/raid1/www/Hosts/bankrupt/TCR_Public/020513.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, May 13, 2002, Vol. 6, No. 93
Headlines
AEI RESOURCES: Emerges From Chapter 11 & Changes Name to Horizon
ANC RENTAL: Los Angeles Airport Wants Lease Payments
AT&T CANADA: Shrugs-Off Debtholder's Action As "Groundless"
AIR CANADA: Extends CDN$11.5M ERP Contract with CGI for 3 Years
CANADIAN IMPERIAL: Garden Hill Production to Commence on May 21
CASUAL MALE: Designs Inc. to Close $170M Acquisition in Mid-May
CHOICE ONE: March 31 Working Capital Deficit Slides-Up to $7MM
COLE NATIONAL: S&P Rates $150MM Senior Subordinated Notes at B
CONQUISTADOR PLAZA: Defaults on Building Loan Agreement
COSERV: Enters Settlement Pact That Will Set Stage for Emergence
CRESCENT REAL: Exceeds First Quarter 2002 Results Expectations
DYNASTY COMPONENTS: Won't File Fin'l Results for Year & Quarter
EDISON INT'L: Appoints PwC as Independent Public Accountants
ENRON: Court Nixes Atty. General's Move to Appoint Fee Examiner
ENRON CORP: Ad Hoc Committee Moves to Curtail Use of EESI's Cash
EXIDE TECHNOLOGIES: Gets Court Nod to Pay Critical Vendor Claims
EXIDE TECHNOLOGIES: Suing Former Executives to Recoup Legal Fees
FAIRFIELD MFG: Liquidity is Strained Due to Decline in Sales
FALCON PRODUCTS: Moody's Junks Rating on $100MM Senior Notes
FINE AIR SERVICES: Judge Cristol Confirms Reorganization Plan
FLAG TELECOM: Alcatel Wants Prompt Decision on Contract
FLORSHEIM GROUP: Court Approves $45 Million Sale to Weyco Group
GLIATECH INC: Files for Chapter 11 Protection in N.D. Ohio
GLIATECH INC: Voluntary Chapter 11 Case Summary
GLOBAL CROSSING: Bringing-In Jaffe Raitt as Special Counsel
GOLDMAN INDUSTRIAL: Seeking Authority to Employ Walsh Monzack
GRANT GEOPHYSICAL: S&P Further Junks Corporate Credit Rating
HERCULES: Completes Sale of Water Treatment Business for $1.8BB
IMC GLOBAL: Fitch Affirms B-Rated Sr. Secured & Unsecured Debts
IT GROUP: Employs Zolfo Cooper as Consultant & Financial Advisor
KAISER ALUMINUM: Committee Signs-Up Akin Gump as Lead Counsel
KASPER ASL: Gets Extension on Lease-Related Decision Deadline
KMART CORP: Secures Okay to Assume & Assign 13 Leases to Rubloff
LTV CORP: Bethlehem Wants Performance on Partnership Obligation
LEINER HEALTH: Gets Court OK to Hire Richards Layton as Counsel
MALAN REALTY: Reviewing Closely Other Strategic Alternatives
MICROCELL TELECOMMS: First Quarter 2002 Revenues Up by 17%
NTL INCORPORATED: Arranges $670 Million DIP Financing Pact
N-VIRO INT'L: Terry Logan Replaces J. Patrick Nicholson as CEO
NEWCOR: Gets OK to Sign-Up Pachulski Stang as Bankruptcy Counsel
OMEGA HEALTHCARE: First Quarter FFO Slides-Down to $6.9 Million
OWENS CORNING: Asks Court to Approve Johns Manville Stipulation
PENTON MEDIA: Weak Revenue Spurs S&P to Change Outlook to Neg.
PRANDIUM INC: Case Summary & 20 Largest Unsecured Creditors
PRINTING ARTS: Wants Plan Filing Exclusivity Extended to July 31
PROVELL INC: Files for Voluntary Chapter 11 Reorganization
PROVELL INC: Case Summary & 30 Largest Unsecured Creditors
PSINET: Seeks Court Approval of Settlement Agreement with B4BCO
QUALMARK CORP: Nasdaq SmallCap Delists Shares Effective May 10
REVLON INC: Total Shareholders' Equity Deficit Tops $1.3 Billion
SAFETY-KLEEN: Kraus-Ward Wants Prompt Decision on Stock Pacts
SIMMONS COMPANY: March 30 Balance Sheet Upside-Down by $59 Mill.
SPECIAL METALS: Unit Agrees on 3-Year Contract Terms with USWA
SPECIAL METALS: First Quarter Net Sales Drop 19% to $159 Mill.
STANDARD AUTOMOTIVE: Goldman Sachs Discloses 11.9% Equity Stake
TAYLOR FARMS LLC: Voluntary Chapter 11 Case Summary
TRANSFINANCIAL: Closes $17MM Sale of Units' Outstanding Shares
TRANSTECHNOLOGY: Pursuing Talks to Refinance Sr. Credit Facility
US AIRWAYS: Warns of Chapter 11 Filing to Effect Restructuring
UNIVERSAL AUTOMOTIVE: Posts Improved Q1 Net Sales of $1.6 Mill.
USEC INC: S&P Cuts Rating to BB on Lower than Expected Earnings
VERADO HOLDINGS: Committee Retains Alvarez & Marsal for Advice
W.R. GRACE: Court Fixes March 31, 2003 General Claims Bar Date
WARNACO GROUP: Seeks to Enter into Agreement with Floor Ready
WAREFORCE: Will File Chapter 11 to Sell All Assets to PC Mall
WESTPOINT STEVENS: Jeffrey Feinberg Discloses 5.23% Equity Stake
WHEELING-PITTSBURGH: Resolves TECO's Disputed $1.4M Admin. Claim
WINSTAR: Trustee Asks Court to Fix August 30 Claims Bar Date
WISER OIL: Has $9 Million Working Capital Deficit at March
31WORLDCOM: Fitch Downgrades Several Debt Ratings to Low-B Level
XEROX: Fitch Places Ratings on Outlook Neg Over Refinancing Deal
ZENITH INDUSTRIAL: Gets OK to Tap Young Conaway as Co-Counsel
* BOND PRICING: For the week of May 13 - May 17, 2002
*********
AEI RESOURCES: Emerges From Chapter 11 & Changes Name to Horizon
----------------------------------------------------------------
AEI Resources Holding, Inc., a major U.S. coal producer in
Central Appalachia, the Illinois Basin and the Rocky Mountains,
has emerged from Chapter 11 restructuring after only 10 weeks
and has begun building a stronger future as Horizon Natural
Resources Inc.
"We accomplished a great deal in a very short time," said
Chairman, Chief Executive Officer and President Donald Brown.
"We now have a much stronger capital structure, and we are able
to focus on providing a more secure and brighter future for
employees, suppliers, customers and shareholders."
In the future, Horizon will continue to focus on working safely,
improving profits and reducing debt, Mr. Brown said.
"These will be the primary guideposts from which we will not
stray," Mr. Brown said. "Safety and loss control will be a top
priority of all employees. Management will focus on obtaining
maximum cost reductions and productivity improvements. We will
seek to further decrease debt and thereby enhance financial
flexibility."
Under the restructuring, the Company's pre-petition debt of
approximately $1.3 billion was reduced to approximately $925
million of restructured debt.
Mr. Brown also reiterated that the Company's long-term prospects
for production, revenues and earnings remain strong.
"As we move forward as Horizon Natural Resources, we are both
gratified and encouraged that we can continue to depend on the
dedication of our employees and the support of our customers and
suppliers," Mr. Brown said.
Several changes took effect when the Chapter 11 process ended:
* The Company gained access to a $250 million exit
financing facility from Deutsche Bank. The exit
financing will supplement cash flow to fund day-to-day
operations and capital expenses.
* A new Board of Directors took over guidance of the
Company.
* The Company's name was changed to Horizon Natural
Resources to better reflect its prospects and its future.
* Mr. Brown, who had been Chairman and CEO, added the title
of President as Stephen Addington stepped down to pursue
other business interests.
As previously announced, the new Board is composed of Donald
Brown, who has more than three decades of high-level experience
in the coal industry, including nine years as President of
Cyprus Coal; B.R. (Bobby) Brown, who has more than 40 years of
experience in the industry, including more than two decades in
senior management positions with Consol Energy, most recently as
Chairman, CEO and a Director; Robert C. Scharp, the former CEO
of Anglo Coal Australia Pty Ltd. (previously Shell Coal Group),
who prior to that had a 22-year career with Kerr-McGee Corp.,
including four years as president of its coal division; John J.
Delucca, who has more than three decades of senior-level
experience in finance and investments and is currently Executive
Vice President-Finance and Administration, Chief Financial
Officer and a member of the Executive Committee of Coty, Inc.;
and Scott Tepper, Vice Chairman of the Board of Bio-Plexus Inc.,
a medical device company.
Horizon Natural Resources is the fourth-largest steam coal
producer in the United States as measured by revenues and the
second-largest steam coal producer in the Central Appalachian
coal region as measured by production. The Company produced 46
million tons of coal in 2001. Horizon Natural Resources
primarily mines and markets steam coal from mines in Kentucky,
West Virginia, Tennessee, Indiana, Illinois and Colorado. Its
27 surface mines and 17 underground mines are operated in three
regions -- Central Appalachia, the Illinois Basin and the Rocky
Mountains.
ANC RENTAL: Los Angeles Airport Wants Lease Payments
----------------------------------------------------
The Los Angeles Department of Airports asks the Court to compel
ANC Rental Corporation, and its debtor-affiliates, to pay post-
petition lease obligations and to assume or reject unexpired
leases for the Debtors' car rental operations at Los Angeles
International Airport and Ontario International Airport.
Substantial post-petition defaults exist under each of
the Leases. As of April 21, 2002, these amounted to
approximately $1,623,822.
David M. Fournier, Esq., at Pepper Hamilton LLP in Wilmington,
Delaware, relates that Alamo and Los Angeles are parties to a
certain concession agreement dated February 9, 1998, pursuant to
which, Los Angeles granted Alamo the right to operate, among
other things, rental car counters, kiosks, and telephone
reservation boards in the central terminal area at Los Angeles
Airport for a term of five years. At its sole option, Los
Angeles Airport may approve one or more one-year extensions of
the concession agreement for as long as the term of the
concession agreement does not exceed 10 years. Sans extensions,
terms of the Alamo Concession Agreement expire on January 31,
2003.
Mr. Fournier explains that the Alamo concession agreement
requires Alamo to pay Los Angeles the greater of (i) 9% of the
total gross revenue derived by Alamo from the operation of its
automobile rental business at Los Angeles Airport or (ii) the
minimum annual sum of $4,942,268, to be paid in monthly
installments equal to 1/12 of the MAG or 9% of the Alamo's gross
monthly revenue, whichever is greater. Alamo is also required to
pay all property taxes and maintenance charges. Monthly payments
are due, and must be received by Los Angeles, within 20 days
after the end of each calendar month. Under the same concession
agreement, Mr. Fournier states that interest accrues on any
delinquent payment at the greater of 10% per annum or the rate
established by the Federal Reserve Bank of San Francisco on
advances to member banks under Sections 13 and 13a of the
Federal Reserve Act plus 4«% per annum. Late fees also accrue at
a rate of $100 per day for each day that the applicable monthly
payment is late. As of the date of the motion, the post-petition
defaults under the Alamo concession agreement are not less than
$914,055, exclusive of applicable interest, late fees,
attorneys' fees and costs.
Mr. Fournier informs the Court that Alamo and Los Angeles are
also parties to a concession agreement for the Ontario
International Airport dated June 4, 1998. Pursuant to this
agreement, Los Angeles granted Alamo the right to operate an
automobile rental business at the new Ground Transportation
Center at the airport. This included rental car counters,
office space, and telephone reservation boards for a term of
five years, with no options to extend. The terms of the Alamo-
Ontario Concession Agreement expire on June 4, 2003.
Mr. Fournier submits that the Alamo-Ontario concession agreement
requires Alamo to pay Los Angeles the greater of (i) 9% of the
total gross revenue derived by Alamo from the operation of its
automobile rental business at Ontario for years one through
three, 9.25% for year four and 9.5% for year five or (ii)the MAG
of $750,000. Rent is to be paid in monthly installments equal to
1/12 of the MAG or the applicable percentage of Alamo's gross
monthly revenue, whichever is greater. In addition, Alamo is
required to pay all property taxes and maintenance charges.
Monthly payments are also due, and must be received by Los
Angeles, within 20 days after the end of each calendar month.
Pursuant to the express terms of the Ontario concession
agreement, interest accrues on any delinquent payment at the
greater of 10% per annum or the rate established by the Federal
Reserve Bank of San Francisco on advances to member banks under
Sections 13 and 13a of the Federal Reserve Act plus 4«% per
annum. Late fees also accrue at a rate of $100 per day for each
day that the applicable monthly payment is late.
Mr. Fournier adds that Alamo and Los Angeles are also parties to
a ground lease for Ontario that requires Alamo to compensate Los
Angeles $1,962 per month, based on ground rent at $15,000 per
acre per year. The same ground lease also provides that the
rental rate shall be periodically adjusted to a fair market
rental rate. The rent is to be paid monthly on or before the
first day of the month.
Pursuant to the expressed terms of the ground lease, Mr.
Fournier tells the Court that interest accrues on any delinquent
payment at the greater of 10% per annum or the rate established
by the Federal Reserve Bank of San Francisco on advances to
member banks under Sections 13 and 13a of the Federal Reserve
Act plus 4«% per annum. Alamo is also required to pay all
property taxes, utility charges, and maintenance charges and is
responsible for all costs related to the maintenance and removal
of all hazardous and other regulated substances. Alamo is also
required to pay all property taxes, utility charges, and
maintenance charges. The postpetition defaults under the Alamo-
Ontario concession agreement and ground lease are not less than
$995,743, exclusive of applicable interest, late fees,
attorneys' fees and costs and environmental claims.
Like Alamo, National is also a party to a concession agreement
with Los Angeles for the Los Angeles International Airport and
Ontario International Airport. According to Mr. Fournier, the
Los Angeles concession agreement sets a term limit of five years
and expires on January 31, 2003. It requires National to pay Los
Angeles the greater of 9% of the total gross revenue derived by
National from the operation of its automobile rental business at
Los Angeles airport or the MAG of $4,000,008. Rent is paid in
monthly installments equal to 1/12 of the MAG or 9% of the
National's gross monthly revenue, whichever is greater. Interest
accrues on any delinquent payment at the greater of 10% per
annum or the rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Sections 13 and 13a
of the Federal Reserve Act plus 4«% per annum. Late fees also
accrue at a rate of $100 per day for each day that the
applicable monthly payment is late. National, in turn, was
granted the right to operate, among other things, rental car
counters, kiosks, and telephone reservation boards in the
central terminal area at the Los Angeles airport.
Mr. Fournier says that the ground lease between National and Los
Angeles for the Los Angeles airport requires that National pay
Los Angeles $83,360 per month. For any delinquent payment,
interest accrues at the greater of 10% per annum or the rate
established by the Federal Reserve Bank of San Francisco on
advances to member banks under Sections 13 and 13a of the
Federal Reserve Act plus 4 «% per annum. As of the date of this
Motion, the post-petition defaults under the National concession
agreement and the ground lease are not less than $498,917,
exclusive of applicable interest, late fees, attorneys' fees and
costs and environmental claims.
As for the Ontario airport, Mr. Fournier maintains that National
and Los Angeles are parties to a concession and a ground
agreement for a term of five years. This agreement has no
options for extension, and is set to expire on June 4, 2003.
Under National-Ontario concession agreement, National is
required to pay Los Angeles the greater of (i) 9% of the total
gross revenue derived by National from the operation of its
automobile rental business at Ontario for years one through
three, 9.25% for year four and 9.5% for year five or (ii) the
minimum annual sum of $960,000. Rent is paid in monthly
installments equal to 1/12 of the MAG or the applicable
percentage of National's gross monthly revenue, whichever is
greater. Interest accrues on any delinquent payment at the
greater of 10% per annum or the rate established by the Federal
Reserve Bank of San Francisco on advances to member banks under
Sections 13 and 13a of the Federal Reserve Act plus 4«% per
annum. Late fees accrue at a rate of $100 per day for each day
that the applicable monthly payment is late.
Mr. Fournier explains that the ground lease, meanwhile, grants
National the right to use 1.96 acres of land at Ontario for a
period of 20 years. Under this ground lease, National is
required to compensate Los Angeles $2,450 per month. Interest
accrues on any delinquent payment at the greater of 10% per
annum or the rate established by the Federal Reserve Bank of San
Francisco on advances to member banks under Sections 13 and 13a
of the Federal Reserve Act plus 4«% per annum. As of the date of
the Motion, the post-petition defaults under the National-
Ontario concession agreement and ground lease are not less than
$129,162, exclusive of applicable interest, late fees,
attorneys' fees and costs and environmental claims. (ANC Rental
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
AT&T CANADA: Shrugs-Off Debtholder's Action As "Groundless"
-----------------------------------------------------------
AT&T Canada Inc. (NASDAQ: ATTC) (TSE: TEL.B), stated that an
oppression application that has been filed against the
company and its directors by certain investment community
professionals is without merit and based on groundless
allegations.
The company will vigorously defend against this action.
"The board and management are committed to act in the best
interests of the company and is committed to building the
company for the long term for all stakeholders," said Purdy
Crawford, Chairman of the Board, AT&T Canada.
AT&T Canada has stated that it is implementing an aggressive
plan to ensure its future as a strong competitor and a growing
and profitable company.
AT&T Canada is the country's largest national competitive
broadband business services provider and competitive local
exchange carrier, and a leader in Internet and E-Business
Solutions. With over 18,700 route kilometers of local and long
haul broadband fiber optic network, world class data, Internet,
web hosting and e-business enabling capabilities, AT&T Canada
provides a full range of integrated communications products and
services to help Canadian businesses communicate locally,
nationally and globally. AT&T Canada Inc. is a public company
with its stock traded on the Toronto Stock Exchange under the
symbol TEL.B and on the NASDAQ National Market System under the
symbol ATTC. Visit AT&T Canada's Web site,
http://www.attcanada.comfor more information about the company.
* * *
As previously reported (Troubled Company Reporter Feb. 27, 2002
Edition), the ratings on AT&T Canada Inc., were lowered to 'BB'
and placed on CreditWatch with developing implications on Feb.
22, 2002. Previously, the ratings on AT&T Canada had benefited
from Standard & Poor's assumption of a very significant degree
of support from AT&T Corp. The downgrade reflects Standard &
Poor's heightened concerns about AT&T Corp.'s economic incentive
to provide support to AT&T Canada debtholders in the long term
should regulatory changes and the continuation of challenging
market conditions not support a competitive telecommunications
market. As the company has previously disclosed, the CRTC price-
cap review has immediate financial implications for AT&T Canada
and could have broader ramifications for the future direction of
competitive telecommunications in Canada.
AIR CANADA: Extends CDN$11.5M ERP Contract with CGI for 3 Years
---------------------------------------------------------------
Air Canada (TSX: AC) and CGI Group Inc. (TSX: GIB.A; NYSE: GIB;)
announced the signing of a CDN$11.5 million dollar, three-year
extension for the support and maintenance of their existing
five-year enterprise resource planning contract which includes
PeopleSoft Human Resources, Benefits, Payroll and Finance, as
well as related mainframe applications and interfaces.
As part of the agreement, over 1000 Air Canada employees mainly
in Montreal and Winnipeg are supported by CGI professionals
through CGI's support center. Over the course of the agreement,
via trend analysis, cross training and quality assurance, CGI
has been successful in stabilizing and streamlining the complex
system resulting in a robust and effective environment that
meets the clients' need for flexibility and quality control.
"We found CGI to be an extremely flexible partner as they were
able to readjust the initial contract to meet the business needs
of our changing organization. It is important for us to know
that we are not locked into an agreement that does not evolve
with our organization," said Jean-Paul Bourgeois, senior
director, enterprise systems, Air Canada.
Michael Roach president and chief operating officer for CGI
added: "We are very pleased to be supporting Air Canada in this
most important area of their business. Through our support
center, a core team dedicated to Air Canada is able to quickly
adjust the system, make modifications and respond to user
queries. As Canada's global IT services firm, it is through
understanding and evolving with our clients that we are able to
maintain successful long-term partnerships."
CGI has been delivering services to Air Canada since 1998. In
the last quarter of 1998, CGI took over the support of the Air
Canada enterprise applications, namely of PeopleSoft finance, as
well as mainframe applications in the areas of finance and human
resources/payroll, and successively in 1999 was responsible for
the support of PeopleSoft Human Resources, Benefits and Payroll.
Client requests for changes and improvements are dealt with in
an efficient manner and CGI offers ongoing system evolution
thanks to its large pool of diversified expertise - unmatched in
any single corporation. The quick and successful integration of
Canadian Airlines' IT functions also demonstrates the benefits
of dealing with CGI specialists capable of quickly providing
competent resources when demand increases.
Founded in 1976, CGI is the fourth largest independent
information technology services firm in North America, based on
its headcount of 13,700 professionals. CGI's annualized revenue
run-rate totals CDN$2.1 billion (US$1.3 billion). CGI's order
backlog currently totals CDN$10.7 billion (US$6.7 billion). CGI
provides end-to-end IT services and business solutions to more
than 3,000 clients worldwide from more than 60 offices. CGI's
shares are listed on the TSX (GIB.A) and the NYSE (GIB). They
are included in the TSX 100 Composite Index as well as the
S&P/TSX Canadian Information Technology and Canadian MidCap
Indices. Web site: http://www.cgi.ca
CANADIAN IMPERIAL: Garden Hill Production to Commence on May 21
---------------------------------------------------------------
Canadian Imperial Venture Corp. (CDNX:CQV) announces that it
will commence production of oil and gas at its Garden Hill
facility in western Newfoundland on or before May 21, 2002.
The Company has completed the commissioning of its existing
facilities and has been granted all necessary approvals and
permits.
As previously reported, the Government of Newfoundland and
Labrador has issued a production lease to the Company for its
Garden Hill oil field. The lease covers an area of approximately
33,000 acres along a prospective fault-bounded inversion fairway
on the Port au Port Peninsula and includes the Port au Port No.
1 discovery well. The lands and prospects are described in the
Company's approved 2001 Development Plan for Garden Hill --
available on the company's Web site at
http://www.canadianimperial.com
The production lease confers to the Company an exclusive right
to develop, produce and market oil and gas in the lease area in
accordance with the approved development plan. The initial term
of the lease is 10 years and can be extended for one or more 5-
year terms. This is the first onshore production lease ever
issued by the Government of Newfoundland and Labrador.
Recent well testing during the commissioning and hookup phase
indicated that improved production performance from the Port au
Port No. 1 discovery well would be achieved with an additional
recompletion. The Company has completed the necessary
engineering and has contracted Schlumberger to perform the
required work. Schlumberger will mobilize the required equipment
and work will start on May 18, 2002. It will take two to three
days to conclude the program. Production is expected to commence
on or before May 21, 2002 at Garden Hill, Newfoundland and
Labrador's first onshore oil and gas production facility.
The Company also announces that further to its news release
of April 18, 2002, the closing has now taken place under the
debt restructure agreement. This closing effectively changes the
status of the participating creditors from unsecured to secured.
In accordance with the terms of the debt restructure agreement,
it is still possible for creditors who have not yet ratified the
agreement to send in creditor ratifications subject to those
ratifications being received no later than May 31, 2002.
Creditors are encouraged to contact the Company directly in this
regard.
Canadian Imperial Venture Corp. (CDNX: CQV) is an independent
Newfoundland-based energy company.
CASUAL MALE: Designs Inc. to Close $170M Acquisition in Mid-May
---------------------------------------------------------------
Designs, Inc. (NASDAQ/NMS: "DESI"), operator of branded retail
stores, including Levi's(R) Outlet by Designs, Dockers(R) Outlet
by Designs, and Candie's(R) outlet stores, said that on Tuesday,
May 7, 2002, the U.S. Bankruptcy Court for the Southern District
of New York approved the sale of Casual Male Corp. to Designs,
Inc. The Company expects to close the $170 million Casual Male
acquisition by mid-May 2002.
David A. Levin, President and Chief Executive Officer of
Designs, Inc., commented, "We believe Casual Male's leading
market position, along with Designs' efficient operating
capabilities, will produce a very profitable combination. The
synergies offered in combining the two companies will create an
efficient cost structure and is consistent with Designs'
strategic focus on managing businesses in a cost-effective
manner. Upon closing of the acquisition, Designs' annual sales
are expected to exceed $500 million."
Designs, Inc. operates 105 Levi's(R) Outlet by Designs,
Dockers(R) Outlet by Designs and Candie's(R) outlet stores
primarily in the Eastern part of the United States and in Puerto
Rico. The Company is headquartered in Needham, Massachusetts and
its common stock is listed on the Nasdaq National Market under
the symbol "DESI". Investor Relations information is available
on the Company's Web site at http://www.designsinc.com
CHOICE ONE: March 31 Working Capital Deficit Slides-Up to $7MM
--------------------------------------------------------------
Choice One Communications (Nasdaq: CWON), an Integrated
Communications Provider offering facilities-based voice and data
telecommunications services, web hosting, design and development
to small and medium-sized businesses announced strong operating
and financial results for the first quarter ended March 31,
2002.
"Our first quarter results demonstrate tremendous operational
accomplishments combined with strong financial performance,"
commented Steve Dubnik, chairman and CEO. "We sold a record
65,000 new lines, installed more than 46,000 net new lines,
completed the migration of acquired FairPoint assets and clients
onto our network and billing systems, achieved a 26% sequential
increase in revenue and reduced our EBITDA losses by 40%."
First-quarter 2002 revenue was $70.6 million, up 26% from fourth
quarter 2001 revenue of $56.2 million and up 103% from revenue
of $34.9 million one year ago. Gross profits in the quarter
were $28.4 million, or 40.2% of revenue, compared with $21.8
million, or 38.9% of revenue in fourth quarter 2001.
Selling, general and administrative (SG&A) expenses were $37.7
million, including an $800,000 charge to write off an
uncollectible balance due from Global Crossing, who filed for
bankruptcy protection last quarter. Excluding this charge, the
company's SG&A expenses were $36.9 million, or 52.3% of revenue
in the quarter, compared with $36.1 million, or 64.3% of revenue
in the fourth quarter and $31.8 million, or 91.4% of revenue in
first quarter 2001. In the first quarter, Choice One generated
$18 of incremental revenue for every $1 spent on SG&A.
"The reduction in our EBITDA losses accelerated in the first
quarter, highlighting the continued gains we are making in
operational scale and efficiency and the successful integration
of the acquired FairPoint lines," added Dubnik. "The FairPoint
transaction added a substantial base of revenue with only a
modest increase in SG&A expenses. The elimination of transition
related expenses, duplicate network elements and collocations,
combined with our continued strong internal growth, tight
control over costs, and gains in network efficiency, should lead
to even greater operating leverage in our future results."
