/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/020110.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, January 10, 2002, Vol. 6, No. 7 Headlines AMC ENTERTAINMENT: Moody's Rates New Senior Sub. Notes as Junk ANC RENTAL: Lease Decision Deadline Hearing Set for January 23 ADVANTICA RESTAURANT: S&P Ratchets Junk Ratings Down Further AFFINITY TECHNOLOGY: Must Restructure Finances to Remain Viable AMES DEPT: US Trustee Amends Creditors' Committee Membership ARMSTRONG HOLDINGS: Settles Legal Squabble with Congoleum Corp. BETHLEHEM STEEL: Gets Approval to Sign-Up PricewaterhouseCoopers BRILLIANT DIGITAL: Sets Special Shareholders Meeting for Feb. 20 BROADBAND WIRELESS: Commences Reorganization Under Chapter 11 CHIPPAC INC: Expects Revenues to Reach $76.5 Million in Q4 2001 CHIQUITA BRANDS: Court Approves Management Retention Program CHIVOR S.A.: Default Unlikely to Impact AES Gener's Ratings CLARENT CORP: Probe Uncovers Irregularities in Financial Results CLARENT: Appoints New Board Members & Senior Management Officers COMDISCO INC: Selling Interests in 3 Partnerships for $5 Million COVENTRY HEALTH: S&P Assigns BB+ Counterparty Credit Rating EMAGIN CORP: Net Loss Nearly Doubled to $42MM in Sept. Quarter EMERITUS ASSISTED: Will Get Mortgage Financing on 3 Properties ENRON CORPORATION: Seeks Injunction Against Utility Providers ENRON CORP: Receives Bids for Majority Stake in Trading Business EXODUS COMMS: Gets Go-Signal to Hire Lazard Freres as Advisor FACTORY CARD: U.S. Trustee Wants Case Converted to Chapter 7 FEDERAL-MOGUL: Robins Cloud Seeks Expansion of Claimants' Panel FORMICA CORP: Bringing In Lazard Freres as Restructuring Advisor GENESIS HEALTH: MultiCare Seeks 4th Extension of Removal Period INDIGO BOOKS: No Offers Received to Acquire Stores in Canada INTEGRATED HEALTH: Committee Wants to Sue Directors & Officers KMART CORP: Fitch Downgrades Ratings into Low-B Territory KMART FUNDING: Fitch Drops Secured Lease Bonds to B+ from BB+ LODGIAN INC: Gets Okay to Pay Critical Service Providers' Claims LUBY'S INC: Working Capital Deficit Widens to $11.4 Million MARINER POST-ACUTE: Taps Jones Day Again as Litigation Counsel MARINER POST-ACUTE: Omnicare Completes Acquisition of APS Assets NORD PACIFIC: Seeks Funding to Redeem Tritton Proj. in Australia OPTICARE HEALTH: Seeking Consents for Capital Restructuring PACIFIC GAS: CPUC Wants to End Exclusivity & Propose a Plan PILLOWTEX: Summary of Debtors' Joint Plan of Reorganization PSINET: Intends to Sell Unit in Japan to C&W Entity for $10.2MM RESOURCE RECOVERY: Case Summary & 20 Largest Creditors SIMON WORLDWIDE: Gotham Int'l Discloses 7.51% Equity Interest SIMONDS INDUSTRIES: S&P Cuts Ratings to D After Missed Payment SUITE101.C0M: Considering Discussing Reorganization Transactions TELIGENT INC: Investcorp Acquires ECI Business for $60 Million TELSCAPE INT'L: Trustee Has Until March 20 to Decide on Leases TRISM INC: Has Until January 17 to File Schedules and Statements U.S. WIRELESS: Wants Exclusive Period Extended to March 28 UNITED DEFENSE: Fitch Ratchets Senior Secured Rating Up to BB VALLEY MEDIA: Giordano DellaCamera Reports 8.94% Equity Holding VECTOUR INC: Wants Removal Period Stretched Through May 14, 2002 ZEPHION NETWORKS: Case Conversion Hearing Scheduled For Jan. 15 * DebtTraders' Real-Time Bond Pricing ********* AMC ENTERTAINMENT: Moody's Rates New Senior Sub. Notes as Junk -------------------------------------------------------------- Moody's Investors Service assigned a Caa3 rating to the proposed new senior subordinated notes to be issued by AMC Entertainment Inc. The rating agency also confirmed its ratings on the company's outstanding issues. The rating outlook remains stable while there is approximately $1 billion of debt securities affected, the international rating agency said. Moreover, Moody's said that it assigned the ratings to reflect the company's high financial leverage and low coverage of interest by pre-rent cash flow. The ratings also incorporate several risks that remain truly relevant to the industry as a whole. The stable outlook incorporates the company's planned equity offering of 9 million common shares as recently announced. Moody's believe that this offering will augment the new high yield note issuance in support of the planned acquisition of GC Companies. Likewise, it will create additional liquidity through incremental availability under its revolver after temporary repayments are made. Rating Action * $425 million Guaranteed Senior Unsecured Revolver due 2004 - B3 * $150 million of New Senior Subordinated Notes due 2012 - Caa3 * $200 million of 9-1/2% Senior Subordinated Notes due 2009 - Caa3 * $225 million of 9-1/2% Senior S Subordinated Notes due 2011 - Caa3 * Senior Unsecured Issuer Rating - Caa2 * Senior Implied Rating - B3 One of the largest movie theater exhibition companies in the United States, AMC Entertainment with theaters located mostly in the United States maintains its headquarters in Kansas City, Missouri. ANC RENTAL: Lease Decision Deadline Hearing Set for January 23 -------------------------------------------------------------- ANC Rental Corporation, and its debtor-affiliates seek an order granting the Debtors an extension through confirmation of a plan or plans of reorganization in the Debtors' chapter 11 cases of the time within which the Debtors must elect to assume or reject the Leases. The Debtors additionally request that such extension of time be without prejudice to the right of any lessor to obtain an order requiring the Debtors to assume or reject a particular lease in a shorter time, upon a showing of good cause. During the first 60 days of these cases, Mark J. Packel, Esq., at Blank Rome Comiskey & McCauley LLP in Wilmington, Delaware, relates that the Debtors have been focusing their efforts on stabilizing operations, obtaining approval of their initial and subsequent post-petition financings and dealing with a myriad of other pressing matters. The Debtors require an extension of time to analyze the Leases and to avoid what would be either a premature assumption or rejection of the Leases. Mr. Packel submits that the Debtors' decision to assume or reject a particular Lease, and the timing of such assumption or rejection, depends in large part on whether the location which relates to the Lease will play a future role in the Debtors' operations going forward. At this early stage, the Debtors have not yet determined whether each of these locations will play a role in the Debtors' future operations. Moreover, that the Debtors also need to consider and determine whether there is value for the Debtors in assigning certain Leases rather than in simply rejecting them. Mr. Packel believes that such decisions cannot be made properly and responsibly in these cases without an extension of the time within which such leases must either be assumed or rejected. Several agreements have already been rejected and Debtors will continue to do so as their role in the reorganization becomes clear. Due to the size, nature, and complexity of the Debtors chapter 11 cases and given the number of issues confronting the Debtors, Mr. Packel contends that it is not possible for the Debtors to determine whether to assume or reject all of the Leases at this time. Over the course of these cases, the Debtors intend to constantly reevaluate each different location to determine its future role in the Debtors' operations. In addition, the Debtors will determine which, if any, of the Leases can be consolidated with another Lease to effect cost savings. If the Debtors are forced to make the determination whether to assume or reject the Leases now, or in the near term, Mr. Packel fears that they could be compelled to make an imprudent determination that would negatively effect their ability to reorganize successfully. Therefore, the Debtors request an extension through confirmation of a plan or plans of reorganization of the time within which they must elect to assume or reject the Leases. Absent an extension of the time to assume or reject the Leases, Mr. Packel states that the Debtors will be forced to make determinations regarding the Leases without the opportunity to make a prudent determination as to whether the assumption or rejection of each Lease is warranted. Such a result would put the Debtors at risk of either assuming Leases prematurely, and thereby creating unnecessary administrative expense claims, or rejecting Leases that could prove to be valuable, either for the Debtors' businesses or because such Leases could be profitably assumed and assigned. A hearing on this motion is scheduled for January 23, 2002. (ANC Rental Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADVANTICA RESTAURANT: S&P Ratchets Junk Ratings Down Further ------------------------------------------------------------ Standard & Poor's lowered its rating on Advantica Restaurant Group Inc.'s $529.6 million 11.25% senior unsecured notes due 2008 to single-'C' from triple-'C'-plus and lowered its corporate credit rating to double-'C' from single-'B' and its senior secured bank loan rating to triple-'C'-plus from single- 'B'. All ratings were placed on CreditWatch with negative implications. The downgrade is based on Advantica's announcement that the company will exchange up to $204.1 million of new 12.75% senior notes for $265 million of existing 11.25% senior notes for $770 in principal for each $1,000 in principal. On completion of the transaction, Standard & Poor's expects to lower the rating on the senior unsecured notes to 'D'. According to Standard & Poor's criteria, a default includes an exchange offer in which the total value of securities and cash offered is materially less than the originally contracted amount. In addition, this offer is deemed coercive because the unexchanged old notes will be structurally subordinated to the new notes; therefore, the refusal to accept the offer could lead to an even worse alternative for the noteholders. Similarly, the corporate credit rating on Advantica would be lowered to 'SD' (selective default) on completion of the exchange offer. Standard & Poor's criteria requires a selective default rating when an issuer defaults on one class of obligations but continues to honor others. DebtTraders reports that Advantica Restaurant Group's 11.250% bonds due 2008 (ADVRES1) are currently trading between 69 and 71. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=ADVRES1 AFFINITY TECHNOLOGY: Must Restructure Finances to Remain Viable --------------------------------------------------------------- To date, Affinity Technology Group, Inc. has generated substantial operating losses, has experienced an extremely lengthy sales cycle for its products and has been required to use a substantial amount of existing cash resources to fund its operations. The Company has taken certain measures to increase and preserve its cash resources. These measures include the issuance of a $1 million note in July 2001, the placement of a $1 million convertible debenture in November 2000, and a 33% reduction in its work force in March 2001. The Company believed that existing cash and internally generated funds would be sufficient to fund its operations for the remainder of 2001. However, the Company may have encountered unexpected expenses, the loss of anticipated revenues and other developments that may have impacted the Company's ability to fund operations for all of 2001. To remain viable, the Company must substantially increase its revenues, raise additional capital, or significantly reduce its operating expenses. To maintain the minimal resources necessary to support its current operations and business lines, the Company does not believe that substantial additional reductions in its operating expenses are feasible. No assurances can be given that the Company will be able to increase revenues, raise additional capital, or significantly reduce its operating expenses in a manner that will allow it to continue its operations. The Company's revenues for the three and nine months ended September 30, 2001 were $1,097,803 and $3,011,550, respectively, compared to $446,352 and $1,478,731 for the corresponding periods of 2000. However, the Company has generated net losses of $66,071,034 since its inception and has financed its operations primarily through net proceeds from its initial public offering in May 1996. Net proceeds from the Company's initial public offering were $60,088,516. In July 2001, the Company issued a $1 million note, secured by the common stock of its subsidiary, Surety Mortgage, Inc. Additionally, in 2000 the Company sold 484,848 shares of its common stock for $500,000 and issued a $1 million convertible debenture. AMES DEPT: US Trustee Amends Creditors' Committee Membership ------------------------------------------------------------ The United States Trustee for Region II amends her appointment of creditors to the Official Committee of Unsecured Creditors of Ames Department Stores, Inc., to include GMAC Commercial Credit LLC. The Official Committee of Unsecured Creditors is now composed of: A. The Chase Manhattan Bank, Indenture Trustee Institutional Trust Services 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Mr. James R. Lewis, Vice President B. Mr. Paul K. Miller 606 24th Ave. So., Ste. B-12 Minneapolis, MN 55454 C. GSC Partners 500 Campus Drive, Suite 220 Florham Park, NJ 07932 Attention: Mr. Bradley Kane D. State Street Bank and Trust Co., Indenture Trustee 2 Avenue de Lafayette Boston, MA 02111 Attention: Ms. Laura L. Moran, Assistant Vice President E. Sara Lee Knit Products Retail Credit Department P.O. Box 2996 Winston-Salem, NC 27102 Attention: Mr. Grey Loggins, Credit Department F. VF Jeanswear LP 400 North Elm Street Greensboro, NC 27401 Attention: Mr. Michael Durant G. Hasbro, Inc. P.O. Box 200 200 Narragansett Park Drive, Pawtucket, RI 02862-0200 Attention: Ms. Judith A. Smith, VP & Assistant Treasurer H. Arlee Home Fashions, Inc. 261 Fifth Avenue New York, NY 10016 Attention: Mr. Arnold Frankel, Chairman, CEO I. Thomasville Furniture Industries, Inc. 401 East Main Street P.O. Box 339 Thomasville, NC 27361-0339 Attention: Mr. D. Paul Dascoli, Senior VP, CFO J. Sunbeam Corporation 2381 Executive Center Dr. Boca Raton, FL 33446 Attention: Mr. Douglas Ernst, VP - Financial Services K. American Greetings One American Road Cleveland, OH 44144 Attention: Mr. Art Tuttle L. International Business Machines Corporation North Castle Drive Armonk, NY 10504 Attention: Mr. David Karchere, Program Manager M. Footstar, Inc. One Crosfield Avenue West Nyack, NY 10994 N. Kovoner/Rosen Interests P.O. Box 4054 Farmington, CT 06034-4054 Attention: Mr. R. Michael Goman, President O. GMAC Commercial Credit LLC One Pennsylvania Plaza, 9th Floor New York, New York 10119 Attention: Mr. Cedric G. Williams, Vice President (Ames Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG HOLDINGS: Settles Legal Squabble with Congoleum Corp. --------------------------------------------------------------- Armstrong Worldwide, Inc., asks Judge Newsome for his authorization and approval of a settlement with Congoleum Corporation concluding non-bankruptcy litigation over certain marketing which AWI used in which it compared its products to those of Congoleum on a "rip tear and gouge" test. The Congoleum Litigation Debra A. Dandeneau, Esq., at Weil, Gotshal & Manges explains that AWI uses various marketing techniques to promote its "ToughGuard" vinyl flooring product line. One marketing technique involves conducting performance tests using ToughGuard products and a variety of competing vinyl flooring products, including competing products manufactured by Congoleum. As a result of such performance tests AWI's advertising and promotional materials have represented that the performance tests demonstrate that ToughGuard products are superior to the competing products, including the Congoleum products. The ToughGuard products include "Initiator," "Memories," "Starstep(R)," and "Rhythm(R)" vinyl flooring products. The Congoleum Products that were tested against AWI's ToughGuard products include "Valuflor(R)," "Diamondflor(R)," Ultraflor(R)," and "ArmorBright" vinyl flooring products. On or about February 16, 2000, Congoleum filed a lawsuit in the United States District Court for the District of Massachusetts against AWI. In the complaint, Congoleum alleged that AWI violated the Lanham Act because AWI's advertising and promotional materials allegedly contained false and/or misleading information about the Congoleum products. Specifically, Congoleum alleged in its complaint that the product comparisons in certain AWI advertising and promotional materials misrepresented the nature, characteristics, and qualities of the Congoleum products by improperly portraying the Congoleum products as the worst performing of the competing products in performance tests conducted by AWI. In addition, Congoleum alleged that AWI engaged in unfair competition under common law and unfair or deceptive acts or practices under Massachusetts law. Congoleum sought injunctive relief, compensatory damages, treble damages, corrective advertising, and recovery of its attorney's fees and costs. On April 28, 2000, AWI filed an answer denying the material allegations of the complaint and asserting numerous affirmative defenses. The Congoleum litigation was stayed as a result of the commencement of AWI's Chapter 11 case. On or about August 31, 2001, Congoleum filed a proof of claim against AWI's estate. The Congoleum Proof of Claim was filed by Congoleum to ensure that any favorable judgment obtained by Congoleum in the action would be recognized as a valid claim. Specifically, in the Congoleum Proof of Claim, Congoleum asserted a claim in the amount of not less than $2,000,000.00 for any damages arising in connection with the action. The Congoleum Settlement Agreement Following the filing of the answer, AWI and Congoleum engaged in settlement negotiations in an effort to resolve the Congoleum. litigation. As a result of such good faith, arms-length negotiations, AWI and Congoleum entered into a settlement agreement and mutual release on or about August 28, 2001. The principal terms of the Congoleum settlement are: (1) Congoleum will release, acquit, and forever discharge AWI, and AWI will release, acquit, and forever discharge Congoleum, from any and all known or unknown claims that Congoleum or AWI (i) alleged or could have alleged (whether known or unknown) as a result of the acts, omissions, occurrences, and events set forth in Congoleum's complaint, and (ii) now have or may have in the future on account of alleged false or misleading representations in AWI's advertisements or promotional materials that were published prior to the date of the Congoleum Settlement. (2) The Congoleum settlement does not constitute an admission of liability by any party to any other party. (3) With the exception of certain disclosures that may be made to third parties in connection with the Congoleum Settlement, the terms and conditions of the Congoleum Settlement shall remain confidential as between AWI and Congoleum and their respective counsel, and are filed with this Court under seal. The Congoleum Settlement will be submitted to the U.S. Trustee and made available to each of the Committees on a confidential basis, and a copy will be submitted to the Court under seal in connection with the Seal Motion. The Permitted Disclosures include: (i) a statement disclosing that the Congoleum litigation has been settled, but that a confidentiality agreement prevents AWI and Congoleum from disclosing the details of