/raid1/www/Hosts/bankrupt/TCR_Public/020328.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 28, 2002, Vol. 6, No. 62
Headlines
AIG GLOBAL: S&P Places 'B' CBO-3 Rating on CreditWatch Negative
ADVANCED ELECTRONIC: Lender Waives Financial Covenant Violations
ADVANCED GLASSFIBER: Working Capital Deficit Tops $310 Million
AMERICAN SKIING: Inks Definitive Pact to Sell Heavenly Resort
ARCH WIRELESS: Full-Year 2001 Net Loss Balloons to $1.5 Billion
AUSTRIA FUND: Will Make 2nd Liquidation Distribution of $3 Mill.
BLUE EMERALD: Fails to Meet Tier 2 Tier Maintenance Requirements
BOYD GAMING: Fitch Rates Proposed Senior Subordinated Notes at B
BURLINGTON: Court Extends Exclusive Period through September 16
CHART HOUSE: Reviewing Financing Options to Repay Maturing Debt
CLARITI TELECOMMS: Four Board of Directors Members Resign
COHEN MEDICAL: Has Until April 2 to File Plan of Reorganization
CORAM HEALTHCARE: Richard Levy Continues Equity Representation
CYPRESS BIOSCIENCE: Wins Okay to Complete $17M Private Placement
ENRON CORP: Seeks Approval of NewPower Settlement Agreement
EVERCOM INC: Moody's Further Junks Ratings on Poor Performance
FEDERAL-MOGUL: Wants Deadline to Remove Actions Moved to July 1
FLOWSERVE CORP: S&P Affirms BB- Rating On Higher Financial Risks
FRUIT OF THE LOOM: Seeks OK of Bondholder Confidentiality Pact
GENCORP INC: Working Capital Deficit Tops $47MM at Feb. 28, 2002
GLOBAL CROSSING: Intends to Reject 2 Unexpired Aircraft Leases
GLOBAL CROSSING: Fiber Optek Pursuing Study of Debtors' Finances
GOLDEN BOOKS: Asks Delaware Court to Dismiss Chapter 11 Cases
HA-LO INDUSTRIES: Secures Exclusivity Extension through May 20
HAYES LEMMERZ: Closing Somerset Production Facility by Month-End
HEARME: Taps Burr Pilger & Mayer to Manage Wind-Down Proceedings
IT GROUP: Committee Wants to Hire Raymond J. Pompe as Consultant
INTEGRATED HEALTH: Rotech Unit Exits Bankruptcy through Spin-Off
INTERPLAY ENTERTAINMENT: Titus Discloses 72.54% Equity Stake
KAISER ALUMINUM: Bringing-In Wharton Levin as Asbestos Counsel
LAIDLAW INC: Enters Into Surety Bond Pact with Kemper Insurance
LERNOUT & HAUSPIE: Dictaphone's Lease Decision Period Extended
LODGIAN INC: Proposes to Hire Poorman-Douglas as Claims Agent
MARINER POST-ACUTE: Equity Panel Appointment Meets Resistance
MCLEODUSA INC: Chapter 11 Case Reassigned to Judge R. Barliant
METRICOM INC: WorldCom Discloses 20.5% Equity Stake
METROCALL: Bank Lenders Agree to Further Amend Loan Agreement
NATIONAL STEEL: Has Until May 21 to File Schedules & Statements
NATIONSRENT INC: Signs-Up Korn/Ferry as CEO Search Consultants
OWENS CORNING: Court OKs Peter Solomon as Future Rep.'s Advisor
PACIFIC AEROSPACE: Completes Exchange of 11.25% Sr. Sub. Notes
PACIFIC GAS: Bringing-In Cooley Godward as Litigation Co-Counsel
PACIFICARE HEALTH: S&P Affirms BB- Counterparty Credit Rating
PILLOWTEX CORP: Seeks Approval to Assume Lease Pact with Regions
POLAROID CORP: Exclusive Plan Filing Period Stretched to Apr. 29
READER'S DIGEST: S&P Cuts Rating to BB+ over Reiman Acquisition
REPUBLIC TECHNOLOGIES: Plan Filing Period Extended to June 28
ROADHOUSE GRILL: Revenues Drop 12.7% to $36MM in January Quarter
SAFETY-KLEEN: Services Unit Wins Nod to Continue DIP Financing
SONUS COMMUNICATION: Case Summary & Largest Unsecured Creditors
SPECIAL METALS: Files for Chapter 11 Reorganization in Lexington
TIERS CREDIT: S&P Assigns BB- Rating to $3M Class 1 Certificates
TOPSAIL CBO: S&P Puts Low-B Class C Notes Rating on Watch Neg.
VALHI INC: Fitch Affirms Low-B Ratings on Expected Workout Deal
VENTAS INC: Actively Pursuing Various Debt Refinancing Options
VERADO HOLDINGS: Emerald Bay Offers to Purchase 13% Disc. Notes
VERIDIAN CORP: S&P Assigns BB- Credit and Senior Secured Ratings
WESTERN INTEGRATED: Wants to Keep Current Cash Management System
WINSTAR: Chapter 7 Trustee Seeks Lease Decision Time Extension
XM SATELLITE RADIO: KPMG Raises Going Concern Doubts
ZENITH INDUSTRIAL: Creditors' Meeting Will Convene On April 12
* DebtTraders' Real-Time Bond Pricing
*********
AIG GLOBAL: S&P Places 'B' CBO-3 Rating on CreditWatch Negative
---------------------------------------------------------------
Standard & Poor's placed its single-'B' rating on the class B
notes (current balance of $20 million) issued by AIG Global
Investment Corp. CBO-3 Ltd., an arbitrage CBO transaction
originated in 1999, on CreditWatch with negative implications.
At the same time, the triple-'A' ratings on the class A-1 notes
(current balance $99.902 million) and class A-2 notes (current
balance $137.865 million) are affirmed. The affirmations are
based on financial guarantee policies issued by Financial
Security Assurance Inc.
The CreditWatch placement on the class B notes reflects several
factors that have negatively affected the credit enhancement
available to support the notes during recent months. These
factors include par erosion of the collateral pool securing the
rated notes and a downward migration in the credit quality of
the assets within the pool.
The overcollateralization ratio tests for AIG Global Investment
Corp. CBO-3 Ltd. are currently out of compliance, and there has
been a significant deterioration in the transaction's
overcollateralization ratios since the transaction was
originated. As of the March 15, 2002 monthly trustee report,
the class A overcollateralization ratio was 103.7% (the required
minimum ratio is 115%), versus an initial ratio of approximately
130.7%. The class B overcollateralization ratio was 95.6% (the
required minimum ratio is 107%), versus its initial ratio of
approximately 120.5%.
The credit quality of the assets in the collateral pool has also
deteriorated since the transaction was originated. Currently,
$51.6 million (or approximately 18.6% of the collateral pool)
has defaulted. In addition, $15.8 million (or approximately
7.0%) of the performing assets in the collateral pool come from
obligors with a Standard & Poor's credit rating in the triple-
'C' range, $12 million (or approximately 5.3%) of the performing
assets in the collateral pool come from obligors with a Standard
& Poor's credit rating in the double-'C' range, and $24.5
million (or approximately 10.8%) of the performing assets in the
collateral pool come from obligors with a Standard & Poor's
credit rating that is currently on CreditWatch negative.
Standard & Poor's will be reviewing the results of current cash
flow runs generated for AIG Global Investment Corp. CBO-3 Ltd.
to determine the level of future defaults the rated tranches can
withstand under various stressed default timing and interest
rate scenarios, while still paying all of the rated interest and
principal due on the notes. The results of these cash flow runs
will be compared with the projected default performance of the
transaction's current collateral pool to determine whether the
single-'B' rating assigned to the class B notes is commensurate
with the level of credit enhancement currently available.
Rating Placed On Creditwatch Negative
AIG Global Investment Corp. CBO-3 Ltd.
Rating Balance (mil.$)
-------------------- -------------------
Class To From Orig. Current
----- -- ---- ----- -------
B B/Watch Neg B 20 20
Ratings Affirmed
AIG Global Investment Corp. CBO-3 Ltd.
Class Rating Orig. Current
----- ------ ----- -------
A-1 AAA 100 99.902
A-2 AAA 138 137.865
ADVANCED ELECTRONIC: Lender Waives Financial Covenant Violations
----------------------------------------------------------------
Advanced Electronic Support Products, Inc. (Nasdaq: AESP)
announced that it has received a waiver from its senior lender
of its previously announced financial covenant violations at
December 31, 2001. In connection with obtaining such waiver, the
Company agreed to increase the interest rate payable on its line
of credit by one-half percent (.5%), bringing the interest rate
on the line of credit to prime plus one percent (1%).
The Company also reported that it will announce its 2001 results
of operations by the end of March 2002.
Advanced Electronic Support Products, Inc. designs,
manufactures, markets and distributes network connectivity
products under the brand name Signamax(TM) Connectivity Systems
as well as customized solutions for original equipment
manufacturers worldwide. The Company offers a complete line of
active networking and premise cabling products for copper and
fiber optic based networks, as well as computer connectivity
products.
ADVANCED GLASSFIBER: Working Capital Deficit Tops $310 Million
--------------------------------------------------------------
Advanced Glassfiber Yarns LLC announced that net sales for the
quarter ended December 31, 2001 decreased $36.9 million, or
52.5%, to $33.4 million as compared to $70.3 million for the
quarter ended December 31, 2000 and net sales for the year ended
December 31, 2001 decreased $72.0 million, or 25.9% to $206.3
million as compared to $278.3 million for the year ended
December 31, 2000.
Had the Euro exchange rate versus the US dollar not declined by
3.0% year to year, 2001 net sales would have been $1.8 million
higher. The benefit of price increases implemented earlier
during 2001 have been more than offset by a 29% decline in
volumes sold during the year. This decrease in demand reflects a
global economic downturn and inventory corrections, which were
particularly severe in the electronics and industrial markets.
Sales to the electronics markets in 2001 were down $49.4
million, or 50.0%, over the prior year and sales to the
industrial market in 2001 were down $16.2 million, or 22.7%,
over the prior year. While the Company cannot provide any
assurances, the electronics market is expected to improve in
2002, primarily driven by the telecommunications and personal
computer segments. Further, the Company believes that it has
reached the bottom of the cycle in the fourth quarter as
evidenced by a modest up-turn in sales in the first quarter of
2002.
In response to these market conditions, the Company reduced
production schedules and focused on operating cost reductions
and working capital management. Since May 2001, the Company has
reduced its production workforce through furloughs by 36% as
compared to January 2001. In December 2001, the Company
temporarily shutdown the Huntingdon and South Hill facilities to
mirror the production curtailment by the Company's key weaving
customers. In addition to the furlough of production employees,
in the fourth quarter the Company reduced the number of salaried
positions in order to cut costs in future periods.
Gross profit decreased to 25.7% of net sales for the year ended
December 31, 2001 from 25.8% in the year ended December 31,
2000. Excluding the impact of changes in the exchange rate of
European currencies, gross profit in the year 2001 would have
been 25.9%. The under-absorption of fixed costs, primarily due
to increasing under-utilization of capacity during the year, was
partially offset by continued improvement in manufacturing
performance and cost reduction efforts, as well as the
previously mentioned price increases.
Selling, general and administrative expenses increased to 6.9%
of net sales for the year ended December 31, 2001 as compared to
5.9% of net sales for the year ended December 31, 2000. This
increase is strictly driven by the decrease in net sales. When
expressed as an absolute value, expenses for the year ended
December 31, 2001 dropped $2.1 million as compared to the year
ended December 31, 2000. The decrease in absolute value is
attributable to the implementation of cost containment measures
such as the elimination of the profit sharing and incentive
compensations as well as the reduction in the salaried
workforce.
As a result of the aforementioned factors, and a restructuring
charge of $2.4 million associated with the production and
salaried workforce reduction, operating income decreased $19.5
million to $24.6 million, or 11.9% of net sales, for the year
ended December 31, 2001 from $44.1 million, or 15.8% of net
sales, for the year ended December 31, 2000.
Adjusted EBITDA for the quarter ended December 31, 2001
decreased $15.3 million, or 79.7%, to $3.9 million from $19.2
million for the quarter ended December 31, 2000 and for the year
ended December 31, 2001 decreased $19.7 million, or 26.8%, to
$53.9 million from $73.6 million for the year ended December 31,
2000. Adjusted EBITDA is defined as net income before interest
expense, income taxes, depreciation, amortization and non-
recurring, non-cash charges as defined per the credit agreement.
On December 14, 2001, the Company amended its senior credit
facility. The amendment primarily provides for less stringent
financial covenants through March 31, 2002, to accommodate the
anticipated financial performance. The Company is currently in
compliance with the amended financial ratios and other covenants
under its senior credit facility. However, based on the current
level of operations, the Company cannot make assurances that it
will continue to be in compliance with such ratios and other
covenants commencing during the second quarter of 2002. If the
Company defaults under its senior credit facility, the lenders
may immediately accelerate repayment of all amounts outstanding
under the senior credit facility. In an effort to take a
conservative position with respect to the Company's financial
statements, all long-term financial debt has been reclassified
as current in accordance with Generally Accepted Accounting
Principles.
Additionally, the Company has engaged Credit Suisse First Boston
as its financial advisor to explore strategic alternatives
including, but not limited to, restructuring the Company's debt
and negotiating with its lenders favorable amendments to the
senior credit facility.
Advanced Glassfiber Yarns, headquartered in Aiken, SC, is one of
the largest global suppliers of glass yarns, which are a
critical material used in a variety of electronic, industrial,
construction and specialty applications. Prior to and including
September 30, 1998, the Company was the glass yarns and
specialty materials business of Owens Corning. Since September
30, 1998, Advanced Glassfiber Yarns has been a joint venture
between Porcher Industries, S.A. and Owens Corning.
At December 31, 2001, the company's balance sheet showed a
working capital deficit of about $310 million.
AMERICAN SKIING: Inks Definitive Pact to Sell Heavenly Resort
-------------------------------------------------------------
American Skiing Company (OTC Bulletin Board: AESK) announced
that it had entered into a definitive agreement to sell its
Heavenly ski resort in South Lake Tahoe, California to Vail
Resorts, Inc. The transaction, when closed, will complete the
debt reduction component of the Company's previously announced
restructuring program. The Company further reported that its
Board of Directors had decided not to proceed with the sale of
its Steamboat ski resort in Steamboat Springs, Colorado and will
retain that premier resort.
"The sale of Heavenly represents a critical element of our
restructuring plan to significantly reduce debt and position the
Company for future growth," said American Skiing Company CEO
B.J. Fair. "With this important transaction in place, we can
now focus on the fundamentals of our business and deliver the
highest quality ski and mountain resort vacation for our
guests."
"While we initially identified Steamboat as the asset to be
sold, it became clear after discussions with our key lenders
that the objectives of the restructuring plan could not be fully
realized through this transaction. In the end, we determined
that the Heavenly sale would better achieve our goals for debt
reduction and the overall restructuring plan," said Fair.
The sale of Heavenly completes a critical remaining element of
the Company's previously announced restructuring plan. Since
announcing the plan in May 2001, the Company has completed the
following:
-- Implemented cost reductions and performance enhancements
providing $5 million in annual financial benefits, contributing
to the best fourth quarter resort operating performance in the
Company's history during fiscal 2001, and significantly
bolstered results during the current fiscal year;
-- Responded to a significantly changed economic
environment early in the current fiscal year;
-- Closed and funded a financial restructuring that raised
additional capital, amended the Company's senior credit
facilities and restructured portions of its existing debt;
-- Completed the sale of the Sugarbush ski resort;
-- Signed a management consulting agreement with MeriStar
Hotels & Resorts (NYSE: MMH) to improve the operating
performance of lodging properties and enhance its national sales
network; and
-- Accelerated the sale of its remaining New England
quartershare real estate inventory through focused sales efforts
and a successful auction at Attitash Bear Peak in New Hampshire.
Heavenly Sale
The gross sale price will be approximately $102 million for the
resort and associated real estate. Net proceeds from the sale
will be used to reduce American Skiing Company's debt. The
transaction is subject to standard closing conditions, including
Hart-Scott-Rodino antitrust approval and consent of the United
States Forest Service, and is expected to close on or before
June 30, 2002.
"We have worked closely with the people of South Lake Tahoe to
promote the region and revitalize the downtown core and made
great strides in growing the resort," continued Fair. "Although
our decision to sell the resort was difficult, we are confident
that Vail is committed to the success of Heavenly and will play
an active role in the community. We are proud of our
accomplishments at Heavenly and our participation in the
redevelopment of South Lake Tahoe."
Steamboat
As a result of the Heavenly sale, the Company will retain
ownership of the Steamboat ski resort. The Company reported
that it had decided not to proceed with its previous plan to
sell its Steamboat ski resort to Triple Peaks, LLC after
discussions with its lenders concluded that the transaction
would not achieve the objectives of the restructuring plan. The
Company indicated that it does not plan to seek another buyer
for Steamboat.
"We realize that the events of the past few months have created
a great deal of uncertainty for our employees and the community
of Steamboat Springs," said Fair. "We are now in the position
to focus on the future with Steamboat's exceptional management
team. We are committed to working with the local team and the
community to expand upon the traditions that have made Steamboat
a long-standing, world-class ski destination. We want the staff
and community of Steamboat to know that we are committed to
providing the resources needed to ensure the continued success
of the resort."
As indicated in the Company's recently filed form 10-Q with the
Securities and Exchange Commission, the Company is in
discussions with senior lenders under both its resort and real
estate credit facilities to restructure its borrowing facilities
to address future mandatory principal reductions, maximum
borrowing capacity and liquidity. Those discussions are not yet
complete and until they have been addressed, investors should
continue to refer to the disclosures made by the Company in its
second quarter form 10-Q as filed with the Securities and
Exchange Commission on March 18, 2002.
Steamboat is recognized as one of the premier resort
destinations in the world. The resort and town of Steamboat
Springs are most famous for their authentic western heritage,
world-class terrain, Champagne Powder(R) snow, Olympic
tradition, friendly staff and family programs. With 25 lifts
and 142 trails spread across 2,939 acres, Steamboat is one of
the country's most popular ski resorts, recording more than one
million skier/rider visits annually and enjoys the most
recognized brand identities in the industry.
Headquartered in Newry, Maine, American Skiing Company is one of
the largest operators of alpine ski, snowboard and golf resorts
in the United States. Its resorts include Killington and Mount
Snow in Vermont; Sunday River and Sugarloaf/USA in Maine;
Attitash Bear Peak in New Hampshire; Steamboat in Colorado; The
Canyons in Utah; and Heavenly in California/Nevada. More
information is available on the Company's Web site,
http://www.peaks.com
ARCH WIRELESS: Full-Year 2001 Net Loss Balloons to $1.5 Billion
---------------------------------------------------------------
Arch Wireless Communications, Inc. is a provider of wireless
messaging and information services in the United States.
Currently, Arch provides traditional and advanced wireless
messaging services. Traditional messaging consists of numeric
and alphanumeric messaging services. Numeric messaging services
enable subscribers to receive messages that are composed
entirely of numbers, such as a phone number, while alphanumeric
messages may include numbers and letters, which enable the
subscriber to receive text messages. Advanced wireless messaging
services enable subscribers to send and receive messages to and
from another device activated on Arch's network. Arch also
offers wireless information services, such as stock quotes and
news, voice mail, personalized greeting, message storage and
retrieval, equipment loss protection and equipment maintenance
for both traditional and advanced messaging subscribers. Arch is
a wholly-owned subsidiary of Arch Wireless, Inc.
Certain holders of 12-3/4% Senior Notes due 2007 of Arch filed
an involuntary petition against Arch on November 9, 2001 under
chapter 11 of the U.S. Bankruptcy Code in the United States
Bankruptcy Court for the District of Massachusetts, Western
Division. On December 6, 2001, Arch consented to the
involuntary petition and the bankruptcy court entered an order
for relief with respect to Arch under chapter 11 of the
Bankruptcy Code. Also on December 6, 2001, Parent and 19 of
Parent's other wholly-owned, domestic subsidiaries, including
Arch Wireless Holdings, Inc., filed voluntary petitions for
relief, under chapter 11, with the bankruptcy court. These cases
are being jointly administered under the docket for Arch
Wireless, Inc., et al., Case No. 01-47330-HJB. Parent and its
domestic subsidiaries are operating their businesses and
managing their property as debtors-in-possession under the
Bankruptcy Code.
The Debtors filed an amended plan of reorganization with the
bankruptcy court on March 13, 2002. The plan provides for
separate classes of claims and interests for creditors and
equity holders of each of the Debtors. The plan proposes that
the holders of Arch's 9-1/2% Senior Notes due 2004 and Arch's
14% Senior Notes due 2004 and the lenders under AWHI's credit
agreement will receive in the aggregate (1) $200 million of new
10% Senior Secured Notes due 2007 to be issued by AWHI; (2) $100
million of new 12% Senior Subordinated Secured Notes due 2009 to
be issued by AWHI; (3) 15,133,098 shares of new common stock to
be issued by Parent; and (4) 100% of the cash available for
distribution as detailed below. The unsecured creditors of AWHI,
including the deficiency claims of secured creditors, and its
subsidiaries will receive in the aggregate 3,600,000 shares of
new common stock to be issued by Parent, plus a distribution
equal to the net proceeds collected from potential avoidance and
recovery actions under the Bankruptcy Code. Unsecured creditors
of Parent and its subsidiaries other than Arch and AWHI and its
subsidiaries will receive no distribution. The unsecured
creditors of Arch, including the deficiency claims of the
secured creditors, will receive a pro rata share of 66,902
shares of new common stock to be issued by Parent. Holders of
Parent's common and preferred equity interests will receive no
distributions under the plan and all equity interests in Parent
will be cancelled. The plan also provides for the creation of a
management stock plan pursuant to which 1,200,000 shares of
Parent's new common stock will be distributable to management
for a nominal price, one third of which will vest on each of the
first three anniversaries following the effective date. Except
for the shares of new common stock issuable pursuant to the
management stock plan, the new common stock to be issued to the
secured and unsecured creditors will constitute 100% of the
outstanding common stock of Parent on the effective date of the
plan of reorganization. The cash available for distribution to
the Secured Creditors is an amount of cash equal to the amount
by which the Debtors' cash plus the amount of availability under
a revolving line of credit, if any, exceeds $45 million less
administrative expense claims reasonably expected to be payable
for services provided and fees earned through the closing of the
transactions contemplated by the plan of reorganization
Year Ended December 31, 2001
Revenues increased to $1,143.7 million, a 34.9% increase, in
2001 from $847.6 million in 2000 reflecting a full year of the
results of the acquired PageNet operations, offset by the
decline in units in service from 11.6 million at December 31,
2000 to 8.2 million at December 31, 2001. Net revenues (revenues
less cost of products sold) increased to $1,102.8 million, a
35.8% increase, in 2001 from $812.0 million in 2000. Revenues
and net revenues in 2000 and 2001 were adversely affected by the
declining demand for traditional paging services which led to
subscriber cancellations of 3,386,000 units in service in 2001.