EBITDA (earnings before interest, taxes, depreciation and
amortization, excluding non-cash management carry, non-cash
deferred compensation and other non-cash charges) losses, as
reported were $9.3 million in the quarter compared with $14.3
million in fourth quarter 2001. Excluding the $800,000 write-
off of uncollectible receivables, EBITDA losses were $8.5
million and 40% lower than fourth quarter 2001. First quarter
2001 EBITDA losses were $23.0 million.
Cash interest expense (net of interest income) was $7.2 million
for the first quarter, compared with $10.3 million in fourth
quarter 2001 and $12.4 million in first quarter 2001. The
reduction in cash interest expense reflects the November 9, 2001
rollover of the company's subordinated credit facility to nine-
year notes with interest payable in kind (PIK) and not in cash,
until November 9, 2005.
Capital expenditures of $6.5 million were substantially lower
than fourth quarter 2001, reflecting the company's tight control
and focus on capital efficiency through increases in network
utilization as well as the timing of spending. Capital
expenditures were $19.7 million in fourth quarter 2001 and $19.6
million in first quarter 2001. The company now expects full
year 2002 capital expenditures to be in the range of $40 - $45
million.
The first quarter net loss per share was $1.37 compared with
$1.71 in fourth quarter 2001 and $1.96 a year ago. Excluding
non-cash charges totaling $41.3 million, the loss per share
would have been $0.39. Non-cash expenses consist of management
ownership allocation charge, non-cash deferred compensation,
depreciation and amortization, PIK interest on nine-year notes
and charges for accretion of preferred stock and accrued
dividends recorded in connection with the issuance of $200
million of preferred stock with five-year PIK dividends. The
company adopted Statement of Financial Accounting Services
(SFAS) No. 142 in the first quarter, and no longer amortizes
goodwill.
The company's first quarter 2001 loss per share, excluding the
amortization of goodwill, would have been $1.74.
The company added 46,120 net new lines in the quarter, compared
with 88,656 net new lines in fourth quarter 2001, which included
lines acquired in the FairPoint asset purchase. As expected,
and as a result of the FairPoint migration, the company's
average monthly churn rate increased modestly during the first
quarter, to 1.3%. Choice One continues to have one of the
lowest churn rates in the industry.
At March 31, 2002, the company had 430,095 lines in service,
with 89% of these lines on-switch. Choice One's on-switch
penetration of addressable business lines was 6.6% at March 31,
2002 compared with 6.1% at December 31, 2001. At the end of the
quarter, the company had 528 central office collocations
addressing approximately 5.7 million business access lines.
Results in the company's first five markets, which are Buffalo,
Albany and Syracuse, New York; Pittsburgh, Pennsylvania; and
Providence, Rhode Island, continue to show favorable operational
and financial progress. The first two of these markets, Albany
and Buffalo, were turned up in February 1999. The remaining
three markets were turned up between April 1999 and August 1999.
Aggregate first quarter performance in these first five markets
is summarized below:
* On-switch penetration of addressable lines
(at March 31, 2002) of 10%
* Gross margins of 53%
* EBITDA margins (after corporate allocation) of 24%
* Positive free cash flow (EBITDA minus capital
expenditures minus allocated cash interest)
At March 31, 2002, accounts receivable was $51 million and gross
property and equipment was $439 million. Days sales outstanding
(DSO) were 65 days at March 31, 2002.
FairPoint Integration Completed on Schedule
As previously announced in April, the company completed the
migration of billing, collocations and lines acquired from
FairPoint Communications Solutions Corp. on schedule. This was
a coordinated effort between the two companies, with minimal
client-impacting service issues occurring during the migration
process.
In accordance with the contingent consideration provision
outlined in the asset purchase agreement, Choice One expects to
issue one million additional shares of common stock to FairPoint
Communications on or before May 19, 2002.
Sales and Operational Highlights
Since substantially expanding the sales organization a year ago,
the company has achieved significant increases in sales and
sales productivity. This led to 65,368 net new lines sold in the
first quarter, a company record for organic sales. Choice One
believes this strong performance is sustainable and expects
these sales and productivity trends to continue, reflecting the
continued demand for alternatives for communications services
and the favorable competitive environment within the company's
fully built 30-market footprint.
The company continues to leverage the investments into its back-
office infrastructure. In the first quarter, the company
transitioned all carrier access billing (CABS) from an outside
service bureau to the company's in-house billing department. By
eliminating service bureau fees, which had increased in direct
proportion to the company's growing client base, the company
will achieve substantial savings and will have greater control
and flexibility over the billing process.
Choice One recently turned up local fiber rings in Pittsburgh,
Pennsylvania and Indianapolis, Indiana. The company's 2002
investments in local fiber will reduce the overall cost of local
transport and will contribute positively to cash this year. The
company also lit fiber along its existing inter-city fiber
network during the first quarter. Choice One now is operating
local fiber networks in 14 of its 30 markets and has 1,666
operational route-miles of intra- and inter-city fiber
throughout its footprint.
Choice One had 1,820 total colleagues, including 541 in direct
sales at March 31, 2002, compared with 1,758 total colleagues,
including 516 direct sales colleagues at December 31, 2001.
Guidance
"Our line additions and sales are tracking in line with our
expectations, reflecting the continued strong demand for our
bundled voice and data services offering," said Mr. Dubnik.
"However, like many other carriers, we are experiencing a slight
decline in local and long distance usage across our client base.
This led to a reduction in our average revenue per user (ARPU)
as we moved through the first quarter."
"Offsetting this, we are beginning to realize substantial
network savings due to recent reductions in UNE rates in New
York and Maine. These savings, combined with greater
utilization of our network and increased network efficiencies
associated with the FairPoint migration will enable us to
achieve our second quarter and full year profitability targets
despite the recent trends in our usage-sensitive revenue."
Headquartered in Rochester, New York, Choice One Communications,
Inc. (Nasdaq: CWON) is a leading integrated communications
services provider offering voice and data services including
Internet and DSL solutions, and web hosting and design,
primarily to small and medium-sized businesses in second and
third-tier markets.
Choice One currently offers services in 30 markets across 12
Northeast and Midwest states. Choice One had annualized first
quarter revenue of approximately $280 million. At March 31,
2002, the company had 430,095 lines in service, 93,953 accounts
and 1,820 total colleagues.
Also, at March 31, 2002, Choice One's working capital deficit
climbed up to over $7 million.
For further information about Choice One, visit our web site at
http://www.choiceonecom.com
COLE NATIONAL: S&P Rates $150MM Senior Subordinated Notes at B
--------------------------------------------------------------
A 'B' rating was assigned on May 9, 2002, to Cole National Group
Inc.'s proposed $150 million senior subordinated note issue due
in 2012. Proceeds will be used to repurchase all of the
company's outstanding $150 million 9.875% senior subordinated
notes due in 2006. The notes are being offered under Rule 144A
with registration rights. The 'BB-' corporate credit rating on
the company was also affirmed on May 9. Outlook is stable.
The ratings on Cole National reflect the challenges of operating
in the increasingly competitive optical retail industry and the
risks associated with expanding into Target Inc.'s discount
stores. These factors are somewhat mitigated by Cole's leading
market position and good long-term industry demographics.
Merchandising and customer service initiatives implemented at
Pearle Vision in 2000 to improve operations have contributed to
positive comparable-store sales growth in the past two years. At
Pearle company-owned stores, comparable-store sales grew 2.6% in
2001, reflecting a higher average transaction selling price for
the first nine months of 2001 and an increase in the number of
transactions in the fourth quarter. Although margin and cash
flow improvement lagged sales growth in 2000 due to costs
associated with new operating initiatives, EBITDA increased to
$77 million in 2001 from $72 million in 2000. Lease-adjusted
operating margins improved to 13.7% in 2001, from 13.4% for the
same period the year before, reflecting the higher average
selling price of spectacles and better operating efficiency.
This improvement in operating profits was achieved after
absorbing losses from the continued expansion of Target Optical.
Despite the costs associated with this new business, the
expansion appears to be manageable and is not expected to affect
Cole's consolidated credit profile materially in the near term.
The company's Cole Vision business segment has been negatively
affected by slower growth rates and more competitive pricing in
the retail optical industry. Industry annual growth rates slowed
to less than 3% in 1999 and 2000, from more than 5% in previous
years. Lengthened purchase cycles and more competitive pricing
have contributed to this slowdown. Despite increasing
competition, Cole has maintained a leading position in the
retail optical industry. Furthermore, good prospects for its
managed-care business should strengthen the company's position.
Credit protection measures remain appropriate for the rating,
with EBITDA interest coverage at about 2.8 times (x) and total
debt to EBITDA at 3.6x in 2001. Financial flexibility is
adequate, provided by availability under the company's $75
million revolving credit facility and lack of near-term
maturities.
Outlook
Standard & Poor's believes the improvement in operating results
is sustainable, despite the company's expansion into Target
locations. Ratings are supported by Cole's leading market
position and Standard & Poor's expectation that the company's
credit profile will remain appropriate for the rating category.
Ratings List
Cole National Group Inc.
* Corporate credit rating BB-/Stable/--
* Senior secured bank loan BB+
* Subordinated debt B
CONQUISTADOR PLAZA: Defaults on Building Loan Agreement
-------------------------------------------------------
National Residential Properties, Inc. (OTCBB:NRES.OB) said that
Conquistador Plaza Inc. has been provided formal notice that it
is in default of the Building Loan Agreement and the mortgage by
First Housing Development Corporation of Florida.
The company has returned all stock that it held in Encore
Services, Inc. to Encore Services Inc. president, Braulio
Gutierrez, ending the NRES' association with Encore Services,
Inc. and Braulio Gutierrez. Braulio Gutierrez has resigned as a
director of NRES.
NRES has moved its offices to 6915 Red Road, Coral Gables,
Florida 33143.
NRES, based in Miami, is a fully-reporting company engaged in
real estate development. NRES has five major projects in which
it owns the land and which are either under construction or in a
plan and permitting process. NRES' projects are:
GRANADA GRAND, which is subject to an agreement of sale
dependent on financing and other normal contingencies. The sales
price is $2,000,000.
CONQUISTADOR PLAZA APTS is a 60 unit project at 2270 SW 32
Avenue, Miami.
The company is developing EAGLE TRACE, a 62-unit subdivision in
Vero Beach, Florida. EAGLE TRACE is a heavily deed restricted,
walled, gated community with a lake in the center. One-third of
the lots are on the lake. NRES intends to build houses and sell
unimproved lots to other builders.
The Company's 60 unit condominium project known as THE
RESIDENCES AT BAY HARBOR, located on Bay Harbor Island, Miami,
is under contract for sale, subject to the buyer's acquisition
of a mortgage for construction and other standard contingencies.
The sales price is $2,250,000
The Company has a 70 unit apartment house project in Miami known
as BARCELONA APARTMENTS. The Company anticipates that this
project, which is in the permitting and permit stage, will
either be built out by the Company or sold as a project
immediately available for construction.
NRES has signed a contract to acquire the stock of CAPITOL GUARD
CORPORATION. Capitol Guard is a security company that provides
guard service to office building, condominiums, hotels and
motels in Palm Beach and Broward Counties, Florida.
COSERV: Enters Settlement Pact That Will Set Stage for Emergence
----------------------------------------------------------------
Last Friday, CFC, CoServ (Denton County Electric Cooperative in
Texas), and the Unsecured Creditors Committees jointly submitted
a letter of agreement in the U.S. Bankruptcy Court in Fort
Worth, Texas.
The letter of agreement outlines the terms and conditions of a
comprehensive settlement that is supported by all parties in the
CoServ Chapter 11 bankruptcy cases.
The comprehensive agreement will enable a resolution among CFC,
CoServ, and CoServ's unsecured creditors. This agreement covers
all entities in bankruptcy, including telecom, realty, and
electric.
The terms of the settlement were submitted to the Honorable
Judge Michael Lynn under seal. Plans of reorganization and
related pleadings specifying the details of the settlement are
expected to be filed jointly by the parties by approximately
June 1, 2002.
The parties have agreed to suspend all activity in the pending
litigation, which will be dismissed when plans of reorganization
are confirmed by the Court at the close of the restructuring.
The agreement will result in CoServ's emerging from Chapter 11
bankruptcy. CoServ is expected to continue to function as a
consumer-owned electric cooperative, refocused on its core
utility distribution business.
With approximately $20 billion in loans outstanding, CFC is the
premier private lender to the nation's electric cooperative
network. Formed in 1969, CFC provides state-of-the-art financial
products and services to its 1,045 electric cooperative owners
located in 49 states and four U.S. territories.
CRESCENT REAL: Exceeds First Quarter 2002 Results Expectations
--------------------------------------------------------------
Crescent Real Estate Equities Company (NYSE:CEI) announced
results for the first quarter 2002. Funds from operations for
the three months ended March 31, 2002 was $64.1 million,
compared to $72.3 million for the same period in 2001.
According to John C. Goff, Chief Executive Officer, "We were
pleased to have reported better than expected financial results
this quarter. We exceeded our original FFO guidance by $.09 per
share based on the high end of our range, and our net income was
also affected, primarily as a result of three factors:
accelerated timing of residential development sales, higher than
expected resort operating results and the recognition of a tax
benefit associated with obtaining resort/hotel lease interests
in February. As such, we are reaffirming our 2002 FFO guidance
range of $2.00 to $2.30 per share."
Net income available to common shareholders for the three months
ended March 31, 2002 was $11.9 million compared to $27.9 million
for the same period in 2001. Net income was reported after the
application of two new SFAS rulings. A gain of $.03 per share
related to an office property sale was recorded as discontinued
operations in accordance with SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", and a write-off of
$.09 per share related to goodwill in the temperature-controlled
logistics investment was recorded in accordance with SFAS 142,
"Goodwill and Other Intangible Assets".
Business Sector Review
Office Sector (67% of Total Asset Value as of March 31, 2002)
Office property same-store net operating income declined 0.5%
for the three months ended March 31, 2002 over the same period
in 2001 for the 25.8 million square feet of office property
space owned during both periods. Average occupancy for these
properties for the three months ended March 31, 2002 was 90.0%
compared to 92.6% for the same period in 2001. As of March 31,
2002, the overall office portfolio was 90.5% leased based on
executed leases. During the three months ended March 31, 2002
and 2001, Crescent received $1.2 million and $1.7 million,
respectively, of lease termination fees. Crescent's policy is to
exclude lease termination fees from its same-store NOI growth
calculation.
The Company leased 1.0 million net rentable square feet during
the three months ended March 31, 2002, of which 585,000 square
feet was renewed or re-leased. The weighted average FFO net
effective rental rate (rental rate less operating expenses)
increased 13% over the expiring rates for the renewed or re-
leased leases, all of which have commenced or will commence
within the next twelve months. Tenant improvements related to
these leases were $.79 per square foot per year and leasing
costs were $.71 per square foot per year.
On January 18, 2002, Crescent closed on the sale of Cedar
Springs, a 111,000 square foot Class A office property located
in the Uptown / Turtle Creek submarket in Dallas. The sale
generated net proceeds to Crescent of approximately $12 million.
Denny Alberts, President and Chief Operating Officer, commented,
"We continue to be encouraged by our office leasing activity
given the economic uncertainty. Nearly 70% of our 3.9 million
square feet of leases expiring in 2002 have been signed or are
in active negotiations. And using first quarter renewal and re-
leasing activity as a measure, we are experiencing a healthy
roll up in net effective rental rates."
"As expected, our average occupancy declined to 90% in the first
quarter as a result of certain lease expirations early in the
year. This caused our same-store net operating income to
slightly decline. However, we are pleased with our progress in
backfilling that space and anticipate occupancy levels rising
over the year. Due to continued economic uncertainty, we remain
cautious in projecting 2002 growth for our office segment, and
as such, we are reaffirming our same-store growth range of 0% to
4% based on occupancy of 90% to 93%," Alberts added.
Resort and Residential Development Sector
(22% of Total Asset Value as of March 31, 2002)
Destination Resort Properties
Based on actual performance of Crescent's five resort
properties, same-store net operating income declined 10% for the
three months ended March 31, 2002 over the same period in 2001.
The average daily rate increased 2% and revenue per available
room decreased 5% for the three months ended March 31, 2002
compared to the same period in 2001. Weighted average occupancy
was 75% for the three months ended March 31, 2002 compared to
79% for the three months ended March 31, 2001.
"Although first quarter results in 2002 were below 2001, resort
performance exceeded our expectations and showed a dramatic
recovery from fourth quarter 2001 levels. We have seen strong
operating results from our Canyon Ranch and Park Hyatt Beaver
Creek properties," commented Alberts.
Upscale Residential Development Properties
"While we continue to feel the effects of a soft economy in our
residential development projects, we are clearly seeing signs
that velocity of sales activity is picking up. Based on overall
residential performance in the first quarter, we are cautiously
optimistic that our consolidated residential results will meet
our expectations for the year," commented Alberts.
Investment Sector
(11% of Total Asset Value as of March 31, 2002)
Upscale Business-Class Hotel Properties
Based on actual performance of Crescent's four hotel properties,
same-store net operating income declined 17% for the three
months ended March 31, 2002 over the same period in 2001. The
average daily rate decreased 4%, while revenue per available
room decreased 14% for the three months ended March 31, 2002
compared to the same period in 2001. Weighted average occupancy
was 65% for the three months ended March 31, 2002 compared to
73% for the three months ended March 31, 2001.
Temperature-Controlled Logistics Investment
AmeriCold Logistics' same-store EBITDAR (earnings before
interest, taxes, depreciation and amortization, and rent)
remained flat for the three months ended March 31, 2002,
compared to the same period in 2001. AmeriCold Logistics elected
to defer $3.0 million (of the $35.0 million contracted
rent) for the first quarter, of which Crescent's share was $1.2
million.
Receipt of COPI Assets
As was announced on February 14, 2002, Crescent reached an
agreement with Crescent Operating, Inc. ("COPI") under which,
during the first quarter, Crescent received COPI's lessee
interests in eight of Crescent's resort/hotel properties, the
voting interests in three of Crescent's residential development
corporations and related entities, and other assets. As a
result, the financial information of the resort/hotel and
residential development properties includes operations of these
properties beginning on the date Crescent received the assets.
Balance Sheet Review
On April 15, 2002, Crescent's operating partnership completed a
private offering of $375 million in 9.25% senior, unsecured
notes due 2009. Proceeds were used to repay existing
indebtedness and redeem preferred units of one of its
subsidiaries.
On April 26, 2002, Crescent also completed a preferred stock
issuance of 2.8 million shares of its 6 3/4% Series A
convertible cumulative preferred stock to an institutional
investor. Proceeds of $50 million were used to redeem preferred
units of one of its operating partnership subsidiaries.
"The successful placement of the senior unsecured notes with
institutional investors and the issuance of the preferred stock
gives us substantial financial flexibility. By paying down our
line of credit with proceeds from the unsecured notes, we are in
a position to repay the remaining $98 million of unsecured notes
due in September and a $63.5 million mortgage loan due in
December. Effectively, we will have no significant debt
maturities prior to 2005," commented Goff.
2002 OUTLOOK
FFO Per Share
Crescent's management reaffirms its previously disclosed 2002
FFO guidance range of $2.00 to $2.30 per share, of which $.43 to
$.45 is expected for the second quarter.
Supplemental Operating And Financial Data
Crescent's supplemental and operating financial data report for
the first quarter 2002 is available on the Company's Web site --
http://www.cei-crescent.com-- in the investor relations
section. To request a hard copy, please call the Company's
investor relations department at 817/321-2180.
Crescent Real Estate Equities Company, through its subsidiaries,
owns and manages some of the highest quality properties in the
country. Its portfolio consists primarily of 76 office
properties (which includes 3 retail properties) totaling over 28
million square feet located in six states, as well as world-
renowned luxury resorts and spas and upscale residential
developments.
* * *
As previously reported in the Troubled Company Reporter,
Standard & Poor's affirmed its ratings on Crescent Real Estate
Equities Co. and Crescent Real Estate Equities L.P. and removed
them from CreditWatch, where they were placed on Jan. 23, 2002.
The outlook remains negative.
Ratings Affirmed And Removed From CreditWatch
Issue To From
Crescent Real Estate Equities Co.
Corporate credit rating BB BB/Watch Neg
$200 million 6-3/4%
preferred stock B B/Watch Neg
$1.5 billion mixed shelf prelim B/B+ prelim B/B+/Watch Neg
Crescent Real Estate Equities L.P.
Corporate credit rating BB BB/Watch Neg
$150 million 6 5/8% senior
unsecured notes due 2002 B+ B+/Watch Neg
$250 million 7 1/8% senior
unsecured notes due 2007 B+ B+/Watch Neg
DYNASTY COMPONENTS: Won't File Fin'l Results for Year & Quarter
---------------------------------------------------------------
Dynasty Components Inc. (TSE: DCI) announced that, as a result
of its application under the Companies' Creditors Arrangement
Act to restructure is debt obligations, it does not expect to
file and provide to its shareholders the financial statements
related to its fiscal year ended December 31, 2001, and its
first quarter, ended March 31, 2002, while it remains in CCAA
protection. DCI does not anticipate filing such statements
until, at the earliest, the completion of its restructuring
under the CCAA. DCI has been under CCAA protection since
November 30, 2001, which protection has been extended until May
30, 2002. The expected delay in filing the financial statements
is a result of DCI directing its resources to corporate
restructuring and continued operations of the DCI business and
the uncertainty regarding DCI's future operations.
DCI has refocused its business strategy entirely on its wholly-
owned subsidiary, Parts Logistics Management Corp., which
continues to operate normally. Parts Logistics Management Corp.
provides web-based B2B e-procurement and fulfillment logistics
solutions. Focused almost exclusively on the Information
Technology industry, PLM provides logistics solutions to IT
outsourcing service providers, assisting them in managing the
procurement, delivery and tracking of IT parts, as well as parts
disposition and logistics management services to computer
original equipment manufacturers.
While under CCAA protection, DCI will comply with the alternate
information guidelines set out in Ontario Securities Commission
Policy 57-603 for issuers who are delayed in filing and
forwarding to shareholders financial statements within the times
prescribed by applicable securities laws. The guidelines, among
other things, require DCI to file a report, by way of a material
change report, with the OSC disclosing information provided to
creditors at the same time as such information is provided to
creditors and to issue bi-weekly status reports by way of a news
release so long as DCI remains in CCAA protection and remains in
breach of securities law requirements related to filing
financial statements.
DCI acknowledges that if it fails to meet the alternative
guidelines set out in Policy 57-603 or if CCAA protection is
lifted or expires, it may be the subject of a management cease
trade order imposed by the OSC. DCI further acknowledges that if
a management cease trade order is imposed by the OSC, two months
following the imposition of such an order, the OSC may also
order an issuer cease trade order, suspending trading in DCI
securities, if DCI has not met filing obligations by such time.
Concurrently with the issuance of this press release, DCI has
filed with the OSC a report in the form of a material change
report, which discloses additional information related to DCI's
CCAA protection, including the information available to DCI's
creditors, and its delay in filing the required financial
statements.
EDISON INT'L: Appoints PwC as Independent Public Accountants
------------------------------------------------------------
Edison International (NYSE: EIX) announced that its board of
directors has appointed PricewaterhouseCoopers LLP to serve as
the corporation's independent public accountants for the balance
of 2002. Arthur Andersen LLP, the previous auditor, had served
the corporation and its affiliate Southern California Edison
since 1924.
Based in Rosemead, Calif., Edison International is the parent
company of Southern California Edison, Edison Mission Energy,
Edison Capital and Edison O&M Services.
* * *
As reported in the March 12, 2002 issue of the Troubled Company
Reporter, Fitch Ratings has raised Edison International and
Southern California Edison's senior unsecured debt ratings to
'B' and 'BB-', respectively; the senior unsecured notes of EIX
and SCE were previously rated 'CC'. Fitch has withdrawn EIX and
SCE's commercial paper rating because the past-due notes have
been repaid and no commercial paper remains outstanding. EIX and
SCE's securities have been removed from Rating Watch Positive.
The changes to EIX and SCE's ratings are summarized below. The
new ratings reflect actions taken by the California Public
Utilities Commission (CPUC) to implement its settlement
agreement with EIX/SCE, and the payment of roughly $5.5 billion
of SCE's past due obligations on March 1, 2002. The Utility
Reform Network's challenge to the federal court decision
adopting the settlement agreement between the CPUC, EIX, and SCE
remains pending. Future court action overturning the settlement
agreement on appeal is a relatively improbable outcome, in our
view; nonetheless, the current ratings reflect the potential for
further court review. The Rating Outlook is Positive based on
the more likely view that the settlement agreement will remain
in force, strengthening financial ratios at SCE and, to a lesser
degree, EIX. EIX's very high financial leverage and weak
interest coverage measures continue to overshadow the dramatic
recovery projected for SCE.
Edison International
--Senior unsecured to 'B' from 'CC';
--Trust preferred to 'CCC' from 'C';
--Commercial paper rating withdrawn.
ENRON: Court Nixes Atty. General's Move to Appoint Fee Examiner
---------------------------------------------------------------
The Office of the Attorney General of Texas, on behalf of Texas
state agency creditors, asks the Court to appoint an independent
Fee Examiner to review and report on all subsequent fee
applications filed by professionals in the bankruptcy cases of
Enron Corporation and its debtor-affiliates.
Texas Deputy Attorney General for Litigation, Jeffrey S. Boyd,
explains that one of the primary focuses of an independent fee
examiner would be to review and compare rates charged by the
case professionals in light of the nature of the work performed.
"However qualified the case professionals may be, it is still
necessary for the Court to insure that fees paid are for
reasonable and necessary services performed," Mr. Boyd says.
To illustrate, Mr. Boyd notes that:
-- On February 20, 2002, Enron's bankruptcy counsel, Weil,
Gotshal & Manges, L.L.P., filed fee applications with the
Court requesting payment for over $6,200,000 in legal fees
and expenses for services rendered in December 2001;
-- Other case professionals, such as Andrews & Kurth L.L.P.,
requested compensation for services rendered from December
2, 2001 to January 31, 2002 in the approximate amount of
$1,930,000;
-- The firms of Togut, Segal & Segal, and LeBoeuf, Lamb,
Greene & MacRae, L.L.P. and Cadwalader, Wickersham & Taft,
requested compensation for services rendered in December
2001 in the aggregate amount of $1,250,000;
-- On March 11, 2002, the firm of Milbank, Tweed, Hadley &
McCloy, L.L.P., representing the Official Committee of
Unsecured Creditors on issues such as adequate protection,
asset sales, automatic stay enforcement, change of venue,
DIP Financing, etc., requested payment of $528,117 in fees
and $51,789 in expenses for services rendered from
December 12, 2002 to December 31, 2002.
-- Even more recently (March 15, 2002), Milbank, Tweed
requested payment of $1,645,748 in fees and $150,145 in
expenses for services rendered for the month of January
2002.