such settlement, and (ii) a joint statement that may be distributed in its totality to third parties concerning the resolution of the Congoleum Litigation. The Joint Statement is: Congoleum and Armstrong announce the settlement of the lawsuit entitled Congoleum Corporation vs. Armstrong World Industries. This settlement is not an admission of liability by any party to the other party. Congoleum claimed that photographs in certain trade advertising and promotional materials of Armstrong portrayed Congoleum as the worst performing of several products in rip, tear, gouge tests conducted by Armstrong. Armstrong acknowledges that it was not the intention of these materials to suggest that Congoleum's products performed worse than all other products in the rip, tear, gouge tests. In fact, in many instances, the Congoleum product performed better than other competitive products portrayed in these promotional materials. Rather. the intention was to show that the rip, tear, gouge tests demonstrated the superiority of ToughGuard. Armstrong regrets any harm that may have been caused to Congoleum. (4) Upon Court approval of the Congoleum Settlement, AWI and Congoleum will prepare and execute all pleadings necessary to dismiss the Congoleum litigation with prejudice. Ms. Dandeneau argues that the Congoleum settlement is in the best interests of creditors because it resolves the dispute on a consensual basis. AWI assures Judge Newsome it believes it has a strong defense against Congoleum's accusations, but it recognizes that litigation is always fraught with uncertainty. The issues raised in this dispute are complex and fact- intensive, so it is not possible to predict with any certainty how a court might ultimately rule. Based on these factors, it is impossible to forecast whether AWI ultimately would prevail in litigation against Congoleum. Approval of this settlement will eliminate any risks and uncertainty that is associated with such litigation. If AWI were required to defend against Congoleum's allegations, AWI would be required to expend substantial time and legal expense without the assurance of obtaining a better result. Although Congoleum does not seek specified damages in its complaint, the Congoleum proof of claim indicates that the total amount of Congoleum's claim is "not less than $2,000,000, plus unvalued injunctive relief. AWI estimates that the cost of defending against Congoleum's claims could be "substantial". These legal expenses would constitute administrative costs that would diminish AWI's chapter 11 estate. In the absence of any counterclaims against Congoleum, AWI does not believe that the substantial fees and expenses associated with litigating Congoleum's claims to their conclusion are reasonable. Finally, AWI believes that approval of this settlement is in the best interests of its creditors. This settlement will enable AWI to end the Congoleum litigation without expending any funds or incurring the administrative expenses associated with litigation. Because these claims will be finally settled and forever barred, the claims against AWI will be reduced by at least $2,000,000 as a result. Thus approval of this settlement increases potential distributions available to AWI's creditors, as well as the likelihood that AWI's creditors will be able to receive a distribution immediately upon the effective date of the plan. AWI therefore believes, in what it describes as the "exercise of its sound business judgment", that this settlement should be approved. (Armstrong Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) BETHLEHEM STEEL: Gets Approval to Sign-Up PricewaterhouseCoopers ---------------------------------------------------------------- Bethlehem Steel Corporation and its debtor-affiliates want to employ and retain PricewaterhouseCoopers, a limited liability partnership comprised of experienced certified public accountants and consultants, to provide professional services in the areas of accounting, auditing, tax, and other related consulting services in these Chapter 11 cases. Jeffrey L. Tanenbaum, Esq., at Weil, Gotshal & Manges LLP, in New York, New York, tells the Court that PricewaterhouseCoopers has rendered extensive accounting and auditing and certain tax advisory and related services to the Debtors prior to Petition Date. That's why, Mr. Tanenbaum explains, PricewaterhouseCoopers is familiar with the Debtors' operations, management and accounting procedures, and can render the services for which the Debtors seek to retain PricewaterhouseCoopers most effectively and efficiently. Accordingly, Mr. Tanenbaum asserts that PricewaterhouseCoopers is well qualified to perform the accounting, auditing and tax advisory services for which they are sought to be retained. Specifically, Mr. Tanenbaum notes that the scope of PricewaterhouseCoopers' retention includes, but not limited to: (i) Audits of the financial statements of the Debtors as may be required from time to time and assistance in the preparation and filing of financial statements and disclosure documents required by the Securities and Exchange Commission, including Forms 10-K and 10-Q as required by applicable law, or as requested by the Debtors; (ii) Audits of the Debtors' benefit plans as may be required by the Department of Labor or the Employee Retirement Income Security Act, as amended; (iii) Advice and assistance regarding tax issues, including assistance in the preparation, review and/or filing of tax returns as well as other tax advice and assistance as needed and requested by the Debtors; and (iv) Performance of other accounting services requested by the Debtors as may be necessary or desirable. In connection with the annual audit services, Mr. Tanenbaum informs Judge Lifland that the Debtors and PricewaterhouseCoopers have agreed to a fixed fee of $860,500 for the audits of the Debtors' financial statements for the year ended December 31, 2001 and the related quarterly reviews, as well as the audits of employee benefit plans for 2000 and certain other special reporting requirements. To date, Mr. Tanenbaum reports that $669,500 has been paid to PricewaterhouseCoopers related to these auditing services. "The completion of such services will require the Debtors to pay an additional $191,000, plus related out-of-pocket expenses, for post-petition services," Mr. Tanenbaum says. For the Fixed Fee Services, Mr. Tanenbaum continues, PricewaterhouseCoopers intends to include as an exhibit to each of its interim fee applications a summary (in reasonable detail) of the amount of time spent by its professionals on various tasks in lieu of contemporaneous time records in partial hour increments. Both parties contend that the fixed fee is reasonable, customary, and at market rate for services of this nature. PricewaterhouseCoopers advises the Debtors that the firm intends to apply to the Court for allowances of compensation and reimbursement of expenses for all other accounting, tax and related support services. James G. Kaiser, a partner of PricewaterhouseCoopers LLP, reports that the range of current hourly rates charged by PricewaterhouseCoopers' professionals assigned to this engagement are: Partners $500 - $595 Managers/Directors $275 - $495 Associates/Senior Associates $140 - $325 Administrative/Para-professional $85 - $150 Mr. Kaiser emphasizes that these hourly rates are adjusted annually. Both parties maintain that these hourly rates are consistent with market rates for comparable services. In addition, Mr. Kaiser relates that PricewaterhouseCoopers will also seek reimbursement for its reasonable out-of-pocket expenses, which include travel, lodging, report production, delivery services and other necessary costs incurred in providing services to the Debtors. According to Mr. Kaiser, PricewaterhouseCoopers' professionals have conducted a review of its professional contacts or connections with the Debtors, their affiliates and certain entities holding large claims against the Debtors that were reasonably known to PricewaterhouseCoopers' professionals. PricewaterhouseCoopers discloses that it has provided and likely will continue to provide services unrelated to the Debtors' chapter 11 cases for its various clients. "To the best of my knowledge, no services have been provided to these entities or other parties in interest which could impact their rights and obligations with respect to the Debtors, their estates or these chapter 11 cases, nor does PricewaterhouseCoopers' involvement in these cases compromise its ability to continue such auditing, tax and/or consulting services," Mr. Kaiser asserts. Mr. Kaiser informs Judge Lifland that only two entities exceed 1% of PricewaterhouseCoopers' U.S. annual revenues. "Those entities, J. P. Morgan Chase & Co. and Bank of America, each represented 1.2% of the PricewaterhouseCoopers' U.S. revenues during the 2001 fiscal year," Mr. Kaiser reports. According to Mr. Kaiser, the primary services to each of these entities were audit, tax, information system and other services, unrelated to the Debtors and these chapter 11 cases. Mr. Kaiser contends that PricewaterhouseCoopers has provided and likely will continue to provide services unrelated to the Debtors' chapter 11 cases for these entities. "In the event that an actual conflict arises with respect to J.P. Morgan Chase & Company or Bank of America and PricewaterhouseCoopers' role in these cases, the Debtors would employ other accountants or advisors or refer such matters to accountants or advisors that have already been retained in these cases," Mr. Kaiser explains. Furthermore, Mr. Kaiser maintains that PricewaterhouseCoopers is not a "creditor" of any of the Debtors. To the extent any of the Debtors owed any pre-petition fees to PricewaterhouseCoopers for services rendered, Mr. Kaiser says, PricewaterhouseCoopers agrees to waive any claim with respect to any such unpaid fees. "To the best of my knowledge, PricewaterhouseCoopers is a "disinterested person" as that term is defined in section 101(14) of the Bankruptcy Code," Mr. Kaiser assures the Court. If any new relevant facts or relationships are discovered during PricewaterhouseCoopers' update of its relationship database search, Mr. Kaiser promises that the firm will promptly file a supplemental affidavit disclosing all such facts and relationships. Moreover, Mr. Tanenbaum states that the Debtors and PricewaterhouseCoopers have agreed, subject to the Court's approval of this Application, that: (i) any controversy or claim with respect to, in connection with, arising out of, or in any way related to this Application or the services provided or to be provided by PricewaterhouseCoopers to the Debtors as outlined in this Application, including any matter involving a successor in interest or agent of any of the Debtors or of PricewaterhouseCoopers, shall be brought in the Bankruptcy Court for the Southern District of New York or the District Court for the Southern District of New York, if such District Court withdraws the reference; (ii) PricewaterhouseCoopers and the Debtors, and any and all successors and assigns thereof, consent to the jurisdiction and venue of such court as the sole and exclusive forum (unless such court does not have or retain jurisdiction over such claims or controversies) for the resolution of such claims, causes of actions or lawsuits; (iii) PricewaterhouseCoopers and the Debtors, and any and all successors and assigns thereof, waive trial by jury, such waiver being informed and freely made; (iv) if the Bankruptcy Court, or the District Court if the reference is withdrawn, does not have or retain jurisdiction over the foregoing claims and controversies, PricewaterhouseCoopers and the Debtors, and any and all successors and assigns thereof, will submit first to non- binding mediation; and, if mediation is not successful, the parties will submit to binding arbitration, in accordance with the dispute resolution procedures; and (v) judgment on any arbitration award may be entered in any court having proper jurisdiction. Thus, the Debtors seek the Court's approval to employ PricewaterhouseCoopers pursuant to this agreement. Further, Mr. Tanenbaum relates, PricewaterhouseCoopers has agreed not to raise or assert any defense based upon jurisdiction, venue, abstention or otherwise to the jurisdiction and venue of the Bankruptcy Court or the District Court to hear or determine any controversy or claims arising out of this Agreement. * * * After due deliberation, Judge Lifland approves the Debtors' application. The Court rules that all compensation and reimbursement of expenses paid to PricewaterhouseCoopers, including, for the fixed fee services described in the application in an amount of up to $191,000, shall be subject to prior Court approval. (Bethlehem Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) BRILLIANT DIGITAL: Sets Special Shareholders Meeting for Feb. 20 ---------------------------------------------------------------- A Special Meeting of Stockholders of Brilliant Digital Entertainment, Inc. will be held at the Hilton Hotel, 6360 Canoga Avenue, Woodland Hills, California 91367, on Wednesday, February 20, 2002 at 10:30 a.m., Pacific Standard time. The Special Meeting is being held for the following purpose: To approve an amendment to the Amended and Restated Certificate of Incorporation of the Company to increase the aggregate number of shares of common stock of the Company, par value $0.001 per share authorized for issuance from 30,000,000 shares to 150,000,000 shares. Only stockholders of record of the common stock of the Company at the close of business on December 24, 2001 are entitled to notice of, and to vote at, the Special Meeting and at any of its adjournments or postponements. * * * As reported in the Dec. 12, 2001 edition of Troubled Company Reporter, Brilliant Digital's Board had considered that due to the difficulty to immediately attract other equity investments, debt financings, or strategic partnership transactions, its was foreseen that the company's financial condition could worsen, and thus would be unable to continue as a going concern, and forced to seek steps to protect its assets for the benefit of the company's creditors. Thus, the Board asserted that "given [its] current lack of financing alternatives and our immediate need for capital, [its] Board is not aware of any material controversy among stockholders regarding the Transaction and believes the Transaction is necessary to ensure [its] continuing viability." Brilliant Digital Entertainment, Inc. (Amex: BDE) is a leading developer of real-time 3D technology for rich media content creation, distribution and ad serving for the Internet. It sells its b3d Studio content creation and authoring toolset to enable the creation and delivery of interactive, streaming, real-time 3D graphics over the Internet, and licenses its ad serving technology to the content and advertising communities. The b3d Studio toolset is used by studios, production houses, web content suppliers and advertising agencies to produce entertainment, advertising and music content for consumers distributed over the Internet. Brilliant also licenses its Brilliant Banner ad serving technology to the web based advertising industry. Brilliant produces real-time-3D digitally animated interactive titles featuring popular characters such as Superman, Xena, KISS and Ace Ventura, and music artists such as DMX, Ja Rule, Sum 41 and Ludacris. Developed using Brilliant's proprietary suite of b3d software tools, these full-screen productions have small files for faster downloads. Content is distributed broadly via Internet syndication to partners including Warner Bros. Online, MTV.com, Road Runner and VH1.com. Find out more at http://www.brilliantdigital.com BROADBAND WIRELESS: Commences Reorganization Under Chapter 11 ------------------------------------------------------------- Broadband Wireless International Corporation (OTC Bulletin Board: BBAN) announced the company has entered Chapter 11 Reorganization following the exit from the Federal Receivership and the dismissal of actions by the SEC. The SEC filed a motion on December 12 with the Federal Court requesting the pending actions against Broadband Wireless be dismissed. The court issued its final order approving the motion and removed the Temporary Receiver on December 21st. The application to reorganize was filed on December 27 by the firm of Kline, Kline, Elliott, Castleberry & Bryant, P.C., on behalf of the company. "We are extremely excited about the events that have occurred over the last 30 days and look forward to the reorganization process finalizing in the near future. The reorganization is an essential part of the company putting a final closure to the actions of past officers and directors that caused the SEC to place the company in receivership in August of 2000," commented BBAN President, Dr. Ron Tripp. In December of 2000 a new Board of Directors was installed consisting of Mr. Albie Shaffer, Chairman, Mr. Bill Higgins, and Dr. Tripp. The court approved an application by the Board to move into operations in February 2001. The company continues to provide wireless service to financial institutions and the Native American market. In November, Broadband Wireless released its nationwide ISP, bbanonline, and subsequently signed a letter of intent and definitive agreement for acquisition of EDTV of Las Vegas, Nevada. EDTV utilizes a methodology of marketing, Extreme Niche Targeting, combining multiple technologies and communications media, providing artists, athletes, labels, advertisers and consumer product manufacturers direct contact with the targeted niche market. Email, websites, interactive games, and identity ISPs are the primary delivery channels. Tripp further stated, "The reorganization will allow us to move forward and prepare to finalize the acquisition of EDTV. The primary need of the reorganization is to remove any possible contingent liability created by the actions of those individuals who allegedly violated SEC rules and regulations prior to August of 2000. In reorganization we will have the opportunity to bring those issues created by Mr. Knight and others to closure once and for all. The company is currently in the process of finalizing the disclosure statement and business plan that will be distributed to shareholders for review and approval. With the support of the shareholders, Broadband Wireless will have an opportunity to exit reorganization, complete the acquisition and focus on the EDTV, ISP, and wireless service products that we currently offer." CHIPPAC INC: Expects Revenues to Reach $76.5 Million in Q4 2001 --------------------------------------------------------------- ChipPAC, Inc., (Nasdaq: CHPC) confirmed that it expects revenue of approximately $76.5 million for the fourth quarter ended December 31, 2001, which represents an increase from the company's reported revenue of $74.6 million for the third quarter ended September 30, 2001. The company expects to report a pro-forma net loss for the fourth quarter of $0.22 per share, which is ahead of the First Call analyst consensus of $0.23. ChipPAC is one of the world's largest and most diversified providers of semiconductor assembly and test services. On November 1, 2001, ChipPAC indicated it believed revenues for the fourth quarter ending December 31, 2001 would be flat to up 5% from the preceding third quarter, with a pro-forma net loss in the range of ($0.24) to ($0.22) per share. This excludes the previously announced planned restructuring charges and an asset write-down which are designed to return the company