/raid1/www/Hosts/bankrupt/TCR_Public/020425.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, April 25, 2002, Vol. 6, No. 81
Headlines
360NETWORKS: Committee Taps Bragar Wexler as Special Counsel
ACME METALS: Has Until June 22 to Make Lease-Related Decisions
ACTIVE IQ TECH.: Virchow Krause Raises Going Concern Doubts
ADELPHIA COMM: S&P Junks Credit Rating on Weak Financial Profile
ADVANTICA RESTAURANT: Sets Investors' Conference Call for May 1
ADVANTICA RESTAURANT: S&P Junks Senior Unsecured Notes Rating
AMAZON.COM: Insolvency Widens, Slightly, to $1.44 Billion
APPLIEDTHEORY: Look for Schedules and Statements by June 3, 2002
ATHERTON FRANCHISEE: S&P Drops Class E & F Notes Ratings to D
BLOCK COMMS: S&P Rates $200MM Sr. Secured Credit Facility at BB-
BOISE CASCADE: S&P Assigns BB+ Rating to $500 Million Shelf
BORDEN CHEMICALS: Court Extends Lease Decision Period to June 28
BREAKAWAY SOLUTIONS: Court Sets May 27, 2002 as Claims Bar Date
BUNTING BEARINGS: Voluntary Chapter 11 Case Summary
BURLINGTON INDUSTRIES: Court OKs $500K Break-Up Fee for Springs
CG AUSTRIA INC.: Voluntary Chapter 11 Case Summary
CLASSIC COMMS: Exclusive Period Extended to May 13, 2002
COVANTA ENERGY: Court Grants Injunction Against Utilities
DAIRY MART: Wins Approval to Extend Exclusive Period to June 4
DIGITAL TELEPORT: Court Approves 4 Major Contract Settlements
EBT INT'L: Performance Specialist Reports 11.188% Equity Stake
ENRON CORP: Intends to Assign Rights and Claims to Iberdrola
ENRON CORP: Azurix Raises Debt Tender Offer Purchase Price
EXIDE: Wants to Honor & Pay $9.7MM Prepetition Shipping Claims
FEDERAL-MOGUL: Seeks Okay to Execute IBM Computer Lease Contract
FLAG TELECOM: Intends to Continue Using Existing Bank Accounts
FLAG ATLANTIC: Case Summary & 20 Largest Unsecured Creditors
FLAG ASIA: Case Summary & 20 Largest Unsecured Creditors
FLAG TELECOM GROUP: Case Summary & Largest Unsecured Creditors
FLAG TELECOM LTD.: Case Summary & 20 Largest Unsec. Creditors
FLAG TELECOM USA: Case Summary & 20 Largest Unsecured Creditors
GMX RESOURCES: Seeking Means to Resolve Lender Technical Default
GENESEE CORP: Boston Beer Lifts Performance Guaranty under Pact
GLOBAL CROSSING: Gets Open-Ended Lease Decision Period Extension
GRAPES COMMS: Creditors Meeting to Convene on June 13, 2002
GRAY COMMS: Issues $40MM of Preferred to Repay Outstanding Debts
HEARTLAND TECHNOLOGY: Dec. 31 Balance Sheet Upside-Down by $8MM
HEXCEL CORP: Adjusted EBITDA Drops to $26M in First Quarter 2002
HOMESEEKERS.COM: Firms-Up New Separation Pacts with Ex-Directors
INTEGRATED HEALTH: Premiere Panel Taps BDO Seidman as Advisors
KAISER ALUMINUM: Wants to End Nat'l Refractories' Put/Call Deal
KMART CORP: Court Fixes July 31, 2002 as General Claims Bar Date
KRYSTAL COMPANY: Has Sufficient Funds to Continue through 2002
METALS USA: Court OKs Poorman-Douglas' Retention as Claims Agent
METROMEDIA FIBER: Fails to Meet Nasdaq Listing Requirements
MICRON TECH: S&P Puts Low-B's on Watch Neg. over Hynix Talks
NATIONSRENT INC: KeyCorp Pushing for Prompt Decisions on Leases
NETIA HOLDINGS: Netia Telekom Joins Affiliates in Arrangement
ONVIA.COM INC: Falls Below Nasdaq Continued Listing Standards
PACIFIC GAS: Court Approves Debtor's Disclosure Statement
PACIFICARE HEALTH: AM Best Views Facility Extension Positively
PHOENIX GOLD: Fails to Meet Nasdaq SmallCap Listing Criteria
POLAROID CORP: Seeks Okay to Assign Contracts to Equity Partners
RAILAMERICA: S&P Rates $475M Sr. Secured Credit Facilities at BB
RIVERWOOD INT'L: S&P Affirms B Credit Rating Over Increased Debt
SAFETY-KLEEN CORP: Wants Fifth Extension of Exclusive Periods
SAFETY-KLEEN: Clean Harbors' Due Diligence Nearing Completion
SCIENTIFIC GAMES: S&P Places B+ Credit Ratings on Watch Positive
SILGAN HOLDINGS: S&P Assigns BB- Ratings After Debt Transactions
SPHERA OPTICAL: Universal Access Withdraws Bid for Assets
TELSCAPE INT'L: Trustee Has Until May 20 to Decide on Leases
TENNECO AUTOMOTIVE: Posts Improved Results in First Quarter
UNIFORET INC: Defaults on US Sr. Notes & Convertible Debentures
VSI HOLDINGS: Pursuing Plan to Sell Assets to Repay Secured Debt
VANTAGEMED: Continues Nasdaq Trading Pending Panel's Decision
W.R. GRACE.: Posts Improved Operating Results for First Quarter
WARNACO GROUP: Court Extends Exclusive Period for the Third Time
* DebtTraders' Real-Time Bond Pricing
*********
360NETWORKS: Committee Taps Bragar Wexler as Special Counsel
------------------------------------------------------------
The Official Committee of Unsecured Creditors of 360networks
inc., and its debtor-affiliates, asks to employ and retain
Bragar Wexler Eagel & Morgenstern as their special counsel.
Mark Brandenburg, of Pirelli Cables & Systems, the Committee's
chair, relates that the Bragar Firm is a law firm of
approximately 10 attorneys, having its offices at 900 Third
Avenue, New York, New York 10022. The Committee selected the
Bragar Firm as its counsel because the attorneys involved have
expertise and experience in many facets of the legal disciplines
that affect the Committee's duties, including investigation and
challenges to the Banks' security interests, liens and claims.
Thus, the Committee seeks to retain the Bragar Firm as special
counsel because of the firm's extensive experience, expertise
and knowledge in the field of litigation in and outside of
bankruptcy and in the fields of Debtors' and creditors' rights
and business reorganizations under Chapter 11 of the Bankruptcy
Code.
Mr. Brandenburg tells the Court that the Bragar firm will be
expected to perform these services:
(a) to assist and advise the Committee in connection with the
Committee's investigation of the security interests, liens
and claims of the Banks;
(b) to commence, if necessary, and prosecute adversary
proceedings against the Banks and other necessary parties,
which shall include all aspects of discovery;
(c) in connection with any matter in which the Bragar Firm is
involved on behalf of Committee, to attend meetings and
negotiate with the representatives of the Debtors and/or
any party which is the subject of investigation by the
Committee or against which the Committee may commence an
adversary proceeding;
(d) in connection with any matter in which the Bragar Firm is
involved on behalf of Committee, to take all necessary
action to protect and preserve the interests of the
Committee concerning:
-- the prosecution of actions on their behalf, and
-- negotiations concerning all litigation in which the
Debtors are involved;
(e) in connection with any matter in which the Bragar Firm is
involved on behalf of Committee, to prepare on behalf of
the Committee all necessary adversary complaints and
related motions, applications, answers, orders, reports
and other papers in support of positions taken by the
Committee in any adversary proceeding;
(f) in connection with any matter in which the Bragar Firm is
involved on behalf of Committee, to appear, as
appropriate, before this Court, the Appellate Courts,
State Courts and the United States Trustee and to protect
the interests of the Committee before said Courts and the
United States Trustee; and
(g) to perform all other necessary legal services in these
Cases as is appropriate given the purpose and scope of the
Bragar Firm's retention, with those services primarily
related to present or former clients of Sidley.
"The Bragar Firm has stated its willingness to serve in these
cases and render the necessary professional services as special
counsel for the Committee," Mr. Brandenburg states. The
Committee firmly believes that the Bragar Firm is well qualified
to represent its interests in these cases.
Peter D. Morgenstern, Esq., a partner of the Bragar firm,
reports that, subject to this Court's approval, the Firm will
calculate its fees for professional services based on its
customary hourly billing rates. These rates are subject to
revision in the normal course of business. The current range of
customary hourly rates charged by the Bragar Firm is:
Partners: $300 to $500
Associates: $225 to $300
Legal Assistants and Staff: $100 to $150
"If a proceeding is filed to assert any Claims against any or
all of the Banks, the Bragar Firm intends to apply to the Court
for compensation, and for reimbursement of actual and necessary
expenses incurred in such proceeding, to be awarded strictly on
a contingency fee basis," Mr. Morgenstern adds. Subject to the
Court's approval, the Bragar Firm will charge a contingency fee
calculated in a way that the fees will be contingent upon
results as measured by the distribution to the unsecured
creditors other than the Banks under a Plan of Reorganization,
or as a result of a liquidation pursuant to Chapter 7 of the
Bankruptcy Code, either in cash or in kind or any other tangible
benefit inuring to the unsecured creditors. Such fees will be
equal to:
(i) 10% of distributions to unsecured creditors other than the
Banks for the first $10,000,000 recovered;
(ii) 8% of the Distribution for any recovery between
$10,000,001 and $20,000,000; and
(iii) 5% of the Distribution for any recovery in excess of
$20,000,000.
In the event there is a benefit to the estate resulting from the
Bragar Firm's efforts, but the Distribution to the unsecured
creditors is limited relative to the benefit obtained by the
Debtors' estate, then it reserves the right to apply to the
Court for fees that are based on the time expended by the Firm
and in connection with the benefit obtained by the Debtors'
estate from those efforts.
In addition, Mr. Morgenstern explains that for matters
pertaining to the continuing investigation of the Banks'
security interests, liens and claims, the Bragar Firm intends to
apply to the Court for allowance of compensation for
professional services rendered and reimbursement of expenses
incurred in these Chapter 11 cases. The Bragar Firm will seek
compensation for the services of each attorney and
paraprofessional on behalf of the Committee in these cases at
the then-current standard rate charges for such services on a
non-bankruptcy matter.
Accordingly, Mr. Morgenstern asserts that the Bragar Firm has
not otherwise represented the Debtors, their creditors, equity
security holders, or any other parties-in-interest, or their
respective attorneys, in any matters relating to the Debtors or
their estates. The Bragar Firm:
(i) does not hold or represent any interest adverse to
the Committee in the matters for which it is retained,
(ii) is a "disinterested person" as that phrase is defined in
Section 101(14) of the Bankruptcy Code,
(iii) nor its professionals have any connection with the
Debtors, the creditors or any other party in interest, and
(iv) the Bragar Firm's employment is necessary and in the best
interests of the Committee and the Debtors' estates. (360
Bankruptcy News, Issue No. 22; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ACME METALS: Has Until June 22 to Make Lease-Related Decisions
--------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, Acme Metals and its debtor-affiliates obtained an
extension of their lease decision period. After determining
that the unexpired leases are important assets of the Debtors
and critical to the Debtors' reorganization, the Court gives
them until June 22, 2002 to elect whether they must assume,
assume and assign or reject unexpired leases of nonresidential
real property.
Acme Metals filed for chapter 11 bankruptcy protection on
September 28, 1998. Brendan Linehan Shannon, Esq. and James L.
Patton, Esq. at Young, Conaway, Stargatt & Taylor represent the
Debtors in their restructuring efforts. When the company filed
for protection from its creditors, it listed assets of $813
million and liabilities of $541 million.
ACTIVE IQ TECH.: Virchow Krause Raises Going Concern Doubts
-----------------------------------------------------------
Active IQ Technologies, Inc. provides accounting software and
eBusiness services solutions to the small to medium-sized
business market, known as the "SME market." Its solutions
address existing legacy applications, general business
requirements and select vertical markets.
The company offers traditional accounting and financial
management software solutions through Red Wing Business Systems,
Inc., Champion Business Systems, Inc. and FMS Marketing, Inc.
(which does business as FMS/Harvest, and as of December 31,
2001, was merged with and into Red Wing), its recently-acquired
and wholly-owned subsidiaries. In addition to traditional
accounting and financial management software solutions, the
Company offers eBusiness applications and software solutions as
part of its "Epoxy Network." The Epoxy Network offers an
Internet merchandising system called "Storefront" and a tool for
managing customer information named "Account Management."
Through an exclusive worldwide-hosted licensing agreement with
Stellent, Inc., it also develops hosted content management
solutions in selected vertical markets using Stellent's Content
Management software.
The Company's objective is to become a leading provider of
accounting software, eBusiness solutions and hosted solutions to
small to medium-sized businesses. To achieve this objective, it
intends to pursue the following strategies: provide additional
value-added products and services to existing customers; acquire
complimentary businesses; leverage its existing sales channels;
and develop and market web-based content management solutions to
selected vertical markets.
Active IQ Technologies was originally incorporated under
Colorado law in December 1992 under the name Meteor Industries,
Inc. In April 2001 it reincorporated under Minnesota law.
Principal offices are located at 5720 Smetana Drive, Suite 101
Minnetonka, Minnesota 55343, with telephone number (952) 345-
6000. The Company's Internet address is http://www.activeiq.com
Until April 2001, Active IQ was engaged in the distribution of
oil, gas and other refined petroleum products. On April 30,
2001, however, it completed a series of significant transactions
resulting in the disposition of its historical operating assets
and adoption of a business plan focused on providing business
software and solutions. The primary reason the Company decided
to exit its historical business operations was because its
operations were no longer able to generate the cash flow needed
to conduct business. Historically, Active IQ had grown its
business through acquisitions using either cash or stock as
consideration. As business operations required more working
capital to offset the increased price of petroleum products, the
Company had less working capital to use toward acquisitions.
Moreover, it was not able to generate sufficient interest in its
stock to continue using it as attractive consideration. Its
board of directors therefore determined that it was prudent to
sell the operating assets since the company no longer had a
means to fund the acquisitions that were central to its business
development.
Accordingly, as the first step in the plan to shift business
operations, Active IQ sold all of the outstanding stock of its
wholly-owned subsidiary, Meteor Enterprises, Inc., which
directly or indirectly owned substantially all of the company's
operating assets, to Capco Energy, Inc. At the time of the
transaction, Capco was a significant shareholder of Active IQ.
In consideration for the sale of Meteor Enterprises, Capco
Energy paid approximately $5.1 million consisting of $4.6
million in cash and a 9-month promissory note in the amount of
$500,000, of which there remained a principal balance of
approximately $290,000 as of February 28, 2002. In addition,
Capco also surrendered for cancellation an aggregate of 100,833
shares of Active's common stock held by it.
Immediately following the sale of Meteor Enterprises to Capco
Energy, the Company completed a merger transaction in which
activeIQ Technologies Inc., a privately-held Minnesota
corporation, merged with and into the newly-created wholly-owned
subsidiary, AIQ, Inc., a Minnesota corporation, in a triangular
merger transaction. In consideration for the merger, the former
shareholders of Old AIQ received one share of new AIQ's common
stock for each share of common stock of Old AIQ held, which
resulted in the former Old AIQ shareholders holding
approximately 50 percent of the company's outstanding shares of
common stock immediately following the transaction. In addition
to the shares of common stock, each former Old AIQ shareholder
also received two Class B Redeemable Warrants for every three
shares of Old AIQ common stock held at the time of the merger.
Each Class B Warrant grants to the holder thereof the right to
purchase one share of new AIQ common stock at a price of $5.50
per share. The Class B Warrants may be redeemed by the Company
if the closing price of its common stock averages $7.50 per
share for a 10-day period. Pursuant to the merger agreement,
immediately following the merger all of the directors of the
company resigned and were replaced by 6 new directors, five of
whom were appointed by Old AIQ and the other appointed by the
Company.
Old AIQ was a development stage company since its inception in
April 1996 through its fiscal year ended December 31, 2000. For
accounting purposes, however, Old AIQ was treated as the
acquiring company.
Revenues of Active IQ Technologies were $2,710,861 for 2001 as
compared to no revenue for 2000. Revenues are as follows: Active
IQ had software and miscellaneous incomes of $279,444, the Epoxy
Network generated $183,356, and $2,248,061 from Red Wing,
Champion and FMS/Harvest. The FMS/Harvest merger closed on
October 10, 2001. During 2000, the company was in the
development stage and had not yet generated any revenue. Net
losses in the years ended December 31, 2001, 2000, and 1999 were
$9,446,808, $2,840,419, and $461,981, respectively.
The Company has funded its operations and satisfied its capital
expenditure requirements primarily through the sale of its
common stock in private placements and the exercise of employee
stock options, in addition to the cash received from the merger
and acquisition of activeIQ and Meteor. Net cash used by
operating activities was $3,843,954 for 2001 as compared to net
cash used by operating activities of $2,236,896 for 2000 and
$292,736 for 1999.
The Company had a working capital deficit of $2,679,454 at
December 31, 2001, compared to working capital of $643,505 on
December 31, 2000. Cash and equivalents were $1,764,893 at
December 31, 2001, representing an increase of $415,436 from the
cash and equivalents of $1,349,457 at December 31, 2000. The
Company's principal commitments consists of payments to the
former shareholders at Red Wing Business Systems, Champion
Business Systems and FMS/Harvest. The remaining notes payable to
Red Wing of $800,000 (two payments of $400,000 each) are due
June 2002 and December 2002. In January 2002, the Company paid
the first payment of $250,000 to Champion and the remaining
notes payable of $750,000 (three payments of $250,000 each) are
due May 2002, September 2002 and January 2003. The remaining
notes payable to FMS/Harvest of $300,000 are due April 2002.
Although the Company has no material commitments for capital
expenditures, it anticipates continued capital expenditures
consistent with its anticipated growth in operations,
infrastructure and personnel.
The auditing firm of Virchow, Krause & Company, LLP of
Minneapolis, Minnesota, in its Auditors Report dated March 7,
2002 made the following statement, among others: "...the
Company had net losses for the years ended December 31, 2001,
2000 and 1999 and had an accumulated deficit and negative
working capital at December 31, 2001. These conditions raise
substantial doubt about its ability to continue as a going
concern."
Management has said that the Company's ability to continue its
present operations and successfully implement its expansion
plans is contingent upon its ability to increase its revenues
and ultimately attain and sustain profitable operations. Without
additional financing, the cash generated from current
operations will not be adequate to fund operations and service
indebtedness during the next year of operations.
ADELPHIA COMM: S&P Junks Credit Rating on Weak Financial Profile
----------------------------------------------------------------
The ratings on cable television operator Adelphia Communications
Corp. were lowered on April 22, 2002. The corporate credit
rating is down at 'CCC+'. The ratings remained on CreditWatch
developing at that time. The downgrade was based on concerns
that the delay in the filing of the company's 10K coupled with
formalization of the SEC's investigation into its accounting
further exacerbates Adelphia's already weakened financial
profile.
The company missed filing its 10K within the 15-day extension
from the SEC. Standard & Poor's does not know when the 10K will
be filed. As a result of missing this deadline, the company
jeopardizes its ability to sell publicly registered securities
as well as maintain the listing of its equity securities on the
NASDAQ. Standard & Poor's more immediate and serious concern is
that Adelphia's continued delay in filing its 10K and in
obtaining certain other audited financial statements could
impair the company's ability to meet covenants related to some
of its public debt issues or bank credit facilities. In
addition, the presence of material adverse event language in
subsidiary credit agreements heightens risk.
Standard & Poor's previously downgraded Adelphia on April 8,
citing concerns regarding the impact of the co-borrowings by
Adelphia subsidiaries and certain companies owned by the Rigas
Family (managed entities). Adelphia has disclosed that these
managed entities had outstanding borrowings of almost $2.3
billion at December 31, 2001, which was not consolidated on its
balance sheet.
The developing CreditWatch indicates that ratings may be raised
or lowered. If the delayed 10K filing, the SEC investigation, or
other events lead to covenant violations, ratings could be
lowered further. The prerequisites for a potential upgrade are
formidable and include the company's ability to obtain the
audited statements needed to allay concerns regarding possible
covenant violations; more surety that the 8.75 times debt-to-
cash flow covenant test applicable to parent debt issues can be
met during 2002; and satisfactory resolution of the current SEC
investigation. Importantly, the company's commitment to sell
assets and reduce debt would be key in determining the magnitude
of a potential upgrade. In addition, for Standard & Poor's to
provide any rating, Adelphia will need to provide adequate
financial information, particularly in regard to its off-
balance-sheet activities.
Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1) are
quoted at a price of 89.25, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
for real-time bond pricing.
ADVANTICA RESTAURANT: Sets Investors' Conference Call for May 1
---------------------------------------------------------------
Advantica Restaurant Group, Inc. (OTCBB: DINE) announced that
its quarterly conference call for investors and analysts will
take place on Wednesday May 1, 2002 at 1:00 p.m. EST.
During this call Advantica will review the Company's financial
and operating results for the first quarter ended March 27,
2002. These results will be released the morning of the call,
before the market opens.
Investors and interested parties are invited to listen to a
live, listen only broadcast of the Advantica conference call.
The call may be accessed through the Company's Web site at
http://www.advantica-dine.com From the main page follow the
link to "Investor Info" and then click the "Webcast" icon. A
replay of the call may be accessed at the same location later in
the day and will remain available for at least 30 days.
Advantica Restaurant Group, Inc. is one of the largest
restaurant companies in the United States, operating over 2,300
moderately priced restaurants in the mid-scale dining segment.
Advantica owns and operates the Denny's, Coco's and Carrows
restaurant brands. FRD Acquisition Co., the parent company of
Coco's and Carrows and a wholly owned subsidiary of Advantica,
is classified as a discontinued operation for financial
reporting purposes and is currently under the protection of
Chapter 11 of the United States Bankruptcy Code effective as of
February 14, 2001. For further information on the Company,
including news releases, links to SEC filings and other
financial information, please visit Advantica's Web site,
http://www.advantica-dine.com
ADVANTICA RESTAURANT: S&P Junks Senior Unsecured Notes Rating
-------------------------------------------------------------
On April 19, 2002, Standard & Poor's raised its rating on
Advantica Restaurant Group Inc.'s $441.5 million 11.25% senior
unsecured notes due 2008 and its long-term corporate credit
rating to 'B-'. At the same time Standard & Poor's assigned its
'CCC' rating to the company's new $70.4 million 12.75% senior
notes due 2007, jointly issued by Denny's Holdings Inc. and
Advantica. As a result, the old notes are now structurally
subordinated to the new notes.
The senior unsecured debt is rated two notches below the
corporate credit rating in accordance with Standard & Poor's
policy of notching down debt that is structurally subordinated
to both secured debt and operating liabilities at Denny's.
The rating action follows the completion of the exchange of
$70.4 million of 12.75% senior notes due 2007 for $88.1 million
of 11.25% senior unsecured notes due 2008. This reduces the
company's debt by $17.7 million to $632.5 million and annual
interest expense by only $0.9 million.
The ratings reflect the challenges of improving the operations
of Denny's restaurants amid a highly competitive restaurant
industry environment and weak cash flow protection measures.
These risks are partially offset by the company's relatively
well known brand name and regional market position.
On February 19, 2002, Advantica reached an agreement with the
unsecured creditors of FRD for the sale of Coco's and Carrows
pending the creditors obtaining new financing to repay, at a
discount, the outstanding borrowings from Denny's. FRD filed a
voluntary Chapter 11 bankruptcy petition on February 14, 2001,
to facilitate the divestiture of Coco's and Carrows.
Advantica operates and franchises 1,749 Denny's units.
Historically, Denny's performance has been inconsistent.
Advantica's management is in the process of implementing
programs to revitalize the Denny's brand and improve the
concept's profitability. In 2001, comparable store sales rose
2.7% and the company's operating margin increased to 16.1% from
14.6% in 2000 due to lower product costs and a higher percentage
of franchised units in its system. The company sold 59 company-
owned units to franchisees in 2001, 148 units in 2000, and plans
to continue to refranchise units on a limited basis.
Leverage is very high, with total debt to EBITDA at 5.3 times
and cash flow protection measures are thin, with EBITDA covering
interest only 1.7x. Coco's and Carrows are accounted for as
discontinued operations. Financial flexibility exists through a
$200 million revolving credit facility, of which $89 million was
available as of December 26, 2001.
Outlook: Developing
The ratings on Advantica may either be raised, affirmed, or
lowered depending on the company's ability to refinance its
revolving credit facility which matures January 7, 2003, and to
the extent that it provides any change in financial flexibility.
DebtTraders says that Advantica Restaurant Group's 11.25% bonds
due 2008 (DINE08USR1) are trading at around 79. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=DINE08USR1
for real-time bond pricing.
AMAZON.COM: Insolvency Widens, Slightly, to $1.44 Billion
---------------------------------------------------------
Amazon.com, Inc. (NASD:AMZN) announced financial results for its
first quarter ended March 31, 2002, and further reductions in
book prices. Shareholder equity continues to erode, albeit at a
slower pace than a year ago, with liabilities exceeding assets
by $1,477,375,000 at March 31, 2002.
Net sales for the quarter were $847 million, compared with $700
million in the first quarter of 2001, an increase of 21%.
The Company recorded a first quarter 2002 operating profit of $2
million, compared with a loss of $217 million a year ago. Net
loss for the first quarter of 2002 was $23 million, compared
with a first quarter 2001 net loss of $234 million (including
restructuring-related and other charges of $114 million and
goodwill amortization of $49 million).
Amazon.com exceeded its pro forma operating profit goal for the
quarter. Pro forma operating profit was $25 million, compared
with a loss of $49 million in the first quarter of 2001, an
improvement of over $70 million. Pro forma net loss, which
includes net interest expense, for the first quarter of 2002 was
$5 million, compared with a pro forma net loss of $76 million,
in the first quarter of 2001.
The Company also announced that, effective April 23, 2002,
Amazon.com has lowered book prices again. Customers can now save
30% on books over $15, unless marked otherwise.
