/raid1/www/Hosts/bankrupt/TCR_Public/020502.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, May 2, 2002, Vol. 6, No. 86
Headlines
360NETWORKS: Adolfson to Prosecute Foreclosure on TX Property
ACT MANUFACTURING: Taps GML Associates as Tax Return Accountants
ANC RENTAL: Cash Collateral Agreement Continues to September 22
ADELPHIA BUSINESS: Utility Companies Want Security Deposits
AIRGATE PCS: Working Capital Deficit Tops $29M at March 31, 2002
AKORN INC: Nasdaq Stays Delisting Action Pending Panel Decision
ANKER COAL: S&P Junks Rating On Likely Operations Restructuring
ARMSTRONG HOLDINGS: First Quarter Sales Slide-Down to $747MM
BOUNDLESS CORP: Banks Syndicate Agrees to Forbear Until May 31
CMI INDUSTRIES: Closes Sale of Elastic Fabrics to EFA Holdings
CALL-NET ENTERPRISES: Cuts 1st Quarter Net Loss Down to C$91MM
CALPINE: Retires $685.5MM of Zero Coupon Convertible Debentures
CLAXSON INTERACTIVE: Unit Won't Make Payment on 11% Senior Notes
COMDISCO INC: Classification & Treatment of Claims Under Plan
CONSOLIDATED CONTAINER: S&P Junks Senior Subordinated Debt
COVANTA ENERGY: Signs-Up Kilpatrick Stockton as Special Counsel
ENRON CORP: Wind Unit Taps Arnold & Porter as Special Counsel
ENRON CORP: Court OKs Swidler Berlin as Debtor's Special Counsel
ENRON CORP: Azurix Extends Consent Payment Deadline Until Today
ETHYL CORP: S&P Cuts Rating to B+ On Fin'l Flexibility Concerns
EXIDE TECHNOLOGIES: Intends to Maintain Existing Bank Accounts
EXODUS: Liquidating Plan's Classification & Treatment of Claims
FLAG TELECOM: Seeks Okay to Maintain Cash Management System
FLAG TELECOM: LINKdotNET Buys Unit's Cairo to New York Capacity
FORMICA CORP: Seeking To Hire Lazard Freres for Financial Advice
FOSTER WHEELER: Lenders Extend Waiver Under Revolver thru May 30
GENERAL PUBLISHING: Canadian Court Grants CCAA Protection
GLIATECH INC: Eyeing Chapter 11 Filing to Restructure Finances
GREAT LAKES AVIATION: Violates Nasdaq SM Listing Requirements
HAYES LEMMERZ: CIBC Balks at Debtors' Employee Retention Plan
HOME INTERIORS: Enhanced Fin'l Flexibility Spurs S&P Upgrades
IMMUNE RESPONSE: Fails to Meet Nasdaq Listing Requirements
KAISER ALUMINUM: Gets Nod to Hire Wharton as Asbestos Counsel
KMART CORPORATION: DJM Handling Sale of 283 Store Leases
KMART: Proposes Uniform Bidding Protocol for 283 Store Leases
KNOWLES ELECTRONICS: Mar. 31 Balance Sheet Upside-Down by $474K
LTV: Inks Pact to Sell Walbridge Interests to Material Sciences
LAIDLAW: Expects to Release Fiscal 2001 Results by End of June
LERNOUT & HAUSPIE: Sues SG Cowen to Recoup $7 Million Preference
MILLENIUM SEACARRIERS: Creditors Want Chapter 11 Trustee Named
METROMEDIA FIBER: Nortel Networks Discloses 6% Equity Stake
NATIONAL STEEL: Committee Seeks OK to Hire Reed Smith as Counsel
NETIA HOLDINGS: Unit Won't Make Interest Payment on 11.25% Notes
NORD PACIFIC: Closes Sale of Australian Copper Assets for A$6.8M
NORD PACIFIC LIMITED: Appoints C.R. Hastings as Vice President
NVIDIA CORP: S&P Affirms B+ Rating After Completing SEC Report
ON SEMICONDUCTOR: S&P Junks Senior Secured Notes Rating
PACIFIC GAS: U.S. Trustee Balks at Skadden's $1.2MM 4-Month Bill
PAPA JOHN'S: Working Capital Deficit Tops $121MM at March 31
PAULA INSURANCE: Insolvency Prompts S&P to Drop Rating to R
PENTACON: Likely to File Chapter 11 to Consummate Debt Workout
PILLOWTEX CORP: Intends to Assume Lease Agreements with Verizon
PLAY BY PLAY TOYS: Seeking Case Conversion to Chapter 7
PROTECTION ONE: Sets Annual Shareholders' Meeting for May 23
PRUDENTIAL SECURITIES: S&P Drops P-T Certs. Series 1995-C1 to D
PSINET INC: Brings-In Paul Weiss as Special Litigation Counsel
PUBLICARD INC: Needs Additional Financing to Fund Business Plan
READER'S DIGEST: S&P Rates $1.14BB Bank Credit Facilities at BB+
SENIOR HOUSING: Seeks to Renew Maturing Revolving Bank Facility
SPIEGEL: Nasdaq Changes Symbol to SPGLE Over Filing Delinquency
STELCO INC: Unable to Reach Settlement on Labor Negotiations
TELESPECTRUM: Enters Financial Restructuring Pact with Banks
TRICORD SYSTEMS: Net Loss Slides-Down to $5.4MM in First Quarter
TRUMP CASINO: S&P Assigns B- Corp. Credit & Senior Debt Ratings
VELOCITA CORP: Banks Waive Loan Covenants Further through May 15
VITAL LIVING: Plans to Deregister Common Stock by May 10
WHX CORP: Sets Annual Shareholders' Meeting for June 18, 2002
WARNACO GROUP: Notices of De Minimis Asset Sale Waived
WILLIAMS COMMS: Seeks Authority to Use Lenders' Cash Collateral
* DebtTraders' Real-Time Bond Pricing
*********
360NETWORKS: Adolfson to Prosecute Foreclosure on TX Property
-------------------------------------------------------------
In a Court-approved stipulation, 360networks inc., and Adolfson
& Peterson Construction agree that:
(i) the automatic stay is modified for the sole purpose of:
(a) allowing Adolfson & Peterson to commence and prosecute
an action in Texas state court to foreclose on the
Property;
(b) conduct a foreclosure sale with respect to the
Property;
(c) apply the proceeds from the sale to the unpaid balance
plus permissible costs under Texas state law subject
to the Bankruptcy Code; and
(d) remit excess funds received from the sale to the
Debtors in accordance with this stipulation. Excess
proceeds are subject to the Pre-petition Lenders'
lien.
(ii) to the extent that it is an executory contract under the
Bankruptcy Code, the Construction Agreement is rejected.
(iii) to the extent that any personal property of the Debtors
remains at the Property, the Debtors must give Adolfson &
Peterson facsimile notice prior to the removal of any non-
fixture property. If the Debtors do not receive a written
objection to such removal within five business days after
the service of the notice, the Debtors may remove such
non-fixture property at their discretion. If the Debtors
do receive a written objection to such removal within five
business days, the Debtors cannot remove the non-fixture
property without further order from the Court. Adolfson &
Peterson must provide the Debtors with immediate access to
the property to secure the non-fixture property. The
Debtors will be responsible for paying to Adolfson &
Peterson the costs to restore or repair any damage to the
Property caused by the Debtors removal of the non-fixture
property.
(iv) Adolfson & Peterson is to provide the Debtors and their
counsel written, facsimile notice of the sale no later
than five business days to:
360 USA
(303) 854-5100
Attn: Gary Ray
-and-
360 USA's Counsel
(212) 728-8111
Attn: Shelley C. Chapman
Morris J. Massel
(v) if Adolfson & Peterson receives proceeds from the sale of
the Property from any third party in excess of the unpaid
balance plus permissible costs and interest, such excess
will be paid to the Debtors, according to any written
instructions received from the Debtors within five
business days after goods and collected funds are received
from the sale, which excess proceeds are also subject to
Pre-petition Lenders' lien. If the sale price is less
than the unpaid balance, any allowable deficiency claim of
Adolfson & Peterson against the Debtors will be an
unsecured claim capped at the difference of the sale price
and the unpaid balance. If Adolfson & Peterson or any of
its affiliates obtains title to the Property at the sale,
Adolfson & Peterson will waive any purported deficiency
claim.
(vi) upon the Debtors' reasonable request, Adolfson & Peterson
must provide the Debtors information on the process which
Adolfson & Peterson is undertaking to effectuate the
foreclosure and the sale. This is provided, however, that
the Debtors only recourse for a breach is an order
compelling Adolfson & Peterson to provide such reports.
(vii) Adolfson & Peterson must forever release, acquit and
discharge the Debtors of all claims, causes of action,
debts, suits, rights of action, dues, sums of money,
accounts, bonds, bills, covenants, contracts,
controversies, agreements, promises, damages, judgments,
variances, executions, demands or obligations arising in
connection with the Construction Agreement except if it
relates to:
(a) any claims and obligations under this stipulation and
order; and
(b) any claims of the Adolfson & Peterson releasors
against the Debtors' releasees that may arise as a
result of any action instituted against the Adolfson &
Peterson releasors.
(viii) the Debtors also forever release, acquit and discharge
Adolfson & Peterson from all claims, causes of action,
debts, suits, rights of action, dues, sums of money,
accounts, bonds, bills, covenants, contracts,
controversies, agreements, promises, damages, judgments,
variances, executions, demands or obligations arising in
connection with the Construction Agreement.
* * *
As reported in Troubled Company Reporter August 8, 2001 edition,
Adolfson & Peterson Construction sought relief from the
automatic stay to foreclose on a project involving construction
of a Point of Presence Facility in San Antonio, Texas for
360networks Inc., and recover its secured claim from the
proceeds of sale of the Project.
Adolfson & Peterson Construction is a secured creditor of the
Debtors.
The Debtors retained A&P as its general contractor last August
2000 for the construction of a Point of Presence Facility at
5430 Greatfare Drive, San Antonio, Texas. A&P's retention is
covered in a Construction Design-Assist Agreement.
As early as July 2000, the Debtors already authorized A&P to
start procuring the materials and equipment needed to carry out
the work. Since then, A&P furnished labor and materials to the
Debtors.
On May 10, 2001, the Debtors suddenly issued a Stop
Work Notice to A&P. But by then, Mr. Rich notes, A&P had
substantially completed the Project. Mr. Rich tells the Court
that as of the Petition Date, the Debtor owed A&P $2,835,200.49.
A&P filed and perfected a Mechanic's and Materialman's Lien on
the Project last June 2001. The Texas Property Code provision
that a mechanic's lien has priority over any other prior lien,
except for a lien that existed at the time of the inception of
the mechanic's lien.
Since the Debtors' lenders filed a Deed of Trust on October 5,
2000, after A&P commenced construction work in September 2000,
Mr. Rich argues that the security interest of the Debtors'
lenders is junior to A&P's first priority lien.
Thus, A&P will incur substantial harm if the relief is not
granted because a significant portion of the Debtors' debt to
A&P is, in turn, owed by A&P to its Project subcontractors. (360
Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ACT MANUFACTURING: Taps GML Associates as Tax Return Accountants
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Massachusetts
gives ACT Manufacturing, Inc., and its debtor-affiliates
permission to employ George Locano and his firm, GML Associates,
P.C., as their accountants, nunc pro tunc to January 7, 2002.
Specifically, the Debtors require the services of GML for the
limited purpose of preparing and finalizing the Debtors' 2001
tax returns and assisting in any corresponding issues which may
arise concerning such returns.
GML will be paid for its accounting services on an hourly basis
in accordance with its customary hourly rates. Since January 7,
2002 and in connection with the preparation of the tax returns,
the Debtors have incurred fees from GML in the amount of
$29,800. The Debtors mistakenly paid GML $29,800 for work
completed since January 7, 2002. Now that the retention of GML
is approved, that amount shall be held as a retainer pending an
order approving a formal fee application.
ACT Manufacturing, Inc. provides value-added electronics
manufacturing services to original equipment manufacturers in
the networking and telecommunications, computer and industrial
and medical equipment markets. The company filed for chapter 11
protection on December 21, 2001. Richard E. Mikels, Esq., Deena
C. Ethridge, Esq. and Daniel S. Beck, Esq. at Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo PC represent the Debtor in its
restructuring efforts.
ANC RENTAL: Cash Collateral Agreement Continues to September 22
---------------------------------------------------------------
Judge Walrath authorizes ANC Rental Corporation and its debtor-
affiliates to continue using the Lenders' cash collateral
through September 22, 2002, provided that the Debtors do not
default in their reporting obligations or materially deviate
from the financial targets outlined in non-public budgets ANC
has delivered to the Lenders. Judge Walrath recognizes that if
she didn't allow ANC access to the Lenders' cash, ANC would be
unable to continue to meeting post-petition obligations to
vendors or pay wages, salaries, rent, utilities and other
expenses associated with their business operations.
Judge Walrath grants the Secured Creditors valid, binding and
enforceable security interests in and liens of the same validity
and priority as they enjoyed pre-petition in all of the Debtors'
assets, including all accounts, all chattel paper, the
collateral account and all cash, money and instruments at any
time on deposit in the Collateral Account. The Lenders also
receive dollar-for-dollar superpriority replacement liens to the
extent they use their Lenders' cash collateral. Each of the
secured lenders, Judge Walrath, may also setoff any amounts owed
to them by the Debtors using amounts in any account maintained
by the Debtors at the Lenders' institutions. This basket of
goodies, Judge Walrath finds, is sufficient to adequately
protect ANC's Lenders' security interests. (ANC Rental
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ADELPHIA BUSINESS: Utility Companies Want Security Deposits
-----------------------------------------------------------
Adelphia Business Solutions, Inc., and its debtor-affiliates
propose to afford Verizon and other utilities no deposit at all
and no pre-payments or other security. Instead, they propose to
afford Verizon nothing more than what it already had pre-
petition, without the benefit of Section 366. This is simply a
mere unsecured promise by the Debtors to pay. The Debtors argue
that no deposit is required because of the Debtors' supposed
excellent pre-petition payment history, because they are seeking
$135 million in post-petition debtor-in-possession financing,
and because utility companies will receive an administrative
expense priority for unpaid utility obligations. Darryl S.
Laddin, Esq., at Arnall Golden Gregory LLP in Atlanta, Georgia,
contends that none of these so-called protections provides
"adequate assurance of payment."
Mr. Laddin tells the Court that it is far from clear that the
Debtors, in fact, have an excellent history of payment. The
Debtors presumably have not paid (and cannot pay) all of their
pre-petition obligations as they come due, or they would not
have filed for bankruptcy protection. As for their debts to
their utilities, the Debtors' list of 20 largest unsecured
creditors discloses unpaid pre-petition utility obligations in
excess of $22,500,000.
Mr. Laddin states that the financing that the Debtors anticipate
receiving may (unless and until there is a default) provide the
Debtors with liquidity. However, it also will ensure that there
is as much as $135 million in super-priority administrative
expense claims and liens on all of their assets ahead of Verizon
and other utilities. These will be left with a mere
administrative claim under Section 503(b) of the Bankruptcy
Code. Indeed, the Debtors propose to further subordinate the
administrative claims of Verizon and other utilities by granting
the holders of their $250 million in 121/4% Senior Secured Notes
a super-priority administrative claim. Moreover, the Debtors'
debtor-in-possession lenders are apparently seeking, as part of
the final order on the proposed DIP financing, a waiver of any
claim by the estate under Section 506(c) of the Bankruptcy Code,
thereby further eroding any protection to Verizon and other
utilities. Mr. Laddin adds that Verizon has not been provided
with a budget showing that the post-petition financing is
sufficient to fund ongoing operations and utility bills.
Further, a default by the Debtors under their post-petition
financing arrangements could result in the termination of their
right to use any post-petition financing to pay Verizon.
As for the administrative claim that the Debtors propose to
afford Verizon, Mr. Laddin points out that the Debtors are
offering nothing more than Verizon, or any other post-petition
administrative creditor, would be entitled to under Section
503(b) in any event, even if Section 366 were not part of the
Code.
Finally, the Debtors' request a procedure for the resolution of
any disputes regarding whether they have provided adequate
assurance that is contrary to the express terms of Section 366.
The Debtors propose that each utility have 25 days from entry of
this Court's Order on the Utilities Motion to serve the Debtors
with a request for assurance of payment in the form of a deposit
or other security. If the Debtors (in their sole discretion)
deem the request "unreasonable," the Debtors will (on an
unspecified schedule) file a motion. In the interim until the
Court has entered a final order, the utility will be required to
maintain service and will be deemed to have been provided
adequate assurance of payment by reason of the mere
administrative claim it is receiving. Mr. Laddin argues that
Section 366, however, explicitly allows any "party in interest,"
including a utility, to request "reasonable modification of the
amount of the deposit or other security necessary to provide
adequate assurance of payment." It explicitly allows a utility
to "alter, refuse or discontinue service" if the debtor does not
furnish adequate assurance "within 20 days after the date of the
order for relief." In effect, by not requiring the Debtors to
post any form of deposit as adequate assurance, the Motion seeks
an Order that extends the period provided in Section 366(b) for
the Debtors to provide adequate assurance. It extends the
period from 20 days until such time as the Debtors get around to
filing a motion to determine what additional assurance of future
payment is needed. Nowhere in the Motion do the Debtors provide
any citation of authority that would allow the Debtors to
circumvent the express terms of Section 366.
SBC Affiliates Object
Lisa M. Golden, Esq., at Jaspan Schlesinger Hoffman LLP in
Garden City, New York, tells the Court that the Debtors' Motion
attempts to establish that the Utilities are adequately assured
of future performance. This assurance is based upon nothing
more than the Debtors' "promise" to pay all post-petition
utility charges as they become due and give "entitlement" of
each Utility to an administrative expense claim for the value of
the services that a Utility provides to the Debtors. There is no
showing in the Motion that the Utilities are not subject to an
unreasonable risk of nonpayment. There is only the bald
assertion that there is no such risk to the Utilities. There is
no discussion of the Debtors cash position or their cash needs
in the post-petition period that would give even minimal
substance to the Debtors' promise to pay for services. Ms.
Golden notes that there is not a requirement in the Bankruptcy
Code or case law that vendors must provide post-petition goods
and services to a debtor under such uncertain circumstances. In
fact, recent case law has held that requiring a Utility to
provide services under such circumstances is not permissible.
Post-petition, the Debtors seek to continue to receive
telecommunications services from the SBC Affiliates, which are
valued post-petition at approximately $4 million per month.
There is no question that the services to be provided by the SBC
Affiliates to the Debtors will constitute actual and necessary
expenses of preserving the Debtor's estates as the Debtors
cannot fully operate without the SBC Affiliates services. The
Motion fails to offer the SBC Affiliates with anything more than
the SBC Affiliates are already entitled to receive in these
bankruptcy cases. Without further adequate assurances the SBC
Affiliates should not be compelled to continue to provide
services to the Debtors in these cases.
In the Motion the Debtors asserted that their demonstrated
ability to pay future utility bills, and the administrative
expense priority afforded under Sections 503(b) and 507(a)(1) of
the Bankruptcy Code to the Utilities, together constitute
adequate assurance to each of the Utilities of payment for all
future services. The Debtors go on to assert that their promise
to pay constitutes appropriate adequate assurance of future
performance based upon their pre-petition prompt payment
history. However, Ms. Golden submits that the Debtors do not
have a timely payment history with the SBC Affiliates. Thus, the
foundation for the assurances provided in the Motion are both
faulty and inadequate. Accordingly, the Motion should be denied
unless and until the Debtors provide actual assurance of future
performance.
AT&T Objects
Kenneth A. Rosen, Esq., at Lowenstein Sandler PC in New York,
New York, tells the Court that the Utilities Motion fails to
provide adequate assurance of payment for post-petition
services. Section 366 of the Bankruptcy Code requires a "deposit
or other security" as adequate assurance. In this case, AT&T
should receive a deposit in an amount equal to three months'
services (approximately $2.1 million), 30 days pre-payment of
all post-petition services ($711,000), and payment of all post-
petition services as an administrative priority claim. Without
such adequate assurance, AT&T should be permitted to exercise
its right to terminate post-petition services upon expiration of
the 20-day period as authorized by Section 366(b) of the
Bankruptcy Code.
According to Mr. Rosen, AT&T is one of the Utility Companies
that provides Utility Services to certain of the Debtors. AT&T
is still in the process of calculating the post-petition run
rates. Prior to the Petition Date, AT&T provided approximately
$711,000 of telecommunications services per month to the
Debtors. As of the Petition Date, the Debtors owed AT&T
approximately $1.3 million but is still in the process of
reconciling these figures.
The Debtors seek to provide adequate assurance to AT&T in the
form of the Debtors' "promise" to pay for future Utility
Services rendered to the Debtors as an administrative expense of
their Chapter 11 estates pursuant to Sections 503(b) and
507(a)(1) of the Bankruptcy Code. Although the Utility Motion
states that an administrative expense claim is sufficient to
provide AT&T with adequate assurance, Mr. Rosen claims that the
Motion fails to provide AT&T with anything more than what it is
already entitled.
Mr. Rosen contends that a vendor that provides post-petition
goods or services to a debtor on a continuous basis is entitled
to payment for those goods and services on a timely basis if the
debtor wants the vendor to continue supplying the goods or
services. Neither the Bankruptcy Code nor the applicable case
law require vendors to provide post-petition goods and services
to a debtor on a continuous basis without payment. The Debtors'
"promise" to pay on a timely basis only confirms the Debtors'
pre-existing obligation.
Mr. Rosen states that there is no question that the services
provided by AT&T to the Debtors constitute actual and necessary
expenses of preserving the Debtors' estates. The Debtors are in
the business of obtaining Utility Services from Utility
Companies and selling those services to its customers. AT&T
asserts that the Debtors cannot fully operate absent AT&T's
services. Thus, regardless of the Utility Motion, AT&T is
entitled to apply for an administrative claim for its post-
petition services. Accordingly, the Motion fails to provide AT&T
with anything more than what AT&T is already entitled to receive
in these bankruptcy cases.
Mr. Rosen relates that Section 366(b) of the Bankruptcy Code
provides that a "utility may alter, refuse, or discontinue
service if neither the trustee not 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." The Bankruptcy Code's
mandate to provide adequate assurance of payment for post-
petition services in the form of a deposit or other security is
clear. The Debtors' promise to pay coupled with an
administrative expense claim does not satisfy the standard as
adequate assurance in the form of an administrative expense
priority claim is nothing more than another form of the Debtors'
promise to pay. The Debtors are promising pay AT&T in a timely
manner. If they fail to do so, then Debtors promise to pay AT&T
in the future with an administrative claim. If the Debtors are
unable to pay AT&T on a timely basis, the Debtors will likely
lack the resources to pay AT&T's administrative claim.
Accordingly, AT&T asserts that the Utility Motion fails to
provide adequate assurance of future payment.
Mr. Rosen submits that critical in this case is the time it will
take AT&T to effect a termination of services to the Debtors.
Because of the complexity of the services provided by AT&T to
the Debtors, and governance by public service commissions, it
will take AT&T between 30 and 60 days to complete a termination
of the services provided to the Debtors. Thus, a three-month
deposit and a monthly pre-payment, is necessary to provide AT&T
with adequate assurance. Absent this relief, AT&T is at risk for
over $2 million on a post-petition basis alone, and when
combined with the existing pre-petition balances, AT&T is at
risk for close to $2.5 million.
Sprint Objects
According to Gary I. Selinger, Esq., at Salomon Green & Ostrow
P.C. in New York, New York, the Debtors use long distance
telecommunications services, purchase other telecommunications
services, and receive local telephone exchange services from
Sprint LP and Sprint LTD, pursuant to various contracts between
the parties. Under the Agreements, such Debtors were required to
pay the Sprint Entities for the Services on a timely basis. Due
to the normal billing practices of the parties, payment is due
by Debtors in approximately 45 days for Sprint LTD and 60 days
for Sprint LP. Historically, however, Debtors have made payment
to Sprint LP more than 60 days past due, resulting in a credit
exposure period up to approximately 120 days after rendering the
Services.
During the three months preceding the Petition Date, Mr.
Selinger submits that the Debtors' average monthly usage of the
services provided by Sprint LP was approximately $2,200,000.
During the same period, Debtors' average monthly usage of the
services provided by Sprint LTD was approximately $935,000.
These figures translate to monthly credit for usage by Debtors
of the Services of $3,135,000 and weekly credit for usage of
$729,070.
As of the Petition Date, Mr. Selinger relates that the Debtors
were past due in payment to Sprint LP in the amount of
$3,551,878.49 for long distance service. Portions of this sum
were past due pursuant to the terms of the invoices by
approximately 60 days. As of the Petition Date, Debtors were
past due in payment to Sprint LTD in excess of $200,000.
Since the Petition Date, Mr. Selinger informs the Court that the
Sprint Entities have continued to provide such Debtors with the
Services pursuant to the terms of the Agreements in compliance
with Section 366 of the Bankruptcy Code. Debtors have failed to
make any payments to the Sprint Entities for the Services. They
have instead filed the Motion in which they seek an order
prohibiting the Sprint Entities from discontinuing the Services
simply upon the Debtors' promise of future payment. In the two
weeks since the Petition Date, the weekly usage predicted above
indicates a likely post-petition debt to the Sprint Entities of
approximately $1,500,000.
Paragraph 17 of the Motion erroneously alleges that Debtors
"have an excellent pre-petition payment history with the Utility
Companies." In fact, Mr. Selinger claims that the Debtors are
past due in excess of $3,700,000 for pre-petition Services. In
sum, Debtors' payment status with the Sprint Entities strongly
indicates that a mere promise to pay future invoices is not
"adequate assurance" of timely, future performance of Debtors'
obligations under the Agreements. In addition, it is not clear
that Debtors have sufficient post-petition administrative
solvency to comply with such promises to the Sprint Entities and
other entities defined by Debtors as "Utilities" in the Motion.
This treatment violates the requirements of Section 366(b) of
the Bankruptcy Code.
Mr. Selinger states that the credit exposure of the Sprint
Entities can exceed 60 days from the time of service. This
period of time represents credit exposure to these Debtors of
approximately $3,135,000 per month for a total of approximately
$6,270,000 at any given time. Debtors have presented no evidence
in the Motion that either their payment history to the Sprint
Entities or their post-petition administrative solvency are
sufficient to meet the "adequate assurance" promise of future
payment made to the multitude of "Utilities," including the
Sprint Entities.
Pursuant to Section 366, Mr. Selinger contends that the Debtors
are required to provide adequate assurance of payment to the
Sprint Entities. In the alternative, if Debtors fail to
immediately provide adequate assurance of payment as set forth
herein, the Sprint Entities submit that cause exists, pursuant
to Section 362(d)(1) of the Bankruptcy Code, to modify the
automatic stay to permit the Sprint Entities to cease provision
of the Services and terminate the Agreements immediately. For
these reasons, the Sprint Entities seek the following additional
adequate assurance of future performance:
A. an immediate cash deposit in the amount of $6,270,000 and
payments thereafter pursuant to the terms of the Agreements,
or, in the alternative, weekly pre-payments by wire transfer
to the Sprint Entities of $729,070 on Wednesday of each week
for the following week of Services. Both alternatives are
subject to modification in light of post-petition actual
usage and without reduction in payments due to disputes
asserted by Debtors prior to written agreement by the Sprint
Entities or a final order of the Court sustaining such
disputes;
B. immediate payment by wire transfer to the Sprint Entities of
the greater of all post-petition amounts charged by the
Sprint Entities, if any, which have not yet been paid; or an
amount equal to the weekly prepayment for the period from the
Petition Date to the commencement of the weekly prepayments.
C. the entry of an order directing that if Debtors fail to
timely make any payments due under the order entered by this
Court or perform any of the other terms and conditions set
forth in the Agreements, the Sprint Entities have the right
to terminate service to the Debtors immediately and without
further order of the Court, and to the extent necessary,
modifying the automatic stay of Section 362 of the Bankruptcy
Code to permit the Sprint Entities to exercise such rights
and remedies under the Agreements, including termination; and
D. the entry of an order lifting the automatic stay to permit
the Sprint Entities to offset all pre-petition amounts owing
to Debtors by the Sprint Entities, if any, against all pre-
petition amounts owing by Debtors to the Sprint Entities.
(Adelphia Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AIRGATE PCS: Working Capital Deficit Tops $29M at March 31, 2002
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AirGate PCS, Inc., (Nasdaq/NM: PCSA), a Sprint PCS Network
Partner, announced financial and operating results for the
second fiscal quarter and six months ended March 31, 2002.
The Company reported the following consolidated operating
results, reflecting the first full quarter of results for
AirGate PCS and iPCS as a combined entity. EBITDA loss for the
consolidated operations (earnings before interest, taxes,
depreciation and amortization), excluding non-cash stock option
compensation expense and goodwill impairment was ($6.8) million
for the second quarter of fiscal 2002, compared with ($13.6)
million for the second quarter of fiscal 2001. On a stand-alone
basis without the consolidation of iPCS, AirGate PCS achieved
positive EBITDA, excluding non-cash stock option compensation
expense and goodwill impairment, of $0.3 million.
Net revenues were $114.9 million for the second quarter of
fiscal 2002, compared with $37.1 million for the prior-year
period. After taking into account an impairment charge, the
Company reported a net loss of $301.9 million, for the three
months ended March 31, 2002, compared with a net loss of $28.4
million for the prior-year period. The Company recorded a
goodwill impairment of $261.2 million in the second fiscal
quarter related to the acquisition of iPCS. This goodwill
impairment reflects recent valuations in the wireless industry
and does not affect cash flows, expected cash cushion, expected
earnings from operations or debt covenant compliance. Excluding
this item, net loss for the second fiscal quarter of 2002 would
have been $40.7 million.