to profitability in the second half of 2002 based on improving industry volume and a lower corporate cost structure. Dennis McKenna, Chairman and Chief Executive Officer of ChipPAC, Inc. commented, "We are seeing generally favorable trends with unit volumes beginning to improve and the rate of selling price declines decreasing. We are also pleased with our continued progress on reducing our cost structure and further rationalizing our global asset base. We are confident that our actions have put our company in a stronger competitive position. Overall, we have a positive view for ChipPAC in 2002." ChipPAC will review detailed fourth quarter 2001 results and guidance for the first quarter 2002 on Friday, February 1st at 5PM EST. The conference call-in number is 212-346-0241. A replay will be available from 7PM EST on February 1st through 7PM EST, February 8th. The replay number is 800-633-8284 (domestic) or 858-812-6440 (international). The confirmation number is 20133102. The live call and replay will also be accessible over the web at http://www.chippac.com ChipPAC is a full-portfolio provider of semiconductor packaging design, assembly, test and distribution services. The company combines a history of innovation and service with more than a decade of experience satisfying some of the largest -- and most demanding -- customers in the industry. With advanced process technology capabilities and a global manufacturing presence spanning Korea, China, Malaysia and the United States, ChipPAC has a reputation for providing dependable, high quality packaging solutions. For more information, visit the company's Web site at http://www.chippac.com ChipPAC is a full-portfolio provider of semiconductor package design, assembly, test and distribution services. As of September 30, 2001, the company sustained strained liquidity, with current liabilities exceeding current assets by about $6million. CHIQUITA BRANDS: Court Approves Management Retention Program ------------------------------------------------------------ Chiquita Brands International, Inc., asks Judge Aug to approve its management retention program. Kim Martin Lewis, Esq., at Dinsmore & Shohl, in Cincinnati, Ohio, explains that it is imperative for the Debtor to stabilize its workforce at this point in their Chapter 11 case. "This is to ensure that the necessary complement of employees required to proceed with the Debtor's reorganization are in place," Ms. Lewis adds. Ms. Lewis further tells the Court that this program is a modification of the Debtor's regular management incentive program for 2002 and is targeted at approximately 62 key employees. "During this chapter 11 case, an important element of the Debtor's successful restructuring is its employees," Ms. Lewis asserts. This proposed management retention program is designed to: (1) assist the Debtor's retention of the services of its employees by providing financial incentives, (ii) protect the Debtor's investment in human capital during this chapter 11 case, and, (iii) help the Debtor's achieve a successful restructuring. Ms. Lewis informs the Court that the Debtor's senior management has developed a management retention program, which has been approved by the Debtor's Board of Directors. The Management Incentive Program provides for annual bonus payments to employees at the manager level and above. "These bonuses are based on the Debtor's operating performance in connection with the respective key employee's performance achievements. It is payable early in the year following the year in which the performance achievements are reviewed," Ms. Lewis explains. This Management Incentive Program is a merit based incentive program. In accordance with the Debtor's Management Incentive Program, each key employee has an annual target bonus amount, which is expressed as a percentage of the base salary. Ms. Lewis relates that the program is designed to reward key employees who remain with the Debtor throughout the restructuring. "An employee must be actively employed at the time program bonuses are paid in order to qualify for an award," says Ms. Lewis. Ms. Lewis further states that 50% of the Target Award for each eligible employee will be earned on the later of June 30, 2002 or 90 days after the Debtor emerges from its chapter 11 proceeding -- Earned Date. According to Ms. Lewis, the amount earned as of the Earned Date will constitute a retention incentive and will not be conditioned on any rating of the Key Employee dictated by the 2002 Management Incentive Program, or any other criterion, other than continuing full-time employment with the Debtor of its subsidiaries through the Earned Date. This Early Payment will be paid promptly after the Earned Date. Ms. Lewis relates that at the end of year 2002, all participant employees will be rated in conformity with the Debtor's procedures and the Key Employee's approved annual 2002 Management Incentive Program bonus will be reduced by the amount of the corresponding Early Payment. "Final payment of each 2002 Management Incentive Program award, if any, will be paid in early 2003," Ms. Lewis informs Judge Aug. In essence, Ms. Lewis notes, the payment under the Program is simply an advance of 50% of the annual bonus under the 2002 Management Incentive Program. As a result of the credit, Ms. Lewis says, the Program will not raise the overall costs of the Debtor's traditional Management Incentive Program for the year 2002, except: (i) to the extent Key Employees terminate their employment relationship with the Debtor after having received the Early Payment but before a date upon which they would otherwise be eligible to receive the normal end-of-year Management Incentive Program, or (ii) to the extent a Key Employee's 2002 Management Incentive Program Award would have been less than the applicable Early Payment made on the Earned Date. Ms. Lewis reports that the estimated maximum cost of the Early Payments to be made under the Program to Debtor employees will be approximately $1,500,000. Ms. Lewis asserts that the implementation of the management retention program will accomplish a sound business purpose and maximize the value of the Debtor's estate. "Key employees are intimately familiar with the Debtor's business and if any of these employees are lost, it will be difficult and expensive for the Debtor to get qualified replacement," Ms. Lewis justifies. Moreover, if key employees will leave the Debtor, Ms. Lewis fears that the Debtor's operations will suffer greatly. * * * After due deliberation, Judge Aug grants the Debtor's management retention program. (Chiquita Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) CHIVOR S.A.: Default Unlikely to Impact AES Gener's Ratings ----------------------------------------------------------- Fitch views the recent payment default by Chivor S.A., an asset of AES Gener S.A., on a bullet maturity of an international syndicated bank loan as credit neutral to AES Gener. The bank loan is non-recourse to AES Gener and potential covenant violations with AES Gener and its other assets appear manageable at this time. Late last month, Chivor S.A. was unable to refinance an international syndicated bank loan in the Colombian local bank and capital markets on time due to market conditions and timing. Chivor is currently seeking to negotiate an extension of its existing debt, primarily the bank loan of US$336 million, to provide the company with ample time to re-launch and/or seek alternative financing options. Despite the missed payment, Chivor continues to generate positive cash flow and has a solid business position; cash flow is currently more than sufficient to service interest expense. Fitch's current 'BBB' unsecured debt rating of AES Gener does not rely on associated income from Chivor given the expectation that the company will complete the planned divestiture of Chivor and that the company will be primarily operating in the Chilean electricity market. Chivor is expected to be sold, or transferred, to an AES affiliate at fair market value after the debt negotiation and as part of AES Gener's medium-term plan. AES Gener is rated higher than its parent, AES Corporation, but to minimize associated credit risk the company has developed a structure to insulate AES Gener's credit quality from that of AES Corporation. AES Gener is the second largest electricity generation group in Chile in terms of operating revenue and generating capacity with an installed capacity of 1,754 MW composed of 1,509 MW of thermal and 245 MW of hydro generating capacity. The company operates most of the thermal electric power plants in the country and supplied approximately 23% of Chile's total generating capacity during 2000. AES Gener serves both the Central Interconnection System (SIC) and Northern Interconnection System (SING) through various subsidiaries and related companies. CLARENT CORP: Probe Uncovers Irregularities in Financial Results ---------------------------------------------------------------- Clarent Corporation (Nasdaq:CLRNE) announced that it received a Nasdaq Notice of Additional Concerns on January 3, 2002 indicating that the Company has failed to comply with Marketplace Rule 4310(c)(14) with respect to its Annual Report on Form 10-K for the year ended December 31, 2000 because the Annual Report does not contain audited financial statements. Additionally, the Nasdaq notice indicated that the information contained in the Company's September 4, 2001 and October 23, 2001 press releases raises public interest concerns under Marketplace Rules 4300 and 4300(a)(3) related to the protection of investors. The Company announced on November 27, 2001 that it had received a Nasdaq Staff Determination that its common stock was subject to delisting from The Nasdaq Stock Market. The Company has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination and to address the matters described in the Notice of Additional Concerns. As a result, the delisting has been stayed pending the Panel's determination. There can be no assurance that the Panel will grant the Company's request for continued listing. The Company is continuing its investigation into the previously announced overstatement of historical revenues. The preliminary results of this investigation indicate that there have been financial irregularities that materially affect the previously reported financial results for fiscal year 2000, as well as the first two quarters of fiscal year 2001. Clarent Corporation (Nasdaq:CLRNE) is a leading provider of voice solutions for next generation networks. Clarent's solutions enable service providers to deploy a converged network (voice, data and applications). Clarent solutions reduce costs and increase operating efficiencies while delivering innovative new services that allow end users to manage their communications. Founded in 1996, Clarent is headquartered in Redwood City, Calif. and has offices in Asia, Europe, Latin America and North America. For more information please visit http:/www.clarent.com CLARENT: Appoints New Board Members & Senior Management Officers ---------------------------------------------------------------- Clarent Corporation (Nasdaq:CLRNE) announced the addition of two new members to its board of directors, J. Mark Hattendorf, and Tom Elliot, as well as several changes to its management team that have been instituted during the past several months. The company also estimates that revenues for the year ended December 31, 2001 will be in the range of approximately $60 to $65 million, and cash and cash equivalents at December 31, 2001 will be approximately $50 million. New Additions: Mr. Hattendorf brings over 30 years of financial and operational experience, having served most recently as COO of Questlink Technology. Mr. Hattendorf previously held CFO positions at several public and private companies including SpringStreet.com; Broderbund Software, Acclaim Entertainment and Prodigy Services. Mr. Elliot brings over 35 years of important business experience as well as knowledge of the cable industry, including being one of the founders of CableLabs, a cable industry research and development consortium of cable television system operators representing most of the cable subscribers in North America. Mr. Elliot previously spent numerous years in all phases of technical management at Telecommunications, Inc. Their appointments underscore Clarent's commitment to effectively managing its business and capitalizing on growth markets. The company has also taken steps to bolster its management team with several new appointments. Toward that end, Clarent has appointed John J. O'Shea as chief financial officer. Mr. O'Shea brings to Clarent more than 30 years of experience in startups and public companies and has held roles as chief financial and administrative officer for such telecommunications companies as Tvia, Inc., V-Bits, Inc., and Compression Labs, Inc. Changes to Management Team: Mike Vargo, previously the company's chief technology officer who had been serving as interim CEO, has stepped down, but will continue to serve in a technical advisory capacity to the board. The company's board has been in active discussions with prospective CEO candidates who are positioned to assume CEO responsibilities with minimal delay. To facilitate communication and coordination with the board prior to the appointment of the new CEO, the board has designated new board member, J. Mark Hattendorf, to assist in day-to-day communications between the board of directors andClarent's management team. Clarent also announced a reorganization of its senior management team and the delegation of new responsibilities. In addition to Mr. O'Shea, the new management team includes: -- Tuck Newport, vice president of sales and service -- Currently responsible for Clarent's worldwide sales and service, Mr. Newport has over 20 years of leadership experience in developing and marketing software and network products for start-up enterprises and large corporations. He has founded and managed wireless data, enterprise software, and magazine publishing firms and before joining Clarent served as a vice president at VeriFone. -- Elizabeth Cholawsky, vice president of marketing -- Ms. Cholawsky is responsible for product strategy and planning, and for Clarent's global strategic marketing and branding initiatives. She leads a team of business development, product marketing, product management and marketing communications professionals. She has 20 years of leadership experience in high technology having held management positions with Voice Processing Corporation, Connected Systems, !hey, Inc., Digital Sound Corporation, Trinzic Corporation and Applied Expert Systems. -- Tim Harris, vice president of human resources -- With more than 30 years of experience in human resources, Mr. Harris currently manages the planning, development and implementation of Clarent's human resource activities. He served as the corporate vice president of administration for Adaptec, Inc., a global digital systems bandwidth manufacturer of hardware and software high-performance products, and as the senior vice president of human resources for Novell. -- David Emerson, general counsel -- Emerson oversees all legal activity pertaining to Clarent, including commercial contracts and intellectual property matters. With eight years of practice in general business and corporate law, he most recently practiced law at Cooley Godward LLP, where he specialized in corporate and intellectual property law. -- Steve Langion, vice president of research & development -- Mr. Langion is responsible for driving the continued development and innovation of Clarent's softswitch and IP products. With over 20 years of experience in various engineering and development functions in the telecommunications field, he has a proven track record for creating and managing the successful delivery of complex, robust software systems and network management systems. Most recently, Mr. Langion was President and CEO of PEAK Software Solutions, and was responsible for the creation, direction, organization, operation and growth of the company and its software solutions. -- Ron Elswick, vice president of operations -- Mr. Elswick manages Clarent's worldwide operating infrastructure and information services areas to assure the company is well- positioned to take advantage of market opportunities. He has more than 40 years of experience in operations, manufacturing and engineering with the last 10 years spent as vice president of operations for telecommunications companies. "We welcome the addition of Mark Hattendorf and Tom Elliot to our board, and we are confident that our expanded board and new management team will enable Clarent to continue to offer industry leading products and services, and provide world-class customer service to our customers around the world," said director William R. Pape. "We want to particularly express the company's gratitude to Mike Vargo for his tremendous commitment, dedication and service to Clarent, and we look forward to continuing to benefit from his knowledge and experience through his technical advisory role to the board." Clarent also announced that Simon Wong, who became Clarent's CFO earlier last year, has decided to pursue other interests now that the Company's restatement process is in its final stages. "Simon has played a key role during our recent investigation and restatement process and we appreciate his dedication, hard work and important contributions to these efforts," said Mr. Pape. "Simon was also instrumental in supporting Clarent in its restructuring process last year," added Mr. Pape. Clarent Corporation (Nasdaq:CLRNE) is a leading provider of voice solutions for next generation networks. Clarent's solutions enable service providers to deploy a converged network (voice, data and applications). Clarent solutions reduce costs and increase operating efficiencies while delivering innovative new services that allow end users to manage their communications. Founded in 1996, Clarent is headquartered in Redwood City, Calif., and has offices in Asia, Europe, Latin America and North America. For more information please visit http://www.clarent.com COMDISCO INC: Selling Interests in 3 Partnerships for $5 Million ---------------------------------------------------------------- Comdisco, Inc., and its debtor-affiliates notify the Court that it intends to sell its interest in the limited partnership of New Enterprise Associates 10, L.P.; Oak Investment Partners X; and Weiss, Pack & Greer for a purchase price of $5,585,195. The Debtors intend to sell these Assets to Commonfund Capital Inc. The Debtors assure the Court that Commonfund Capital is not an insider and has no other connections to the Debtors. The Debtors believe that the purchase price accurately reflects the current market value of the Assets. The Debtors marketed these Assets to the potential purchasers, and this was the best bid they received. The Buyer's offer is fair, appropriate and favorable. If there are no objections filed by January 2, 2002 -- the Debtors will consummate the sale of the Assets free and clear of liens, claims and encumbrances, and take all actions necessary to close the transaction and sale process. (Comdisco Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVENTRY HEALTH: S&P Assigns BB+ Counterparty Credit Rating ----------------------------------------------------------- Standard & Poor's assigned its double-'B'-plus counterparty credit rating to Coventry Health Care Inc. At the same time, Standard & Poor's assigned its double-'B'-plus rating to Coventry's $175 million 10-year, fixed-rate unsecured notes with registration rights. The outlook is stable. The counterparty credit rating reflects Coventry's very good quality balance sheet, very strong earnings and cash flow, adequate but pressured capital adequacy, and acquisition growth strategy. Coventry's securities are offered under Rule 144A and are exempt from registration under the Securities Act of 1933. The net proceeds of the offering will be used to repurchase Coventry common stock and warrants from a primary shareholder. Major Rating Factors: -- Very good quality balance sheet. Coventry maintains a very good quality balance sheet supported by a conservative investment portfolio strategy and prudent use of financial leverage. Coventry's investment guidelines emphasize investment- grade, fixed-income instruments to provide short-term liquidity and minimize the risk to principal. Coventry's liquidity ratio, based on Standard & Poor's liquidity model, was 175% at year-end 2000, which is considered strong. Pro forma debt leverage and interest coverage at Sept. 30, 2001 would have amounted to 26.2% and 10.1 times, respectively. For 2002, Standard & Poor's expects debt leverage of 21%-23% and interest coverage of more than 10x, which is above average for the current rating category. Goodwill and intangibles, related mainly to acquisitions, amounted to $265.4 million at Sept. 30, 2001, or about 40% of shareholder equity. Standard & Poor's considers this somewhat unfavorable for the company's financial condition given the industry's recent history of asset write-downs and restructuring charges. However, so far Coventry has been able to successfully integrate numerous operations that conducted business in markets already familiar to Coventry but in which the acquired company lacked sufficient scale or expertise. -- Very strong earnings and cash flow. Coventry's financial picture continues to improve, benefiting from favorable pricing conditions and strong brand equity in its core markets. For year-end 2001, Standard & Poor's expects Coventry to achieve its third consecutive year of underwriting profitability as it continues to increase membership and revenues. If Coventry meets expectations, consolidated pretax income and operating cash flows are expected to remain consistent with the trends established through Sept. 2001. Given the underlying retention of existing business and implemented premium yield increases, Standard & Poor's believes Coventry is well-positioned to sustain very strong earnings and cash flow performance in 2002. -- Adequate but pressured capital adequacy. Coventry's capital adequacy, which is a function of how well its downstream operating companies are capitalized, is currently considered good but is near the marginal level according to Standard & Poor's model. Consolidated capital adequacy, which was 103% at year-end 2000, is expected to diminish modestly to 95%-100% by year-end 2001 despite the expectation of strong earnings overall. This is a function of Coventry's growth strategy and current operational structure, which are based on acquisition and building the parent company's cash position. Coventry currently maintains strong liquidity at the holding-company level, which partially mitigates the risks posed by the level of capitalization at the operating companies. If either liquidity at the holding company level or capital at the operating company level diminishes materially in 2002, Standard & Poor's may lower the rating. -- Acquisition-oriented growth strategy. Coventry's growth strategy depends partly on its ability to acquire additional health plans and successfully integrate those plans into its existing operations. Although Coventry has been relatively successful with this strategy so far, Standard & Poor's believes current and future integration risks remain, particularly if the size of the deals were to increase. In addition, Coventry's balance sheet quality could be somewhat diminished by an increase in the level of intangibles, and its risk-based capitalization is likely to experience added strain as premium growth exceeds underlying capital growth at the operating- company level. Outlook: Stable Standard & Poor's expects the company's business position to remain very good. Excluding acquisitions, enrollment is expected to increase moderately to 1.90 million-1.95 million members for 2002. Consolidated GAAP pretax income is expected to achieve sustained earnings strength for the year ending 2002, which is expected to boost the company's five-year earnings adequacy ratio to a level that Standard & Poor's considers very strong. Despite the expectation for strong bottom-line performance in 2002, Standard & Poor's believes Coventry's capital adequacy is likely to be modestly diminished by the level of revenue growth, which is expected to increase statutory operating leverage. As a result, capital adequacy is expected to diminish modestly to 90%-95% according to Standard & Poor's capital model. EMAGIN CORP: Net Loss Nearly Doubled to $42MM in Sept. Quarter -------------------------------------------------------------- eMagin Corporation is a leading developer of organic light emitting diode ("OLED") microdisplays, and optics systems. It currently provides custom video display headsets, in limited quantities, largely to government customers. It is seeking to transition into commercial distribution of its products and technology as components to OEM system manufacturers for near- eye and headset applications. The products are targeted for handheld telecommunication and internet devices, wearable computers, and computer and entertainment headsets. Prior to the acquisition of FED Corporation (the predecessor company), the Company had no operations. Management believes that the comparison of eMagin's financial results to that of the Predecessor provides the most meaningful comparative information to the reader. Accordingly, the following comparative information effects the operating results of eMagin Corporation for the three and nine months ended September 30, 2001 Net revenue for the three and nine months ended September 30, 2001 were $1.2 million and $4.8 million, respectively, as compared to $1.0 million and $2.4 million, respectively, for the three and nine months ended September 30, 2000. Revenues consist primarily of contracts funded by certain U.S. government programs, and the amount of revenues earned in any period is dependent upon, among other factors, the execution of new government contracts and funding issues, and may not be predictable or consistent from period to period but remains subject to unpredictable government funding issues. Product revenues of $0.3 million and $0.5 million, respectively, for the three and nine months ended September 30, 2001 included SVGA+ microdisplay evaluation kits and follow-on shipments, primarily to government contractors. Evaluation kits are composed of an OLED microdisplay with associated electronics for customer evaluation. The Company's net loss for the three months ended September 30, 2001 was $42,377,769 as compared to the net loss of $24,178,544 for the same three months of 2000. Net loss for the nine months ended September 30, 2001 was $62,918,960. During the next 12 months, the Company's foreseeable cash requirements are expected to be met by a combination of existing cash, revenue generated by the Company's sales, and additional equity or debt financing. The Company is currently devoting substantial resources to the establishment of sales and distribution relationships and it's initial product launch cycles. The Company believes that it will be able to secure financing in the near term and that the proceeds from such financings, along with its remaining cash resources at September 30, 2001, will be sufficient to fund the Company's operations into the second quarter of 2002 and beyond. However, there can be no assurance that sufficient capital will be available, when required, to permit the Company to realize its plan, or even if such capital is available, that it will be at terms favorable to the Company. Additionally, there can be no assurance that the Company's efforts to produce a commercially viable product will be successful, or that the Company will generate sufficient revenues to provide positive cash flows from operations. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. To the extent the Company raises additional capital by issuing equity or securities convertible into equity, ownership dilution to the Company's shareholders will result. EMERITUS ASSISTED: Will Get Mortgage Financing on 3 Properties -------------------------------------------------------------- Emeritus Assisted Living (AMEX:ESC)(Emeritus Corporation), a national provider of assisted living and related services to senior citizens, announced that it has received a commitment for mortgage financing on three properties totaling $30.5 million. The commitment was provided by GE Capital Healthcare Finance, formerly Heller Healthcare Finance, and is expected to close in the first quarter of 2002. This commitment fulfills the requirement to reduce indebtedness on the previously announced extension of $73.3 million outstanding mortgage debt originally due April 29, 2001. The commitment and subsequent closing of the financing will allow Emeritus to extend the remaining $43.0 million to May 2003. The remainder of the portfolio can be released as the individual properties qualify for new debt financing. Ray Brandstrom, CFO commented, "The commitment from GE Capital provides us an additional eighteen months to focus on maturing this portfolio of properties and to secure permanent financing solutions." Emeritus Assisted Living is a national provider of assisted living and related services to seniors. The Company is one of the largest developers and operators of freestanding assisted living communities throughout the United States. The Company also participates in a joint venture to develop assisted living communities in Japan. These communities provide a residential housing alternative for senior citizens who need help with the activities of daily living with an emphasis on assistance with personal care services to provide residents with an opportunity to age in place. The Company currently holds interests in 154 communities representing capacity for approximately 13,843 residents in 29 states and Japan. The Company's common stock is traded on the American Stock Exchange under the symbol ESC, and its home page can be found on the Internet at http://www.emeritus.com ENRON CORPORATION: Seeks Injunction Against Utility Providers ------------------------------------------------------------- Enron Corporation, and its debtor-affiliates ask the Court for an order: (a) prohibiting the Utility Companies from altering, refusing or discontinuing services on account of pre-petition invoices, including the making of demands for security deposits or accelerated payment terms, (b) determining that the Utility Companies have been provided with "adequate assurance of payment" within the meaning of section 366 of the Bankruptcy Code, (c) establishing procedures for determining requests for adequate assurance of payment, (d) providing that if any Utility Company objects to entry of an order granting this Motion within 30 days of mailing of the Utility Order and requests adequate assurance that the Debtors believe is unreasonable, the Debtors will file a Motion for Determination of Adequate Assurance of Payment and the Court will set such motion for a hearing, (e) providing that any Utility Company that does not timely request adequate assurance, as provided for herein, shall be deemed to have adequate assurance under section 366 of the Bankruptcy Code; and (f) providing that, in the event that a Determination Motion is filed or a Determination Hearing is scheduled, any objecting Utility Company shall be deemed to have adequate assurance of payment under section 366 of the Bankruptcy Code without the need for payment of deposits or other securities or the acceleration of payment terms until an order of the Court is entered in connection with such Determination Motion or Determination Hearing. Martin Sosland, Esq., at Weil, Gotshal & Manges LLP, in New York, New York, tells the Court that Garden State Paper Company obtains electricity, natural gas, water, telephone services, garbage collection and/or other similar services from numerous utility companies. Section 366 of the Bankruptcy Code provides that within 20 days after the commencement of Garden State's chapter 11 case, the Utility Companies may not alter, refuse, or discontinue service to, or discriminate against, Garden State solely on the basis of the commencement of its chapter 11 case or the existence of pre- petition debts owed by Garden State. But after the 20-day period, however, Mr. Sosland notes, the Utility Companies arguably may discontinue service if the Debtors have not provided adequate assurance of future performance of Garden State's post-petition obligations to the Utility Companies. "If the Utility Companies are permitted to terminate service on the 21st day following the commencement of Garden State's chapter 11 case, Garden State will be unable to complete the orderly termination of operations at its paper mill and will not be able to continue operation of its paper recycling centers, resulting in additional costs and loss of revenue," Mr. Sosland explains. This would cause substantial harm to the Debtors' efforts to expeditiously restructure their business affairs to the detriment of their estates and creditors, Mr. Sosland anticipates. Accordingly, Mr. Sosland asserts, it is important that the Utility Services continue uninterrupted. Garden State assures the Court that it generally has and will continue to pay all undisputed obligations for Utility Services as billed and when due. The estimated average monthly cost of their Utility Services has been approximately $1,421,125. Mr. Sosland claims the Debtors can readily demonstrate their ability to provide "adequate assurance" of future payment for Utility Services. In addition, Mr. Sosland reminds the Court that further adequate assurance is provided by the fact that the claims of the Utility Companies for post-petition Utility Services are to be granted administrative claim status. According to Mr. Sosland, the Debtors' proposed method of furnishing adequate assurance of payment for post-petition Utility Service is in keeping with the spirit and intent of section 366 of the Bankruptcy Code, is not prejudicial to the rights of any Utility Company, and is in the best interest of the Debtors' estates. Persuaded by the Debtors' arguments, Judge Gonzalez authorizes and directs the Debtors to pay on a timely basis all undisputed invoices in respect of post-petition electricity, natural gas, water, telephone services, garbage collection and/or other similar services rendered by any utility company to or for the benefit of Debtors. "Any undisputed charge for utility services furnished by any utility company to Debtors post-petition shall constitute an administrative expense of the Debtors' chapter 11 cases in accordance with sections 503(b) and 507(a)(1) of the Bankruptcy Code," Judge Gonzalez rules. At the same time, the Court prohibits the utility companies from altering, refusing, or discontinuing service to, or discriminating against Debtors on account of the Debtors' pre- petition obligations, or requiring the payment of a deposit or other security in connection with any utility services provided to Debtors, except as may be otherwise ordered by the Court in accordance with these procedures: (1) The Debtors shall serve a copy of this Order and the Motion upon: (i) each of the utility companies by United States first class mail and/or facsimile transmission within 3 business days after the date of entry hereof; (ii) each of the utility companies that is listed on any subsequently filed supplement by United States first class mail and/or facsimile transmission within 3 business days after the date of filing of such supplement. (2) This Order is without prejudice to the rights of any of utility company to request additional adequate assurances of payment, and any such request shall be in writing and shall be addressed to: Enron Corp. Attention: Mr. Steve Woods Enron Building 1400 Smith Street Houston, Texas 77002 Weil, Gotshal & Manges LLP Attention: David Wolnerman, Esq. 767 Fifth Avenue New York, New York 10153 -and- Togut, Segal & Segal LLP Attention: Gerard DiConza, Esq. One Penn Plaza, Suite 3335 New York, New York 10119 (3) In the event any utility company requests additional adequate assurances of payment within 30 days after mailing of this Order, and the Debtors believe such request to be unreasonable, the Debtors shall promptly file a Motion for Determination of Adequate Assurance of Payment as to such utility company and shall request a hearing thereon upon notice to such utility companies. (4) The objecting utility companies shall be deemed to have adequate assurance of payment pursuant to this Order unless and until this Court enters a final order to the contrary in connection with the Determination Motion. (Enron Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Receives Bids for Majority Stake in Trading Business ---------------------------------------------------------------- DebtTraders reports that Enron has reportedly received bids for a majority stake in its trading operations from Citigroup, UBS and BP. No financial details have been disclosed. However, an announcement as to the winning bid is expected later this week. Enron Corp. 7.875% bonds due 2003 were last quoted around 24. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRON1 EXODUS COMMS: Gets Go-Signal to Hire Lazard Freres as Advisor ------------------------------------------------------------- Finding good and sufficient cause for the relief requested, Judge Robinson approves the application of Lazard Freres & Co. as Exodus Communications, Inc.'s financial advisor. Judge Robinson also rules that Lazard's liability shall be limited to the aggregate fees paid to Lazard for investment banking services. (Exodus Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) FACTORY CARD: U.S. Trustee Wants Case Converted to Chapter 7 ------------------------------------------------------------ Donald F. Walton, the Acting United States Trustee for Region 3, asks the Delaware Bankruptcy Court to convert Factory Card Outlet Corp.'s cases to liquidation proceedings under chapter 7 or, alternatively, to dismiss the cases or to dispossess the Debtors through appointment of a chapter 11 trustee, whichever is the best interest of the creditors and the estate. Failure to pay quarterly fees is among the grounds cited for relief. According to the Motion, the Debtors are seeking to evade full payment of quarterly fees by taking disbursements which were made on a particular debtor's behalf and reallocating them to another debtor in an attempt to pay amounts less than those due the United States Trustee System Fund. Factory Card Outlet Corporation, one of the largest chains of company-operated superstores in the card, party supply and special occasion industry in the United States, filed for chapter 11 protection on March 23, 1999 in the District of Delaware. Daniel J. DeFrancheschi of Richards Layton & Finger, P.A., represents the Debtor in their restructuring effort. As of August 4, 2001, the company listed $77,551,000 in assets and $92,141,000 in debt. FEDERAL-MOGUL: Robins Cloud Seeks Expansion of Claimants' Panel --------------------------------------------------------------- Robins Cloud Greenwood & Lobel, LLP moves the Court to expand the Official Committee of Asbestos Claimants, or alternatively, to reconstitute The Official Committee of Asbestos Claimants in the chapter 11 cases of Federal-Mogul Corporation and its debtor-affiliates. William J. Rhodunda, Jr., Esq., at Oberly & Jennings P.A. in Wilmington, Delaware, informs the Court that Robins Cloud represents numerous claimants injured by asbestos products manufactured by Gasket Holdings, Inc., a debtor in these jointly administered proceedings. On May 25, 2001, Robins Cloud obtained a judgment for 22 clients against Gasket Holdings in the case of Herman and Cynthia Wells, et al. v. Pittsburgh Corning, et al., in the Judicial District Court, Jefferson County, Texas. The original amount of the Judgment was in excess of $20,000,000, but it has been reduced to approximately $15,000,000 as a result of a settlement with the other judgment defendant. According to Mr. Rhodunda, the Judgment is the largest asbestos liability judgment obtained and pending against the Debtors. The Wells Plaintiffs wish to serve on the Official Committee of Asbestos Claimants in this case, but no Wells Plaintiff was appointed by the US Trustee. Prior to the selection of the Committee by the US Trustee, Mr. Rhodunda submits that the Wells Plaintiffs filled out questionnaires detailing their claims under the Judgment and attaching a copy of the Judgment. Apparently these questionnaires were not considered by the US Trustee in the selection process, as after the Committee was appointed, counsel for the assistant US Trustee who actually appointed the Committee indicated that she was unaware of the Judgment. Mr. Rhodunda points out that the Committee does not include an asbestos judgment creditor of the Debtors and therefore, does not adequately represent the interests of asbestos judgment creditors. The issues that might concern asbestos creditors that have pending lawsuits or settlements with the Debtors would not be of concern to judgment creditors. By definition, the absence of a judgment creditor on the Committee means that the interests of judgment creditors are not represented. The selection process utilized by the US Trustee to fill the Committee appears to be flawed and one in which the Trustee has abused his discretion, particularly, it has failed to: A. Consider and/or review the information provided by creditors prior to appointing the members of the Committee. B. Consider and/or review the Judgment prior to appointing the members of the Committee. C. Appoint a judgment creditor to the Committee, although asbestos liability judgment creditors exist and hold substantial claims in this case. D. Appoint members to the Committee with different interests. E. Appoint an odd number of members to the Committee so as to avoid the possibility of voting deadlocks. Mr. Rhodunda assures the Court that the addition of one more member to the Committee would not disrupt its configuration, and would in fact assist the function of the Committee by changing its composition to an odd number - preventing the possibility of deadlocked voting. (Federal-Mogul Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) FORMICA CORP: Bringing In Lazard Freres as Restructuring Advisor ---------------------------------------------------------------- Formica Corporation announced that its President, Chief Executive Officer and Chairman of the Board of Directors, Vince Langone, tendered his resignation as an officer and director of the Company, its direct parent, FM Holdings, Inc. and its indirect parent, Laminates Acquisition Co., and their subsidiaries, and Mr. Langone was terminated as an employee of these companies. Formica Corporation also announced that Frank A. Riddick III has been elected President, Chief Executive Officer and Director of the Company, its direct parent, FM Holdings, Inc. and its indirect parent, Laminates Acquisition Co. His experience includes serving as President, Chief Operating Officer and Chief Financial Officer of Armstrong World Industries, Inc. Mr. Riddick also served as Chief Executive Officer of Triangle Pacific Corporation, a wholly owned subsidiary of Armstrong World Industries, Inc. Formica Corporation also announced that it has entered into an agreement with Lazard Freres & Co. LLC as restructuring advisor to advise it in connection with potential restructurings, business combinations and financings. Formica Corporation also announced that William Adams resigned as Director of Formica Corporation and its direct parent, FM Holdings, Inc. and its indirect parent, Laminates Acquisition Co., and their subsidiaries. Mr. Adams also resigned as an officer of Formica International Corporation, a subsidiary of Formica Corporation, and its subsidiaries, but will remain as an employee until June 14, 2002. Formica Corporation, whose owners include Credit Suisse First Boston Private Equity, Citicorp Venture Capital, Ltd. and CVC Capital Partners Limited, was founded in 1913, and is a prominent worldwide manufacturer and marketer of decorative surfacing materials, including high pressure laminate, foils, printed papers, Surell and Fountainhead solid surfacing materials and laminate flooring. GENESIS HEALTH: MultiCare Seeks 4th Extension of Removal Period --------------------------------------------------------------- The MultiCare Companies, Inc., Debtors sought and obtained an order from Judge Wizmur extending the deadline by which they may remove prepetition lawsuits and other actions or proceedings from courts outside of the District of Delaware to the District of Delaware for continued litigation. The MultiCare Debtors ask that the deadline imposed under Rule 9027 of the Federal Rules of Bankruptcy Procedure be extended through the earlier of (a) March 18, 2002 or (b) the day which is 30 days after entry of an order terminating the automatic stay with respect to the particular action sought to be removed. Maureen D. Luke, Esq., at Young, Conaway, Stargatt & Taylor, says that the MultiCare Debtors need more time to evaluate which, if any, lawsuits should be moved to Delaware. During these cases the MultiCare Debtors have focused on matters related to large and complex chapter 11 bankruptcy cases including: -- finalizing their fiscal year 2001 budget and long range business plan; -- preparing and filing their schedules and statements of financial affairs; -- conducting their review and evaluation of the Debtors' related party transactions with GHV, and engaging in negotiations with GHV concerning the terms of such relationships; -- investigating and analyzing potential claims that the Debtors may have against GHV and its affiliated debtors; -- assessing the operations of their numerous facilities and renegotiating and/or rejecting certain of their leases; -- negotiating and consummating the complicated ElderTrust transaction; -- formulating and negotiating a restructuring strategy with their prepetition senior secured lenders and certain general unsecured creditors; and -- finalizing and seeking confirmation of a plan of reorganization. As a result, Ms. Luke explains, the MultiCare Debtors have not as yet fully reviewed their records in order to evaluate whether they need to or should remove any claims or civil causes of action pending in state court. The MultiCare Debtors believe that the most prudent and efficient course of action is to request an extension of their removal period. (Genesis/Multicare Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) INDIGO BOOKS: No Offers Received to Acquire Stores in Canada ------------------------------------------------------------ On September 17, 2001, Richter & Partners Inc. was appointed trustee under the Consent Order issued by the Competition Tribunal dated June 6, 2001, regarding the sale of 23 Indigo and Chapters stores. In accordance with the Consent Order, the deadline for Chapters and Indigo assets to be divested will pass today. Accordingly, Richter & Partners Inc.'s mandate as trustee in the sale process also expires. While several parties expressed interest in acquiring certain stores, no formal offers were received. Richter engaged in a comprehensive sale program and canvassed domestic and international markets in search of potential purchasers. In total, Richter contacted 288 parties regarding the divestiture. "General market conditions, and restrictions on foreign ownership of retail bookstores in Canada made it difficult to secure a buyer for the stores," says Peter Farkas, Senior Vice President, Richter & Partners Inc. "Tighter capital markets, brought on by the recent economic downturn acted as a further barrier to entry." Richter & Partners Inc. is a leader in the field of financial reorganization and insolvency, with offices in Toronto, Montreal and Calgary. It is part of Richter, Usher & Vineberg, one of Canada's largest independent accounting, business advisory and consulting firms. INTEGRATED HEALTH: Committee Wants to Sue Directors & Officers -------------------------------------------------------------- The Committee in the Chapter 11 cases of Integrated Health Services, Inc., and its debtor-affiliates, by and through its co-counsel, Otterbourg, Steindler, Houston & Rosen, P.C. and Klehr, Harrison, Harvey, Branzburg & Ellers LLP, moves the Court, pursuant to Sections 105, 1103(c)(5) and 1109(b) of the Bankruptcy Code, for entry of an Order authorizing the Committee to commence and prosecute any and all claims arising from the compensation and other matters investigated by the Committee in connection with the Review (as previously reported and described further below), relating to the compensation of the directors and officers of IHS for the period prior to the February 2, 2000 petition date, when IHS was under the control of its then Chairman and CEO, Dr. Robert N. Elkins. The Committee seeks authority to commence and prosecute such claims including claims against, among others and without limitation, certain current and former members of the Debtors' Board of Directors and certain current and former Officers of the Debtors. Upon approval in January 2001 of the Separation Agreement between the Company and Dr. Elkins, IHS was required to forgive over $40 million in loans to Dr. Elkins in accordance with the terms of his pre-petition agreements with the Company and the notes he made in the Company's favor. IHS also incurred tax obligations of approximately $20 million resulting from such forgiveness. In view of this massive forgiveness and related liability, Committee counsel advised the Court at the hearing on the Separation Agreement: "[that] those who are responsible for the implementation of the officer loan program, those who erred ... in connection with not knowing or realizing that there were tax consequences associated with forgiveness of loans when the program was implemented, are the subject of ongoing investigations. And that is why we reserved all our rights in connection with claims to be asserted under the officers and directors policy against Dr. Elkins and those policies aggregate about 90 million." In connection with the Review of matters relating to the compensation of the directors and officers of IHS for the period prior to the February 2, 2000 petition date, the Committee entered into the Stipulation and Order Establishing Protocol of Joint Review with the Debtors, pursuant to which the Review was conducted. As a result of the Joint Review, the Committee has determined that colorable claims exist against, without limitation, certain of the current and former Company officers and members of the Board. While the confidentiality provisions of the Protocol constrain the Committee from describing in detail the results of the Review, the Committee relates that these Claims include, inter alia, Claims of: (1) breach of the duty of loyalty; (2) waste; and (3) bad faith breach of the duty of care arising from the compensation matters investigated. The Separation Agreement and the agreements between the Company and several officers do not release the Claims. The Claims are related to a series of decisions in connection with compensation matters made by IHS during the period from not later than 1997 through 2000, at a time when the Board was dominated by Dr. Elkins and implemented Dr. Elkins' compensation package at his instruction, the Committee asserts. The Committee notes that the following happened during this period: -- The Board approved the $40 million or more in loans to Dr. Elkins, the terms of certain of which were modified as late as July 1999, just months before the bankruptcy case, to provide additional forgiveness to Dr. Elkins, -- Enhancements were made to Dr. Elkins' employment arrangements during the same period, increasing his benefits without discernable consideration to IHS. -- Loans were also made to IHS' Senior Officers, totaling approximately $17 million, the forgiveness provisions of which were enhanced just weeks before bankruptcy, when the Senior Officers' employment agreements were executed or amended, thereby entrenching Dr. Elkins, by effectively forgiving all Senior Officers' debts, on several grounds, including, among other reasons, termination of Dr. Elkins' employment with IHS. (SVPs received automatic debt forgiveness by virtue of Dr. Elkins' departure. EVPs received the right to terminate their employment for "Good Reason" based on Dr. Elkins' departure, and debt forgiveness would be achieved by their termination for "Good Reason".) -- Dr. Elkins and the Senior Officers received significant enhancements as the Company slid toward bankruptcy. Thus, while IHS was experiencing financial difficulties, and only months before the Petition Date, in July 1999, IHS approved changes to the terms of Dr. Elkins' loans, including the $4.7 Million Note, the $4.25 Million Note and the $4.5 Million Note, to include significant forgiveness provisions that had not previously been included. Then, in January 2000, just weeks before its bankruptcy filing, IHS approved employment agreements with its SVPs and amendments to its EVPs' employment agreements. The new documents included provisions whereby the loans to Senior Officer effectively would be subject to forgiveness upon the termination of Dr. Elkins' employment. As a result of these amendments, the costs to IHS if Dr. Elkins were to be terminated were significantly increased. -- As a result of Dr. Elkins' departure in January 2001, all of the Senior Officer loans became eligible for forgiveness. The Debtors Declined to Prosecute the Claims The Committee tells the Court that, both orally and by subsequent letter dated December 21, 2001, the Committee advised the Company that the Claims exist. While formally making demand upon the Company to assert the Claims on behalf of the Estates, the Committee made it clear that the Committee believes that it, and not the Debtors, is the proper party to prosecute the Claims on behalf of the Estate. The Committee has not received any response to its December 21st letter. The Committee tells the Court that, so far as it is aware, "the Company has not taken any steps necessary to prosecute these Claims in a timely fashion." "In these circumstances, the Debtors' silence is tantamount to a refusal to prosecute the Claims directly," the Committee asserts. The Committee believes that the Debtors' inaction is unjustified. The Committee believes that the Claims are colorable and represent a significant asset of the Debtors' estate and the potential recovery far outweighs the cost of commencing and prosecuting such Claims. In total, the Committee believes that damages incurred by IHS from these insider transactions are not less than $75 million and likely as much as $100 million or more. The time in which the Estates can commence and prosecute certain of these causes of action pursuant to Section 108 of the Bankruptcy Code may be claimed to lapse on February 2, 2002, the two year anniversary of the Petition Date. The Committee notes that the Debtors clearly have a conflict of interest in that certain of the Debtors' directors and officers may be potential targets of an action and would be unable to zealously prosecute claims against themselves. The Committee tells Judge Walrath it has no such conflict and will adequately represent the interests of all creditors by pursuing claims which will ultimately augment Estate assets. In addition, a substantial amount of the due diligence required in bringing such lawsuits has already been conducted. The Committee assures that every effort will be made going forward to efficiently prosecute these Claims, the Committee tells the Court. The Committee is prepared to file a complaint or complaints prosecuting the Claims as soon as the Committee is authorized to do so, and certainly prior to February 2, 2002. The Committee therefore seeks authority to prosecute all the Claims, whether derivative or otherwise, arising from or related to the Review and the facts discovered thereunder. The Review Pursuant to the Protocol approved by the Court, the Committee investigated the matters broadly outlined in the Protocol relating to the compensation of the directors and officers of IHS prior to the Petition Date, including, without limitation, salary, bonuses, loans made under a plan or otherwise, stock options, tax liability and other matters related thereto or arising therefrom to determine, inter alia, whether causes of action exist, including, without limitation, causes of action arising from (i) the acts, conduct and decisions of the officers and directors of the Debtors, or (ii) the advice of consultants to the Company, or its officers or directors (the "Review"). As part of the Review and in accordance with the Protocol, the Committee obtained extensive documentation from the Debtors and 4 other persons or entities and 6 persons were examined or interviewed on a confidential basis as required by the Protocol. The Debtors' counsel received all the foregoing information and attended or defended the examinations and interviews in accordance with the Protocol. Based upon the information obtained by the Committee, the Committee believes that Claims exist arising from the Review, including without limitation, Claims against current and former Company officers and members of the Board. These Claims are property of the Debtors' Estates, and the Committee believes that the Claims should be prosecuted to maximize the Estates' value. Overview of Claims The Claims arising from the Review generally relate, without limitation, to various compensation matters, including, inter alia, the following, the Committee asserts, all at a time when, the Board was under Dr. Elkins' control: (a) approval of a series of loans made by IHS to Dr. Elkins totaling over $40 million in the aggregate, including: (1) a promissory note dated July 8, 1999 in the principal amount of $4,409,095 which superceded a promissory note dated December 19, 1996 evidencing a loan of $4,690,527 (the $4.7 Million Note); (2) a $13,447,000 loan evidenced by a promissory note dated September 29, 1997 (the $13.5 Million Note); (3) a $2,088,000 loan evidenced by a promissory note dated January 28, 1998 (the $2.088 Million Note) which was subsequently consolidated with the $13.5 Million Note and restated on September 30, 1998 in the amount of $15,535,000 (the $15.5 Million Note) which in turn was subsequently replaced in its entirety by Note dated July 8, 1999 in the principal amount of $11,780,210; (4) a $4,250,000 loan evidenced by a promissory note dated October 12, 