officers should have
shifted from RGH shareholders of the corporation to its
creditors. However, RGH continued to pay large common stock
dividends: $36.7 million in 1999 and $37.1 million in 1998.
Rather than benefiting themselves through the payment of these
dividends, the directors and officers of RGH should have
preserved assets to repay creditors.
3. Directors and Officers Destroyed
the Debtors' Income Sources:
As holding companies, the Debtors' principal sources of income
were dividends, advances and net tax payments from their
subsidiaries, primarily RIC and its insurance company
subsidiaries. When RGH was near insolvency, RGH's directors and
officers caused and/or permitted RIC to set inadequate loss
reserves, engage in improper, inconsistent and negligent
underwriting practices, write large volumes of high risk
business that proved unprofitable and sell valuable assets on
terms that did not reflect their fair value. The attorneys
assert that this was done to artificially increase the dividends
payable under Pennsylvania law from RIC to RGH. These decisions
by RGH's directors and officers were not motivated by the
interests of RGH and its creditors. Rather, they were intended
to provide further funds to be siphoned off by RGH's directors
and officers through excessive compensation and dividends. RIC
is the primary source of the Debtors' cash flow to service and
repay the debt burden. However, due to the actions of RGH's
Ds&Os, RIC is in liquidation proceedings and the Debtors, unable
to satisfy their debt obligations, have filed for bankruptcy
protection.
4. Shareholder Lawsuits:
RGH made a number of material misrepresentations and omissions
in its recent public financial statements concerning its
financial condition, growth, liquidity, and ability to repay and
refinance its debts. For example, RGH stated it had a solid
financial foundation, strong core businesses, and that it
expected to refinance senior notes and term loans which were due
in 2000. RGH also stated it expected to repay debt maturing in
2001 through 2003 by either refinancing or using cash flow from
operations or a combination thereof.
This artificially inflated the price of RGH securities. These
statements were materially false and misleading and lacked a
reasonable basis. RGH's financial condition was worsening and
it was highly improbable that RGH could repay the debt by
refinancing and/or using cash flow from operations due to:
(a) its increasingly negative operating cash flows;
(b) its exposure in the workers' compensation reinsurance
liability created and managed by Unicover's Managers,
Inc., and the enormous amount of cash required for the
settlement with other insurance companies in the
Unicover arrangement;
(c) the worsening ratio of claims-paid to earned premiums;
(d) its increasing amount of "run-off" claims expense
caused by the decision of RIC to cancel or not renew
certain insurance lines, including property and marine
lines.
These and other related misrepresentations and/or omissions by
RGH constitute violations of the federal securities laws and/or
actionable negligent misrepresentations by RGH's directors and
officers.
5. Insider Trading:
A number of RGH's directors and officers, including most notably
Saul Steinberg and Robert Steinberg, sold large amounts of RFG
stock when RGH was making misrepresentations and/or omissions
concerning its financial condition and ability to repay and
refinance its debts. For example, between March 3, 2000 and July
26, 2000, Saul Steinberg sold over eight million shares of RGH
stock for total proceeds in excess of $10 million. Between May
11, 2000 and May 15, 2000, Robert Steinberg sold over one
million shares of RGH stock for total proceeds in excess of
$2.48 million. These insider sales while in the possession of
material adverse non-public information, constitute breaches of
the fiduciary duties of loyalty and care, corporate waste and
mismanagement, negligence and gross negligence.
The attorneys claim that the Committees should be granted
permission to complete discovery to determine the full range of
the causes of action against the Ds&Os, their approximate value
and if formal legal proceedings should be commenced at this time
or in the near future to avoid applicable statute of
limitations.
Discovery is necessary, Ms. Dix and Mr. Denatale hold, since
they anticipate that a plan of reorganization will create of a
vehicle to prosecute Debtors' claims and/or those of the
Debtors' creditors. The mechanism contemplated to vest the
litigation vehicle with the claims includes (i) the contribution
of claims held directly by creditors pursuant to the provisions
of a plan of reorganization and the balloting process and (ii)
the transfer of certain claims held by the Debtors to the
litigation vehicle.
The litigation vehicle, through its managing member, would be
responsible for prosecuting claims and distributing recoveries
in the manner prescribed by the plan of reorganization.
Fundamental to this process is the identification, preservation
and exploration of the claims against the Ds&Os. The
Committee's discovery is essential to that effort.
Although Bankruptcy Rule 2004 permits broad "fishing
expeditions," the discovery requested by the Committees is
tailored to its purpose and consists of requests for documents
related to the Debtors' financial condition and certain actions
of the Ds&Os. It further requests examinations of a limited
number of Ds&Os who have knowledge of relevant events.