Two-way messaging revenues increased to $101.4 million, 8.9% of
total revenue, in 2001 from $9.4 million, 1.1% of total revenue,
in 2000. Two-way messaging net revenues increased to $85.6
million, 7.5% of total net revenue, in 2001 from $9.4 million,
1.1% of total net revenues, in 2000. The Company did not begin
to sell its two-way messaging products and services on a
commercial scale until August 2000. Two-way units in service
increased from 158,000 at December 31, 2000 to 324,000 at
December 31, 2001.
Revenues consist primarily of recurring revenues associated with
the provision of messaging services, rental of leased units and
product sales. Product sales represented less than 10% of total
revenues in 2000 and 2001. Arch does not differentiate between
service and rental revenues.
Arch believes the demand for traditional messaging services
declined in 2000 and in 2001, and will continue to decline in
the foreseeable future. Arch believes that future growth in the
wireless messaging industry, if any, will be attributable to
two-way messaging and information services. As a result, Arch
expects to continue to experience significant declines of units
in service during 2002, as Arch's addition of two-way messaging
subscribers will be exceeded by its loss of traditional
messaging subscribers.
Operating losses were $1,415.3 million in 2001 compared to
$241.9 million in 2000. Net loss increased to $1,532.0 million
in 2001 from $340.0 million in 2000.
AUSTRIA FUND: Will Make 2nd Liquidation Distribution of $3 Mill.
----------------------------------------------------------------
The Austria Fund, Inc. (NYSE: OST), a closed-end management
investment company, declared on this date, March 26, 2002, a
further liquidating distribution of $3,011,249, equal to $0.47
per share of Common Stock, payable on April 18, 2002 to
stockholders of record at the close of business on April 5,
2002. Ex-date will be April 19, 2002.
This liquidating distribution is the second of three such
distributions made pursuant to the Fund's Plan of Liquidation
and Dissolution, which was approved by the Fund's stockholders
at the October 24, 2001 Special Meeting of Stockholders. With
this distribution, approximately 98% of the Fund's total net
assets immediately before liquidation will have been distributed
to stockholders. The remaining approximately 2% of such assets
consists of a cash reserve and two small portfolio positions
that are in the process of sale by the Fund.
The Fund also declared on this date, March 26, 2002, a final
liquidating distribution of all net assets per share of Common
Stock undistributed on the payable date, payable on May 3, 2002
to stockholders of record at the close of business on April 26,
2002. On April 26, 2002, which will be the Fund's last day of
trading on the New York Stock Exchange, the books and records of
the Fund will be closed.
The Austria Fund, Inc. is managed by Alliance Capital Management
L.P.
BLUE EMERALD: Fails to Meet Tier 2 Tier Maintenance Requirements
----------------------------------------------------------------
Blue Emerald Resources Inc. has been designated as an Inactive
Issuer effective November 2, 2001 as it was unable to meet the
Tier 2 Tier Maintenance Requirements for financial status. The
Company is required to file an acceptable Reactivation Plan with
the Exchange on or before November 1, 2002 in order for the
Exchange to remove the Inactive status of the Company. The
shares of Blue Emerald will continue to trade during
this period.
The Company is a natural resource issuer focussing on mineral
and energy projects. The Company continues to review projects of
merit.
BOYD GAMING: Fitch Rates Proposed Senior Subordinated Notes at B
----------------------------------------------------------------
Fitch Ratings has assigned a 'B' rating to Boyd Gaming's
proposed $200 million senior subordinated notes due 2012. The
notes will be issued under Rule 144A and will rank pari passu
with BYD's existing $250 million 9.50% senior subordinated notes
rated 'B'. The proceeds from the issuance will be used to repay
$127 million in term loans and reduce outstanding bank debt. BYD
has substantial debt maturing in 2003 and the new notes issuance
addresses in part these pending maturities. Ratings affirmed
include BYD's $612 million senior secured bank credit facility
due 2003 at 'BB', $200 million 9.25% senior unsecured notes due
2003 and $200 million 9.25% senior unsecured notes due 2009 at
'BB-'. The Rating Outlook is Negative.
The ratings are based on the company's diversified property
portfolio, strong customer focus, favorable earnings mix and
growing cash flow visibility. Approximately 60% of BYD's
revenues are generated from slot play, which is generally a more
consistent source of earnings. Due to the events of September 11
and the slowing economy, drive-to properties have had a
relatively strong performance compared to the Las Vegas Strip.
More than 60% of property EBITDA during 2001 was generated by
the Blue Chip, Par-A-Dice and Treasure Chest casinos, which are
all drive-to properties, while less than 10% of EBITDA was
generated from BYD's Las Vegas Strip property. The ratings also
incorporate the solid cash flow potential of Delta Downs, which
opened on Feb. 13, 2001.
Concerns are centered upon the company's relatively high debt
levels in relation to cash flows. In particular, total debt of
$1.146 billion was approximately 5.1 times total company EBITDA
at Dec. 31, 2001. However, following the $37 million equity
contribution to The Borgata project, which was funded during the
first quarter 2002, Fitch expects debt reduction to be a
priority for the remainder of the year. As a result, debt/EBITDA
should approach low to mid-4x at Dec. 31, 2002, levels more
appropriate for the rating category. Additional credit concerns
include construction risk pertaining to BYD's joint venture
project, the Borgata, in Atlantic City, which is expected to
open in mid-2003. The project is currently running on time and
on budget.
BYD is expected to be comfortably cash flow positive during 2002
following $60 million in maintenance capital expenditures.
Application of excess cash to a reduction in debt could lead to
the rating returning to a Stable Rating Outlook.
BURLINGTON: Court Extends Exclusive Period through September 16
---------------------------------------------------------------
Burlington Industries, Inc., and its debtor-affiliates obtained
Court approval:
(i) extending the period during which the Debtors have the
exclusive right to file a plan or plans of reorganization
by approximately six months, through and including
September 16, 2002; and,
(ii) extending the period during which the Debtors have the
exclusive right to solicit acceptances through and
including November 15, 2002.
DebtTraders reports that Burlington Industries' 7.250% bonds due
2005 (BRLG05USR1) are quoted at a price of 13. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG05USR1
for real-time bond pricing.
CHART HOUSE: Reviewing Financing Options to Repay Maturing Debt
---------------------------------------------------------------
Chart House Enterprises, Inc. (OTCBB: FISH) announced total
revenues of $37.5 million for the fourth quarter of 2001
compared to $35.9 million in 2000. Total revenues for 2001 were
$150.9 million compared to $141.7 million in 2000. The Company
reports fiscal years under a 52/53-week format and fiscal 2001
consisted of 53 weeks. Fourth quarter 2001 revenues benefited
from the 53rd week and two new Angelo and Maxie's restaurants
opened during 2001. These revenue increases were offset by a
9.0% decrease in same store sales and a reduction in revenues
from restaurants disposed of in 2001. Full year revenues for
2001 further benefited from four Angelo and Maxie's restaurants
opened and two Chart House restaurants reopened during 2000.
These revenue increases were offset by a 4.8% decrease in same
store sales for the year. "The economic contraction experienced
since early in 2001 magnified by the national tragedy of
September 11, 2001 had a significant impact on revenues for the
year," said Kenneth R. Posner, President and Chief Financial
Officer.
For the fourteen-week period ended December 31, 2001, the
Company incurred a net loss of $1,429,000. The net loss for the
thirteen-week period ended December 25, 2000 was $5,017,000 loss
per common share. Results for the 2000 quarter included
restaurant pre-opening costs of $2,034,000 and asset impairment
and restructuring charges of $1,450,000 compared with no pre-
opening costs and $179,000 of asset impairment and restructuring
charges in the 2001 quarter.
For the fiscal year ended December 31, 2001 the Company incurred
a net loss of $20,427,000, including an extraordinary loss
related to material modification of debt of $942,000. The net
loss for the year ended December 25, 2000 was $10,426,000.
Reflected in the 2001 loss were $597,000 in pre-opening costs,
$5,699,000 in asset impairment and restructuring charges and a
$5,380,000 increase in the valuation allowance related to the
Company's deferred tax asset. Reflected in the 2000 loss were
$5,266,000 in pre-opening costs and $3,810,000 in asset
impairment and restructuring charges.
At December 31, 2001, the Company had in excess of $25 million
of senior, secured debt that matures on April 30, 2002. Since
December 2001, the Company has been conducting a review of
strategic alternatives with a principal focus on identifying
appropriate sources of capital to address the debt maturity
matter. This process has identified a number of capital sources,
several of whom have expressed possible interest in making a
significant investment in the Company. Although no definitive
agreements have been reached with any of these potential
investors, and no assurances can be given, management continues
to believe that this process will be successful.
Headquartered in Chicago, Chart House Enterprises, Inc.
currently operates 45 restaurants in the continental United
States. They include the California-inspired Chart House
Restaurants, known for great seafood, spectacular locations, and
breathtaking views, Angelo and Maxie's, a sophisticated
steakhouse with oversized portions at reasonable prices, and the
South Pacific-inspired Peohe's Restaurant located in Coronado,
California.
CLARITI TELECOMMS: Four Board of Directors Members Resign
---------------------------------------------------------
On March 6, 2002, the following members of the Board of
Directors of Clariti Telecommunications International, Ltd.
resigned as Directors and members of any committees of the Board
of Directors: Michael Jordan, Robert Sannelli, John
D'Anastasio, Chester Hunt and Dr. H.G. Hinderling, LL.M.
Clariti Telecommunications International's ClariCAST system is a
patented method of providing digital wireless voice messaging
using the subcarrier channels of FM radio. FM channels are
prevalent throughout the world as opposed to wireless phone
standards, which vary in availability. In order to focus on
expanded. Users carry a small device that allows them to listen
to voice mail messages wherever they can receive an FM
frequency. Clariti has sold its telephony services operations to
focus on expanding the ClariCAST system. The company plans to
develop the system's features, including wireless modems for PCs
and hand held devices. At September 30, 2001, Clariti reported
that its total liabilities exceeded its total assets by about
$4.5 million.
COHEN MEDICAL: Has Until April 2 to File Plan of Reorganization
---------------------------------------------------------------
The U.S. Bankruptcy Court for the Central District of
California, Los Angeles Division extended the exclusive periods
of Cohen Medical Corporation. The Debtor obtained an extension
of its exclusive right to file a plan of reorganization through
April 2, 2002 and its exclusive right to seek acceptances of the
plan of reorganization through July 1, 2002.
Cohen Medical Corporation, doing business as Tower Health, filed
for chapter 11 protection on October 4, 2001. Richard K.
Diamond, Esq., at Danning, Gill, Diamond & Kollitz represents
the Debtor in its restructuring efforts.
CORAM HEALTHCARE: Richard Levy Continues Equity Representation
--------------------------------------------------------------
The Official Committee of Equity Security Holders of Coram
Healthcare Corp. asks the U.S. Bankruptcy Court for the District
of Delaware for permission to retain and employ Jenner & Block,
LLC as its counsel in these Chapter 11 cases substituting
Altheimer & Gray.
At its organizational meeting on October 19, 2000, the Equity
Committee selected Altheimer & Gray and Richard Levy, Esq., as
its counsel. On March 15, 2002, Mr. Levy withdrew as a member
of Altheimer & Gray and joined Jenner & Block.
Because of the relevant knowledge and experience that Mr. Levy
has acquired in these Chapter 11 cases, the Committee wish to
continue his representation. The loss of Mr. Levy, the Committee
relates would cause delay, disruption and a significant loss of
the accumulated knowledge in these cases.
The Committee expects that Jenner & Block will provide them
general legal services as needed like:
a. advising the Equity Committee as to its rights, powers
and duties;
b. advising the Equity Committee in connection with
proposals and pleadings submitted by the Debtor or
others to the Court;
c. investigating the actions of the Debtors and the assets
and liabilities of the estates;
d. advising the Equity Committee in connection with
negotiation and formulation of any plans of
reorganization;
e. reviewing all applications and motions filed by parties
other than the Equity Committee and to represent the
interests of the Equity Committee in and outside of
court with respect to all applications and motions;
f. generally advocating positions that further the
interests of the Equity Committee's constituents; and
g. performing such other services as are in the interests
of the Equity Committee's constituents.
The services to be rendered by Jenner & Block's paralegals
include:
a. assisting Jenner & Block attorneys in the performance of
their duties;
b. assisting Jenner & Block attorneys in preparing papers
for filing; and
c. completing any and all other necessary work requested by
Jenner & Block with respect to these cases.
Mr. Levy's billing rate is set at $600 per hour. In an effort to
reduce the Equity Committee's expenses, other professionals that
will render services are:
Daniel R. Murray Member $495 per hour
David J. Bradford Member $475 per hour
Vincent E. Lazar Member $415 per hour
Jeffrey L. Gansberg Associate $270 per hour
Megan Fahey Associate $185 per hour
Coram Healthcare, a provider of home infusion-therapy services
filed for Chapter 11 bankruptcy protection on August 8, 2000 in
the District of Delaware. Under the terms of its bankruptcy it
still operates more than 70 branches in 40 states and Canada
while it restructures its debt. Goldman Sachs and Cerberus
Partners each own about 30% of the firm. Christopher James
Lhuiler, Esq., at Pachulski Stang Ziehl Young & Jones PC
represents the Debtors in their restructuring efforts.
CYPRESS BIOSCIENCE: Wins Okay to Complete $17M Private Placement
----------------------------------------------------------------
Cypress Bioscience Inc. (NASDAQ:CYPB) (NASDAQ:CYPBC) announced
that it received stockholder approval to sell up to 6,882,591
shares of common stock and warrants to purchase up to 3,441,296
shares of common stock, for a total of up to $17 million, to
institutional and other accredited investors.
When the contemplated financing closes later this week, Cypress
will have approximately 13,231,812 million shares of common
stock outstanding.
Closing of the financing is only contingent upon receipt of
stockholder approval and continued listing of the company's
securities on the Nasdaq SmallCap Market.
The company filed a proxy with the Securities Exchange
Commission to seek stockholder approval for the contemplated
financing, as required under the rules of the National
Association of Securities Dealers, since the proposed securities
represent more than 20% of Cypress' common stock outstanding and
have been sold in a private financing at a price below market.
For each two shares of common stock bought, the purchaser will
receive a warrant to acquire one share of common stock at a
premium to the current market price. The purchase price for the
combined security is $2.47, based on a 10% discount off the 10-
day average closing bid price for the period ending Feb. 15,
2002. A Special Stockholder's Meeting pursuant to which the
company solicited and received stockholder approval of the
financing occurred on March 25, 2002.
Regarding the continued listing of the company's securities on
the Nasdaq SmallCap Market, in January 2002, Cypress announced
that it had received notice from Nasdaq that it was not in
compliance with the minimum tests for net tangible assets or
stockholders' equity for The SmallCap Market, and that the
company's securities were subject to delisting. In March 2002,
Cypress announced that it received notification from Nasdaq that
the company's securities will continue to be listed on the
Nasdaq SmallCap Market under the symbol CYPBC pursuant to an
exception from the net tangible assets/stockholders' equity
requirement. The exemption will expire no later than April 1,
2002. Based on the exemption, the company believes Nasdaq will
allow the company's common stock to continue to be listed on the
Nasdaq SmallCap Market and that, with the completion of the $17
million financing, the company's Nasdaq symbol will return to
CYPB as long as it files its Annual Report on Form 10-K for the
fiscal year ended Dec. 31, 2001 on or before April 1, 2002 with
an audited balance sheet as of Dec. 31, 2001 and an unaudited
balance sheet as of a date no earlier than 45 days in advance of
such filing, including pro forma adjustments that reflect the
closing of the financing.
The common stock and the warrants to purchase common stock have
not been registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States
absent a registration statement or exemption from registration.
The company plans to use substantially all of the net proceeds
from the transaction for conducting clinical trials, for working
capital and other general corporate purposes.
Cypress is committed to be the innovator and commercial leader
in providing products that improve the diagnosis and treatment
of patients with fibromyalgia syndrome, or FMS. In January 2001,
the company began a strategic initiative focusing on FMS. In
August 2001, Cypress licensed its first product for clinical
development, milnacipran, to treat the widespread pain
associated with FMS. For more information about Cypress, visit
the company's Web site at http://www.cypressbio.com For more
information about FMS, visit http://www.FMSresource.com
ENRON CORP: Seeks Approval of NewPower Settlement Agreement
-----------------------------------------------------------
As a condition to acquiring Enron's equity interests in The New
Power Company, Windsor Acquisition Company requires the NewPower
Entities to sever virtually all of their contractual
relationships with the Enron Companies.
According to Martin J. Bienenstock, Esq., at Weil, Gotshal &
Manges LLP, in New York, Enron and certain of its affiliates
entered into a variety of agreements with the NewPower Entities
in 2000 governing their commercial relationships, including:
(a) agreements for the purchase and sale of certain
commodities;
(b) agreements that:
(1) allocate business opportunities and establish areas of
non-competition among such parties,
(2) provide for the performance by the parties of services
used in the operation of their businesses,
(3) obligate Enron Energy Services LLC to provide certain
computer software and support to the NewPower
Entities, and
(4) provide methodologies to be used to transfer certain
gas contracts contributed by Enron Energy Services LLC
to the NewPower Entities with respect to certain
electricity and natural gas customers; and
(c) miscellaneous agreements to which one or more Enron
Entities, and Enron Energy Services LLC, on the one hand,
and one or more of the NewPower Entities, on the other
hand, are parties or for which their assets or affiliates
are bound.
Just last month, Mr. Bienenstock relates, the NewPower Entities
and the Debtors entered into a Settlement Agreement and Master
Termination Agreement -- for the termination and settlement of
any and all amounts and obligations otherwise due and payable
under the Commodities Contracts.
The Settlement Agreement provides that:
-- The NewPower Entities agree to pay to Enron Corporation,
Enron North America Corporation, Enron Power Marketing Inc.,
Enron Energy Services Inc., and Enron Energy Services LLC,
concurrently with the execution and delivery of the Merger
Agreement, an aggregate amount of $98,058,000 in full
compromise, settlement and final resolution of all amounts
that any party to the Commodities Contracts may owe or be
owed thereunder;
-- The Settlement Amount will be paid through releasing to the
Enron Entities $70,058,000 held by them as cash collateral,
together with an additional $28,000,000 to be paid by the
NewPower parties as evidenced by a promissory note. The
Promissory Note shall be payable upon the earliest to occur
of:
(a) July 5, 2002;
(b) the first business day after the date upon which Windsor
has purchased any Shares pursuant to the Tender Offer;
and
(c) an Acceleration Event;
-- Immediately upon payment in full of the Promissory Note, the
Commodities Contracts will be deemed terminated and be of no
further force and effect and the parties thereto will be
deemed released from any and all obligations thereunder;
-- Enron and each of the Enron Entities agree to indemnify
severally and not jointly, the NewPower Entities from and
against any and all losses and liabilities such NewPower
Entities may incur with respect to:
(a) the conduct of such Indemnifying Party or any of its
direct or indirect, current or former, subsidiaries prior
to the effective time of the merger; and
(b) the mere status of the NewPower Entities as former
subsidiaries of such Indemnifying Parties, including
without limitation losses and liabilities arising from:
(i) the membership of any NewPower Entity in the Enron
consolidated tax group, or
(ii) the requirement of any NewPower Entity to
contribute to any Multi-employer Plan;
It is provided, however, that the maximum aggregate amount
that the Indemnifying Parties will be obligated to pay
pursuant to clause (a) will not exceed $3,000,000 and in no
event will any Indemnifying Party be required to indemnify any
NewPower Entity for any claim that has not been commenced
before the third anniversary of the first date upon which
Shares are purchased pursuant to the Tender Offer. This
indemnification would constitute a priority administrative
liability of the Debtors' estates;
-- Immediately upon payment in full of the Promissory Note, any
and all guarantees by Enron or any other guarantor of the
Enron Entities or any of the NewPower Entities with respect
to the Commodities Contracts will terminate;
-- The Settlement Agreement (and the Promissory Note) will
terminate on the earlier to occur of:
(a) July 5, 2002 if this Motion is not approved by this Court
prior to such date; and
(b) delivery of written notice of termination by the Enron
Entities, at their option, to NewPower if NewPower has
defaulted in the payment of the Promissory Note.
The Master Termination Agreement will terminate if the Tender
Offer is not consummated in accordance with its terms.
Thus, the Debtors ask Judge Gonzalez for authority to enter into
the Settlement Agreement. (Enron Bankruptcy News, Issue No. 17;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EVERCOM INC: Moody's Further Junks Ratings on Poor Performance
--------------------------------------------------------------
Moody's Investors Service lowered down the ratings of Evercom
Inc. The rating outlook is negative.
Rating Actions To From
-------------- -- ----
* Senior unsecured debt of Ca Caa1
$115 million 11.0% guaranteed
senior notes
* senior implied rating Caa3 B3
* issuer rating Ca Caa2
The rating downgrade reflects the failure of the company to
perform according to Moody's earlier financial expectations. The
current economic weakness and competition from other markets
will further put a strain into the company's liquidity position.
Moody's however, recognizes the company's relative success in
generating good operating earnings but profit margins have
continued to trend down over the past quarters and it is
Moody's belief that this would be a trend expected to continue
over the near term.
The company's growth has been largely acquisition related,
something which resulted in a large interest burden and a level
of intangibles exceeding 50% of total assets.
Evercom registers, as of September 30,2001, assets of about $5.7
million in cash and cash equivalents and $27.5 million worth of
net property plant and equipment. It has outstanding debt
obligations of approximately $142 million, $13.5 million of
which is short-term in nature. Moody's considers the unsecured
debtholders' recovery prospects as poor in a distress scenario.
Evercom Inc., headquartered in Irving, Texas, is a provider of
inmate telecommunication voice services to local, county, state,
federal and private correctional facilities. The company
operates on multi-year agreements with the facilities, wherein
Evercom is the exclusive provider of telecommunication services
to inmates within each facility for a period of three to five
years. Evercom pays the facility a commission based on revenues
gained from that facility.
FEDERAL-MOGUL: Wants Deadline to Remove Actions Moved to July 1
---------------------------------------------------------------
Federal-Mogul Corporation, and its debtor-affiliates seek
entry of an order, pursuant to Rule 9006(b) of the Bankruptcy
Rules, further extending the time by which they may remove
prepetition lawsuits to the District of Delaware for continued
litigation . . . through and including July 1, 2002.
The Debtors believe that it is prudent to seek an additional
extension to protect their right to remove those pre-petition
actions, which they deem appropriate to be considered by this
Court. According to Laura Davis Jones, Esq., at Pachulski Stang
Ziehl Young & Jones P.C. in Wilmington, Delaware, the Debtors
are presently in the process of evaluating the actions pending
against them in order to determine which actions might be
suitable for removal; however, given the size of the Debtors'
businesses and the magnitude of the litigation pending against
the Debtors, a significant extension of the removal period is
warranted. The process of evaluating such litigation is also
lengthened by the numerous competing demands on the time of the
Debtors' internal legal staff, management, and professionals
mandated by these cases.
Accordingly, Ms. Jones submits that the extension sought will
afford the Debtors an additional opportunity to make
fully-informed decisions concerning removal of each pre-petition
action and will assure that the Debtors do not forfeit valuable
rights under Section 1452. Further, the rights of the Debtors'
adversaries will not be prejudiced by such an extension. Any
party to a pre-petition action that is removed may seek to have
it remanded to the state court pursuant to 28 U.S.C. 1452(b).