For the six months ended March 31, 2002, the Company reported
net revenues of $196.6 million compared with $60.1 million for
the same period last year. EBITDA loss, excluding non-cash stock
option compensation expense and goodwill impairment, was $27.5
million for the first six months of fiscal 2002, compared with
$34.1 million for the same period a year ago. AirGate PCS
reported a net loss of $331.6 million for the six months ended
March 31, 2002, compared with a net loss of $62.2 million in the
same period of 2001. Excluding the goodwill impairment of $261.2
million recorded in the second fiscal quarter, net loss for the
six months ended March 31, 2002 would have been $70.3 million.
At March 31, 2002, the company's unaudited consolidated balance
sheet showed a working capital deficit of about $29.5 million.
"Delivering outstanding subscriber growth and solid financial
results ahead of expectations were noteworthy accomplishments
for AirGate during the second fiscal quarter," commented Thomas
M. Dougherty, president and chief executive officer of AirGate
PCS. "By every measure, we continued to demonstrate strong
execution in a very competitive market. The second fiscal
quarter was highlighted by reaching two important milestones.
First, we achieved positive EBITDA excluding special items, for
AirGate stand-alone, establishing AirGate as among the first
Sprint PCS Network Partners to reach this financial objective.
More importantly, our ability to achieve this milestone in only
ten quarters since our initial funding in September 1999 ranks
our performance among the best of all wireless companies.
Second, we surpassed the half million subscribers mark in our
territories with 325,899 Sprint PCS subscribers in the Southeast
region and 180,468 Sprint PCS subscribers in the Midwest region.
These metrics are yet another testament to our success as a
leading wireless provider in our territory.
"The smooth integration of the acquired iPCS operations into
AirGate has been a top priority during the quarter," continued
Dougherty. "Our objective is to employ best practices across all
functional areas and leverage the successful track record
enjoyed by both companies. As a result, we are making excellent
progress in positioning AirGate for continued success in 2002.
In addition, as a Sprint PCS Network Partner, we are in the
final stages of upgrading our networks for the next generation
of wireless services, or 3G technology, with the planned launch
of exciting new applications in mid 2002. With 3G technology
offering greater speed and increased capacity for both voice and
data, we are very excited about the opportunity to lead this
evolution and offer a more meaningful wireless experience to
consumers and business customers in our territory."
Additional combined financial and operating highlights for the
second quarter of fiscal 2002 include the following:
-- AirGate added 53,010 net new Sprint PCS customers in
its ninth quarter of commercial PCS operations, net of an
adjustment for subscribers not reasonably expected to pay. As a
result, the Company had a total of 506,367 subscribers as of
March 31, 2002, which translates into a covered POP penetration
rate of 4.4%.
-- The Company completed the restructuring of its sales
organization and sales leadership by dividing into two regions:
the original AirGate PCS territory is the Southeast region and
the former iPCS territory is now known as the Midwest region.
-- The Company launched commercial PCS service in the
Nebraska markets of Norfolk, Hastings, Grand Island-Kearney, and
portions of Lincoln, adding approximately 350,000 covered POPs.
As a result, all markets in the Midwest region have been
launched.
-- Average revenue per subscriber (ARPU), gross of bad
debt and excluding roaming, was $60 for the quarter, an increase
from pro forma ARPU of $59 in the previous quarter.
-- Total roaming revenue was $22.2 million for the second
fiscal quarter of 2002, compared with $21.3 million for the
previous quarter. The base roaming rate with Sprint declined
from $0.12 per minute to $0.10 per minute for stand-alone
AirGate and from $0.20 per minute to $0.10 per minute for iPCS
in the second fiscal quarter. For both companies, the long
distance rate declined from $0.06 per minute to $0.02 per minute
in the second fiscal quarter. The current rates will remain in
effect for calendar year 2002. Roaming expense was $18.2 million
for the quarter, compared with $17.1 million for the previous
quarter. Thus, net roaming margin was $4.0 million in the second
fiscal quarter compared to $4.2 million in the first fiscal
quarter.
-- Churn, net of 30-day returns and an adjustment for
those customers not reasonably expected to pay, was 3.0% in the
second fiscal quarter, consistent with 3.0% in the prior
quarter.
-- Capital expenditures were $37.4 million, which included
upgrade costs for 3G technology services, or 1XRTT.
The Company also indicated that, based on current market
conditions, current and anticipated product offerings and credit
policies, current and historical sales patterns, and budgeted
expenditures, it is providing guidance for the third fiscal
quarter ending June 30, 2002, as follows:
-- Net additions are expected to be 35,000 to 40,000,
which reflects the expected impact of selling with a deposit
requirement for a full three months.
-- ARPU is expected to be $59 to $61.
-- Roaming revenue is forecasted to be $24 million to $26
million. Conversely, roaming expense is expected to be $21
million to $23 million.
-- EBITDA loss, excluding non-cash stock option
compensation expense, is expected to be between ($1.0) million
and ($3.0) million.
-- Capital expenditures will be in the range of $17
million in the third fiscal quarter.
-- Churn is expected to be consistent with recent trends.
AirGate PCS, Inc. including its subsidiaries, is the Sprint PCS
Network Partner with the exclusive right to sell Sprint PCS
products and services in territories within seven states located
in the southeastern and mid-western United States. The
territories include over 14.6 million residents in key markets
such as Grand Rapids, Michigan; Charleston, Columbia, and
Greenville-Spartanburg, South Carolina; Augusta and Savannah,
Georgia; Champaign-Urbana and Springfield, Illinois; and the
Quad Cities areas of Illinois and Iowa. AirGate PCS is among the
largest Sprint PCS Network Partners. As a Sprint PCS Network
Partner, AirGate PCS operates its own local portion of the
Sprint PCS network to exclusively provide 100% digital, 100% PCS
products and services under the Sprint name in its territories.
Sprint operates the nation's largest all-digital, all-PCS
wireless network, already serving the majority of the nation's
metropolitan areas including more than 4,000 cities and
communities across the country. Sprint has licensed PCS coverage
of more than 280 million people in all 50 states, Puerto Rico
and the U.S. Virgin Islands. In mid-2002, Sprint plans to launch
its 3G network nationwide and expects to deliver faster speeds
and advanced applications on Sprint PCS 3G Phones and devices.
For more information on products and services, visit
www.sprint.com/mr. Sprint PCS is a wholly-owned tracking group
of Sprint Corporation trading on the NYSE under the symbol
"PCS." Sprint is a global communications company with more than
80,000 employees worldwide and $26 billion in annual revenues
and is widely recognized for developing, engineering and
deploying state-of-the art network technologies.
AKORN INC: Nasdaq Stays Delisting Action Pending Panel Decision
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Akorn, Inc. (Nasdaq: AKRNE) has requested a hearing before a
Nasdaq Listing Qualifications Panel. A hearing has been
scheduled for May 16, 2002, and the proposed delisting process
has been stayed until such time. The proposed delisting action
by Nasdaq was due to the fact that the Company filed its
December 31, 2001 Form 10-K with unaudited financial statements
as its independent auditors were unwilling to issue an audit
opinion until the proposed Securities and Exchange Commission
enforcement action was resolved. Akorn is cooperating with the
SEC and working with its independent auditors to resolve these
issues and is committed to obtaining audited financial
statements as soon as feasible. On April 23, 2002, the
Company's common stock symbol was changed from AKRN to AKRNE and
will remain so until this matter is resolved. There can be no
assurances that the Nasdaq Listing Qualifications Panel will
grant the Company's request for continued listing.
Akorn, Inc. manufactures and markets sterile specialty
pharmaceuticals, and markets and distributes an extensive line
of pharmaceuticals and ophthalmic surgical supplies and related
products.
ANKER COAL: S&P Junks Rating On Likely Operations Restructuring
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On April 29, 2002, Standard & Poor's lowered its credit ratings
on Anker Coal Group Inc. to 'CCC'. Rating outlook is negative.
The downgrade was a result of Anker's announcement that it is
exploring alternatives with respect to its capital structure.
Also, Anker intends to further restructure its mining operations
and is anticipating a 2001 pretax loss that will be
approximately $21 million higher than was recorded in 2000
(i.e., approximately $34 million). The pretax loss is primarily
due to a $21 million impairment of assets charge associated with
the restructuring.
The ratings on Anker reflect the company's very weak business
position as a small, geographically concentrated coal producer
with continuing operating problems and burdensome debt leverage.
Over the past few years, the company has been plagued by
production short falls as it attempted to emphasize higher
margin deep mines. These problems were a result of ongoing
geologic conditions and a shortage of skilled labor. Indeed,
production has fallen from 8.6 million tons in 1997 to its
current level of approximately 5 million tons. Specifically, the
company's two Spruce mines in Upshur County continue to
encounter adverse geologic conditions such as clay seams in the
roof of the mines that make it difficult to hold the roof during
production. Also, the Barbour County mine experienced a
production shortfall and a delay in planned development of a
seam due to a roof cave in. As a means of addressing these
problems, Anker opted to switch to contract miners to reduce
expenses and capital investments. However, the company has had
difficulty in retaining contract miners and replacement of these
workers has not gone well. Still, Anker expects increased
production once these issues are resolved. As a result of the
shortfalls in production, Anker did not fully realize the
dramatic improvement in coal industry conditions from the fall
of 2000 through the end of 2001.
With 60% of its revenues derived from three customers--AES
Corp., Virginia Electric Power and Potomac Electric--Anker's
customer base is highly concentrated. These companies are
competitive and financially sound and are equipped with
scrubbers that will allow them to comply with air quality
regulations despite burning Anker's noncompliant coal. Given its
burdensome amortization and interest payment schedule, Anker
issued 34.2 million preferred shares in exchange for $34.2
million of the 14.25% notes outstanding in the second quarter of
2001. Although this will reduce interest expense by $4.9 million
per year, liquidity remains extremely limited. Anker continues
to encounter liquidity issues because of ongoing problems with
its operations. Unless the company avoids the operating problems
that have marred its production for the past two years and
substantially increases its coal output, meeting the high
interest cost associated with the 14.25% notes will be a
significant challenge. At best, earnings and cash flow
protection measures for the next two years will likely remain
thin, and the company's capital structure will continue to be
very aggressive.
Outlook
Given the recurrence of operating problems, credit quality could
deteriorate further. The company will need higher coal output at
higher coal prices and a successful restructuring in order to
avoid a further downgrade.
ARMSTRONG HOLDINGS: First Quarter Sales Slide-Down to $747MM
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Armstrong Holdings, Inc. (NYSE: ACK) reported first quarter net
sales of $747.6 million as compared to $779.9 million in the
first quarter of 2001. Increases in Wood Flooring and Cabinets
were offset by declines in the other business segments.
Operating income of $40.5 million in the first quarter of 2002
decreased 6.5% from $43.3 million in the first quarter of 2001.
The only segment reporting higher operating income was Building
Products. As expected, a reduced pension credit and higher
medical costs hurt operating income.
Earnings from continuing operations for the first quarter of
2002 were $21.9 million as compared to $25.2 million for the
first quarter of 2001.
Commenting on the first quarter performance, Chairman and CEO
Michael D. Lockhart said, "Building Products is doing very well
in a tough commercial market. We are pleased with the U.S.
sales performance of our flooring business. This reflects good
customer support for our new products and our marketing
initiatives. However, our performance in Europe was
disappointing."
Armstrong adopted the new goodwill accounting standard, FAS 142,
effective January 1, 2002. Under this standard, goodwill is no
longer amortized; in the first quarter of 2001, goodwill
amortization was $5.7 million. The Company recorded
restructuring costs in several of its businesses totaling $0.5
million and $5.4 million in the first quarters of 2002 and 2001,
respectively.
More details on the Company's performance can be found in its
Form 10-Q, filed with the SEC Tuesday.
Segment Highlights
Resilient Flooring net sales in 2002 of $280.9 million decreased
3.5% from $291.1 million in 2001. Increases in the Americas
were offset by a soft European market and the negative effects
of foreign exchange rates. Operating income of $18.8 million in
2002 declined 17.2% from operating income of $22.7 million in
2001, primarily due to lower sales volume in Europe and higher
medical and promotional expenses, partially offset by lower raw
material costs and the impact of changes in long-term disability
benefit policies for certain employees.
Weak commercial construction markets led to a 9.5% decrease in
Building Products net sales of $195.5 million in the first
quarter of 2002 as compared to $216.1 million in the first
quarter of 2001. Operating income of $22.7 million in 2002
increased 15.2% from operating income of $19.7 million in 2001,
as lower energy costs and the impact of changes in long-term
disability benefit policies for certain employees were partially
offset by the lower sales volume.
Wood Flooring net sales of $160.9 million in the first quarter
of 2002 increased 3.9% from $154.9 million in 2001, primarily
from increased volume from home center distributors. Operating
income of $8.7 million in the first quarter of 2002 was lower
than operating income of $10.1 million in the first quarter of
2001. The decrease in operating income was primarily driven by
higher selling and advertising expenses, partially offset by
higher sales and lower lumber costs.
Cabinets net sales of $56.3 million in the first quarter of 2002
increased 4.1% from $54.1 million in the first quarter of 2001.
Operating income of $3.2 million in the first quarter of 2002
declined from operating income of $4.6 million in the first
quarter of 2001. Higher labor and post retirement medical costs
offset the benefits of the sales increase.
Textiles and Sports Flooring net sales in the first quarter of
2002 decreased 15.2% over the first quarter of 2001 to $54.0
million from $63.7 million in 2001. Excluding the impact of
foreign exchange rates, net sales decreased 10.7% primarily due
to a weak European market. Operating income in the first
quarter of 2001 of $2.3 million declined to an operating loss of
$1.4 million in the first quarter of 2002.
Unallocated corporate expense of $11.6 million in the first
quarter of 2002 compared to $5.0 million in the first quarter of
2001. This increase was primarily due to a $4.9 million
reduction in pension credit and higher unallocated
administrative expenses.
Outlook
An annual pension credit reduction of approximately $20 million
and increased cost of retiree medical benefits of approximately
$16 million will reduce earnings for 2002.
It is likely there will be a non-cash impairment charge
representing the cumulative effect of adopting FAS 142. While
the amount has not been determined, the non-cash charge is
expected to be in excess of $500 million.
Armstrong Holdings, Inc. is the parent company of Armstrong
World Industries, Inc., a global leader in the design and
manufacture of floors, ceilings and cabinets. In 2001,
Armstrong's net sales totaled more than $3 billion. Founded in
1860, Armstrong has approximately 16,000 employees worldwide.
More information about Armstrong is available on the Internet at
http://www.armstrong.com
Armstrong Holdings Inc.'s 9% bonds due 2004 (ACK04USR1), an
issue in default, are quoted at a price of 58.5, DebtTraders
reports. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=ACK04USR1
BOUNDLESS CORP: Banks Syndicate Agrees to Forbear Until May 31
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Boundless Corporation (Amex: BND) has taken several positive
steps towards completion of their financial turnaround.
According to company executives, these steps include reaching a
forbearance agreement with their current senior lender and the
signing of a commitment letter with an alternative lender. The
company has also initiated a plan that includes debt resolution
negotiations with its unsecured creditors.
As stated in a Form 8K that was filed Tuesday with the
Securities and Exchange Commission, Boundless has entered into a
Forbearance Agreement with their bank syndicate led by JP Morgan
Chase. Although the company had not been in default of any
payments, it was in default of certain covenants related to its
revolving line of credit. The forbearance period will be in
effect until May 31, 2002 and is subject to continued
satisfaction of certain conditions. The period between now and
May 31 coincides with the time period during which Boundless
must also comply with certain conditions of the commitment
letter with the replacement lender, including concessions from
its unsecured creditors.
As previously mentioned, the company is actively engaged in
discussions with the replacement lender to finalize alternative
financing prior to the expiration of the forbearance period.
Boundless President & CEO, Joseph Joy, said, "We have already
received a commitment letter and anticipate rapid completion of
alternative financing that will increase our borrowing capacity.
Our entire management team has been working very hard to put a
business model in place that is attractive to new lenders and
investors. All the operational restructuring undertaken over
the last year, including the recent announcement of our
facilities consolidation, has created a solid platform for
profitable operations in the future. We are now addressing the
need to complete our balance sheet restructuring and secure a
well-suited line of credit that best supports our short and long
term strategy in the electronics manufacturing services
business."
Mr. Joy added, "As part of our balance sheet restructuring
effort and to meet the conditions of the commitment letter from
our new prospective lender, we have been working closely with
our unsecured creditors to put together the best forward-looking
plan. The initial reaction has been quite positive and
reassuring. By the end of May, we hope to have the largest part
of the restructuring behind us so that we can then focus on
taking advantage of our excellent market opportunity with the
very capable and dedicated team that we have built and been
fortunate to retain through all of these changes."
Boundless Corporation is a global technology company and is
composed of two subsidiaries: Boundless Technologies, Inc. --
http://www.boundless.com/index-- a desktop display products
company, and Boundless Manufacturing Services, Inc. --
http://www.boundless.com/manufacturing-- an emerging EMS
company providing build-to-order (BTO) systems manufacturing,
printed circuit board assembly, as well as complete end-to-end
solutions from design through product end-of-life to its
customers.
CMI INDUSTRIES: Closes Sale of Elastic Fabrics to EFA Holdings
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CMI Industries, Inc. completed the sale of its wide elastic
business to EFA Holdings LLC in accordance with CMI Industries'
Chapter 11 reorganization plan, which was approved in United
States Bankruptcy Court for the District of Delaware on April
11, 2002.
EFA Holdings LLC will operate the Greensboro based manufacturer
of warp and circular knit fabrics under the name of Elastic
Fabrics of America. All employees and management directly
associated with the business will be retained by the new
company.
"We are pleased with the outcome for this business," said James
Robbins, who was named President/CEO of the new company. "The
partnership we have developed with our new owners allows us to
do all the things necessary to have a healthy, successful, and
ongoing business. We are excited about the potential for our
company, which bodes well for our customers, suppliers,
employees, and other stakeholders."
"While we faced uncertainty during CMI's restructuring, we will
now be able to fully focus on the business needs of our
customers and realize our true potential."
"We are grateful to our customers, employees, and suppliers who
demonstrated unwavering support of our business during this
period."
In addition to the retention of current management, EFA
announced that Gary Monroe will be rejoining the company as
Chief Operating Officer. Gary will be responsible for all
manufacturing operations.
Elastic Fabrics of America is a market leader in the production
of warp and circular knit fabrics for the intimate apparel,
swimwear, medical, athletic wear, and specialty markets. The
operation in Greensboro, which was established in 1982, will
serve as the company's headquarters. The company's main sales
office is in New York.
CALL-NET ENTERPRISES: Cuts 1st Quarter Net Loss Down to C$91MM
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Call-Net Enterprises Inc. (TSE: FON, FON.B; NASDAQ OTCBB: CNEZF)
announced its financial results for the quarter ending March 31,
2002.
"The first quarter was a strategic, operational and financial
turning point in Call-Net's history," said Bill Linton,
president and chief executive officer of Call-Net Enterprises.
"We successfully recapitalized the Company reducing our debt by
over $2 billion. We also successfully renegotiated a new
comprehensive 10-year agreement with Sprint U.S. As a result
Call-Net is now better positioned to succeed with the
implementation of its 'on-net' local service and data oriented
revenue growth plan."
Call-Net's net loss for the quarter was C$91.8 million compared
to a net loss of C$185.9 million in the first quarter of 2001.
The primary reason for the improvement, was the significantly
lower foreign exchange loss year over year on the Company's U.S.
dollar denominated debt. The improvement in the foreign exchange
loss was partially offset by a C$25.0 million decline in
earnings before interest, taxes, depreciation and amortization
(EBITDA).
Revenue for the first quarter was C$201.8 million compared to
C$263.1 million for the same period in 2001 and to C$215.1
million in the previous quarter.
Year over year, both lower volume and pricing contributed to the
C$61.3 million or 23.3% decline in revenue. Call-Net's decisions
to cancel its fixed price consumer long distance programs and to
withdraw from certain unprofitable segments of the wholesale
market were the primary reasons customer count and associated
volumes declined. The bankruptcy of some wholesale customers and
the transfer of certain wholesale customers' long distance
minutes onto their own networks also contributed to the decline
in long distance volumes since last year. Long distance pricing,
while stable in the residential segment, declined by 20.1% year
over year in the business segment because of intense price
competition. A C$7.6 million or 165% increase in local services
revenue reflects the transition Call-Net is undertaking to
replace its dependence on stand alone long distance customers
with a bundled local, voice and high speed Internet offering.
Call-Net's revenue declined C$13.3 million, or 6.2%, from the
previous quarter. A reduction in non-recurring data revenue was
a significant component of the decline. Pricing pressure on
business long distance and recurring data services continued to
be a factor, but the downward pressure on pricing this quarter
was less evident than in the latter half of 2001. Similarly,
while the decline in the number of stand-alone consumer long
distance customers contributed to the drop in revenue, the
amount of customer churn abated in the quarter. Furthermore,
while Call-Net lost 18,000 long distance residential customers,
it more importantly added 19,000 local bundled residential
customers in the quarter. By quarter end, the expanded business
sales force was also making significant progress with its
customer acquisition initiatives. Consequently, Call-Net
believes its revenue should increase, rather than decline, in
the second half of the year.
EBITDA of C$11.9 million in the first quarter of 2002 was down
C$25.0 million from C$36.9 million in the first quarter of 2001.
Lower revenue and a tighter gross margin, primarily resulting
from aggressive price competition in the long distance and data
services market, accounted for most of the decline. The C$36.9
million decline in gross profit was partially offset by
operating cost savings of C$11.9 million associated with
headcount reductions and other cost savings initiatives
undertaken in 2001.
EBITDA declined from C$20.6 million in the fourth quarter of
2001, to C$11.9 million this quarter. Higher customer facing
costs associated with the Company's revenue growth initiatives,
increased bad debts and a one-time charge for the reassessment
of previous years' capital taxes were the primary reasons for
the decline. With the exception of the capital tax expense,
management had expected EBITDA would decline in the first
quarter as a result of the up-front costs associated with
investing for revenue growth.
At March 31, 2002, Call-Net has a total shareholders' equity
deficit of about C$1.5 billion.
"Call-Net's financial results -- revenue, EBITDA and net loss
per share -- should all improve for the remainder of the year.
We began to reinvest in our growth engines, including our sales
force, marketing and advertising, customer care and provisioning
in the first quarter," said Bill Linton. "The associated revenue
related to these increased expenditures should build throughout
the year. By the end of the year we expect to have established a
long term positive trend for both revenue and EBITDA."
Call-Net Enterprises Inc. is a leading Canadian integrated
communications solutions provider of local and long distance
voice services as well as data, networking solutions and online
services to businesses and households primarily through its
wholly-owned subsidiary Sprint Canada Inc. Call-Net,
headquartered in Toronto, owns and operates an extensive
national fibre network and has over 100 co-locations in nine
Canadian metropolitan markets. For more information, visit the
Company's Web sites at http://www.callnet.caand
http://www.sprint.ca
DebtTraders says that Call-Net Enterprises Inc.'s 9.375% bonds
due 2009 (CN09CAR1) are quoted at a price of 26.5. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CN09CAR1for
real-time bond pricing.
CALPINE: Retires $685.5MM of Zero Coupon Convertible Debentures
---------------------------------------------------------------
Calpine Corporation (NYSE: CPN) has purchased and retired all of
its remaining Zero Coupon Convertible Debentures due April 30,
2021, totaling $685.5 million, pursuant to the April 30, 2002
put provided for under the terms of the securities.
Based in San Jose, California, Calpine Corporation is an
independent power company that is dedicated to providing
customers with clean, efficient, natural gas-fired and
geothermal power generation. It generates and markets power,
through plants it develops, owns and operates, in 29 states in
the United States, three provinces in Canada and in the United
Kingdom. The company was founded in 1984 and is publicly traded
on the New York Stock Exchange under the symbol CPN. For more
information about Calpine, visit its Web site at
http://www.calpine.com.
* * *
As previously reported, Standard & Poor's lowered its corporate
credit rating on Calpine Corp. to double-'B' from double-'B'-
plus. The outlook is stable. At the same time, Standard & Poor's
lowered its rating on Calpine's senior unsecured debt to single-
'B'-plus from double-'B'-plus, two notches below the corporate
credit rating; its rating on the "SLOBS" (Tiverton/Rumford and
Southpoint/Broad River/Rockgen) to double-'B' from double-'B'-
plus; and its rating on the convertible preferred stock to
single-'B' from single-'B'-plus.
In addition, all of the above ratings were removed from
CreditWatch, where they were placed on March 12.
The actions follow Calpine's decision to secure approximately $2
billion ahead of Calpine's unsecured bondholders. "Calpine plans
to pledge all of its 2.0 trillion cubic feet of U.S. and
Canadian gas assets, as well as its Saltend power plant in the
U.K. and its equity investment in nine U.S. power plants to
three groups of secured debt holders," said Standard & Poor's
analyst Jeffrey Wolinsky. Calpine has secured a $1 billion
revolver and the existing $400 million corporate revolver that
expires in May 2003, and plans to finalize a $600 million, two-
year term loan shortly. This security adds to the existing
secured asset base under the $3.5 billion construction revolver,
which includes power plants under construction and about $1
billion of secured assets under the SLOBS.
To shore up its liquidity position, Calpine has added about $1.5
billion of debt beyond its forecast in October 2001, which
brings adjusted minimum and average funds from operations to
interest coverage ratios to about 1.9 times and 2.4x,
respectively, from 2002-2005. This deviates substantially from
the previous forecast ratios of 2.3x and 2.8x, respectively.
This change in coverage ratios comes with little alteration to
the forecast portfolio of assets since October 2001. While the
$2 billion in secured debt may improve Calpine's short-term
liquidity position, the additional debt will increase interest
expense, refinancing risk, and interest-rate risk.
In line with Standard & Poor's notching criteria, the amount of
secured debt on a sub-investment grade corporation relative to
Calpine's capitalization warrants a two-notch differential
between the corporate credit rating and the unsecured debt
rating. Moreover, Standard & Poor's believes that the magnitude
of the secured debt financing will likely prevent Calpine from
obtaining unsecured debt financing in the future. Therefore, the
expectation is that future debt issuances would also be secured,
further subordinating the unsecured bonds.
DebtTraders reports that Calpine Corp.'s 8.50% bonds due 2011
(CPN11USR1) are trading at about 84. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN11USR1for
real-time bond pricing.
CLAXSON INTERACTIVE: Unit Won't Make Payment on 11% Senior Notes
----------------------------------------------------------------
Claxson Interactive Group, Inc. (Nasdaq: XSON), a multimedia
provider of branded entertainment content to Spanish and
Portuguese speakers around the world, announced that its
Argentine subsidiary Imagen Satelital S.A. issued the following
statement:
IMAGEN SATELITAL S.A., an Argentina-based cable programming and
distribution company, announced today that it will not make an
interest payment of US $4.4 million on its 11% Senior Notes due
2005 (144 A CUSIP No.- 45245HAA0 and Reg S ISIN No.-
USP52800AA024). This interest payment is due tomorrow.
Banc of America LLC, an investment banking firm, has been
engaged to provide financial advice and to assist the company in
evaluating restructuring alternatives. In this regard, the
company is contemplating a bond swap. IMAGEN SATELITAL plans to
announce the details of an informal meeting with noteholders
over the next few weeks. The meeting will provide a forum for
preliminary discussions with noteholders. In the meantime,
IMAGEN SATELITAL will continue to operate its business and
satisfy its operating expenses consistent with its normal
business practice.
* * *
As previously reported in the March 19, 2002 edition of the
Troubled Company Reporter, Claxson is evaluating a number of
alternatives and taking certain steps including, among others,
the possible restructuring of some of its subsidiaries' debt
including renegotiation of applicable covenants, as well as
other commitments. Claxson believes that if these steps are not
successfully completed in a timely manner, it is likely that its
auditors will express a "going concern" opinion in connection
with Claxson's annual report on Form 20- F to be filed with the
Securities and Exchange Commission in June 2002.
On February 14, 2002, Claxson received notification from Nasdaq
that its common shares had failed to maintain a minimum market
value of publicly held shares (MVPHS) of $5.0 million for 30
consecutive trading days as required by Nasdaq rules, and that
Claxson would have until May 15, 2002 to regain compliance with
Nasdaq's continued listing requirements.
In addition, on February 28, 2002, Claxson received a
notification from Nasdaq that its common shares had failed to
maintain a minimum bid price of $1.00 for 30 consecutive trading
days required by Nasdaq rules, and that Claxson would have until
May 29, 2002 to regain compliance with Nasdaq's continued
listing requirements.
Claxson is evaluating several options in case it cannot regain
compliance within the set period, including filing an
application for transferring its securities to The Nasdaq
SmallCap Market and applying for quotation on the OTC Bulletin
Board.
COMDISCO INC: Classification & Treatment of Claims Under Plan
-------------------------------------------------------------
Comdisco, Inc.'s proposed Plan of Reorganization constitutes
separate plans of reorganization for the Comdisco Debtors and
the Prism Debtors. Accordingly, the Plan contains separate
classes for the Claims and Interests of the Comdisco Debtors and
the Prism Debtors.
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, in Chicago, Illinois, states that the estimated amount of
Administrative Claims to be incurred during the Chapter 11 Cases
including accrued but unpaid professional fees and estimated
payments for cure amounts with respect to assumed contracts and
leases, is estimated to be $189,000,000 against the Comdisco
Debtors. Other than Professional fees there have been no
significant Administrative Claims against the Prism Debtors.
"The estimated amount of Priority Tax Claims is $30,000,000
against the Comdisco Debtors," Mr. Butler says. There have been
no significant priority claims filed against the Prism Debtors.