"Last July we lowered book prices to 30% off books over $20,
then six months later we introduced free Super Saver Shipping on
orders over $99. [Tues]day, we're thrilled to extend our 30%
discount to include books over $15," said Jeff Bezos, founder
and CEO of Amazon.com. "We said we're the type of retailer that
relentlessly works to lower prices for customers, but we didn't
expect to be able to do it again so soon."
"We are ahead of schedule financially. Our continued operational
progress and momentum allow us to further lower prices for
customers and at the same time increase our 2002 guidance," said
Warren Jenson, chief financial officer. "It's the best of all
worlds -- lower prices for customers, better customer service
and lower costs -- all driving us toward our objective of free
cash flow for the year."
Highlights of First Quarter Results
(comparisons are with the equivalent period of 2001)
-- Operating cash flow reached $46 million for the
trailing twelve months, an improvement of over $260
million.
-- Marketplace (new, used and refurbished items sold on
Amazon.com product detail pages by small businesses and
individuals) equaled approximately 23% of total U.S.
orders and 12% of U.S. units, compared with 4% of U.S.
orders and 2% of U.S. units.
-- International segment sales, from the Company's U.K.,
Germany, France and Japan sites, grew 71% to $226
million and pro forma operating results improved by 67%
to a loss of $11 million, or 5% of International sales.
-- Including sales from the U.S. site, more than one-third
of the Company's sales were made to international
customers.
-- U.S. Books, Music, and DVD/Video segment sales growth
accelerated to 8% and pro forma operating profit
increased 68%.
-- U.S. Electronics, Tools and Kitchen segment sales grew
8% to $126 million and pro forma operating losses
declined by 55%, to $21 million.
-- Annualized inventory turns improved 40% to 18, up
from 13.
-- Cash and marketable securities were $745 million at
March 31, 2002.
Financial Guidance
Second Quarter 2002 Expectations
-- Net sales are expected to be between $765 million and
$815 million, or grow between 15% and 22%.
-- Pro forma operating income is expected to be between $5
million and $15 million.
Full Year 2002 Expectations
-- Net sales are expected to grow by over 15%.
-- Pro forma operating income is expected to be over $100
million.
Amazon.com opened its virtual doors on the World Wide Web in
July 1995 and today offers Earth's Biggest Selection. Amazon.com
seeks to be the world's most customer-centric company, where
customers can find and discover anything they might want to buy
online. Amazon.com and sellers list millions of unique new and
used items in categories such as electronics, computers, kitchen
and housewares, books, music, DVDs, videos, camera and photo
items, toys, baby and baby registry, software, computer and
video games, cell phones and service, tools and hardware, travel
services, magazine subscriptions and outdoor living items.
Through Amazon Marketplace, zShops and Auctions, any business or
individual can sell virtually anything to Amazon.com's millions
of customers, and with Amazon.com Payments, sellers can accept
credit card transactions, avoiding the hassles of offline
payments.
Amazon.com operates four international Web sites:
http://www.amazon.co.uk http://www.amazon.de
http://www.amazon.frand http://www.amazon.co.jp It also
operates the Internet Movie Database (www.imdb.com), the Web's
comprehensive and authoritative source of information on more
than 300,000 movies and entertainment titles and 1 million cast
and crew members dating from the birth of film.
Amazon.com Inc.'s 6.875% convertible bonds due 2010
(AMZN10USN1), DebtTraders says, are quoted at a price of 50. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMZN10USN1
for real-time bond pricing.
APPLIEDTHEORY: Look for Schedules and Statements by June 3, 2002
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
grants an extension of time to file schedules and statements to
AppliedTheory Corporation and its debtor-affiliates. The Court
gives the Debtors until June 3, 2002 to file their schedules of
assets and liabilities and statement of financial affairs.
AppliedTheory Corporation provides internet service for business
and government, including direct internet connectivity, internet
integration, web hosting and management service. The Company
filed for chapter 11 protection on April 17, 2002. Joshua Joseph
Angel, Esq. and Leonard H. Gerson, Esq. at Angel & Frankel,
P.C., represent the Debtors in their restructuring efforts. When
the Company filed for protection from its creditors, it listed
$81,866,000 in total assets and $84,128,000 in total debts.
ATHERTON FRANCHISEE: S&P Drops Class E & F Notes Ratings to D
-------------------------------------------------------------
Standard & Poor's lowered its double-'B' rating on the class E
and its single-'B' rating on the class F notes issued by
Atherton Franchisee Loan Funding 1999-A LLC to 'D'.
Concurrently, the rating on the class D notes is lowered and
placed on CreditWatch with negative implications. At the same
time, the ratings on the class B and C notes are placed on
CreditWatch with negative implications.
The rating actions reflect the deteriorating performance of the
underlying pool of franchise loan obligors and the subsequent
reduction in cash flow available to pay the monthly expenses of
the trust. Specifically, the defaults of the class E and F notes
reflect the failure to cure the significant ongoing cumulative
monthly interest shortfalls, which total $91,499 and $183,796,
respectively. The downgrade and CreditWatch placement of the
class D notes follows the recent interest shortfalls experienced
by noteholders in February and March 2002, and reflects Standard
& Poor's concern as to whether those shortfalls will be cured.
While the class D noteholders received current interest for the
month of April 2002 in addition to recovering a portion of
interest shortfalls from prior periods, there remains $36,407 in
unpaid interest carryover shortfalls still outstanding. The
CreditWatch placement of the class B and C notes reflects
Standard & Poor's concern that further deterioration in pool
performance and liquidity may cause the class B and C
noteholders to experience a shortfall of interest in the near
term. Standard & Poor's is in contact with Atherton, the issuer,
and GMAC Commercial Mortgage Corp., the servicer, in order to
gauge the likelihood of future interest shortfalls and to
discuss the future outlook on pool performance.
As of the April 15, 2002 payment date, delinquencies total
$25.78 million, or 21.8% of the total outstanding pool balance
of $117.86 million (the current pool factor is 84.9%). The
reduced liquidity level currently being experienced by this
transaction is a product of this increasing delinquency level
within the pool further stressed by the servicer choosing to
exercise its right to recover principal and interest advances
that were made on behalf of delinquent obligors in prior periods
from monthly collections.
Standard & Poor's will be reviewing its loss assumptions, under
certain stress scenarios, relative to remaining credit support
in order to assure that the ratings assigned continue to
accurately reflect the risks associated with this transaction.
Ratings Lowered
Atherton Franchisee Loan Funding 1999-A
Rating
Class To From Balance ($ mil)
----- -- ---- ---------------
E D BB $4.406
F D B $2.937
Rating Lowered And Placed On Creditwatch Negative
Atherton Franchisee Loan Funding 1999-A
Rating
Class To From Balance ($ mil)
----- -- ---- ---------------
D BB/Watch Neg BBB $7.343
Ratings Placed On Creditwatch Negative
Atherton Franchisee Loan Funding 1999-A
Rating
Class To From Balance ($ mil)
----- -- ---- ---------------
B AA/Watch Neg AA $7.710
C A/Watch Neg A $6.976
BLOCK COMMS: S&P Rates $200MM Sr. Secured Credit Facility at BB-
----------------------------------------------------------------
On April 19, 2002, Standard & Poor's assigned its 'BB-' rating
to Block Communications Inc.'s $200 million senior secured
credit facility. This credit facility, whose components include
an $85 million reducing revolving credit facility, a $40 million
delayed draw term loan which expires at year-end 2003, and a $75
million term loan, will be used to refinance debt and fund major
capital spending in the near term. At the same time, Standard &
Poor's affirmed its 'B+' long-term corporate credit rating on
the Toledo, Ohio-based company. Rating outlook is stable.
The bank loan rating is one notch higher than the corporate
credit rating because the amount of the secured bank loan on a
theoretical fully drawn basis is substantially exceeded by
Standard & Poor's assessed value of Block's assets. In arriving
at an overall value for the company, Standard & Poor's estimated
the cable business at about $3,000 per subscriber and the
publishing business at about 6 times multiple of average
historical EBITDA.
Block, a family-owned company, owns the incumbent cable
television service provider in the greater Toledo, Ohio area
with more than 152,000 subscribers, and two newspaper publishers
(The Blade in Toledo, Ohio and Pittsburgh Post-Gazette in
Pittsburgh, Pennsylvania). Each of these businesses face limited
competition and have been owned by the company for many decades.
Of note in particular is that Block's ownership of both the
local newspaper and cable franchise in the greater Toledo market
allows it to benefit from major advertising synergies in that
market. The publishing business has historically had a lower
profit margin and greater volatility in its financial
performance due to the unstable cost of newsprint and its
dependence on advertising revenues, which accounts for about 50%
of company-wide revenues and continues to be affected by the
economy. However, the cable business has had better financial
stability due to its higher operating leverage and reliance on
subscription fees, which are less sensitive to the economy and
have generally increased over time, offsetting rising
programming costs. The cable business substantially accounted
for Block's 3.4% average consolidated annual revenue growth and
14% average EBITDA margin in the last four years. The company's
strategy is to grow cable revenues through increased penetration
of advanced cable services (i.e., digital cable and cable modem
services) and limit publishing costs.
Standard & Poor's expects leverage and EBITDA-interest coverage,
which were 4.7x and 2.6x, respectively, at the end of 2001, to
deteriorate through 2003 mostly due to increased financing for
major capital expenditures. The higher capital expenditures will
be used to extend advanced cable services to all subscribers and
installing new equipment that will lower future publishing
costs. Separately, the company's ability to fully realize some
projected savings may be impacted by the outcome of ongoing
negotiations with newspaper labor unions over future wage
increases and health-care benefits. If Block executes its
capital spending program solidly and reaches favorable terms
with its unions, the company's financial profile will likely
recover in 2004.
Outlook
The company's financial parameters are expected to weaken in the
near term due to debt-financed capital expenditures and the
potential for advertising-based revenues to remain soft. The
ratings incorporate Standard & Poor's assumption that Block's
stable cable business and operating savings at the publishing
business will enable these financial ratios to recover in the
intermediate term.
BOISE CASCADE: S&P Assigns BB+ Rating to $500 Million Shelf
-----------------------------------------------------------
Standard & Poor's assigned its 'BB+' preliminary rating to Boise
Cascade Corp.'s $500 million shelf. Rating outlook is stable.
The rating reflects Boise Cascade Corp.'s below-average business
position in cyclical paper and wood products markets, and its
high debt level resulting from an aggressive, primarily debt-
financed, acquisition program within its office products
business.
Boise Cascade is a major distributor of office products and
building materials and a manufacturer of paper and wood
products. The company also owns more than two million acres of
timberland. Although on average, office products distribution
has lower margins than the company's other businesses, it
provides somewhat greater earnings stability, which should
moderate the more volatile results produced by the company's
printing and writing papers and wood products. However,
financial results are expected to be weak, at least through the
first half of 2002, because of the continuing industry downturn.
The seasonal improvement in wood product prices is likely to be
insufficient to offset the impact of very weak paper market
conditions, particularly in newsprint and uncoated free sheet.
Heavy capital spending, a series of largely debt-financed
acquisitions, and weak paper markets have kept debt leverage at
high levels, despite the application of proceeds from
divestitures toward debt reduction. Credit protection measures
should gradually improve as markets recover, with debt to
capital moving toward the 50% to 55% range over time, from
between 55% and 60% for the past few years. Funds from
operations to debt is expected to average in the low-20% area
through the industry cycle.
Outlook
Changes in the company's business mix during the past few years
should lead to operating performance at adequate levels and
permit improved credit protection measures over an industry
cycle.
BORDEN CHEMICALS: Court Extends Lease Decision Period to June 28
----------------------------------------------------------------
Borden Chemicals and Plastics Operating Limited Partnership
sought and obtained from the U.S. Bankruptcy Court for the
District of Delaware an extension of its time period to elect
whether to assume, assume and assign, or reject unexpired
nonresidential real property leases. The Court gives the
Debtors until June 28, 2002 to make lease-related decisions.
Borden Chemicals and Plastics Operating Limited Partnership, a
producer of PVC resins, filed for chapter 11 petition on April
3, 2001 in the U.S. Bankruptcy Court for the District of
Delaware. Michael Lastowski, Esq. at Duane, Morris, & Hecksher
represents the Debtors in their restructuring efforts.
Borden Chemical & Plastics' 9.50% bonds due 2005 (BCPU05USR1)
are being quoted at a price of 5, according to DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BCPU05USR1
for real-time bond pricing.
BREAKAWAY SOLUTIONS: Court Sets May 27, 2002 as Claims Bar Date
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware fixes
May 27, 2002 as the deadline by which creditors of Breakaway
Solutions, Inc. must file proofs of claim or be forever barred
from asserting that claim.
The Court rules that each person or entity that wishes to assert
a claim against the Debtors that arose before the Petition Date,
shall file a written proof of that claim and must be received on
or before 4:00 p.m. of the Claims Bar date by:
Breakaway Solutions Claims Docketing Center
c/o The Altman Group, 60 East, 42nd Street
New York, New York 10165
Proofs of claim are not required to be filed anymore if they
are:
a) claims that has already properly filed with the Court or
the Altman Group a proof of claim;
b) claims not listed as "disputed," "contingent" or
"unliquidated" in the Schedules; and who agrees with the
nature, classification and amount of such claim set
forth in the Schedules;
c) claim or interest previously has been allowed by, or
paid pursuant to, an order of this Court; and
d) any person having a claim as an administrative expense
of the Debtor's chapter 11 case.
Breakaway Solutions, Inc., which provides collaborative business
solutions to its clients, filed for Chapter 11 petition on
September 05, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Gary M. Schildhorn, Esq. and Leon R. Barson, Esq.
at Adelman Lavine Gold and Levin and Neil B. Glassman, Esq. and
Steven M. Yoder, Esq. at The Bayard Firm represent the Debtor in
its restructuring efforts. When the company filed for protection
from its creditors, it listed $45,319,579 in assets and
$25,877,720 in debt.
BUNTING BEARINGS: Voluntary Chapter 11 Case Summary
---------------------------------------------------
Debtor: Bunting Bearings Corp.
PO Box 729
Holland, Ohio 43528
Bankruptcy Case No.: 02-32578
Chapter 11 Petition Date: April 22, 2002
Court: Northern District of Ohio (Toledo)
Judge: Richard L. Speer
Debtors' Counsel: H. Buswell Roberts, Jr., Esq.
Shumaker Loop & Kendrick
1000 Jackson Street
Toledo, Ohio 43624
(419)241-9000
BURLINGTON INDUSTRIES: Court OKs $500K Break-Up Fee for Springs
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approved
Burlington Industries, Inc.'s proposed payment of $500,000
break-up fee for Springs Industries, if the proposed sale of its
Bedding and Window Treatment Business to Springs Industries,
Inc. does not push through.
The Buyer Assets Purchase Agreement states that:
-- if Spring Industries is ready, willing and able to close the
Sale of the Assets under the Agreement and the Debtors seek
approval and close such transaction with another Qualified
Bidder, then Spring Industries shall be entitled to receive
the following upon the closing of such transaction:
(i) a $500,000 break-up fee; and
(ii) up to $500,000 in reasonable, actual, out-of-pocket
expenses incurred in connection with negotiations, due
diligence, participation in the Auction Process and the
Auction as well as the Court-approval process relating
to the Sale.
-- if as a result of the Auction, Spring Industries is the
successful bidder at a price higher than the price stated in
the original Buyer Assets Purchase Agreement, Springs
Industries shall receive a credit against the final purchase
price equal to the lesser of:
(i) the amount of such excess; and,
(ii) the sum of the break-up fee plus an amount equal to its
actual out-of-pocket expenses but not exceeding
$500,000. (Burlington Bankruptcy News, Issue No. 11;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
CG AUSTRIA INC.: Voluntary Chapter 11 Case Summary
--------------------------------------------------
Debtor: CG Austria, Inc.
One Technology Center
Tulsa, OK 74103
fka Williams Global Communications Holdings, Inc.
Bankruptcy Case No.: 02-11956
Type of Business: CG Austria is a guarantor under the secured
bank credit facility of its non-debtor
affiliate Williams Communications, LLC.
Chapter 11 Petition Date: April 22, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtor's Counsel: Erica M. Ryland, Esq.
Jones, Day, Reavis & Pogue
222 East 41st Street
New York, New York 10017
(212) 326-3939
Fax : (212) 755-7306
Estimated Assets: $10 Million to $50 Million
Estimated Debts: More than $100 Million
CLASSIC COMMS: Exclusive Period Extended to May 13, 2002
--------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, Classic Communications, Inc. and its debtor-affiliates
obtained an extension of their exclusive periods. The Court
gives the Debtors until May 13, 2002 the exclusive right to file
their plan of reorganization and until July 9, 2002 to solicit
acceptances of that Plan.
COVANTA ENERGY: Court Grants Injunction Against Utilities
---------------------------------------------------------
Deborah M. Buell, Esq. at Cleary Gottlieb, in the chapter 11
cases of Covanta Energy Corporation and its debtor-affiliates,
requested and obtained an order:
(a) prohibiting utilities from altering, refusing or
discontinuing services to, or discriminating against,
the Debtors on the basis of the commencement of these
cases or on account of any unpaid invoice for service
provided prior to the Petition Date;
(b) requiring the Debtors to file a motion for determination
of adequate assurance of payment and set such motion for
hearing if a Utility timely and properly requests from
the Debtors additional adequate assurance that the
Debtors believe is unreasonable;
(c) fixing the amount of any additional adequate assurance
payments in the event that a Determination Motion is
filed with respect to a Utility and it is found that the
Utility is deemed to have adequate assurance of payment
under Section 366 of the Bankruptcy Code until the entry
of an order finding that the Utility is not adequately
assured of future payment;
(d) deeming that any Utility that does not timely request in
writing additional adequate assurance pursuant to the
above procedures does have adequate assurance under
Section 366 of the Bankruptcy Code;
(e) authorizing the Debtors to supplement the list of
Utilities in Exhibit A of the Order to include Utilities
not listed, but subsequently discovered; and
(f) ensuring that timely and proper requests for additional
adequate assurance by Utilities are actually received by
the Debtors' counsel:
Cleary, Gottlieb, Steen & Hamilton
Attn.: Deborah M. Buell
One Liberty Plaza
New York, New York 10006
within twenty-five (25) days of the date of the Order.
Ms. Buell explains that the Debtors conduct their operations
through a fully integrated cash management system. Revenues and
receipts from goods and services provided at the affiliate level
are passed up to the main concentration or operating account
held by Covanta. In many cases, Covanta then transfers cash to
the affiliates for disbursements and payments for these goods
and services. These include payments for electricity, natural
gas, water, telephone services, telecommunications and/or other
similar services that Covanta's affiliates obtain from a
multitude of utility companies or utility company divisions.
Section 366 of the Bankruptcy Code governs the rights and
obligations of utility companies as providers of services to the
debtors and debtors in possession stating:
(a) Except as provided in Subsection (b) of this section, a
utility may not alter, refuse, or discontinue service
to, or discriminate against, the trustee or the debtor
solely on the basis of the commencement of a case under
this title or that a debt owed by the debtor to such
utility for service rendered before the order for relief
was not paid when due.
(b) Such utility may alter, refuse, or discontinue service
if neither the trustee nor the debtor, within 20 days
after the date of the order for relief, furnishes
adequate assurance of payment, in the form of a deposit
or other security, for service after such date. On
request of a party in interest and after notice and a
hearing, the court may order reasonable modification of
the amount of the deposit or other security necessary to
provide adequate assurance of payment. 11 U.S.C. Section
366.
If the Utilities are permitted under Section 366(b) to terminate
service on the 21st day after the Petition Date, Ms. Buell
contends, the Debtors will be forced to cease operations of
their facilities and offices, resulting in disruption and loss
of revenue and profits. Such disruption and loss would cause
substantial harm to the Debtors' efforts to expeditiously
restructure their business affairs to the detriment of their
estates and creditors. Accordingly, it is essential that the
Utilities continue to provide their services without
interruption.
The Debtors are confident that their ongoing operations provide
them with sufficient cash to pay for all of their post-petition
utility services on a current basis. Ms. Buell offers that the
Utilities are further protected by their entitlement to an
administrative expense priority under Section 503 of the
Bankruptcy Code, for any unpaid post-petition utility service.
Also, the Debtors are a better credit risk now that they have
filed for Chapter 11 protection than they were before they filed
because of the benefits provided by the Bankruptcy Code.
Ms. Buell continues that, under the terms of Section 366(b) of
the Bankruptcy Code, this Court may determine the standards for
assurance of future payments for utility services. Bankruptcy
courts have the exclusive responsibility for determining what
constitutes adequate assurance for payment of post-petition
utility charges and are not bound by local or state regulations.
See In re Begley, 41 B.R. 402, 405-406 (E.D. Pa. 1984), aff'd,
760 F. 2d 46 (3d Cir. 1985).
"Adequate assurance" under Section 366 is not synonymous with
"adequate protection." In determining adequate assurance, the
Court is not required to give utility companies the equivalent
of a guaranty of payment, but must only determine that the
utility is not subject to an unreasonable risk of non-payment
for post-petition services. See In re Caldor, Inc., 199 B.R. 1,
3 (S.D.N.Y. 1996), aff'd sub. nom. Virginia Elec. & Power Co. v.
Caldor, Inc.-New York, 117 F.3d 646 (2d. Cir. 1997).
Courts have previously held that where debtors have generally
paid their utility bills prior to the commencement of their
Chapter 11 cases in a timely manner, the administrative expense
priority provided in Sections 503(b) and 507(a)(1) of the
Bankruptcy Code constitutes adequate assurance of payment. As
such no deposit or other security is required. See, e.g.,
Virginia Elec. & Power Co. v. Caldor, Inc.-New York, 117 F.3d
646 (2d. Cir. 1997) ("[S]ection 366(b) of the Code does not
permit a utility to request adequate assurance of payment for
continued service unless there has been a default by the debtor
on a pre-petition debt owed for services rendered.")
Continuing, Ms. Buell states that this Court has the authority
to grant the relief requested here, pursuant to Section 105(a)
of the Bankruptcy Code, which permits the court to "issue any
order, process, or judgment that is necessary or appropriate to
carry out the provisions of this title." 11 U.S.C. Section
105(a) (2002). In that regard, the Court should note that
payments to Utilities on behalf of the Debtors are essential to
the Debtors' reorganization. Any failure to receive services
from the Utilities invariably results in a disruption in those
Debtors' operations, and a consequent interruption of revenues
received directly from them.
The Debtors believe that granting the relief requested herein
does not prejudice the rights of the Utilities under Section 366
of the Bankruptcy Code and is in the best interests of the
Debtors' estates and creditors. Uninterrupted service from the
Utilities is absolutely necessary to the Debtors' continued
business operations. (Covanta Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
DAIRY MART: Wins Approval to Extend Exclusive Period to June 4
--------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the Southern District
of New York, Dairy Mart Convenience Stores, Inc. and its debtor-
affiliates obtained an extension of their exclusive periods.
The Court gives the Debtors until June 4, 2002 the exclusive
right to file their plan of reorganization and until August 5,
2002 to solicit acceptances of that Plan.
Dairy Mart Convenience Stores, Inc. filed for chapter 11
protection on September 24, 2001. Dennis F. Dunne, Esq. at
Milbank, Tweed, Hadley & McCloy LLP represents the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed debts and assets of
over $100 million.
DIGITAL TELEPORT: Court Approves 4 Major Contract Settlements
-------------------------------------------------------------
Digital Teleport Inc. announced that a U. S. Bankruptcy Court
Judge approved four more major contract settlements as the
company's reorganization proceedings near the May 3 deadline for
filing proof of creditors claims.
A regional fiber communications carrier in secondary and
tertiary markets in the Midwest, Digital Teleport remains on
track to emerge from Chapter 11 reorganization before the end of
the year.
Judge Barry S. Schermer of the U. S. Bankruptcy Court for the
Eastern District of Missouri in St. Louis approved the contract
settlements that release Digital Teleport from liability under
previous agreements.
The four contract settlements were with Broadwing
Communications, FTV Communications, Kansas Department of
Transportation and Oklahoma Department of Transportation.
Under terms of the new agreements, these telecommunications
companies and government agencies will continue providing
telecom facilities or access to their rights-of-way to Digital
Teleport within its core eight-state Midwest regional network.
Digital Teleport will no longer have obligations to support out-
of-region network assets previously obtained from these
companies and has reduced its future right-of-way costs to these
government agencies.
"We're pleased with our progress in negotiating settlements and
staying on track to successfully emerge before the end of the
year," said Paul Pierron, president and CEO of Digital Teleport.
"We appreciate the understanding and support of our
reorganization effort among our customers and suppliers."
Creditors have until May 3 to file proof of claims that arose in
their relationships with Digital Teleport before Dec. 31, 2001,
when the company filed voluntary petitions for Chapter 11
reorganization. The deadline for filing proof of claims by
governmental creditors is July 1.
Digital Teleport amassed a debt load of more than $300 million
and extended its network beyond its core Midwest region, seeking
to operate a national fiber network. Through court supervised
reorganization, the company plans to exit the national long-haul
business, eliminate non-revenue producing fiber routes and
strengthen its balance sheet.
Digital Teleport provides wholesale fiberoptic transport
services in secondary and tertiary Midwest markets to national
and regional communications carriers. The company's network
spans 5,700 route miles across Arkansas, Illinois, Iowa, Kansas,
Missouri, Nebraska, Oklahoma and Tennessee. Digital Teleport
also provides Ethernet service to enterprise customers and
government agencies in office buildings in areas adjacent to the
company's metropolitan network rings. The company's Web site is
http://www.digitalteleport.com
EBT INT'L: Performance Specialist Reports 11.188% Equity Stake
--------------------------------------------------------------
Performance Specialist Group, LLC, broker/dealer with principle
offices in New York, New York, beneficially owns 1,659,931
shares of the common stock of eBT International, Inc.,
representing 11.188% of the outstanding common stock of the
Company. The Specialist Group has sole power to vote, or direct
the vote; and sole power to dispose of, or to direct the
disposition of, the entire 1,659,931 shares held.
eBT International (formerly Inso) evolved from a maker of
spelling and grammar tools to a provider of electronic
publishing and media content workflow software. Battling
slumping sales, the company (which did business as eBusiness
Technologies) sold its linguistics software and its Product Data
Management and Information Exchange divisions, and restructured
around its DynaBase Web publishing software product line. The
company also offered its engenda software for content management
and workflow automation. Failing to reap financial gain from its
new focus, the company's board and shareholders agreed to
liquidate the company completely and distribute the proceeds to
shareholders.