The Debtors submit that the relief requested is in the best
interest of the Debtors, their estates and their creditors
because it will maximize the Debtors' likelihood of a successful
reorganization. (Federal-Mogul Bankruptcy News, Issue No. 13;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLOWSERVE CORP: S&P Affirms BB- Rating On Higher Financial Risks
----------------------------------------------------------------
On March 22, 2002, Standard & Poor's revised its outlook on
Flowserve Corp. to stable from positive. At the same time,
Standard & Poor's affirmed its 'BB-' corporate credit rating on
the company.
The outlook revision is based on the company's announcement that
it reached an agreement to acquire the Flow Control Division
(IFC) from Invensys for $535 million. Although a significant
portion of the purchase price will be funded through public
issuance of equity, so that the company's leverage will remain
at about the same level as prior to the acquisition, and the
business position is improved, the pace of improvement in the
financial profile will likely be reduced from previous
expectations and there will be some integration costs and risks.
The ratings on Flowserve reflect elevated financial risk and
high debt levels (partly from the recently announced purchase,
but primarily due to the August 2000, $775 million acquisition
of Ingersoll-Dresser Pump Co.; IDP). These factors are somewhat
offset by substantial, defensible shares of competitive markets.
The IFC purchase adds a number of valve products and makes the
company the second largest valve producer worldwide.
Irving, Texas-based Flowserve has leading business positions in
the global markets for engineered pumps, valves, and mechanical
seals. The IFC purchase will increase valve segment revenues so
that all three segments--pumps, flow solutions and valves are
relatively equal, with pumps remaining the leading segment. The
firm competes in cyclical, fragmented, and mature markets
subject to price pressures and foreign currency exchange rate
shifts. Somewhat less than half of sales are to petroleum and
chemical end markets. Capital spending by Flowserve's customers
in these markets is sensitive to swings in commodity prices.
Petroleum industry demand is on an upswing after being soft for
the past two years, but demand in the chemical sector has been
constrained. Flowserve benefits from having more than half of
its revenues derived from the more stable aftermarket for repair
and maintenance services. Also, geographic diversity is very
good, with 48% of sales outside the U.S. prior to the IFC
purchase.
Flowserve's borrowings remain elevated despite recent equity
issuance. Lease-adjusted debt to total capital was in the mid-
70% area at Dec. 31, 2001, and EBITDA coverage of interest
around 2.5 times. EBITDA coverage of interest expense is
expected to become adequate for the rating, at more than 3x. An
ambitious rationalization program from IDP is mostly complete
and a similar approach is expected with the IFC purchase. Over
the intermediate term, enhanced internal cash generation should
provide the funds to repay material amounts of debt.
Outlook
Geographic diversity and a substantial aftermarket business
should bolster internal cash generation. Management has
demonstrated financial discipline by keeping debt reduction a
priority and issuing equity, which should gradually push credit
measures to levels commensurate with the rating.
FRUIT OF THE LOOM: Seeks OK of Bondholder Confidentiality Pact
--------------------------------------------------------------
Fruit of the Loom Ltd. asks Judge Peter J. Walsh for entry of an
order, pursuant to 11 U.S.C. Sec. 105 and Rule 7026 of the
Federal Rules of Bankruptcy Procedure, directing DDJ Capital
Management, Lehman Brothers, and Mariner Investments, to enter
into a proposed Confidentiality Stipulation and Order.
David R. Gelfand, Esq., of Milbank, Tweed, Hadley & McCloy,
tells the Court that between December 17, 2001, and February 14,
2002, Fruit of the Loom and the Bondholders each served on the
other party two separate document production requests. Both
parties produced documents in response and both expect to
produce additional documents. Fruit of the Loom and the
Dissident Bondholders have designated certain documents that
they have produced as confidential. Mr. Gelfand predicts that
both Fruit of the Loom and the Bondholders will designate, as
confidential, additional documents that they produce in response
to pending document requests served by the other party.
The documents that have been produced and that the parties
intend to produce in the future relate to the confirmation
hearing scheduled for April 4, 2002. Among the documents that
Fruit of the Loom has sought from the Bondholders are:
(i) any documents relating to communications between the
Bondholders and potential purchasers of Fruit of the Loom;
(ii) any documents concerning any valuations or appraisals
prepared by the Bondholders relating to Fruit of the Loom;
and
(iii) any documents concerning the Bondholders' solicitation of
votes to accept or reject any plan of reorganization of
Fruit of the Loom.
Since January 2001, the parties have been trying to negotiate a
mutually acceptable confidentiality stipulation and proposed
order that would govern the treatment of each side's
confidential documents. Fruit of the Loom believes that the
parties have reached agreement on every term of the proposed
Confidentiality Stipulation, with one exception. The Bondholders
have objected to paragraph 4(e), which provides that either
party may disclose confidential documents to:
"Outside counsel to the Official Committee of Unsecured
Creditors, the Informal Committee of Senior Secured
Noteholders, the Agent for the Pre-Petition Banks, and
their employees to whom such disclosure is reasonably
deemed necessary by such counsel for the conduct of these
Reorganization Cases, provided that they agree to be bound
by the terms of this Stipulation."
Confidentiality Stipulation, Paragraph 4(e).
The Bondholders have opposed the inclusion of any provision that
would enable counsel for the Senior Secured Noteholders'
Committee, the Agent for the Pre-Petition Banks, and the
Official Committee of Unsecured Creditors to access documents
that the Bondholders have produced and designated as
"confidential." The Bondholders have taken this position
even though the terms of the proposed Confidentiality
Stipulation require counsel for each of these entities to agree
to be bound by the terms of the Confidentiality Stipulation.
Counsel for the Senior Secured Noteholders' Committee, the Agent
for the Pre-Petition Banks, and the Official Committee of
Unsecured Creditors has told Fruit of the Loom that they do not
wish to be foreclosed from access to these documents. Mr.
Gelfand argues that the above counsel represents either parties
or constituents whose interests will be greatly implicated at
the confirmation hearing scheduled for April 4, 2002.
Therefore, they should be granted access to the Bondholders'
confidential documents provided that they agree to be bound by
the terms of the proposed Confidentiality Stipulation.
Bruce Bennett, Esq., of Hennigan, Bennett & Dorman, counsel for
the Dissident Bondholders, strongly disagrees. He tells Judge
Walsh that his clients want to Confidentiality Order modified to
prevent Fruit of the Loom from sharing sensitive information
with third parties simply because they want it.
According to Mr. Bennett, there is no principled basis under
which Debtors should be entitled to share proprietary
information with counsel for the Senior Secured Noteholders'
Committee, the Agent for the Pre-Petition Banks, and the
Official Committee of Unsecured Creditors. If these third
parties want the information, they should be required to serve
separate discovery requests upon the Bondholders. This will
enable his clients to assess both the relevance of the
information to that party and the harm that would result if that
party were to receive the confidential documents. Moreover, the
Bondholders will be able to ensure that their confidential
documents are not misused or inadvertently disclosed.
Mr. Bennett makes the accusation that, "The Debtors' attempt to
obtain authority to disseminate the Bondholders' confidential
information among multiple parties appears to be yet another
tactical weapon to attack the Bondholders on account of their
objections to the relief requested by the Debtors in this case."
The Bondholders want Judge Walsh to strike the disputed
Paragraph 4(e) from the Confidentiality Order. Mr. Bennett
claims this relief is warranted under Rule 26c(7), which allows
for a protective order providing that "a trade secret or other
confidential research, development, or commercial information
not be revealed or be revealed only in a designated way."
Richard D. Feintuch, Esq., of Watchell, Lipton, Rosen & Katz,
does not want his client to go through these extensive
procedures. He reminds Judge Walsh that his client, Bank of
America, is collateral agent for $1,200,000,000 in secured debt
and is the administrative agent for $650,000,000 in secured bank
debt. It has the largest financial stake in these
reorganization cases by far. Therefore, it is incumbent upon
BofA to be fully involved with the factual and legal matters
that will be addressed in the contest over confirmation of a
plan of reorganization. BofA must be able to review documents
produced by the Bondholders that are relevant to the
confirmation hearing.
Mr. Feintuch refutes the Bondholders argument that BofA should
be required to serve its own document request on the
Bondholders. "This is plainly nonsense, as the relevant issues
for confirmation will be same for all of the parties which are
supporting the plan." He also disagrees that individual
document requests from each party will enable the Bondholders to
ensure that their confidential information will be protected.
"This carries no weight." BofA assures the Court that if it
signs a confidentiality agreement, regardless of which party has
served the document request, BofA will honor its obligations
when it gains access to the documents.
Mr. Feintuch asserts that the Bondholders have offered no
meaningful basis for precluding BofA from being a party to the
proposed confidentiality agreement. "It is unfortunately
apparent that what the Bondholders seek to accomplish with this
objection is to create delay and protract these proceedings.
Such cynical litigation tactics should not be countenanced."
(Fruit of the Loom Bankruptcy News, Issue No. 51; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GENCORP INC: Working Capital Deficit Tops $47MM at Feb. 28, 2002
----------------------------------------------------------------
GenCorp (NYSE: GY) announced first quarter 2002 results, posting
segment operating income in the first quarter of 2002 of $19
million, as compared to $9 million in the first quarter 2001, an
increase of 111 percent.
Earnings per diluted share were $0.07, versus $0.33 in the first
quarter of 2001. Earnings per share for the first quarter 2002
included the expense of approximately $6 million for the
accounting review related to the restatement as announced March
6, 2002. Earnings per share for the first quarter 2001 included
an $11 million foreign exchange gain related to the Draftex
acquisition, a $7 million unusual item related to a tax refund,
and income from the Aerojet Electronic and Information Systems
(EIS) business, sold in October 2001.
Revenues for the first quarter 2002 were $249 million, down from
$353 million in the first quarter of 2001 as expected due to the
sale of the EIS business. Excluding EIS results and pension
income, revenues and operating income in the first quarter 2002
were up over the first quarter 2001 in all segments.
"I am pleased with the significant performance improvements at
GDX Automotive during the quarter, resulting from major
restructurings of that segment in 2001," said Bob Wolfe,
Chairman and CEO. "Year over year, the improvement in operating
profits at GDX Automotive in the first quarter is $13 million.
We believe the GDX Automotive segment has stabilized and expect
continued improvement throughout the year," he said. "Within
the Fine Chemicals segment, both sales and operating margins
improved, positive signs that this segment is beginning to
benefit from the substantial cost reduction actions taken last
year, and the number of new products added. Continued
performance improvement and the return of this segment to
profitability, however, remains a priority," he added. "We
expect Fine Chemicals to continue to improve sequentially with
each quarter of fiscal year 2002."
GDX Automotive
Net sales for the GDX Automotive segment in the first quarter
2002 were $190 million, a five percent increase over net sales
of $181 million for the first quarter 2001. North American
revenues were up slightly during the quarter, at $107 million
versus $97 million in the first quarter of 2001. Revenues
increased related to strong sales of GM light truck and Sport
Utility Vehicle platforms and increased production of the Ford
Escape platform in North America. In addition, the first
quarter of 2002 reflects three months of sales from the Draftex
acquisition versus two months in the first quarter of fiscal
year 2001.
The GDX Automotive segment recorded an operating profit of $6
million in the first quarter 2002, as compared to an operating
loss of $7 million in the first quarter 2001. Operating margins
increased to three percent from negative four percent for the
comparable 2001 period, favorably impacted by restructuring and
cost saving actions.
Aerospace and Defense
Net sales for the Aerospace and Defense segment, Aerojet,
totaled $54 million for the first quarter 2002, versus $170
million in the first quarter 2001, decreased due to the sale of
the EIS business in October 2001. Excluding EIS results,
revenues for the segment increased $10 million year over year,
attributable to work on the Titan IV launch vehicle, the COBRA
booster engine for NASA's second generation reusable launch
vehicle program and the forward boom for the F-22 fighter
aircraft. Operating profit for Aerojet during the first quarter
2002 was $16 million, versus $27 million for the first quarter
2001, down due to the sale of the EIS business and lower pension
income. Excluding EIS results and the decrease in pension
income, operating profit for the segment increased $2 million
year over year.
Aerojet's first quarter 2002 was highlighted by the successful
launches of a Titan IV rocket carrying a military satellite and
a Delta II rocket carrying five replacement satellites for the
Iridium mobile telephone constellation into orbit. Aerojet
manufactures the first and second stage engine for Titan IV and
the second stage engine used on the Delta II.
Also in the first quarter, Aerojet successfully tested the solid
propellant divert and attitude control system (SDACS) for the
U.S. Navy's Standard Missile 3, and delivered the deorbit
propulsion stage for the X-38 to NASA. The SDACS is a
propulsion system for the kinetic weapon propelled into space by
the Standard Missile 3 to intercept incoming ballistic missile
warheads outside the earth's atmosphere. The X-38 is NASA's
full-scale prototype for the International Space Station
emergency crew vehicle. As of February 28, 2002, contract
backlog for Aerojet was $594 million, versus $755 million for
the same period in 2001. Backlog excludes those programs that
were part of the former EIS business, and reflects a $146
million decrease due to the inability of a commercial customer
to raise additional required program funding.
Fine Chemicals Segment
Revenues for Aerojet Fine Chemicals in the first quarter 2002
were $5 million as compared to $2 million for the first quarter
of 2001. The segment had an operating loss of $3 million in the
quarter versus an operating loss of $4 million in the first
quarter 2001. Operating margins for the first quarter of 2002
improved over the prior year first quarter, reflecting higher
production volumes for new products and the realization of cost
savings as a result of the restructuring program that was
completed in November of 2001. Contract backlog at the end of
the first quarter 2002 for the segment was $36 million versus
$24 million at the end of the first quarter 2001.
Other
Interest expense decreased to $3 million in the first quarter
2002 from $9 million in the first quarter 2001, due primarily to
a lower average outstanding debt level and lower average
interest rates. Corporate and other expenses increased in the
first quarter 2002 to $9 million compared to $4 million in the
same period of 2001, primarily due to a $6 million pretax
expense for outside legal advisors and accounting consultants
involved in the review of the accounting issues at GDX
Automotive.
The Company recorded an expense of $2 million in the first
quarter 2002, the net result of certain agreements that were
part of the transaction to reacquire a 40 percent minority
interest in Aerojet Fine Chemicals from NextPharma Technologies
USA, which was completed in December 2001.
Net pension income was $5.9 million after tax for the quarter.
Subsequent Events
On March 16, 2002, the Company reached an agreement with The
Laird Group resolving the remaining adjustments to the purchase
price of the Draftex business and certain claims of the Company
and The Laird Group. As a result of this agreement, the Company
received approximately $10 million from The Laird Group and the
final purchase price of the Draftex business was effectively
reduced to $205 million, including cash of $199 million and
direct acquisition costs of $6 million. The final adjustment to
the purchase price will be recorded in the second quarter of
2002 as a reduction of the goodwill that resulted from the
Draftex acquisition.
Current Outlook
The Company still expects earnings per share for fiscal year
2002 to be in the range of $0.90 to $1.00, excluding any unusual
items. Earnings per share of $0.22 are expected in the second
quarter of 2002. Revenues for the full year 2002 are expected
to be approximately $1.1 billion. The effective tax rate for
2002 is expected to be 39 percent.
GenCorp Inc., as at February 28, 2002, reported a working
capital deficit of about $47 million.
GLOBAL CROSSING: Intends to Reject 2 Unexpired Aircraft Leases
--------------------------------------------------------------
According to Matthew A. Feldman, Esq., at Willkie Farr &
Gallagher in New York, to build, maintain, and operate a global
business, Global Crossing Ltd. and its debtor-affiliates'
executives and senior personnel must frequently travel to
locations around the world where they perform tasks essential to
the Debtors' businesses, including negotiating agreements with
vendors, visiting construction sites, and monitoring the
operation of the Network. To guarantee timely and reliable
travel, prior to the Commencement Date, the Debtors entered into
two aircraft leases with General Electric Capital Corporation.
In November 1998, Mr. Feldman relates that the Debtors entered
into a 144-month lease for a Gulfstream Aerospace Model G-IV
Aircraft requiring an initial $163,049 payment and rental
payments of $163,049 each month thereafter. On March 15, 2000,
the Debtors and GECC entered into a 120-month lease for a 1985
Canadair Ltd. Model Challenger CL 600-2A12 Aircraft requiring a
$90,153 initial payment and rental payments of $97,591 each
month thereafter.
Although the Aircraft proved to be useful in the operation of
their businesses, Mr. Feldman states that the leasing and
operating costs are significant. In addition to the monthly
rents of $260,640 each month ($3,127,679 each year), the Debtors
spend an additional $5,500,000 each year in operating costs.
These operating costs include leasing hanger space, purchasing
fuel, providing maintenance, paying insurance for the Aircraft,
purchasing catering services, and compensating 11 employees
working exclusively with the Debtors in connection with the
operation of the Aircraft, including 6 pilots, 2 mechanics, one
mechanic's assistant, one employee to schedule the Aircraft's
use, and one office assistant.
Applying their business judgment, the Debtors have determined
that rejecting the Leases is a good business decision because
the benefits to the estate resulting from continued retention of
the Aircraft do not outweigh the financial burden posed by the
remaining rent payments and the high costs associated with
operating the Aircraft. The Debtors has determined that
rejecting the Leases will save the estate and its creditors in
excess of $8,500,000 each year.
By this Motion, the Debtors seek authority to execute, deliver
and file any necessary documents and take all other actions
necessary for the purpose of terminating the Leases and to
remove the existence of Debtors' and any trustee's right, title
and interest, in respect to the Aircraft and any other property
or collateral relating thereto, form the registry and records of
the Federal Aviation Administration and any other pertinent
uniform commercial filing office.
Mr. Feldman tells the Court that the Debtors' executives and
senior personnel will continue to travel around the world to
manage the Debtors' businesses. But, for the benefit of the
estates and to further preserve the estates' assets, the
Debtors' executives and senior personnel will employ alternate
and less costly methods of travel, including commercial
airliners. (Global Crossing Bankruptcy News, Issue No. 6;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GLOBAL CROSSING: Fiber Optek Pursuing Study of Debtors' Finances
----------------------------------------------------------------
Following its announcement two weeks ago that it was considering
a bid for Global Crossing, Ltd. (Nasdaq:GBLXQ), Fiber Optek
Interconnect Corp.(R) reported today that it is proceeding with
a complete study of Global Crossing's present financial
position, its future prospects, as well as its bankruptcy
filings.
"Our attorneys, accountants, and public relations people are
assisting in our examination," said Michael S. Pascazi,
president of Fiber Optek. He added that through its attorney,
the company has also filed a notice of appearance before the
Federal Bankruptcy Court overseeing Global Crossing's Chapter 11
bankruptcy petition.
Since its announcement of two weeks ago, Mr. Pascazi said he has
received many favorable comments and words of encouragement. "We
would like to thank publicly those well-wishers for their show
of support," he concluded.
Fiber Optek is a privately-owned leading developer and installer
of fiber optic telecommunications networks.
DebtTrader reports that Global Crossing Holdings Ltd.'s 9.625%
bonds due 2008 (GBLX3) are quoted at a price of 2.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX3for
real-time bond pricing.
GOLDEN BOOKS: Asks Delaware Court to Dismiss Chapter 11 Cases
-------------------------------------------------------------
Golden Books Family Entertainment, now known as GB Holdings
Liquidation, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the District of Delaware to dismiss their
chapter 11 cases.
Having fully disposed of substantially all of their assets and
having further paid down their secured creditors, the Debtors
have reached the inescapable conclusion that there are no longer
available funds to support the continued administration of these
cases. There are no unencumbered assets available for
distribution to any remaining unsecured creditors on account of
their claims, the Debtors add.
The Debtors relate that the proceeds from the Company's asset
sales were used for:
a) repayment of the obligations of the Debtors to their
debtor in possession lenders in the amount of $34
million;
b) payment of $4.5 million to DIC for a break-up fee and
expense reimbursement pursuant to the terms of the bid
Procedures;
c) funding, with consent from the Noteholders' Committee,
certain essential administrative expenses arising in
connection with the Asset Sale and other liquidation
efforts; and
d) pay down of the Debtors' secured debentures to the
Indenture Trustee.
The Debtors concede that they will not be able to either confirm
or consummate the Plan in any modified form.
Conversion of these cases to chapter 7 is not feasible since all
of the Debtors' assets have been liquidated. The increased
administrative costs of a chapter 7 trustee to liquidate the
Debtors' assets are unnecessary in this situation.
In view of the Debtors' inability to effectuate a plan,
inability to make distribution to any remaining unsecured
creditors of their claims, inability to obtain access to
additional funds to continue the administration of these chapter
11 cases, and having fully disposed of their assets, the Debtors
submit that their is no reason to continue these Chapter 11
cases.
Golden Books Family Entertainment, one of the largest children's
books publishers in the U.S., filed for chapter 11 protection on
June 4, 2001. Curtis J. Crowther, Esq., at White & Williams,
represents the Debtors. As of March 31, 2001, the company had
$156,135,000 in assets.
HA-LO INDUSTRIES: Secures Exclusivity Extension through May 20
--------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, the exclusive periods during which only Ha-Lo
Industries and its debtor-affiliates may file a plan and solicit
acceptances of the plan are extended. The Debtors' exclusive
period to file a plan of reorganization is extended through May
20, 2002 and the exclusive period to solicit acceptances of that
plan runs through July 22, 2002.
HA-LO Industries, Inc. and subsidiaries Lee Wayne Corporation
and Starbelly.com, Inc., provide full service, innovative brand
marketing in the custom and promotional products industry. The
Company filed for Chapter 11 Petition on July 30, 2001. Adam G.
Landis, Eric Lopez Schnabel, Mary Caloway at Klett Rooney Lieber
& Schorling represent the Debtors in their restructuring
efforts.
HAYES LEMMERZ: Closing Somerset Production Facility by Month-End
----------------------------------------------------------------
Hayes Lemmerz International, Inc. (OTC: HLMMQ) said that it is
closing its production facility in Somerset, Kentucky.
The closure is in line with the Company's continuing efforts
to eliminate excess cost and underutilized capacity.
The 300,000-square-foot plant produced cast aluminum
wheels. The remaining work has been transferred to other Hayes'
facilities. Preparations for shutting down the Somerset
facility have begun with a projected closing by the end of March
2002.
According to Curtis Clawson, Hayes Lemmerz' Chairman and CEO,
"Our decision to close the plant in Somerset was based on a
strategy to reduce our fixed-cost structure.
While this rationalization is difficult for the affected
location, it is necessary in order to improve the
competitiveness and viability of the entire business."
