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/raid1/www/Hosts/bankrupt/TCR_Public/020314.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, March 14, 2002, Vol. 6, No. 52 Headlines A.B. WATLEY: Nasdaq Cites Additional Noncompliance for Delisting AMERIGAS PARTNERS: Commences Sale of $60MM 8-7/8% Senior Notes ARMSTRONG HOLDINGS: Gibbons Del Deo's Employment Under Fire ASPEON INC: Trying to Resolve Issues to Secure Needed Financing BAC SYNTHETIC: Fitch Junks Class D & E Notes over High Defaults BAUSCH & LOMB: Moody's Lowers Senior Ratings to Ba1 from Baa3 BAUSCH & LOMB: Shrugs-Off Moody's Credit Rating Downgrade BURLINGTON: Sets-Up Uniform Casa Burlmex Bidding Procedures CE GENERATION: Fitch Keep Watch on Low-B Rated Secured Bonds CELLPOINT INC: Shedding Short-Term Debt Owed to Castle Creek CHADMOORE WIRELESSS: Plan of Liquidation Effective February 23 CONNECTICUT SURETY: S&P Revises Rating to R After Rehabilitation DELTA FINANCIAL: Prices $175 Million of Asset-Backed Securities EVTC INC: Violates Nasdaq Market Capitalization Requirements ENRON: Committee Taps Ernst & Young as Restructuring Advisors EXODUS COMM: Looks to Deloitte for Advice on Tax-Related Matters FEDERAL-MOGUL: Future Rep. Signs-Up ARPC as Asbestos Consultants FLEMING COMPANIES: Expects Strong Net Earnings Growth for 2002 FOURTHSTAGE TECHNOLOGIES: Shoos-Away Ernst & Young as Auditors FRUIT OF THE LOOM: Tosses Some Grenades to DDJ, Lehman & Mariner GC COMPANIES: AMC Entertainment Agrees to Support Plan Revisions GLOBAL CROSSING: Tyco Demands Prompt Decision on Contracts GLOBAL CROSSING: Plans to Reject Woodcliff Office Park Lease HQ GLOBAL WORKPLACES: Files for Chapter 11 Relief in Delaware HQ GLOBAL: Case Summary & 50 Largest Unsecured Creditors HAYES LEMMERZ: Secures Court Approval of KPMG's Engagement Terms HOMESEEKERS.COM: Completes 120-Day Operations Consolidation Plan HOUSE OF LLOYD: Court Approves Home Interiors as Lead Bidder HUGHES ELECTRONICS: S&P Assigns BB Rating to $1.812BB Bank Loan ICH CORP: Committee Brings-In Vinson & Elkins as General Counsel IT GROUP: Committee Asks Court to Terminate Exclusive Period INTEGRATED BUSINESS: Completes $2.8 Million Debt Restructuring INTEGRATED HEALTH: Wants More Time to Decide on Unexpired Leases INTELLICORP INC: Board Approves One-For-Ten Reverse Stock Split INTERACTIVE TELESIS: Begins Trading on OTCBB Under TSISQ Symbol INT'L FIBERCOM: Nasdaq Delists Shares Effective March 11, 2002 INT'L FIBERCOM: Trustee Appoints Official Creditors' Committee JACOBSON STORES: Hires Financo to Identify Restructuring Options KAISER ALUMINUM: Bringing-In Arthur Andersen as Tax Advisors KELVIN LTD: Fitch Slashes Senior Notes Rating to DD from B KEYSTONE CONSOLIDATED: 9-5/8% Note Exchange Offer Expires Today KMART CORP: Institutional Committee Hires Jones Day as Counsel LAIDLAW: Canadian Court OKs Intercompany Debt Structure Changes LODGIAN: Court Okays Debevoise as Committee's Chapter 11 Counsel MADISON RIVER: Pursuing Negotiations for Additional Financing MCLEODUSA INC: Gets Okay to Hire Ordinary Course Professionals NEXTCARD: Inks Amended Service Pact with Former Unit's Receiver OHIO CASUALTY: S&P Rates $125 Million Convertible Notes at BB OMNOVA SOLUTIONS: Fitch Ratchets Senior Debt Rating Down a Notch OWENS CORNING: Fabwel Inc. Now Named OC Fabricating Solutions PACIFICARE HEALTH: Subsidiary Names Brian Crary as Regional VP PENTASTAR COMMS: Can No Longer Meet Current Cash Obligations PENTON MEDIA: Enters Agreement to Amend Senior Credit Facility PHILEX GOLD: Selling Interest in JV Project to Repay Bank Debts PHYCOR: Court Approves Continued Use of Cash Management System POLAROID CORP: Intends to Renew Three Fleet Letters of Credit PRECISION AUTO CARE: Extends Rights Offering to April 15, 2002 PSINET: Court OKs Holdings' Employee Retention & Severance Plan SERVICE MERCHANDISE: Designation Rights Sale Prompts Objections STELAX INDUSTRIES: Wells Fargo Appoints Receiver to UK Affiliate TECSTAR INC: Court Approves Irell & Manella as Debtors' Counsel USDATA CORPORATION: Has Working Capital Deficit of $1.5 Million WARNACO INC: Taps Keen Realty to Dispose of Real Estate Assets ZILOG INC: Appoints Jim Thorburn to Reinforce Turnaround Program * DebtTraders' Real-Time Bond Pricing ********* A.B. WATLEY: Nasdaq Cites Additional Noncompliance for Delisting ---------------------------------------------------------------- As previously announced, A.B. Watley Group Inc. (NASDAQ:ABWG), premier financial services software provider -- http://www.abwatley.com-- received a Nasdaq Staff Determination on February 21, 2002 indicating that the Company fails to comply with the filing requirement for continued listing set forth in Marketplace Rule 4310(C)(14) and the requirement to list additional shares set forth in Marketplace Rule 4310(C)(17). The Company has also been notified by the NASD that the failure of the Company to comply with the minimum $4,000,000 net tangible assets or the minimum $10,000,000 stockholders' equity requirement set forth in Marketplace Rules 4450(a)(3) and 4450(b)(1) constitutes additional grounds for the delisting of its securities from the Nasdaq National Market. Anthony Huston, President of the Company, stated, "the Company is taking the following steps to maintain compliance with the applicable NASD listing requirements: First, we expect to file our 10-Q for the quarter ended December 31, 2001 shortly after resolving accounting issues raised by the November 2001 acquisition of certain assets of On-Site Trading, Inc.; second, we will file the required listing application; and third, we will present to the NASD the Company's plan for achieving the $4,000,000 net tangible assets requirement, including the conversion into equity of certain loans made by management to the Company." In accordance with Watley's request, a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination will be held on March 21, 2002. Mr. Huston continued, "Although there can be no assurance the Panel will grant the Company's request for continued listing, we are optimistic that Watley can clear up any regulatory issues and maintain its listing." A.B. Watley Group Inc. is a financial services software company that owns and operates A.B. Watley, Inc., a New York-based NASD registered broker/dealer. A.B. Watley, Inc. is among the largest direct-access brokerage firms in the industry and operates an Institutional Sales and Trading Division specializing in the execution of complex and sensitive large-block equity transactions for institutions in the buy-side community. A.B. Watley Group licenses software technology and provides trading solutions for E-Brokerages, banks, SOES firms and clearing corporations. Watley Group additionally owns and operates its own 'ticker-plant' allowing it to redistribute an equity and equity option data feed at greatly reduced costs. Through A.B. Watley, Inc. the firm provides one of the highest quality trading platforms available at among the lowest costs in the industry. Watley Group's technology has been featured in thee case studies by Sun Microsystems and was featured in the SUNW annual report. A.B. Watley Group Inc.'s competitors include NYFIX, E-Speed, OM Group, Trade Cast, Ameritrade and Schwab. The firm is located at 40 Wall street and on the Web at http://www.abwatley.com AMERIGAS PARTNERS: Commences Sale of $60MM 8-7/8% Senior Notes -------------------------------------------------------------- AmeriGas Partners, L.P. and AP Eagle Finance Corporation offer $60,000,000 in 8 7/8% Series B Senior Notes due 2011. The Company may sell from time to time its 8 7/8% Series B Senior Notes due 2011 in denominations of $1,000 or an integral multiple of $1,000. It will pay interest semi-annually in arrears on May 20 and November 20 to holders of record on the immediately preceding May 5 and November 5. The Company may sell the notes to underwriters, through agents, or directly to other purchasers. The distributed prospectus supplement will list any underwriters or agents and the compensation they may receive. The Company does not intend to list the notes on any securities exchange. The company boosted its position as one of the top two US retail propane purveyors (rivaling Ferrellgas for the #1 slot) by buying the Columbia Energy Group propane businesses from NiSource in 2001. AmeriGas sells more than 1 billion retail gallons of propane annually. It serves residential, commercial, industrial, agricultural, motor fuel, and wholesale customers from more than 700 locations in all 50 states. AmeriGas also sells propane-related supplies and equipment and operates a prefilled portable tank service. Utility holding company UGI owns 52% of AmeriGas. At December 31, 2001, the company reported that its total current liabilities eclipsed its total current assets by $78 million. ARMSTRONG HOLDINGS: Gibbons Del Deo's Employment Under Fire ----------------------------------------------------------- Donald F. Walton, Acting United States Trustee, appearing through Frank J. Perch, III, Trial Attorney, objects to the Armstrong Holdings, Inc., and its debtor-affiliates' employment of Gibbons Del Deo, telling Judge Newsome that this case is "already overrun with professionals" and that the application does not demonstrate any need for the services which Gibbons Del Deo is to perform. The U.S. Trustee sees that the Application seeks authority to retain Gibbons for two purposes. One purpose is to act as local counsel in the Maertin litigation which is pending in a New Jersey nonbankruptcy forum and as to which the stay was lifted. The UST might not object to the retention of Gibbons for that purpose provided that first an adequate factual record is made as to why it is necessary to bring in new counsel for that matter. However, the Application does not adequately set forth the facts. Presumably, other New Jersey counsel had appeared for the Debtors in that litigation before it was stayed by the Chapter 11 filing. If that is not the case, the Debtors should affirmatively disclose that. If it is the case, Debtors need to explain why the interests of the estate require replacing existing New Jersey counsel with Gibbons. The Application also seeks authority to retain Gibbons as co- counsel in the case generally on the ground that the "reassignment of these cases to Judge Wolin . . . has created the need for the Debtors to retain Local New Jersey Counsel." The Application does not explain why this is so, in light of the fact that the Order of Chief Judge Becker of the Court of Appeals of the Third Circuit, which led to the assignment of this and other asbestos cases to Judge Wolin, designated Judge Wolin for special service in the District of Delaware. Thus, Judge Wolin is sitting as a Delaware judge for purposes of this case. As such, proceedings before Judge Wolin are Delaware proceedings, just as proceedings before the various Delaware visiting bankruptcy judges, including but not limited to the Honorable Randall J. Newsome and the Honorable Judith K. Fitzgerald, are Delaware proceedings regardless of whether the proceedings take place physically (as they have) in Wilmington, Oakland, Pittsburgh, Camden or Chicago. This is not a New Jersey case, the U.S. Trustee stresses. This case remains a Delaware case. The docket and all filings remain lodged in the District of Delaware. Allowing the Debtors to retain New Jersey counsel will result in rampant duplication of services to the great economic detriment of the estates. The Debtors will have three sets of attorneys present at every hearing and reviewing every pleading. Moreover, permitting the Debtors to retain a New Jersey firm is likely to spark an attorney "arms race," with the Committees seeking to retain equal and opposite New Jersey co-counsel of their own, further accelerating the professional fee burn rate. Armstrong's lead counsel, Weil Gotshal, is located in New York City, just minutes away from the Court in Newark -- certainly close enough to handle any emergency matter that would require the immediate physical presence of an attorney in court in Newark. The Debtors entered Chapter 11 fourteen months ago and at the outset of the case filed applications to retain Weil Gotshal and Richards Layton averring that those firms were skilled in bankruptcy representation and were well qualified to represent the interests of the estates. If those representations remain true, there is no reason to retain a third set of general bankruptcy lawyers. The Debtors' right to select their own counsel is not boundless, the U.S. Trustee argues, and the Debtors simply have not shown a genuine need to retain yet another firm in a case already overrun with professionals. Further, the U.S. Trustee complains, Gibbons is not disinterested and is therefore not eligible for employment under section 327(a). Gibbons has client relationships with numerous key parties in the case, including five members of the Official Committee of Unsecured Creditors, six additional members of the bank group, three additional of the 20 largest creditors, two large trade creditors and one member of the Property Damage Committee, and apparently as a result of those relationships, will not take any action in the case adverse to any of those parties. Because those client relationships require Gibbons to restrict its representation of the Debtors and to forego taking actions within the scope of Gibbons' engagement that may be in the estates' best interest, they constitute material adverse interests as a result of which Gibbons is not disinterested. Even if those restrictions on Gibbons' representation did not render Gibbons ineligible to be retained, they further demonstrate that it is entirely pointless to retain Gibbons, because there is nothing they could freely do. It is difficult to conceive of any step they could take that one or more of their clients might not consider an adverse act. The interests of the estates will be hindered, not advanced, by placing any matter of importance in the hands of a firm that will always be looking over its shoulder to see if it is falling into one or more of seventeen different conflicts. The US Trustee therefore prays that Judge Newsome deny the Application. The PD Committee Objects The Official Committee of Asbestos-Related Property Damage Claimants, appearing through Joanne B. Wills, Esq., at Klehr Harrison Harvey Branzburg & Ellers, objects to Armstrong's Application. Ms. Wills reminds Judge Newsome that on November 27, 2001, Chief Judge Edward R. Becker of the United States Court of Appeals for the Third Circuit entered an order captioned "Designation of a District Judge for Service in Another District with the Circuit". In this Order, Chief Judge Becker designated and assigned Judge Alfred M. Wolin of the United States District Court for the District of New Jersey "to hold court in the District of Delaware" for certain Delaware bankruptcy cases involving asbestos claims, including the cases sub judice. On December 10, 2001, Judge Wolin entered an Order (1) Referring Certain Cases to the Bankruptcy Court and (2) Allocating Responsibilities Between the District Court and the Bankruptcy Court. Under the Referral Order, Judge Wolin referred the Debtors' bankruptcy cases to the Honorable Randall J. Newsome, subject to withdrawal of the reference as to specific proceedings or issues1. The Referral Order entered by Judge Wolin directs that all "pleadings, applications, or documents concerning these cases shall be filed with the Clerk of the Bankruptcy Court for the District of Delaware in accordance with applicable procedures and Local and Federal Rules of Bankruptcy Procedure." By Order entered on January 28, 2002, the reference was withdrawn as to two adversary proceedings captioned Armstrong World Indus., Inc. v. Center for Claims Resolution and Safeco Ins. Co. and Safeco Ins. Co. of Am. v. Center for Claims Resolution, Inc., and all related motions and proceedings. Pursuant to the Bankruptcy Code, the Debtors have retained the law firms of Weil Gotshal & Manges, LLP, based in New York, and Richards, Layton & Finger, P.A., based in Delaware, to represent them in these cases. The Debtors have also retained numerous other law firms to assist the Debtors in connection with the asbestos claims, which are the focus of this case. These firms include, among others: Kirkland & Ellis; Spriggs & Hollingsworth; Covington & Burling; Church & Houff, P.A.; Gilbert, Heintz & Randolph; and Kasowitz, Benson, Torres & Friedman. In total, the Debtors have retained approximately 17 law firms in these cases, some of which are retained in connection with the asbestos claims and some of which are retained for other special purposes. The Debtors now seek to retain Gibbons, Del Deo, Dolan, Griffinger & Vecchione, P.C. as "New Jersey local counsel." The Debtors state the necessity for retention of New Jersey local counsel arises from the "reassignment of these chapter 11 cases to Judge Wolin, along with certain pending litigation matters in the New Jersey District Court." To the extent the Debtors seek to retain Gibbons Del Deo to represent the Debtors in proceedings in which venue is based in New Jersey District Court, the Property Damage does not object to the Debtors' Application since retention of New Jersey local counsel is required in such circumstances by the New Jersey Federal Practice Rules. However, the Debtors' Application makes it clear that the Debtors seek to have Gibbons Del Deo enter an appearance as local counsel in these bankruptcy cases, not just in litigation pending in the New Jersey District Court. The stated benefits of the proposed retention-Gibbons Del Deo's "proximity" to the Newark, New Jersey District Courthouse; "its ability to respond quickly to emergency hearings and other emergency matters in the New Jersey District Court; and its "knowledge practicing before" the New Jersey District Court - provide no support for the Debtors' retention of Gibbons Del Deo in these cases. In fact, the reason for retention of any firm as New Jersey local counsel in these - "reassignment of these cases to Judge Wolin," -is inexplicable since these cases have been referred to Judge Newsome and remain Delaware cases. Finally, despite the Debtors' stated intent to avoid duplication of services by its various law firms, the retention of New Jersey local counsel will require enormous duplication of services being rendered to the Debtors by the firms of Weil Gotshal and Richards Layton & Finger. Such duplication is effectively mandated by the responsibilities (and corresponding liabilities) imposed upon New Jersey local counsel by the New Jersey Federal Practice Rules. If the assignment of Judge Wolin to these Delaware cases created a requirement that the Debtors retain New Jersey local counsel, then the assignment would impose the same local counsel requirement for all other parties. In addition, all lawyers participating in the cases that are not licensed in New Jersey would have the obligation to seek pro hac admission and to otherwise comply with the New Jersey Federal Practice Rules. The Dubious "Proximity" and "Emergency Hearing Availability" Benefits Are Far Outweighed by the Costs of Local Counsel "Proximity" to the Newark courthouse and "ability to respond quickly to emergency hearings and other emergency matters in the New Jersey District Court" are the only criteria disclosed by the Debtors for the proposed New Jersey local counsel retention in general, and the specific selection of Gibbons Del Deo, a prominent New Jersey law firm. Proximity without reference to geography provides no support for the retention of New Jersey local counsel. Newark, New Jersey is a 15-minute train ride on Amtrak from New York's Penn Station. Thus, the Debtors' New York-based counsel, Weil Gotshal, enjoys quick and easy access to Newark. Even the Debtors' Delaware-based counsel is within 90 minutes of the Newark courthouse, since regularly scheduled trains shuttle commuters from Wilmington, Delaware to Newark, New Jersey and beyond throughout the day. Due to the proximity to Newark of counsel already retained by the Debtors, the retention of another firm is not justified by the Debtors' dubious specter of emergent meetings or emergency hearings. Certainly, it would be most unusual for Judge Wolin to schedule emergency meetings or hearings on such short notice that only parties with counsel located within the confines of the City of Newark could attend. There is No Legal Basis for Retention of New Jersey Local Counsel in These Cases Apart from "proximity," the only other reason advanced for Gibbons Del Deo's retention as the Debtors' New Jersey local counsel is the "reassignment of these chapter 11 cases to Judge Wolin" under the Order entered by Chief Judge Becker. It is difficult to understand how the Order can be interpreted as requiring the Debtors or any other constituencies in these cases to retain New Jersey local counsel. The Order did not transfer these cases to the District of New Jersey. Indeed, both the caption of the Order and the body of the Order make it quite clear that Chief Judge Becker selected Judge Wolin, a New Jersey District Court Judge, for "service in another district," that is, "to hold court in the District of Delaware." Thus, venue of these cases remains in Delaware. Any question as to whether these cases are now pending in New Jersey or in Delaware was answered in Judge Wolin's Referral Order. Judge Wolin ordered that all "pleadings, applications, or documents concerning these cases shall be filed with the Clerk of the Bankruptcy Court for the District of Delaware in accordance with applicable procedures and Local and Federal Rules of Bankruptcy Procedure." Independent of the directives in Chief Judge Becker's Order and in Judge Wolin's Referral Order, reassignment of a judge from one district in the Third Circuit to another within the Third Circuit does not give rise to any need for local counsel. To the contrary, the need for New Jersey local counsel arises only in cases in which out-of-state attorneys seek to participate in cases pending in New Jersey. In such circumstances, attorneys not licensed in New Jersey must (a) promptly seek admission to the Court pro hac vice, (b) make a payment to the New Jersey Lawyers Fund for Client Protection, (c) submit to the disciplinary jurisdiction of the Court (including all applicable rules of the New Jersey Supreme Court), (d) pay an admission fee as set by the Court and (e) retain local counsel upon whom all notices, orders and pleadings may be served. In short, the Debtors have failed to state a valid reason for retention of New Jersey local counsel in these Delaware bankruptcy cases. Moreover, the Debtors have failed to recognize a far less costly alternative even if they believe that assignment of a New Jersey District Court Judge to serve in Delaware cases triggers application of local counsel requirements under New Jersey Federal Practice Rules. It would certainly be a surprise to most parties in these cases, and an injustice to creditors of the bankruptcy estates, if the Order directing Judge Wolin to hold court in the District of Delaware created the need for retention of New Jersey local counsel. To avoid such additional costs, the Debtors' first avenue of relief should be to request the Court to dispense with any need for pro hac admission in New Jersey and its concomitant requirement of retention of local counsel. Indeed, New Jersey federal courts have recognized that the cost of having local counsel as well as primary counsel can be prohibitive and have invoked L.Civ.R. 83.2(b) to excuse court appearances by local counsel. Duplication of Services is Not Only Likely, But Mandated by the Retention of New Jersey Local Counsel Retention of New Jersey local counsel in the bankruptcy cases is not only pointless, but wasteful. While the Application states that the services to be rendered by Gibbons, Del Deo "are not intended to be duplicative in any manner with the services performed and to be performed by any other party retained by the Debtors," the rules governing New Jersey local counsel mandate otherwise. As in many other jurisdictions, the role of local counsel in New Jersey is not perfunctory. "According to the practice rules, local counsel must do more than merely sign off on pleadings or file a few documents." Local counsel has the obligation to supervise out-of-state counsel and, unless excused, to appear in court for all proceedings. It is New Jersey local counsel rather than the out-of-state counsel who is deemed to be counsel of record and only New Jersey local counsel may file papers, enter stipulations and take other actions. Clearly, Gibbons Del Deo would not be in a position to handle the "emergency hearings and other emergency matters" envisioned by the Debtors without being fully informed of the numerous aspects involved in these cases. Regardless of the tasks delegated by pro hac vice attorneys to local counsel, New Jersey local counsel "wittingly or unwittingly exposes itself to liability for penalties such as sanctions." Moreover, upon entering an appearance as local counsel, New Jersey local counsel must be prepared to proceed with all aspects of the case. Given the express obligations imposed upon New Jersey local counsel, it is axiomatic that retention of New Jersey local counsel by the Debtors will result in duplication, regardless of the Debtors' intentions. Gibbons Del Deo- at rates ranging to $525 an hour- will be required to review and supervise the work of Weil Gotshal and Richards, Layton & Finger to accept service and review pleadings, correspondence and the like from other constituencies in the cases; and to review and sign stipulations, consent orders and all pleadings. The duplication is already clear in the Application. The Debtors note that Gibbons Del Deo attended the initial conference held by Judge Wolin on December 20, 2001. That conference included not only counsel in these cases, but counsel in all cases affected by Chief Judge Becker's Order. Weil Gotshal & Manges and Richards, Layton & Finger also represented the Debtors at that conference. The Debtors are silent as to why Gibbons Del Deo also attended. The Maertin Litigation or Other New Jersey Adversary Proceedings The Property Damage Committee does not object to the Debtors' retention of Gibbons Del Deo as New Jersey local counsel in adversary or other proceedings in which venue is actually based in New Jersey District Court. For these reasons, the PD Committee respectfully submits that the Debtors' request for the entry of an Order authorizing the retention of Gibbons Del Deo as New Jersey local counsel in these cases should be denied, and that retention of Gibbons Del Deo as New Jersey local counsel should be permitted only in adversary proceedings or other proceedings actually pending in the United States District Court for the District of New Jersey. (Armstrong Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) ASPEON INC: Trying to Resolve Issues to Secure Needed Financing --------------------------------------------------------------- Aspeon Inc. announced a $2.9 million net loss for the quarter ended Dec. 31, 2001. Revenues for the quarter were $9.5 million. These compared with a net loss of $6.9 million on sales of $16.1 million in the same quarter in 2001. For the 6 months ended Dec. 31, 2001 the company reported a net loss of $5.3 million on sales of $21.2 million as compared with a net loss of $31.6 million on sales of $35.8 million during the same period the previous year. In announcing the results, Robert Nichols, CEO, said: "We have actually made good progress during the quarter, despite a significant reduction in sales revenue. The reduction in revenue is attributable largely to the phasing out of most of our ASP business in the current year and to lower sales of our POS (Point-Of-Sale) products because of our inability to purchase sufficient inventory to meet the demand. "Cash resources are limited and we do not have a line of credit for U.S. operations. The company has faced a number of major challenges that have impaired its ability to secure necessary financing. "We have been devoting most of our attention to the resolution of these problems in order that financing may be obtained and we can then concentrate on the regrowth of the Javelin POS business which is where the strength of our company lies. During this period we have also significantly reduced the cost structure of the company." Included in the current year loss for the quarter is an amount of $554,500 accrued for default interest on preferred shares ($1.1 million for the 6 months). Shown as extraordinary income in both the quarter ($15,100) and the year to date ($520,100) are amounts reflecting gains on settlement of accounts payable pursuant to debt restructuring agreements. On the balance sheet included as a current liability is an amount of $15,372,900 representing the balance owing under the preferred share agreement (in default). In the event that a settlement is reached with the holder, this amount may be significantly reduced. Included in long-term debt at Dec. 31, 2001 is approximately $1.1 million representing long-term settlements of accounts payable pursuant to debt restructuring agreements. As previously reported, the company's auditors, BDO Seidman LLP, have not had access to the working papers of the company's auditors for prior fiscal years, and therefore BDO Seidman was not able to complete its audit of the company's financial statements for the fiscal year ended June 30, 2001. Until such time as the company's auditors are able to complete their audit of the company's financial statements for the fiscal year ended June 30, 2001, the company will face certain consequences, including that the company will not be able to file its Annual Report on Form 10-K and its Quarterly Reports for the three months ended Sept. 30, 2001 and Dec. 31, 2001 on Form 10-Q with the Securities and Exchange Commission, the company will not be able to hold its annual stockholder meeting, and stockholders of the company will not be able to rely upon Rule 144 or 145 of the Securities Act of 1933 for the resale of restricted securities. The company continues to explore alternatives as to how it might be possible to proceed, however no assurances can be made that the company's auditors will be able to complete their audit of the company's financial statements for the fiscal year ended June 30, 2001. Aspeon is a leading manufacturer and provider of point-of-sale (POS) systems, services and enterprise technology solutions for the retail and foodservice markets. Visit Aspeon at http://www.aspeon.com BAC SYNTHETIC: Fitch Junks Class D & E Notes over High Defaults --------------------------------------------------------------- Fitch Ratings has downgraded two classes of notes issued by BAC Synthetic CLO 2000-1 Limited, a synthetic cash flow CDO established by Bank of America to provide credit protection on a $10 billion portfolio of investment grade, corporate debt obligations. No rating action has been taken or is contemplated at this time for the class A, class B notes and class C notes, which are rated 'AAA', 'A+' and 'BBB' respectively. Based on the current risk profile of the reference portfolio, the class A, class B and class C notes continue to maintain credit enhancement levels consistent with the assigned ratings. The following securities have been downgraded and removed from Rating Watch Negative: -- $100,000,000 class D notes to 'CCC' from 'BB-'; -- $25,000,000 class E notes to 'CC' from 'CCC'. Fitch's rating action reflects higher than expected defaults in the underlying