ENRON CORP: Intends to Assign Rights and Claims to Iberdrola
------------------------------------------------------------
Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New
York, tells the Court that Enron Corporation is the sole
shareholder of each of Enron Power Corporation and Enron Europe
LLC -- both the joint shareholders of ECT Europe Inc. On the
other hand, Mr. Rosen relates, ECT Europe is the sole
shareholder of Enron Europe Limited, which is:
(a) the sole shareholder of Enron Capital & Trade Resources
Limited and the sole shareholder of Enron Power Operations
Limited; and
(b) the sole shareholder of ECT Spain Limited, and the sole
shareholder of ECT Espana Limited.
According to Mr. Rosen, both Enron Europe Ltd. and Enron Power
Operations are in pending insolvency proceedings in the United
Kingdom. In addition, Mr. Rosen continues, Enron is the sole
shareholder of:
-- Enron North America Corp.,
-- Enron Capital & Trade Resources - Europe B.V., and
-- Enron Espana Energia, S.L.
Enron Espana Energia is in a pending insolvency proceeding in
Spain, Mr. Rosen informs Judge Gonzalez.
SII Espana, an indirect subsidiary of Enron, owns Enron Espana
Generaci>n, S.L. Sociedad Unipersonal, also known as the Project
Company.
The Project Company has borrowed from Enron, Enron Europe, ECT
Europe, Enron Power Operations and ECT Espana these sums:
(a) $13,174,602 pursuant to these loan agreements:
-- the loan agreement dated February 14, 2002 between
Enron and the Project Company,
-- the loan agreement dated February 14, 2002 between
Enron Europe and the Project Company,
-- the loan agreement dated February 14, 2002 between
ECT Europe and the Project Company,
-- the loan agreement dated February 14, 2002 between
Enron Power Operations and the Project Company,
-- the loan agreement dated February 14, 2002 between
ECT Espana and the Project Company,
-- the loan agreement dated February 14, 2002 between
Enron Espana Energia and the Project Company, and
-- the loan agreement dated February 14, 2002 between
SII Espana and the Project Company; and
(b) any amounts (not to exceed $1,000,000 in the aggregate
without Iberdrola's prior consent) advanced by the Enron
Lenders.
In connection with the SII Espana Sale and the Woodlark Sale,
Mr. Rosen says, the Enron Lenders assign to SII Espana, all of
their right, title and interest in and to the Rights and Claims
pursuant to the terms of that certain Assignment of Debt by
Enron Affiliates. "SII Espana will then assign such Rights and
Claims to Iberdrola pursuant to the terms of that certain
assignment agreement," Mr. Rosen explains.
According to Mr. Rosen, the Enron Lenders, the Project Company
and Iberdrola will enter into a mutual release with respect to
any claims against or related to the Project Company except for
those claims (if any) arising out of the Purchase Agreement.
(Enron Bankruptcy News, Issue No. 21; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ENRON CORP: Azurix Raises Debt Tender Offer Purchase Price
----------------------------------------------------------
Azurix Corp. announced that it is increasing the total purchase
price in its previously announced tender offer and consent
solicitation for its 10-3/8 percent Series B Senior Dollar Notes
due 2007 and 10-3/4 percent Series B Senior Dollar Notes due
2010 to US$900 per US$1,000 principal amount and for its 10-3/8
percent Series A and B Senior Sterling Notes due 2007 to Pounds
Sterling 900 per Pounds Sterling 1,000 principal amount.
Azurix also is extending to 5:00 p.m. New York time on Friday,
April 26, 2002, the deadline by which holders of its notes must
tender and consent to receive the consent payment of 1.5 percent
of par that is included in the total purchase price, and to 5:00
p.m. New York time on May 7, 2002, the expiration date for the
tender offer and consent solicitation.
Holders of notes who tender and deliver the related consents
after the April 26 deadline will receive the increased total
purchase price minus the consent payment of 1.5 percent of par,
or a total of 88.5 percent of par. Although Azurix already has
received tenders and consents from holders of a majority of its
outstanding 10-3/8 percent Series A and Series B Senior Sterling
Notes due 2007, and has entered into a supplemental indenture
relating to these notes, holders of the Senior Sterling Notes
who have not already tendered but do so by 5:00 p.m. New York
time on April 26, 2002, will be entitled to receive the consent
payment. Tenders of Senior Sterling Notes are no longer
revocable.
Holders of notes who already have delivered (and not withdrawn)
their tenders and consents do not need to take any further
action to receive the increased total purchase price. Payments
will be made for notes only if they are accepted for payment,
which is subject to a number of conditions described in the
Offer to Purchase and Consent Solicitation dated April 1, 2002,
and the related Letter of Transmittal and Consent.
Salomon Smith Barney is acting as dealer manager of the tender
offer and consent solicitation. Questions regarding the tender
offer and consent solicitation may be directed to Salomon Smith
Barney at 800/558-3745. An Offer to Purchase and Consent
Solicitation, dated April 1, 2002, and related Letter of
Transmittal and Consent describing the tender offer and consent
solicitation have been distributed to holders of notes. Requests
for additional copies of documentation can be made to Mellon
Investor Services at 866/293-6625.
EXIDE: Wants to Honor & Pay $9.7MM Prepetition Shipping Claims
--------------------------------------------------------------
James E. O'Neill, Esq., at Pachulski Stang Ziehl Young & Jones
P.C. in Wilmington, Delaware, contends that Exide Technologies
and its debtor-affiliates have a reputation for reliability and
dependability among their customers. Many of the Debtors'
pricing policies and marketing strategies revolve around their
reliability and dependability. This reputation depends in
substantial part on the timely delivery of product to the
Debtors' customers. In turn, the Debtors' ability to make timely
deliveries depends on a successful and efficient system for
receipt of raw materials, parts and components used in the
Debtors' operations as well as finished goods manufactured
overseas and sold by the Debtors in this country.
Mr. O'Neill explains that this supply and delivery system
involves the use of reputable domestic and international common
carriers, shippers and truckers, a network of warehouses, and
professional customs brokers and freight forwarders. Timely and
efficient clearance of the Debtors' goods through customs is
also a vital component of the Debtors' supply and delivery
system. Thus, it is essential for the Debtors' continuing
business viability, as well as the value of their estates, that
they maintain a reliable and efficient distribution system.
Because the Debtors are in many cases dependent on third
parties, Mr. O'Neill deems it is essential that their bankruptcy
cases not be a reason or excuse for any third party to cease
performing timely services. The Debtors' continuing business
viability, and the Debtors' efforts to maximize value for
creditors, depends on the Debtors' ability to maintain a
reliable and efficient distribution system. For example, if the
Debtors are unable to receive deliveries of raw materials or
supplies on a timely and uninterrupted basis, their
manufacturing operations will be impeded within a matter of
weeks or less, thereby causing irreparable damage to their
businesses. Similarly, if the Debtors are unable to provide
finished goods to customers on a timely basis, the Debtors will
likely suffer a significant loss of credibility and customer
goodwill, thereby causing substantial harm to the Debtors'
businesses and their reorganization efforts.
By this Motion, the Debtors goal is to prevent any breakdown of
their shipping network. They request authority to pay certain
pre-petition claims related to shipping as, in their business
judgment, the Debtors determine is necessary or appropriate to:
A. obtain release of critical or valuable goods detained in
transit pending payment,
B. maintain a reliable, efficient and smooth distribution system
and
C. induce critical shippers to continue to carry goods and make
timely delivery.
Shippers & Warehousemen
According to Mr. O'Neill, the Shippers ship, transport, store
and deliver raw materials, parts and components, as well as the
finished product to the Debtors and their customers. Goods which
are in transit are often deposited into warehouses that do not
belong to the Debtors, but rather to independent third parties.
Unless the Debtors continue to receive delivery of goods on a
timely and uninterrupted basis, their operations will shut down
within a matter of weeks or less, thereby causing irreparable
damage to the Debtors' businesses and the value of their
estates.
Mr. O'Neill claims that, under the laws of some states, a
carrier or a warehouseman may have a lien on the goods in its
possession to secure charges or expenses incurred in connection
with the transportation or storage of the goods. In addition,
pursuant to Section 363(e) of the Bankruptcy Code, a carrier or
a warehouseman, as a bailee, may be entitled to adequate
protection of a valid possessory lien. The Shippers and the
Warehousemen will likely argue that they are entitled to
possessory liens for transportation and storage, as applicable,
of the goods in their possession as of the Petition Date and may
refuse to deliver or release such goods before their claims have
been satisfied and their liens redeemed.
In addition, the Debtors expect that, as of the Petition Date,
certain of the Shippers and Warehousemen will have outstanding
invoices for goods that were delivered to the Debtors or the
Debtors' customers prior to the Petition Date. If the Debtors do
not pay these unrelated Shipping and Warehousing Charges, Mr.
O'Neill fears that certain of the Shippers will discontinue
services and withhold shipment of essential goods. A portion of
the Debtors' outstanding shipping charges are owed to a freight
consolidator, who audits the Shippers' invoices and bills the
Debtors for the Shippers' services. The freight consolidator
does not pay the Shippers until the Debtors pay the freight
consolidator's invoice. Therefore, if the Debtors were not
allowed to pay the freight consolidator, the Shippers used
through this service will not be paid and will likely
discontinue services and withhold shipment of essential goods
currently in transit. Further, certain of the Warehousemen will
refuse to release essential goods.
Mr. O'Neill submits that the battery manufacturing industry is
shipping intensive. The Debtors routinely ship goods between
their numerous branches and distribution centers prior to
shipping to their customers and consumers. Therefore, the value
of the goods in the possession of the Shippers and Warehousemen
and the potential injury to the Debtors if the goods are not
released, is likely to exceed the amount of such Shipping and
Warehousing Charges. The Debtors, thus, believe that it is
necessary and essential to the value of their estates that they
be permitted to make payments on account of certain Shipping and
Warehousing Charges.
Accordingly, by this Motion, the Debtors seek authorization,
inter alia, to make payments to the Shippers and Warehousemen as
they deem necessary to obtain the release of the goods held by
such Shippers and Warehousemen. Such payments are not expected
to exceed $9,700,000. The Debtors seek authority to make such
payments in the amounts necessary to satisfy non-disputed pre-
petition Shipping and Warehousing Charges and to satisfy any
potential, asserted, or actual possessory liens on goods that
may by held by a Shipper or a Warehouseman, pending the payment
of such charges. The Debtors represent that they will only pay
Shipping and Warehousing Charges that they believe, in their
business judgment, benefit their estate and creditors.
The Debtors submit that the total amount to be paid to the
Shippers and Warehousemen, if the requested relief is granted,
is minimal compared to the losses the Debtors may suffer if
their operations are disrupted. Moreover, the Debtors do not
believe there are viable timely alternatives to the procedures
in place.
Customs Duties
According to Mr. O'Neill, in the course of their normal business
operations, the Debtors receive quantities of raw materials,
parts and components and finished goods from companies located
overseas. Timely receipt of the Imported Goods is critical to
the Debtors' business operations. Any disruption or delay in the
receipt of the Imported Goods would adversely affect the
Debtors' business operations and would be detrimental to the
their estates.
The Debtors pay approximately $600,000 annually in customs
duties. When the Imported Goods arrive in the United States, the
Debtors' custom brokers file an "entry" on behalf of the Debtors
and pay the customs duties. The Debtors' GNB business is
required to pay an estimated duty directly or through one of
their customs brokers immediately upon filing of the entry or it
will not receive the goods. The estimated Entry Payment for
goods currently in transit is approximately $30,000. The
Debtors' transportation business does not pay an Entry Payment.
The Debtors' transportation business receives an invoice from
its customs broker for the actual duty.
Mr. O'Neill deems it imperative that the Debtors' customs
brokers, as the Debtors' agents, continue to have the authority
to make Entry Payments to the United States Customs Service even
if the Debtors incurred the liability for the relevant entries
prior to the Petition Date. If such Imported Goods are not
redelivered to the Customs Service, the Customs Service may
detain future deliveries of the Imported Goods, as well as
implement various sanctions against the Debtors, including
fines. If the Imported Goods remain in the custody of the
Customs Service for, generally, five days, the Debtors will be
charged for the storage of such Imported Goods in addition to a
government holding fee ranging from $35-$75 per day after the
five day grace period. Therefore, it is imperative that the
Debtors be able to pay their custom brokers so that the Debtors
will continue to receive the Imported Goods without delay to
ensure continuous manufacturing operations and to avoid paying
significant amounts in storage fees.
After the Entry Payment is made and the Imported Goods are
delivered to the Debtors, Mr. O'Neill informs the Court that an
import specialist at the Customs Service reviews the documents
submitted by the respective Debtors' agent and determines
whether the amount of the Entry Payment was correct. If such
specialist determines that further duty amounts are owed, an
additional amount is assessed and a bill "at liquidation" (i.e.,
the final computation of the duties accruing on an entry) is
issued. Such liquidation amount is then payable by the Debtors'
customs broker. As stated above, the Debtors' transportation
business makes one custom duty payment for the actual duty.
Mr. O'Neill believes that it is essential that the assessed
Liquidation Payments be made promptly by the Debtors' agents
because, if such duties remain unpaid, the Customs Service will
assess interest charges and may impose sanctions against the
Debtors. Such sanctions may include denial of importing
privileges and/or substantial monetary penalties. At a minimum,
the Customs Service is likely to demand that all Imported Goods
be paid on a "cash before receipt," rather than "entry" basis.
This so called "live entry" policy will unnecessarily result in
substantial delay in the receipt by the Debtors of the Imported
Goods and increased storage charges by the Customs Service.
In addition, the Debtors' transportation business has posted a
$600 annual bond. It is important that the Customs Service is
not forced to draw on this bond for the payment of the Debtors'
prepetition obligations. If this occurs, the Debtors would be
required to post a new bond to secure their obligations at
significant additional cost.
Customs Brokers
As a consequence of the complexity of the U.S. and Canadian
customs laws and regulations and the dire consequences that can
befall an importer for failure to follow these laws strictly,
Mr. O'Neill submits that it is customary for importers to use
the services of professional customs brokers and freight
forwarders as agents for the importer. The Debtors use the
services of multiple customs brokers and freight forwarders.
They are vital links in the Debtors' chain of supply as they
complete paperwork necessary for customs clearance, prepare
import summaries and obtain tariff numbers and perform numerous
other miscellaneous services for the Debtors. Most importantly,
the Customs Brokers advance funds on behalf of the Debtors to
pay Customs Duties, and the charges of certain ocean, air and
land Shippers, and certain miscellaneous storage and handling
expenses and GST taxes to Revenue Canada.
Mr. O'Neill adds that the Debtors also pay the Customs Brokers
for their services, who submit invoices to the Debtors for both
the Advances and the Brokers Fees. Generally, the Customs
Brokers receive payment from the Debtors one or two weeks after
the receipt of the invoices. As of the Petition Date, certain of
the Custom Fees and Advances and Brokers Fees for pre-petition
services have not been paid by the Debtors. The amount of such
outstanding Custom Duties, Advances and Brokers Fees, including
the estimated Entry Payment due for goods currently in transit,
is approximately $180,000 in the aggregate.
The Debtors believe that they must pay the Brokers Fees and
Advances to prevent any disruption in its current arrangement
with the Customs Brokers and in the essential services they
provide. The Debtors believe that the Customs Brokers may refuse
to continue to make further Advances if the outstanding pre-
petition Advances and Brokers Fees remain unpaid. If the Customs
Brokers do not get reimbursed for the Advances and are not paid
the Brokers Fees, the Customs Duties will not be paid timely by
the Customs Brokers on behalf of the Debtors. This would lead to
a severe disruption of the Debtors' supply network, and will
have the adverse consequences described above, thereby
endangering the value of the Debtors' businesses and their
chances to reorganize.
Mr. O'Neill claims that unpaid customs brokers have been known
to confuse title to imported goods by asserting liens on the
goods for unpaid fees and advances. Even if the Customs Brokers
could be replaced with customs brokers willing to perform the
same services, there is no guarantee that the services would be
available either timely or on terms as favorable as those the
Debtors enjoy currently. The community of customs brokers is
known to be close knit, and if a significant importer were to
fail to pay its customs brokers, this news would travel fast. It
is likely that any replacement customs brokers would demand
payment in advance. The Debtors, thus, would lose an
inexpensive, pre-existing source of financing. Moreover, the
current import system is designed to enable the Imported Goods
to flow to the Debtors, from carrier to carrier, without any
interruption for Customs Service processing. The current Customs
Brokers know how this delivery system works, but there is no
guarantee that any replacement customs brokers could learn the
system in sufficient time to prevent its breakdown and the
consequential costs and delays. (Exide Bankruptcy News, Issue
No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FEDERAL-MOGUL: Seeks Okay to Execute IBM Computer Lease Contract
----------------------------------------------------------------
Federal-Mogul Corporation and its debtor-affiliates seek entry
of an order authorizing them to execute a post-petition computer
lease agreement with International Business Machines Corporation
for the leasing of various computer equipment.
Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl, Young &
Jones, P.C., in Wilmington, Delaware, explains that the new IBM
agreement will replace substantially all of the computer
equipment currently in place in the Debtors' North American
operations. The new computer equipment will be technologically
superior and cheaper. Presently, the Debtors have leased
computer equipment from 5 different Computer Equipment Lessors,
namely, IBM, Computer Sales International, CIT/Newcourt,
Toshiba/GE, and Comdisco and are currently a party to a master
lease agreement with each of them.
Ms. Jones tells the Court that, after substantial negotiations
with IBM and other vendors over the last few months, the Debtors
have an agreement in principle to have IBM replace approximately
4000 computers and 200 servers at between 50 and 60 locations
throughout North America over the course of the next several
months. The Debtors propose to execute the IBM Agreement in
order to obtain leased equipment on a nearly company-wide,
rather than an ad hoc, basis.
Ms. Jones accords that, historically, the Debtors have leased
computer equipment on an "as-needed" basis. For example, when a
department at a given location determined that it needed to
obtain new or replace used computer equipment, that department
would contact one of the two procurement offices, either in St.
Louis, Missouri or in Southfield, Michigan. These procurement
offices would contact Dell Computers, or another computer
vendor, and one of the Equipment Lessors for the purchase and
lease-back of the equipment. Ms. Jones states that the Vendor
would ship the equipment to the Debtors and, upon receiving
notification that the equipment had been installed at one of the
Debtors' locations, contact the applicable Computer Equipment
Lessor for payment of the purchase price. The Debtors and that
Lessor then would document the lease of the equipment by
including the piece of equipment on a Master Lease Schedule that
would be attached to the Master Lease then in effect between the
Debtors and the particular Lessor.
The general terms of the IBM agreement are:
A. Over the course of approximately three months, IBM will
replace virtually all of the Debtors' leased computer
equipment with similar, but more modern, equipment;
B. The Debtors will pay IBM slightly more than $8,000,000 over
the next three years on a quarterly basis, or slightly less
than $700,000 per quarter and commence payment following a
roll-out period of up to three months during which the
Debtors will pay no rent for the computer equipment;
C. IBM will install the new computer equipment in accordance
with a rollout plan mutually agreed between the Debtors and
IBM to be developed during the two-month period commencing
approximately April 1, 2002. IBM expects the Rollout Period,
during which it will begin deploying equipment, to commence
on or about June 1, 2002;
D. During the Rollout Period, IBM will provide full customer
hardware and software support at no additional charge to the
Debtors. As the Debtors replace pieces of computer equipment
currently owned by the Computer Equipment Lessors, IBM will
repackage the replaced equipment for return to the applicable
equipment lessor;
E. During the initial 36-month term of the IBM agreement, the
leasing of individual new pieces of computer equipment will
be governed by a proposed "Term Lease Master Agreement"
between the Debtors and IBM;
F. The Debtors will assume the Assumed Master Lease Schedules;
G. The Debtors and IBM may modify the IBM agreement from time to
time necessary to fulfill its purpose; and,
H. The IBM agreement is subject to the approval of the
Bankruptcy Court.
Ms. Jones believes that procuring the computer equipment
pursuant to the IBM agreement will provide the Debtors with
substantial and immediate savings. Based upon a quarterly
estimate of $700,000 per quarter, the Debtors would pay about
$233,000 per month for virtually all of their computer needs. By
comparison, the Debtors currently pay approximately $385,000 per
month to the Computer Equipment Lessors for equipment that is
significantly less modern than that offered by IBM. Therefore,
the Debtors anticipate savings worth $150,000 monthly for each
month that the IBM agreement is in effect, or as much as
$5,500,000 over the course of the first 3 years of the IBM
agreement.
In addition, Ms. Jones claims that the services that IBM offers
under the agreement during the Rollout Period provide a
substantial benefit to the Debtors. Although this benefit is
somewhat difficult to quantify, the costs to the Debtors of
using their own IT personnel to install computers is
substantial. Assuming that the Debtors require approximately
$150 worth of professional IT personnel time and resources to
install a computer - a fair, if conservative, estimate - the
transaction costs involved in replacing all of the Debtors'
leased computer would be roughly $600,000. Assuming that the
Debtors would keep computer equipment for an average of three
years, Ms. Jones points out that the foregoing estimate
represents a significant additional cost savings over the next
three years. The support services that IBM is offering through
the IBM agreement are exceptional in the industry as a whole as
it is highly unusual for a firm of any size to be able to obtain
complete technological support for deployment of computer
equipment at no additional cost beyond that associated with the
equipment. (Federal-Mogul Bankruptcy News, Issue No. 15;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLAG TELECOM: Intends to Continue Using Existing Bank Accounts
--------------------------------------------------------------
FLAG Telecom Holdings Limited and its debtor-affiliates seek a
waiver on a requirement for closing bank accounts and opening
new post-petition accounts. The Office of the United States
Trustee requires Debtors-In-Possession to, among other things,
close all existing bank accounts and open new Debtor-In-
Possession accounts. They are required to issue checks and use
business forms with a "Debtor In Possession" designation.
Janet M. Weiss, Esq., at Gibson, Dunn & Crutcher LLP, indicates
the requirements are unnecessary and potentially disruptive in
view of the sudden filing of the Debtors' Chapter 11 cases.
Since the Petition Date, the Debtors have been occupied with
stabilizing their business operations. The Debtors believe that
closing their existing bank accounts and opening new accounts
would cause disruption to efforts at developing a business plan
and negotiating with creditors and impair efforts at preserving
the value of their estates through a speedy reorganization.
Ms. Weiss says maintaining the existing bank accounts is
critical to the continued business operations of the Debtors.
Besides, the Debtors can readily distinguish between pre-
petition and post-petition obligations, and most banks are able
to easily identify and hold checks with pre-petition dates.
Therefore, notwithstanding the maintenance of the Debtors'
existing bank accounts, pre-petition checks, drafts, wire
transfers or other forms of tender that have not yet cleared,
the relevant drawee bank as of the Petition Date will not be
honored unless authorized by a Court order.
M. Natasha Labovitz, Esq., at Gibson, Dunn & Crutcher LLP, tells
the Court that the Debtors could not make critical payments
without access to the funds held at Bermuda Commercial Bank. The
Debtors also have significant amounts on deposit with Barclays
Bank plc, but those funds are unavailable to the Debtors because
of an administrative freeze put in place the day before the
Petition Date. In this regard, the Debtors request the Court for
an expedited Order for access to funds held in those bank
accounts.
The Debtors further request that the Court authorize all the
banks with which the Debtors maintain accounts to continue to
maintain, service and administer those accounts in accordance
with the terms of agreements governing the accounts. They also
want the banks to rely on representations of the Debtors as to
which checks, wires or transfer requests issued on or dated
prior to the Petition Date (i) may not be paid by law or (ii)
are permitted to be paid pursuant to Orders of the Court.
The Debtors also seek a waiver of the requirement that they
obtain new checks and other business forms designating their
Debtor-In-Possession status.
Kees van Ophem, FLAG's Secretary and General Counsel, tells the
Court that in the ordinary course of their business, the Debtors
use many checks, invoices, stationery and other business forms.
By the nature and scope of the business in which the Debtors are
engaged, and the numerous other parties with whom the Debtors
deal, Mr. van Ophem says a substantial amount of time and
expense would be needed to print new checks and other business
forms. There will also be potential for misunderstanding by
foreign parties with which the Debtors do business as to the
Chapter 11 process and the consequences of a "Debtor-In-
Possession" designation.
Further, the Debtors ask the Court, at the request of certain
foreign banks, to issue a clarification that bank accounts held
by non-Debtors, containing assets of non-Debtors, are not
subject to restrictions, freezes or closures by operation of the
Bankruptcy Code or by order of the Court.
Ms. Weiss notes that in other Chapter 11 cases, courts have
waived technical requirements, such as those which the Debtors
seek a waiver from, and replaced them with alternative
procedures. Ms. Weiss makes clear that the Debtors do not seek a
ruling with respect to the use of funds that were transferred
from FLAG Telecom Holdings Ltd. to its wholly-owned subsidiary
FLAG Pacific Holdings Ltd., a non-debtor. (Flag Telecom
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FLAG ATLANTIC: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Debtor: FLAG Atlantic USA Limited
615 South Dupont Highway
Dover, Delaware 19901
Bankruptcy Case No.: 02-11979
Chapter 11 Petition Date: April 23, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
Fax : (212) 351-4035
Estimated Assets: More than $100 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Alcatel Italia S.p.A. Trade Debt $6,602,922
25 Piazza della Repubblica
Milano 20124
Italy
Via Trento, 30
20059 Vimercate (MI)
Italy
Fax: 39 6081483
Keyspan Energy Trade Debt 1,244,113
Management Inc.
Mr. R. Choinski
201 Old Country Road
Suite 300
Melville New York 11747-2725
Fax: 1 516 512 7502
Lucent Technologies, Inc. Trade Debt $949,761
600 Mountain Avenue
Murryhill
New Jersey, New Jersey 07974
Lowenstein Sandler, P.C.