Currently, the closure is expected to result in a pre-tax charge
of approximately $10.7 million of which $6.3 million, related to
asset impairment losses, will be charged to earnings in the
fourth quarter of 2001 and $4.4 million will be charged to
earnings in 2002. Approximately $3.3 million of the fiscal 2002
charge relates to equipment lease obligations and will be
classified in the Company's financial statements as part of
liabilities subject to compromise. (Hayes Lemmerz Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
HEARME: Taps Burr Pilger & Mayer to Manage Wind-Down Proceedings
----------------------------------------------------------------
HearMe (OTCBB: HEARZ.OB) announced that it has engaged Burr,
Pilger & Mayer LLP to manage HearMe's wind-down process, and
elected Stephen Mayer of Burr, Pilger & Mayer LLP as President,
Chief Executive Officer and Chief Financial Officer of the
Company and appointed Mr. Mayer to the Company's Board of
Directors. Following the appointment of Mr. Mayer, HearMe's
Board of Directors acknowledged the resignations of all of its
other directors and executive officers. As disclosed in HearMe's
Annual Report on Form 10-K for the year ended December 31, 2001,
as filed with the Securities and Exchange Commission, this was a
planned event to enable HearMe to reduce costs and conduct
activities in a more efficient manner during the remainder of
the three-year wind-down period mandated under Delaware law.
Following the substantial progress made by HearMe in satisfying
or reducing expenses and future liabilities and liquidating its
assets, on or about March 12, 2002, HearMe paid to stockholders
of record as of November 26, 2001, the date previously fixed as
the final record date for all distributions, a cash distribution
of net available assets of $0.18 per share.
In addition, the Board of Directors has established a
contingency reserve to provide for known and potential future
expenses, claims and liabilities during the wind-down period,
which is expected to be completed by the end of 2004. HearMe
will continue to focus its efforts on winding up its business
and affairs in accordance with the plan of liquidation and
dissolution adopted by the Company's Board of Directors and
stockholders. The Company anticipates that it will continue to
file periodic reports with the Securities and Exchange
Commission ("SEC") in accordance with SEC requirements until
such time as the SEC may waive such requirements.
The Company may make future distributions to stockholders during
or at the conclusion of the three-year wind-down period, as
determined by the Company's Board of Directors. There can be no
assurance that any additional distribution will be made,
however, or that any such distribution will be material in
amount.
IT GROUP: Committee Wants to Hire Raymond J. Pompe as Consultant
----------------------------------------------------------------
The Official Committee of Unsecured Creditors, in the chapter
cases of The IT Group, Inc., and its debtor-affiliates, asks the
Court to permit their employment of Raymond J. Pompe as
Committee consultant.
Murray H. Hutchison, Co-chairman of the Unsecured Creditors
Committee, believes that the employment of Mr. Pompe is critical
for a successful investigation and evaluation of the Debtors'
businesses. Mr. Pompe was previously employed by the Debtors
for 11 years serving as Vice President of the Construction and
Remediation Services division, Senior Vice President of Project
Operations, Senior Vice President and President of the
Engineering and Construction division and is familiar with the
Debtors and their businesses.
Ms. Hutchison says that Mr. Pompe will:
A. work at the direction of the Committee, and in conjunction
with other advisors retained by the Committee;
B. provide advice and assistance to the Committee concerning any
and all aspects of investigating the acts, conduct assets,
liabilities, and financial conditions of the Debtors; and,
C. provide advice and assistance to the Committee concerning the
Debtors' business, and any other matter relevant to the
cases or to the formulation of the Debtors' plan of
reorganization.
As agreed, Mr. Pompe's compensation will be a flat $1,000 per
day.
After conducting a conflict search to determine if he has any
connections or relations with the Debtors and their parties-in
interest, Mr. Pompe discloses connections, in matters unrelated
to these chapter 11 cases, with:
A. The IT Corp., the IT Group, Inc., Beneco Enterproses, Inc.,
and certain of the OHM subsidiaries: The Consultant served
as an officer during the period of Sept. 1998 through July
1999;
B. Stone & Webster: The consultant has worked in this firm
during his employment with ITC, on behalf of ITC, to pursue
certain government contracts; and,
C. Members of the Unsecured Creditors Committee: Murray H.
Hutchison, was an officer and member of the Board of
Directors of ITC during part of the consultants employment
with ITC.
In addition, after Mr. Pompe's termination of employment in July
21, 1999, he requested arbitration with respect to certain terms
and conditions of his then-existing employment agreement. He
also commenced a lawsuit against the Debtors on the basis of age
discrimination, both of which were settled in 2001. (IT Group
Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
INTEGRATED HEALTH: Rotech Unit Exits Bankruptcy through Spin-Off
----------------------------------------------------------------
Rotech Healthcare Inc., a leading provider of home respiratory
therapy and durable medical equipment and services, announced
that its predecessor, Rotech Medical Corporation, has spun-off
from its parent company and emerged from Chapter 11, and that
the new company will operate as an independent, standalone
entity.
Rotech made the unique spin-off possible by securing $575
million in exit financing.
Rotech Medical was a subsidiary of Integrated Health Services
(IHS), a provider of post-acute care and related specialty
healthcare. When IHS filed for bankruptcy in February 2000,
Rotech, as a guarantor of IHS' bank debt, voluntarily filed for
Chapter 11. As part of Rotech's plan of reorganization, which
was confirmed on February 13, 2002 by the US Bankruptcy Court
and which became effective on March 26, 2002, Rotech is no
longer an IHS subsidiary.
"We are pleased to move beyond the constraints of Chapter 11 and
continue serving our clients, setting standards of excellence
for home health care, and growing our business," said Stephen
Linehan, President and Chief Executive Officer of Rotech
Healthcare Inc. "We are confident that our new corporate and
financial structure will provide a solid platform to advance our
competitive position in the marketplace."
In connection with the Company's emergence from Chapter 11, a
syndicate of financial institutions, led by UBS Warburg LLC and
Goldman Sachs Credit Partners, L.P., have extended to Rotech
Healthcare $275 million in senior secured credit facilities. The
facilities include a $200 million, six-year term loan facility
and a $75 million, five-year revolving credit facility. The
facilities are guaranteed by substantially all the assets of
Rotech Healthcare.
Rotech also announced that it has issued $300 million of 9-1/2%
Senior Subordinated Notes, due 2012. Rotech may redeem up to 35%
of the notes with the net proceeds of qualified equity
offerings, prior to April 1, 2005. The Company may redeem the
notes, in whole or in part, at any time on or after April 1,
2007.
All of the net proceeds from the credit facilities and the
Senior Subordinated Notes will be distributed to Rotech
Medical's creditors under the Company's plan of reorganization.
The revolving credit facility will be used for general corporate
purposes, including working capital, acquisitions, and capital
expenditures.
The Senior Subordinated Notes have not been registered under the
Securities Act or under any state securities laws and unless so
registered, may not be offered or sold in the United States,
except pursuant to an exemption from the registration
requirements of the Securities Act and applicable state
securities laws.
Rotech Healthcare Inc. is a leading provider of home respiratory
care and durable medical equipment and services to patients with
breathing disorders such as chronic obstructive pulmonary
diseases (COPD). The Company provides its equipment and services
in 47 states through over 600 operating centers, located
principally in non-urban markets. Rotech's local operating
centers ensure that patients receive individualized care, while
its nationwide coverage allows the Company to benefit from
significant operating efficiencies.
INTERPLAY ENTERTAINMENT: Titus Discloses 72.54% Equity Stake
------------------------------------------------------------
Titus Interactive SA, a French corporation, whose principal
business is developing and publishing games for personal
computers and video game console systems, beneficially owns
67,427,221 shares of the common stock of Enterplay Entertainment
Corporation, or approximately 72.54% of the shares of common
stock outstanding. Of these shares, Titus Interactive SA, as of
March 15, 2002, had: (i) sole power to vote or to direct the
vote of 67,427,221 shares and (ii) sole power to dispose or to
direct the disposition of 67,427,221 shares. Included within the
67,427,221 shares of common stock beneficially owned by Titus
are 460,298 shares of common stock that may be acquired by Titus
upon the exercise of warrants.
The source of the consideration for the prior purchases of
common stock and other securities of Interplay Entertainment
reported here was the working capital of Titus, some of which
was acquired through a public offering of Titus' securities in
France consummated, in part, for the purpose of raising money to
acquire the common stock. Additional purchases may be funded
from Titus' working capital and/or from capital that may be
raised from investors.
Interplay Entertainment makes PC and console video games with
such serene titles as Dungeon Master II, Redneck Rampage, and
Torment. Among the subsidiaries and divisions under the
Interplay umbrella are 14 Degrees East (strategy and puzzle
games), Black Isle (role playing games), Shiny Entertainment
(cartoon animation), Tantrum (action games), and Digital Mayhem.
Struggling to rebound from financial problems, Interplay is
putting more focus on its console games. Interplay's
shareholders include French software firm Titus Interactive
(nearly 44%); Universal Studios (about 15%); and founder,
chairman, and CEO Brian Fargo (13%). At September 30, 2001, the
company's balance sheet showed a total shareholders' equity
deficit of about $24 million.
KAISER ALUMINUM: Bringing-In Wharton Levin as Asbestos Counsel
--------------------------------------------------------------
Kaiser Aluminum Corporation, and its debtor-affiliates ask the
Court for authority to employ and retain Wharton Levin
Ehrmantraut Klein & Nash, P.A. as special asbestos counsel in
their chapter 11 cases to represent them in connection with all
aspects of pending and future asbestos bodily injury-related
claims.
Paul N. Heath, Esq., at Richards, Layton & Finger in Wilmington,
Delaware, tells the Court that Wharton is a 23-year old firm
with national and regional practice concentrating in litigation
and based in Annapolis, Maryland. Wharton regularly represents
product manufacturers, other major corporations, professionals,
and business interests in the defense of product liability
litigation, medical malpractice and other professional liability
litigation and commercial litigation. The firm has extensive
experience and expertise in the substantive areas of law
associated with complex, multi-party toxic tort product
liability, personal injury and wrongful death actions,
especially including the type of large complex litigation,
strategic counseling and related matters for which the Debtors
seek to employ Wharton.
In addition, Mr. Heath claims that Wharton is very familiar with
the Debtors' businesses and affairs both generally and
especially with respect to the matters for which it would be
employed. The firm has represented the Debtor Kaiser Aluminum &
Chemical Corporation and certain of the other Debtors in
connection with various litigation, strategic planning and
related matters since approximately 1987, when Robert Dale
Klein, proposed lead counsel for Wharton, joined the firm.
Wharton has provided extensive legal services and advices to the
Debtors concerning asbestos personal injury and wrongful death
actions and since approximately July 1998 has served as National
Coordinating Counsel for the Debtors in such matters. The firm
also has served as National Coordinating Counsel for the Debtors
in property damage actions related to agricultural chemicals
used by others to treat plywood to render it fire retardant and
has represented and counseled the Debtors in other miscellaneous
litigation involving the Debtors, their products or premises.
Mr. Heath accords that, before joining the firm, since
approximately the late 1970s, Mr. Klein represented Kaiser in
various litigation matters primarily, but not only, asbestos-
related proceedings, when he was with the firm of Piper &
Marbury in Maryland. As a result of two decades of experience
and expertise in counseling the Debtors, Mr. Klein and others at
Wharton have a deep understanding of the nature and extent of
the asbestos liabilities, have a strong grasped of issues that
lie ahead with respect to addressing those liabilities in the
context of these chapter 11 cases. Additionally, Mr. Heath
discloses that during the month preceding the petition date,
Wharton also assisted the Debtors and their proposed general
bankruptcy counsel in their attempts to resolve their financial
difficulties without resulting to chapter 11, particularly as
these difficulties relate to the Asbestos Claims.
Wharton will be charged with:
A. Counseling, providing strategic advise to, and representing
the Debtors in connection with any and all matters in or
outside of these bankruptcy cases proceedings arising from
or relating to the asbestos claims, including without
limitation:
a. counseling and representing the Debtors or coordinating
the representation of the Debtors in connection with
all aspects of Asbestos Claims related litigation,
including commencing, conducting and defending such
litigation wherever located;
b. counseling and representing the Debtors and assisting
general reorganization counsel in connection with the
formulation, negotiation and promulgation of a plan of
reorganization and related documents as these matters
relate to the Asbestos Claims; and,
c. counseling and representing the Debtors and assisting
general reorganization counsel in reviewing,
estimating and resolving the Asbestos Claims;
B. Performing any necessary or appropriate legal services in
connection with certain non-asbestos related litigation
matters pending as of the petition date with respect to
which Wharton previously has provided counseling to the
Debtors, including but not limited to, other toxic tort
litigation involving the Debtors, and occupational injury
or other claims arising in connection with various
products, operations or premises of the Debtors; and,
C. Performing all other necessary or appropriate legal services
in connection with Wharton's special representation of the
Debtors.
The professionals expected to render services in these chapter
11 cases are:
Professional Position Rate
------------------- ----------- ------
Robert Dale Klein Shareholder $300
Jack L. Harvey Shareholder $275
Victoria H. Wink Associate $150
Joseph M. Aden Associate $135
Paralegals $ 75
Mr. Heath informs the Court that, on or about February 7 and 8,
20002, the Debtors provided the firm with two payments in the
aggregate amount of about $716,329. After the application of
these payments to Wharton's actual fees and expenses through
January 31, 2002 and estimated expenses and fees from February
1-11, 2002, Wharton was left with a retainer of about $380,000
for services to be rendered and for reimbursement of expenses on
behalf of the Debtors. The remaining portion of the retainer,
after the reconciliation of the firm's actual, prepetition fees
and expenses, will be held by Wharton as a postpetition
retainer. Including the retainer, the Debtors made prepetition
payments to the firm aggregating $1,871,282 during the year
immediately preceding the petition date sourced form the Debtors
operating cash on account of fees and expense incurred or to be
incurred by Wharton on matters relating to the Debtors.
Robert Dale Klein, officer and shareholder of the law firm
Wharton Levin Ehrmantraut Klein & Nash, P.A., discloses that the
firm currently represents, or in the past has represented,
various defendants, other than the Debtors, who are alleged to
have asbestos-related liability, including:
A. Current Clients: Bridgestone/Firestone Inc., International
Truck & Engine Corp., Lear Siegler Diversified holdings
Corp., Mallinckrodt, Inc., National Refractories & Minerals
Corporations; Sears Roebuck & Co.; and,
B. Former Clients: Air Products & Chemicals Corporation, Exomet,
Inc., Ford Motor Company, Harbison-Walker Refractories
Company.
Mr. Klein assures the Court that none of these clients is a
creditor of the Debtors but that it is possible that one or more
of these clients could assert claims fro contribution or
indemnity against the Debtors in this bankruptcy proceeding, or
that the Debtors could have such claims against these companies.
Wharton will also not represent the Debtors, or any of their
successors, or any party adverse to the Debtors with respect to
such claims. (Kaiser Bankruptcy News, Issue No. 4; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KMART CORP: Seeks Okay to Modify Prepetition Compensation Plans
---------------------------------------------------------------
Prior to the Petition Date, Kmart Corporation, and its debtor-
affiliates established two deferred compensation plans for the
benefit of over 3,000 employees and directors. According to
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, in Chicago, Illinois, the beneficiaries directed the
Debtors to contribute a portion of their regular compensation to
one of two trusts in order to obtain certain tax benefits.
"These contributions are payable to the employees at a later
time in accordance with the terms of the trust," Mr. Butler
explains. The trusts collectively hold roughly $14,600,000 in
employee and director contributions.
By this motion, the Debtors seek the Court's authority to modify
the plans so they can distribute these funds to the plan
participants now.
The Debtors further ask Judge Sonderby for an order directing
the trustee of the two plans to make these distributions at the
direction of the Debtors and in accordance with the proposed
modifications requested. Moreover, the Debtors seek the Court's
authority to amend a separate plan to authorize the Debtors to
purchase insurance policies directly for the beneficiaries of
the plan, rather than having the trustee purchase such insurance
from the plan assets.
(A) Deferred Compensation Plan
The Kmart Corporation 1998 Management Deferred Compensation
and Restoration Plan was established pursuant to the Kmart
Corporation Deferred Compensation and Restoration Plan Trust
Agreement.
Under the Plan, Mr. Butler relates, certain key management
employees defer a portion of their compensation through
contributions of such compensation, made by the Debtors, to a
trust established by the Deferred Compensation Trust
Agreement. According to Mr. Butler, the purpose for the
deferral is to restore to the employees certain retirement
benefits that they otherwise would not have by virtue of
statutory limits imposed by the Internal Revenue Code of
1986. "These limits impose caps on the amount of
compensation -- and hence taxes -- that can be deferred," Mr.
Butler explains. Many employees experience the effects of
these caps through the annual limit that they can contribute
to 401(k) plans. Mr. Butler tells the Court that the
Deferred Compensation Plan was designed simply as another
avenue of tax savings that employees can realize if they
choose to defer their compensation.
As of the Petition Date, there were roughly 3,000 employees
who were participants in the Deferred Compensation Plan. The
trust held roughly $13,000,000 in employee contributions as
of that Date, for an average of roughly $4,300 per employee.
(B) Directors' Compensation Plan
Prior to the Petition Date, Mr. Butler relates, the Debtors
also established that certain Kmart Corporation Directors
Stock Plan and Deferred Compensation Plan for Non-Employee
Directors. According to Mr. Butler, the Directors Plan was
established pursuant to the terms of that certain Kmart
Corporation Directors Stock Plan and Deferred Compensation
Plan for Non-Employee Directors Trust Agreement.
Under the Directors Plan, Mr. Butler notes, the Debtors'
directors are able to defer a portion of the compensation.
Mr. Butler tells the Court that such deferred compensation is
contributed by the Debtors to a trust established by the
Directors Plan Trust Agreement. "The rationale for the
deferral is the same as that with respect to the Deferred
Compensation Plan," Mr. Butler explains.
As of the Petition Date, Mr. Butler reports that the trust
held roughly $1,600,000 in cash plus stock in Kmart.
(C) Estate Enhancement Plan for Directors
The Estate Enhancement Plan for Directors provides the
members of the Debtors' board of directors the ability to
elect life insurance coverage pursuant to a split-dollar life
insurance arrangement, Mr. Butler informs Judge Sonderby.
"Three board members have already done so," Mr. Butler says.
According to Mr. Butler, the Estate Plan requires the
insurance to be purchased out of the assets of the trust
established by the Directors Plan Trust Agreement.
The trustee of each of the trusts under the Deferred
Compensation Trust Agreement and the Directors Plan Trust
Agreement is Boston Safe Deposit and Trust Company.
"Both plans provide that the Trustee shall cease payments of
benefits to the participants if the Debtors become the subject
of bankruptcy proceedings," Mr. Butler explains.
Because of the tax-mandated provisions in the Deferred
Compensation Trust Agreement and the Directors Plan Trust
Agreement, Mr. Butler says, the trust assets are subject to the
claims of general unsecured creditors.
According to Mr. Butler, the Debtors' employees are concerned
that they may not derive the benefits of the compensation that
they earned and deposited in the trusts.
"That's why the Debtors need to amend the plan provisions so
that the trust assets may be distributed to plan beneficiaries,"
Mr. Butler points out.
Similarly, Mr. Butler continues, the Debtors need to modify the
provisions of the Estate Plan that contemplate the Trustee
paying insurance premiums for the Debtors' directors out of the
assets of the trust established by the Directors Plan Trust
Agreement so that the Debtors may simply make such payments
directly.
In order to do this, Mr. Butler relates that the Debtors have
decided to terminate both plans altogether.
Mr. Butler emphasizes that it is critical to the Debtors'
reorganization efforts that their employees not lose the
benefits of their existing compensation arrangements. "Losing
those benefits would lower employee morale, which could then
result in massive employee turnover," Mr. Butler says.
Retaining its employees is essential to the Debtors' successful
reorganization outcome, Mr. Butler reiterates. (Kmart Bankruptcy
News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
LAIDLAW INC: Enters Into Surety Bond Pact with Kemper Insurance
---------------------------------------------------------------
Laidlaw Inc., and its debtor-affiliates seek the Court's
authority to enter into a Surety Bond Agreement and Pledge
Agreement with Kemper Insurance Companies.
Garry M. Graber, Esq., at Hodgson Russ, LLP, in Buffalo, New
York, informs Judge Kaplan that the Debtors' ambulance services
business segment is frequently required to post performance
bonds to guarantee its performance under certain service
contracts. Without a readily available bond, the "Ambulance
Business would not be able to maintain existing service
contracts, pursuant to certain state and local laws," Mr. Graber
explains.
Accordingly, the Debtors negotiated with Kemper to provide the
bonding facility for the Ambulance Business. Kemper agrees to
provide the surety bonds, through its affiliates (Lumbermans
Mutual Casualty Company, American Motorists Insurance Company,
American Manufacturers Mutual Insurance Company and American
Protection Insurance Company), on the terms and conditions set
in the Surety Bond Agreement:
(a) American Medical Response, Inc. can access up
to $30,000,000 in surety bonds outstanding with the
Sureties at any one time;
(b) American Medical Response can request the issuance of
surety bonds at any time through February 28, 2003;
(c) Surety bonds issued under the Surety Bond Agreement must
have a term of less than one year;
(d) Surety bonds are classified under the Surety Bond
Agreement either as "Performance Bonds" or "Financial
Guarantee Bonds." Performance Bonds are any surety
agreements, undertakings or instruments of guaranty
under which loss is payable upon failure to perform
services required under any contract for services or to
make payments of claims in connection with a contract
for the performance of services. Financial Guarantee
Bonds are any surety agreements under which loss is
payable on proof of occurrence of financial loss;
(e) American Medical Response, Laidlaw, Inc., and Laidlaw
Transportation -- Indemnifiers -- must pledge collateral
before a surety bond may be issued. Collateral
can be either in cash or letter of credit. Collateral
must be pledged in the amount of:
-- 50% of the size of the Performance Bond, or
-- 100% of the size of any Financial Guaranty Bond;
(f) Cash collateral must be provided in even $1,000,000
increments, rounding up to the next increment if the
size of the surety bond results in a fractional
figure for collateral size;
(g) The Debtors must pay a premium of $10 for every $1,000
outstanding in the Performance Bonds. The Financial
Guarantee Bonds bear a premium at the Sureties' then-
current standard manual rates for Financial Guaranty
Bonds;
Mr. Graber asserts that the request is within the bounds of
Section 363(b)(1) of the Bankruptcy Code where the Debtors,
"after notice and hearing, may use, sell or lease the property
of the estate." Mr. Graber adds that the motion is also
protected by Section 364(b) of the Bankruptcy Code, and that
"the court, after notice and hearing, may authorize the trustee
to obtain unsecured credit . . . allowable under Section
503(b)(1) as an administrative expense."
Furthermore, Mr. Graber explains that, with the Surety Bond
Agreement or the Pledge Agreement, American Medical Response is
primarily responsible for the underlying obligations secured by
the security bonds and must have the funds available to satisfy
such obligations. As such, Laidlaw Inc. and Laidlaw
Transportation's respective estates are not at a substantial
risk to make any payments under the Agreement. (Laidlaw
Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
LERNOUT & HAUSPIE: Dictaphone's Lease Decision Period Extended
--------------------------------------------------------------
Judge Wizmur enters an order extending further the deadline by
which Dictaphone Corporation must assume, assume and assign, or
reject any outstanding unexpired leases under which Dictaphone
is a lessee or sub-lessee until and including the Effective Date
of its Plan of Reorganization, as it has been and may be amended
from time to time. Dictaphone's plan of reorganization was
confirmed by the Bankruptcy Court earlier this month.