Mr. Butler explains that for purposes of estimating the
percentage recoveries for holders of Claims in certain classes,
the enterprise value of the Debtors is between $1,984,200,000
and $1,782,500,000 inclusive of the New Common Stock assumed to
be valued at between $642,000,000 and $440,000,000 in the
aggregate. The estimated percentage recovery to holders of
Claims in Class C-4 is based upon New Common Stock valued at
$486,000,000. Based on these values, the Debtors and their
financial advisors believe that the recovery to holders of Class
C-4 Claims will be between 84% and 89% with an estimated
recovery of 87%. The Debtors estimate that more than half of the
recovery to holders of General Unsecured Claims will come from
an initial Cash distribution and the remainder will come from
the New Senior Notes, the New PIK Notes and the New Common
Stock.
The Debtors' financial advisor, Rothschild, valued the New
Common Stock based, in part, on information and financial
projections provided by the Debtors. The foregoing valuation
assumptions include, among other things, an assumption that the
results projected for the Reorganized Debtors will be achieved
in all material respects. However, Mr. Butler asserts that no
assurance can be given that the projected results will be
achieved. To the extent that the valuation assumptions are
dependent upon the achievement of the results projected by the
Debtors, the valuation assumptions must be considered
speculative. The valuation assumptions also consider, among
other matters:
(i) market valuation information concerning certain publicly
traded securities of certain other companies that are
considered relevant,
(ii) certain general economic and industry information
considered relevant to the business of the Reorganized
Debtors, and
(iii) such other investigations and analyses as were deemed
necessary or appropriate.
"The Debtors and Rothschild believe these valuation assumptions
are reasonable" Mr. Butler adds.
Mr. Butler relates that the Debtors have engaged in an active
review of all Scheduled and filed Claims to estimate the total
Claims outstanding. While there was approximately
$10,600,000,000 in Claims filed or Scheduled against the
Comdisco Debtors, approximately $1,900,000,000 of these Claims
were withdrawn or amended and superceded. In addition, another
approximately $2,600,000,000 were expunged under the Debtors'
first omnibus Claims objection. Therefore, there is
approximately $6,100,000,000 in claims remaining against the
Comdisco Debtors. Of these remaining Claims, Mr. Butler states
that certain of these Claims were filed significantly in excess
of their actual value. Accordingly, to estimate the distribution
to creditors the Debtors have analyzed their books and records
to determine what the Debtors believe is a reasonable range for
these Claims. As a result of this analysis, the Debtors believe
the General Unsecured Claims against Comdisco will be
approximately $4,200,000,000.
(1) Comdisco Debtors
Class/Description Proposed Treatment
----------------- ------------------
Class C-1 Unaltered.
Secured Claims On the Effective Date, their claims may be
reinstated, receive as cash equal to the
amount of such Allowed Secured Claim or such
other treatment that will not impair the
holder of such Allowed Secured Claim.
Holders of these claims are not entitled to
vote on the Plan.
Estimated Percentage Recovery: 100%
Estimated Amount of Claims: $151,516,244
Class C-2 Unaltered.
Other Priority On the Effective Date, their claims may be
Claims claimed as Cash equal to the amount of such
Allowed Other Priority Claim or such other
treatment that will not impair the holder of
Such Allowed Other Priority Claim. Holders of
these claims are not entitled to vote on the
Plan.
Estimated Percentage Recovery: 100%
Estimated Amount of Claims: $35,000,000
Class C-3 Impaired.
General Unsecured On the effective Date, General Unsecured
Convenience Claim Convenience Claim becomes an Allowed General
Unsecured Convenience Claim. The holders
will receive Cash equal to 87% of such
Allowed General Unsecured Convenience Claim
or the same treatment as is afforded to
holders of Allowed Class C-4 General
Unsecured Claims against Comdisco if the
holder of such General Unsecured Convenience
Claim makes an irrevocable written election
made on a validly executed and timely
delivered ballot. Holders of these claims
are entitled to vote under the Plan.
Estimated Percentage Recovery: 87%
Estimated Amount of Claims: $2,925,497
Class C-4 Impaired.
General Unsecured On the Effective Date and each Quarterly
Claims Distribution Date, holders will receive
its Pro Rata share of (i) the Net Available
Comdisco Cash, (ii) the New Senior Notes,
(iii) the New PIK Notes, (iv) the Trust
Assets and (v) the New Common Stock. Holders
of these claims are entitled to vote under
the Plan.
Estimated Percentage Recovery: 87%
Estimated Amount of Claims: $4,057,319,503
Class C-5 Impaired.
Interests and On the Effective Date and each Quarterly
Subordinated Distribution Date, each holder of an
Claims Allowed Comdisco Interest or an Allowed
Subordinated Claim will receive (i) if
Classes C-3, C-4 and C-5 vote to accept the
Plan such holder's Pro Rata share of the
Contingent Equity Distribution or (ii) if
Class C-3, C-4 or C-5 does not vote to accept
the Plan, then the holders will receive or
retain no property under the Plan on account
of such Claims or Interests. Holders
of these claims are entitled to vote under
the Plan.
Estimated Percentage Recovery: The Debtors
believe that the value of any Equity
distribution is uncertain.
(2) Prism
Class/Description Proposed Treatment
----------------- ------------------
Class P-1 Unimpaired.
Secured Claims If the holders of Class P-3 against Prism
vote to accept the Plan, then the holders of
Secured Claims will receive (i) Cash equal to
the Allowed Amount of such Allowed Secured
Claim or (ii) such other treatment that will
not impair the holder of such Allowed Secured
Claim. If the holders of Class P-3 against
Prism vote against the Plan then the
Comdisco/Prism Intercompany Secured Claim
shall remain a Class P- l Secured Claim and
shall receive Cash equal to the Allowed
amount of the Comdisco/Prism Intercompany
Secured Claim. Holders are not entitled to
vote on the Plan.
Estimated Amount of Claims: $45,748,777
Estimated % Recovery if Class P-3 votes in
favor of the Plan: 100%
Estimated % Recovery if Class P-3 votes
against the Plan: All holders of Class P-1
Secured Claims other than Comdisco will
receive 100% of the Allowed Amount of such
Secured Claim, and Comdisco will receive any
remaining available Cash to the extent
of its Allowed Secured Claim.
Class P-2 Unimpaired.
Other Priority On the Effective Date, each Holder will
receive Cash equal to the amount of such
Allowed Other Priority Claim or such Claim
will be otherwise treated in any other manner
such that it will not be impaired. Holders
are not entitled to vote on the Plan.
Estimated Amount of Claims: $13,707
Estimated % Recovery: 100%
Class P-3 Impaired
General Unsecured On the Effective Date, each holder receive
their Pro Rata share of the Net Available
Prism Cash, provided, however, that if the
holders vote to accept the Plan, then
Comdisco will agree to limit its recovery on
account of the Comdisco/Prism Intercompany
General Unsecured Claim and the
Comdisco/Prism Intercompany Secured Claims to
(i) l/3 of the distribution to all holders of
Class P-3 against Prism plus (ii) the New
Common Stock of Reorganized Prism. Holders
are entitled to vote on the Plan.
Estimated Amount of Claims, excluding the
Comdisco/Prism Intercompany Secured Claims:
$54$,661,772
Estimated % Third Party Recovery, if Class
P-3 Votes in Favor of the Plan: 13%
Estimated % Comdisco Recovery if Class P-3
Votes in Favor of the Plan: 1%
Estimated % Recovery if Class P-3 Votes
Against the Plan: 0%
Class P-4 Impaired.
Interests On the Effective Date, the Old Common Stock
of Prism and all other Interests in Prism
will he cancelled and the holders will not
receive or retain any distribution on account
of such Interests. Holders are not entitled
to vote on the Plan.
Estimated % Recovery: 0%
(Comdisco Bankruptcy News, Issue No. 27; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
CONSOLIDATED CONTAINER: S&P Junks Senior Subordinated Debt
----------------------------------------------------------
On April 30, 2002, Standard & Poor's lowered its long-term
corporate credit ratings on Consolidated Container Company LLC
and its wholly owned subsidiary, Consolidated Container Capital
Inc., to 'B-' and placed the ratings on CreditWatch with
negative implications. Atlanta, Georgia-based Consolidated is a
domestic producer of rigid plastic containers for a variety of
consumer products, including dairy, water, foods, beverages,
household and agricultural chemicals, and motor oil.
The downgrade reflects continued weakness in Consolidated's
financial performance and constrained financial flexibility. The
CreditWatch listing highlights Standard & Poor's heightened
near-term concerns about potential deterioration in liquidity
due to possible violation of financial covenants in the
company's recently amended revolving credit facility. The credit
agreement requires that Consolidated achieve minimum EBITDA of
$35 million for the period of January through May of 2002, which
may not be achievable without a significant improvement to
operating results. In addition, other financial covenants
tighten in the second half of 2002, and the company faces a
sizable debt amortization schedule.
Consolidated has faced significant operating challenges related
to new capital projects for key customers, and plant
rationalizations since the third quarter of 2001, which has
adversely affected profitability levels. Relatively stable
revenues from existing customers and timely completion of
management's restructuring initiatives are expected to gradually
improve profitability levels to the mid-teen percentage area in
the intermediate term.
Financial risk is high with EBITDA interest coverage (adjusted
for capitalized operating leases) under 2 times, and total
adjusted debt to EBITDA of about 5.5x as at December 31, 2001.
Moreover, intangibles (mainly goodwill) represent a significant
50% of total assets, and the company will likely need to take a
material charge when it adopts FAS 142 (goodwill impairment).
Despite lower capital spending levels, free cash generation
(after cash restructuring costs) is expected to be marginal in
2002. Availability under the revolving credit facility is
expected to provide for immediate-term liquidity needs, although
increasing debt maturities and stringent financial covenants
limit financial flexibility.
Standard & Poor's will focus on management's ability to
stabilize operating performance and meet its profitability
targets, necessary to remain in compliance with financial
covenants. If financial flexibiiy is further pressured, ratings
could be lowered.
Ratings Lowered, Placed On Creditwatch Negative
Consolidated Container Company LLC TO FROM
- Senior secured bank loan B- B+
- Senior subordinated debt CCC B-
Consolidated Container Capital Inc.
- Senior subordinated debt* CCC B-
(* Co-issued by Consolidated Container Company LLC)
COVANTA ENERGY: Signs-Up Kilpatrick Stockton as Special Counsel
---------------------------------------------------------------
Covanta's Senior Vice President-Legal Affairs, Jeffrey R.
Horowitz, tells Judge Blackshear Covanta Energy Corporation and
its debtor-affiliates submit this application to retain
Kilpatrick Stockton LLP, nunc pro tunc effective as of April 1,
2002, as special counsel for the Debtors in these Chapter 11
cases.
The Debtors propose to retain and employ Kilpatrick, pursuant to
Section 327(e) of the Bankruptcy Code, as their special counsel
to represent them in on-going or future litigation relating to
wrongful termination of Amended and Restated Solid Waste
Disposal Service Agreement between the Onondaga Country Resource
Recovery Agency (OCRRA) and the Onondaga Limited Partnership.
In March 2001, Onondaga Limited Partnership filed suit against
OCRRA for a variety of reasons, including, among others,
repeated breaches of the Onondaga Service Agreement and OCRRA's
failure to comply with the New York Open Meetings Law before
taking various actions against the Limited Partnership.
Specifically, OCRRA claims that a downgrade of Covanta's credit
rating in December 2001 was, without more, a sufficient basis to
terminate the Onondaga Service Agreement. Covanta disputes that
claim and has alleged that OCRRA has been engaged in a long-term
pattern of bad faith dealing.
Kilpatrick is a law firm that employs more than 500 attorneys.
The Debtors have selected Kilpatrick as special counsel because
of the firm's involvement as lead litigation counsel in this
case prior to the bankruptcy, and Kilpatrick lawyers' regular
representation of Covanta in a variety of complex litigation
matters which gives it great familiarity with Covanta's
business. Kilpatrick has indicated a willingness to act on the
Debtors' behalf to render the foregoing professional services.
Mr. Horowitz contends that the Debtors firmly believe that
Kilpatrick is well qualified to represent their interests and
the interests of their estates. If the Debtors are not permitted
to retain Kilpatrick as their special counsel, the Debtors,
their estates and all parties in interest would be unduly
prejudiced by the time and expense necessary to familiarize
themselves with the Onondaga Service Agreements and related
legal issues.
In addition to its representation of the Debtors, Kilpatrick has
previously represented other creditors and parties in interest
herein. Kilpatrick has not represented any of these entities in
connection with matters relating to the Debtors or their
estates. In this matter, retention is sought under Section
327(e) of the Bankruptcy Code, which provides that:
"The trustee, with the court's approval, may employ, for a
specified special purpose, other than to represent the
trustee in conducting the case, an attorney that has
represented the debtor, if in the best interest of the
estate, and if such attorney does not represent or hold
any interest adverse to the debtor or to the estate with
respect to the matter on which such attorney is to be
employed." 11 U.S.C. Section 327(e).
The Debtors understand that Kilpatrick intends to apply to the
Court for allowance of compensation and reimbursement of
expenses in accordance with applicable provisions of the
Bankruptcy Code, the Bankruptcy Rules and the Local Rules and
orders of this Court. Subject to Court approval under Section
330(a) of the Bankruptcy Code, compensation will be payable to
Kilpatrick on an hourly basis at its customary hourly rates for
legal services rendered that are in effect from time to time,
plus reimbursement of actual, necessary expenses incurred by the
Firm. Kilpatrick's hourly rates, subject to periodic adjustments
to reflect economic and other conditions, are:
Partners $230 - $500
Of Counsel $275 - $500
Counsel/Associates $160 - $350
Paralegals $95 - $170
The Firm's standard hourly rates are set at a level designed to
compensate the Firm fairly for the work of its attorneys and
paralegals and to cover fixed and routine overhead expenses.
In connection with the reimbursement of actual, necessary
expenses, the Debtors have been informed that it is the Firm's
policy to charge its clients in all areas of practice for
expenses incurred in connection with the clients' cases. The
expenses charged to Kilpatrick's clients include, among other
things, telephone and telecopier charges, mail and express mail
charges, special or hand delivery charges, document processing
charges, photocopying charges, travel expenses, expenses for
"working meals," computerized research, transcription costs, as
well as non-ordinary overhead expenses such as secretarial
overtime. The Debtors have been informed that the Firm believes
it is fairer to charge these expenses to the clients incurring
them than to increase the hourly rates and spread the expenses
among all its clients. The Debtors have been assured that
Kilpatrick will charge the Debtors for these expenses in a
manner and at rates consistent with charges made to the Firm's
other clients.
Kilpatrick has received certain amounts from the Debtors as
compensation for professional services performed on behalf of
the Debtors prior to the commencement of these Chapter 11 cases.
In the past 12 months, the Debtors paid Kilpatrick approximately
$867,557.78 for legal services. In addition, Kilpatrick holds
prepetition claims against the Debtors' estate on account of
legal services rendered prior the Petition Date in the total
amount of $61,545.50.
Mr. Horowitz assures Judge Blackshear that the Debtors do not
request authorization in this Application to pay such pre-
petition claims owed to Kilpatrick. The Debtors also submit that
such claims do not serve to disqualify Kilpatrick from
representing the Debtors on a post-petition basis. This is
because Kilpatrick does not represent or hold any interest
adverse to either the Debtors or their estates with respect to
the matters upon which Kilpatrick is to be employed.
No promises have been received by either the Firm or any member,
counsel, associate or other employee thereof as to compensation
or payment in connection with this case other than in accordance
with the provisions of the Bankruptcy Code. Kilpatrick has no
agreement with any other entity to share with such entity any
compensation received by the Firm in connection with this
Chapter 11 case.
In closing, Mr. Horowitz asks Judge Blackshear to enter an order
allowing the Debtors to employ and retain Kilpatrick Stockton
LLP, nunc pro tunc to April 2, 2002, as their special counsel
pursuant to Section 327(e) of the Bankruptcy Code, and that the
Court grant to the Debtors such other and further relief as is
just and proper. (Covanta Bankruptcy News, Issue No. 4;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
ENRON CORP: Wind Unit Taps Arnold & Porter as Special Counsel
-------------------------------------------------------------
Enron Wind Corporation, Enron Wind Systems Inc., Enron Wind
Constructors Corp., Enron Wind Maintenance Corp. and Enron Wind
Energy Systems Corp. ask to employ Arnold & Porter as special
real estate, turbine and project sale counsel, nunc pro tunc to
February 20, 2002.
Melanie Gray, Esq., at Weil, Gotshal & Manges LLP, in New York,
tells the Court that the Enron Wind Debtors selected Arnold &
Porter because the firm has represented them on real estate and
turbine and project sale issues since 1994. "Thus, Arnold &
Porter has significant knowledge about Enron Wind's businesses
and assets and substantial experience and expertise in these
critical legal areas," Ms. Gray explains.
In addition, Ms. Gray points out that, Arnold & Porter has also
provided regulatory advice to the Enron Wind Debtors for
projects in the states of California and Colorado, where it has
offices and expertise and experience as well. "It will be far
more efficient and far less costly for the Enron Wind Debtors to
employ Arnold & Porter on these issues than it would be to
retain new counsel unfamiliar with their operations, assets or
the legal issues pertaining to them," Ms. Gray asserts.
According to Ms. Gray, the Enron Wind Debtors have already
retained Arnold & Porter as an "ordinary course professional,"
but this Application seeks an order will supersede the ordinary
course order with respect to Arnold & Porter.
Ms. Gray assures Judge Gonzalez that Arnold & Porter will
coordinate with the Debtors' bankruptcy counsel -- Weil, Gotshal
& Manges LLP -- to ensure that they do not perform duplicative
services for the Enron Wind Debtors. Specifically, Ms. Gray
says, Arnold & Porter will be employed to perform such legal
services as the Enron Wind Debtors or its general bankruptcy
counsel determine to be necessary and appropriate after advice
and consultation.
The firm intends to charge the Enron Wind Debtors its customary
hourly rates, currently priced at:
partners $330 - 650
associates 165 - 375
paraprofessionals 40 - 235
Edward W. Zaelke, a partner of the firm of Arnold & Porter, adds
that they will also seek reimbursement for out-of-pocket
disbursements at cost.
Mr. Zaelke reports that the Firm has received payment from the
Enron Wind Debtors and their affiliated non-debtor entities in
the approximate amount of $2,374,391 for professional services
rendered and expenses incurred for the year prior to February
20, 2002. According to Mr. Zaelke, Enron Wind Corporation still
owes Arnold & Porter $529,399 for pre-petition legal services.
"This places the Firm among the 20 largest creditors of Enron
Wind Corporation," Mr. Zaelke notes. Arnold & Porter informs
the Court that they intend to pursue such claims.
Moreover, Mr. Zaelke adds, Arnold & Porter represents General
Electric on antitrust issues pertaining to its purchase of
assets from Enron Wind Corporation. "The Firm's advice to
General Electric pertains to the permissibility of the
contemplated transactions under antitrust law, whereas the
Firm's work for the Enron Wind Debtors will be simply to
implement the real estate transfer aspect of the transaction,"
Mr. Zaelke explains. Therefore, Arnold & Porter believes these
are separate matters and Arnold & Porter is therefore not
adverse to the Enron Wind Debtors with respect to the matter for
which it is being retained. Out of an abundance of caution, Mr.
Zaelke relates that the Firm has directed all its attorneys that
the individuals working for General Electric on these
transactions are not to participate in the Firm's representation
of the Enron Wind Debtors, and those individuals working for the
Enron Wind Debtors are not to participate in the Firm's
representation of General Electric.
Mr. Zaelke maintains that Arnold & Porter does not represent or
hold any interest adverse to the Enron Wind Debtors with respect
to the matter on which the firm is to be employed. (Enron
Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ENRON CORP: Court OKs Swidler Berlin as Debtor's Special Counsel
----------------------------------------------------------------
The Court authorizes Enron Corporation and its debtor-affiliates
to retain and employ Swidler Berlin Shereff Friedman LLP as
Special Employees' Counsel nunc pro tunc to December 10, 2001.
However, Judge Gonzalez emphasizes that "the Debtors, and any
person who served for any period post-petition as an officer or
employee of the Debtors, may seek authority from the Court to
retain or have the Debtors pay the fees and costs of separate
counsel for one or more present and former officers and
employees of the Debtors in connection with the Investigations
based on showing that:
(i) the employees and officers in question are simply
witnesses in the Investigations; and
(ii) (a) Swidler Berlin has determined that it cannot represent
the employees and officers in question (at least with
respect to the particular matter at issue), or
(b) Swidler Berlin has recommended that the employees and
officers in question engage separate counsel, or
(c) the matter involves an area where Swidler Berlin does
not have the requisite expertise, or
(d) there is a reasonable basis for a belief by the
employees and officers in question that either Swidler
Berlin would have a conflict of interest in
representing such individuals or that Swidler Berlin
could not fully or adequately represent such
individuals' interests.
* * *
As previously reported, the Debtors expect Swidler Berlin to
provide these services:
(a) representing the Employees in connection with specific
Investigations or other regulatory matters relating to the
Debtors involving any branches and agencies of the
United States Government (including, by way of
illustration only, any hearings and investigations
initiated by the United States Congress, the Federal
Energy Regulatory Commission, the Department Of Labor, the
SEC and the Department of Justice), as well as similar
matters initiated by foreign or domestic state or local
governmental entity;
(b) representing the Employees in any litigation or
arbitration matters;
(c) attending meetings with third parties on behalf of the
Employees;
(d) appearing before the Bankruptcy Court, any district or
appellate courts, and the United States Trustee on behalf
of the Employees;
(e) facilitating and coordinating communications between the
Employees and other parties in connection with the
Investigations; and
(f) performing on behalf of the Employees the full range of
legal services normally associated in these matters.
Swidler Berlin will work closely with the Debtors' other
professionals such as Skadden, Arps, Slate, Meagher & Flom, to
avoid unnecessary duplication of effort with such other
professionals.
As proposed, the Debtors will compensate Swidler Berlin based on
the firm's current hourly rates:
Partners $290 - 580
Counsel 280 - 355
Associates 145 - 350
Legal Assistants 105 - 145
The firm also charges for reimbursement of out-of-pocket
expenses including photocopying, telephone and telecopier, toll
and other charges, travel expenses, expenses for "working
meals", computerized research, transcription costs, and non-
ordinary overhead expenses such as secretarial and other
overtime. (Enron Bankruptcy News, Issue No. 21; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ENRON CORP: Azurix Extends Consent Payment Deadline Until Today
---------------------------------------------------------------
In connection with its previously announced tender offer and
consent solicitation for its 10-3/8 percent Series B Senior
Dollar Notes due 2007, its 10-3/8 percent Series A and B Senior
Sterling Notes due 2007, and its 10-3/4 percent Series B Senior
Dollar Notes due 2010, Azurix Corp., an Enron subsidiary, is
extending to 5:00 p.m. New York time on today, May 2, 2002, the
deadline by which holders of these notes must tender and consent
to receive the consent payment of 1.5 percent of par.
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.
ETHYL CORP: S&P Cuts Rating to B+ On Fin'l Flexibility Concerns
---------------------------------------------------------------
On April 26, 2002, Standard & Poor's lowered its corporate
credit rating on Ethyl Corp. to 'B+' as a result of heightened
refinancing risk, as well as prospects for the continuation of
an aggressive financial profile. Outlook is negative.
Ethyl, based in Richmond, Virginia, is a manufacturer and
marketer of fuel and lubricant additives products and has about
$360 million of debt outstanding.
The rating action reflected concerns regarding diminished
financial flexibility following the short-term refinancing of
the company's bank debt and the expectation that difficult
business conditions in the petroleum additives market would
serve to limit improvement to cash flow protection measures. The
company recently renewed its bank credit facility (which
represents virtually all debt outstanding), extending the
maturity to March 2003. The agreement can be extended for an
additional year based on certain debt reduction targets, but
challenging operating conditions are expected to impair the
company's ability to fully achieve these objectives.
Accordingly, Ethyl may need to pursue alternative debt reduction
plans or again refinance their debt in the near term.
The ratings reflect Ethyl's position in the petroleum additives
industry, offset by significant refinancing risk, persistent
operating challenges, and weak cash flow protection measures.
Petroleum additives are specialty chemicals that improve the
performance of fuels, automotive crankcase oils, transmission
and hydraulic fluids, and industrial engine oils. Research and
development costs are significant, given the competitive
pressure to meet new product specifications required by auto and
diesel engine manufacturers. A major factor in the company's
overall earnings decline over the past few years has been the
market deterioration in one of the key business sectors,
crankcase additives, the high-volume motor oil portion of the
petroleum additives segment. Overcapacity in the crankcase
industry, and the considerable pricing leverage of the
consolidating oil industry, have made it very difficult to
obtain satisfactory price increases, and the industry is
suffering from low to no growth. To return the crankcase product
line to profitability, Ethyl downsized those operations in 2001.
Recent operating results continue to reflect soft volumes in the
petroleum additives segment, coupled with an operating
environment characterized by oversupply and weak pricing.
Petroleum-based raw material costs, which declined in 2001, have
experienced a run up during the past few months due to continued
turbulence in the Middle East. Tetraethyl lead (TEL) income,
which remains a substantial contributor to overall
profitability, is on a long-term downward trend due to clean air
initiatives. Consequently, Ethyl will have difficulty restoring
operating margins from the dismal 5% to 7% range, until economic
conditions demonstrate sustainable improvement to bolster
demand. In addition, total debt (adjusted for the capitalization
of operating leases) to EBITDA (excluding one-time charges) is
expected to remain near the aggressive 4 to 5 times range for
the foreseeable future.
Outlook
Ratings could be lowered during the next year if challenging
business conditions or other developments impair Ethyl's ability
to refinance near term debt maturities. Current ratings
anticipate that management will take steps to preserve
sufficient financial flexibility and that challenging business
conditions will not result in further deterioration to key
financial statistics.
EXIDE TECHNOLOGIES: Intends to Maintain Existing Bank Accounts
--------------------------------------------------------------
Christopher J. Lhulier, Esq., at Pachulski Stang Ziehl Young &
Jones P.C. in Wilmington, Delaware, relates that the United
States Trustee for the District of Delaware has established
certain operating guidelines for Debtors-in-Possession that
operate their businesses. The United States Trustee Guidelines
requires a Chapter 11 Debtor-in-Possession to open new bank
accounts and close all existing accounts. The Guidelines and
also require that new bank accounts be opened in certain
financial institutions designated as authorized depositories by
the United States Trustee. The intention is to provide a clear
line of demarcation between pre-petition and post-petition
claims and payments and to protect against inadvertent payment
of pre-petition claims by preventing banks from honoring checks
drawn before the Petition Date. Before the Petition Date, Exide
Technologies and its debtor-affiliates maintained approximately
22 bank accounts in the ordinary course of business in their
cash management system.
The Debtors seek a waiver of the United States Trustee's
requirement that the Bank Accounts be closed and new post-
petition bank accounts be opened at depositories authorized by
the United States Trustee. If strictly enforced in this case,
Mr. Lhulier fears hat the United States Trustee's requirement
would cause substantial disruption in the Debtors' activities
and would impair the Debtors' ability to reorganize their
businesses for the benefit of their estates and parties in
interest.
The Debtors' ability to maintain and use the Bank Accounts would
greatly facilitate the Debtors' operations in Chapter 11. To
avoid delays in receipt of payments and payment of debts
incurred post-petition, Mr. Lhulier argues that the Debtors
should be permitted to continue to maintain the existing Bank
Accounts and, if necessary, to open new accounts. Subject to a
prohibition against honoring pre-petition checks or offsets
without specific authorization from this Court, the Debtors also
request that the Bank Accounts be deemed Debtor In Possession
accounts. The Debtors request authorization to maintain and
continue the use of these accounts in the same manner and with
the same account numbers, styles and document forms as those
employed during the pre-petition period.
Mr. Lhulier assures the Court that the Debtors will not pay, and
each of its banks where the Bank Accounts are maintained will be
directed not to pay, any debts incurred before the Petition Date
other than as specifically authorized by this Court. (Exide
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
EXODUS: Liquidating Plan's Classification & Treatment of Claims
---------------------------------------------------------------
Under Exodus Communications, Inc.'s proposed Plan of
Reorganization, each class of claims that will or may receive or
retain property or any interest in property is entitled to vote
to accept or reject the Plan. Ballots will be cast and tabulated
on a consolidated basis, in accordance with the expected
substantive consolidation of the Debtors' estates and Chapter l1
Cases. By operation of the law, each unimpaired class of claims
is deemed to have accepted the Plan and, therefore, is not
entitled to vote to accept or reject the Plan. Holders of Class
6 claims and Class 7 interests are presumed to have rejected the
Plan and thus are not entitled to vote.
An impaired class of claims will have accepted the Plan if the
holders of these claims (with at least two-thirds in the amount
of the allowed claims) have voted to accept the Plan and that
more than one-half of the holders of one allowed class of claims
have voted to accept the Plan.
Claims under the Debtors' Chapter 11 cases are classified as:
Class Description Treatment
----- ----------- ---------
Administrative Claimant will receive cash equal
to the unpaid portion of such
allowed administrative claim or
such less favorable treatment as
to which the Debtors or
Reorganized EXDS have agreed upon
in writing.
Priority Tax Claimant will receive cash equal
Claims to the unpaid portion of such
allowed administrative claim or
such less favorable treatment as
to which the Debtors or
Reorganized EXDS have agreed upon
in writing.
Senior Indenture Cash on the Effective Date as an
Trustee's Fees Administrative Claim
and Expenses
Class 1 Non-Tax Claimant will receive cash equal
Priority Claims to the amount of such Allowed Non-
Tax Priority Claim or such less
favorable treatment as to which
the Debtors or Reorganized EXDS
and the holder of such allowed
Non-Tax Priority Claim have agreed
upon in writing.
Class 2 Secured Claims Claimant will receive cash equal
to the amount of such Allowed
Secured Claim or such less
favorable treatment as to which
the Debtors or Reorganized EXDS
and the holder of such allowed
secured claim have agreed upon in
writing.
Class 3 Senior Note Claims Claimant will receive a pro-rata
share of available cash plus
proportionate share of the
Subordination Redistribution
Amount minus the proportionate
share of the Subordinated Note
Payment, if any.