65 Livingston Avenue
Roseland, New Jersey 07068
Tel: 1 973 -597 2500
Fax: 1 973 597 2400
Trammell Crow Company Trade Debt $428,970
101 West Elm St.,
Suite 400
Conshocken, PA 19428
Financial Center
695 East Main Street
Suite 104
Stamford, Connecticut 06901
Fax 1 203 353 1139
Acterna Trade Debt $241,386
Centrepoint Trade Debt $235,189
601 West Associates LLC Trade Debt $198,415
Fibernet Telecom Group Inc. Trade Debt $75,600
Robert Derector Associates Trade Debt $31,567
J.C. & F. Services, Inc. Trade Debt $22,510
Tishman Real Estate Trade Debt $22,442
Management Co.
Verizon Trade Debt $20,590
LIPA Trade Debt $12,995
All Fire Systems, Inc. Trade Debt $4,754
Communications Supply Trade Debt $4,445
Corporation
Louis K McLean Associates Trade Debt $554
New York State Dept. of Government $150
Taxation & Finance
AT&T Trade Debt $13
FLAG ASIA: Case Summary & 20 Largest Unsecured Creditors
--------------------------------------------------------
Debtor: FLAG Asia Limited
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
Bankruptcy Case No.: 02-11978
Chapter 11 Petition Date: April 23, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
Fax: (212) 351-4035
Estimated Assets: More than $100 Million
Estimated Debts: More than $100 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Alcatel Submarine Networks Trade Debt $53,537,570
72 Avenue de la Liberte
92723 Nanterre
Cedex, France
Attn: Michael Foreman, Esq.
Proskauer Rose LLP
1585 Broadway
New York, NY 10036-8299
Tel: 1 212 969 3000
Fax: 1 212 969 2900
CIENA Communications, Inc. Trade Debt $10,631,481
Heron House
15 Adam Street
The Strand
London, WC2N 6AH
P.O. Box 281267
Atlanta, Georgia 303084-1267
Tel: 44 207 389 7100
Facsimile: 44 207 389 7116
Eastern Broadband Telecom Trade Debt $5,000,000
227 Sung Jen Road
Taipel 110
Taiwan, ROC
Korea Telecom Trade Debt $4,450,397
41-1 Jung-Anadong
Kwanchon City
Kyungki-do, Korea
Fax: 82 31 727 2569
206 Jungja-dong,
Pundang-gu, Sungnam
Kyongki-do 463-711 Korea
CHIEF Telecom Inc. Trade Debt $2,670,219
5F, No.45, Lane 76,
Rui Guang Rd. Taipei,
Taiwan, Republic of China
No. 35, Lane 188,
Rui Guang Rd., Nei-hu,
Taipei, Taiwan, Republic of China
Fax: 886 2 87922677
ADC Telecommunications Trade Debt $132,315
Bovis Lend Lease Limited Trade Debt $103,695
Kim, Chang & Lee Professional Services $29,328
Grandsoft Information Trade Debt $22,290
Inc.
Mintz, Levin, Cohn, Professional Services $16,305
Ferris, Glovsky
Environmental Resources Trade Debt $16,279
Management-HK
Shay & Partners Professional Services $11,194
Squire, Sanders & Professional Services $7,940
Dempsey, L.L.P.
PricewaterhouseCoopers Professional Services $6,120
Tomotsune & Kimura Professional Services $4,971
Mason Hayes & Curran Professional Services EURO 4,242
Anderson Mori Trade Debt $2,631
Reach Ltd. Trade Debt Unliquidated
Level (3) Communications
Ltd HK Trade Debt Unliquidated
FLAG TELECOM GROUP: Case Summary & Largest Unsecured Creditors
--------------------------------------------------------------
Debtor: FLAG Telecom Group Services Limited
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
Bankruptcy Case No.: 02-11975
Chapter 11 Petition Date: April 23, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
Fax: (212) 351-4035
Estimated Assets: $500,000 to $1 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
A.J. Mandin Trade Debt $16,200
David C. Everidge Trade Debt $15,578
J.T. & D. Shenstone Ltd. Trade Debt $14,091
Richard Poole Trade Debt $13,650
DIM Connection Trade Debt $13,375
Bougeard, Michel Trade Debt $12,900
David Kent Trade Debt $12,400
Webb, Anthony Trade Debt $11,200
Telecom Counsel Trade Debt $9,774
Graham K. Playford Trade Debt $8,050
Gary Staton Trade Debt $7,864
Offshore Geophysical & Trade Debt $3,520
Hydrographic
Hurley, Peter Trade Debt $1,000
Cole, Robert Trade Debt $727
Netherton, John Trade Debt $640
Simmons & Simmons Professional Services $523
Peter D. Larkin Trade Debt $297
South West Surveys Trade Debt $120
FLAG TELECOM LTD.: Case Summary & 20 Largest Unsec. Creditors
-------------------------------------------------------------
Debtor: FLAG Telecom Limited
9 South Street
London W1K 2XA
United Kingdom
Bankruptcy Case No.: 02-11976
Chapter 11 Petition Date: April 23, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
Fax : (212) 351-4035
Total Assets: $10 Million to $50 Million
Total Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Inland Revenue Government $960,082
5th Floor
Euston Tower
286 Euston Road
London NW1 3UN
United Kingdom
Tel: 44 20 7667 4000
Fax: 44 20 7667 4173
City of Westminster Government $551,022
Business Rate
P.O. Box 4010
London United Kingdom
City of Westminster
PO Box 240
Westminster City Hall
London SW1E 6QP
Tel: 44 20 8315 2050
Fax:44 20 8315 2074
Data Connectivity Trade Debt $279,189
Services Ltd
Unit 7 Elmwood
Chineham Business Park
Hampshire UK
Fax: 44 1256 707559
Sociaal Secretariaat Trade Debt $252,830
Genevestraat 4
B-1140 Brussel
Belgium
Regus Business Centres Trade Debt $130,560
MRI Worldwide Trade Debt $119,073
PricewaterhouseCoopers DA Professional Services $115,473
Compelsolve Ltd Trade Debt $106,263
Nexus Interim Management Trade Debt $100,348
Ltd.
Morgan, Lewis & Professional Services $92,750
Bockius
Sirius Associates Trade Debt $63,699
Greenwich Technology Trade Debt $62,733
Partners Ltd
Lucent Technologies Trade Debt $59,712
Nederland B.V.
Heidrick & Struggles Trade Debt $56,264
Cable & Wireless Trade Debt $55,754
Portman Travel Group Trade Debt $52,102
Hays ZMB Ltd Trade Debt $52,008
Studio De Consulenza Trade Debt $49,757
Legale E. Tribut
Jigsaw Executive Search, Trade Debt $48,596
Ltd.
Global Search Consulting Trade Debt $45,767
FLAG TELECOM USA: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: FLAG Telecom USA Ltd.
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Bankruptcy Case No.: 02-11977
Chapter 11 Petition Date: April 23, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Conor D. Reilly, Esq.
Gibson, Dunn & Crutcher, LLP
200 Park Avenue
New York, NY 10166
(212) 351-4000
Fax : (212) 351-4035
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Charles E. Smith Trade Debt $10,098
Graybar Trade Debt $7,682
Federal Express Trade Debt $4,225
Regus Instant Offices Trade Debt $2,599
Lee Hecht Harrison Trade Debt $2,500
Unim Life Insurance Co. Trade Debt $1,851
of America
AT&T Business Services Trade Debt $1,777
Paul, Hastings, Jenofsky Professional Services $1,765
& Walker LLP
Staples Trade Debt $1,196
Qwest Wholesale Services Trade Debt $946
Colonial Parking Trade Debt $800
Verizon Trade Debt $564
Lexington Flower Shop Trade Debt $338
Limousine Service Trade Debt $286
International
Viking Office Products Trade Debt $281
Toshiba Easy Lease Trade Debt $271
International Bonded Trade Debt $197
Courier
Exp@nets Trade Debt $173
Grainger Trade Debt $134
GMX RESOURCES: Seeking Means to Resolve Lender Technical Default
----------------------------------------------------------------
Ken L. Kenworthy, Sr., Executive Vice President of GMX Resources
Inc. (Nasdaq: GMXR; Warrants: GMXRW, GMXRZ) --
http://www.GMXRESOURCES.com-- released the text of the annual
letter to shareholders from Ken L. Kenworthy, Jr., President,
Chairman and Chief Executive Officer of GMX. The complete text
of the letter:
To Current and Future Shareholders
"GMX and our industry, economy, nation and world had a
tumultuous and eventful year in 2001. GMX became a public
company and added key employees to our experienced staff. We
began aggressive development of our proved reserves at the end
of the 2nd quarter and also raised the balance of our initial
capital requirements in a secondary offering in July. We
increased production to record levels in the 3rd and 4th
quarters. Accomplishments in 2001 include:
* GMX production increased to: 1.8 Bcfe - 52% GROWTH
* GMX estimated net proved reserves increased to: 92
BCFE - 28% GROWTH
* Natural gas increased to 73% of total production
"This growth was from successful drilling and completion, mainly
in our East Texas properties. The energy industry's drilling
activity in 2001 reached nearly 1200 rigs, a 16 year high. Our
production growth led to above average financial gains for the
year:
* EBITDA 24% GROWTH
* Revenues 54% GROWTH
* Oil and gas sales 42% GROWTH
"Strategically, we have set out to develop our proven reserve
base. In the 2nd half of 2001 we experienced drilling and
completion cost increases of up to 100%, coupled with falling
commodity prices which averaged $20.57 per bbl and $2.40 per mcf
in the second half of 2001. Commodity prices plummeted from a
December 27, 2000 high of $10.10 per million British thermal
units (mmBtu) to a September 26, 2001 low of $1.76 per mmBtu
(83% decrease). This crisscross of prices and costs, coupled
with the economic recession set the E & P sector in a tail spin.
Our sector immediately released numerous rigs and the active
North American Rotary Rig Count (Baker Hughes) dropped from 1175
in July 2001 to 747 (as of April 12, 2002) a 36% decrease.
Additionally GMX experienced inefficiencies in the drilling and
completion phase unparalleled in my 27 years in this industry.
The outcome of these challenges and changes has been precipitous
declines in production, which results in diminished natural gas
supply from the sector. This decline continues today and the
diminished supply factor has contributed support to our
commodity price increases in 2002.
"Natural gas continues to be a focus of GMX development and
growth. In our opinion, the demand for Natural gas in the USA
can be expected to grow. It would take very little growth in
demand to exceed supply and strain the industry's production
capabilities. Supply increases from the industry become very
expensive and there are limits to supply growth. These factors
lead to stronger gas prices long term. Long term gas prices are
again approaching $4 per mmBtu.
"Management had to make a difficult decision late in 2001 to
discontinue drilling and terminate our take or pay drilling
contract with Nabors Drilling, when we were unsuccessful in our
attempts at renegotiation, this unavoidable decision created
another challenge which led to the noncompliance with our
lender's covenants. The two current challenges are:
* Nabors drilling dispute
* Lender technical default
"GMX experienced a working capital shortfall at year end 2001 of
approximately $5.7 million before the reclassification of bank
debt as a current liability. Payables exceeded current assets
during this period primarily due to low commodity prices
(December 2001 $2.04 per mmBtu, $15.28 per bbl), high costs of
drilling and completion services associated with our aggressive
drilling program, and less than expected production levels from
new wells. To offset this shortfall, in the 1st quarter of
2002, GMX drew on its unused, approved line of credit from its
primary lender in the amount of $3.7 million. At March 31 the
net working capital shortfall is approximately $2 million. As
of December 31, 2001, and March 31, 2002 GMX was not in
compliance with the positive working capital covenant included
in the credit facility with its primary lender.
"Additionally, subsequent to December 31, 2001, Nabors Drilling
USA filed liens against seven of the Company's wells asserting
claims for drilling services. The filing of the liens creates
an additional instance of noncompliance with the credit facility
covenants. The lender has not waived either of the
noncompliance items. The noncompliance creates a technical
default, although the lender has not demanded payment. As a
result of the technical default, the borrowings outstanding
under the facility are reflected as current liabilities on GMX's
consolidated balance sheet, and our auditors gave us a "going
concern" qualification in their year end audit report due to the
uncertainties about our ability to meet our current obligations.
"GMX plans to continue with the legal proceedings related to
Nabors. Nabors has filed a counter claim against GMX for $8.9
million ($1.8 million in unpaid invoices and $7.1 in contract
termination fees were claimed). A finding in our favor or a
settlement with Nabors would reduce the Company's exposure to
amounts asserted as obligations by Nabors and help cure the
technical default of the credit facility covenants. Trial has
been scheduled for Federal Court in Oklahoma for December of
2002.
"The Company has initiated a process to potentially sell a
portion of its proved producing and proved undeveloped reserves.
The Company will also continue to pursue additional debt and
equity financings to complement the expected continued positive
operating cash flow in order to reduce the accounts payable
balance and continue the development program. As a result of
these liquidity issues the Company has reduced its capital
expenditures in the first quarter of 2002.
"Absent the Nabors lien filings, we believe our liquidity
problem could have been satisfied from conventional debt. Now
we must use other means to fund our needs and execute our
business plans. We believe our bank will be patient while we
work through this process although we plan to move promptly to
eliminate the risks associated with the current technical
default.
"We are fortunate to have abundant reserves and plenty of
development opportunities in attractive regions. The problems
will be reconciled and the challenge met to restart our drilling
strategy by monetizing some of our proven reserves. Our year
end 2001 proven reserves were appraised by Sproule Associates
Inc, an independent international engineering firm:
* Estimated net proven reserves 92 Bcfe
* 157 operated wells
* Three core areas; E. Texas, Kansas and New Mexico
"We will attempt to divest of some assets during 2002 to restore
our liquidity. We believe the environment for our divestiture
is very good. We will attempt to find a buyer(s) who will
purchase the rights to part of our East Texas development. We
will target 33% for sale, which is 26 Bcfe (according to
Sproule's year end report) and create a joint operating
agreement. Prices from recent transactions in East Texas
(Waterous & Co. Fourth Quarter 2001, 'Quarterly Market Review')
showed an average sale price of $1.26/Mcfe and a high of
$1.80/Mcfe for proven reserves purchased in East Texas. Our
development area in East Texas has a number of positive
attributes which we think will be appealing to a potential
buyer:
* Large acreage position (16,921 net acres) held by
shallow production since 1950's. Multiple producing horizons,
over 20 zones and 78 known reservoirs from 900 feet to 10,000
feet.
* Thick (2000'), productive Cotton Valley Sands (30 zones)
underlie the acreage, virgin reservoir pressures (3800 -
4200#psi), on trend with multi BCF reserve fields
* Outstanding Travis Peak (35 zones) and Pettit (7 zones)
reservoirs with cumulative production on and around leasehold,
individual wells with over 200,000 BO and up to 7 BCFG reserves.
GMX has found virgin reservoir in Pettit Page, potential 25 BCF
reserve reservoir
* 41 producers, 40 PUDS (85% Natural gas) and 250
development locations.
"We may also attempt divestiture of up to 100% our Kansas
properties. Our development area in Kansas has approximately 10
BCFE in proven reserves (according to Sproule's year end
estimate). Kansas highlights include:
* 100 operated wells in three fields
* Several proven undeveloped and development locations
* Injection minimal, disposal wells and gathering systems
"The proceeds from the sale of these assets will be used pay
down debt and resume development of our proven reserves.
Monetizing some of these assets will also help provide funding
if necessary to resolve litigation, reduce our risk in the
development, strengthen our ability to capture opportunities in
the merger and acquisition markets, and most importantly,
contribute to increasing shareholder value."
GMX RESOURCES INC. is an independent oil & gas exploration and
production company headquartered in Oklahoma City, Oklahoma.
GMX has production and properties in the Sabine Uplift of the
East Texas Basin of Texas and Louisiana, the Tatum Basin on the
western edge of the Permian Basin in southeastern New Mexico,
and the Sedgwick and Hugoton Basins in Kansas. The Company
operates 90% of the 152 wells in which it owns interests. The
Company currently has leased in the East Texas Basin 18,000 net
acres containing up to 240 potential drilling locations in the
GMX inventory.
GMX's strategy is to continue to create additional value from
its existing property base by drilling proved undeveloped oil
and gas reserves and to significantly add to its reserve
position through development, exploitation and acquisitions of
additional producing oil and gas properties that would be
immediately accretive to earnings and would enlarge the
Company's existing core properties or create new core holdings.
GMX's goal is to continue to add value for its shareholders.
GENESEE CORP: Boston Beer Lifts Performance Guaranty under Pact
---------------------------------------------------------------
Genesee Corporation (Nasdaq: GENBB) has obtained a release from
the Corporation's performance guaranty of the production
agreement between Boston Beer Corporation and High Falls Brewing
Company, LLC. Boston Beer Corporation required the guaranty as
a condition to allowing the Corporation to assign the production
agreement to High Falls Brewing Company in connection with the
December 2000 sale of the Corporation's brewing business to High
Falls Brewing Company.
The guaranty required the Corporation to maintain liquid net
worth of at least $7 million to secure its obligations under the
guaranty. The release from the guaranty also released the
Corporation from the minimum net worth requirement, which will
allow the Corporation to distribute to its shareholders funds
that it otherwise would have retained to support the minimum net
worth requirement through its scheduled expiration in December
2003.
The Corporation also announced that it has declared a partial
liquidating distribution of $5.00 per share, payable on May 17,
2002 to Class A and Class B shareholders of record on May 10,
2002. The partial liquidating distribution is the third
liquidating distribution paid to the Corporation's shareholders
pursuant to the plan of liquidation and dissolution approved by
the Corporation's shareholders in October 2000. Liquidating
distributions of $7.50 and $13.00 per share were paid to
shareholders on March 1, 2001 and November 1, 2001,
respectively.
"We are very pleased that the strong performance of High Falls
Brewing Company and the strength of the contract brewing
relationship between Boston Beer Corporation and High Falls
Brewing Company created the opportunity for the Corporation to
negotiate an early release from its guaranty and minimum net
worth obligations to Boston Beer Corporation," said Mark W.
Leunig, Senior Vice President and Chief Administrative Officer
of the Corporation. "Release from the guaranty eliminates a
significant contingent liability and assures that the
Corporation's shareholders will receive value from the contract
brewing relationship that originated in 1995 between the former
Genesee Brewing Company and Boston Beer Corporation," said Mr.
Leunig.
The Corporation also announced that the $2.25 million mortgage
note receivable that funded a portion of the escrow from the
October 2001 sale of the foods business has been paid in full by
the purchaser of the Corporation's foods business so that the
escrow account is now funded by $2.43 million in cash which is
invested in commercial bank money market funds. "Repayment of
the mortgage note eliminates another uncertainty for the
Corporation's shareholders by eliminating the risk of default on
the mortgage note and ensuring the liquidity of that portion of
the proceeds from the sale of the foods business that are being
held in the escrow account," said Mr. Leunig.
Based on the release from the Boston Beer Corporation guaranty
and minimum net worth requirement and payment of a $5.00 per
share liquidating distribution, the Corporation updated its
estimate of net assets in liquid liquidation. The Corporation's
best estimate of net assets in liquidation after payment of the
$5.00 per share liquidating distribution on May 17, 2002 is
$28.9 million, or $17.25 per share, compared to net assets in
liquidation at January 26, 2002 of $37.5 million, or $22.43 per
share.
The Corporation expects to make additional liquidating
distributions as other contingent liabilities from the sale of
the Corporation's brewing business are discharged and as it
receives payment on the $10.1 million balance outstanding on the
promissory notes from High Falls Brewing Company that financed a
portion of the brewing business sale. The Corporation also
expects to make additional liquidating distribution and other
assets; and risks associated with the liquidation and
dissolution of the Corporation, including without limitation,
settlement of the Corporation's liabilities and obligations,
costs incurred in connection with carrying out the plan of
liquidation and dissolution, the amount of income earned during
the liquidation period on the Corporation's bond portfolio and
investments in money market funds, risks that the market value
of the Corporation's bond portfolio could decline, risks
associated with investment in bonds and money market funds in
the current low interest rate environment, and the actual timing
of the winding up and dissolution of the Corporation. Rules
governing liquidation accounting require the Corporation to
estimate the net value of assets in liquidation. The estimates
of net assets in liquidation are based on present facts and
circumstances and the value of assets actually realized in
liquidation is expected to differ from the amounts estimated and
could be greater or lesser than the amounts estimated.
Accordingly, it is not possible to predict the aggregate amount
that will ultimately be distributable to shareholders and no
assurance can be given that the amount to be received in
liquidation will equal or exceed the estimate of net assets in
liquidation per share set forth herein.
GLOBAL CROSSING: Gets Open-Ended Lease Decision Period Extension
----------------------------------------------------------------
Carlyle One Wilshire LLC and Carlyle Seventeenth Street LLC,
objects to Global Crossing Ltd.'s Motion for an Extension of
Their Time to Assume or Reject Unexpired Leases of
Nonresidential Real Property Pursuant to Section 365(d)(4) of
the Bankruptcy Code filed by the Debtors.
According to Adam L. Rosen, Esq., at Rosen & Slome LLP in Garden
City, New York, the Landlords do not object to a limited, 90-day
extension, subject to further extension for cause, of the
deadline for assuming or rejecting nonresidential real property
leases. If, at the conclusion of that extension, despite their
diligent efforts, the Debtors and their professionals still need
more time, a further extension could be considered then. The
Debtors have not, however, demonstrated cause for the open-ended
extension requested. Mr. Rosen contends that the Debtors'
proposal is a de facto repeal of the 1984 amendments to the
Bankruptcy Code and turns Congressional policy on its head. The
Debtors would have the Court shift their burden to the Landlords
to seek to limit the time to assume specific leases throughout
the course of these cases. A limit should therefore be placed on
any extension of time to assume or reject the Leases granted to
the Debtors.
The Landlords acknowledge that the sixty-day period offered by
default under Section 365(d)(4) of the Code is inadequate for
the Debtors' purposes. They recognize that these are large and
complex Chapter 11 cases with a significant number of leases to
evaluate. In light of the number of leases and the demonstrated
diligence, Mr. Rosen submits that the Debtors have shown cause
for an extension, but such extension, however, should be
relatively short, perhaps an additional 60 to 90 days. Such an
extension should be subject to reduction, or further extension,
upon notice and a hearing. In addition, in light of the en masse
nature of the Debtors' request, where no attention is given to
the circumstances of any particular lease, the Debtors should at
all times retain the burden of demonstrating cause. For example,
if the Landlords were to move, within an extended period, to
shorten that period, the Debtors would have the burden of
proving that the period should not be shortened. Mr. Rosen
argues that leaving the cause burden on the Debtors is
especially justifiable in the present situation and minimizes
the burdens to landlords from an expedited, blanket extension
for so many leases.
At this early point in the case, Mr. Rosen believes that the
Debtors should be granted a limited extension of the
assumption/rejection deadline. A shorter extension permits the
Court and parties in interest to monitor the Debtors' progress
and make difficult decisions on a lease-by-lease basis rather
than in conjunction with a mass-production hearing.
* * *
Judge Gerber rules that Global Crossing's time within which to
decide whether it will assume, assume and assign, or reject its
Unexpired Leases with Non-Objecting Lessors is extended to the
date on which a plan of reorganization is confirmed in the
Debtors' chapter 11 cases.
This extension is without prejudice to the right of any lessor
to file an appropriate application with the Court for a
reduction of that time period, with the Debtor retaining the
burdens of proof and persuasion on any such motion.
With respect to the the Giralda Lease, the 365(d)(4) Period is
extended until May 13, 2002 at 9:45 a.m. prevailing Eastern Time
or until the Court can consider the Cross-Motion of MSGW New
Jersey I, LLC for an Order Directing Debtor, Global Crossing
Development Co., to Immediately Assume or Reject its Unexpired
Lease of Nonresidential Real Property with MSGW. Unless and
until the Court grants the Cross-Motion, the extension of the
365(d)(4) Period up to and until confirmation of the Debtors'
plan of reorganization, applies to the Giralda Lease. (Global
Crossing Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
GRAPES COMMS: Creditors Meeting to Convene on June 13, 2002
-----------------------------------------------------------
A meeting of creditors pursuant to section 341(a) of the
Bankruptcy Code is scheduled to happen on June 13, 2002, 1:00
p.m. at 80 Broad Street, Second Floor, New York, New York 10004.
The meeting will not be convened if:
i) the Plan is confirmed prior to the date set forth for
the Section 341(a) Meeting and
ii) the order confirming the Plan (or order entered
substantially contemporaneously therewith) contains a
provision waiving the convening of a Section 341(a)
Meeting.
All creditors are invited, but 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.
Grapes Communications N.V./S.A. is a holding company with
subsidiaries that are alternative providers of telecommunication
services, primarily targeting small- and mediumsized businesses
in Italy and Greece. The Debtor filed for chapter 11 protection
on April 16, 2002. James L. Garrity, Jr., Esq. at Shearman &
Sterling represents the Debtor in its restructuring efforts.
When the Company filed for protection from its creditors, it
listed EUR251,097,012 in total assets and EUR308,102,397 in
total debts.
GRAY COMMS: Issues $40MM of Preferred to Repay Outstanding Debts
----------------------------------------------------------------
Gray Communications Systems, Inc. (NYSE: GCS GCS.B) has issued
$40 million of a redeemable and convertible preferred stock to a
group of private investors. The preferred stock was designated
as Series C Preferred Stock and has a liquidation value of
$10,000 per share.
The Series C Preferred Stock will be convertible into the
company's Class B Common Stock at a conversion price of $14.39
per share. The Series C Preferred Stock will be redeemable at
the company's option on or after April 22, 2007, and will be
subject to mandatory redemption on April 22, 2012. Dividends on
the Series C Preferred Stock will accrue at 8% per annum until
April 22, 2009 after which the dividend rate shall be 8.5% per
annum. Dividends, when declared by the company's board of
directors may be paid at the company's option in cash or
additional shares of Series C Preferred Stock.
As part of the transaction, holders of the company's Series A
and Series B preferred stock have exchanged all of the
outstanding shares of each respective series, an aggregate value
of approximately $8.6 million, for an equal number of shares of
the Series C Preferred Stock. Upon closing this transaction,
the Series C Preferred Stock is the only currently outstanding
preferred stock of the company.