Mr. Boyd asserts that the appointment of a fee examiner would
aid the court in its statutory duty to review and evaluate
lengthy and detailed fee applications filed in this case. "Any
conclusions relative to the reasonableness and the need for the
requested fees and expenses may then be made by the Court," Mr.
Boyd explains. If all the fee applications already filed in the
case are approved in their entirety, then Enron will spend over
$11,700,000 on professional fees, alone, in the three months
since filing bankruptcy. "At this rate, precious few dollars may
inure to the benefit of general unsecured creditors if and when
a plan of reorganization or liquidation is approved," Mr. Boyd
observes.
Specifically, the Office of the Attorney General suggests that
the fee examiner should focus on:
-- examination of fee applications for duplication of
services,
-- the time spent on and the need for such services,
-- the rates charged for such services,
-- the reasonableness of such charges, and
-- any other relevant factors to determine cost-effectiveness
of the services rendered and expense requests.
Debtors Respond
The Court previously indicated that it would enter an order
directing the United States Trustee to appoint a committee to
review fee applications in these Chapter 11 cases, Melanie Gray,
Esq., at Weil Gotshal & Manges LLP, in New York, recalls.
As of April 22, 2002, Ms. Gray says, this order is still in the
process of being prepared for filing with the Court.
"Presumably, however, once formed the Fee Committee will be
tasked with similar responsibilities as those sought for the fee
examiner by the Attorney General's Motion," Ms. Gray speculates.
Thus, Ms. Gray asserts, the relief sought by the Attorney
General's Motion is duplicative of the Fee Committee and, if
granted, would needlessly duplicate efforts and administrative
expenses in these Chapter 11 cases. "Although informed of the
imminent appointment of the Fee Committee, the Attorney General
has declined to withdraw the Motion or adjourn the hearing until
such time as the Fee Committee can be appointed and commence its
designated tasks," Ms. Gray notes.
For these reasons, the Debtors ask the Court to deny the
Attorney General's motion in its entirety as moot in light of
the imminent appointment of the Fee Committee.
* * *
It turns out the Debtors are right. Judge Gonzalez denies the
Attorney General's motion.
The U.S. Trustee is expected to appoint former bankruptcy judge
Joseph Patchan and four other representatives of core parties-
in-interest in Enron's cases to a formal fee review committee.
(Enron Bankruptcy News, Issue No. 24; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ENRON CORP: Ad Hoc Committee Moves to Curtail Use of EESI's Cash
----------------------------------------------------------------
The Ad Hoc Committee of Energy Merchants asks the Court to
extend the ENA Cash Management Order to Enron Energy Services
Inc. Specifically, the Ad Hoc Committee wants the Court
to prohibit transfers of cash of EESI under the same terms and
conditions of the current prohibition of transfers of cash of
Enron North America Corp.
John S. Willems, Esq., at White & Case LLP, in New York, asserts
that EESI and ENA should receive the same cash protection. Mr.
Willems presents these undisputed facts:
-- EESI and ENA are both energy traders,
-- EESI and ENA are the two largest generators of revenue in
the Enron group,
-- EESI and ENA have generated over 90 percent of Enron's
revenue,
-- EESI's cash continues to be swept up daily to the Debtors'
centralized concentration account, and
-- Because of the ENA cash freeze, EESI currently is the
largest source of cash for Debtor operations.
Because ENA and EESI are similarly situated and because there is
no dispute as to the relevant facts, the Ad Hoc Committee
contends that transfers of EESI's cash should also be prohibited
under the same terms and conditions as ENA's cash is frozen.
Under the current cash management system, Mr. Willems notes that
the interest of EESI's creditors in EESI's cash is not
adequately protected. "Given the Debtors' refusal to inform the
Ad Hoc Committee whether EESI's cash is being swept into the
Debtors' concentration account, the Ad Hoc Committee can only
assume that it is swept daily," Mr. Willems says. Once Enron
collects EESI's cash, Mr. Willems speculates that Enron
presumably distributes it to other Debtors and non-Debtors, as
was customary prior to institution of the ENA-specific
protections.
Due to the ENA cash freeze, Mr. Willems tells the Court that
EESI is now the largest inter-company source of cash for Enron
and the other Debtors. Thus, Mr. Willems concludes, the Debtors
likely are using EESI cash to fund their operations, and the
operations of non-Debtor affiliates, just as the Debtors were
used ENA and EESI cash before entry of the Amended Cash
Management Order.
Mr. Willems argues that EESI cash deserves the same protection
as ENA cash because:
1) ENA and EESI are energy trading debtors with substantially
similar creditor groups. There is no reason to treat EESI
any different from ENA, and neither the Debtors nor the
DIP Lenders have articulated any such reason;
2) ENA and EESI have contributed over ninety percent of the
total revenue collected by Enron from its subsidiaries and
affiliates. For example, for the period between the
Petition date and January 23, 2002, ENA and EESI were far
and away the largest contributors of cash to Enron,
respectively contributing $347,410,000 and $55,020,000,
out of $435,010,000 in total revenue generated by the
Debtors; and
3) Prior to the institution of the ENA cash protections, ENA
and EESI were de facto DIP lenders for the rest of the
Debtors, and even for non-Debtors. The fact that the
Debtors still have not drawn on the DIP facility indicates
that EESI continues to function as a lender for the Enron
group. (Enron Bankruptcy News, Issue No. 24; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
EXIDE TECHNOLOGIES: Gets Court Nod to Pay Critical Vendor Claims
----------------------------------------------------------------
Exide Technologies and its debtor-affiliates asked for and
obtained the Court's approval to pay claims of their
unaffiliated Essential Trade Creditors, including:
* lead suppliers -- lead is an integral part of battery
manufacturing and the number of U.S. suppliers is small;
* parts suppliers -- including chemicals, separators,
copper, plastic, expanders and resin;
* suppliers of parts used on products purchased by the
United States Government where a change in part or
supplier required government certification;
* suppliers of manufacturing tools -- especially pasting
belt and bushings;
* uniform suppliers and handlers -- special protective
uniforms are required for compliance with Occupational
Safety and Health Administration regulations and uniform
cleaning services must be qualified to handle lead and
waste water disposal;
* wholesale vendors from which Exide buys finished
batteries and chargers to round-out its product line;
* packaging companies who supply special materials
necessary for shipping batteries; and
* third-party sales agents, many of which also provide
warranty and repair services.
* * * *
As previously reported, the Debtors describe three hallmarks of
Essential Trade Creditors:
* sole source suppliers without whom the Debtors could not
operate;
* irreplaceable within a reasonable time on terms as
beneficial as those already in place;
* if the relationship terminated, Exide's revenues or
profits would suffer.
The Debtors argued that if they can benefit from maintaining
lower costs of goods purchased postpetition, it is prudent to
pay an Essential Trade Creditor some or all of its prepetition
claim.
The Debtors asked and got Judge Akard's permission for broad
discretion to decide which creditors are Essential and which
ones aren't, when to make these payments, and how much to pay,
subject to two conditions:
* a $30,000,000 cap on all Essential Creditor Payments; and
* The Debtors will not pay any Essential Trade Creditor's
prepetition claim unless the recipient agrees to
"continue to sell their goods at the same reduced prices
and on at least as favorable terms on a going forward
basis as were in effect" prior to the Petition Date --
and agrees to that in writing.
The Debtors have no intention of divulging the identities of the
Essential Trade Creditors at this time (or perhaps ever),
because, Mr. Kleiman says, that "would likely cause such vendors
to demand payment in full." (Exide Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXIDE TECHNOLOGIES: Suing Former Executives to Recoup Legal Fees
----------------------------------------------------------------
Exide Technologies (OTCBB: EXDT) Wednesday filed suit to recover
legal fees paid to the two most senior members of its former
management team:
* Arthur M. Hawkins, former Chairman, President and Chief
Executive Officer, and
* Douglas N. Pearson, former Executive Vice President and
President - North American Operations.
Messrs. Hawkins and Pearson were forced to resign from Exide in
October 1998.
The complaint, filed in the United States Bankruptcy Court for
the District of Delaware, seeks to recover approximately $1.1
million in legal and defense fees paid by Exide to Hawkins and
Pearson. Exide filed a voluntary chapter 11 petition on April
15, 2002. The complaint alleges that Hawkins and Pearson
received payments, which allowed them to recover more than
similarly situated creditors in the bankruptcy case, and seeks
to compel immediate disgorgement of the preferential transfers.
The court has scheduled a trial for the lawsuit in August 2002.
Since the resignations of these former officers in 1998, Exide
has been the subject of several investigations and lawsuits, all
based upon the conduct of these former officers. These included
investigations by the United States Attorney for the Southern
District of Illinois, by the U.S. Securities and Exchange
Commission and by three state attorneys general, as well as more
than a dozen lawsuits filed on behalf of numerous private
parties. The government investigations have all been resolved
either by settlements or by decisions not to proceed by those
agencies. The private party claims were resolved by a "global"
settlement in May 1999, and affirmed by the court in February
2000. Altogether, these exposures have cost Exide more than $50
million.
The culmination of these proceedings was the indictment of
Hawkins, Pearson and their colleague, Alan E. Gauthier, on March
22, 2001. A superseding indictment was issued in July 2001. The
indictments charge these former officers with several offenses,
including wire fraud. The criminal trial of Messrs. Hawkins and
Pearson is currently proceeding before the Honorable David
Herndon in the United States District Court for the Southern
District of Illinois. Mr. Gauthier has agreed to plead guilty to
certain of the charged offenses and is no longer participating
in the trial. Exide is cooperating fully with the Government's
prosecution.
Exide has also filed suit against these former officers, seeking
to recover amounts it has paid defending and resolving claims
related to the conduct of its former management. These cases
have been stayed, pending resolution of the criminal case.
Exide Technologies is the world's largest industrial and
transportation battery producer and recycler, with operations in
89 countries. Industrial applications include network-power
batteries for telecommunications systems, fuel-cell load
leveling, electric utilities, railroads, photovoltaic (solar-
power related) and uninterruptible power supply (UPS) markets;
and motive-power batteries for a broad range of equipment uses,
including lift trucks, mining vehicles and commercial vehicles.
Transportation uses include automotive, heavy-duty truck,
agricultural, marine and other batteries, as well as new
technologies being developed for hybrid vehicles and new 42-volt
automotive applications. The Company supplies both aftermarket
and original-equipment transportation customers. Further
information about Exide Technologies, its financial results and
other information can be found at http://www.exide.com
FAIRFIELD MFG: Liquidity is Strained Due to Decline in Sales
------------------------------------------------------------
Fairfield Manufacturing Company Inc. falls under the general
industrial classification of Industrial & Commercial Fans &
Blowers & Air Purifying Equipment.
On or about February 26, 2002, Peter Joseph, a director and Vice
President of Fairfield Manufacturing Company Inc., commenced a
lawsuit against the Company, the Company's sole shareholder,
Lancer, and Paul Levy (also a director, Chairman of the Board
and Vice President of the Company) in the Delaware Chancery
court, challenging certain corporate actions by Lancer and the
Company. Both Messrs. Levy and Joseph are also directors,
officers and shareholders of Lancer. The Company does not
expect that the lawsuit will have a material adverse effect on
the Company.
On or about March 8, 2002, Kaydon Corporation commenced a
lawsuit against the Company and several of the Company's
employees who were formerly employed by Kaydon. Kaydon alleges
that the Company and certain of its employees have appropriated
Kaydon trade secrets, induced Kaydon employees to leave their
employment at Kaydon, and are now competing with Kaydon
unfairly. On March 14, 2002, the Ann Arbor court rejected
Kaydon's motion for an injunction against the Company. The
court ruled that Kaydon had not established any of the
requirements for an injunction, and that Kaydon had failed to
establish it was likely to succeed on the merits of its
allegations. The Company believes that the lawsuit is without
merit and does not expect it to have a material adverse effect
on the Company.
The Company's net sales and profits have been adversely affected
by the general slowdown in the economy and the recent recession,
as well as a result of pricing pressure from foreign
competitors, principally due to the strong U.S. dollar. This
decrease in sales and profits has strained the Company's
liquidity and capital resources, and the present market
conditions are expected to continue for the foreseeable future.
Net sales for the three months ended March 31, 2002 were $35.0
million, a decrease of $4.8 million, or 12.1%, from the same
period in 2001. The decrease in sales for the three months
ended March 31, 2002 compared to the same period in 2001 was
primarily driven by a substantial decline in the access platform
market. Although the on-highway market continues to remain
depressed, the Company has new programs in this market resulting
in higher on-highway sales during the current quarter versus the
same quarter in 2001. The Company experienced a slight recovery
in the industrial and agriculture markets through the first
quarter of 2002. Rail and mining markets for 2002 are flat with
2001. The Company believes that the downturn in several of its
core markets is a direct result of the slowdown in the U.S.
economy, tight lending and capital policies, and pricing
pressure from foreign competition, principally due to the strong
U.S. dollar. In addition, while the Company continues to
execute its expansion plans at Fairfield Atlas Limited to gain
access to new markets and to develop a low cost manufacturing
and procurement base for certain products, those operations are
growing slower than anticipated and recent world and regional
events will likely delay and/or further disrupt the expansion
plans. Continuation of the FAL expansion plans requires further
capital resources.
Cost of sales for the three months ended March 31, 2002
decreased by $1.4 million to $32.6 million compared to $34.0
million for the same period in 2001. Cost of sales as a
percentage of net sales increased 7.8% to 93.3% on account of
production inefficiencies due to lower sales volume, unfavorable
product mix and continued pricing pressure.
Selling, general and administrative expenses were $3.3 million,
or 9.6% of net sales, for the three months ended March 31, 2002,
compared to $3.8 million, or 9.5% of net sales for the same
period in 2001. The decrease in SG&A expenses reflects the fact
that goodwill is no longer amortized under FAS 142. Goodwill
amortization for the three months ended March 31, 2001 was $0.4
million.
Loss from operations for the three months ended March 31, 2002
decreased to $1.0 million, or 2.9% of net sales, compared to
operating income of $2.0 million, or 5.1% of net sales, for the
comparable 2001 period. The reduction in earnings is directly
attributed to the lower sales volume, production inefficiencies
and pricing pressure.
The Company has the ability to obtain short-term borrowings
under its credit agreement to meet liquidity requirements.
Availability under the Company's revolver has not materially
changed since December 31, 2001. Net cash used by operations
for the three months ended March 31, 2002 was $(1.4) million, an
increase in cash flows from operations of $1.2 million compared
with the same period in 2001 when net cash used by operations
was $(2.6) million. Net cash used by operations in 2002
benefited by increases in accounts payable and accrued
liabilities during the first quarter of 2002 compared to the
same quarter of 2001. Working capital less cash at March 31,
2002 increased to $14.8 million from $14.1 million at December
31, 2001 reflecting slower inventory turns and a higher
investment in accounts receivable relative to sales, partially
offset by an increase in accounts payable and accrued
liabilities.
Capital expenditures for manufacturing equipment, machine tools,
and building improvements totaled $1.2 million and $1.4 million
during the three months of 2002 and 2001, respectively,
exclusive of $2.5 million and $0.8 million in 2002 and 2001,
respectively, which was funded by accounts payable. Capital
expenditures for 2002 have been primarily related to the
expansion of Fairfield Atlas Limited whereas expenditures in
2001 were primarily for replacement equipment. The FAL
expansion is not yet complete and will require further capital
expenditures. It is anticipated that the expansion will be
completed by the end of 2002.
Net cash provided by financing activities was $0.9 million
during the first quarter of 2002 compared to net cash provided
of $1.3 million during the first quarter of 2001. The Company
elected to pay the March 15, 2002 Exchangeable Preferred Stock
dividend in kind and, in connection therewith, issued 3,137.8
shares of Exchangeable Preferred Stock to the holders of record
as of March 1, 2002. The additional proceeds from issuance of
long-term debt relates to additional term loans used to finance
the Fairfield Atlas Limited expansion and operations.
With more than 1,300 employees, Fairfield is one of the world's
largest independent designer and manufacturer of gears, custom
gear sets and power transmission assemblies. It is the leader in
planetary gear hydrostatic power drives: Torque-Hub. On
September 30, 2001, the company reported a total shareholders'
equity deficiency of about $47 million.
FALCON PRODUCTS: Moody's Junks Rating on $100MM Senior Notes
------------------------------------------------------------
Moody's Investors Service lowered its ratings on Falcon
Products, Inc. Outlook for the said ratings is negative.
Rating Action To From
* $30 Million Senior Secured Revolving
Term Facility due 2005 B3 B1
* $44 Million Senior Secured Amortizing
Term Facility due 2005 B3 B1
* $100 Million 11 3/8% Senior
Subordinated Notes due 2009 Caa2 B3
* Senior Implied Rating B3 B1
* Senior Unsecured Issuer Rating Caa1 B2
The ratings downgrade reflect the company's weak sales, its
liquidity constraints and the various restructuring charges it
is experiencing. Falcon recently failed to meet covenant
requirements and has needed to approach its bank group for
modification of its covenants.
The negative outlook reflects the indeterminate nature of
Falcon's finances and its currently reduced revolver
availability. Further deterioration of its operating performance
would mean further ratings downgrade. Conversely, a sustained
improvement of operations cash flow and enhanced liquidity could
mean more positive ratings.
Falcon is a leading supplier of furniture and related products
for various segments in the commercial furniture market. Its
headquarters is in St. Louis, Missouri.
FINE AIR SERVICES: Judge Cristol Confirms Reorganization Plan
-------------------------------------------------------------
The U. S. Bankruptcy Court has confirmed the Plan of
reorganization of Fine Air and its related companies including
Arrow Air setting the stage for the emergence from bankruptcy of
the fourth largest cargo airline in the United States. Fine Air
has been operating since September 2000 in Chapter 11 and the
approval by Judge Cristol was the final step setting the stage
for the emergence of the company from the protection of the
Bankruptcy Court.
Coincidentally with the confirmation of the Plan of
Reorganization, Mr. Richard Haberly was named President and CEO
of the Company effective immediately. "Dick Haberly brings over
40 years of entrepreneurial experience in successfully building
air cargo operations and we look forward to supporting his
efforts and sharing with him his success in this new venture,"
stated Dort Cameron III, President of Arrow Air Holdings Corp.,
the successor owner of the acquired assets of Fine Air.
Immediately prior to accepting this position, Mr. Haberly was
President of Florida West Airlines that he had brought out of
bankruptcy in 1995 and turned into one of the premier Latin
American cargo airlines. His new tenure at Fine Air/Arrow Air is
a homecoming as he was the President of Arrow Air from 1987 to
1995 prior to Arrow's acquisition by Frank and Barry Fine. Mr.
Haberly is a very well-known icon in the air cargo business
whose prior experience includes a long term assignment as a
senior executive of Flying Tigers.
The efforts to acquire Fine Air began in early March when Thomas
M. Donegan, President of Aviation Finance International LLC,
initiated the successful process to arrange for a plan sponsor,
acquire the necessary equity and debt exit financing and
assemble a world class management team to allow a competing plan
to be submitted to the court in a bid for the Company. Mr.
Donegan has personally provided interim executive management and
oversight to the Company following the acceptance by the Court
of the Plan of Reorganization pending its confirmation. "Today's
action by the court is vindication of the work we have put into
this effort. It also marks a beginning for what we believe will
be the future success of a great company. I intend to remain
active in the future development of Arrow Air and have believed
from the beginning of this process Arrow Air can rise to the
heights it previously enjoyed if the balance sheet could be
restructured. I look forward to having Dick assume the role of
President and feel very fortunate we were able to arrange for
him to join the company," stated Mr. Donegan.
Aviation Finance International LLC provides financial
transactional services to the world's airlines, aviation
vendors, OEM companies, financial institutions and investors.
FLAG TELECOM: Alcatel Wants Prompt Decision on Contract
-------------------------------------------------------
Alcatel Submarine Networks moves the Court to compel FLAG
Telecom Holdings Limited and its debtor-affiliates to assume or
reject a December 28, 2000 contract between Alcatel and FLAG
Asia Ltd. on or before May 30, 2002. Alcatel also wants FLAG to
pay amounts due under the contract.
The grounds for the Motion are:
(1) Alcatel has not received any post-petition payments from
the Debtors including FLAG Asia pursuant to the
Contract,
(2) the Debtors are requiring Alcatel to perform under the
contract, which has been in suspension since March 29,
2002,
(3) the Debtors have no demonstrative ability to perform
their obligations under the contract,
(4) the Debtors' estates are receiving substantial post-
petition benefits from Alcatel's performance under the
contract which has in fact been in suspension since
March 29, 2002, and
(5) Alcatel's negotiations to address and resolve the
Debtors' contract issues, including those for FLAG Asia,
have not resulted in a satisfactory method of addressing
the issues so that relief from the Court is now
warranted.
French telecom-equipment giant Alcatel and Debtor Flag Asia Ltd.
are jointly building an integrated optical fiber cable system
that links Japan, Hong Kong and South Korea. Alcatel acts as
Supplier in that contract, FLAG Asia as Purchaser. The project
was to be carried out in three phases. The system links Japan
and Korea under Phase 1 and Korea and Hong Kong under Phase 2.
Work up to the second phase will form the FLAG West Asia Cable
System, or FWACS. Under Phase 3, FWACS will be linked with a
separate fiber optic cable system known as North Asia Cable
System to create a single integrated system to be called FLAG
North Asia Loop.
FWACS is targeted to be ready and operational on or before May
31, 2002, in time for the World Cup Soccer tournament for which
Japan and Korea have between them poured roughly $7,500,000,000
into infrastructure alone.
Phase 1 was scheduled for provisional acceptance by March 30,
2002; Phase 2 by May 30, 2002; and Phase 3, by June 30, 2002.
Steven E. Obus, Esq., at Proskauer Rose LLP, says none of the
work phases are complete, though all are nearing completion.
The contract was made in England and is subject to English law.
Article 36 provides that all disputes concerning the Contract
are to be resolved by arbitration before the International
Chamber of Commerce in London.
Amounts Due
The total outstanding amount due to Alcatel under the contract
is approximately $90 million, of which $27,156,855 is past due
including a post-petition payment obligation of $18,750,855. On
April 10, 2002, Alcatel issued an invoice for $24,427,439 for
which payment will become due on May 25, 2002. There are
subsequent additional payments that will come due under the
contract post-petition, in excess of $37,000,000, including a
payment of at least $24,000,000, which will become due upon
provisional acceptance pursuant to Article 22 of the contract.
Under the contract, FLAG Asia is to pay a total of approximately
$284,000,000, of which $202,000,000 has been paid.
For Phase 1, out of approximately $21,000,000 that remains
outstanding, approximately $7,700,000 was billed pre-petition,
and approximately $13,300,000 has yet to be billed.
Mr. Obus says the Debtors' budget submitted to the Court on
April 23, 2002 has made no provision for payment of amounts
payable to Alcatel under the contract, whether they arise pre-
petition or post-petition. In addition, there was no plan
submitted to address how, if at all, FLAG Asia intends to pay
for Alcatel's work.
Because of FLAG Asia's failure to make payments on past due
invoices, Alcatel has suspended work under the contract.
Right to Suspend Work
On March 29, 2002, 21 days before FLAG Asia filed its Chapter 11
petition, Alcatel exercised its contractual right to suspend
work. Mr. Obus says that Alcatel issued a Suspension Notice in
accordance with Article 15.2 of the contract, which states in
part:
In the event that the Purchaser is unable to make any
payment due under this Agreement to the Supplier, then the
Supplier is entitled to give the Purchaser notice to
effect the payment no later than 30 days after the notice.
If the payment is not made together with interest of three
points over LIBOR, the Supplier may suspend all or part of
the Work and the suspension will be deemed to be suspension
under Article 15.1.
The March 29 suspension notice states that Alcatel is suspending
working "effective immediately." Mr. Obus says this suspension
will remain in force until all amounts currently due to Alcatel
under the Contract have been paid in full."
Mr. Obus makes clear that at the time that FLAG Asia filed its
bankruptcy petition on April 23, 2002, Alcatel had already
suspended work under the contract for 25 days. Alcatel did,
however, perform some work on the system after March 29. This
work included cable repairs to protect the Phase 1 cable;
completion of the Phase 2 cable installation; post-burial
inspection and layout of both the Phase 1 and 2 cables; testing
of the cables to ensure the cables had not been damaged; and
limited integration tests. Mr. Obus says that work was
consistent with the March 29 suspension pursuant to Article
15.2, which authorized Alcatel to suspend "all or part of the
Work."
By April 23, Mr. Obus says, Alcatel had completed the work
necessary to safeguard the system and took steps to put the
system in a standby mode to minimize costs and prevent any
unauthorized access to or use of the system.
After suspending work, Alcatel disengaged a number of
"repeaters" and changed the passwords to its computer work
management system to prevent unauthorized access to or use of
the system. These actions drew criticism from the Debtors'
counsel, Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP,
as amounting to "vandalism." Mr. Obus says Alcatel was simply
taking measures to secure the system during the suspension
period.
Mr. Obus says Alcatel has every right and interest in taking
such protective measures because, under the Contract, Alcatel,
not FLAG Asia, has title to the system. Under the contract,
title may not pass to FLAG Asia until payments are made, work is
completed and the certificate of provisional acceptance is
issued.
Request for Adequate Protection
Alcatel wants adequate protection from the Debtors and some
conditions to be applied in case the Court permits the Debtors
to continue using the system:
(a) the Debtors' use of the system should be strictly
limited to testing by its customers and suppliers unless
and until the Debtors pay Alcatel all amounts due with
respect to any Phase of the system that the Debtors plan
to use for commercial purposes, and unless and until the
Debtors issue a valid certificate of acceptance for that
Phase pursuant to the Contract;
(b) The provisional acceptance purportedly issued by the
Debtors on May 2, 2002 should be declared null until
the Debtors have decided to assume the contract and have
cured the suspension, cured the payment defaults and
complied with the prerequisites to provisional
acceptance;
(c) The Debtors should be prohibited from taking any further
action to force a transfer of title to the system, or
any Phase of the system, from Alcatel. Specifically,
the Debtors should be restrained from issuing any
further certificate of provisional acceptance until the
Debtors have assumed the Contract and have complied with
The prerequisites to provisional acceptance;
(d) The Debtors should assume any and all risks associated
with the system's use by the Debtors, their customers
and suppliers. They should reimburse Alcatel for
insurance coverage during the interim period, and should
otherwise hold Alcatel harmless from any potential
claims resulting or arising out of the use of the system
by the Debtors, their customers or suppliers;
(e) The Debtors should be prohibited from interfering in any
way with Alcatel's access to or use of the system,
including any Phase of the system or any equipment
associated with the system;
(f) The Debtors should be ordered to pay any and all post-
petition amounts due under the contract from and since
April 23, 2002, including the $24,000,000 that will be
due upon provisional acceptance. (Flag Telecom
Bankruptcy News, Issue No. 6; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
FLORSHEIM GROUP: Court Approves $45 Million Sale to Weyco Group
---------------------------------------------------------------
Weyco Group, Inc. (Nasdaq: WEYS) announced that the U.S.