Class 4 Subordinated Cash equal to its proportionate
Note Claims share of the Subordinated Note
Payment Amount.
Class 5 General Unsecured Claimant will receive pro-rata
Claims share of available cash.
Class 6 Inter-company Claim of this sort are deemed
Claims eliminated at Confirmation Date.
Class 7 Old Equity Claims of this sort are deemed
cancelled at the Confirmation
Date.
(Exodus Bankruptcy News, Issue No. 17; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FLAG TELECOM: Seeks Okay to Maintain Cash Management System
-----------------------------------------------------------
Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP, says that
in order to operationally and administratively maintain and
support the FLAG Telecom global fiber-optic network, FLAG
Telecom Holdings Limited and its debtor-affiliates require a
uniquely coordinated and integrated system to manage the revenue
and costs associated with their business. Among other things,
the cash management system allows the Debtors to: (i) control
corporate funds; (ii) ensure the maximum availability of funds
when necessary; and (iii) reduce borrowing costs and
administrative expenses by facilitating the movement of funds
and the development of more timely and accurate account balance
information.
Mr. Reilly says the use of the cash management system has
historically reduced interest expense by enabling the Debtors to
utilize all funds within the system to satisfy operating
expenses, thereby eliminating the need for one affiliated entity
to borrow funds while another entity has excess funds available.
Also, the Debtors' ability to maintain their operating
businesses depends on the continued use of the cash management
system in order to allow the funding of their operating
subsidiaries through cash held at FLAG Telecom Holdings Limited.
Without such funding, and the associated inter-company
transfers, the Debtors' operating affiliates would have no funds
with which to pay network maintenance costs and other overhead
expenses, and the global network might be forced to shut down.
The Debtors also request authorization to continue funding their
foreign affiliates who have not sought Chapter 11 protection to
enable them to continue in their operations while the Debtors
reorganize.
Mr. Reilly says that because of the Debtors' complex corporate
and financial structure, which includes 57 debtor and non-debtor
entities, it is extremely difficult and expensive to establish
and maintain a separate cash management system for each Debtor
and non-Debtor entity. Nevertheless, the Debtors will maintain
records of all transfers within the cash management system to
ensure that all transfers and transactions are documented in
their books and records. (Flag Telecom Bankruptcy News, Issue
No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLAG TELECOM: LINKdotNET Buys Unit's Cairo to New York Capacity
---------------------------------------------------------------
FLAG Telecom Holdings Ltd. (Nasdaq: FTHLQ; LSE: FTL), a leading
global network services provider and independent carriers'
carrier, said that LINKdotNET, one of the leading Internet
providers in Egypt, has signed an STM-1 (155Mbps) capacity
agreement with one of FLAG Telecom's subsidiaries for service
between Cairo and the Internet hub city of New York. Terms of
the multi-million dollar agreement were not disclosed.
This is made possible as a result of the establishment of a FLAG
Telecom virtual point of presence (VPOP) in Cairo and an
agreement with Telecom Egypt to jointly provide network services
to the international carrier community and ISPs supported by
service level guarantees. FLAG Telecom's MBS product provides
city-to-city connectivity from the center of Cairo to major
business centers across the world.
The STM-1 (155Mbps) service will utilize FLAG Telecom's global
network, specifically its FLAG Europe - Asia system and FLAG
Atlantic -1 (FA-1) system the world's first and only- multi-
terabit transatlantic cable system. This will allow LINKdotNET
to reliably route its Internet traffic with flexibility. FLAG
provides an innovative range of carrier services and network
services to the international carrier community, ASPs and ISPs.
LINKdotNET one of the largest ISPs in the Middle East and North
Africa selected FLAG Telecom in order to benefit from its
Managed Bandwidth Service, which provides seamless solutions and
fully managed international circuits across its global network.
Khaled Beshara, CEO of LINKdotNET, said, "Customer satisfaction
has always been a top priority for us at LINKdotNET. With FLAG
Telecom's fully protected service, we aim to provide the
LINKdotNET users with seamless service that would enable them to
surf the net, perform e-commerce transactions, and utilize the
various capabilities of the world wide web."
"The introduction of the Free Internet Initiative in Egypt has
set new challenges for the Egyptian ISPs. Connection speed and
traffic management have become the main dominators of survival
on both the short and long term - to this end our agreement with
FLAG Telecom is essential."
Mr. Walid Irshaid, FLAG Telecom's Regional Vice President of
Middle East said, "We are delighted that we are able to offer
LINKdotNET a 'one-stop shop' for their international
connectivity, taking full responsibility for ordering,
provisioning and management. We look forward to helping enable
LINKdotNET to expand its position within the Middle East and
Africa region."
At the time of the signing of the POP arrangement in July 2000,
Akil Beshir, Chairman of Telecom Egypt, said: "[Wednes]day's
agreement with FLAG Telecom takes our partnership with the
company to a new level. Many customers are looking for city-to-
city connections around the world and service level guarantees.
FLAG Telecom's network platform connects major business centers
our customers want to reach. We are a landing partner on the
FLAG Europe-Asia cable, and our facilities are already
interconnected, allowing us to offer advanced network services
to our customers and other leading carriers quickly. We are
delighted to be working with FLAG Telecom once again."
FLAG Telecom is a leading global network services provider and
independent carriers' carrier providing an innovative range of
products and services to the international carrier community,
ASPs and ISPs across an international network platform designed
to support the next generation of IP over optical data networks.
On April 12 and April 23, 2002, FLAG Telecom and certain of its
subsidiaries filed voluntary petitions for reorganization under
chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Southern District of New York.
FLAG Telecom continues to operate its business as a debtor in
possession under chapter 11 protection. FLAG Telecom has the
following cable systems in operation or under development: FLAG
Europe-Asia, FLAG Atlantic-1 and FLAG North Asian Loop. Recent
news releases and information are on FLAG Telecom's Web site at:
http://www.flagtelecom.com
FORMICA CORP: Seeking To Hire Lazard Freres for Financial Advice
----------------------------------------------------------------
Formica Corporation and its debtor-affiliates ask the U.S.
Bankruptcy Court for an authority to employ Lazard Freres & Co.
LLC as their financial advisors and investment bankers.
The Debtors tell the Court that they seek to retain Lazard as
their financial advisors and investment bankers because, among
other things, Lazard and its senior professionals have an
excellent reputation for providing high quality financial
advisory and investment.
Lazard has become familiar with the Debtors' business and
financial affairs as a result of a prepetition engagement
wherein Lazard provided advice in connection with the
Debtors' attempts to complete a strategic restructuring and the
preparation of these cases.
Lazard will assist the Debtors by:
a. performing a review and analysis of the Debtors'
business, operations and financial projections;
b. evaluating the Debtors' potential debt capacity in light
of its projected cash flows;
c. assisting in the determination of an appropriate capital
structure for the Debtors;
d. determining a range of values for the Debtors on a going
concern basis;
e. advising the Debtors on tactics and strategies for
negotiating with the holders of the Existing Obligations
and the Existing Interests;
f. rendering financial advice to the Debtors and
participating in meetings or negotiations with the
Stakeholders and Rating agencies or other appropriate
parties in connection with any restructuring,
modification or refinancing of the Debtors' Existing
Obligations and Existing Interests;
g. advising the Debtors on the timing, nature, and terms of
new securities, other consideration or other inducements
to be offered pursuant to the Restructuring;
h. advising and assisting the Debtors in evaluating
potential capital markets transactions of public or
private debt or equity offerings by the Debtors, and, on
behalf of the Debtors, evaluating and contacting
potential sources of capital as the Debtors may
designate and assisting the Debtors in negotiating such
a Financing Transaction;
i. assisting the Debtors in preparing documentation within
our expertise required in connection with the
Restructuring of the Existing Obligations and Existing
Interests;
j. assisting the Debtors in identifying and evaluating
candidates for a potential Business Combination,
advising the Debtors in connection with negotiations and
aiding in the consummation of a Business Combination
including the undertaking of any customary financial
analysis in connection therewith;
k. advising and attending meetings of the Debtors' Boards
of Directors and their committees;
l. providing testimony in any aspect of the Restructuring,
as necessary, in any proceeding before the applicable
court;
m. if requested by the Board of Directors of Formica
Corporation, render an opinion as to the fairness to
Formica Corporation or its shareholders, from a
financial point of view, of the consideration to be
received pursuant to a substantial Business Combination
consummated outside of a bankruptcy proceeding and will
furnish to Formica Corporation a letter expressing such
Opinion;
n. providing the Debtors with other customary general
restructuring advice and valuation advice.
The Debtors agree to pay Lazard:
a. a $150,000 monthly fee; and
b. a $3,300,000 Restructuring Fee, in cash, upon the
completion of a Restructuring.
Formica, together with its debtor and non-debtor-affiliates is a
preeminent worldwide manufacturer and marketer of decorative
surfacing materials. The company filed for chapter 11 protection
on March 5, 2002. Alan B. Miller, Esq. and Stephen Karotkin,
Esq. at Weil, Gotshal & Manges LLP represent the Debtors in
their restructuring efforts. As of September 30, 2001, the
Company reported a consolidated assets of $858.8 million and
liabilities of $816.5 million.
Formica Corp.'s 10.875% bonds due 2009 (FORMICA1), DebtTraders
reports, are quoted at a price of 17. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=FORMICA1for
real-time bond pricing.
FOSTER WHEELER: Lenders Extend Waiver Under Revolver thru May 30
----------------------------------------------------------------
Foster Wheeler Ltd. (NYSE: FWC) reported a net loss for the
first quarter of $24.6 million on $806.0 million in revenues.
The results were impacted by a loss of $19.0 million triggered
by a preliminary agreement to sell a waste-to-energy facility in
the U.S.
Also, the company incurred increased corporate expenses for
professional services and waiver fees for the ongoing
negotiations with the company's bank lending group and for its
intervention program consultants.
These results compare with net earnings of $8.1 million, or
$0.20 per share, and revenues of $698.2 million in the first
quarter of 2001. New orders booked were $792.8 million versus
$950.5 million in the first quarter of last year, and backlog
was $6.0 billion essentially unchanged from the level of $6.0
billion at the close of fiscal 2001.
At the close of the first quarter 2002, the company's cash and
cash equivalents position increased to $423.2 million compared
to $224.0 million at the end of the fourth quarter of 2001.
Also, net debt decreased 16 percent from the end of the fourth
quarter to $681.5 million from $815.0 million at the end of
fiscal 2001, the lowest level it has been in five years.
"Our performance during the first quarter was mixed," said
Raymond J. Milchovich, Foster Wheeler's chairman, president and
CEO. "The primary component of the loss for the first quarter is
a write-down associated with the sale of one of our waste-to-
energy plants. This action is part of an ongoing program to
monetize non-core assets, reduce debt and strengthen our balance
sheet and improve the company's future ability to earn.
"We are also working diligently to complete negotiations with
our various lenders, which were interrupted following the
unexpected additional charges we had to take in the fourth
quarter of 2001. Although I was very disappointed with the
performance problems leading to these charges, they were
isolated in one U.S. business unit and are not pervasive
throughout our operations. In fact, operations in our U.K.,
Italian and Finnish units are very strong and are showing
increasing growth. Therefore, I remain highly confident that we
will obtain favorable credit agreements.
"In addition, our performance improvement initiatives are
showing positive results. For example, we now measure our
performance each week on several critical parameters of our top
22 projects for 2002. We then execute action plans to correct
any problems or take advantage of opportunities on each project.
We are installing a new operating system to tighten control of
accounts receivable on our entire portfolio of active projects
in North America. And, we now have more than 10,000 vendors
worldwide linked to our e-procurement network, enabling us to
leverage our buying power and significantly reduce our
administrative costs.
"The excellent reputation Foster Wheeler enjoys in the
marketplace, along with the huge performance improvement
potential that we have identified, make me highly confident that
we will rapidly work through our near-term issues and put the
company on a much stronger financial footing," he said.
Negotiations with Bank Lending Group Continues
Foster Wheeler's management is continuing its discussions with
the company's lenders and various other financial institutions
regarding a new long-term credit facility and a replacement for
its lease financing and receivables sale arrangement. As a
result, the company has obtained a further extension of its
waiver under its revolving credit facility through May 30, 2002,
subject to the satisfaction of certain conditions. Also, the
company has requested extension of the forbearance of remedies
for its lease financing facility through May 30, 2002.
The company's $50 million receivables sale arrangement was
terminated by the lender on April 30, 2002. The company may
elect to replace this facility if it can negotiate terms and
conditions satisfactory to it from one or more of the financial
institutions with which it is currently in discussions.
According to DebtTraders, Foster Wheeler Corporation's 6.75%
bonds due 2005 (FWC) are quoted at a price of 48. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=FWCfor real-
time bond pricing.
GENERAL PUBLISHING: Canadian Court Grants CCAA Protection
---------------------------------------------------------
General Publishing Co. Ltd. sought and received protection from
creditors for General Publishing/The Musson Book Company,
General Distribution Services, and Stoddart Publishing under the
Companies' Creditors Arrangement Act. The Order gives the
company time to re-organize its business and implement a
restructuring plan to present to creditors. Irwin Publishing, a
subsidiary of General, is an educational publisher unaffected by
retail trade conditions and has not been included in the filing.
Deloitte & Touche Inc. will serve as the Court-appointed
monitor.
Under CCAA, the business will continue to operate as it re-
organizes. Scotiabank has agreed to provide interim financing to
the company in order to provide liquidity and to support the
continuing businesses. GDS will continue to receive and fill
orders on behalf of approximately 200 publishers. Stoddart's
publishing program of best-selling Canadian authors and
General/Musson's sales and marketing activities will also
continue.
Company chairman Jack Stoddart indicated that the protection is
needed in response to a series of industry problems. "I am
confident that we could have met many of these challenges
individually, but taken together they were overwhelming."
Stoddart cited delays and cost overruns in expanding his
warehouse operations, the past practices of Chapters under
former management, and the recent departure of a few of GDS's
client publishers as reasons for the financial difficulty.
"As a Canadian-owned book publisher and distributor, we have
been hit by all of the industry challenges - and they had a
compounding effect. The publishing and book industry has changed
dramatically and we need time to restructure our business."
concluded Mr. Stoddart.
David Murray, an experienced restructuring practitioner has been
retained by General to serve as Chief Restructuring Officer.
David will assist the Company in further developing and
implementing its restructuring plan.
General is a Canadian-owned book publisher and distributor. Its
operating divisions include Irwin Publishing, General
Publishing/The Musson Book Company, Stoddart Publishing, House
of Anansi Press and Boston Mills Press, and General Distribution
Services. General Publishing Co. Ltd was founded in 1923, and is
a privately held company.
GLIATECH INC: Eyeing Chapter 11 Filing to Restructure Finances
--------------------------------------------------------------
Gliatech Inc. (OTC Bulletin Board: GLIA.OB) provided the
following corporate update on its financial and regulatory
status:
Financial Status:
Gliatech announced that a previously disclosed proposed private
placement will not be consummated. As a result, the Company
expects to take steps to reduce expenses including a significant
reduction in the Company's workforce. The Company is
considering strategic options including the sales of its ADCONr
product line and pharmaceutical programs to strategic buyers.
Gliatech does not expect that the proceeds from any such sales,
if consummated, will provide adequate resources to fund the
ongoing operations of the Company. The Company is likely to seek
court protection under the U.S. Bankruptcy Code in order to
manage its financial restructuring options, including the
orderly auction and sale of its assets to meet its obligations
to its creditors.
As of March 31, 2002, Gliatech had approximately $2.4 million of
cash, cash equivalents and short-term investments. The Company
believes that it currently has sufficient cash, cash equivalents
and short-term investments on hand to meet operating
requirements through May 2002.
International Sales:
Gliatech continues to market ADCONr-L in countries outside of
the U.S. through a network of independent distributors managed
by its internal sales organization. The product is currently
registered in 41 countries outside of the U.S. Revenues outside
of the U.S. in the first quarter of 2002 were approximately
$500,000. It is the Company's intention to work with its
international distributors to maintain its international sales
activities even if the Company seeks bankruptcy protection.
Pharmaceutical Programs:
Gliatech is currently in discussions with investors and
strategic buyers regarding a sale of all or parts of the
Company's pharmaceutical programs, including its Histamine H3
small molecule drug candidates, its anti- inflammation
monoclonal antibodies, including the partnership established in
November 2001, and its glycine transporter programs.
ADCON(R) Product Family:
Gliatech has had discussions with several strategic buyers
regarding a sale of all or parts of the ADCONr family of
products, including domestic and international rights to its
ADCON(R) gel and solution products. The Company has received
strong initial indications of interest from various potential
buyers, some of whom may be interested in all of the ADCON(R)
technology and products or in individual ADCON(R) products for
specific territories.
Regulatory Update:
As previously disclosed, the Company has developed an
Application Integrity Policy corrective action plan to address
concerns raised by the FDA or the independent auditor regarding
internal systems, procedures, training and data integrity. This
AIP corrective action plan was submitted to the FDA in November
2001. Subsequently, the Company has responded to several
comments from the FDA related to this plan. The FDA has
completed its review of the AIP corrective action plan and has
indicated to the Company that it will conduct an inspection of
the Company before deciding, at FDA's sole discretion, if and
when the Company will be removed from AIP. Gliatech has entered
into discussions with the FDA regarding the impact of the
anticipated changes at the company following the termination of
the planned financing.
Gliatech Inc. is engaged in the discovery and development of
biosurgery and pharmaceutical products. The biosurgery products
include ADCON(R)-L, ADCON(R)-T/N and ADCON(R) Solution, which
are proprietary, resorbable, carbohydrate polymer medical
devices designed to inhibit scarring and adhesions following
surgery. Gliatech's pharmaceutical product candidates include
small molecule drugs to modulate the cognitive state of the
nervous system and proprietary monoclonal antibodies designed to
inhibit inflammation.
GREAT LAKES AVIATION: Violates Nasdaq SM Listing Requirements
-------------------------------------------------------------
Great Lakes Aviation, Ltd. (Nasdaq: GLUX) has received a letter
from Nasdaq to the effect that the company is not in compliance
with the requirements for continued listing on the Nasdaq
SmallCap Market. Financial information contained in the
company's Form 10-K for the period ended December 31, 2001,
indicate that it is not in compliance with the required minimum
of $2 million in net tangible assets, $2.5 million in
stockholders' equity or $500,000 of net income from continuing
operations for the most recently completed fiscal year or two of
the three most recently completed fiscal years.
The company has been given until May 7, 2002, to submit a
specific plan to achieve and sustain compliance with all The
Nasdaq SmallCap Market listing requirements. The company was
previously advised by Nasdaq of noncompliance due to the bid
price of its common stock being below $1.00, as required for
continued listing, and was given until August 13, 2002, to
achieve compliance with this Nasdaq SmallCap Market continued
listing requirement. If the company's stock does not satisfy
all the continued listing requirements, the company expects that
it will receive a letter that its stock will be delisted. The
company has the right to appeal this determination.
The Company is currently negotiating with its major creditor to
convert a portion of its debt into equity and restructure the
balance of its obligations. If these negotiations are
successful in the near term, the Company believes that it would
be in compliance with Nasdaq's financial requirements. The
Company further believes that its improving financial
performance may result in its being able to meet the Nasdaq
minimum bid price requirements.
Additional company information is available on its Web site
which may be accessed at http://www.greatlakesav.com
HAYES LEMMERZ: CIBC Balks at Debtors' Employee Retention Plan
-------------------------------------------------------------
David J. Baldwin, Esq., at Potter Anderson & Corroon LLP in
Wilmington, Delaware, tells the Court that Canadian Imperial
Bank of Commerce, as agent for the pre-petition secured lenders
of Hayes Lemmerz International, Inc., and its debtor-affiliates,
does not have a per se objection to the basic proposition that,
in the appropriate context, it may be a reasonable exercise of
business judgment for a debtor to seek approval of, and to
implement, a program that provides incentives for key employees
to remain with the debtor through the reorganization process.
Indeed, such a program, if narrowly defined and carefully
tailored, may be entirely appropriate in these Chapter 11 cases.
To that end, the Agent, together with its professionals, has
been working with the Company, the Committee, and their
respective professionals to try to reach consensus as to the
terms and conditions of a suitable employee retention and
compensation program.
Mr. Baldwin submits that the fundamental difficulty that the
Agent has with the Company's Employee Programs is that, in their
current state, the overall compensation levels and other
business terms are neither market based nor competitive with
other programs implemented in similar Chapter 11 cases. Even
employing the Debtors' base-case estimates, the total dollar
amount of the payments to the Debtors' top 13 senior management
members under the Restructuring Bonus, the Stay Bonus and the
Incentive Bonus Programs is $16.6 million. This amount exceeds
compensation levels for employees at companies of similar size
and character. Total payments to all covered employees would
aggregate approximately $38.6 million. Yet, if one uses a more
realistic earnings estimate of $250 million, Mr. Baldwin points
out that Senior Management will receive $27.3 million. Coupling
the salary and other benefits that Senior Management is
projected to receive and the proposed assumption by the Debtors
of severance obligations to these same executives (which, if
triggered, could result in $12.2 million, in the aggregate of
additional administrative expense claims), the amount of money
to be transferred to Senior Management is staggering and, truly
an "embarrassment of riches."
Moreover, Mr. Baldwin argues that the Restructuring Bonus and
the Incentive Bonus Programs are largely duplicative in that
they are both based upon increasing the Company's earnings.
Thus, employees will be compensated twice for the same effort.
The Restructuring Bonus is designed, in part, to compensate
Senior Management for their lost pre-petition stock options and
benefits, a goal that is incompatible both with the letter and
spirit of the Bankruptcy Code. Further, employees should not be
compensated for earnings increases that are not driven by their
own initiations but, instead, result from, among other things,
the overall recovery of the automotive industry in general. To
do otherwise is to award compensation to individuals for
benefits they do not actually confer upon these estates, in
contravention of 11 U.S.C. Section 503(b).
According to Mr. Baldwin, it is also not clear why the CEO and
the other top five members of Senior Management should receive
stay or restructuring bonuses of the magnitude now proposed.
These employees all received substantial sign-on bonuses,
ranging from $500,000 to $1,200,000 per employee, when they
joined the Company within months of the Petition Date. These
bonuses were paid at a time when it should have been quite clear
to these employees that the Company was headed for a bankruptcy
filing. Indeed, at a meeting prior to the Petition Date, the CEO
sought to justify to the Agent and the Pre-Petition Secured
Lenders the propriety of these large payments (he alone received
$1,200,000) by stating that no further retention or
restructuring compensation would be paid to these employees
during the Chapter 11 cases. In exchange for the Sign-On
Bonuses, Mr. Baldwin explains that these employees agreed to
remain employed with the Debtors for at least three years and to
repay that portion of the Sign-On Bonus pro-rated over the
remaining term of their employment agreements if they
subsequently left the Company voluntarily. The senior managers
received substantial "money" up-front and have to repay
significant sums if they leave at any time during the next 2.5
years. As a practical matter, the amount of any further stay or
restructuring compensation to these employees should at least be
scaled back considerably since they are already obligated to
stay on with the Company or face significant repayment
obligations.
Finally, the Agent objects to the Debtors' request to assume the
Employee Agreements as it believes it is premature for the
Debtors to assume these agreements, particularly since the Cases
are just over four months old and no meaningful discussions have
yet occurred between the Agent, the Pre-Petition Secured
Lenders, the Committee and the Company regarding the terms of a
Plan of Reorganization. Indeed, Mr. Baldwin contends that the
Debtors' five-year business plan is months away from completion.
The effect of assumption will be to saddle the Debtors with
severance and change control obligations that total potentially
in excess of $12.2 million. Moreover, little, if any, analysis
has apparently been undertaken by the Debtors regarding the
potential magnitude of additional administrative liabilities
that the Debtors propose to incur as a result of assuming the
Employee Agreements. Mr. Baldwin claims that the magnitude of
these un-liquidated pre-petition obligations, which the Debtors
seek to convert into administrative expense obligations, could
possibly hinder the Debtors' successful emergence from Chapter
11. In addition, by assuming these agreements, the Debtors lose
the ability to limit rejection damage claims pursuant to 11
U.S.C. Section 502(b)(7) and to require the terminated employees
to mitigate their damages, if any, following severance. (Hayes
Lemmerz Bankruptcy News, Issue No. 10; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
HOME INTERIORS: Enhanced Fin'l Flexibility Spurs S&P Upgrades
-------------------------------------------------------------
On April 30, 2002, Standard & Poor's raised its corporate credit
rating for Home Interiors & Gifts Inc to 'B'. Rating outlook is
stable.
The upgrade reflects Home Interiors' enhanced financial
flexibility, which is the result of improved profitability and
cash flow generation achieved through the retention of
experienced sales representatives, a better merchandise
assortment, and strong order fulfillment rates.
The rating is based on Home Interiors' high level of business
risk associated with its direct sales business model and its
aggressive debt leverage.
Home Interiors sells decorative accessories, such as framed art,
mirrors, and candles, to over 59,000 independent sales
representatives called displayers. Displayers resell the
products using a party-plan method. Sales are vulnerable to
changes in incentives for the displayers; slight disruptions in
fulfillment of orders; training and experience level of
displayers; and competition in recruitment for experienced
personnel.
By retaining experienced displayers and by improving
manufacturing and logistics, Home Interiors had a strong fourth
quarter in 2001, its important Christmas selling season. Sales
rose 10.1% for the quarter, while the EBITDA margin expanded to
19.0% from 11.0% for the fourth quarter 2000. Order size and
fulfillment rates were back to historical levels after
disruptions in 2000 from changes to sales incentives and the
implementation of a new warehouse distribution system.
In April 2002, Home Interiors acquired the inventory, and
customer and sales representative lists of House of Lloyd LLC, a
Kansas City, Missouri-based competitor. Standard & Poor's
believes that this acquisition will improve Home Interiors'
market share.
In 2001, Home Interiors restructured its debt by issuing $96.1
million in preferred stock to related parties in exchange for
senior and subordinated debt acquired in the open market.
Because of its debt restructuring, total debt to EBITDA fell to
4.0 times at year-end 2001 from 6.3x in 2000. EBITDA coverage of
interest expense, adjusted for operating leases, was 2.1x in
2001 versus 1.7x the prior year. Liquidity is adequate with $30
million available under the revolving credit facility at
December 31, 2001.
Outlook
The risks associated with Home Interiors' business model limit
the ratings' upside potential; still, Standard & Poor's believes
that credit ratios will remain appropriate for the current
rating.
Ratings List
Ratings To From
Senior secured debt B B-
Subordinated debt CCC+ CCC
IMMUNE RESPONSE: Fails to Meet Nasdaq Listing Requirements
----------------------------------------------------------
The Immune Response Corporation (Nasdaq: IMNR) has received
notification from the Nasdaq Listing Qualifications Department
indicating that the Company does not comply with Marketplace
Rule 4450(a)(5) because for the last 30 consecutive trading days
the Company's common stock had closed below the minimum $1.00
bid price per share requirement for continued inclusion on The
Nasdaq National Market. In order to regain compliance, the
closing bid price per share for the Company's common stock must
be $1.00 or more for a minimum of 10 consecutive trading days
during any period through July 24, 2002. If the Company cannot
demonstrate compliance with the NASD rule by July 24, 2002, the
NASD indicated that it would provide notification that the
Company's securities would be delisted. At such time, the
Company could appeal the determination. Alternatively, before
July 24, 2002, the Company could apply to transfer its
securities to The Nasdaq SmallCap Market which would extend the
period to comply with the minimum $1.00 bid per share
requirement until October 22, 2002.
As previously announced, the Company's Board of Directors has
requested that stockholders grant it the discretion to effect a
1-for-4 reverse stock split. This issue will be considered for
approval by the Company's stockholders at the upcoming Annual
Stockholder Meeting on June 11, 2002.
The Immune Response Corporation is a biopharmaceutical company
based in Carlsbad, California, developing immune-based therapies
to induce specific T-cell responses for the treatment of HIV,
autoimmune diseases and cancer. In addition, the Company is
developing a targeted non-viral delivery technology for gene
therapy, which is designed to enable the delivery of genes
directly to the liver via intravenous injection. NOTE: Company
information can also be located on the Internet Web site:
http://www.imnr.com
KAISER ALUMINUM: Gets Nod to Hire Wharton as Asbestos Counsel
-------------------------------------------------------------
Kaiser Aluminum Corporation, and its debtor-affiliates obtained
Court authority to employ and retain Wharton Levin Ehrmantraut
Klein & Nash, P.A. as special asbestos counsel in their chapter
11 cases to represent them in connection with all aspects of
pending and future asbestos bodily injury-related claims.
Wharton is a 23-year old firm with national and regional
practice concentrating in litigation and based in Annapolis,
Maryland. Wharton regularly represents product manufacturers,
other major corporations, professionals, and business interests
in the defense of product liability litigation, medical
malpractice and other professional liability litigation and
commercial litigation. The firm has extensive experience and
expertise in the substantive areas of law associated with
complex, multi-party toxic tort product liability, personal
injury and wrongful death actions, especially including the type
of large complex litigation, strategic counseling and related
matters for which the Debtors seek to employ Wharton.