Financial Condition Discovery
One of the explicitly authorized purposes of discovery under
Bankruptcy Rule 2004 is to obtain information regarding the
liabilities and financial condition of a debtor. See Fed. R.
Bankr. P. 2004(b). Discovery regarding the financial condition
of the Debtors is particularly appropriate here because RGH has
not filed a 10-K for the fiscal year ended December 31, 2000 due
to reported "significant changes" in RGH's operational,
corporate and organizational structure. RGH also did not file
quarterly reports for the periods ended March 31, 2001 and June
30, 2001. Thus, the last publicly reported information on RGH's
financial condition is contained in RGH's 10-Q filed almost a
year ago on November 14, 2000.
The Committees are entitled to obtain, through discovery,
information to bring their understanding of the Debtors'
financial condition up to date. Discovery also is needed for
the Committees to evaluate the Debtors' potential liabilities.
Among other issues, RGH considers, as one of its principal
liabilities, a purported intercompany obligation to RIC in the
amount of $284,900,000. This purported obligation relates
primarily to a Tax Allocation Agreement between RGH and RIC.
Even apart from the legal merits of the "constructive trust"
claim asserted by the Rehabilitator, the Committees have reason
to believe that the Debtors do not have an intercompany
obligation to RIC in the amount presumed. The Committees believe
that there were amendments to the Tax Allocation Agreement that
may sharply reduce or eliminate the intercompany obligation to
RIC. In order to get a full picture of RGH's liabilities, so
that they may make an informed evaluation of the rights of their
constituencies, it is necessary for the Committee to take
discovery from the Debtors, and their subsidiaries and
affiliates.
The Official Unsecured Creditors Committee and the Official
Unsecured Bank Committee respectfully request that the Court
issue an Order, pursuant to Rule 2004, allowing them discovery
of the Debtors. (Reliance Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SOLECTRON CORP: S&P Concerned About Weakening Credit Measures
-------------------------------------------------------------
Standard & Poor's lowered its corporate credit, senior unsecured
note, and senior unsecured bank loan ratings on Solectron Corp.
to double-'B'-plus from triple-'B'-minus. At the same time,
Standard & Poor's assigned its double-'B'-plus rating to the
proposed $500 million senior credit facilities, and will
subsequently rate the proposed $1 billion adjustable-conversion-
rate equity Security Units. The outlook is negative.
The ratings downgrade is based on deteriorating operating
performance and weaker credit measures, compounded by high debt
levels. Dependence on weak communications end markets (which
comprise more than half of sales) and operating metrics that are
subpar compared with other top-tier electronic manufacturing
services (EMS) providers contributed to the lowering of the
ratings. Sales for the June first half of fiscal 2002 are
expected to fall by nearly 45%, to about $6 billion, from just
over $11 billion in the first half of fiscal 2001.
The proposed financing, along with existing cash balances,
alleviates concerns associated with the potential exercise of
the near-term put provisions associated with its LYONs issues.
Still, the major rating concern continues to be Solectron's
subpar operating performance under difficult industry
conditions, which Standard & Poor's expects will persist until
at least mid-2002.
Ratings continue to reflect Solectron's top-tier position in the
EMS industry, well-established customer relationships with
leading original equipment manufacturers (OEMs), and favorable
long-term growth trends towards outsourcing for larger EMS
providers. These factors are offset by the likelihood that
Solectron's industry leadership position will be challenged by
other top-tier EMS providers, its more leveraged financial
profile, and exposure to the communications market.
Operating metrics have been affected by low capacity utilization
and unusually high inventory levels. Operating margins for the
first half of fiscal 2002 are likely to be less than one-third
of those in the like period of fiscal 2001, and profitability
measures are likely to remain depressed over the intermediate
term. However, operating performance should benefit from
restructuring actions that reduce headcount and manufacturing
capacity by more than one-third and are expected to produce
cumulative annualized cost savings exceeding $750 million.
Credit measures are likely to benefit modestly from the
financing activity. Pro forma for the issue, the financial
profile remains leveraged, with debt to EBITDA for the 12 months
ended Nov. 30, 2001, of more than 4 times. Still, cash flow
generation is solid, as the liquidation of working capital
and reduced fixed capital needs resulted in more than $1.2
billion of free operating cash flow over the three quarters
ended Nov. 30, 2001. Pro forma for the issue, the company's cash
balance will exceed $3.5 billion. Solid cash flow is expected to
moderate the credit impact of weaker operating measures.
Standard & Poor's believes the company has sufficient financial
flexibility to meet any near-term put on its outstanding LYONs
issues.
Outlook: Negative
Reliance on weak communications end markets and difficult
industry conditions are likely to challenge Solectron
management's efforts to improve operating performance and credit
measures over the near term.