assets. This has resulted in higher than expected credit protection payments under the credit default swap agreement with Bank of America CLO Corporation II, and a diminished level of credit enhancement for the class D and E notes. BAUSCH & LOMB: Moody's Lowers Senior Ratings to Ba1 from Baa3 ------------------------------------------------------------- Moody's Investor Service downgraded the senior credit ratings of Bausch and Lomb from Baa3 to Ba1. The company's short-term rating was also revised to Not-Prime from Prime-3. Ratings Actions: Bausch & Lomb, Inc.'s puttable/callable notes, medium term notes from Baa3 to Ba1 Short-term rating to Not-Prime from Prime-3. Efforts had been made to stem declining revenues like the staff reduction in late 2000 and the arrival of a new CEO in late 2001. However, it is Moody's belief that the arrival of a new senior management is not enough to reverse the effects of the past lagging operating performance of the company. Strong competition and underlying industry trends will still pose as challenges in the company's bid to regain lost market share. Moody's thinks that the company's current cash holdings, at about $500 million, is sufficient to cover debt payments. Therefore, outlook is stable. Bausch & Lomb, Incorporated, based in Rochester, New York, is a world-wide provider of eyecare products, including lens care, contact lens, eye pharmaceuticals and surgical products. BAUSCH & LOMB: Shrugs-Off Moody's Credit Rating Downgrade --------------------------------------------------------- Bausch & Lomb (NYSE:BOL) responded to Moody's Investors Service's downgrade of its senior ratings to Ba1 and its short- term rating to Not-Prime based on lagging operating performance. The company emphasized that it faces no liquidity issues and is more than able to satisfy all of its outstanding maturing obligations. Bausch & Lomb also reaffirmed the 2002 operating guidance it provided to investors on its fourth quarter earnings release conference call on January 24, 2002. Specifically, the Company expects to report mid-to-upper single-digit revenue growth for the year. Operating margins are expected to be 9% of sales, excluding the impact of the Company's adoption of Statement of Financial Accounting Standards No. 142. Bausch & Lomb Chairman and Chief Executive Officer Ronald L. Zarrella said, "It is disappointing to have Moody's take this action on the basis of past operating performance. We're continuing to move very aggressively to reduce operating and product costs; we have new products in the market that should help to grow our revenues; and our prospects for improving profitability are good." Zarrella continued, "[Mon]day's action by Moody's will not alter our focus on improving our performance and reducing costs. We have an operating plan in place that we are confident will lead us to solid earnings improvements quarter after quarter." Bausch & Lomb said it foresees no liquidity issues as a result of the downgrade, given its strong balance sheet and healthy cash flows from operations, and further emphasized that it is not a party to any off-balance-sheet financings. The Company indicated that, as noted in Moody's press release, the downgrade may trigger an early liquidation of a $200 million partnership transaction that was classified as minority interest on the Company's balance sheet. In the event this occurs, the Company will be required to record a one-time early liquidation premium of approximately $7 million after taxes. Absent this item, the Company indicated that the downgrade will not have a material impact on its net financing costs for the year. Bausch & Lomb Incorporated is the preeminent global technology- based healthcare company for the eye, dedicated to helping consumers see, look and feel better through innovative technology. Its core businesses include soft and rigid gas permeable contact lenses, lens care products, ophthalmic surgical and pharmaceutical products. The Company is advantaged with some of the most respected brands in the world starting with its name, Bausch & Lomb, and including SofLens, PureVision, Boston, ReNu, Storz and Technolas. Founded in 1853 in Rochester, N.Y., where it continues to have its headquarters, the Company had revenues of approximately $1.8 billion in 2000, and employs approximately 12,000 people in more than 50 countries. Bausch & Lomb products are available in more than 100 countries around the world. Additional information about the Company can be found on Bausch & Lomb's Worldwide Web site at http://www.bausch.com BURLINGTON: Sets-Up Uniform Casa Burlmex Bidding Procedures ----------------------------------------------------------- Burlington Industries, Inc., and its debtor-affiliates ask the Court to approve uniform bidding procedures to be employed in connection with the sale substantially all of the assets of Casa Burlmex, S.A. de C.V. The proposed Bidding Procedures provide: A. Participation Requirements Each person desiring to participate in the auction process shall be required to deliver to the Debtors on or before the bid deadline of April 22, 2002, at 5:00 p.m., Eastern Time: (i) a written purchase offer stating that: (a) the bidder offers to purchase the Assets for not less than $26,250,000 in cash or immediately available U.S. funds; (b) the bidder offers to purchase the Assets and assume the Assumed Liabilities on the same terms and conditions as set forth in the Buyer Asset Purchase Agreement, including entry into each of the transactions described in Section 1.5 of the Buyer Asset Purchase Agreement; and (c) the Offer remains open and irrevocable until 48 hours after the earlier of: (1) the closing of the sale of the Assets, whether or not to such Qualified Bidder; or, (2) the termination by its terms of the Buyer Asset Purchase Agreement or any other applicable asset purchase agreement and the withdrawal of the Assets for sale by the Debtors. (ii) A deposit in cash or cash equivalents equal to 5% of the purchase price set forth in the Offer and written evidence of available cash, a commitment for financing or ability to obtain a satisfactory commitment if selected as the successful bidder and such other evidence of ability to consummate the transaction as the Debtors may reasonably request. Patties that submit the foregoing by the Bid Deadline shall be deemed to be Qualified Bidders and the Offer a qualified bid. B. Due Diligence Any person wishing to conduct due diligence regarding the Assets must provide the Debtors with: (i) an executed confidentiality agreement in form and substance satisfactory to the Debtors; and, (ii) current audited financial statements or other evidence satisfactory to the Debtors of the Potential Bidder's financial wherewithal to purchase the Assets. The Debtors will afford any Potential Bidder such due diligence access or additional information as may be reasonably requested which the Debtors, in their business judgment, determine to be reasonable and appropriate. The Debtors will designate an employee or other representative to coordinate all reasonable requests for additional information and due diligence access from such Potential Bidder. Any additional due diligence shall not continue after the Bid Deadline. If any Potential Bidder receives any material new information from the Debtors not given to all other Potential Bidders, the Debtors shall provide such other Potential Bidders with such information. D. Termination of the Auction Process The Debtors may terminate the Auction Process at any time if the Debtors, in their business judgment and in their sole discretion, determine that the Auction Process is not in the best interests of their estates. Any termination of the Auction Process shall not give rise to any liability to any Qualified Bidder by any Debtor. In the event of such termination, rights of the Buyer and the Debtors shall be governed by the Buyer Asset Purchase Agreement and any applicable order of the Bankruptcy Court. E. Auction Unless otherwise ordered by the Bankruptcy Court for cause shown or unless the Debtors in their reasonable discretion waive any requirements relating to participation in the Auction Process, only a Qualified Bidder who has submitted a Qualified Bid is eligible to participate at the auction with respect to the Assets. At least two business days prior to the Auction, the Debtors will notify all Qualified Bidders of the amount of the highest and best offer received by the Bid Deadline. If the Debtors receive only the Buyer Bid, the Debtors shall not hold the Auction and shall designate the Buyer Bid as the Successful Bid for purposes of these Bidding Procedures. If Qualified Bids have been received from at least one Qualified Bidder other than the Buyer, the Debtors will conduct the Auction as follows: (i) Date and Time. The Auction will take place on May 1, 2002, at 11:00 a.m., Eastern Time. (ii) Location. The Auction will take place at the offices of Richards, Layton and Finger, One Rodney Square, in Wilmington, Delaware. (iii) Bidding. The bidding shall start at the amount of the Baseline Bid, and continue in increments of at least $100,000 in cash. At the Auction, participants will be permitted to increase their bids and will be permitted to bid based only upon the amount of the Baseline Bid. Any such incremental bid shall be an "all cash" bid. (iv) Procedures. The Debtors may adopt rules for the Auction Process at the Auction that, in their reasonable judgment, will better promote the goals of the Auction Process and that are not inconsistent with any of the provisions of the Bankruptcy Court order approving the Bidding Procedures or the Buyer Asset Purchase Agreement. All such rules will provide that: (a) the procedures must be fair and open, with no participating Qualified Bidder disadvantaged in any material way as compared to any other Qualified Bidder; (b) all bids shall be made and received in one room, on an open basis, and all other bidders shall be entitled to be present for all bidding with the understanding that the true identity of each bidder shall be fully disclosed to all of, bidders and that all material terms of each Qualified Bid will be fully disclosed to all other bidders throughout the entire Auction; and, (c) no Qualified Bidder will be permitted more than one hour to respond to the previous bid at the Auction. (v) At the conclusion of the Auction, the Debtors, in consultation with their financial and legal advisors, shall: (a) identify the highest and best bid for the Assets at the Auction; and, (b) notify all Qualified Bidders at the Auction, prior to its adjournment, of the name or names of the maker of the Successful Bid and the amount of the Successful Bid. Any bid submitted after the conclusion of the Auction shall not be considered by the Debtors unless an order of the Bankruptcy Court is entered directing the Debtors to consider the bid. F. The Sale Hearing The Debtors will seek Bankruptcy Court approval of the Sale of the Assets to the Successful Bidder on terms and conditions consistent with the Buyer Asset Purchase Agreement and these Bidding Procedures and in accordance with the Bidding Procedures at a hearing scheduled for May 2, 2002, at 2:00 p.m., Eastern Time. The Sale Hearing may be adjourned or rescheduled without further notice by an announcement of the adjourned date at the Sale Hearing. G. Acceptance of Qualified Bids The Debtors presently intend to sell the Assets to the Qualified Bidder that submits the highest and best bid. The Debtors have accepted the Buyer Bid, subject to the Auction Process and approval by the Bankruptcy Court. The Debtors' presentation to the Bankruptcy Court for approval of any other bid as the Successful Bid does not constitute the Debtors' acceptance of the bid. The Debtors shall have accepted such other bid only when such other bid has been approved by the Bankruptcy Court at the Sale Hearing. H. Return of Good Faith Deposit The Good Faith Deposits of all Qualified Bidders shall be retained by the Debtors, notwithstanding Bankruptcy Court approval of a Sale, until 48 hours after the earlier of: (i) closing of the Sale; or (ii) the termination by its terms of the Buyer Asset Purchase Agreement or any other applicable asset purchase agreement and the withdrawal of the Assets for sale by the Debtors; but in any event, not later than 30 days after the Sale Hearing. If the Successful Bid does not close, the Debtors shall have the right to present the next highest and best bid by a Qualified Bidder capable of closing whether made prior to or at the Auction to the Bankruptcy Court for approval. I. Modifications The Debtors may: (i) determine, in their business judgment and in their sole discretion, which bid, if any, is the highest and best offer; and, (ii) reject, at any time before entry of an order of the Bankruptcy Court approving any bid as the Successful Bid, any bid that, in the Debtors' business judgment and in their sole discretion, is: (a) inadequate or insufficient; (b) not in conformity with the requirements of the Bankruptcy Code, these Bidding Procedures or the terms and conditions of sale set forth in the Buyer APA; or, (c) contrary to the best interests of the Debtors, their estates and creditors. The Debtors may extend or alter any deadline contained herein that will better promote the goals of the Auction Process, provided that such extension or alteration shall not have the effect of extending any deadlines or other dates in the Buyer Asset Purchase Agreement without the Buyer's prior approval. All documents required to be delivered to the Debtors in accordance with these Bidding Procedures must be delivered to: (i) BURLINGTON INDUSTRIES, INC. 3330 West Friendly Avenue, Greensboro, North Carolina Attn: John D. Englar, Esq. facsimile: (336) 379-4504; and, (ii) counsel to Burlington, JONES, DAY, REAVIS & POGUE, North Point, 907 Lakeside Avenue, Cleveland, Ohio 44114 Attn: Richard M. Cieri, Esq., Michelle Morgan Harner, Esq. and Carl E. Black, Esq. facsimile: (216) 579-0212; and RICHARDS, LAYTON & FINGER One Rodney Square, Wilmington, Delaware 19501 Attn: Daniel J. DeFranceschi, Esq. facsimile: (302) 651-7701. (Burlington Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392- 0900) CE GENERATION: Fitch Keep Watch on Low-B Rated Secured Bonds ------------------------------------------------------------ Fitch Ratings has placed it's rating of CE Generation LLC's $400 million secured bonds due 2018 on Rating Watch Positive. The bonds are currently rated 'BB'. The change in Rating Watch status is largely the result of the improved credit quality of Southern California Edison, the purchaser of a significant portion of CE Generation's output. Fitch recently increased the rating of SCE's senior unsecured debt to 'BB-' with a Ratings Outlook Positive. The new rating reflects actions taken by the California Public Utilities Commission to implement its settlement agreement with SCE, and SCE's payment of roughly $5.5 billion past due obligations on March 1, 2002. CE Generation is a portfolio of 13 generation facilities, including eight geothermal Qualifying Facilities (QFs) that sell their output under long-term agreements with SCE. The portfolio also includes three QFs selling their output under long-term agreements to investment grade counterparties, and two geothermal facilities selling their output on a merchant basis. Last year, SCE and participating QFs, including those in the CE Generation portfolio, entered into an agreement that set forth the terms under which the QFs would be paid for future power deliveries as well as past due amounts. In accordance with the agreement, a subsidiary of CE Generation received $105 million from SCE on March 1 for past due amounts. Fitch is currently reviewing the financial and operating performance of the portfolio, including the revised pricing for the eight geothermal QFs, the outlook for the merchant facilities, the performance of the three other QFs, and the credit quality of all contractual offtakers. Fitch will take appropriate rating action once that review is completed. CELLPOINT INC: Shedding Short-Term Debt Owed to Castle Creek ------------------------------------------------------------ CellPoint Inc. (Nasdaq: CLPT), a global provider of mobile location software technology and platforms, has concluded negotiations to eliminate short-term debt held by Castle Creek Technology Partners and all other debt holders. In the terms accepted late Friday last week, half of all outstanding debt and interest instruments held by each debt holder, approximately $5.5 million, will be converted to equity at 78 cents per share, which is a 50% premium to the latest market closing price. All remaining debt has been renegotiated to long-term debt and is not due until March 2004. These agreements are subject to a settlement being negotiated in parallel with the rest of the Company's creditors. "The Company and its debt holders realized that the short-term debt had been an obstacle for interested parties such as new investors, strategic partners as well as customers and we have worked cooperatively to repair this," said Peter Henricsson, Chairman and CEO of CellPoint Inc. "This financial restructuring of CellPoint is the final part of the restructuring work we commenced last summer," said Henricsson. "The reason that this reconstruction has been possible is that the Company's business plan and position in the market are fundamentally sound and that there is a strong belief among all stakeholders that the future for CellPoint is bright based on this financial restructuring. The restructured company will have no short term debt, lower payables and a very focused and efficient organization going forward." The Company will disclose publicly further details of the final restructuring once a settlement with existing creditors is concluded. CellPoint Inc. (Nasdaq and Stockholmsborsen: CLPT) is a leading global provider of location determination technology, carrier- class middleware and applications enabling mobile network operators rapid deployment of revenue generating location-based services for consumer and business users and to address mobile E911/E112 security requirements. CellPoint's two core products, Mobile Location System (MLS) and Mobile Location Broker (MLB), provide an open standard platform adapted for multi-vendor networks with secure integration of third-party applications and content. CellPoint's location platform handles over 500,000 location requests per hour and has a seamless migration path to GPRS and 3G. CellPoint's early entry and experience with European mobile operators has allowed the development of products and features that address key requirements such as active and idle mode positioning, international roaming, multiple location determination technologies and consumer privacy. CellPoint is a global company headquartered in Kista, Sweden. For more information, please visit http://www.cellpoint.com CHADMOORE WIRELESSS: Plan of Liquidation Effective February 23 -------------------------------------------------------------- Chadmoore Wireless Group, Inc., a dissolved Colorado corporation-2002, announced that it is in the process of finalizing, with the assistance of its auditors and tax and litigation counsel, the amount of the reserve required under Colorado law to be set aside to cover creditor claims and tax liabilities. As the Nextel sale became a cash transaction, immediately prior to closing, substantially greater analysis with respect to tax liabilities is required than the Company or its Tax advisors anticipated when it was believed the transaction would qualify as a tax free exchange. Following this final determination, the Company will commence the initial distribution of cash to the Company's shareholders as of the dissolution date, which is expected to occur within about three weeks. Timely distribution is subject to receipt of confirmation from each shareholder that he or she is not subject to backup tax withholding as required by the Internal Revenue Code. The Company already has transmitted an inquiry concerning tax status to shareholders of record, in order to promptly make this determination. The Company will make further distributions from time to time as claims are satisfied and the Company adjusts the level of the reserve required for creditors. The total distribution per share is expected to be consistent with the amounts outlined in the Company's proxy statement filed in connection with its asset sale to Nextel and its Plan of Liquidation. The Company filed its Articles of Dissolution on February 22, 2002 and they became effective as of 12:01 a.m. on February 23, 2002. The Company's transfer agent has closed the share transfer records of the Company and will no longer recognize or record any transfers of shares of the Company's common stock. In addition, in conjunction with its dissolution the Company's shares were de-listed from the Over-the-Counter Bulletin Board under the trading symbol, "MOOR." February 22, 2002 is the record date for all future distributions to shareholders of the Company's common stock. The Company shall be winding up its affairs for the next five years pursuant to the Plan of Liquidation of the Company as approved by its shareholders on January 28, 2002. CONNECTICUT SURETY: S&P Revises Rating to R After Rehabilitation ---------------------------------------------------------------- Standard & Poor's said it revised its financial strength rating on Connecticut Surety Co. to 'R' after the Commissioner of Insurance for Connecticut, Susan F. Cogswell, pursuant to an order of rehabilitation, placed Connecticut Surety into rehabilitation. "An order of rehabilitation gives the commissioner control of the company and the ability to thoroughly analyze, evaluate, and oversee the company's finances and claims," explained Standard & Poor's credit analyst Jonathan Chassin. Effective June 1, 2000, Connecticut Surety ceased writing new business and reinsured 100% of its renewals. When Standard & Poor's assigned its triple-'Cpi' rating to Connecticut Surety on July 5, 2000, it cited the company's weak capitalization, rapidly deteriorating surplus, high leverage, and continued poor operating performance as major rating factors. An insurer rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations. DELTA FINANCIAL: Prices $175 Million of Asset-Backed Securities --------------------------------------------------------------- Delta Financial Corporation (OTCBB: DLTO.OB), priced last week through its subsidiary $175 million of residential closed-end home equity loan-backed securities through lead manager Greenwich Capital Markets, Inc. and co-manager Wachovia Securities Inc. The Renaissance Home Equity Loan Trust 2002-1 was a senior subordinate structure, with a fully-funded overcollateralization account at closing and included a surety wrap credit enhancement by Financial Security Assurance, Inc on the AAA securities. All the securities were rated by Standard & Poor's, Fitch IBCA, and Moody's Investors Service, Inc. Commenting on the securitization, Hugh Miller, President and Chief Executive Officer stated, "We were pleased with the overall execution on this transaction. We are continuing to move the business in the right direction" Founded in 1982, Delta Financial Corporation is a Woodbury, New York-based specialty consumer finance company that originates, securitizes and sells (and until May 2001, serviced) non- conforming home equity loans. Delta's loans are primarily secured by first mortgages on one- to four-family residential properties. Delta originates home equity loans primarily in 20 states. Loans are originated through a network of approximately 1,500 brokers and the Company's retail offices. Prior to July 1, 2000, loans were also purchased through a network of approximately 120 correspondents. Since 1991, Delta has sold approximately $7.2 billion of its mortgages through 31 AAA rated securitizations. * * * As previously reported in the Troubled Company Reporter, Delta Financial Corp. recorded for the year ended December 31, 2000, a net loss of $49.4 million. The majority of the net loss incurred related to (1) the write-down of the Company's capitalized mortgage servicing rights, (2) a reduction in the carrying value of a portion of the Company's excess cashflow certificates related to an increase in the discount rate of such certificates included in the Company's NIM Transaction, (3) the write-down of the Company's goodwill relating to the 1997 purchase of Fidelity Mortgage, (4) costs associated with the Company's NIM transaction in November 2000, and (5) restructuring and debt modification charges. EVTC INC: Violates Nasdaq Market Capitalization Requirements ------------------------------------------------------------ EVTC, Inc. (Nasdaq: EVTC) announced that, by letter dated March 4, 2002, The Nasdaq Stock Market staff notified the Company that the Company was no longer in compliance with the market capitalization requirements for continued inclusion of its securities with The Nasdaq Stock Market under Marketplace Rules 4310(C)(2)(B). As disclosed in its public filings made with the Securities and Exchange Commission during February of 2002, the staff granted the Company's request for an oral hearing before a Nasdaq Listing Qualifications Panel to hear the Company's opposition to any delisting of its securities. By its March 4th letter, the staff advised the Company that the Panel would consider additional submissions from the Company regarding its noncompliance with the market capitalization requirements when rendering a decision following the March 1, 2002 panel hearing with respect to the previously disclosed deficiencies. Pending an adverse determination by the Panel, the Company's securities will continue to be traded on The Nasdaq Stock Market. ENRON: Committee Taps Ernst & Young as Restructuring Advisors ------------------------------------------------------------- The Official Committee of Unsecured Creditors in the chapter 11 cases of Enron Corporation and its debtor-affiliates seek the Court's authority to retain Ernst & Young Corporate Finance LLC as Restructuring Advisors, nunc pro tunc to December 13, 2001. Committee Co-Chair William G. von Glahn, Senior Vice President and General Counsel of The Williams Companies Inc., relates that Ernst & Young Corporate Finance will provide these services: (a) analyzing the current financial position of the Debtors; (b) analyzing the Debtors' business plans, cash flow projections, restructuring programs, and other reports or analyses prepared by the Debtors or their professionals in order to advise the Committee on the viability of the continuing operations and the reasonableness of projections and underlying assumptions; (c) analyzing the financial ramifications of proposed transactions for which the Debtors seek Bankruptcy Court approval, including, but not limited to, DIP financing and cash management, counterparty transactions, assumption or rejection of contracts, asset sales, management compensation and retention and severance plans and payment of professional fees; (d) analyzing the Debtors' internally prepared financial statements and related documentation, in order to evaluate the performance of the Debtors as compared to projected results on an ongoing basis; (e) attending and advising at meetings with the Committee, its counsel, other financial advisors and representatives of the Debtors; (f) assisting and advising the Committee and its counsel in the development, evaluation and documentation of any plan(s) of reorganization or strategic transaction(s), including developing, structuring and negotiating the terms and conditions of potential plan(s) or strategic transaction(s); (g) performing, under the direction of Milbank as counsel to the Committee, certain procedures to consist of: (i) an investigation of the books and records of the Debtors to determine whether the Debtors' financial statements for the fiscal years ended December 31, 1997, 1998, 1999 and 2000 contain any material errors; (ii) an investigation of the audits of such financial statements performed by Arthur Andersen & Co. to determine whether Andersen failed to perform such audits in accordance with applicable professional standards; (iii) providing advice with respect to potential claims against third parties, officers and others, as shall be mutually agreed upon by Ernst & Young Corporate Finance, the Committee and Milbank; and (iv) providing Milbank with a statement (either verbal or written, as mutually agreed between Ernst & Young Corporate Finance and Milbank) as to Ernst & Young Corporate Finance's findings concerning the work performed in connection with paragraphs (i) through (iv); (h) rendering testimony in connection with procedures (a) through (g) on behalf of the Committee, if the Committee or its counsel shall request such testimony; and (i) providing such other services, as requested by the Committee and agreed to by Ernst & Young Corporate Finance. According to Mr. Von Glahn, the Committee chose Ernst & Young Corporate Finance because of its experience in advising creditors' committees in large chapter 11 cases and other debt-restructuring scenarios. "Ernst & Young Corporate Finance is an investment banking affiliate of Ernst & Young LLP, a major national accounting firm, and has specialized expertise in bankruptcy proceedings," Mr. Von Glahn relates. Mr. Von Glahn informs Judge Gonzalez that the Committee also seeking to retain Ernst & Young LLP, a major national accounting firm with specialized expertise in bankruptcy proceedings, as accountants to the Committee. "Although certain aspects of the representation will necessarily involve both Ernst & Young LLP and Ernst & Young Corporate Finance, the Committee believes that Ernst & Young Corporate Finance's services will be complementary to, rather than duplicative of, the services to be performed by Ernst & Young LLP," Mr. Von Glahn says. Furthermore, Mr. Von Glahn adds, the Committee will make efforts to ensure that neither Ernst & Young Corporate Finance nor Ernst & Young LLP will duplicate services. Ernst & Young Corporate Finance intends to apply to this Court for payment of compensation and reimbursement of expenses. C. Kenneth White, managing director of Ernst & Young Corporate Finance LLC, informs the Court that the firm will charge the Debtors its standard hourly rates, which are based upon the professionals' level of experience. At present, Ernst & Young Corporate Finance's hourly rates range from: $550 to 650 managing directors and principals 475 to 545 directors, 375 to 440 vice presidents, 320 to 340 associates, 275 analysts, and 140 client service associates Mr. White notes that these rates are revised periodically. "Ernst & Young Corporate Finance shall advise the Committee of its new rates once the new rates are established if a rate change is effective during the course of the engagement," Mr. White says. Moreover, Mr. White continues, Ernst & Young Corporate Finance reserves the right to negotiate a completion bonus with the Committee that would be subject to the approval of the Bankruptcy Court. In addition to its fees, Mr. White relates that firm plans to seek reimbursement of its actual and necessary expenses related to this engagement. Ernst & Young Corporate Finance will bill these expenses separately on a monthly basis, according to Mr. White. Normal and reasonable expenses will include costs directly associated with this engagement, including travel, accommodations and out-of-town meals, overnight delivery, database access charges, telephone, facsimile, postage, printing