The professionals expected to render services in these chapter
11 cases are:
Professional Position Rate
------------------- ----------- ------
Robert Dale Klein Shareholder $300
Jack L. Harvey Shareholder $275
Victoria H. Wink Associate $150
Joseph M. Aden Associate $135
Paralegals $ 75
Wharton will be charged with:
A. Counseling, providing strategic advise to, and representing
the Debtors in connection with any and all matters in or
outside of these bankruptcy cases proceedings arising from
or relating to the asbestos claims, including without
limitation:
a. counseling and representing the Debtors or coordinating
the representation of the Debtors in connection with
all aspects of Asbestos Claims related litigation,
including commencing, conducting and defending such
litigation wherever located;
b. counseling and representing the Debtors and assisting
general reorganization counsel in connection with the
formulation, negotiation and promulgation of a plan of
reorganization and related documents as these matters
relate to the Asbestos Claims; and,
c. counseling and representing the Debtors and assisting
general reorganization counsel in reviewing,
estimating and resolving the Asbestos Claims;
B. Performing any necessary or appropriate legal services in
connection with certain non-asbestos related litigation
matters pending as of the petition date with respect to
which Wharton previously has provided counseling to the
Debtors, including but not limited to, other toxic tort
litigation involving the Debtors, and occupational injury
or other claims arising in connection with various
products, operations or premises of the Debtors; and,
C. Performing all other necessary or appropriate legal services
in connection with Wharton's special representation of the
Debtors. (Kaiser Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KMART CORPORATION: DJM Handling Sale of 283 Store Leases
--------------------------------------------------------
Kmart Corporation and its 37 debtor-affiliates seek to realize a
significant value by selling the 283 closing store location
leases to parties submitting the highest and best bids.
John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher &
Flom, explains that the Debtors' proposed bidding procedures
provide several alternative methods for the sale of the
Properties to accommodate the needs of the most likely buyers.
To illustrate, Mr. Butler tells the Court that:
(1) Because many retailers or other end users will have an
interest in the Properties, the Debtors will seek to
assume and assign leases with respect to such Properties
to end-users that are ultimately Successful Bidders;
(2) Because many real estate investors and other non-end users
have expressed an interest in the Properties, the Debtors
are offering for sale, in lieu of an immediate assignment
of a Lease, the right to direct the Debtors to assume and
assign a Lease to a third party after such non-end user
locates a replacement tenant. The risk of locating a
replacement tenant and the carrying costs during the
period prior to the location of such tenant would be the
responsibility of the non-end user; and
(3) Many landlords have expressed an interest in "purchasing"
their own leases. To the extent that a landlord is the
Successful Bidder for its own Lease, a landlord would
execute a Lease Termination Agreement that may provide for
both cash consideration and the waiver of any lease
rejection claims. The Debtors may submit an order
approving any Lease Termination Agreement following 10
days notice of such agreements without objection.
In the event that the Debtors do not receive any interest in
certain of the Properties, the Debtors ask the Court's
permission to reject the Leases associated with such properties
on 10 days' notice. "The rejection will be effective on the
tenth day following the date of the notice," Mr. Butler
explains.
The Debtors propose to advertise the sale in Discount
Merchandiser, Dealmakers, Shopping Center Today, Shopping Center
Business, and Chainstore Age as soon as practicable. In
addition, Mr. Butler says, the Debtors' representatives have
already distributed over 5,000 flyers and e-mails advising
parties in interest concerning the potential disposition of the
Leases. Moreover, Mr. Butler adds, websites are available for
accessing information regarding the Leases.
According to Mr. Butler, the results of the Auction, if any,
will be posted as soon as practicable after the closing of the
Auction on this Web site: http://www.djmasset.com
The Debtors further ask the Court to schedule the Sale Hearing
on June 26, 2002 at 11 a.m. Objections to the proposed sale of
the Properties must be submitted as of noon (prevailing Central
Time) on June 20, 2002. (Kmart Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART: Proposes Uniform Bidding Protocol for 283 Store Leases
-------------------------------------------------------------
Kmart Corporation and its debtor-affiliates ask the Court's
authority to put uniform bidding procedures in place to assure
that they will obtain the best return possible on the 283
closing store locations for the benefit of their estates and
creditors.
"A key component of the Bidding Procedures is the ability to bid
on individual Properties or on multiple Properties as part of a
package," John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, in Chicago, Illinois, explains.
For example, Mr. Butler illustrates that:
(1) a sale of multiple Properties as part of a package can be
beneficial to the Debtors as a result of the obvious
transactional cost savings associated with closing fewer
and larger deals; while
(2) a sale of individual Properties can also be beneficial to
the Debtors by attracting bidders that have a more focused
interest in particular Properties and, therefore, may be
willing to bid more for such Properties on an individual
basis than they would if such Properties were part of a
larger package.
By structuring the bidding procedures so as to allow for both
individual and package bidding, the Debtors believe they can
maximize the value realized on all of the Properties.
A. The Bidding Process
The Company will:
-- determine whether any person is a Qualified Bidder,
-- coordinate the efforts of Qualified Bidders in conducting
their respective due diligence investigations regarding
the Leases,
-- receive offers from Qualified Bidders, and
-- negotiate any offer made to purchase the Leases.
Any person who wishes to participate in the Bidding Process
must be a Qualified Bidder. The Company has the right to
adopt such other rules for the Bidding Process which, in its
sole judgment, will better promote the goals of the Bidding
Process and which are not inconsistent with any of the other
provisions of the Bidding Procedures or of any Bankruptcy
Court order.
B. Reservation of Rights
The Company has been, and will continue, negotiating and
entertaining offers for the Leases, including package offers
that encompass more than one Lease (and up to all of the
Leases offered far sale). The Company reserves the right to
enter into agreements for the sale of the Leases,
individually or as part of a package, without further notice
to any party prior to the Auction, which agreements, if any,
may be subject to higher or otherwise better bids at the
Auction (including evaluation on a package or individual
basis) but which may be subject to bid protection or break up
fees as authorized by the Bankruptcy Court. The Company will
retain the right to withdraw one or more Leases from the
Auction, including in connection with a package offer, up to
the date of the Auction. The Company also retains all rights
to the Leases that are not subject to a bid accepted by the
Company and approved by the Bankruptcy Court at the Sale
Hearing.
C. Due Diligence
The Company has been, and will continue, providing due
diligence information to potential bidders who so request by
contacting, in writing, the Company's real estate consultant:
DJM Asset Management LLC
c/o Mr. Andrew Graiser
445 Broad Hollow Road, Suite 417
Melville, New York 11747
fax: 631752-1231
Information regarding the Leases can also be found at
http://www.djmasset.com DJM Asset Management LLC will
coordinate all reasonable requests for due diligence access
from such bidders. The Company will not be obligated to
furnish any due diligence information after the Bid Deadline
or to any person that the Company determines is not
reasonably likely to be a Qualified Bidder. Bidders are
advised to exercise their own discretion before relying on
any information regarding the Leases provided by anyone other
than the Company or its representatives.
D. Required Bid Documents
All bids must include these documents:
-- A letter stating that the bidder's offer is irrevocable
until the earlier of:
(x) 48 hours after all of the Leases upon which the bidder
is bidding have been disposed of pursuant to these
Bidding Procedures or withdrawn from the Auction by
the Company, and
(y) 45 days following the entry of an order by the
Bankruptcy Court approving the sale of such Leases to
a third party (other than the bidder).
-- An executed copy of the Asset Purchase Agreement (and, if
the bidder intends to take assignment of any Leases, an
Assignment and Assumption Agreements for each Lease) or in
the case of a landlord bidding on its own lease, an
executed Lease Termination Agreement for each Lease,
marked and initialed to show those amendments and
modifications to such agreement, including price and
terms, that the bidder proposes.
-- A certified check in an amount that is, at a minimum,
equal to the greater of:
(a) l0% of the purchase price proposed by the bidder, or
(b) $50,000 for each Lease (which, in the case of a
package bid will be in the cumulative amount of the
Good Faith Deposit for each Lease for which a bid is
submitted),
payable to the order of "First American Title Insurance
Company, as escrow agent for Kmart Corporation," along
with a check in the amount of $200 payable to First
American Title Insurance Company as a non-refundable
payment for the applicable escrow fees.
-- Evidence of ability to consummate the applicable
transaction, as determined by the Company, in its sole
discretion.
-- If the bidder intends to take assignment of any Leases,
evidence of the ability to provide adequate assurance of
the future performance of such Leases as required under
the Bankruptcy Code and as determined by the Company, in
its sole discretion. The submission of a bid will be
deemed to be the bidder's consent for the Company to share
any information submitted by the bidder to the Committees,
the DIP Lenders and any landlord or related party in
interest with respect to a Lease.
-- A completed bidder registration statement.
E. Bid Deadline
To be considered a timely bid, five copies of the bid
containing each of the Required Bid Documents must be
delivered to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
c/o Marian P. Wexler, Esq.
333 West Wacker Drive, Chicago, Illinois 60606
fax: 312-407-0411
and one copy of the bid containing the Required Bid Documents
must be delivered to:
DJM Asset Management LLC
c/o Mr. Andrew Graiser
445 Broad Hollow Road, Suite 417
Melville, New York 11747
fax: 631-752-1231
so that they are received not later than noon (prevailing
central lime) on June 7, 2002. The Company may extend the Bid
Deadline once or successively without further notice and for
one or more bidders, but will not be obligated to do so.
F. Qualified Bids
A "Qualified Bid" is a bid that includes each of the Required
Bid Documents and which:
-- is timely received by the parties listed in the preceding
section entitled "Bid Deadline";
-- with respect to the Applicable Marked Agreement, is on
terms (taken as a whole) that, in the Company's business
judgment, are not materially more burdensome or
conditional than the terms of the Asset Purchase
Agreement, Assignment and Assumption Agreements or the
Lease Termination Agreement, as applicable;
-- contains evidence satisfactory to the Company that the
bidder is reasonably likely (based on availability of
financing, experience and other considerations) to be able
to consummate a purchase of tire Leases sought to be
acquired if selected as the Successful Bidder; provided
that any landlord is deemed to have satisfied this
requirement with respect to the Leases for which it is the
lessor;
-- if the bidder intends to take assignment of any Leases,
provides evidence of adequate assurance of the future
performance of such Leases as required under the
Bankruptcy Code;
-- is not conditioned on obtaining financing;
-- is not conditioned on the outcome of unperformed due
diligence;
-- does not request or entitle the bidder to any break-up
fee, termination fee, expense reimbursement or similar
type of payment;
A bidder that submits a bid meeting the criteria will be
deemed a "Qualified Bidder."
G. Auction
After all bids have been received, the Company may conduct an
auction with respect to the Leases. The Auction will take
place beginning at 11:00 a.m. (CDT) on June 18, 2002 at the
offices of:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2100
Chicago, Illinois 60606
(312) 407-0700,
or such later time or other place as the Company notifies
all Qualified Bidders who have submitted Qualified Bids. Only
a Qualified Bidder who has submitted a Qualified Bid is
eligible to participate at the Auction. At the Auction,
Qualified Bidders will be permitted to increase their bids.
Based upon the terms of the Qualified Bids received, the
level of interest expressed as to particular Leases, and such
other information as the Company determines is relevant, the
Company, in its sole discretion, may conduct the Auction to
the manner it determines will achieve the maximum value for
the Leases including, but not limited to:
-- offering the Leases for bidding as an entire package, to
groups of less than all of the Leases or individually,
-- offering the Leases for bidding in such successive rounds
as the Company determines to be appropriate,
-- setting opening bid amounts in each round of bidding as
the Company determines to be appropriate, and
-- conducting a silent and open auction.
Upon conclusion of the Auction or, if the Company determines
not to hold an Auction, then promptly following the Bid
Deadline, the Company, in consultation with its advisors, the
Committees and the DIP Lenders, will:
-- review each Qualified Bid on the basis of financial and
contractual terms and the factors relevant to the sale
process, including those factors affecting the speed and
certainty of consummating the sale with respect to the
Leases, and
-- identify the highest or otherwise best offers for the
Leases.
A Qualified Bidder that submits a Successful Bid is a
"Successful Bidder."
H. Sale Hearing
The Sale Hearing is presently scheduled to take place on June
26, 2002 at 11.00 a.m. The Sale Hearing may be adjourned or
rescheduled without notice by an announcement of the
adjourned date at the Sale Hearing. At the Sale Hearing, the
Company will present to the Bankruptcy Court for approval the
Successful Bids for the Leases.
I. Acceptance of Qualified Bids
The Company presently intends to sell the Leases to the
Qualified Bidder with the highest or otherwise best Qualified
Bids. Other than Asset Purchase Agreements executed by the
Company (but still subject to Bankruptcy Court approval), the
Company's presentation to the Bankruptcy Court for approval
of a particular Qualified Bid does not constitute the
Company's acceptance of the bid. The Company will accept a
bid only when the bid has been approved by the Bankruptcy
Court at the Sale Hearing.
Upon failure to consummate a sale of some or all of the
Leases after the Sale Hearing because of a breach or failure
on the part of the Successful Bidder with respect to such
Leases, the next highest or otherwise best Qualified Bidder,
as disclosed at the Sale Hearing with respect to some or all
of such Leases, will be deemed the Successful Bidder without
further order of the Court.
J. Return of Good Faith Deposit
Each Good Faith Deposit of any Qualified Bidder will be held
in escrow until the earlier of:
-- 48 hours after all Leases upon which the bidder is bidding
have been disposed of pursuant to these Bidding Procedures
or withdrawn from the Auction by the Company, and
-- 45 days following the entry of an order by the Bankruptcy
Court approving the sale of such Leases to a third party
(other than Purchaser).
K. "As Is, Where Is"
The sale of the Leases are on an "as is, where is" basis
and without representations or warranties of any kind,
nature, or description by the Company, its agents or its
estate, except to the extent set forth in the Applicable
Marked Agreements of the Successful Bidders as accepted by
the Company. Except as otherwise provided in such agreements,
all of the Company's right, title and interest in and to the
respective assets will be sold free and clear of all pledges,
liens, security interests, encumbrances, claims, charges,
options and interests thereon and there against in accordance
with Section 363 of the Bankruptcy Code, such Transferred
Liens to attach to the net proceeds of the sale of such
assets.
Each bidder will acknowledge and represent that it has had an
opportunity to inspect and examine the Leased Premises and
conduct any and all due diligence regarding the Lease and the
Leased Premises prior to making its offers, that it has
relied solely upon its own independent review, investigation
and inspection of any documents including, without
limitation, the Lease and the leased Premises in making its
bids and that it did not rely upon or receive any written or
oral statements, representations, promises, warranties or
guarantees whatsoever, whether express, implied, by operation
of law, or otherwise, with respect to the Leases or the
Leased Premises, or the completeness of any information
provided in connection with the Leases or the Leased Premises
or the Auction, except as expressly stated in these Bidding
Procedures.
L. Modifications
The Company may:
(a) determine, in its business judgment, which Qualified Bid,
if any, is the highest or otherwise best offer with
respect to one or a group of the Leases; and
(b) reject at any time before entry of an order of the
Bankruptcy Court approving a Qualified Bid, any bid that,
in the Company's sole discretion, is:
-- inadequate or insufficient,
-- not in conformity with the requirements of the
Bankruptcy Code, the Bidding Procedures, or the terms
and conditions of sale, or
-- contrary to the best interests of the Company, its
estates and its creditors.
The Company may adopt rules for the bidding process that, in
its judgment, will better promote the goals of the bidding
process and that are not inconsistent with any of the other
provisions hereof or of any Bankruptcy Court order.
Mr. Butler tells Judge Sonderby that similar procedures have
been successfully employed in the disposition of surplus real
estate in other large retail cases, such as in Service
Merchandise Company Inc., Montgomery Ward Holding Corp. et al.,
Long John Silver's Restaurants Inc., et al., and Venture Stores,
Inc. (Kmart Bankruptcy News, Issue No. 18; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
KNOWLES ELECTRONICS: Mar. 31 Balance Sheet Upside-Down by $474K
---------------------------------------------------------------
Knowles Electronics Holdings Inc. announced results for the
first quarter of 2002.
The manufacturer of hearing aid components and other products
reported net sales of $51.0 million, 7% less than the $54.7
million reported for the first quarter of 2001. Operating income
was $7.9 million, compared with $10.9 million for the first
quarter of the previous year. After interest expense and taxes,
the company had a net loss for the quarter of $0.4 million,
compared to net income of $0.7 million for the first quarter of
2001.
While sales at the company's core Knowles Electronics Division
were almost even with the first quarter of 2001, its Automotive
Components Group reported a 19% decline, and its Emkay Division
reported a 6% decline. The Knowles Electronics Division reported
a sales decline of $400,000, or 1%. The company's Automotive
Group reported sales of $11.7 million, compared to $14.5 million
in the first quarter of 2001, primarily due to reduced demand
this year for a specialized high margin solenoid product sold in
the first quarter of last year and lower auto position sensor
sales this year. At the company's Emkay Division, sales were
$517,000 less than they were in the first quarter of 2001.
Knowles' March 31, 2002 balance sheet shows that the company has
a total shareholders' equity deficit of about $474,370.
"Although our results are down from last year, we are beginning
to see some improvement in our sales," said John Zei, President
and CEO. "Our results for March are significantly higher than
those for January and February and both Emkay and our Automotive
Components Group achieved better results than they did in March
of 2001."
The company's EBITDA for the first quarter, excluding
restructuring charges, totaled $11.4 million or 22.4% of sales,
compared to $14.7 million, or 26.8% of sales, in the first
quarter of 2001. Both EBITDA and operating income fell more
sharply than sales as a result of changes in the mix of its KE
and ACG division products and customers, with a higher
percentage of sales coming from lower margin products and
customers coupled with higher KE division customer rebates this
year.
In response to current conditions the company is reducing costs
and improving cash flows. "We've been very successful in
controlling expenses, inventory and capital expenditures," said
Zei. "Our SG&A expenses are down more than $400,000 compared to
2001. We have cut capital expenditures by almost $3 million, and
we have reduced inventories by about $1 million, compared to a
$3 million increase in the first quarter of last year."
James F. Brace, Executive Vice President and CFO, said that the
company is closely monitoring receivables and payables. Because
March 2002 sales were $2 million higher than December 2001
sales, the company's receivables increased since year-end.
Payables were reduced from high year-end levels, also resulting
in a use of cash during the first quarter. "We expect payables
to be small contributor to cash flow in the second quarter and
both to be contributors to cash flow in the third quarter,"
Brace commented. "Although we expect sales to improve, even if
they improve less than expected, we will improve cash flow
through improved collections, control of payables, and continued
reduction of operating expenses, inventories and capital
expenditures."
The company has been unable to comply with several of the
covenants under its bank credit agreement due to the lower first
quarter 2002 operating results. The company currently is
negotiating modifications to and waivers of the covenants, which
it expects to complete shortly. Until the completion of those
negotiations, the company has delayed the filing of its Annual
Report on Form 10-K for 2001 and has not made the interest
payment on its 13 1/8% Senior Subordinated Notes, scheduled for
April 15, 2002. After the company is once again in compliance
with its bank agreement, it will make the interest payment and
file its Form 10-K. In the meantime, the attached statements in
this release remain unaudited and all of the company's long-term
debt has been reclassified as current.
"We believe we may be seeing some improvements in our markets,"
said Zei. The implementation of our Enterprise Resource Planning
system has begun to reduce our supply chain costs and improve
our ability to manage inventories. Additionally, new products
are helping increase sales in our core hearing aid market.
Knowles Electronics is the world's leading manufacturer of
transducers and related components used in hearing aids. The
company also manufactures acoustic components used in voice
recognition, telephony, and Internet applications as well as
automotive solenoids and sensors. In 1999, the European fund
management company Doughty Hanson & Co Ltd acquired Knowles.
LTV: Inks Pact to Sell Walbridge Interests to Material Sciences
---------------------------------------------------------------
Material Sciences Corporation has signed an agreement to acquire
LTV Corporation's ownership interests in Walbridge Coatings.
Under the terms of this agreement, MSC will buy all of LTV's
equity interest in the Partnership. The purchase is subject to
the completion of requirements under the order of the Bankruptcy
Court dated March 21, 2001, as modified on November 7, 2001,
relating to the sale of assets for proceeds. As a result of the
purchase, MSC's ownership interest in the Partnership will
increase to 66.5 percent, and it will gain access to an
additional 33 percent of the facility's available line time.
Bethlehem Steel Corporation will continue to maintain a 33.5
percent ownership interest in the Partnership and have access to
63 percent of the available line time. The sale is expected to
close in May 2002.
Nadig said, "We are extremely pleased to be able to increase our
ownership in Walbridge Coatings and gain greater access to this
operation's unique capabilities. Walbridge houses our biggest,
fastest, and most versatile coating line. Moreover, this line
has the unique wide-width capability to electrogalvanize and
coil coat a strip of metal in a single pass, which offers
economic and efficiency benefits not otherwise available in
North America. We are finding growing interest in this
capability, particularly by the building and appliance markets.
"About two years ago, we added laminating capability to the
Walbridge line," Nadig explained. "This has made it our primary
source for Quiet Steel(R), which is used for automotive body
panels such as the dash panel in the new Lincoln Navigator."
Material Sciences Corporation is a leading provider of
materials-based solutions for electronic, acoustical/thermal,
and coated metal applications. MSC uses its expertise in
materials, which it leverages through relationships and a
network of partners, to solve customer-specific problems,
overcoming technical barriers and enhancing performance. MSC
differentiates itself on the basis of its strong customer
orientation, knowledge of materials combined with a deep
understanding of its markets, and the offer of specific value
propositions that define how it will create and share economic
value with its customers. Economic Value Added (EVA(R)) is
MSC's primary financial management and incentive compensation
measure. The company's stock is traded on the New York Stock
Exchange under the symbol MSC and is included in the Standard &
Poor's SmallCap 600 Index.
LTV Corporation's 11.75% bonds due 2009 (LTV2), DebtTraders
says, are quoted at a price of 0.5. For real-time bond pricing,
see http://www.debttraders.com/price.cfm?dt_sec_ticker=LTV2
LAIDLAW: Expects to Release Fiscal 2001 Results by End of June
--------------------------------------------------------------
Laidlaw Inc (TSE:LDM) says it currently expects to release its
audited results for the fiscal year ended August 31, 2001 by
June 30, 2002. The announcement revises its prior expectation
regarding release of this information prior to April 30, 2002.
The preparation and filing of the financial statements is
delayed due to the time required by PricewaterhouseCoopers,
Laidlaw's auditor, to complete the audit.
In June 2001, Laidlaw Inc., and five of its subsidiary holding
companies - Laidlaw Investments Ltd., Laidlaw International
Finance Corporation, Laidlaw One, Inc., Laidlaw Transportation,
Inc. and Laidlaw U.S.A., Inc. filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in
the United States Bankruptcy Court for the Western District of
New York. At the same time, Laidlaw Inc. and Laidlaw Investments
Ltd. filed cases under the Canada Companies' Creditors
Arrangement Act in the Ontario Superior Court of Justice in
Toronto, Ontario. Laidlaw's plan of reorganization, as filed,
contemplates no distribution of value to holders of Laidlaw's
equity.
Consistent with its January 2002 announcement, in accordance
with OSC Policy 57-603, Laidlaw will continue to abide by the
provisions of the alternate information guidelines until it has
satisfied its financial statement filing requirements by making
required filings with the relevant securities regulatory
authorities throughout the period in which it is not in
compliance with such requirements.
Laidlaw Inc. is a holding company for North America's largest
providers of school and intercity bus transportation, municipal
transit, patient transportation and emergency department
management services.
LERNOUT & HAUSPIE: Sues SG Cowen to Recoup $7 Million Preference
----------------------------------------------------------------
Lernout & Hauspie Speech Products, represented by Robert J.
Dehney of Morris Nichols, brings suit against SG Cowen
Securities Corporation to recover, under the "strong-arm" powers
of the Bankruptcy Code, certain prepetition payments in the
amount of $6,972,387 paid in September 2000, and alleged to be
preferential, and which permitted Cowen to receive more than it
would have on a claim in the same class and nature as it asserts
if this case were a liquidation proceeding.
Cowen appears, represented by Patricia A. Widdoss of the
Wilmington office of Skadden Arps Slate Meagher & Flom, and
answer the Complaint, admitting payments as a "success" fee, but
denying that its receipt of this money constitutes a preference.
As affirmative defenses, Cowen says that L&H NV cannot in any
event recover the money because the transfer was (i) in payment
of a debt incurred by L&H NV in the ordinary course of business
affairs between L&H NV and Cowen, (ii) made in the ordinary
course of business or financial affairs of L&H NV and Cowen, and
(iii) made according to ordinary business terms.
Further, Cowen gave new value to or for the benefit of L&H NV
not secured by an otherwise unavoidable security interest, and,
on account of which new value, L&H NV did not make an otherwise
avoidable transfer to Cowen.
Finally, Cowen alleges that at the time of the transfers L&H NV
was solvent. Cowen asks Judge Wizmur to dismiss the suit with
prejudice and award it judgment against L&H NV for all costs and
its attorney's fees. (L&H/Dictaphone Bankruptcy News, Issue No.
22; Bankruptcy Creditors' Service, Inc., 609/392-0900)
MILLENIUM SEACARRIERS: Creditors Want Chapter 11 Trustee Named
--------------------------------------------------------------
More Millenium Seacarriers Inc. creditors have filed a motion
requesting the U.S. Bankruptcy Court in Manhattan to appoint a
chapter 11 trustee to administer the company's bankruptcy case.
The creditors have said that the company has no funding and that
it has been mismanaged. Several other creditors, however, are
asking the court to convert Millenium Seacarriers' chapter 11
reorganization to a chapter 7 liquidation.
Cayman Islands-based Millenium Seacarriers and 19 affiliates
sought bankruptcy protection on January 15, listing assets of
$85.1 million and debt of $112.9 million. (ABI World, April 29)
METROMEDIA FIBER: Nortel Networks Discloses 6% Equity Stake
-----------------------------------------------------------
Nortel Networks Corporation, a Canadian corporation,
beneficially owns 42,914,884 shares of the common stock of
Metromedia Fiber Network Inc., representing 6.0% of the
outstanding common stock of the Company. Nortel has sole powers
of voting and disposition of the stock.
The 42,914,884 shares beneficially owned by Nortel Networks
Corporation at April 22, 2002 consist of 42,914,884 shares of
Class A common stock of Metromedia Fiber Network Inc. that are
issuable upon the exercise of the remainder of a warrant to
purchase shares of Class A common stock of Metromedia Fiber
Networks issued on October 1, 2001 and exercisable commencing
December 20, 2001. The warrant was originally exercisable for
87,143,243 shares of Class A common stock of Metromedia, after
giving effect to certain anti-dilution adjustment provisions,
which was further adjusted to 85,829,769 shares. The number of
shares of Class A common stock of Metromedia that are
beneficially owned by Nortel Networks Corporation upon the
exercise of the warrant was reduced to 42,914,884 after the sale
of part of the warrant to a third-party purchaser on April 22,
2002. The remainder of the warrant is held by Nortel Networks
Inc., a wholly-owned subsidiary of Nortel Networks Limited,
which in turn is a wholly-owned subsidiary of Nortel Networks
Corporation.
Metromedia Fiber Network, a 52%-controlled by Metromedia
Company, builds urban fiber-optic networks distinguished by the
sheer quantity of fiber available -- its 864 fibers per cable is
up to nine times the industry norm -- and sells the dark fiber
to telecommunications service providers. MFN supplies fiber to
all types of telecom carriers as well as to other businesses. It
has networks under construction in big cities across the US, has
created intercity links by swapping fiber, and has begun
operating in Europe. The company, which has expanded by buying
AboveNet and SiteSmith, also provides Internet infrastructure
management services, including Web hosting.
As previously reported, Metromedia Fiber Networks has defaulted
on its $975 million subordinated debentures and is currently
subject to Nasdaq delisting actions for noncompliance of
continued listing requirements. Moreover, the company is seeking
alternative external sources of financing to meet its current
debt obligations.
NATIONAL STEEL: Committee Seeks OK to Hire Reed Smith as Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors in National Steel
Corporation's chapter 11 cases seeks the Court's authority to
employ Reed Smith as their counsel nunc pro tunc to March 18,
2002.
EES Coke Battery LLC Vice-President Gerald S. Endler, Chair of
the Committee, explains that Reed Smith was selected to
represent the Committee because of the firm's extensive general
experience and knowledge. In particular, Reed Smith was selected
because of its expertise in the field of Debtor protection and
creditors' rights and business reorganizations under Chapter 11
of the Bankruptcy Code. In addition to its expertise in
bankruptcy and restructuring, the firm has substantial expertise
in matters involving banking and finance law, labor and
employment law, pension law, environmental law, litigation and
other areas of legal practice.
"Reed Smith has represented clients in the steel industry for
more than 100 years," Mr. Endler says. As a result of its
experience, Reed Smith has become familiar with the Debtors'
business and affairs as well as the Debtors' capital structure.
Accordingly, Reed Smith has the necessary background to deal
effectively with many of the potential legal issues that may
arise in the context of these cases.
Mr. Endler lists the services expected of Reed Smith as:
(a) advising the Committee regarding its duties and powers in
these cases;
(b) consulting with the Debtors about the administration of
these cases;
(c) assisting the Committee in its investigation of the acts,
conduct, assets, liabilities, and financial condition of
the Debtors, the operation of the Debtors' business, and
the desirability of the continuation of such business, and
any other matters relevant to the case or the formulation
of a Plan;
(d) preparing all necessary motions, applications, answers,
orders, reports, or other papers in connection with the
administration of the Debtors' estates;
(e) reviewing any proposed Plan and Disclosure Statement,
participating with the Debtors or others in the
formulation or modification of a Plan, or proposing a
Committee Plan if appropriate;
(f) providing services in the area of governmental affairs as
requested; and
(g) performing such other legal services as may be required
and in the interest of the Committee.
Furthermore, Mr. Endler reports that Reed Smith will be paid its
customary hourly rates ranging from $175 to $600 for lawyers and
$75 to $195 for paraprofessionals for services rendered and
reimbursed according to the firm's customary reimbursement
policies.
Paul M. Singer, Esq., a partner in the law firm of Reed Smith,
in Pittsburgh, Pennsylvania, adds that their firm also reserves
the right to adjust such rates form time to time consistent with
its customary practices. "Each monthly invoice submitted to the
Committee will include out-of-pocket expenses," Mr. Singer says.