LODGIAN INC: Proposes to Hire Poorman-Douglas as Claims Agent
-------------------------------------------------------------
In accordance with 28 U.S.C. Sec. 156(c), Lodgian, Inc., and its
debtor-affiliates propose to employ Poorman-Douglas Corporation,
to serve as claims and balloting agent in connection with the
Debtors' Chapter 11 cases.
Subject to the Court's approval, Poorman-Douglas has agreed to
provide at the Debtors' request the following services in these
cases:
A. notify all potential creditors of the existence and amount of
their respective claims as evidenced by the Debtors' books
and records as set forth in the Schedules;
B. furnish a notice of the last date for the filing of proofs of
claims and a form for the filing of a proof of claim, after
such notice and form are approved by this Court;
C. file with the Clerk a copy of the notice, a list of persons
to whom it was mailed, and the date the notice was mailed,
within 10 days of service;
D. docket all claims received, maintain the official claims
registers for each Debtor on behalf of the Clerk, and
provide the Clerk with certified duplicate unofficial
Claims Registers on a monthly basis, unless otherwise
directed;
E. specify, in the applicable Claims Register, the following
information for each claim docketed:
a. the claim number assigned,
b. the date received,
c. the name and address of the claimant and agent, if
applicable, who filed the claim, and
d. the classifications of the claim (e.g., secured,
unsecured, priority, etc.);
F. relocate, by messenger, all of the actual proofs of claim
filed to Poorman-Douglas, not less than weekly;
G. record all transfers of claims and provide any notices of
such transfers required by Rule 3001 of the Federal Rules
of Bankruptcy Procedure;
H. make changes in the Claims Registers pursuant to Court
Order;
I. upon completion of the docketing process for all claims
received to date by the Clerk's office, turn over to the
Clerk copies of the Claims Registers for the Clerk's
review;
J. maintain the official mailing list for each Debtor of all
entities that have filed a proof of claim. The list shall
be available upon request by a party-in-interest or the
Clerk;
K. work directly with the Debtors to facilitate the claims
reconciliation process, including:
a. matching scheduled liabilities to filed claims;
b. identifying duplicate and amended claims;
c. categorizing claims within "plan classes" and
d. coding claims and preparing exhibits for omnibus
claims motions;
L. provide exhibits and materials in support of motions to
allow, reduce, amend and expunge claims;
M. update the Claims Register to reflect Court orders affecting
claims resolutions and transfers of ownership;
N. print creditor and shareholder/class specific ballots and
coordinating the mailing of ballots, the plan and related
disclosure statement, and generating an affidavit of
service regarding the same;
O. solicit votes on the plan;
P. receive ballots at a post office box, inspecting, date
stamping and numbering such ballots consecutively and
tabulating and certifying results;
Q. assist with, among other things, solicitation and calculation
of votes and distribution as required in furtherance of
confirmation of plan(s) of reorganization;
R. 30 days prior to the close of these cases, an order
dismissing the Agent shall be submitted terminating the
services of the Agent upon completion of its duties and
responsibilities and upon the closing of these cases; and
S. at the close of the case, box and transport all original
documents in proper format, as provided by the Clerk's
office, to the Federal Records Center.
Lisa A. Thompson, Esq., at Cadwalader Wickersham & Taft in New
York, New York, relates that in its fourteen years of service as
a claims processor, Poorman-Douglas has provided similar claims
agent and general case management services directly to debtors
in possession and trustees in numerous other large Chapter 11
cases, including R.H. Macy & Co., Inc., et al., which had
approximately 16,000 claimants, Federated Department Stores,
Inc. and Allied Stores Corp., et al., which had approximately
180,000 claimants, and Eastern Airlines Inc., which had
approximately 200,000 claimants.
The Debtors propose that Poorman-Douglas be compensated for its
services as claims and balloting agent for the Debtors in
accordance with the terms, procedures and conditions outlined in
the Agreement which provides the following payment terms:
A. The Debtors shall pay Poorman-Douglas a retainer in the
amount of $2,500.00 to be applied against Poorman-Douglas'
final invoice for the services provided herein.
B. For services and materials furnished by Poorman-Douglas under
the Agreement, the Debtors will pay the charges set forth
in the Agreement. Notwithstanding any provision therein to
the contrary, all charges and expenses of Poorman-Douglas
under the Agreement shall be reasonable and subject to
prior review and approval of the Debtors. The Debtors shall
not be responsible for any charges and expense which are
not reasonable and not specified in the Agreement. Poorman-
Douglas will bill the Debtors monthly. All invoices shall
be due 30 days following the date of billing.
C. Where the Debtors require measures that are unusual and
beyond normal business practice of Poorman-Douglas such
as, CPA audit, or off premises storage of data,
the cost of such measures, if provided by Poorman-Douglas,
will be charged to the Debtors at a competitive rate
subject to the approval of the charges and related expenses
as set forth in paragraph (b) above.
D. The Debtors agree to prepay all notice mailing and/or legal
notice publishing performed by Poorman-Douglas, in an
amount which shall be mutually agreed upon by the Debtors
and Poorman-Douglas.
The Debtors request authority to compensate and reimburse
Poorman-Douglas in accordance with the payment terms of the
Agreement for all services rendered and expenses incurred in
connection with the Debtors' Chapter 11 cases. The Debtors
believe that such compensation rates are reasonable and
appropriate for services of this nature and comparable to those
charged by other providers of similar services.
In an effort to reduce the administrative expenses related to
Poorman-Douglas' retention, the Debtors seek authorization to
pay the firm's fees and expenses without the necessity of the
firm filing formal fee applications. Len Clarke, an Executive
Vice President of Poorman-Douglas, acknowledges that it will
perform its duties if it is retained in the Debtors' Chapter 11
cases regardless of payment and to the extent that PDC requires
redress, it will seek appropriate relief from the Court.
In the event that Poorman-Douglas' services are terminated, the
firm shall perform its duties until the occurrence of a complete
transition with the Clerk's Office or any successor
claims/balloting agent. Mr. Clarke assures the Court that
neither the firm nor any of its members or employees hold or
represent any interest adverse to the Debtors' estates or
creditors with respect to the services described herein and in
the Agreement. (Lodgian Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
MARINER POST-ACUTE: Equity Panel Appointment Meets Resistance
-------------------------------------------------------------
JPMorgan Chase Bank, individually and as the agent for the MPAN
Senior Lenders, joins in the Mariner Post-Acute Network, Inc.
Debtors' opposition to the Motion of stockholder Vincent C.
Pangia for the Appointment of an Equity Holders Committee.
Chase reminds the Court that, as of the Petition Date, the MPAN
Debtors were indebted to the MPAN Senior Lenders in the
approximate principal amount of $1,000,000,000, plus accrued and
unpaid interest, fees, costs and other charges (in an aggregate
amount of not less than $200,000,000) pursuant to the Corporate
Credit Agreement. Such obligations are secured by first priority
liens on substantially all of the MPAN Debtors' assets.
The firm of Conway, Del Genio, Gries & Co., LLC (CDG), which
retained to analyze the enterprise value of the Debtors, has
advised the Debtors that their analyses indicated that the
enterprise value of the Reorganized Debtors was between $810
million and $870 million as of December 12, 2001. However, of
the total enterprise value, only approximately $560 million to
$600 million is believed to be attributed to the assets of the
MPAN Debtors, while approximately $250 million to $270 million
is attributable to the assets of the MHG Debtors. Therefore, the
MPAN Senior Lenders substantially undersecured.
Moreover, the most recent Audited Balance Sheet, as of September
30, 2001 revealed that the total stockholders' deficit as of
that date was $1.47 billion.
Under the Plan, Chase points out, the MPAN Senior Lenders will
receive consideration having a value of approximately 70% of the
principal amount of the approximately $1 billion pre-petition
indebtedness (exclusive of interest, costs, fees and other
charges), with a significant part of that recovery coming in the
form of equity securities in the reorganized MPAN. Moreover, the
Plan provides MPAN's unsecured creditors with a recovery of less
that 10% on the face value of allowed claims. These
distributions are consistent with the CDG valuation analyses.
However, of the total enterprise value, only approximately $560
million to $600 million is attributable to the assets of the
MPAN Debtors. Accordingly, even assuming the highest CDG
enterprise value of the MPAN Debtors ($600 million), there would
still be a shortfall to the MPAN Senior Lenders in the amount of
approximately $400 million, before taking into account interest,
costs, fees and other charges or the surplus cash held by the
Debtors.
Chase further points out that the Debtors' most recent Audited
Balance Sheet as of September 30, 2001 revealed a total
stockholders' deficit in the approximate amount of $1.4 billion.
Accordingly, based on the CDG enterprise valuation analyses, the
substantial deficit in stockholders' equity as reported in the
Audited Balance Sheet as of September 30, 2001, and the
preparedness of the Committee in arms'-length negotiations to
accept less than $.10 on the dollar for their claims (which rank
above equity), there can be little doubt that the Debtors are
hopelessly insolvent and the equity shareholders have no
meaningful economic interest that requires representation.
Chase tells the Court that an Equity Committee should not be
because the Debtors are hopelessly insolvent, the possibility of
shareholder recovery is non-existent and creditors are not
receiving amounts close to full value. The costs and expenses
associated with the appointment of an equity committee far
outweigh the need for such a committee, Chase represents.
Objection By the U.S. Trustee
Donald F. Walton, the Acting United States Trustee for Region 3
objects to the Motion of Pangia on the following grounds:
(a) It is too late.
(b) The work proposed to be accomplished by the Equity Committee
-- valuation of the Debtors' business -- is duplicative of
the work already performed by the Committee.
(c) The Movant has failed to establish any reasonable basis upon
which the Court could conclude that the Debtor is solvent
and that equity holders are entitled to distribution on
account of their interests.
(d) Movant has failed to establish that the Debtors' Board of
Directors has acted in breach of its fiduciary duty or has
not adequately represented the interests of shareholders in
this case.
(E) The UST did not abuse his discretion in declining Movant's
request to appoint an Equity Holders Committee in this case.
(Mariner Bankruptcy News, Issue No. 27; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
MCLEODUSA INC: Chapter 11 Case Reassigned to Judge R. Barliant
--------------------------------------------------------------
Judge Erwin I. Katz, in an Order dated March 15, 2002,
reassigned McLeodUSA Inc.'s Chapter 11 case to Judge Ronald
Barliant effective March 25, 2002.
Judge Barliant will convene an omnibus hearing on April 5, 2002,
at 9:30 a.m. (McLeodUSA Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
MESA AIR GROUP: State Street Research Reports 9.16% Equity Stake
----------------------------------------------------------------
State Street Research & Management Company, with principal
office in Boston, has reported ownership of 3,028,800 shares of
the common stock of Mesa Air Group, Inc., which represents 9.16%
of the outstanding common stock of the Company. State Street
Research has the sole power to vote or to direct the vote of
2,931,800 such shares and the sole power to dispose or to direct
the disposition of 3,028,800 shares.
State Street Research & Management Company is an investment
adviser firm and disclaims any beneficial interest in any of the
foregoing securities. All foregoing shares are in fact owned by
clients of State Street Research & Management Company.
Mesa Air Group is finally taxiing off into profitability after
being grounded with three years of flat sales and losses. The
company, which owns three US regional carriers, is adding
regional jets to its fleet while cutting back on unprofitable
turboprops. Mesa Air serves more than 140 North American cities
in the US (in 36 states and the District of Columbia), Canada,
and Mexico. One of the firm's regional carriers, Mesa Airlines,
operates as America West Express in the US Southwest and as US
Airways Express in the East and Midwest under code-sharing
arrangements. Mesa Air Group's other carriers, Air Midwest and
CCAIR, operate as US Airways Express. The group's code-sharing
affiliations account for 95% of sales.
METRICOM INC: WorldCom Discloses 20.5% Equity Stake
---------------------------------------------------
On November 15, 1999, WorldCom acquired 30,000,000 shares of
Series A1 Preferred Stock of Metricom, Inc. from Metricom under
a Preferred Stock Purchase Agreement dated June 20, 1999 between
Metricom, WorldCom and Vulcan Ventures Incorporated. Vulcan
Ventures Incorporated purchased 30,000,000 shares of Series A2
Preferred Stock of Metricom under the Preferred Stock Purchase
Agreement. WorldCom purchased the shares for cash consideration
of $10.00 per share, for an aggregate consideration of
$300,000,000. The funds for the purchase of the shares were
provided from the general working capital of WorldCom.
Dividends on shares of Series A1 Preferred Stock may, at the
election of Metricom, be paid in additional shares of Series A1
Preferred Stock. WorldCom acquired an additional 1,950,000
shares of Series A1 Preferred Stock as payment for dividends.
WorldCom acquired the shares for investment purposes. Shares of
Series A1 Preferred Stock become convertible into common stock
at the rate of 25% every six months, commencing May 15, 2002,
except in the event of a change in control of Metricom or a
major acquisition by Metricom, in which event all such shares
become convertible at the option of the holder. Shares of
Series A1 Preferred Stock are automatically converted into
common stock in the event of any transfer of shares other than
to Vulcan Ventures or to affiliates of WorldCom or Vulcan
Ventures. Each share of the Series A1 Preferred Stock is
convertible into one share of common stock, subject to
adjustment for stock splits, stock dividends, reclassifications,
certain reorganizations, mergers, sales of assets and the like.
Holders of shares of Series A1 Preferred Stock have no voting
rights with respect to such shares except that, as long as more
than 7,500,000 shares of Series A1 Preferred Stock (as adjusted
for any stock dividend, split, combination or other similar
event with respect to such shares) remain outstanding,
(i) holders of shares of Series A1 Preferred Stock, voting as a
separate class, have the right to elect one member of the
Company's Board of Directors and (ii) the consent of the holders
of at least a majority of the outstanding shares of Series A1
Preferred Stock is required to effect certain significant
corporate actions by the Company.
As a result of the foregoing, WorldCom owns beneficially
7,987,500 shares of Metricom's common stock issuable upon the
conversion of an equal number of shares of Series A1 Preferred
Stock, which become convertible on May 15, 2002, representing
approximately 20.5% of the outstanding shares of the Company's
common stock (based upon 30,910,645 shares of common stock of
Metricom, Inc. issued and outstanding as of April 30, 2001, as
reported in its Form 10-Q for the quarterly period ended March
31, 2001, filed with the Commission). Upon conversion, WorldCom
would have the sole power to vote and the sole power to dispose
of such shares.
Metricom, Inc. is a high-speed wireless data Company. With its
high-speed Ricochet mobile access, Metricom is making
"information anytime" possible-at home, at the office, on the
road, and on many devices. Metricom filed for Chapter 11
reorganization on July 2, 2001, in the U.S. Bankruptcy Court for
the Northern District of California in San Jose.
METROCALL: Bank Lenders Agree to Further Amend Loan Agreement
-------------------------------------------------------------
On February 25, 2002, Metrocall Inc. and its bank lenders
entered into the Third Amendment and Limited Waiver to the Fifth
Amended and Restated Loan Agreement, effective January 1, 2002.
The amendment amended certain definitions contained within
Article 1 of the Loan Agreement "Definitions". It also amended
sections 2.1(a), 2.1(b), 2.2(a), 2.2(b)(ii) and 2.2(c) which
generally pertain to the revocation of the option to borrow a
Eurodollar Advance.
The Applicable Margin was also amended to 2.875% effective
January 1, 2002, retroactive for interest on all Base Rate
Advances outstanding for the period October 1, 2001 through
January 1, 2002.
The Majority Lenders signatory to this amendment have also
agreed to a limited waiver that prohibits them from demanding
for payment any default interest that has accrued between March
16, 2001 and January 1, 2002 on the outstanding Obligations.
With about 6.2 million subscribers on its nationwide wireless
network, Metrocall is the #2 independent US paging company,
behind Arch Wireless. Services include advanced messaging,
alphanumeric display messaging, digital display, and digital
broadband and PCS (through an alliance with AT&T Wireless). Its
Inciscent joint venture is developing a wired-to-wireless
application service provider (ASP) to offer broadband Internet
access, wireless e-mail, and related services. Metrocall has
terminated an agreement to merge with a smaller rival, WebLink
Wireless. In 2001 Metrocall EVP and COO Steven Jacoby was killed
when the plane on which he was traveling crashed into the
Pentagon.
DebtTraders reports that Metrocall Inc.'s 10.375% bonds due 2007
(MCALL2) are quoted at a price of 4. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MCALL2for
real-time bond pricing.
NATIONAL STEEL: Has Until May 21 to File Schedules & Statements
---------------------------------------------------------------
With the Court's approval, National Steel Corporation and its
debtor-affiliates now have until May 21, 2002 to file their:
(i) schedules of assets and liabilities;
(ii) statements of financial affairs;
(iii) schedules of current income and expenditures;
(iv) statements of executory contracts and unexpired leases;
and
(v) lists of equity security holders.
Mark A. Berkoff, Esq., at Piper Marbury Rudnick & Wolfe, in
Chicago, Illinois, explains that there are tens of thousands of
creditors and parties in interest in National Steel's chapter 11
cases. "Given the size and complexity of their businesses and
the fact that certain pre-petition invoices have not yet been
received or entered into the Debtors' financial systems, the
Debtors have not had the opportunity to gather the necessary
information to prepare and file their respective Schedules and
Statements," Mr. Berkoff says.
According to Mr. Berkoff, the Debtors have started the task of
gathering the necessary information to prepare and finalize
their Schedules and Statements. Mr. Berkoff estimates that a
60-day extension will provide sufficient time to prepare and
file the Schedules and Statements.
Mr. Berkoff tells the Court that the Debtors reserves their
right to seek any further extensions from this Court, or to seek
a waiver of the requirement of filing certain Schedules.
(National Steel Bankruptcy News, Issue No. 3; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NATIONSRENT INC: Signs-Up Korn/Ferry as CEO Search Consultants
--------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates seek the Court's
authority to employ and retain Korn/Ferry International as
executive search consultants in their Chapter 11 cases to assist
in their search for a new Chief Executive Officer.
Michael J. Merchant, Esq., at Richards, Layton & Finger in
Wilmington, Delaware, reminds the Court that the Debtors require
qualified search consultants to assist in recruiting a new chief
executive officer for NationsRent because under the DIP Credit
Agreement, the Debtors must:
A. Select an executive search firm to assist in recruiting a new
CEO not later than March 8, 2002;
B. Obtain Court approval of the engagement of a search firm
not later than April 2, 2002; and,
C. Select a permanent president and CEO officer not later than
June 1, 2002.
Mr. Merchant asserts that Korn/Ferry is particularly well suited
and qualified to assist the Debtors in this executive search
since they are among the leading executive search firms in the
world. The firm began providing executive search services in
1969 and since then has conducted more than 80,000 senior
management or executive searches. Korn/Ferry successfully has
assisted many major corporations in the U.S. in their respective
searches for senior executives, including recent searches for
such well-known companies as Ann Taylor Stores Corp.,
AutoNation, Inc. , CellularOne Group, Inc., Kaiser Permanente,
Krispy Kreme Doughnuts, Inc., Ocean Spray Cranberries, Inc., and
Waste Management, Inc.
Pursuant to the Executive Search Agreement and subject to the
Court's approval, Korn/Ferry will charge a retainer fee equal to
one-third of the projected first year's total cash compensation,
including bonuses of NationsRent's new chief executive officer,
capped at $250,000, which will be billed in four monthly
installments. Mr. Merchant says that notwithstanding any other
language in the search agreement, any fees of Korn/Ferry will
only become due and payable upon application to the Court.
Korn/Ferry will refund the difference if a new CEO is hired at a
lower targeted first year total cash compensation package than
the original estimate.
Mr. Merchant informs the Court that the Debtors have the right
to cancel the search agreement at any time. The first retainer
payment, as agreed, is nonrefundable, but cancellation removes
liability for any portion of the retainer due after
cancellation. Korn/Ferry also receives reimbursement for search
related expenses such as administrative support, communication,
courier, reproduction and computer services, which is capped at
6.5% of the retainer. Mr. Merchant states that Korn/Ferry will
bill these expenses on a monthly basis, even if all installments
of the retainer have already been paid. Also, the Debtors will
reimburse the firm for direct, out-of-pocket expenses, such as
candidate and consultant travel, lodging and video-conferencing,
on a monthly basis without inclusion in the expense
reimbursement cap.
Colleen Hulce, Managing Director of Korn/Ferry International,
discloses the following interested parties for whom Korn/Ferry
is currently performing or has performed executive search
services in matters unrelated to these Chapter 11 cases. These
firms include: Amsouth Bancorporation(HQ), AutoNation, Inc.,
Bank of Montreal(HQ), Bank of Montreal Group of Companies, BNP
Paribas, BNP Paribas Asset Management SGR, C.A. Goodyear de
Venezuela, CIA Hulera Goodyear - Oxo, S.A. de C.V., CIGNA
HealthCare, Cintas Corp., Citibank Korea, Citibank N.A. Hong
Kong, Citibank N.A. Korea, Citibank N.A. Mexico, CNH Global,
Compania Goodyear del Peru S.A., Credit Lyonnais, Credit
Lyonnais(HQ), Credit Lyonnais Luxembourg SA, Credit Suisse First
Boston, Credit Suisse Group(HQ), Credit Suisse Life Co., Ltd.,
Credit Suisse/First Boston, Credit Suisse/First Boston(US HQ),
Deutsche Bank AG, Deutsche Bank Alex Brown, Deutsche Bank
Argentina Sociedad de Boisa SA, Deutsche Bank Company, Limited,
Deutsche Bank Securities Inc., Deutsche Bank Warsaw, EMC Corp.,
EMC Corp.(HQ), Erste Bank Osterreichischen Sparkassen AG, Erste
Bank Rt., Ford Motor Company, Ford Motor Company Ltd, Ford Motor
Company, Mexico SA de C.V., Ford Motor de Venezuela S.A., GE
Capital Real Estate, GE Capital Australia, GE Capital Brazil, GE
Capital Corp., GE Capital East Asia, GE Capital Europe Limited,
GE Capital Europe Ltd., GE Capital Fleet Services, GE Capital
Mexico, GE Capital Mortgage Services, GE Capital Services GmbH,
GE Capital Structured Finance Group, GE Capital/ Mercurbank AG,
Goodyear, Goodyear de Chile S.A.I.C., Goodyear de Colombia,
S.A., Goodyear de Venezuela, Goodyear de Brasil Produtos de
Borracha, Goodyear Internat'l Corp., Goodyear Jamaica Ltd.,
Goodyear Tire Rubber Co., Gran Industria de Neumaticos,
CentroAmericana, S.A., JP Morgan Chase & Co., JP Morgan Chase
Private Bank, JP Morgan Chase Private Bank(HQ), JP Morgan
Securities Asia, JP Morgan Bank, KeyCorp Australia, Manulife
Financial, Mellon Financial Corp., Morgan Stanley Dean Witter,
Morgan Stanley Dean Witter Alternative Investment Partners,
Morgan Stanley Dean Witter Investment Management, Neumaticos
Goodyear S.A., Omniquip Lull Tractor, Omniquip Parts Worldwide,
Raiffeisen Zentralbank Osterreich AG(RZB), SSB Citi Asset
Management, SunTrust Banks, Inc., SunTrust Equitable Securities,
The Goodyear Tire & Rubber Company, The Toronto-Dominion Bank,
UBS Warburg, and Washington Mutual. (NationsRent Bankruptcy
News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
OWENS CORNING: Court OKs Peter Solomon as Future Rep.'s Advisor
---------------------------------------------------------------
James J. McMonagle, the Legal Representative for Future
Claimants of Owens Corning obtained the court order:
A. Authorizing the retention and employment of Peter J. Solomon
Company Ltd. as his investment banker and financial
advisor for the purpose of providing financial advisory,
investment banking and other related services in
connection with the Debtors' chapter 11 cases as provided
in the retention letter agreement dated October 30, 2001
B. Approving the proposed fee structure, including the
indemnification provisions;
C. Approving the entitlement of compensation and reimbursement
payments under the letter agreement as administrative
expenses and determining that such payments shall be
entitled to benefits of any 'carve-outs' for
professionals' fees and expenses in effect in these
Chapter 11 cases; and
D. Futures Representative's request that such retention be nunc
pro tunc to November 6, 2001, the date when Solomon
commenced post-petition services to him.