Net cash proceeds approximate $30.5 million, after transaction
fees and expenses and excluding the value of the Series A and
Series B preferred stock exchanged into the Series C Preferred
Stock. The company intends to use the net cash proceeds to
repay current outstanding borrowings under the company's
revolving credit facility and for other general corporate
purposes.
The company had previously announced that it has entered into a
Letter of Intent to acquire Stations Holding, Inc., the parent
company of Benedek Broadcasting Corporation in a transaction
valued at approximately $500 million. Benedek currently owns
and operates 22 television stations in 21 television markets.
Gray Communications Systems, Inc. is a communications company
headquartered in Atlanta, Georgia, and operates ten CBS-
affiliated television stations, three NBC-affiliated television
stations, four daily newspapers, a wireless messaging and paging
business and a satellite uplink and production business. The
Company's current operations are concentrated in the South,
Southwest and Midwest U.S.
* * *
As reported in the December 24, 2001 edition of Troubled Company
Reporter, Standard & Poor's assigned its single-'B'-minus rating
to Gray Communications Systems Inc.'s Rule 144A $180 million
senior subordinated notes due December 15, 2011. All existing
ratings were also affirmed, all with stable current outlook.
The ratings on Gray Communications Inc. (B+/Stable/--) reflect
the strong market positions of the company's TV stations, its
modest geographic and operational diversity, the overall good
free cash flow of television broadcasting, and the company's
experienced management team. These factors are balanced by an
aggressive financial profile, a debt-reliant acquisition
strategy, and the mature growth of its core TV and newspaper
operations.
HEARTLAND TECHNOLOGY: Dec. 31 Balance Sheet Upside-Down by $8MM
---------------------------------------------------------------
Heartland Technology, Inc., (Amex: HTI), reported a fiscal 2001
net loss of $12.6 million, compared with a loss of $4.3 million,
in 2000. Revenues for the year ended December 31, 2001, were
$7.1 million compared with $22.6 million a year earlier.
The 2001 loss is primarily attributable to operating losses at
Zecal, which has ceased operations; loss on the sale of PG
Design to Trilogy; and operating losses at Solder Station One.
The company reported that it is not currently generating enough
cash from operations to pay fixed costs. Heartland Technology
is in discussions with its creditors to see if it can reach
agreements to restructure its debt. The company also is seeking
to sell or merge various assets and subsidiaries as well as the
entire company in order to create value. If Heartland Technology
is unsuccessful in these efforts, the company is likely to be
dissolved or liquidated.
The company has also been informed by officials of the American
Stock Exchange that it does not meet the requirements for
continued listing on that stock exchange and that if the company
does not produce a plan that will lead to it meeting the listing
requirements the American Stock Exchange will initiate
procedures to delist the company's common stock.
At December 31, 2001, Heartland Technology's balance sheet
showed a working capital deficit of about $16 million, and a
total shareholders' equity deficit of $8 million.
HEXCEL CORP: Adjusted EBITDA Drops to $26M in First Quarter 2002
----------------------------------------------------------------
Hexcel Corporation (NYSE/PCX: HXL) reported results for the
first quarter of 2002. Net sales for the 2002 first quarter were
$222.1 million as compared to $276.2 million for the 2001 first
quarter and $239.1 million for the 2001 fourth quarter. Adjusted
EBITDA for the first quarter of 2002 was $25.8 million versus
$38.9 million for the first quarter of 2001 and $19.9 million
for the fourth quarter of 2001.
Net loss for the 2002 first quarter was $9.2 million, compared
to net income of $5.5 million, for the first quarter of 2001,
and a net loss of $413.8 million for the fourth quarter of 2001.
Excluding business consolidation and restructuring expenses and
the fourth quarter 2001 impairment charges, the Company's pretax
loss for the first quarter of 2002 was $3.6 million as compared
to pretax income of $7.4 million in the first quarter of 2001
and a pretax loss of $12.4 million in the fourth quarter of
2001.
Chief Executive Officer Comments
Mr. David E. Berges, the Chairman, President and CEO of Hexcel
Corporation said, "While much remains to be done to improve the
performance of our company, the first quarter demonstrated our
commitment to react to market challenges. Dramatic cost removals
and good cash management mitigated the potential impact of major
revenue declines in two of our most important markets. As
expected, commercial aerospace revenues declined by 30% compared
to the same quarter last year, and our electronics revenues
continued to be off more than 50%. These declines were offset in
part by 7.8% higher revenues from our other market segments, but
in total Hexcel had to respond to a 19.6% sales drop compared to
the first quarter, 2001. Compared to the fourth quarter of 2001,
sales declined 7.1% but Adjusted EBITDA increased by $5.9
million, or 29.6%."
"During the quarter we completed most of our previously
announced restructuring actions to generate the 20% reduction in
cash fixed costs committed to in November. Cash fixed costs for
the quarter were $17.9 million lower than in the first quarter
of 2001 and $8.4 million lower than in the fourth quarter of
2001, which already reflected some of the benefits of our
actions. As revenues declined and we implemented these actions,
our total employment was reduced by a further 10% in the quarter
in addition to the 10% reduction accomplished during the fourth
quarter of 2001."
Mr. Berges added, "Our net debt increased by less than we had
expected in the quarter. Historically, the Company uses cash in
the first quarter; but even with the impact of $9.4 million of
cash restructuring payments in the quarter, and certain other
non-recurring payments of about $8.0 million, net debt only
increased by $13.4 million. So, for the difficult two quarters
following September 11th, we have used only $10 million in cash
despite spending $16 million on restructuring. As the year
progresses, we hope to be able to generate cash."
In conclusion, Mr. Berges observed, "With our costs moving down
in line with sales, and good progress on cash management, we're
now able to direct part of our attention to the long term growth
targets that had us so excited before September."
Revenue Trends
Consolidated revenues for the 2002 first quarter of $222.1
million were 19.6% lower than the 2001 first quarter revenues of
$276.2 million, reflecting the sharp reduction in sales to both
the commercial aerospace and electronics markets. The impact
from these market changes was offset in part by continued growth
in sales to industrial applications such as soft body armor,
wind turbine blades and impact protection for automobiles. The
change in foreign exchange rates accounted for only $3.5 million
of the year over year sales decline. Consolidated revenues for
the 2002 first quarter were 7.1% lower than 2001 fourth quarter
revenues of $239.1 million.
-- Commercial Aerospace. Sales to aircraft producers and
their subcontractors declined in the quarter, reflecting the
impact of reducing commercial aircraft build rates. Revenues for
the 2002 first quarter were $101.4 million, or 30.0% lower than
2001 first quarter revenues of $144.8 million, and 18.4% lower
than the fourth quarter of 2001.
-- Space & Defense. Revenues for the first quarter of 2002
were $37.2 million, 5.1% higher than the first quarter of 2001
revenues of $35.4 million, but 6.3% lower than the unusually
strong fourth quarter of 2001. While the Company's space &
defense revenues tend to vary quarter to quarter, sales
associated with military aircraft and helicopters continue to
trend upwards as the new generation of military aircraft in the
United States and Europe ramp up in production. The Company
benefits from programs such as the F/A 18E/F, the F-22, the V-
22, the C-17 and Euro-fighter. The Company will also benefit
from new programs such as the Joint Strike Fighter and the A-
400M.
-- Electronics. The severe industry downturn and inventory
correction in the global electronics market first became evident
at the end of the first quarter of 2001. Accordingly, sales for
the first quarter of 2002 of $16.5 million were down $18.2
million, or 52.4%, compared to the same quarter last year. While
sales in the first quarter of 2002 did improve by $4.9 million
compared to the record low fourth quarter of 2001, there is
still no evidence of a substantial recovery in this market.
-- Industrial. Reflecting the continued strength in demand
for the Company's products used in soft body armor, wind energy
and automotive applications, among other markets, sales were
$67.0 million in the first quarter of 2002 compared to $61.3
million in the first quarter of 2001, an increase of 9.3%.
Compared to revenues of $63.6 million in the fourth quarter of
2001, sales were 5.3% higher.
Gross Margin and Adjusted Operating Income
Gross margin for the first quarter of 2002 was $39.6 million, or
17.8% of net sales, compared with $60.1 million, or 21.8% of net
sales, for the first quarter of 2001, and $35.2 million, or
14.7% of net sales, for the fourth quarter of 2001. Year over
year gross margins declined as a result of reduced commercial
aerospace sales and the dramatic industry-wide downturn in the
electronics market first seen towards the end of the first
quarter, 2001. The gross margin improvement seen in the first
quarter of 2002 as compared to the fourth quarter of 2001
reflects, in part, the benefits of the cash fixed cost
reductions associated with the restructuring program announced
in November 2001.
Adjusted operating income for the 2002 first quarter was $14.0
million, or 6.3% of net sales, compared to $23.7 million, or
8.6% of net sales, for the 2001 first quarter, and $2.8 million,
or 1.2% of net sales, for the fourth quarter of 2001. Excluding
the $3.2 million benefit of the new accounting standard for the
amortization of goodwill, selling, general and administrative
expenses in the first quarter of 2002 of $21.6 million were $6.9
million lower than the first quarter of 2001and $3.4 million
lower than the fourth quarter of 2001.
Restructuring Plan
On November 7, 2001, Hexcel announced a restructuring program to
both reduce its cash fixed costs by 20%, or $60 million, and to
reduce direct employment in line with customer orders. These
actions were required to size the Company's cost structure with
its changed business environment. The Company continued the
implementation of this program during the first quarter of 2002,
further reducing its workforce by 582, or over 10%, to 4,794
employees in addition to the 629 person reduction in the fourth
quarter, 2001. The aggregate cash payments made in conjunction
with this restructuring program and prior restructuring
initiatives were $9.4 million during the quarter, with the
remaining estimated restructuring cash payments of approximately
$25.0 million to be made over the next three quarters.
Senior Credit Facility Amendment
As previously announced, on January 25, 2002, the Company's bank
syndicate approved an amendment to its Senior Credit Facility.
The amendment provides for, among other matters, revised
financial covenants that accommodate the Company's anticipated
financial performance through the year 2002. This amendment will
permit the Company to focus on better serving its customers
during the year and executing its cost reduction and performance
improvement plans. Included in interest expense in the first
quarter of 2002 was $1.7 million of fees and expenses incurred
in connection with the bank amendment. The Company was in
compliance with its revised financial covenants at the end of
the first quarter of 2002.
Taxes
The Company's tax provision of $2.5 million in the first quarter
of 2002 was for taxes on European income, and reflects the
impact of the establishment of a non-cash valuation allowance on
all currently generated U.S. net operating losses.
Equity In Losses
The equity in losses of affiliated companies was $2.4 million
for the first quarter of 2002, reflecting the on-going impact of
the electronics market decline on the Company's Asian
Electronics joint venture and start-up losses associated with
the Structures joint ventures in China and Malaysia. These
losses by affiliates do not affect the Company's cash flows.
Equity in earnings of affiliated companies was $1.4 million for
the first quarter of 2001.
Debt and Cash Flow
Total debt, net of cash, increased by $13.4 million to $687.7
million as of March 31, 2002, compared to December 31, 2001. In
the past, the Company has tended to use cash in the first
quarter of each year. Cash business consolidation and
restructuring payments were $9.4 million during the quarter. In
addition, the Company made certain other non-recurring cash
payments of about $8.0 million in the quarter. Inventories
remained virtually unchanged during the quarter. The Company had
undrawn revolver and overdraft revolver availability under its
Senior Credit Facility of $65.2 million as of March 31, 2002.
Hexcel Corporation is the world's leading advanced structural
materials company. It develops, manufactures and markets
lightweight, high-performance reinforcement products, composite
materials and composite structures for use in commercial
aerospace, space and defense, electronics, and industrial
applications.
As reported in the February 14, 2002 edition of Troubled Company
Reporter, Standard & Poor's affirmed its ratings on Hexcel Corp.
and removed them from CreditWatch, where they were placed
September 21, 2001. The outlook is negative.
Ratings Affirmed and Removed from CreditWatch
Hexcel Corp.
Corporate credit rating B
Senior secured (bank loan) debt B
Subordinated debt CCC+
The ratings on Hexcel reflect a very weak financial profile,
stemming from high debt levels and unprofitable operations,
which outweigh the company's substantial positions in
competitive industries and generally favorable long-term
business fundamentals. The firm is the world's largest
manufacturer of advanced structural materials, such as
lightweight, high-performance carbon fibers, structural fabrics,
and composite materials for the commercial aerospace, defense
and space, electronics, recreation, and general industrial
sectors. The markets served are cyclical, but most have growth
potential where the company's materials offer significant
performance and economic advantages over traditional materials.
HOMESEEKERS.COM: Firms-Up New Separation Pacts with Ex-Directors
----------------------------------------------------------------
Thomas Chaffee, CEO of HomeSeekers.com Inc. (OTC Bulletin Board:
HMSK, HMSKE), d/b/a Realigent Inc., announce the complete re-
working of the separation agreements with former directors Greg
Johnson, Doug Swanson and John Giaimo.
"The outpouring from the shareholders was overwhelming on this
issue," noted Chaffee. "We are endeavoring to be as responsive
as possible to their wishes, and on this issue we shared their
concerns."
The original agreements represented a total aggregate value of
$4.7 million payable in the company's common stock and warrants
to purchase the company's common stock. At the company's
current stock price levels, this would require the issuance of
over 36 million new shares of common stock in addition to the
current authorized amount of 50 million. The new agreements are
structured as follows: Greg Johnson and John Giaimo will each
receive 1 million shares of common stock and warrants to
purchase 1 million shares of common stock at an exercise price
of $.10 per share. Doug Swanson will receive warrants to
purchase 1 million shares of common stock at an exercise price
of $.10 per share and the company will forgive indebtedness from
him of approximately $90,000.
Using the Black-Scholes model for pricing stock warrants, the
combined value of the new agreements is $816,000. The company is
not obligated to issue any cash in connection with the new
agreements. Any issuances of common stock or any exercise of
warrants to purchase common stock as contemplated by these new
agreements are subject to an increase in the authorized number
of common shares available which must be approved by the
company's stockholders in a meeting anticipated to be held
within 90 days.
"The former directors were equally interested in achieving fair
resolution of this matter and, as evidenced by their actions,
they remain committed to the success of the company," said
Chaffee. "Accordingly, we feel that it is in the best interests
of the company to finalize these new agreements and move forward
with the operations of the business.
"We are dedicated to SEC compliance and filing our reports on a
timely basis, however resources at the company remain highly-
constrained," he added. "In view of the tremendous consolidation
and restructuring efforts that have been underway, we felt it
was equally important to resolve the issue of these separation
agreements now at the risk of filing our Annual Report on Form
10-K late."
HomeSeekers.com Incorporated (OTC Bulletin Board: HMSK, HMSKE),
dba Realigent, is a leading technology solutions provider to the
real estate industry. The company offers numerous products,
applications, services and custom solutions serving brokers,
agents, multiple listing services (MLS), builders, lenders,
consumers and all constituents involved in a real estate
transaction. Detailed product and service offerings can be
viewed at the company's primary Web site at
http://www.realigent.com
INTEGRATED HEALTH: Premiere Panel Taps BDO Seidman as Advisors
--------------------------------------------------------------
The Court authorized the Premiere Committee, in the chapter 11
cases of Integrated Health Services, Inc., to employ BDO
Seidman, LLP as its accountants and financial advisors in the
IHS Chapter 11 cases nunc pro tune to January 11, 2002.
The Court's order specifies that BDO Seidman, LLP services are
limited to performing services:
1. Review the financial condition of, and financial
relationships among, Debtors and the Premiere Group and
their bankruptcy estates for the purpose of advising the
Premiere Committee regarding:
a. the valuation of the Premiere Group Debtors'
businesses;
b. the advisability of substantive consolidation and its
impact on the Premiere Group Debtors;
c. the potential for, and cost/benefits of, an action to
avoid the Premiere Group's guaranty of the Revolving
Credit and Term Loan Agreement dated as of September
15, 1997 and the stock pledge agreements associated
therewith; and
d. the cost/benefits of actions against the Directors and
Officers of the Premiere Group for acts or omissions in
breach of their duty to the Premiere Group.
2. Review the use of pre-petition and post-petition loan
proceeds from the Credit Agreement to determine the amount
of proceeds, if any, used by the Premiere Group;
3. Review and critique the "Memorandum addressing upstream
guaranty by IHS subsidiaries under the 1997 Citibank Credit
Facility" insofar as the Memorandum relates to the Premiere
Group;
4. Meet and communicate with representatives of the Debtors,
the Premiere Committee, and other parties in interest and
acquire necessary information to accomplish the tasks
authorized to perform;
5. Assist the Premiere Committee in its evaluation of the
financial aspects of a plan or plans of reorganization or
liquidation;
6. Review debtor-in-possession financing or exit financing
solely as it relates to the Premiere Group Debtors and
their bankruptcy estates; mid
7. Advise the Premiere Committee with regard to the financial
aspects of applications, motions, answers, objections,
orders, complaints, reports or other pleadings relating to
the Premiere Group Debtors.
As agreed by BDO Seidman and stated in the order, the charges
for BDO Seidman's services shall not exceed an average of
$50,000.00 per month through April, 2002. After April 30, 2002,
the compensation arrangement, if any, will be fixed by the
Court.
The Court's order also states that the Debtors and the IHS
Committee reserve the right to seek the Court's permission, upon
application after notice to the Premiere Committee, BDO Seidman,
LLP, and other parties in interest, to allocate BDO Seidman,
LLP's charges among Debtors and the Premiere Group Debtors.
* * *
As previously reported, BDO will charge compensation on an
hourly rate basis, plus reimbursement of actual, necessary
expenses incurred by the firm. The current hourly rates of the
firm for work of this nature are as follows at present:
Partner $330 to $550
Senior Manager $215 to $480
Manager $195 to $330
Senior $140 to $245
Staff $85 to $185
In the normal course of business, BDO revises its regular hourly
rates to reflect changes in responsibilities, increased
experience, and increased costs of doing business. (Integrated
Health Bankruptcy News, Issue No. 34; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KAISER ALUMINUM: Wants to End Nat'l Refractories' Put/Call Deal
---------------------------------------------------------------
Kaiser Aluminum Corporation and its debtor-affiliates urge the
Court to permit them to reject their Put/Call Agreement with
National Refractories & Minerals Corporation.
Patrick M. Leathem, Esq., at Richards, Layton & Finger in
Wilmington, Delaware, tells the Court that the Debtors realize
that taking ownership of the Moss Landing Property could expose
them to additional liabilities that require them to expend
resources that would be better directed towards their
restructuring efforts.
Mr. Leathem believes that rejection of the agreement will ensure
that National Refractories is not able to require the Debtors to
purchase the Moss Landing Property. Upon further examination of
the property, the Debtors have determined that National
Refractories could not satisfy the closing conditions reflected
in the Put/Call Agreement. The ownership interest of the
property is no longer of interest to the Debtors' estate.
Mr. Leathem admits that when the Debtors originally entered into
the agreement, they had determined that taking control of the
property was the most cost-effective way of addressing potential
liabilities stemming from their prior ownership of the property.
They also saw this agreement as the best way of controlling the
future use of the property in a way that would maximize its
value. Moss Landing Property is a magnesium and refractory brick
facility. It resides in an approximately 188-acre parcel of
property located in Moss Landing, California.
Mr. Leathem relates that on December 31, 1984, the Debtors sold
a number of assets to National Refractories, including the Moss
Landing facility. The Moss Landing magnesium facility opened in
1942 and while the operation produced basic refractory brick and
gum mixes, ramming mixes and mortars, chemical grade magnesium,
magnesia, magnesite, periclase and magnesium hydroxide. In
connection with the sale to the National Refractories, the
Debtors retained certain potential environmental liabilities
arising from the operation of the facility prior to the sale,
and National Refractories assumed certain obligations to
maintain the Moss Landing Property. National Refractories
severely curtailed its operations at the Moss Landing Property
several years ago and has actively marketed the property for
sale since that time.
During this time, Mr. Leathem adds, the financial condition of
National Refractories continued to deteriorate. The Debtors and
National Refractories began to discuss the possible sale of the
Moss Landing Property to the Debtors. This provides National
Refractories with a source of liquidity and the Debtors, among
other things, the ability to exercise greater control over the
property and its future use in a way that would minimize, if not
eliminate, any potential environmental issues and maximize the
value of the property to potential purchasers. As a result of
these discussions, both parties entered into the Put/Call
Agreement, effective as of September 13, 2001.
Pursuant to the Put/Call Agreement, Mr. Leathem informs the
Court that the Debtors granted National Refractories the option
to require the Debtors to purchase the Moss Landing Property and
National Refractories granted the Debtors the option to purchase
the Moss Landing Property. The purchase price for the Moss
Landing Property under the Put Option and the Call Option is
$5,000,000. The Put/Call Agreement requires that proceeds from
the purchase price be applied to certain indebtedness owed by
National Refractories to Congress Financial Corporation.
National Refractories has until April 15, 2002 to exercise the
Put Option and the Debtors may exercise the Call Option between
April 16, 2002 and June 17, 2002.
On October 10, 2001, National Refractories filed a Chapter 11
petition and subsequently opted and obtained to assume the
Put/Call Agreement in its own bankruptcy case. However, Mr.
Leathem submits that it has not yet exercised the Put Option.
(Kaiser Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KING PRODUCTS: Ontario Court Appoints Receiver Over Assets
----------------------------------------------------------
KING Products Inc. announced that the Ontario Superior Court of
Justice has appointed a Receiver over its assets, property and
undertaking and has approved the subsequent sale by the Court-
Appointed Receiver of substantially all of the assets of King to
Urmet, TLC S.p.A. (or its nominee) pursuant to the agreement
between Urmet and King previously announced on April 16, 2002.
Under the terms of such Court approval, Urmet will make offers
of employment to substantially all of the employees of King and
has agreed to assume certain customer and other contractual
liabilities of King.
Urmet, an important player in the telecommunication market,
specifically in Terminal Equipment design & manufacturing, with
this agreement proves its commitment to deliver the most
effective multimedia terminals and services.
It is expected that from the proceeds of such sale that all
current "trade creditors" of King will be paid in full save and
except for the indebtedness owed by King to its largest
shareholder and "trade creditor" and that there will be no
distribution to King shareholders.
Upon completion of the transaction, Urmet will carry on the King
business through its subsidiary, King Technologies Inc., with a
vision of promoting, developing and enhancing multimedia and
architectural solutions previously developed by King.
King trades on the Canadian Venture Exchange under the symbol
YKK.
The Canadian Venture Exchange has not reviewed and does not
accept responsibility for the adequacy or accuracy of this
release.
KMART CORP: Court Fixes July 31, 2002 as General Claims Bar Date
----------------------------------------------------------------
Kmart Corporation, and its debtor-affiliates obtained an order
establishing:
(a) July 31, 2002 (4:00 p.m. Eastern Standard Time) as the
deadline for all persons and entities holding or
wishing to assert a claim against any of the Debtors to
file a proof of such Claim in these cases.
(b) the later of the General Bar Date or 30 days after a
claimant is served with notice that the Debtors have
amended their schedules of assets and liabilities
reducing, deleting, or changing the status of a
scheduled claim of such claimant as the bar date for
filing a proof of claim in respect of such amended
scheduled claim;
(c) the later of the General Bar Date or 30 days after the
effective date of any order authorizing the rejection
of an executory contract or unexpired lease as the bar
date by which a proof of claim relating to the Debtors'
rejection of such contract or lease must be filed;
(d) July 31, 2002 as the deadline for all governmental
units to file a proof of claim in these cases.
Exceptions to the General Bar Date
No proofs of claim will be required from:
-- Any Person or Entity:
(a) that agrees with the nature, classification, amount of
such Claim set forth in the Schedules, and
(b) whose Claim against a Debtor is not listed as
"disputed," "contingent" or "unliquidated" in the
Schedules;
-- Any Person or Entity that has already properly filed a proof
of claim against the correct Debtor;
-- Any Person or Entity asserting a Claim allowable as an
administrative expense of the Debtors' Chapter 11 cases;
-- Any of the Debtors or any direct or indirect subsidiary of
any of the Debtors that hold Claims against one or more of
the other Debtors;
-- Any Person or Entity whose Claim against a Debtor previously
has been allowed by, or paid pursuant to, an order of the
Bankruptcy Court; and
-- Any holder of equity securities of, or other interests in,
the Debtors solely with respect to such holder's ownership
interest in or possession of such equity securities, or
other interest in, provided, however, that any such holders
who wish to assert a Clam against any of the Debtors based
on transactions in the Debtors' securities, including, but
not limited to, Claims for damages or recision based on the
purchase or sale of such securities, must file a proof of
claim on or prior to the General Bar Date.
Consequence of Not Filing a Claim
For those who fail to file a proof of claim in a timely manner,
Mr. Ivester asserts that such persons and entities should be
forever barred and enjoined from:
(a) asserting any Claim against the Debtors that such Person
or Entity has that:
(i) is in an amount that exceeds the amount, if any,
that is set forth in the Schedules, or
(ii) is of a different nature or in a different
classification; and
(b) voting upon, or receiving distributions under, any plan
or plans of reorganization in these Chapter 11 cases in
respect of an Unscheduled Claim.
Notice Procedures
According to Mr. Ivester, Trumbull Services LLC will give notice
of the Bar Dates by serving on all known Persons and Entities
holding potential pre-petition Claims:
(a) a notice of the Bar Dates; and
(b) a proof of claim form.
Mr. Ivester assures the Court the Bar Date Notice and the Proof
of Claim Form will be mailed by first class U.S. mail, postage
prepaid, to all known potential claimants as soon as the
Schedules are filed, but in no event later than April 1, 2002.
Because of the extensive nature of the Debtors' businesses, Mr.
Ivester admits that there may be many claims that the Debtors
are unaware of, such as:
-- Claims of trade vendors who failed to submit air invoice to
the Debtors;
-- Claims of former employees; and Claims that, for various
reasons, are not recorded on the Debtors' books and
records.
Accordingly, Mr. Ivester says, the Debtors intend to give notice
of the Bar Date Notice by publication in The New York Times
(national edition), The Wall Street Journal (national, European
and Asian editions), and USA Today (worldwide). Such notices
shall be published on or about March 25, 2002.
