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/raid1/www/Hosts/bankrupt/TCR_Public/020321.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 21, 2002, Vol. 6, No. 57 Headlines 360NETWORKS: Debtors' Exclusive Period Runs to May 28, 2002 ANC RENTAL: Seeks Approval to Consolidate at Pittsburgh Airport ALLIANCE INV.: Fitch Further Junks Participating Loan Rating AMERICA WEST: Will Recall Furloughed Flight Attendants & Pilots AMERICAN AMMUNITION: Reduces Debt in Preferred Stock Conversion AVIATION DISTRIBUTORS: Grant Thornton Bows-Out as Accountant BGF INDUSTRIES: Dec. 31 Balance Sheet Upside-Down by $9 Million BETHLEHEM STEEL: Court Nixes Move to Appoint Retirees' Committee BION ENVIRONMENTAL: Sets Annual Shareholders' Meeting for Apr. 4 BOISE CASCADE: Annual Shareholders' Meeting Set for April 18 BUCKEYE TECHNOLOGIES: Bank Group Agrees to Amend Credit Facility BURLINGTON INDUSTRIES: Committee Taps Saul Ewing as Co-Counsel BURLINGTON MOTOR: Gains Okay to Sell Certain Assets to Celadon CALHOUN CBO: Fitch Junks $57 Mill. 2nd Priority Fixed Rate Notes CHIQUITA BRANDS: Names Cyrus F. Freidheim as Chairman and CEO COMDISCO INC: Christus Wants Master Agreement Assumption Barred COVANTA ENERGY: Negotiating Additional Waivers with Bank Lenders CYPRESS FOODS: Completes Disposition of 1.2 Mil. Hens at 9 Farms DANKA BUSINESS: Intends to Repay Outstanding 6.75% Conv. Notes DECORATIVE SURFACES: Case Summary & Largest Unsecured Creditors DOE RUN: Moody's Hatchets Junk Ratings After Interest Nonpayment ELIZABETH ARDEN: S&P Maintaining Watch on Low-B Ratings EMAGIN CORP: Secures Commitment for $15MM Continued Financing EMAGIN CORP: Raises $2.5 Million from Private Equity Placement EMAGIN CORP: Dec. 31 Balance Sheet Shows Equity Deficit of $5MM ENRON CORP: Energy Debtors Propose Contract Bidding Procedures ENRON INDIA HOLDINGS: Voluntary Chapter 11 Case Summary ENRON MAURITIUS: Case Summary & Largest Unsecured Creditor FEDERAL-MOGUL: Hanly & Conroy Replaces C&W as Asbestos Counsel FLEMING: Strikes Major Supply Pact with Albertson's Stores GLOBAL CROSSING: Teleglobe Wants Adequate Assurances of Payment HAYES LEMMERZ: CIBC Balks at Houlihan Lokey's Engagement Terms HORIZON MEDICAL: Arranges Recap. to Extinguish Senior Bank Debt ICG COMMUNICATIONS: Court Allows Continued Cash Collateral Use IT GROUP: Look for Schedules and Statements on Friday INTEGRATED HEALTH: Obtains Approval of Replacement DIP Facility KAISER ALUMINUM: Will Be Paying Prepetition Trust Fund Taxes KMART: Institutional Committee Signs-Up FTI as Fin'l Advisors LERNOUT & HAUSPIE: Court Okays Asset Sale to SpeechWorks Int'l MAGNUM HUNTER: S&P Ups Credit Rating to BB- Following Merger MALAN REALTY: Board of Directors Adopts Plan of Liquidation MARINER POST-ACUTE: Pangia Seeks Equity Committee Appointment MEDICALOGIC: GE Medical Systems Pitches Highest Bid for Assets MONUMENT CAPITAL: Fitch Cuts Class B Notes Rating to Low-B Level NATIONAL STEEL: Wins Approval to Maintain Existing Bank Accounts NABI: Changes Name to Nabi Biopharmaceuticals Following Merger NATIONSRENT INC: CIT Group Seeks Stay Relief to Recover Property NAVISTAR FINANCIAL: S&P Rates $200MM Exchangeable Notes at BB- NETIA HOLDINGS: Resumes Trading on Nasdaq Beginning March 20 NEXTEL COMMS: Fitch Revises Outlook on Low-B Ratings to Negative OHIO CASUALTY: Closes $201MM Convertible Note Private Offering PACIFICARE HEALTH: S&P Affirms BB- Counterparty Credit Rating PENTON MEDIA: Amends Sr. Credit Facility after Private Placement PICKUPS PLUS: Closes Initial Stage of Refinancing with Pups Inv. POTLATCH CORP: Fitch Affirms BB+ Sr. Subordinated Notes Rating PREMIER LASER: Tranzon Auctioning Laser & IP Inventory PROVANT INC: IIR Intends to Purchase $47MM Outstanding Bank Debt PSINET INC: Selling TX Real Property to Steam Realty for $10.5MM SAMSONITE CORP: Fourth Quarter Operating Loss Doubles to $14MM SERVICE MERCHANDISE: Selling Store Fixtures in Bulk for $3.3MM SOFTWARE LOGISTICS: Zomax Inc. Bolts Asset Purchase Agreement TRI-NATIONAL DEV'T: Court Extends Exclusive Period to July 31 TRICORD SYSTEMS: Fails to Meet Nasdaq Listing Requirements W.R. GRACE: Court Okays HR&A as PD Committee's Claims Expert WARNACO GROUP: Seeks Approval of Settlement with HIS Equipment * DebtTraders' Real-Time Bond Pricing ********* 360NETWORKS: Debtors' Exclusive Period Runs to May 28, 2002 ----------------------------------------------------------- Judge Gropper grants 360networks inc., and its debtor- affiliates' extensions of their exclusive periods to: (a) May 28, 2002 -- to file a plan or plans of reorganization; and (b) July 26, 2002 -- to solicit acceptances to a plan or plans of reorganization. (360 Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANC RENTAL: Seeks Approval to Consolidate at Pittsburgh Airport --------------------------------------------------------------- ANC Rental Corporation and its debtor-affiliates ask the Court for permission to reject the Alamo Concession Agreement and Lease and to assume the National Concession Agreement and Lease and assign it to ANC, both of which are with the Pittsburgh International Airport. Mark J. Packel, Esq., at Blank Rome Comisky & McCauley LLP in Wilmington, Delaware, states that proposed actions will result in cost savings for the Debtors of over $1,000,000 per year in fixed facility costs and other operational cost savings. In addition, much benefit can be gained by the increase in efficiency from operating two brands out of a single location. Avis Objects Herbert W. Mondros, Esq., Rosenthal, Monhait, Gross & Goddess, P.A., in Wilmington, Delaware asks the Court to deny the Debtors' motion for the same reasons that Avis has consistently objected to the Debtors' motions for the consolidation of operations of Alamo and National at the other airports. Mr. Mondros points out that the agreements at hand are with a governmental entity that are subject to competitive bidding requirements as well as federal and state constitutional requirements. The National Agreement, he continues, was a competitively bid agreement by which the Airport Authority was to consider many items to determine whether the proposed concessionaire had the requisite skill, ability and experience to obtain one of the competitively bid concessions. Since the competitive bidding requirements did not require the Airport Authority to accept performance from anyone, he states that the Airport Authority cannot be forced to accept the proposed assignment. In addition, Pennsylvania law requires that airport concessionaires, like Avis, National and Alamo, be treated substantially the same. Mr. Mondros, however, points out that the new agreement would enable Alamo and ANC, which do not have airport concessions, to obtain concessions without complying with competitive bidding requirements. The National Agreement, in addition, does not permit a concessionaire to operate two brands from one location. Thus, permitting modification and assignment of the National Agreement would violate Pennsylvania law and is contrary to 11 U.S.C. Sec. 365(c)(1)(B). In addition, Mr. Mondros states that National, Alamo and ANC are separate Debtors with separate constituencies. With the motion, he goes on to say, the Debtors are seeking to substantively consolidate their cases without providing notice to creditors, and without considering the potential conflicts of interest. This, he tells the Court, should not be done in the context of a motion to assume and assign. (ANC Rental Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) ALLIANCE INV.: Fitch Further Junks Participating Loan Rating ------------------------------------------------------------ Fitch Ratings downgrades the participating loan issued by Alliance Investment Opportunities Fund, L.L.C., a market value collateralized debt obligation. The following rating action is effective immediately: --$30,000,000 participating loan to 'CC' from 'CCC+'. Alliance originally failed its senior minimum net worth test on Dec. 31, 1999. To remedy the failure, the fund redeemed rated debt in an amount to correct the minimum net worth test on Jan. 25, 2000. To date, Alliance has successfully paid down four rated classes of debt leaving the $30 million Participating Loan the only rated tranche outstanding. The participating loan was originally downgraded from its initial rating of 'B' to 'CCC+' in January 2000. This additional rating action results from the further decline of the market value of the fund's assets. Alliance is currently failing its Participating Loan over-collateralization test by roughly 30%. Taken at current market value the portfolio assets are worth approximately $23 million which is less than the $30 million of par that is due to the holders of the Participating Loan. Moreover, the current portfolio investments are nearly all semi-liquid and illiquid investments. The large percentage of semi-liquid and illiquid assets in the portfolio is a result of the significantly delevered capital structure. Due to the uncertainty of the liquidity and the price volatility of the portfolio, Fitch believes that rating action is necessary to reflect the current risk to the remaining holders of the Participating Loan. AMERICA WEST: Will Recall Furloughed Flight Attendants & Pilots --------------------------------------------------------------- America West Airlines (NYSE: AWA) announced it plans to recall from furlough 170 flight attendants and an additional 38 pilots by June to support a projected increase in travel demand. The company anticipates the recall of all furloughed flight attendants by year end. America West previously recalled 75 pilots in February. "As demand for air travel continues to increase, we are responding by adding flights back to our schedule," said Jeff McClelland, executive vice president, operations. "To support this additional service to our customers, we're very happy to be returning our furloughed flight attendants and pilots to the America West team. Our goal, as demand improves, is to return all remaining furloughed employees to active status as soon as possible." America West furloughed 179 pilots and 244 flight attendants due to the downturn in travel demand that resulted from the September 11 terrorist attacks, while reducing its flight schedule by approximately 20 percent. Since then, the airline has reinstated nearly half of the flights that had been affected and plans to reinstate additional flights next month. America West has brought back more than 1,500 employees since the reductions in force last October. America West Airlines, the nation's eighth-largest carrier, serves 88 destinations in the U.S., Canada and Mexico. Along with its codeshare partners, America West serves more than 170 destinations worldwide. For the second consecutive month, America West ranks number one in on-time performance among all major carriers as recorded in the Air Travel Consumer Report published by the U.S. Department of Transportation. America West Airlines is a wholly owned subsidiary of America West Holdings Corporation, an aviation and travel services company with 2001 sales of $2.1 billion. AMERICAN AMMUNITION: Reduces Debt in Preferred Stock Conversion --------------------------------------------------------------- American Ammunition (OTCBB:AAMI) announced that five shareholders voluntarily converted 1,749,600 shares of $5.00 Series A Convertible Preferred Stock into common stock of the Company. This represents an investment in the Company of $8,748,000.00 in cash and debt conversion. The Series A Convertible Preferred Stock provides for cumulative dividends at the rate of 8% per year, payable quarterly, in cash or shares of common stock. The conversion eliminates the 8% dividend payments incurred by the Company. "This significant amount of dividend/debt reduction further strengthens the Company's balance sheet, and increases the equity in the corporation, further enabling the Company to attract additional investment and remain competitive in the marketplace", said Andres Fernandez, President of American Ammunition. American Ammunition is an autonomous manufacturer of ammunition, with the technology and equipment to take advantage of the growing market. It has an excellent reputation within the industry. The ammunition industry has experienced a 28% average increase in revenues annually between 1991 through 1998, and the trend is expected to continue through the year 2005 and beyond. For further product information, please call 1-305-835-7400 or visit the Web site at: http://www.a-merc.com For Investor Relations information, please call toll free: 1-800-288-7499 or e-mail: info@dpmartin.com AVIATION DISTRIBUTORS: Grant Thornton Bows-Out as Accountant ------------------------------------------------------------ Grant Thornton LLP resigned as the independent accountant of Aviation Distributors, Inc. effective February 26, 2002. Grant Thornton's reports on the Company's financial statements for the years ended December 31, 2000 and 1999 contained an unqualified opinion with a emphasis paragraph describing an uncertainty as to the Company's ability to continue as a going concern. The Company's dominant shareholder pled guilty in February 2002 to criminal charges of deceiving its prior bank and previous auditors in 1997. Grant Thornton has determined that this shareholder was active in management of significant aspects of the Company's operations in the year ended December 31, 2001. Accordingly, Grant Thornton concluded that they could not render a report or otherwise complete an audit of the Company's 2001 financial statements in accordance with Generally Accepted Auditing Standards. On February 26, 2002, the Company engaged Squar, Milner, Reehl & Williamson, LLP as its principal accountant. Aviation Distributors' Board of Directors has approved the decision to engage Squar Milner. ADI sells new and used airplane parts, primarily to commercial passenger airlines. The company offers a variety of parts, including those classified as rotable (extensively repaired and reused), repairable (repaired a limited number of times), and expendable (used only once). ADI handles parts made by Airbus, Boeing, General Electric, Lockheed Martin, Pratt & Whitney, and Rolls Royce. It sells parts from its own inventory, on consignment, and through marketing agreements with airlines, manufacturers, and distributors. About half of ADI is held by founder Osamah Bakhit. BGF INDUSTRIES: Dec. 31 Balance Sheet Upside-Down by $9 Million --------------------------------------------------------------- BGF Industries, Inc. (BGF) announced that net sales for the quarter ended December 31, 2001 decreased $24.3 million, or 44.2%, to $30.7 million as compared to $55.0 million for the quarter ended December 31, 2000, and net sales for the year ended December 31, 2001 decreased $54.6 million, or 27.1%, to $146.8 million as compared to $201.4 million for the year ended December 31, 2000. This decrease was due primarily to a decrease in sales of electronics fabrics and sales of filtration fabrics. The decrease in sales of electronics fabrics was primarily a result of significant inventory adjustments in the electronics industry that began during the first quarter of 2001. In addition, the decrease in capital spending in the information technology and telecommunications industry led fabricators of printed circuit boards to reduce production which negatively impacted our sales to these customers. The decrease in sales of filtration fabrics was due to fewer large utility projects that have replaced filter bags as well as a downturn in the steel and foundry industries. Our second largest market, fabrics used in composite materials, held up well prior to September 11, 2001. We now expect to confront a decline in orders from customers in the aerospace industry due to uncertainty over airline traffic recovery. It is unknown if this decrease will be fully or partially offset by the market for refurbishing existing aircraft or increased purchases by the military. In response to these market conditions, we reduced production schedules and focused on operating cost reductions and working capital management. In the third and fourth quarters of 2001, we furloughed production employees thereby reducing our production workforce by approximately 25% since January 1, 2001. In addition to the furlough of production employees, we reduced a number of salaried positions in order to cut costs in future periods. The reduction of production schedules resulted in an $8.1 million decrease in inventories as of the end of the fourth quarter compared to the end of the third quarter. EBITDA for the quarter ended December 31, 2001 decreased $10.3 million, or 92.8%, to $0.8 million from $11.1 million for the quarter ended December 31, 2000, and for the year ended December 31, 2001 decreased by $18.9 million, or 51.4%, to $17.9 million from $36.8 million for the year ended December 31, 2000. EBITDA is defined as net income before interest expense, income taxes, depreciation, amortization expense and non-recurring, non-cash charges. Gross profit margins decreased to 10.4% in the year ended December 31, 2001 from 17.7% in the year ended December 31, 2000 due primarily to shifts in product mix as well as lower sales and production volumes which resulted in less absorption of fixed costs. Selling, general and administrative expenses were 4.8% and 4.6% of net sales in the years ended December 31, 2001 and 2000, respectively. The increase was primarily due to lower sales volumes for 2001, offset by decreased accruals for profit sharing and management fees and bonuses. As a result of the aforementioned factors and charges of $502,000 incurred in 2001 due to the restructuring plan that eliminated several salaried positions across the company, operating income decreased $18.6 million to $7.7 million, or 5.3% of net sales, in the year ended December 31, 2001, from $26.3 million, or 13.1% of net sales, in 2000. Interest expense decreased $0.2 million, to $14.0 million in 2001 from $14.2 million in 2000, primarily due to lower interest rates offset by a write-off of $0.6 million of deferred financing fees relating to our senior credit facility. As a result of the aforementioned factors, net income decreased $11.4 million to a loss of $(3.0) million in the year ended December 31, 2001 from $8.4 million in the year ended December 31, 2000. BGF, headquartered in Greensboro, NC, manufactures specialty woven and non-woven fabrics made from glass, carbon and aramid yarns for use in a variety of electronic, filtration, composite, insulation, construction, and commercial products. At December 31, 2001, the company's balance sheet showed that its total liabilities eclipsed its total assets by $9,011,000. BETHLEHEM STEEL: Court Nixes Move to Appoint Retirees' Committee ---------------------------------------------------------------- The Retired Employees' Benefits Coalition, Inc. was formed in 1987 as a result of reports that Bethlehem Steel Corporation and its debtor-affiliates would probably file a voluntary petition for reorganization. The organization is made up of the Debtors retired salaried employees, their spouses and dependents. Dennis Terrell, Esq., at Drinker Biddle & Reath, in New York, relates that the organization seeks to appoint an official statutory committee to serve as the authorized representative of the Debtors' non-union retirees. Mr. Terrell explains that as a result of a Settlement Agreement, a Benefit Plan for non-union retirees and their dependents was established. However, in an effort to ease the financial burden placed upon the Debtors from various employee benefit plans, the Debtors commenced negotiations with the United Steel Workers of America to modify the existing collective bargaining agreement. The Debtors have alleged that any plan of reorganization must include a solution to their approximate $3,000,000,000 retiree healthcare obligation. Mr. Terrell reports that despite nearly $300,000,000 in net costs deductions, the Debtors have not been able to overcome the injury caused by record levels of unfairly traded steel imports that reduced revenues by approximately $1,300,000,000 annually. Furthermore, Mr. Terrell states that the resulting operating losses of approximately $500,000,000 and negative cash flow have severely impaired the Debtors' financial condition. "As such, the Debtors claim that the Benefit Plans impose significant financial obligations on the Debtors' estates," Mr. Terrell says. In light of the ongoing negotiations, Mr. Terrell explains that many are questioning how the non-union salaried retirees' views could be heard. Thus, the organization sought to have an official committee of nonunion retirees appointed by the United States Trustee. However, the United States Trustee responded that only the Court has the authority to appoint a committee of nonunion retirees. The organization proposes the appointment of a committee that will accurately reflect the interest of all nonunion retirees. The proposed Official Nonunion Retirees' Committee will have a total of five members, composed of participants of both Benefit Plans, three members of the organization and two individuals that served in the Debtors' benefits department: Proposed Committee Background Description ------------------ ---------------------- Walter Buckley A participant under the Benefit Plans and former chief trustee of the Bethlehem Pension Trust Fund Robert Lohr Former senior member of Bethlehem's employee benefits department Bruce Davis General counsel to the organization and former member of Bethlehem's General Counsel's office Fred Harvey The organization director and former General Manager of the Bethlehem Steel plant in Bethlehem, Pennsylvania James Van Vliet The organization president and formerly vice president of marketing for Bethlehem Mr. Terrell asserts that these individuals' experience and knowledge of non-union benefit plans will ensure the appropriate representation for all nonunion retirees. Therefore, the Retired Employees' Benefits Coalition asks the Court to grant them authority to appoint an Official Non-union Retirees' Committee as the representative of the Debtors' non- union retirees. Debtors Object According to George A. Davis, Esq., at Weil, Gotshal & Manges, in New York, the relief requested by the Retired Employees' Benefits Coalition is premature. "The Debtors are in full compliance with their obligations to all retirees and the payment of Retiree Benefits. No modification of Retiree Benefits has been proposed to date," Mr. Davis adds. Mr. Davis states that at this time, the appointment of a Retiree Committee is inappropriate. It would only add to already significant administrative expenses being incurred by the Debtors. The Debtors are still in the process of stabilizing their business operations and attempting to improve productivity and reduce costs, particularly healthcare and employment costs. Mr. Davis reports that specifically, the Debtors have been: (i) responding to many exigencies and other matters which are incidental to the commencement of any chapter 11 case, but which are compounded given the size and complexity of these cases; (ii) responding to a multitude of inquiries and information requests made by the statutory committee of unsecured creditors appointed in these cases, the pre-petition and post-petition lenders, the USWA, vendors, customers and bondholders. * * * "Motion denied," Judge Lifland rules. If and when Bethlehem believes it needs to negotiate retiree benefit modifications, Judge Lifland is certain that the Debtors' lawyers know what's required under section 1113 of the Bankruptcy Code and will follow those procedures. (Bethlehem Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) BION ENVIRONMENTAL: Sets Annual Shareholders' Meeting for Apr. 4 ---------------------------------------------------------------- The Annual Meeting of Shareholders of Bion Environmental Technologies, Inc., a Colorado corporation, will be held at the Company's headquarters at 18 East 50th Street, 10th Floor, New York, New York, on Thursday, April 4, 2002, at 10:00 a.m., Eastern Time, and at any and all adjournments thereof, for the purpose of considering and acting upon the following matters. 1. The election of five (5) Directors of the Company to serve until the next Annual Meeting of Shareholders and until their successors have been duly elected and qualified; 2. The ratification of the appointment of BDO Seidman, LLP as the Company's independent auditors; 3. The approval of the Company's 2002 Incentive Plan; 4. The approval of a proposed 1 for 3.5 reverse split of the outstanding shares of the Company's common stock; and 5. The transaction of such other business as may properly come before the meeting or any adjournment thereof. Only holders of the no par value common stock of the Company of record at the close of business on February 25, 2002, will be entitled to notice of and to vote at the Meeting or at any adjournment or adjournments thereof. Bion designs and operates advanced waste and wastewater treatment systems for a variety of industrial and agricultural applications. At March 31, 2001, Bion reported a total shareholders' equity deficit of close to $9 million. BOISE CASCADE: Annual Shareholders' Meeting Set for April 18 ------------------------------------------------------------ The 2002 annual meeting of shareholders of Boise Cascade Corporation, will be held on Thursday, April 18, 2002, at 12 noon, Mountain Daylight Time, at Powerhouse Event Center, 621 South 17th Street, Boise, Idaho to consider and act upon the following: To elect four directors to serve three-year terms; To approve the appointment of the Company's independent auditors for 2002; To consider and act upon two shareholder proposals; and To conduct other business properly brought before the meeting. Shareholders who owned stock at the close of business on February 25, 2002, can vote at the meeting. Boise Cascade is a major distributor of office products and building materials, manufactures paper and wood products, and owns more than 2 million acres of timberland. At September 30, 2001, the company recorded a working capital deficit of about $160 million. BUCKEYE TECHNOLOGIES: Bank Group Agrees to Amend Credit Facility ---------------------------------------------------------------- Buckeye Technologies Inc. (NYSE:BKI) announced that it has reached agreement with its bank group on amendments to the Company's existing $215 million revolving credit facility. The Company also commented on current business conditions. Buckeye indicated that the amended agreement with its bank group loosens financial covenants through June 2003, but increases its interest rate by 50 basis points to a current rate of 5.8%. The Company regards the terms of the agreement as satisfactory. Buckeye Chairman Robert E. Cannon commented that "We are pleased to have reached agreement with our banks and are comfortable with the revised covenants. We enjoy a strong relationship with an outstanding group of banks, including Fleet, Wachovia, Bank of America, and Toronto Dominion. They understand our business and have been supportive during a difficult economic period." With regard to the Company's current quarter, Mr. Cannon stated, "We are in the process of significantly reducing our finished product inventories. This generates cash, but hurts earnings in the current weak wood pulp market. We are taking a one-time restructuring charge of about $1 million which will also adversely impact the current quarter. Consequently, we expect to experience a net loss of about $4 million in the January-March quarter. "There are, however, some signs that the pulp market may be turning around. Industry shipments were brisk in February and we are now moving into the usually stronger spring months. We believe that the worst is behind us and that our business results will start improving in the April-June quarter." Buckeye, a leading manufacturer and marketer of specialty cellulose and absorbent products, is headquartered in Memphis, Tennessee, USA. The Company currently has facilities in the United States, Germany, Canada, Ireland and Brazil. Its products are sold worldwide to makers of consumer and industrial goods. BURLINGTON INDUSTRIES: Committee Taps Saul Ewing as Co-Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors, in the chapter 11 cases of Burlington Industries, Inc., and its debtor-affiliates, seeks the Court's authority to retain Saul Ewing as its co-counsel, nunc pro tunc to February 27, 2002. Committee Chair Pamela K. Wilson, from WLR Recovery Fund, states that it is essential to employ Akin Gump and Saul Ewing as their counsel to perform the legal services for their chapter 11 cases. Ms. Wilson explains that Akin Gump is employed as the Committee's attorneys because of the firm's extensive knowledge and expertise in the areas of law relevant to these cases. "However, because the counsel and associates of Akin Gump are not Delaware lawyers, the retention of Saul Ewing as Delaware counsel is necessary," Ms. Wilson adds. Furthermore, Ms. Wilson explains that the Committee seeks to retain Saul Ewing because of the firm's experience and knowledge in the field of creditors' rights. In