1998 (the $4.25 Million Note); (5) a $4,500,000 loan evidenced by a promissory note dated November 13, 1998 (the $4.5 Million Note); and (6) a $11,500,000 loan evidenced by a promissory note dated April 1999 (the $11.5 Million Note); and (7) approval in July 1999 of changes to the terms of the $4.7 Million Note, the $15.5 Million Note, the $4.25 Million Note and the $4.5 Million Note including consolidation of the $4.25 Million Note and the $4.5 Million Note into a single Note of $8.75 million (the $8.75 Million Note); (b) approval in November 1997 of the Second Amendment to Dr. Elkins' Employment Agreement (Amendment No. 2 to Employment Agreement) and a Supplemental Agreement between Dr. Elkins and IHS (the Supplemental Agreement); (c) approval in November 1998 of Amendment No. 1 to the Supplemental Agreement between Dr. Elkins and IHS (the Amended Supplemental Agreement); (d) a series of loans to IHS' Senior Officers made between 1997 and 2000 totaling approximately $17 million including $12.9 million in loans pursuant to the so called 1999 IHS loan program approved in March 1999 and the proceeds of which were disbursed in the following months through July 1999; and (e) approval in December 1999 and January 2000 of certain employment agreements for Senior Vice Presidents (SVPs) and amendments to the employment agreements for Executive Vice Presidents (EVPs and together with the SVPs, the Senior Officers) which effectively provided that officer loan obligations to IHS would be subject to forgiveness upon termination of Dr. Elkins' employment. Based on the Review, including the Committee's investigation into the acts, conducts and decisions of the Board in connection with the items, it is the Committee's view that colorable claims exist, among others, against current and former officers and members of the Board under Delaware law for, inter alia, (i) breach of the duty of loyalty; (ii) waste; and (iii) bad faith breach of the duty of care. Accordingly, the Committee requests that the Court (i) authorize the Committee to commence an action or actions on behalf of the Estates asserting any and all of the Claims, whether derivative or otherwise, relating to or arising from the Review, against any person or entity, and (ii) grant such other, further and different relief as the Court may deem warranted. (Integrated Health Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Fitch Downgrades Ratings into Low-B Territory --------------------------------------------------------- Fitch lowered it ratings of Kmart Corporation as follows: bank facility to 'BB-' from 'BB+'; notes and debentures to 'B+' from 'BB+'; and convertible preferred securities to 'B-' from 'BB'. Approximately $3.8 billion of debt securities and $890 million of preferred securities are affected by the downgrades. At the same time, the Rating Outlook has been revised to Negative from Stable. The downgrades reflect Kmart's weakened operations that have produced materially lower cash flow and higher financial leverage in 2001. Kmart's sales momentum turned negative during the latter part of 2001 as a price cutting initiative in consumable items failed to generate additional store traffic while competition remained fierce. As a result, the company's credit protection measures will be considerably worse than Fitch had anticipated. Despite these trends, Fitch is comfortable with Kmart's near term liquidity position. Kmart is expected to have sufficient capacity on its bank facility to cover any cash flow shortfall. Also, Fitch expects that Kmart will be successful in renewing its bank facility, which matures in December 2002, albeit with higher rates, more restrictive covenants, and possibly security. The higher rating for the bank facility reflects the banks' superior position and ability to renegotiate terms ahead of the noteholders. Kmart's operations should begin to improve when the retail environment picks up, but its ability to compete with the other national discounters remains a concern. Kmart has made some progress in improving its retail execution and customer service, and will be overhauling its distribution infrastructure during 2002. Implementing new systems could be disruptive over the short-run, but should support longer-term improvement in the company's supply chain costs and in-stock position. The Negative Rating Outlook takes into consideration the challenges inherent in executing new strategies, as well as longer-term competitive pressures, which will intensify with the continued rapid growth of Wal-Mart and Target, among others. Kmart is expected to adjust capital spending in 2002 to levels that can be financed internally. While this is a necessary step over the near term, reduced investment levels could dampen the company's competitive position over time. DebtTRaders reports that KMart Corp's 12.500% bonds due in 2005 (KMART9) are trading between 85 and 88. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KMART9 KMART FUNDING: Fitch Drops Secured Lease Bonds to B+ from BB+ ------------------------------------------------------------- Kmart Funding Corporation's secured lease bonds $96.6 million series F and $20.9 million series G are downgraded to 'B+' from 'BB+' by Fitch. Series A, B, C, D and E have previously been paid in full. The rating downgrades follow Fitch's review and downgrade of Kmart's corporate credit on January 7, 2002. The transaction closed August 1994. The certificates are currently collateralized by an assignment of rents on 24 properties guaranteed by absolute net leases to Kmart Corporation, in which Kmart is obligated to pay rental payments with no setoff, abatement or reduction. The properties originally consisted of 19 Kmart stores, 4 Builders Square stores and one apparel warehouse location. Although one of the Kmart properties is vacant and the Builders Square locations are vacant, the ratings of this transaction depend entirely on the rating of Kmart's senior debt obligations. Fitch downgraded its ratings of Kmart at to 'B+' from 'BB+' and revised the Rating Outlook to Negative from Stable. Fitch will continue to monitor the performance of this transaction and the ratings of the corporate credit, as surveillance is on-going. LODGIAN INC: Gets Okay to Pay Critical Service Providers' Claims ---------------------------------------------------------------- Lodgian, Inc., and its debtor-affiliates sought and obtained entry of an order authorizing them to pay, in their sole discretion, the pre-petition claims of certain critical service providers and authorizing and directing applicable banks and other financial institutions to receive, process, and pay any and all checks and other transfers related to such claims. Adam C. Rogoff, Esq., at Cadwalader Wickersham & Taft in New York, relates that in the ordinary course of the Debtors' business, the Debtors rely on numerous third parties to provide services that are necessary and critical to the Debtors' ability to operate their hotels. These Critical Service Providers include food and beverage services, trash hauling services, housekeeping and janitorial services, hotel safety and maintenance services, snowplowing services, information technology services, which providers maintain essential computer and other equipment for the hotels and corporate-office support, payroll processing related services, linen suppliers and suppliers of room amenities. Mr. Rogoff submits that many of the Critical Service Providers are owed payments on account of unpaid pre-petition Critical Services provided to the Debtors. Absent payment for their pre- petition services, the Debtors believe that the Critical Service Providers will not continue to perform the Critical Services for the Debtors post-petition. The failure of the Debtors to continue to obtain the benefit of the post-petition Critical Services could have an immediate and adverse impact upon the Debtors' operations. Accordingly, in the Debtors' reasonable business judgment and discretion, the Debtors payment of the Critical Service Provider Claims to the Critical Service Providers, will be conditioned on: A. the agreement of Critical Service Providers to continue to provide the Debtors with post-petition services on credit terms and limits that are the same as or better than those provided to the Debtors during the last quarter of the calendar year 2001, and thereafter, if the Critical Service Providers fail to adhere to the Acceptable Credit Terms during the pendency of these cases, then any payments of Critical Service Provider Claims made after the Commencement Date shall be deemed unauthorized post- petition transfers and thus recoverable by the Debtors in cash; and B. at the Debtors' option, the Debtors receipt of written verification from the Critical Service Providers of the Acceptable Credit Terms. Mr. Rogoff tells the Court that the Debtors need to ensure that there is no disruption to the services necessary to operate their hotels. While the Critical Service Providers have been or will be assured of payment for their post-petition services, the Debtors believe that it is likely that some or many of the Critical Service Providers will refuse to continue to provide post-petition services to the Debtors promptly and without disruption absent assurances of payment of the pre-petition amounts due and owing to such service providers. Moreover, Mr. Rogoff points out that finding replacement service providers for the Critical Services would be an arduous and lengthy process. Further, in many of the areas in which the Debtors' hotels are located, the Critical Service Providers are or may be the primary providers of these services or are already familiar with the Debtors' hotel operations. In addition, the Debtors may be forced to pay a premium for replacement Critical Service Providers because of the perceived risk of doing business in chapter 11 or short notice of the requested services. Without the continued assurances of the Critical Services, including food and beverage services, trash pick-up, housekeeping and janitorial services, snowplowing, and safety and maintenance services, Mr. Rogoff explains that the Debtors effectively would be unable to run their hotels or maintain their corporate offices in a safe environment, thereby prejudicing the estates and all parties in interest. Authorizing payment of Critical Service Provider Claims would salvage ongoing relationships among the Debtors and Critical Service Providers and protect the Debtors' hotel guests. Mr. Rogoff informs the Court that the Debtors only seek to pay Critical Service Provider Claims where non-payment of such claims would lead to the disruption of the Debtors' businesses. The sums involved are insignificant in relation to the potential disruption that would occur if relationships with the Critical Service Providers were to be terminated. Thus, the Debtors submit that the relief requested is narrowly tailored to facilitate the Debtors' chapter 11 reorganization process and approval of the payments is appropriate. To implement the terms of the authority requested by the Motion, the Court entered an order providing authorization for the Debtors to do in order to satisfy the actual Critical Service Provider Claims: A. The Debtors are authorized, in their discretion and the exercise of their business judgment, to make payment to the Critical Service Providers on the conditions that by accepting payment, the Critical Service Providers agree to maintain or reinstate Acceptable Credit Terms during the pendency of these cases, and the Debtors mail a copy of the Order to each Critical Service Provider to which any payment permitted hereunder is made; B. A Critical Service Provider's acceptance of payment is deemed to be acceptance of the terms of the Order, and if the Critical Service Provider thereafter does not provide the Debtors with Acceptable Credit Terms during the pendency of these cases, then any payments of pre-petition claims made after the Commencement Date may be deemed to be unauthorized post-petition transfers and therefore recoverable by the Debtors; and C. The Debtors are authorized, but not required, to obtain written verification of Acceptable Credit Terms to be supplied by the Critical Service Providers before issuing payment hereunder. (Lodgian Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) LUBY'S INC: Working Capital Deficit Widens to $11.4 Million ----------------------------------------------------------- Luby's Inc.'s sales decreased $18,705,000, or 16.4%, in the first quarter of fiscal 2002 compared to the first quarter of fiscal 2001. Nine fewer days in the current quarter accounted for approximately $12 million of the total sales decline. Revenues were also lower due to the closure of 30 stores since September 2000. Excluding the effect of fewer days and stores this quarter, same-store sales declined $2.6 million, or 2.7%, which was primarily pressured by recent recessionary trends. Loss for the quarter ended November 21, 2001 was $5,184 as compared with the loss of $2,115 for the same quarter of 2000. Cash and cash equivalents decreased by $1,053,000 from the end of the preceding fiscal year to November 21, 2001. Capital expenditures for the first quarter ended November 21, 2001, were $3,062,000. All capital expenditures for fiscal 2002 are being funded from cash flows from operations and cash equivalents. As of the quarter-end, the Company owned seven properties held for sale, including five undeveloped land sites. The Company also has 18 properties held for future use. Capital expenditures for fiscal 2002 are expected to approximate $15 million. The Company will focus on improving the appearance, functionality, and sales at existing restaurants. These efforts will include changing several locations to other dining concepts, where feasible. As a start, the Company plans to remodel two currently closed units. One will reopen as a new seafood restaurant. The new dining theme for the other restaurant is still under development. The Company typically carries current liabilities in excess of current assets because a substantial portion of cash generated from operating activities is reinvested in capital expenditures. At November 21, 2001, the Company had a working capital deficit of $11,405,000, in comparison to a working capital deficit of $8,975,000 at August 31, 2001. The higher deficit was primarily attributable to an increase in accounts payable of $8,109,000, due to changes in the timing of operational cutoffs and Thanksgiving holiday purchases under the Company's new 13-period fiscal year. Partially offsetting the rise in accounts payable was the improvement in cash and cash equivalents and short-term investments provided by operating activities to a combined total of $26,014,000 at the end of the first quarter of fiscal year 2002, from $24,083,000 at the end of the previous fiscal year. As of September 1, 2001, the Company had a balance of $122 million outstanding under its credit facility. Due to the events of September 11 and the resulting impact on the economy, the Company was unable to meet its first quarter fiscal 2002 EBITDA covenant requirement for its credit facility. Accordingly, the Company obtained a waiver and amendment to its credit facility dated December 5, 2001, which waives its noncompliance with EBITDA levels, resets remaining fiscal 2002 quarterly EBITDA targets, and limits capital expenditures to $15 million. During the quarter, two payments totaling $766,000 were made to the credit facility, which brought the balance to $121.2 million as of November 21, 2001. There is no ability to borrow additional funds under the credit facility. MARINER POST-ACUTE: Taps Jones Day Again as Litigation Counsel -------------------------------------------------------------- The Mariner Health Group Debtors have given notice to reinstate the application, filed almost a year ago (on January 5, 2001), for retention and employment of Jones, Day, Reavis & Pogue as Special Litigation Counsel, nunc pro tunc as of December 15, 2000. Regarding the original application, a Certificate of No Objection was filed with the Court due to miscommunication among the Debtors' counsel and upon that, a order approving the application was entered. The Debtors then sought and obtained an order from the Court vacating that order of approval entered upon miscommunication. The Debtors now seek the retention of Jones, Day, nunc pro tunc to the date of their current notice (December 13, 2001). (Mariner Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) MARINER POST-ACUTE: Omnicare Completes Acquisition of APS Assets ---------------------------------------------------------------- Omnicare, Inc. (NYSE: OCR) announced that it has completed the previously announced acquisition of the assets comprising the pharmaceutical business of American Pharmaceutical Services, Inc. and other related entities, wholly-owned subsidiaries of Mariner Post-Acute Network or Mariner Health Group. Combined, MPAN and MHG represent one of the nation's largest providers of post-acute healthcare services, primarily through the operation of skilled nursing facilities. On December 6, 2001, Omnicare announced that, following a successful bid for APS in an auction process established as part of the bankruptcy proceedings of MPAN and MHG, it had executed a definitive agreement to acquire APS. The purchase price for the transaction was $97 million in cash plus $18 million in deferred cash payments contingent upon performance. Given the anticipated realization of economies of scale and cost synergies from the acquisition, it will be accretive to Omnicare's diluted per share earnings in 2002 and beyond. APS, headquartered in Naperville, Illinois, provides professional pharmacy and related consulting services to approximately 60,000 residents of skilled nursing and assisted living facilities. It also provides respiratory and Medicare Part B services for residents of long-term care facilities. APS serves these residents through its network of 32 pharmacies in 15 states. APS assets to be acquired are expected to generate revenues of approximately $240 million for the twelve-months ended December 31, 2002. Omnicare, based in Covington, Kentucky, is a leading geriatric pharmaceutical care company. Including the acquisition of APS, Omnicare now serves approximately 715,000 residents in long-term care facilities, in 43 states, making it the nation's largest provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers. Omnicare also provides clinical research services for the pharmaceutical and biotechnology industries in 27 countries worldwide. Omnicare's total revenues are currently running at an annual rate in excess of $2 billion. For more information on Omnicare, Inc., via the Internet, including a full menu of news releases, visit http://www.omnicare.com NORD PACIFIC: Seeks Funding to Redeem Tritton Proj. in Australia ---------------------------------------------------------------- Nord Pacific Limited (OTC: NORPF; Toronto: NPF) announced that effective October 29, 2001, the Company entered into a settlement agreement with former President & CEO, Dr. W. Pierce Carson. In April of 2001, Dr. Carson filed an action in United States District Court for the District of New Mexico against the Company and its wholly owned subsidiary Hicor Corporation in which he alleged his entitlement to early retirement and asked the court to declare that split dollar insurance policy, for which the Company had paid premiums, be committed to funding his retirement. Under the terms of the settlement agreement, Dr. Carson agreed to