Bankruptcy Court has approved the sale of Florsheim Group,
Inc.'s (OTC Bulletin Board: FLSCQ.OB) domestic wholesale
business, related assets and 23 retail stores for approximately
$45 million. The transition is expected to close in the upcoming
weeks.
Florsheim's product will be added to Weyco's stable brands which
include Nunn Bush, Brass Boot and Stacy Adams.
GLIATECH INC: Files for Chapter 11 Protection in N.D. Ohio
----------------------------------------------------------
Gliatech Inc. (OTC Bulletin Board: GLIA.OB) has filed a
voluntary petition for protection under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Northern
District of Ohio in order to manage its financial restructuring
options, including the orderly auction and sale of
assets to meet its obligations to its creditors.
Pharmaceutical Programs:
Gliatech has entered into an agreement with a strategic partner
on the sale of its assets related to its Histamine H3 and H4
small molecule drug candidates and its glycine transporter
programs for a purchase price of $5 million. Such agreement is
subject to Bankruptcy Court approval and an auction process
under which other interested parties may bid on these assets.
The proposed purchase does not include the Company's complement
inhibitor antibody program.
ADCON(R) Product Family:
Gliatech has had discussions with several strategic buyers
regarding a sale of all or parts of the ADCON(R) 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.
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.
GLIATECH INC: Voluntary Chapter 11 Case Summary
-----------------------------------------------
Lead Debtor: Gliatech Inc.
24320 Commerce Park Road
Beachwood, Ohio 44122
Bankruptcy Case No.: 02-15045
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Gliatech Medical Inc. 02-15046
GIC Inc. 02-15047
Chapter 11 Petition Date: May 9, 2002
Court: Northern District of Ohio (Cleveland)
Judge: Pat E. Morgenstern-Clarren
Debtors' Counsel: Shawn M Riley, Esq.
McDonald, Hopkins, Burke & Haber Co LPA
600 Superior Avenue, E, #2100
Cleveland, Ohio 44114
Phone: (216) 348-5400
Total Assets: $9,099,000 (at December 31, 2001)
Total Debts: $16,312,000 (at December 31, 2001)
GLOBAL CROSSING: Bringing-In Jaffe Raitt as Special Counsel
-----------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates, seek
authorization, pursuant to Section 327(e) of the Bankruptcy
Code, to retain and employ Jaffe Raitt Heuer & Weiss,
Professional Corporation as special counsel, commencing May 1,
2002, with respect to:
A. certain limited matters involving commercial litigation
related to the Debtors' large commercial and reseller
customers,
B. enforcement of certain of the Debtors' contracts and tariffs,
C. representation of the Debtors as parties in interest in other
bankruptcy cases and insolvency matters involving the
Debtors' customers, and
D. certain limited corporate work related to the Debtors'
investment in American Communications Network, Inc.
According to Mitchell C. Sussis, Corporate Secretary of the
Debtors, since Debtors acquired Frontier Corp. and its various
subsidiaries in 1999, Jaffe Raitt has performed legal services
for certain of the Debtors and non-debtor affiliates handling
the types of matters mentioned above. Jaffe Raitt was listed as
ordinary course counsel in the Order dated January 28, 2002.
However, many of the matters being handled by Jaffe Raitt
require ongoing legal services that are expected to greatly
exceed the scope of services provided by "ordinary course"
counsel. Thus the Debtors seek to retain Jaffe Raitt pursuant to
Section 327(e).
The Debtors submit that Jaffe Raitt is well qualified and
uniquely able to provide the advice sought by the Debtors on a
going forward basis. Given Jaffe Raitt's pre-petition
representation of the Debtors, Mr. Sussis contends that the firm
is intimately familiar with the legal issues that have arisen
and are likely to arise. The Debtors believe that both the
interruption and the duplicative cost involved in obtaining
substitute counsel to replace Jaffe Raitt's unique role at this
juncture would be extremely harmful to the Debtors and their
estates and creditors. Were the Debtors required to retain
counsel other than Jaffe Raitt in connection with the specific
and limited matters upon which Jaffe Raitt's advice is sought,
the Debtors, their estates and all parties in interest would be
unduly prejudiced by the time and expense necessary to replicate
Jaffe Raitt's ready familiarity with the intricacies of the
ongoing legal matters and the Debtors' business operations,
corporate and capital structure, and strategic prospects. The
Debtors believe Jaffe Raitt will be an efficient provider of
legal services.
The Debtors propose that Jaffe Raitt be employed to provide
representation in relation to:
A. general litigation matters concerning the Debtors' large
commercial and reseller customers in accordance with the
practices and procedures existing prior to the Debtors'
bankruptcy;
B. insolvency matters and bankruptcy cases involving the
Debtors' customers, and
C. the Debtors' investment in American Communications Network,
Inc., located in Michigan.
Eric Linden, a shareholder of Jaffe Raitt Heuer & Weiss,
Professional Corporation, assures the Court that the members and
associates of Jaffe Raitt do not have any connection with or any
interest adverse to the Debtors, their creditors, or any other
party in interest, or their respective attorneys and
accountants, with respect to the matters on which Jaffe Raitt
will be retained. However, Jaffe Raitt may have performed
services in the past and may perform services in the future, in
matters unrelated to these Chapter 11 cases, for persons that
are parties in interest in the Debtors' Chapter 11 case
including:
A. Strategic Partners: Cisco Systems, EMC Corporation, Nortel
Networks, Lucent Technologies, and Swift;
B. Secured Creditors: Allstate Insurance, Bank of America, Bank
Of Hawaii, Bank of Montreal, Bank of Novascotia, Bank of
Tokyo-Mitsubishi, Bank One, Bank United, Black Diamond
Capital Management LLC, CIBC Oppenheimer, Citibank, Credit
Lyonnais, First Union, Fleet BankBoston, General Electric
Capital Corporation, Goldman, Sachs & Co., ING Capital
Advisors, JP Morgan Chase, Key Bank, Merrill Lynch, Morgan
Stanley Dean Whitter, Royal Bank of Canada, Textron Financial
Corp., Toronto Dominion, Travelers Company, and UBS Warburg;
C. Other Creditors: Chase Manhattan Bank, Washington Mutual,
and Westdeutsche Landesbank;
D. Vendors: Palmer, Siemens, and Telia;
E. Indenture Trustees: United States Trust Co. of New York, and
Manufacturers Hanover Trust Co.;
F. Underwriters: CIBC, Inc., Canadian Imperial Bank of Commerce,
Goldman, Sachs Credit Partners, LP, Citicorp. USA, Inc., and
Merrill Lynch Capital Corp.;
G. Significant Stockholder: Microsoft Corp.
Subject to Court approval under Section 330(a) of the Bankruptcy
Code, compensation will be payable to Jaffe Raitt on an hourly
basis, plus reimbursement of actual, necessary expenses and
other charges incurred by Jaffe Raitt. The hourly rates charged
by Jaffe Raitt's attorneys that are currently expected to work
on this matter are:
Partners $175.00 to $425.00
Associates $120.00 to $185.00
Legal Assistants $ 75.00 to $120.00
Mr. Linden relates that Jaffe Raitt is owed $176,472.08 by the
Debtors as compensation for professional services performed on
behalf of the Debtors prior to the commencement of the Chapter
11 cases. Jaffe Raitt is also acting as escrow agent and, in
that capacity, holds $100,000 of Debtors' pre-petition funds.
The Debtors have been advised that at a future date, Jaffe Raitt
may seek Court authority, by separate motion, to apply these
funds to pre-petition invoices for services performed by Jaffe
Raitt for the Debtors. (Global Crossing Bankruptcy News, Issue
No. 9; Bankruptcy Creditors' Service, Inc., 609/392-0900)
GOLDMAN INDUSTRIAL: Seeking Authority to Employ Walsh Monzack
-------------------------------------------------------------
The Official Committee of Unsecured Creditors appointed in the
chapter 11 case involving Goldman Industrial Group, Inc. asks
the U.S. Bankruptcy Court for the District of Delaware for
permission to retain Walsh, Monzack and Monaco, PA, nunc pro
tunc to April 3, 2002, as its counsel.
The Committee selected Walsh Monzack because of its attorneys'
experience and knowledge and because of the absence of any
conflict in interest.
Walsh Monzack will:
a) generally attend hearings pertaining to the cases, as
necessary;
b) periodically review applications and motions filed in
connection with the cases;
c) communicate with Miller Canfield, the Committee's lead
counsel, as necessary;
d) communicate with and advise the Committee and
periodically attend meetings of the Committee, as
necessary;
e) provide expertise on the substantive law of the State of
Delaware procedural rules and regulations applicable to
these cases; and
f) perform all other services for the Committee that are
necessary for the co-counsel to perform in these cases.
Walsh Monzack will bill for services at its customary hourly
rates:
a) Francis A. Monaco, Jr. $350 per hour
b) Joseph J. Bodnar $270 per hour
c) Kevin J. Mangan $240 per hour
d) Heidi Sasso $110 per hour
e) S. Lee Sobiocinski $110 per hour
Goldman Industrial Group, Inc., with its affiliates, provides
metalworking machinery to manufacturers; marketing and selling
original equipment primarily to the aerospace, automotive,
computer, defense, medical, farm, construction, energy,
transportation and appliance industries. The Company filed for
chapter 11 protection on February 14, 2002. Victoria W.
Counihan, Esq., at Greenberg Traurig, LLP represents the Debtors
in their restructuring efforts.
GRANT GEOPHYSICAL: S&P Further Junks Corporate Credit Rating
------------------------------------------------------------
On May 9, Standard & Poor's lowered its corporate credit and
senior unsecured debt ratings on Houston, Texas-based Grant
Geophysical Inc. to 'CC' from 'CCC+'. At the same time, Standard
& Poor's placed its ratings on the company on CreditWatch with
developing implications.
The rating action follows the company's announcement that it is
currently in default of certain nonfinancial covenants in its
credit facility, with Foothill Capital Corporation and Elliott
Associates L.P. While Foothill has not taken any steps to
accelerate the maturity amounts outstanding under the facility,
it could do so at any time. In addition, if Foothill were to
accelerate amounts due under the facility, the trustee under the
indenture for the company's 9 ¾ senior notes due 2008 could take
the steps necessary to cause that debt to become immediately due
and payable. If the company's maturity on any of Grant's debt
were accelerated, it is unlikely that the company would be able
to continue its operations without seeking protection from its
creditors under the federal bankruptcy code. Should Grant
receive relief from its creditors for these covenant violations
and receive an injection of new capital, which is possible,
although not likely, Standard & Poor's will re-evaluate its
ratings and outlook on the company at that time.
Ratings List: To: From:
Grant Geophysical Inc.
* Corporate credit rating CC CCC+
* Senior unsecured debt CC CCC+
HERCULES: Completes Sale of Water Treatment Business for $1.8BB
---------------------------------------------------------------
On April 29, 2002, Hercules Incorporated announced the
completion of the sale of the Water Treatment Business,
consisting of the BetzDearborn Division and certain Pulp and
Paper Division treatment businesses, to GE Specialty Materials,
a unit of General Electric Company.
The sale price was $1.8 billion in cash, resulting in net after
tax proceeds of approximately $1.665 billion. As previously
announced, the Company used the net proceeds to prepay debt
under its senior credit facility and ESOP credit facility. The
following provisions of the March 6, 2002 amendments to the
senior credit facility and the ESOP credit facility became
effective upon the consummation of the sale of the Water
Treatment Business and the prepayment of debt under those credit
facilities:
i. the release of the subsidiary stock
pledged to the collateral agent;
ii. the elimination of the requirement
that stock of any additional
subsidiaries be pledged in the
future; and
iii. increases in the permitted amounts of
asset purchases and dispositions.
Proceeds from the divestiture will also serve as collateral for
outstanding letters of credit.
IMC GLOBAL: Fitch Affirms B-Rated Sr. Secured & Unsecured Debts
---------------------------------------------------------------
Fitch Ratings has affirmed IMC Global's bank debt rating and
senior unsecured debt ratings. IMC Global's senior secured
credit facility is rated 'BB+', IMC Global's senior unsecured
notes with subsidiary guarantees are rated 'BB', and IMC
Global's senior unsecured notes without subsidiary guarantees
are rated 'B+'. Concurrently, Fitch has affirmed the Phosphate
Resource Partners senior notes rating of 'BB+'. The Rating
Outlook is Stable for both IMC Global and Phosphate Resource
Partners.
IMC Global's liquidity position has been substantially improved
as a result of the sale of the salt business and certain
chemical assets for $640 million ($600 million in cash and $40
million in equity). The 2002 bond maturity of $300 million has
been repaid and $180 million is in escrow to meet a 2003 bond
maturity of $200 million. Looking forward, $450 million in debt
matures in 2005, although the senior secured credit facility
agreement matures early if the maturing 2005 debt is not
refinanced by October of 2004. Based on the improving outlook
for phosphate fertilizer margins and continued strength in
potash fertilizer margins Fitch's Rating Outlook is Stable.
Phosphate fertilizer market conditions deteriorated in 2001 as
China scaled back on diammonium phosphate fertilizer (DAP)
imports. As a result of bottom of the cycle pricing for DAP and
the sale of the EBITDA generating salt business in 2001, IMC
Global's 2001 credit statistics weakened from already low
levels. Financial covenants under the senior secured credit
facility agreement were amended and relaxed in December of 2001.
DAP prices have since improved as a result of stronger Chinese
imports of DAP. IMC Global's credit protection measures and free
cash flow should be significantly better in 2002 than they were
in 2001. Improvement in financial ratios should allow the
company to enjoy continued access to liquidity via the revolver.
In May 2002 revolver availability was $168 million (based on
$210 million revolver reduced by approximately $42 million in
outstanding letters of credit).
Credit protection measures, particularly EBITDA-to-interest
coverage and debt-to-EBITDA, are expected to improve through
2002 and 2003 as EBITDA increases with higher margins. Free cash
flow for debt reduction should turn positive, although stronger
EBITDA will to some extent be offset by higher capital
expenditures in 2002 and 2003 and by investments in working
capital required to support higher sales levels. As a result,
debt levels will probably not be significantly reduced by 2003.
IMC Global is the largest global supplier of phosphate and
potash fertilizers and benefits from mining and fertilizer
production facilities that are among the lowest cost in the
world. Potash ore deposits are concentrated globally, which has
limited the number of producers and resulted in consistent
profits and cash flow generation. IMC Global generated roughly
$800 million in potash sales in 2001, or about 40% of total 2001
sales. The phosphate fertilizer industry is more volatile,
although IMC Global enjoys a leading market position and a low-
cost production position, which affords the company a degree of
flexibility during market downturns. IMC Global is also a
significant producer of potassium and phosphate feed
ingredients. Phosphate fertilizer and feed ingredients, which
make up the company's PhosFeed reporting segment, generated
roughly $1.2 billion in 2001 sales, or 60% of total 2001 sales.
IT GROUP: Employs Zolfo Cooper as Consultant & Financial Advisor
----------------------------------------------------------------
The IT Group, Inc., and its debtor-affiliates, gains the Court's
to employ and retain Zolfo Cooper LLC as bankruptcy consultant
and special financial advisor to the Debtors during these
chapter 11 cases.
* * * *
As previously reported in the February 18, 2002 issue of the
Troubled Company Reporter, Zolfor Cooper will specifically:
A. Advise and assist management in organizing the Debtors'
resources and activities so as to effectively and
efficiently plan, coordinate and manage the chapter 11
process and communicate with customers, lenders,
suppliers, employees, shareholders and other parties in
interest;
B. Assist management in designing and implementing programs to
manage or divest assets, improve operations, reduce costs
and restructure as necessary with the objective of
rehabilitating the business;
C. Advise the Debtors concerning interfacing with Official
Committees, other constituencies and their professionals,
including the preparation of financial and operating
information required by such parties and/or the
Bankruptcy Court;
D. Advise and assist management in the development of a Plan of
Reorganization and underlying Business Plan, including
the related assumptions and rationale, along with other
information to be included in the Disclosure Statement;
E. Advise and assist the Debtors in forecasting, planning,
controlling and other aspects of managing cash and, if
necessary, obtaining DIP and/or Exit financing;
F. Advise the Debtors with respect disputes and otherwise
managing process;
G. Advise and assist the Debtors in its Plan of Reorganization
With the for and other constituencies;
Zolfo's hourly billing rates for professionals who may be
assigned to this engagement, in effect as of January 1, 2002,
are:
Principals/Members $500 - $675
Professional Staff $225 - $495
Support Personnel $ 75 - $200
Zolfo Cooper has received a retainer from the Debtors in the
amount of $500,000, less application of any outstanding
prepetition fees and expenses. The balance is to be held subject
to further order by the Bankruptcy Court. (IT Group Bankruptcy
News, Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
KAISER ALUMINUM: Committee Signs-Up Akin Gump as Lead Counsel
-------------------------------------------------------------
The Official Committee of Unsecured Creditors asks and gets
permission to retain Akin, Gump, Strauss, Hauer & Feld, LLP as
its co-counsel in Chapter 11 cases of Kaiser Aluminum
Corporation and its debtor-affiliates, effective February 22,
2002.
Akin Gump will provide, among other things, the following
assistance:
A. advise the Committee with respect to its rights, duties and
powers in these Cases;
B. assist and advise the Committee in its consultations with the
Debtors relative to the administration of these Cases;
C. assist the Committee in analyzing the claims of the Debtors'
creditors and the Debtors' capital structure and in
negotiating with holders of claims and equity interests;
D. assist the Committee's investigation of the acts, conducts,
assets, liabilities and financial condition of the Debtors
and other parties involved with the Debtors, and of the
operation of the Debtors' businesses;
E. assist the Committee in its analysis of and negotiations with
the Debtors or any third party concerning matters related to,
among other things, the assumption or rejection of certain
leases of non-residential real property and executory
contracts, asset dispositions, financing of other
transactions and the terms of a plan of reorganization for
the Debtors;
F. assist and advise the Committee as to its communications to
the general creditor body regarding significant matters in
these Cases;
G. represent the Committee at all hearings and other
proceedings;
H. review and analyze all applications, orders, statements of
operations and schedules filed with the Court and advise the
Committee as to their propriety;
I. assist the Committee in preparing pleadings and applications
as may be necessary in furtherance of the Committee's
interests and objectives; and,
J. perform such other legal services as may be required and are
deemed to be in the interest of the Committee in accordance
with the Committee's powers and duties as set forth in the
Bankruptcy Code.
Subject to the Court's approval, Akin Gump charges for its legal
services on an hourly basis in accordance with its ordinary and
customary hourly rates. The current hourly rates charged by the
firm for professionals and paraprofessionals employed in its
offices are:
Billing Category Range
----------------------------- ---------
Partners $400-$700
Special Counsel and Counsel $285-$600
Associates $185-$430
Paraprofessionals $ 55-$165
The firm's professionals expected to have primary responsibility
for providing services to the Committee and their hourly rates
are:
Professionals Position Rate
------------------- ---------- ---------
Lisa G. Beckerman Partner $550/hr
H. Rey Stroube, III Partner $550/hr
Henry J. Kaim Partner $500/hr
Legal fees and related costs and expenses incurred by the
Committee on account of services by Akin Gump in these cases
will be paid as administrative expenses of the estates.
Lisa G. Beckerman, Partner of the law firm Akin, Gump, Strauss,
Hauer & Feld, LLP, indicates that the firm has rendered services
to the Debtors and potential parties in interests in matters
unrelated to these Chapter 11 proceedings, including:
A. Debtors and Nondebtor affiliates: Kaiser Aluminum;
B. Major Business Affiliations of the Debtors' Current Officers
and Affiliates: Flowserve Corp., Ocean Energy, Inc., Reliant
Energy Inc., Temple Inland, MAXXAM, Inc., New Jersey
Resources Corp.;
C. Majority Shareholders and their Affiliates and Professionals:
MAXXAM, Inc.;
D. Minority Shareholders Holding 5% or More of Voting
Securities: Capital Group Internat'l, Inc., and certain
affiliates and subsidiaries;
E. Debtors' Professionals: Arthur Andersen, Lazard Freres & Co.,
Jones Day, Kramer Levin, Resources Connections, Richards
Layton & Finger, Seyfarth Shaw;
F. Indenture Trustees and Other Significant Parties in the
Debtors Major Debt Issuances: JP Morgan Chase, Bank One
Trust, State Street Bank and Trust Company and certain
affiliates and subsidiaries;
G. Parties to Collective Bargaining Agreements: International
Brotherhood of Teamsters, Local 986, International Union of
Operating Engineers, Engineer Local 39;
H. Debtors' Material Lenders: The CIT Group and certain
affiliates and subsidiaries, Bank of America and certain
affiliates and subsidiaries;
I. Proposed Lenders and their Professionals: Bank of America,
Latham & Watkins and certain affiliates and subsidiaries;
J. Material Holders of the Debtors' Debenture and their
Professionals: Bank of Hawaii, Bakers Trust Company,
Citibank, NA, Credit Suisse Asset Management, Dexia BIL-BSTN
Internat'l, Farrallon Capital Management, Fidelity Advisors,
Illinois Annuity Insurance Co., Legg Mason High Yield Fund,
Merrill Lynch, Morgan Stanley, Oppenheimer, Prudential
Insurance, Smith Barney, SunAmerica, The Liberty Funds, Abbot
Lab Annuity Retirement Fund, Alliance Capital Management,
HSBC Bank, IBM Pension Fund, Offit Bank, RBC Dominion
Securities, State Street Global Advisors, Whitney Nat'l Bank;
K. Parties With Significant Contracts: The Boeing Companies,
Coral Energy Resources, Kinder Morgan, Cytec Industries,
Occidental Chemical Corp.;
L. Parties To Material Litigation With The Debtors: AXA
Corporate Solutions, Southwire Company, The Boeing Company,
Vought Aircraft Industries And Certain Affiliates And
Subsidiaries;
M. Other Parties In Interest: Enron Metals, North American
Energy, Reynolds Metals Corp.;
N. Debtors' Largest Unsecured Creditors And Material Trade
Creditors: Bank One Trust, Bryan Cave, Coral Energy
Resources LP, Foster Pepper & Shefelman, Kinder Morgan,
Thelen Reid & Priest, American Power Company, Morgan Lewis
& Bockius, State Street Bank And Trust Co.;
O. Proposed Committee Professionals: Houlihan Lokey Howard &
Zukin;
P. Members Of The Creditors' Committee: Bank One Trust, Merrill
Lynch, Pension Benefit Guaranty Corp., State Street Bank
And Trust. (Kaiser Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KASPER ASL: Gets Extension on Lease-Related Decision Deadline
-------------------------------------------------------------
Kasper ASL, Ltd. and its debtor-affiliates secured an extension
of their lease decision period -- the time within which to elect
whether to assume, assume and assign, or reject unexpired
nonresidential real property leases. The U.S. Bankruptcy Court
for the Southern District of New York gives the Debtors until
the earlier of:
a) September 30, 2002; and
b) the date on which an order is entered confirming a
chapter 11 plan or reorganization.
The Honorable Judge Allan L. Gropper grants this extension
without prejudice to the right of any lessors' right to file an
appropriate application for a hearing to consider a reduction of
time.
Kasper A.S.L., Ltd., one of the leading women's branded apparel
companies in the United States filed for chapter 11 protection
on February 5, 2002. Alan B. Miller, Esq., at Weil, Gotshal &
Manges, LLP represents the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $308,761,000 in assets and $255,157,000 in
debts.
KMART CORP: Secures Okay to Assume & Assign 13 Leases to Rubloff
----------------------------------------------------------------
In an agreed order, the Court authorizes Kmart Corporation, and
its debtor-affilates, to assume and assign the lease for store
number 1528 in Kentwood, Michigan to Rubloff Development Group
Inc. Judge Sonderby further directs Rubloff to satisfy these
requirements:
(a) the cure claim with respect to the Real Property Lease
shall be reconciled and paid by Rubloff; provided,
however, any disputes relating to the cure claim will be
resolved by the Court;
(b) Rubloff must pay any monetary obligations under the Lease
and the Lease Assignment and Assumption Agreement will be
deemed to include such obligation of Rubloff;
(c) Rubloff shall execute a contingent assignment of
subleases and rents and such other documents as have been
agreed to between 28th Street Kentwood Associates (the
Landlord) and Rubloff to satisfy the requirements of
Section 365(b)(3) of the Bankruptcy Code;
(d) Rubloff must provide to 28th Street Kentwood Associates
proof of adequate insurance in the amount of no less than
$5,000,000 on the Property naming 28th Street Kentwood
Associates as additional insured; and
(e) Rubloff must enter into an amendment of the Lease with
the Landlord, which amendment will provide that the
Property may only be used for lawful retail use,
Including restaurants. (Kmart Bankruptcy News, Issue No.
20; Bankruptcy Creditors' Service, Inc., 609/392-0900)
LTV CORP: Bethlehem Wants Performance on Partnership Obligation
---------------------------------------------------------------
Bethlehem Steel Corporation and its wholly-owned subsidiaries
Alliance Coatings Company and Ohio Steel Service Company LLC,
ask Judge Bodoh to (i) compel LTV Steel Company, Inc., The LTV
Corporation, and their wholly-owned subsidiaries Dearborn
Leasing Company and LTV-Columbus Processing, Inc. to perform in
connection with the Partnership Operating Agreements and
conditioning any sale of their interests in Columbus Coatings
Company and Columbus Processing Company upon the provision of
adequate protection of the interests of the Bethlehem partners.
The Bethlehem parties also ask that Judge Bodoh direct the
payment of CCC and CPC-related costs as administrative expenses.
The APP did not address the Debtors' obligations to CCC and CPC.
Since starting the APP, the Debtors have failed to pay, through
January 2002, at last $3,030,314 as their share of required
payments with respect to CCC and CPC. The Debtors have stated
clearly in several communications that they do not intend to pay
any of these amounts or to pay any future required payments.
The Debtors have also ceased making steel and thus have ceased
to use the CCC facility.
In light of these monetary defaults under the Partnership
Operating Agreements, Dearborn is deemed a "non-performing
partner" and a "derelict partner" and as such it and its
guarantor LTV Corp. are liable to CCC for these amounts, plus
interest at the Prime Rate plus 2%.
Under the Partnership Operating Agreements, Dearborn and LTV
Corp. are also obligated to Bethlehem for costs Bethlehem has
paid in an effort to preserve the Partnerships for the accounts
of the Debtors and the Bethlehem parties. Through January 2002,
these total $1,936,164.
Dearborn is a partner in CCC along with Alliance, and LTV Corp.
and Bethlehem are joint and several guarantors of CCC's
obligations under an approximately $110 million loan and
security agreement between CCC and Columbus Steel Facility, LLC.
LTV-CP is a partner in CPC, a joint venture operationally
related to CCC, along with Ohio Steel, another subsidiary of
Bethlehem.