addition, Ms. Wilson notes, Saul Ewing also possesses expertise and knowledge in practicing before this Court. Since the firm is close to the Court, Ms. Wilson says, it has the ability to respond quickly to emergency hearings and related matters. "Saul Ewing's appearance before this Court will be more efficient and cost effective," Ms. Wilson insists. As co-counsel, Saul Ewing will: (i) provide legal advice with respect to the Committee's rights, powers and duties in these cases; (ii) prepare on behalf of the Committee all necessary applications, answers, responses, objections, forms of orders, reports and other legal papers; (iii) represent the Committee in all matters involving contests with the Debtors, alleged secured creditors and other third parties; (iv) assist the Committee in its investigation and analysis of the Debtors and the operations of the Debtors' businesses; and (v) perform all other legal services for the Committee which may be necessary and proper in these proceedings. Accordingly, Ms. Wilson states that compensation will be payable to Saul Ewing on an hourly basis, plus reimbursement of actual, necessary expenses incurred by the law firm. The attorneys and paralegals designated to represent the Committee and their standard hourly rates are: Norman L. Pernick $425 Mark Minuti (Partner) $345 Donald J. Detweiler (Special counsel) $260 Tara Lattomus (Associate) $245 Jeremy W. Ryan (Associate) $235 Annmarie Stergakos (Law clerk) $125 Pauline Z. Ratkowiak (Paralegal) $125 Veronica Parker (Case management clerk) $50 "Other attorneys and paralegals may from time to time serve the Committee," Ms. Wilson reports. Mr. Detweiler explains that these are Saul Ewing's standard rates for work of this nature. "The rates are set at a level designed to fairly compensate the firm for the work of its attorneys and paralegals and to cover fixed and routine overhead expenses," Mr. Detweiler says. Moreover, Mr. Detweiler adds, the firm will seek reimbursement of out-of-pocket expenses such as: telephone and telecopier toll and other charges, mail and express mail charges, special or hand delivery charges, photocopying charges at the rate of $.15 per page, travel expenses, expenses for "working meals", computerized research, transcription costs, as well as non-ordinary overhead expenses such as secretarial and other overtime. "To the best of my knowledge, Saul Ewing has not represented the Debtors, its professionals, members of the Committee or their professionals, noteholders, creditors, customers or any other parties in interest," Mr. Detweiler asserts. Furthermore, Mr. Detweiler assures the Court that Saul Ewing does not hold or represent any interest adverse to the Committee. Thus, Mr. Detweiler contends, Saul Ewing is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. (Burlington Bankruptcy News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON MOTOR: Gains Okay to Sell Certain Assets to Celadon -------------------------------------------------------------- Celadon Group, Inc. (Nasdaq: CLDN) announced that a Federal bankruptcy court has approved Celadon's previously announced agreement to acquire certain assets of Burlington Motor Carriers. The ruling in U.S. Bankruptcy Court for the Southern District of Indiana permits Celadon to acquire assets including customer contracts and lists, tractors and trailers, office equipment and general intangibles from Foothill Corporation, a secured lender to BMC. BMC, a truckload carrier based in Daleville, Indiana, has operated since July 2001 in a reorganization proceeding. Financial terms of the transaction were not disclosed. Celadon Group Inc., a trucking company headquartered in Indianapolis, operates approximately 2,500 line haul tractors and 7,000 trailers. Celadon Group also is majority owner of TruckersB2B, a business-to-business provider of pre-negotiated savings on fuel, tires, trailers and other products and services purchased by small and medium-sized trucking companies and private fleets. The company's Web sites are http://www.celadontrucking.comand http://www.truckersb2b.com CALHOUN CBO: Fitch Junks $57 Mill. 2nd Priority Fixed Rate Notes ---------------------------------------------------------------- Fitch Ratings downgrades two classes of notes issued by Calhoun CBO Ltd./Calhoun CBO Corp. In conjunction, Fitch Ratings removes the Second Priority Senior Secured Fixed Rate Notes from Rating Watch Negative. The following rating actions are effective immediately: -- $227,070,729 Senior Secured Floating Rate Notes, Due 2010 downgraded from 'AA' to 'BB-'; -- $57,963,579 Second Priority Senior Secured Fixed Rate Notes, Due 2010 downgraded from 'BBB-' to 'C'. Calhoun CBO, a collateralized bond obligation managed by American Express Asset Management Group Inc. was established in July 1998 and currently maintains approximately 78.4% of its invested note proceeds in non-emerging markets high yield assets and 21.6% in emerging markets assets. After reviewing the portfolio performance, discussions with the portfolio manager, and conducting different cash flow scenarios amidst increasing levels of defaults and deteriorating credit quality of the underlying assets, Fitch Ratings has determined that the original ratings assigned to the Senior notes and Second Priority notes no longer reflect the current risk to noteholders. Calhoun CBO continues to fail its senior and second priority overcollateralization tests since March 2001 and its second priority interest coverage test since January 2002. Moreover, Calhoun CBO also continues to fail its required average portfolio rating test, its maturity profile test as well as some other collateral requirements. In addition, Calhoun CBO maintains 7.9% of its portfolio in assets rated 'CCC+' or worse excluding defaults. Currently, the portfolio contains approximately 11% in defaulted assets. CHIQUITA BRANDS: Names Cyrus F. Freidheim as Chairman and CEO ------------------------------------------------------------- Chiquita Brands International, Inc. (NYSE: CQB), the world's largest banana producer, announced that Cyrus F. Freidheim, Jr., was elected chairman of the board and chief executive officer. Freidheim, 66, will retire as vice chairman of Booz Allen & Hamilton at the end of this month after 35 years of service with the firm. Steven G. Warshaw, who successfully led the company through the difficult bankruptcy reorganization process, has resigned as president, chief executive officer and as a director of the company. Robert W. Fisher, a Board member and former president of Dole Food Co., was named acting chief operating officer. Fisher, 64, also served as chief operating officer of The Noboa Group, the largest private banana company, and as president of Geest Banana Co. Freidheim commended Warshaw for his dedicated work in helping put together a reorganization plan acceptable to the court and the creditors. "Steve provided leadership during the most difficult period in the company's history," Freidheim said. "We all wish Steve well in the next phase of his career. "I consider it a privilege to head up one of the oldest and most distinguished companies in the United States. Chiquita is one of the most recognizable and successful brand names in the world and it has become synonymous with quality. "Thanks to the dedication and hard work of our loyal employees in North America, Europe and Latin America, we have weathered the storm and have emerged intact from our Chapter 11 reorganization. "Our focus in the weeks and months ahead will be rebuilding as we all work together to restore profitability, grow shareholder value and resume our position of leadership in the industry." Freidheim said the board and the company's top managers would conduct an intensive top-to-bottom review of company operations over the next few months to determine the future course of Chiquita Brands. Other board members besides Freidheim and Fisher include: Morten Arntzen, 46, chief executive officer for American Marine Advisors, a merchant banking company for global shipping; Jeffrey Benjamin, 40, managing director of investment banking firm Libra Securities LLC; Roderick Hills, 71, chairman of Hills Enterprises Ltd., an investment consulting firm, and former chairman of the Securities and Exchange Commission; and Carl H. Lindner, former chairman of the board of Chiquita Brands International. Freidheim has over 35 years of business consulting experience with some of the world's leading corporations in 15 countries. His clients were spread across several industries including food, consumer products, and agribusiness. Freidheim has specialized in strategy and restructuring of global corporations, including playing a key role in devising and implementing the successful government-backed program to restore the Chrysler Corporation to profitability. The new board also reaffirmed the Company's previous statements that the financial projections prepared last May in connection with its restructuring discussions and that were subsequently publicly disclosed in connection with the Chapter 11 process will not be updated and should not be regarded as the company's prediction of future performance. Principally due to seasonality and volatility inherent in its business, Chiquita will resume its prior practice of not publishing or publicly disclosing financial projections. Chiquita Brands International, Inc., is a leading international marketer, producer and distributor of bananas and other quality fresh and processed foods sold under the Chiquita and other brand names. The Company is the U.S. leader of private label canned vegetables and has a growing export business. The diversified foods product line includes fruits and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based products. Background on Cyrus F. Freidheim, Jr. Cyrus F. Freidheim, Jr., the newly elected chairman of the board and chief executive officer of Chiquita Brands International, Inc., brings more than 35 years of experience in helping restructure and revitalize global corporations. As vice chairman of Booz Allen & Hamilton, Freidheim worked with the some of the world's leading corporations in 15 countries, including corporations in food, consumer products and agribusiness. In taking up his new post, Freidheim, 66, is retiring from Booz Allen after 35 years of service. While at Booz Allen, Freidheim was managing director U. S.; President-International in Paris; and managing director-Latin America. His major client focuses centered on restructuring, organization, turn-arounds, and crisis management for global corporations. He played a lead role in planning and successfully implementing the government-backed program to restructure and return to profitability the then financially strapped Chrysler Corporation during the 1979-1981 period when the company faced bankruptcy. Freidheim has written and spoken widely on global business, corporate governance and corporate organization, financing and restructuring. His 1998 book, "The Trillion Dollar Enterprise. How the Alliance Revolution Will Transform Global Business," presaged the many mega-mergers and alliances among major global corporations that have taken place since then. Freidheim received his bachelor's degree in chemical engineering from Notre Dame University in 1957 and his master's degree from Carnegie Mellon University in 1963. In 1959, while serving with a U.S. Navy security group, he attended the U. S. Naval Language School, where he majored in Russian. Before joining Booz Allen, Freidheim worked for Union Carbide, Price Waterhouse and the Ford Motor Company. He is a member of the Council on Foreign Relations in New York, the U.S.-Japan Business Council and has served on many commercial and not-for-profit boards. DebtTraders reports that Chiquita Brands' 10.250% bonds due 2006 (CQB06USR1) are quoted at a price of 98. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CQB06USR1for real-time bond pricing. COMDISCO INC: Christus Wants Master Agreement Assumption Barred --------------------------------------------------------------- Christus Health asks the Bankruptcy Court to: -- bar the assumption of a Master Technology Services Agreement by virtue of the financial accommodation benefiting Comdisco, Inc., and its debtor-affiliates or -- modify the automatic stay and allow them to terminate the Agreement. Allan R. Mills, Esq., at Barnes & Thornburg, in Indianapolis, Indiana, relates that the Debtors and Christus Health are parties to a Master Technology Services Agreement. Under the Agreement, Christus is to make quarterly payments in advance for services or equipment being provided amounting to $1,983,787. "This figure is based on pre-payment of $1,777,541 per quarter for equipment leasing and a pre-payment for the IT CAP Services in the amount of $206,247 per quarter," Mr. Mills says. Mr. Mills tells the Court that Christus is under no obligation to spend its quarterly payment since it was stated in the Agreement that Christus may spend less or more than the quarterly payment. "Thus, the Agreement is not a requirements agreement nor does it place a quota on Christus to purchase a certain level of equipment or services from the Debtors," Mr. Mills states. In the event that Christus does not utilize the entire amount of a quarterly payment, the Debtors who pay Christus interest at 6% per annum retain the unspent amount. Mr. Mills reports that the Agreement also contains a clause allowing a party to terminate the Agreement upon the insolvency or filing of a bankruptcy petition by the other party. The Agreement has also not been assumed by the Debtors or subject to pending assignment to any other third-party. Mr. Mills asserts that the Agreement is an executory contract or an unexpired lease because Christus is under a continuing obligation to make quarterly payments; thus, the Debtors have a reciprocal duty to either lease computer equipment or provide IT CAP Services. Under the Agreement, Mr. Mills explains that the quarterly payments constitute a financial accommodation since: (i) the payments are made in advance of the performance of services or the leasing of equipment by the Debtors; (ii) Christus is obligated to make the quarterly payments, regardless of whether Christus intends on purchasing IT CAP Services or equipment from the Debtors for that particular quarter; (iii) the Agreement places no mandatory purchasing quotas on Christus and yet Christus' obligation to advance nearly $2,000,000 per quarter continues for the life of the Agreement; (iv) the Debtors pay Christus 6% per annum on the retained refunds held in the Technology Funding Pool, thus, a de facto lender/borrower relationship is created; (v) Because Christus is obligated to advance the quarterly payments in advance of the need or receipt of the equipment or IT CAP Services, the Agreement requires Christus to accept from the Debtors a mere promise to repay the retained funds or to provide the equipment and services required by Christus; (vi) Christus only entered into the Agreement based on the Debtors' financial health, which this proceeding now calls into doubt; (vii) the quarterly payments and retained funds are not placed in trust or otherwise isolated for the benefit of Christus and the Debtors thus has the use of the quarterly payments and retained funds until returned to or utilized by Christus; and (viii) the quarterly payments allow the Debtors to purchase the equipment when it otherwise would not be able to do so. "Therefore, cause exists for this Court to modify the automatic stay to allow Christus to exercise its right to terminate the contract," Mr. Mills asserts. Christus Health thus asks the Court to bar the assumption of the Agreement by the Debtors or in the alternative, modify the automatic stay to allow them to terminate the Agreement. (Comdisco Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVANTA ENERGY: Negotiating Additional Waivers with Bank Lenders ---------------------------------------------------------------- Covanta Energy Corporation (NYSE:COV) announced that it is discussing with its banks the impact of the recent put to it of the Class A Distressed Preferred Shares related to the Corel Centre in Ottawa, Canada and the Class II Distressed Preferred Shares related to Ottawa Senators Hockey Team. The Company's obligations to repurchase these shares for approximately $105.5 million are secured by letters of credit issued under the Company's Master Credit Facility. Covanta is now in discussions with its banks regarding possible means of resolving these obligations, although there can be no assurances that the discussions will result in an agreement. As previously announced, the Company is pursuing a restructuring of its balance sheet as part of its comprehensive review of strategic options. Covanta Energy Corporation is an internationally recognized designer, developer, owner and operator of power generation projects and provider of related infrastructure services. The Company's independent power business develops, structures, owns, operates and maintains projects that generate power for sale to utilities and industrial users worldwide. Its waste-to-energy facilities convert municipal solid waste into energy for numerous communities, predominantly in the United States. The Company also offers single-source design/build/operate capabilities for water and wastewater treatment infrastructures. Additional information about Covanta can be obtained via the Internet at http://www.covantaenergy.com or through the Company's automated information system at 866-COVANTA (268- 2682). CYPRESS FOODS: Completes Disposition of 1.2 Mil. Hens at 9 Farms ---------------------------------------------------------------- Georgia Commissioner of Agriculture Tommy Irvin announced that the disposition of more than a million chickens left without adequate food following the bankruptcy of a Florida egg company is now complete. The state Department of Agriculture advised, monitored and supervised the trustees of Cypress Foods, Inc., with the removal and disposal of approximately 1.2 million hens at nine farms in southeast Georgia. Approximately 705,000 hens were sold to other poultry business entities, 40,000 were shipped to slaughter and 426,000 were humanely euthanized. The Department expended more than 180 working hours in helping resolve this dilemma, according to Commissioner Irvin. The company's bankruptcy left the egg producers with little or no supply of feed. Under the agreement the producers had with the company, the company supplied feed for the birds. Cost of the feed could be thousands of dollars per week depending on the size of the operation. "Some producers tried purchasing feed themselves to keep the flocks alive until a solution could be found. We persuaded the bankruptcy judge to allow what little cash assets were available be used to remedy the situation," said Commissioner Irvin. "We want to thank the Georgia Poultry Federation for helping rally support from the poultry industry and Wimpey Poultry, American Protein Inc., Claxton Poultry and Tim Ford for providing feed, workers or services to assist in resolving this problem," said Irvin. DANKA BUSINESS: Intends to Repay Outstanding 6.75% Conv. Notes -------------------------------------------------------------- Danka Business Systems PLC (Nasdaq:DANKY) announced that its 6.75% convertible subordinated notes due 2002 mature on April 1, 2002 and that Danka plans to pay the outstanding principal amount of $15,988,000 of 6.75% Notes in full on maturity, together with the accrued interest thereon, from Danka's available cash resources. The 6.75% Notes are convertible, subject to the terms and conditions of the indenture for the 6.75% Notes, into Danka's American depositary shares or, in the limited circumstances set out in the indenture, Danka's ordinary shares, up to 5.00 p.m. (New York City time) on April 1, 2002. Danka Business Systems, PLC, headquartered in London, England, and St. Petersburg, Florida, is one of the world's leading providers of office imaging solutions and related services and supplies. Danka provides office imaging equipment and related services, parts and supplies to customers in 27 countries around the world. For additional information about copier, printer and other office imaging products from Danka, visit the Web site at: http://www.danka.com. DECORATIVE SURFACES: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Decorative Surfaces International, Inc. 1610 Design Way Dupo, Illinois 62239 Bankruptcy Case No.: 02-10841 Chapter 11 Petition Date: March 19, 2002 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtors' Counsel: Bruce Grohsgal, Esq. Pachulski, Stang, Ziehl Young & Jones 919 N. Market Street 16th Floor Wilmington, Delaware 19899-8705 302-778-6403 Fax : 302-652-4400 and Laura Davis Jones, Esq. Pachulski, Stang, Ziehl Young & Jones 919 N. Market Street 16th Floor Wilmington, Delaware 19801 302-652-4100 Estimated Assets: $10 to $50 Million Estimated Debts: $50 to $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Polyone Corporation Trade $881,440 Patti MacLean 940 Chippawa Creek Road PO Box 1026 Avon Lake, Ohio 44012 Tel: (800) 438-4366 Fax: (905) 353-4260 Wade Steen-Franklin Real Estate and $589,207 County Treasurer Personal Property 373 S. High Street, 17th Taxes Floor Columbus, Ohio 43215-6306 Tel: (614) 462-3053 Fax: (614) 221-8024 Borden Chemicals & Trade $430,860 Plastics Corp. 4338 Highway 73 Geismer, Los Angeles Tel: (225) 673-6121 Fax: (225) 673-0672 Munksjo Paper D,cor, Inc. Trade $430,860 B. Nourie 642 River Street Fitchburg, Massachusetts 01420 Tel: (978) 342-1080 Fax: (978) 345-0639 Spartan Mills Corp. Trade $410,703 John K. Fort, Esq. In Re Spartan Mills, Chapter 7 Debtor USBC, District of South Carolina - Case N. 01-10254 (B) 195 N. Fairview Avenue Spartanburg, SC 29302 Tel: (864) 573-5311 Fax: (864) 582-6236 American Electric Utilities $261,418 Power Co. One Riverside Plaza Columbus, Ohio 43215 Tel: (614) 223-1000 Fax: (614) 223-1823 Tentok Paper Co. Ltd. Trade $239,701 Enron Energy Marketing Utilities $165,031 Columbia Gas of Ohio, Inc. Utilities $192,658 Interstate Gas Supply Utilities $133,777 Schweitzer-Mauduit Trade $128,703 Mid-American Machine & Trade $125,100 Equipment, LLC Creditor Int'l Trading & Trade $114,534 Assisting Co. Olympia Partners Lease $105,924 Formosa Plastics Corporation Trade $102,610 St. Clair County Tax Taxes $99,105 Collector IMPC, Inc. Trade $98,772 Kaneka Texas Corporation Trade $95,200 Shumaker Loop & Kendrick, Professional Fees $94,622 LLP Aristech Chemical Corp Trade $76,652 DOE RUN: Moody's Hatchets Junk Ratings After Interest Nonpayment ---------------------------------------------------------------- Moody's Investors Service lowered its ratings for The Doe Run Resources Corporation following the company's non-payment of approximately $16 million of interest due March 15 for its $305 million of senior notes. The company has plans of a debt restructuring. Rating outlook is negative. Ratings Actions To From * $100 million secured revolving credit Caa1 B3 facility, * $50 million of 11.25% guaranteed Ca Caa2 senior secured notes due 2005, * $200 million of 11.25% guaranteed C Caa3 senior notes due 2005, * $55 million of guaranteed floating C Caa3 interest rate senior notes (FIRSTSsm*) due 2003, * Doe Run's senior implied rating, Ca Caa2 * Doe Run's senior unsecured issuer rating C Caa3 The Doe Run Company, headquartered in St. Louis, Missouri, is a fully-integrated US lead producer and processor of complex polymetallic mineral concentrates in Peru. ELIZABETH ARDEN: S&P Maintaining Watch on Low-B Ratings ------------------------------------------------------- On March 15, 2002 Standard & Poor's said that its single-'B' ratings on fragrance and cosmetics maker Elizabeth Arden Inc. would remain on CreditWatch with negative implications, where they were placed on January 31, 2002. The company recently completed the negotiations with its bank group for an amendment to its credit agreement, waiving financial covenant violations for the fourth quarter fiscal 2002 (ended January 31), amid weak financial performance for the fiscal year. The amendment to the credit agreement also loosened the related covenant levels for each quarter of fiscal 2003 and the first three quarters of fiscal 2004. Standard & Poor's said the company's performance was impacted by the challenging conditions in the retail cosmetics industry, which was especially hard hit following the September 11, 2001 terrorist attacks. Revenues and operating profits were affected by the soft 2001 holiday selling season, intense competition, destocking by retailers, and reduced store traffic, especially at department stores and travel outlets. The company's January 2001 acquisition of Unilever's Elizabeth Arden business also added a significant amount of debt to the company's balance sheet, which has further exacerbated its weakened financial performance. Standard & Poor's expects that fiscal 2002 credit protection measures will include total debt to EBITDA of about 5 times, while EBITDA interest coverage is likely to be about 1.5x, far below the ratios achieved in fiscal 2001. Standard & Poor's will meet with Elizabeth Arden's senior management to discuss its ongoing business and financial strategies. Elizabeth Arden both manufactures and distributes fragrances and cosmetics. EMAGIN CORP: Secures Commitment for $15MM Continued Financing ------------------------------------------------------------- eMagin Corporation (AMEX: EMA) announced that it has received a commitment to provide the Company with up to $15 million from a private equity fund. The deal provides eMagin with the right, but not the obligation, to issue shares when it wishes to over the next thirty six months, subject to certain monthly maximum and minimum amounts up to a maximum of $15 million and in certain circumstances up to $20 million. The financing is subject to the filing of a registration statement with the Securities and Exchange Commission covering the registration of the shares. Pricing will be based upon the volume weighted average price of the Company's stock during the investment period. Gary Jones, president and CEO of eMagin, commented, "This financing commitment will give us the flexibility to issue equity if it is needed to finance the expansion of the company, specifically with the rollout of our OLED based imaging products to customers. It will serve primarily as back up working capital support, and we are excited about the chance to work with another institutional investor. The availability of these funds should help us accelerate our growth and enable our OEM customers to bring a new class of imaging products to the world." Further details on the terms will be available in the company's forthcoming Form 8-K, to be filed with the Securities and Exchange Commission. eMagin Corporation (AMEX:EMA) designs, develops, and markets virtual imaging system-on-a-chip solutions to enable the visual display of information, data, video, and games through a wide variety of mobile electronic devices and the next-generation of interactive virtual reality systems. The world leader in organic light emitting diode (OLED)-on-silicon technology, eMagin combines integrated circuits, microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin invented the award-winning SVGA+ and SVGA-3D OLED microdisplays, the worlds' first and only single-chip color video OLED microdisplay and embedded controller for advanced virtual imaging. eMagin's microdisplay systems are expected to enable new mass markets for wearable personal computers, wireless Internet appliances, portable DVD- viewers, digital cameras, and other emerging applications for consumer, industrial, and military applications. OLED microdisplays demonstrate performance characteristics important to military and other demanding commercial and industrial applications including low power consumption, high brightness and resolution, wide dimming range, wider temperature operating ranges, shock and vibration resistance, and insensitivity to high G-forces. eMagin's intellectual property portfolio of more than 100 patents issued or filed is leveraged by key OLED technology licensed from Eastman Kodak. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its campus in East Fishkill, N.Y. Optics and system design facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. Additional information is available at http://www.emagin.com As previously reported, eMagin considered bankruptcy filing to reorganize its operational and financial structures. EMAGIN CORP: Raises $2.5 Million from Private Equity Placement -------------------------------------------------------------- eMagin Corporation (AMEX: EMA) announced the completion and receipt of approximately $2.5 million private placement of common stock with several institutional and individual investors. The financing consisted of approximately 3.6 million shares of eMagin common stock and warrants to purchase up to approximately 1.4 million additional shares. The common stock investment was completed at 110% of the prior 5-day average market price on the determination date of February 27, 2002, which was $0.6913 per share of common stock. Warrants were issued at 120% of the above market price, or $0.7542 per share. The three-year warrants provided these investors with the future right to purchase 0.4 shares of eMagin common stock for every share of Common stock purchased in this transaction. Commenting on this financing transaction, Gary Jones, president and chief executive officer, stated, "This investment and investment commitment enables us to continue to move our manufacturing ramp forward and generate increased cash flow from sales in the near term. We will carefully control expenditures as we begin to fulfill order backlogs and increasing rate of sales. We plan to increase our supply inventories and add staff, mostly to increase off-shift production. The high level of automation of our microdisplay production equipment should permit large production gains from relatively small staffing increases." The company stated that it expects to use the net proceeds of the offering for working capital and general corporate purposes, and to help execute manufacturing goals for production of both consumer and military products. Further details on the terms will be available in the Company's forthcoming form 8-K, currently being filed with the Securities and Exchange Commission. eMagin Corporation (AMEX:EMA) designs, develops, and markets virtual imaging system-on-a-chip solutions to enable the visual display of information, data, video, and games through a wide variety of mobile electronic devices and the next-generation of interactive virtual reality systems. The world leader in organic light emitting diode (OLED)-on-silicon technology, eMagin combines integrated circuits, microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin invented the award-winning SVGA+ and SVGA-3D OLED microdisplays, the worlds' first and only single-chip color video OLED microdisplay and embedded controller for advanced virtual imaging. eMagin's microdisplay systems are expected to enable new mass markets for wearable personal computers, wireless Internet appliances, portable DVD- viewers, digital cameras, and other emerging applications for consumer, industrial, and military applications. OLED microdisplays demonstrate performance characteristics important to military and other demanding commercial and industrial applications including low power consumption, high brightness and resolution, wide dimming range, wider temperature operating ranges, shock and vibration resistance, and insensitivity to high G-forces. eMagin's intellectual property portfolio of more than 100 patents issued or filed is leveraged by key OLED technology licensed from Eastman Kodak. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its campus in East Fishkill, N.Y. Optics and system design facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. Additional information is available at http://www.emagin.com EMAGIN CORP: Dec. 31 Balance Sheet Shows Equity Deficit of $5MM --------------------------------------------------------------- eMagin Corporation (AMEX:EMA), which develops and markets organic light emitting diode (OLED) microdisplays built on silicon chips and virtual imaging systems, announced its financial results for the fourth quarter and for the full year ended December 31, 2001. Revenue for the fourth quarter 2001 rose 42% to $1.0 million compared to total revenue of $0.7 million in the fourth quarter of 2000. Revenues for the twelve months ended December 31, 2001 increased 87% to $5.8 million compared to total revenue of $3.1 million for the same period in 2000. In addition to the above revenues, eMagin received contract research reimbursements of $1.6 million during 2001 that were categorized as a negative expense to research and development rather than as revenue as a result of accounting classification for government contracts for which the company contributes, or cost shares, a portion of the total program costs. For the three months ended December 31, 2001, eMagin reported a net loss, as adjusted for certain non-cash charges, of $3.7 million versus a loss of $4.2 million for the same period of the prior year. The net loss, as adjusted for certain non-cash charges, excludes purchased intangibles amortization and non- cash charges related to stock-based compensation. Including purchased intangibles amortization and non-cash charges related to stock-based compensation, the Company reported a net loss of $5.6 million for the fourth quarter of 2001. The net loss resulted from increased research and development and administrative expenses, which were partially offset by higher billings on government contracts. During the fourth quarter of 2001, the company reduced its staff by 66. The as adjusted net loss for the twelve months ended December 31, 2001, which excludes purchased intangibles amortization and non-cash charges related to stock-based compensation, was a loss of $14.7 million versus the as adjusted net loss for the 12 months ended December 31, 2000, which excludes amortization and write-down of goodwill and purchased intangibles, in-process research and development charges and non-cash charges related to stock-based compensation, for a pro forma net loss of $14.4 million for the twelve months ended December 31, 2000. Revenues and expenses, as adjusted for certain non-cash charges, for the twelve months of 2000 include the revenue and expenses of FED Corporation (the predecessor company) for the period January 1, 2000, through March 15, 2000, and eMagin revenue and expenses for the twelve months ended December 31, 2000. Including amortization and write-down of goodwill and purchased intangibles and non-cash charges related to stock-based compensation, the net loss for the twelve months ended December 31, 2001 was $68.5 million. "We are now beginning to garner the benefits of our past investments in technology development and marketing with significant product introductions and acceptance," said Gary Jones, eMagin's Chairman and CEO. "We introduced and shipped our first commercial product, the SVGA+ OLED color microdisplay, to more than 60 OEM customers for evaluation and qualification. In the fourth quarter, we introduced the world's first imbedded stereovision capable microdisplay, our SVGA-3D, which should be a significant enabler for advanced game and wearable PC applications during 2002. We were honored that our technology and product design innovations were recognized by a number of prestigious awards including Electronic Products Magazine's Product of the Year, the Society Information Display and Information Display Magazine Display of the Year Gold Award, and the 2001 Army Quality Award. But even more significantly, we are pleased with the strong levels of interest, acceptance and initial design wins that we have achieved for products being designed around our unique microdisplays and optics for mobile information products including portable DVD players, gaming platforms, medical products, and wearable computers, as well as for key U.S. military programs such as Land Warrior and Joint Strike Fighter. We continue to work with the US Air Force and US Army, as well as OEM military systems integrators, to develop high performance OLED microdisplays for a variety of avionics and land-based helmet-mounted display systems. A strong focus on manufacturing and engineering has permitted our products to be qualified by some of the most demanding customers in the world and to be declared to be more environmentally rugged and reliable than other microdisplay alternatives." Jones continued, "In spite of severe financial challenges during 2001, we posted record increases in revenue, which we expect to continue to grow significantly during 2002. In the late fourth quarter of 2001 we implemented cost reduction programs, including a workforce reduction, reduction of expenditures wherever practical, and renegotiated several fixed operating cost arrangements. Our advanced technology and production facilities are permitting us to ramp into initial production with fewer staff. We have improved production yield and efficiencies and are now delivering higher quantities of displays. Strong sales and customer interest continue to outpace our increasing production." "Military, fire-rescue, medical, industrial, and consumer gaming and entertainment are expected to be the primary sales drivers for 2002 as OEM customers develop their own products using our microdisplays as a key component. Our chief focus over the next several quarters encompasses building up production so we can supply the demand for our products, focusing on marketing and customer service, formalizing key strategic partnerships, augmenting communications with our investors, and continuing our activities to secure sufficient financing for the company. We look forward to reporting on further developments in process with strategic, OEM, and financial partners. Because our equipment set is already in place and operational, implementing three-shift production operations and increasing our silicon chip inventory base will be key to attaining our goals of 20X throughput increases during the remainder of 2002. Profitability on a monthly basis is now a reasonable goal by the end of this year. We are diligently focused on delivering both leading products to our customers and managing our operations to deliver results to our shareholders." During 2001 the company also announced the following: -- Demonstration of the world's first SVGA+ color OLED-on- silicon microdisplay at the DisplaySearch US Flat Panel Display Conference in March 2001. The display operates in both 16:9 and 4:3 image aspect ratios for compatibility with a variety of applications, including DVD players, portable computers, military, medical, and industrial applications, and offers OEMs a complete integrated interface microdisplay solution. First evaluation samples of this display began shipping immediately after this conference. -- Demonstration of the world's first SVGA-3D display at the LCD/PDP conference in Japan the end of October 2001 that imbedded stereovision capability, targeting the consumer PC gaming/DVD entertainment and the wearable PC markets. -- Demonstration of the world's first OLED-on-silicon direct view display, which was jointly developed with IBM Research. The VGA format display (640 by 480 pixels) has a very high resolution pixel density of 740 pixels per inch and was fabricated with eMagin's OLED technology and IBM's single crystal silicon chip electronics. The OLED display was demonstrated on a prototype wrist-worn computer watch using the Linux operating system. -- Received a $5 million renewal of its Phase III Small Business Innovation Research (SBIR) contract from the US Air Force to further advance the development of high-resolution active matrix OLED microdisplays toward extremely high luminance applications. -- Presented data showing the ability to create OLED video displays with a balanced full-color spectrum exceeding that of the best commercially available liquid crystal display notebook displays. This balanced full-color spectrum represents the largest color gamut known to have been obtained from an OLED display of any type. -- Received a 2001 U.S. Army Phase II Quality Award for the development of high-resolution active matrix OLED microdisplays for incorporation into military head- mounted displays. The annual Quality Awards Program recognizes top quality Army Phase II projects for their technical achievement, contribution to the Army, and potential for commercial use. eMagin Corporation (AMEX:EMA) designs, develops, and markets virtual imaging system-on-a-chip solutions to enable the visual display of information, data, video, and games through a wide variety of mobile electronic devices and the next-generation of interactive virtual reality systems. The world leader in organic light emitting diode (OLED)-on-silicon technology, eMagin combines integrated circuits, microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin invented the award-winning SVGA+ and SVGA-3D OLED microdisplays, the worlds' first and only single-chip color video OLED microdisplay and embedded controller for advanced virtual imaging. eMagin's microdisplay systems are expected to enable new mass markets for wearable personal computers, wireless Internet appliances, portable DVD- viewers, digital cameras, and other emerging applications for consumer, industrial, and military applications. OLED microdisplays demonstrate performance characteristics important to military and other demanding commercial and industrial applications including low power consumption, high brightness and resolution, wide dimming range, wider temperature operating ranges, shock and vibration resistance, and insensitivity to high G-forces. eMagin's intellectual property portfolio of more than 100 patents issued or filed is leveraged by key OLED technology licensed from Eastman Kodak. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its campus in East Fishkill, N.Y. Optics and system design facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. Additional information is available at http://www.emagin.com At December 31, 2001, the company recorded a working capital deficit of about $6.5 million, and a total shareholders' equity deficit of about $5 million. ENRON CORP: Energy Debtors Propose Contract Bidding Procedures -------------------------------------------------------------- Enron Energy Services Inc. asks the Bankruptcy Court to approve uniform Bidding Procedures designed to yield a transaction that will maximize the realizable value of their Retail Contracts to supply power to customers located in Texas, Maine and Massachusetts. The proposed Bidding Procedures provide that: -- To participate in the bidding process, each person must deliver to Enron Energy: (i) an executed confidentiality agreement, and (ii) current audited financial statements of the Potential Bidder. -- A "Qualified Bidder" is a Potential Bidder that delivers the documents and whose financial information demonstrates the financial capability to consummate the purchase of the assets. -- Within two business days after the Potential Bidder delivers all of the materials required, Enron Energy shall determine, and shall notify a Potential Bidder in writing, whether the Potential Bidder is a Qualified Bidder. At the same time, Enron Energy shall deliver to the Qualified Bidder: (i) a confidential memorandum containing information and financial data relative to the Retail Contracts, and, (ii) copies of the Purchase and Sale Agreements. -- To obtain due diligence access or additional information, a Qualified Bidder must first advise Enron Energy in writing of its preliminary proposal regarding: (i) the assets sought to be acquired, (ii) purchase price range, (iii) the structure and financing of the transaction, (iv) any additional conditions to closing that it may wish to impose, and (v) the nature and extent of additional due diligence it may wish to conduct. -- Neither Enron Energy nor any of its affiliates are obligated to furnish any information relating to Enron Energy to any person except to such Qualified Bidder who makes an acceptable preliminary proposal. -- All bids must be submitted to: (i) Stuart Rexrode, Enron Energy Services, Inc. 1400 Smith Street, Houston, Texas 77002, and (ii) Irene M. Goldstein, Esq., at LeBoeuf, Lamb, Greene & MacRae LLP, 125 West 55th Street, New York, New York not later than 4:00 p.m. (EST) on a date that is at least 5 business days prior to the Sale Hearing. -- A Bid is a letter from a Qualified Bidder stating that: (i) the Bidder offers to purchase the Retail Contracts upon the terms and conditions set forth in the Purchase and Sale Agreements relating to the Retail Contracts that the Qualified Bidder is interested in, marked to show those amendments and modifications, including, but not limited to price, any escrow or indemnities and the time of closing, that the Qualified Bidder proposes, and (ii) the Bidder's offer is irrevocable until rejected by Enron Energy. Enron Energy shall provide a copy of all Bids to Constellation and the Committee. -- A Bidder shall accompany its bid with a good faith deposit in an amount equal to 5% of its bid. The Good Faith Deposit shall be by: (i) wire transfer to the account of an escrow agent to be provided upon request, or (ii) issuance, by a money center bank having capital of at least $100,000,000, of an irrevocable letter of credit for the benefit of Enron Energy. In the case of a wire transfer, the Good Faith Deposit shall be held by an escrow agent in an escrow account together with any interest earned thereon, and shall be returned to any Bidder whose Bid is not accepted by Enron Energy within three business days of the consummation of the proposed sale. The Good Faith Deposit of the successful Bidder, together with any interest earned thereon, shall be treated in accordance with the terms of the escrow agreement in the form to be mutually agreed upon by Enron Energy and such Bidder and shall be applied against the purchase price. -- Enron Energy will consider a bid only if the bid: (a) provides for consideration having a readily ascertainable fair market value of not less than 3% in excess of the sum of the Base Purchase Price plus the Termination Payment payable to Constellation; (b) is on terms that, in Enron Energy's business judgment after consultation with the Committee, are not materially more burdensome than the terms of the Purchase & Sale Agreements; (c) is not conditioned on obtaining financing or on the outcome of unperformed due diligence by the Bidder; (d) does not request or entitle the Bidder to any break-up fee, termination fee, expense reimbursement or similar type of payment, and (e) is likely to receive all governmental approvals, including, without limitation, the requirement that Bidder is or will become a retail electric provider under Texas regulations. -- If Enron Energy receives a Qualified Bid from an entity other than Constellation, Enron Energy will conduct an auction at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York 10019 two business days prior to the Sale Hearing, beginning at 10:00 a.m. (EST) or such later time or other place as EESI shall notify all Qualified Bidders who have submitted Qualified Bids. -- Only Constellation, Enron Energy, representatives of the Committee and any Qualified Bidders who have timely submitted Qualified Bids shall be entitled to attend the Auction and only Constellation and such Qualified Bidders will be entitled to make additional bids at the Auction. -- The opening bid at the Auction shall not be less than $200,000 greater than the highest Qualified Bid. All offers subsequent to the opening bid at the Auction must exceed the prior offer by not less than $200,000. Bidding at the Auction will continue until such time as the highest and best offer is determined. -- Upon conclusion of the Auction, Enron Energy shall review each Qualified Bid on the basis of financial and contractual terms and the factors relevant to the sale process, including those factors affecting the speed and certainty of consummating the sale with respect to the Retail Contracts, and after consultation with the Committee, submit the highest or otherwise best bid for approval by this Court. -- Bids submitted by the Bid Deadline shall remain open and irrevocable until expressly rejected by Enron Energy, which rejection shall be deemed to have occurred with respect to all bids not ultimately approved as the highest and best bid for the Retail Contracts by the Court. -- If Enron Energy does not receive any higher or otherwise better offers at the Auction, Enron Energy will report the same to the Court and will proceed with a sale and assignment of the Retail Contracts to Constellation. (Enron Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON INDIA HOLDINGS: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Lead Debtor: Enron India Holdings Ltd. P.O. Box 1350, The Huntlaw Building Fort Street, G.T. Grand Cayman, Cayman Islands, B.W.I. Bankruptcy Case No.: 02-11268 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Enron Mauritius Company 02-11267 Type of Business: Debtor is a holding company for an ownership interest in Enron Mauritius Company. Chapter 11 Petition Date: March 19, 2002 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 212-310-8602 Fax: 212-310-8007 and Melanie Gray, Esq. Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, Texas 77002 Telephone: (713) 546-5000 Total Assets: $7,357,086 Total Debts: $12,144 ENRON MAURITIUS: Case Summary & Largest Unsecured Creditor ---------------------------------------------------------- Lead Debtor: Enron Mauritius Company 10 Frere Felix De Valois Street Port Louis Mauritius Bankruptcy Case No.: 02-11267 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Enron India Holdings Ltd. 02-11268 Type of Business: Debtor is a holding company for an interest in Dahbol Power Company. Chapter 11 Petition Date: March 19, 2002 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 212-310-8602 Fax: 212-310-8007 and Melanie Gray, Esq. Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, Texas 77002 Telephone: (713) 546-5000 Total Assets: $200,676,205 Total Debts: $42,915,343 Debtor's Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Multiconsult Trade Debt $7,500 FEDERAL-MOGUL: Hanly & Conroy Replaces C&W as Asbestos Counsel -------------------------------------------------------------- Federal-Mogul Corporation, and its debtor-affiliates sought and obtained entry of an order substituting Hanly & Conroy LLP as special asbestos litigation counsel in place of Coblence & Warner P.C., nunc pro tunc to February 1, 2002, pursuant to the same terms and conditions as set forth in the Court's order appointing Coblence & Warner as special asbestos litigation counsel to the Debtors. James E. O'Neill, Esq., at Pachulski Stang Ziehl Young & Jones P.C. in Wilmington, Delaware, relates that on February 1, 2002, nine attorneys who were members of or associated with Coblence at the time of the retention order left the firm to form Hanly & Conroy. A review of Coblence's billing records confirms that all of Hanly's attorneys who had worked in matters related to these chapter 11 cases since the petition date are now members or employees of Hanly. Accordingly, the proposed substitution of counsel to the Debtors is closer to a change of firm name than to a true substitution of counsel. As a result of the Court aprroval, Hanly & Conroy will provide legal and litigation support required by the Debtors in connection with their asbestos litigation matters, including: A. providing analysis and advice to the Debtors in formulating and implementing a litigation strategy for resolving asbestos-related claims; B. providing strategic advice to and representing the Debtors in connection with any and all matters in these bankruptcy proceedings arising from asbestos-related personal injury and property damage claims including: 1. counseling and representing the Debtors in connection with all aspect of asbestos claims related litigation, including commencing, conducting and defending such litigation wherever located; 2. counseling and representing the Debtors and assisting the Debtors' general bankruptcy counsel in connection with the formulation, negotiation and promulgation of a plan of reorganization and related documents related to asbestos claims; and 3. counseling and representing the Debtors and assisting the Debtors' general bankruptcy counsel in connection with reviewing, estimating & resolving the asbestos claims. C. Analyzing, litigating and advising the Debtors concerning the asbestos claims, including issues related to: 1. removal, transfer, venue, abstention, injunctions, automatic stay and related matters, to the extent related to alleged asbestos liability; 2. assisting the Debtors' general bankruptcy counsel with respect to asbestos claims bar date, asbestos-related proof of claim forms and related notice and asbestos claim processing issues, asbestos claim objections and litigation relating to claim allowance or disallowance, to the extent related to alleged asbestos liability. (Federal-Mogul Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEMING: Strikes Major Supply Pact with Albertson's Stores ---------------------------------------------------------- In an announcement that is strategically significant within the industry and representative of the company's expanding market opportunities for supplying self-distributing chains, Fleming (NYSE: FLM) announced an agreement with Albertson's, Inc. to provide procurement and distribution services to Albertson's stores in two states. "Self-distributing retailers are looking critically at their supply chains to identify the most efficient alternatives," said Mark Hansen, Fleming Chairman and CEO. "We believe this agreement is a confirmation of the advantages provided by Fleming's nationwide footprint of distribution facilities." Hansen continued, "Fleming's ability to efficiently serve quality retailers of all sizes and formats, including self- distributing chains, is a key component of our continued growth. This arrangement with Albertson's supports our strategy to further diversify our customer base and makes Albertson's one of our five largest customers. We are proud to provide our supply chain efficiencies to this leading supermarket retailer." Larry Johnston, Albertson's Chairman and CEO, said "Our recent decision to exit several markets served by the Tulsa distribution center created an opportunity for Albertson's and Fleming to work together. Fleming is a highly regarded wholesaler and this transaction allows us to both maximize shareowner value and increase supply chain efficiency." The five-year arrangement initially includes annualized sales volume of approximately $250 million. As part of the companies' agreement, Fleming will acquire the Albertson's distribution center in Tulsa to supply the 28 Oklahoma Albertson's stores. Fleming's Lincoln Division will supply the 11 Nebraska stores. The parties expect that this arrangement, which is subject to customary closing conditions in the agreement, will commence in July 2002. "The Tulsa distribution center is already staffed with a high- quality associate team, and we anticipate hiring the vast majority of these associates to continue serving the Albertson's stores in Oklahoma," said Hansen. The company intends to lease the Tulsa facility from a third party. Related capital expenditures, estimated at $15 million, are included in Fleming's 2002 capex target of approximately $200 million. "Our distribution strategy is based on high-volume, low-cost distribution centers. From 1998 through 2001, Fleming's average sales per distribution center increased from approximately $389 million to a run rate of approximately $640 million, which is among the highest in the industry. We believe there are several opportunities to increase the sales levels at this state-of-the- art Tulsa facility, consistent with Fleming's distribution strategy. The specifics of our plan will be announced at the time of the company's first quarter earnings release," said Hansen. Fleming is the #1 distributor of consumables to the United States retail industry and has a growing presence in value retailing. Fleming's primary business is buying and selling merchandise. The company serves approximately 3,000 supermarkets, 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 previously reported in the Troubled Company Reporter, S&P has placed its low-B ratings assigned to Fleming on CreditWatch with negative implication. This rating action was taken after the bankruptcy filing of major retailer Kmart Corporation. GLOBAL CROSSING: Teleglobe Wants Adequate Assurances of Payment --------------------------------------------------------------- Teleglobe USA, Inc. and Teleglobe Canada, Inc. want an order: A. Deeming rejected Teleglobe USA's Telecommunications Services Agreement with Link USA Corporation, n/k/a Global Crossing Advanced Card Services, Inc., Teleglobe Canada's Telecommunications Services Agreement with Frontier Communications Services Inc., n/k/a Global Crossing Telecommunications, Inc., and Teleglobe USA's Telecommunications Services Agreement with Global Telecom entered into on or about March 12, 2001; and B. granting Teleglobe relief from the automatic stay to exercise its contractual rights to terminate the Agreements or to increase rates and/or require security absent termination as provided in the Agreements. Absent such relief, Teleglobe alternatively seeks adequate assurances of payment under section 366(b) of the Bankruptcy Code or otherwise requests adequate protection for any post- petition services provided under the Agreements. Since these cases were commenced, the Debtor Counter-Parties have incurred more than $800,000 in usage charges for Teleglobe's services under the Agreements. Pursuant to the Agreements, Larren M. Nashelsky, Esq., at Morrison Foerster LLP in New York, New York, relates that Teleglobe in the last quarter of 2001 provided an average of approximately $181,000 per month in Services to Global. Since their January 28, 2002 bankruptcy petitions, however, Debtors' usage of Teleglobe