TELESYSTEM: Will Repay Debenture Holders in Sub. Voting Shares
--------------------------------------------------------------
Telesystem International Wireless Inc. (TSE: TIW; NASDAQ: TIWI)
announces that it has sent the maturity notice required under
the Indenture governing the 7.00% Equity Subordinated Debentures
due February 15, 2002 (ESD), advising registered ESD holders
that it has elected to repay the ESD principal amount of CDN$150
million in subordinate voting shares of the Company.
The maturity notice will become null and void if TIW is
successful in its purchase offer and consent request for its
ESDs since the maturity of the ESDs would be extended to
December 2006. On November 29, 2001, TIW launched an offer to
purchase all of its outstanding ESDs for CDN$300 in cash for
each CDN$1,000 in principal amount, including any accrued and
unpaid interest. In conjunction with the purchase offer, TIW is
requesting consents from ESD holders to amend the existing
indenture governing the ESDs in order to, among other things,
extend the maturity of the ESDs to December 2006, reduce the
principal amount of each ESD to CDN$250, delay the next interest
payment date to June 30, 2002, provide for the right of TIW to
convert the ESDs at maturity into subordinate voting shares at a
price equal to the greater of CDN$1.00 or 95% of the then
current market price of the subordinate voting shares and
provide for the optional conversion at maturity by holders of
the ESDs into subordinate voting shares at a price of CDN$4.40.
The Purchase Offer is conditional upon consent from holders
representing at least 66-2/3% in aggregate principal amount.
The purchase offer and consent request will expire at 11:59
p.m., Montreal time, on January 9, 2002 unless extended or
withdrawn.
TIW is a global mobile communications operator with 4.9 million
subscribers worldwide. The Company's shares are listed on the
Toronto Stock Exchange (TIW) and NASDAQ (TIWI).
UNIFORET INC: CCAA Protection in Canada Extended to February 4
--------------------------------------------------------------
Uniforet Inc., and its subsidiaries, Uniforet Scierie-Pate Inc.
and Foresterie Port-Cartier Inc., announced that on December 21,
2001 they have obtained from the Superior Court of Montreal an
order extending for an additional period of 45 days expiring on
February 4, 2002 the Court protection afforded to the Company
under the "Companies' Creditors Arrangement Act".
As already announced, the meeting of the class of US
Noteholders-creditors to vote on the amended plan of arrangement
is still temporarily suspended, following the institution of
proceedings, until settlement of the composition of that class
of creditors. These proceedings are presently heard by the
Court.
The Company intends to keep on its current operations and its
customers are not affected by the Court order. Suppliers who
will provide goods and services necessary for the operations of
the Company will continue to be paid in the normal course of
business.
Uniforet Inc. is an integrated forest products company which
manufactures softwood lumber and bleached chemi-thermomechanical
pulp. It carries on its business through its subsidiaries
located in Port-Cartier (pulp mill and sawmill) and in the
Peribonka area in Quebec (sawmill). Uniforet Inc.'s securities
are listed on The Toronto Stock Exchange under the trading
symbol UNF.A, for the Class A Subordinate Voting Shares, and
under the trading symbol UNF.DB, for the Convertible Debentures.
VALEO ELECTICAL: Wants More Time to File Schedules & Statements
---------------------------------------------------------------
Valeo Electrical Systems Sales & Marketing, LLC wishes to extend
their time to file the list of equity security holders, schedule
of assets and liabilities, schedule of current income and
expenditures, schedule of executory contracts and unexpired
leases and statement of financial affairs.
Due to the complexity of Debtors' business and the diversity of
its operations and assets, the fifteen-day automatic extension
of time to file the Schedules provided will not be sufficient to
permit completion of the Schedules. Debtors assert that their
businesses requires them to maintain voluminous books and
records and a complex accounting system around business lines
and divisions. Accordingly, Debtors require additional time to
bring books and records up to date and to collect the data
needed for the preparation and filing of the Schedules.
The Debtors tell the U.S. Bankruptcy Court for the Southern
District of New York that they estimate they can file their
Schedules by April 2002.
WARNACO GROUP: Obtains Okay to Hire Gavin Anderson as PR Advisor
----------------------------------------------------------------
The Court approves the retention and employment of Gavin
Anderson & Company as communications consultants for The Warnaco
Group, Inc., and its debtor-affiliates effective as of November
8, 2001.
In addition, Judge Bohanon rules that Gavin Anderson shall be
compensated for indemnification, upon appropriate application.
All requests of Gavin Anderson for payment of indemnity shall be
by means of an application and shall be subject to review by the
Court to ensure that payment of such indemnity conforms to the
terms of the Letter Agreement. It should also be reasonable,
Judge Bohanon emphasizes, based upon the circumstances of the
litigation or settlement in respect of which indemnity is
sought.