Mr. Singer asserts that Reed Smith has no connection with the
Debtors, the Creditors, the Court, the U.S. Trustee or any party
in interest in these Chapter 11 cases. Although the firm
represents several of the Debtors' lenders, it is unrelated to
matters in these proceedings. Thus, Mr. Singer states that Reed
Smith do not have any adverse interest in these cases and has
stated its desire and willingness to act and represent the
Committee as their counsel. (National Steel Bankruptcy News,
Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900)
NETIA HOLDINGS: Unit Won't Make Interest Payment on 11.25% Notes
----------------------------------------------------------------
Netia Holdings S.A. (Nasdaq: NTIAQ, WSE: NET), Poland's largest
alternative provider of fixed-line telecommunications services,
announced that its subsidiary, Netia Holdings B.V., will not
make interest payments of US$10,250,000 on the 10-1/4% Dollar
Notes due 2007, US$10,887,000 on 11-1/4% Discount Dollar Notes
due 2007 or an interest payment of approximately EUR5,823,000 on
the 11% Discount DM Notes due 2007, all due on May 1, 2002.
As previously announced, Netia has reached an agreement with its
bondholders concerning a consensual reorganization of its
balance sheet to reduce its debt and interest burdens. This non-
payment of interest announced today is in accordance with the
agreed terms of Netia's restructuring.
DebtTraders reports that Netia Holdings SA's 13.50% bonds due
2009 (NETH09PON2) are trading at a price of 18. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09PON2
for real-time bond pricing.
NORD PACIFIC: Closes Sale of Australian Copper Assets for A$6.8M
----------------------------------------------------------------
Nord Pacific Limited (OTC: NORPF) has completed the previously
announced sale of its Girilambone and Tritton copper projects in
New South Wales, Australia to Straits Mining Pty. Ltd., a wholly
owned subsidiary of Straits Resources Limited. The Company has
now received cash of A$1,265,726 (approximately US$671,000) from
Straits, and was further relieved of all debt owed to Straits on
the Tritton Copper Project and cash calls for the Girilambone
Copper Company. The total debt relief amounted to approximately
A$5,500,000 (US$2,915,000). In addition Straits assumed all
responsibilities for the environmental rehabilitation
liabilities associated with both projects.
The total value of the transaction is approximately A$6.8
million (US$3.6 million). The cash component will be used to
pay other creditors and the balance for corporate working
capital purposes. The Company, after payment of the current
accounts payable, will be substantially debt free.
Girilambone was scheduled for shutdown in mid-2002 due to
economic depletion of the leach heaps in mid-2002. In view of
depressed copper prices, the ability to develop Tritton was
questionable and the Company had not been successful in securing
a joint venture partner to assist with project financing.
The Company previously announced that it now intends to focus
upon its Tabar Islands gold assets in Papua New Guinea and its
Mapimi gold-silver-lead-zinc property in Durango, Mexico.
Funding will be sought to advance these projects and to maintain
corporate viability. The Company has initiated discussions with
several interested parties regarding providing working capital,
project financing and the funding of further exploration.
The Tabar Islands are located off the coast of New Ireland and
are part of the Lihir Gold Corridor. The nearby island of Lihir
hosts one of the largest gold deposits in the world, which is
being actively mined at a production rate of approximately
650,000 ounces of gold annually. The geology of the Tabar
Islands is essentially the same as that found at Lihir, and gold
mineralization is extensive on the three main islands of the
Tabar Group. All of the Tabar Islands are held in exploration
licenses granted to Nord Pacific. It is an extremely attractive
area for gold and copper exploration and highly prospective for
the discovery of world-class gold deposits.
The Company plans to release a newsletter to shareholders in the
near future providing additional details concerning its plans
and objectives. As a part of overall restructuring of the
Company's plan of operations, Nord Pacific has also issued a
total of 2.3 million restricted shares of Common Stock to
employees, directors and consultants of the Company who remain
engaged by the Company through December 31, 2002. Management
believes that this action is essential to preserving its core
group of key personnel and creating a worthwhile incentive to
enhance the likelihood of future success.
NORD PACIFIC LIMITED: Appoints C.R. Hastings as Vice President
--------------------------------------------------------------
The Board of Directors of Nord Pacific Limited (OTC: NORPF;
Toronto: NPF) announces the appointment of C.R. (Ross) Hastings
to the position of Vice President, effective April 29, 2002.
Mr. Hastings has been with the Company since 1996 and has been
based in Sydney, Australia as Manager of Operations. In his new
position, Ross will be responsible for exploration, technical,
maintenance and business activities in Australasia.
Mr. Hastings, 51, is a graduate of MacQuarie University and
holds a BS and MS in geology. He spent fourteen years in Papua
New Guinea with Ok Tedi Mining Co. and with Misima Mines, a
subsidiary of Placer Dome Inc. in various operating and
technical capacities. He joined Nord Pacific's affiliate,
Girilambone Copper Company in Nyngan, New South Wales in 1994
and subsequently in 1996, became Technical Manager for Nord
Resources (Pacific). He is a member of the AusIMM and SME. He
is married and has three children.
NVIDIA CORP: S&P Affirms B+ Rating After Completing SEC Report
--------------------------------------------------------------
On April 29, 2002, Standard & Poor's affirmed its 'B+' corporate
credit rating on Nvidia Corp. and removed it from CreditWatch,
where they were placed on Feb. 15, 2002. The action reflects the
company's announced completion of its internal accounting
review, performed at the request of the SEC and presumes no
further related action by the SEC.
Ratings for Santa Clara, California-based Nvidia reflect the
company's good position in the computer graphics chip market,
offset by the challenges of rapid technology evolution and
aggressive competition. Complex technological challenges that
can lead companies to miss product introductions, negatively
affecting market positions, remain a risk in the graphics chip
segment. Nvidia's financial profile is adequate for the ratings
level and includes cash balances of about $800 million as of
January 2002.
Nvidia announced it would adjust certain product and operating
costs for accounting errors, revisions to accounting estimates,
and reversals of prior adjustments in fiscal years 2000, 2001
and 2002. Importantly, there is no restatement to the company's
cash position. The adjustments involved are relatively small,
impacting net income less than $4 million in each of the three
fiscal years.
Outlook
While technological risks continue to limit the ratings upside,
a good technology base and adequate financial flexibility
support the current ratings level.
ON SEMICONDUCTOR: S&P Junks Senior Secured Notes Rating
-------------------------------------------------------
On April 25, 2002, Standard & Poor's lowered its corporate
credit and senior subordinated note ratings to 'B' on ON
Semiconductor Corp. and assigned a 'CCC' rating to the company's
pending sale of $300 million in senior secured notes due 2008.
Outlook is negative. The rating change reflects depressed
operating profitability, high leverage, and limited financial
flexibility of the Phoenix, Arizona-based maker of
semiconductors.
ON Semiconductor is a major supplier of standard logic and
analog integrated circuits and of discrete semiconductors,
holding about a 6% combined share of those fragmented markets.
Sales in 2001 declined 41%, a steeper decline than in the
industry at large, to $1.21 billion, from $2.07 billion in 2000.
Revenue growth in 2000 was 16%, far below the industry's growth
rate in a robust expansionary year. Both years' results reflect
a high cost base, which impeded the company's ability to compete
effectively. Resulting operating margins fell to 6% in 2001,
from 20% in 2000, and EBITDA in 2001 declined to $75 million,
from $409 million in 2000. EBITDA interest coverage was about
0.6 time in 2001, compared to 3.6x in 2000.
The company's profitability levels reflect its largely commodity
product line, which is more subject to pricing pressures than
the overall industry. Revenues also reflected declining unit
volumes in 2001 due to the recession.
Recognizing these marketplace challenges, ON undertook
restructuring actions in 2001 designed to reduce operating
expenses by $360 million by the end of 2002. Although ON
anticipates revenues in the June 2002 quarter to be flat with
the March 2002 and December 2001 quarters, June quarter EBITDA
is expected to be $45 million-$50 million, compared to $29
million in March and $17 million in the December 2001 period.
Further profitability improvements are anticipated later this
year, as already-announced cost-reduction actions become
effective. Still, weaker-than-historical conditions are expected
to persist over the next year or two, challenging the company's
efforts to return to former profitability levels despite its
cost reduction program.
Capital expenditures were also trimmed in 2001, to $118 million,
including costs to relocate operations to lower-cost areas, from
$199 million in 2000. Still, free cash flows were negative $294
million in 2001. While capital expenditures will be around $40
million in 2002, cash flow generating ability is still likely to
remain very limited. With nominal borrowing capacity available
under the revolving credit agreement at March 31, 2002, cash
balances of $148 million are modest.
The company's bank loan package, pro forma for the new note
issue, consists of $575 million in term debt and the revolver,
secured by the company's domestic assets. The bank loan is rated
the same as the corporate credit rating. While the senior
lenders' position is somewhat enhanced by their secured
position, it is not likely that the banks would receive full
recovery in a distress scenario.
ON is offering to sell $300 million in senior secured notes due
in 2008. The notes are secured on a second-priority basis by the
same assets that secure the bank debt. Due to the substantial
amount of bank debt senior to the new issue, the new issue is
effectively subordinated to the bank debt and is rated the same
as the company's structurally subordinated debt.
Outlook
The company's financial profile, although improving, remains
subpar for the rating level. If debt-protection measures do not
improve materially in coming quarters, or if liquidity declines
substantially, the ratings could be lowered.
PACIFIC GAS: U.S. Trustee Balks at Skadden's $1.2MM 4-Month Bill
----------------------------------------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP seeks interim allowance
of $1,218,705.75 in fees, representing a total of 3,777.55 hours
spent providing services to Pacific Gas and Electric Company
during the Application Period. In addition, Skadden seeks
interim allowance of $54,942.41 in expenses incurred on behalf
of the Debtor during the Application Period.
The UST objects to Skadden's Application on the grounds:
(1) that Skadden's Application did not provide adequate
description of its services;
(2) that the UST cannot distinguish between work performed by
Skadden and Winston & Strawn (W&S);
(3) that Skadden did not disclose the results of certain work
performed on behalf of the Debtor in the WAPA Dispute matter
category;
(4) that Skadden should not be compensated in full for services
that may be classified as clerical in nature provided by its
paraprofessionals ;
(5) that certain of Skadden's time should be eliminated as
duplicate entries for certain professionals; and
(6) that certain airfare charges should be reduced.
The UST objects that Skadden "could have described its work [on
the Plan of Reorganization] with much greater precision." The
UST also expresses the concern that the "skimpy descriptions" do
not allow the UST to determine whether Skadden and W&S "were
doing the same work." The UST states that a "proper description"
of the work would have included a detailed recitation of the
tasks involved, any research performed, and the results reached.
In light of the UST's objection, Skadden has provided a more
detailed description of the services provided to the Debtor.
Skadden also agrees to a reduction in the total amount of
$23,510.00, $6987.00 of which is due to a technical error and
$16523.00 of which due to charging 235.4 hours of work at the
rate of $40 for paraprofessionals instead of the rates for
professionals. Skadden concedes to a reduction of $4,589.00 for
airfare, in order not to expend additional time and incur
additional costs associated with researching this matter
although Skadden does not believe that such charges represent
first class airfare, as alleged by the UST. Based on the
revisions, Skadden requests that the Court allow Skadden's fees
in a revised amount of $1,195,195.75, and expenses in a revised
amount of $50,353.41, which reflects a revised total amount of
$1,245,549.16.
The following is a summary of the more detailed description of
work provided by Skadden:
Overview of Nature of the Work
The principal focus of Skadden's services, as it relates to the
Plan, is the contractual commitments that the electric
transmission business (ETrans) will need to implement the
proposed disaggregation of PG&E's electric business. To
accomplish this disaggregation, ETrans will execute numerous
contracts with PG&E's other electric business lines, principally
the electric generation business (Gen) and the retail gas and
electric distribution and sales business (Reorganized PG&E).
There are many such contracts, but each has, as a common thread,
the purpose of maintaining the coordinated operation of the
electric transmission, distribution and generation functions
that, today, reside solely within PG&E as an integrated
business.
Most of these contracts fall under the jurisdiction of the
Federal Energy Regulatory Commission (FERC). Skadden, which has
one of the leading FERC practices in the United States, was
retained by PG&E to prepare those contracts and petition for
FERC approval of them.
Scope and Complexity of the Work
There are two main functions associated with Skadden's work on
the ETrans Contracts. The first is drafting the contracts
themselves. The second is representing PG&E and ETrans in FERC
proceedings to obtain approval of those contracts.
The contract drafting function requires knowledge of the
commercial needs of businesses undergoing the type of
restructuring that is occurring in the Plan.
Using the experience that the firm has acquired through its
representation of numerous U.S. utilities that have divested
their generation or transmission assets or otherwise
disaggregated their business lines, Skadden performed several
tasks in its work on the ETrans Contracts. First, the firm
surveyed contracts used in prior disaggregations, or in other
similar contexts, to determine whether PG&E could avoid drafting
its agreements from scratch. Second, the firm prepared numerous
drafts of the ETrans Contracts for review and approval by the
client. Third, the firm engaged in a series of meetings,
conference calls and other interactions with the client to
review and modify the initial drafts as necessary to meet the
client's needs.
In addition, there were other tasks that were unique to
particular contracts. A case in point is the preparation of the
"Back-to-Back Agreement." The purpose of that Agreement is to
address the manner in which PG&E's disaggregated business lines
will continue to perform contracts with wholesale customers that
involve the assets of more than one business line. To prepare
this Agreement, Skadden was required to review each and every
wholesale contract. There are more than 150 of these contracts.
Thus, in order to draft the contract properly, the firm was
asked to review and assess numerous other agreements to which
the Back-to-Back Agreement related.
The second main function is representation of PG&E in the
regulatory proceedings required for FERC approval of the ETrans
Contracts. To obtain approval of these contracts from the FERC,
several tasks were required. First, a formal application was
prepared by the firm for approval under Section 205 of the
Federal Power Act. The application consisted of a detailed
explanation of the contracts, a discussion of why the principal
terms of the contracts are consistent with the public interest,
a description of why such terms are consistent with applicable
FERC precedents, and a recitation of the relief sought. The
application also required the drafting of supporting testimony
by a company witness. This application was filed on November 30,
2001.
Relationship of Skadden's Work to That of Other Firms
There are three firms that are assisting in the effort to obtain
FERC approval of the jurisdictional elements of the Plan. There
is no undue overlap in this allocation of responsibility.
Skadden is responsible for the application under Section 205 of
the WA to approve the ETrans Contracts.
Dewey Ballantine is principally responsible for two major FERC
applications: (i) the application under Section 203 of the
Federal Power Act to transfer PG&E's electric facilities and
assets as necessary to implement the Plan, and (ii) the
application under Section 205 of the Federal Power Act to
approve the Power Sale Agreement between Gen and Reorganized
PG&E through which Gen will sell the output of all its
generating facilities to Reorganized PG&E.
W&S is principally responsible for the application under Section
7 of the Natural Gas Act to approve the reorganization of PG&E's
natural gas pipeline assets as necessary to implement the Plan.
W&S is also responsible for the application to the Nuclear
Regulatory Commission (NRC) to approve a transfer of ownership
of certain of the Debtor's nuclear power facilities. (Pacific
Gas Bankruptcy News, Issue No. 33; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
PAPA JOHN'S: Working Capital Deficit Tops $121MM at March 31
------------------------------------------------------------
Papa John's International, Inc. (Nasdaq: PZZA) announced
revenues of $245.7 million for the first quarter of 2002,
representing a decrease of 1.4% from revenues of $249.3 million
for the same period in 2001. Net income for the first quarter of
2002 was $12.9 million as compared to last year's reported net
income of $12.8 million, and diluted earnings per share
increased to $0.60 for the first quarter from $0.56 as reported
for the comparable period in 2001.
The company adopted Statement of Financial Accounting Standards
(SFAS) No. 142, "Goodwill and Other Intangible Assets," at the
beginning of fiscal year 2002. The impact of this new standard
is the elimination of goodwill amortization in the company's
operating results in first quarter 2002 and future periods. If
SFAS No. 142 had been in effect for 2001, first quarter 2001 net
income would have been $13.2 million and diluted earnings per
share would have been $0.58. Net income for the first quarter of
2002 was 2.4% less than the 2001 pro forma amount and diluted
earnings per share for the first quarter of 2002 was 3.4%
greater than the 2001 pro forma amount.
For the quarter, domestic systemwide comparable sales decreased
2.0% (1.3% decrease at company-owned restaurants and 2.2%
decrease at franchised restaurants) due to the overall
competitive environment, including significant price discounting
by major competitors. Additionally, the company's 2002 National
Anniversary Promotion was established with a $1.00 higher price
point than the 2001 promotion and was not as successful in
driving transactions as the prior year.
Atotal of 28 restaurants were opened (2 company-owned and 26
franchised) and 25 restaurants were closed (10 company-owned and
14 franchised Papa John's restaurants and one franchised Perfect
Pizza restaurant) during the quarter. As of March 31, 2002,
there were 2,742 Papa John's restaurants (593 company-owned and
2,149 franchised) operating in 47 states and nine international
markets. Papa John's also owns or operates 183 Perfect Pizza
restaurants (2 company-owned and 181 franchised) in the United
Kingdom.
Papa John's reported having a working capital deficit of about
$121 million at March 31, 2002.
First Quarter Operating Results
During the first quarter of 2002, domestic corporate restaurant
sales were $112.5 million compared to $117.4 million for the
same period in 2001. This 4.1% decrease is primarily due to a
5.4% decrease in the number of equivalent company-owned units
open in the 2002 period as compared to the 2001 period, coupled
with a 1.3% decrease in comparable sales for the 2002 quarter.
Domestic franchise sales increased 2.4% to $340.3 million from
$332.2 million for the same period in 2001 primarily resulting
from a 4.2% increase in the number of equivalent franchised
domestic restaurants open in the 2002 period compared to the
2001 period, partially offset by a 2.2% decrease in comparable
sales for the 2002 quarter.
The first quarter comparable sales base for domestic corporate
restaurants consisted of 560 units, or 95.7% of total equivalent
units, and the domestic franchise base consisted of 1,809 units
or 91.6% of total equivalent units. Average weekly sales for
restaurants included in the corporate comparable base were
$14,985, while other corporate units averaged $10,714 for an
overall average of $14,801. Average weekly sales for the
restaurants included in the franchise comparable base were
$13,462, while other franchise units averaged $10,915 for an
overall average of $13,247.
Domestic franchise royalties were $13.1 million in both the
first quarter of 2002 and 2001 as the increase in franchise
sales noted above was offset by a slight decrease in the
effective royalty rate. Domestic franchise and development fees
were $534,000 compared to $810,000 for the same period in 2001
due to 20 restaurant openings in 2002 compared to 36 in 2001.
The restaurant operating margin at domestic company-owned units
was 21.9% in the first quarter 2002 compared to 18.9 % for the
same period in 2001, consisting of the following differences:
- Cost of sales was relatively flat in 2002 as a higher
cheese price was offset by lower prices for certain other
commodities and a higher average sales price point.
- Salaries and benefits were 1.6% lower in 2002 due to labor
efficiencies and the higher average price point, partially
offset by continued wage rate increases.
- Advertising and related costs were 0.3% higher as a
percentage of lower sales in 2002, but were relatively
flat in dollars.
- Occupancy costs were 0.3% lower in 2002 due primarily to
lower utilities.
- Other operating expenses were 1.4% lower in 2002 due to
improved controls over mileage reimbursement and the
various components of cash losses, and reduced travel
costs.
Domestic commissary and equipment and other sales increased 1.0%
to $111.8 million in the first quarter of 2002 from $110.7
million for the same period in 2001, primarily resulting from
increased commissary sales due to higher cheese prices,
partially offset by lower equipment sales due to fewer unit
openings in 2002 as compared to 2001.
Domestic commissary, equipment and other margin was 9.4% in the
first quarter 2002 compared to 11.2% for the same period in
2001. Cost of sales was 72.9% of revenues in 2002 compared to
71.7% in 2001 with the increase due primarily to higher cheese
costs in 2002, which have a fixed dollar mark-up, partially
offset by cost efficiencies achieved on print materials as a
result of bringing web press production capabilities in-house
during the second quarter of 2001. Salaries and benefits and
other operating costs increased to 17.7% in 2002 from 17.1% in
2001, primarily as a result of expanded insurance-related
services provided to franchisees.
International revenues, which include the Papa John's U.K.
operations, increased 5.9% to $7.7 million during the quarter
compared to $7.3 million for the same period in 2001 (7.9%
increase prior to the unfavorable impact of exchange rates), due
primarily to increased commissary sales. International operating
margin increased to 15.4% in 2002 from 11.5% in 2001 due
primarily to improved commissary and company-owned restaurant
operating margins.
General and administrative expenses were $18.3 million or 7.5%
of revenues in the first quarter of 2002 compared to $19.3
million or 7.8% of revenues in the same period in 2001. The
decrease reflects the company's efforts to control G&A costs
primarily through organizational efficiencies resulting from the
company's management restructuring that was still in process
during the first quarter of 2001.
Aprovision for uncollectible notes receivable of $713,000 was
recorded in the first quarter of 2002 based on our evaluation of
our franchise loan portfolio.
Pre-opening and other general expenses were $2.2 million in the
first quarter of 2002 compared to $133,000 for the comparable
period in 2001. Pre-opening costs of $12,000 and relocation
costs of $408,000 were included in the 2002 amount as compared
to pre-opening costs of $60,000 and relocation costs of $151,000
in the 2001 amount. The 2002 amount also includes $1.7 million
related to disposition or valuation losses for restaurants and
other assets, while the 2001 amount included net gains on
dispositions which were substantially offset by costs related to
certain franchisee support initiatives undertaken during the
quarter.
Depreciation and amortization was $7.8 million (3.2% of
revenues) for the first quarter of 2002 as compared to $8.5
million (3.4% of revenues) for the same period in 2001,
including goodwill amortization of $703,000 for 2001. As
previously mentioned, there is no goodwill amortization in 2002
with the adoption of SFAS No. 142. On a pro forma basis,
depreciation and amortization for the first quarter of 2001
would have been $7.8 million (3.1% of revenues) had SFAS No. 142
been adopted at that time.
Net interest expense was $1.5 million in the first quarter of
2002 compared to $2.0 million for the same period in 2001 due to
both a lower average debt balance and lower effective interest
rates in 2002. The company's effective income tax rate was 37.5%
in the first quarter of 2002 compared to 37.7% for the
comparable period in 2001.
Share Repurchase Activity
The company repurchased 1,307,500 shares of common stock at an
average price of $26.94 per share during the first quarter of
2002, bringing the total repurchased since inception of the
program in December 1999 to 10.2 million shares at an average
price of $24.85 per share. Subsequent to March 31, 2002, through
April 29, 2002, the company repurchased an additional 431,000
shares of common stock at an average price of $29.90 per share.
The company's Board of Directors has authorized the repurchase
of up to $275 million of common stock through December 29, 2002,
and to date, an aggregate of $265.4 million has been repurchased
(representing 10.6 million shares at an average price of $25.05
per share).
Update of 2002 Guidance
The company previously announced earnings guidance for 2002 in
the range of $2.22 to $2.32, with first quarter guidance of
$0.57 to $0.60. Based upon actual first quarter results, the
company is now updating its 2002 guidance to $2.25 to $2.32,
with no revision to the guidance as previously announced for the
second, third and fourth quarters.
Preliminary April 2002 Comparable Sales Results
The company also announced that April domestic systemwide
comparable sales are expected to increase approximately 5.0% (a
6.5% increase at company-owned restaurants and a 4.5% increase
at franchised restaurants). The company estimates that the
timing of the Easter holiday had a 1% to 2% positive impact on
April comparable sales. Most Papa John's restaurants reduced
operating hours on Easter Sunday, which fell during March this
year and during April in the previous year. Final April
comparable sales will be announced on May 7, 2002.
As of March 31, 2002, Papa John's had 2,742 restaurants (593
company-owned and 2,149 franchised) operating in 47 states and 9
international markets. Papa John's also owns or operates an
additional 183 Perfect Pizza restaurants (2 company-owned and
181 franchised) in the United Kingdom. For more information
about the company, please visit www.papajohns.com.
PAULA INSURANCE: Insolvency Prompts S&P to Drop Rating to R
-----------------------------------------------------------
Standard & Poor's revised its financial strength rating on PAULA
Insurance Co. to 'R' because of insolvency.
On April 26, 2002, PAULA Insurance Co. was placed under an order
of conservation by the Los Angeles County Superior Court, which
was granted to California Commissioner of Insurance Harry W.
Low. The order of conservation was filed because PAULA Insurance
Co. reported a negative policyholders surplus of more than $22
million thus making it insolvent. The Conservation & Liquidation
Office will manage PAULA Insurance Co. paying all claims in full
and on time.
PAULA Insurance Co. underwrites workers' compensation and
employment practices liability insurance with specialization in
the agribusiness industry.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
PENTACON: Likely to File Chapter 11 to Consummate Debt Workout
--------------------------------------------------------------
Pentacon, Inc. (OTC Bulletin Board: PTAC), a leading distributor
of fasteners and other small parts and provider of related
inventory management services, has signed a restructuring
agreement with certain holders of a majority of Pentacon
subordinated debt to enter into a transaction to significantly
de-leverage the Company. The agreement, previously announced as
an agreement in principle, will significantly improve Pentacon's
capital structure and has been approved by the Company's Board
of Directors.
Specifically, the Company has signed an agreement with holders
of a majority of its $100 million of 12-1/4 percent Senior
Subordinated Notes due April 1, 2009 to effect a
recapitalization of Pentacon. The transaction, once completed,
would result in the elimination of between $60 and $65 million
of debt of the Company, thereby reducing its pro forma debt to
approximately $95 million, compared to approximately $160
million today. The contemplated transaction provides for the
holders of the Notes to receive, in exchange for at least $95
million of Notes, approximately 90% of the stock of Pentacon and
$35 million principal amount of newly-issued senior notes due
2007.
In addition, the Company is finalizing an agreement with the
lenders under its senior revolving bank credit facility to
extend the maturity of the facility for one year. The Company
anticipates that the proposed new credit facility will provide
additional borrowing capacity and liquidity. The proposal is
not a commitment by the lenders, and no assurances can be made
regarding the Company's ability to enter into a new credit
facility with the existing lenders. The Company also has
obtained a commitment from a different senior lender to provide
a new $60 million senior credit facility which will be available
to the Company in the event it does not proceed with the
proposed restructuring of its existing facility.
Rob Ruck, Chief Executive Officer, said: "Last month we
announced that Pentacon had commenced a restructuring. I am
pleased to report that we have passed another critical milestone
by signing a restructuring agreement with a majority of our
Noteholders. Once completed, this recapitalization will provide
the requisite financial flexibility to accomplish our strategic
objectives."
The agreement with Noteholders provides that the transaction may
be completed through an out-of-court exchange offer or a pre-
negotiated Chapter 11 bankruptcy proceeding. An out-of-court
restructuring will require that holders of 95% of the
outstanding Notes participate in the exchange offer, and has a
number of other conditions. The Company is currently evaluating
the benefits of seeking to effect the transaction through the
out-of-court exchange offer or through a Chapter 11 bankruptcy
filing. Because of the numerous contingencies associated with
an out-of-court transaction, a Chapter 11 proceeding may prove
to be the most expeditious way to consummate the restructuring
agreement. The agreement with these Noteholders provides that,
under either restructuring scenario, all trade credit will be
assumed and paid in full, which positions the Company to
continue to provide uninterrupted service to its customers.
The restructuring is conditioned upon a number of factors,
including completion and execution of definitive documentation,
completion of certain due diligence by the Noteholders and other
conditions. In addition, the Company and the Noteholders have
the right to terminate the restructuring agreement to pursue an
offer to purchase the Company's stock, its notes or its assets
which is deemed to be a superior proposal. The restructuring is
expected to be completed in the third quarter of 2002. There
can be no assurance that the contemplated recapitalization will
be successful or completed.
While the Company has reached the understandings described
above, the following points should be noted: The Company's
lenders under its Senior Credit Facility have notified the
Company that it is not in compliance with certain financial
covenants under the Bank Credit Facility that, if acted upon by
the lenders, would give the lenders the right to accelerate the
indebtedness under the Senior Credit Facility and give the
Noteholders the right to terminate the restructuring agreement.
The Company and the senior lenders have entered into a
forbearance agreement in which the lenders have agreed not to
exercise their remedies under the Senior Credit Facility prior
to May 31, 2002. In addition, the scheduled interest payment
date for the Company's Notes was April 1, 2002. The Company did
not make the interest payment within the provided-for 30-day
grace period, placing its Notes in default. As a result, the
Notes which were previously classified as long-term debt have
now been reclassified as a current liability. A default under
the Notes is also a default under the Company's Senior Credit
Facility. The senior lenders have agreed not to exercise their
remedies for this default as long as the principal amount of the
Notes is not accelerated and declared immediately due and
payable.
Results of Operations
For the quarter ended March 31, 2002, Pentacon reported revenues
of $55.8 million compared to $71.3 million in the prior year
period. Excluding nonrecurring charges, EBITDA (earnings before
interest, income taxes, depreciation and amortization) was $5.0
million in the quarter, in line with expectations, compared to
$6.3 million in the comparable 2001 quarter. EBITDA before
charges was 9 percent of revenues in both periods. Compared to
the fourth quarter ended December 31, 2001, revenues increased 5
percent and operating income before charges and excluding
goodwill amortization increased 51 percent. Before nonrecurring
charges, the Company reported net income of $1.2 million or
$0.07 per share for the quarter ended March 31, 2002. Pentacon
reported a net loss of $0.3 million or $0.02 per share in the
first quarter of 2002 before the effect of a change in
accounting for goodwill but after the effect of the nonrecurring
charges. This compares with net income in the prior year's
first quarter of $82 thousand or $0.00 per share. Including the
effect of a $88.8 million noncash charge for the write-off of
certain goodwill in accordance with the new accounting rules,
Pentacon reported a net loss of $89.1 million or $5.26 per share
for the first quarter of 2002.