In June 2001, Bethlehem entered into a second Forbearance
Agreement in connection with the loan which it had
collateralized by a $30 million letter of credit and a mortgage
on Bethlehem's corporate headquarters. An appraisal of the
headquarters building yielded a value of approximately $32
million. The Debtors contributed nothing to this
collateralization of the loan.
Should the CCC Lender draw on the $30 million letter of credit,
which it may do at any time, the obligations of the Debtors will
increase by $15 million, their half share of the debt paydown.
Should the CCC Lender realize value on the mortgaged
headquarters building under the Bethlehem mortgage, the
obligations of the Debtor will increase by at least $10 million,
again their half share of the assumed value of the realized
proceeds and debt paydown.
Finally, CCC has been forced to pay, under the Forbearance
Agreements, default interest at a rate of an additional 2% on
the principal of the loan and the fees and expenses of Latham &
Watkins, counsel to the CCC Lender. This has amounted to
$855,826 for the period from the Debtors' Petition Date until
the Bethlehem parties' chapter 11 filing on October 15, 2001.
In addition to this amount being allocable in its entirety
to the Debtors under the Partnership Operating Agreements, the
Debtors have not even fully paid half of these costs.
The failure of Dearborn to fund its portion of the interest and
principal due under the loan and the forbearance agreement has
now caused the CCC Lender to issue a Reservation of Rights
letter to CCC on January 3, 2002, stating that the Forbearance
Agreement had been terminated. A week later, as a result of the
Debtors' continued refusal to fund CCC's capital call, the CCC
Lender issued a demand letter with respect to the unpaid
principal and interest, stating that if the full amount is not
paid within a week, the CCC Lender will draw the entire amount
of the letter of credit and take any and all other actions to
exercise its rights and remedies under the Forbearance
Agreement, the loan documents, and applicable law.
To prevent foreclosure and a draw on the letter of credit by the
CCC Lender, the Debtors' deliberate principal and interest
shortfalls in January and thereafter were paid by CCC out of its
available cash. No such cash remains for future payments. The
CCC Lender has made continued payments of principal and interest
a pre-condition even to negotiations about further forbearance
on its part. In order for the Bethlehem parties to fund the
continuing shortfalls of the Debtors so as to prevent
foreclosure on CCC's assets and a draw on the letter of credit,
in February the Bethlehem Debtors asks Bankruptcy Judge Lifland
to cover the Debtors' refusal to pay, Bethlehem has also
continued negotiations with the CCC Lender concerning further
forbearance.
Besides all of these other defaults, the Debtors' share of
operating costs will continue to accrue at the rate of
approximately $1 million per month, and their obligations for
principal and interest continue at the same rate. The estates
of Bethlehem will continue to incur costs due to the Debtors'
defaults at a rate of approximately $215,000 a month and remain
at risk for a draw on the letter of credit and a foreclosure of
the Bethlehem mortgage. Finally, the estates of the Bethlehem
parties have been forced to make Alliance loans to cover the
Debtors' defaults.
Unlike the numerous motions filed by various postpetition
providers of goods and services to the Debtors, the
administrative expenses sought with respect to the CCC and CPC
Partnerships have to do with the preservation and protection of
assets in which the Debtors have an interest. The payment of
costs and expenses attributable to the Debtors under the
Partnership Operating Agreements are necessary to preserve the
value of the Partnerships and thus any value for the Debtors.
In order to avoid further defaults under the loan and the
Forbearance Agreement and other agreements with third parties,
Judge Bodoh should direct that the Debtors pay their share of
all costs and expenses that have come due and as they will come
due under the Partnership Operating Agreements and the
Forbearance Agreement, including, but not limited to, principal,
interest, project costs, operating costs, costs of collateral
and legal fees, and grant to Bethlehem and CCC an administrative
claim under the APP Order to the extent that any of them have
paid or pays such costs and expenses on behalf of the Debtors.
(LTV Bankruptcy News, Issue No. 29; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
LEINER HEALTH: Gets Court OK to Hire Richards Layton as Counsel
---------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware approves
the request of Leiner Health Products Group, Inc. and its
debtor-affiliates to employ Richards, Layton & Finger, PA as
bankruptcy co-counsel.
The Debtors assure the Court that Richards Layton and the law
firm of Levene, Neale, Bender, Rankin & Brill L.L.P. have
discussed a division of responsibilities regarding
representation of the Debtors and will make every effort to
avoid duplication of effort in these cases.
Richards Layton will:
a) advise the Debtors of their rights, powers and duties as
debtors and debtors in possession;
b) take all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions
on the Debtors' behalf, the defense of any actions
commenced against the Debtors, the negotiation of
disputes in which the Debtors are involved, and the
preparation of objections to claims filed against the
Debtors' estates;
c) prepare on behalf of the Debtors all necessary motions,
applications, answers, orders, reports, and papers in
connection with the administration of the Debtors'
estates; and
d) perform all other necessary legal services in connection
with the Debtors' chapter 11 cases.
The Debtors will pay Richards Layton's professionals at their
customary hourly rates:
a) Mark D. Collins $425 per hour
b) Rebecca L. Booth $200 per hour
c) Etta R. Wolfe $180 per hour
d) Laura J. Kostyk $125 per hour
Leiner Health Products Group, Inc. manufacture vitamins,
minerals and nutritional supplements.The Company filed for
chapter 11 protection on February 28, 2002. Mark D. Collins,
Esq. at Richards, Layton & Finger, PA and David W. Levene, Esq.
at Levene, Neale, Bender, Rankin & Brill LLP represent the
Debtors in their restructuring efforts. When the Debtors filed
for protection from their creditors, they listed $353,139,000 in
total assets and $493,594,000 in total debts.
MALAN REALTY: Reviewing Closely Other Strategic Alternatives
------------------------------------------------------------
Malan Realty Investors, Inc. (NYSE: MAL), a self-administered
real estate investment trust (REIT), announced operating results
for the first quarter of 2002.
For the quarter ended March 31, 2002, funds from operations
(FFO) was $1.7 million vs. $2.0 million for the quarter ended
March 31, 2001. Cash available for distribution for the quarter
ended March 31, 2002 was $1.9 million compared with $2.1 million
for the quarter ended March 31, 2001. Total revenues, consisting
primarily of rent and recoveries from tenants, were $10.0
million in the first quarter of 2002 vs. $10.6 million in the
first quarter of 2001.
On March 19, 2002, Malan announced that its board of directors
voted to recommend a plan of liquidation to the company's
shareholders. The proposed plan contemplates the sale of all
the company's properties and other assets and is subject to
shareholder approval at the annual meeting of shareholders
and agreements from some of the company's lenders.
"We will continue to closely examine any alternative strategies,
including offers for the sale of the entire company or a
substantial part of the outstanding stock of the company," said
Jeffrey Lewis, president and chief executive officer of Malan
Realty Investors. "However, the board believes that liquidation
remains the proper plan of action to realize shareholder value
at this time."
"Our property sales efforts consistent with our previously
announced strategic plan are progressing well," Lewis added.
"We currently have five properties, including Bricktown Square
in Chicago, under contract with proceeds totaling more than $55
million. We anticipate closing on several of these contracts
within the next 30 to 60 days." Proceeds of the sales are
expected to be utilized to pay down the company's outstanding
debt obligations.
The company also recorded an additional impairment of real
estate on Bricktown Square during the first quarter in
accordance with Statement of Financial Accounting Standard 144.
The impairment writedown is the result of the expected net
realizable value of the property as reflected by the sales
contract.
Malan Realty Investors, Inc. owns and manages properties that
are leased primarily to national and regional retail companies.
The company owns a portfolio of 58 properties located in nine
states that contains an aggregate of approximately 5.5 million
square feet of gross leasable area.
MICROCELL TELECOMMS: First Quarter 2002 Revenues Up by 17%
----------------------------------------------------------
Microcell Telecommunications Inc. (NASDAQ:MICT) (TSE:MTI.B.)
announced its consolidated financial and operating results for
the first quarter ended March 31, 2002. Total revenues for the
first quarter increased by 17% to $140.1 million, compared to
$119.9 million for the first quarter of last year, while total
operating expenses (excluding depreciation and amortization, and
restructuring charges) decreased by 9% to $126.6 million. This
resulted in the Company posting its third consecutive quarter of
positive earnings before interest, taxes, depreciation and
amortization (EBITDA). On a consolidated company basis, and
before restructuring charges of $3.8 million, EBITDA was $13.5
million in the first quarter. For PCS-related operations, EBITDA
before restructuring charges was $15.4 million for the three
months ended March 31, 2002.
"This quarter we consolidated our core PCS operations and
further adjusted our business priorities to respond to current
market conditions," said Andre Tremblay, President and Chief
Executive Officer of Microcell Telecommunications Inc.
"Improving profitability is a key objective for us. To achieve
this, we remain focused on effective and prudent cost management
initiatives. The results of our efforts are evident as we
achieved positive EBITDA for the third consecutive quarter."
Jacques Leduc, Chief Financial Officer and Treasurer of
Microcell Telecommunications Inc. stated: "We will continue to
focus on EBITDA-our most relevant financial measure of operating
performance. We will also closely track expenses to ensure that
our profitability targets are met. This quarter, we achieved
solid EBITDA results by adjusting our cost structure to reflect
the reality of our customer mix and revenue performance. We also
further improved our funding with the successful closing of a
$100 million senior secured credit facility. The proceeds of
this financing initiative increased our cash availability to
$500 million during the quarter."
Other operating and financial highlights in the quarter
included:
-- On a gross-activation basis, the Company added 131,666
new wireless retail customers in the first quarter, an increase
of 8% over the 121,724 gross activations attained in the same
quarter in 2001. This represents an estimated market share of
wireless gross additions of 20% in regions where Fido(R) Service
is offered, which is slightly higher than the 19% achieved in
the first quarter of 2001. The postpaid-prepaid gross-activation
customer mix for the first quarter was in line with the
Company's full-year 2002 expectation of a 50/50 split. Postpaid
subscriber additions in the quarter represented 67,902 of the
total gross additions, a substantial 70% year-over- year
improvement. Prepaid accounted for the remaining 63,764 new
wireless gross activations, a 22% decrease compared with last
year's first quarter.
-- The blended retail, post-guarantee-period average
monthly churn rate was 2.8% in the first quarter, compared with
2.2% in the same quarter last year. The increase was due to
higher prepaid churn, especially among occasional, security-type
users, and to higher postpaid churn, which included increased
Company-initiated churn to disconnect non-paying customers. The
Company's customer retention program and customer life cycle
initiatives, currently being implemented, are expected to reduce
churn beginning in the second half of 2002.
-- At March 31, 2002, the Company provided wireless
service to 1,235,766 retail PCS customers, 635,292 of which were
on postpaid and 600,484 on prepaid. The total number of
customers represents a 26% year-over-year increase. The Company
added 26,566 new net retail customers in the first quarter,
compared with 56,339 in the first quarter of 2001. Net
subscriber additions in the first quarter were affected
primarily by the post-holiday period slowdown, the economy and
increased churn. First quarter net additions were composed
entirely of prepaid customers because of substantially higher
postpaid churn and the net migration of 20,189 postpaid
customers to prepaid service. In addition, as at the end of the
first quarter of 2002, Microcell provided PCS network access to
21,116 wholesale subscribers.
-- Service revenue in the first quarter increased 22% to
$133.5 million from $109.2 million in the first quarter of 2001.
The improvements can be attributed primarily to customer base
expansion and a higher proportion of postpaid subscribers in the
retail customer base. Equipment sales of $6.7 million in the
first quarter decreased 37% year-over-year due to a lower volume
of accessory sales and lower retail prices for handsets.
-- Retail postpaid average revenue per user (ARPU)
improved 4% to $56.50 for the first quarter of 2002, compared
with $54.10 for the same three-month period in 2001. The
increase was due mainly to higher value-added service revenue
from the addition of an unlimited weekends and evenings usage
option, a higher system access fee and a marked increase in
average monthly minutes of usage (MoU). Average postpaid MoU for
the first quarter was 349 minutes compared with 272 minutes for
the same quarter last year.
-- Retail prepaid ARPU for the three months ended March
31, 2002 was $15.41, compared with $21.94 for the first quarter
of 2001. The decrease was due primarily to a lower average
monthly usage of 44 minutes per customer compared with 65
minutes per customer for the comparable periods. The reduced
prepaid MoU resulted from the migration of high-usage prepaid
customers to postpaid monthly plans. Mainly as a result of lower
prepaid ARPU, the Company's combined retail postpaid and prepaid
ARPU for the first quarter was $36.75, compared with $37.84 for
the same quarter in 2001.
-- In keeping with its focus on profitability, the Company
continued to exercise prudence in controlling costs. Operating
expenses, excluding depreciation and amortization, decreased to
$126.6 million in the first quarter of 2002 from $139.0 million
for the same quarter one year ago. The 9% improvement was
primarily due to lower cost of products and reduced selling and
marketing expenses.
Total cost of products and services of $72.3 million for the
first quarter consisted of $27.1 million for cost of products
and $45.2 million for cost of services, compared with cost of
products of $38.1 million and cost of services of $51.0 million
for the same quarter in 2001. The principal factor that
contributed to the improvement in cost of products was the lower
per-unit cost of the Company's portfolio of GSM digital handsets
and the economies of scale associated with producing an
increased volume of prepaid vouchers for distribution to a
larger number of points of sale. The number of retail points of
sale increased to 5,641 as at March 31, 2002 compared with 4,051
at the same date one year ago. The decrease in cost of services
was due to lower network operating costs resulting from reduced
interconnection fees, as well as improved network traffic volume
efficiency, a lower contribution revenue tax rate for 2002
compared with 2001, and decreased spending related to the
Company's non-PCS operations.
The retail cost of acquisition (which consists of a handset
subsidy and related selling and marketing expenses) decreased by
18% to $298 per gross addition for the first quarter of 2002,
compared with $364 per gross addition for the same three-month
period in 2001. This significant improvement was due to a higher
number of gross activations, reduced handset subsidies resulting
from a lower-cost mix of GSM handsets, and well controlled
spending on advertising. The Company was able to maintain its
quarterly selling and marketing expenses at a virtually
unchanged level, year-over-year. Selling and marketing expenses
were $24.6 million for the three-month period ended March 31,
2002 compared with $25.1 million for the first quarter of 2001.
General and administrative expenses in the first quarter were
$29.7 million, compared with $24.8 million for the same quarter
one year ago. The increase was due primarily to higher
subscriber-related expenses offset partially by lower salaries
and benefits resulting from a reduced workforce.
-- Capital expenditures of $41.9 million in the first
quarter of 2002 were primarily related to the support of
incremental customer growth and increased network usage. Going
forward, capital expenditures will be assessed in the context of
adjusting network capacity in response to customer needs.
Management continues to expect that full-year capital
expenditures should be approximately $175 million.
-- The Company further improved its funding position
during the first quarter with the successful closing of its
previously announced CAN$100 million senior secured credit
facility. As at March 31, 2002, Microcell had $476.8 million of
available liquidity, comprising $106.6 million in cash and cash
equivalents, $99.4 million in short-term investments and
marketable securities, and $270.8 million in available Senior
Secured Revolving Credit Loans.
-- During the first quarter of 2002, a $3.8 million
restructuring charge was incurred due to the layoff of 180
employees in January 2002 to adjust the Company's workforce to
the requirements of its 2002-2003 operating plan. Excluding the
impact of this restructuring charge, consolidated EBITDA
improved by $32.7 million, year-over- year, to $13.5 million in
the first quarter of 2002 from negative $19.2 million in the
same quarter last year. EBITDA from the Company's core PCS
operations (excluding the $3.8 million restructuring charge
impact) was $15.4 million for the first quarter of 2002, ompared
with negative $13.4 million for the same quarter in 2001.
-- The Company posted consolidated net losses of $95.3
million for the quarter ended March 31, 2002. This compares with
net losses of $172.0 million, for the same three-month period
last year.
Commenting further on the Company's results, Mr. Leduc
concluded, "Through conscious cost management, we delivered
solid EBITDA in line with expectations, despite a seasonally
lower ARPU. However, our churn rate was higher than we would
like it to be. To address churn, we are focusing on improving
the customer experience right from the point of purchase. We
expect these efforts will generate positive results in the
second half of the year. Managing subscriber growth and
maximizing customer retention are key objectives as we balance
the cost of competition against the goal of achieving increased
profitability."
"We are committed to delivering on our new business plan and
comprehensive cost management initiatives," concluded Mr.
Tremblay. "Our key performance targets include capturing a 20%
share of market growth where Fido Service is offered, and
achieving a cost-efficient and balanced ratio of postpaid to
high-revenue generating prepaid customer additions.
One of the cornerstones of our future success is to provide all
our customers with a superior wireless experience that meets
their individual needs."
Microcell Telecommunications is a Canadian wireless
communications company active in three primary areas: Personal
Communications Services, wireless Internet and investments.
Microcell PCS, a division of Microcell Telecommunications, is
responsible for the marketing of Fido Service in Canada.
Microcell Telecommunications has been a public company since
October 15, 1997, and is a member of the TSE 300, TSE 200 and
S&P/TSE Canadian SmallCap indices. Microcell's head office is
located in Montreal and the Company employs approximately 2,000
people across Canada. For more information, visit
http://www.microcell.ca
* * *
As reported in May 10, 2002 edition of Troubled Company
Reporter, Moody's Investors Service downgraded the ratings on
Microcell Telecommunications Inc., concluding its review of the
company. Outlook is negative.
Rating Action To From
* Senior Implied rating Caa2 B3
* Issuer rating Caa3 Caa1
* Senior Unsecured rating Caa3 Caa1
comprised of the following debt issues:
- 14% Senior Discount Notes due 2006, US$471 million face
value
- 11.125% Senior Discount Notes due 2007, US$429 million face
value
- 12% Senior Discount Notes due 2009, US$270 million face
value
Microcell has managed to arrange additional liquidity in late
2001 and early 2002. However, Moody's believes that it will
again need to access funding from capital markets within two
years as the company has a high debt leverage and because of its
status as the most financially constrained of the four Canadian
wireless companies. Should Microcell need to restructure its
debts, the investors service expresses doubts that the company's
asset values can fully cover its debt obligations.
NTL INCORPORATED: Arranges $670 Million DIP Financing Pact
----------------------------------------------------------
Kayalyn A. Marafioti, Esq., at Skadden, Arps, Slate, Meagher &
Flom, tells Judge Gropper that NTL Incorporated and its debtor-
affiliates have determined they need access to debtor-in-
possession financing in order to continue to operate their
businesses in Chapter 11 and to ensure their successful
reorganization. Ms. Marafioti indicates the Debtors may need
incremental liquidity pending completion of their proposed
recapitalization because their estimated cash disbursements will
exceed estimated cash receipts over the next 30 days, showing
the Court this financial document:
NTL Incorporated
Schedule Of Estimated Cash Receipts And Disbursements
For The 30-Day Period Following May 7, 2002
Projected Cash Flow
-------------------
Receipts:
Income $ --
Disbursements:
Salaries and benefits $ 450,000
Rent/Insurance 550,000
Other general office 1,100,000
Minority interests/Capital contributions 27,000,000
Total projected disbursements $29,100,000
Net projected cash flow ($29,100,000)
John Francis Gregg, NTL's Senior Vice President and Chief
Financial Officer tells the Court that the Debtors have arranged
to obtain a super-priority Debtor-in-Possession Financing
facility providing the Company with $670,796,000 of new DIP
Financing.
Communications Cable Funding Corp. will be the borrower, and all
of the other Debtors (other than Diamond Cable Communications
Ltd. and Diamond Holdings Ltd.) will guarantee CCFC's
obligations. NTL Delaware -- with lots of cash on hand -- will
lend up to $170,796,000 and unidentified entities called
Specified Holders will lend up to $500,000,000. As soon as the
ink on the definitive documentation is dry, the Debtors will
bring the agreement to Judge Gropper for interim and final
approval. (NTL Bankruptcy News, Issue No. 1; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
N-VIRO INT'L: Terry Logan Replaces J. Patrick Nicholson as CEO
--------------------------------------------------------------
N-Viro International Corp. (Nasdaq: NVIC) announced at its
annual meeting the company's Board of Directors has named Terry
J. Logan, Ph.D., Chief Executive Officer. Currently the
company's President and Chief Operating Officer, Dr. Logan
succeeds N-Viro Founder J. Patrick Nicholson, who is retiring as
CEO.
Dr. Logan is a retired professor of Soil Science at The Ohio
State University and an internationally recognized authority on
organic waste utilization. He has been a consultant to N-Viro
since 1986, a board member since 1992 and President and Chief
Operating Officer since 1999.
J. Patrick Nicholson will continue to serve as N-Viro's Chairman
of the Board and as an active consultant, focusing on U.S.
Resource Conservation and Recovery national policy,
international sales and technology. Nicholson and Jeffrey
Burnham, Ph.D., former professor of microbiology at Medical
College of Ohio, Toledo, were the inventors of N-Viro's base
technologies.
Michael Nicholson, N-Viro's Senior Vice President, was elected
Executive Vice President and will replace Dr. Logan as Chief
Operating Officer. Michael Nicholson joined the company in 1990
and has served in various sales and sales executive positions.
Dr. Logan's major contributions to organic waste utilization
have included coauthoring "Land Application of Sludge" (Lewis
Publishers, Inc., 1987) and coauthoring the 1983 EPA Task Force
Report on municipal sludge use. He also was co-chair of the
W170 Peer Review of the federal regulations on sludge use (40
CFR 503).
At N-Viro's Annual Meeting held in Toledo, Dr. Logan advised
stockholders that litigation expenses have been a major cause of
the company's difficult finances during 2000 and 2001. Despite
these difficulties, he said much good has been accomplished.
According to Dr. Logan: "Expected material events could result
in an increase in net worth in 2002 of about $3 million (over $1
per share); with a comparable increase in working capital,
without dilution of stock; and the retirement of practically all
long-term debt. These material events include possible
completion of a preferred, convertible stock offering; sale of
Florida N-Viro; a 2002 annual profit; and exercise of a stock
repurchase plan, contingent on the sale of Florida N-Viro."
On the question of N-Viro's possible delisting by NASDAQ, Dr.
Logan pointed out that the company has appeared before the
NASDAQ hearing panel. "We believe our plan, if successfully
implemented," Dr. Logan said, "will satisfy the NASDAQ listing
requirements and will position N-Viro to be a profitable and
financially secure company that will continue to impact U.S.
RCRA national policy, as it has done so effectively in the
past."
Highlighting the meeting was Dr. Logan's introduction of N-Viro
Fuel, the company's latest technology. The new patent covers
use of the N-Viro SoilT product as an alternative fuel at coal-
burning power plants. The patent covers all major organic
wastes -- sewage sludge, animal manure, pulp and paper waste,
etc.
According to Dr. Logan, "Converting organic waste to fuel adds
dimension to the Company's technologies that greatly enhances
our competitiveness, particularly for large volume customers.
"The process gives energy generators low-cost and sustainable
fuel that has the potential to help scrub nitrous oxides and
sulfur dioxides and may result in future carbon credits. The
process would give organic generators the option to eliminate
all sludge or manure-treatment investments and costs, except
dewatering and a cost competitive tipping fee to power plants,"
Dr. Logan said.
"The power plants would use the sludge or manure, converted to
N-Viro Soil, as a sustainable fuel source. N-Viro is in late-
stage negotiations with a major Midwestern power utility to
jointly develop the technology. We expect to bring the N-Viro
Fuel technology to the market in 2003."
Dr. Logan concluded: "In future years, we believe the N-Viro
Fuel joint venture will be a primary contributor to N-Viro's
growth and profits. We are excited about the potential for this
revolutionary new concept."
The four inventors of the N-Viro Fuel technology are Dr. Logan;
Dr. Erv Faulmann, Consultant; James O'Neil, P.E., N-Viro's
retired Chief Engineer; and Tim Nicholson, N-Viro's mineral
resource manager.
N-Viro International Corporation develops and licenses its
technology to municipalities and private companies. N-Viro's
patented processes use lime and/or mineral-rich, combustion
byproducts to treat, pasteurize, immobilize and convert
wastewater sludge and other bio-organic wastes into bio-mineral
agricultural and soil-enrichment products and sustainable bio-
fuel energy products with real market value. More information
about N-Viro International can be obtained by contacting the
office or on the Internet at http://www.nviro.comor by e-mail
inquiry to info@nviro.com
NEWCOR: Gets OK to Sign-Up Pachulski Stang as Bankruptcy Counsel
----------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware gives its
permission to Newcor, Inc., and its debtor-affiliates to sign-up
Pachulski, Stang, Ziehl, Young & Jones PC for the filing and
prosecution of their chapter 11 cases.
The principal attorneys and paralegals presently designated to
represent the Debtors and their current standard hourly rates
are:
Laura Davis Jones $550 per hour
Scotta McFarland $395 per hour
James E. O'Neill $375 per hour
Peter J. Duhig $225 per hour
Timothy O'Brien $110 per hour
Camille Ennis $110 per hour
As Debtors' counsel, Pachulski Stang will be:
a. providing legal advice with respect to their powers and
duties as debtors in possession in the continued
operation of their businesses and management of their
properties;
b. preparing and pursue confirmation of a plan and approval
of a disclosure statement;
c. preparing on behalf of Debtors necessary applications,
motions, answers, orders, reports and other legal
papers;
d. appearing in Court and to protect the interests of
Debtors before the Court; and
e. performing all other legal services for Debtors which
may be necessary and proper in these proceedings.
Pachulski Stang received $35,000 from Debtors in connection with
the preparation of initial documents and its proposed
postpetition representation.
Newcor, Inc., along with its subsidiaries, design and
manufacture a variety of products, principally for the
automotive, heavy-duty, capital goods, agricultural and
industrial markets. The Company filed for chapter 11 protection
on February 25, 2002 Laura Davis Jones, Esq. at Pachulski,
Stang, Ziehl Young & Jones P.C. represents the Debtors in their
restructuring efforts. When the Debtors filed for protection
from its creditors, it listed $141,000,000 in total assets and
$181,000,000 in total debt.
OMEGA HEALTHCARE: First Quarter FFO Slides-Down to $6.9 Million
---------------------------------------------------------------
Omega Healthcare Investors, Inc. (NYSE:OHI) announced its
results of operations for the quarter ended March 31, 2002. The
company reported Funds From Operations ("FFO") for the three-
month period ended March 31, 2002 of $6.9 million, as compared
to $7.2 million for the three-month period ended March 31, 2001.
The company recorded a net loss for the three months ended March
31, 2002 of $0.6 million on revenues of $43.9 million. This
compares to a net loss of $0.4 million for the same period in
the prior year.
Nursing home revenues of owned and operated assets for the
period ending March 31, 2002 totaled $21.7 million, a decrease
of $24.2 million over the same period in 2001. This is
principally due to a decrease in the number of owned and
operated facilities in the 2002 period versus the same period in
2001 (19 at March 31, 2002 compared with 66 at March 31, 2001).
Correspondingly, nursing home expenses for owned and operated
assets for the three-month period ending March 31, 2002
decreased by $22.8 million versus the same period in 2001.