Services has increased dramatically, and before Global filed its bankruptcy petitions, Teleglobe was working with it to obtain security against the credit risk it started presenting. Despite listing numerous telecommunications service providers providing very similar services to the Debtors, Mr. Nashelsky contends that the Debtors neglected to include Teleglobe on the list of utilities and gave only the listed Utilities notice of entry of the 366 Motion even though the Debtors sought to prohibit all Utilities, regardless of whether listed, from discontinuing service unless they sought additional adequate protection within 25 days after entry of the order. Debtors never served the 366 Motion on Teleglobe. In their 366 Motion, Mr. Nashelsky points out that the Debtors described a net loss of about $4,600,000,000 for the nine months ending September 30, 2001, which equates to an annualized pre-petition net loss for 2001 as of September 30, 2001 in the amount of $6,125,333,332, and an average monthly pre-petition net loss of $510,444,444. Although the Debtors have failed in any of their court filings thus far to disclose what their average monthly pre-petition net cash loss was for 2001, it presumably was a figure closer to their average monthly pre- petition net loss of $510,444,444 than to their aggressively low projected net cash loss of only $138,100,000 for the first thirty days following the Petition Date. Given their Chapter 11 filings, the associated costs, disruptions of bankruptcy, and the recent failures of so many other telecommunications companies to emerge from bankruptcy, however, the Debtors' claim that they will be able to achieve such reduced cash drain so quickly is not credible. Even giving the Debtors the benefit of substantial doubt, Mr. Nashelsky contends that Debtors will still run out of their unrestricted cash on hand, in little over four months from the Petition Date using their own numbers in the absence of a prompt infusion of additional cash from asset sales or debtor-in- possession financing. Debtors apparently pin their hopes of avoiding running out of cash in four months in their Investment Motion, which they filed on February 5, 2002, under which, Debtors request entries of court orders approving a letter of intent under which Hutchison Whampoa Limited and Singapore Technologies Telemedia Pte. Ltd. may invest $750 million to become 79% equity owners of the reorganized Debtors. However, even if the numerous conditions for the proposed investment in the LOI are met and the Potential Investors do decide to actually commit to making it, the remains the substantial possibility that the Debtors will run out of cash based on the timetable provided for fulfillment of those conditions in the LOI, which requires Debtors to obtain exit financing "within 230 days of the Commencement Date," or more than 7 1 /2 months into their bankruptcies, as a final condition to closing on the proposed investment. Thus, extrapolating from the Debtors' own 30 Day Projection, their potential white knight may arrive three months too late to save them. Furthermore, Mr. Nashelsky claims that the LOI imposes extensive conditions precedent to any commitment by the Potential Investors that will be difficult to achieve given the current caution exhibited by the capital markets towards telecommunications companies. In addition to meeting numerous financial performance targets, Debtors are further required to obtain debtor-in-possession financing of "no less than US$150 million" and additional exit financing "of not less than US$350 million." However, in the Teligent bankruptcies, for example, lenders demonstrated their new caution when those debtors' potential white knight, Teligent Acquisition Corporation, could not even obtain financing for its asset purchase under an amended sale agreement which reduced the price from $117.5 million to just $78 million. Indeed, Mr. Nashelsky believes that potential lenders are likely to exhibit great caution here since it is likely the postpetition lenders in the Winstar bankruptcy cases will not even be repaid their principal on the post-petition loan following the conversion of those cases to Chapter 7. The fact is that the LOI on which Debtors rest their hopes is nothing more than "an indication of interest for discussion purposes only . . . [that] does not constitute a legally binding obligation," yet further qualified by difficult conditions precedent and governed by an uncertain timetable which still might prove too long even if the Debtors succeed in accomplishing its bankruptcy restructuring milestones within half the time permitted by the LOI. In other words, without a grant of the relief requested herein, Teleglobe would be asked to finance the Debtors' attempt at reorganization on terms that would not be acceptable to customary providers of post-petition credit in these circumstances, where payment and even administrative expenses is far from certain. Mr. Nashelsky informs the Court that Teleglobe sought through several meetings with Global's representatives since the Petition Date to resolve this matter consensually with the Global, but has thus far been unable to come terms with them. (Global Crossing Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) HAYES LEMMERZ: CIBC Balks at Houlihan Lokey's Engagement Terms -------------------------------------------------------------- Canadian Imperial Bank of Commerce urges the Court to deny the Committee's application to retain Houlihan, Lokey, Howard & Zukin Financial Advisors, Inc., in the chapter 11 cases of Hayes Lemmerz International, Inc., and its debtor-affiliates. Monica Leigh Loftin, Esq., at Potter, Anderson & Corroon LLP in Wilmington, Delaware, asserts that the indemnification provisions of the Houlihan Lokey retention agreement, which exculpate the advisory firm from potentially unlimited liability, are too broad and inappropriate. There is no justification to make the Debtors' estates act as insurer for Houlihan Lokey and be saddled with a potential administrative obligation to indemnify the firm for its negligence. It's axiomatic, Ms. Loftin suggests, that Houlihan's negligence will not confer an actual or necessary benefit upon the Debtors, their estates or the creditors. Moreover, the Debtors and their creditors face the risk that Houlihan's indemnification claim might be so large that it could effectively act as an impediment to confirmation of a reorganization plan in these cases. Leaving aside the propriety of any indemnification to the Debtors, Ms. Loftin asserts that the proposed indemnification must be revised to make clear that Houlihan Lokey will not be indemnified, on a post-petition administrative expense claim basis, for any prepetition acts or omissions. There is just no justification for why a pre-petition indemnification claim should be converted to a postpetition administrative expense obligation. She also balks at the provision that Houlihan's affiliates will be indemnified from prepetition and postpetition claims. Ms. Loftin argues that, assuming that Houlihan Lokey is apt to receive an indemnity for its postpetition negligence, there is no reason as well to give the firm's affiliates -- whoever they might be -- a limitless indemnity right against the Debtors. In addition to this, CIBC objects to the improper heightening of the gross negligence standard in the agreement by inclusion of the word "primarily" in connection with the carve-out from the indemnity resulting from Houlihan Lokey's gross negligence or willful misconduct. The agreement also suggests waiving the rights of creditors or other parties-in-interest from seeking to recover compensation for damages sustained based upon the Houlihan Lokey's acts or omissions in these cases or otherwise. Ms. Loftin claims that the agreement also gives the firm unilateral consent rights with respect to Debtors' ability to resolve pending claims, actions or proceedings in these cases that relate to the Houlihan Lokey. She believes that if the firm is concerned with how the Debtors propose to settle a claim, Houlihan Lokey is free to express its reservations to the Court at the appropriate time. The agreement also puts cap or limit the firm's liability to the fees and expenses paid to it. Ms. Loftin adds that CIBC objects to the provisions of the agreement letter to the extent that the firm's retention under section 328 could later preclude the Court from conducting a de novo review of any alleged indemnification obligation. She suggests that the Court, instead, should retain the unrestricted right to review whether it is appropriate for the Debtors' estates to indemnify Houlihan Lokey and, if so, the reasonable amount of any indemnity payment. She adds that any indemnification obligation should be given and discharged to the extent of the consummation of a plan of reorganization. Ms. Loftin believes that without disclosure in the agreement, the advisory firm is also seeking as part of its retention a waiver of any claim the Debtors' estates might have against Houlihan Lokey for amounts received by the firm prior to the petition date. Houlihan Lokey rendered prior service to the Debtors in prepetition acquisitions and transactions and, therefore, is not as disinterested as it claims to be. Ms. Loftin informs the Court that Canada Imperial Bank, the Committee and Houlihan Lokey have had several discussions since the filing of the Application in an attempt to resolve concerns about the transaction fee. In that regard, the Committee has agreed that Houlihan's transaction fee will be paid solely from property to be distributed to unsecured creditors. (Hayes Lemmerz Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) HORIZON MEDICAL: Arranges Recap. to Extinguish Senior Bank Debt --------------------------------------------------------------- Horizon Medical Products, Inc. (Amex: HMP) announced that it has completed an arrangement with ComVest Venture Partners, LP, LaSalle Business Credit, Inc. and Medtronic, Inc. (NYSE: MDT) to implement a major recapitalization of the Company that will extinguish all of HMP's senior debt held by Bank of America (B of A). Commonwealth Associates, an affiliate of ComVest, acted as advisor to HMP in the restructuring and recapitalization. Marshall B. Hunt, in conjunction with Commonwealth Associates, led the recapitalization effort for the Company. Mr. Hunt, who will reassume the position of Chairman of the Board and Chief Executive Officer, commented that the capital restructuring will provide an approximate $14.8 million gain for the Company in 2002, and substantially reduce the Company's debt service going forward. "In addition, this new debt structure will give us much more latitude to set our own business course than we had under the forbearance agreement with B of A," Mr. Hunt said. "Even more significant is our new relationship with Medtronic, one of the world's premier medical technology companies." HMP and Medtronic, which has invested $4 million into the Company, have entered into a two year co-promote alliance to market Medtronic's IsoMed(R) and SyncroMed(R) drug infusion systems to the oncology market. HMP has one of the largest sales forces in the United States focused on the oncology market, which is a key target for IsoMed and SyncroMed sales. In addition to Mr. Hunt's re-appointment as Board Chairman and Chief Executive Officer, the Company is adding three new members to its Board of Directors and has formed an executive committee to the Board. The new Board members include Robert Tucker, former chairman and chief executive officer of Scherer Healthcare, Inc., H. Ross Arnold, III, founder of Quest Capital Corp, and Lee Provow of Commonwealth Associates; the Executive Committee consists of Lee Provow, Robert Tucker and Marshall Hunt. To facilitate the recapitalization, ComVest has purchased HMP's $40.3 million senior note payable to B of A for approximately $22 million in cash, leaving $2 million in subordinated debt held by B of A. Commonwealth has negotiated a reduction in HMP's indebtedness to B of A by approximately $16 million. In return, HMP has entered into a Note Purchase Agreement with several investors led by Comvest and Medtronic, under which the Company has issued senior subordinated convertible notes in an aggregate principal amount of $11 million to ComVest and other investors introduced by Commonwealth and in an aggregate principal amount of $4 million to Medtronic. In addition, ComVest provided a bridge loan to the company to cover certain costs of the transaction. A portion of the notes ($270,000) may be converted into up to 27 million shares of HMP common stock, subject to a downward adjustment upon a repayment of a portion or all of the notes. Following the conclusion of this transaction, the Company will have approximately 50 million shares of common stock outstanding on a fully diluted basis. The remaining balance of the transaction will be funded by senior debt covered in a new credit and term loan facility of up to $22 million that HMP has negotiated with LaSalle. HMP will seek shareholder approval for the recapitalization transaction and to increase the number of authorized shares of common stock from 50 million to 100 million shares. Year-End And Fourth Quarter 2001 Results HMP announced that for the year ended December 31, 2001, EBITDA increased to $2.7 million from an EBITDA loss of $11.9 million in 2000. Revenue for 2001 was $59.1 million compared to $63.3 million for the prior year. The Company's net loss for 2001 decreased to $5.1 million from $19.8 million in 2000. For 2001, gross profit increased to 34.4 percent compared to 26.2 percent in 2000. SG&A expenses were up slightly for 2001 over 2000. For the fourth quarter ended December 31, 2001, EBITDA increased to $296,595 from an EBITDA loss of $17 million in fourth quarter 2000. Revenue for fourth quarter 2001 was $13.6 million compared to $13.8 million for the prior period. The Company's net loss for fourth quarter 2001 decreased to $1.5 million from $18.5 million in fourth quarter 2000. Horizon Medical Products, Inc., headquartered in Atlanta, is a specialty medical device company focused on manufacturing and marketing vascular access products. The Company's oncology product lines include implantable ports, some of which feature VTXT technology; tunneled central venous catheters; and stem- cell transplant catheters used primarily in cancer treatment protocols. VTXTM Technology refers to the swirling blood flow produced by a uniquely rounded reservoir design and tangential outlet that substantially eliminates thrombosis, or the buildup of sludge from blood and drug byproducts, in the port reservoir and reduces certain complications that require additional surgery. The Company also markets a complete line of acute and chronic dialysis catheters. Commonwealth Associates is an Investment and Merchant Bank, established intion, typically acting as the lead investor in each investment that it sponsors. ICG COMMUNICATIONS: Court Allows Continued Cash Collateral Use -------------------------------------------------------------- Judge Wizmur enters her Order granting ICG Communications, Inc.'s Motion, in the absence of any objection by any party, authorizing the Debtors to use cash collateral according to the revised budget, up to the hearing on the Debtors' revised Disclosure Statement. All equipment lease payments required to be made during this period under leases between the Debtors will continue to be made in the ordinary course of business; however, the Debtors represent that they did not make any intercompany lease payments for the month of January, 2002, subject to a full reservation of rights, and the Lenders agree that such failure to make intercompany lease payments will not be enforced as a default. All unpaid out-of-pocket costs and expenses of the Agent and the Lenders, including professional fees incurred in connection with matters related to the Credit Agreement, the Lenders' collateral and these bankruptcy cases, "and for the avoidance of doubt", are to be paid by the Debtors. As stated in the Debtors' Motion, the revised budget indicates that the intercompany lease payments for the months of January 2002 and February 2002 are to be accrued rather than paid. However, nothing in this stipulation is to be construed as an agreement by or waiver by the prepetition lenders to the nonpayment of these amounts. The Debtors and the Lenders agreed that the Debtors might continue to use cash collateral for ordinary budget purposes up to the date of the hearing on approval of the Debtors' disclosure statement. The Debtors agreed to pay all unpaid out-of-pocket costs of the Lenders, including professional fees, incurred in connection with the Credit Agreement. (ICG Communications Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900) IT GROUP: Look for Schedules and Statements on Friday ----------------------------------------------------- The IT Group, Inc., and its debtor-affiliates sought and obtained an order giving them more time to file their schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs. The documents are due March 22, 2002. (IT Group Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTEGRATED HEALTH: Obtains Approval of Replacement DIP Facility --------------------------------------------------------------- As previously reported, Integrated Health Services, Inc., and its debtor-affiliates moved the Court for an order authorizing the IHS Debtors to enter into a Commitment Letter setting forth the terms on which the Lenders have agreed to provide the IHS Debtors with replacement DIP financing. The Court has granted the Commitment Letter Motion. As advised in the Commitment Letter Motion, the parties proceeded to negotiate a definitive Replacement DIP Agreement that will avail the Debtors of the DIP Facility after its current expiry date of May 3, 2002 until the earlier of (i) one year anniversary of the Closing Date, (ii) the effective date of a plan of reorganization for any of the IHS Debtors, (iii) acceleration following the occurrence and continuation of all Event of Default and (iv) such earlier date as specified in the DIP Credit Agreement. In this motion, the Debtors seek the issuance and the entry of a Final DIP Financing Order pursuant to section 364(c)(1), (2) and (3) of the Bankruptcy Code and Bankruptcy Rules 2002, 4001(c) and 9014 authorizing the IHS Debtors to enter into the DIP Credit Agreement and to perform their obligations under it. The major elements of the DIP Facility are: a. Borrower. IHS b. Guarantors All the Borrower's subsidiaries that also are debtors and debtors-in-possession under chapter 11 of the Bankruptcy Code. c. Facility. The principal amount of the DIP Facility will be an amount not to exceed $75,000,000 in the aggregate, of which $50,000,000 will be available for letters of credit. The DIP Facility will be utilized to satisfy in full all obligations arising out of the Initial DIP Agreement and to fund the Debtors' operations in accordance with the terms of the DIP Order and the DIP Credit Agreement. d. Availability. Availability under the DIP Facility may not exceed the lesser of i. $75,000,000; and ii. the Borrowing Base; minus certain reserves; e. Borrowing Base. The Borrowing Base consists of a formula which essentially encompass (i) the sum of 85% of Eligible Accounts, plus certain required cash collateral balances, minus (ii) Eligibility Reserves. f. Interest. Interest on outstanding Loans under the DIP Facility will accrue, at the option of the Borrower, at either the Eurodollar Rate plus 325 basis points or the Base Rate plus 125 basis points, in each case calculated on the basis of a year of 360 clays. g. Fees/Expenses. In addition to the costs and expenses of the Agents and the DIP Lenders, the following fees are payable by the Debtors: i. a loan facility fee in the amount of $750,000, payable to the Administrative Agent as follows: (x) an amount equal to $375,000, payable upon the granting of the Commitment Letter Motion (but no later than March 11, 2002); and (y) the balance payable on the Closing Date. ii. a collateral management fee in the amount of $125,000 per annum for the account of the Collateral Agent; iii. an arrangement fee in an amount equal to $125,000 payable to the Administrative Agent on the Closing Date; iv. a line of credit fee of 0.50% per annum will accrue as a percentage of the daily average unused Portion of the DIP Facility, payable monthly in arrears and on the Termination Date. v. an early termination fee in an amount equal to $750,000 payable to the Administrative Agent for the account of DIP Lenders in the event the IHS Debtors terminate the DIP Facility prior to the Termination Date under certain specified circumstances. vi. letter of credit fees (calculated on the basis of a year of 360 days) payable to the Administrative Agent for the account of each DIP Lender that participates in a letter of credit guaranty in the amount of 2.5% per annum plus all charges imposed on the DIP Lenders by the letter of credit issuing bank. h. Security and Priority. The Administrative Agent and the DIP Lenders shall be granted first and second priority liens on and security interests in all Collateral under sections 364(c)(2) and (3) of the Bankruptcy Code, subject only to (i) valid, perfected and enforceable liens of record existing as of the Petition Date, (ii) the Carve-Out, and (iii) certain purchase money liens. The Obligations also constitute "superpriority" administrative claims against each of the Debtors with priority over all other administrative expenses of the kind specified in sections 503(b) or 507(1)) of the Bankruptcy Code, subject to the Carve-Out. The Collateral shall not be surchargeable under any section of the Bankruptcy Code, including, without limitation, section 506(e) of the Bankruptcy Code. i. Collateral. The Collateral consists of all assets and properties of the Borrower and each Guarantor, whether now owned or hereafter acquired. j. The Carve-Out. The Carve-Out includes (i) amounts payable pursuant to 28 U.S.C. Sec. 1930(a) and (ii) the payment of allowed and unpaid fees and expenses of professionals retained pursuant to sections 327 and 1103 of the Bankruptcy Code (other than fees and expenses incurred in the prosecution of claims against the Agents or the DIP lenders) in an aggregate amount not to exceed $3,000,000 (the Cap); provided that any payments made to such professionals prior to the occurrence of an Event of Default or Potential Event of Default shall not reduce the Cap. k. Conditions Precedent. The effectiveness of the DIP Credit Agreement is subject to the satisfaction of certain conditions including that (i) the Rotech Plan shall have been consummated, and (ii) on any particular Borrowing Date, the balance of the CITBC Collateral Account shall be at least equal to the Required Cash Collateral Balance. m. Repayment. The Debtors must repay all amounts outstanding under the DIP Credit Agreement, and the commitments shall terminate, on the earlier to occur of the following: (i) the one year anniversary of the Closing Date, (ii) the effective date of a plan of reorganization for any of the IHS Debtors, (iii) acceleration following the occurrence and continuation of all Event of Default and (iv) such earlier date as specified in the DIP Credit Agreement. n. Events of DIP Default. The occurrence and continuation of an Event of Default gives the Administrative Agent and the DIP Lenders the right to immediately terminate the DIP Facility and to accelerate the payment of all Obligations. o. The Automatic Stay. The automatic stay under section 362 of the Bankruptcy Code will be vacated upon the entry of the DIP Order. During the continuance of an Event of Default, upon three Business Day's prior written notice to the Borrower, any creditors' committee appointed in the Cases and the U.S. Trustee, the Administrative Agent and the DIP Lenders shall be permitted to take immediately any action permitted under the DIP Credit Agreement, the Other Loan Documents, the Bankruptcy Code, the UCC or other applicable law with respect to the Collateral or otherwise. The Debtors also request that the DIP Order provide that with respect to any recoupment and/or setoff rights resulting from any overpayment and other claims owing to certain governmental entities, the settlement with the United States Department of Health and Human Services (HHS) embodied in the Stipulation between HHS and the Debtors, as approved by the Court, be carried forward, and that such settlement continue in full force and effect with respect to the Agents and the DIP Lenders. (Integrated Health Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) KAISER ALUMINUM: Will Be Paying Prepetition Trust Fund Taxes ------------------------------------------------------------ Kaiser Aluminum Corporation and its debtor-affiliates sought and obtained authority to pay any trust fund taxes collected prior to the petition date, but not yet remitted to the applicable taxing authorities. Paying these trust fund taxes, the Debtors assert, will avoid the serious disruption to their reorganization efforts that would result from the nonpayment of such taxes, including the distractions that could result from liability for the nonpayment imposed upon the Debtors' officers and directors. In the ordinary course of business, Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger in Wilmington, Delaware, relates that the Debtors collect certain trust fund taxes from their customers and employees, as applicable, and hold them for a certain period of time before remitting them to the appropriate taxing authorities. In addition, the Debtors withhold certain taxes such as income, FICA and Medicare taxes from the Debtors' employees' paychecks, which amounts then are periodically to the appropriate federal, state or local taxing authority. Mr. DeFranceschi explains that the prepetition trust fund taxes that have been collected or withheld by the Debtors are held in trust for the benefit of those third parties to whom payment is owed or on behalf of whom such payment is being made. As such, these taxes are not property of the Debtors' estates with the meaning of section 541 of the Bankruptcy Code and will not otherwise be available to the Debtors' estates. Thus, the payment of the prepetition trust fund taxes will not adversely affect the Debtors' estates and is warranted. In addition, Mr. DeFranceschi tells the Court that many federal, state and local taxing authorities impose personal liability on the officers and directors of entities responsible for collecting trust fund taxes to the extent that such taxes are collected but not remitted. Thus, if any prepetition trust fund taxes remain unpaid, the Debtors' officers and directors may be subject to lawsuits or even criminal prosecution on account of such nonpayment during the pendency of these chapter 11 cases. Such lawsuits or proceedings obviously would constitute a significant distraction to the directors and officers at the time when they should be focused on the Debtors' effort to stabilize their postpetition business operations and develop and implement a successful reorganization strategy. The taxing authorities may also cause the Debtors to be audited if these taxes are not paid promptly. Such audits would further divert attention and resources from the reorganization process. Mr. DeFranceschi submits that the Debtors made their best efforts to pay sales, use and similar taxes in full before the petition date. Such that, in the later half of January 2002 and in accordance with the Debtors' usual practice, the debtors remitted to the applicable taxing authorities all sales, use and similar taxes collected on behalf of the customers through December 2001. Furthermore, the amount of sales and use taxes collected by the Debtors on a monthly basis is generally de minimis. As of petition date, the Debtors' remaining obligations for prepetition sales, use and similar taxes collected from January 1, 2002 through the petition date are de minimis. The Debtors also remitted the following employees' prepetition withheld taxes to the applicable authorities: A. on February 8, 2002 and in accordance with the Debtors' payroll cycle, all incomes, FICA and Medicare taxes withheld which are paid on weekly basis through January 27, 2002 or February 3, 2002; B. on February 11, 2002 and in accordance with the Debtors' payroll cycle, all incomes, FICA and Medicare taxes withheld which are paid on a bi-weekly basis through January 20, 2002, February 2, 2002, February 4, 2002 or February 8, 2002; C. on February 1, 2002 and in accordance with the Debtors' payroll cycle, all income, FICA and Medicare taxes withheld which are paid on a semi-monthly basis through January 31, 2002; Mr. DeFranceschi informs the Court that, as of petition date, the Debtors' remaining employees' withheld tax obligations are estimated at $1,850,000. The Debtors represent that they have sufficient cash reserves, together with the anticipated access to the sufficient DIP financing to pay promptly all their respective remaining obligations for the prepetition trust fund taxes in the ordinary course of