Aerospace Group
Pentacon Aerospace Group's first quarter revenues and operating
income were $25.6 million and $2.6 million, respectively. The
revenue was 2% higher than the December 31, 2001 quarter and 27%
lower than the prior year period. The reduction was caused by
lower levels of non-contract business resulting from the overall
reduction in aerospace activity levels due to the events of
September 11th. Operating income improved 24 percent in
comparison to the December 31, 2001 quarter, before
restructuring charges recognized in that period. Compared to
the prior year quarter, operating income declined 25 percent.
Industrial Group
Pentacon Industrial Group's first quarter revenues of $30.2
million resulted in operating income of $2.5 million. Compared
to the quarter ended December 31,2001, revenues increased 7
percent and operating income, before charges, increased 57
percent as a result of increased revenues and recently-
instituted cost reduction efforts. Compared to the prior year
quarter, revenue declined $6.12 million and operating income,
before charges, declined $0.7 million. The first quarter
operating results were effected by decreased demand from the
Company's telecommunications, power generation, heavy truck and
certain of its transportation customers.
Non-Comparable Items
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 modifies
the accounting and reporting of goodwill and intangible assets.
The pronouncement requires entities to discontinue the
amortization of goodwill, to reallocate all existing goodwill
among reporting segments based on criteria in the Statement and
to perform initial impairment tests by applying fair-value-based
analysis on the goodwill in each reporting segment.
At December 31, 2001, the Company's net goodwill was
approximately $125.9 million, and annual amortization of such
goodwill was approximately $3.5 million. The Company adopted
SFAS No. 142 effective January 1, 2002 and recorded a noncash
goodwill impairment charge of $88.8 million. The adoption does
not impact the Company's free cash flows or its EBITDA.
In connection with the Company's restructuring efforts, it has
engaged advisors and incurred costs with respect to
professionals engaged by its lenders and potential lenders and
investors in performing due diligence. In addition, the Company
has further reduced its workforce. The Company recognized $1.6
million in the first quarter of 2002 for those nonrecurring fees
and costs.
The Job Creation and Workers Act, which was enacted in March
2002, provides that net operating loss carry-back claims for the
years ended December 31, 2001 and 2002 are extended from two
years to five years. As a result, the Company's will receive
$1.7 million of additional income tax refunds. This benefit was
recorded in the quarter ended March 31, 2002.
Headquartered in Chatsworth, California, Pentacon is a leading
distributor of fasteners and other small parts and provider of
related inventory management services. Pentacon presently has
30 distribution and sales facilities in the U.S., along with
sales offices in Europe, Canada, Mexico and Australia. For more
information, visit the Company's Web site at
http://www.pentacon.com
PILLOWTEX CORP: Intends to Assume Lease Agreements with Verizon
---------------------------------------------------------------
Pillowtex Corporation and its debtor-affiliates ask the Court's
authority to assume, as modified, Lease Agreements with Verizon
Credit, Inc., wherein the Debtors lease certain Production
Equipment that they use in their manufacturing operations.
"The Lease Agreements each have a term of 96 months and an
option at the end of the term to purchase the Production
Equipment for fair market value," Michael G. Wilson, Esq., at
Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware
states. In addition, the Lease Agreements also each have an
early purchase option that is exercisable after the first 60
months for certain of the Lease Agreements or after the first 84
months for other of the Lease Agreements, in all cases for a
purchase price that is based on a specified percentage of the
original acquisition cost. The aggregate monthly rent under the
Lease Agreements is approximately $87,009.
Mr. Wilson further relates that as part of the Debtors' strategy
to restructure their production equipment leases, the Debtors
have negotiated a restructuring of the Lease Agreements with
Verizon that allows them to purchase the Production Equipment at
an earlier date and at a more favorable price than is otherwise
permitted under the Lease Agreements. The material terms of the
Amended Agreement are:
-- The Lease Agreements would be assumed, as modified by the
Amendment.
-- Provided that the Debtors are current, on a post-petition
basis under the Lease Agreements, the Debtors agree to pay
$3,000,000 for the Production Equipment within 15 days
after the effective date of any Debtors' Plan of
Reorganization confirmed by the Court.
-- Upon receiving the purchase price for the Production
Equipment, Verizon will provide the Debtors with a bill
of sale for the Production Equipment, and the Lease
Agreements will terminate.
-- The Debtors agree to pay Rent to Verizon until the date
the Lease Agreements terminate.
-- Any Rent paid by the Debtors in respect of amounts due
under the Lease Agreements from March 2002 through the
Termination Date will be deducted from the Purchase
Price.
-- Verizon will have an allowed unsecured claim against the
Debtors' estates for $1,975,199.20.
-- Subject to the effectiveness of the Amendment and the
Debtors' payment of its obligations under the Amendment,
Verizon waives any rights to any payments to cure any
defaults under the Lease Agreements that arose prior to
the execution of the Amendment.
Accordingly, Mr. Wilson asserts that assumption of the Lease
Agreements, as modified, enables the Debtors to continue using
the Production Equipment, which is necessary for their
manufacturing operations. The purchase of the Production
Equipment will eliminate the obligations to continue paying Rent
and converts over $1.9 million of the amounts due under the
Lease Agreements into a general unsecured claim against the
Debtors' estates.
Moreover, the Debtors will receive a credit against the Purchase
Price for any Rent it pays in respect of amounts due under the
Lease Agreements from March 2002 through the date the production
equipment is purchased. (Pillowtex Bankruptcy News, Issue No.
26; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PLAY BY PLAY TOYS: Seeking Case Conversion to Chapter 7
-------------------------------------------------------
Play By Play Toys & Novelties Inc. on April 24, 2002 filed a
motion asking the U.S. Bankruptcy Court in San Antonio, Texas,
to convert the company's chapter 11 bankruptcy case to a chapter
7 liquidation. The company says it has no operations, employees
or financing.
According to the filing obtained, Play By Play Toys said it has
no prospects for reorganization and doesn't intend to function
as a business in the future. In its motion, Play By Play Toys
said it has resolved many of the issues it faced as of its
October 31, 2001 bankruptcy filing. A hearing is scheduled for
April 30 to consider the request.
The San Antonio, Texas-based company sought chapter 11
bankruptcy protection on October 31, 2001. It listed assets of
about $36.8 million and liabilities of nearly $46.6 million as
of September 20, 2001 in its petition. (ABI World, April 29,
2002)
PROTECTION ONE: Sets Annual Shareholders' Meeting for May 23
------------------------------------------------------------
Protection One, Inc. will hold the Shareholder Annual Meeting on
Thursday, May 23, 2002, 10:00 A.M. PDT, at The Hyatt Valencia,
24500 Town Center Drive, Valencia, CA 91355 for the following
purpose:
-- To elect nine directors to serve for a term of one year
-- To approve an increase in the number of shares
authorized for issuance under the Protection One, Inc.
Employee Stock Purchase Plan; and
-- To conduct other business properly raised before the
meeting and any adjournment or postponement of the
meeting.
Shareholders of record on April 10, 2002 may vote at the Annual
Meeting, or any postponement or adjournment thereof.
Topeka, Kansas-based Protection One Alarm Monitoring is the
second largest security alarm company in the U.S., providing
monitoring and related security services to nearly 1.3 million
customers in North America.
As previously reported, Standard & Poor's lowered its corporate
credit and senior unsecured debt ratings on Protection One Alarm
Monitoring Inc. to single-'B' from single-'B'-plus and its
subordinated note ratings to triple-'C'-plus from single-'B'-
minus. According to S&P, the company's operating performance
continues to deteriorate, thus, weakening its credit protection
measures. In addition, the ratings on Protection One, S&P says,
take into consideration a highly leveraged financial profile and
the management challenge of improving subpar operating
performance.
PRUDENTIAL SECURITIES: S&P Drops P-T Certs. Series 1995-C1 to D
---------------------------------------------------------------
Standard & Poor's lowered its ratings on class E and F of
Prudential Securities Secured Financing Corp.'s commercial
mortgage pass-through certificates series 1995-C1. At the same
time, ratings are affirmed on six classes of the same series.
The lowered ratings reflect cumulative unpaid interest
shortfalls in the amount of $299,637 and $190,326, respectively.
In addition, class F has experienced significant credit support
erosion relating to the disposition of a REO asset, as reflected
on the March 25, 2002 distribution statement.
The affirmations reflect increased credit enhancement levels
since last review and the stable financial performance of the
majority of the underlying mortgage loans.
Realized principal losses in the amount of $2.5 million were
reflected on the March 25, 2002 distribution date, relating, for
the most part, to the disposition of a 97-unit retirement
apartment complex in Lubbock, Texas. There is one delinquency,
at 90-plus days, in the amount of $2.7 million (or 6.9% of the
outstanding loan pool balance). It is the largest loan in the
pool. The loan is secured by a 125-bed health care property
located in Pompano Beach, Florida, which became REO in December
2000. Total exposure on the loan is $5.4 million. Based on
recent discussions with the master servicer, Midland Loan
Services Inc. (Midland), and the special servicer, Lennar
Partners Inc., and based on current property performance,
Standard & Poor's is concerned that the ultimate disposition of
the loan may result in a material principal loss to the trust.
In addition, ongoing property protection advances are likely to
contribute to interest shortfalls, which will affect the
subordinate certificates.
As of April 25, 2002, there are 24 outstanding loans with an
aggregate principal balance of $38.5 million, down from 66 loans
totaling $105.7 at issuance. Midland provided interim 2001 and
net cash flow data for 95.04% of the pool. Using this
information, Standard & Poor's calculated the weighted average
debt service coverage to be 1.80 times based on NCF. This
compares favorably to the weighted average NCF DSC at last
review of 1.75x. To avoid skewness, the reported coverage of the
REO asset, which was negative at September 2001, was excluded
from the coverage calculations.
The pool largely consists of amortizing balloon loans,
representing 88% of the pool balance. The remainder of the
loans are fully amortizing. All of the loans bear fixed
interest rates, with a weighted average coupon of 10.21%, which
is relatively flat since issuance. There is one loan, with an
ending scheduled balance of $1.2 million, which is scheduled to
mature in September 2002. The loan reported strong coverage at
year-end 2000 and at September 2001.
The pool is geographically dispersed, with properties domiciled
in 14 states. The only states with concentrations in excess of
10% are Texas (21.4% of pool balance) and California (12.3%).
The pool has significant retail exposure (46.2%) and health
care/senior housing exposure (23%). The balance of the pool is
represented by multifamily, office, industrial, and self-
storage.
As of the April 25, 2002 distribution date, three assets,
comprising 10.1% of the outstanding pool, appear on Midland's
watchlist. One loan, with an unpaid balance of $1.9 million,
has space leased to Kmart Corp. (Kmart), which is currently
subleased to two tenants. The lease appeared in Schedule B of
Kmart's January 2002 bankruptcy filing, which listed leases to
be rejected with 10 days notice. The subtenants are Office
Depot Inc. and Hobby Lobby. Office Depot has vacated its space
but is still paying its obligations under the sublease. The
balance of the watchlist comprises a $1.1 million office
property scheduled to mature in September 2002 and a $780,886
retail property with low occupancy. The near-term maturity
reported a strong year-end 2001 DSC of 3.33x.
Other than the REO asset, no other loans are in special
servicing. Over the past 21 reporting periods, there have been
no reported delinquencies other than the specially serviced
asset and the loan secured by the recently liquidated retirement
complex in Lubbock, Texas, which caused the March 2002 realized
loss. No other realized losses have been reported to date.
Excluding the REO, the pool has exposure to three loans, with an
aggregate unpaid balance of $6.2 million, secured by health
care-related properties. Standard & Poor's is concerned with two
of these three loans. The first, at $2.5 million, is a
participation in a mortgage loan encumbering a congregate care
facility in Brooklyn, N.Y. The operators of the facility, which
serves as an adult home for the mentally ill, recently lost
their license to operate the facility. The second is a $1.2
million loan secured by a skilled nursing facility in El Monte,
Calif. The DSC for the loan has been less than 1.0x for the
years ending 2000 and 2001.
Standard & Poor's stressed the specially serviced loans,
watchlist loans, and those loans with poor operating
performance. The resulting credit enhancement levels support
the lowered and affirmed ratings.
Ratings Lowered
Prudential Securities Secured Financing Corp.
Commercial mortgage pass-thru certs series 1995-C1
Class Rating Credit Enhancement (%)
To From
E D BB 15.3
F D CCC 1.62
Ratings Affirmed
Prudential Securities Secured Financing Corp.
Commercial mortgage pass-thru certs series 1995-C1
Class Rating Credit Enhancement (%)
A-1 AAA 86.4
A-2 (IO) AAA N/A
A-3 (IO) AAA N/A
B AAA 70
C AA+ 50.9
D AA- 39.9
PSINET INC: Brings-In Paul Weiss as Special Litigation Counsel
--------------------------------------------------------------
PSINet Inc. sought and obtained approval by the Court, pursuant
to section 327(e) of the Bankruptcy Code, and Rules 2014(a) and
2016 of the Bankruptcy Rules, to retain and employ Paul, Weiss,
Rifkind, Wharton & Garrison, nunc pro tunc to March 26, 2002, as
special litigation counsel to PSINet during the pendency of
these chapter 11 cases.
PSINet is authorized to retain Paul, Weiss to advise it with
respect to an Information Request made by Holdings' Chapter 11
Trustee, Harrison J. Goldin, and to perform all other necessary
services in connection therewith. Because the Trustee's motion
for Bankruptcy Rule 2004 Information Request seeks information
relating to, among other things, Wilmer Cutler's and Nixon
Peabody's representation of both PSINet and Holdings and certain
issues and disputed matters arising between PSINet and Holdings,
Wilmer Cutler and Nixon Peabody have determined that they can no
longer represent PSINet in such matters where they may be
adverse to Holdings. PSINet selected Paul, Weiss because of its
expertise in litigation and in representing debtors in chapter
11.
Paul, Weiss will charge PSINet its customary hourly rates for
services performed in this case:
Lawyers: Hourly Rates
-------- ------------
Partners: $490 to $665
Counsel: $485
Associates: 0 to 3 years $250 to $360
4 to 6 years $380 to $435
7 or more years $455 to $460
Legal Assistants: $75 to $180
These attorneys will have primary responsibility for
representing PSINet:
Mark F. Pomerantz (25 years experience) ($665 per hour)
(Litigation)
Jeffrey D. Saferstein (13 years experience) ($550 per hour)
(Bankruptcy)
Marc Falcone (8 years experience) ($490 per hour)
(Litigation)
John Agar (15 years experience) ($460 per hour)
(Litigation)
Loren F. Levine (6 years experience) ($455 per hour)
(Bankruptcy)
Darren W. Johnson (1 year experience) ($250 per hour)
(Litigation)
Paul, Weiss intends to apply for compensation for professional
services rendered in connection with this case, and for
reimbursement of actual and necessary expenses incurred, in
accordance with the applicable provisions of the Bankruptcy
Code, the Bankruptcy Rules, and the local rules and orders of
this Court.
Jeffrey D. Saferstein, a member of the law firm of Paul, Weiss,
declares that to the best of his knowledge and information,
Paul, Weiss does not hold or represent any interests that are
adverse to PSINet with respect to the matters on which Paul,
Weiss is to be employed.
Paul, Weiss and members and associates of Paul, Weiss presently
represent, may have represented in the past and may represent in
the future parties in interest in the PSINet chapter 11 case, in
matters unrelated to the PSINet chapter 11 case. Mr. Saferstein
declares that, to the best of his knowledge, there are no such
entities except that:
a. Paul, Weiss represents or has represented Price Waterhouse
LLC (PW), Coopers and Lybrand (CL) and their successor,
PricewaterhouseCoopers LLP (PWC), the Debtors' accountants,
in certain matters unrelated to the Debtors. In addition, PW
and PWC have served and PWC continues to serve as Paul,
Weiss' outside auditors.
b. Paul, Weiss represents and has represented Lazard Freres &
Co. LLC, financial advisor to one of the Debtors, in certain
matters unrelated to the Debtors. In addition, Paul, Weiss
is assisting Lazard in connection with filing its fee
application in these cases.
c. Paul, Weiss represents or has represented the following
entities in matters unrelated to the PSINet chapter 11
cases:
* Verizon Communications, Inc., the parent company of the
Operating Subsidiaries of Verizon Communications, Inc.,
creditors of the Debtors,
* Morgan Stanley Dean Witter Investment Management, one of
the Debtors creditors, and certain of its affiliates,
* Varde Partners, Inc., one of the Debtors creditors,
* Mackay Shields, one of the Debtors' creditors,
* General Electric Capital Corporation, one of the Debtors'
creditors, and certain of its affiliates and employees,
* American Telegraph and Telephone Company, one of the
Debtors' creditors, and certain of its affiliates and
employees,
* MCI Communications Corporation, the predecessor in
interest to MCI Worldcom, Inc., an affiliate of one of the
Debtors' creditors, and certain of its affiliates and
employees,
* Cable & Wireless, one of Holdings' creditors, and certain
of its affiliates and employees,
* Metromedia Fiber Network Services, one of the PSINet's
creditors and a member of its creditors' committee.
d. Paul, Weiss represented the following entities in matters
that are no longer pending:
* Bank of America, one of the Debtors' bank lenders, in a
matter adverse to PSINet.
* Cori Capital Partners, L.P., in connection with its
proposed acquisition of PSINet's Latin American
operations.
* Marubeni Corporation in lawsuit against PSINet involving
issues unrelated to these chapter 11 cases.
* Chatterjee Group in an arbitration proceeding against
PSINet involving issues unrelated to these chapter 11
cases.
In addition, Paul, Weiss associate William F. Lee represented
Metamor Worldwide, Inc., a/k/a PSINet Consulting Solutions
Holdings, Inc., in certain matters unrelated to PSINet while
previously employed at another law firm, Mr. Saferstein reveals.
Mr. Saferstein submits that, to the extent that Paul, Weiss
discovers any facts bearing on the disinterestedness of Paul,
Weiss during the period of its employment by the Debtors, Paul,
Weiss will supplement the information contained in this
Affidavit.
PSINet believes that Paul, Weiss is well qualified to represent
it in connection with the matters described above and that its
retention is necessary and in the best interests of PSINet, its
estate and its creditors.
Accordingly, PSINet requests that the Court authorize the
retention and employment of Paul, Weiss as special litigation
counsel to PSINet in this chapter 11 case, and grant such other
and further relief as this Court deems just and proper. (PSINet
Bankruptcy News, Issue No. 19; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
PUBLICARD INC: Needs Additional Financing to Fund Business Plan
---------------------------------------------------------------
PubliCARD, Inc. (Nasdaq: CARD) reported its financial results
for the quarter ended March 31, 2002. Sales for the first
quarter of 2002 were $1,199,000, compared to $1,520,000 a year
ago. The 2001 figure includes $480,000 of revenues associated
with the smart card reader and chip business, which the Company
exited in July 2001. Sales related to smart card platform
solutions for educational and corporate sites increased 15% in
the first quarter of 2002 versus the prior year period. The net
loss for the quarter ended March 31, 2002 was $1,125,000,
compared with $3,509,000 a year ago. The decline in the net
loss is attributable primarily to work force reductions and
other cost containment measures associated with the Company's
exit from the smart card reader and chip business. As of March
31, 2002, cash and short-term investments totaled $3,667,000,
exclusive of approximately $2,100,000 of escrow deposits
established in connection with prior dispositions.
The Company also announced that its common stock listing will
transfer to the Nasdaq SmallCap Market effective today, May 2,
2002. The Company previously announced that it was not in
compliance with the minimum $1.00 bid price-per-share and the $5
million market value of publicly held shares requirements for
continued listing on the Nasdaq National Market. To ensure
continuity of its Nasdaq listing and to protect the interests of
stockholders, the Company elected to transfer to the Nasdaq
SmallCap Market. The Company's common stock will continue to
trade under the symbol CARD.
Headquartered in New York, NY, PubliCARD, through its Infineer
Ltd. subsidiary, designs smart card platform solutions for
educational and corporate sites. PubliCARD's future plans
revolve around an acquisition strategy focused on businesses in
areas outside the high technology sector while continuing to
support the expansion of the Infineer Ltd. business. More
information about PubliCARD can be found on its Web site
http://www.publicard.com
Liquidity and Going Concern Considerations
The consolidated statements of income (loss) and consolidated
balance sheets contemplate the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company has incurred operating losses, a substantial decline
in working capital and negative cash flow from operations for
the three months ended March 31, 2002 and the years 2001, 2000
and 1999. The Company has also experienced a substantial
reduction in its cash and short term investments, which declined
from $17.0 million at December 31, 2000 to $3.7 million at March
31, 2002, and has an accumulated deficit of $106 million at
March 31, 2002.
Although the Company believes that existing cash and short term
investments may be sufficient to meet the Company's obligations
and capital requirements at its currently anticipated levels of
operations through December 31, 2002, additional working capital
will be necessary in order to fund the Company's current
business plan and to ensure it is able to fund its pension and
environmental obligations. See Notes 6 and 8 to the Consolidated
Financial Statements contained in PubliCARD's Annual Report on
Form 10-K for the fiscal year ended December 31, 2001, as
amended, which has been filed with the SEC. While the Company is
actively considering various funding alternatives, the Company
has not secured or entered into any arrangements to obtain
additional funds. There can be no assurance that the Company
will be able to obtain additional funding on acceptable terms or
at all. If the Company cannot raise additional capital to
continue its present level of operations it may not be able to
meet its obligations, take advantage of future acquisition
opportunities or further develop or enhance its product
offering, any of which could have a material adverse effect on
its business and results of operations and could lead the
Company being required to seek bankruptcy protection. These
conditions raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
READER'S DIGEST: S&P Rates $1.14BB Bank Credit Facilities at BB+
----------------------------------------------------------------
The 'BB+' bank loan rating on Reader's Digest Association Inc.'s
$1.14 billion credit facilities reflect its market positions in
the highly competitive publishing and direct marketing
industries, offset by weak profitability and increasing
financial risk resulting from the proposed debt-financed $760
million acquisition of Reiman Publications and a $100 million
share repurchase. Rating outlook is negative.
Reader's Digest Association, based in Pleasantville, New York,
publishes one of the world's highest-circulating paid magazines
and is a leading direct marketer of books, videos, and music.
Total debt as of March 31, 2002, was $154 million.
The company's revenues are derived from a mix of direct
marketing, circulation, and advertising operations. In addition,
its QSP Inc. (youth magazine subscription) and Books are Fun
Ltd. (school book fairs) subsidiaries offer operational
diversity. The company's broad global presence provides some
geographic diversity. However, the company faces strategic and
competitive issues in the direct marketing industry, as well as
challenges in diversifying its distribution channels.
EBITDA declined 37% over the nine months ended March 31, 2002,
due to lower magazine advertising demand and reduced BHE
profitability resulting from the implementation of the 2001
multistate settlement on sweepstakes marketing. Reader's
Digest's QSP (youth magazine subscription) and Books are Fun
(school book fairs) subsidiaries and non-U.S. operations provide
some operating and geographic diversity. Nevertheless, Standard
& Poor's expects the company to increase EBITDA in the
seasonally weak fiscal fourth quarter ended June 30, 2002
largely due to cost reduction initiatives and weak comparisons.
Standard & Poor's believes the Reiman purchase provides a good
strategic fit and complements Reader's Digest's position in the
highly competitive magazine publishing and direct marketing
industries. Potential operating synergies and cost saving
opportunities could possibly increase profitability and cash
flow generation over the near term. Over the long term, Standard
& Poor's believes there are questions as to its growth
prospects.
The Reiman transaction would be the largest purchase in Reader's
Digest's history, reflecting a shift from more moderate
financial policies. The debt-financed transaction results in an
increase in financial risk and lower pro forma interest
coverages. EBITDA coverage of gross interest expense declines to
a pro forma level of 4.5 times for the 12 months ended March 31,
2002, from an actual level of about 10.0x.
The rating on the bank loan is the same as the corporate credit
rating. The bank loan consists of a $192.5 million revolving
credit facility due 2006, a $250 million tranche A term loan due
2007, and a $700 million tranche B term loan due 2008. The bank
loan is secured by a first priority security interest in the
company's domestic subsidiaries and material intellectual
property. Although the collateral package provides some
protection, it would likely suffer an erosion of value if
overall company earnings declined in a default scenario.
Standard & Poor's simulated default scenario assumed that the
revolving credit facility was fully drawn, and that both cash
flow and resale multiples were at distressed levels. Possible
causes of a default scenario could include declining market
share for the company's publications, the company's inability to
attract and retain new and younger magazine subscribers and U.S.
BHE product customers to offset the maturing of its customer
base, a delay in achieving operating synergies and cost savings
from the Reiman acquisition, or a combination of these. Because
these facilities are secured, lenders can expect to recover more
than a typical unsecured creditor in the event of a default or
bankruptcy. However, based on Standard & Poor's simulated
default scenario, it is not clear that a distressed enterprise
value would be sufficient to cover the entire loan facility,
which accounts for nearly all of the debt structure.
Outlook
Standard Poor's expects minimal acquisition or share repurchase
activity over the near term because of heightened debt levels
and the company's operating challenges. Standard & Poor's also
expects that Reader's Digest will use the majority of its free
cash flow to reduce debt levels to restore flexibility. However,
the transactions may restrict the company's ability to maintain
its financial profile if the profitability of the core U.S.
magazine and books and home entertainment businesses does not
sufficiently improve.
SAFETY-KLEEN: Clean Harbor Transaction Clears Justice Department
----------------------------------------------------------------
Clean Harbors, Inc. (Nasdaq: CLHB), a leading provider of
environmental services throughout the United States and Puerto
Rico, said that the U.S. Department of Justice has completed its
review of the Company's proposed acquisition of the Chemical
Services Division of Safety-Kleen under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and has allowed the waiting
period to expire without further action. The Hart-Scott-Rodino
Act requires parties to acquisitions above $50 million to notify
the Federal Trade Commission and the Antitrust Division of the
Department of Justice in advance of the acquisition, and to
observe a waiting period, during which one of the antitrust
agencies will examine the transaction for potential
anticompetitive effects. Expiration of the waiting period for
this transaction signifies that the Department of Justice has
completed its review, and has determined that the transaction is
not likely to lessen competition.
"We are pleased that the Department of Justice will allow this
transaction to proceed without challenge," said Alan S. McKim,
Clean Harbors' Chairman and Chief Executive Officer.
On February 25, 2002, Clean Harbors signed a definitive
agreement to acquire CSD/SK, one of the nation's largest
environmental services companies, for $46.3 million in cash and
the assumption of approximately $265 million in environmental
liabilities. Safety-Kleen Corp., based in Columbia, South
Carolina, is currently operating under Chapter 11 protection in
U.S. Bankruptcy Court for the District of Delaware.
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
SENIOR HOUSING: Seeks to Renew Maturing Revolving Bank Facility
---------------------------------------------------------------
Senior Housing Properties Trust (NYSE: SNH) announced its
financial results for the quarter ended March 31, 2002, as
follows (in thousands):
Quarter Ended March 31,
2002 2001
---- ----
Total revenues $28,707 $68,722
Net income 11,620 2,836
Funds from operations (FFO) 19,521 10,263
Cash available for distribution (CAD) 18,371 10,163
The character of revenues reported in the 2001 and 2002 periods
displayed above are not comparable. The 2001 period revenues
include $57.4 million of operating revenues derived from nursing
homes which were repossessed from former tenants. At year end
2001, SNH completed a spin off of its subsidiary which operated
these properties and the 2002 period includes rental income
received for the properties previously operated for SNH's
account as well as rents from new investments made in 2002.
Commenting upon these results, David J. Hegarty, President,
issued the following statements:
"During the past year, SNH has dramatically improved its capital
structure and the quality of its properties:
- In the past year SNH raised approximately $680 million
of new capital including $408 million of common equity, $245
million of senior unsecured notes due in 2012, and $27 million
of trust preferred securities which mature in 2041.
- At year end 2001, SNH spun off its subsidiary, Five
Star Quality Care, Inc., to shareholders and leased 55
properties which were previously operated by SNH to that new
public company.
- In January 2002, SNH acquired 31 up-market senior
living communities operated by Marriott for $600 million. These
communities have 7,487 separate apartments or living units, they
are over 90% occupied and almost 90% of their current revenues
are paid by residents from private resources.
- Also in January 2002, SNH completed a transaction with
one of its tenants, HEALTHSOUTH Corporation, which exchanged
five under-performing nursing homes for two rehabilitation
hospitals, reduced the rent payable by HEALTHSOUTH and extended
the lease term to 2011.
"As a result of these activities, common equity now represents
about 70% of SNH's total book capitalization and over 80% of
SNH's current rents are received for properties where large
majorities of the operating revenues come from residents'
private resources, not from Medicare or Medicaid programs. We
believe that these improvements in SNH's capitalization and in
the character of its properties have positioned SNH to carry out
its business plans for 2002; specifically, to renew our
revolving bank agreement which expires in September 2002, to
continue to monitor the performance of our tenants and leased
properties and to opportunistically consider new investment
opportunities."
Senior Housing Properties Trust is a real estate investment
trust headquartered in Newton, MA that owns 111 senior housing
properties located in 28 States.
SPIEGEL: Nasdaq Changes Symbol to SPGLE Over Filing Delinquency
---------------------------------------------------------------
Spiegel (Downers Grove, IL) announced that fiscal 2001 earnings
will miss previous estimates due to a larger than expected loss
on the sale of its credit-card business.