and duplication. In the event that any proceedings or legal actions are brought as a result of Ernst & Young Corporate Finance's performance of these services, Mr. White emphasizes that the firm will seek reimbursement of actual expenses and fees. Mr. White admits that the firm's affiliate -- Ernst & Young LLP -- performed certain professional services for the Debtors prior to the Petition Date. "But since then, no services have been provided by the firm," Mr. White emphasizes. Although Ernst & Young Corporate Finance have existing relationships with certain parties in interest for matters unrelated to these cases, Mr. White clarifies that such relationships are not materially adverse to the Committee. "I believe that Ernst & Young Corporate Finance is eligible for retention by the Committee under the Bankruptcy Code," Mr. White contends. If additional information is discovered that warrants disclosure, Mr. White promises to immediately file a supplemental affidavit with the Court. (Enron Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXODUS COMM: Looks to Deloitte for Advice on Tax-Related Matters ---------------------------------------------------------------- Exodus Communications, Inc., and its debtor-affiliates ask the Court for permission to upgrade the employment of Deloitte and Touche LLP from ordinary course professionals to formally retained professionals, nunc pro tunc to February 1, 2002. Adam W. Wegner, the Debtors' Senior Adviser for Legal and Corporate Affairs, informs the Court that Deloitte has been retained by the Debtors since March, 2000 and was employed as of January 25, 2002 by the Debtors as an ordinary course professional upon the commencement of their cases. By virtue of its prior engagements, Deloitte is familiar with the books, records, financial information and other data maintained by the Debtors and thus is well qualified to provide tax advisory services needed by the Debtors. Deloitte is expected to: A. Assist the Debtors with the preparation and filing of various sales, real and personal property and income tax returns; B. Assist the Debtors in preparing for audits by taxing authorities; C. Assist the Debtors in recovery of foreign indirect taxes in various jurisdictions; D. Provide assistance to Debtors' counsel regarding the tax impact of the sale of assets and stock of certain of Debtors' foreign affiliates; E. Assist the Debtors' finance department in business process control reviews; F. Assist the Debtors, as agreed by Deloitte, and pursuant to separate engagement letters, with the preparation and filing of additional various sales, real and personal property and income tax returns, in controlling and managing its property tax burden and reportable taxable property and by providing such other additional tax and related consulting services as the Debtors may, from time to time, require; and G. Assist the Debtors, as agreed by Deloitte, and pursuant to separate engagement letters, in obtaining various sales, real and personal property, value added and income tax refunds in the United States and in various foreign jurisdictions, and by providing such other additional tax and related consulting service as the Debtors may, from time to time, require. Mr. Wegner states that the Debtors will be retaining Deloitte on a contingent fee basis in obtaining refunds on various taxes, which will be based on a percentage of the refunds obtained by the Debtors as a result of Deloitte's contingent services. Under such an arrangement, Deloitte will not realize any significant pecuniary benefit unless and until the Debtors successfully receive a refund based on Deloitte's services. In addition, Deloitte will be paid by the Debtors on an hourly basis: Partners $350 to $525 Senior Managers $300 to $400 Managers $175 to $350 Senior Accountants $150 to $225 Accountant Consultants $150 to $225 Staff Accountants $100 to $150 Staff Consultants $100 to $150 Paraprofessionals $50 to $100 David A. Roche, a Partner at Deloitte & Touche, assures the Court that the firm does not hold or represent any interest adverse to the Debtors' estates and is a "disinterested person", as defined in 11 U.S.C. Section 101(14) of the Bankruptcy Code. However, the firm is current providing services to several parties in interests in matters unrelated to the Debtors' cases, including Aegon, Akamai Technologies Inc., American Information Systems Inc., American Skandia JanCap Growth Fund, AT&T, Arca Systems, Inc., Bain Capital Group, Bain Securities Inc., Bank of Tokyo, Barclays Bank, Berger-All investment, Brookside Capital Partners Fund, LP, Brookside Savings and Loan Assoc., Brookside State Bank; Cable & Wireless, Capital Research & Management Co., Casey Thomas, CIGNA CHARTER Large Company Stock Growth Fund, CNS, Cohesive Technology Solutions Inc., CRT's Inc.; Dean Wetter, Development Bank of Singapore, Eaton Vance, EMC Corporation, Equity Office, Fidelity Management & Research Company, Fiji Bank & Trust Co. Inc., FMR Corp., Fuji Bank; G.E. Capital Corp, GECC Financial Corporation, General Electric, Global Crossing Ltd., Global Center Holding Co., Global Center Inc., Goldman Sachs, Hi-tech Engineering, HRH Construction, Janus, JMG Capital Management Inc., K Capital Partners LLC, Kemper Corporation Kemper Financial Services Inc., Kemper Securities Group Key Labs Inc., Krause Foundation Inc. R&W, Krause William Latham & Watkins, Lazard Freres Legg Mason, Lehman Brothers, Loomis Sayles, Lord Abbett & Co, Mark & Wynne Dubovoy Marsh & Mclennan Companies, Ted Mocarski, Morgan Stanley, MSDW, North Western Investment Management, Nova, Nova Capital II Inc., Nova Capital, LLC, Nova Chemicals Corporation, NOVA Corporation, Oppenheimer, Oracle, Oracle Westmore Co., Oracle: Automotive & Flow Manufacturing, Pachulski, Stang, Ziehl & Young, Pachulski Stang Ziehl Young & Jones, Paul Hastings Janofsky Walker, PG Investors, Prudential, Putnam Investment, RBC Dominion, Richard White, Richards Layton & Finger, Sabey Construction, Saloman Smith Barney, Sanrise, Scudder Kemper Funds, Scudder Kemper Investments Inc., Service Metrics Inc., Shearson Lehman Brothers, Silicon Valley Bancshares, Startt Acquisition LLC, Storage Networks Inc., T. Rowe Price, TCW, The Goldman Sachs Foundation, TMG Life Insurance Company, TMG Partners Transamerica Corp, Turner Construction, Turner Development, Ventura Investment Corporation Inc., Venture, Venture Capital Fund, Venture Holdings Trust, Venture Industries, Venture Investment Association, Venture Investment Management Company LLC, Ventures Ltd. Ventures, Wachtel, Lipton, Rosen & Katz, Wellington Financial Corp., Wellington Management, Wellington Trust Company NA, Wells Fargo, Westcon Inc., Richard S. White, Richard T & Eva P. White, William Austin, Zurich Financial Services, Zurich Insurance, Zurich Investment Management and Zurich Scudder Investments Inc. Mr. Roche informs the Court that during the last 12 months prior to the petition date, Deloitte was compensated approximately $1,117,600 by the Debtors on account of prepetition services rendered. (Exodus Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) FEDERAL-MOGUL: Future Rep. Signs-Up ARPC as Asbestos Consultants ---------------------------------------------------------------- Eric D. Green, Esq., the Legal Representative for Future Claimants appointed in Federal-Mogul's chapter 11 cases, moves the Court to authorize his employment and retention of Analysis, Research, and Planning Corporation as an Asbestos Consultant. Mr. Green says that, as the legal spokesperson of those who might want to claim asbestos-related liabilities against the Debtors, he wants the firm to provide consulting services to aid in estimating the volume, value, and timing as well as the management and processing of future claims. The services will allow him to can effectively quantify the contingent liabilities of the unknown asbestos claimants. Mr. Green believes that the ARPC is well suited for the task. For twenty years, the firm has dealt with many of the largest personal injury and property damages in the country and has been retained in litigation arising from asbestos, breast implants, Albuterol asthma medication, Dalkon Shield, IUD, the Love Canal Waste site, the Three Mile Island nuclear incident, and several other superfund sites. During the course of these retentions, the firm's professionals have helped in the development of reorganization plans, and have retained as expert witnesses for the qualification of liability in bankruptcy cases. Mr. Green is confident that the firm's familiarity with the Debtors' asbestos-related liability issues will significantly benefit the Debtors' estates, the creditors and the unknown claimants. Subject to Court's approval, the firm will be paid on an hourly basis: Principal $350-$450 Senior Consultants $250-$350 Consultants $180-$250 Analysts $125-$200 Analysis, Research, and Planning Corporation President B. Thomas Florence says that his firm has no interest adverse to the Debtors' estates and has not represented the Debtors or any other creditor, equity security holder or party-in-interest in connection with Federal-Mogul's chapter 11 cases. However, ARPC have previously done work, unrelated to the Debtors' Chapter 11 cases, with three law firms connected to these proceedings: Gilbert Heintz & Randolph, Sidley Austin Brown & Wood, and Spriggs & Hollingsworth. In 1998, Mr. Thomson adds that the firm had been retained to assist the Debtor in a chapter 11 case with Fuller Austin Insulation Company where Mr. Green was appointed as the Future Claimants' Representative. In 2000, the firm also served as claims evaluation consultant to Mr. Green in the Babcock & Wilcox Company bankruptcy case and was the proposed consultant for the Armstrong World Industries, Inc. case. (Federal-Mogul Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEMING COMPANIES: Expects Strong Net Earnings Growth for 2002 -------------------------------------------------------------- Fleming (NYSE: FLM) updated earnings guidance for its 2002 and 2003 fiscal years. Total earnings per share are anticipated to range from $2.65 to $2.75 in 2002. This represents net earnings growth of approximately 18 percent compared to 2001. The fully diluted average share count for the year is anticipated to be 52 million shares, up from 48.9 million for 2001. In assessing updated guidance, Fleming incorporated the loss of sales related to Kmart's store closure plan, assumed lower sales going forward for Kmart's remaining locations, and costs associated with the shutdown and start-up of sales to Kmart that occurred in January 2002. The net impact of these was a reduction of approximately $.20 per share from Fleming's previous earnings guidance. "Despite the sudden bankruptcy of our largest customer, I am very pleased with the strong earnings growth we are anticipating for 2002," said Mark Hansen, chairman of the board and chief executive officer. "It is a tribute to the focus and adaptability of our associates throughout the organization." Commenting on Kmart's announcement to close 284 stores, Hansen said, "We applaud the move by Kmart to quickly address store closures. By closing the least productive stores, both Kmart and Fleming are in a better position help move the remaining business forward." Lower Sales from Kmart: $.15 Per Share Lower Kmart sales volumes attributable to the announced 284 store closures will reduce annualized revenue by approximately $400 million. Additionally, due to consumer uncertainty and the generally lower sales levels that most retailers experience as a result of a Chapter 11 filing, Fleming is assuming annualized volume at the remaining Kmart stores will be lower by up to an additional $500 million, with an aggregate 2002 annual earnings impact of approximately $.15 per share. Business Disruptions Related to Kmart Shutdown and Start-up: $.10 per Share Fleming suffered significant disruptions to its business in the first quarter with the sudden shutdown and startup of business to Kmart because of their bankruptcy filing. These disruptions included stopping and re-starting shipments in a five day period in January after Kmart failed to pay their receivable; re- routing approximately $200 million of merchandise through the system; absorbing or re-directing perishable products to other customers; working with vendors to re-establish supply to Kmart; and, forecasting supply levels for Kmart as they began to replenish shelves after the bankruptcy filing. In total, these measurable disruptions cost the business approximately $.10 per share in lost earnings. Mitigating Efforts Earn Back $.05 Per Share Fleming mitigated a substantial portion of these costs by reducing inventories by approximately $65 million on top of significant inventory reductions in the fourth quarter, further reducing SG&A expenses, and eliminating temporary warehouse space. The benefit of these mitigating efforts will be approximately $.05 per share. "When a retailer files for bankruptcy, there are always uncertainties regarding disruptions within the supply chain and sustainable sales levels," said Hansen. "I am proud of the fact that the Fleming organization was able to mitigate a substantial amount of the effect of the Kmart disruption in order to minimize the impact on earnings per share." Fleming has a number of significant initiatives in process that will help drive sales and margins going forward, further mitigating the costs noted above. Fleming's technology roll-out is showing early benefits that will progressively grow throughout the year; important sales prospects appear imminent that will begin to fill the void resulting from the Kmart store closures; and, strong prospects in other new retail channels will continue to diversify the Fleming customer base. "Fleming has a number of powerful initiatives and programs underway that, in our opinion, will help us recover much of what was lost from the Kmart business," noted Hansen. FAS 142: $.40 Per Share In 2002, Fleming is implementing FAS 142 ("Goodwill and Other Intangible Assets"), which eliminates amortization of goodwill to earnings. Goodwill amortization in 2001 was $21.2 million. The company's 2002 guidance reflects a positive impact of approximately $.40 per share attributable to the new accounting rules. First Quarter 2002 Guidance First quarter 2002 earnings will range from $.50 to $.54 per share, with subsequent quarters growing approximately 15 percent above 2001 levels excluding the amortization of goodwill. Fleming's first quarter guidance, which incorporates the impact of lower Kmart sales and business disruptions (estimated to be approximately $.08 in the quarter), represents net earnings growth of approximately six percent for the quarter. The first quarter 2002 fully diluted share count, assumed to be 51 million shares, is up nearly 21 percent from the first quarter of 2001, which totaled 42.2 million shares, resulting principally from the company's convertible bond issuance in early 2001 and the issuance of shares in a private equity transaction. 2003 Guidance Earnings guidance for 2003 is in a range of $3.40 to $3.50 per share. In preparing its guidance, Fleming has assumed Kmart sales remain flat at $3.6 billion annually. Kmart Quantified In its financial review, Fleming identified the total value of the Kmart business on Fleming's earnings. "To put this in context," said Hansen, "the total effect of the Kmart business is currently approximately $.50 per share in the overall Fleming results, but will increase over the life of the contract with the growth of anticipated synergies." Fleming is the industry leader in distribution and has a growing presence in value retailing. Fleming's primary business is buying and selling merchandise. The company serves approximately 3,000 supermarkets, including supermarkets under the IGA banner, 6,800 convenience stores, and more than 2,000 supercenters, discount, limited assortment, drug, specialty, and other stores across the United States. To learn more about Fleming, visit our Web site at http://www.fleming.com * * * As reported in the January 29, 2002 edition of Troubled Company Reporter, Standard & Poor's placed its ratings on Fleming Cos. Inc. on CreditWatch with negative implications. The placement reflected uncertainty about the impact of Kmart Corp.'s bankruptcy filing on Fleming. These uncertain issues include the extent of Kmart's downsizing of its store base and the resulting impact on Fleming's capacity utilization and profitability, and what changes, if any, may be made to the existing supply contract between Kmart and Fleming. Fleming's $4.5 billion 10-year supply chain agreement with Kmart Corp., effective June 2001, covers distribution of substantially all of Kmart's food and consumables products. Ratings Placed on CreditWatch with Negative Implications Fleming Cos. Inc. Corporate credit rating BB Senior secured debt BB+ Senior unsecured debt BB- Subordinated debt B+ FOURTHSTAGE TECHNOLOGIES: Shoos-Away Ernst & Young as Auditors -------------------------------------------------------------- Fourthstage Technologies, Inc., f/k/a Aperian, Inc., has dismissed their independent auditors, Ernst & Young, effective February 18, 2002. Also on that date the Company appointed Semple & Cooper, LLP, of 2700 N. Central Avenue, Ste. 1100, Phoenix, Arizona 85004, as independent auditors. These actions were approved by Fourthstage's Board of Directors upon recommendation of its audit committee. The selection of Semple & Cooper was approved by Fourthstage after an evaluation process initiated by Fourthstage's audit committee. During the retention of Ernst & Young, the financial statement for the year ended March 31, 2001 contained an uncertainty paragraph with respect to Fourthstage's ability to continue as a going concern. Ernst & Young also reported a material weakness letter, issued February 2001, concerning the lack of internal controlto prepare financial statements within the meaning of Item 304 of SEC regulation S-K for that period of time. FourthStage Technologies filed for chapter 11 reorganization in the U.S. Bankruptcy Court for the District of Arizona in Phoenix on December 31, 2001. The Company provides technology integration systems. FRUIT OF THE LOOM: Tosses Some Grenades to DDJ, Lehman & Mariner ---------------------------------------------------------------- Luc A. Despins, Esq., at Milbank, Tweed, Hadley & McCloy, counsel for Fruit of the Loom, seeks a court order compelling the Dissident Bondholders -- DDJ Capital Management, Lehman Brothers and Mariner Investments -- to produce documents revealing the full nature and extent of their claims in these cases. Do the Dissident Bondholder Hold Secured Debt Too? Mr. Despins tells Judge Walsh that the Dissident Bondholders have placed squarely at issue their ownership of various claims against, and bonds issued by, Fruit of the Loom. In their Objection to Fruit of the Loom's Disclosure Statement, the Dissident Bondholders have positioned themselves as the champion of the unsecured creditors by virtue of their ownership of Fruit of Loom's unsecured 8-7/8% Senior Notes. However, nowhere in their Objection to the Disclosure Statement do the Dissident Bondholders mention that they own, in addition to the 8-7/8% Notes, some secured notes issued by Fruit of the Loom. Fruit of the Loom believes that the Dissident Bondholders presently hold at least $80,000,000 in face amount of senior secured notes. To date, the Dissident Bondholders have not disclosed sufficient facts regarding their ownership, purchase or sale of these senior secured notes. Did the Dissident Bondholders Trade on Inside Information? In addition, the Debtors argue that documents concerning the Dissident Bondholders' secured claims are relevant to explore whether they obtained, or were in a position to obtain, confidential information concerning Fruit of the Loom that was then used to purchase and sell Fruit of the Loom securities. This matter should be fully explored because the Dissident Bondholders may have obtained their unsecured claims under dubious circumstances. This may give them a hidden agenda to ensure defeat of the amended plan of reorganization. Fruit of the Loom reminds Judge Walsh that prior to the filing of the Rule 2019 Verified Statement, the Dissident Bondholders had numerous potential avenues to obtain confidential information concerning Fruit of the Loom. Through March 2001, certain of the Dissident Bondholders were listed as members of the Informal Committee of Senior Secured Noteholders. Thereafter, in May and June 2001, the Dissident Bondholders participated in confidential mediation proceedings. From May through October 2001, they were allowed access to all information pertaining to the then-confidential Marketing Process, which was not made public until November 2, 2001. This access to material, non-public information and the possible use of that information to purchase secured and unsecured claims provides a more than adequate basis on which to seek the production of the requested documents. Fruit of the Loom submits that it is entitled to examine the interests the Dissident Bondholders have and what motivations this group has to vote, and to solicit the votes of others, in any plan of reorganization by virtue of their diverse ownership interests. The interests of unsecured creditors, many of whom likely purchased their claims pre-petition for 100 cents on the dollar, may be quite different from those of the Dissident Bondholders, who may have purchased and sold secured and unsecured claims both before and after the Petition date of December 29, 1999. Specifically, the motivations and good faith of the Dissident Bondholders will be relevant to any questions regarding solicitation. The Bondholders' Rule 2019 Statement is Deficient On November 19, 2001, counsel for the Dissident Bondholders filed and served their Rule 2019 Verified Statement, which stated: "[Hennigan Bennett] has been advised by the Bondholders that they collectively hold approximately $134.8 million of the face amount of the [8-7/8%] Notes, which equals 53.9% of the total outstanding face amount of [8-7/8%] Notes." In making the bare representation above, counsel for the Dissident Bondholders failed to meet the disclosure requirements of Bankruptcy Rule 2019, which states in pertinent part: Data Required. In a chapter 9 municipality or chapter 11 reorganization case, except with respect to a committee appointed pursuant to Section 1102 or 1114 of the Code, every entity or committee representing more than one creditor or equity security holder and, unless otherwise directed by the court, every indenture trustee, shall file a verified statement setting forth (1) the name and address of the creditor or equity security holder; (2) the nature and amount of the claim or interest and the time of acquisition thereof unless it is alleged to have been acquired more than one year prior to the [Petition Date]. In response to Hennigan Bennett's deficient Rule 2019 Verified Statement, Fruit of the Loom served a Document Request on the Dissident Bondholders. The Document Request principally sought documents relating to any claims against, or interests in, Fruit of the Loom, including documents reflecting the Dissident Bondholders' purchase or sale of any senior secured notes. Fruit of the Loom claims that the Dissident Bondholders' document production has been patently inadequate. The Dissident Bondholders objected to the production of documents relating to their ownership of claims against or notes issued by Fruit of the Loom other than the 8-7/8% Notes, principally on the grounds that such documents were irrelevant and beyond the scope of permissible discovery. The Dissident Bondholders have not produced any documents in response to these requests other than those relating to the 8-7/8% Notes. The Dissident Bondholders are Acting Hypocritically Subsequent events have increased the relevance of the withheld documents relating to the Dissident Bondholders' secured claims. On January 25, 2002, the Dissident Bondholders filed their "Specific Objections" to the Disclosure Statement's adequacy. They also wanted the Solicitation Package to include a letter attached to their Objection to the Disclosure Statement. In their proposed solicitation letter, the Dissident Bondholders urged unsecured creditors to reject Fruit of the Loom's proposed plan of reorganization as not being in their best interests. Although the Court correctly overruled this unreasonable demand, the Dissident Bondholders remain free to send that same letter to creditors on their own, independently of Fruit of the Loom's distribution of the Disclosure Statement. In fact, the Dissident Bondholders demanded and Fruit of the Loom agreed to provide them with the mailing lists used to send the Plan solicitation materials to all voting classes. This is obvious proof that the Dissident Bondholders' intend to continue to solicit rejections of the Plan. Mr. Despins asserts that the Dissident Bondholders are acting in a hypocritical manner. Under their Objection to the Disclosure Statement entitled "The Disclosure Statement Fails to Disclose Certain Information Regarding Berkshire," the Dissident Bondholders conceded that information relating to all of the various claims and ownership interests of a party should be made available to creditors voting on the plan. In challenging the adequacy of the disclosure of Berkshire Hathaway's ownership interests in Fruit of the Loom, the Dissident Bondholders stated as follows: The Disclosure Statement fails to include certain significant information regarding the relationship between the Debtors and Berkshire. Specifically, the Disclosure Statement should disclose that Berkshire is the holder of claims against the Debtors, and state the amount of those claims and whether they are secured or unsecured, so that creditors voting on the Amended Plan can evaluate the various interests of Berkshire in this case and whether Berkshire used its holdings as a creditor to gain an unfair advantage in the sale process. The Disclosure Statement should also disclose whether Berkshire has been provided with financial and cash flow projections different from those attached to the Amended Plan. Fruit of the Loom says that the same reasoning militates in favor of compelling the Dissident Bondholders to disclose all of their ownership interests. This group cannot demand production of documents concerning all of Berkshire Hathaway's claims in Fruit of the Loom, but object to any request for the very same information relating to their claims. The requested information is necessary to evaluate whether the "various interests" of the Dissident Bondholders have been used in an improper manner with respect to the Plan and other creditors. The Debtors also suspect that the Dissident Bondholders have purchased additional unsecured claims since the filing of their Rule 2019 Verified Statement on November 19, 2001. In their Rule 2019 Verified Statement, the Dissident Bondholders claimed they held only $134,800,000 of the face amount of the 8-7/8% Notes. However, in their Objection to the Disclosure Statement, filed approximately two months later, the Dissident Bondholders asserted that they held approximately $160,000,000 of the 8-7/8% Notes. Thus, the only conclusion that can be drawn from these documents is that since November 19, 2001, the Dissident Bondholders have purchased additional 8-7/8% Notes in the approximate face amount of about $26,000,000. (Fruit of the Loom Bankruptcy News, Issue No. 50; Bankruptcy Creditors' Service, Inc., 609/392-0900) GC COMPANIES: AMC Entertainment Agrees to Support Plan Revisions ---------------------------------------------------------------- In furtherance of AMC Entertainment's efforts to complete its proposed acquisition of GC Companies, Inc., on February 27, 2002, the Company, together with GC Companies and the official committee of unsecured creditors in the Chapter 11 cases of GC Companies and its chapter 11 debtor affiliated entities, entered into a support agreement with The Bank of Nova Scotia wherein the parties conditionally agreed to support a modification to the GC Companies' plan of reorganization. With the execution of this agreement, AMC now has obtained support agreements from the most significant institutional creditors of GC Companies. On March 1, 2002, GC Companies and the official committee of unsecured creditors filed a modified first amended joint plan of reorganization reflecting, among other matters, the modifications referred to in the Bank of Nova Scotia support agreement and a support agreement with Fleet National Bank and Bank of America referred to below that was entered into on February 14, 2002. In addition, on March 1, 2002, Fleet National Bank notified AMC of its election to accept payment under the plan of reorganization of its domestic bank claims in the form of AMC's senior subordinated notes. As a result of these and other developments, AMC currently estimates that the purchase price for GC Companies will be $174.8 million (net of $6.5 million from the committed sale of GC Companies' portfolio of venture capital investments), consisting of $74.4 million of cash, $70 million of AMC's senior subordinated notes and $30.4 million of AMC common stock, which would represent approximately 2.7 million shares at a price of $11.24 per share (the last reported sale price of its common stock on March 4, 2002). The ultimate amount that AMC will distribute to creditors of GC Companies is not presently determinable with certainty and will depend, among other things, upon: -- a final determination of allowed claims that will be made by the bankruptcy court; -- the form of consideration chosen by certain creditors to whom alternatives are available; -- the form of recovery and consideration AMC chooses to issue to certain creditors; -- the amount of cash otherwise available to GC Companies at the effective date of the plan of reorganization; and -- the length of time it takes to consummate the transaction. AMC's purchase price estimates do not include certain contingent obligations. Its purchase price estimates also assume that GC Companies' debtor-in-possession, or DIP, facility borrowings at the effective time of the plan of reorganization will not exceed $20.5 million, which amount includes $10.75 million for the purchase of participating interests in loans to GC Companies' South American joint venture as contemplated by the Fleet/Bank of America support agreement. If borrowings at the effective time are different from current estimates, the purchase price and the cash AMC will pay may increase or decrease depending on the final borrowings outstanding under the DIP facility. AMC is required to repay the DIP facility on the effective date of the plan of reorganization if GC Companies is unable to do so. GLOBAL CROSSING: Tyco Demands Prompt Decision on Contracts ---------------------------------------------------------- Tyco Telecommunications (US) Inc. moves the Court for an order compelling Global Crossing Ltd., and its debtor-affiliates to assume or reject certain executory contracts immediately. Paul Kizel, Esq., at Lowenstein Sandler PC in Roseland, New Jersey, relates that the Debtors are party to four contracts with Tyco: A. Project Development and Construction Contract between Tyco and Atlantic Crossing Ltd. (AC-1) dated March 18, 1997. The outstanding contract amount to complete work under the AC-1 Contract is $15,179,226. B. Project Development and Construction Contract Between Tyco and Pan American Crossing Ltd. dated July 21, 1998 The