The decrease in FFO per share for the quarter, as compared to
the prior year, is primarily due to the reduction in net
earnings ($1.5) million associated with the company's Owned and
Operated Assets and an increase in the weighted-average number
of outstanding shares resulting from the completion of a rights
offering and private placement in February 2002. The reduction
in FFO was partially offset by a savings in general,
administrative and legal costs of $0.7 million and interest
expense of $1.5 million versus the same period in the prior
year.
As previously announced, in February 2002, the company completed
a rights offering and a simultaneous private placement to
Explorer Holdings, L.P., its largest stockholder, raising $50
million in aggregate gross proceeds. Amendments to both of the
company's revolving credit facilities became effective
simultaneously with the completion of the rights offering and
private placement. The amendments included modifications and/or
eliminations to certain financial covenants. The amendment
regarding the company's $175 million revolving credit facility
included a one-year extension in maturity from December 31, 2002
to December 31, 2003, and a reduction in the total commitment
from $175 million to $160 million. As part of the amendment
regarding the company's $75 million revolving credit facility,
the company prepaid $10 million originally scheduled to mature
in March 2002.
In February 2002, the company refinanced an investment in a
Baltimore, Md., asset leased by United States Postal Service
resulting in $13.0 million of net cash proceeds. The new, fully
amortizing mortgage has a 20-year term with a fixed interest
rate of 7.26 percent. This transaction is cash neutral on a
monthly basis, as lease payments due from USPS equal debt
service on the loan.
During the first quarter of 2002, the company entered into
agreements to lease four Arizona facilities to subsidiaries of
Infinia Health Care Companies and to sublease four other Arizona
facilities to the same party. The agreements initially began as
management arrangements, effective March 1, 2002, and convert
into leases upon the receipt of various approvals. The terms for
the four Arizona leases and four subleases are 10 years and
three years, respectively, providing for an initial combined
annual net rent payment of $1.02 million.
Also on March 1, 2002, the company leased four facilities in
Massachusetts to subsidiaries of Harborside Healthcare
Corporation. The initial lease term for the four properties is
10 years with an initial annual rent payment of $1.675 million.
The company leased one additional facility on March 1, 2002 for
an initial annual rent of $0.38 million. Additionally, on
February 1, 2002, the leasehold interest in one facility was
terminated by the landlord.
In addition, during April the company closed a 120 bed nursing
facility in Texarkana, Texas. The company has recently
instructed the managers of two other facilities in Massachusetts
to begin the necessary steps to close each of those facilities.
On May 1, 2002, the company entered into a Master Lease to lease
three facilities in Colorado to Conifer Care Communities. The
initial term of the lease is 4.7 years with three options to
renew for four years each. The initial annual rent payment is
approximately $0.38 million. As a result of the three re-leased
facilities and the three announced facility closings, the total
number of Owned and Operated Assets is expected to decline by
six, leaving 13 remaining facilities.
In April 2002, the company purchased $27.0 million of 6.95%
Notes due June 2002. The remaining balance on the 6.95% Notes
due June 2002 is $34.9 million. The company expects to pay the
remaining balance on the 6.95% Notes due June 2002 from cash on
hand as a result of the proceeds of the rights offering and
private placement completed in February plus cash from
operations.
After the 6.95% Notes due June 2002 are paid off and based on
second quarter results, the board of directors will evaluate the
dividend policy on the company's common and preferred stock.
Accordingly, no assurance can be given at this time regarding
when dividends may recommence or the rate of dividends to be
declared, if any.
The company will be conducting a conference call on Tuesday, May
14, 2002, at 10 a.m. EDT to review the company's 2002 first
quarter results, the status of the company's core and owned and
operated portfolio and the company's forecast through 2003. To
participate, log on to http://www.omegahealthcare.com30 minutes
prior to the call to download the necessary software. Webcast
replays of the call will be available on the company's Web site
for two weeks following the call. The company also plans to
post a summary of the company's forecast as presented in the
conference call presentation on its Web site within 24 hours
following the conference call.
Omega is a Real Estate Investment Trust investing in and
providing financing to the long-term care industry. At March 31,
2002, the company owned or held mortgages on 235 skilled nursing
and assisted living facilities with approximately 24,600 beds
located in 28 states and operated by 37 independent healthcare
operating companies.
OWENS CORNING: Asks Court to Approve Johns Manville Stipulation
---------------------------------------------------------------
Owens Corning, and its debtor-affiliates, ask the Court to
approve the stipulation with Johns Manville International Inc.,
which would authorize the set-off of mutual debts and resolve
reclamation claims.
Norman L. Pernick, Esq., at Saul Ewing LLP in Wilmington,
Delaware, tells the Court that prior to the Petition Date, the
Debtors and Johns Manville routinely sold goods to one another.
Johns Manville also provided sales support to the Debtors for
the sale of their products. As a result of these pre-petition
transactions, Johns Manville owes pre-petition obligations to
Owens Corning amounting to $879,307 while Owens Corning owes
pre-petition obligations to Johns Manville in the amount of
$1,034,467. Separately, CDC Corporation also owes pre-petition
obligations to Johns Manville pegged at $6,604.
Mr. Pernick relates that the Debtors and Johns Manville have
reached an agreement to setoff each other's debt. The remaining
$155,510 of the Debtors' debt, meanwhile, will be allowed as an
administrative expense priority claim. Upon the effectuation of
the set-off, and when Johns Manville has received full payment
of the remaining claim, Johns Manville will amend the proof of
claim against Owens Corning and place the value of the claim at
$0. As to Johns Manville's claim against CDC Corporation, it
will be deemed to be an allowed unsecured claim against CDC
Corporation. It will be paid as an allowed administrative
expense claim after the confirmation of Reorganization Plan or
by the Court's final Order. (Owens Corning Bankruptcy News,
Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900)
PENTON MEDIA: Weak Revenue Spurs S&P to Change Outlook to Neg.
--------------------------------------------------------------
On May 9, 2002, Standard & Poor's revised its outlook on
business-to-business media company Penton Media Inc. to negative
from developing due to additional concerns about the company's
profitability in light of continued revenue declines and the
operating difficulties of key end markets. Standard & Poor's
also affirmed its existing ratings on Penton, including its
single-B-minus corporate credit rating.
Cleveland, Ohio-based Penton is one of the leading trade
magazine publishers and event organizers in the U.S. with more
than 65 controlled circulation magazines and 135 trade shows and
conferences. Total debt as of March 31, 2002, was $331 million.
Penton continues to experience significant revenue softness in
key segments of its portfolio and this is likely to prevent the
company from achieving its goal of generating at least $50
million in EBITDA in 2002. The troubled technology and
manufacturing segments of the economy represented approximately
50% and 25% of Penton's revenue in 2001. Penton's revenue from
these sectors, adjusted for show timing, dropped by 50% and 27%,
respectively, in the first quarter of 2002. These trends
continue the declines that started in 2001 due to sector-
specific problems and the sharp drop in business travel
following September 11. In addition, second quarter results will
be hurt by a 75% drop in the number of exhibitors at its recent
Internet World Spring event, typically one of its largest shows,
compared with the company's expectations of a 50% decrease.
These results highlight the difficulty of predicting revenue in
this environment and the severity of the market conditions being
experienced by Penton's key customer groups. Penton recently
lowered its revenue guidance for 2002 and has announced
additional cost reduction measures. Although Penton should have
easy prior year comparisons and is already benefiting from
existing cost reductions, these are unlikely to offset the sharp
declines in revenue, in Standard & Poor's opinion. A significant
recovery of Penton's technology and manufacturing businesses
will depend on, and likely trail, the recovery of these
underlying sectors of the economy. The timing and extent of any
such recovery is uncertain and Standard & Poor's expects that
certain subsectors, like Internet broadband, are likely to
operate well below historical levels for the foreseeable future.
In the meantime, Penton's operating performance will depend on
the stability and improvement of other portions of its business
and the success of its cost reductions.
Penton's ratings continue to be supported by the substantial
improvement in the company's liquidity and financial flexibility
resulting from Penton's recent refinancing of its bank debt with
proceeds from $157.5 million in senior secured notes and $50
million in convertible preferred stock. As a result of these
transactions, Penton modestly increased its cash balances--which
totaled $36 million at March 31, 2002, eliminated all near-term
debt maturities, and removed the financial covenants on its
revolving line of credit, although its new, undrawn $40 million
revolving credit facility is subject to an accounts receivable
borrowing formula. This improved liquidity and access to capital
is critical while profits remain depressed and credit measures
are strained. Key credit measures are very weak as indicated by
EBITDA to interest coverage of 1.3x and debt to EBITDA of 9.1x
for 2001, and should deteriorate further in the next several
quarters.
Outlook
Ratings could be lowered if Penton fails to maintain adequate
liquidity to fund its operations during this difficult operating
environment.
Ratings List: To: From:
Penton Media Inc.
* Corporate credit rating B-/Negative/-- B-/Dev/--
* Senior secured debt rating B-
* Subordinated debt rating CCC
PRANDIUM INC: Case Summary & 20 Largest Unsecured Creditors
-----------------------------------------------------------
Debtor: Prandium, Inc.
f/k/a Family Restaurants, Inc.
Koo Koo Roo Enterprises, Inc.
2701 Alton Parkway
Irvine, California 92606
Bankruptcy Case No.: 02-13529
Chapter 11 Petition Date: May 6, 2002
Court: Central District of California (Sta. Ana)
Judge: Robert W. Alberts
Debtor's Counsel: Richard Levin, Esq.
Peter W. Clapp, Esq.
Stephen J. Lubben, Esq.
Skadden, Arps, Slate, Meagher & Flom, LLP
300 S. Grand Avenue, Suite 3400
Los Angeles, CA 90071-3144
Tel: 213 687 5000
Total Assets: $173,882,000
Total Debts: $336,536,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
The Bank of New York Notes Payable $121,302,160
as Indenture Trustee 9 ¾% Senior Notes
Attn: Stacey Poindexter due 21/2002
101 Barclay Street
New York, NY 10286
Tel: 212 896 7106
Fax: 212 896 7298
State Street Bank and Notes Payable $36,845,279
Trust Company 10 2/8% Senior Sub
as Indenture Trustee Discount notes
Attn: Laura Moran due 2/1/2004
PO Box 778
Boston, MA 02102
Tel: 617 662 1753
Fax: 617 662 1456
Pitney Bowes Management Trade Debt $24,648
Huntley Financial Group Trade Debt $18,611
Brian B. Bennett Trade Debt $7,800
Right Management Trade Debt $6,000
Consultants
CCBN.com Inc. Trade Debt $6,780
Adecco LLC Trade Debt $2,915
Appleone Trade Debt $2,587
Topnotch Software Trade Debt $2,575
Solutions Inc.
Expanse Financial Services Trade Debt $2,575
Expanets Financial Services Trade Debt $2,202
U.S. Air Conditioning Trade Debt $2,192
Recall Total Information Trade Debt $2,123
Management
Tax Analysis Trade Debt $1,999
Donlen Corporation Trade Debt $1,882
Toshiba America Trade Debt $1,593
Information
Hewlett-Packard Trade Debt $1,516
Liberty Graphics Trade Debt $1,401
Boise Cascade Office Trade Debt $1,229
Pro, Inc.
Uriner Barry Publications, Trade Debt $1,110
Inc.
PRINTING ARTS: Wants Plan Filing Exclusivity Extended to July 31
----------------------------------------------------------------
Printing Arts America, Inc., along with its debtor-affiliates
submit their second motion to extend their exclusivity periods.
The Debtors want to extend their exclusive right to file a
reorganization plan through July 31, 2002 and a concomitant
extension, until September 30, 2002, of their time to solicit
acceptances of that plan.
The Debtors assert that they are proceeding diligently to
evaluate their options to exit these cases while maintaining the
stability of their operations and increase profitability.
To maintain operations and address liquidity issues, the Debtors
relate that they have negotiated and obtained Court approval of
a post-petition financing agreement with a subset of their
prepetition secured lenders. The Debtors have negotiated, and
continue to negotiate, agreements with numerous suppliers and
trade creditors to resolve disputes and prevent supply
interruptions. The Debtors have also worked to maintain their
customer base and retain their sales force. Currently, the
Debtors are continuing to evaluate the feasibility of a sale of
certain of the estates' assets as an exit strategy.
The Debtors believe that the extension is necessary to preserve
the prospect of a consensual reorganization and ensure that the
Debtors have the opportunity to realize the best possible return
for their creditors and equity holders.
Printing Arts America, Inc. filed for chapter 11 protection on
November 1, 2001 in the U.S. Bankruptcy Court for the District
of Delaware. Teresa K.D. Currier, Esq. and William H. Schorling,
Esq. at Klett Rooney Lieber & Schorling represent the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed estimated assets and
debts of over $100 million.
PROVELL INC: Files for Voluntary Chapter 11 Reorganization
----------------------------------------------------------
Provell, Inc. has filed a voluntary petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code with the U.S.
Bankruptcy Court. Each of the Company's wholly owned
subsidiaries also filed for protection under Chapter 11. The
Chapter 11 filing will enable the Company to continue to
restructure its operations.
The Company also announced that it has secured a $21 million
senior secured debtor-in-possession (DIP) financing facility
with Ableco Finance LLC and Foothill Capital Corporation, as
agent. The DIP facility, which remains subject to Bankruptcy
Court approval, should provide adequate liquidity to fund the
Company's continuing operations during the reorganization
process. The Company expects to be able to access $2 million of
the DIP facility upon court approval of an interim financing
order; the full facility is subject to final court approval at a
later date.
In connection with the filing, the Company also announced that
it had retained Financo Restructuring, the financial advisory
division of Financo, Inc., and Stone Ridge Partners LLC, as its
financial advisors and investment bankers for purposes of
assisting the Company in devising and implementing a successful
resolution to its Chapter 11 case.
Provell, Inc., develops, markets and manages an extensive
portfolio of unique and leading-edge membership and customer
relationship management programs. Members of the Company's
proprietary programs receive value-added benefits, insightful
information, and exclusive savings opportunities on a wide range
of related products and services in the areas of shopping,
travel, hospitality, entertainment, health/fitness, finance, and
affinity activities such as cooking and home improvement. As of
December 31, 2001, nearly 2.8 million consumers enjoyed benefits
provided through Provell's membership programs. The Company was
founded in 1986 and is headquartered in Minneapolis, Minnesota.
PROVELL INC: Case Summary & 30 Largest Unsecured Creditors
----------------------------------------------------------
Lead Debtor: Provell, Inc.
301 Carlson Parkway
Suite 201
Minneapolis, Minnesota 55305
aka Damark International, Inc.
Bankruptcy Case No.: 02-12232
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Provell Financial Services, Inc. 02-12233
Texas Telemarketing, Inc. 02-12234
ClickShip Direct, Inc. 02-12235
Type of Business: Provell, Inc. develops, markets and manages
an extensive portfolio of membership and
customer relationship management programs
that provide discounts and other benefits to
members in the areas of shopping, travel,
hospitality, entertainment, health/fitness,
finance, cooking and home improvement.
Chapter 11 Petition Date: May 9, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Alan Barry Hyman, Esq.
Jeffrey W. Levitan, Esq.
David A. Levin, Esq.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
(212) 969-3275
Total Assets: $40,574,000
Total Debts: $82,964,000
Debtor's 30 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
West Telemarketing Corp Outbound/Client $5,870,478
Michael White
10931 Laureate Drive
San Antonio, Texas 78249
(800) 521-6000
DialAmerica Marketing, Outbound Telemarketing $5,868,255
Inc.
Judy Reifler
960 MacArthur Blvd.
Mahway, NJ 07495
(800) 531-3131
RMH Teleservices Inc. Outbound Telemarketing $2,534,796
Brian McIlhenny
40 Morris Avenue
Bryn Mawr, PA 19010
(610) 520-5300
NSDI Teleperformance Outbound Telemarketing $1,644,109
4151 Ashford Dunwoody
Rd., Suite 675
Atlanta, GA 30319
Dave Surette
(404) 256-4673
Victoria's Secret Direct Client $844,045
LLC
Bill Konves
3425 Morse Crossing
Columbus, OH 43219
(614) 337-5372
Bureau-Minneapolis Printing Service $772,670
Jim Thul
3400 Technology Drive
Minneapolis, MN 55418
(612) 788-1000
Household Credit Services Client $652,530
Lisa Laycock
1441 Schilling Place
Salinas, CA 93901
(831) 755-6638
AON Innovative Warranty Service $386,548
Solutions Inc.
1795 Clarkson Road,
Suite 200
Chesterfield, MO 63017
Rock Wilson
(636) 519-9565
General Litho Services Printing Service $243,778
Inc.
Home Shopping Network Client $232,083
Anderberg Lund Printing Printing Service $220,207
Company
First USA Bank NA Client $211,394
First Industrial LP Rent $205,470
Skymall Client $195,496
JC Whitney and Company Client $175,666
NIMS Associates Inc. Outside Contractor $169,698
Sun Microsystems Finance Computer Lease $158,644
Etelequest Outbound Telemarketing $135,701
Maximum Graphics Printing Service $131,320
Wells Fargo Client $124,394
Gage Marketing Services Printing Service $123,015
Sprint Phone Service $114,530
Expedite Printing Service $108,233
VCommerce Inc. Merchandise Fulfillment $99,879
Bruce Printing Inc. Printing Service $96,474
Flynn & Gaskins Legal $86,367
Arthur Andersen LLP - Tax & Auditing $86,000
Chicago Service
DE Lage Landen Financial Equipment Lease $85,865
Services
Reliant Energy Retail Inc. Electric Service $84,009
Oracle Corporation - Computer Maintenance $78,979
Chicago
PSINET: Seeks Court Approval of Settlement Agreement with B4BCO
---------------------------------------------------------------
PSINet, Inc. and its debtor-affiliates ask the Court to approve
a Deed of Termination and Release dated April 30, 2002 that will
resolve potential claims of Australian company B4BCo against the
Debtors arising from:
(1) a Services and Equipment Contract pursuant to which PSINet
Services, which is a debtor subsidiary of PSINet, agreed to
provide certain Internet and hosting services and related
equipment to B4BCo in exchange for AUS$2,775,000, and
(2) a Subscription Agreement pursuant to which PSINet Services
agreed to purchase 370,000 shares of capital stock in B4BCo
at an agreed upon value of AUS$10.00 per share (that is, at
total purchase price of AUS$3,700,000).
A related set-off agreement provides for payment of the B4BCo
stock by AUS$925,000 in cash plus a set-off of the remaining
portion by PSINet Services' obligation to provide the Services
and Equipment worth AUS$2,775,000.
Background
On or about November 1, 2000, some of the B4BCo shares purchased
by PSINet Services later were swapped for shares of Total Sport
& Entertainment Group Limited (TSE) at the rate of one share in
B4BCo for twenty five shares in TSE under a merger
implementation agreement. As a result, PSINet Services currently
holds 9,250,000 shares of TSE stock.
During the first fourteen months of the Services Contract,
PSINet Australia Pty Limited (PSINet Australia) provided
Services to B4BCo in accordance with PSINet Services'
obligations under the Services Contract. PSINet Australia,
incorporated under the laws of New South Wales, Australia, is a
non-debtor indirect subsidiary of PSINet. After taking into
account the AUS$601,000 in Services provided by PSINet
Australia, PSINet Services remains obligated under the Services
Contract to provide AUS$2,174,000 worth of Services and
Equipment to B4BCo. The Service Contract expires by its own
terms in October 2003.
Claim of B4BCo
B4BCo filed a claim (#01339) in the Debtors' case seeking
US$1,160,900 (approximately AUS$2,232,000) arising out of PSINet
Services' alleged obligations under the Services Contract.
Deed of Termination & Settlement Agreement
In February 26, 2002, PSINet Services, PSINet Australia, B4BCo
and TSE entered into a Deed of Termination and Release (the
February Deed), but the Committee objected to the terms. As a
result, the parties terminated the February Deed and propose to
replace it with the Deed of Termination and Release entered into
on April 30, 2002 by and among PSINet Services and PSINet
Australia on the one hand and B4BCo and TSE on the other hand
(the Settlement Agreement). The Committee has informed the
Debtors that it has no objection to the terms of the proposed
Settlement Agreement.
The Settlement Agreement:
(1) disposes of B4BCo's claim in the Debtors' case in exchange
for US$50,000,
(2) releases all other claims TSE and B4BCo may have against the
Debtors and their affiliates (and vice versa),
(3) provides for the potential sale of 5,560,000 ordinary shares
of TSE stock owned by PSINet Services in conjunction with a
public offering being undertaken on TSE's behalf, and
(4) assuming that the Offering is consummated by June 30, 2002,
requires that PSINet Services agree not to sell its
remaining 3,690,000 shares of TSE stock for a maximum of one
year.
Shares of TSE currently are not listed on the Australian Stock
Exchange, and there is no public measure of TSE's share price.
In an effort to raise capital for a planned acquisition and
increase working capital, TSE plans to launch the Offering. The
lead manager and underwriter for the Offering, J.P. Morgan
Australia Limited, has required as conditions to the Offering
that all major shareholders, including PSINet Services, either
(i) sell down their shares in the Offering at the offering price
(but not less than AUS $0.15 per share), or (ii) agree to escrow
their shares for twelve months following the Offering.
In addition, under the Settlement Agreement, the parties agree
that:
(a) PSINet Australia will transfer to B4BCo ownership of certain
equipment that is not needed by PSINet Australia and that is
currently in the possession of B4BCo,
(b) B4BCo will return to PSINet Australia all other equipment
owned by PSINet Australia that is currently in the
possession of B4BCo,
(c) PSINet Australia will reimburse PSINet Services for any fees
(including taxes) paid to third parties in respect of
services consumed by B4BCo after December 31, 2001, and
(d) PSINet Australia will continue to provide services to B4BCo
under normal commercial rates and subject to PSINet
Australia's right to terminate on no more than fourteen
days' notice. (PSINet Services' obligations under the
Voluntary Restriction Agreement will terminate on June 30,
2002 unless (i) TSE sells ____ shares of TSE stock for not
less than AUS$0.15 per share and (ii) PSINet Services sells
5,560,000 shares of TSE stock for not less than AUS$0.15 per
share.
In their business judgment, the Debtors have determined that the
Settlement Agreement is fair and equitable, is in the best
interests of their creditors and estates, and represents the
most efficient resolution of the potential claim of B4BCo
against the Debtors and their estates and provides the estates
with additional liquidity, assuming that J.P. Morgan sells
PSINet Services' 5,560,000 shares in the Offering. The Debtors
also believe that the Court's approval of the Settlement
Agreement may facilitate the sale or liquidation of PSINet
Australia, the proceeds of which will ultimately benefit the
Debtors' estates.
The Debtors submit that the resolution reached in the Settlement
Agreement was negotiated among the parties and their counsel in
good faith. No insider of the Debtors will unfairly benefit from
the compromise proposed herein.
The Debtors therefore request approval of the Settlement
Agreement by and among PSINet Strategic Services Inc. and
PSINet Australia Pty Limited (PSINet Australia), on the one
hand, and B4BCo Limited and Total Sport & Entertainment Group
Limited on the other. (PSINet Bankruptcy News, Issue No. 20;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
QUALMARK CORP: Nasdaq SmallCap Delists Shares Effective May 10
--------------------------------------------------------------
QualMark Corporation (Nasdaq: QMRKC), after the close of the
market, received notification from the Nasdaq Listing
Qualifications Department that its stock is being delisted
effective May 10, 2002, from the Nasdaq SmallCap Market.
The Company notified Nasdaq that it believes it is
unconscionable that Nasdaq would change its position regarding
its listing after previously giving its approval of The Roser
Partnership financing, based on an interpretation not made
public at the time the agreement became binding. Nasdaq has
elected to disregard the Company's request to adhere to its
original decision and is going forward to delist the Company's
stock. The Company will immediately apply for listing on the OTC
Electronic Bulletin Board.
On March 20, the Company was notified by The Nasdaq Stock Market
that a Nasdaq Listing Qualifications Panel found that QualMark
had presented a definitive plan that would enable it to evidence
compliance with all requirements for continued listing on the
Nasdaq SmallCap Market within a reasonable period of time and
sustain compliance with those requirements over the long term.
The Panel determined to continue the listing of the Company's
stock on The Nasdaq SmallCap Market if it complied with certain
undertakings. On March 27, the Company, in reliance upon this
notification, completed a $1 million preferred stock financing
transaction with The Roser Partnership III, which provided that
if shareholder approval was not obtained for the stock issuance,
the preferred stock would convert on a different basis than if
shareholder approval was obtained. Although the Company complied
with the undertakings established by Nasdaq, on May 9, The
Nasdaq Stock Market notified the Company that this transaction,
which was initially approved by Nasdaq, did not meet the
requirements of an interpretation of the shareholder approval
requirements. According to IM-4350-2, first published March 7,
2002, that states that if the terms of a transaction can change
based upon the outcome of a shareholder vote, no shares may be
issued prior to shareholder approval.
QualMark Corporation, headquartered in Denver, Colorado, is a
leader in designing, marketing, and manufacturing accelerated
life-testing systems providing America's largest corporations
with products that improve product reliability and allow them to
get to market faster. The Company has installed more than 450 of
its proprietary testing systems in 18 countries and operates
four of its own testing and consulting facilities in Denver,
Colorado; Santa Clara, California; Hopkinton, Massachusetts;
Huntington Beach, California; and Winter Park, Florida. In
Detroit, Michigan, the Company has a strategic alliance with a
large testing facility. QualMark has also formed international
ARTC alliances in Ireland, the Netherlands, Italy, France and
Sweden. The Company also offers engineering services and
products that complement the core technologies of QualMark and
other test equipment providers.
REVLON INC: Total Shareholders' Equity Deficit Tops $1.3 Billion
----------------------------------------------------------------
Revlon, Inc. (NYSE:REV) announced first quarter 2002 results.
In the first quarter 2002, Revlon's net loss per share from
ongoing operations1 was $0.65 compared to First Call consensus
estimate of a net loss per share of $0.69.
Net sales in the first quarter of 2002 were $275.4 million,
compared with $303.8 million in the first quarter of 2001, a
decrease of 9.3% or 6.3% on a comparable currency basis.
Operating income was $7.0 million in the first quarter of 2002,
compared with $12.5 million in the first quarter of 2001.
EBITDA(3) was $30.2 million in the first quarter of 2002,
compared with $35.4 million in the first quarter of 2001, and
net loss in the first quarter 2002 was $33.8 million, or $0.65
per diluted share, compared with $24.7 million, or $0.47 per
diluted share, for the first quarter of 2001.
Revlon Inc. also reported that its upside-down March 31, 2002
balance sheet showed a total shareholders' equity deficit of
about $1.3 billion.
In North America, which includes the U.S. and Canada, net sales
were $196.4 million for the first quarter of 2002, compared with
$212.5 million in the first quarter of 2001, a decrease of 7.6%.