Mr. McMonagle cites these services that Solomon is expected to
render:
A. Valuation of the Debtor as a going-concern, in whole or in
part;
B. Valuation analyses of the Debtor's asbestos exposure;
C. Review and consultation of the financing options for the
Debtor, including proposed DIP financing;
D. Review of and consultation on the potential divestiture,
acquisition and merger transactions for the Debtor;
E. Review of and consultation on the capital structure issues
for the reorganized Company resulting from the Chapter 11
case, including Debt Capacity;
F. Review of and consultation on the financial issues and
options concerning potential plans of reorganization, and
coordinating negotiations with respect thereto;
G. Review of and consultation on the company's operating and
business plans, including an analysis of the Company's
long term capital needs and changing competitive
environment;
H. Testimony in court in behalf of the Futures Representative,
if necessary; and
I. Any other services as the Futures Representative or his
counsel may request from time to time with respect to
financial, business and economic issues that may arise out
of the Chapter 11 proceedings;
Mr. Dietz tells the Court that the salient terms of the Letter
Agreement governing the engagement of Solomon are:
A. Term - The Letter Agreement has an initial term of 3 months
commencing on the date of the Letter Agreement and the
Futures Representative has the right to continue the
engagement on a month-to-month basis thereafter. The
Futures Representative has the right to terminate the
Letter Agreement after the initial period upon 30 days
notice.
B. Fee - As compensation for its services, Solomon proposes to
charge the Futures Representative a monthly advisory fee
of $175,0000 as well as seek periodic reimbursement of
reasonable out-of-pocket expenses, including reasonable
attorneys fees. Solomon is also entitled to seek a
Reorganization Fee under the agreement provided there is a
plan of reorganization satisfactory to the Futures
Representative and approval is granted by the Court.
Additionally, Mr. Dietz relates that Solomon and certain related
persons are entitled to be indemnified from and against certain
losses and liabilities arising out of or related to the
performance of its services on behalf of the Futures
Representative. The indemnity, however, will not apply to any
liability that has been determined by the court to have resulted
from gross negligence, fraud, lack of good faith, bad faith,
willful misfeasance, or reckless disregard of the obligations of
Solomon. (Owens Corning Bankruptcy News, Issue No. 29;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC AEROSPACE: Completes Exchange of 11.25% Sr. Sub. Notes
--------------------------------------------------------------
Pacific Aerospace & Electronics, Inc. (OTC Bulletin Board:
PCTH), a diversified manufacturing company specializing in metal
and ceramic components and assemblies, announced that it has
completed an exchange of all of its 11.25% senior subordinated
notes for new senior subordinated notes, preferred stock and
common stock of the Company. The Company had been in default in
the payment of interest on the Old Notes for failure to make its
last two interest payments. Pursuant to the Exchange, all of
the Old Notes have been cancelled. Accordingly, the defaults
related to those notes no longer exist.
"We are very pleased to complete this exchange and secure new
senior financing," said Don Wright, the Chief Executive Officer
of the Company. "We can now move forward with a greatly reduced
level of debt and refocus our energy on providing innovative and
quality solutions for our customers. We are particularly
excited to complete the introduction of several of our new
ceramic and metal composite technologies to the market.
Recently, we were issued two new patents which will allow us to
provide lightweight, high-performance electronic composite
packages to the aerospace and defense industries."
Matthew Kaufman, a Managing Director of GSC Partners, the new
majority shareholder of the Company, stated, "We are very
pleased to help with the restructuring of the Company. We are
impressed with the Company's technology and look forward to a
long and beneficial relationship."
In addition to consummating the Exchange, the Company has
entered into a new five-year senior secured loan in the
principal amount of $36.0 million. The New Senior Loan was
issued at a discount and will bear interest at a rate of 5% per
annum. The net proceeds of the loan totaled approximately $22
million, which was used, in part, to pay off the Company's 21%
senior secured loan. The Company had also been in payment and
covenant default under the Old Senior Loan prior to its
repayment. The remainder of the proceeds of the New Senior Loan
will be used for working capital, to pay the fees and costs of
the restructuring and for other general corporate purposes.
Pursuant to the Exchange, the holders of the Old Notes exchanged
$63.7 million aggregate principal amount of Old Notes, together
with accrued interest thereon, for shares of common stock of the
Company, shares of preferred stock of the Company and $15
million in aggregate principal amount of 10% pay-in-kind senior
subordinated notes. The Noteholders, by virtue of their
ownership of the common stock and the New Preferred, in the
aggregate control 97.5% of the voting power of the Company. The
New Preferred will be automatically converted into common stock
following shareholder approval of an increase in the number of
authorized shares of common stock. Votes with respect to the
increase in the number of authorized shares of common stock will
be solicited only pursuant to a proxy statement filed with and
cleared by the Securities and Exchange Commission The
Noteholders have agreed to vote in favor of the increase in
authorized shares of common stock and hold a sufficient number
of shares to ensure such increase's approval. Following the
conversion of the New Preferred into common stock, the
Noteholders will beneficially own 97.5% of the outstanding
shares of common stock of the Company on a fully-diluted basis.
In connection with the Exchange, the Board of Directors was
reconstituted to consist of five directors, all of whom are
designated by the Noteholders. Donald A. Wright, the Company's
President and Chief Executive Officer, will remain a member of
the Company's Board of Directors.
Pacific Aerospace & Electronics, Inc. is an international
engineering and manufacturing company specializing in
technically demanding component designs and assemblies for
global leaders in the aerospace, defense, electronics, medical,
telecommunications, energy and transportation industries. The
Company utilizes specialized manufacturing techniques, advanced
materials science, process engineering and proprietary
technologies and processes to its competitive advantage. The
Company has approximately 850 employees worldwide and is
organized into three operational groups -- U.S. Aerospace, U.S.
Electronics and European Aerospace (Aeromet). More information
may be obtained by contacting the Company directly or by
visiting its Web site at http://www.pcth.com
PACIFIC GAS: Bringing-In Cooley Godward as Litigation Co-Counsel
----------------------------------------------------------------
Pacific Gas and Electric Company applies to the Court for an
order authorizing its employment of Cooley Godward LLP to
(1) Assist Bankruptcy Co-Counsel
-- to assist as co-counsel to the law firm of Howard Rice,
Applicant's general bankruptcy counsel, with litigation and
related matters in connection with any potential or actual
proposed plans of reorganization;
(2) Perform GRC Services
-- to provide services to PG&E in connection with the
utility's 2003 General Rate Case, other General Rate Cases,
or other rate related matters, including, without
limitation, providing strategic planning, legal analysis,
or litigation related services.
(3) Compliance Matters.
-- advising and representing PG&E in connection with
litigation and other trailers relating to PG&E's regulatory
and legal compliance activities, including but not limited
to compliance with Section 851 of the Public Utilities
Commission Code (PUC Code).
In connection with the Compliance Matters, Cooley, among other
things, provides representation to PG&E with regard to
responding to the Orders to Show Cause issued by the
California Public Utilities Commission (CPUC) with respect to
application numbers 01-07-031 and 01-06-043. As to these
particular Compliance Matters, the CPUC granted PG&E's
requests to provide certain rights in its land to third
parties but criticized the utility for potentially failing to
comply with Section 851, which requires CPUC approval prior to
a utility "encumbering" its property. Therefore, PG&E requires
the services of an outside law firm such as Cooley to
represent it with respect to the Compliance Matters.
(4) Reorganization Matters.
-- advising PG&E regarding certain legal and strategic
analyses regarding the structural, corporate, securities,
financial, contractual and related aspects of various
issues in connection with the preparation of PG&E's plan of
reorganization by PG&E and its Reorganization Counsel, and
to assist PG&E with respect to the documentation and
execution of such matters.
(5) Corporate Matters.
-- advising and assisting PG&E with respect to general
corporate and contractual matters arising in the ordinary
course of the utility's business, including assistance in
the review and negotiation of commercial agreements.
Debtor and Cooley promise to make every effort to work with
Howard Rice and any other professionals who also may be involved
in rendering services in connection with these additional
matters to ensure that the respective professional services
provided to PG&E are not duplicative.
PG&E and Cooley intend that Cooley will continue to provide the
prior authorized services as is necessary or appropriate.
Pursuant to the Original Application and Order, Cooley renders
to the Debtor professional services relating to substantial
disputes and other matters arising from the continuing
California energy crisis. These services include:
(a) advising and representing PG&E in connection with
Applicant's claim against the State of California arising
from the State's action regarding Applicant's Block Forward
Contracts in connection with the Declaration of Emergency.
(b) advising and representing PG&E in connection with disputes
with energy suppliers arising out of California's energy
crisis.
(c) advising and assisting the PG&E with certain legal analyses
and advise the Applicant regarding its strategic options in
connection with energy related issues.
(d) performing other tasks such as the preparation of employment
applications pertaining to its own employment and related
documents and activities, and the preparation of fee
applications and related documents and activities.
Cooley will be paid its standard hourly rates and reimbursed for
costs incurred. Cooley's effective standard hourly billing rates
for attorneys and paraprofessionals range from $75.00 to $600.00
per hour. The Debtor represents that these rates are competitive
within the legal profession in the geographical areas in which
Cooley practices. Such rates are subject to change from time to
time.
The primary attorneys and paraprofessionals expected to bill
time in connection with Cooley's special representation, and
their current hourly rates are:
(a) In connection with PG&E's claim against the State of
California arising from the State's action regarding PG&E's
Block Forward Contracts in connection with the Declaration
of Emergency:
Attorneys: Martin S. Schenker $435
Linda F. Callison $370
Clay C. Wheeler $270
Maureen P. Alger $240
Monica K. Hoppe $240
Senior Paralegal: Kate Rorrer $160
Paralegal: Sheree Cruz-Laucirica $100
(b) In connection with disputes with energy suppliers arising
out of California's energy crisis:
Attorneys: Stephen C. Neal $600
Martin S. Schenker $435
Benjamin K. Riley $430
Patrick P. Gunn $355
J. Timothy Nardell $300
Clay C. Wheeler $270
Maureen P. Alger $240
Monica K. Hoppe $240
Senior Paralegal: Kate Rorrer $160
Paralegal: Sheree Cruz-Laucirica $100
(c) In connection with energy related legal analyses and
strategic options advice:
Attorneys: Stephen C. Neal $600
Martin S. Schenker $435
Linda F. Callison $370
Charles M. Schaible $365
J. Timothy Nardell $300
Clay C. Wheeler $270
Maureen P. Alger $240
Monica K. Hoppe $240
(d) In connection with employment and fee application related
matters:
Attorneys: J. Michael Kelly $475
Martin S. Schenker $435
Susan L. Ruebush $225
Paralegal: Kris T. Cachia $110
(e) In connection with the Compliance Matters:
Attorneys: John C. Dwyer $410
Neal J. Stephens $375
Jeffrey S. Karr $300
Wendy J. Brenner $240
Greg K. Klingsporn $215
Angela L. Mikels $190
Paralegal: Danielle Fluker $110
(f) In connection with the Reorganization Matters and/or the
Corporate Matters:
Attorneys: Susan C. Philpot $575
Samuel M. Livermore $510
Thomas Z. Reicher $485
Joseph A. Scherer $465
Paul Churchill $450
Deborah A. Marshall $450
Jamie E. Chung $395
Michael A. Plumleigh $395
Robert J. Edwards $270
Maricel Mojares-Moore $355
Bradley C. Crawford $330
Dma E. Alexander $300
Edward A. Deibert $300
Soo Kim $240
Cathlin Suh $240
Anil Advani $215
Peter T. Smith $215
Jason S. Throne $215
David E. Tang $190
Todd A. Hamblet $190
Senior Paralegal: Eric J. Steiner $215
(g) Additional Reorganization Services:
partner Martin S. Schenker ($435), partner Linda Callison
($370), associate Clay Wheeler ($270), associate Maureen
Alger ($240), associate Craig Daniel ($190), and paralegal
Jeannine Douglas ($135).
(h) GRC Services:
partner Benjamin K. Riley ($430) and associate John P.
Kinsey ($190).
Professional Disclosure
Martin S. Schenker, Esq., advises that Cooley has served as
counsel to PG&E since at least 1991. As of the petition date of
PG&E's bankruptcy, Cooley held an unapplied retainer provided by
the PG&E in the amount of $280,792.05, which PG&E expects to be
applied toward Cooley's compensation for postpetition services
to be provided to PG&E.
According to Mr. Schenker, Cooley has represented entities
adverse to the Debtor or parties of interest in PG&E but either
the relationship has concluded or the matter is unrelated to the
matter for which Cooley is employed by PG&E. In any event, Mr.
Schenker assures, Cooley will not represent these or any other
persons or entities in connection with the Debtor, its
bankruptcy proceeding, or the matters on which Cooley would be
employed. Such entities as revealed in Mr. Schenker's
Declaration are: the law firm of O'Melveny and Myers, Bank One
Akron, Bankers Trust, Banque National de Paris, Deutsche Bank,
Los Angeles Department of Water and Power, and PacifiCorp, an
individual pro bono client through the San Francisco Legal
Services Clinic in connection with certain customer billing
disputes with the Debtor, PG&E Enterprises (an affiliate of the
Debtor), Commerce One (a software company, in connection with a
license to Pantellos Corp. which was established by various
companies, including the Debtor), a client in connection with
its acquisition of assets from a group that is a party to one or
more power contracts with the Debtor, the estate of John Bonner,
a former President of the Debtor, in trust and estate related
matters, and this estate or its beneficiaries may have rights or
claims against the Debtor, Bank of America, Rabobank Nederland,
Valiant Networks, Inc., in its negotiations of a service
agreement with PG&E Telecomm, an affiliate of the Debtor, the
parent and affiliates of Sempra Energy Trading, Goldman Sachs,
which is the parent of J. Aron & Co., a creditor of the Debtor
and a natural gas supplier adverse or potentially adverse to the
Debtor on matters for which Cooley is to be employed, Morgan
Stanley Dean Witter (MSDW) and Morgan Stanley Venture Partners,
L.P. (MSVP), which are affiliated with Morgan Stanley Capital
Group, an energy trading company adverse or potentially adverse
to the Debtor on matters for which Cooley is to be employed,
Merrill Lynch & Co., which is affiliated with Merrill Lynch
Capital Services, an energy trading company adverse or
potentially adverse to the Debtor on matters for which Cooley is
to be employed, Cargill, Inc., which is affiliated with Cargill-
Alliant LLC, an energy trading company adverse or potentially
adverse to the Debtor on matters for which Cooley is to be
employed, BP Amoco PLC, which is likely affiliated in some
manner with BP Energy Co. and BP Canada Energy Marketing Corp.,
creditors of the debtor and/or energy suppliers adverse or
potentially adverse to the Debtor on matters for which Cooley is
to be employed, a fund of GC&H Investments, an investment
partnership in which many partners and employees of Cooley
participate, has a de minimis (less than one percent) passive
investment in Automated Power Exchange, a private company entity
which appeared on the Debtor's Energy Suppliers List.
Further, Delta Energy LLC, a joint venture of Calpine
Corporation and Bechtel Enterprises, Inc., is one of the third
parties to whom PG&E granted property rights thus triggering one
of the Compliance Matters. Cooley formerly represented Bechtel
BWXT Idaho LLC in a few small matters unrelated to Debtor or its
bankruptcy case. BWXT is not a party in interest, but it has
some affiliation with Bechtel, the exact nature of which is
unknown to Cooley. In any event, Cooley no longer represents
BWXT.
One of Cooley's corporate special counsels is the spouse of a
partner at Pachulski Stang Ziehl & Young, a law firm which has
been advising PG&E Corp., the Debtor's parent, on issues
relating to the Debtor's bankruptcy. However, this corporate
special counsel has not had and will not have any involvement in
Cooley's proposed representation of the, Debtor in this
bankruptcy case. Moreover,a few Cooley partners and employees
have relatives employed by the Debtor. At least one Cooley
employee has a de minimis remaining claim against the Debtor
arising from an accident involving one of Debtor's trucks. In
addition to the potential GC&H Investments connection discussed
above, many partners and employees of Cooley likely hold
insignificant amounts of stocks or bonds of PG&E Corp., the
Debtor's parent, creditors, and possibly even energy suppliers
or other parties in interest who may be adverse to the Debtor in
the matters for which Cooley is to be employed.
Additionally, a corporate partner of Cooley who has not been and
will not be involved in Cooley's representation of Debtor is the
spouse of a Latham & Watkins partner who works on legal matters
for PG&E Corp., the parent company of Debtor.
Cooley believes that given the huge size of the Debtor and its
involvement with so many persons and entities in California and
beyond, these types of minor connections are inevitable and
insignificant.
Pursuant to the Original Application and Order, Cooley has been
found to satisfy the requirements for employment as special
counsel pursuant to 11 U.S.C. Sec. 327(e). (Pacific Gas
Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PACIFICARE HEALTH: S&P Affirms BB- Counterparty Credit Rating
-------------------------------------------------------------
Standard & Poor's 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 January 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 August 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 December 31, 2001.
Offsetting this strength are PacifiCare's below-average
operating performance, marginal capitalization, and high
percentage of goodwill in its capital.
PILLOWTEX CORP: Seeks Approval to Assume Lease Pact with Regions
----------------------------------------------------------------
Pillowtex Corporation and its debtor-affiliates seek the Court's
authority to assume, as modified, certain Lease Agreements with
Regions Bank.
William H. Sudell, Jr., Esq., at Morris, Nichols, Arsht &
Tunnel, in Wilmington, Delaware, relates that the Lease
Agreements each have a term of 96 months and an option at the
end of the term to purchase the Production Equipment for fair
market value. "The aggregate monthly rent under the Lease
Agreements is approximately $54,473," Mr. Sudell says. As of
the Petition date, the Debtors owed Regions Bank approximately
$72,492 for payments due under the Lease Agreements.
In accordance with the Debtors' strategy to restructure its
production equipment leases, which is a key component in their
ability to return to long-term profitability, the debtors has
negotiated a restructuring of the Lease Agreements with regions
Bank. "This will materially reduce the amount of lease payments
owed to Regions Bank in connection with the Debtors' agreement
to assume the Lease Agreements," Mr. Sudell says. The Debtors
and Regions Bank has negotiated and agreed that:
(i) the Lease Agreements will be assumed, as modified by the
Amendments;
(ii) each of the Lease Agreements will have a 60-month term,
beginning January 1, 2002 and ending December 31, 2006;
(iii) the aggregate balance due under the Lease Agreements as of
January 1, 2002 is $3,807,585. However, Regions Bank will
reduce the aggregate balance due to $2,000,000, which is
the agreed fair market value of the production Equipment.
The new aggregate balance due under the Lease Agreements
will be equal to the fair market value plus the cure
amount;
(iv) the new Principal Balance will be amortized over the new
term, with aggregate monthly payments of $41,272;
(v) the Debtors will pay interest on the New Principal Balance
at the rate of 7.5%, compounded annually;
(vi) Regions Bank will be entitled to submit an unsecured claim
against the Debtors estate for the difference between the
Old Lease Balance and the New Principal Balance; and
(vii) provided that the Debtors remains current under the Lease
Agreements, as modified, the Debtors will have the option
to acquire title to the Production Equipment at the end of
the new term for no additional consideration.
The Debtors have also agreed that until it emerges from
bankruptcy -- if after written notice and opportunity to cure --
it fails to make payment due under the modified Lease
Agreements, the automatic stay provided will be automatically
modified to permit Regions Bank to foreclose on its lien and
security interest. Accordingly, Mr. Sudell states, Regions Bank
will then take all necessary actions to liquidate the Production
Equipment.
Mr. Sudell tells the Court that if the Debtors fail to make a
timely payment due under the Lease Agreements, Regions Bank must
give written notice of the default to the Debtors, their
counsel, counsel to the Creditors' Committee and counsel to the
Debtors' pre-petition and post-petition secured lenders. The
Debtors will have 14 days from its receipt of that notice to
cure the payment default, after which time if the default is not
cured, the automatic stay would be modified without further
motion or order of the Court. "The Debtors acknowledges that
Regions Bank has a first priority security interest in the
Production Equipment," Mr. Sudell adds.
Mr. Sudell explains that assumption of the modified Lease
Agreements enables the Debtors to continue to use the Production
Equipment, which is necessary for their manufacturing operations
thus, substantially reducing their lease obligations. In fact,
Mr. Sudell adds, the restructuring of the lease payments will
convert over $1,800,000 of the amounts due under the Lease
Agreements into a general unsecured claim against the Debtors'
estate. Moreover, the cure amount will be included in the New
Principal Balance and paid over 5 years and the Debtors have the
option to obtain title of the Production Equipment at the end of
the term for no additional consideration. Thus, the assumption
of the Lease Agreements will be beneficial to the Debtors and
their estates. (Pillowtex Bankruptcy News, Issue No. 24;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
POLAROID CORP: Exclusive Plan Filing Period Stretched to Apr. 29
----------------------------------------------------------------
Judge Walsh extends the exclusive periods for Polaroid
Corporation and its debtor-affiliates to file a plan through
April 29, 2002 and to solicit acceptances of the plan through
June 24, 2002. "If the Debtors fail to file a plan by this
date, JPMorgan Chase Bank, as agent for the lenders, may file a
plan and may seek approval of the right to solicit acceptances
of such plan," according to Judge Walsh. (Polaroid Bankruptcy
News, Issue No. 13; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
READER'S DIGEST: S&P Cuts Rating to BB+ over Reiman Acquisition
---------------------------------------------------------------
On March 22, 2002, Standard & Poor's lowered its ratings on
Reader's Digest Association Inc. to double-B-minus following the
company's agreement to acquire the assets of Reiman Publications
LLC for $760 million in cash. The rating outlook is stable.
Reader's Digest Association, based in Pleasantville, New York,
publishes one of the world's highest-circulating paid magazines
and is a leading direct marketer of books, videos, and music.
Total debt as of December 31, 2001, was $216 million.