outstanding amount to complete work under the PAC Contract is $29,375,346. C. Construction Contract Between Tyco and Mid-Atlantic Crossing Ltd. and MAC Landing Corp. dated November 30, 1998. The outstanding contract amount to complete work under the MAC Contract is $1,129,633. D. Supply Contract Between Tyco and Atlantic Crossing-II Ltd. (AC-II) dated March 7, 2000. The outstanding amount to complete work under the AC-II Contract is $5,308,802. Mr. Kizel explains that the Supply Contracts govern Tyco's design, construction, installation, supply, delivery and manufacture of Debtors' undersea fiber optic cable network, as well as system upgrades, warranty, long-term support and provision of intellectual property, including non-exclusive non- assignable licenses. A significant amount of work, upgrade work and warranty support remains to be performed under each of the Supply Contracts except in the case of the MAC Contract which does not provide for upgrade work. Mr. Kizel relates that on January 31, 2002, Tyco advised the Debtors that it is ready, willing and able to perform under the Supply Contracts and requested that the Debtors assume each of these executory contracts or provide cash in advance payments of approximately $24,000,000 representing payment for work, which Tyco believed the Debtors desired Tyco to immediately undertake. The Debtors responded to Tyco by letter dated February 7, 2002 and refused to provide Tyco with any assurance of payment but have continued to request that Tyco perform under the Supply Contracts. Despite its insecurity, Mr. Kizel tells the Court that Tyco is presently providing and supporting the Debtors' worldwide fiber optic networks pursuant to the Supply Contracts. Tyco currently intends to continue building these networks, unless and until it becomes evident through the Debtors rejection of the Supply Contracts or other events that Tyco may not be paid in full, in a timely manner for its performance under the Supply Contracts. Without the assurance provided by the Debtors' assumption of the Supply Contracts or payments in advance, however, Tyco faces increasing uncertainty and unacceptable financial risk of non- payment. Mr. Kizel believes that the Court should order the Debtors to assume or reject the Supply Contracts on or before February 28, 2002. The work to be completed under the Tyco Supply Contracts is essential to the Debtors' plan to complete their international fiber optic network. Indeed, the Debtors are requesting Tyco perform under the Supply Contracts thereby demonstrating that the Supply Contracts are critical and necessary for the Debtors' reorganization. Therefore, any argument that it is "premature" to determine whether the Supply Contracts are necessary is without merit. Mr. Kizel contends that the Debtors have the financial ability to cure the $29,000,000 pre-petition debt scheduled in the chapter 11 petition2, and such other amounts that are due and owing, and to pay in advance for goods and services under the Supply Contracts. Under the circumstances, no harm could result from compelling the Debtors either to assume or reject the Supply Contracts on or before February 28, 2002. In fact, doing so will promote the Debtors' reorganization efforts, because continued performance by Tyco is an essential part of establishing the Debtors' networks. By contrast, Mr. Kizel asserts that denying the Motion will cause great harm to Tyco, which continues in good faith to perform under the Supply Contracts. Until the Debtors decide whether to assume or reject the Supply Contracts, Tyco will be in a position of providing significant and valuable goods and services to the Debtors with no assurance of being compensated. (Global Crossing Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Plans to Reject Woodcliff Office Park Lease ------------------------------------------------------------ Global Crossing announced that it has notified Widewaters Woodcliff VI Co. that it will not be moving into the Woodcliff Office Park in Perinton, N.Y., as previously announced. Global Crossing, which announced in November 2001 that it would lease the Woodcliff Office Park as part of its plan to consolidate its Rochester operations, decided instead to utilize area facilities it already occupies. Global Crossing will be filing a motion with the U.S. Bankruptcy Court for the Southern District of N.Y. to reject the Woodcliff Office Park lease. No filing date has been announced. Since Global Crossing did not yet occupy the building, no employees, operations or customers are affected by this decision. "We re-evaluated the situation and determined that it would be more cost-effective for Global Crossing to move in a different direction," said David Carey, senior vice president, Global Crossing. "We took into consideration the cost of preparing the facility for our use, and determined that we could eliminate millions of dollars in capital expenditures by utilizing facilities we already occupy. "The consolidation that is taking place in Rochester, as well as that which we have previously announced in Beverly Hills, is part of a larger effort to vacate more than 70 sites and save an estimated $72 million in real estate costs," Carey added. "This is a critical step towards helping Global Crossing achieve its goal of becoming a leaner operation as we continue to work through the restructuring process." Global Crossing plans to reduce the number of offices leased in Rochester from 10 to three by the end of the second quarter. However, Carey noted that the Rochester community would continue to be central to operations. "We want to emphasize that we are not leaving Rochester -- we continue to have a substantial presence in the community," said John Legere, chief executive officer of Global Crossing. Global Crossing announced recently that it is planning to reduce its workforce by approximately 1,600 by the end of March. However, Global Crossing has not released information on the specific impact of any geographic region. "That is all still under consideration," stated Legere. Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. Global Crossing operates throughout the Americas and Europe, and provides services in Asia through its subsidiary, Asia Global Crossing. On January 28, 2002, certain companies in the Global Crossing Group (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda. Please visit http://www.globalcrossing.comor http://www.asiaglobalcrossing.comfor more information about Global Crossing and Asia Global Crossing. HQ GLOBAL WORKPLACES: Files for Chapter 11 Relief in Delaware ------------------------------------------------------------- HQ Global Workplaces, a leading office outsourcing company, and 32 of its U.S. affiliates filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. In conjunction with the filing, HQ has received a commitment for up to $30 million in debtor-in-possession (DIP) financing which, upon Bankruptcy Court approval and execution of definitive agreements, will provide funding for the company's ongoing operations. Over the last several months HQ has taken a number of steps to restructure its operations and has addressed the operational problems that, along with certain external factors, including the difficult economic climate, negatively affected the company's performance. "We have accomplished a great deal in the last few months, " said Jon Halpern, recently appointed Chief Executive Officer of HQ. "We have streamlined our operations by closing unprofitable office centers, reducing our workforce, and eliminating excess inventory. We have restructured our field operations to better drive business from the local level. Most importantly, we have changed our corporate culture in a manner that will allow our employees to focus more on building business relationships and providing our clients with an even higher quality of service than before. These accomplishments put HQ on the path to success." Halpern continued, "Having already made great strides in restructuring our operations, we are now able to turn our focus to restoring our financial stability and ensuring our long-term financial health. After carefully consideration, we concluded that Chapter 11 reorganization is the best course for HQ. The decision to seek protection under Chapter 11 will allow HQ to reorganize its financial structure with minimal disruption to our operations. With much of our operational improvements already in place, HQ is well positioned to emerge from Chapter 11 as a strong, profitable company." HQ will continue to operate in the ordinary course of business. The company said that it expects to receive Bankruptcy Court approval to, among other things, continue payment of pre- petition and post-petition wages, salaries, incentive plans, medical, disability, severance, vacation and other benefits. Halpern concluded, "We appreciate the ongoing loyalty and support of our Team Members. Their dedication and hard work is critical to our success, and for that I thank them. I also thank our clients, vendors and landlords for their support during HQ's restructuring. Our management team and I are committed to making this reorganization successful and leading HQ towards a brighter future." As a world leader in the business center industry, HQ Global Workplaces -- http://www.HQGlobal.com-- offers a flexible and cost-effective alternative to traditional office leasing for Fortune 100 corporations, small- to mid-size companies and independent entrepreneurs. Through its network of over 400 company-owned and franchised locations, HQ provides its 38,000 clients with furnished, private offices, team rooms and meeting rooms along with essential business services, including administrative support. HQ also offers a variety of state-of- the-art, technology-based productivity tools including high- speed Internet access, videoconferencing and telecommunications services. HQ garners the world's largest videoconferencing public room network with more than 3,000 locations. HQ is majority owned by FrontLine Capital Group (NASDAQ: FLCG). HQ GLOBAL: Case Summary & 50 Largest Unsecured Creditors -------------------------------------------------------- Lead Debtor: HQ Global Holdings, Inc. 15305 Dallas Parkway Suite 1400, LB-20 Addison, Texas 75001 Bankruptcy Case No.: 02-10760 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- HQ Global Workplaces, Inc. 02-10761 CCCO, Inc. 02-10762 Executive Office Center, Inc. 02-10763 Executive Office Network, Ltd. 02-10764 HQ Network Systems, Inc. 02-10765 HQPA, Inc. 02-10766 OfficePlus Corporation 02-10767 a/k/a Vantas Midwest, Inc. OfficeWorks, Inc. 02-10768 Overfield Balck Associates, Inc. 02-10770 RTCCO, Inc. 02-10771 San Francisco Office Network, Inc. 02-10772 Texas Suites, Inc. 02-10773 Travel Disposition Company 02-10774 TYCO, Inc. 02-10775 Vantas 2300 M., Inc. 02-10776 Vantas Avenue of the Stars, Inc. 02-10777 Vantas Bethesda Metro, Inc. 02-10778 Vantas Boca Raton, Inc. 02-10779 Vantas Corporate Centers, Inc. 02-10780 Vantas Costa Mesa, Inc. 02-10781 Vantas Costa Mesa Executive Offices, Inc. 02-10782 Vantas Dublin, Inc. 02-10783 Vantas International Holdings, Inc. 02-10784 Vantas Long Island, L.L.C. 02-10785 Vantas New York, Inc. 02-10786 Vantas Newport, Inc. 02-10787 Vantas North Michigan, Inc. 02-10788 Vantas North California, Inc. 02-10789 Vantas Pacific, Inc. 02-10790 Vantas San Francisco, Inc. 02-10791 Vantas Skokie, L.L.C. 02-10793 Vantas Southern California, Inc. 02-10794 Chapter 11 Petition Date: March 13, 2002 Court: District of Delaware Judge: Mary F. Walrath Debtors' Counsel: Daniel J. DeFranceschi, Esq. Richards, Layton & Finger, P.A. One Rodney Square Wilmington, Delaware 19899 302/651-7700 and Corinne Ball, Esq. Jones, Day, Rtavis & Pogue 222 East 41st Street New York, New York 10017 212/326-3939 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtor's 50 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ JP Morgan Partners and Mezzanine Debt $46,134,515 Chase Equity Associates Andrew Cavanna 1221 Avenue of the Americas 39th Floor New York, New York 10020-1080 Tel: 212-899-3560 Fax: 917-464-8298 Blackstone Mezzanine Mezzanine Debt $41,520,882 Partners L.P. Salvatore Gentile 345 Park Avenue, 31st Floor New York, New York 10022 Tel: 212-847-3513 Fax: 212-847-3535 CT Mezzanine Partners L.P. Mezzanine Debt $28,559,433 Daniel Classen c/o Capital Trust 410 Park Avenue, 14th Floor New York, New York 10022 Tel: 212-655-0244 Fax: 212-655-0044 Ares Leveraged Mezzanine Debt $7,688,985 Investment Fund Eric Beckman 1999 Avenue of the Stars Los Angeles, California 90067 Tel: 310-201-4215 Fax: 310-201-4157 Ares Leveraged Investment Mezzanine Debt $7,688,985 Adam Stein 1999 Avenue of the Stars, Los Angeles, California 90067 Tel: 310-201-4182 Fax: 310-201-4157 Blackstone Mezzanine Mezzanine Debt $4,613,633 Holdings L.P. Salvatore Gentile 345 Park Avenue, 31st Floor New York, New York 10022 Tel: 212-583-5443 Fax: 212-583-5482 Gibson Dunn & Crutcher Services - Legal Fees $1,244,092 LLP Harlan Cohen 2100 McKinney Avenue Suite 1100, Dallas, Texas 75201 Tel: 214-698-3109 Fax: 214-847-3535 Goldentree Asset Mezzanine Debt $1,098,254 Management Laurie Lapine 410 Park Avenue, 14th Floor New York, New York 1022 Tel: 212-847-3513 Fax: 212-847-3535 Hogan & Hartson LLP Services - Legal fees $875,079 Karen Hardwick Columbia Square 555 Thirteenth Street NW, Washington DC 20004 Tel: 202-637-5600 Fax: 212-847-3535 223 Broadway LLC Landlord - Real $838,856 Attn: General Counsel Property Lease & Controller RCPI Landmark Properties, LLC c/o Tishman Speyer Properties, LP 45 Rockefeller Plaza, New York, New York 10111; Office of the Center, 45 Rockefeller Plaza, New York, New York 10111 Tel: 212-332-6664 Fax: 212-332-6674 Wahlstrom/West Service - Advertising $732,731 Kevin Ryan 17600 Gillette Avenue Irvine, California 92614 Tel: 949-399-8600 Fax: 949-851-8150 Brook Furniture Rental, Inc. Personal Property $688,790 Michelle Robinson Lease - Furniture 18960 E. San Jose Avenue City of Industry, California 91748 Tel: 626-965-3811 x 219 Fax: 626-965-7982 Xerox Corporation Personal Property $685,762 Pat Tullo Lease - Copiers/Faxes 220 East Las Colinas Boulevard Irving, Texas 75039 Tel: 972-830-4324 Fax: 972-830-4026 Nexuraone LLC Service Agreement $637,269 Polly Derrick Telephone Maintenance 2800 Post Oak Boulevard, Mail Stop 26-32 Houston, Texas 77056 Tel: 713-393-8309 Fax: 713-307-4170 Everdream Corporation Service Agreement & $613,374 Chris Laurent Personal Property Lease 6591 Dumbarton Circle, - Computers Fremont, California 94555 Tel: 510-818-5537 Fax: 510-818-5510 AT&T Corporation Services - Utilities $508,254 Kimberly Deutsch Teleport Drive, 3rd Floor Staten Island, New York 10311 Tel: 703-277-7309 Fax: 703-691-6949 Shared Technologies Service Agreement - $403,656 Fairchild, Inc. Telephone Maintenance John DeMarco 2 University Plaza,6th Floor Hackensack, New Jersey 07601 Tel: 201-498-1200 Fax: 201-498-1100 Verizon Services- Utilities $381,364 Colleen Malone PO Box 6050 Inglewood, California 90312-6050 Tel: 617-295-8197 Fax: 508-884-3498 Cort Furniture Rental Personal Property $359,945 Jerry Szec Lease - Furniture 11250 Waples Mill Road Suite 500, Fairfax, Virginia 22030 Tel: 703-968-8583 Fax: 703-633-8606 Dekalb Office Personal Property $316,927 Environments, Inc. Lease - Furniture Rene Gunter 1320 Ridgeland Parkway, Alpharetta, Georgia 30004 Tel: 770-360-0200 Fax: 770-360-0305 Kilroy Realty, L.P. Landlord -Real $275,090 Mary L. Watkins, Esq. Property Lease 2250 E. Imperial Highway Suite 1200, El Segundo, California 90245 Tel: 310-563-5500 Fax: 310-414-0010 CTC Communications Service Agreement - $258,989 Jim Morressey Voice and Data Lines PO Box 80000 Department 284, Hartford California, CT 06180284 Tel: 914-789-2023 Fax: 914-347-6768 520 LLC Landlord- Real $237,344 Property Lease Boston Properties, Inc. Landlord - Real $217,332 Property Lease Powell, Goldstein, Frazier Services - Legal Fees $210,569 & Murphy Payton Construction Services - Tenant $202,200 Corporation Improvements Qwest Services - Utilities $196,669 Jackson Wood Ltd. Landlord - Real $196,240 Property Lease Airborne Express Services - Overnight $193,353 Mail Globe Furniture Rental Personal Property $192,637 Lease - Furniture Quill Advertising Services - Advertising $185,420 Sharp Finance Company Personal Property $183,094 Lease - Copiers/Faxes Duke-Weeks Realty Limited landlord - Real Estate $182,639 Property Lease National Office Partners Landlord - Real $179,941 Limited Partners Property Lease Furniture Marketing Personal Property Lease $175,850 Group, Inc. - Furniture Boston Properties Landlord - Real $159,817 Property Lease Highwoods Realty Limited Landlord - Real $151,591 Partnership Property Lease Prime West Boulder Landlord - Real $145,839 Venture III Property Lease Data-Com Telecommuni- Services - Voice $136,569 cations, Inc. And Data Goldman Sachs & Co. Services - Regus Deal $135,790 Sharp Electronics Credit Co. Personal Property $133,044 Lease - Copiers/Faxes Equity Office Properties Landlord - Real $124,854 LLC - Seattle Property Lease Duke Weeks Realty, LP Landlord - Real $124,727 Property Lease Executive Furniture Center Services - Tenant $123,624 Improvements 3D/International Services - Tenant $121,572 Improvements Carnegie VIII - Marsh Landlord - Real $121,311 Realty Property Lease Intermedia Communications, Services - PBX $116,240 Inc. Maintenance Volt-Services Group Services - Temporary $115,780 Employees Esplanade Office Limited Services - Temporary $111,500 Partnership Employees Callison Architecture, Inc. Promissory Note $111,227 HAYES LEMMERZ: Secures Court Approval of KPMG's Engagement Terms ---------------------------------------------------------------- Hayes Lemmerz International, Inc., and its debtor-affiliates obtained approval from the Court authorizing the retention and employment of KPMG LLP as accountants and financial advisors. The Debtors anticipate that KPMG LLP may render the following services in this case: A. Accounting and Auditing Services a. Audit and review services in conjunction with the restatement of the Debtors' financial statements for the year ended January 31, 2001 and quarter ended April 30, 2001; b. Audit and review examinations of the financial statements of the Debtors as may be required from time to time; c. Analysis of accounting issues and advice to the Debtors' management regarding the proper accounting treatment of events; d. Assistance in the preparation and filing of the Debtors' financial statements and disclosure documents required by the Securities and Exchange Commission; e. Assistance in the preparation and filing of the Debtors' registration statements required by the SEC in relation to debt and equity offerings; and f. Performance of other accounting services for the Debtors as may be necessary or desirable. B. Tax Advisory Services a. Review of and assistance in the preparation and filing of any tax returns; b. Advice and assistance to the Debtors regarding tax planning issues, including, assistance in estimating net operating loss carryforwards, international taxes, and state and local taxes; c. Assistance regarding transaction taxes, state and local sales and use taxes; d. Assistance regarding tax matters related to the Debtors' pension plans; e. Assistance regarding real and personal property tax matters, including, review of real and personal property tax records, negotiation of values with appraisal authorities, preparation and presentation of appeals to local taxing jurisdictions and assistance in litigation of property tax appeals; f. Assistance regarding any existing or future IRS, state and/or local tax examinations; and g. Other consulting, advice, research, planning or analysis regarding tax issues as may be requested. C. Financial Advisory Services a. Assistance in the preparation and review of reports or filings as required by the Bankruptcy Court or the Office of the U.S. Trustee, including, schedules of assets and liabilities, statement of financial affairs, mailing matrix and monthly operating reports; b. Review of and assistance in the preparation of financial information for distribution to creditors and other parties-in-interest, including, analyses of cash receipts and disbursements, financial statement items and proposed transactions for which Bankruptcy Court approval is sought; c. Assistance with analysis, tracking and reporting regarding cash collateral and any DIP financing arrangements and budgets; d. Assistance with implementation of bankruptcy accounting procedures as required by the Bankruptcy Code and generally accepted accounting principles, including Statement of Position 90-7; e. Evaluation of potential employee retention and severance plans; f. Assistance with identifying and implementing potential cost containment opportunities; g. Assistance with identifying and implementing asset redeployment opportunities; h. Analysis of assumption and rejection issues regarding executory contracts and leases; i. Assistance in preparing business plans and analyzing the business and financial condition of the Debtors; j. Assistance in evaluating reorganization strategy and alternatives available to the Debtors; k. Review and critique of the Debtors' financial projections and assumptions; l. Preparation of enterprise, asset and liquidation valuations; m. Assistance in preparing documents necessary for confirmation, including financial and other information contained in the plan of reorganization and disclosure statement; n. Advice and assistance to the Debtors in negotiations and meetings with bank lenders, creditors and any formal or informal committees; o. Advice and assistance on the tax consequences of proposed plans of reorganization, including assistance in the preparation of IRS ruling requests regarding the future tax consequences of alternative reorganization structures; p. Assistance with claims resolution procedures, including, analyses of creditors' claims by type and entity and maintenance of a claims database; q. Litigation consulting services and expert witness testimony regarding avoidance actions or other matters; and r. Other such functions as requested by the Debtors or their counsel to assist the Debtors in its business and reorganization. The compensation for professional services rendered to the Debtors will be based upon the hours actually expended by each assigned professional at each professional's hourly billing rate plus reimbursement for necessary expenses incurred in providing professional services. The customary hourly rates for accounting, tax advisory and consulting services to be rendered by KPMG LLP and applicable herein are: Accounting and Tax Advisory: Partners $500 - $600 Directors/Senior Managers/Managers $300 - $400 Senior/Staff Accountants $150 - $225 Paraprofessionals $ 75 - $100 Financial Advisory: Partners $500 - $600 Directors/Senior Managers/Managers $375 - $400 Senior/Staff Accountants $275 - $375 Paraprofessionals $140 - $250 (Hayes Lemmerz Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) HOMESEEKERS.COM: Completes 120-Day Operations Consolidation Plan ---------------------------------------------------------------- Thomas Chaffee, CEO of HomeSeekers.com Inc. (OTC Bulletin Board: HMSK), currently undergoing a name change to Realigent Inc., announce the completion of the initial 120-day plan to rescue the company and consolidate its operations. "Everyone in the company has been working non-stop over the past several months to transform Realigent into a thriving business. The task of removing the vestiges of years of poor management has been absolutely Herculean," noted Chaffee. When the current management team took over, the company was in complete disarray. There was no leadership, no vision and absolutely no capital. The company was, for all intents and purposes, defunct. "I made a very public commitment to the shareholders at the time to try to save the company, an endeavor that came at tremendous personal and professional risk to those of us involved. It did not take a genius to recognize the value in Realigent -- it offers excellent products and services, as well as significant intellectual capital, that in the past were neither recognized nor monetized," said Chaffee. Literally hours from bankruptcy, the company engineered the sale of its XMLS Web division in less than one week, which provided enough financial stability for the company to execute the 120- day turnaround plan. Steve Crane was immediately appointed president and COO because of his experience in corporate turnarounds, his Tatum CFO credentials and his proven track record in "managing by the numbers." In addition, his experience managing publicly traded technology companies offered qualities and discipline sorely needed by the company. When the turnaround plan was first initiated 120 days ago, Realigent had 150 employees scattered around the country with offices in five separate states. Communication was poor, as were employee morale and productivity. The company was operationally dysfunctional with multiple accounting systems, numerous rogue bank accounts, ineffective human resources and no comprehensive set of internal controls. There were incompatible telecommunication systems, numerous and often conflicting contact points, and a broken sales and order entry process. In general, virtually all of the company's business processes were broken, and operated with no synergy, focus or management. Customer outreach and contact was horrific, with a highly confused brand identity, no marketing program, sluggish, decreasing sales and intolerable customer-service telephone hold times. Finally, the contingent liabilities were pervasive, with the prospect of numerous lawsuits keeping the remaining managers of the company from focusing on the operations of the company. What remains from the XMLS Web division sale is a business that produced nearly $12 million in revenue in fiscal 2001, a foundation for the future growth of the firm. With the 120-day operational rescue plan realized, there are now 82 employees and one corporate office located in Brea, Calif. The company is in the final stages of centralizing its accounting, order entry, billing and customer service processes into one system and has established local relationships with professional legal and accounting service firms and providers. Employee morale and productivity have increased dramatically, as team members have become believers in their own success. "The feeling of ownership and pride is returning among the employees," said Chaffee. A great example of the company's renewed sprit was the recent migration of all of Realigent's hosted systems to a new state- of-the-art data center within a Qwest Cybercenter(SM). To grow substantially, Realigent must provide its customers with the absolute best-in-class backbone and Internet services. The move to Qwest has provided the company with the finest data environment available -- allowing Realigent to serve Web sites and applications faster and much more efficiently and reliably than in the past. Over the past three weeks, Realigent engineers, under CTO John Hensley's inspired leadership, migrated tens of thousands of domains and hundreds of systems to the new Qwest center from the capacity-strapped Brea center. Chaffee noted, "During this migration, the team worked around the clock for nearly two weeks. The entire company stood behind this migration effort as team members from other disciplines inside the company assisted the engineers in any way they could. This is an example of the deep commitment the employees feel toward the company and its growing esprit de corps. It has not gone unnoticed." Greg Robertson, vice president of sales, has revamped and refined the company's sales process while establishing aggressive sales goals. Sales are trending positively upwards as a result. Amy Tomchak, newly appointed director of customer services, has re-dedicated her department to the goal of providing the best customer support in the industry and noted that hold times are now averaging under five minutes. These are significant improvements directly attributable to these individuals and their respective teams. "There is now a cohesive vision, clearly articulated operational methodology and stringent financial controls placed throughout the company," commented Chaffee. "We have also implemented the necessary metrics to engage each employee in the process of success at every level of the company." Chaffee continued, "I feel confident that we have the core of the team necessary to execute the plan on a go-forward basis. The largest impediments we now face are the past sins and baggage left over from the legacy of this company. This is no small task, but we are managing. If you combine the overwhelming level of confusion and hype with the lack of execution that has historically plagued HomeSeekers, one can easily understand why the company was so close to disappearing. That is why it is especially gratifying to announce that Realigent has achieved a significant corporate milestone: this company is cash-flow positive from ongoing operations for the first time ever." HomeSeekers.com Incorporated (OTC Bulletin Board: HMSK), DBA Realigent, is a leading technology solutions provider to the real estate industry. The company offers numerous products, applications, services and custom solutions serving brokers, agents, multiple listing services (MLS), builders, lenders, consumers and all constituents involved in a real estate transaction. Detailed product and service offerings can be viewed at the company's primary website, http://www.realigent.com HORIZON GROUP: Debt Restructuring Program Dragging On ----------------------------------------------------- Horizon Group Properties, Inc. (HGP) (Nasdaq: HGPI), an owner, operator and developer of factory outlet and power centers, today announced fourth quarter 2001 Funds From Operations (FFO) of $280,000. This compares to $925,000 in the same quarter in the prior year. FFO for the twelve months ended December 31, 2001 totaled $1,167,000. Included in FFO for the fourth quarter of 2001 was a loss of $.31 per share related to six properties which are subject to non-recourse loans on which HGPI currently remits the net cash flow. FFO for the fourth quarter of 2001 also includes gains from sales of real estate of $.18 per share. FFO for the fourth quarter of 2000 included $.07 per share of gain from sale of real estate. Fourth Quarter Statistics Leasing -- Portfolio occupancy decreased slightly, to 76.0% from 76.5% at the end of the third quarter of 2001 and from 81.6% at the end of the fourth quarter of 2000. Working occupancy is 76.7% including leases signed but yet to be occupied. -- Centers showing increases in occupancy included Lakeshore Marketplace in Norton Shores, Michigan up to 94.0% at the end of the fourth quarter of 2001 from 88.9% at the end of the third quarter of 2001 and Monroe, Michigan up to 75.5% at the end of the fourth quarter of 2001 from 71.0% at the end of the third quarter 2001. -- Renewed 135,908 square feet of leases or 73% on or before their expiration (including tenants remaining in occupancy past expiration). -- Executed 18,424 square feet of new leases. -- New tenants taking occupancy commencing in the fourth quarter of 2001 included Petco, taking 18,000 square feet at Lakeshore Marketplace, Spiegel, occupying 12,600 square feet in Monroe, Michigan and Gap, opening a 14,000 square foot store in Somerset, Pennsylvania. Sales -- Same space sales increased 6.8% for the entire portfolio for the twelve months ended December 31, 2001 compared to the same period a year earlier. Centers