forego any claims to retirement benefits from the Company and authorized the payment of $120,000 by the life insurance company to Nord Pacific. The Company gave up any claims to the split dollar life insurance policy, and agreed to issue 1,431,482 shares of Common Stock to Dr. Carson on or before February 1, 2005 (or immediately under other certain events such as merger or sale of substantially all of the Company's assets). The issued stock will be restricted (Rule 144) stock. Dr. Carson also agreed to a number of other conditions pertaining to the stock for a period of two years upon issuance. Each party released the other party for all further claims. The settlement is considered final and the case was dismissed with prejudice. As separate matters, the Company's wholly owned subsidiary in Australia, Nord Australex Nominees Pty Ltd., which is the company that legally owns Nord Pacific's interests in the Girilambone Joint Ventures and the Tritton Copper Project, is in dispute with its joint venture partner, Straits Mining Pty Ltd of Perth, Western Australia (a wholly owned subsidiary of Straits Resources Limited) over the management and funding of the Girilambone Copper Operations. Previously, Australex had defaulted on scheduled payments for the purchase of the Tritton project from Straits. The defaults occurred following the Company's failure to procure anticipated financing. This was exacerbated by the reduced cash flow being derived from Australex's share of copper sales from Girilambone, due to the gradual exhaustion of copper production from the leach heaps, and by the low price of copper being realized. On December 21, 2001, Straits issued to Australex a Statutory Demand for Payment of monies owed (A$1,500,000 or approximately US$780,000) under the terms of the Tritton Sale Agreement. Australex has 21 days, or until January 11, 2002, to meet this demand. Under Australian law, a company may be declared insolvent if it cannot meet its bills when due and payable. In order to rectify these situations, Nord Pacific is in discussion with a number of parties to secure financing for the acquisition of Straits' share of the Girilambone joint ventures and the redemption of the Tritton Project, or, to otherwise come to some suitable arrangement with Straits. OPTICARE HEALTH: Seeking Consents for Capital Restructuring ----------------------------------------------------------- OptiCare Health Systems, Inc. (Amex: OPT) announced that it has distributed to its stockholders a form of consent and related consent statement regarding its proposed capital restructuring. In the consent statement, the Company is seeking the consent of holders of a majority of its outstanding common stock to a set of proposals which, if approved by the stockholders, would authorize the Company to carry out its previously announced capital restructuring. OptiCare intends to take the corporate action and close the proposed capital restructuring transactions as promptly as practicable after OptiCare has received the consents of holders of a majority of its outstanding common stock in favor of the proposals, and all other conditions to the closing of the transactions have been fulfilled or waived, including the execution of definitive agreements. However, OptiCare will not take action on the proposals or close the restructuring transactions prior to January 15, 2002. OptiCare Health Systems, Inc. is an integrated eye care services company focused on managed care and professional eye care services. It also provides systems, including internet-based software solutions, to eye care professionals. PACIFIC GAS: CPUC Wants to End Exclusivity & Propose a Plan ----------------------------------------------------------- Pacific Gas and Electric Company issued the following statement after the California Public Utilities Commission (CPUC) filed a motion in Bankruptcy Court objecting to the extension of the utility's exclusivity period and announced sparse elements of an alternative plan: "The CPUC announcement [Tues]day is simply the latest in a series efforts to delay PG&E's emergence from bankruptcy. The CPUC, whose actions and inactions were a major cause of the state's energy crisis and PG&E's bankruptcy, has tried to obstruct our efforts to resolve the case. "PG&E has developed a plan of reorganization that resolves all creditor claims, does not ask the Bankruptcy Court to raise rates, protects customers from rate volatility and provides a path for the state to get out of the energy business. Our plan is supported by the Official Creditors' Committee and has been developed in record time, notable achievements in a bankruptcy of this size. "The elements outlined [Tues]day by the CPUC do not appear to provide these benefits. We will be asking the Bankruptcy Court to deny the CPUC's request." PILLOWTEX: Summary of Debtors' Joint Plan of Reorganization ----------------------------------------------------------- Pillowtex Corporation and its debtor-affiliates present the Court with their Plan of Reorganization. The cornerstones of that plan are: -- the cancellation of certain indebtedness in exchange for cash, New Common Stock or New Warrants; -- the cancellation of indebtedness under the Designated Post- Petition Loans in exchange for Exit Term Loan Notes; -- the discharge of pre-petition Intercompany Claims among the Debtors; -- the cancellation of the Old Common Stock of Pillowtex and Old Preferred Stock of Pillowtex; -- the assumption, assumption and assignment, or rejection of Executory Contracts and Unexpired Leases to which any Debtor is a party; -- the selection of boards of directors (or similar governance bodies) of the Reorganized Debtors; -- the merger of Pillowtex with and into New Pillowtex, a Delaware corporation, with New Pillowtex as the surviving corporation; and -- the corporate restructuring of certain Pillowtex Subsidiary Debtors designed to simplify the Debtors' corporate structure. The Effective Date is assumed to occur on June 29, 2002. According to William H. Sudell, Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, the Debtors have evaluated numerous alternatives to the Plan, including: (a) alternative structures and terms of the Plan, (b) the liquidation of the Debtors, and (c) delaying the adoption of any plan of reorganization. "While the Debtors have concluded that the Plan is the best alternative and will maximize recoveries by holders of Claims, if the Plan is not confirmed, the Debtors could attempt to formulate and propose a different plan or plans of reorganization," Mr. Sudell admits. If no plan of reorganization can be confirmed, Mr. Sudell relates that the Reorganization Cases may be converted to chapter 7 cases. In a liquidation case under chapter 7 of the Bankruptcy Code, Mr. Sudell notes, a trustee or trustees would be elected or appointed to liquidate the assets of each Debtor. "The proceeds of the liquidation would be distributed to the respective creditors of the Debtors in accordance with the priorities established by the Bankruptcy Code," Mr. Sudell adds. The Debtors contend that a chapter 7 liquidation would result in substantial reduction in the value to be realized by holders of Claims, as compared to the proposed distributions under the Plan, because of, among other factors: (a) the failure to realize the maximum going concern value of the Debtors' assets; (b) the substantial negative impact of conversion to a chapter 7 case and subsequent liquidation on the employees and customers of the Debtors; (c) additional costs and expenses involved in the appointment of trustees, attorneys, accountants and other professionals to assist such trustees in the chapter 7 cases and potential litigation arising from the same; (d) additional expenses and Claims, some of which would be entitled to priority in payment, which would arise by reason of the liquidation and from the rejection of unexpired real estate leases and other Executory Contracts and Unexpired Leases in connection with a cessation of the Debtors' operations; and (e) the substantial time that would elapse before entities would receive any distribution in respect of their Claims. Faced with this bleak alternative, the Debtors urge approval of this Plan. (Pillowtex Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) PSINET: Intends to Sell Unit in Japan to C&W Entity for $10.2MM --------------------------------------------------------------- PSINet, Inc., and its debtor-affiliates move the Court, pursuant to Sections 105, 363, 365 and 1146 of the Bankruptcy Code and Rules 2002, 6004, 6006 and 9014 of the Bankruptcy Rules, for approval of a sale of the Debtor's non-debtor subsidiary in Japan, PSINet Japan, to an entity designated by Cable & Wireless IDC Inc. (C&W), for US$10.2 million, subject to higher and better offers. Sale Procedures The Debtors sought and obtained the entry of a Sale Procedures Order: (1) approving certain bidding and sale procedures, including payment of a termination fee and expense reimbursement in certain circumstances; (2) scheduling a bidding deadline and a Sale Hearing to consider approval of the Sale; and (3) approving the form and manner of notice thereof; The Cable & Wireless Transaction The Debtors seek the entry of a Sale Order: (1) authorizing the sale of all of the issued ordinary shares of PSINet Japan (the Company) by PSINet to the C&W designee or the "Buyer"), free and clear of all liens, claims, encumbrances and interests, subject to the terms and conditions of the Share Purchase Agreement and subject to higher and better offers; (2) approving the terms and conditions of the Share Purchase Agreement, dated as of December 9, 2001, by and between PSINet (the Seller), on the one hand, and C&W, on the other hand, and approving certain related agreements; and (3) determining that the Sale is exempt from any stamp, transfer, recording or similar tax. The Court has granted part I of the motion and issued a Sale Procedures Order authorizing the Debtors, among other things, to solicit bids in accordance with the Bidding Procedures, and to subsequently hold a public auction on January 14, 2002 at 11:00 a.m. at the offices of Dresdner Kleinwort Wasserstein, 1301 Avenue of the Americas, New York, New York. The Debtors are also authorized to pay to Purchaser the termination fee in an amount up to $306,000, in the case of a termination, in accordance with Article 7 of the Share Purchase Agreement) and to make reimbursement of expenses not to exceed $100,000. The Court has determined that the Debtors' payment to Purchaser, of the Termination Fee and the Expense Reimbursement is (i) an actual and necessary cost of preserving the Debtors' estates, within the meaning of 11 U.S.C. Sec. 503(b), (ii) necessary to ensure that Purchaser will continue to pursue its proposed acquisition of the Shares, (iii) of substantial benefit to the Debtors' estates, and (iv) reasonable and appropriate, including in light of the size and nature of the Sale and the efforts that have been and will be expended by Purchaser notwithstanding that the proposed Sale is subject to higher or better offers. The Court is satisfied that the Termination Fee and Expense Reimbursement were material inducements for, and conditions of, Purchaser's entry into the Purchase Agreement and has therefore promoted more competitive bidding. Judge Gerber directs that the Debtors' obligation to pay the Termination Fee and the Expense Reimbursement shall survive termination of the Purchase Agreement and, until indefeasibly paid, shall constitute administrative expenses of Realty's estate under sections 503(b) and 507(a)(1) of the Bankruptcy Code and shall be paid when due without further order of the Court. On January 15, 2002, at 9:45 a.m. Eastern time, the Court will conduct a Sale Hearing to consider Part II of the Motion with respect to the Sale and consider confirmation of the Auction, if any. Objections to the entry of the Sale Order, if any, must be actually received no later than 4:00 p.m. Eastern time on January 11, 2002. Business Rationale The Debtors reiterate that, since the latter part of 2000, they have been engaged in developing an effective restructuring strategy together with their professionals. In the beginning of March 2001, the Debtors determined that it was necessary to pursue a dual tracked approach; marketing their businesses for sale while simultaneously developing a stand-alone plan of reorganization. The Debtors, with the assistance of Goldman Sachs, prepared a detailed offering memorandum describing the Debtors' entire business. The Offering Memorandum was distributed to over 50 parties who were willing to sign confidentiality agreements. A number of assets, including the Debtors' subsidiaries in Canada, Hong Kong, Panama and Chile have been sold with the authorization of the Court. With respect to PSINet Japan, the Debtors received several inquiries. After discussions with multiple parties, the Debtors determined that the terms offered by Buyer were the highest and best terms available, and that proceeding to contract with Buyer would be in the interests of the Debtors and their estates. The Debtors submit that negotiations with the Buyer were extensive, in good-faith, noncollusive, and at arms length. The Debtors believe that the proposed transaction represents exercise of reasonable business judgment and is in the best interests of the Debtors' estates. First, the proceeds of a sale of the Shares, to the extent sold as a going concern, likely will be greater than if the assets of PSINet Japan are sold by piecemeal liquidation. Second, a prompt sale will aid in minimizing administrative expenses of the estates. Third, prompt receipt of the Sale proceeds will provide working capital to fund the Debtors' various operations and to preserve the value of their assets, thereby maximizing the value received from a restructuring, sale or other disposition of their assets for the benefit of the Debtors' estates and their creditors. The Share Purchase Agreement provides for the sale of the Shares to the Buyer, free and clear of all liens, claims, encumbrances, interests and transfer taxes in exchange for $10.25 million in cash (subject to certain adjustments and escrows). The Temporary Trademark License Agreement and the Transitional Services Agreement are attached as Exhibit D and E to the Share Purchase Agreement. Establishment of the escrow account provides the Buyer security in the event the Sellers fail to perform their obligations under the Share Purchase Agreement and constitutes a material inducement for the Buyer to enter into the Share Purchase Agreement, the Debtors represent. Accordingly, the Debtors request the Court's approval of the Sale to the Buyer pursuant to the Asset Purchase Agreement and related agreements. The Debtors also request that the Buyer be granted limited relief from the automatic stay to the extent necessary to allow the Buyer to give any notice provided for under the Share Purchase Agreement or the Related Agreements and to take any actions permitted by such agreements. The Debtors further request that, in the event the Debtors become obligated to pay any amounts pursuant to the Share Purchase Agreement or the Related Agreements, such obligation will constitute an administrative expense under Sections 503(b) and 507(a)(1) of the Bankruptcy Code and be immediately payable if and when the Debtors' obligations arise under the Share Purchase Agreement or the Related Agreements without further The Debtors request that the Court eliminate the 10-Day Stay under Rule 6004(g) of the Bankruptcy Rules because they need to close this Sale as soon as possible after closing conditions have been met. While the Debtors believe that the Buyer's offer for the Shares, reflected in the Share Purchase Agreement, is the best offer the Debtors have received, in order to obtain the greatest value for the Shares, the Debtors believe good cause exists to expose the Shares to sale at a public auction, thereby maximizing the value obtained for the Shares. The Debtors believe the Bidding Procedures will promote active bidding that will result in the highest and best offer the marketplace can offer, and the proposed sale procedures and protections taken together will encourage, rather than hamper, bidding for the Shares and that they are therefore appropriate under the standards governing bidding incentives in bankruptcy proceedings. Bidding Procedures Pursuant to the Court's Sale Procedures Order, the proposed sale will be subject to Bidding Procedures as follows: (A) Any Competing Offer must provide for aggregate consideration or value to the Sellers' estates of at least $10,956,000. (B) All subsequent overbids at the auction must include additional consideration of at least $250,000, over the previous bid. (C) In order for a Competing Offer to be considered, it must meet the criteria of a "Qualified Bid" as set forth in the Sale Purchase Agreement. Among other things, a Qualified Bid must (1) be in writing in the form of the Share Purchase Agreement marked to show any and all changes thereto; (2) have a cash component greater than or equal to the sum of (x) the value, as reasonably determined by the independent financial advisor of Seller, of the consideration to be provided by the Share Purchase Agreement, plus (y) the amount of the Termination Fee and the Expense Reimbursement, plus (z) US $350,000 (the sum of subsections (x), (y) and (z) is referred to as the "Alternative Purchase Price"); (3) is a proposal that Seller and the Committee, in good faith and after consultation with their independent financial advisors (if Seller and the Committee deem such consultation to be necessary and appropriate) reasonably determine is not materially more burdensome or conditional than the terms of this Agreement (in light of the total consideration provided by such Competing Offer); (4) is substantially on the same or better terms and conditions as those set forth in a copy of the Share Purchase Agreement and the Related Agreements; (5) is accompanied by satisfactory evidence of committed financing or other ability to perform the payment of the Alternative Purchase Price; (6) is accompanied by a deposit (by means of a certified bank check from a U.S. bank or by wire transfer) equal to or greater than the Initial Deposit plus the Termination Fee and the Expense Reimbursement; and (7) includes a commitment to consummate the transaction not more than 30 days after the entry of an order approving the purchase, subject to receipt of governmental and regulatory approvals, which must be obtained or otherwise satisfied within 60 days of such order. (D) Each Competing Offer must be irrevocable until the closing of the purchase of the Shares. (E) Competing Offers shall be delivered to the Debtors, with copies to Purchaser and to the Committee, so as to be received by them no later than noon on January 11, 2002 (the "Bid Deadline"), provided, however, that prospective purchasers that submitted timely Competing Offers and the Purchaser shall be permitted to make subsequent Overbids at the auction. Competing Offers shall be delivered to the Debtors, the Committee and Purchaser as follows: (1) to the Debtors, to: PSINet Inc. 44983 Knoll Square Ashburn, VA 20147 Attention: General Counsel Telephone: (703) 726-4100 Facsimile: (703) 726-4264 with a copy to: Wilmer, Cutler & Pickering 2445 M Street N.W. Washington, DC 20037 Attention: Craig Goldblatt, Esq. Telephone: (202) 663-6000 Facsimile: (202) 663-6363 (2) to the Purchaser, to: Cable and Wireless plc 124 Theobalds Road London WC1X 8RX England