This decrease was driven primarily by lower shipments to our
retail customers as a result of the decision by two major U.S.
retailers to shift the timing of plan-o-gram resets for certain
2002 new products. This resulted in shipments of approximately
$14 million of 2002 new products in the fourth quarter 2001.
International net sales were $79.0 million for the first quarter
of 2002, compared with $91.3 million in the first quarter of
2001, a decrease of 13.5%, or 3.6% on a constant dollar basis,
primarily due to lower sales in the European region, and lower
sales in Argentina and Venezuela primarily due to political and
economic conditions in those two countries.
Net sales in the first quarter 2002 were $275.4 million,
compared with net sales of $313.6 million in the first quarter
2001. The 2001 period includes sales from the Colorama business,
which we disposed of in July 2001.
Including restructuring costs of $4.0 million in the first
quarter 2002 and $14.6 million in the first quarter 2001,
business consolidation costs of $0.8 million in the first
quarter 2002 and $8.1 million in the first quarter 2001, and
executive severance costs of $6.5 million in the first quarter
2002, operating loss was $4.3 million in the first quarter 2002
versus an operating loss of $9.5 million in the first quarter
2001. Also including the aforementioned costs, net loss in the
first quarter 2002 was $46.1 million compared with a net loss of
$46.5 million in the first quarter of 2001.
Market Share Highlights and Brand Support
According to ACNielsen, in the first quarter of 2002, the
combined dollar consumption (which means products purchased by
consumers from our retail customers) of our color cosmetics,
skin care, women's hair coloring, anti-perspirant/deodorant and
beauty tools in the U.S. mass-market grew by 2.0% versus the
prior year quarter and by 5.7% versus the fourth quarter 2001.
There was consumption growth in Revlon brand color cosmetics,
Revlon brand hair color, Almay brand skin care, and Mitchum
brand anti-perspirant/deodorants. This consumption growth was
partially offset by declines in Almay brand color cosmetics.
Revlon brand U.S. mass-market color cosmetics dollar consumption
increased versus the prior year quarter by 2.6%.
In terms of dollar market share, we experienced declines versus
the 2001 first quarter and increases versus the fourth quarter
2001 in Revlon and Almay brand color cosmetics. We experienced
increases in dollar market share versus the 2001 first quarter
in skin care and women's hair coloring and anti-
perspirant/deodorant, and a decrease in beauty tools dollar
market share.
Revlon brand color cosmetics dollar market share in the first
quarter 2002 was 16.1% versus 16.7% in the first quarter 2001
and 15.9% in the fourth quarter 2001. Almay brand color
cosmetics dollar market share in the first quarter 2002 was 5.7%
versus 6.5% in the first quarter 2001 and 5.6% in the fourth
quarter 2001.
Total brand support expense, includes all expenses incurred
(except permanent display amortization) to support our brands to
increase consumption at our retail customers, as a percent of
gross sales was 24.8%, or $84.4 million, in the first quarter of
2002 compared with 22.0%, or $81.2 million, in the first quarter
of 2001.
CEO Comments
President and Chief Executive Officer Jack Stahl said, "Since
joining in February, I have spent much of my time at Revlon
performing a detailed analysis of the Company's business,
meeting with employees and customers, and working with my
management team to develop a comprehensive strategy.
After a successful cost reduction effort completed in 2001, we
are devoting greater energy and attention to what Revlon does
best - the development and marketing of innovative cosmetics and
personal care products. Improving overall execution at all areas
of our business and developing and executing consumer and retail
partner based growth strategies, will be our primary focus for
the foreseeable future. To improve overall execution, we are
improving various processes within Revlon, spanning from when
products are first conceived to when products leave the retail
store in the hands of satisfied consumers. Revlon is a great
company with great brands and talented and dedicated people.
With the right focus and with better execution and brand
positioning, we can take Revlon to the next level.
Revlon is a worldwide cosmetics, skincare, fragrance, and
personal care products company. The Company's vision is to
become the world's most dynamic leader in global beauty and
skincare. Web sites featuring current product and promotional
information, as well as corporate investor relation's
information, can be reached at http://www.RevlonInc.com
http://www.Revlon.comand http://www.Almay.com The Company's
brands include Revlon(R), Almay(R), Ultima(R), Charlie(R) and
Flex(R) and they are sold worldwide.
SAFETY-KLEEN: Kraus-Ward Wants Prompt Decision on Stock Pacts
-------------------------------------------------------------
Jess F. Kraus IV, Robert M. Ward, Linda Allen, Christopher Kraus
and Jeremy Kisner, the Kraus-Ward Group, represented by William
D. Sullivan of the Wilmington firm of Elzufon Austin Reardon
Tarlov & Mondell, ask Judge Peter J. Walsh to force Safety-Kleen
Corporation to immediately assume or reject a Stock Purchase
Agreement from May 1996 among Safety-Kleen Systems, then Safety-
Kleen Corporation, as purchaser, the Kraus-Ward Group as
sellers, and 3E Company Environmental, Ecological and
Engineering, a non-debtor majority owner of Systems. The Debtor
and the Kraus-Ward Group constitute all of the shareholders of
3E.
SK's Acquisition of 3E
3E is a California corporation engaged in the business of
providing material safety data sheets and related products in
San Diego, California. In May, 1996, Kraus, Ward, 3E, and the
Debtor entered into the Purchase Agreement providing that the
Debtor would purchase 151,000 of the issued and outstanding
755,000 shares of 3E common stock for a purchase price of
$1,150,000.00 with options to purchase an additional
453,000 shares. The Purchase Agreement required Kraus and Ward
(and later Allen) to execute a Non-Competition Agreement. The
Purchase Agreement also required the parties to enter into a
Shareholders Agreement made as of May 22, 1996, as amended on
October 14, 1997, and on November 4, 1999, by and between KW,
3E, and the Debtor. Under the Purchase Agreement, the Non-
Competition Agreement and the Shareholders Agreement are
incorporated into the Purchase Agreement.
The Shareholders Agreement
And the "Control Premium"
The Shareholders Agreement provided for certain restrictions on
transfer of shares and the terms of certain options granted to
Debtor for the purchase of additional shares in 1997 or 1998.
Finally, in the event the Debtor exercised either the 1997 or
1998 options, the Debtor could at any time after January 1,
2001, begin the process to exercise its "Follow Up Option" to
purchase all (and not less than all) of the remaining 3E shares.
In the event the Debtor failed to exercise the Follow Up Option,
then any time after December 31, 2001, KW had the right to
require the Debtor to purchase all remaining shares owned by KW.
On or about October 14, 1997, the Debtor exercised its option to
purchase additional 3E shares and amended the Shareholders
Agreement in connection with the purchase. The 1997 Amendment
expanded the Purchase Agreement definition of the Kraus-Ward
Group to include option holders, Christopher Kraus, Jeremy
Kisner and Linda Allen. It also provided for a "Control Premium"
to be paid to Kraus and Ward on January 1, 2001, in the initial
minimum amount of $289,380 for Kraus and $130,620 for Ward.
Finally, Allen was required to execute a Non-Competition
Agreement at the time of the 1997 Amendment.
The Shareholders Agreement was again amended on November 4, 1999
to settle a dispute which had arisen between KW and the Debtor
regarding whether the Debtor was properly operating 3E. In order
to settle the dispute, the Debtor agreed to make payments to KW
of $965,000 payable on January 6, 2000, and $965,000 payable on
January 1, 2001, which amounts would be applied to the final
amount to be paid when the Debtor purchased the remaining KW
shares.
The 1999 Amendment also, inter alia, changed the date the Debtor
could begin the Follow Up Option process from January 1, 2001,
to January 1, 2002.
When the Debtor filed this chapter 11 proceeding, it owned 76
percent of the 3E shares outstanding. Post-petition, the Debtor
has failed to pay KW $965,000 for the January 1, 2001 payment
set forth in the 1999 Amendment, and has failed to pay Kraus and
Ward $347,256 and $156,744 respectively, for the Control
Premium.
No Payments By Debtor - Onerous Non-Compete
KW brings this Motion because the Debtor has not made the
payments required under the Contract and KW is consequently
suffering from the onerous Purchase Agreement requirement that
Ward, Kraus and Allen enter into the Non-Competition Agreement.
The Non-Competition Agreement prevents Kraus, Ward and Allen
from pursuing their livelihood, even as the Debtor refuses to
make the payments which are intended to compensate Kraus, Ward
and Allen for this exclusive right. The Debtor has been reaping
the benefit of owning and controlling 3E as well as of the Non-
competition Agreement since January 1 of this year without
paying the post-petition amounts due under the Contract.
Kraus, Ward and Allen are further burdened on January 1, 2002,
when their employment agreements required under the Purchase
Agreement and currently in existence with the Debtor terminates,
while they will continue to be bound by the Non-Competition
Agreement which has yet to be assumed or rejected as part and
parcel of the Contract.
KW therefore requests that this Court compel the Debtor to
assume or reject the Contract effective immediately. The Debtor
has had more than ample time to make its decision and no
continuance of the hearing on this matter is warranted.
The Agreement is Executory
While the Debtor purchased a portion of the stock in 1996, the
Contract remains executory. The Debtor purchased only 151,000
shares in 1996, and exercised options in 1997 to bring the
Debtor's total ownership to 80% of the 755,000 shares of 3E
common stock outstanding. Subsequently, members of KW exercised
options resulting in the Debtor's current ownership of 76% of 3E
shares. Under the Shareholders Agreement, KW may require the
Debtor to purchase the remaining 24% of the 3E shares after
written notice any time after December 31, 2001.
In addition, the Contract required Kraus, Ward and Allen to
enter into employment agreements for a term ending January 1,
2002, and to enter into the Non-competition Agreements with the
Debtor prohibiting any of them from competing with 3E for a
period of five years after termination.
Finally, the Contract provides that on January 1, 2001, the
Debtor was obligated to pay $965,000 to KW and $289,380 and
$130,620 to Kraus and Ward respectively. Thus, both parties have
unperformed obligations that would constitute a material breach
if not performed and, therefore, the Contract is executory
within the meaning of 11 U.S.C. Sec. 365.
A "Reasonable Time" for Assumption has Passed
KW acknowledges that the Debtor should be allowed a reasonable
time to assume or reject its executory contracts, however a
reasonable time has long since passed in this case.
Reasonableness depends on the circumstances of each case. The
factors which the Court may consider in determining what
constitutes a reasonable time include, (i) the nature
of the interests at stake, (ii) the balance of hurt to the
litigants, (iii) the good to be achieved, (iv) the safeguards
afforded those litigants, and (v) whether the action to be taken
is so in derogation of Congress' scheme that the court may be
said to be arbitrary.
Debtor Has Benefit - But Refuses Burden
In applying these factors, the basic interests at stake are that
the Debtor entered into the Contract which allows it to purchase
3E stock while delaying payment of the full fair market value,
and while employing 3E shareholders and prohibiting certain 3E
employees from competing. In other words, the Debtor currently
enjoys ownership and control of 3E, but has refused to accepted
the burdens of the Contract by failing to pay post-petition
payments due. This situation has existed during the entire time
this bankruptcy has been pending, since June 9, 2000 - sixteen
months.
KW's Hurt
The Debtor's refusal leads to the second factor, the balance of
hurt to the litigants. The Debtor's enjoyment of ownership and
control of 3E without making post-petition payments has
repeatedly been condemned by courts. Courts also acknowledged
the "seriousness" of a debtor's failure to pay post-petition
payments and stated that the courts should give greater weight
to such failure over longer periods of time. "Particularly is
that so when the debtor adds uncertainty."
The Debtor in the instant case has not made the post-petition
payments due to KW since January, 2001, but has continued to
enjoy the benefits of the Contract. In addition, KW is left with
uncertainty over whether the Debtor will ever assume the
Contract. "Such doubt from the risk of rejection, when it
concerns an entire enterprise and the jeopardizing of a major
investment, can be paralyzing and far outweigh the benefit
to be derived from creditors."
KW's inability to plan concerning the Debtor's assumption or
rejection of the Contract creates total havoc in the operations
of 3E. KW is left with uncertainty regarding future employment,
and without the ability to provide a stable living for
themselves and their families, and cannot properly plan for the
future of 3E. The Debtor should be required to bring the post-
petition payments current and immediately assume or reject the
Contract.
The safeguard afforded the Debtor is that, absent a court order
setting an earlier date, it can reject the Contract at any time.
KW's safeguards include (i) a claim for administrative expense
under 503 (b)(1)(A); (ii) relief from the automatic stay under
Sec. 362; (iii) adequate protection payments under Sec. 361; and
(iv) compelling assumption or rejection of the Contract under
Sec. 365. The Debtor has refused to act, and given the harm to
KW, it is entitled to require that the Debtor assume or reject
the Contract without delay.
The Debtor Must Be Benefiting
Presumably the Debtor is enjoying benefits of its ownership of
3E or it would long ago have determined to reject the Contract
and eliminate the continuing accrual of post-petition
obligations. Courts have acknowledged the harm to a debtor's
estate when administrative claims accrue from the debtor's
failure to pay post-petition costs. The Debtor in this case is
in a similar situation and should not be allowed to further
delay and accrue post-petition administrative costs without
assuming the Contract and paying KW.
While the equities may favor a debtor early in a Chapter 11
proceeding, as a case proceeds and a party to a contract is
increasingly burdened, the equities should shift. In the instant
case, the Debtor filed this proceeding sixteen months ago and
there is no plan of reorganization on file. While the Debtor has
asserted excuses for this delay, excuses do not help KW in
bearing the burden of the Debtor's failure to make post-petition
payments due under the Contract.
Finally, KW reserves all rights to file an appropriate claim for
damages and/or other appropriate relief, including equitable
relief, in the event the Debtor rejects the Contract.
* * *
SK Opposes: Might Divest 3E; Agreement is Not Executory;
Debtors Not Parties to Non-Compete; and Motion is Premature
Safety-Kleen Systems, Inc., formerly known as Safety-Kleen
Corporation until 1998, when the name was changed to the present
term, announces its opposition to the Kraus-Ward Motion. SK
describes the Kraus-Ward Stock Purchase Agreement as "fully
consummated", and says the movants are trying to bootstrap Judge
Walsh into forcing the Debtors to accept or reject a separate
shareholders agreement among Systems, 3E and the Kraus-Ward
Group, and three separate non-competition agreements solely
between 3E and each of Messrs. Kraus, Ward and Ms. Allen.
Systems says the Motion should be denied because:
(1) the Debtors' business plan is not yet completed and
the Debtors are diligently working to resolve, among
other things, the completion of the assimilation of
various diverse entities and/or divestiture of those
entities that do not strategically fit, which include
entities such as 3E;
(2) the Stock Purchase Agreement is fully consummated and
cannot be assumed or rejected;
(3) the Debtors are not a party to the non-competition
agreements;
(4) to the extent that the Shareholders Agreement is or
may be executory, compelling the Debtors to determine
at this time whether they should assume or reject the
Shareholders Agreement would be premature and may
limit the Debtors' strategic alternatives that could
maximize value for the benefit of the Debtors'
estates.
The Debtors' Version of the Facts
The Debtors are a product of numerous acquisitions and other
business combinations. One of these acquisitions involved the
purchase by Systems of a majority interest in 3H through a
series of transactions. As of the Petition Date, Systems owned
and continues to own approximately 76% of the outstanding shares
of 3E, with the Kraus-Ward Group owning in the aggregate the
remaining 24% of the shares of 3E.
3E is not a debtor in these chapter 11 cases and is operated by
independent management -- principally, Messrs. Kraus and Ward,
who serve as Chief Executive officer and the Chief Financial
Officer, respectively. Under the terms of the Stock Purchase
Agreement, Systems purchased from Messrs. Kraus and Ward 151,000
shares of the outstanding shares of 3E, which represented 20% of
the total outstanding shares of 3E, for an aggregate purchase
price of $1,150,000.
The Shareholders Agreement
And The Stock Purchase Agreement
Systems, 3E, Kraus, and Ward also entered into the Shareholders
Agreement which, among other things, granted Systems the right
to purchase from Kraus and Ward an additional number of
outstanding shares of 3E. Pursuant to a Stock Purchase
Agreement, dated October 14, 1997, Systems exercised its right
under the Shareholders Agreement and purchased from Kraus and
Ward an additional 453,000 shares of 3E, which increased
Systems' total holdings of shares of 3E to 604,000, representing
80% of the total outstanding shares of 3E, for an aggregate
purchase price of $4,380,750. The Debtors explain that, because
certain of the members of the Kraus-Ward Group exercised
options to purchase shares of 3E, in January 1999, Systems'
equity interest in 3E was diluted to slightly less than 76%.
The Debtors announce that they preserve all claims that they
have or may assert in connection with their pre-emptive rights
to subscribe for additional shares under the Shareholders
Agreement in connection with such options.
In connection with the 1997 Purchase Agreement, Systems, 3E,
Kraus, and Ward entered into an amendment to the Shareholders
Agreement. The 1997 Amendment - which is silent as to the
obligor -- provides that "[s]ubsequent to October 14, 1997 and
with the purchase of any of the Shares of Kraus or Ward, there
shall be paid to Kraus or Ward, as the case may be, a
premium[.]" This provision of the 1997 Amendment was amended by
the 1999 Amendment, which provides that "[t]he 'Control
Premium . . . shall be paid to Kraus and Ward on January 1,
2001." The premium was initially set at $289,380 for Kraus and
$130,620 for Ward and was subject to adjustment as provided in
the 1997 Amendment. Indeed, nowhere in the 1997 Amendment or in
the 1998 Amendment does it state that Systems is the party that
is obligated to pay the premium as alleged in the Motion.
The 1999 Amendment:
Payments, Put and Follow-Up Option
On November 14, 1999, Systems, 3E, and the Kraus-Ward Group
entered into Amendment Number Two To Shareholders Agreement. By
November 1999, the other members of the Kraus-Ward Group had
exercised options to purchase shares of 3E and became
signatories to the 1999 Amendment. Among other things, the 1999
Amendment provides that Systems will make two partial payments
to the Kraus-Ward Group of $965,000 each, payable on January 6,
2000 and on January 1, 2001, to be divided among the members of
the Kraus-Ward Group on a pro rata basis.
Put or Follow-Up Option Makes a Credit
The 1999 Amendment further provides that if Systems exercises
the so-called Follow-Up Option (i.e., an option exercisable by
Systems from and after January 1, 2002, as extended by the 1999
Amendment, to buy all of the shares of 3E then held by the
Kraus-Ward Group) or if any member of the Kraus-Ward Group
exercises his or her so-called Kraus-Ward Put (i.e., a right to
require 3E or Systems to purchase all shares then held by such
member), the amount to be paid to the Kraus-Ward shareholder
would be reduced by the total amount of such payments
($1,930,000).
The Debtors Look For Claims Against KW
Or Strategic Alternatives
Systems made the first payment to the Kraus-Ward Group, due on
January 6, 2000, approximately six months prior to the Petition
Date. The Debtors have been analyzing whether they have any
potential claims against the Kraus-Ward Group. The Debtors have
yet to make the second payment under the 1999 Amendment.
The Debtors face numerous complex financial and operational
issues and have been working to finalize the business plan that
will form the basis of a reorganization plan. In conjunction
therewith, the Debtors have been exploring certain strategic
alternatives with the Kraus-Ward Group, while also analyzing
whether 3E would be a strategic fit for the Debtors in the
future. The Debtors continue to be in good-faith discussions
with the Kraus-Ward Group with respect to strategic
alternatives.
Debtors Must Be Given Reasonable Time
A debtor is entitled to assume or reject executory contracts to
which it is a party at any time before the confirmation of its
reorganization plan. Nevertheless, upon request of a nondebtor
party, the court may order the debtor to assume or reject an
executory contract within a reasonable time. What constitutes a
reasonable time for assumption or rejection of an executory
contract, however, is left to the court's discretion, to be
determined in light of the particular circumstances Of the case.
Above all, the court should interpret reasonable time consistent
with the broad purpose of Chapter 11, which is 'to permit
successful rehabilitation of debtors.
No Reasonable Time to Decide Here
The Debtors' decision whether to assume or reject particular
contracts, as well as the timing of ch assumption or rejection,
depends in large part on completion of their comprehensive
business plan for the future (e.g., whether the subject of the
contracts will play a role in the Debtors' operations upon
emergence from chapter 11) and the preparation of the Debtors'
plan or plans of reorganization to implement the business plan.
The necessary business plan is not yet complete, however.
Delays Required by Need to Restate
The Debtors previously have advised Judge Walsh that on or about
July 9, 2001, the Debtors filed with the Securities and Exchange
Commission their Form 10-K/A, Amendment No. I for the fiscal
year ended August 31, 2000. The 10-K/A included, among other
things, the Debtors' restated financial results for fiscal years
1997, 1998, and 1999, as well as audited financial results for
fiscal year 2000. As the Debtors are sure Judge Walsh can no
doubt appreciate, the restatement and audit of four years,
financial results required monumental efforts by, and tremendous
coordination between, the Debtors and their retained
professionals. Indeed, the restatement process consumed hundreds
of thousands of man-hours and, despite the tireless efforts of
all parties involved, took many months longer to complete than
the Debtors or anyone else could possibly have anticipated. As a
result, the Debtors' preferred timetable for completion of their
business plan and formulation and negotiation of their Plan
necessarily has been similarly delayed. Having completed the
restatement process, however, the Debtors can now focus on
revising and finalizing their business plan, and formulating,
negotiating, and confirming a Plan.
Upon finalizing the business plan, however, the Debtors will
need to assess, at least preliminarily, their actual and
projected performance under that plan. This assessment
undoubtedly will impact the Debtors, decision as to the
appropriate treatment of many, if not all, of the Debtors'
thousands of executory contracts. The Debtors thus require
additional time to complete their business plan and,
accordingly, to make a fully informed decision with respect to
each of their executory contracts. The success of the Debtors,
reorganization depends upon the ultimate outcome of several
complex financial and operational issues that the Debtors
The Put Is Not Enforceable
And SPA Is Not Executory Contract
The Debtors submit that the Kraus-Ward Put is unenforceable
against Systems, and to the extent that the purported exercise
of the Kraus-Ward Put deprives Systems of any rights, such act
is excusing performance of the other." Systems fulfilled its
material obligations under the Stock Purchase Agreement when it
paid for the shares it received from Kraus and Ward. Thus, the
essence of the contract was fulfilled, and no obligations remain
on the part of either party, the failure of which to perform
would constitute a material breach excusing performance of the
other party.
The Indemnities Are Not Enough
Although indemnities survived the termination of the Stock
Purchase Agreement (indeed, it is commonplace that at least some
obligations remain to be performed on both sides in numerous
contracts), the failure to indemnify the other party would not
excuse the other party from performing its obligation to
indemnify or any other obligations under the Stock Purchase
Agreement. It would merely provide the aggrieved party with a
cause of action. The simple fact that money should or should
not be paid does not make [a contract] executory.
Systems Is Not A Party
The Non-Competition Agreements are solely between 3E and each of
Kraus, Ward, and Allen. No Debtor is party to those agreements.
Section 365(a) of the Bankruptcy Code provides that "the
trustee, subject to the court's approval, may assume or reject
any executory contract or unexpired lease of the debtor." Quite
simply, the Non-Competition Agreements are not contracts of
Systems and cannot be assumed or rejected by Systems under the
Bankruptcy Code.
Even With Integration, Still Not Executory
Even assuming arguendo that the Non-Competition Agreements were
deemed integrated with the Stock Purchase Agreement -- which the
Debtors submit they are not -- Systems could not be compelled to
assume or reject the Non-Competition Agreements because the Non-
Competition Agreements are not executory contracts. Referring
to a covenant not to compete, a Pennsylvania Bankruptcy Court
recently stated "[I]f the covenant were a separate contract, it
could not be rejected because the only obligation remaining is
the Debtor's duty not to compete. A contract is executory when
substantial performance remains due by both parties and the
failure of either to perform would constitute a material breach
excusing the other party's performance." The only obligation
which remains to be performed in the Non-Competition Agreements
is the duty of Kraus, Ward, and Allen not to compete with 3E.
Systems has no obligations whatsoever under those agreements.
Therefore, the Non-Competition Agreements are not executory and
cannot be assumed or rejected.
But The Agreements Are Not Integrated
The Kraus-Ward Group erroneously states that the Stock Purchase
Agreement, the Non-Competition Agreements, and the Shareholders
Agreement are "incorporated into the [Stock Purchase
Agreement]". In fact, only the exhibits to the Stock Purchase
Agreement are incorporated by reference (and, only forms
substantially in the form of the exhibits), not the agreements
themselves.
The Shareholders Agreement has been twice modified since the
execution of the original agreement and none of the
modifications has been incorporated into the Stock Purchase
Agreement either. Therefore, the Kraus-Ward Group's assertion
that the agreements related to the Stock Purchase Agreement are
incorporated into the Stock Purchase Agreement is patently
wrong.
Moreover, the Stock Purchase Agreement, the Non-Competition
Agreements, and the Shareholders Agreement simply cannot be and
should not be integrate because each of those agreements contain
severability clauses. "The purchase agreement contains a
severability provision, which states that, if any provision is
rendered invalid, the remaining portions of the contract are not
affected thereby. Thus the parties intended that any portion of
the purchase agreement, and any other instrument with which it
may be integrated . . . stand alone, and not depend on any other
instrument for its survival." The Stock Purchase Agreement, the
Non-Competition Agreements, and the Shareholders Agreement all
contain substantially similar severability provisions.
Therefore, each agreement stands and falls on its own and cannot
be integrated with the other separate agreements.
Assumption Or Rejection Is Premature
The Debtors submit that at this stage of their cases,
determination of assumption or rejection of the Shareholders
Agreement -- which the Debtors submit is or may possibly be the
only relevant 3E agreement Systems can assume or reject -- is
premature. At this time, assumption of the Shareholders
Agreement and its attendant obligations could require the
Debtors to spend estate funds with no presently recognizable
benefit, while rejection could foreclose possible future benefit
to the Debtors' estates. Accordingly, the Debtors maintain that
neither assumption nor rejection of the Shareholders Agreement
is appropriate at this juncture.
Krause, Ward Can't Compete Anyway
Kraus-Ward Group offers no compelling reason why Systems should
be required to assume or reject the Shareholders Agreement at
this time. Although the Krause-Ward Group asserts that their
basic interest at stake is the prohibition from competing with
3E by virtue of the Non-Competition Agreements, the members of
the Kraus-Ward Group are officers and directors of 3E, which
positions preclude them from competing with 3E in the first
place. It is axiomatic under corporate law that an officer or
director cannot compete against the company by which he is
employed.
No Actual Burden on KW
The Kraus-Ward Group asserts that they will be further burdened
by the expiration of their employment agreements.