showing significant gains over the prior twelve month period include Traverse City, Michigan, up 26.7%, Laughlin, Nevada, up 13.5%, and Medford, Minnesota, up 9.3%. -- Same store sales for December increased by 7.4% for HGP's outlet portfolio, exceeding the increase in outlet center sales reported by the International Council of Shopping Centers by 6.8%. For the twelve months ended December 31, 2001, we outperformed results reported by the International Council of Shopping Centers by 1.1%, registering a decline of 3.2%. Operations Efforts continued to improve the returns of the properties: -- Continued programs to appeal property taxes resulting in a refund of prior years' taxes totaling $156,000 for our corporate office building in Muskegon, Michigan and reductions in property tax expense of $57,000 at Lakeshore Marketplace and $59,000 at Daleville, Indiana in the fourth quarter of 2001 compared to the same period a year earlier. -- Further reduced corporate General & Administrative expenses resulting in a $389,000 decrease in expense in the fourth quarter of 2001 compared to the same period in the prior year and by $544,000 for the full year. -- Sold three outparcels of land resulting in a net gain of $601,000 in the fourth quarter. -- Exercised a purchase option to acquire the land under the center in Laughlin, Nevada. The planned acquisition should result in a significant increase in net cash flow from the property. Commenting on the Company's fourth quarter and year-end results, HGP's Chairman, President and Chief Executive Officer, Gary J. Skoien, said, "The recovery from the impact of the events of September 11th began in the fourth quarter of 2001. Sales in October set the stage for the upswing which we are currently experiencing. Unfortunately, it was also in October when the cash flow from the properties which secure the JP Morgan loans reached a level which could not fully service the related loans. We made the painful decision to remit the net cash flow from the properties, which was less than the full required payment. Progress in restructuring the loans has not been as rapid as we would like, but we continue to manage and lease the properties which secure the loans in accordance with the terms of our agreements. We are hopeful that a mutually beneficial solution will be achieved." Based in Chicago, Illinois, Horizon Group Properties, Inc. has 11 factory outlet centers and one power center in 9 states totaling more than 2.5 million square feet. HOUSE OF LLOYD: Court Approves Home Interiors as Lead Bidder ------------------------------------------------------------ Home Interiors & Gifts, Inc., one of the nation's largest direct sellers of decorative accessories and gifts, announced that on March 11, 2002, the United States Bankruptcy Court for the Western District of Missouri entered an Order approving it as the lead bidder to acquire assets of House of Lloyd L.L.C. a/k/a Open Invitation. If the successful bidder, Home Interiors plans to build upon the integrity and value of the Lloyd family's 50-year legacy of brands, including Christmas Around the World. With 45 years of strong direct seller performance, and a reputation for excellence in the home decor and direct selling industry, Home Interiors has over 70,000 independent contractors (Displayers) around the United States, Mexico and Canada. If successful in its bid for House of Lloyd, Home Interiors will be eager to explore independent contractor opportunities with House of Lloyd's devoted consultants and the potential for bringing them into the same family of care and creativity that Mary Crowley established at Home Interiors in 1957. If the successful bidder, Home Interiors intends to explore independent contractor opportunities with the House of Lloyd consultants including, opportunities to grow a home-based business, set one's own hours, achieve unlimited income, and participate in a variety of contests and incentives for achievement in sales and recruiting. Joey Carter, Chairman and CEO of Home Interiors stated, "The bid presents a great opportunity for us and for House of Lloyd consultants to move forward with an eye toward future potential in our company's culture and legacy of success. From home accessories and gifts to seasonal and holiday products, we think House of Lloyd would not only enhance Home Interiors' flourishing brand, it would also create a greater value for our combined customers, hostesses and Displayers." Home Interiors believes its strong and stable financial position bodes well for a successful future, and takes pride in its legacy of first-rate products and services. To add to this legacy, Home Interiors will offer former House of Lloyd's Christmas Around the World products, plus new home decorating accessories from Home Interiors Kids and great new gift ideas through a partnership with Thomas Kinkade, known as the "Painter of Light." Home Interiors is also seeking to acquire assets of House of Lloyd in Mexico and Canada and looks forward to the opportunities in those countries as well. A hearing will be held in the United States Bankruptcy Court for the Western District of Missouri on March 29, 2002 to determine who the successful bidder is for the assets of House of Lloyd. Established in Dallas, Texas, in 1957, Home Interiors and Gifts is a leading direct sales company. Founded by Mary Crowley and led by her grandson and CEO, Joey Carter, Home Interiors has empowered thousands of people to "decorate lives" and realize their creative and personal potential while achieving rewarding and financially independent lives. HUGHES ELECTRONICS: S&P Assigns BB Rating to $1.812BB Bank Loan --------------------------------------------------------------- The rating on Hughes Electronics Corp. was lowered to `BB-` on March 8, 2002, and remained on CreditWatch negative. A rating of `BB' was also assigned to the El Segundo, California-based company's $1.812 billion bank credit facilities at that time. That rating was placed on CreditWatch negative. The ratings are on CreditWatch pending the outcome of Hughes' merger with EchoStar Communications Corp., which is uncertain at this time. Standard & Poor's has indicated that the corporate credit rating for either the combined EchoStar/Hughes/PanAmSat Corp. or EchoStar/PanAmSat will be either a 'BB-' or 'B+'. The downgrade was based on a more thorough determination of the credit quality of Hughes on a stand-alone basis, in light of the new financing, should the merger not be approved. Hughes recently increased the size of its revolving credit facility to $1.235 billion from $750 million, and is currently syndicating a $577 million term loan. Drawdowns under the new bank credit facilities will refinance Hughes' debt at its Latin American subsidiaries, and fund the company's operations during 2002. As of December 31, 2001, Hughes' consolidated debt was about $2.6 billion. The new facility is secured by the assets and capital stock of two of Hughes' subsidiaries: DirectTV Enterprises Inc. and Hughes Network Systems Inc. Both subsidiaries provide upstream guarantees. Repayment of the facilities is expected to come from the completion of the merger, or from proceeds from the sale of Hughes' 81%-owned subsidiary PanAmSat to EchoStar should the merger be rejected. The maturity date of the facility is the earlier of December 5, 2002, or completion of the merger. The facility ranks parri passu with a $500 million loan recently arranged from General Motors Acceptance Corp., a subsidiary of General Motors Corp. The $1.825 billion facility is rated one notched higher than Hughes' corporate credit rating, reflecting Standard & Poor's belief that bank lenders would receive full recovery in a distressed scenario. Assuming the entire $2.3 billion in bank loans are drawn, debt per subscriber is very low at less than $300 (based on about 9.1 million subscribers, excluding National Rural Telecommunications Cooperative subscribers and DirectTV Latin America customers, which are not part of the collateral package). Management estimates cash needs during 2002 in the $1.8 billion to $2.0 billion range, and has projected EBIDTA, excluding PanAmSat, of about $200 million. If the merger does not receive regulatory approval, EchoStar is required to purchase PanAmSat for $2.7 billion and pay a $600 million break-up fee to Hughes. These proceeds will be used to pay down all the company's outstanding debt, with excess cash expected to be available for cash needs in 2003, even if operating performance falls short of expectations. Hughes' outlook on a stand-alone basis would be determined at that time, in conjunction with a review of business and competitive conditions, execution during 2002, capital spending levels in 2003, and capital structure considerations. ICH CORP: Committee Brings-In Vinson & Elkins as General Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of ICH Corporation seeks authority from the U.S. Bankruptcy Court for the Southern District of New York to employ Vinson & Elkins L.L.P. as general counsel, nunc pro tunc as of February 13, 2002. The Committee's selection of V&E largely depends on the belief that its attorneys have extensive experience and knowledge in bankruptcy and commercial law areas and are well qualified to represent the Committee in these cases. The professional services V&E is expected to render are: a. giving the Committee advice on its powers and duties under the Code, including aiding the Committee in its: 1. consultations with the Debtors concerning the administration of the case; 2. investigation of the acts, conduct, assets, liabilities, and financial conditions of the Debtors, the operation of the Debtors' businesses and the desirability of the continuance of such businesses; and 3. participation in formulating a plan; b. advising the Committee on legal issues that become relevant in these cases; c. preparing and submitting on behalf of the Committee all legal papers that may need to be prepared and submitted in these cases, including all applications, motions, complaints, answers, responses, orders, reports, plans, disclosure statements, and other legal papers to be prepared and submitted in this case; d. negotiating with the Debtors, the Debtors' secured creditors and other parties in interest concerning all aspects of the Debtors' Chapter 11 cases; e. appearing on behalf of the Committee at all hearings scheduled before the Court; and f. representing the Committee and performing all other legal services for the Committee as may be necessary in connection with these cases. V&E's standard hourly rates are: partners $310 to $665 per hour counsel $245 to $575 per hour associates $190 to $440 per hour paraprofessionals $85 to $165 per hour The attorneys who intend to work on this matter are: Daniel C. Stewart, Partner $545 per hour Steven M. Abramowitz, Partner $475 per hour Jonathan Krueger, Associate $250 per hour Michaela C. Crocker, Associate $200 per hour ICH Corporation, a Delaware holding corporation which, through two principal operating subsidiaries, Sybra and Sybra Conn., currently operates 240 Arby's restaurants located primarily in Michigan, Texas, Pennsylvania, New Jersey, Florida and Connecticut. The Company filed for chapter 11 protection on February 05, 2002. Peter D. Wolfson, Esq. at Sonnenschein Nath & Rosenthal represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated debts and assets of $50 million to $100 million. IT GROUP: Committee Asks Court to Terminate Exclusive Period ------------------------------------------------------------ The Official Committee of Unsecured Creditors wants the Court to terminate The IT Group, Inc. and its debtor-affiliates' 120-day period of exclusivity for proposing and filing a plan of reorganization. The Committee wants the opportunity -- now -- to file and pursue confirmation of an alternative plan. Jeffrey M. Schlerf, Esq., at The Bayard Firm, P.A., in Wilmington, Delaware, explains that section 1121 of the Bankruptcy Code generally provides that a debtor has the exclusive rights to file a plan of reorganization during the first 120 days after the order for relief is entered. This is intended to facilitate the fundamental rehabilitation policy of chapter 11 by forcing creditor constituents to negotiate with the debtor regarding the terms of a plan for a reasonable period of time. This basic underpinning for the preservation of exclusivity is vitiated, however, when a debtor enters chapter 11 without the intention of reorganizing, but instead seeks only to utilize chapter 11 to liquidate for the benefit of its secured lenders. Mr. Schlerf admits that it is indeed, difficult to discern what chapter 11 policy supports the continuance of exclusivity when the debtor has abandoned any hope of reorganizing and creditors believe not only that reorganization is possible, but would maximize value. Mr. Schlerf states that although the Debtors filed voluntary petitions for reorganization relief under chapter 11, all of their efforts thus far have been in pursuit of liquidation. The record demonstrates that the Debtors rushed to conclude a transaction with Shaw within just 2 weeks of first offering for sale all or substantially all of the Debtors' assets. Mr. Schlerf says that the Debtors have agreed to sell essentially all of their assets to Shaw for consideration so miniscule that secured creditors would stand to receive pennies on the dollars for their claims, and the unsecured creditors receive nothing. Thus, the purpose of the exclusivity period does not apply in this case, that is, there is no reason to afford the Debtors time to propose a plan for reorganization without interference from competing plans, because the Debtors do not intend to submit a reorganization plan. Mr. Schlerf alleges that if, indeed, the Debtors have any sort of plan, it is a plan to liquidate their assets by a way of a sale to Shaw for a price that is less than the Debtors' EBITDA for the 12 months prior to petition date. The Committee opposes any liquidation of the Debtors' assets on these terms given the revenue generated by the assets. Mr. Schlerf submits that having resigned themselves to liquidation, rather than reorganization, it is no surprise that the Debtors have mismanaged their operations postpetition. Since petition date, the Debtors have failed to even consider significant cost-saving measures, make any meaningful change to their overhead structures, plan any meaningful reductions in workforce, plan the elimination of any subsidiaries, or attempt to jettison projects that are generating negative cash flows. Instead, the Debtors are heeding what they understand to be the requirements of APA with Shaw, which is to keep the business together despite the fact that the Court has not approved the sale to Shaw. Mr. Schlerf contends that the Debtors' contractual obligations to Shaw are not only entirely inconsistent with the Debtors' fiduciary obligations to the creditors, but also demonstrate that the Debtors have no reorganization purpose in these cases. In addition, Mr. Schlerf states that the Debtors' disregard the conflicts of the Debtors' key advisors, Gibson, Dunn & Crutcher and the Lehman Brothers, each of whom currently represents, or has represented, Shaw, is a further evidence of the Debtors' unwillingness to engage in meaningful reorganizational efforts. Given the serious concerns raise regarding the Shaw deal, Mr. Schlerf proposes that the committee, at a minimum, be afforded the opportunity to offer a competing plan for the sale of the debtors' assets. Because the approval disclosure statement is a prerequisite to the circulation of a plan and the solicitation of votes, a competing plan will give creditors the ability to choose which plan they prefer after having been provided with adequate information to make an informed judgment. The Committee's diligence has revealed that, if appropriate financing can be obtained, a going concern reorganization of the Debtors may yield an enterprise having a value of $400,000,000 to $900,000,000, which geometrically increases the recovery to be realized under the Shaw transaction. (IT Group Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392- 0900) INTEGRATED BUSINESS: Completes $2.8 Million Debt Restructuring -------------------------------------------------------------- Integrated Business Systems and Services, Inc. (OTCBB: IBSS), a leading provider of Collaborative Production Management software, announced the closing of $750,000 of new investment in the Company as part of a private placement of convertible debentures and common stock purchase warrants. The private placement follows the Company's December 2001 recapitalization of approximately $2.8 million of convertible debt, comprising substantially all of the Company's year-end liabilities, excluding trade payables. The restructuring replaced approximately $2 million of short-term debt and approximately $200,000 of long-term debt with two-year convertible debentures and warrants, effectively extending to 2004 the Company's repayment obligation on the prior debt. Interest on the debt is not payable until 2003. "The restructuring of almost ninety percent of our outstanding debt has greatly strengthened our balance sheet and has enhanced our cash flow for the next two years. With the closing of $750,000 in additional funding, IBSS has successfully achieved a critical milestone in its overall capital raising strategy. The investors in the recapitalization share management's excitement for the tremendous growth opportunities that lie ahead for IBSS. They also concur in our confidence that IBSS will be able to successfully take advantage of those growth opportunities," said Dr. George Mendenhall, Chairman and Chief Executive Officer of IBSS. Consistent with its success in achieving greater industry visibility and customer acceptance of its proprietary suite of Synapse software solutions, IBSS announced last week the establishment of its global reseller relationship with EDS, a worldwide leader in systems integration services. Included in that announcement was the commencement of a project-specific teaming agreement under which EDS and IBSS are to jointly design a solution to address improvements for tracking and inventory control for a large automaker customer of EDS. IBSS is a national software provider of quick payback solutions to complex, industry-specific information problems. The Company's flagship product, Synapse, is targeted to be the preferred architecture for dynamic, distributed, real-time software applications. The ease and speed of Synapse installation, its low maintenance and enormous versatility give Synapse users a true competitive advantage. The Synapse suite of products includes Synapse for Manufacturing, designed to maximize flexibility in implementing site-specific manufacturing solutions at the lowest possible cost and time-to-benefit; Synapse EAI+ for enterprise modeling and application integration in highly dynamic environments; and Synapse ASP for flexible, highly scalable ASP enablement. IBSS has offices in Columbia and Detroit. For more information about IBSS' technology and services, please call 800-553-1038 or visit http://www.ibss.net INTEGRATED HEALTH: Wants More Time to Decide on Unexpired Leases ---------------------------------------------------------------- Integrated Health Services, Inc., and its debtor-affiliates seek a further extension, pursuant to section 365(d)(4) of the Bankruptcy Code, of the time within which they must decide to assume, assume and assign, or reject their unexpired nonresidential real property leases to and including October 1, 2002 (with certain modifications with respect to the leases of Rotech Medical Corporation and its subsidiaries). As of the Petition Date, the Debtors were parties to more than 1,500 unexpired nonresidential real property leases and subleases. Over the course of these chapter 11 cases, the Debtors have obtained Court approval to reject certain of the Unexpired Leases and assume others. Consequently, at the present time, the Debtors, are lessees or sub-lessees under more than 1,300 Unexpired Leases. The Debtors urge the Court to grant the extension because the Unexpired Leases are valuable assets of the Debtors' estates and are integral to the continued operation of their businesses. Failure to assume valuable Leases within the currently set period will result in a forfeiture of their right to assume such valuable assets while premature assumption in order to avoid the "deemed rejection" provision of the Bankruptcy Code will result in unnecessary substantial administrative expenses to their estates. The Debtors substantiate their requests with various causes for which the request should be granted: -- determinations to assume or reject the Unexpired Leases must be reasoned and informed, because the Unexpired Leases are an integral part of the Debtors' business. -- The Debtors' cases are large and complex. -- The complexity and distinctiveness of many of the lease arrangements make the task of deciding to assume or reject that much more daunting. In some cases, the Debtors' facility leases are intertwined with other facility leases with the same landlord, making the assumption/rejection decision more complex. -- The Debtors' continuing effort to rationalize their vast lease portfolio produced significant results during the Fourth Extension Period. In particular, the Court confirmed a joint plan of reorganization for the Rotech Debtors, which are the lessees under more than 75% of the Unexpired Leases. Upon the Effective Date of the Rotech Debtors' plan of reorganization, each of the Rotech Leases will either be rejected or assumed. The Rotech Debtors hope that the Effective Date of the Rotech Plan will occur prior to April 1, 2002. However, because the Rotech Plan's effectiveness requires satisfaction of certain conditions which are not within the Rotech Debtors' exclusive control, they are requesting an extension (to the earlier of the Effective Date of the Rotech Plan or October 1, 2002) in an abundance of caution. -- During the Fourth Extension Period, the Debtors assumed or filed pending motions to assume at least 15 facility leases and rejected or filed pending motions to reject at least 75 facility leases. In many cases, the rejections have required the transfer of operations, which the Debtors have achieved in large part on a consensual basis. -- At this stage in their chapter 11 cases, the Debtors are evaluating plan of reorganization alternatives, including a possible sale of some or all of the Debtors' assets. It would be premature and possibly harmful to the estates for the Debtors to make precipitous decisions to assume or reject Unexpired Leases prior to determining which of them will be targeted for acquisition by potential purchasers. -- The Debtors' decision-making process with respect to many of its remaining facility leases has recently become increasingly complex and uncertain as a result of proposed changes in federal and state reimbursement rates to healthcare providers, which are currently in a state of flux. Among other things, the Medicare Add-Ons pursuant to legislation in 1999 enacted in response to an explosion of bankruptcy filings in the industry are due to expire in October 2002. -- The effect of the dramatic increase in insurance costs in the wake of the tragic events of September 11, 2001, together with a higher rate of inflation for wages than projected has rendered certain once-favorable facility leases in danger of generating lower or even negative revenues. The Debtors require additional time to evaluate the impact of these important economic factors. -- Decisions to assume or reject facility leases necessarily involve complex negotiations not only with landlords but with a number of government departments. -- As providers of post-acute and related specialty healthcare services, the Debtors must avert any inadvertent or forced closure of a long-term care facility that would adversely affect the health and welfare of the facility's residents. -- The lessors in respect of the Unexpired Leases will not be prejudiced by the relief the Debtors request because: (i) the Debtors continue to perform in a timely manner their post- Filing Date obligations under the Unexpired Leases, except with respect to bona-fide disputes; and (ii) any lessor may request that the Court fix an earlier date by which the Debtors must assume or reject its lease in accordance with section 365(d)(4) of the Bankruptcy Code. -- In other large healthcare bankruptcy cases, which have faced the same complex issues in making assumption/rejection decisions, the Court granted extensions through the confirmation of such debtors' plans of reorganization, e.g., In re Sun Healtheare Group. Inc. Case No. 99-3657, In re Genesis Health Ventures, Inc., et al., Case No. 00-2692. For all these reasons, the Debtors are convinced that they should not be compelled to make precipitous decisions as to lease assumption or rejection and perhaps inadvertently reject a valuable lease or prematurely assume a burdensome lease and incur substantial administrative obligations, particularly in light of the uncertainty surrounding the status of the Medicare Add-Ons and the Debtors' ongoing sale efforts. Accordingly, the Debtors submit that the extension of the period within which the Debtors may assume or reject the Unexpired Leases to and including October 1, 2002 is in the best interest of the Debtors and their estates and should be granted. (Integrated Health Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTELLICORP INC: Board Approves One-For-Ten Reverse Stock Split --------------------------------------------------------------- IntelliCorp, Inc. (NASDAQ:INAI), a leading provider of business process optimization solutions, announced that the board of directors has approved a one for ten reverse split of the Company's common stock. Upon the requisite shareholder approval expected in April, each ten shares of outstanding common stock of the Company will automatically be exchanged for one share of "new" common stock. In addition, all warrants, options, and conversion rights will be appropriately adjusted. "The preliminary proxy for a Special Meeting of Shareholders, which we will be filing shortly with the SEC, will include two proposals for our shareholders to consider and approve. The first proposal will be for shareholder approval of the one for ten reverse split. The second proposal will be for shareholder approval to issue shares to repay certain notes payable and accrued interest thereon by the issuance of common stock as stated in the recently announced equity transaction. These two proposals, if approved, will provide the required working capital for the Company to "weather" the current economic downturn, as well as help our effort to maintain our current NASDAQ listing," said Jerry Klajbor, Chief Financial Officer of IntelliCorp. As announced on February 13, 2002, IntelliCorp is appealing NASDAQ's delisting decision. IntelliCorp is a leading solutions and services firm focused on the optimization of key business processes across the entire enterprise requiring extensive technical integration and business process expertise. Today's challenging business climate requires the tight integration of front-office processes with back-office systems to reduce cost and improve operational efficiencies, while increasing customer satisfaction and retention. IntelliCorp has deep capability and experience with SAP R3, MySAP.com, Siebel eBusiness Applications, and a number of other dominant software suites and components. In addition, IntelliCorp offers a suite of software solutions, tools, and applications for business process management and support of the integration and management of SAP's back office systems. Headquartered in Mountain View, CA, the company has offices across the United States and throughout Europe. IntelliCorp's web site is http://www.intellicorp.com/ INTERACTIVE TELESIS: Begins Trading on OTCBB Under TSISQ Symbol --------------------------------------------------------------- Interactive Telesis(TM) Inc. announced that the company's common stock began trading on the OTC Bulletin Board (OTCBB) under a new symbol, effective as of the opening of business on March 12, 2002. The company's common stock will now trade under the ticker symbol of TSISQ. The symbol change is a condition of the previously announced chapter 11 reorganization filing on March 8, 2002. Shareholders and other interested parties can find more information about the symbol change and the OTCBB at http://www.otcbb.com Interactive Telesis specializes in custom interactive voice response (IVR) services and deployment of automated speech recognition (ASR) technologies. Interactive Telesis presents a very compelling offering for companies wishing to leverage the benefits of IVR and speech recognition without the high cost of ownership, capital outlay and internal IT staff requirements. Clients include industry leaders such as 3D Systems, Global Crossing, Lucent, MCI, Nike, Sprint, Wells Fargo, Worldcom and Verizon, among others. Interactive Telesis is headquartered in San Diego. For additional information, call 858/523-4000 or visit http://www.interactivetelesis.com INT'L FIBERCOM: Nasdaq Delists Shares Effective March 11, 2002 -------------------------------------------------------------- International FiberCom Inc. (Nasdaq:IFCIQ) announced that its common stock was delisted from the Nasdaq National Market effective as of the close of business Monday, March 11, 2002. The board of directors requested that Nasdaq take such action in light of the company's present circumstances. The company also stated that TenX Capital Partners, with whom the company has signed a letter of intent to sell substantially all of its assets and businesses, is continuing its due diligence activities, along with other interested bidders. The company plans to commence negotiations on a definitive agreement for the sale of its assets and business later this month with TenX. While any sales transaction with TenX, or any other party, is subject to the approval of the U.S. Bankruptcy Court in Phoenix, the company believes that there will be no substantial assets available for its common and preferred shareholders as a result of its Chapter 11 bankruptcy proceeding based on the bids it has received from TenX and other interested bidders. International FiberCom, operating through its subsidiaries, is an end-to-end solutions provider for the telecommunications industry, offering a broad range of engineering-based solutions designed to enable and enhance voice, data and video communications through fixed and wireless networks. The company designs, deploys and manages internal and external networks infrastructure for leading wireline, wireless and broadband telecommunications providers in the United States. INT'L FIBERCOM: Trustee Appoints Official Creditors' Committee -------------------------------------------------------------- The United States Trustee overseeing cases filed in the District of Arizona appoints these creditors to serve on the Official Committee of Unsecured Creditors in International Fibercom, Inc. and its affiliated debtors' chapter 11 cases: 1. Premier Fiber Technologies, LLC Attn: Kevin Smith 1201 Howard Ave., #203 Burlingame, CA 94010 (650) 558-1125 2. Pirelli Cables and Systems USA, LLC Attn: Mark Brandenburg 246 Stoneridge Drive, 4th Fl. Columbia, SC 29210 (803) 951-1016 3. Von Behren Electric, Inc. Attn: Kevin Von Behren 3131 Stanton Ave. Springfield, IL 62703 (217) 529-9473 4. Graybar Electric Co. Attn: Steve Beckmann 2050 