Filing Requirements
For any Proof of Claim Form to be validly and properly filed,
Mr. Ivester notes that a signed original of the completed Proof
of Claim Form, together with accompanying documentation must be
delivered to the Claims and Noticing Agent so as to be received
no later than 4:00 p.m., Eastern Standard Time, on the
respective Bar Date.
Facsimile submissions will not be accepted, Mr. Ivester
emphasizes.
Mr. Ivester also clarifies that creditors who wish to assert
Claims against more than one Debtor are required to file a
separate proof of claim form with respect to each such Debtor.
(Kmart Bankruptcy News, Issue No. 14; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KRYSTAL COMPANY: Has Sufficient Funds to Continue through 2002
--------------------------------------------------------------
*** CORRECTION: On April 2, 2002 the Troubled Company Reporter
*** stated that The Krystal Company "has insufficient funds to
*** continue after 2002." That statement was incorrect.
*** Please refer to Form 10-K for The Krystal Company for an
*** accurate description of the Company's financial condition.
The Krystal Company was founded in 1932 as a single restaurant
in Chattanooga, Tennessee by R. B. Davenport, Jr. and J. Glenn
Sherrill. The Company expanded steadily in subsequent years,
entering the Georgia market in 1936, and during the 1950's and
1960's, began relocating restaurants from urban to suburban
locations and transforming its format from "cook-to-order" items
to a more standardized quick-service menu.
The Company's centerpiece of growth was its namesake, the
KRYSTAL, a small, square hamburger with steamed-in flavor served
hot and fresh off the grill. As competition in the restaurant
industry increased in the late 1980's, the Company firmly
maintained its market niche by emphasizing the unique KRYSTAL.
Krystal restaurants have continued to emphasize the KRYSTAL and
have built their customer base around this and other items such
as "Krystal Chili," "Chili Pups," "Corn Pups," the "Sunriser," a
specialty breakfast sandwich, the "Krystal Chik," a specialty
chicken sandwich and the "Country Breakfast."
On September 26, 1997 (effective September 29, 1997 for
accounting purposes), the Company was acquired by Port Royal
Holdings, Inc. At the closing of the Acquisition, a wholly-
owned subsidiary of Port Royal was merged with and into the
Company and the Company as the surviving corporation retained
the name "Krystal." As a result of the Acquisition and Merger,
Port Royal became the owner of 100% of the common stock of the
Company.
The Company develops, operates and franchises full-size KRYSTAL
and smaller "double drive-thru" KRYSTAL KWIK quick-service
restaurants. The Company believes it is among the first fast
food restaurant chains in the country. The Company began to
franchise KRYSTAL KWIK restaurants in 1990 and KRYSTAL
restaurants in 1991. In 1995, the Company began to develop and
franchise KRYSTAL restaurants located in non-traditional
locations such as convenience stores. At December 30, 2001, the
Company operated 246 units (241 KRYSTAL restaurants and 5
KRYSTAL KWIK restaurants) and franchisees operated 165 units (97
KRYSTAL restaurants, 26 KRYSTAL KWIK restaurants and 42 KRYSTAL
restaurants in non-traditional locations) in eleven states in
the Southeastern United States.
The Company also leases 19 restaurant sites in the Baltimore,
Washington, D.C. and St. Louis metropolitan areas which it in
turn subleases to Davco Restaurants, Inc., a Wendy's
International, Inc. franchisee and former affiliate of the
Company.
Since 1977 the Company has operated a fixed base hangar and
airplane fueling operation through a subsidiary company
("Krystal Aviation") in Chattanooga, Tennessee.
Comparison of the Fiscal Year Ended December 30, 2001
to the Fiscal Year Ended December 31, 2000
Restaurant sales for the total Krystal system (Company and
Franchise combined) or fiscal year ended December 30, 2001 were
$372.4 million compared to $355.6 million for the twelve months
ended December 31, 2000, a 4.7% increase.
Total Company revenues decreased 2.3% to $260.7 million for
fiscal 2001 compared to $266.7 million for fiscal 2000. Of this
$6.0 million decrease, restaurant sales accounted for a $7.1
million decrease, franchise fees increased $0.1 million,
royalties increased $1.0 million, and the Company's
aviation subsidiary revenues decreased $0.1 million.
Company-owned average same restaurant sales per week for fiscal
2001 were $18,894 compared to $18,959 for fiscal 2000, a
decrease of 0.34%. The decrease in same restaurant sales per
week was attributable to several factors, including heavy
discounting by competitors and a decrease in transaction counts
which was partially offset by an increase in the average
customer check. The Company operated 246 restaurants at
December 30, 2001 compared to 251 restaurants at December 31,
2000. The five store decrease in Company operated units
resulted from the Company's sale (re-franchising) of two
restaurants, which were sold in connection with the execution of
new restaurant development commitments by franchisees, and the
closure of three under-performing units.
The average customer check for Company-owned restaurants in
fiscal 2001 was $4.65 as compared to $4.55 in fiscal 2000, an
increase of 2.2%. The increase in average customer check was
due primarily to maintaining product price increases of
approximately 1.75% implemented during fiscal 2001. Transaction
counts per restaurant day decreased to 592 in fiscal 2001
compared to 606 in fiscal 2000, a decrease of 2.3%.
Franchise fee income was $1.0 million in fiscal 2001 compared to
$901,000 in fiscal 2000. Royalty revenue increased 20.9% to
$6.0 million in fiscal 2001 from $4.9 million in fiscal 2000.
The increase in franchise fees, which are earned upon the
opening of new franchise restaurants, resulted primarily from an
increase in the number of new franchise restaurants opened in
fiscal 2001 compared to the same period in 2000. During fiscal
2001, franchisees opened 32 new restaurants, and re-opened six
additional restaurants that had been temporarily closed. There
were no franchise fees associated with the re-opened
restaurants. During fiscal 2000, franchisees opened 24
franchise restaurants. The increase in franchise royalties was
due to a 23.5% increase in franchise system sales compared to
fiscal 2000 resulting primarily from a 18.7% increase in the
number of franchisee operated restaurants. The franchise system
operated 165 restaurants at December 30, 2001 compared to 139 at
December 31, 2000.
Other revenue, which is generated primarily from the Company's
aviation subsidiary, was $6.8 million for fiscal 2001 compared
to $6.9 million for fiscal 2000, a 1.4% decrease. This decrease
in revenue resulted primarily from a 7.3% decrease in jet fuel
sales and was partially offset by a 3.1% increase
in average retail jet fuel prices during fiscal 2001 compared to
fiscal 2000.
The Company's net loss for fiscal 2001 was $3,601 as compared to
$5,311, the net loss for fiscal 2000.
At December 30, 2001, the Company had existing cash balances of
$13.0 million and availability under its credit facility of $3.5
million. The Company expects these funds and funds from
operations will be sufficient to meet its operating requirements
and capital expenditures through 2002.
* * *
Standard & Poor's lowered its corporate credit and senior
unsecured debt ratings on The Krystal Co. to single-'B' from
single-'B'-plus and lowered its senior secured bank loan rating
to double-'B'-minus from double-'B'. All ratings were removed
from CreditWatch, where they had been placed August 16, 2001.
The outlook is stable.
The downgrade is based on Krystal's weakened operating and
financial performance, as the company has experienced negative
comparable-store sales and receding operating margins over the
past two years. Intense competition from stronger industry
players, and higher food and paper costs have negatively
impacted results. Comparable-store sales at company-owned stores
declined 1.4% for the nine months ended Sept. 30, 2001,
following a decrease of 4.4% in 2000.
METALS USA: Court OKs Poorman-Douglas' Retention as Claims Agent
----------------------------------------------------------------
Metals USA, Inc., and its debtor-affiliates obtained permission
from the Court to retain and employ Poorman-Douglas Corporation
as Claims, Noticing and Balloting agent to:
A. Serve as the Court's Notice Agent to mail notices to the
estates' creditors and parties-in-interest;
B. Provide computerized claim, claim objection and balloting
database services; and
C. Provide expertise and consultation and assistance in claim
and ballot processing and with other administrative
information with respect to the Debtors' bankruptcy cases.
Poorman provides these services as agent for the Court:
A. Establish an address to which all proofs of clams are
directed for filing. This address is: Poorman-Douglas
Corporation, Attn: Metals USA Claims, 10300 S.W. Allen Blvd.,
Beaverton, Oregon 97005;
B. Maintain copies of all proofs of claims and proofs of
interest filed in these cases;
C. Maintain official claims registers in these cases by
docketing all proofs of claim and proofs of interest in a
claims database that includes this information for each claim
or interest asserted:
a. the name and address of the claimant or interest holder
and any agent thereof, if the proof of claim or proof of
interest is filed by agent;
b. The date the proof of claim or proof of interest is
received by Poorman-Douglas and the Court;
c. The claim number assigned to the proof of claim or proof
of interest;
d. The asserted amount and classification of the claim; and
e. the Debtor-entity to which the claim is asserted.
D. Implement necessary security measures to ensure the
completeness and integrity of the claims registers;
E. Transmit to the Clerk's Office a copy of the claims registers
on a weekly basis unless requested by the Clerk's office on a
more or less frequent basis;
F. Maintain a current mailing list for all entities that have
filed proofs of claim or proofs of interest and make this
list available on request to the Clerk's office or any party-
in-interest;
G. Record all transfers of claims pursuant to the Bankruptcy
Rule 3001 and provide notice of such transfers as required by
Bankruptcy Rule;
H. Comply with applicable federal, state, municipal and local
statutes, ordinances, rules, regulations orders and other
requirements;
I. Promptly comply with any further conditions and requirements
that the Clerk's Office or the Court may at any time
prescribe; and
J. Such other claims processing, noticing and related
administrative services that may be requested from time to
time by the Debtors.
In addition, Poorman will assist the Debtors with the
reconciliation and resolution of claims and the preparation,
mailing and tabulation of ballots for the voting to accept or
reject a Reorganization Plan. The fees and expenses incurred by
the Debtors will be treated as an administrative expense of the
Debtors' Chapter 11 cases and will be paid by the Debtors in the
ordinary course of business. (Metals USA Bankruptcy News, Issue
No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
METROMEDIA FIBER: Fails to Meet Nasdaq Listing Requirements
-----------------------------------------------------------
Metromedia Fiber Network, Inc. (Nasdaq: MFNXE), the leading
provider of digital communications infrastructure, announced
preliminary restatements of its previously reported results for
the first three quarters of 2001 and preliminary results for the
fourth quarter and year-ended December 31, 2001.
As previously announced, the filing of the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 with
the Securities and Exchange Commission was delayed beyond the
intended filing date of April 16, 2002, which was the extended
due date for the filing of the report pursuant to SEC rules. As
also previously announced, the Company is reexamining its
reported operating results for each of the quarterly periods
included in the fiscal year ended December 31, 2001 with the
assistance of KPMG LLP, who was appointed as MFN's auditors
effective December 2001, and as a result, the Company expects to
restate its quarterly results for each of the first three
quarters of the fiscal year ended December 31, 2001. These
restatements involved revenue/sales credit recognition, timing
of expense recognition and non-cash lease accounting and
purchase accounting issues.
MFN also announced that it received a letter from Nasdaq
indicating that the Company's securities are subject to
delisting from the Nasdaq Stock Market because MFN failed to
file with the Securities Exchange Commission its Annual Report
on Form 10-K for the year ended December 31, 2001 as required
pursuant to Marketplace Rule 4319(c)(14). As permitted by the
Nasdaq rules, MFN has requested a hearing before a Nasdaq
Listing Qualification Panel to review this decision. The
hearing request will stay the delisting of the Company's
securities pending the Panel's decision. In addition, MFN was
previously notified by Nasdaq that if the trading price per
share of its securities failed to equal or exceed One Dollar
($1.00) for 10 consecutive days by May 15, 2002, the Company's
securities could be delisted, again, subject to a prior Panel
hearing.
MFN is the leading provider of digital communications
infrastructure solutions. The Company combines the most
extensive metropolitan area fiber network with a global optical
IP network, state-of-the-art data centers, award-winning managed
services and extensive peering relationships to deliver fully
integrated, outsourced communications solutions to Global 2000
companies. The all-fiber infrastructure enables MFN customers
to share vast amounts of information internally and externally
over private networks and a global IP backbone, creating
collaborative businesses that communicate at the speed of light.
Customers can take advantage of MFN's complete, end-to-end
solution or select individual components to complement their
existing infrastructures. By leasing MFN's metropolitan and
regional fiber, customers can create their own, private optical
network with virtually unlimited, un-metered bandwidth at a
fixed fee. For more reliable, secure and high-performance
Internet connectivity, customers can use MFN's private IP
network to communicate globally without ever touching the
public-switched network. Moreover, MFN's comprehensive managed
services enable companies to create a world-class Internet
presence, optimize complex sites and private optical networks,
and transform legacy applications, all with a single point of
contact.
PAIX.net, Inc., a subsidiary of MFN and the original neutral
Internet exchange, offers secure, Class A co-location facilities
where ISPs and other Internet-centric companies can form public
and private peering relationships with each other, and have
access to multiple telecommunications carriers for circuits
within each facility.
For more information on MFN, visit its Web site at
http://www.mfn.com
MICRON TECH: S&P Puts Low-B's on Watch Neg. over Hynix Talks
------------------------------------------------------------
Standard & Poor's placed its 'BB-' corporate credit rating on
Micron Technology Inc. on CreditWatch with negative
implications, reflecting the company's discussions of a possible
acquisition of the memory operations of Korea-based Hynix
Semiconductor Inc.. Micron is the second-largest supplier of
"dynamic memory" chips in the world, holding a 24% share, while
Hynix has about a 17% share. The possible acquisition would be
for about $3.36 billion, largely in stock.
The ratings on Boise, Idaho-based Micron Technology Inc. reflect
its position in the highly volatile semiconductor memory market,
as well as its conservative financial policies. Micron is
expected to retain a strong position in the industry through the
course of the business cycle. Still, industry conditions are
very challenging. Revenues of $646 million in the February 2002
quarter were only 28% of the cyclical peak of $2.3 billion set
in August 2000. Unit demand normally rises 70%-100% annually,
offset by extremely aggressive pricing. The company reported a
net loss of $30 million for the February 2002 quarter, compared
to net income of $736 million in the August 2000 peak quarter.
Still, due to conservative capitalization, Micron's debt-
protection measures have remained good for the rating level
through the business cycle, with an historical peak debt below
30% of capital. Micron had about $460 million of debt at Feb.
28, 2002, while cash balances totaled $1.5 billion.
The memory market is currently depressed. If the proposed
transaction becomes final, Standard & Poor's would meet with
management to discuss integration issues as well as potential
longer-term marketplace and financial implications of the
transaction before resolving the CreditWatch listing.
NATIONSRENT INC: KeyCorp Pushing for Prompt Decisions on Leases
---------------------------------------------------------------
KeyCorp Leasing, a division of Key Corporate Capital, Inc. asks
the Court to:
A. compel NationsRent Inc. to assume or reject leases;
B. compel immediate payment of administrative costs and rent as
well as all other lease obligations and other ancillary
relief; or in the alternative,
C. provide adequate protection; and,
D. grant relief from the automatic stay.
Lee Harrington, Esq., at Blank Rome Comisky & McCauley LLP, in
Wilmington, Delaware, contends that the Debtors are in default
of their post-petition obligations regarding the leases for the
KeyCorp Equipment. It is unclear whether the Debtors are
seeking to avoid their obligations as to KeyCorp. The Debtors
are enjoying the use of the KeyCorp Equipment and generating
income from their operations. However, the Debtors are not
concomitantly paying their obligation to KeyCorp. which is owed
in excess of $15,000,000 on an accelerated basis as of the
Petition Date. In the alternative, KeyCorp should be granted
relief from stay to protect and enforce its rights.
According to Mr. Harrington, KeyCorp is the lessor and assignee
of the rights under certain lease schedules pursuant to which
the Debtors have leased certain equipment. The schedules cover
approximately 502 different items of construction equipment
owned by KeyCorp. Specifically, Schedule 1 among the parties
relates to a Master Lease Agreement dated February 24, 2000,
between KeyCorp and NationsRent, Inc. and several of its
affiliates and subsidiaries. Schedules 5, 6 and 38 among the
parties relate to a Master Lease Agreement dated May 28, 1998,
as amended, inter alia, by the Amendment and Restatement of
Equipment Lease Agreement dated February 25, 1999, between
KeyCorp, as assignee of LaSalle National Leasing Corporation,
and NationsRent, Inc. The schedules and respective contractual
payment amounts are:
Schedule Quarterly Payment Amount
------------ ----------------------------
1 $ 428,896
5 48,599
6 190,037
38 252,041
Mr. Harrington explains that rent payments are due quarterly
under each of the Schedules: on January 1, April 1, July 1, and
October 1. Presently, the Debtors are in payment default under
the schedules by virtue of failing to remit the quarterly rent
payments due on January 1, 2002. The Debtors' next scheduled
rent payment under the KeyCorp Leases is due April 1, 2002,
which is more than 60 days after the commencement of these
cases. (NationsRent Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NETIA HOLDINGS: Netia Telekom Joins Affiliates in Arrangement
-------------------------------------------------------------
Netia Holdings S.A. (Nasdaq: NTIAQ, WSE: NET), Poland's largest
alternative provider of fixed-line telecommunications services,
said that the court in Warsaw yesterday opened an arrangement
proceeding with respect to Netia Telekom S.A., one of its
subsidiaries, following Netia Telekom's motion filed on February
20, 2002, with a deadline for verifying creditors' claims set
for May 20, 2002.
As previously announced, filings for opening of arrangement
proceedings were also made on February 20, 2002 by Netia
Holdings S.A. and another of its subsidiaries, Netia South Sp. z
o.o. By April 29, 2002, an expert appointed by the same court is
required to submit his opinion to the court on detailed
questions formulated by the court concerning whether Netia
Holdings S.A. qualifies for arrangement proceedings. The hearing
for Netia South Sp. z o.o. to determine whether to open its
arrangement proceeding is scheduled by the court for May 7,
2002.
The arrangement proceedings for Netia Holdings S.A., Netia
Telekom S.A. and Netia South Sp. z o.o. are occurring in the
context of the Restructuring Agreement reached on March 5, 2002
with Netia's bondholders and certain of its creditors.
According to DebtTraders, Netia Holdings SA's 13.50% bonds due
2009 (NETH09PON2) are quoted at a price of 18. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09PON2
for real-time bond pricing.
ONVIA.COM INC: Falls Below Nasdaq Continued Listing Standards
-------------------------------------------------------------
Onvia.com, Inc. (Nasdaq: ONVI), helping businesses secure
government contracts and government agencies find suppliers
online, announced its first quarter financial results for the
period ended March 31, 2002.
Financial Results
B2G Network Revenue
-- B2G network revenue grew to $1.6 million in the three
months ended March 31, 2002, compared to $282,000, an increase
of 455%, and $1.3 million, an increase of 25%, for the quarters
ended March 31, 2001 and December 31, 2001, respectively. Total
revenue for the three months ended March 31, 2001 includes $11.6
million from discontinued products and businesses.
Loss from Operations Before Other Charges
-- Loss from operations before other charges for the first
quarter was $3.4 million compared to $13.6 million for the same
period in 2001.
Net Loss
-- Net loss for the first quarter was $19.9 million
compared to $44.0 million for the same period in 2001. Net loss
for the three months ended March 31, 2002 and 2001 include a
$16.5 million charge for a change in accounting principle and a
$24.5 million restructuring charge, respectively.
Earnings per Share
-- On a per share basis, the company reported a quarterly
net loss of $0.26 compared to a net loss of $0.52 for the same
period in 2001.
-- On a per share basis, the company reported a quarterly
loss before other charges of $0.04 compared to a loss of $0.16
for the same period in 2001.
Adjusted Net Loss
-- Adjusted net loss includes the impact of new accounting
guidance for goodwill as if it had been adopted in January 2001.
Net loss for the period ended March 31, 2001, adjusted for
goodwill amortization of $3.7 million, was $0.48 per share.
The company's other financial metrics remained strong. The
company finished the quarter with $74.1 million in cash, prior
to the payment of its declared cash distribution of $0.39 per
share. Cash on hand decreased due to net loss from operations,
severance and idle facilities payments of $2.3 million, and the
prepayment of Onvia's Directors and Officers insurance during
the first quarter. Deferred revenue from paid subscriptions was
$2.6 million at the end of the first quarter. The company
recognizes deferred revenue evenly over the term of the paid
subscription.
The company's non-financial metrics -- subscribing suppliers,
average monthly subscription price and government bids -- are on
track to reach the company's projections of operating cash flow
profitability. Subscribing suppliers grew to more than 25,750
from 24,200 in the fourth quarter of 2001, an increase of 6
percent. The average monthly new subscription price for the
first quarter was $24, consistent with the prior quarter. Bids
through the system grew to over 60,000 in the first quarter, up
from 46,600 bids in the prior quarter, an increase of over 29%.
"With the final phase of our corporate restructuring behind us
in 2001, our first quarter focus was on improving product
quality, providing superior customer service, maintaining tight
cost controls, and enhancing shareholder value," stated Mike
Pickett, Onvia's chairman and chief executive officer. "These
initiatives will be the cornerstones of our organization and,
consequently, our first quarter results reflect a 25% increase
in revenues and a 33% decrease in operating expenses from the
fourth quarter of 2001; promising achievements on our path to
profitability. Also, over the past nine months, we examined the
cash requirements of our new business model and explored
alternatives for increasing shareholder value. As a result of
this activity, the Board of Directors determined that the
company was over capitalized, and authorized a cash distribution
of $0.39 per share to its shareholders. This distribution goes
ex-dividend on May 6, 2002. After the distribution the company
will retain in excess of $40 million in cash which should allow
us to achieve projected cash flow profitability while
maintaining a strong balance sheet."
In addition, the company adopted the new accounting requirements
for goodwill, which became effective in 2002. The company has
incurred a non-cash charge of $16.5 million to write-down its
existing goodwill as a result of the new accounting requirements
which eliminates all goodwill from the company's balance sheet.
This charge has been reflected as a cumulative change in
accounting principle in its March 31, 2002 financial statements.
Also, the company continues to pursue sublease options to
decrease or eliminate the 79,000 square feet of idle office
space currently under lease through 2010. The timing of the
company's achievement of cash flow profitability is dependent
on, among other things, its ability to sublease these idle
office space leases. If the company is unable to eliminate these
idle lease costs, operating cash flow profitability may be
delayed until the second quarter of 2003.
The company was advised by NASDAQ that it has begun enforcing
compliance with its minimum bid price requirement, effective
January 2, 2002. On February 14, 2002, the company received an
initial warning letter from NASDAQ that the price of the
company's common stock had closed below the minimum $1.00 per
share listing requirement for 30 consecutive trading days and
that the 90-calendar day grace period had begun. On May 15,
2002, the company will enter the appeal phase of the delisting
process, which could take up to 90 days. The company also has
the option of applying for SmallCap listing. If approved, this
action could defer delisting into early 2003. Additionally,
Onvia's Board of Directors is considering other actions, such as
recommending to its shareholders a reverse stock split, in order
to maintain its NASDAQ listing.
Onvia.com, Inc. helps businesses secure government contracts and
government agencies find suppliers online. Onvia assists
businesses in identifying and responding to bid opportunities
from more than 50,000 government purchasing offices in the $600
billion federal, state, and local government marketplace. Onvia
also manages the distribution and reporting of requests for
proposals and quotes from more than 400 government agencies
nationwide. The size and strength of Onvia's network allows
suppliers and agencies to find better matches quickly, saving
time and money. For more information, contact Onvia.com, Inc.:
1260 Mercer St, Seattle, WA 98109. Tel: 206-282-5170, fax:
206/373-8961, or visit http://www.onvia.com or email
InvestorRelations@onvia.com
PACIFIC GAS: Court Approves Debtor's Disclosure Statement
---------------------------------------------------------
Pacific Gas and Electric Company issued the following statement
after the U.S. Bankruptcy Court approved its disclosure
statement:
"The approval of the disclosure statement is a significant
milestone as the case moves forward in the bankruptcy process.
PG&E remains confident that it has the only solution that
restores the utility's investment-grade credit rating and allows
the State to exit the power buying business."
Also in Court yesterday, PG&E questioned whether the California
Public Utilities Commission (CPUC) had the necessary authority
to submit and agree to be bound by the alternative plan of
reorganization it filed last week. The CPUC had earlier
indicated to the Bankruptcy Court that it had the authority to
submit a binding plan and would do so by the Court's deadline.
However on April 11, responding to a legal challenge by the
Foundation for Taxpayers and Consumer Rights (FTCR) that it did
not have the authority to propose an alternative plan, the CPUC
said it would open a proceeding to consider the rate impacts of
its plan of reorganization in order to give interested parties
an opportunity to comment. On April 17, two days after the CPUC
filed its alternative plan, it told the California Supreme Court
the FTCR charge should be dismissed because the Commission
planned to hold the public hearings and give parties an
opportunity to challenge its alternative plan. And in fact on
April 22, the CPUC opened the proceeding to hold a public
hearing.
PG&E indicated to the Bankruptcy Court that it believes these
inconsistencies need to be resolved before the CPUC's
alternative plan can be allowed to move forward.
PACIFICARE HEALTH: AM Best Views Facility Extension Positively
--------------------------------------------------------------
A.M. Best Co. views positively the agreement between PacifiCare
Health Systems, Inc., Santa Ana, California, and its lenders to
extend its credit facility of $735 million by two years beyond
its original maturity date in January 2003.
Essentially, the agreement is subject to the repayment of $250
million of existing debt by year-end 2002. A.M. Best believes
the company will be able to raise the required $250 million from
its operating cash flows, supplemented by alternate funding,
such as the use of an equity line put in place in the second-
half of 2002. This development considerably reduces refinancing
pressure over the medium term.
Nevertheless, significant concerns remain. They relate to
PacifiCare's recovery from the earnings decline, which began in
the third quarter of 2000, stabilization of provider
relationships, continuing high financial leverage and
uncertainties related to the suit recently filed by the Texas
attorney general.
A.M. Best acknowledges that PacifiCare has made great strides in
stabilizing provider relationships by reducing capitated
arrangements on the hospital side, and the risk related to
future shifts is mitigated by lessons learned from past
experience. Earnings will most likely improve as pricing for the
January 2003 renewals reflect a good estimate of future claims
cost.