Standard & Poor's believes the purchase provides a good
strategic fit and complements Reader's Digest's position in the
highly competitive magazine publishing and direct marketing
industries. Potential operating synergies and cost saving
opportunities have the potential to increase profitability and
cash flow generation over the near term. Over the long term,
Standard & Poor's believes there are questions as to its growth
prospects. The Reiman transaction would be the largest purchase
in Reader's Digest's history, reflecting a shift from more
moderate financial policies. The deal increases financial risk
at a time when the profitability of the core U.S. magazine and
books and home entertainment (BHE) businesses are weak.
The addition of Reiman improves operating and cash flow
diversity. Reiman publishes 12 magazines oriented to the rural
market, which rely on stable subscriptions for the about 95% of
magazine revenue. Reiman has also leveraged its subscriber base
through the publication and direct marketing of high-margin
books that borrow content from its magazines. Over the near-
term, Reiman can benefit from Reader's Digest's expertise in
international distribution, newsstand and advertising sales.
Reader's Digest can profit from Reiman's non-sweepstakes
promotional expertise, content, and customer list. However, in
Standard & Poor's view, the demographic and lifestyle trends of
the rural population may not offer significant long-term growth
potential.
Reader's Digest's core U.S. magazine and BHE direct marketing
businesses, accounting for half of fiscal 2001 revenues, are
underperfoming. Overall EBITDA declined 37% over the last three
quarters ended Dec. 31, 2000, due to lower magazine advertising
demand and increased testing of new subscription sources. In
addition, BHE profitability fell due to lower response rates
resulting from the implementation of the 2000 multistate legal
settlement on sweepstakes marketing. Reader's Digest's QSP
(youth magazine subscription) and Books are Fun (school book
fairs) subsidiaries and international operations provide some
operating and geographic diversity.
The debt-financed transaction results in an increase in
financial risk and lower pro forma interest coverages. EBITDA
coverage of gross interest expense declines to a pro forma level
of 4.3 times for the 12 months ended Dec. 31, 2001, from an
actual level of about 10.0x
Outlook
Standard Poor's expects acquisitions and share repurchases to
remain minimal over the near term due to heightened debt levels
and the company's operating challenges. Standard & Poor's also
expects that Reader's Digest will use the majority of its free
cash flow to reduce debt levels to restore flexibility.
REPUBLIC TECHNOLOGIES: Plan Filing Period Extended to June 28
-------------------------------------------------------------
Republic Technologies International LLC, the nation's leading
supplier of special bar quality steel, announced the U. S.
Bankruptcy Court approval for an extension of the exclusive
period in which the company can propose a Chapter 11 plan of
reorganization.
The court's ruling extends Republic's exclusive right through
June 28, 2002.
"We are making significant progress on the development of our
plan," said Joseph F. Lapinsky, president and chief executive
officer. "While the court's ruling extended the exclusivity
period until June 28, we look forward to completing and
submitting this plan by May 31, consistent with the target date
set forth in both our labor agreement and current financing
extension agreement."
Republic Technologies International, based in Fairlawn, Ohio, is
the nation's largest producer of high-quality steel bars. With
4,300 employees and 2000 sales of nearly $1.3 billion, Republic
was included in Forbes magazine's 2001 and 2000 lists of the
largest U.S. private companies. Republic operates plants in
Canton, Massillon, and Lorain, Ohio; Beaver Falls, Pa.; Chicago
and Harvey, Ill.; Gary, Ind.; Lackawanna, N.Y.; Cartersville,
Ga.; and Hamilton, Ont. The company's products are used in
demanding applications in the automotive, agricultural,
aerospace, off-highway, industrial machinery and energy
industries.
ROADHOUSE GRILL: Revenues Drop 12.7% to $36MM in January Quarter
----------------------------------------------------------------
Roadhouse Grill, Inc. (Nasdaq:GRLL), a full service, casual
dining restaurant operator, today announced results for the
thirteen weeks ended January 27, 2002 ("Third Quarter of Fiscal
Year 2002"). Roadhouse Grill, Inc. reported a 12.7% decrease in
total revenues to $36.5 million in the third quarter of fiscal
year 2002 down from $41.8 million in the comparable period in
fiscal year 2001. The Company reported a net loss of $1.6
million for the third quarter of fiscal year 2002 versus a net
loss of $10.8 million in the third quarter of fiscal year 2001.
Same store sales for the quarter decreased 5.2% from the same
period in the prior year.
Ayman Sabi, President and Chief Executive Officer stated that he
is "excited with the recent improvement in operational
effectiveness" and is "confident that this positive trend will
continue." Mr. Sabi attributed the decrease in sales in the
second and third quarters "primarily to the closure of thirteen
unprofitable stores, the closing of which was part of the
Company's restructuring plan. Further, same store sales were
negatively affected by the September 11 events. The Company
started to realize the benefits of its restructuring plan,
launched in late September 2001, by the reduction of labor cost,
corporate overhead and cost of goods sold. Accordingly, the
Company's net loss was reduced by approximately $2.8 million in
comparison to the same quarter in the prior year, after
adjustments for asset impairment and income taxes. Additionally,
new recruitment and training programs have been successfully
implemented and have increased efficiency throughout the
Company. The various restructuring initiatives will continue to
provide improvement to the results of operations. The Company
generated positive cash flow and returned to profitability in
the month of January. I believe the Company has turned in the
direction to position itself for future growth and
profitability.
"In November and December 2001, the Company could not service
certain of its lease and debt obligations. On January 18, 2002 a
petition for involuntary bankruptcy was filed against the
Company by three related landlords. On February 7, 2002, the
Company filed a motion for abstention seeking an order
dismissing or suspending all proceedings under the petition for
involuntary bankruptcy. I am encouraged that the Company was
granted a continuance by the court on March 12, 2002 in order to
allow the parties to attempt to reach a pre-negotiated
agreement. Such continuance should allow the Company to propose
an orderly plan of reorganization."
Roadhouse Grill, Inc. reported a 2.9% decrease in total revenues
to $119.1 million for the first nine months of fiscal year 2002
from $122.6 million in the comparable period in fiscal year
2001. The Company reported a net loss of $12.8 million for the
first nine months of fiscal 2002 versus a $13.8 million loss
during the first nine months of fiscal year 2001.
Roadhouse Grill, Inc. currently owns and operates 73 full
service, casual dining restaurants, franchises seven other
locations, and has one joint venture location. The Roadhouse
Grill concept offers a "rambunctious" style consistent with the
Company's motto, "Eat, Drink and Be Yourself." The comfortable,
entertaining roadhouse setting is designed to appeal to a broad
range of customers, including business people, couples, singles
and particularly families. Roadhouse Grill restaurants are
located in Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, New York, North Carolina, Ohio, and South Carolina.
Thirty-one of the Company-owned restaurants are located in
Florida. Three franchised Roadhouse Grill restaurants are
located in Las Vegas, Nevada, three are in Malaysia, and one is
in Brazil. The unit in Italy was opened in the third quarter of
fiscal year 2002 as a Joint Venture with Cremonini S.p.A., a
leading, publicly traded Italian conglomerate specializing in
the food services industry in Europe, which is to operate a
minimum of 60 Roadhouse Grill restaurants in Europe by the year
2004.
SAFETY-KLEEN: Services Unit Wins Nod to Continue DIP Financing
--------------------------------------------------------------
"[Safety-Kleen Services'] ability to maintain business
relationships with vendors, suppliers and customers, to pay
their 8,200 employees and otherwise finance their operations,"
Judge Walsh says, "is essential to the Debtors continued
viability." Judge Walsh finds that the Debtors make their case
for a one-year extension of their DIP Financing Package and the
DIP Financing pact, as further amended to resolve objections,
will be approved. Judge Walsh is convinced that the Debtors
need for continued DIP Financing is real. "The Debtors do not
have sufficient available sources of working capital and
financing to operate their business . . . and maintain their
property in accordance with state and federal law without
continued and additional Postpetition Financing," Judge Walsh
observes.
Judge Walsh put his stamp of approval on two stipulated Orders
resolving various objections an allowing the Company access to
uninterrupted working capital financing:
-- The first Order is a Stipulated Order (A) Authorizing Use Of
Cash Collateral Pursuant To 11 U.S.C. Section 363(c)(2); (B)
Authorizing Use Of Prepetition Collateral Pursuant To 11
U.S.C. Section 363 (c)(1); (C) Granting Adequate Protection
Pursuant To 11 U.S.C. Sections 361, 362, 363, and 364(d);
and (D) Amending Existing Cash Collateral Order.
This Stipulated Order resolves the Prepetition Lenders'
objections by reaffirming the Lenders' prepetition liens and
imposes two new deadlines on the Company:
(1) A sale of the Blue Business must be consummated on or
before October 31, 2002; and
(2) Safety-Kleen covenants that it will file a plan of
reorganization by November 30, 2002;
Additionally, the Debtors agree to maintain Cumulative
Adjusted EBITDA levels no less than two-thirds of amounts
shown on a non-public monthly Budgets delivered to the DIP
Lenders and the Prepetition Lenders.
-- The second is a Final Order (I) Authorizing Additional
And Extended Secured Postpetition Financing On A
Superpriority Basis Pursuant To 11 U.S.C. Section 364,
And (II) Granting Adequate Protection Pursuant To 11
U.S.C. Sections 363 and 364.
This order memorializes modifications buried in the new
Second Amended and Restated Debtor-in-Possession Credit
Facility:
(a) the Tranche B Lenders get a lien on up to $35,000,000
of any proceeds recovered by the Debtors (or any
subsequent trustee) on account of any avoidance
actions arising under Chapter 5 of the Bankruptcy
Code;
(b) the DIP Lenders' claims do not have a lien on any
recoveries the Debtors or the Creditors' Committee
may realize in the event they challenge the pre-
petition liens; and
(c) the DIP Lenders' liens are subordinated to the
Rittenmeyer Liens.
Judge Walsh finds that the terms of this Postpetition Financing
"appear to be fair and reasonable, are ordinary and appropriate
for secured financing to debtors in possession, reflect the
Debtors' exercise of prudent business judgment consistent with
their fiduciary duties, and are supported by reasonably
equivalent value and fair consideration." Moreover, Judge Walsh
notes, no other lender has stepped forward to underwrite a loan
to Safety-Kleen. (Safety-Kleen Bankruptcy News, Issue No. 30;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SONUS COMMUNICATION: Case Summary & Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Sonus Communication Holdings, Inc.
55 John Street, 2nd Floor
New York, New York 10038
Bankruptcy Case No.: 02-11387
Type of Business: The Debtor is a provider of communication
services.
Chapter 11 Petition Date: March 26, 2002
Court: Southern District of New York
Debtors' Counsel: Timothy W. Walsh, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NT 10019-5389
212-424-8000
Total Assets: $1,043,898
Total Debts: $524,455
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Ardent Research Debenture $97,086
Partners LP
Herbard Ltd. Debenture $69,726
Evansville Debenture $68,929
Williams Street Associates Rent $61,812
M.R. Weiser Professional Fees $15,000
Nathanson Telecom Partners Debenture $14,881
CSP Telecom Ltd. Partners Debenture $11,904
Houston Venture Inc. Debenture $10,629
Hassan Nemazee Debenture $10,629
Daniel J. Gomez Consulting $9,693
Larry Kaplan Debenture $8,503
Feldman and Associates Professional Fees $7,055
McGuire, Woods, Battle Professional Fees $6,878
L. Flomehaft & Co. Debenture $5,740
MDJ Telecom Group LP Debenture $5,527
Michael Conway Debenture $3,189
Bowne of New York City Trade Debt $2,986
Epical Corp Debenture $2,126
Cyrus Wolf Debenture $2,126
Domaco Venture Capital Debenture $2,126
SPECIAL METALS: Files for Chapter 11 Reorganization in Lexington
----------------------------------------------------------------
Special Metals Corporation (Nasdaq:SMCX) announced the company
and its U.S. subsidiaries have filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code. The petitions were filed in the U.S. Bankruptcy Court for
the Eastern District of Kentucky in Lexington. Special Metals
said the reorganization will improve the company's short-term
liquidity as it aims to compete more effectively amid difficult
economic and market conditions.
The company said its cash flow in the first quarter of 2002 was
adversely affected by the weak U.S. economy, increased import
activity facilitated by the strength of the dollar, and a
significant downturn in demand from industries served by the
company, particularly aerospace, following the events of
September 11, 2001. Due to changes in the company's financial
prospects, Special Metals' senior lenders have prohibited the
company from additional borrowing under its revolving credit
facility. As a result, the company lacks sufficient liquidity to
make approximately $9 million in scheduled principal payments
that are due at the end of March.
Special Metals President T. Grant John stated: "Special Metals
is taking difficult but necessary action to build a stronger
foundation for future success. In light of tough market
conditions for 2002, reorganization is necessary to preserve the
company's short-term liquidity and enhance our ability to meet
future obligations. Our goal is to ensure that Special Metals is
a viable, competitive and financially stable company for years
to come. During the reorganization process, our facilities and
our people will continue to focus on meeting and exceeding the
expectations of our customers."
The company has sufficient funds on hand to finance current
operations and is working with its bank group to arrange for
debtor in possession financing. This filing will not interfere
with day-to-day operations.
"With the support and cooperation of our customers, vendors and
employees, Special Metals expects to emerge from reorganization
as a stronger producer of nickel-based alloys," John said. "This
process gives us the time and the resources we need to address
the future and rise to the challenge."
On Jan. 31, 2002, Special Metals announced a corporate
restructuring program to reduce its annual costs by $5 million a
year, streamline and strengthen management, and realign its core
businesses to improve efficiency and performance.
Under that program and reorganization, Special Metals is
accelerating its ongoing efforts to reduce costs. In January
2002, the company eliminated 75 salaried positions as part of
the restructuring program and continues to aggressively pursue
company-wide improvement initiatives and efficiency efforts
across its business and facilities.
Special Metals is the world's largest and most diversified
producer of high-performance nickel-based alloys. Its specialty
metals are used in some of the world's most technically
demanding industries and applications, including: aerospace,
power generation, chemical processing, and oil exploration.
Through its 10 U.S. and European production facilities and a
global distribution network, Special Metals supplies over 5,000
customers and every major world market for high-performance
nickel-based alloys. Special Metals and its subsidiaries have
about 3,200 employees worldwide.
In addition to Special Metals Corporation, the U.S. subsidiaries
that filed reorganization petitions are A-1 Wire Tech, Inc.,
Special Metals Domestic Sales Corporation, and Inco Alloys
International, Inc., doing business as Huntington Alloys (Inco
Alloys International, Inc. is independent of and not affiliated
with Inco Limited--the trademark and trade name of "INCO" or
"Inco" is owned by Inco Limited and is used by permission). The
company's principal U.S. facilities are in Huntington, W.Va.,
New Hartford, N.Y., Dunkirk, N.Y., Princeton, Ky., Burnaugh,
Ky., Elkhart, Ind., Rockford, Ill., and Newton, N.C. The
company's operations in the United Kingdom, France, Italy,
Canada and the Far East are not part of the Chapter 11 filings.
Special Metals Corporation and its U.S. subsidiaries will
continue operations and provide high-quality products and
excellent customer service during the reorganization process.
On Monday, April 1, Special Metals expects to file its 10-K
annual report with the Securities and Exchange Commission and
report results for the fourth quarter and calendar year ended
December 31, 2001. Special Metals' operating performance showed
improvement over the previous year with significant progress
being made in the areas of customer service, quality, and
delivery performance.
TIERS CREDIT: S&P Assigns BB- Rating to $3M Class 1 Certificates
----------------------------------------------------------------
Standard & Poor's assigned its double-'B'-minus rating to TIERS
Credit Linked Certificates Trust Series 2002-3's $3 million
8.41% class 1 certificates and $7 million 8.41% class 2
certificates.
The rating on the class 1 certificates reflects the credit
quality of the reference obligation, Allied Waste North America
Inc.'s 7.875% senior notes due January 1, 2009, (double-'B'-
minus); the rating of the swap counter-party, Citibank N.A.
(double-'A'); and the rating of the term assets, Capital One
Master Trust's $1,300 million asset-backed certificates series
2001-6 (triple-'A').
The rating on the class 1 certificates addresses the likelihood
of the trust making payments on the certificates as required
under the trust agreement. On the occurrence of certain credit
events with respect to Allied Waste North America Inc., the
certificate holders will receive the cash value of deliverable
obligations ranking pari passu to the reference obligation
rather than the cash value of the underlying securities.
The rating on the class 2 certificates reflects the credit
quality of the reference obligation, HMH Properties Inc.'s 8.45%
senior notes due December 2, 2008, (double-'B'-minus); the
rating of the swap counter-party, Citibank N.A.; and the rating
of the term assets, Capital One Master Trust's $1.3 billion
asset-backed certificates series 2001-6.
The rating on the class 2 certificates addresses the likelihood
of the trust making payments on the certificates as required
under the trust agreement. On the occurrence of certain credit
events with respect to HMH Properties Inc., the certificate
holders will receive the cash value of deliverable obligations
ranking pari passu to the reference obligation rather than the
cash value of the underlying securities.
TOPSAIL CBO: S&P Puts Low-B Class C Notes Rating on Watch Neg.
--------------------------------------------------------------
Standard & Poor's placed its double-'B' rating on the class C
notes issued by Topsail CBO Ltd., an arbitrage CBO transaction,
on CreditWatch with negative implications. At the same time, the
triple-'A' rating on the class A notes is affirmed.
The CreditWatch placement on the double-'B' rating assigned to
the class B notes reflects factors that have negatively affected
the credit enhancement available since the transaction was
originated in April of 2001, particularly a par erosion of the
collateral pool securing the rated notes. The affirmation of the
triple-'A' rating assigned to the class A notes is based on the
level of overcollateralization available to support the class A
notes, and on the overall credit quality of the assets within
the collateral pool. Standard & Poor's notes that $18.025
million of asset defaults have occurred since the transaction
was originated, and that another $4.5 million of assets
currently in the collateral pool come from obligors rated
double-'C', which are considered highly vulnerable to default.
As of the Feb. 27, 2002 monthly report, the class C
overcollateralization ratio was at 106.30%, compared with its
minimum required ratio of 109.29% and a ratio of approximately
114.4% on the transaction's effective date.
The credit quality of the collateral pool has deteriorated
somewhat since the transaction was originated. Currently, $24.04
million (or approximately 13.52%) of the performing assets in
the collateral pool come from obligors with ratings on
CreditWatch negative, and $10.00 million (or approximately
5.10%) of the performing assets come from obligors with ratings
in the triple-'C' range. On a positive note, nearly 43% of the
assets in the total collateral pool currently have market values
in excess of their par values.
Finally, the weighted average coupon generated by the performing
fixed-rate assets in the pool has declined slightly since the
transaction was originated. Currently, the weighted average
coupon of performing assets is approximately 10.17%, versus a
minimum required level (and level assumed in the cash flow runs
at origination) of 10.25%.
Standard & Poor's will be reviewing the results of current cash
flow runs generated for Topsail CBO Ltd. to determine the level
of future defaults the rated tranches can withstand under
various stressed default timing and interest rate scenarios
while still paying all of the interest and principal due on the
notes. The results of these cash flow runs will be compared with
the projected default performance of the performing assets in
the collateral pool to determine whether the ratings assigned
remain consistent with the credit enhancement available.
Rating Placed On Creditwatch Negative
Topsail CBO Ltd.
Class Rating
To From Balance
C BB/Watch Neg BB $6.00 million
Rating Affirmed
Topsail CBO Ltd.
Class Rating Balance
A AAA $135.500 million
VALHI INC: Fitch Affirms Low-B Ratings on Expected Workout Deal
---------------------------------------------------------------
Fitch Ratings has affirmed Valhi's senior unsecured and senior
secured debt rating of 'BB-' and NL Industries' senior secured
rating of 'BB'. The Rating Outlook is Stable.
Valhi and NL credit statistics were strong for the rating level
again in 2001 and are expected to remain strong near-term given
modest debt levels and the outlook for titanium dioxide
profitability in the coming year. Net debt levels at the Valhi
level have remained low in 2001 and so far in 2002. At Dec. 31,
2001, Valhi cash and securities exceeded $200 million, while
gross debt was $608 million. Valhi's $250 million Snake River
bonds, included in gross debt, are offset by an equity interest
in, and a note receivable from, the Snake River Sugar Company.
Valhi's EBITDA for 2001 was $309 million (2001 EBITDA $262 net
of a securities gains) against gross interest of about $62
million.
While Valhi and NL's current credit statistics are fairly strong
for the rating, Fitch expects that at some point Valhi might
pursue an acquisition or a restructuring transaction that could
significantly change the credit profile of Valhi and/or NL. For
example Valhi recently pursued a transaction that would have
exchanged a portion of its stake in NL for a stake in Titanium
Metals Corporation (TIMET), in the process structurally
subordinating Valhi to TIMET.
Titanium dioxide industry profitability is related to capacity
utilization rates. Titanium dioxide prices were on a positive
trend in 2000 before declining in 2001 as cyclically sensitive
demand declined. Fitch's 2002 outlook is for demand to stabilize
and to start to trend back upwards, possibly leading to
increasing prices by the end of the year. Overall operating
income for NL should be flat to slightly down in 2002.
NL is named in a variety of lead paint related lawsuits
initiated by the State of Rhode Island, the City of Milwaukee
and other cities. Several other former lead pigment producers
are also named in the lawsuits. Lead paint litigation of this
nature has been ongoing since the 1980's with limited success.
The ratings do not anticipate significant net cash outflows in
the near-term for NL, although it is difficult to rule this
possibility out.
Valhi Inc. is a holding company with ownership stakes in NL
Industries; a producer of titanium dioxide pigments, CompX; a
producer of locks and ball bearing slides serving the office
furniture industry, TIMET; a producer of titanium metals
products, and Waste Control Specialists; a provider of hazardous
waste disposal services.
VENTAS INC: Actively Pursuing Various Debt Refinancing Options
--------------------------------------------------------------
Ventas, Inc. (NYSE:VTR) announced its results for the year ended
December 31, 2001. Normalized Funds From Operations for the year
was $78.1 million compared with $76.5 million for the comparable
2000 period. Including the Company's fourth quarter gain on the
sale of common stock of its primary tenant Kindred Healthcare,
Inc. (Nasdaq:KIND), 2001 FFO was $93.5 million.
Net income for 2001 totaled $50.6 million after an extraordinary
loss of $1.3 million related to the partial write-off of
unamortized deferred financing fees associated with the
repayment of principal under the Company's Amended Credit
Agreement. For the year ended December 31, 2000, the Company
recognized a net loss of $65.5 million after an extraordinary
loss of $4.2 million.
"2001 was a great year for Ventas because we achieved all of the
goals we began working toward in early 1999," Ventas President
and CEO Debra A. Cafaro said. "2002 will be our first normalized
year, and we look forward to a period of stabilized earnings
growth and further balance sheet and cash flow improvement."
Fourth Quarter Highlights
And Other Recent Developments
Recent highlights include:
-- Ventas sold $225 million of commercial mortgage-backed
securities, raising $213 million that was used to pay down debt
under the Company's Amended Credit Agreement and lower its cost
of debt.
-- On December 31, 2001, Ventas paid $10 million to reduce
the outstanding principal balance of its Amended Credit
Agreement to $623 million. In the first quarter of 2002, Ventas
has paid an additional $16 million, reducing the outstanding
principal balance further to $607 million.