Nancy Hanks Dr. Norcross, GA 30091 (678) 291-5141 5. Bailey Boring, Inc. Attn: Terry Bailey 1008 Southview Circle Center, TX 75935 (936) 598-8587 6. Goldsmith Construction Co., Inc. Attn: William Goldsmith 2683 Lime Ave. Signal Hill, CA 90806 (562) 595-5975 7. Aztec Cable and Communication, Inc. Attn: Teresita Wright 2730 E. County Rd. 18 Loveland, CO 80537 (970) 278-9494 International Fibercom, Inc. resells used, refurbished communications equipment, including fiber-optic cables. The Company filed for chapter 11 protection on February 13, 2002. Robert J. Miller, Esq. at Bryan Cave, LLP represents the Debtors in their restructuring efforts. JACOBSON STORES: Hires Financo to Identify Restructuring Options ---------------------------------------------------------------- Jacobson Stores Inc. announced it has hired Financo, Inc., a New York-based investment banking firm, to assist the company in identifying and evaluating restructuring alternatives during the Company's Chapter 11 reorganization. "With almost 30 years investment banking experience in the retail sector, we believe Financo has the expertise to help us explore available financial and strategic options," said Carol Williams, Jacobson's President and CEO. William M. Smith, President of Financo, Inc., commented, "Jacobson's is a unique regional franchise in that it provides a high level of customer service and merchandise to the upper tier and luxury conscious customer." Jacobson's, a regional specialty store chain, filed a Chapter 11 petition for reorganization on January 15, 2002, with the United States Bankruptcy Court for the Eastern District of Michigan, Southern Division, in Detroit. Jacobson's also announced it has been removed from The Nasdaq Stock Market roster of companies. Trading of Jacobson's stock (Nasdaq: JCBS) had been suspended in January when the Company filed its Chapter 11 petition for reorganization. Jacobson's was notified by Nasdaq on February 26 that continued listing of the Company's securities on the Nasdaq stock market was not warranted based on, among other things, its bankruptcy filing and the Company's failure to demonstrate its ability to sustain compliance with all requirements for continued listing. Accordingly, Nasdaq de-listed the Company's securities at the opening of business on March 6, 2002. Jacobson's currently operates 18 specialty stores in Michigan, Indiana, Kentucky, Kansas and Florida. The Company's Web site is located at http://www.jacobsons.com KAISER ALUMINUM: Bringing-In Arthur Andersen as Tax Advisors ------------------------------------------------------------ Kaiser Aluminum Corporation and its debtor-affiliates seek Court authority to employ Arthur Andersen LLP as their auditors, accountants, restructuring and tax advisors. Patrick M. Leathem, Esq., at Richards, Layton & Finger in Wilmington, Delaware, relates that the Debtors want to employ Andersen because of the firm's prepetition employment as the Debtors' auditors and tax advisors and due to the firm's extensive knowledge of the Debtors' financial affairs. The firm has been retained as auditors, tax advisors, accounting and financial advisor to render professional services to the debtors, creditors, creditors' committee, investors and others in numerous bankruptcy cases and has served the Debtors since 1989. By virtue of its prior engagement on behalf of the Debtors, Andersen is familiar with the books, records and financial information and other data maintained by the Debtors and is well qualified by the background and experience to continue to provide professional services to the Debtors. Besides, the cost and delay of obtaining and educating new auditors, accountants, restructuring and tax advisors who do not possess the extensive knowledge of the Debtors' financial history can be detrimental to the Debtors' reorganization efforts. Mr. Leathem tells the Court that the Debtors desire to obtain approval of Andersen's employment on a comprehensive basis to allow them flexibility to seek specific services from the firm on an as-needed, case-by-case basis. However, there may be instances in the future where other similar service providers may be better suited and more cost-effective to render certain advice or assistance to the Debtors. In those circumstances, the Debtors may seek the approval of the retention of another service provider, notwithstanding the present proposed retention of Andersen, and hereby reserve their right to do so. Andersen will provide these services to Kaiser: A. Restructuring and Reorganization Services: a. provide assistance in the development of cash receipts and disbursement schedules to be used for business management, planning, cash collateral, DIP financing and reorganization purposes; b. advise and assist the Debtors' management in preparing information that may be required by creditors and a Bankruptcy Court, including monthly operating reports, schedules of assets and liabilities, statement of financial affairs and other bankruptcy schedules; c. provide advice and assistance in creating and maintaining databases for scheduled debts, creditors claims, analyzing claims by type and entity and preparing required periodic reports; d. analyze, if appropriate, the books and records of the Debtors for potential voidable transactions and unenforceable claims pursuant to the bankruptcy Code; and, e. perform such other services as may be requested by the Debtors to provide consulting assistance in the operation and reorganization of the Debtors' business, including but not limited to, disclosure statements, transactional assistance, and assistance in developing and confirming plans of reorganization, subject to Andersen's approval; B. Accounting and Auditing: a. assistance with reports and filings required by the Bankruptcy Court and the U.S. Trustee; b. assistance with the presentation of financial statements in compliance with the American Institute of Certified Public Accountants Statement of Position 90-7, if applicable; c. perform an audit of the Debtors' Annual Financial Statements and perform other related auditing, accounting, financial reporting and tax services as required by the Debtors and SEC; d. consult with the Debtors' management and counsel in connection with operational, financial and other business matters relating to accounting and auditing matters as the same pertain to the ongoing activities of the Debtors; e. consult with and advise the Debtors regarding financial reporting controls and procedures; and, f. performance of other accounting and auditing services as requested by the Debtors; C. Tax Consulting: a. provide general tax planning and consulting services relative to restructuring related matters; b. provide consultation with respect to a variety of tax compliance issues and year end tax planning; c. assist with tax matters in connection with potential acquisitions, dispositions or similar transactions; d. prepare any amended tax returns or applications for tax refunds; e. render other reorganization related tax advice and assistance including, but not limited to, the tax consequences of any plans of reorganization and assisting in the preparation of any Internal Revenue Services ruling requests regarding future tax consequences or the Debtors reorganization; and f. provide any such other tax services as may be requested by the Debtors. Andersen will bill for services at its customary hourly rates: Position Hourly Rate ------------------- --------------- Partners/Directors $500 - 575 Managers $310 - 400 Associates $200 - 250 Analysts $150 - 175 Mr. Leathem advises that Kaiser paid Andersen a $50,000 retainer for postpetition services and that the firm intends to apply to the Court for allowance of compensation and reimbursement of expenses in accordance with the applicable provisions of the Bankruptcy Code and Rules. The Andersen Engagement Agreement for audit services contains no indemnification provisions while the restructuring and tax advisory agreement provides that the Debtors will indemnify Andersen against costs, fees, expenses, damages and liabilities associated with any third party claims relating to the services to be performed by the firm, the Debtors' use or disclosure of materials prepared by the firm, except in the case of Andersen's sole negligence or willful misconduct. The agreement also includes that the Debtors will not be obligated to indemnify Andersen for third party claims to the extent that such claims have been finally determined to have resulted from the firm's sole negligence or willful misconduct. The Debtors believe that the fee structure and indemnification provisions contained in the agreement are reasonable terms and conditions of employment in the light of industry practice, market rates for comparable services, the firm's experience and the nature and scope of work to be performed by the firm and should be approved. Andersen director Dean E. Swick, discloses that Andersen has performed services to the Debtors and other Kaiser entities in the 12 months prior to the petition date. Andersen received $2,291,478 for those audit, tax restructuring and business consulting services. Other than that, Andersen has not performed services for the Debtors, any creditors or any other parties-in-interest, except: A. Andersen was retained to perform audit and audit related services to the Debtors inclusive of the Debtors' fees paid within the 12 months prior to the Debtors' filing of these chapter 11 cases for this engagement are $1,728,401; B. Under the various engagements, Andersen was retained by the Debtors, inclusive of the Debtors' to provide general tax planning, consulting, and other tax-related services. Fees paid within the 12 months prior to the Debtors' filing of their chapter 11 cases for this engagement are $446,633; C. Andersen was retained by the Debtors to provide business consulting services. Fees paid within the 12 months prior to the Debtors' filing of their chapter 11 cases for business consulting are $79,035; D. On February 2, 2002, Andersen was retained by the Debtors to provide corporate restructuring assistance for the Debtors. Fees paid since February 2, 2002 for restructuring assistance are $37,409; E. Andersen provides and has provided for several years, audit and tax services to MAXXAM Inc., a publicly owned company. MAXXAM Inc. owns about 63% of the Debtors' common equity. During the last 12 months before petition, Andersen provided audit and tax services to MAXXAM Inc. and was paid fees for these services of $2,457,429; F. Andersen has reviewed a list of the 91 largest unsecured creditors of the Debtors as they have been identified thus far. Andersen may continue to provide 33 of these companies or their affiliates auditing, tax, business consulting services and corporate finance services, including ABB Automation, Inc., Alcan International LTD., Alcoa Primary Metals, Alusuisse Trading, American Electric Power, Bonneville Power Admin, Bryan Cave LLP, Clark Oil Trading Co., Coral Energy Resources, L.P., Cytec Industries, Inc., Defense Logistics Agency, Dravo Lime Company, Enron Metals Ltd., Fluor Daniel, Inc., Formosa Plastics Corp., Foster, Pepper & Shelfman LLC, Glencore Ltd., Grinnell Fire Protection, Hatch Associates Consultants, Inc., Kinder Morgan Bullk Terminal, Koch Carbon, Inc./ Koch Industries, Metlife, Mitsubishi International Corp., Nalco Chemical Company, Occidental Chemical Corp., Ondeo Nalco Company, Pechiney Trading, RBC Dominion Securities, Relocation, Rexel Southern, Inc., Turner Construction Co., United Healthcare, and Valspar Corporation. G. Andersen has worked, continue to work, and has mutual clients with the law firms of Jones, Day, Reaves & Pogue, counsel for the debtors. Additionally, Andersen is likely to have worked with or have mutual clients with other law firms that may become involved in this case. Mr. Swick assures the Court that the Andersen and its professionals do not represent any interest adverse to the Debtors or their estates, and the firm is a disinterested person as defined in 11 U.S.C. Sec. 101(14) and required under 11 U.S.C. Sec. 327(a). (Kaiser Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) KELVIN LTD: Fitch Slashes Senior Notes Rating to DD from B ---------------------------------------------------------- Fitch Ratings has downgraded the senior notes issued by Kelvin, Ltd. due to a loss payment made by Kelvin under a weather portfolio swap. Kelvin's First Event Weather-Linked Fixed Rate Senior Notes (First Event Notes) were downgraded to 'DD' from 'B-' and its Second Event Weather-Linked Fixed Rate Senior Notes (Second Event Notes) were downgraded to 'B-' from 'BBB-'. Kelvin is a special-purpose Cayman Islands company whose operations are limited to issuing notes and entering into a weather portfolio swap with Koch Energy Trading, Inc., a subsidiary of Koch Industries, Inc. Kelvin effectively securitized a portfolio of weather derivative contracts and placed the associated risk with investors in the capital markets. Performance of the two note classes depends on the actual temperature experience in specific U.S. locations over specific periods of time. The weather derivative contracts covered by the weather portfolio swap include call options, put options and swaps, and are based on heating degree days, cooling degree days and average temperature degree days. During the second of three annual risk periods, losses on the derivative portfolio exceeded a pre-defined trigger value, which resulted in a loss payment from Kelvin to Koch. As the result of this loss payment, holders of the First Event Notes received no interest payment for the second annual risk period and, additionally, lost 22.1% of their principal balance. The rating actions are based on the First Event Notes' loss of interest and partial loss of principal. The First Event Notes' 'DD' rating reflects an expected recovery of between 50% and 90% of original principal. Since the First Event Notes have suffered a partial loss (a first event), the Second Event Notes are now partially exposed to loss in the third annual risk period. The Second Event Notes' 'B-' rating reflects the increased probability of a loss to those notes now that the first event has occurred. Issue Type Action Rating Outlook ----- ---- ------------- ------- 1st Event Weather Linked Fixed Rate Sr Notes Downgrade 'DD' 2nd Event Weather Linked Fixed Rate Sr Notes Downgrade 'B-' KEYSTONE CONSOLIDATED: 9-5/8% Note Exchange Offer Expires Today --------------------------------------------------------------- Keystone Consolidated Industries, Inc. (OTC Bulletin Board: KESN) announced that it has extended the expiration date of its previously announced exchange offer to holders of its $100 million 9-5/8% Senior Secured Notes from 5:00 p.m., New York City time on March 12, 2002, to 5:00 p.m., New York City time on March 14, 2002. The Company determined to grant the request of a noteholder for additional time to complete its intended tender. As of 5:00 p.m., New York City time, on March 12, 2002, at least $90,850,000 aggregate principal amount of the Senior Secured Notes had been tendered for exchange. The Company also announced that the State of Illinois has funded a $10 million grant to the County of Peoria to provide for the $10 million subordinated loan to the Company. These funds are being held by a bank in Peoria, Illinois, pending completion of certain documentation and the restructuring. The Company also announced that it has executed agreements with certain key vendors to provide for long-term repayment of existing past due trade obligations of the Company. Except for the extension of the expiration date, all other terms and provisions of the exchange offer remain in effect. The exchange offer is subject to certain conditions, which may be waived by the Company, as more fully described in the exchange offer circular. Keystone Consolidated Industries, Inc. is headquartered in Dallas, Texas. The Company is a leading manufacturer and distributor of fencing and wire products, carbon steel rod, industrial wire, nails and construction products for the agricultural, industrial, construction, and original equipment markets and the retail consumer. Keystone is traded on the OTCBB under the symbol KESN. KMART CORP: Institutional Committee Hires Jones Day as Counsel -------------------------------------------------------------- The Official Committee of Institutional Creditors of Kmart Corporation wants to retain Jones, Day, Reavis & Pogue as its counsel in these chapter 11 cases, nunc pro tunc to January 31, 2002. Agnes L. Levy of JPMorgan Chase, chairing the Institutional Creditors' Committee, explains that they selected Jones Day as its counsel because of the firm's extensive expertise in the areas of bankruptcy, corporate, employee benefits, environmental, finance, intellectual property, labor and employment, litigation, real estate, securities and tax. The Institutional Creditors' Committee anticipates that Jones Day will: (a) advise the Committee concerning its rights, powers and duties under section 1103 of the Bankruptcy Code; (b) advise the Committee concerning the administration of the Debtors' chapter 11 cases; (c) advise the Committee concerning any efforts by the Debtors or other parties to collect and recover property for the benefit of the Debtors' estates; (d) counsel the Committee in connection with the formulation, negotiation and confirmation of a plan or plans of reorganization and related documents; (e) review the nature, validity and priority of liens asserted against the Debtors' property and advise the Committee concerning the enforceability of such liens; (f) investigate, if necessary, any actions pursuant to sections 542-550 and 553 of the Bankruptcy Code; (g) prepare on behalf of the Committee all necessary and appropriate applications, motions, notices, draft orders and other pleadings, and review all financial and other reports filed in these chapter 11 cases; (h) advise the Committee concerning, and prepare responses to, applications, motions, pleadings, notices and other pleadings and papers that may be filed in these chapter 11 cases; (i) advise and assist the Committee in connection with any potential dispositions of property of the Debtors' estates; (j) advise and assist the Committee concerning proposed executory contract and unexpired lease assumptions, assumptions and assignments, and rejections; (k) assist the Committee in claims analysis and resolution matters; (l) commence and conduct any and all litigation necessary or appropriate to assert rights on behalf of the Committee, or otherwise further the goals of the Committee in these cases; and (m) perform all other legal services for and on behalf of the Committee that may be necessary or appropriate to assist the Committee in performing its duties under section 1103 of the Bankruptcy Code. Jones Day will charge for legal work at its customary hourly rates. The Jones Day attorneys who will do the most work in Kmart's cases are: Professional Position Office Location Hourly Rate ------------ -------- --------------- ----------- David G. Heiman Partner Cleveland $675 Richard M. Cieri Partner Cleveland 635 Paul E. Harner Partner Chicago 565 Brad B. Erens Associate Chicago 425 Ray C. Schrock Associate Chicago 280 Ilana N. Glazier Associate Chicago 240 Daniel B. Pricto Associate Chicago 240 Paul E. Harner, Esq., assures the Court that neither the Firm nor any of its personnel has any connection with the Debtors, their creditors, the U.S. Trustee, or any other party in interest in these chapter 11 cases. Mr. Harner informs Judge Sonderby that Jones Day represented Kmart in eight employment discrimination suits from March to October 2001. But this engagement has been terminated. Jones Day has also formally withdrawn as counsel for Kmart from all pending matters except one inactive case at the Illinois Supreme Court. "Should this case become active, Jones Day will also withdraw as counsel," Mr. Harner says. Jones Day will also establish an internal "ethical wall," according to Mr. Harner to shield those labor lawyers from anything related to the Institutional Committee. From time to time, Mr. Harner admits, Jones Day has represented, and will likely continue to represent certain members of the Committee, other Institutional Creditors, various other creditors of the Debtors, and other various parties in interest in matters unrelated to these chapter 11 cases. "As far as I have been able to ascertain, neither I, Jones Day or any partner or associate holds or represents any interest adverse to the Committee in the matters for which Jones Day is proposed to be retained," Mr. Harner assures Judge Sonderby. (Kmart Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) LAIDLAW: Canadian Court OKs Intercompany Debt Structure Changes --------------------------------------------------------------- Mr. Justice Farley entered a parallel order in the CCAA proceedings approving Laidlaw Inc.'s request to: (a) modify Intercompany Debts into non-interest bearing demand debts as of August 1, 2001; (b) convert Laidlaw Investments Limited's intercompany debt into equity; and (c) transfer certain assets to the three wholly owned subsidiaries of Laidlaw Transportation, Inc. and to consummate the Restructuring Transactions outlined to Judge Kaplan. * * * As previously reported in the Troubled Company Reporter, Laidlaw Inc., and its debtor-affiliates ask the Court to approve the said modifications to its Intercompany Debts Structure. As stated in the Debtors' motion, the Laidlaw Companies has a cash management system designed to move funds from the Laidlaw Companies with excess cash into a common pool and transfer such fund to Laidlaw Companies in need of cash. Interest is paid on any outstanding balances, Mr. Witalec adds. As of July 31, 2001, it was reported that Laidlaw Transit, Ltd., Greyhound Canada Transportation Corp. and Canadian Medical Response Ltd. -- Canadian Subsidiaries -- owe Laidlaw, Inc. $703,000,000 with an interest rate of 8.5%. Laidlaw Inc. intends to use the interest income to pay the interest on its debt obligations to the Bank Group and the Pre-petition Noteholders. Thus, in the U.S. Bankruptcy Court, Judge Kaplan authorized Laidlaw Inc. to modify the Intercompany Debts to become non- interest bearing demand debts as of August 1, 2001. The Court also allowed Laidlaw Inc., to exchange the Laidlaw Investments Limited Debt for stock in Laidlaw Investments Limited. In addition, Judge Kaplan permitted Laidlaw Transportation Inc. to consummate the Restructuring Transactions, including the transfer of assets to the Laidlaw Transportation Subsidiaries. (Laidlaw Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) LODGIAN: Court Okays Debevoise as Committee's Chapter 11 Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors in the chapter 11 cases of Lodgian, Inc. and its debtor-affiliates obtained permission from the Court to employ and retain Debevoise & Plimpton as its counsel in the consolidated chapter 11 bankruptcy cases of Lodgian, Inc., and its debtor-affiliates, nunc pro tunc to January 11, 2002. Specifically, the Committee will look to Debevoise to: A. advise the Committee with respect to its powers and duties under section 1103 of the Code; B. take action necessary to preserve, protect and maximize the value of the Debtors' estates for the benefit of the Debtors' unsecured creditors including, but not limited to, investigating the acts, conduct, assets, liabilities, and financial condition of the Debtors, the operation of the Debtors' businesses and the desirability of the continuance of such businesses, and any other matter relevant to the case or to the formulation and/or evaluation of a plan of reorganization; C. prepare on behalf of the Committee motions, applications, answers, orders, reports, pleadings and papers that may be necessary to the Committee's interests in these chapter 11 cases; D. participate in the negotiation, formulation and implementation of a plan of reorganization as may be in the bests interests of the Committee and the unsecured creditors of the Debtors' estates; E. represent the Committee's interests with respect to the Debtors' efforts to obtain postpetition financing; F. advise the Committee in connection with any potential valuation or sale of assets; G. appear before this Court, any appellate courts, and the United States Trustee and protect the interests of the Committee and the value of the Debtors' estates before such courts and the United States Trustee; H. consult with the Debtors' counsel on behalf of the Committee regarding tax, intellectual property, labor and employment, real estate, corporate, litigation matters, and general business operational issues; I. assist the Committee in evaluating the necessity of seeking the appointment of a trustee or examiner, and requesting such appointment, if deemed appropriate; and J. perform all other necessary legal services and provide all other necessary legal advice to the Committee in connection with these chapter 11 cases. George E.B. Maguire, a Debevoise member, assures the Court that the firm has no connection with the Debtors, their creditors, equity security holders, or any other parties in interest or their respective financial advisor and accountants, the United States Trustee or any person employed in the office of the United States Trustee, except that: A. Debevoise represents the Committee in these cases and has represented the Bondholder Committee in the restructuring efforts which led up to the filing of these chapter 11 cases, and B. Debevoise represents certain of the Debtors' creditors and other parties in interest in matters unrelated to these proceedings. As the Committee proposed, Debevoise will be compensated for the services described herein at its ordinary billing rates and in accordance with its customary billing practices regarding other charges and expenses. The current hourly rates of the partners, associates and legal assistants of Debevoise who are expected to render services to the Committee in connection with these chapter 11 cases are as follows: George E.B. Maguire $650.00 Michael E. Wiles $665.00 Sung Su Pak $400.00 Michael B. Beckman $390.00 James B. Roberts $390.00 Rachel J. Mauceri $240.00 Alexia L. Richmond $170.00 (Lodgian Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) MADISON RIVER: Pursuing Negotiations for Additional Financing ------------------------------------------------------------- Madison River Communications (MADRIV), an established and growing rural local exchange carrier, announced its financial and operating results for the fourth quarter and the year ended December 31, 2001. Highlights * Revenues for 2001 increased to $184.3 million from $167.1 million in the prior year, a 10% increase; * Adjusted EBITDA for 2001 increased $7.6 million, or 14%, over the prior year; * Adjusted EBITDA for the fourth quarter of 2001 of $18.5 million is a 21% increase over the third quarter 2001; * Local Telecommunications Division (LTD) finished 2001 with Adjusted EBITDA of $85.6 million for an Adjusted EBITDA margin of 50.7%, up from 44.8% in 2000; and * Integrated Communications Division's (ICD) 2001 fourth quarter Adjusted EBITDA loss of $3.4 million represents a $2.0 million, or 37%, sequential quarterly improvement. 2001 Fourth Quarter Results In the fourth quarter of 2001, Adjusted EBITDA, computed as operating income before depreciation, amortization, restructuring charges and non-cash long-term incentive plan expenses(1), was $18.5 million, a $3.2 million, or 21%, sequential increase over the third quarter of 2001. Approximately $2.0 million of the increase is attributable to a lower Adjusted EBITDA loss in the ICD with the remaining $1.2 million coming from improvement in the LTD's Adjusted EBITDA. Comparing the fourth quarter of 2001 to the fourth quarter of 2000, Adjusted EBITDA increased by $2.3 million, or 14%. The $2.3 million increase is the result of a $0.9 million increase in the LTD's Adjusted EBITDA and a $1.4 million decrease in the ICD's Adjusted EBITDA loss. Included in the fourth quarter of 2000 were the results of two completed construction projects which contributed approximately $0.9 million to Adjusted EBITDA. In 2001, there were no comparable construction operations. Excluding the impact of these construction operations, Adjusted EBITDA in the fourth quarter of 2001 increased approximately $3.2 million, or 21%, from the prior year. Revenues for the fourth quarter ended December 31, 2001 were $46.8 million, a decrease of $3.6 million, or 7%, from $50.4 million reported for the fourth quarter ended December 31, 2000. The comparative decrease is primarily attributable to higher miscellaneous revenues in the fourth quarter of the prior year when revenues from the two construction projects, totaling approximately $6.0 million, were recognized. No comparable revenues were recognized in the fourth quarter of 2001. Excluding the impact of these construction projects, revenues in the quarter increased approximately $2.4 million, or 5%, over the same period in the prior year. The $2.4 million increase is the result of growth in the ICD's revenues. Sequentially, revenues in the fourth quarter of 2001 were slightly higher than those reported for the third quarter of 2001. The Company incurred a net loss of $20.0 million for the fourth quarter of 2001 compared to a net loss of $19.0 million for the fourth quarter of 2000, an increase of $1.0 million, or 5%. The increase in net loss is primarily attributable to an increase in non-operating expenses related to the writedown of the carrying value of certain investments of approximately $8.9 million and a restructuring charge of approximately $2.8 million in the fourth quarter of 2001. For the fourth quarter of 2001, the LTD reported revenues of $42.6 million, Adjusted EBITDA of $21.9 million and an Adjusted EBITDA margin of 51.4%. This compares to revenues of $45.9 million, Adjusted EBITDA of $21.0 million and an Adjusted EBITDA margin of 45.8% in the fourth quarter of 2000. The $3.3 million decrease in revenues is attributable primarily to approximately $3.0 million in revenues recognized from a construction project in the fourth quarter of 2000 and the impact of the sale of approximately 4,280 connections in May 2001 which contributed approximately $0.7 million in revenues in the fourth quarter of the prior year. On a sequential basis, revenues increased $0.9 million, or 2%, and Adjusted EBITDA increased $1.2 million, or 6%, from the third quarter of 2001. As of December 31, 2001, the LTD had approximately 205,900 voice access and DSL connections in service or an increase of approximately 5,460 connections from December 31, 2000. The increase of 5,460 connections is comprised of an increase of approximately 9,740 connections offset by the sale of approximately 4,280 connections in the second quarter of 2001. On a sequential quarter basis, the LTD had an increase of approximately 2,540 connections in service, or 1%. Of the 205,900 total connections, approximately 135,700 are residential lines, 59,100 are business lines and 11,100 are DSL connections. In addition, the LTD had approximately 80,200 long distance accounts and 30,000 dial-up Internet subscribers at December 31, 2001. Penetration rates for vertical services such as voice mail, caller ID, call waiting and call forwarding continued to increase in the fourth quarter of 2001. The LTD's revenue run-rate for high-speed special access services in the fourth quarter of 2001 increased 18% over the same period in 2000 and 6% sequentially. In addition, the penetration rate in installed DSL in the LTD's service areas reached 5.7% of access lines. This continues to be among the highest penetration rates for telecommunications providers in the United States. For the fourth quarter of 2001, the ICD reported revenues of $4.2 million. For the same quarter in 2000, the ICD's revenues were $4.5 million, which included approximately $3.0 million in miscellaneous revenues related to a construction project that was completed. Excluding the impact of this construction project, for which there were no comparable operations in 2001, the ICD's revenues increased approximately $2.7 million, or 185%, and Adjusted EBITDA increased $2.3 million, or 40%, in the fourth quarter of 2001 compared to the fourth quarter of 2000. The ICD's Adjusted EBITDA loss in the fourth quarter of 2001 was $3.4 million compared to $4.8 million in the fourth quarter of 2000. As of December 31, 2001, the ICD had approximately 16,700 voice and 700 DSL connections in service compared to approximately 9,400 voice and 200 DSL connections in service at December 31, 2000. On a sequential quarter basis, the ICD's revenues decreased $0.9 million, or 17%, while the Adjusted EBITDA loss decreased $2.0 million, or 37%. As announced previously, the ICD slowed its growth in order to allow it to achieve positive Adjusted EBITDA operating results and a positive net cash flow in a shorter period of time. By following this strategy, the ICD expects to significantly reduce its cash burn as lower operating and overhead expenses are incurred and reduced capital expenditures are needed to support the lower growth rate. The ICD will continue to add new connections but at a significantly lower rate than in the past. Once the ICD achieves its cash flow targets, it is anticipated that the ICD will fund its own growth as it moves forward. As part of this operating strategy, the ICD has focused its growth in two of its established ICD markets, the Research Triangle and Triad area of North Carolina and New Orleans, Louisiana. The Company's presence in Peoria and Bloomington, Illinois has been maintained; however, no new sales efforts are being directed in those territories. In conjunction with this strategy, the Company has reduced its overall work force to match the lower level of growth. The Company maintains a sales staff of five quota carrying general business sales representatives and three major account representatives for transport and larger accounts. J. Stephen Vanderwoude, Chairman and Chief Executive Officer, commented regarding the progress of the LTD and ICD, "The LTD provided strong results for 2001. Our LTD management team continues to focus on how it can improve the LTD's operations and maintain this momentum in 2002. We also believe that we are on the right track with the ICD. Our operating results improve each month, and our cash burn lessens as we move towards our goal of the ICD self funding its growth. This would be a tremendous turnaround for a division that had an Adjusted EBITDA loss of $23.1 million in 2001." 