A significant challenge for the medium term is the execution of
a much-needed shift in product mix. Declines in one of
PacifiCare's core product lines, Medicare+Choice, remains to be
offset by the growth of profitable commercial HMO business and
the recently introduced PPO and Medicare Supplement products.
Another concern relates to PacifiCare's financial flexibility.
Although a mid-term solution to the refunding of debt due in
January 2003 has been found, it has not been without cost. The
new facility calls for a 50 basis point increase in its interest
rate. Additionally, the company's total debt to total capital
remains above the norm for managed care organizations, and a
senior note for $88 million is due in September 2003.
In 2001, a $100 million capital infusion was required for the
Texas operation to offset losses and cover fines and penalties.
Further, the Texas attorney general is suing PacifiCare for
unspecified damages, alleging it was slow to pay medical claims
to three physician groups, thus forcing them into bankruptcy.
A.M. Best recognizes PacifiCare's strengths stemming from its
very good market position, recognition of its Secure Horizons
brand in health care for seniors and its production of positive
operating cash flow throughout its disruptions. Nonetheless, due
to the continuing concerns, the ratings remain unchanged.
PacifiCare is one of the nation's largest health care services
companies, serving approximately 3.5 million members.
A.M. Best Co., established in 1899, is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit A.M. Best's Web site at
http://www.ambest.com
PHOENIX GOLD: Fails to Meet Nasdaq SmallCap Listing Criteria
------------------------------------------------------------
Phoenix Gold International, Inc. (Nasdaq: PGLD) reported net
earnings of $85,000, for the second quarter of fiscal 2002 which
ended March 31, 2002 as compared to a net loss of $157,000, in
last year's second quarter. Revenue for the second quarter of
fiscal 2002 was $8.0 million, an increase of 34% from revenue of
$6.0 million in the second quarter of fiscal 2001.
For the six months ended March 31, 2002, the Company reported
net earnings of $91,000, versus a net loss of $151,000 for the
comparable period last year. Revenue for the six months ended
March 31, 2002 increased 29% to $14.9 million from $11.5 million
for the same period in 2001.
"For the third consecutive quarter, the Company increased sales
by more than 20%," stated Keith A. Peterson, Chairman, President
and Chief Executive Officer. "It is very encouraging to achieve
these results given the world-wide economic environment. We
have begun to realize the benefits of the strategies implemented
over the last several quarters through targeting new markets and
distribution channels, developing new products, expanding
product-lines, and reorganizing our sales and marketing
activities."
"We began shipping several new products during the second
quarter, including new digital mono-block car audio amplifiers,"
continued Mr. Peterson. "Further, we are nearing the completion
of several new product development activities, including our new
ZR series of professional sound amplifiers and additional models
of the Titanium series of car audio amplifiers. We expect to
begin to ship these products during the next two quarters."
The Company also provided the following information on its
second quarter and outlook for the remainder of fiscal 2002:
Domestic sales increased $1.8 million, or 38%, to $6.5 million,
as a result of a 36% increase in sales of electronics, 77%
increase in sales of speakers and a 16% increase in sales of
accessories. Phoenix Gold and AudioSource branded products and
OEM products contributed to the increase. Sales of electronics
to a significant customer increased 156% from a year ago. The
amount and timing of purchase orders from this customer may
fluctuate from quarter to quarter. International sales
increased 21% to $1.5 million. Sales increases were achieved in
Asia, Europe and other significant international markets. The
Company expects the domestic market to remain challenging due to
the current economic environment and competition in the market
for the placement of products. Sales of AudioSource products and
sales of new Phoenix Gold and Carver Professional products are
expected to offset the expected lower sales of older products.
The Company also renewed its bank revolving line of credit
agreement during the second quarter. The line of credit
provides for $3.5 million of potential borrowings at the bank's
prime rate.
The Company also announced that it had adopted during the second
quarter Emerging Issues Task Force guidelines for accounting for
consideration given by a vendor to a customer or a reseller of
the vendor's products. These guidelines require the Company to
classify certain allowances given to customers as a reduction in
sales rather than a selling expense. Net sales and selling
expense amounts reported in prior periods have been reclassified
to conform to the current presentation. The reclassification
had no effect on previously reported operating income (loss),
net earnings (loss) or shareholders' equity.
Phoenix Gold also reported that the Company remains out of
compliance with the market value of public float requirement for
continued listing on the Nasdaq SmallCap Market. On February
15, 2002, the Company reported that the Nasdaq Stock Market,
Inc. had notified the Company that its common stock had failed
to maintain a minimum market value of publicly held shares of $1
million over the last 30 consecutive trading days as required
for continued listing on the Nasdaq SmallCap Market. The
Company was provided until May 15, 2002 to regain compliance
with this rule or request a hearing with the Nasdaq Listings
Qualifications Panel.
"The Board of Directors continues to believe that the current
trading price for our shares of common stock does not fairly
reflect the value of our enterprise," commented Mr. Peterson.
"We remain optimistic, however, given our sales increases over
the trailing four quarters and our return to profitability, that
the future trading price may more appropriately reflect the
value of Phoenix Gold." Mr. Peterson also noted that the
Company's book value per share was more than double the current
trading range.
Phoenix Gold International, Inc. designs, manufactures, markets
and sells innovative, high quality, high performance
electronics, accessories and speakers for the audio market. The
Company sells its products under the brand names Phoenix Gold,
Carver Professional and AudioSource. The Company's products are
used in car audio, professional sound and home audio/theater
applications.
POLAROID CORP: Seeks Okay to Assign Contracts to Equity Partners
----------------------------------------------------------------
As part of the One Equity Partners Purchase Agreement, OEP
agrees to assume certain liabilities. For this to be so,
Polaroid Corporation and its debtor-affiliates ask for the
Court's authority to assume and assign the Assumed Contract to
OEP or the Successful Bidder.
Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
LLP, in Wilmington, Delaware, proposes these procedures to
effectuate the assumption and assignment of the Contracts:
(a) On or before May 15, 2002, the Debtors will provide the
Assignment Notice to the non-debtor parties to the
contracts on the Preliminary Assumed Contracts List of:
-- the Debtors' intention to assume, assign and transfer
such designated Contracts to Purchaser;
-- the amount, if any, required to be paid to cure any
monetary default related to each such Contract;
-- the Purchaser's right to amend or modify the list of
Assumed Contracts as provided in the Sale Procedures
Order and in the Purchase Agreement; and
-- such other matters as requested by the Purchaser.
(b) The non-debtor party to the Assumed Contract has until
June 4, 2002 to object to the assumption and assignment
of the Assumed Contract or Cure Amount and must state in
its objection specifically what cure it believes is
required;
(c) If an objection is not timely received, the Assumed
Contract is deemed assumed and assigned to the Purchaser
or the Successful Bidder, on the Closing Date. Moreover,
the Cure Amount will be fixed at the amount set in the
Debtors' Cure Notice, notwithstanding anything to the
contrary in any Assumed Contract or other document.
Thereafter, the non-debtor party to the Assumed Contract
is:
-- forever barred from asserting any other claim
against the Debtors or the Purchaser with respect to
the Assumed Contract arising prior to the assignment
and that any additional amounts are due or defaults
exist, or conditions to assignment must be satisfied
under such Assumed Contract; and
-- deemed to have waived and released any right to
assert an objection to the proposed assignment of the
Assumed Contract or the Cure Amount, including on the
basis of lack of consent to the assumption and
assignment;
(c) If an objection is timely received, a hearing with
respect to the objection may be held at:
-- the Sale Hearing or
-- at such other date as the Bankruptcy Court may
designate;
(d) If the Assumed Contract subject to an objection is
assumed and assigned, the Cure Amount asserted by the
objecting party will be deposited with and held in a
separate account by the Purchaser or such other person
as the Court may direct pending further order of the
Court or mutual agreement of the parties.
To provide quicker resolution of objections, the Debtors request
Judge Walsh to authorize the Purchaser and the Debtors to settle
any disputed Cure Amounts with the relevant non-debtor party to
any Assumed Contract without approval of the Bankruptcy Court or
notice to any party.
Mr. Galardi asserts that the assumption and assignment of the
executory contracts and unexpired leases is warranted under
Section 365(f)(2) of the Bankruptcy Code because OEP will cure
the defaults prior to their assumption and assignment. Also, the
Debtors promise to provide facts during the Sale Hearing to show
the financial capability, experience in the industry, and
willingness and ability to perform under the Assumed Contracts.
(Polaroid Bankruptcy News, Issue No. 15; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
RAILAMERICA: S&P Rates $475M Sr. Secured Credit Facilities at BB
----------------------------------------------------------------
Standard & Poor's raised its long-term corporate credit rating
on RailAmerica Inc., citing the rail operator's improved
financial flexibility. The senior secured debt rating was raised
to 'BB' from 'BB-', and the subordinated debt rating was raised
to 'B' from 'B-'. Standard & Poor's also assigned its 'BB'
rating to $475 million in senior secured credit facilities
issued by RailAmerica Transportation Corp. and guaranteed by
RailAmerica Inc. Local and Foreign Currency Ratings are assigned
at 'BB-' and 'BB+' respectively. Ratings outlook is stable.
The rating actions reflected the company's successful expansion
of operations and improved financial profile. Nevertheless, debt
leverage remains elevated, in the 70% debt to capital area, and
management's active acquisition strategy carries potential for
additional debt financing.
The new bank lines, a $100 million 6-year revolving credit
facility and a $375 million 7-year term loan, were rated one
notch above the corporate credit rating. The loans are secured
by substantially all North American assets. Under Standard &
Poor's bankruptcy scenario, the collateral should retain
sufficient value to assure complete recovery by the secured
lenders.
RailAmerica, with $369 million of revenues in 2001, has a
geographically diverse business profile. The firm owns a large
number (currently 57) of independent local freight railroads in
North America (66% of revenues) and larger, regional railroads
in Australia (27% of revenues) and Chile. RailAmerica is by far
the largest "short line" (regional and local) rail operator in
North America and the largest customer of the large Class I
railroads.
In North America, about 77% of RailAmerica's rail traffic
interchanges with Class I railroads. Typically, a RailAmerica
line is the only rail carrier directly serving its customers,
usually under contracts specifying the rate per carload (indexed
for inflation) and/or the number of carloads to be hauled in a
given period. Competition, which varies significantly, is
primarily with trucks and, to a lesser extent, barges.
RailAmerica benefits from the operating flexibility of mostly
nonunion employees. Diverse commodities are hauled, with modest
concentrations in coal, forest products, agricultural products,
and chemicals. Despite the substantial dispersion of rail
properties, management has achieved respectable efficiencies. In
2001, operating ratios (operating expenses divided by revenues)
in North America and Australia were solid at 75.5% and 78.3%,
respectively, better than the ratio for most large North
American railroads.
At Dec. 31, 2001, RailAmerica's debt to total capital was a high
70%. This is down materially from 82% at the end of 2000, and
management has expanded the equity base to bolster financial
flexibility. Internal cash generation has improved with the
successful integration of acquisitions, and EBITDA coverage of
interest is expected to run 2.5 times to 3.5x.
Outlook
Major acquisitions have been successfully integrated, and
RailAmerica's internal cash generation should support current
ratings. Further small- and medium-sized acquisitions are
anticipated, and management is expected to finance large
acquisitions with a mix of debt and equity to preserve current
credit quality.
RIVERWOOD INT'L: S&P Affirms B Credit Rating Over Increased Debt
----------------------------------------------------------------
On April 22, 2002, Standard & Poor's affirmed its 'B' corporate
credit rating on paperboard manufacturer Riverwood International
Corp. Standard & Poor's also rated the company's new $250
million senior secured term loan due 2007. The proceeds will be
used to redeem Riverwood's outstanding $250 million 10-1/4%
senior unsecured notes. At the same time, Standard & Poor's
lowered its rating on the company's existing $635 million senior
secured bank credit facility and lowered its senior unsecured
debt rating on the company. Rating outlook is stable.
The rating actions reflected a shift in the composition of
Riverwood's debt following this transaction, which substantially
increased the amount of secured debt. Consequently, the
company's bank loan rating is the same as its corporate credit
rating and not one notch higher as was previously the case.
Although Standard & Poor's believes there is a strong
possibility of substantial, or perhaps even full, recovery of
principal in the event of default or bankruptcy, its level of
confidence in full recovery is not sufficient to warrant the
bank loan rating being one notch higher than the corporate
credit rating. Although Standard & Poor's recognizes the
company's leading share in relatively stable paperboard markets
and competitive cost position, the value of the collateral,
including accounts receivable, inventory, mills, and converting
facilities, under a distressed scenario may not fully cover the
increased amount of secured debt.
The rating on Riverwood's senior unsecured debt is now two
notches below the company's corporate credit rating rather than
one notch because of the significant increase in the outstanding
and potential senior secured debt that would rank ahead of
senior unsecured creditors in the event of bankruptcy.
The ratings reflect Riverwood's average business position as a
paperboard and packaging systems manufacturer, and an aggressive
financial profile. The company primarily produces coated
unbleached kraft (CUK), a value-added paperboard used in
beverage, food, and toy packaging, plus some commodity
containerboard. Riverwood has about a 50% share of the CUK
market, its only other significant competitor being MeadWestvaco
Corp. CUK demand is expected to grow gradually in conjunction
with rising beverage consumption, particularly overseas.
However, there is some threat from competing paperboard grades
and substitutes such as plastics. Weak containerboard markets
have negatively affected recent performance, although soft-drink
demand has rebounded and CUK pricing has held fairly well.
Nonetheless, there is excess production capacity in CUK and in
other paperboard grades, so future pricing trends remain
uncertain.
The company's cost position has improved significantly during
the past few years following a restructuring of operations. As a
result, operating margins (before depreciation and amortization)
have improved to the mid-20% area from the mid-teens. Additional
modest improvement in operating profitability is expected as the
company continues to reduce costs and improve its product mix by
shifting linerboard production to higher margin products.
Riverwood remains highly leveraged as a result of the debt-
financed acquisition of the company by Clayton, Dubilier & Rice
in 1996 with debt now totaling about $1.6 billion. Total debt to
EBITDA is expected to remain in the 5 times to 6x range, with
EBITDA covering interest expense about 1.6x. The company's
substantially undrawn revolving credit facility provides
flexibility; however, the company faces meaningful term loan
amortization beginning in 2003.
The company's amended $885 million bank facility, which is
secured by substantially all of the company's assets, consists
of a $300 million revolving credit facility due 2006, a $335
million term loan maturing in 2006, plus the new $250 million
term loan B maturing in 2007.
Outlook
Improved performance resulting from ongoing cost reductions,
greater operating efficiency, and favorable product mix, plus
modest debt reduction, should result in credit quality measures
consistent with the ratings.
SAFETY-KLEEN CORP: Wants Fifth Extension of Exclusive Periods
-------------------------------------------------------------
Safety-Kleen Corp., and its debtor-affiliates, under Mr.
Rittenmeyer's stewardship, have been working to finalize the
business plan that will form the basis of a reorganization plan.
As part of the reorganization, the Debtors have worked on:
(a) obtaining additional postpetition financing by
maintaining and increasing financing up to an aggregate
principal amount not to exceed $200,000,000 consisting of (A) a
$75,000,000 revolving credit and letter of credit facility and
(B) a $125,000,000 credit and letter of credit facility, which
financing was approved by the Court on March 20, 2002;
(b) negotiating the sale of substantially all of the
assets and certain equity interests of the Debtors' CSD to Clean
Harbors, Inc. and finalizing the asset purchase agreement and
the schedules to that agreement;
(c) streamlining the Debtors' operating and financial
systems and controls, including improvements to the company's
information technology and transportation management systems by
entering into outsourcing agreements thus maximizing the
company's efficiency and the cost-effectiveness of its
operations;
(d) resolving the multi-billion dollar claims that
Laidlaw, Inc. and its affiliates, on the one hand, and the
Debtors, on the other, have asserted against each other, in
accordance with the Mediation Protocol approved by the Delaware
and the Western District of New York Bankruptcy courts;
(e) pending litigations against PricewaterhouseCoopers
LLP, PricewaterhouseCoopers LLP (Canada), National Union Fire
Insurance Company of Pittsburgh, PA and American Home Assurance
Company; and
(f) the disallowance, reduction, or other resolution of
various substantial prepetition and administrative claims
asserted against one or more of the Debtors, all of which could
impact the feasibility of any reorganization plan for the
Debtors.
The Debtors assure Judge Walsh they have "spent tremendous
efforts" on these issues, which have allowed them to better
focus their attention on formulating a reorganization plan. The
Debtors thus request that the Court grant them a six-month
extension of the Exclusive Periods to continue facilitating the
resolutions of some of the outstanding issues and focus on
formulating a reorganization plan. Despite their size and
complexity, the Debtors' reorganization efforts have been
proceeding aggressively and the Debtors have made tremendous
progress in these cases. Indeed, they have made remarkable
progress with respect to stabilizing their business,
streamlining operations, divesting of sections of operations
which were not as profitable, and resolving the many difficult,
and at times contentious, issues that necessarily must be
addressed during these chapter 11 cases.
Section 1121(b) of the Bankruptcy Code provides for: (a) an
initial 120-day period after the Petition Date within which the
Debtors have the exclusive right to file a reorganization plan
or plans in their cases; and (b) an initial 180-day period after
the Petition Date within which the Debtors have the exclusive
right to solicit and obtain acceptances of any reorganization
plan or plans the Debtors file during the Plan Proposal Period.
The Debtors have received four previous extensions of these
periods, with the latest plan period expiring on April 30, 2002
and the Solicitation Period on June 30, 2002. By this Motion the
Debtors request entry of an order under 11 U.S.C. 1121(d)
further extending the Exclusive Periods for approximately six
months, through and including October 31, 2002 and December 31,
2002, respectively.
The Exclusive Periods were intended to afford chapter 11 debtors
a full and fair opportunity to rehabilitate their business and
to negotiate and propose a reorganization plan -- without the
deterioration and disruption of their business that might be
caused by the filing of competing reorganization plans by
nondebtor parties.
Here, the Debtors' Plan Proposal Period is set to expire on
April 30, 2002, and the attendant Solicitation Period is set to
expire on June 30, 2002. Given the size and complexity of their
cases and in light of certain recent developments -- which the
Debtors are careful not to talk about -- the Debtors need
additional time to determine the most effective way to maximize
the value of their estates for the benefit of all creditors; to
formulate, negotiate and file a plan that achieves this goal;
and to solicit acceptances of that plan.
The Debtors have made significant progress towards
rehabilitation during the past few months, such as streamlining
operations, including the licensing and installing of financial
software to improve their operation processes and reduce current
and future operations costs; disposing of certain significant
assets and establishing an auction process to divest themselves
of the Chemical Services Division; and seeking and obtaining the
approval of additional post-petition financing. The Debtors
believe that they will need approximately an additional six
months to propose a reorganization plan and to solicit its
acceptances.
Judge Walsh will convene a hearing on at 9:30 a.m. on May 9,
2002, in Wilmington to entertain the Debtors' request and
consider any objections. Accordingly, the Debtors' exclusive
period to propose and file a plan is extended through the
conclusion of that hearing. (Safety-Kleen Bankruptcy News, Issue
No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900)
SAFETY-KLEEN: Clean Harbors' Due Diligence Nearing Completion
-------------------------------------------------------------
Clean Harbors, Inc. (Nasdaq: CLHB), a leading provider of
environmental services throughout the United States and Puerto
Rico, announced results for the first quarter ended March 31,
2001.
The Company reported first-quarter revenues of $53,319,000,
compared with $51,818,000 for the same quarter of 2001, an
increase of $1,501,000. Clean Harbors recorded a net loss of
$242,000 for the first quarter of 2002, compared with a net loss
of $1,032,000 for the first quarter of 2001, narrowing the first
quarter loss by nearly $800,000 year over year. EBITDA for the
quarter, year over year, increased 20% from $3,587,000 to
$4,287,000.
Alan S. McKim, Chairman and Chief Executive Officer, stated,
"Despite the continuing economic downturn and our industry's
historically slow first quarter we are pleased to report a three
percent year-over-year revenue increase, reflecting growth in
our CleanPack business and the conclusion of field service
activities from the prior quarter. These results are
particularly positive in light of the limited number of
emergency response events we recorded during the quarter. We are
encouraged that we have been able to increase our business in a
period of economic uncertainty."
"The highlight of the first quarter was the announcement of our
intention to purchase the Chemical Services Division of Safety-
Kleen Corp. (CSD/SK) for $46.3 million in cash and the
assumption of approximately $265 million in environmental
liabilities," continued McKim. "We are excited about the
prospects of this combination and the opportunity to acquire
these highly valuable assets. If we are successful in completing
the transaction, we expect to triple our revenue, significantly
expand our geographic footprint and become the largest operator
of hazardous waste disposal facilities in North America."
Safety-Kleen Corp. is currently operating under Chapter 11
protection in U.S. Bankruptcy Court for the District of
Delaware. Clean Harbors' acquisition of CSD/SK is subject to the
approval of the Bankruptcy Court as well as subject to various
regulatory approvals, satisfactory completion of the due
diligence process and obtaining adequate financing. The
acquisition does not require shareholder approval by either
company.
"We are nearing completion of the due diligence process," McKim
said. "We also have moved ahead in our regulatory efforts by
submitting our Hart-Scott-Rodino filing and meeting with the
Department of Justice. On the financing front, we have engaged
Deutsche Banc Alex Brown as our investment banker in the
transaction and continue to meet with potential lenders. We are
confident in our ability to secure the financing necessary to
complete the transaction."
"Looking ahead, our focus will be on producing steady results as
we progress toward the approval and closing of the Safety-Kleen
transaction," McKim concluded. "Anticipating the integration of
CSD/SK, we are readying all of our business processes and
enhancing our state-of-the-art software and systems, including
the roll-out of Microsoft's .NET technology. Our goal is to
begin to realize the synergies between our two companies as
rapidly as possible once the deal is approved. We continue to
expect to close the transaction during the third quarter."
Clean Harbors, Inc. through its subsidiaries provides a wide
range of environmental and waste management services to a
diversified customer base including a majority of the Fortune
500 companies, thousands of smaller private entities and
numerous governmental agencies. Within its national footprint,
the Company currently has service and sales offices located in
26 states and Puerto Rico, and operates 11 waste management
facilities strategically located throughout the country. For
more information, visit our Web site at
http://www.cleanharbors.com
SCIENTIFIC GAMES: S&P Places B+ Credit Ratings on Watch Positive
----------------------------------------------------------------
On April 22, 2002, Standard & Poor's placed the 'B+' corporate
credit, senior secured debt, and subordinated debt ratings for
Scientific Games Corp. on CreditWatch with positive
implications.
The CreditWatch listing reflects the company's continued solid
operating results during the first quarter ended March 31, 2002
and the expectation that this trend will continue in the near
term.
In addition, the company's recent filing of a registration
statement for an approximately $100 million equity offering,
with proceeds expected to be used to reduce debt, increases
financial flexibility and materially improves pro forma credit
statistics. New York, New York-based Scientific Games had more
than $400 million of total debt outstanding as of March 31,
2002.
Standard & Poor's will evaluate management's future operating
and financial strategies, in addition to the proposed equity
offering, before resolving the CreditWatch listing.
SILGAN HOLDINGS: S&P Assigns BB- Ratings After Debt Transactions
----------------------------------------------------------------
On April 23, 2002, Standard & Poor's revised its outlook on
Silgan Holdings Inc. to positive from stable. At the same time,
Standard & Poor's affirmed its 'BB-' long-term corporate credit
rating on the company. In addition, Standard & Poor's assigned
its 'BB-' rating to Silgan's proposed $200 million 9% senior
subordinated debentures due 2009. The debentures are expected to
be placed under Rule 144A with registration rights.
Standard & Poor's also assigned its rating to Silgan's proposed
$1.05 billion senior secured bank facility, based on preliminary
terms and conditions. Proceeds are expected to be used to
refinance existing bank debt. Stamford, Conn.-based Silgan is a
major North American rigid consumer goods packaging producer.
The outlook revision is based on the improving trend in Silgan's
financial profile and added financial flexibility following the
completion of the proposed debt transactions, supported by a
solid business profile. Although management will likely maintain
an aggressive financial posture as it pursues growth, it is not
expected to take actions that would materially alter the longer-
term trend towards credit profile improvement.
The ratings reflect Silgan's average business position and
steady cash flow generation, offset by a narrow product mix,
limited geographic diversity, and aggressive debt leverage. The
firm's business mix is about 75% in metal food cans, and 25% in
plastic bottles and containers primarily for personal care
products. Silgan enjoys a dominant 47% volume share in the metal
food cans segment, twice the share of each of the other two
competitors. Although end markets are mature and competitive,
they are relatively stable. However, they are subject to some
seasonal variations in food production and consumer buying
habits. A significant portion of Silgan's metal container output
is produced under long-term supply contracts that include
meaningful protection against raw material price movements.
Further, management has a good track record of purchasing
complementary businesses at reasonable valuations and
successfully integrating operations.
In the future, earnings will benefit from the increasing shift
in product mix towards higher-margin plastic packaging products,
and improved pricing and value-added features (such as easy-open
ends) in metal food containers. The company is expected to
generate adequate free cash flows after meeting working capital
requirements and capital spending needs, which are then expected
to be utilized towards growth initiatives or debt reduction. As
a result, EBITDA interest coverage and funds from operations to
total debt (adjusted for capitalized operating leases) are
expected to improve somewhat from the 3.1 times and 16% area,
respectively, levels appropriate for the current rating.
Financial flexibility is aided by sufficient availability under
the proposed credit facilities and the absence of meaningful
debt maturities until 2008, assuming the debt transactions are
completed as proposed. In addition, substantially increased
float following the recent secondary equity offering improves
the firm's access to capital markets, if and when required.