business. The Court also order that all applicable banks and financial institutions are authorized and directed to receive, process, honor and pay any and all checks drawn to pay the said tax obligation, whether the checks were presented before or after the petition date, as sought by the Debtors, provided that sufficient funds are available in the applicable accounts to make the payments. (Kaiser Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART: Institutional Committee Signs-Up FTI as Fin'l Advisors ------------------------------------------------------------- The Official Committee of Institutional Creditors in the chapter 11 cases of Kmart Corporation and its debtor-affiliates seeks the Court's authority to retain FTI Policano & Manzo as its Financial Advisors, nunc pro tunc to February 5, 2002. Agnes L. Levy, managing director of JP Morgan Chase & Company and chairing the Institutional Creditors' Committee, tells the Court that they were impressed with the firm's extensive experience in and knowledge of business reorganizations under Chapter 11 of the Bankruptcy Code. The Institutional Committee expects FTI Policano to: (a) advise and assist the Committee in its analysis and monitoring of the Debtors' historical, current and projected financial affairs, including without limitation: -- schedules of assets and liabilities, -- statement of financial affairs, -- periodic operating reports, -- analyses of cash receipts and disbursements, -- analyses of cash flow forecasts, -- analyses of trust accounting, -- analyses of various asset and liability accounts, -- analyses of cost-reduction programs, -- analyses of any unusual or significant transactions between the Debtors and any other entities, and -- analyses of proposed restructuring transactions; (b) analyze the Debtors' store closing plans, including arrangements for liquidation sales; (c) analyze the Debtors' plans regarding the rejection or assumption of real estate leases; (d) analyze arrangements with trade creditors regarding post- petition credit extension, including inventory return programs and other related issues; (e) develop a monthly monitoring report to enable the Committee to effectively evaluate the Debtors' performance on an ongoing basis; (f) if requested by the Committee and counsel, assist and advise the Committee and counsel in reviewing and evaluating any court motions filed or to be filed by the Debtors or any other parties-in-interest; (g) analyze and critique any debtor-in-possession financing arrangements; (h) advise and assist the Committee in reviewing executory contracts, including leasing arrangements, and provide recommendations to assume or reject; (i) advise and assist the Committee in identifying and reviewing preference payments, fraudulent conveyances and other causes of action; (j) analyze the Debtors' assets and analyze the Committee's recovery under various recovery scenarios; (k) assist and advise the Committee in evaluating and analyzing restructuring plans proposed by the Debtors; (l) analyze alternative reorganization scenarios in an effort to maximize the recovery to the Committee and develop negotiation strategies to support the Committee's position; (m) assist the Committee and its counsel in the negotiation of any and all aspects of a restructuring; (n) review and provide analysis of any plan of reorganization and disclosure statement relating to the Debtors; (o) assist and advise the Committee in implementing a plan of reorganization of the Debtors; (p) perform a liquidating analysis of the Debtors and advise the Committee and counsel in connection with it; (q) advise and assist the Committee in its assessment of the Debtors' management team, including a review of any existing or proposed bonus incentive and retention plans; (r) advise and assist the Committee in reviewing any proposed sales or acquisitions of assets or business units; (s) advise and assist the Committee in its review of the Debtors' existing management processes, including but not limited to organizational structure, cash management and management information and reporting systems; (t) advise and assist the Committee in its review of transactions between the Debtors and non-filing subsidiaries and affiliates; (u) render expert testimony and litigation support services, as requested from time to time by the Committee and counsel, regarding the feasibility of a plan of reorganization and other matters; (v) attend Committee meetings and court hearings as may be required in the role as financial advisor of the Committee; and (w) provide other services that are consistent with the Committee's role and duties as may be requested from time to time. Ms. Levy assures the Court that the Committee will try its best to ensure that its professionals avoid a duplication of services to the fullest extent possible. According to Ms. Levy, FTI Policano has agreed to coordinate its activities with the Unsecured Creditors' Committee's professionals in instances where the two committee's interests are aligned. In exchange for its services, FTI Policano will charge its customary hourly rates: Managing Director $525 - 575 Staff 250 - 475 Support Staff 75 - 175 FTI Policano will maintain detailed contemporaneous records of time and any actual and necessary expenses incurred in connection with their services to the Institutional Committee. Edwin N. Ordway, managing director of FTI Policano & Manzo, tells Judge Sonderby that the firm does not have any connection with the Debtors, the Debtors' creditors, their respective attorneys and accountants or any other parties in interest, except as otherwise disclosed to the Court. "The firm does not provide advisory services to any other entity having an adverse interest in connection with these cases," Mr. Ordway adds. Mr. Ordway explains that FTI Policano is a separate operating unit of FTI Consulting Inc., a public company that provides consulting services regarding litigation support and engineering and scientific investigation. Mr. Ordway admits it is possible that one of FTI Consulting's clients may hold a claim or is a party-in-interest in Kmart's chapter 11 cases. "But we do not believe any of these business activities constitute interests materially adverse to the Debtors' estates, or to the Committee in matters upon which FTI Policano is to be employed," Mr. Ordway says. Although every reasonable effort has been made to discover and eliminate the possibility of any conflict, Mr. Ordway admits that FTI Policano is unable to state with certainty whether one of its clients holds a claim or is a party in interest in these chapter 11 cases. "If FTI Policano discovers any information that is contrary to or pertinent to the disclosures made, the firm will file a supplemental disclosure with the Court," Mr. Ordway assures Judge Sonderby. (Kmart Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) LERNOUT & HAUSPIE: Court Okays Asset Sale to SpeechWorks Int'l -------------------------------------------------------------- Having reserved allocations of proceeds and other related issues in her prior bench Order approving this sale, Judge Wizmur now enters a written Order approving the sale of its Speech and Language Technology Business to SpeechWorks International Inc., and finding that L&H Holdings "soundly exercised its business judgment" in entering into this sale between Holdings and Scansoft, Inc. by which Scansoft purchased the "audiomining" SLT asset, free and clear of all liens, claims and encumbrances, excepting that the term "encumbrance" does not include any licenses or escrow agreements, outside of a plan, and that subsequent to the auction ScanSoft submitted the highest and best offer for these assets. However, Judge Wizmur still does not address the allocation issues, in this Order, but the issues are resolved through the Motion described above, subject to the approval of the Belgian court representatives. The Asset Sale The SLT Assets include, without limitation, equipment, inventory, intellectual property and other intangible property, permits, receivables, license agreements and other executory contracts, and goodwill that are associated with eight separate asset groups that together comprise the SLT Assets. These eight asset groups are: (i) the Text-to-Speech Asset Group; (ii) the L&H Speech Processing/Dialog (and Automotive) Asset Group; (iii) the Dragon Speech Processing/Dialog Asset Group (which includes the M-REC speech recognition engine); (iv) the ISI Speech Processing/Dialog Asset Group; (v) the Intelligent Content Management Asset Group; (vi) the Audiominig Asset Group; (vii) the Knexyx Asset Group; and (viii) the Machine Translation Asset Group. The Debtors/Sellers entered into the Agreement, pursuant to which the Sellers have agreed to sell two of the SLT Asset Groups (the Text-to-Speech Asset Group and the L&H Speech Processing/Dialog (and Automotive) Asset Group) to the Purchaser, subject to higher or otherwise better offers. The SLT Assets, excluding the Purchaser Assets, are referred to in this Motion as the "Other Assets". The SLT Business The SLT Business is comprised of the SLT Assets owned and operated by L&H NV, Holdings, and the other Sellers. The SLT Business constitutes a substantial part of the remaining core assets of the L&H Group. The SLT Business is a leading developer, licensor, and provider of conversational user interface technologies, systems, and products to customers in multiple markets. As of October, 2001, the SLT Business employed approximately 600 full-time employees around the world, including almost 400 research and product development engineers. B. Products and Services. The SLT Business develops and sells a wide variety of speech and language technologies, systems, and products that incorporate automatic speech recognition, text-to- speech, intelligent content management, and other capabilities. These technologies enable telecommunication systems, computing equipment, and mobile communications devices to effectively hear what users say, speak to users, carry on conversations, recognize users by their voice, and understand the information in the computer or on the web in order to find what users need and deliver it in the most natural and efficient way. The SLT Business products and services are capable of operating across multiple languages and in a variety of environments. L&H NV and Holdings believe, in their business judgment, that the Sellers will receive maximum value from the Purchaser Assets if they are sold on the terms set forth in the Agreement, subject to higher or otherwise better offers in accordance with the Bidding Procedures, and if the Other Assets can also be sold at the Auction to the highest and best bidder or bidders. (L&H/Dictaphone Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) MAGNUM HUNTER: S&P Ups Credit Rating to BB- Following Merger ------------------------------------------------------------ On March 15, 2002, Standard & Poor's raised the corporate credit ratings of Magnum Hunter Resources Inc. to BB- and its senior unsecured debt rating to B+. The ratings on Magnum Hunter Resources Inc. reflect its participation in the volatile exploration and production segment of the petroleum industry and aggressive financial leverage. The company's midsize reserve base consists of 920 billion cubic feet equivalent of reserves (76% proved developed; 58% natural gas) located in the Permian Basin (47%), Mid-Continent (30%), Gulf Coast (14%), and offshore Gulf of Mexico (9%). Magnum Hunter benefits from geographic diversification, enhanced technical expertise in core reservoirs, increased operating scale, and operational control. In addition, the company has a conservative balance between longer-lived onshore properties and faster-producing offshore plays. Magnum Hunter's sizeable inventory of lower-risk drilling prospects provides a measure of stability to its higher-risk, high-impact, shallow-water Gulf of Mexico program. Magnum Hunter's capital structure remains aggressive, with total debt to capital expected to remain around 60% in 2002. The company's financial profile, however, benefits from a favorable hedge position and a moderately conservative 2002 capital- spending program. Roughly 50% of anticipated 2002 production is hedged at $3.35 to $3.62 per million cubic feet and $23.22 to $25.15 per barrel. Magnum Hunter's $115 million capital program is skewed toward development and offsets riskier offshore exploration efforts with low-risk drilling in its familiar onshore properties. Cash flow protection measures are expected to be adequate for the rating category with EBITDA interest coverage of around 4.5 times and EBITDA interest plus capital expenditures of 1.25x, in a midcycle pricing environment. Liquidity is strong, given cash on hand and availability under the company's senior secured revolving credit facility. Outlook The stable outlook reflects expectations that Magnum Hunter's management will finance growth initiatives in a conservative manner. MALAN REALTY: Board of Directors Adopts Plan of Liquidation ----------------------------------------------------------- The board of directors of Malan Realty Investors, Inc. (NYSE: MAL), a self-administered real estate investment trust (REIT), voted to recommend a plan of liquidation to the company's shareholders. The proposed plan contemplates the sale of all the company's properties and other assets and will be subject to shareholder approval at the annual meeting of shareholders, scheduled for later this summer, as well as to agreements from some of the company's lenders. The board believes at this time that the plan of liquidation is the best course of action to maximize shareholder value, given the current trading price of the company's common stock. "From the time the current board was elected, our strategic plan has always included all possible options, including liquidation," stated Jeffrey D. Lewis, Malan's chief executive officer. "At this juncture, the board has decided that liquidation offers the best possibility for shareholders to realize a premium to the current trading price of our stock." Factors influencing the board's decision include the company's debt structure, including the over-leverage at Bricktown, impediments to the redevelopment of Malan's Farmington Hills, Michigan property, the recession, and the bankruptcy filing of Kmart Corporation, the company's largest tenant. If the shareholders approve the plan of liquidation, Malan expects to achieve meaningful reductions in operating costs during the liquidation period. The company is actively considering a number of cost-control measures, including reducing general and administrative expenses. In addition, the board has voted to decrease the size of the board of directors from seven directors to five at the next annual meeting. Management does not anticipate any immediate reductions in staff because the number of owned and managed properties generally determines Malan's staffing requirements. Staff reductions are anticipated to begin after the formal approval of the plan of liquidation and will be consistent with the reduced size of the company. In anticipation of the adoption of a plan of liquidation and because of the uncertainty surrounding the company's cash flow due to the Kmart bankruptcy filing, the board announced it is indefinitely suspending the regular quarterly cash dividend, which would have been declared at this time. It is currently contemplated that during the liquidation period, cash generated from operations and property sales will be used first to make required repayments of debt and other liabilities, and then distributed to common shareholders. The liquidation plan will not become effective until after shareholder approval. The liquidation process is anticipated to proceed in an orderly fashion and could take 24 months or more to complete from the date of shareholder approval. However, there are no assurances that the process will be either shorter or longer than the current time estimate. The company's common stock is expected to qualify for continued listing on the New York Stock Exchange until total market capitalization drops below $15 million. Chicago-based Cohen Financial is advising the company on the sale of properties as part of the liquidation process. For further information, contact Richard Tannenbaum at (312) 346- 5680. Malan Realty Investors, Inc. owns and manages properties that are leased primarily to national and regional retail companies. The company owns a portfolio of 58 properties located in nine states that contains an aggregate of approximately 5.4 million square feet of gross leasable area. MARINER POST-ACUTE: Pangia Seeks Equity Committee Appointment ------------------------------------------------------------- Vincent C. Pangia, the beneficial holder of 1,905,965 shares representing approximately 2.5% of Mariner Post-Acute Network, Inc.'s outstanding common stock, moves the Court for an appointment of an Equity Holders Committee to represent interests of holders of MPAN common stock. Mr. Pangia, a certified public accountant in Poughkeepsie, New York, sees a possible error of half a billion dollars in CDG's "enterprise value" of MPAN/MHG. An error of that magnitude is worthy of investigation by an independent appraiser/auditor through an equity holders committee, Mr. Pangia avers. Mr. Pangia, like other holders of MPAN common stock (Class EP-1 in the Plan), will receive no consideration if the Plan is approved, will not be issued shares of the emerging "New MPAN" entity, and are deemed to have voted against the Amended Plan. MPAN's creditors, on the other hand, would be issued new shares of stock, along with other valuable consideration, if the Plan is approved. Mr. Pangia objects to the Plan for its: * Failure to take in account the equity holders' interests; * Failure to adequately and properly value the present assets of MPAN; * Failure to adequately and properly value the future potential of MPAN; and * Failure to treat equity holders fairly and properly. Mr. Pangia explains to the Court his Per-Bed Valuation of the Debtors' facilities as follows: CDG arrived at "enterprise value" figures for Debtors of $810 - $870 million. Of those figures, $560 million - $600 million is attributed to MPAN, and $250 million - $270 million is attributed to MHG. If one takes the low-end CDG figure of $810 million, and divides it by the number of beds available (33,373) under the occupancy rate assumed by Debtors (88% of the total of 38,100 beds), a per bed figure of $24,271 is obtained. At 100% occupancy, the per-bed figure would be $21,260. Mr. Pangia submits those figures are artificially low and do not accurately reflect the values of the MPAN or MHG facilities either on a fair market value basis or on a per-bed basis. Fair market value is the price that would be paid by a willing buyer with full knowledge of the facts pertaining to the facilities. Mr. Pangia goes on: Under the proposed Plan, Senior Credit Facility holders would receive 96.01% of stock in the new post-bankruptcy company, as well as all cash in excess of $25 million. The estimated cash according to the Disclosure Statement is well in excess of $200 million. If one takes the CDG low-end estimate of $810 million and adds back a conservative figure of $200 million for available cash, the result is a figure of $1,010,000,000 for total company value. If one then takes the liabilities listed in Annex 4 (712,700,000) and backs them out, a figure of $1,722,700,000 is obtained for the total value of Debtors' assets. One may then subtract the Disclosure Statement figure of $389,900,000 for non-facility assets leaving a figure of 1,332,800,000 for the total value of Debtors' facilities. Dividing that figure by the number of beds available at an 88% occupancy rate (33,793) gives a per-bed value of the facilities of $39,440. At an occupancy figure of 100% (38,100 beds), the per-bed value of the facilities would be $34,980. These figures are based on the data and estimates contained in the Disclosure Statement, and they are significantly higher (about 50%) than the figures based only on the "enterprise values" cited by CDG, Mr. Pangia tells the Court. Moreover, figures for comparable facilities in the health care industry should be of prime importance to any reasonable valuation of MPAN or MHG facilities, but Debtors even concede that CDG did not consider this factor, Mr. Pangia points out. Mr. Pangia obtained information concerning the recent (December 2001) sales of facilities owned by Sunrise Assisted Living, Inc., the operator of facilities that are reasonably similar to Debtors' health care facilities. The publicly reported per-bed fair market value figure for four Sunrise transactions at a time when Sunrise was in financial difficulty were as follows: $180,987 per bed (12 facilities, 1,094 beds) $127,551 per bed (2 facilities, 196 beds) $195,122 per bed (1 facility, 82 beds) $ 49,382 per bed (1 facility, 162 beds). More recently, at the end of January 2002, ILM II Senior Living, Inc. announced a sale of 703 units in senior assisted living facilities for $45,500,000 which amounts to $64,723 per bed. It is evident from the figures in the ILM and Sunrise transactions that per-bed figures for Debtors' facilities, calculated from the information in the Disclosure Statement, are considerably lower than what actually exist in the marketplace, Mr. Pangia represents. Mr. Pangia notes that the difference in per-bed fair market value is greater than $15,000 ($34,980 for Mariner versus $49,382 for Sunrise), which represents a 50% difference. Multiplying the difference of $15,000 by the number of MPAN/MHG beds (38,100) gives a figure of $571,500,000 for full occupancy or $506,895,000 at 88% occupancy (33,793 beds). Thus, Mr. Pangia arrives at a difference of more than half a billion dollars over CDG's "enterprise value" of MPAN/MHG. Mr. Pangia also notes the following that might cast doubt upon the fairness in the Debtors' way of spending money and their valuation of assets: -- It is unclear why three separate valuation consultants (American Appraisal Associates (AAA), Value Management Group (VMG) and Conway, Del Genio, Gries & Co., L.L.C. (CDG)) were retained, and why only CDG's conclusions were referenced in the Disclosure Statement. Debtors have not disclosed any of AAA's work product, although a fee application in excess of $220,000 has been submitted and approved. It is unknown what VMG did in the last 18 months as Debtors have chosen not to disclose any of VMG's work product or its conclusions. -- CDG's analysis, to the extent there was one, is flawed for a number of reasons. For example, CDG failed to determine or even consider the fair market value of the health care facility assets. -- From the Disclosure Statement, it appears that CDG relied completely on figures and information provided to it by Debtors without any independent verification. Moreover, based on the disclaimers and statements concerning the limitation of the evaluation, it is evident that CDG's "analysis" is essentially meaningless. -- Debtors acknowledge that they did not follow standard accounting practices in performing its analysis. Basically, Debtors' figures are estimates prepared exclusively by them and designed expressly to support their Plan. There is certainly no assurance given by Debtors that their figures are reliable or were reviewed by anyone other than an interested party to this bankruptcy proceeding. -- The valuation analysis failed to include, or take into account, the significant reductions in operating costs already realized by Debtors as a result of their reorganization efforts. -- It is not clear how, or even whether, Debtors' two captive and solvent insurance companies, as well as significant interests in other solvent companies, were considered in the valuation process. On a related note, it is not clear why Debtors included figures of more than $33 million in cash during post-reorganization years in the "changes in long-term insurance reserves" section of their forecasts of future cash flow. No such asset appears in the liquidation analysis in Annex 5 of the Disclosure Statement. -- In CDG's analysis, there is no explanation or disclosure of the transaction in which Debtors take an MPAN loan obligation (the Modified Omega Loan) with an approximate balance of $59.7 million, "off - balance sheet". (See prior entry at [00315].) -- CDC has not properly identified, disclosed, or provided for MPAN's agreement to manage, or have a subsidiary manage, Omega Facilities which will result in retained management fees (70% of the free cash flow of the Omega Facilities in addition to a monthly 5% management fee). -- Debtors have resisted producing any documents to Mr. Pangia absent a signed confidentiality order that would severely restrict Mr. Pangia's ability to utilize the information so obtained. -- Erroneous Valuation of APS Subsidiary which shows that Debtor's valuation analysis for the NeighborCare transaction was flawed by nearly 100%. (See prior entry at [00339].) Mr. Pangia submits that the facts and circumstances of this case warrant the appointment of an Equity Holders Committee: "First, there are 1,029 equity shareholders and the companies are publicly traded. The investors are, therefore, scattered and unconcentrated, which diminishes their voice in this proceeding in the absence of a representative body such as a Committee. "Next, this is a complex Chapter 11 case involving the valuation and future of hundreds of individual health care facilities and other assets. Debtors have already retained numerous professionals with the intent of hastily cramming down an Amended Plan that favors certain creditor interests over Debtors' own stockholders. The complexity of the issues and the proceeding weigh in favor of the stockholders voicing a "second opinion," particularly given Debtors' history of significantly undervaluing their own assets. "The delay involved in appointment of a Committee would be minimal given the economic value that might be returned to Debtors, creditors, and stockholders through proper valuation of Debtors' assets and possible sales of Debtors' assets. "Further evaluation of Debtors' assets could also affect the determination of whether the entities are truly insolvent. "This application for appointment of a Committee is also timely given the facts and circumstances of the case. Debtors first proposed their Plan to exclude all equity interests on November 30, 2001, which is less than 90 days ago. During the nearly two years between the filing of the bankruptcy petitions and the first proposal of the Plan, Mr. Pangia and other equity holders relied to their detriment on Debtors' officers and directors honoring their fiduciary duties with respect to protecting stockholder interests. ... [S]enior management of MPAN and MHG received in excess of $18 million under the "management incentive programs" while they were engaged in formulating a plan to strip their stockholder constituents of the complete value of their investments. Up to this point, Mr. Pangia has single-handedly pursued the interests of all equity holders and unsecured creditors at his own expense. As a lone stockholder, he acted promptly upon receiving notification that he stands to lose his entire investment based on an analysis that he, as a certified public accountant, knows to be inaccurate and misleading." Mr. Pangia tells the Court he does not have the financial resources necessary to protect the interests of the stockholders, particularly with respect to the costs of retaining a health care industry appraisal expert. Mr. Pangia has been in contact with a health care industry appraisal expert, Michael P. Bertrand, MAI, of Bertrand & Associates, Inc., in connection with possible retention to conduct a proper appraisal of Debtors' assets but he cannot bear the expense of such an appraisal on his own. Mr. Pangia indicates that he stands ready to assist an Equity Holders Committee in any way he can, including consultation with Mr. Bertrand or any other suitable appraiser, which will ultimately benefit both stockholders and creditors. "Fairness and equity weigh in favor of appointment of an Equity Holders Committee that could possibly return higher value to Debtors, creditors, and stockholders than contemplated at present under Debtors' proposed Plan," Mr. Pangia represents, "The fact that Debtors's stockholders are to receive nothing under the proposed Plan, combined with the questionable performance of Debtors' management, should trigger serious concern in the minds of stockholders, creditors, and the Court. This case presents the quintessential example of 'the natural tendency of a debtor in distress to pacify large creditors, with whom the debtor would expect to do business, at the expense of small and scattered public investors.'" Objection of the Committee The Committee tells the Court the motion should be denied because (1) the formation of an equity committee would cause unnecessary delay and increased costs for the estates; (2) the Debtors are hopelessly insolvent; (3) the Motion has been filed on the eve of confirmation; and (4) shareholders are adequately represented; and (5) the substantial costs associated with an equity committee are unjustified in these cases. Both the Debtors' independent financial advisor and the Creditors' Committee's financial advisor have concluded that the MPAN Debtors' estates are insolvent, the Committee advises. Specifically, the Committee advises, -- The Debtors' book equity is worthless by a wide margin and continues to decline. The Debtors' book equity as of September 30, 2001 totaled negative $1.5 billion. This deficit would be approximately $302 million greater if the Debtors had continued to fully accrue interest on their liabilities during the Chapter 11 Cases. -- The market value of the Debtors' senior bank debt and subordinated debt is less than half compared to the related claims, further demonstrating that there is no value to the Debtors' current equity holders. Upon information and belief, the Debtors' bank debt has been trading between 55 and 65 cents and the Debtors subordinated debt is trading infrequently and then at values of between 1 and 5 cents. Thus, while the aggregate principal amount of the claims of the Debtors' senior bank lenders and subordinated noteholders total approximately $2.1 billion, the total market value, using the high end of the range, totals approximately $939 million. -- The Debtors have no prospective reorganization value of magnitude even remotely sufficient to cover the creditor indebtedness. Claims aggregating approximately $2.6 billion have been asserted against the Debtors (not including claims for punitive damages and settlements with the United States government). Thus, before there is any value for the existing equity, the reorganized value of the Debtors must exceed $2.4 billion (total claims amount net of excess cash at emergence). Even under a best case scenario in which the Debtors are able to fully achieve their projected operating results, the Debtors' enterprise value falls far short of the Debtors' approximately $2.4 billion of claims. The comparatives used by the Movant in his analysis are not appropriate in the Debtors' circumstances, the Committee avers: -- The analysis in the Motion is based on 38,100 beds. However, approximately 35% of these beds are leased and would not be available for sale or consideration under a true asset valuation. -- For per bed comparatives, the analysis in the Motion uses assisted living facilities which command much higher per unit values. Assisted living facilities maintain higher margins generally 30% to 40% EBITDA compared to nursing homes which maintain 10% to 20%. In addition, the facilities used as comparatives in the Motion, on the average, are 10 to 15 years newer than those of the Debtors. -- The analysis in the Motion utilizes several transactions with Sunrise Assisted Living for comparative purposes. However, the majority of the Sunrise transactions were not arms length as Sunrise maintained an ownership interest in the company purchasing the facilities and receives an ongoing management fee. The analysis refers to Sunrise as being troubled but at and around the time of the transactions throughout December 2001, Sunrise maintained a stock price in excess of $20 per share. The Committee tells the Court that appointment of an equity committee in the face of undeniable evidence of insolvency is an unreasonable risk, the costs of which will be borne solely by estate creditors. Moreover, shareholders' interests are adequately represented and it is simply too late in the Debtors' chapter 11 cases to appoint an Equity Committee, the Committee opines. "The Motion is an overt attempt by Movant to foist the costs of his objections to the Plan onto the Debtors' creditors," the Committee says, " Creditors should not shoulder the expense of the Movant's opposition to the Plan." If Movant wishes to remain involved in these cases, he is permitted to do so, but he should bear his own costs and not be permitted to shift them to the estate, the Committee avers. The Committee points out that it had every incentive to contest the Debtors' and Senior Lenders valuations in order to increase unsecured creditor recovery and the Committee's interests were aligned with those of equity holders in as much as a higher valuation would ultimately benefit shareholders if a 100% recovery were realized for unsecured creditors. The Committee's independent valuation revealed, however, that this was not possible. The Committee tells the Court that an equity committee will result in substantial costs, will give equity holders a license to try to extract hold up value and will burden the Debtors' estates, all of which will inure to the detriment of creditors. Thus, the facts do not warrant the discretionary appointment of an equity committee pursuant to section 1102 of the Bankruptcy Code, the Committee concludes. The Debtors' Objection The Debtors object to the motion for essentially similar reasons. The Debtors remind the Court that near the end of December, 2001, Mr. Pangia, through his counsel, contacted the United States Trustee regarding the appointment of an equity committee. The United States Trustee promptly informed Mr. Pangia's counsel that the United States Trustee found no basis for appointing an equity committee at this late stage in the case, particularly in light of the agreement of the creditors' committees that unsecured creditors would receive far less than payment in full based upon the Debtors' financial condition. Mr. Pangia failed, upon the United States Trustee's rejection of his request, to file an immediate motion to appoint an equity committee, the Debtors point out. The Court, at the January 25 hearing on the Disclosure Statement, made clear to Mr. Pangia's counsel that any request for the appointment of an equity committee had to be made by way of a properly noticed motion. The Court set the March 25, 2002 confirmation hearing date and the March 5, 2002 deadline to object to confirmation. "Mr. Pangia's counsel did not object to the setting of these dates," the Debtors note, "Nor did Mr. Pangia's counsel request a hearing date for a motion to appoint an equity committee." "There is absolutely no explanation of, or justification for, Mr. Pangia's delay in filing his Equity Committee Motion," the Debtors tell the Court, "Mr. Pangia waited to file his Equity Committee Motion for more than twenty-five months after the petition date; for more than three months after he knew what the Debtors' Plan provided; for more than two months after the United States Trustee informed Mn Pangia that he did not support an equity committee; and for more than one month after th[e] Court told him that his prior "request" was procedurally improper. The Debtors also point out that the members of MPAN's Board are significant holders of MPAN's common stock and/or options to purchase such stock, either directly or indirectly. At the direction of the Board, MPAN's senior management team and professional advisors developed a business plan designed to maximize the Debtors' reorganization value so as to provide the basis for the optimal treatment of all classes of claims and equity interests, and that business plan was ultimately approved by the Board. Further, the Debtors reveal that, in connection with negotiations regarding the Joint Plan, the Debtors proposed repeatedly that their principal creditor constituencies consent to a plan of reorganization that allowed current MPAN stockholders to receive some consideration, notwithstanding the fact that unsecured creditors would themselves receive far less than payment in full on account of their allowed claims. These proposals were rejected each time they were made, and the Debtors do not believe that their principal creditor constituencies would vote to accept any plan that would provide consideration for current MPAN stockholders. "Thus, notwithstanding the Debtors' negotiators' best efforts at the direction of MPAN's Board to achieve some distribution for holders of MPAN's prepetition equity interests, it was not feasible to do so based upon any supportable valuation of the Debtors," the Debtors aver, "The absence of any distribution under the Joint Plan for holders of prepetition equity interests is not indicative of any lack of adequate representation on behalf of shareholders; rather, it reflects the economic reality that MPAN is hopelessly insolvent and that the holders of equity interests have no bargaining power. That reality will not change whether or not an official equity holders' committee is appointed in MPAN's case." Based on the reasons represented, the Debtors request that the Court deny Mr. Pangia's Equity Committee Motion. (Mariner Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) MEDICALOGIC: GE Medical Systems Pitches Highest Bid for Assets -------------------------------------------------------------- MedicaLogic (OTC:MDLIQ), announced that GE Medical Systems Information Technologies, a unit of General Electric Company, has been declared the winning bidder at an auction to acquire the digital health record business of MedicaLogic, a provider of electronic medical records for outpatient settings. GE Medical Systems initially announced its agreement to acquire the digital health record assets of MedicaLogic in January of this year. An auction was held in Wilmington, Delaware on March 18, 2002. GE Medical Systems' winning bid was for the amount of $35,250,000 and was subject to bankruptcy court approval that was expected to be received at a hearing Tuesday. MedicaLogic/Medscape, Inc. (OTC:MDLIQ) is a leading provider of digital health records. The core of MedicaLogic's product portfolio is the industry-leading Digital Health Record (DHR). DHR applications and services are an integral part of the practice of medicine and are used every day by physicians and consumers across the country. MedicaLogic's DHR enables physicians to access patient information, share data with existing systems, communicate among practice members and capture and store quantifiable data for patient-by-patient or population-based studies. The DHR also enables practice sites to interact with their patients electronically to answer questions, schedule appointments and address personal health concerns, while offering consumers private access to their medical records and related disease management information and services. More than 16 million patients now have digital records hosted on MedicaLogic systems. More information about MedicaLogic's products and services is available on the Web at http://www.medicalogic.com The Company, headquartered in Hillsboro, Oregon, currently employs approximately 200 people. MedicaLogic and Logician are registered trademarks of MedicaLogic/Medscape, Inc. in the United States. Other product and brand names are trademarks of their respective owners. GE Medical Systems Information Technologies provides hospitals and healthcare systems with advanced software and technologies to improve their clinical performance. The Company's expertise spans the areas of cardiology, patient monitoring, image management, clinical communications, clinical information systems and Six Sigma-based management tools to enable a real- time, integrated electronic medical record for the in-and outpatient settings. GE Medical Systems Information Technologies is a business of GE Medical Systems, an $8 billion global leader in medical imaging and technology. Additional information about GE Medical Systems can be found at http://www.gemedical.com MONUMENT CAPITAL: Fitch Cuts Class B Notes Rating to Low-B Level ---------------------------------------------------------------- Fitch Ratings takes rating actions on two tranches of liabilities issued by Monument Capital Ltd. (Monument) and removes both tranches from Rating Watch Negative. The following rating actions are effective immediately: -- $306,000,000 Class A Notes affirmed at 'AAA'; -- $64,000,000 Class B Notes downgraded from 'BBB' to 'B'. Monument is a collateralized loan obligation, which is backed predominantly by senior secured loans. Monument is managed by Alliance Capital. Based on the most recent numbers available to Fitch, the deal has a total of $18.65 million (5.08%) in defaulted assets outstanding. There is also $26 million (7.07%) 'CCC+' rated assets, excluding defaults. As a result, Monument is failing its weighted average rating test. Due to the negative migration of the credit quality of the assets in the portfolio, Fitch does not believe that the 'BBB' rating of the class B notes is commensurate with the risk to noteholders and subsequently has downgraded the notes to the appropriate rating. After extensive model simulations, Fitch does find that despite the negative migration of the credit quality of the current portfolio, the class A notes continue to maintain credit enhancement levels consistent with its assigned rating of 'AAA'. NATIONAL STEEL: Wins Approval to Maintain Existing Bank Accounts ---------------------------------------------------------------- Prior to the Petition Date, National Steel Corporation and its debtor-affiliates maintained approximately 38 Bank Accounts. According to Mark A. Berkoff, Esq., at Piper Marbury Rudnick & Wolfe, in Chicago, Illinois, the Bank Accounts are an integral part of the Debtors' centralized cash management system that the Debtors need to maintain these accounts in order to ensure smooth collections and disbursements in the ordinary course of businesses. The Debtors routinely deposit, withdraw and transfer funds from and among the Bank Accounts by various methods including check, wire transfer, automated clearing house transfer and electronic funds transfer. "The Debtors complete thousands of transactions per month through the Bank Accounts," Mr. Berkoff states. The Debtors ask Judge Squires to waive the requirements of the United States Trustee "Operating Guidelines and Financial Reporting Requirements Required in All Cases Under Chapter 11," which mandate, among other things, the closure of the Debtors' pre-petition bank accounts, the opening of new bank accounts and the immediate printing of new checks with a "Debtor-in- possession" designation on them. The burdens outweigh the benefits in these billion-dollar bankruptcy cases. * * * In response, Judge Squires authorizes the Debtors to: (i) designate, maintain and continue to use any and all of their respective depository, lockbox, concentration, payroll disbursement and non-payroll disbursement accounts in existence as of the Petition Date, with the same account numbers; (ii) maintain any blocked account or account control agreements related to said bank accounts; (iii) if necessary, open new accounts, and give the U.S. Trustee prompt notice of each such newly opened account, wherever they are needed, irrespective of whether such banks are designated depositories in the Northern District of Illinois; and (iv) treat the Bank Accounts and any such newly opened accounts for all purposes as accounts of the Debtors in their capacity as debtors-in-possession. (National Steel Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) NABI: Changes Name to Nabi Biopharmaceuticals Following Merger -------------------------------------------------------------- At the close of business on March 4, 2002, Nabi changed its name from "Nabi" to "Nabi Biopharmaceuticals". The name change was effective upon the filing of a Certificate of Ownership and Merger with the Secretary of State of Delaware resolving to merge a wholly owned subsidiary of the Company into the Company for the sole purpose of changing its name. The Company's common stock still trades under the ticker symbol "NABI" on the Nasdaq Stock Market. Nabi makes products to prevent and treat infectious diseases and autoimmune disorders. The firm sells Nabi-HB, which prevents hepatitis B; WinRho SDF for immune platelet disorders; AutoPlex T for the treatment of hemophilia; and Aloprim to treat chemotherapy-induced hyperuricemia, a condition that can lead to renal disease. It is developing therapies to combat staph infections, nicotine addiction, and hepatitis C. To focus on its drug development programs, Nabi sold to Australia's CSL a unit that provides plasma and plasma-based products and screens donors for naturally occurring antibodies that can be administered as therapeutics to patients suffering particular diseases. In October 2001, Standard & Poors raised the junk ratings on the company following the sale of its Antibody Collection assets. NATIONSRENT INC: CIT Group Seeks Stay Relief to Recover Property ---------------------------------------------------------------- CIT Group/ Equipment Financing, Inc., asks the Court to: A. Terminate the automatic stay, compelling surrender and turnover of CIT's property; or, B. Compel NationsRent Inc., and its debtor-affiliates to provide adequate protection; or, C. Compel the Debtors to assume or reject unexpired Leases. Ralph N. Sianni, Esq., at Duane Morris LLP in Wilmington, Delaware, tells the Court that the Debtors and CIT are parties to certain leases to which the Debtors are leasing from CIT certain equipment owned by CIT. Pursuant to the Lease Agreements, the Debtors are required, inter alia, to: A. make monthly rental payments to CIT; B. pay, when due, and to indemnify and hold CIT harmless from all license, title and registration fees, levies, import duties charges, withholdings and sale, use, personal property, stamp or other taxes; C. maintain the Equipment in good and safe operating order, repair and condition; and, D. maintain insurance on the Equipment. As of petition date, the Debtors were indebted to CIT in the aggregate approximate amount of $5,384,682.41, net residuals, unearned income, taxes and late charges, plus interest, collection costs, and other damages arising from the Debtors' defaults under the Lease. Mr. Sianni believes that CIT is entitled to relief from automatic stay pursuant to section 362(d)(1) of the Bankruptcy Code because its interest in the Equipment is not adequately protected because of: A. the Debtors failure to make the payments required by the Lease Agreements; B. the Debtors' lack of any equity in the Equipment; C. the continuing decline in the value of the Equipment caused by the passage of time and the Debtors' use of the Equipment; D. the possible failure by the Debtors to keep the Equipment in good repair, maintain insurance on the Equipment as required by the Lease Agreements and pay charges applicable to the Equipment; and, E. the failure of the Debtors to provide CIT with any form of adequate protection. In addition, Mr. Sianni claims that the that automatic stay provisions must be lifted pursuant to section 362(d)(2) because the Debtors lack equity in the Equipment, which is titled in the name of CIT, and the Equipment is not essential or necessary for an effective reorganization since it is not unique and can be obtained from another vendor. The Court should order the termination of the automatic stay to permit CIT to take possession of its Equipment and to exercise and enforce all of its rights and remedies against the Equipment in accordance with the provisions of the Lease Agreements and applicable law, direct the Debtors to assemble and deliver the Equipment to CIT, maintain proper insurance coverage on the Equipment and make all applicable payments until it is returned to CIT as well as maintain the Equipment in good condition and repair until such Equipment is returned to CIT. However, if relief from automatic stay is not granted, the Debtors should provide CIT with adequate protection in five ways: A. The Debtors must provide CIT with proof that insurance on the Equipment is being maintained for both physical damage and loss of the Equipment with CIT named as loss payee; B. The Debtors must provide CIT with proof that the Equipment is being maintained in good operating condition and repair, and that the repair of such Equipment complies with manufacturer specifications; C. The Debtors must provide CIT with proof that accurate maintenance records are being kept with respect to the Equipment; D. The Debtors must provide CIT with proof that no mechanics or other possessory liens have been or are being to be attached to the Equipment; E. The Debtors must make the Equipment and any and all maintenance records available for inspection by CIT or its agents at reasonable times; and, F. The Debtors must cure all payment and other defaults and make payments to CIT on an ongoing basis in accordance with the Lease. Mr. Sianni submits that if the Court should decide not to grant CIT's relief from the automatic stay, the Debtors should be required, in the alternative, to decide whether they would assume or reject the Lease because, to date, the Debtors have continued to enjoy all monetary and other post-petition benefits from CIT's Equipments, while refusing to pay CIT for such continued use. CIT is in the unenviable position of suffering ongoing and increasing injury as its Equipment depreciates in value, while simultaneously being compelled to perform its obligations under the Lease with no reciprocal performance by the Debtors. In this event, CIT proposes that: A. the Debtors be compelled to assume or reject the unexpired Lease within 10 days of the entry of the Order; B. if the Debtors elect to assume the Lease Agreements, compel the Debtor to: a. cure all monetary and non-monetary defaults; b. provide adequate assurance of future performance under the Lease Agreements; c. comply with the terms and conditions of the Lease in accordance with the provisions of the Lease; and, C. if the Debtor elects to assume the Lease but fails to comply with the terms of Section 365 of the Code or the Order approving this Motion, or if the Debtor elects to reject the Lease: a. the automatic stay shall be terminated without further application to this Court to permit CIT to take possession of the Equipment and exercise and enforce all of its rights and remedies against the Equipment in accordance with the provisions of the Lease and applicable law; b. the Debtor shall be required to assemble the Equipment and deliver the Equipment to CIT and maintain proper insurance coverage on the Equipment in accordance with the terms of the Lease until said Equipment is returned to CIT; and, c. the Debtor shall maintain the Equipment in good condition and repair until it is returned to CIT. Mr. Sianni asserts that all postpetition unpaid amounts due under the Lease should be allowed as administrative claims and the Debtors should make their rent payments and other obligations to CIT that continue to accrue on an ongoing and timely basis. (NationsRent Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAVISTAR FINANCIAL: S&P Rates $200MM Exchangeable Notes at BB- -------------------------------------------------------------- On March 15, 2002, Standard & Poor's assigned its rating to Navistar Financial Corp.'s new $200 million subordinated exchangeable notes due 2009 at 'BB-'. On March 13, 2002, Standard & Poor's lowered its long-term corporate credit ratings on Navistar Financial and its parent company, Navistar International Corp to 'BB+'. All ratings were removed from CreditWatch where they were placed on February 11, 2002. The outlook is negative. The downgrades of March 13 reflected Navistar's increase in financial leverage and a significant diminution in financial flexibility, which have resulted from persistent soft demand in the North American heavy- and medium-duty truck markets. Standard & Poor's expects that the end markets may have bottomed, however, the timing and magnitude of a recovery is uncertain. As a result, a material reduction in debt is unlikely in the next few years. Navistar is a leading producer of trucks, operating in the highly cyclical and intensely competitive heavy- and medium-duty truck markets. Heavy-duty truck demand remains at very depressed levels, resulting from the cyclical downturn that started in mid-2000. Demand for new heavy- and medium-duty trucks is closely tied to the business cycle, and as a result, can be very volatile. Although demand for new trucks has recently shown some signs of improvement, this may be temporary, as truck operators place orders to "pre-buy" trucks prior to the new engine emission standards, which go into effect in October of 2002. Adding to weak market conditions is the glut of used truck inventories. During the past several years the company has spent heavily on capital expenditures ($1.3 billion since 1999) for new facilities and product development related to the company's next generation trucks and diesel engines. As a result, Navistar has a newer product offering than some of its competitors. Additionally, Navistar continues to diversify to help reduce its exposure to the cyclical swings in the truck market, as evidenced by its expanded role as a supplier of med-range diesel engines to Ford Motor Co. Navistar has continued to focus on improving its cost structure by emphasizing improvements in labor productivity, parts procurement, and working capital management. Navistar has been effective in enhancing its cost- competitiveness, emphasizing improvements in labor productivity, and by shifting production to lower-cost facilities. The company accelerated its cost-cutting efforts by reducing its white-collar staff by 15% in fiscal 2001. Although capital expenditures have been large in the past several years, they are expected to decline from their peak levels in 2000. However, they will remain significant over the near term, resulting in continued negative free cash flow. Navistar's leverage has increased during the past several years due to weak cash generation and heavy capital outlays. Total debt at the company's manufacturing operation (including sale lease back obligations) was about $1.4 billion at fiscal year- end, compared with $700 million in 2000. Additionally, leverage at the company's finance operation Navistar Financial remains very aggressive, with net debt (adjusting for asset back securities) to equity of over 13 to 1. Adding to financial risk is Navistar's significantly un-funded pension liability of about $509 million and $1.4 billion in medical retirement benefits at fiscal year end 2001. Outlook Although borrowing capacity is expected to remain adequate for the revised ratings, an extended or prolonged downturn in the economy could cause financial flexibility to erode further. Additionally, asset protection for the company's senior note holders is diminishing due to the company's heavy use of sale leasebacks; continued use could result in potential notching down relative to the company's corporate credit rating. NETIA HOLDINGS: Resumes Trading on Nasdaq Beginning March 20 ------------------------------------------------------------ The Nasdaq Stock Market(R) announced that the trading in Netia Holdings S.A. (Nasdaq: NTIAQ), ZAP (Nasdaq: ZAPPQ), and Frontline Capital Group (Nasdaq: FLCGQ) resumes Wednesday, March 20, 2002 at 8:00 a.m., Eastern Time. Each of these issues was previously halted based upon the announcement of the filing of a bankruptcy petition. Nasdaq's review of the continued listing status of these issues is ongoing. If Nasdaq determines to delist an issuer, the issuer will be notified in accordance with Nasdaq's rules and be required to issue a press release announcing such determination. Nasdaq's rules further provide that an issuer can request a review of such a determination. For news and additional information about the company, please contact the company directly, or check under the company's symbol using InfoQuotes(SM) on the Nasdaq Web site at http://www.nasdaq.com DebtTraders reports that Netia Holdings SA's 13.50% bonds due 2009 (NETH09PON2) are trading between 18 and 20. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09PON2 for real-time bond pricing. NEXTEL COMMS: Fitch Revises Outlook on Low-B Ratings to Negative ---------------------------------------------------------------- Fitch Ratings has changed the Rating Outlook on Nextel Communications Inc. to Negative from Stable. The Negative Rating Outlook applies to Nextel's senior unsecured note rating of 'B+', the senior secured bank facility of 'BB' and the preferred stock rating of 'B-'. The Negative Rating Outlook reflects Fitch's concern of Nextel fully executing its strategic objectives in 2002/2003 and accelerating its operational performance improvement to meet several challenges. While current financial and operating performance is encouraging, the company must make steady progress toward free cash flow positive by early 2004. This is especially important due to a rapidly increasing debt service beginning in 2003 that could put pressure on liquidity absent strong cash flow progress. The company should also consider debt pay-down as a priority as a means to enhance cash flow and improve overall credit quality. Additional challenges for the company include capital expenditure reductions without affecting service quality, the competitive wireless pricing environment and quarterly EBITDA requirements associated with its bank convenants. These concerns are partially mitigated by Nextel's adequate near-term liquidity position, which reflects $3.5 billion in cash at the end of 2001 and $1.5 billion remaining on its bank facility, a unique and differentiated offering to moderate pressure on ARPU and a high quality subscriber base. Although credit protection measures improved modestly with debt- to-EBITDA from domestic operations decreasing from 8.3 times in 2000 to 7.3x in 2001, the company remains highly leveraged, and capital expenditures remain high in the near-term due to capacity and growth requirements. Nextel has indicated opportunities exist to substantially reduce capital spending during the next two years, which Fitch believes is necessary to further enhance its liquidity position when considering future debt service requirements. During 2002, net debt service is expected to increase by about $150 million. By 2003, net debt service is expected to significantly grow by approximately $800 million more due to an increase in cash interest expense associated with senior redeemable discount notes, cash dividend requirements from its preferred stock and the amortization of its bank facility. With its high leverage and debt service obligations, limited ability to access the capital markets and domestic debt of about $14 billion, Fitch believes it's critical for Nextel to meet its free cash flow objective of 2004 or earlier to avoid potential liquidity concerns. Based on the company's guidance, bank covenant requirements are not expected to be an issue in 2002. EBITDA for the fourth quarter 2001 was about $540 million, and Nextel expects to generate approximately $2.5 billion in EBITDA for 2002. Assuming total debt remains constant, Nextel will require approximately $500 million of EBITDA for each of the first two quarters of the year and about $580 million of EBITDA per quarter for the second half of 2002 to remain in compliance. For 2003, EBITDA requirements increase to $700 million per quarter, which could be potentially more challenging for the company. Resolution of the Negative Rating Outlook requires the company to execute its operational and financial targets over the next several quarters, provide further positive indication of its ability to meet meaningful free cash flow by 2004 or earlier, materially improve credit protection measures through cash flow growth and debt reduction and further penetrate its small business, enterprise and government segments to meet subscriber addition targets. DebtTraders reports that Nextel Communications' 12% bonds due 2008 (NEXCOM4) are quoted at a price of 72. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NEXCOM4for real-time bond pricing. OHIO CASUALTY: Closes $201MM Convertible Note Private Offering -------------------------------------------------------------- Ohio Casualty Corporation (Nasdaq:OCAS) announced that it has closed the sale of $201,250,000 aggregate principal amount of 5.0% convertible notes due March 19, 2022. The sale included the exercise of an over-allotment option granted to the initial purchasers. The notes will be convertible at the option of the holders into shares of Ohio Casualty Corporation common stock at a conversion price of $22.62 (which represents a conversion premium of 27% over the last reported bid price on the Nasdaq National Market on March 13, 2002). The net proceeds from the note offering have been used for repayment of bank debt. The notes have been privately offered only to qualified institutional buyers under Rule 144A under the Securities Act of 1933 and outside the United States to non-U.S. persons under Regulation S under the Securities Act. The notes have not been registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. As previously reported in the Troubled Company Reporter March 14, 2002 edition, Standard & Poor's assigned a BB rating to the company's proposed $125 million convertible notes. PACIFICARE HEALTH: S&P Affirms BB- Counterparty Credit Rating ------------------------------------------------------------- Standard & Poor's said it affirmed its double-'B'-minus counterparty credit rating on PacifiCare Health Systems Inc. and removed it from CreditWatch because of PacifiCare's expected earnings improvements in 2002 and the company's continued work on refinancing or extending the maturity of its existing bank term loans, which are due on Jan. 2, 2003. Standard & Poor's also said that the outlook on the company is negative. "If PacifiCare is unable to refinance or extend the maturity of the existing bank loans in the near term, Standard & Poor's will probably lower the ratings," explained Standard & Poor's credit analyst Phillip C. Tsang. The ratings had been placed on CreditWatch on Aug. 3, 2001, following PacifiCare's announcement that it was terminating its debt financing arrangement. Santa Ana, California-based PacifiCare currently has a strong business position as a regional managed care organization, with key market shares in California, Colorado, Oklahoma, Arizona, and Texas. It had 3.5 million members as of Dec. 31, 2001. Offsetting this strength are PacifiCare's below-average operating performance, marginal capitalization, and high percentage of goodwill in its capital. PENTON MEDIA: Amends Sr. Credit Facility after Private Placement ---------------------------------------------------------------- Penton Media, Inc. (NYSE:PME) announced that it has closed on its agreement with an investor group led by ABRY Mezzanine Partners, L.P. for the private placement of 40,000 shares of a new series of convertible preferred stock and warrants to purchase 1.28 million shares of Penton common stock for $40 million. The sale of an additional 10,000 shares of preferred stock and warrants to purchase 320,000 shares of Penton common stock for $10 million is expected to close within 30 days. The additional closing is subject to the absence of a material change in Penton's business or in the financial markets and certain other customary conditions. There can be no assurance that these conditions will be met or that this closing will occur. Coincidental with the closing of the private placement, an agreement to amend the terms of the Company's existing senior secured credit facility became effective. The amendment provides the Company with significant covenant relief and will reduce its revolving credit facility to a maximum availability of $40 million. The securities noted in this press release have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offering, solicitation or sale would be unlawful. * * * As reported on March 19, 2002, by Troubled Company Reporter, Standard & Poor's lowered its ratings on Penton Media Inc. and removed them from CreditWatch, whose current outlook is developing. Standard & Poor's also rated the company's proposed Rule 144A $150 million senior secured notes due 2007 at 'B-'. Proceeds from the notes and a $50 million preferred stock issue will be used to repay approximately $180 million in existing bank term debt and provide some modest near-term liquidity. The downgrade reflected the significant deterioration of Penton's credit profile as a result of the recession and post- September 11 travel industry and advertising downturn. Expectations are for additional weakness in the first half of 2002 and uncertainty exists about when key credit measures will improve. PICKUPS PLUS: Closes Initial Stage of Refinancing with Pups Inv. ---------------------------------------------------------------- Pickups Plus, Inc. (OTCBB:PUPS), a leading retailer and national franchiser in the $30 billion truck and SUV aftermarket accessories industry, announced that it has successfully consummated the initial phase of its refinancing efforts. Pickups Plus announced the completion its refinancing with Pups Investment, LLC. Pups Investment, LLC is a Florida limited liability company, which was formed by private investors to provide funding for Pickups Plus and promote the company's growth. Pups Investment, LLC has agreed to provide the following: -- $500,000 in funding over the next three (3) months for working capital and initial expansion. The company initially received $200,000. -- The companies existing bank credit line with a balance of $253,507 has been retired. -- Terminated the companies equity credit line with Cornell Capital Partners, L.P. and agreed to pay off the companies existing note over 12 months, and issue Cornell Partners 50,000 shares of stock. -- Completed the conversion and/or redemption of all of the company's outstanding convertible debentures. -- Provide for an option to fund $500,000 in capital for future expansion. "We are excited to announce the successful completion of the initial stage of our refinancing with Pups Investment LLC. Management believes that Pickups Plus will now have the financial flexibility to address outstanding issues with our vendor community and to undertake the key business initiatives necessary to sustain our growth in 2002," said John Fitzgerald, Chairman and President of Pickups Plus. "We believe that the operating initiatives we have implemented, as well as the new capital resources resulting from the refinancing, are important steps in strengthening the Company operationally and financially while providing growth funding." John Fitzgerald also stated, "Pups Investment LLC has provided the necessary capital through equity financing without debt and has shown their faith in Pickups Plus by accepting all restricted stock. By issuing restricted stock in this transaction management believes the benefit to current shareholders is that no marketplace dilution is anticipated for at least two years." Pickups Plus is a leading national operator and franchiser of retail stores dedicated to the sale and installation of quality aftermarket accessories for pickup trucks and SUV's. Pickups Plus currently operates four corporate retail stores and has another seven franchise stores throughout seven states. After several years of extensive development and testing of its franchise system, the Company intends to start a nationwide expansion in both corporate and franchise stores to become the first national chain in its growing, but highly fragmented industry. POTLATCH CORP: Fitch Affirms BB+ Sr. Subordinated Notes Rating -------------------------------------------------------------- Fitch Ratings has affirmed Potlatch Corp.'s ratings of senior secured at 'BBB', senior unsecured at 'BBB-', senior subordinated notes at 'BB+', and commercial paper at 'F3'. The Rating Outlook for PCH is Stable. The ratings reflect PCH's announcement that it is selling its printing paper assets in Cloquet, MN. The proceeds of $480 million will be used to reduce the company's debt. The sale will take PCH out of the coated paper business, which has been the business most affected by the recession and generated operating losses ($36.7 million) for the year 2001. Without coated papers, Fitch anticipates improved earnings from continuing operations in 2002 and improved credit statistics, with EBITDA/interest near or north of 3.0 times. PREMIER LASER: Tranzon Auctioning Laser & IP Inventory ------------------------------------------------------ Premier Laser Systems (Irvine, Calif.), is auctioning off its assets as part of a bankruptcy process. This auction includes an expansive inventory of: lasers; parts; delivery devices; intellectual property; and FDA clearances. Applications for these devices and patents include: dental, surgical, veterinary, and aesthetics. Premier also has more than fifty 510(k) clearances, and more than 100 issued and pending patents. "After reviewing this inventory package, I believe that it contains significant value and opportunity for our industry," said Michael Moretti, President of Medical Insight, Inc., and editor of the industry trade report Medical Laser Insight. "Aside from the laser and parts inventory, the intellectual property and regulatory clearances may offer strategic advantages to many companies in our industry. In addition, Premier management has advised me that they are open to strategic discussions regarding licensing of the intellectual property in their portfolio." A sealed bid sale is currently underway, and the deadline for sealed bids is April 26, 2002. To place a bid, or for further details, contact: Mike Walters at Tranzon Walters via phone at: 714 508 9211 or email: mwalters@tranzon.com Mr. Moretti is also available to discuss the strategic value and market potential for the Premier assets. Medical Insight is a publishing and market research company specializing in high-tech medical devices and new technologies. For a complete list of market studies and publications, including the monthly Medical Laser Report, visit MiiNews.com. PROVANT INC: IIR Intends to Purchase $47MM Outstanding Bank Debt ---------------------------------------------------------------- Irvine Laidlaw, Chairman of the Institute for International Research (IIR), announced on Thursday, January 24, 2002, that he made a proposal to the board of directors of Provant, Inc. and has asked to commence discussions regarding a possible transaction. IIR is ready to purchase Provant's outstanding bank debt of approximately $47 million and convert such indebtedness in exchange for approximately 47 million new common shares of Provant (a conversion price of $1 per share). Further, IIR is prepared to offer existing Provant shareholders the option to exchange up to 50% of their existing shares at $1 cash per share. Mr. Laidlaw stated that the proposal would "provide existing shareholders a premium of approximately one hundred per cent while also permitting the shareholders to take part in the future of the company." IIR intends to maintain Provant's listing on Nasdaq. Upon consummation of the proposed transaction, IIR would own between approximately 71% and 85% of the equity of Provant, depending on the strength of shareholders' response to the tender offer. The proposal is subject to the approval of the Provant board and to customary conditions, including due diligence, financing, antitrust and other regulatory approvals. In addition, the proposal is subject to Provant not disposing of certain strategic assets. Mr. Laidlaw stated that he believes that "the elimination of Provant's debt and the extensive experience of IIR in this sector would be beneficial to Provant. We have determined to make our proposal to make an offer public because of our belief in the underlying value of Provant and our concern that the board of directors is not addressing the current financial position of the company in a manner designed to enhance long term shareholder value." Institute for International Research is the largest provider of corporate training in the world, with brands such as Achieve Global, ESI and Huthwaite. It is an independent, privately-owned company with offices in more than 30 countries that delivers strategic, legal, technical, product and financial information to business professionals via a network of conferences and events. The Information Agent for the Offer is: Georgeson Shareholder 17 State Street - 10th Floor New York, NY 10004 Banks and Brokers Call 212.440.9800 All Others Call Toll-Free 1.866.431.8991 PROVANT's training programs help large and medium-sized companies learn, so they can earn. PROVANT, a group of more than 20 training companies, offers classroom instruction and training programs, as well as technology-based training via CD-ROM, the Internet, and intranets. Programs include human resources training, performance skills, spoken communication, and customer service improvement. PROVANT also offers management consulting services. PROVANT serves more than 1,500 companies and government bodies (federal government work accounts for 15% of sales). The company was formed in 1998 from the combination of seven smaller firms; since then it has bought more than a dozen others. However, now PROVANT is considering putting itself up for sale. At September 30, 2001, the company's balance sheet showed a working capital deficiency of $41 million. PSINET INC: Selling TX Real Property to Steam Realty for $10.5MM ---------------------------------------------------------------- PSINet, Inc., and its debtor-affiliates seek two orders (a Sale Procedures Order and a Sale Order) relating to the proposed sale of real property located at 1333 Crestside Drive in Coppell, Texas. The Property consists of a building of approximately 80,000 square feet of rentable space improved with raised flooring, suppplemental HVAC and redundant fiber network and power to make it suitable for use as a hosting center, together with approximately 6.527 acres of land. On March 15, 2002, PSINet Realty Inc. and Stream Realty Acquisition, L.L.C. entered into the Real Property Purchase and Sale Agreement. PSINet agrees to sell all of its right, title and interest in and to the Property to Stream Realty or an assignee as permitted under the Agreement for $10,500,000 subject to certain usual and customary adjustments as specified in the Purchase Agreement. The Sale is also subject to Stream Realty being satisfied with the results of its due diligence review. Although the Debtors believe the Purchase Agreement is fair and reasonable and reflects the highest and best value for the Property as of the date of the Motion, in order to obtain the greatest value for the Property, the Debtors intend to submit the Purchase Agreement to the test of the broader public marketplace through the bidding procedures including sale at a public auction if competing bids emerge. The Debtors seek entry of a Sale Procedures Order approving the bid procedure terms. The Debtors seek entry of a Sale Order (i) authorizing the Sale to the Buyer for $10,500,000, pursuant to the Purchase Agreement (or such other buyer that the Debtors will propose to the Court at the Sale Hearing as the highest and best bidder) and (ii) directing that the Sale be free and clear of all liens, claims, encumbrances, rights and interests (other than Permitted Exceptions) and exempt from Transfer Taxes. The Buyer has placed $150,000 of cash into escrow as the initial deposit. Upon the expiration of the due diligence period (a 52- day period that commenced on March 15, 2002), if the Purchase Agreement is still in force and effect, then the Buyer will place into escrow a second cash deposit in the amount of $150,000 and a third cash deposit in the amount of $200,000. If the Buyer is satisfied with its due diligence and if the Court approves the sale of the Property to the Buyer, then the deposits will be credited against the Purchase Price on the Closing Date. If the Buyer declines to proceed to closing based on its due diligence review, or if the Court does not approve the sale to the Buyer, then the escrow agent will return all three deposits to the Buyer except that if the Buyer terminates the Purchase Agreement after the due diligence period and before the entry of the Sale Order, then the Seller will get the first and second deposits and only the third deposit will be returned to the Buyer. Under the Purchase Agreement, the Buyer may terminate the Purchase Agreement if (i) the Sale Order is not entered on or before 60 days after the Due Diligence Period has expired; or (ii) the Court enters an order approving the sale of the Property to a person other than the Buyer. The Seller will only make minimal, customary representations and warranties, which are set forth in the Purchase Agreement. Part I. Competitive Bidding Procedures In the first part of the motion, the Debtors request entry of a Sale Procedures Order: (a) authorizing and scheduling a Bidding Deadline at May 13, 2002, at 4:00 p.m. prevailing Eastern time, and an Auction to be held on May 15, 2002, at 10:00 a.m. Eastern time; (b) scheduling a Sale Hearing on or about May 20, 2002, at 9:45 a.m. Eastern time to consider the Sale Order; (c) approving the Bidding Procedures, including the provision for a 3% breakup fee; and (d) approving the manner of notice of the Sale, the bidding deadline, the Auction, the Bidding Procedures and the Sale Hearing. The Debtors request the Court to authorize them, outside of their ordinary course of business and in accordance with the Bidding Procedures, to solicit bids for a competing transaction involving the Property, and if any Competing Bids meeting the requirements of the Bidding Procedures are received, to subsequently hold a public Auction at which the Buyer and any qualified competing bidder may compete against each other to offer that bid which the Debtors will select as the highest and best bid for the Property and then propose to the Court for approval at the Sale Hearing. The Staubach Company - Northeast will help the Debtors actively market for sale. In this regard, Staubach expects to, among other things, make outgoing calls to potentially interested parties. Those parties that express an interest in purchasing the Property will be provided a copy of the Purchase Agreement. The Debtors believe that their considerable efforts, together with the ongoing efforts of Staubach, and the Bidding Procedures will ensure that the Debtors obtain the highest and best offer for the Property. * Qualified Competing Bid The Debtors will consider only Competing Bids that are made in compliance with the Bidding Procedures. To be qualified, a Competing Bid must: (a) be submitted (with a copy to the Committee and the Buyer) on or before the Bidding Deadline; (b) be for the purchase of the entire Property; (c) be in writing in the form of the Purchase Agreement marked to show all changes thereto; and (d) provide for the payment to the Debtors of at least $10,865,000 in cash (the Minimum Overbid) (which reflects the sum of the Buyer's Purchase Price of $10,500,000, plus the Breakup Fee of $315,000, plus an overbid of $50,000). * Auction If a Qualified Competing Bid is submitted prior to the Bidding Deadline, the Debtors will commence the Auction on May 15, 2002, at 10:00 a.m. Eastern time at the offices of Wilmer, Cutler & Pickering, 1600 Tysons Boulevard, 10th Floor, Tysons Corner, Virginia. Only the Buyer and any prospective buyer who has timely submitted a Qualified Competing Bid will be entitled to participate in the Auction. The Buyer will be entitled to make an overbid and to credit bid the amount of the Breakup Fee against any such overbid. At the Auction, bidding will begin with the highest Qualified Competing Bid timely submitted on or before the Bidding Deadline. All subsequent overbids must include additional consideration of at least $50,000 more than the previous bid. The Auction will not conclude until each participating bidder has had the opportunity to submit any additional overbid with full knowledge of the existing highest bid. The Debtors will determine in good faith whether a submitted Competing Bid complies with the Bidding Procedures and whether the Purchase Agreement or a submitted Qualified Competing Bid constitutes the most favorable transaction for the Debtors' estates. The most favorable bid as determined by the Debtors will be submitted to the Court for review and approval at the Sale Hearing. * Breakup Fee. Pursuant to the Bidding Procedures, the Seller shall pay to the Buyer the Breakup Fee in an amount equal to $315,000, which constitutes 3% of the Purchase Price if: (1) the Seller sells the Property to another bidder at or following the Auction pursuant to a Qualified Competing Bid, and (2) the Buyer was not, as of the date set by the Bankruptcy Court for the Auction, itself in breach of any material provision of the Purchase Agreement as to entitle the Debtors not to proceed to closing, and (3) the Buyer's right to terminate the Purchase Agreement has expired or been waived by the Buyer and the Buyer had not, on or prior to the date set by the Bankruptcy Court for the Auction, terminated the Purchase Agreement. Such amount shall be payable within 5 business days of the closing of a sale to the bidder submitting such Qualified Competing Bid. Although the Debtors seek approval of the Breakup Fee at a time when the Buyer is still conducting due diligence, the Buyer will not be entitled to the Breakup Fee unless its due diligence condition has expired or been waived. The Debtors submit that the Breakup Fee is the result of extended, good faith, arm's-length bargaining between the Debtors and the Buyer. The Debtors agreed to the Breakup Fee because, in their considered business judgment, the Debtors believed that the availability of this payment provides a net benefit to the Debtors' estates and that a transaction as favorable could not have been reached without it. The Buyer has indicated that it is unwilling to proceed with the Purchase Agreement unless the Breakup Fee is approved. The Breakup Fee is fair and reasonable, particularly in view of the Buyer's efforts to date to market the Property and the stalking horse risk to which public dissemination of its valuation now exposes it, the Debtors represent. The Buyer's $10,500,000 Purchase Price, once the due diligence conditions are waived or expire, will establish a floor against which other bidders can base their bids without conducting their own expensive due diligence. The Debtors believe that other bidders interested in the Property will be more inclined to bid, and to bid higher than they otherwise would. * Notice The Debtors propose to serve the Motion, the Purchase Agreement, the proposed Sale Order and the Sale Procedures Order on or before April 10, 2002, by overnight courier and/or first-class mail, postage prepaid, upon (i) the Office of the United States Trustee for the Southern District of New York; (ii) counsel for the Buyer; (iii) counsel for the Committee; (iv) all entities (or counsel therefor) known to have asserted any lien, claim, right of refusal, encumbrance or other interest of any kind whatsoever in or upon the Property; (v) all federal, state and local regulatory or taxing authorities or recording offices which have a reasonably known interest in the relief requested by the Motion; (vi) all parties known to have expressed a bona fide interest in acquiring the Property; (vii) the Internal Revenue Service; (viii) all entities who have filed a notice of appearance and request for service of papers in the Debtors' cases; and (ix) each indenture trustee of the Debtors. The Debtors submit that such notice constitutes good and sufficient notice under the circumstances. On April 9, 2002, 9:45 a.m., Judge Gerber will convene a hearing on the first part of the motion to consider entry of the Sale Procedures Order. April 8, 2002, 12:00 noon is the deadline for objections to the Sale Procedures. Part II. Seeking Sale Order for Transaction At the Sale Hearing, the Debtors will request the Court to enter the Sale Order either (i) authorizing the Debtors, if no Qualified Competing Bids have been submitted, to consummate the Purchase Agreement with the Buyer, or (ii) confirming the results of the Auction and approving the sale of the Property to the bidder who has made the highest and best offer, and granting related relief. The Debtors submit that their decision to sell the Property pursuant to the Purchase Agreement is an exercise of reasonable business judgment. In the Debtors' view, the Purchase Agreement represents substantial value to the Debtors' estates inasmuch as it provides favorable terms for the disposition of the Property at a price that represents fair and reasonable consideration having a certain value. The Property was marketed by Staubach commencing in September 2001. As part of its marketing efforts, Staubach contacted more than 150 local and national real estate development and investment companies in addition to contacting known active users and owners both locally and nationally. In February 2002, the Debtors and the Buyer commenced negotiations. The negotiations with the Buyer were extensive, in good-faith, non- collusive and at arm's length and were conducted by the companies and their respective professionals, the Debtors submit. The Debtors submit that a sale free and clear of liens, claims, encumbrances, rights and interests (including preferences and other rights) is appropriate under the circumstances because any lien, claim or interest in the Property that exists immediately prior to the closing of the Sale will attach to the Sale proceeds with the same validity, priority, force and effect as it had at such time. Thus, the Sale satisfies Section 363(f)(1) of the Bankruptcy Code. A sale free and clear of liens, claims, encumbrances, rights and interests is necessary to maximize the value of the Property while a sale subject to liens, claims and interests will likely result in a lower purchase price, the Debtors represent. Moreover, the Sale is exempt from Transfer Taxes, the Debtors aver, because Section 1146(c) of the Bankruptcy Code provides that the making or delivery of an instrument of transfer under a confirmed Chapter 11 plan of reorganization may not be taxed under any law imposing a stamp or similar tax, and in the instant case, the Debtors' sale of the Property is essential to the consummation of a plan and therefore should be deemed to be "under a plan." There are no conditions in the Purchase Agreement that predetermine the rights of creditors under a plan. Therefore, the proposed transaction is appropriate outside of a plan of reorganization, the Debtors submit. In summary, the Debtors submit that their marketing