2001 Year-End Results For the year ended December 31, 2001, revenues were $184.3 million, an increase of $17.2 million, or 10%, over revenues of $167.1 million in 2000. Year-to-date revenues for 2001 include $168.8 million for the LTD and $15.5 million for the ICD. The increase in revenues is partially attributable to a full year of revenues being reported for Coastal Communications. Coastal Communications was acquired at the end of the first quarter of 2000 and was only included in 2000 operating results for nine months as compared to a full year for 2001. The remaining increase is due to the growth in voice and DSL connections in the LTD and ICD. The LTD reported an increase in revenues of $8.4 million, or 5%, primarily as the result of a full year of Coastal Communications' revenues. The ICD reported a revenue gain of $8.7 million, or 131%, for 2001 compared to 2000. For the year ended December 31, 2001, Adjusted EBITDA improved by $7.6 million, or 14%, to $62.5 million when compared to 2000. By division, this was comprised of $85.6 million for the LTD and a loss of $23.1 million for the ICD. Included in this increase is $4.8 million related to a full year of Coastal Communications' operations being included in 2001. On a pro forma basis, assuming that the Coastal Communications acquisition occurred as of January 1, 2000 and therefore was included in revenues for a full twelve months in 2000, revenues increased $8.1 million in 2001, or 5%, and Adjusted EBITDA increased $4.1 million, or 7%. For the LTD, on a comparable pro forma basis, Adjusted EBITDA increased 14%, or $10.2 million, on a small decrease in revenues of $0.7 million, or 0.4%. Revenues for the LTD in 2000 reflect approximately $3 million from a construction project for which no comparable revenues were recognized in 2001. In addition, the sale of 4,280 connections at the end of May 2001 impacted revenues as twelve months of revenues, or approximately $2.6 million, were recognized in 2000 for these connections compared to only five months of revenues, or approximately $1.2 million, in 2001. As of December 31, 2001, the Company had $21.6 million in cash on hand. In addition, the Company has $21.8 million in available credit facilities with the Rural Telephone Finance Cooperative. The Company will continue its discussions with potential equity investors as well as consider strategies to improve liquidity and funding. Paul Sunu, Chief Financial Officer, commented, "We continue to improve our leverage ratio through our operating success. In December 2001, the ICD achieved an $872,000 Adjusted EBITDA loss for the month. In January 2002, the ICD's Adjusted EBITDA loss was below $470,000. We are encouraged by the fact that by taking our 2001 LTD results and annualizing January 2002's ICD Adjusted EBITDA loss over our net debt provides us with a leverage ratio that is under 7.9 times." Cash paid for capital expenditures in 2001 was approximately $54 million. For 2002, the Company anticipates that total capital expenditures will be approximately $20 million as a result of the lower expected growth in the LTD and slower growth plans for the ICD. MCLEODUSA INC: Gets Okay to Hire Ordinary Course Professionals -------------------------------------------------------------- McLeodUSA Inc. obtained Court authorization: (a) to retain the Ordinary Course Professionals under Bankruptcy Code sections 105 (a) and 327 without the necessity of a separate, formal retention application approved by the Court for each ordinary Course Professional, and (b) to compensate the ordinary Course Professionals for post-petition services rendered, subject to certain limits, without the necessity of additional Court approval. Payment of fees and expenses As proposed by the Debtor, the Court also approved: (a) that the Debtor be permitted to pay, without formal application to the Court by any Ordinary Course Professional, 100% of the interim fees and disbursements to each of the Ordinary Course Professionals upon the submission to the Debtor of an appropriate invoice setting forth in reasonable detail the nature of the services rendered after the Petition Date, provided that such interim fees and disbursements do not exceed a total of $25,000 per month per Ordinary Course Professional; (b) that payments to a particular professional would become subject to Court approval pursuant to an application for an allowance of compensation and reimbursement of expenses under Bankruptcy Code sections 330 and 331 if such payments exceed $25,000 per month for that Ordinary Course Professional. In addition, the Court authorized the Debtor to employ additional Ordinary Course Professionals as necessary, in the ordinary course of its business without the need to file individual retention applications and without the need for any further hearing or notice to any other party, by filing with the Court a supplement. (McLeodUSA Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEXTCARD: Inks Amended Service Pact with Former Unit's Receiver --------------------------------------------------------------- NextCard, Inc. (Nasdaq:NXCD) announced that it has signed a Restated and Amended Service Agreement with the Federal Deposit Insurance Corporation, in its capacity as Receiver for NextBank, N.A., the Company's former banking subsidiary. Pursuant to the Agreement, the Company transferred its portfolio servicing operations to the FDIC-R and agreed to continue providing, for a minimum of three months, certain administrative services and a nonexclusive license for the Company's intellectual property. The Agreement provides for the FDIC-R to have uninterrupted access to the Company's technology and proprietary systems during the period of time believed necessary for the FDIC-R to market NextBank's credit card portfolio. In exchange for the Company's commitment to continue to provide technology support for the NextBank portfolio, the FDIC-R has agreed to pay certain ongoing fees and retention benefits necessary to maintain this support. The FDIC-R has the option to continue the agreement on a monthly basis after May 31, 2002 in return for the Company's agreement to continue providing support. The FDIC has also made a non-recourse loan to the Company of approximately $1 million. The loan is non-interest bearing, will mature in six months and is secured by an assignment in favor of the FDIC-R of all of the Company's right, title and interest in and to the security backing a letter of credit, in like amount as the loan, executed in favor of MasterCard International. In connection with the Agreement, the Company has reduced its number of employees by 546 persons (approximately 90% of the Company's workforce), leaving 65 persons remaining employed by the Company. Of the employees terminated, 465 persons have been offered temporary employment with a third-party contractor on behalf of the FDIC-R. The movement of the Company's workforce to the supervision of the FDIC-R is intended to ensure continuous provision of customer and portfolio servicing with respect to the NextBank credit card assets. Separately, the Company announced that it has voluntarily filed a request with NASDAQ to delist its stock from the NASDAQ Market System. The NASDAQ has advised the Company that its delisting will take place on or about March 18, 2002. The Company decided to request delisting because it is unable to meet the NASDAQ's continued listing requirements. The Company has also been removed from the NASDAQ Financial 100 Index. OHIO CASUALTY: S&P Rates $125 Million Convertible Notes at BB ------------------------------------------------------------- Standard & Poor's said it assigned its double-'B' senior debt rating to Ohio Casualty Corp.'s $125 million convertible notes due in 2022 based on the company's regional business position, good capitalization, and improved investment strategy. Standard & Poor's also said it affirmed its triple-'B' counterparty credit and financial strength ratings on Ohio Casualty's operating subsidiaries and its double-'B' counterparty credit rating on the holding company. The outlook was revised to stable from negative. "Over the past year, Ohio Casualty has made steady progress toward the implementation of its strategic plan and its goal to improve operating performance," said Standard & Poor's credit analyst Laline Carvalho. Positive restructuring actions, which should support operating improvements over the next two years, include significant rate increases, the elimination of its mono- line workers' compensation business and unprofitable agents, the cancellation of managing general agent contracts, and the exit from the New Jersey private passenger auto business through a transaction completed at the end of 2001. Management has also been proactive in reducing its investment portfolio risk by significantly reducing its equity holdings and re-investing proceeds in fixed-rate securities. The holding company's financial flexibility has been limited by marginal interest coverage over the last three years, as well as restrictive covenants on the group's $205 million outstanding bank facility, which is due in October 2002. Although Ohio Casualty is currently in compliance with its debt covenants, Standard & Poor's believes the group's convertible note issue will significantly improve financial flexibility by affording the holding company greater breathing room to enact its strategic plan. The outlook reflects Ohio Casualty's improved strategic focus with the entrance of a new management team in 2001. It also reflects re-underwriting actions that are gradually improving operating performance. Partially offsetting these factors are challenges related to the group's restructuring as well as three consecutive years of poor operating performance and low interest coverage at the holding-company level. OMNOVA SOLUTIONS: Fitch Ratchets Senior Debt Rating Down a Notch ---------------------------------------------------------------- Fitch Ratings has lowered the senior secured debt rating for OMNOVA Solutions Inc. 'BB+' from 'BBB-'. The ratings have been removed from Rating Watch Negative and assigned a Stable Rating Outlook. Fitch has lowered Omnova's ratings based on the company's weakened financial position and credit statistics and a concern that improvement in financial performance may not be sufficient to justify an investment grade rating. Total debt, defined by Fitch as balance sheet debt plus accounts receivable backed commercial paper, has remained high. EBITDA declined slightly in 2001, keeping leverage and interest coverage weak. Although earnings and credit statistics are expected to improve in 2002, the resulting improvement could be modest if demand and margin improvements are not strong. Omnova's ratings are supported by the company's strong market positions. The company is a leader in areas such as commercial vinyl wallcovering, vinyl and urethane fabrics, and styrene-butadiene latex. The Stable Rating Outlook reflects the likelihood of continued improvement in Omnova's markets and its earnings. Some improvement in the Performance Chemicals segment margins has been seen to date. Margin improvement is expected this year in the Decorative and Building Products segment. For the trailing 12-month period ending Dec. 31, 2001, EBITDA- to-interest has declined to 3.3 times from 3.6x at the end of 2000. For the same period, total adjusted debt-to-EBITDA has increased to 3.9x from 3.6x at the end of 2000. These credit ratios are expected to improve in 2002 with recovering EBITDA. Capital spending is expected to be at lower levels than in previous years. Free cash flow is expected to be positive in 2002 and debt levels are likely to decline. OMNOVA Solutions is a specialty chemical company with $737 million in sales in 2001. The company produces commercial wallcovering, coated fabrics, commercial roofing membrane systems, adhesives, and paper and paperboard chemicals. End-use markets for Omnova's products include construction and home furnishings, textiles, and paper. OWENS CORNING: Fabwel Inc. Now Named OC Fabricating Solutions ------------------------------------------------------------- Owens Corning announced that its Fabwel division has changed its name to Owens Corning Fabricating Solutions, in order to support its growth and enhance its alignment within the company. Founded in 1972, Fabwel, Inc. began as a fabricator of exterior aluminum sheet products for the recreational vehicle market. As the company expanded into other markets, Fabwel created a niche for itself as a custom fabricator and supplier of exterior components to the recreational vehicle, manufactured housing, residential cargo trailer, light commercial building and marine markets. Growth during the past three decades is attributed to a commitment to expand the materials that Fabwel fabricates. Currently these materials include steel, aluminum, fiberglass reinforced sheet and vinyl. In June of 1997, Fabwel was purchased by Toledo, Ohio, based Owens Corning. Synergies created by the two companies, along with the use of the system approach to product performance, have created exciting new growth opportunities. "This move demonstrates Owens Corning's commitment to its customers," said Bud Stout, president Owens Corning Fabricating Solutions. "Transitioning the name to Owens Corning Fabricating Solutions will translate into stronger consumer confidence in the company, its services and products." (Owens Corning Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFICARE HEALTH: Subsidiary Names Brian Crary as Regional VP -------------------------------------------------------------- PacifiCare of Colorado, Inc., a subsidiary of PacifiCare Health Systems, Inc. (Nasdaq:PHSY), announced it has promoted Brian Crary to regional vice president and has named Doug Wilson vice president of sales and service. As regional vice president, Crary will lead the Colorado health plan's operations, overseeing network relations and contracting, commercial sales, medical management, underwriting and finance. Crary reports to Richard Rivers, who was named senior vice president of PacifiCare Health Systems in charge of health plan operations in Colorado, Nevada, Arizona, Washington and Oregon. The changes are part of a strategic restructuring announced last month by PacifiCare Health Systems to consolidate regions in order to enhance focus on its commercial business growth and to improve its operational efficiency. "As a health and consumer services company, we value leadership that can drive our vision to make people's lives better," said Rivers. "With solid business judgment and sound insight into the Colorado market, Brian is well-equipped to guide PacifiCare of Colorado as we continue to strengthen our company through improved commercial growth." Crary joined PacifiCare in October 1999 as vice president and chief financial officer overseeing finance, accounting and underwriting. Before joining PacifiCare, Crary was a senior vice president of Foundation Health Systems overseeing the financial operations of non-California operations. As vice president of sales and service, Wilson will be responsible for commercial sales and service as well as broker and employer client relationships. He will report to Crary. "Doug will play a key role in advancing our competitive position in the commercial market and in achieving our growth goals," said Crary. "His experience with the Colorado market and his broad product expertise will add significant strength to our sales team and assist in reinventing PacifiCare as an innovative consumer health company." From 1994 to 1999, Wilson was vice president of sales and client services for Cigna Healthcare of Colorado, where he consistently exceeded sales quotas and customer retention goals. Most recently, Wilson was vice president of business development for Sitel Corp., where he focused on outsourcing solutions for insurance and health care companies. PacifiCare Health Systems is one of the nation's largest health services companies. Primary operations include health insurance products for employer groups and Medicare beneficiaries in eight states and Guam. Other specialty products and operations include behavioral health services, life and health insurance, dental and vision services and pharmacy benefit management. More information on PacifiCare Health Systems can be obtained at http://www.pacificare.com PENTASTAR COMMS: Can No Longer Meet Current Cash Obligations ------------------------------------------------------------ PentaStar Communications, Inc. (Nasdaq: PNTA) announced that as a result of being unable to collect, on a timely basis, receivables from various communications service providers with which it has agency agreements, it is unable to meet current cash obligations including, but not limited to, certain payroll obligations and debt service payments to its lenders. PentaStar's balance sheet currently reflects in excess of $3 million of past due receivables from the communications service providers. The Company has been working with the providers to collect past due amounts. As previously disclosed, the Company has recently implemented an operational restructuring plan to reduce costs, which the Company believed based upon recent revenue and order flow activity, would have allowed the Company to produce positive earnings before depreciation and amortization on a go-forward basis. The Company also announced it is in default under its Wells Fargo Bank West, National Association and Merrill Lynch Business Financial Services credit agreements. Both lenders are unwilling to advance additional funds to the Company. The Company's obligations to the lenders are secured by all of its assets, and such obligations exceed the Company's current assets. The Company is currently working to develop a plan to allow it to continue to operate on a modified basis so it can pay its creditors. However, it is unlikely that operations on this basis will allow the Company's shareholders to realize any value. PentaStar designs, procures and facilitates the installation and use of communications services solutions that best meet customers' specific requirements and budgets. PentaStar was formed in March 1999 to become a national communications services agent and specializes in being the single source provider of total communications solutions for its business customers. PentaStar's common stock is traded on the Nasdaq National Market under the ticker symbol PNTA. For more complete information about PentaStar, contact PentaStar Communications, Inc., 1660 Wynkoop St., Denver, Colorado 80202, (303) 825-4400, visit the Company's Web site at http://www.pentastarcom.comor send an email to info@pentastarcom.com. PENTON MEDIA: Enters Agreement to Amend Senior Credit Facility -------------------------------------------------------------- Penton Media, Inc. (NYSE:PME) announced that it has entered into an agreement with an investor group led by ABRY Mezzanine Partners, L.P. for the private placement of 50,000 shares of a new series of convertible preferred stock and warrants to purchase 1.6 million shares of Penton common stock for $50 million. The preferred stock will be convertible into shares of Penton common stock at any time at the investors' option at a conversion price of $7.61, subject to adjustments. The dividend accrues daily and is payable semi-annually in cash only if declared by Penton's board of directors and approved by no less than 75% of the convertible preferred stock then outstanding. Penton has no present intentions to pay cash dividends on the preferred, therefore the dividends will accrete to the liquidation value of the preferred stock. Proceeds from the private placement will be used to repay indebtedness. Closing is subject to the absence of a material adverse change in the Company's business or in the financial markets, confirmation from the New York Stock Exchange that the issuance of the convertible preferred stock and warrants complies with NYSE listing requirements, and certain other customary conditions. Penton has also entered into an agreement to amend the terms of its existing senior secured credit facility. Upon effectiveness, the amendment will provide the Company with significant covenant relief and will reduce its revolving credit facility to a maximum availability of $40 million. The amendment will become effective upon the closing of the private placement of the convertible preferred stock and warrants, which the Company expects to be completed no later than March 15, 2002. PHILEX GOLD: Selling Interest in JV Project to Repay Bank Debts --------------------------------------------------------------- Philex Gold Inc. (CDNX:PGI) recorded a net loss for the 12 months ended December 31, 2001 of $48.2 million, which included a provision for write-down of the Bulawan mine assets and deferred exploration costs of $41.6 million as a result of a decision during the fourth quarter to terminate all development work at the operation. This compares to a net loss of $11.3 million in the prior year, which included a translation loss of $4.0 million due to the change in the translation rate applied to materials and supplies inventory. In fiscal 2001, operating revenues amounted to $15.9 million while the cash flow from operations was $4.1 million. The comparable figures for the prior year were revenues of $14.3 million and a negative cash flow of $2.1 million. The realized price of gold for 2001 of $274 per ounce was lower than the prior year's $283 per ounce. For the fourth quarter of 2001, revenues were $3.7 million and a net profit of $146,000 was incurred prior to the aforementioned write-down. Cash flow from operations was $1.2 million. For the comparable period of the prior year, revenues and net profit amounted to $6.7 million and $659,000, respectively, prior to the foreign exchange translation loss. Cash flow from operations was $1.2 million. The realized price of gold for the quarter was $284 per ounce compared to $272 per ounce in the comparable quarter of the prior year. At December 31, 2001, the company's balance sheet showed a total shareholders' equity deficit of over $45 million. As mentioned in an earlier release on November 23, 2001, a re- evaluation of the economic feasibility of continuing development of the remainder of the Central Block at the Bulawan mine indicated that in light of the expensive ground support system required due to poor ground conditions coupled with a low gold price, the financial returns would be marginal. In view of these findings and the financial condition of the Company, a decision was made to terminate all development work at the mine. The operation now continues at a reduced manpower level with the objective of extracting the remaining broken ore reserves above the developed draw points as long as positive cash flows are generated. It has been projected that the operation will continue through the first quarter of 2002. In order for the Company to repay its bank debts of $13.7 million and other liabilities in view of the impending closure of the Bulawan mine, as announced on December 18, 2001, an agreement was signed with Anglo American Exploration (Philippines) B.V., the Company's joint venture partner on the Boyongan project, to sell a 10% equity interest in the project and surrounding tenements for $20 million. Additional payments of up to $5 million may be received on the basis of an increase in the metal content of the deposit or from any other discovery within the surrounding tenements on the basis of feasibility studies. The implementing documentation relating to the sale has been executed and payment is expected on or before March 19th. The funds will be used to pay down the bank debt in full and other liabilities. As a result of the sale, the Company's equity in the project has been reduced to 50%. Should Anglo at its sole expense bring the project through a bankable feasibility study, Anglo would be entitled to an additional 30% equity either directly or through a joint venture with a qualified entity, and will conduct the operations if the project proceeds to development. In such a situation, Philex Gold will be required to raise its pro-rata share of the project funding while Anglo would provide 100% of the completion guarantees that may be required by third party lenders. With respect to exploration, the drilling program at the Boyongan copper-gold deposit resumed in January 2002 after a brief year-end shut down period. The latest results of the drilling were released on March 8, 2002 and showed excellent intercepts for holes TSD-35 and 36. Scout drilling at the Magpayang block, about 4 kilometres south of Boyongan, also commenced early in the year. The exploration permit, covering ground between Boyongan and Magpayang, has been approved and scout drilling will commence shortly. Three large capacity drill rigs, with a fourth to be added later in March, are performing resource definition drilling at the Boyongan deposit where 15,000 metres of drilling is planned in 2002. Two rigs are currently being utilized for scout drilling primarily to the south of the deposit, with a target meterage of 3,000 metres in 2002. PHYCOR: Court Approves Continued Use of Cash Management System -------------------------------------------------------------- Prudence Carter Beatty approves the motion of Phycor Inc. and its debtor-affiliates to continue using their existing Cash Management System and engage in Intercompany Transactions in the ordinary course of business. The Court approves the motion provided that the Debtors maintain records of all transfers so that all transactions, including intercompany transactions, may be readily ascertained, traced, and recorded properly on applicable accounts. The Debtors are authorized to continue to use their existing checks and other Business Forms, which checks and Business Forms shall not be required to include the legend "Debtor-in- Possession" or a "debtor-in-possession number." The banks in which the Company's pre-petition Bank Accounts are maintained are directed to continue to servive and administer the Bank Accounts of each Debtor as a debtor-in-possession account, without interruption and in the usual and ordinary course. Furthermore, the Debtors are allowed to open additional bank accounts, or close any existing Bank Accounts as necessary provided that any new account shall be with a bank that is insured with the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation and that is organized under the laws of the United States. Phycor Inc., a medical network management company, filed for chapter 11 protection on January 31, 2002. Kayalyn A. Marafioti, Esq. at Skadden, Arps, Slate, Meagher & Flom LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed total assets of $28,851,499 and total debts of $338,443,734. POLAROID CORP: Intends to Renew Three Fleet Letters of Credit ------------------------------------------------------------- Polaroid Corporation and its debtor-affiliates seek the Court's authority to renew, on the same terms and conditions, three Letters of Credit with Fleet National Bank: (a) a $350,000 Standby Letter of Credit, number 1S1261763, for the benefit of Liberty Mutual Insurance Company; (b) a $7,000,000 Standby Letter of Credit, number 1S1270814, for the benefit of PD Winter Street, LLC; and (c) a $1,000,000 Standby Letter of Credit, number 1S1270917, for the benefit of an unidentified Landlord. Eric W. Kaup, Esq., at Skadden, Arps, Slate, Meagher & Flom, in Chicago, Illinois, relates that even if the renewal is considered an ordinary course transaction, Fleet will not renew the Letters of Credit for the Landlords and Liberty Mutual absent a court order. Mr. Kaup informs Judge Walsh that the Debtors must renew the Letters of Credit because they wish to continue doing business with Landlords and Liberty Mutual. Otherwise, Mr. Kaup contends that the Debtors will face serious problems because: -- it would be near impossible to obtain substitute letter of credit in a short period of time; -- the expense of getting a substitute letter of credit will likely be prohibitive; and -- the Letters of Credit would be drawn and Fleet would exercise its set-off rights against the Cash Collateral, pursuant to the Letters of Credit and Stipulation signed on December 4, 2002. Further, Mr. Kaup says that the Debtors already tried negotiating for alternative Letters of Credit with other lenders but is unable to obtain better terms than the ones with Fleet. (Polaroid Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) PRECISION AUTO CARE: Extends Rights Offering to