"But in no event shall Gavin Anderson be indemnified in the case
of its own bad-faith, self-dealing, breach of fiduciary duty,
gross negligence, reckless or willful misconduct, or
malpractice," Judge Bohanon says. (Warnaco Bankruptcy News,
Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WINSTAR COMMS: WorldCom Agrees to Continue Telecomms Services
-------------------------------------------------------------
Winstar Communications, Inc., and its debtor-affiliates move for
the entry of an order approving a Settlement Agreement between
the Debtors and WorldCom Inc., including the rejection of the
Long Term Lease and the assumption of the Master Service
Agreement.
Pauline K. Morgan, Esq., at Young Conaway Stargatt & Taylor LLP
in Wilmington, Delaware, relates that prior to the commencement
of these chapter 11 cases, the WorldCom provided
telecommunications services and circuits to the Debtors under a
Master Service Agreement dated March 30, 1999. Pursuant to the
Agreement, WorldCom agreed to provide telecommunications
services to the Debtors under a long-term lease utilizing
circuits.
As of the Petition Date, Ms. Morgan submits that the Debtors
owed WorldCom the amount of $4,635,465.89 for providing the
telecommunications services. Additionally, the Debtors render
certain telecommunications services to WorldCom, which as of
Petition Date, WorldCom owes the Debtors $1,319,907.11 for such
services. The Pre-Petition Claim less the Pre-Petition Amounts
equals $3,315,558.78.
On May 8, 2001, Ms. Morgan states that WorldCom and the Debtors
entered into a stipulation concerning adequate assurance of
payment for post-petition services pursuant to which, the
Debtors are required to pay WorldCom on a current basis for the
telecommunication services. Additionally, if the
telecommunication services are not paid by the Debtors on a
timely basis, WorldCom is permitted to terminate the
telecommunication services.
The Debtors and the Service Providers desire to amend the
contractual relationship between the parties:
A. to treat the Long Term Lease as a separate executory
contract,
B. to reject the Long Term Lease,
C. to provide that the Service Providers that the Service
Providers will continue to provide the Long Term Lease
Services to the Debtors,
D. to provide for the assumption of the Master Service Agreement
as provided in the Stipulation and
E. to stipulate that the Service Providers have an allowed
administrative expense claim pursuant in the amount of the
Net Pre-Petition Claim.
Ms. Morgan contends that the Stipulation will permit the Debtors
to continue to use the telecommunication Services which they
need to operate their businesses at the current contract rate
while letting them return circuits which they no longer need and
thereby avoid unnecessary administrative expenses for their
estates. On the other hand, if the Stipulation is not approved,
the Debtors will be obligated to continue paying approximately
$2,700,000 per month under the Long Term Lease and to have
significant termination liability when the Debtors' desire to
discontinue any of the telecommunication services. Because the
Debtors cannot afford to pay these amounts, the
telecommunication services would likely be disconnected, the
Debtors' customers would be left without service and the Debtors
would no longer have a business. (Winstar Bankruptcy News, Issue
No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900)
XEROX: Completes Partial Sale of Assets to Flextronics for $118M
----------------------------------------------------------------
DebtTraders reports that Xerox Corporation completed last Friday
the sale of the first batch of assets to Flextronics for $118
million, including its plants in Toronto, Mexico, and Malaysia.
According to the report of DebtTraders analysts Daniel Fan and
Blythe Berselli, Flextronics will also assume the production of
some Xerox parts and subsystems during the first half of 2002.
Xerox will receive $220 million in total after the completion of
its asset sales to Flextronics, which includes the manufacturing
operations in Resende, Brazil and the Netherlands.
Meanwhile, DebtTraders reports that Xerox Corporation's 8.000%
bonds due in February 2007 (XEROX25) are trading between 55.5
and 56.5. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=XEROX25
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 67 - 69 +7
Federal-Mogul 7.5% due 2004 12 - 14 0
Finova Group 7.5% due 2009 38 - 39 +2
Freeport-McMoran 7.5% due 2006 71 - 74 0
Global Crossing Hldgs 9.5% due 2009 8 - 10 -1
Globalstar 11.375% due 2004 7 - 9 -0.5
Levi Strauss & Co 11.625% due 2008 88 - 90 +1
Lucent Technologies 6.45% due 2029 66 - 68 -5
Polaroid Corporation 6.75% due 2002 9 - 11 0
Terra Industries 10.5% due 2005 77 - 80 0
Westpoint Stevens 7.875% due 2005 33 - 36 +1
Xerox Corporation 8.0% due 2027 55 - 57 0
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 1-212-247-5300. To view our research and find out about
private client accounts, contact Peter Fitzpatrick at
1-212-247-3800. Real-time pricing available at
http://www.debttraders.com
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
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
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Ronald P. Villavelez and Peter A. Chapman, Editors.
Copyright 2001. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
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*** End of Transmission ***