-- Ventas sold or distributed a total of 418,186 shares of
common stock of Kindred. The Company continues to own
approximately 1.1 million shares of Kindred common stock, which
it received as part of the Kindred restructuring in April 2001.
-- Ventas paid the fourth quarterly installment of the
2001 dividend of $0.22 per share, bringing its 2001 regular
dividend to $0.88 per share. An additional dividend of $0.04 per
share was declared during the fourth quarter.
-- Ventas's Distribution Reinvestment and Stock Purchase
Plan became effective on December 31, 2001, and Ventas
stockholders began participating in the Plan with the 2002 first
quarter dividend.
Year-End Results
Rental income for the year ended December 31, 2001 was $185.2
million, of which $182.9 million resulted from leases with
Kindred. The rental income from Kindred includes $1.7 million
related to the amortization of the deferred revenue recorded as
a result of the receipt of (a) Kindred equity and (b) a cash
payment received from Kindred on the effective date of Kindred's
reorganization as additional future rent under the Amended
Master Leases. Interest income totaled approximately $4.0
million and was primarily the result of earnings from investment
of cash reserves during the year.
In the fourth quarter of 2001, the Company recorded a gain of
$15.4 million on the sale or distribution of 418,186 shares of
Kindred common stock.
Expenses for the year ended December 31, 2001 totaled $150.3
million, and included $42.0 million of depreciation expense on
real estate assets and $84.7 million of interest expense on its
debt financing, $4.6 million of interest expense on the
Company's settlement with the Department of Justice and $2.3
million on deferred financing fees. General and administrative
expenses and professional fees for the year ended December 31,
2001 totaled $14.9 million, a reduction of 28 percent over the
comparable prior year period.
Results for the year ended December 31, 2001 also included a
$2.7 million provision for income taxes based on the Company's
estimates of 2001 taxable net income. The tax provision included
$0.7 million provision related to the receipt of the Kindred
equity, which was valued at $18.2 million when it was received
in the second quarter of 2001.
2002 FFO Guidance
The Company reaffirms its 2002 FFO guidance of $1.24 to $1.26
per diluted share as previously announced in a press release
issued by the Company on December 17, 2001. The Company may from
time to time update its publicly announced FFO guidance, but it
is not obligated to do so.
Assumptions
The Company's FFO guidance is based on a number of assumptions,
including, but not limited to, the following: Kindred performs
its obligations under the five Amended Master Leases covering
210 nursing homes and 44 hospitals and various other agreements
between the companies; the Company's other tenants perform their
obligations under their leases with the Company; no additional
debt refinancings occur; no additional dispositions of Kindred
stock occur; no capital transactions, acquisitions or
divestitures occur; the Company's tax and accounting positions
do not change; the Company does not incur any impact from new
Accounting Rule FASB 133 relating to derivatives; interest rates
remain constant; and the Company's issued outstanding and
diluted shares are unchanged.
Refinancing Activity
Ventas also said it is actively pursuing various debt
refinancing strategies and expects to complete one or more
refinancings of its bank debt before the end of 2002 and likely
sooner. There can be no assurance regarding the Company's
ability to refinance any portion of its bank debt.
Ventas, Inc. is a healthcare real estate investment trust whose
properties include 44 hospitals, 215 nursing facilities and
eight personal care facilities in 36 states. At December 31,
2001, the company had a total shareholders' equity deficit of
about $91 million.
VERADO HOLDINGS: Emerald Bay Offers to Purchase 13% Disc. Notes
---------------------------------------------------------------
Verado Holdings, Inc. (OTC Bulletin Board: VRDO.OB) announced
that it has received from Emerald Bay Investors, LLC (an
affiliate of Madison Capital Management) a notice of Emerald
Bay's tender offer for the Company's 13% senior discount notes
due 2008. Emerald Bay has offered to purchase a maximum of
$23.5 million of the face amount of the Notes from their current
holders for 8% of their original face value.
Pursuant to Rule 14e-2 promulgated under section 14 of the
Securities Exchange Act of 1934, Verado is unable to take a
position with respect to the bidder's tender offer. The Company
is not able to take a position because: it has no information
regarding Emerald Bay's creditworthiness and operations; the
tender offer does not acknowledge that any Notes purchased by
Emerald Bay from a party to the Lockup Agreement dated February
15, 2002 between the Company and certain Note holders will
continue to be subject to such Lockup Agreement; and the Company
does not have sufficient information to determine the adequacy
of the price offered by Emerald Bay for the Notes.
On February 15, 2002, the Company and its controlled
subsidiaries filed for Chapter 11 bankruptcy protection after
reaching an agreement on a prenegotiated liquidation with a
committee representing holders of more than 66-2/3% of the
Notes. Under the prenegotiated plan, the Bondholders and other
unsecured creditors will receive 90% of the net proceeds derived
from a liquidation of the Company's assets under Chapter 11; the
remaining 10% of such proceeds will be distributed to Verado's
equity holders. Alvarez and Marsal, Inc., the financial advisors
to the Committee, preliminarily estimates that the recovery of
the Bondholders and other unsecured creditors will be between
$.09 and $.13 on the dollar.
VERIDIAN CORP: S&P Assigns BB- Credit and Senior Secured Ratings
----------------------------------------------------------------
On March 25, 2002, Standard & Poor's assigned a `BB' corporate
credit rating to Veridian Corp., a provider of information
technology, security, and engineering services, primarily to to
the U.S. government. Standard & Poor's also rated the company's
$200 million senior secured credit facilities. Ratings outlook
is stable.
The ratings on Alexandria, Virginia-based Veridian reflect
moderate but predictable earnings and cash flow from a
diversified portfolio. They also reflect an improved capital
structure following Veridian's $175 million initial public
offering (IPO). These factors are tempered by an active
acquisition strategy.
With 2001 revenues that approached $700 million, Veridian
competes in a consolidating industry with many participants,
some of which are much larger. Risks are partly mitigated by its
diversity of programs and customers. In addition, many programs
are structured as lower-risk, cost-plus contracts. Recent
acquisitions should help broaden the company's technical
capabilities as well as add to its healthy order pipeline.
EBITDA margins are stable in the 8% area, benefiting from the
additional scale from acquisitions, operating synergies, and
program mix. At expected moderate growth rates, working capital
and fixed asset expenditures should be manageable. The company
is expected to generate modest levels of free cash flow.
Veridian had $8 million of free cash flow in 2001, with capital
expenditures in the $15 million range. Proceeds from the IPO
will primarily be used to reduce debt. Pro forma debt to EBITDA
declined from the 5 times area to about 3x, while EBITDA
interest coverage improved to about 3x. No further material
balance-sheet improvement is anticipated, as management is
likely to continue to seek acquisitions.
Outlook
Favorable market conditions and a growing contract backlog
should sustain operating results over the near-to-intermediate
term.
WESTERN INTEGRATED: Wants to Keep Current Cash Management System
----------------------------------------------------------------
Western Integrated Networks LLC and its debtor-affiliates seek
authority from the U.S. Bankruptcy Court for the District of
Colorado to keep their existing cash management system intact
and intercompany accounting system in place. The Debtors also
seek to continue using their existing bank accounts and
investment account, existing books, records and preprinted
business forms.
The Debtors believe that complying with the U.S. Trustee's
guidelines concerning these matters would greatly disrupt the
Debtors' business.
The Debtors relate that they maintain 16 depository accounts at
Wells Fargo Bank, two at Bank One, an investment account in
Merryl Lynch and five accounts relating to Debtors' letter of
credit investment accounts. The Debtors tell the Court that they
will direct Wells Fargo not to honor check numbers that
correspond to expenditures made prior to the Petition Date. This
way, the Court is assured that no prepetition claims will be
paid unless authorized by the Court.
The Debtors maintain a centralized cash management system to
collect deposits and making disbursements and recording
intercompany transfers. In order to go forward smoothly, the
Debtors believe that they should continue using their existing
cash management and intercompany accounting practices. However,
they assure the Court that they will continue to maintain strict
accounting practices to track the flow of cash.
The Debtors concede that changing all these system would do them
more harm than good. Reprinting business forms and stationary
and changing the system will create confusion to the Debtors'
vendors, plus the expenses this job would cost. The Debtors
point out that to preserve continuity and to avoid irreparable
injury to the estate, the Court should grant the requested
relief.
Western Integrated Networks, LLC is a single source facilities
based provider of broadband services to residential and small
business customers in certain targeted markets. The Company
filed for chapter 11 protection on March 11, 2002. Douglas W.
Jessop, Esq., at Jessop & Company, P.C., assists the Debtors in
their restructuring efforts.
WINSTAR: Chapter 7 Trustee Seeks Lease Decision Time Extension
--------------------------------------------------------------
Winstar Communications, Inc. and its debtor-affiliates' Chapter
7 Trustee Christine C. Shubert asks the Court to enter an Order
granting an extension of the time within which she must
assume or reject any executory contracts, unexpired leases, or
subleases of non-residential real or personal property to which
the Debtors are a party. Ms. Shubert asks that the time-period
afforded to her by 11 U.S.C. Sec. 365(d)(4) be extended to
September 25, 2002, without prejudice to requests for further
extensions.
In determining if cause exists for such an extension of the time
period to assume or reject leases and contracts, courts have
always relied on several factors including whether the Debtors'
case is complex and involves a large number of leases; whether
the leases are primary among the assets of the debtor; and
whether the lessor continues to receive post-petition rental
payments.
Michael G. Menkowitz, Esq., for the Trustee's attorneys, submits
that without an extension of time in a case as large and complex
as the Debtors' case, the Trustee will be forced to make
decisions in a vacuum. He goes on to say that the Trustee needs
more time to decide on the agreements in order to avoid
forfeiture as provided for in Section 365(d)(1).
Mr. Menkowitz states that until the Trustee has the opportunity
to familiarize herself with the Debtors' businesses, their
Agreements and the consenting parties, the Trustee is unable to
determine which agreements are valuable assets of the Chapter 7
estates. He submits that 60 days is not a realistic timeframe
for the Trustee to make decisions using sound business judgment
as required by Bankruptcy Code Section 365. The 180-day
extension to review the Debtors' affairs and familiarize all of
the Debtors' potentially desirable agreements, he continues, is
relatively modest when compared to the size and complexity of
the Debtors' case and the sheer number of the agreements.
(Winstar Bankruptcy News, Issue No. 25; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
XM SATELLITE RADIO: KPMG Raises Going Concern Doubts
----------------------------------------------------
XM Satellite Radio Holdings Inc. seeks to become a premier
nationwide provider of audio entertainment and information
programming for reception by vehicle, home and portable radios.
Through its two high-power satellites "Rock" and "Roll," its XM
Radio service offers 100 channels of music, news, talk, sports
and children's programming developed by it or third parties for
a monthly subscription price of $9.99. The Company believes XM
Radio appeals to consumers because of its clear sound quality
from digital signal radios, extensive variety of programming and
nationwide coverage. The Company will build a subscriber base
for XM Radio through multiple distribution channels, including
an exclusive distribution arrangement with General Motors, other
automotive manufacturers, car audio dealers and national
electronics retailers. XM launched commercial service in
Dallas/Ft. Worth and San Diego on September 25, 2001. It
continued its rollout through the southeastern and southwestern
U.S. during October and became the first nationwide satellite
radio service on November 12, 2001.
XM transmits the XM Radio signal throughout the continental
United States from "Rock" and "Roll." It has a network of
terrestrial repeaters, which are ground-based electronics
equipment that receive and re-transmit the satellite signals to
augment its satellite signal coverage. Mass production of
chipsets and XM radios has commenced to meet expected demand. XM
radios are now available under the Sony, Pioneer and Alpine
brand names at national consumer electronics retailers, such as
Circuit City, Best Buy, participating Radio Shack dealers and
franchisees, Sears and others. XM developed in-store
merchandising materials and trained the sales forces of several
major retailers.
XM offers its consumers a unique listening experience by
providing 100 channels of programming, coast-to-coast coverage
and clear sound with its digital signals. Its 100 channels
include diverse programming tailored to appeal to a large
audience, including urban and rural listeners of virtually all
ages, and to specific groups that its research has shown are
most likely to subscribe to its service. It has original music
and talk channels created by XM Originals, its in-house
programming unit, and channels created by well-known providers
of brand name programming, including MTV, VH1, ESPN Radio, Radio
Disney, CNN, CNBC, USA Today, Fox News, BET, E!, Radio One,
Clear Channel, and Hispanic Broadcasting Corporation. The
Company has a team of programming professionals with a
successful record of introducing new radio formats and building
local and national listenership.
In addition to its subscription fee, the Company generates
revenues from sales of limited advertising time on a number of
channels. XM Radio offers a new national radio platform for
advertisers that solves many of the problems associated with
buying radio advertising nationally on a spot or syndicated
basis. Through affinity and niche programming, XM offers
advertisers an effective way to aggregate geographically
disparate groups of listeners in their targeted demographic
markets.
Market data show strong demand for radio service. Over 75% of
the entire United States population age 12 and older listens to
the radio daily, and over 95% listens to the radio weekly.
However, many radio listeners have access to only a limited
number of radio stations and listening formats offered by
traditional AM/FM radio. XM expects XM Radio to be attractive to
underserved radio listeners who want expanded radio choices.
Market studies conducted for XM project that as many as 49
million people may subscribe to satellite radio by 2012. The
Company believes, based on its own recent surveys and work with
focus groups, that there is a significant market for XM Radio.
The Company has raised $1.5 billion of equity and debt net
proceeds to date from investors and strategic partners; it is
funded into the fourth quarter of 2002; its strategic and
financial investors include General Motors, Hughes Electronics
Corporation, Clear Channel Communications, DIRECTV, Telcom
Ventures, Columbia Capital, Madison Dearborn Partners, American
Honda and AEA Investors. XM holds one of only two licenses
issued by the Federal Communications Commission to
provide satellite digital audio radio service in the United
States. The Company works closely with radio and automotive
manufacturers and retail distributors to promote rapid market
penetration. It markets its satellite radio service through
several distribution channels including national electronics
retailers, car audio dealers, mass retailers and automotive
manufacturers.
XM has an agreement with the OnStar division of General Motors
whereby, for a 12-year period, General Motors will exclusively
distribute and market the XM Radio service and install XM radios
in General Motors vehicles beginning in 2001. General Motors
sold 4.9 million automobiles in 2001, which represented more
than 28% of the United States automobile market. Under the
agreement, XM has substantial payment obligations to General
Motors, including among others, certain guaranteed, annual,
fixed payment obligations. While XM has discussed with General
Motors certain installation projections, General Motors is not
required to meet any minimum targets for installing XM radios in
General Motors vehicles. In addition, certain of the payments
to be made by XM under this agreement will not be directly
related to the number of XM radios installed in General Motors
vehicles. General Motors made XM radios available as an option
in Cadillac Sevilles and Devilles in the fall of 2001, and
announced that it will expand to over 20 additional models
during 2002.
The Company is currently in discussions with other car
manufacturers regarding additional distribution agreements. It
also plans to meet with automobile dealers to educate them about
XM Radio and develop sales and promotional campaigns to promote
XM radios to new car buyers. In addition, XM has relationships
with Freightliner Corporation and Pana-Pacific and XM radios are
available in Freightliner and Peterbilt trucks and Winnebago
RVs.
XM has contracts with Delphi-Delco, Motorola, Pioneer, Alpine,
Mitsubishi Electric, Clarion, Blaupunkt, Fujitsu Ten, Hyundai
Autonet, Bontec, Visteon, Panasonic and Sanyo for the
development, manufacture and distribution of XM radios for use
in cars and a contract with Sony Electronics to design,
manufacture and market XM radios for the portable, home,
aftermarket and original equipment manufacture car stereo
markets. One of these manufacturers, Delco Electronics
Corporation, a subsidiary of Delphi Automotive Systems, is the
leading original equipment manufacturer of radios for the
automobile industry. Delphi-Delco is also the leading
manufacturer of car radios sold in General Motors vehicles and
has signed a contract to build XM's radios for General Motors.
Sony is the leader in sales of portable CD players by a large
margin and one of the top three sellers of shelf systems. Sony
has agreed to assist with marketing XM radios and has agreed to
incentive arrangements that condition its compensation on use of
XM radios manufactured by Sony or containing Sony hardware.
Motorola is a leading supplier of integrated electronics systems
to automobile manufacturers. Mitsubishi Electric Automotive
America, together with its parent corporation, Mitsubishi
Electric Corp., is the largest Japanese manufacturer of factory-
installed car radios in the United States. Clarion is a leader
in the car audio and mobile electronics industry. Pioneer
Electronics Corporation, Alpine Electronics and Sony, which each
manufacture XM Radios for the car audio aftermarket, together
sold over 43% of aftermarket car radios sold in the United
States in 2001 (NPD Intelect, 2001). XM also has a contract with
SHARP to manufacture and distribute XM radios for home and
portable use. To facilitate attractive pricing for retail radio
and automobile consumers, XM has financial arrangements with
certain radio manufacturers that include XM subsidizing of
certain radio component parts. The Company is pursuing
additional agreements for the manufacture and distribution of XM
radios.
These leading radio manufacturers have strong retail and dealer
distribution networks in the United States and XM expects to
have access to the distribution channels and direct sales
relationships of these distributors, including national
electronics retailers, car audio dealers and mass retailers.
XM markets its satellite radio service in rural counties, using
distribution channels similar to satellite television, to
penetrate rural households not served by traditional electronic
retailers.
The Company has signed an agreement with Sirius Radio to develop
a unified standard for satellite radios to facilitate the
ability of consumers to purchase one radio capable of receiving
both XM and Sirius Radio's services. Both companies expect to
work with their automobile and radio manufacturing partners to
integrate the new standard. Future agreements with automakers
and radio manufactures will specify the unified satellite radio
standard. Furthermore, future agreements with retail and
automotive distribution partners and content providers will be
on a non-exclusive basis and may not reward any distribution
partner for not distributing the satellite radio system of the
other party.
XM's direct competitor in satellite radio service is Sirius
Radio, the only other FCC licensee for satellite radio service
in the United States. Since October 1997, Sirius Radio's common
stock has traded on the Nasdaq National Market. Sirius Satellite
Radio began commercial operations in February 2002 in the four
initial markets of Phoenix, Houston, Denver and Jackson,
Mississippi. Sirius offers its service for a monthly charge of
$12.95, featuring 100 channels.
XM's revenue consists primarily of customers' subscription fees
and advertising revenue. Revenue from subscribers consists of
its monthly $9.99 subscription fee, which is recognized as the
service is provided, and a non-refundable activation fee, which
is recognized on a pro-rata basis over an estimated term for the
subscriber relationship (which estimate XM expects to be further
refined over the next few years as additional historical data
becomes available). Its subscriber arrangements are cancelable,
without penalty. Payments received from customers receiving XM
service under promotional offers are not included as revenue
until the promotional period has elapsed, as these customers are
not obligated to continue receiving service beyond the
promotional period. Advertising revenue consists of sales of
spot announcements to national advertisers that are recognized
in the period in which the spot announcement is broadcast.
Agency commissions are presented as a reduction to revenue in
the Consolidated Statement of Operations, which is consistent
with industry practice.
XM recognized revenue of $533,000 from the date of launch
through December 31, 2001. Total revenue included $246,000 in
subscriber revenue and $295,000 in advertising revenue less
sales commissions of $43,000. The Company expects revenue to
increase during 2002 as it adds subscribers and attracts
additional advertisers.
Net loss for 2001 was $284.4 million, compared with $51.9
million in 2000, an increase of $232.5 million or 448%. The
increase primarily reflects increases in broadcasting operations
expense, sales and marketing expense, depreciation and
amortization expense and general and administrative expense in
connection with the commencement of commercial operations.
The results of operations for XM and its subsidiaries were
substantially the same as the results for Holdings and its
subsidiaries discussed above except that in 2001, XM incurred
additional rent expense of $1.3 million, $0.5 million less
depreciation and amortization expense, $1.1 million less
interest income, $3.0 million less interest expense and $0.8
million less other income. The rent, depreciation and other
income differences are principally related to XM's rental of its
corporate headquarters from Holdings due to Holdings' ownership
of the building since August 2001. The interest income and
expense differences were principally related to the components
of cash and debt held at each company.
At December 31, 2001, XM had a total of cash, cash equivalents
and short-term investments of $210.9 million, which excludes
$72.8 million of restricted investments, and working capital of
$157.0 million, compared with cash, cash equivalents and short-
term investments of $224.9 million, which excludes $161.2
million of restricted investments, and working capital of $212.1
million at December 31, 2000. The decreases in the respective
balances are due primarily to the increasing capital
expenditures and operating expenses for the year ended December
31, 2001, which were partially offset by funds raised from
financing activities in the amount of $382.0 million.
For the year ended December 31, 2001 XM had an operating loss of
$281.6 million compared to $79.5 million for the year ended
December 31, 2000. At December 31, 2001, it had total assets of
approximately $1.5 billion and total liabilities of $529.6
million, compared with total assets of $1.3 billion and total
liabilities of $337.3 million at December 31, 2000. At December
31, 2001, it had $411.5 million of long-term debt outstanding
(net of current portion), compared with $262.7 million at
December 31, 2000.
Considering the above KPMG LLP, the Company's independent
auditor firm, has stated in its Auditors Report dated January
23, 2002: "...... the Company is dependent upon additional debt
or equity financing, which raises substantial doubt about its
ability to continue as a going concern."
ZENITH INDUSTRIAL: Creditors' Meeting Will Convene On April 12
--------------------------------------------------------------
The United States Trustee will convene a meeting of Zenith
Industrial Corporation's creditors on April 12, 2002 at 1:00
p.m., 844 King Street, Room 2112, Wilmington, Delaware.
All creditors are invited, but are not required to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
Zenith Industrial Corporation, a leading worldwide, full-service
Tier 1 supplier of highly engineered metal-formed components,
complex modules and mechanical assemblies for automotive OEMs
filed for chapter 11 protection on March 12, 2002. Joseph A.
Malfitano, Esq., Edward J. Kosmowski, Esq., and Robert S. Brady,
Esq., at Young Conaway Stargatt & Taylor, LLP, and Larry S.
Nyhan, Esq., Matthew A. Clemente, Esq., and Paul J. Stanukinas,
Esq. at Sidley Austin Brown & Wood represent the Debtor in its
restructuring efforts. When the Company filed for protection
from its creditors, it listed estimated debts and assets of more
than $100 million.
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 91 - 93 +2
Federal-Mogul 7.5% due 2004 17.5 - 19.5 +0.5
Finova Group 7.5% due 2009 35.5 - 36.5 -0.5
Freeport-McMoran 7.5% due 2006 83 - 86 +1
Global Crossing Hldgs 9.5% due 2009 2.5 - 3.5 -0.25
Globalstar 11.375% due 2004 8 - 10 -1
Lucent Technologies 6.45% due 2029 63 - 65 -1
Polaroid Corporation 6.75% due 2002 5 - 7 0
Terra Industries 10.5% due 2005 84 - 87 0
Westpoint Stevens 7.875% due 2005 49 - 51 +12
Xerox Corporation 8.0% due 2027 57 - 59 +0.5
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view its research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
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