April 15, 2002 -------------------------------------------------------------- Precision Auto Care, Inc. (OTC Bulletin Board: PACI) Lou Brown, President & CEO of Precision Auto Care, Inc. (PACI), announced that the Company would extend its Rights Offering from March 15 to April 5, 2002. The Company is offering an aggregate of 4,032,723 shares of its common stock to shareholders of record as of February 14, 2002. These shareholders have the right to purchase one share of common stock for each 2.5 shares owned at a purchase price of $0.30 per share. The Company is engaging in this Rights Offering to obtain additional working capital. Precision Auto Care, Inc. is the world's leading franchisor of auto care centers, with over 500 operating centers as of March 12, 2002. The Company franchises and operates Precision Tune Auto Care centers around the world. According to Troubled Company Reporter - October 4 Edition, Precision Auto Care is negotiating extensions of its Senior Debt. However, the report said, in the event that the Company would be unable to accomplish its strategic objectives or would be otherwise unable to generate revenues sufficient to cover operating expenses and pay other debt, the Company would not be able to sustain operations at the current level. This would require the Company to further reduce expenses and liquidate certain assets. PSINET: Court OKs Holdings' Employee Retention & Severance Plan --------------------------------------------------------------- Harrison J. Goldin, Trustee to PSINet Consulting Solutions Holdings, Inc. sought and obtained Court approval for an Order Authorizing the Trustee to Implement the Retention and Severance Plan for Employees at Holdings' Non-Debtor Subsidiaries. The Retention and Severance Plan governs the employment of approximately fifteen employees of Holdings' non-debtor subsidiaries. The Debtor is a holding company that does not directly employ ther Plan Employees, but indirectly employs them through the Subsidiaries. Because the Subsidiaries are wholly- owned by the Debtor and directly or indirectly controlled by the Debtor (their sole shareholder), the Trustee believes that retaining the Plan Employees is vital to preserving and maximizing the value of Holdings' estate. Prior to the PSINet Petition Date, all the Subsidiaries' employees were covered under one severance plan. In September of 2001, a general retention and severance plan was put into place that covered most of the Subsidiaries' employees. In addition to a general retention and severance plan, several key employees signed specific retention and severance plans with individualized terms. Both the general and individualized retention and severance plans expired on or about December 31, 2001. During the first part of January 2002, the Trustee, with the approval of the Committee, paid all the amounts that were due and owing to employees at the Subsidiaries under the retention and severance plans. Under the Plan, the Employees will continue to be paid by the Subsidiaries. The Trustee believes that the implementation of the Plan is essential to the retention of the Plan Employees because: -- The Plan Employees' active assistance will be necessary in resolving potential claims between the Holdings estate and the PSINet estate, General Electric Capital Corporation, and other parties. -- The Plan Employees will continue to provide the Trustee with vital information about the Debtor's and the Subsidiaries' operations. -- The Plan Employees will also assist the Trustee in identifying the companies' assets and liabilities. -- There are few employees remaining at the Subsidiaries capable of providing the Trustee with the information it needs to operate the Holdings estate. -- The Plan Employees' knowledge about the companies' operations is especially important because many files have been packed and are scattered in warehouses across the country, other documents remain with PSINet, and the computer systems of Holdings and its Subsidiaries are no longer operational. The Retention and Severance Plan * Base Salary: Under the Plan, each Plan Employee will be paid his or her base salary for the entire time he or she is employed. The total period of time for which a Plan Employee has agreed to be retained shall be referred to hereinafter as the "retention period". The retention period varies per Plan Employee and ranges from 90 calendar days to 180 calendar days. The total amount of base salary that will be paid under the Plan is approximately $410,000. * Retention Bonus: Each Plan Employee may also be entitled to a retention bonus. For most of the Plan Employees, the retention bonus will be half (50%) of their salary for their retention period. For other Plan Employees the retention payment will either be three quarters (75%) of their salary during the retention period or has been fixed at a specific amount. The total amount of retention bonuses that will be paid under the Plan, assuming no Plan Employee leaves before the end of his or her retention period, is approximately $280,000. This amount does not include upfront payments to three employees, the total amount of which will be approximately $15,000. * Timing Of Payment Of Retention Bonus: Plan Employees are entitled to a retention bonus if they work until the end of their retention period or have worked for 90 calendar days, whichever comes first. (1) Plan Employees Whose Retention Period Is 90 Days will be entitled to 100% of his or her end of his or her retention period. (2) Plan Employees Whose Retention Period Is Over 90 Days will be entitled to 50% of his or her accrued retention bonus after 90 calendar days has passed. The Plan Employee will be entitled to the other 50% of his or her accrued retention bonus for the first 90 calendar days and 100% of his or her retention bonus for the remainder of his or her retention period at the end of his or her retention period. (3) The Trustee and any Plan Employee may mutually agree to extend a Plan Employee's retention period. Under these circumstances, the Plan Employee will receive 50% of his or her accrued retention bonus at the end of the original retention period. This payment would be reduced by any previous payment made to an employee (e.g., payments made to an employee after 90 days). The Plan Employee will receive the other 50% of his or her retention bonus accrued during the original retention period and 100% of his or her retention bonus accrued after the original retention period at the end of the extended retention period. Under the Plan, the Trustee may, in his discretion, raise the retention bonus of any employee from 50% to 75% of his or her salary. As of the date the employee's retention bonus rate is increased, the employee will begin to accrue the greater retention bonus. * Severance: Each Plan Employee who works until the end of his or her entire retention period will be entitled to 6 weeks of severance. The total amount of severance that will be paid under the Plan, assuming no Plan Employee leaves before the end of his or her retention period, is approximately $130,000. To the extent that retention or severance agreements still exist between Plan Employees and PSINet as to stock options in PSINet, the Plan will have no effect and would not serve to revoke these options. * Termination: If a Plan Employee chooses to leave prior to the end of his or her retention period, then he or she will not receive his or her retention bonus or severance. If a Plan Employee is terminated without cause, then that Plan Employee will be entitled to the total amount of his or her salary, retention bonus and severance had he or she worked for his or her entire retention period. If a Plan Employee is terminated for cause, that Plan Employee forfeits his or her retention bonus and severance. * Vacation and Sick Time: Each Plan Employee who is retained will be entitled to payment for any vacation or sick days accrued during the retention period. Any such increase in vacation or sick days will be added to the vacation and sick days previously accrued by the Plan Employee. This accrual does not directly come under the Plan but under the Plan Employee's previous benefits package. * Modification: The Plan may be modified by the Trustee from time to time as the need arises. (PSINet Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) SERVICE MERCHANDISE: Designation Rights Sale Prompts Objections --------------------------------------------------------------- Pursuant to section 365 of the Bankruptcy Code and to facilitate the sale of the Designation Rights and ultimate disposition of the leased Properties, Service Merchandise Company, Inc., and its debtor-affiliates seek the Court's authority to assume and assign the underlying leases and, other contracts, such as REAs, affecting the Properties to the ultimate assignees. John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, in Chicago, Illinois, explains that "adequate assurance of future performance" required by the Bankruptcy Code need not be demonstrated by the Designation Rights Purchaser because "no Leases or Contracts will be actually assigned to the Proposed Purchaser" upon entry of the Sale Order -- the leases and contracts will remain with the Debtors' estates until the Proposed Purchaser identifies designees for the properties. Additionally, the Debtors also ask Judge Paine to rule the unenforceability of anti-assignment provisions, such as: (a) "going dark", alteration, use restrictions and recapture provisions contained in leases and executory contracts, and (b) right of first refusal or purchase option provisions in favor of third parties, continuous operating covenants, covenants that any user of the Debtors' premises operate under the name of "Service Merchandise," and other similar restrictions contained in the reciprocal easement agreements with respect to fee-owned Properties. For the Debtors and the Proposed Purchaser to determine ahead the cure amounts and all defaults for the properties subject to the sale, these deadlines are set: (a) on or before _________, 2002, the Debtors will serve notice of the bar date to all landlords and other known notice parties under the Leases; (b) all parties will have until April 5, 2002 to file and serve a copy of their claim which shall include any and all monetary or non-monetary claims or defaults incurred or could arise prior to March 31, 2002. The Cure Claim must also state the store number and store location in the title of the claim; Further, Mr. Jennings assures Judge Paine that the Bar Date shall not affect a party's rights or remedies with respect to claim or defaults arising after March 31, 2002, or any rights that the parties may have under Section 365 of the Bankruptcy Code other than as to Cure Claims. Objections (1) DDR and Community Centers One DDR Downreit, LLC and Community Centers One, Inc., do not want their stores to go dark. John A. Gleason, Esq., at Benesch, Friedlander, Coplan & Aronoff, LLP in Columbus, Ohio, asserts that the Debtors are attempting to profit from the leased properties in its request to let the properties go dark. Mr. Gleason tells Judge Paine that the Debtors cannot sell a Lease under section 363 of the Bankruptcy Code without violating the rights of the Landlords of the protection guaranteed by section 365(b)(3). Pursuant to section 365, Mr. Gleason says, a debtor may assume and assign a right under a lease by providing adequate assurance of future performance, including: (a) of a source of rent and other consideration due under the lease, and in case of assignment, that the financial condition and operating performance of the proposed assignee shall be similar to the financial condition and operating performance of the debtor at the time the debtor became the lessee under the lease; (b) that any percentage rent due under the lease will not decline substantially; (c) that assumption or assignment of such lease is subject to all provisions including radius, location, use or exclusivity provisions, and will not breach any provision, contained in any other lease, financing agreement, or master agreement relating to the shopping center; and (d) that assumption or assignment of lease will not disrupt any tenant mix or balance in the shopping center. Mr. Gleason further argues that Section 365 also prohibits the Debtors from modifying the terms of the lease as suggested in the motion. (2) Boynton-Catalina Boynton-Catalina LP is the landlord of the Debtors Store No. 117 in Boynton Beach, Florida. Richard L. Allen, Esq., at Pertnoy, Solowsky, Allen & Haber, PA, in Miami, Florida, asserts that the request of the Debtors for the leased properties to remain dark up to 9 months after assignment will cause serious financial and other injury to the Landlords. Furthermore, Boynton objects to the Debtors' Proposed Purchaser -- Kimco Realty Corporation, SB Capital Group, LLC and Simon Property Group, Inc. -- because the group is a direct competitor of the Landlord in the Shopping Center business. Mr. Allen also contends that the Landlord should be given the opportunity to buy back the Lease from the Debtors. In fact, Mr. Allen reports that the Landlord made the offer but the Debtors did not provide any counteroffers or serious consideration. (3) Various landlords Several landlords echo similar concerns: * Pompano Plaza, Ltd, * Mills Corporation, * Gulfport Retail Partners, L.P. * Antonio B. Pomerleau, * Hawley Management, Inc., * Baton Associates, * Macon Associates, * Dixie Associates, * Vorhof-Duenke, Inc., * General Growth Management, Inc., * Overland Park Associates, * Lend Lease Real Estate Investment, Inc., * Basser-Kaufman and * Benderson Kendall Associates Randal S. Mashburn, Esq., at Baker, Donelson, Bearman & Caldwell, PC, in Nashville, Tennessee contends that the motion seek to violate the Leases and applicable law. Mr. Marshburn points that the proposed Sale Order violates section 365 of the Bankruptcy Code because it abdicates the Debtors' duties and that the successful bidder will have the absolute and exclusive right to "select, identify, and designate" which lease are to be assume and assigned and to whom. Mr. Mashburn notes that the "go-dark" relief will also place the landlords in "violation of operating covenants contained in leases with other tenants and third parties". Further, Mr. Mashburn adds that the Debtors also face the risk of loss from deterioration and neglect of the lease properties, given the Debtors' current situation. CBL & Associates Management, Inc. and Glimcher Properties Limited Partnership, both lessors of the Debtors, also pose the same objections. (Service Merchandise Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) STELAX INDUSTRIES: Wells Fargo Appoints Receiver to UK Affiliate ---------------------------------------------------------------- Stelax Industries, Ltd. (OTC Bulletin Board: STAX) announced that its secured creditor, Wells Fargo Business Credit, Inc. has appointed a receiver to administer the operations and assets of its United Kingdom subsidiary. This action permits the protection of these assets from any other creditors that might jeopardize the company's present efforts to complete a successful financing. During the time of receiver control, the receiver will pay all expenses relating to operating costs, and will retain all revenues and earnings. Mr. Hardy, Chairman of Stelax Industries Ltd. stated, "This action taken with Stelax's U.K. subsidiary should permit the company to continue to make limited deliveries as approved by the receiver until it completes its previously announced financing transaction. Should the company be unable to complete a financing, and come to a satisfactory settlement with the receiver, the receiver has the right to sell or deal with the assets that best satisfies the company's obligations to its creditors. However, the company remains optimistic that its financing will be completed." TECSTAR INC: Court Approves Irell & Manella as Debtors' Counsel --------------------------------------------------------------- Tecstar, Inc. and its debtor-affiliate sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to retain and employ Irell & Manella LLP as their general insolvency Counsel while in chapter 11. Specifically, Irell & Manella will: a) advise the Debtors with respect to their powers and duties as debtors-in-possession in the continued management and operation of their businesses and properties; b) attend meetings and negotiate with representatives of creditors and other parties-in-interest; c) take necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on the Debtors' behalf, the defense of any action commenced against the Debtors, negotiations concerning all litigation in which the Debtors are involved, and objections to claims that are filed against the estates; d) prepare in behalf of the Debtors all motions, applications, answers, orders, reports, and papers necessary to the bankruptcy court's administration of the estates; e) negotiate and prepare on the Debtors' behalf a plan of reorganization, disclosure statement, and all related agreements/documents, and take necessary action on behalf of the Debtors to obtain confirmation of such plan; f) represent the Debtors in connection with obtaining postpetition loans; g) advise the Debtors in connection with any potential sale of assets; h) appear before this Court, any appellate courts, and the United States Trustee, and protect the interests of the Debtors' estates before such Courts and the United States Trustee; and i) perform all other necessary legal services and provide all other necessary legal advice to the Debtors in connection with these chapter 11 cases. The Firm services will be compensated at its customary hourly rates for similar services plus reimbursement for all reasonable and necessary expenses. The hourly rates of the Firm's professional staff range from: partners and of counsel $320 to $550 per hour associates $190 to $385 per hour legal assistants $110 to $250 per hour clerical assistants $25 to $135 per hour Tecstar, Inc. manufactures high-efficiency solar cells that are primarily used in the construction of spacecraft and satellite. The Company filed for chapter 11 protection on February 07, 2002 in the U.S. Bankruptcy Court for the District of Delaware. When the company filed for protection from its creditors, it listed estimated assets of $10 million to $50 million and estimated debts of $50 million to $100 million. USDATA CORPORATION: Has Working Capital Deficit of $1.5 Million --------------------------------------------------------------- USDATA Corporation (NASDAQ:USDC), a global provider of industrial automation software and services, announced operating results for the fourth quarter and year ended December 31, 2001. The company reported a loss from continuing operations of $2.1 million for the year ended 2001, an 86% improvement when compared to a loss from continuing operations of $14.9 million in 2000. Net loss applicable to common stockholders was $12.7 million for the year ended 2001, compared to net loss applicable to common stockholders of $44.8 million in 2000. Revenues were $13.6 million for the year ended 2001 compared to $16.0 million for the same period in 2000, representing a decline of 15%. The decline in revenue is consistent with industry-wide revenue declines in industrial automation particularly in the manufacturing sector. Earnings before interest, taxes, depreciation and amortization, excluding restructuring and asset write off charges, ("EBITDA") were $3.2 million for the year ended 2001, compared to a loss of $9.0 million in 2000. EBITDA earnings for the fourth quarter 2001 were $1.1 million, compared to $71,000 for the same period in 2000. Net cash flow provided by continuing operations was $1.6 million for the year ended 2001, a substantial improvement when compared to a negative cash flow from continuing operations of $7.3 million in 2000. The $8.9 million improvement was attributable to the company's continued expense reduction initiatives. Income from continuing operations of $212,000 for the fourth quarter 2001 increased $3.6 million when compared to a loss from continuing operations of $3.4 million in 2000. Fourth quarter 2001 loss applicable to common stockholders was $422,000, or a loss of $0.15 per common share, compared to a net loss of $15.4 million, or a loss of $5.51 per common share in 2000. Revenues for the fourth quarter 2001 were $3.0 million, compared to $4.5 million in 2000. Bob Merry, President and Chief Executive Officer of USDATA commented on this announcement. "Although continued weakening in the industrial automation market and manufacturing significantly impacted our revenue performance during the third and fourth quarters, the fact is, in 2001 we reduced our operating expenses almost 50% and maintained our revenues consistent with overall industry performance." Mr. Merry continued, "The recent signs of economic recovery in the manufacturing sector are indicators for optimism in the second half of 2002 and our positive cash flow from continuing operations during these challenging times positions USDATA well for the future." Now in its 27th year, USDATA Corporation, headquartered in Richardson, Texas (NASDAQ:USDC) is a leading global provider of software and services that give enterprises the knowledge and control needed to perfect the products they produce and the processes they manage. Based upon a tradition of flexible service, innovation and integration, USDATA's software currently operates in more than 60 countries around the globe, including seventeen of the top twenty-five manufacturers. USDATA's software heritage is born out of manufacturing and process automation solutions and has grown to encompass the industry's deepest product knowledge and control solutions. With an eye towards the future of e-business, USDATA continues to innovate solutions that will support the integration of enterprise production and automation information into the supply chain. The company has six offices worldwide and a global network of distribution and support partners. At December 31, 2001, the company's total current liabilities eclipsed its total current assets by about $1.5 million. For more information, visit USDATA on the Web at http://www.usdata.com WARNACO INC: Taps Keen Realty to Dispose of Real Estate Assets -------------------------------------------------------------- Warnaco Inc., the New York based apparel manufacturer/retailer, has retained Keen Realty, LLC and CB Richard Ellis, Inc. to assist the company in the disposition of certain of its real estate assets, including the marketing of a 38,000+ square foot former manufacturing facility in Costa Rica. The facility is located in Alajuela, San Jose, Costa Rica and was formerly used as a sewing and distribution plant. Keen Realty is a real estate firm specializing in selling excess assets and restructuring retail real estate and lease portfolios. The firm is also marketing 65 acres of vacant land in Duncansville, PA and a 234,000+ square foot distribution and manufacturing facility in Murfreesboro, TN for Warnaco, who filed for protection under Chapter 11 of the Bankruptcy Code on June 11, 2001. CB Richard Ellis is a vertically integrated commercial real estate services company with a geographically diversified network focusing on transaction management, financial services, and management services. "The property is very well located in Costa Rica, just 2 miles from the Juan Santamaria International Airport and 12 miles from downtown San Jose", said Craig Fox, Keen Realty's Vice President. "It is also only 40 miles from the Punta Arenas Port on the Pacific coast and 85 miles from the Limon Port on the Atlantic coast. The location and characteristics of the building make it suitable for both industrial and retail uses/users. We are encouraging prospective purchasers to put in their bids immediately as offers are now being considered." For over 15 years, Keen Consultants, LLC has had extensive experience solving complex problems and evaluating and selling real estate, leases and businesses in bankruptcies, workouts and restructurings. Keen Consultants, a leader in identifying strategic investors and partners for businesses, has consulted with hundreds of clients nationwide, evaluated and disposed of over 180,000,000 square feet of properties, and repositioned nearly 9,000 stores across the country. Companies that the firm has advised include: Northern Reflections, Edison Bros., Cosmetic Center, Long John Silver, Caldor, Citibank, N.A. (Ames Dept. Stores), Cumberland Farms, Fayva Shoe, Herman's Sporting Goods, K-Mart, Merry-Go-Round Stores, Neiman Marcus, Petrie Retail Inc., and Woodward & Lothrop. Most recently Keen has sold over $125 million of excess properties for Family Golf Centers, $80 million of excess properties for Service Merchandise Company, raised approximately $5 million for Filene's Basement, $4 million for CODA/Jeans West, and raised $5.5 million for Learningsmith Inc. In addition to Warnaco, other current clients include: Pennsylvania Fashions dba Rue 21, Footstar, Cooker Restaurant Corp., Matlack Truck Systems, Inc., Anamet Industrial and Graham Field Health Products. For more information regarding the sale of the Warnaco properties, please contact Keen Realty, LLC, 60 Cutter Mill Road, Suite 407, Great Neck, NY 11021, Telephone: 516-482-2700, Fax: 516-482-5764, e-mail: krc@keenconsultants.com, Attn: Craig Fox or regarding the Costa Rica property contact Miguel Rosencwaig in San Jose, Costa Rica at 506-296-6060 or Jorge Hurtado in Miami, FL at 305-533-1215. ZILOG INC: Appoints Jim Thorburn to Reinforce Turnaround Program ---------------------------------------------------------------- ZiLOG,(R) Inc., the Extreme Connectivity(TM) Company, announced that Acting CEO Jim Thorburn was elected to ZiLOG's Board of Directors as Chairman and appointed Chief Executive Officer. In addition, Executive Vice President Mike Burger was named President and elected to the Board of Directors. Thorburn, 46, was brought into ZiLOG as Acting CEO in March 2001 to lead a restructuring of the company, which had seen a decline of its business due to the overall weakness in the semiconductor industry. Since Q1 2001, ZiLOG has made significant financial improvement, turning a Q1 2001 EBITDA loss of $7 million into EBITDA gains of $6.6 million in each of Q3 and Q4 2001. Under Thorburn's leadership, ZiLOG's management team is executing a restructuring plan that focuses the business on core products, rationalizes manufacturing capacity, and reduces operating costs. "Jim's leadership and considerable semiconductor and financial experience are successfully leading ZiLOG through a transformational period. As CEO and Chairman of the Board, Jim will leverage the company's strong brand and product expertise to expand its share of the over $5 billion embedded control market," said John Marren, a member of ZiLOG's Board of Directors. ZiLOG recently launched an exchange offer that is expected to result in the conversion of all of its outstanding senior secured notes into equity. After the conversion, expected to be completed before the end of Q2 2002 through a pre-packaged Chapter 11 process, ZiLOG will be virtually debt-free. "I am excited to be leading ZiLOG through its operational and financial restructuring," Thorburn said. "Once we have eliminated our debt by restructuring our balance sheet, we can focus all our resources on supporting our customers with innovative, high value microcontroller, microprocessor and wireless semiconductor products." Thorburn brings more than 20 years of semiconductor industry experience with a background in strategy, finance, international operations, IPOs, leverages, buyouts, divestitures, and acquisitions. Prior to joining ZiLOG, Thorburn was a consultant to the Texas Pacific Group, the current majority shareholder of ZiLOG. He also served as Chief Operating Officer of ON Semiconductor from June 1999 to March 2001. As COO of ON, Thorburn led the company's transformation from a Motorola division through a spinout and, ultimately, to a successful, independent, public company. ON went public on NASDAQ in April 2000 and was the largest semiconductor buyout and IPO in Wall Street history. Prior to ON Semiconductor and TPG, Thorburn's career spanned 17 years at National Semiconductor where he served as Vice President of Operations Finance. He holds an Honors degree in Science and Economics from the University of Glasgow, Scotland, and is a qualified, chartered accountant. Burger Named President Mike Burger, 43, was named President of ZiLOG and was elected to ZiLOG's Board of Directors. In his new role, Burger will be responsible for all product, engineering, marketing and sales activities at the company. Prior to his current title, Burger held positions at ZiLOG as Executive Vice President, and Senior Vice President of Worldwide Sales and Marketing. "Mike has played a critical role in the turnaround at ZiLOG," Thorburn said. "Mike's experience in the semiconductor industry and strong customer relationships will be essential as ZiLOG reinvigorates its core microcontroller and microprocessor businesses. Burger has more than 20 years of semiconductor experience with a focus in sales and marketing of digital logic and analog products. Prior to his current appointment, Mr. Burger was Executive Vice President and General Manager responsible for the company's four Business Units, the Software Development group, the Tool Development group, and the entire selling organization. He joined ZiLOG in December 1998 as Senior Vice President of Worldwide Sales. Before joining ZiLOG, Mr. Burger was Vice President and Managing Director of National Semiconductor's Hong Kong-based Asia Division. While at National, Mr. Burger created several Chinese joint ventures aimed at penetrating the Chinese Telecommunication marketplace. In addition, he restructured the company's marketing approach from a product focus to an application focus, giving the company a better understanding of their customer systems and their applications. As a result, he was responsible for propelling growth in the Taiwanese PC Market place through joint product development programs with several leading Taiwanese PC manufacturers. He also launched product development for the Asian customer base. Mr. Burger holds a Bachelor of Science degree in Electrical Engineering from New Mexico State University. He is a graduate of Stanford's Executive Management Program. ZiLOG, Inc. designs, manufactures and markets semiconductors for the communications and embedded control markets. Headquartered in San Jose, Calif., ZiLOG employs approximately 750 people worldwide. ZiLOG maintains design centers in San Jose, Calif.; Ft. Worth, Texas; Nampa, Idaho; Seattle, Wash.; and Bangalore, India; manufacturing in Nampa; and test operations in Manila, Philippines. * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Crown Cork & Seal 7.125% due 2002 85.5 - 87.5 +1.5 Federal-Mogul 7.5% due 2004 15 - 17 +2 Finova Group 7.5% due 2009 41 - 42 +3.5 Freeport-McMoran 7.5% due 2006 81 - 84 +1 Global Crossing Hldgs 9.5% due 2009 3.75 - 4.75 +0.25 Globalstar 11.375% due 2004 7 - 9 +2 Lucent Technologies 6.45% due 2029 63 - 65 -2 Polaroid Corporation 6.75% due 2002 5 - 7 +1 Terra Industries 10.5% due 2005 84 - 87 0 Westpoint Stevens 7.875% due 2005 33 - 36 0 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 its 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, Donnabel C. Salcedo, 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 $625 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 ***