Silgan's proposed $1.05 billion bank facility includes a $250
million uncommitted term loan facility. The committed credit
facility consists of a $400 million six-year revolving credit
facility, a $100 million A-term loan due 2008, and a $300
million B-term loan due 2008. The bank facility is rated the
same as the corporate credit rating and is secured by a first
priority perfected security interest in all domestic assets and
stock of domestic subsidiaries. Silgan's domestic subsidiaries
also guarantee the obligations. While this facility derives
strength from its secured position and a moderate subordinate
cushion, it is not clear, based on Standard & Poor's simulated
default scenario, that the distressed enterprise value would be
sufficient to fully cover the facility. In a simulated default
scenario, Standard & Poor's assumes that the loan balance would
be fully drawn and that Silgan's operating results would be
significantly depressed.
Outlook
The ratings could be raised within the intermediate term, if
Silgan continues to improve its financial profile, while
balancing its growth objectives. Better pricing and improved
sales mix in metal cans should gradually enhance Silgan's
profitability and cash flow generation.
SPHERA OPTICAL: Universal Access Withdraws Bid for Assets
---------------------------------------------------------
Universal Access Global Holdings Inc. (Nasdaq: UAXS) has taken
steps to withdraw its bid to acquire certain assets of Sphera
Optical Networks. Universal Access stated that a number of
critical conditions to its agreement with Sphera had not been
satisfied and that it had concluded that further efforts to
complete the transaction were unlikely to be successful.
Universal Access also indicated that it had begun steps to
terminate the interim financing it had provided to Sphera. The
bankruptcy court presiding over Sphera's reorganization
proceedings will be considering issues relating to the
termination of the financing and acquisition agreements later
this week.
Universal Access (Nasdaq: UAXS) specializes in
telecommunications procurement services for clients worldwide.
The company is dedicated to alleviating communication
bottlenecks by leveraging its proprietary databases and
multiple-vendor assets in combination with its strategically
deployed network interconnection facilities. By quickly
interconnecting the networks of competing global service
providers, Universal Access enables greater speed to revenue for
clients by timely and cost-effectively extending their networks
and maximizing their current assets. Universal Access Global
Holdings is headquartered in Chicago, Ill. For more information,
visit http://www.universalaccess.net
TELSCAPE INT'L: Trustee Has Until May 20 to Decide on Leases
------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware grants
the request of the Trustee in the chapter 11 cases of Telscape
International and its debtor-affiliates to afford him more time
to decide on unexpired leases. The Court gives the Trustee until
May 20, 2002 to elect whether he should assume, assume and
assign or reject the unexpired leases of nonresidential real
property of the Debtors.
Telscape International is a leading integrated communications
provider serving the Hispanic markets in the United States,
Mexico and Central America, offering local and long distance
telephone, internet and pre-paid calling card services. The
Company filed for Chapter 11 petition on April 27, 2001 in the
District of Delaware. Brendan Linehan Shannon at Young, Conaway,
Stargatt & Taylor and Victoria Watson Counihan at Greenberg
Traurig, LLP represent the Debtors in their restructuring
efforts.
TENNECO AUTOMOTIVE: Posts Improved Results in First Quarter
-----------------------------------------------------------
Tenneco Automotive (NYSE: TEN) said that the company's first
quarter 2002 performance improved significantly versus one year
ago with a reported net loss of $2 million, for the first
quarter of 2002, compared with a net loss of $31 million, in the
first quarter of 2001. More importantly, the company generated
$14 million in positive cash flow, before financing activities,
which was a $73 million cash flow improvement versus first
quarter 2001. The company also reduced its net debt by $11
million at quarter-end.
"We are pleased with an improved first quarter and particularly
with our momentum in North America as well as our continued
success in effectively managing cash," said Mark P. Frissora,
chairman and CEO, Tenneco Automotive. "We continue to make
steady progress on our key objectives of improving gross
margins, reducing working capital, and operating more
efficiently, which is reflected in our improving performance."
The company reported revenue of $809 million for the quarter,
down 6 percent versus $864 million in the first quarter of 2001.
EBITDA for the quarter was $61 million, compared with $43
million the previous year, a 42 percent improvement. Year-over-
year, working capital performance improved by $184 million and
capital spending was $2 million lower.
The first quarter 2002 results include a pre-tax non-accruable
restructuring expense of $1 million, pre-tax charges associated
with the company's renegotiation of its senior debt agreements
of $2 million and income from a tax benefit of $4 million. In
addition, the company incurred higher incremental aftermarket
changeover costs of $5 million in the first quarter of 2002
related to acquiring significant new aftermarket business. The
first quarter 2001 results included pre-tax restructuring
charges of $12 million, pre-tax environmental charges of $6
million and $2 million in charges associated with the company's
renegotiation of its senior debt agreements.
North America
"We are encouraged by our North American aftermarket performance
and the results we are seeing this quarter from expanding our
customer base and leveraging our premium products," Frissora
said. "In addition, our lean initiatives and Six Sigma in the
North American original equipment business drove improved
profitability."
North American original equipment revenue increased 5 percent
during the quarter to $341 million versus $324 million in the
first quarter of 2001. Excluding catalytic converter pass-
through sales, revenue decreased 1 percent. North American
aftermarket revenue increased 14 percent to $126 million from
$111 million one year ago.
North American EBIT increased to $19 million from a loss of $3
million in the first quarter of 2001. EBIT improvement was
driven by stronger aftermarket performance and lower
manufacturing and overhead costs. First quarter 2001 EBIT
included $8 million in restructuring charges and $1 million in
environmental charges.
Europe
"In Europe, we continue to face a struggling market for
replacement parts and expect to see improvement as we lower our
cost of doing business, reduce capacity in the aftermarket
exhaust business and fuel growth with new business and product
introductions," Frissora said. "We were also impacted this
quarter by slowing vehicle sales and launches of key platforms
with our components that were delayed until the second quarter."
The company reported European original equipment revenue of $207
million for the quarter, a 25 percent decrease over first
quarter 2001 revenue of $275 million. Excluding catalytic
converter pass-through sales, revenue would have decreased 14
percent. The 25 percent decrease in the company's European
original equipment revenue was the result of lower precious
metal prices (10 percent), lower currency exchange rates (5
percent), lower production volumes (9 percent) and delayed
platform launches with Tenneco Automotive products (1 percent).
The company's European aftermarket revenue decreased 12 percent
to $65 million, versus $74 million one year ago.
European EBIT was $5 million, down from $8 million in 2001. The
decline this quarter was the result of lower volumes in both the
original equipment and aftermarket businesses. First quarter
2001 EBIT included $2 million in restructuring charges, $5
million in environmental charges and $1 million in charges
associated with renegotiation of the company's senior debt
agreements.
Rest Of World
The company's Australian operations reported revenue of $26
million for the quarter, even with the first quarter of 2001.
In South America, the company reported revenue of $26 million,
compared with first quarter 2001 revenue of $36 million. The
sharp decline was primarily the result of worsening economic
conditions in Argentina and currency devaluations in Brazil and
Argentina of $7 million.
Revenue from the company's Asian operations was also flat year-
over-year at $18 million.
Combined EBIT for Australia, South America, and Asia was $3
million compared with $1 million in first quarter 2001. First
quarter 2001 EBIT included $2 million in restructuring charges
and $1 million in charges related to renegotiating the company's
senior debt agreements.
"While we see some positive upturns in our North American
markets, we remain cautiously optimistic given the global nature
of our business and our exposure to softer economies and slowing
vehicle sales in Europe and South America," Frissora said. "We
continue to be a cash-driven organization, focused on the areas
we can control and our long-term goal of debt reduction through
gross margin improvement."
2002 Annual Meeting
Tenneco Automotive will hold its annual meeting of stockholders
on Tuesday, May 14 at 10:00 a.m. CDT at the Peabody Hotel in
Memphis, Tennessee to, among other things, elect directors,
approve a new Tenneco Automotive equity incentive plan, and
report on the company's results. The company will provide a
simultaneous webcast of the annual meeting.
Tenneco Automotive is a $3.4 billion manufacturing company with
headquarters in Lake Forest, Illinois and 21,600 employees
worldwide. Tenneco Automotive is one of the world's largest
producers and marketers of ride control and exhaust systems and
products, which are sold under the Monroe(R) and Walker(R)
global brand names. Among its products are Sensa-Trac(R) and
Monroe(R) Reflex(TM) shocks and struts, Rancho(R) shock
absorbers, Walker(R) Quiet-Flow(TM) mufflers and DynoMax(R)
performance exhaust products, and Monroe(R) Clevite(TM)
vibration control components.
* * *
As previously reported, Standard & Poor's lowered its corporate
credit rating on exhaust systems and ride control products
manufacturer Tenneco Automotive Inc. to single-'B' from single-
'B'-plus due to the company's continuing poor operating
performance and high debt levels.
The outlook is negative. About $1.5 billion in debt is
outstanding at the Lake Forest, Illinois-based company.
"Despite extensive restructuring actions underway at the
company, intermediate term credit protection measures will
likely remain below levels factored into previous ratings, while
the debt burden will remain substantial," said Standard & Poor's
analyst Lisa Jenkins.
* * *
DebtTraders reports that Tenneco Automotive Inc.'s 11.625% bonds
due 2009 (TENCO1) are trading at around 78.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=TENCO1for
real-time bond pricing.
UNIFORET INC: Defaults on US Sr. Notes & Convertible Debentures
---------------------------------------------------------------
Uniforet Inc. announces that it has incurred a net loss of
C$56.5 million during its fourth quarter, compared with a net
loss of C$2.7 million for the same period in 2000.
Fourth quarter results included a non-recurring after tax
expense of $34.5 million representing essentially a write-down
in the asset value of the Port-Cartier pulp mill, which had
interrupted its operations for an undetermined period last
September 4 due to continued difficult global commercial pulp
market, and a non-recurring expense of C$15.5 million relating
to the increase of the valuation allowance of future income tax
assets.
For the year ended December 31, 2001, the net loss was C$127.6
million, compared with a net income of C$13.4 million for the
same period last year. Financial results for 2001 included non-
recurring expenses of C$98.1 million. In addition to the non-
recurring expenses charged to income during the fourth quarter,
an amount of C$52.0 million was charged to income for the second
quarter of 2001 after the 11.125% US senior notes, held by the
Company's wholly-owned subsidiary, 3735061 Canada Inc., were
taking as payment, by the hypothecary creditor. Furthermore, on
March 30, 2001, the holder of all Series 1 preferred shares
exchanged its 35,526,131 preferred shares of the Company for
5,921,022 Class A subordinate shares, resulting in a non-
recurring gain of C$3.9 million. Excluding non-recurring items
and the increase in the valutation allowance of future income
tax assets of C$15.5 million, the net loss for the year ended
December 31, 2001 amounted to C$29.6 million, compared with a
loss of C$17.1 million.
Also, the Company adopted the new recommendations of the
Canadian Institute of Chartered Accountants concerning foreign
currency translation. Under the new standard, the Company
recognizes in income the effect of foreign exchange fluctuations
on long-term assets and liabilities denominated in foreign
currencies, especially long-term debt. Previously, exchange
gains or losses on long-term monetary assets and liabilities
were deferred and amortized on the remaining useful life of the
related assets and liabilities. These changes were adopted
retroactively and the amounts presented for prior periods have
been restated accordingly. The Company charged an amount of
$6.9 million to its deficit as at December 31, 2000,
representing the deferred exchange loss as at that date on its
long-term debt denominated in US dollars. Furthermore, this
change increased the Company's financial expenses for 2001 by
C$11.3 million.
The meeting of the class of US Noteholders-creditors is still
suspended by Court order rendered on July 26, 2001 pursuant to
proceedings instituted by a few of the US Noteholders until
settlement of the composition of that class of creditors. The
hearing for those proceedings was held from December 3 to
December 21, 2001, and from January 28, 2002 to February 1,
2002, and pleadings were completed on March 15, 2002. The
Company is awaiting judgment. The six other classes of creditors
have approved the amended plan of arrangement. Pending the
decision that will set the future course of action, including
the potential taking of a vote by the US Noteholders-creditors
on the amended plan of arrangement and potential acceptance of
said plan, Uniforet has decided that it was preferable, under
the circumstances, to postpone the calling and holding of its
annual general meeting as well as the filing of its 2001 annual
report, including the audited consolidated financial statements
for the year ended December 31st, 2001 and auditors' report.
Uniforet's annual general meeting will be called, if
circumstance permits, as soon as reasonably practicable pursuant
to the acceptance of its amended plan of arrangement or, in any
event, as soon as Uniforet will deem it appropriate and useful
in the circumstances.
The accompanying consolidated financial statements for the year
ended December 31, 2001 have been compiled on the same basis as
for the consolidated financial statements for the year ended
December 31, 2000, using the going concern assumption. In
addition, these consolidated financial statements do not include
any value adjustment or reclassification of assets, liabilities
or operating results that may be appropriate given recent events
and pursuant to the implementation or the non-implementation of
a potential plan of arrangement with creditors or any other
reorganization plan.
SALES
For the fourth quarter of 2001, sales amounted to C$32.5
million, compared with C$48.1 million for the same quarter last
year. Lumber sales showed an improvement of 5.3% to C$31.4
million, due to increased woodchip shipments into open markets.
Pulp sales decreased significantly to C$1.1 million, compared
with C$18.3 million for the same period last year, as a result
of the pulp mill down time since February 16, 2001.
For the year ended December 31, 2001, sales were C$163.6
million, down by 10.6% compared with sales of C$183.0 million
for the same period of 2000. Lumber sales increased by 13.4% to
C$136.4 million due to increased woodchip shipments into open
markets and improved woodchip selling prices. Woodchip sales
accounted for 26.1% of sales in 2001, compared with 10.3% in
2000. In addition, lumber shipments totaled 295.0 million board
feet in 2001, compared with 341.2 million board feet in 2000,
while selling prices increased by 6.8% compared with the same
period last year. Pulp sales were C$27.2 million, while
shipments amounted to only 62,293 tons compared with 111,481
tons in 2000, as a result of the pulp mill down time and a drop
in selling prices of 22.5% compared with last year.
The operating loss for the fourth quarter of 2001 was C$1.8
million, compared with an operating income of C$1.8 million for
the same quarter last year. The operating income from the lumber
business amounted to C$0.5 million, compared with an operating
loss of C$1.2 million for the corresponding period. Sales rose
due to increased woodchip shipments, but production slowdown
resulting from a soft lumber market had an adverse impact on
volumes and production costs. The operating loss from the pulp
business reached C$2.3 million, compared with an operating
income of C$2.9 million for the corresponding period, as a
result of the mill's complete shutdown during the fourth quarter
of 2001.
The operating loss for fiscal 2001 was C$2.1 million, compared
with an operating income of C$1.1 million last year. Results of
both business units have varied inversely compared with last
year's results. The operating income from the lumber business
shows an improvement of C$16.5 million to C$7.8 million,
compared with an operating loss of C$8.7 million for the
corresponding period, due essentially to increased woodchip
shipments on open markets and improved woodchip and lumber
selling prices. The operating loss of the pulp business amounted
to C$9.9 million, compared with an operating income of C$9.8
million last year, as a result of the mill's complete shutdown
since February 16, 2001.
CASH POSITION
For the fourth quarter of 2001, C$5.5 million were provided by
operations, compared with C$5.0 million for the corresponding
period of 2000. In the fourth quarter, additions to fixed assets
were limited to C$1.0 million, compared with C$2.6 million for
the corresponding period of 2000.
For the year ended December 31, 2001, C$25.8 million were
provided by operations, due mainly to reduced receivables and
pulp inventory levels, compared with C$4.6 million provided by
operations for the corresponding period of 2000. Additions to
fixed assets were limited to C$3.7 million, compared with C$10.0
million for the corresponding period of 2000.
As at December 31, 2001, the Company had a cash position of
C$4.1 million and a working capital deficiency of C$27.9
million, for a ratio of 0.63:1, compared with a ratio of 0.98:1
as at December 31, 2000.
OVERVIEW OF OPERATIONS
On September 4, 2001, the Company announced an interruption of
the Port- Cartier's operations for an undetermined period, due
to continued unfavorable conditions on this market and
persistent difficulty in selling the plant's production on
global markets. During the quarter, sawmill operations were
affected by production slowdown resulting from soft lumber and
woodchip markets. As a result, the Company had to shut down the
Port-Cartier sawmill for a two-week period and the Peribonka
sawmill for one week at the beginning of October. Thereafter,
operations at the Peribonka sawmill resumed normally, while
those at the Port-Cartier sawmill resumed at a reduced pace,
representing 66% of normal production. For the fourth quarter,
sawmill production was 65.4 million board feet, compared with
91.9 million board feet for the corresponding period last year.
On October 30, 2001, the US Department of Commerce (DOC), as a
result of an investigation of the six leading Canadian lumber
producers, decided to impose antidumping duties of 12.58% on
Canadian lumber shipments into the United States, for total
duties of 31.9%. The application of a 19.3% countervailing duty
was suspended as of December 3, as the DOC had not rendered its
final decision within the prescribed deadline. During the fourth
quarter, the Company charged to income a sufficient amount to
cover all shipments affected by the potential application of a
countervailing duty.
OUTLOOK
Following the hearing that took place last December and January,
the Court should render a decision shortly regarding the
proceedings instituted by certain US Noteholders who object,
among other things, to the composition of that class of
creditors. Afterwards, the Company will be in a position to
develop a strategy to complete a plan of arrangement with its
creditors.
Historically low interest rates have stimulated housing
development in North America during the first quarter of 2002,
resulting in increased lumber demand. At the beginning of
February, the Port-Cartier sawmill resumed normal operations
with the resumption of a 3rd shift suspended since mid-October.
On last March 22, the DOC announced that the final
countervailing and antidumping duties on Canadian lumber
shipments into the United States would be 29%, effective mid-May
2002. The Canadian lumber industry, the federal government and
provincial governments have categorically refuted US allegations
and are firmly opposed to the application of these duties. The
Canadian industry could appeal against the decision rendered by
these administrative agencies before the relevant courts and
expert panels of the North-American Free Trade Agreement and
World Trade Organization.
It is anticipated that the application of these countervailing
and antidumping duties on Canadian lumber shipments into the
United States could entail volatility and uncertainty on this
market over the next few months.
Uniforet Inc. is an integrated forest products company, which
manufactures softwood lumber and bleached chemi-thermomechanical
pulp (BCTMP). It carries on its business through its
subsidiaries located in Port-Cartier (pulp mill and sawmill) and
in the Peribonka area (sawmill). Uniforet Inc.'s securities are
listed on The Toronto Stock Exchange under the trading symbol
UNF.A, for the Class A Subordinate Voting Shares, and under the
trading symbol UNF.DB, for the Convertible Debentures.
The Company is currently in default on payment of interest under
its 11.125% US senior notes and its unsecured subordinated
convertible debentures. Under generally accepted accounting
principles, these long term liabilities may have to be reclassed
in current liabilities given the Company's default. Uniforet
Inc. is currently in default under its bank credit agreement.
VSI HOLDINGS: Pursuing Plan to Sell Assets to Repay Secured Debt
----------------------------------------------------------------
VSI Holdings, Inc. (Amex: VIS) is proceeding with plans to sell
portions of its marketing services and technology businesses.
"We believe that there are a number of strategic parties
interested in acquiring the marketing services, dealer training
and technology portions of our business," said Steve Toth,
chairman and chief executive officer of VSI. "We believe such a
sale would assure the orderly transition of our business and the
continuity needed by our key customers."
Toth also said VSI is exploring alternative financing options
for the immediate future.
The VSI action results from the decision by its primary lender
not to continue funding the revolving line of credit currently
utilized by the company to fund its normal business activities.
Last week, the lender also informed the company that it must
develop and present an orderly workout plan for the liquidation
of assets and repayment of secured debt within approximately 60-
90 days.
VSI Holdings, Inc. has been severely impacted by the economic
downturn last year and subsequently eliminated more than $32
million in operating overhead since last June. The company's
client roster includes Fortune 500 companies in the automotive
and pharmaceutical industries.
VSI provides customer relationship management services,
Internet/Intranet communications, education and training, and
edutainment/entertainment. The company employs approximately
700 professionals through its networks and offers integrated
marketing services using a wide range of technology-driven
alternatives.
VANTAGEMED: Continues Nasdaq Trading Pending Panel's Decision
-------------------------------------------------------------
VantageMed Corporation (Nasdaq:VMDCE) has filed a request for a
hearing before the Nasdaq Listing Qualifications Panel to appeal
the Nasdaq's delisting determination as related to the notice
the Company received on April 16, 2002 from Nasdaq. Pursuant to
Nasdaq rule, pending the outcome of this hearing VantageMed's
securities will not be delisted at the opening of business on
April 24, 2002 as previously announced, but rather will continue
to be listed on Nasdaq under the ticker symbol, VMDCE. There can
be no assurance that the Nasdaq Listing Qualifications Panel
hearing VantageMed's appeal will grant our request for continued
listing.
VantageMed is a provider of healthcare information systems and
services distributed to over 11,000 customer sites through a
national network of regional offices. Our suite of software
products and services automates administrative, financial,
clinical and management functions for physicians, dentists, and
other healthcare providers and provider organizations.
W.R. GRACE.: Posts Improved Operating Results for First Quarter
---------------------------------------------------------------
W. R. Grace & Co. (NYSE: GRA) reported that 2002 first quarter
pre-tax income from core operations was $33.8 million compared
with $29.0 million in the first quarter of 2001, a 16.6%
improvement. Sales totaled $413.5 million compared with $395.7
million in the prior year quarter, a 4.5% increase. Excluding
currency translation impacts, sales were up 7.6%. The first
quarter was favorably impacted by continued strong demand for
refining catalysts, augmented by revenue and earnings from bolt-
on acquisitions in catalyst and silica products and construction
chemicals. First quarter net income was $12.4 million, or $0.19
per share, compared with $14.6 million, or $0.22 per share, in
the first quarter of 2001. Net income for the 2002 first
quarter reflects a pension cost increase of $3.5 million in core
operating results, a $3.8 million charge for noncore
environmental remediation and legal fees, and $4.4 million for
Chapter 11-related expenses, partially offset by lower interest
expense and income taxes.
"Our businesses delivered strong results in the first quarter
with both Davison and Performance Chemicals contributing double
digit improvements in operating earnings," said Grace Chairman,
President and Chief Executive Officer Paul J. Norris. "Although
the economic outlook remains uncertain, our productivity and
growth initiatives are continuing to deliver performance in a
difficult operating environment."
CORE OPERATIONS
Davison Chemicals
First quarter sales for the Davison Chemicals segment were
$215.4 million, up 8.6% from the prior year. Excluding currency
translation impacts, sales were up 11.7%. Operating income of
$26.9 million was 10.7% higher than the 2001 first quarter;
operating margin of 12.5% was a 0.3 percentage point
improvement. Operating income and margins were favorably
impacted by lower energy costs and improved productivity in the
first quarter of 2002 compared with the first quarter of 2001.
Sales of catalyst products, which include refining catalysts and
additives, polyolefin catalysts and other chemical catalysts,
were up 7.7% (10.2% excluding currency translation impacts)
compared with the 2001 first quarter. High demand for refining
catalysts to meet increased gasoline usage was the primary
reason for the improvement. Sales of silica products were up
10.8% compared with the first quarter of 2001 (15.4% before
currency translation impacts), primarily from two acquisitions
completed in the past year which expanded the silicas product
line into precipitated silicas, chromatography columns and
separations media.
Performance Chemicals
First quarter sales for the Performance Chemicals segment were
$198.1 million, up 0.4% from the prior year. Excluding currency
translation impacts, sales were up 3.4%. Operating income was
$19.6 million, or 10.1% higher than the prior year quarter.
Operating margin was 9.9%, approximately 0.9 percentage points
higher than the 2001 first quarter. Operating income and
margins were favorably impacted by lower operating expenses and
material costs, attributable to productivity initiatives, in the
first quarter of 2002 compared with the first quarter of 2001.
Sales of specialty construction chemicals, which include
concrete admixtures, cement additives and masonry products, were
up 5.0% versus the year-ago quarter (8.1% excluding currency
translation impacts). Sales increases were strongest in Europe,
with the Pieri acquisition, completed in July 2001, favorably
impacting volume. Sales of specialty building materials, which
include waterproofing and fire protection products, were about
even with the first quarter of last year (both before and after
currency effects), with good results in residential roofing
underlayments being offset by softness in commercial fire
protection sales. Sales of specialty sealants and coatings,
which include container sealants, coatings and polymers, were
off 4.4% compared with first quarter of 2001 (but were up 0.7%
before the effect of currency translation). These results
reflect a continued decline in demand for metal food packages in
favor of plastic and paper substitutes.
CHAPTER 11 PROCEEDINGS
On April 2, 2001 Grace and 61 of its United States subsidiaries
and affiliates, including its primary U.S. operating subsidiary
W. R. Grace & Co. - Conn., filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware. Grace's non-U.S. subsidiaries and certain of its U.S.
subsidiaries were not a part of the Filing. Since the Filing,
all motions necessary to conduct normal business activities have
been approved by the Bankruptcy Court. At a hearing on April
22, 2002 the Bankruptcy Court entered an order establishing a
bar date of March 31, 2003 for clals, building materials, and
sealants and coatings. With annual sales of approximately $1.7
billion, Grace has over 6,000 employees and operations in nearly
40 countries. For more information, visit Grace's Web site at
http://www.grace.com
WARNACO GROUP: Court Extends Exclusive Period for the Third Time
----------------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates obtained
approval from the U.S. Bankruptcy Court in Manhattan extending
their exclusive periods for the third time. Judge Bohanon
extends the time within which the Debtors must propose and file
a plan of reorganization through July 31, 2002, and the time
during which to solicit acceptances of such plan through and
including September 30, 2002.
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 95.5 - 97.5 +0.5
Federal-Mogul 7.5% due 2004 21 - 23 0
Finova Group 7.5% due 2009 36 - 37 0
Freeport-McMoran 7.5% due 2006 85.5 - 87.5 0
Global Crossing Hldgs 9.5% due 2009 2 - 3 0
Globalstar 11.375% due 2004 9.5 - 11.5 -0.5
Lucent Technologies 6.45% due 2029 60.5 - 62.5 -1
Polaroid Corporation 6.75% due 2002 3 - 5 -3
Terra Industries 10.5% due 2005 84 - 87 0
Westpoint Stevens 7.875% due 2005 62.5 - 64.5 +10.5
Xerox Corporation 8.0% due 2027 55 - 57 -2
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***