Attention: Jonathan Hardy Facsimile: +44 (207) 315-5077 with a copy to: Cleary, Gottlieb, Steen & Hamilton One Liberty Plaza New York, New York 10006 Attn: James L. Bromley, Esq Telephone: (212) 225-2264 Facsimile: (212) 225-3999 (3) to the Committee, to: Wachtell, Lipton, Rosen & Katz 51 West 52nd St. New York, New York 10019-6188 Attention: Scott Charles, Esq. Telephone: (212) 403-1000 Facsimile: (212) 403-2000 (F) If the Debtors do not receive any Qualified Bids, the Debtors will proceed with the Sale pursuant to the terms of the Share Purchase Agreement, subject to Debtors' right to pursue an Alternative Transaction. (G) If a qualifying Competing Offer is submitted, an auction (the "Auction") will be held on January 14, 2002 at 11:00 a.m. at the offices of Dresdner Kleinwort Wasserstein, 1301 Avenue of the Americas, New York, New York. Only the Purchaser and any prospective purchaser that has timely submitted a qualifying Competing Offer shall be entitled to participate in the Auction. At the Auction, bidding shall begin with the highest qualifying Competing Offer timely submitted. All subsequent Overbids shall include additional consideration of at least $250,000 over the previous bid. All Bids made at the Auction must remain open until the highest and best Qualified Bid is determined. (H) A Competing Offer shall not be considered to be a higher and better offer unless, at a minimum, such offer is a proposal that the Sellers determine, in good faith (in consultation with the Committee) provides for aggregate consideration or value to the Sellers' estates, when taken together with the value of any Shares or assets of the Company that would be retained by the Sellers under the Competing Offer (as determined in good faith by the Seller in consultation with the Committee) of at least $10,956,000 (with respect to the initial round of bidding) and of at least $250,000, in excess of the aggregate consideration contained in the highest standing Competing Offer (with respect to each subsequent round of bidding, if any). The most favorable bid as determined by the Seller shall be submitted to the Court for approval at the Sale Hearing. The Debtors may determine, in their business judgment, which Competing Offer is the highest or otherwise best offer and reject any competing offer at any time before entry of an order of approval by the Court. (PSINet Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) RESOURCE RECOVERY: Case Summary & 20 Largest Creditors ------------------------------------------------------ Debtor: Resource Recovery Industries, LLC 33 West 67th Street New York, NY 10023 aka Resource, LLC Bankruptcy Case No.: 02-10051-ajg Type of Business: Debtor is engaged in the business of the recycling of aluminum scrap and residues. Chapter 11 Petition Date: December 7, 2002 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtor's Counsel: Laurence May, Esq. Angel & Frankel, P.C. 460 Park Avenue New York, NY 10022 Tel: (212) 752-8000 Fax: (212) 752-8393 Total Assets: $8,718,000 Total Debts: $13,118,000 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ R&J Trucking $293,695 P.O.Box 9454 Boardman, OH 44513 Kelly 800-262-9365 Edward's Transportation Inc. $262,752 P.O.Box 278 Ravenswood, WV 26164 Betty 888-282-8229 Athens Hocking $119,159 Stedman $95,855 Hope Gas, Inc $69,462 Allegheny Power $68,428 All-Pro Transport, Inc $64,740 Amerimark Bldg Prod - Owens $60,171 Indalex Inc $45,309 Ormet Aluminum $41,804 Air Products and Chemicals, Inc $33,245 Bearing Distributors, Inc $31,828 Sheriff of Tyler County $31,473 Rasnake Enterprises $25,616 Allied Metals $24,376 Mountain State Blue Cross $24,159 Didion International $23,981 Frank Bills Trucking, Inc. $23,976 Dana Transport Inc. $22,643 American Industrial Power, Inc. $21,671 SIMON WORLDWIDE: Gotham Int'l Discloses 7.51% Equity Interest ------------------------------------------------------------- Gotham International Advisors, L.L.C., a limited liability company organized under the State of Delaware, holds 1,250,909 shares of the common stock of Simon Worldwide, Inc., which represents beneficial ownership of 7.51% of the Company. Gotham International Advisors, L.L.C., serves as investment manager to Gotham Partners International, Ltd, a company organized under the laws of the Cayman Islands. Simon Worldwide is a diversified marketing and promotion agency with offices throughout North America, Europe and Asia. The Company has worked with some of the largest and best-known brands in the world and has been involved with some of the most successful consumer promotional campaigns in history. Through its wholly owned subsidiary, Simon Marketing, Inc., the Company provides promotional agency services and integrated marketing solutions including loyalty marketing, strategic and calendar planning, game design and execution, premium development and production management. The Company was founded in 1976. As previously reported, as a result of the alleged fraudulent actions of a former employee of its main operating subsidiary, Simon Marketing, the Company's two largest customers, McDonald's and Philip Morris, representing approximately 88% of its sales base, terminated their relationship with the Company in August 2001. As a result of the loss of these major customers, along with associated legal matters described in the Company's quarterly report for the third quarter 2001 on Form 10-Q, there is substantial doubt about the Company's ability to continue as a going concern. Results for the three and nine-month periods ended September 30, 2001 included pre-tax charges of approximately $48.8 million and $69.0 million, respectively, relating principally to the write-down of goodwill attributable to Simon Marketing. SIMONDS INDUSTRIES: S&P Cuts Ratings to D After Missed Payment -------------------------------------------------------------- Standard & Poor's lowered its corporate credit and subordinated debt ratings on Simonds Industries Inc. In addition, all ratings were removed from CreditWatch were they had been placed December 14, 2001. The rating action follows the company's failure to make its January 1, 2002, interest payment associated with its $100 million 10.25% notes due 2008. Standard & Poor's December 14, 2001, press release incorrectly stated that the interest payment was due on January 15, 2002. Simonds' difficulties arise from a highly leveraged balance sheet, onerous debt burden, and weak operating performance. Operations have been severely affected by operating inefficiencies, pricing pressures, and continued softness in several of the company's end markets. In addition, weak foreign currency exchange rates continued to negatively affect profitability. For the nine months ended September 29, 2001, total debt to EBITDA was around 9.5 times and interest coverage was about 0.8x. Simonds recently retained Credit Suisse First Boston to assist the company in addressing alternative transactions to strengthen Simonds' balance sheet. Simonds manufactures industrial cutting and sharpening tools, including saw blades, files, knives, steel rule, and filing room equipment. The company's products are sold into the wood, pulp and paper, packaging, and metal cutting markets. Ratings Lowered, Removed From Creditwatch Simonds Industries Inc. TO FROM Corporate credit rating D CC Subordinated debt D C SUITE101.C0M: Considering Discussing Reorganization Transactions ---------------------------------------------------------------- Suite101.com, Inc. (OTC BB: BOWG) announced that in furtherance of its previously announced efforts to re-direct its operations currently under consideration by its Board of Directors, it is inviting companies and other persons with a possible strategic interest in Suite101.com to consider entering into discussions with the Company looking to a possible business combination, restructuring or other reorganization transaction. The Company is seeking initial responses on or before January 25, 2002. The Company also announced that in conjunction with its efforts to re-direct its operations, it has reduced its staff by five people to 14 employees and has revised its monthly compensation arrangements with its approximately 1,000 Contributing Editors on its editorial team. Previously, the Contributing Editors had received compensation of up to $25 per month, based on the number of articles written. As of December 31, 2001, the Company terminated the payment of the monthly compensation to Contributing Editors. The Company continues to compensate its Managing Editors and Senior Managing Editors. As the Company's management continues its efforts to re-direct its activities, further changes in staffing and compensation arrangements may be made. The Company believes that the changes made in its staff and compensation arrangements are appropriate in the light of the Company's limited revenues and will enhance its ability to enter into a business combination or other restructuring transaction by reducing current levels of overhead. Management also believes that these revised compensation arrangements are in line with current practices of other Internet communities. TELIGENT INC: Investcorp Acquires ECI Business for $60 Million -------------------------------------------------------------- Investcorp, a leading global investment group, announced that it has acquired from Teligent, Inc. substantially all of the assets of Executive Conference, Inc., a leading provider of audio and Internet-based conferencing services, for $60 million in cash. The acquisition of the assets of ECI was authorized by the U.S. Bankruptcy Court in the Southern District of New York, which is overseeing the ongoing bankruptcy proceedings of Teligent. Wayne, NJ-based ECI offers businesses and other organizations a comprehensive portfolio of telephone conferencing services. ECI's audio conferencing capabilities include operator-assisted calls, automated calls, dedicated access numbers, question and answer sessions, automated polling, participant announcements and a number of enhanced features including PowerCall, audio streaming, digital replay and transcription services. As part of the transaction, Graham Sampson, a co-founder of ECI Conference Call Services in 1991 and its former Chairman and CEO, will return as the Chief Executive Officer. "The assets of ECI comprise a business that has an impressive track-record of rapid growth in revenues and profitability. The business of ECI has an extensive base of blue-chip customers and a strong commitment to excellent customer service, qualities that have established it as a leading independent provider of teleconferencing services," said Christopher J. Stadler, a member of Investcorp's Management Committee. "We believe the new company under the leadership of its former CEO and co- founder Graham Sampson will be well positioned to generate further profitable growth." Investcorp is a global investment group with offices in New York, London and Bahrain. The firm has four lines of business: corporate investment, real estate investment, asset management and technology investment. It was established in 1982 and has since completed transactions with an aggregate value of approximately $20 billion. In the United States, Investcorp and its clients currently own corporate investments that include Neptune, Jostens and Synthetic Industries. In Europe, Investcorp and its clients currently own corporate investments that include Avecia, Gerresheimer Glas AG and Welcome Break. Additional information may be found at www.investcorp.com TELSCAPE INT'L: Trustee Has Until March 20 to Decide on Leases -------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, the time within which the Telscape International Trustee must decide whether to assume or reject unexpired leases of nonresidential real property is extended through March 20, 2002. Telscape International is a leading integrated communication providers serving the Hispanic markets in the United States, Mexico and Central America, offering local and long distance telephone, internet and pre-paid calling card services. The Company filed for Chapter 11 petition on April 27, 2001 in the District of Delaware. Brendan Linehan Shannon at Young, Conaway, Stargatt & Taylor and Victoria Watson Counihan at Greenberg Traurig, LLP represent the Debtors in their restructuring efforts. TRISM INC: Has Until January 17 to File Schedules and Statements ---------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Western District of Missouri, Trism Inc.'s time to file schedules of assets and liabilities, schedules of current income, and expenditures, statements of financial affairs and statement of executory contracts is extended through January 17, 2002. Trism, Inc., the nation's largest trucking company that specializes in the transportation of heavy and over-dimensional freight and equipment, as well as material such as munitions, explosives and radioactive and hazardous waste, filed for chapter 11 protection on December 18, 2001 in Western District of Missouri. Laurence M. Frazen, Esq. at Bryan Cave LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $155 million in assets and $149 million in debts. U.S. WIRELESS: Wants Exclusive Period Extended to March 28 ---------------------------------------------------------- U.S. Wireless Corporation asks the U.S. Bankruptcy Court for the District of Delaware to extend its exclusive periods to file a plan of liquidation through March 28, 2002 and asks for a concomitant extension of its time to solicit votes on that plan through May 28, 2002. Until the January 22, 2002 Claims Bar Date has passed, the Debtors won't be in a position to properly analyze the full extent of the asserted claims against their estates. That's a cornerstone of any liquidating plan. U.S. Wireless Corporation is a research and development of wireless location technologies, designs and implements wireless location networks using proprietary "location pattern matching" technology. The Company filed for chapter 11 protection on August 29, 2001 in the U.S. Bankruptcy Court for the District of Delaware. David M. Fournier, Esq. at Pepper Hamilton LLP represents the Debtor in their restructuring effort. When the Company filed for protection from its creditors, it listed $17,688,708 in assets and $22,239,832 in liabilities. UNITED DEFENSE: Fitch Ratchets Senior Secured Rating Up to BB ------------------------------------------------------------- Fitch raises United Defense Industries, Inc.'s (UDI) senior secured rating to 'BB' from 'BB-'. The Rating Outlook is Positive. The rating upgrade reflects the company's repayment of approximately $163 million of senior secured debt from its initial public offering (IPO). In December 2001, UDI and selling shareholders received approximately $401 million in gross proceeds from its IPO. UDI sold 9.25 million shares and Carlyle sold 11.85 million shares to the public at a share price of approximately $19. As a result of the offering and free cash flow, UDI reduced its senior secured term loans by about $169 million to about $431 million. Following the IPO and debt reduction, total debt to EBITDA improved to about 2.7 times from approximately 3.7x at September 30, 2001. Pro forma interest coverage strengthened to an estimated range of 3.5 to 4.0x. The company's operating performance for the nine months ended Sept. 30, 2001 was moderately below expectations. However, the unfavorable variances appear to be primarily attributable to timing differences. Funded backlog increased to approximately $2 billion at September 30, 2001 from $1.8 billion at September 30, 2000. The Rating Outlook Positive relies on continued improvement in the company's leverage position through free cash flow. The Rating Outlook also reflects the company's additional financial flexibility by having access to the public equity market and the favorable trend in defense procurement. However, Fitch acknowledges that UDI's program concentration and inherent political risk in its business continue to constrain the senior secured rating. UDI designs, manufactures, and supplies tracked armored combat vehicles and weapons systems for the US military and the militaries of certain allied governments. The company is a sole- source/prime contractor for a number of important defense programs including the Bradley family of vehicles, the M113 troop transport vehicle, the M88 tank recovery vehicle, the M109 self-propelled howitzer, and the Crusader. VALLEY MEDIA: Giordano DellaCamera Reports 8.94% Equity Holding --------------------------------------------------------------- Giordano DellaCamera Securities, LLC., securities dealer registered under Section 15 of the Exchange Act, owns 8.94% of the common stock of Valley Media, Inc. by beneficially holding 770,100 shares of that Company. The securities dealer holds sole voting and dispositive power over the stock. On November 20, 2001, Valley Media, Inc. (Nasdaq:VMIX) filed a voluntary petition for relief under Chapter 11 of the federal bankruptcy code in the United States Bankruptcy Court for the District of Delaware. No trustee, receiver or examiner has been appointed, and the Company will act as debtor-in-possession while being subject to the supervision and orders of the Court. VECTOUR INC: Wants Removal Period Stretched Through May 14, 2002 ---------------------------------------------------------------- VecTour, Inc. asks the U.S. Bankruptcy Court for the District of Delaware to enlarge its time to file notices of removal of related proceedings through May 14, 2002. As of the Petition Date, the Debtors were party to a large number of civil actions and proceeding in a variety of forums, including numerous tort actions and pending protests of tax assessments. The Debtors and its professionals have not yet had an opportunity to assess all actions that are currently pending in state and federal courts to determine if any should be removed. Moreover, the possibility exists that causes of action of which the Debtors are presently unaware will be revealed by proofs of claim filed prior to the claims bar, date which has not yet been established. To avoid prejudice to the Debtors' estates and their creditors from a loss of the ability to remove related causes of action, the Debtors believe that the most prudent course of action is to briefly extend the removal period. VecTour, Inc. is a leading nationwide provider of ground transportation for sightseeing, tour, transit, specialized transportation, entertainers on tour, airport transportation and charter services. The Company filed for chapter 11 protection on October 16, 2001 in the U.S. Bankruptcy Court for the District of Delaware. David B. Stratton, Esq. and David M. Fournier, Esq. at Pepper Hamilton LLP represent the Debtors in their restructuring effort. ZEPHION NETWORKS: Case Conversion Hearing Scheduled For Jan. 15 --------------------------------------------------------------- A hearing on Zephion Network's motion to convert its chapter 11 cases to chapter 7 liquidation proceedings is scheduled for January 15, 2002, before Judge Gregory M. Sleet in the U.S. Bankruptcy Court for the District of Delaware. Zephion Networks, Inc. which provides Internet access solutions and network services, filed for chapter 11 protection on June 25, 2001 in the U.S. Bankruptcy Court for the District of Delaware. Charlene D. Davis at The Bayard Firm represents the Debtor in their restructuring efforts. * 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 2002. 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 prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***