efforts, the arm's-length negotiations with the Buyer, the postpetition notice of the terms of the Sale and the opportunity for interested bidders to make higher and better offers combine to help assure that, whatever the ultimate purchase price is, it is fair and reasonable. The Debtors, in the exercise of their business judgment, have determined that the prompt Sale of the Property pursuant to Section 363 will return a greater benefit to the Debtors' estates than any of the alternatives, including a sale at a later date. Accordingly, the Debtors request that the Court eliminate or reduce the 10-Day Stay under Rule 6004(g) of the Federal Rules of Bankruptcy Procedure. Without such express elimination by the Court, approval of the sale will be automatically stayed for ten days after entry of the order pursuant to Section 363 of the Bankruptcy Code. The Debtors propose, pursuant to Bankruptcy Rule 9014, that objections, if any, to the Sale of the Property must be filed with the Court, and served so as to be received on or before 4:00 p.m. on May 16, 2002, by (i) counsel to the Debtors; (ii) counsel to the Buyer; (iii) counsel for the Committee; and (iv) the Office of the United States Trustee. Relevant Dates Objections to Sale Procedures -- by April 8, 2002, 12:00 noon Sale Procedures Hearing -- April 9, 2002, 9:45 a.m. Bidding Deadline -- May 13, 2002, 4:00 pm prevailing Eastern time Auction -- May 15, 2002, at 10:00 a.m. Eastern time; Sale Hearing -- on or about May 20, 2002, 9:45 a.m. Eastern time; Objections to Sale Transaction -- by 4:00 p.m., May 16, 2002. (PSINet Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) SAMSONITE CORP: Fourth Quarter Operating Loss Doubles to $14MM -------------------------------------------------------------- Samsonite Corporation (OTC Bulletin Board: SAMC) announced financial results for the fourth quarter and fiscal year ended January 31, 2002. The Company's fourth quarter financial results were adversely affected by the economic decline in its major markets in the aftermath of the terrorist attacks on September 11. Revenues and operating loss for the fourth quarter were $153.4 million and $14.0 million, respectively, compared to revenues of $193.1 million and operating earnings of $6.9 million in the prior year. The fourth quarter operating loss for the current year includes charges totaling $10.6 million for asset impairments, restructuring provisions and expenses related to operating cost reduction initiatives implemented in the Company's European, Mexican and U.S. operations and a $3.3 million charge relating to the impairment of goodwill associated with the Company's South American operations. During the prior year fourth quarter, the Company incurred asset impairment and restructuring charges and expenses of $8.4 million related to its U.S. operations. Loss to common stockholders before extraordinary item was $34.7 million for the fourth quarter compared to $16.2 million in the prior year. Revenues and operating earnings for the fiscal year ended January 31, 2002 were $736.3 million and $21.2 million, respectively, which compares to $783.9 million and $50.8 million in the prior year. Operating earnings for the current fiscal year include charges totaling $22.4 million for goodwill and asset impairments and restructuring provisions and expenses related to operating cost reduction initiatives implemented in the European, U.S., and Mexican/South American operations; during the prior year, the Company incurred $8.4 million of similar charges in its U.S. operations. Loss to common stockholders before extraordinary item for the fiscal year was $72.1 million compared to $41.3 million in the prior fiscal year. Reflecting difficult economic conditions after the September attacks, Adjusted EBITDA (earnings before interest expense, taxes, depreciation, amortization and minority interest, adjusted for items which management believes should be excluded to reflect recurring operations, including goodwill and asset impairments and restructuring charges and expenses) was $6.6 million for the fourth quarter which compares with $23.7 million for the same period in the prior year. Adjusted EBITDA for the year ended January 31, 2002 was $70.3 million compared to $90.3 million in prior year. Luc Van Nevel, President and Chief Executive Officer, stated: "The Company's sales and operating earnings were severely affected during the fourth quarter by the decline in worldwide economic conditions resulting from the terrorist attacks in September and the war in Afghanistan. The terrorist attacks had a disproportionately negative impact on companies involved in travel and travel-related businesses, including the luggage industry. Prior to the September terrorist attacks, the Company's operations, measured in growth in sales and operating earnings, were showing steady improvement despite slowing economic conditions in the United States and Europe. Based on internal forecasts prepared at the end of August, management expected to achieve operating performance for the year in line with its operating Business Plan which called for an improvement of approximately 10% over the prior year and was obviously substantially in excess of what we are reporting here. "In an effort to preserve liquidity and sustain the Company through the anticipated economic recovery period, management implemented immediate actions to control expenses and optimize cash flow. The Company is also restructuring its softside manufacturing operations after the admission of China into the World Trade Organization and is accelerating existing plans to eliminate or downsize certain redundant, inefficient hardside production facilities. In most cases, the accelerated restructuring activities are actions the Company had planned to implement over the next few years as part of its continuing strategy to enhance the Company's long-term operating profitability and marketplace competitiveness. "The Company has seen significant improvement in retail sell- through compared to the 60-90 day period immediately following September 11, and airline travel has steadily increased. Many economic forecasters are now predicting improved economic conditions during the second half of this year; we are hopeful that this will be the case. The difficult economic conditions resulting from the September attacks present Samsonite with the opportunity to use its strong brands and global sales, marketing and distribution network to improve its competitive position in the marketplace." Richard Wiley, Chief Financial Officer, stated: "In the current economic environment, the Company has been faced with a number of significant challenges including adjusting our cost structure, amending our senior credit facility agreement, and appropriately managing working capital and liquidity. In each case, management has been successful in meeting these challenges. The restructuring of our U.S. operations and other cost containment measures that have been put into effect have achieved the targeted reduction in operating costs. As previously announced, on February 13, 2001 an amendment to the senior bank credit facility agreement was obtained which waived noncompliance at January 31, 2002 and modified covenants applicable to the remaining term of the facility agreement. As evidenced by the decline in net working capital and net debt, we have been successful in managing liquidity." Samsonite is one of the world's largest manufacturers and distributors of luggage and markets luggage, casual bags, business cases and travel-related products under brands such as SAMSONITE(R), AMERICAN TOURISTER(R), LARK(R), HEDGREN(R), LACOSTE(R), and SAMSONITE(R) black label. SERVICE MERCHANDISE: Selling Store Fixtures in Bulk for $3.3MM -------------------------------------------------------------- Service Merchandise Company, Inc., and its debtor-affiliates ask the Court to approve a bulk sale of their store fixtures for $3,270,000 to an entity formed by IAR Group LLC, National Retail Equipment Liquidators Inc., Grand & Benedicts Inc. and Bland Enterprises or their affiliates. Sheldon M. Francis, Esq., at Bass, Berry & Sims PLC, in Nashville, Tennessee, tells the Court that the proposed purchasers are among the largest liquidating companies in the United States. Mr. Francis notes that if there is no other better bidder, the Debtors and IAR Group will complete the sale transaction on these terms: (a) Assets: All Fixtures located in the Stores, including any trailers located at any such Stores. The Fixtures shall be purchased "As Is, Where Is", free and clear of any liens, claims and encumbrances, with any such liens, claims and encumbrances to attach to proceeds; (b) Purchase Price: The Purchaser shall pay the Debtors an amount of $3,270,000. A deposit of $500,000 shall be paid upon execution of Agreement and the balance within two days after entry of order approving the sale; (c) Access to Stores: The Purchaser shall have non-exclusive access to Stores to market and sell Fixtures from February 26, 2002 to a date that is the later of April 9, 2002 or four calendar days after the completion of a going out of business sale at a particular Store. Such access shall not interfere or impede with the going out of business sales conducted at any of the Stores; and (d) Broom Clean Condition: Each Store shall be left by the Purchaser in a broom clean condition, provided that the Proposed Purchaser may abandon in place to the Debtors any unsold Fixtures. (Service Merchandise Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) SOFTWARE LOGISTICS: Zomax Inc. Bolts Asset Purchase Agreement ------------------------------------------------------------- Zomax Incorporated (Nasdaq: ZOMX) announced that the agreement to purchase the assets of Software Logistics Corporation (dba iLogistix) has been terminated. Certain significant conditions to closing were not satisfied by iLogistix. Upon termination of the agreement and notice from Zomax, iLogistix is required to refund the deposit plus accrued interest. Transaction expenses will be expensed during the current fiscal period resulting in a charge of approximately $.04 cents per share. iLogistix began a lawsuit against the Company today concerning Zomax' termination of the agreement for the purchase of iLogistix' assets. The suit asks that Zomax be required to complete the transaction or for unspecified damages. The Company anticipates the damages ultimately sought will involve a material sum but believes it acted properly and intends to defend itself vigorously. Jim Anderson, Chairman and CEO, stated "While we are certainly disappointed that iLogistix did not close and believe that their lawsuit is without merit, we are shifting our focus to actively pursue other transactions which we hope will provide similar or greater benefits to Zomax and our world class customers. We plan to use our financial strength to expand our business domestically and internationally, particularly in the Asian market, during 2002. As we explore other acquisition opportunities, our customers will continue to benefit from our single-minded focus on delivering value while planning for the future." Zomax is a leading international outsource provider of process management services. The Company's fully integrated services include "front-end" E-commerce support, call center and customer support solutions; DVD authoring services; CD and DVD mastering; CD and DVD replication; supply chain and inventory management; graphic design; print management; assembly; packaging; warehousing; distribution and fulfillment; and RMA processing. The Company's Common Stock is traded on the Nasdaq National Market under the symbol "ZOMX." iLogistix provides supply chain services to leading technology companies, including procurement, inventory management, assembly, fulfillment, e-commerce, and distribution services. iLogistix has operating facilities in the United States, The Netherlands, Singapore, Taiwan, Mexico, and Brazil. As previously reported, the Bankruptcy Court approved the Asset Purchase Agreement in which Zomax agreed to purchase the business and substantially all the assets of Software Logistics Corporation, dba iLogistix. TRI-NATIONAL DEV'T: Court Extends Exclusive Period to July 31 ------------------------------------------------------------- Tri-National Development Corp. (OTCBB:TNAVQ) announced that the Honorable Judge Hargrove, the presiding judge over the Company's Chapter 11 Reorganization in the San Diego Bankruptcy Court, denied a motion from Senior Care Industries and granted the Company's request for an extension of Tri-National's exclusivity period through July 31, 2002. The action by the bankruptcy court extends the period during which only the Company may file a reorganization plan and during which no other party may file a competing plan. The Company also has an additional three months of exclusivity after timely submittal of the plan to solicit the plan's approval. In addition, Judge Hargrove has agreed to a stipulation to "fast track" the lawsuit between the Company and Senior Care Industries Inc. (OTCBB:SENC) with a target trial date in mid June 2002. Senior Care had vigorously and unsuccessfully attempted to oppose the Company's exclusivity extension. Judge Hargrove indicated this extension was appropriate to allow the adversarial issue with Senior Carte to be resolved first. Michael Sunstein, President and Chief Executive Officer, said, "This extension allows the Company and the court the time needed to hear and rule on Senior Care's claims of their alleged purchase of the Company's assets. What is extremely unclear and illogical is why Senior Care would want to file its own plan for the Company if in fact they had already closed on and own the subject real properties -- properties they continue to list on their balance sheet despite the obvious pending litigation. "We continue to work on a comprehensive strategic plan -- a plan we believe will help effect the realization of the significant value of our numerous real estate assets. Such a plan, successfully implemented, would result in the payment of all creditors and reward our longstanding and patient shareholders, whose continued support we greatly appreciate. We look forward to making ongoing announcements of our continuing progress on this path." Tri-National Development Corp. is an international real estate development, sales and management company. TRICORD SYSTEMS: Fails to Meet Nasdaq Listing Requirements ---------------------------------------------------------- Tricord Systems, Inc. (Nasdaq:TRCD) announced that it received a notice from Nasdaq dated today indicating that it has failed to comply with the $1.00 minimum bid price required for continued listing of its common stock on the Nasdaq SmallCap Market pursuant to Nasdaq Marketplace Rule 4310(C)(4). Pursuant to Nasdaq rules, Tricord will have 180 days from the date of this notice in which to establish compliance with this rule or its common stock will be subject to delisting. "We believe that continued listing on Nasdaq is an important element of our goal of providing value to our stockholders" said Keith Thorndyke, president and CEO, Tricord Systems, "and we therefore intend to take all possible actions to maintain our listing. We are committed to executing on our current business plan and delivering the additional features required to compete more effectively in the markets we are targeting. We believe that successfully executing on this plan is an important component to increasing stockholder value." Mr. Thorndyke did caution, however, that there can be no assurance that Tricord will be successful in its efforts to satisfy Nasdaq's minimum $1.00 bid price requirement or the other continued listing requirements, including the minimum stockholder's equity or net tangible assets requirement, or would otherwise be able to maintain the listing of its common stock on Nasdaq. Any delisting would have a material adverse effect on Tricord as outlined in Tricord's recent SEC filings. Tricord's Illumina(TM) software consists of a revolutionary distributed file system and management technology that clusters multiple server appliances into a single resource. Because multiple appliances in a cluster are managed as one entity, many of the tasks associated with managing and growing storage systems are eliminated. Illumina-enabled appliances are literally plug-and-play, offering seamless growth and continuous access to content with no downtime. As the number of appliances grows, performance and throughput scale along with capacity. This is achieved without expensive system administration or downtime due to the ability of the appliances to operate as a single unit. Tricord Systems, Inc. designs, develops and markets clustered server appliances and software for content-hungry applications. The core of Tricord's revolutionary new technology is its patented Illumina(TM) software that aggregates multiple appliances into a cluster, managed as a single resource. Radically easy to deploy, manage and grow, Tricord's products allow users to add capacity to a cluster with minimal administration. Appliances are literally plug-and-play, offering seamless growth and continuous access to content with no downtime. The technology is currently designed for applications including general file serving, virtual workplace solutions, digital imaging, and security. Tricord is based in Minneapolis, MN with offices in Colorado, California and Georgia. For more information, visit http://www.tricord.com W.R. GRACE: Court Okays HR&A as PD Committee's Claims Expert ------------------------------------------------------------ Judge Fitzgerald approves Application of the Official Committee of Asbestos Property Damage Claimants and authorizes the retention of Hamilton Rabinovitz & Alschuler as a property damage consultant, nunc pro tunc to May 2, 2001, in the chapter 11 cases of W. R. Grace & Co., and its debtor-affiliates. Judge Fitzgerald warns that she will not approve compensation to two consulting firms for the same services and requires that the attorneys for the PD Committee certify as to each monthly application for fees that the attorneys have personally reviewed the applications and either (1) identify each entry of duplicative services, or (2) state there is no duplicative services. HRA is a consulting firm, providing analytical services focused on the estimation of claims and the development of claims procedures with regard to payments and assets of a claims resolution trust. The PD Committee anticipates that HRA will render consulting services for the PD Committee as needed throughout the course of the Chapter 11 Cases, including: (a) Estimation of the number and value of present and future asbestos claims; (b) Development of claims procedures to be used in the development of financial models of payments and assets of an asbestos settlement trust; (c) Analyzing and responding to issues relating to the setting of a bar date regarding the filing of property damage claims; (d) Assessing proposals made by the Debtors or other parties, including, without limitation, proposals from other creditors' committees; (e) Assisting the PD Committee in negotiations with various parties; (f) Rendering expert testimony as required by the PD Committee; and (g) Such other advisory services as may be requested by the PD Committee from time to time. HRA has agreed to accept as compensation for its services in this case such sums as may be allowed by this Court in accordance with law, based upon the services rendered, the results achieved, the difficulties encountered, the complexities involved, and other appropriate factors. HRA has agreed to be compensated for its services on an hourly basis, in accordance with its normal billing practices, subject to allowance by this Court in accordance with the Administrative Fee Order and other applicable law. The current hourly rates HRA charges are: Position Charge Per Hour* -------- ---------------- Senior Partners $375 Junior Partners $325 Principals $275 Directors $200 Managers $175 Senior Analysts $150 Analysts $100 Research Associates $ 75 * Depositions, arbitration hearing or trial testimony hours are billed at time and one-half. (W.R. Grace Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) WARNACO GROUP: Seeks Approval of Settlement with HIS Equipment -------------------------------------------------------------- The Warnaco Group, Inc., and its debtor-affiliates leased computer equipment from HIS Equipment Marketing Co., LP, and HIS Equipment Services Inc. under a 1988 agreement. The Debtors stopped making payments to HIS Equipment in June 1999, believing that the automatic renewal provisions in the Agreements were void and that they'd substantially overpaid HIS under the Agreements. Warnaco sent termination letters to HIS Equipment on July 19, 1999 and November 30, 1999. Thereafter, the Debtors returned some of the equipment to HIS. On February 14, 2000, HIS sued the Debtors in the Supreme Court of the State of New York, County of Kings, for the return of all the Equipment and monetary damages. The next day, the Debtors counter-filed a case against HIS for violation of local laws relative to the Agreements' renewal provisions. The case sought for $2,000,000 recovery of overpayments. On September 27, 2002, the State Court entered a judgment in favor of HIS directing the Debtors to pay $888,450 plus interest from August 31, 2000. The Debtors appealed from that Order and posted a bond, through Liberty Mutual Insurance Company, in the amount of $895,145 plus interest from August 31, 2000. The appeal continued until it was stayed upon the filing of the Debtors' chapter 11 petitions on June 11, 2001. HIS contends that it now holds a pre-petition general unsecured claim against the Debtors of more than $6,000,000 and an administrative claim of $2,800,000 as of March 2, 2002. Furthermore, HIS asserts that the Agreement is executory in nature and needs to be assumed or rejected. If HIS wins in the litigation, the Debtors could be required to pay HIS: (a) an administrative claim of about $2,800,000 as of March 2, 2002 and increasing at the rate of $350,000 per month; (b) a general unsecured claim exceeding $6,000,000 for unpaid pre-petition obligations under the Agreements; and (c) a general unsecured claim for damages arising from the rejection of the Agreements. The Debtors would also need to purchase new computers and related equipment to replace the to-be-returned Equipment. To end the litigation, the Debtors negotiated with HIS and inked a Settlement Agreement. Thus, the Debtors seek the Court's authority to settle the State Action and enter into a Settlement Agreement with HIS Equipment under these terms: (a) the Debtors shall withdraw and dismiss with prejudice the Appeal and will, upon Bankruptcy Court approval of the Settlement Agreement, file a withdrawal of the Appeal with the Appellate Division of the Supreme Court of the State of New York, Second Department; (b) on the Date the bond issuer issues full payment in connection with the obligations under the Bond with interest, and the Bond Payment is received by HIS Equipment and paid by the remitter's bank: -- both parties will execute a stipulation dismissing with prejudice the State Court Action; -- HIS Equipment will execute a quit claim releasing all interests in and rights and claims to the Equipment remaining in the Debtors' possession; and -- HIS Equipment will be granted an allowed general unsecured claim in the amount of $1,900,000 against the Debtors' estate and the Debtors will accordingly treat the claim under the Debtors' plan of reorganization, with no need for HIS Equipment to file a proof of claim. Shalom L. Kohn, Esq., at Sidley Austin Brown & Wood, in New York, argues that the settlement agreement should be approved because the case is complex and with it now being on the appeal stage, the Debtors face these difficulties: (1) the trial court erred in entering an order effectively operating as a summary judgment or on HIS Equipment's claim of replevin, requiring the immediate return of the Equipment, when: -- the OSC and supporting papers that brought on the motion do not seek summary judgment and do not refer to applicable New York law; -- HIS Equipment failed to annex the pleadings to the motion as required by New York law; and -- the Debtors had counterclaims for lease overcharges arising out of the same Agreements, and those counterclaims exceed the value of the Equipment by more than $1,000,000; (2) the trial court abused its discretion by entering an order that effectively operated as a summary judgment order, without staying entry of or execution of such judgment until such time the determination or related counterclaims that exceeded the amount set forth in the summary judgment order; and (3) the trial court erred in entering a judgment as a remedy for contempt, when: -- the Debtors had bonded an appeal from the trial court's order it was accused of violating in the full amount of the order; and -- HIS Equipment failed to comply with any of the requirements for seeking replevin under New York law. Moreover, Mr. Kohn adds that a loss at the trial level are infrequently reversed in the Appellate Division of the Supreme Court of the State of New York. Mr. Kohn also expects that the time and administrative expense involved in advancing the complex arguments would likely exceed any potential savings or recoveries to the estates. Aside from that, Mr. Kohn asserts that the settlement is beneficial to the Debtors' estate because it avoids the diversion of its key management and legal personnel from the reorganization efforts at hand and provides the Debtors with clear title to the Equipment. Liberty Mutual Objects Liberty Mutual Insurance Company issued an Undertaking on Appeal dated August 9, 2000 and numbered 15011705 in the original sum of $888,450 in favor of HIS Equipment, as obligee. The Bond was posted to allow the Debtors to stay its obligations under certain orders in an action in the Supreme Court of the State of New York, County of Kings. One of the orders appealed from, namely the one dated July 21, 2001, gave the Debtors the option of either: (a) returning millions of dollars of valuable computer equipment leased by Warnaco from HIS Equipment under several leases at issue in the State Court Action, or (b) paying $888,450 representing the agreed upon value of the Equipment. Steven H. Rittmaster, Esq., at Torre, Lentz, Gamell, Gary & Rittmaster, LLP, in Jericho, New York, complains that the Debtors' motion is "nothing less than an outrageous attempt to sell its appeal bond surety 'down the river' by abandoning a fully perfected state court appeal causing its surety to pay on the bond which the Debtors believes will allow it to retain possession and to take title of the valuable computer equipment which is the subject of the appeal, at Liberty's expense." Mr. Rittmaster informs the Court that the Debtors entered into the Settlement Agreement with HIS Equipment without the knowledge or consent of Liberty. Liberty believes that by entering into the Settlement Agreement, the Debtors and HIS Equipment have effectively released Liberty from any obligation under the Bond because pursuant to paragraph 4 of the Settlement Agreement, in the event that Liberty does not make full payment to HIS Equipment under the Bond -- HIS Equipment has "the option to declare this Settlement Agreement null and void, in which event the parties hereto shall use their respective best efforts to reinstate the Appeal or otherwise place the parties in the same position as they would have been had this Settlement Agreement not been executed." Also, Mr. Rittmaster notes that Liberty has no obligation of making payment under the Bond unless and until: (a) the appeal is affirmed or dismissed by the appellate court, as required by the terms of the Bond, (b) Liberty receives all of its legal and equitable rights and remedies, and (c) it is adjudicated that the Settlement Agreement did not release Liberty. Even if the Court approves the Settlement Agreement, Mr. Rittmaster asserts that the Settlement Agreement provides Liberty with several defenses to payment under the Bond, including: (a) that the agreement violates Liberty's equitable subrogation rights over the equipment, (b) that the Debtors and HIS Equipment have colluded against Liberty effectively releasing Liberty under the Bond, (c) that the effect of the Settlement Agreement is to make the surety's liability greater than its principal's, (d) that by its actions, the Debtors, in effect, has attempted to assume the Equipment leases under 365 of the Bankruptcy Code with a third party (Liberty) curing the defaults, and (e) that subsequent proceedings in the State Court Action may have served to release the Bond by reserving for the jury the determination of the damages owed by the Debtors to HIS Equipment, which contradicts the September 27, 2000 judgment that had awarded to HIS Equipment money damages in a fixed amount. (Warnaco Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) * 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. 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