Commenting on its efforts to sell its credit card operations,
the Company stated that the process is ongoing and discussions
with interested parties are at various stages. The Company also
announced that it may be required to payout as much as $20.0
million per month to noteholders of asset backed securities,
securitized by the Company's credit card receivables. MBIA
Insurance Corporation (MBIA), which insures the payments to the
noteholders, declared a "Pay Out Event" which would require the
payments. The Company said that it and First Consumers National
Bank (FCNB), filed suit and obtained a temporary restraining
order (TRO) against MBIA. The order prevents MBIA from seeking
to enforce a "Pay Out Event." The Company believes that no such
event has occurred as defined under the securitization
documents. The TRO will remain in place until early May, when a
hearing will take place at which the Company will seek a
preliminary injunction. The Company and MBIA have entered into
a stipulation agreeing to postpone a hearing for a preliminary
injunction, pending discussions with MBIA regarding the "Pay Out
Event."
The Company had previously announced that it expected to reach
an agreement with its lenders to restructure its credit
agreements by mid-April. However, due to the developments
discussed above, negotiations with the bank group will extend
beyond that time. The Company said it continues to rely on
liquidity support provided through its majority shareholder, the
Otto family, which to date has provided approximately $160.0
million.
In addition, F&D Reports observes, the Company still has not yet
filed its Form 10-K for the fiscal year ending December 29,
2001. The Company notified the SEC in a Form 10-K NT that it
will not be in a position to issue financial statements for its
fiscal year ended December 29 until it completes the sale of its
credit card business and resolves the issue of non-compliance
with certain of its loan covenants. As a result of the filing
delinquency, the Nasdaq changed the trading symbol for the
Company's securities from SPGLA to SPGLE as of April 29. The
addition of an "E" denotes that a company is delinquent in
filing required forms with the SEC. The Company expects to file
its 10-K before Nasdaq is required to take any further action to
delist its stock.
STELCO INC: Unable to Reach Settlement on Labor Negotiations
------------------------------------------------------------
Stelco Inc. Hilton Works and the United Steelworkers of America,
Local 1005, were unable to reach an early settlement of the
Collective Agreement by the targeted date, April 29, 2002.
The parties have had detailed discussions on numerous issues and
will be resuming collective bargaining in the near future in an
attempt to conclude a settlement of a new Collective Agreement
prior to the contract expiry date of July 31, 2002.
Stelco Inc. is a market-driven, technologically advanced group
of businesses that are committed to maintaining leadership roles
as steel producers and fabricators. These businesses are
dedicated to meeting the requirements of their customers and
collectively providing an appropriate return for Stelco
shareholders. Stelco has a presence in six Canadian provinces
and three states of the United States. Consolidated net sales in
2001 were $2.6 billion.
For further information please refer to the company's Web site
http://www.stelco.ca
* * *
As reported in the Troubled Company Reporter's January 15, 2002
edition, Standard & Poor's assigned its single-'B' subordinated
debt rating to Stelco Inc.'s CDN$90 million convertible
subordinated debt issue due February 1, 2007. At the same time,
Standard & Poor's assigned its preliminary double-'B'-minus
senior unsecured debt rating and preliminary single-'B'
subordinated debt rating to the company's CDN$300 million shelf.
In addition, the ratings outstanding on the company, including
the double-'B'-minus corporate credit rating, were affirmed. The
outlook is negative.
The ratings on Stelco reflect a weakened financial profile due
to the effect of the ongoing economic downturn and the
prevailing difficult steel industry conditions on its financial
results, offset by the company's fair business position.
TELESPECTRUM: Enters Financial Restructuring Pact with Banks
------------------------------------------------------------
TeleSpectrum Worldwide Inc. (OTC:TLSP) entered into agreements
with its bank lenders resulting in a recapitalization of its
balance sheet and a substantial reduction of its debt.
Under the terms of such agreements, the amounts due under the
Company's existing credit facilities, totaling approximately
$161 million, were converted into a three-year term facility of
$25 million, $40 million of the Company's Series A Preferred
Stock, and shares of the Company's Series B Convertible
Preferred Stock, which will convert into common stock
representing 95% of the Company's common stock on a fully
diluted basis.
The three-year term facility, which is classified as long-term
debt, matures in May 2005 and requires the Company to meet
certain financial covenants, including a fixed charge coverage
ratio and EBITDA targets. The Series A Preferred Stock has a
cumulative 10% annual dividend rate, which is payable either in
cash or in additional shares of Series A Preferred Stock. A
portion of the Series B Preferred Stock was converted into
shares of the Company's common stock immediately after the
closing of the recapitalization, and the remainder will convert
common stock as soon as the Company increases its authorized
number of shares of common stock.
The Company's Board of Directors is comprised of five members,
including J. Peter Pierce, the Company's Chairman and Chief
Executive Officer, and Chris Williams, the Company's Chief
Operating Officer, who are continuing as directors, and three
designees of the bank group.
Mr. Pierce said, "We are pleased that our bank lenders concurred
with our assessment that a consensual conversion of much of
their debt to equity was the best course of action for the
Company. We believe that the recapitalization of our balance
sheet sets a solid financial foundation for TeleSpectrum's
future and will greatly benefit both our customers and employees
by allowing us to reinvest in our infrastructure and continue to
focus on our customers' needs."
Headquartered in King of Prussia, Pennsylvania, TeleSpectrum
Worldwide Inc. is a leading full-service provider of multi-
channel customer relationship management (CRM) solutions for
Global 1,000 companies in diverse industries, including
financial services, telecommunications, technology, insurance,
healthcare, pharmaceuticals and government. In addition to
providing both traditional business-to-consumer and business-to-
business teleservices, TeleSpectrum also offers inbound customer
service, customer care, as well as the ability to measure,
monitor and improve the customer service experience.
TRICORD SYSTEMS: Net Loss Slides-Down to $5.4MM in First Quarter
----------------------------------------------------------------
Tricord Systems, Inc. (Nasdaq:TRCD) announced financial results
for the first quarter ended March 31, 2002. Revenues for the
first quarter totaled $104,000. Net loss applicable to common
shares for the first quarter 2002, which includes non-cash
charges related to the accounting for Series E Convertible
Preferred Stock, was $5.4 million compared to a net loss of $5.9
million for the first quarter of 2001 and a net loss of $5.7
million for the fourth quarter 2001. Net loss, which excludes
the non-cash charges related to the accounting for Series E
Preferred Stock, for the first quarter 2002 was $4.6 million
compared to a net loss of $5.6 million for the first quarter of
2001 and $4.8 million for the fourth quarter of 2001. The non-
cash charges related to the Series E Preferred stock for the
quarter ended March 31, 2002 include a beneficial conversion
charge of $571,000 and $297,000 representing the accrual of the
4.75% annual premium on the Series E Preferred Stock. Charges
for both of these items will continue to be incurred while the
Series E Preferred Stock is outstanding.
Net cash used by the Company during the first quarter 2002 was
$4.4 million, which was the same amount used in fourth quarter
2001. Cash on hand as of March 31, 2002 was $13 million.
"We're disappointed in the revenue numbers for the first
quarter," said Keith Thorndyke, chief executive officer of
Tricord. "However, we're encouraged by our progress in the
Citrix market. We've received interest from a number of Citrix
resellers, and signed Boulder Corporation, a platinum reseller.
The addition of targeted channel partners should help us ramp
revenue in the coming quarters."
Tricord Systems, Inc. designs, develops and markets clustered
server appliances and software for content-hungry applications.
The core of Tricord's revolutionary new technology is its
patented Illumina(TM) software that aggregates multiple
appliances into a cluster, managed as a single resource.
Radically easy to deploy, manage and grow, Tricord's products
allow users to add capacity to a cluster with minimal
administration. Appliances are literally plug-and-play, offering
seamless growth and continuous access to content with no
downtime. The technology is designed for applications including
general file serving, virtual workplace solutions, digital
imaging and security. Tricord is based in Minneapolis, MN with
offices in Colorado, California and Georgia. For more
information, visit http://www.tricord.com
* * *
As reported in the March 21, 2002 edition of Troubled Company
Reporter, Tricord Systems, Inc. (Nasdaq:TRCD) is subject to
delisting for having failed to comply with the $1.00 minimum bid
price required for continued listing of its common stock on the
Nasdaq SmallCap Market pursuant to Nasdaq Marketplace Rule
4310(C)(4). Pursuant to Nasdaq rules, Tricord will have 180 days
from the date of this notice in which to establish compliance
with this rule or its common stock will be subject to delisting.
TRUMP CASINO: S&P Assigns B- Corp. Credit & Senior Debt Ratings
---------------------------------------------------------------
On April 30, 2002, Standard & Poor's assigned its single-'B'-
minus corporate credit and senior secured debt ratings to Trump
Casino Holdings LLC, the newly formed parent of Trump Marina
Associates L.P. and Trump Indiana Inc., and its single-'B'-minus
rating to proposed $470 million first mortgage notes due 2010 to
be jointly issued by TCH and its Trump Casino Funding Inc.
subsidiary. Outlook is stable.
At the same time, Standard & Poor's has placed its ratings for
Trump Atlantic City Associates (TAC) on CreditWatch with
positive implications. Standard & Poor's expects to raise TAC's
corporate credit rating to triple-'C'-plus from double-'C', and
its senior secured debt rating to triple-'C'-plus from double-
'C' with a stable outlook upon a successful sale of the TCH
proposed notes. The CreditWatch positive listing reflects the
healthy operating environment in Atlantic City during the last
several months, and the improved performance of TAC's two
properties, Trump Taj Mahal and Trump Plaza. The CreditWatch
listing also reflects the anticipated refinancing of certain
parent company indebtedness, which is expected to alleviate
pressure to upstream capital to service this obligation. Still,
rating upside above the triple-'C' category is limited at
present by TAC's high debt leverage, tight liquidity, and the
expectation of additional competition and new amenities in the
market during the next two years.
Standard & Poor's expects to withdraw its corporate credit and
senior secured debt ratings for Trump Hotels & Casino Resorts
Holdings, L.P. (THCR) upon consummation of the TCH proposed note
offering. THCR is the parent company of TCH and TAC. It is
anticipated that the new notes offered by TCH will refinance the
remaining outstanding balance of THCR's 15.5% senior notes due
2005.
TCH is to be the parent company for Trump Marina Associates,
L.P. and Trump Indiana, Inc. TCH will be one of two primary
operating subsidiaries of THCR. The other is TAC. Both TCH and
TAC will own and operate two casino properties. TCH will
generate cash flow from Atlantic City based Trump Marina, and
from the company's Gary Indiana based riverboat, while TAC will
generate cash flow from two Atlantic City based properties,
Trump Taj Mahal and Trump Plaza.
Proceeds from TCH's proposed note offering are expected to be
used to refinance the outstanding debt obligations of Trump
Castle Associates, L.P. and Trump Castle Funding, Inc.,
including the 11.75% mortgage notes due 2003, 10.25% senior
secured notes due 2003, and $5 million working capital loan. The
notes will also refinance $24.2 million of Trump Indiana's bank
debt, redeem $14.3 million of Trump Castle Funding's 13.875% PIK
notes due 2005, and repay the outstanding balance of THCR's
15.5% senior notes due 2005. Pro forma for the transaction as of
March 31, 2002, TCH had $480 million in debt, and generated $85
million in EBITDA resulting in total debt to EBITDA of 5.6x, and
EBITDA coverage of cash interest expense of 1.8x.
Ratings for TCH reflect the good operating momentum at both
Trump Marina and Trump Indiana, and improved financial
flexibility stemming from the expected refinancing of debt that
was scheduled to mature in 2003. These factors are offset by
high debt leverage, somewhat limited anticipated levels of free
cash flow to reinvest in the properties, and the relationship to
more highly leveraged TAC.
Standard & Poor's expects that the Chicago gaming market will
remain healthy over the intermediate term, providing a favorable
operating environment for Trump Indiana. Recent cost reduction
efforts improved the bottom line performance of this property in
2001, and those savings should continue to benefit the company
in 2002 and beyond.
Standard & Poor's expects that Trump Marina will benefit over
the long term from its location in the Marina District of
Atlantic City. The Marina District is expected to receive more
visitors in 2002 driven by improved access following the July
2001 opening of a tunnel that connects the area to the Atlantic
City Expressway. Moreover, substantial renovations at nearby
Harrah's, including a new 452 room hotel tower, are expected to
help attract visitors to the Marina. The anticipated summer 2003
opening of Borgata, a 2,000 room property being built in the
Marina District by joint venture partners MGM Mirage (BBB-
/Negative/A-3) and Boyd Gaming Corp. (BB/Stable/--), will
further add excitement to this section of the City when it is
complete. In the intermediate term, Standard & Poor's expects
that Trump Marina will indirectly benefit from these
investments, and longer term, has the potential to expand and
benefit to an even greater degree.
The ratings for TCH and TAC are linked given their common parent
company. Standard & Poor's will continue to monitor the
consolidated performance of the THCR, as well as the individual
performance of TCH and TAC. Although covenants under the bond
indenture for the proposed notes limit transactions with
affiliates, management decisions in the interest of parent
company shareholders may not always be fully aligned with the
interests of TCH bondholders.
Aside from the limitation on transactions with affiliates,
bondholders are expected to benefit from the excess cash flow
offer requirement, and the existence of a maintenance capital
reserve account. Both covenants are designed to require that
certain excess free cash flow generated by TCH is applied toward
debt reduction, and toward re-investing in the properties.
Outlook
The outlook reflects Standard & Poor's expectation that the
operating environment in Atlantic City and the Chicago market
will be favorable in the near term, helping to drive a modest
improvement in TCH's cash flow and credit measures.
Ratings Assigned
Trump Casino Holdings LLC
- Corporate credit rating B-
- Senior secured debt rating B-
Ratings Placed On Creditwatch Positive
Trump Atlantic City Associates
- Corporate credit rating CC
- Senior secured debt rating CC
Ratings Expected To Be Withdrawn
Trump Hotels & Casino Resorts Holdings L.P.
- Corporate credit rating CC
- Senior secured debt rating CC
VELOCITA CORP: Banks Waive Loan Covenants Further through May 15
----------------------------------------------------------------
Velocita Corp., a national broadband networks provider, has
reached agreement with a consortium of banks for a third
extension on its waiver of certain financial covenants in the
company's credit agreement. This waiver extends through May 15,
2002.
The original agreement between Velocita and the banks, announced
March 28, provided for the waiver of certain financial covenants
through April 15, 2002. A second waiver was announced on April
15, and was set to expire today. As with the previous waiver
extensions, the third waiver continues to require Velocita to
comply with its other covenants in the credit agreement and
forego further borrowing under the credit agreement. In
addition, the waiver continues to limit the ability of PF.Net
Corp., the Company's wholly-owned subsidiary, to make restricted
payments to its affiliates, including payments to the Company
that would be required for the Company to pay interest on its
13.75% senior notes due 2010.
During this additional waiver period, Velocita will continue to
move forward on its strategic alternatives and options. In
addition, the company will continue ongoing discussions with its
bank lenders regarding modification of the terms of its credit
agreement. If, at the end of the waiver period, the company has
not obtained an amendment to, or a waiver under, the credit
agreement, the company will be in default with respect to
certain financial covenants under the credit agreement. The
Company is unable to predict when or if it will be able to
obtain the necessary modifications of its credit agreement from
its banks, or whether the banks will at any point pursue any or
all remedies available to them.
Velocita Corp. -- http://www.velocita.com-- based in the
greater Washington, D.C. area, is a broadband networks provider
serving communications carriers, Internet service providers, and
corporate and government customers. Founded in 1998 as a
facilities-based provider of fiber optic communications
infrastructure, Velocita has agreements with AT&T to construct
approximately half of AT&T's nationwide fiber optic network.
These construction agreements with AT&T serve as the foundation
for Velocita, formerly known as PF.Net, to grow and expand its
own network, as well as add service offerings. Cisco Systems
provides all optical and IP equipment to power Velocita's
network.
VITAL LIVING: Plans to Deregister Common Stock by May 10
--------------------------------------------------------
Vital Living Products, Inc., (OTC Bulletin Board: VLPI) d.b.a.
American Water Service said that its Board of Directors has
approved the deregistration of its common stock under the
Securities Exchange Act of 1934, and that to effect such
deregistration it plans to file a Form 15 with the SEC on or
about May 10, 2002, at which time its reporting obligations
under the Exchange Act will be suspended.
In its 2001 Annual Report on Form 10-KSB filed with the SEC on
April, 1, 2002, the company disclosed that given the negative
cash flows it was experiencing, unless it was able to secure
additional financing it would need to substantially reduce
expenses in order to continue to fund its operations. C. Wilbur
Peters, the company's chairman stated, "Given the company's
inability to secure additional financing on satisfactory terms,
it has become necessary to significantly reduce the company's
expenses by, among other things, eliminating the substantial
expenses associated with meeting the company's reporting
obligations under the Securities Exchange Act." Following
deregistration under the Exchange Act the company's common stock
will be delisted from the Nasdaq OTC Bulletin Board and it is
expected that the company's shares will begin to be traded on
the "pink sheets."
Vital Living Products specializes in water testing and treatment
kits that are sold nationally in over 20,000 locations under the
PurTest brand name. Winner of the 2000 Consumer Product Award by
the American Quality Institute and the Best New Product Award in
its category for 2000 by Today's Homeowner, the Company
manufactures and distributes PurTest kits, delivering instant
results. In addition, VLPI provides drinking water systems and
PurGuard water treatment equipment for residential, commercial
and industrial use, and PurWell disinfection kits. PurTest,
recommended by Good Housekeeping Magazine and Consumers Digest,
is available through Ace Hardware, Do It Best, Fred Meyer,
Lowe's, Menards, United Hardware, W.W. Grainger, Mid-states
Distributors plus many Home Depot locations.
WHX CORP: Sets Annual Shareholders' Meeting for June 18, 2002
-------------------------------------------------------------
WHX Corporation (NYSE: WHX) announced that its 2002 Annual
Meeting of Stockholders will be held at 11:00 a.m., local time,
Tuesday, June 18, 2002 at the Dupont Hotel, 11th & Market
Streets, Wilmington, Delaware 19801. The record date for
stockholders entitled to vote at the meeting is May 7, 2002.
Notice of the Annual Meeting, proxy statement and proxy, as well
as the 2002 Annual Report, will be mailed to stockholders in
advance of the Annual Meeting.
WHX also announced that it had been notified by the New York
Stock Exchange that its share price had fallen below the
continued listing criteria requiring an average closing price of
not less than $1.00 over a consecutive 30 trading-day period.
Following notification by the NYSE, WHX has up to six months by
which time WHX's share price and average share price over a
consecutive 30 trading-day period may not be less than $1.00.
In the event these requirements are not met by the end of the
six-month period, WHX would be subject to NYSE trading
suspension and delisting and, in such event, WHX believes that
an alternative trading venue would be available. WHX is
currently evaluating alternatives to bring its average share
price back into compliance with NYSE requirements, including a
potential reverse stock split which is one of the proposals to
be acted upon at the 2002 Annual Meeting of Stockholders.
WHX is a holding company that has been structured to invest in
and/or acquire a diverse group of businesses on a decentralized
basis. WHX's primary businesses currently are: Handy & Harman,
a diversified manufacturing company whose strategic business
segments encompass, among others, specialty wire, tubing, and
fasteners, and precious metals plating and fabrication; and
Unimast Incorporated, a leading manufacturer of steel framing,
vinyl trim and other products for commercial and residential
construction. WHX's other business consists of the WPC Group, a
vertically integrated manufacturer of value-added and flat
rolled steel products, which filed a petition for relief under
Chapter 11 of the Bankruptcy Code on November 16, 2000.
WARNACO GROUP: Notices of De Minimis Asset Sale Waived
------------------------------------------------------
The Warnaco Group, Inc., the US Trustee, the Official Committee
of Unsecured Creditors, the Debt Coordinators for the Pre-
petition Banks, and the Post-Petition Lenders entered into a
Stipulation waiving sale notice procedures relating to the sale
of certain of the Debtors' personal properties. It was
determined that these personal properties are of insufficient
value to warrant a sale at an auction given that the cost of
conducting an auction would far exceed the value of the
properties.
The Debtors belief that the best course of action is to sell the
Personal Property in a manner that is appropriate under the
circumstances of each sale. The Debtors further estimate the
value of the each Personal Property item subject to the sale
ranges up to about $100.
Accordingly, the Parties agree that:
(a) The Notice Requirements set forth in the Order are waived;
(b) Any sale of the Personal Property at the Sales is
consented to all parties who signed in this Stipulation,
subject to the terms of Section 8.4(b) of the Senior
Secured Super-Priority Debtor in Possession Revolving
Credit Agreement, dated June 11, 2001;
(c) The Debtors may sell at the Sales some or all of the
Personal Property to one or more non-executive employees,
Provided that the Personal Property has been
first publicly advertised and the public has had an
opportunity to purchase the Personal Property.
(d) The Debtors will issue bills of sale evidencing transfer
of title to the purchasers free and clear of all liens,
claims, and encumbrances without further Court approval;
(e) Within 30 days after the completion of the Sales, the
Debtors must submit an accounting of the Sales to the
Notice Parties for information purposes only; and
(f) Any liens, claims and encumbrances on any of the Personal
Property will attach to the proceeds of the Sales in
their same priority, extent and value. (Warnaco Bankruptcy
News, Issue No. 23; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
WILLIAMS COMMS: Seeks Authority to Use Lenders' Cash Collateral
---------------------------------------------------------------
Williams Communications Group, Inc., and its debtor-affiliates
seek the Court's authority pursuant to Sections 105(a), 361,
363, 503(b), and 502(b) of the Bankruptcy Code to:
A. use the Pre-petition Secured Parties' Cash Collateral
pursuant to the terms of the Proposed Cash Collateral Order;
and
B. grant to the Pre-petition Secured Parties adequate protection
for the Debtors' use of the Cash Collateral and other
Collateral in the form of replacement liens and super-
priority status for claims arising from the diminution of
value of such Collateral.
Corrine Ball, Esq., at Jones Day Reavis & Pogue in New York, New
York, informs the Court that prior to the Petition Date, the
Pre-petition Secured Lenders made loans to Williams
Communications LLC, advanced credit to Williams LLC, and caused
to be issued on behalf of Williams LLC letters of credit. This
was pursuant to and in accordance with the terms and conditions
of the Credit Documents. The Debtors guaranteed the Williams LLC
Indebtedness, as did certain other of the Debtors' direct and
indirect subsidiaries. The Debtors acknowledge that, in
accordance with the terms of the Debtors' Guarantees, the Pre-
petition Secured Parties have a contingent claim against the
Debtors in the principal amount of approximately $775,000,000.
This is together with accrued and unpaid interest, costs and
expenses including, without limitation, professional fees.
The Debtors further acknowledge that, pursuant to the Security
Agreement, the Pre-petition Secured Parties were granted and
have perfected, valid, enforceable, first priority liens on and
security interests in substantially all of the Debtors' assets
to secure the Debtors' obligations under the Debtors'
Guarantees. These assets include, without limitation, cash,
accounts receivable, contracts, documents, equipment, general
intangibles, instruments, intellectual property, inter-company
notes or accounts, inventory, interests in leaseholds,
machinery, real property, the capital stock of subsidiaries and
membership interests of certain subsidiaries of the Debtors and
the proceeds of all of the foregoing whether existing or
hereafter acquired.
Ms. Ball explains that the Pre-petition Collateral includes the
Debtors' ownership interest in Williams LLC, a Delaware limited
liability company. The Pre-petition Collateral also includes an
inter-company note payable from Williams LLC to the Debtors. The
Pre-petition Secured Lenders have consented to the repayment by
Williams Communications LLC of $25,000,000 under the Inter-
company Note. This is provided that such funds - the Cash
Collateral - are utilized solely pursuant to the terms and
conditions set forth in the Proposed Cash Collateral Order.
They will be used to pay the administrative expenses of the
Debtors' Chapter 11 cases, including the payment of professional
fees as outlined by the Court.
The Pre-petition Secured Parties have consented to the Debtors'
use of the Cash Collateral on the terms and conditions stated in
the Proposed Cash Collateral Order, which includes the following
key provisions:
A. The Budget and Budget Period: A Budget for administrative
expenses has been established and the Cash Collateral may be
used only during the Budget Period and solely and exclusively
for the disbursements set forth in the Budget. The
expenditures authorized in the Budget will be adhered to on a
line-by-line basis, on a cumulative basis during the Budget
Period (i.e., unused amounts carry forward to successive
months on a line-by-line basis), with no carry-over surplus
to any other line item(s) or to a subsequent budget, if any,
except to the extent agreed to in writing by the
Administrative Agent in its sole discretion. This is
provided, however, that with respect to each line item in the
Budget, the Debtors may each month use Cash Collateral in
excess of that set forth in the Budget for that particular
line-item so long as such is a Permitted Deviation or a Non-
Conforming Use.
B. Adequate Protection Liens: The Debtors agree to grant to the
Administrative Agent for the ratable benefit of the
Pre-petition Secured Parties, a security interest in and lien
on the Post-petition Collateral, senior to any other security
interests or liens, and subject only to:
a. the Pre-petition Secured Parties' security interests and
liens existing as of the Petition Date;
b. valid, perfected and enforceable pre-petition liens (if
any) which are senior to the Pre-petition Secured Parties'
liens or security interests as of the Petition Date; and
c. the Carve-Out.
C. Administrative Expense Status: A Budget for administrative
expenses has been established and the Debtors will grant the
Pre-petition Secured Parties an allowed administrative claim
with priority over all other administrative claims in these
Chapter 11 cases (subject only to the Carve-Out), including
all claims of the kind specified under Sections 503(b) and
507(b) of the Bankruptcy Code. This administrative claim
will have recourse to and be payable from all pre-petition
and post-petition property of the Debtors, including, without
limitation, causes of action arising under the Bankruptcy
Code.
D. Carve-Out: There is a Carve-Out of $4,000,000, which is
limited to fees and expenses incurred by the professionals
retained by the Debtors and the Committee. So long as a
Termination Event, or an event which with the giving of
notice or lapse of time or both would constitute a
Termination Event, has not occurred, the Debtors will be
permitted to pay administrative expenses allowed and payable
under Sections 330 and 331 of the Bankruptcy Code, as the
same may be due and payable as provided for in the Budget.
Such payments will not be applied to reduce the Carve-Out.
Notwithstanding anything in the Proposed Cash Collateral
Order to the contrary, no portion of the Carve-Out or any
Cash Collateral can be used for professional fees and
expenses incurred for any litigation or threatened litigation
against the Pre-petition Secured Parties. It cannot be used
for the purpose of challenging the validity, extent or
priority of any claim, lien or security interest held or
asserted by the Pre-petition Secured Parties or asserting any
defense, claim, counterclaim, or offset with respect to the
Guarantee Indebtedness or the security interests or liens
held by the Pre-petition Secured Parties in the Pre-petition
Collateral.
E. Termination Event: The Debtors' use of Cash Collateral
terminates on the occurrence of a Termination Event, which
includes:
a. October 15, 2002,
b. the dismissal of the Chapter 11 cases or their conversion
to Chapter 7 cases,
c. the entry by the Court of an order granting relief from
the automatic stay imposed by Section 362 of the
Bankruptcy Code to any entity other than the
Administrative Agent or the Pre-Petition Secured Pre-
petition Secured Lenders with respect to the Collateral
without the Administrative Agent's consent,
d. the appointment or election of a trustee or examiner with
expanded powers, (which would not include an examiner to
investigate and report with respect to the Spin-Off)
e. the occurrence of the effective date or consummation date
of a plan of reorganization for the Debtors,
f. the failure of the Debtors' plan of reorganization to be
confirmed and to become effective by October 15, 2002,
g. the failure by the Debtors to deliver to the
Administrative Agent any of the documents or other
information required to be delivered pursuant to the
Proposed Cash Collateral Order when due or any such
documents or other information will contain a material
misrepresentation,
h. the failure by the Debtors to observe or perform any of
the material terms or provisions contained in the Proposed
Cash Collateral Order,
i. the occurrence of an Event of Default under the Credit
Agreement,
j. the entry of an order of the Court approving the terms of
any debtor-in-possession financing for any of the Debtors,
or
k. the entry of an order of the Court reversing, staying,
vacating or otherwise modifying the terms of the Proposed
Cash Collateral Order.
Ms. Ball contends that the Debtors have a critical need to use
the Cash Collateral. As noted above, the Debtors are holding
companies with no business operations and, thus, no operating
capital or alternative source of financing from which to fund
these Chapter 11 cases. Substantially all of their assets are
pledged to the Pre-petition Secured Parties. If the Debtors are
not allowed to use the Cash Collateral, they would not be able
to implement the Restructuring Agreements, providing for the
restructuring of approximately $6,000,000,000 in consolidated
indebtedness on the Company's balance sheet. Absent the
agreement of those Pre-petition Secured Lenders constituting the
Required Lenders to allow Williams Communications LLC to repay a
portion of the Inter-company Note, Ms. Ball states that the
Debtors would have no cash to fund these cases. Such consent has
been given, pursuant to the Lock-up Agreement, subject to entry
of the Proposed Cash Collateral Order and satisfaction of the
other requirements and conditions in the Lockup Agreement. In
addition, as part of the Lock-up Agreement, holders of more than
1/3 of the outstanding principal amount of the Senior Redeemable
Notes have reviewed the Proposed Cash Collateral Order and have
no objection to its entry.
Ms. Ball tells the Court that the terms and conditions on which
the Debtors may use Cash Collateral have been carefully designed
to meet the dual goals of Sections 361 and 363. If the Proposed
Cash Collateral Order is entered, the Debtors will be able to
use their cash resources to fund these cases as they endeavor to
achieve the benefits of a successful Chapter 11 reorganization.
At the same time, the Pre-petition Secured Parties are
adequately protected for consenting to such use. (Williams
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
* DebtTraders' Real-Time Bond Pricing
-------------------------------------
Issuer Coupon Maturity Bid - Ask Weekly change
------ ------ -------- --------- -------------
Crown Cork & Seal 7.125% due 2002 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.
This material is copyrighted and any commercial use, resale or
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re-mailing and photocopying) is strictly prohibited without
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contained herein is obtained from sources believed to be
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The TCR subscription rate is $625 for 6 months delivered via e-
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