Notwithstanding such expiration, upon information and belief,
the Kraus-Ward Group continues to receive compensation from 3E
for their services to 3E and suffers no actual burden. Because
discussions with the Kraus-Ward Group concerning strategic
alternatives have not advanced as quickly as the Kraus-Ward
Group would have preferred, the Kraus-Ward Group cannot -- and
should not be permitted to -- use a motion to compel assumption
or rejection as a tool to renegotiate or restructure their
relationship with the Debtors. Further, the Kraus-Ward Group is
no more entitled to pre-confirmation payment of their unsecured
prepetition claims than any other of the thousands of parties
with which the Debtors have executory contracts. Indeed, the
Debtors believe that they may have certain potential claims
against the Kraus-Ward Group.
The Supplement: Exercise the Put
On May 2, 2002, the K&W Group filed a Supplement this Motion,
together with a supplemental declaration of Jess F. Kraus in
support of the Motion, in which the KW appears to be exercising
the put option. (Safety-Kleen Bankruptcy News, Issue No. 34;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
SIMMONS COMPANY: March 30 Balance Sheet Upside-Down by $59 Mill.
----------------------------------------------------------------
Simmons Company announced the operating results for the first
quarter of 2002.
For the first quarter of 2002 net sales were $177.2 million, as
compared to $162.4 million in the same period one year ago.
Reported sales for both years reflect the adoption at the
beginning of the Company's 2002 fiscal year of Financial
Accounting Standards Board Emerging Issues Task Force 00-25,
Vendor Income Statement Characterization of Consideration Paid
to a Reseller of the Vendor's Products. The adoption of this
new accounting pronouncement had the effect of decreasing both
net sales and selling, general and administrative expenses by
$4.6 million for the first quarter of 2002 and $17.2 million for
the first quarter of 2001. The sales increase was positively
impacted by new distribution developed over the last year and
increased sales of higher priced products.
Adjusted EBITDA for the first quarter of 2002 increased by $7.6
million, or 44.9%, to $24.5 million from $16.9 million in the
first quarter of 2001. This adjusted EBITDA was a record first
quarter for Simmons. The Company had net income of $5.7 million
in 2002's first quarter compared to a $1.0 million net loss in
the same period one year ago.
Simmons' March 30, 2002 balance sheet recorded a total
shareholders' equity deficit of close to $60 million, up from
$58 million recorded in December 29, 2001.
Simmons' Chairman and Chief Executive Officer, Charlie Eitel,
said, "We are pleased with our sales growth in the first quarter
which occurred as a result of our efforts to replace several key
dealers which were lost due to bankruptcy over the last twenty-
one months. We are also very pleased with the success of our
new Beautyrest product line, featuring Super Pocketed Coil(R)
Technology and unique covers, which we began shipping in late
2001. We believe the growth in sales at our higher price points,
which we enjoyed in our first quarter, is further evidence that
consumers will pay more for a mattress which will provide them
with a better night's sleep."
Mr. Eitel added, "Our ongoing focus on cost control continues to
be instrumental in our improvement in operating margins. Our
material costs as a percentage of net sales decreased in the
first quarter due in part to the efforts of our associates to
reduce waste in manufacturing. Our labor costs as a percentage
of net sales also declined in the first quarter. As a result of
improved efficiencies in our factories, management of labor
hours, and product demand, we were able to increase sales with
over 13% fewer factory workers as compared to a year ago.
Through our focus on operations, our first quarter gross margin
improved to 47.1%, the thirteenth consecutive quarter of gross
margin improvement versus the comparable quarter of the prior
year."
Total debt levels declined by $7.8 million during the first
quarter to $288.1 million. Executive Vice President and Chief
Financial Officer, William S. Creekmuir, said, "Our operating
cash flow in the first quarter, which increased by $11.8 million
over the first quarter of 2001, is reflective of our ongoing
success in expanding operating margins while at the same time
effectively managing our balance sheet." Over the last twelve
months, total debt has declined by $44.7 million and the
Company's leverage ratio at March 30, 2002 was 3.4 times cash
flow. Mr. Creekmuir continued, "Management remains focused on
the continued de-leveraging of the Company. Over the balance of
2002, through operating cash flows and balance sheet management,
we believe we can continue to generate free cash flow to further
reduce debt."
Mr. Eitel then added, "We are pleased to announce that Dale F.
Morrison has joined Simmons' Board of Directors effective April
30, 2002. Dale is a seasoned business executive who is the
former Chief Executive Officer of Campbell Soup Company. Prior
to being named CEO, Mr. Morrison ran the Pepperidge Farm
Division of Campbell after a long and successful career at both
PepsiCo and General Foods. Most recently, Mr. Morrison served
as Chief Executive Officer of Ci4net, Inc., a technology equity
holding company based in London, England. The Simmons
management team welcomes the counsel that Dale brings to our
Board."
Mr. Eitel continued, "We remain concerned about the state of the
U.S. economy. Although housing sales and interest rates bode
well for our industry, the current unemployment rate in most
parts of the country does not. The International Sleep Products
Association is forecasting three percent sales growth for our
industry in 2002. We believe by continuing to focus on
introducing innovative products designed to deliver consumers 'a
better night's sleep' we can increase our sales in 2002 above
the industry rate. We plan to continue to closely manage our
costs and focus on expanding our customer base. If we continue
to execute in each of these areas, our 2002 adjusted EBITDA
should be a record for Simmons Company."
The maker of Beautyrest(R), BackCare(R), Olympic(R) Queen,
DreamScapes(TM) and Deep Sleep(R), Atlanta-based Simmons Company
is one of the world's largest mattress manufacturers, operating
18 plants across the United States and Puerto Rico. Simmons is
committed to helping consumers attain a higher quality of sleep
and supports its mission through a Better Sleep Through Science®
philosophy, which includes developing superior mattresses and
promoting a sound, smart sleep routine. For more information,
consumers and customers can visit the Company's Web site at
http://www.simmons.com
SPECIAL METALS: Unit Agrees on 3-Year Contract Terms with USWA
--------------------------------------------------------------
Special Metals Corporation (OTC:SMCXQ) said that its Huntington
Alloys subsidiary and United Steelworkers of America, Local
Union No. 7153 have reached an agreement on the terms of a new
three-year contract for the Huntington Alloys manufacturing
facility in Burnaugh, Kentucky.
The membership of USWA Local Union No. 7153 ratified the
contract at a meeting on May 7, 2002.
Special Metals is the world's largest and most-diversified
producer of high-performance nickel-based alloys. Its specialty
metals are used in some of the world's most technically
demanding industries and applications, including: aerospace,
power generation, chemical processing, and oil exploration.
Through its 10 U.S. and European production facilities and a
global distribution network, Special Metals supplies over 5,000
customers and every major world market for high-performance
nickel-based alloys.
SPECIAL METALS: First Quarter Net Sales Drop 19% to $159 Mill.
--------------------------------------------------------------
Special Metals Corporation (OTC: SMCXQ), the world's largest and
most-diversified producer of high-performance nickel-based
alloys, reported financial results for the quarter ended March
31, 2002.
Consolidated net sales for the quarter were $158.7 million, an
18.7% decrease from sales of $195.1 million recorded during the
same period in 2001. The Company reported a net loss of $12.6
million, compared with a net loss of $3.9 million for the first
quarter of 2001. Net loss per share (after accruing preferred
dividends) was $0.93 for the quarter, compared to a loss of
$0.36 for the corresponding 2001 period.
A significant decline in demand for the Company's vacuum-melted
products, especially with respect to the commercial aerospace
and power generation markets, had a substantial effect on
Special Metal's operating performance during the three month
period ended March 31, 2002. Weaknesses in the domestic and
global economies, coupled with increased import activity
facilitated by the strong dollar, also adversely affected both
volume and pricing for the Company's general engineering alloys
and superalloys.
The Company's financial performance in the first quarter of 2002
also reflects the recording of special expenses associated with
a corporate restructuring program that was implemented in
January, as well as professional fees and expenses related to
the filing of voluntary petitions for reorganization by the
Company and its U.S. subsidiaries under Chapter 11 of the U.S.
Bankruptcy Code. During the first quarter of 2002, the Company
recorded restructuring related expenses in the amount of $0.7
million.
Special Metals President T. Grant John said: "The difficult
economic and market conditions we are experiencing were
certainly factors in our decision to file for Chapter 11
reorganization on March 27, 2002. However, we are moving forward
with developing our plan of reorganization so that we may emerge
as a stronger, financially viable organization. An integral part
of that effort involves building upon the substantial gains we
have made in safety, quality, yields, customer service, and
delivery performance. We continue to actively pursue company-
wide initiatives to improve efficiencies, reduce costs and
capture operating synergies within and among our operations.
"Our ability to successfully reorganize is enhanced by the new
$60 million debtor-in-possession revolving credit facility we
have entered into with Credit Lyonnais, as agent for our bank
group," Dr. John continued. "The new financing should provide us
with sufficient resources to continue to deliver quality
products and services to our customers for the foreseeable
future." The Company received final court approval for the new
credit facility following a hearing held Friday. Dr. John also
cited the recent ratification of a new three-year collective
bargaining agreement at the Burnaugh, Kentucky manufacturing
facility as a positive development, stating: "This will help us
maintain an uninterrupted supply of products to our customers."
Special Metals is the world's largest and most-diversified
producer of high-performance nickel-based alloys. Its specialty
metals are used in some of the world's most technically
demanding industries and applications, including: aerospace,
power generation, chemical processing, and oil exploration.
Through its 10 U.S. and European production facilities and a
global distribution network, Special Metals supplies over 5,000
customers and every major world market for high-performance
nickel-based alloys.
STANDARD AUTOMOTIVE: Goldman Sachs Discloses 11.9% Equity Stake
---------------------------------------------------------------
Goldman, Sachs & Co. beneficially own 135,000 shares of the
common stock of Standard Automotive Corporation representing
11.9% of the outstanding common stock of the Company. Goldman,
Sachs shares voting and dispositive powers with The Goldman
Sachs Group, Inc., also beneficial owners of the shares.
Standard manufactures precision products for the aerospace,
nuclear, industrial and defense markets; it designs and builds
remotely operated systems used in contaminated waste cleanup; it
designs and manufacturers trailer chassis used in transporting
maritime and railroad shipping containers; and it builds a broad
line of specialized dump truck bodies, dump trailers, and
related products. The company filed for Chapter 11 on March 19,
2002. J. Andrew Rahl, Jr., Esq. at Anderson Kill & Olick, P.C.
is helping Standard Automotive in its restructuring efforts.
On March 19, 2002, the company posted a total shareholders'
equity deficit of about $11 million.
TAYLOR FARMS LLC: Voluntary Chapter 11 Case Summary
---------------------------------------------------
Lead Debtor: Taylor Farms, L.L.C.
P.O. Box 6227
Virginia Beach, Virginia 23456-0000
Bankruptcy Case No.: 02-73072
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Linda Taylor Chapell 02-73073
Chapter 11 Petition Date: May 6, 2002
Court: Eastern District of Virginia - Live (Norfolk)
Judge: Stephen C. St. John
Debtors' Counsel: W. Greer McCreedy II, Esq.
Kellam, Pickrell, Cox & Tayloe
403 Boush Street, Suite 300
Norfolk, Virginia 23510
(757)627-8365
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
TRANSFINANCIAL: Closes $17MM Sale of Units' Outstanding Shares
--------------------------------------------------------------
In accordance with a negotiated Purchase Agreement, dated
November 6, 2001, on April 19, 2002, TransFinancial Holdings,
Inc. closed the sale of all of the outstanding shares of its
subsidiaries Universal Premium Acceptance Corporation (UPAC),
UPAC of California, Inc., APR Funding Corporation and American
Freight System, Inc., and real estate, formerly constituting the
headquarters of the Company, in Lenexa, Johnson County, Kansas.
The purchaser was KIF, Inc., an Iowa corporation, as assignee of
the buyer named in the Purchase Agreement, Commercial Equity
Group, Ltd., an Iowa corporation. There was no relationship
between the purchaser, or its assignor, and the Company, its
affiliates, its directors and officers, and associates thereof,
except that the Company did understand that the purchaser would,
after the closing, offer an ownership interest to Kurt Huffman,
Executive Vice President of the Company and President of UPAC.
The adjusted purchase price was approximately $17,100,000, which
was reduced by the Buyer's assumption of a contractual
obligation of the Company to Mr. Huffman of about $400,000 and
an inter-company payable from the Company to UPAC in the amount
of $3,500,000. The balance of $13,200,000 was paid to the
Company in cash, except for approximately $2,400,000 transferred
at the closing to pay liabilities secured by the assets sold.
Other expenses paid by the Company from the cash proceeds
included a break-up fee to a firm with which the Company had an
earlier agreement for the sale of UPAC, a sales commission to
Mr. Huffman and related legal and other expenses, approximating
$1,000,000 in the aggregate.
TransFinancial Holdings shut down its trucking businesses --
Crouse Cartage and Specialized Transport, which had accounted
for 95% of TransFinancial's revenues -- in 2000 to concentrate
on its financial services operations, but the remaining debt
proved too much for the surviving parent to overcome. The
company's Universal Premium Acceptance unit, which financed
premiums for buyers of commercial property and casualty
insurance and thus allowed customers more time to pay for
insurance, was sold to an undisclosed buyer.
TRANSTECHNOLOGY: Pursuing Talks to Refinance Sr. Credit Facility
----------------------------------------------------------------
TransTechnology Corporation (NYSE:TT) reported that for the
fiscal 2002 fourth quarter ended March 31, 2002, it recorded
income from continuing operations of $1.4 million, which
included a gain from the sale of real estate of $.9 million.
In the same period of the prior year the company reported a loss
from continuing operations of $6.0 million, which included a
non-recurring restructuring charge of $11.2 million. Revenues
for the fourth quarter of fiscal 2002 decreased 11.3% to $18.5
million from $20.9 million in the same quarter a year ago.
For the twelve months ended March 31, 2002, the company reported
income from continuing operations of $.8 million compared to a
loss of $6.0 million for the same period last year, which
included the respective non-recurring or non-operating items
noted above. Fiscal 2002 EBITDA (earnings before interest,
taxes, depreciation and amortization) from operations increased
46.5% to $15.3 million from $10.5 million in fiscal 2001.
Revenues for the twelve months of the current year increased
2.6% to $72.3 million from $70.5 million during the prior year's
twelve months.
The company reported that while its total fourth quarter
interest expense had decreased to $4.3 million from $8.5 million
in the prior year's quarter, the amount of interest charged to
continuing operations had almost tripled to $3.2 million from
$1.2 million in the prior year's quarter. For the twelve months
of fiscal 2002 interest expense charged to continuing operations
almost doubled to $8.1 million from $4.9 million for the
previous year while total interest fell to $25.1 million from
$34.4 million in the prior fiscal year. Under generally accepted
accounting principles, interest expense is allocated between
continuing and discontinued operations based upon the average
book value of assets in each category. Because the company
completed a substantial number of divestitures during fiscal
2002, the proportion of assets included in the determination of
interest expense recognized for continuing operations increased
when compared to the prior periods, resulting in a higher
interest charge. Additionally, as the proceeds from asset sales
are used to retire senior bank debt with a lower interest rate
than the remaining subordinated debt, the company's effective
interest rate rises when compared to prior periods.
Following the recognition of an after-tax loss from discontinued
operations of $13.2 million or $2.12 per share, the company
reported a net loss for the fourth quarter of $11.8 million or
$1.89 per share. The fourth quarter loss from discontinued
operations included the recognition (pretax) of an additional
$6.9 million of operating losses associated with units divested
or scheduled for divestiture, an increase of $1.1 million for
allocated interest expense, and a $7.8 million increase in
impairment charges associated with lower expected net sales
values on businesses that are slated to be or have been
divested. For the twelve months ended March 31, 2002 the company
reported a loss from discontinued operations of $72.6 million
and a net loss of $71.8 million. In the prior fiscal year the
company reported a loss from discontinued operations of $66.9
million and a net loss of $73.0 million.
The company's continuing operations, which consist of its Breeze
Eastern rescue hoist and cargo hook division and the Norco
aircraft hold-open rod and motion control subsidiary, reported a
strong increase in new orders received and backlog during the
fourth quarter. New orders received in fiscal 2002 totaled $77.8
million, a 17.0% increase over fiscal 2001 new orders of $66.5
million. Backlog at March 31, 2002 stands at $43.7 million
compared with $40.2 million at March 31, 2001. Both Breeze-
Eastern and Norco saw increases in new orders and backlog in
fiscal 2002 compared to fiscal 2001. The 11.3% sales decrease
reported in the fourth quarter was the result of orders that
were substantially completed in the fourth quarter of fiscal
year 2002 but not shipped until the first quarter of the 2003
fiscal year. Fourth quarter gross margin increased four
percentage points to 54.5% as a result of a more favorable mix
of higher margin spare parts and repair work as compared to
lower margin original equipment and engineering work and
adjustments to product costing allowances and the year end
reconciliation of fixed cost absorption rates. The gross margin
for the full fiscal year 2002 of 44.8% compared favorably with
the prior year's full year gross margin of 42.4%. Fourth quarter
SG&A expenses dropped $2.1 million or 27.5% compared to the
prior year's fourth quarter. Of the reported $5.6 million of
SG&A expenses for fourth quarter of fiscal 2002, $2.5 million
was associated with the corporate office as compared to $3.3
million of such expenses in last year's fourth quarter
(exclusive of the above-mentioned fiscal 2001 restructuring
charge).
Michael J. Berthelot, Chairman, President and Chief Executive
Officer of TransTechnology said, "We are very near to the
completion of our restructuring and divestiture program. Since
the beginning of the 2002 fiscal year we completed the
divestiture of our hose clamp businesses in the US and Germany,
our engineered components business, our aerospace rivet
business, and our German retaining ring business. Within the
next few weeks we expect to complete the divestiture of our US,
UK and Brazilian retaining ring operations in separate
transactions, which will eliminate the last of our business
units that report operating losses and negative cash flows. Our
corporate office has been restructured and reduced in size from
24 people a year ago to 10 today, with an ultimate target of
nine people at the end of June, all of who will relocate into
"free" office space at our Breeze Eastern facility in Union, New
Jersey, at the end of July. It has been a difficult environment
in which to complete these transactions, as the US economy
suffered through a downturn and the financing sources for
purchasers of our business units marketed for sale severely
contracted, both of which combined to result in downward
pressures on the values received for the businesses sold. We are
pleased, however, that we have been able to substantially
complete our restructuring plan within the 2002 fiscal year."
Mr. Berthelot continued, "Our aerospace business continues to
show strong growth in new orders, backlog and profitability.
Combined with our lower base of corporate office and
administrative expenses, we expect to see continuing growth in
operating income over the next several quarters. While we expect
to see a fiscal 2003 decline in sales to the commercial airframe
and airline industries at our Norco unit, we expect that loss of
business to be offset by an increase in sales of military
equipment and spare parts and motion control devices. Breeze-
Eastern's sales of rescue hoists, cargo hooks, and weapons'
handing equipment are almost all military or state and local
government search and rescue agency oriented, and thus not
impacted by the anticipated decline in commercial aircraft
production or airline activity in the short-term."
Joseph F. Spanier, Vice President and Chief Financial Officer,
said, "At the end of fiscal 2002, our total debt had been
reduced to $107.6 million from $272.5 million at the end of last
fiscal year. This reduction in debt was accomplished primarily
through the use of proceeds from our divestiture program. In
addition to those proceeds, however, we realized $5.5 million of
income tax refunds as a result of carrying back the prior year's
operating losses. As a result of the Economic Stimulus Act of
2002, we received $1.6 million of additional income tax refunds
early in fiscal 2003 and anticipate receiving an additional $3.8
million in such refunds during the next few months. At the end
of fiscal 2002 we have an income tax net operating loss carry-
forward, after considering the effect of these anticipated
carry-backs, of almost $50 million. In addition, we anticipate
generating $17 million more of tax losses relative to
divestitures expected in fiscal 2003. As a result, while our
future financial statements will report an income tax expense,
almost none of that expense will require a cash outlay. It
remains our plan to refinance our existing senior credit
facility of less than $30 million through a new credit facility
during the current quarter, and active discussions are in
progress with several financial institutions to do so."
Mr. Spanier continued, "Our EBITDA from continuing operations
was very strong this past fiscal year, amounting to $15.3
million compared to $10.5 million last year. As we have gone
through this restructuring program there have been several non-
recurring and unusual charges reflected in our operating
results. Additionally, where in the past we reported segment
information, including a separate breakout of corporate office
expenses, we are no longer required to do so. Accordingly, in
order to provide some transparency and comparability to the
prior years' results and to allow for a reconciliation of EBITDA
and free cash flow to reported net income, an additional table
is being provided along with our standard financial
report."
Mr. Berthelot said, "We have essentially completed the
restructuring of our operations. We are now at the point at
which we must address the restructuring of our balance sheet.
While we expect our operating income to continue to be strong
over the next several quarters, clearly the debt level we have
and the interest rates we are paying are not conducive to the
creation of shareholder value over the long or short terms. As a
result, we are currently undertaking a study relative to the
possible restructuring of the company's balance sheet with the
goal of providing a capital structure that will form the basis
for an immediate benefit to and long-term increase in
shareholder value as well as the capital necessary to sustain
and grow our aerospace businesses. We are also conducting a
separate analysis as to the long-term future of our company as a
much smaller, independent public company and how to best serve
our ultimate goal of increasing shareholder value. We expect to
have these analyses completed during the first quarter of our
current fiscal year."
TransTechnology Corporation designs and manufactures aerospace
products with over 380 people at its facilities in New Jersey
and Connecticut. Total aerospace products sales were $72 million
in the fiscal year ended March 31, 2002.
At March 31, 2002, TransTechnology reported an upside-down
balance sheet, showing a total shareholders' equity deficit of
about $13 million.
US AIRWAYS: Warns of Chapter 11 Filing to Effect Restructuring
--------------------------------------------------------------
US Airways reported that for the first quarter of 2002, the
Company's operating revenues were $1.7 billion, operating loss
was $370 million, loss before cumulative effect of accounting
change was $286 million. For the comparative period in 2001,
operating revenues were $2.2 billion, operating loss was $228
million, loss before cumulative effect of accounting change was
$178 million. The Company's results for the first quarter of
2001 include an unusual item have significantly impacted first
quarter 2002 results. First quarter 2001 results were also
impacted by passenger fare pressures. The lower passenger fares
resulted from declines in business traffic (which has higher
yields than leisure traffic) which began early in 2001 and was
exacerbated by the events of September 11th. The airline
industry has engaged in heavy price discounting since September
11th to entice customers to fly and competition from low-fare
carriers has intensified. While the Company has taken aggressive
actions to reduce its costs since September 11th, including
significant reductions in workforce and capacity (as measured by
available seat miles), many of the Company's costs are fixed
over the intermediate to longer term, so that the Company is not
able to reduce its costs as quickly as it is able to reduce its
capacity. In addition to lower passenger fares, first quarter
2001 results were adversely impacted by relatively jet fuel
prices.
Company Update
The Company's management is currently working with key
stakeholders to develop a restructuring plan that will focus on
three key elements:
* A lower cost structure in which the participation of all
key stakeholders including employees, suppliers and
financial providers will be essential.
* A plan for deploying a significant increase in regional
jets in the US Airways Express system.
* A means to access the significant amount of incremental
revenue US Airways believes it would bring to a larger
domestic and international network.
The Company contemplates that such a restructuring plan would be
supported by liquidity assistance in the form of a government-
guaranteed loan under the Air Transportation Safety and
System Stabilization Act (Stabilization Act) referred to below.
The Company's preferred approach, which it is actively pursuing,
is to reach an accord with its key stakeholders and obtain
assistance under the Stabilization Act on a timely basis in
light of its significant liquidity issues. However, because
there is no assurance that this will occur, the Company also
recognizes that in order to successfully restructure the
Company, alternative restructuring scenarios in the context of a
judicial reorganization also must be considered.
The Company is addressing these scenarios on a contingency
basis.
The Company's ability to use regional jets in its US Airways
Express operation is restricted by the labor agreement between
US Airways and its pilots. In April 2002, the US Airways pilot
leadership agreed to increase the limit to 140 regional jets
from the previous 70 regional jet limit. The need for regional
jets remains pressing. Due to its relatively small-size hubs, US
Airways relies heavily on feed traffic from its US Airways
Express affiliates who carry passengers from low density markets
to US Airways' hubs. The Company continues to lose market share
in markets where its turboprop affiliates compete with other
major airline affiliates which operate regional jets. During the
first quarter of 2002, the Company continued to rationalize US
Airways' fleet types. In late March 2002, the Company retired
its last F-100 and MD-80 aircraft. These retirements represent
the third and fourth fleet retirements over the past year of
older, less efficient aircraft types.
Three Months Ended March 31, 2002
Operating Revenues-Passenger transportation revenues decreased
$528 million or 26.9%. Passenger transportation revenues for US
Airways decreased $503 million due to a 16.0% decrease in RPMs
and a 14.1% decrease in yield. Passenger transportation revenues
related to the whollyowned regional airlines decreased $25
million reflecting a decrease in yield of 18.7% partially offset
by a 1.1% increase in RPMs. The unfavorable yield variances
reflect a decline in business traffic as many companies have
corporate travel restrictions in place as a result of generally
weak economic conditions. In addition, the airline industry has
continued to engage in heavy price discounting since September
11th to entice customers to fly. The decrease in RPMs is
primarily due to the post-September 11th schedule reductions for
US Airways. Cargo and freight revenues decreased 28.3% primarily
as a result of lower mail revenues, which reflect mail carriage
restrictions imposed by the Federal Aviation Administration in
the aftermath of September 11th. Other operating revenues
increased 3.9% principally due to revenues generated from sales
of capacity (available seat miles or ASMs) on regional jet
affiliates. These affiliates operated an average of 69 regional
jets during the first quarter of 2002 versus 44 regional jets
during the first quarter of 2001. The increased revenues
resulting from sales of capacity on the regional jet affiliates
are partially offset by increased expenses recognized in the
Other operating expenses category related to purchases of the
capacity.
Liquidity and Capital Resources
As of March 31, 2002, the Company's Cash and cash equivalents
and Short-term investments totaled $561 million. The Company's
ratio of current assets to current liabilities (current ratio)
was 0.5. As of December 31, 2001, the Company's Cash and cash
equivalents and Short-term investments totaled $1.08 billion and
the current ratio was 0.6. The Company's Cash and cash
equivalents and Short-term investments include funds which, in
the ordinary course of business, it withholds from employees and
it collects from passengers. These funds are required to be paid
to applicable governmental authorities, and include withholding
for payroll taxes, transportation excise taxes, passenger
facility charges and transportation security charges. The
Company's Cash and cash equivalents and Short-term investments
are used to fund the Company's operations, including payments to
such applicable governmental authorities and payments of accrued
obligations to vendors, suppliers, employees and other
creditors. For the first three months of 2002, the Company's
operating activities used net cash of $438 million compared to
operating activities which provided net cash of $17 million for
the first three months of 2001. Operating cash flows during the
first quarter of 2002 were adversely affected by the same
factors that adversely affected financial results during that
period. Additionally, first quarter 2002 cash flow from
operating activities includes payments of $188 million of ticket
taxes for which remittance was deferred until January 2002 under
the Stabilization Act. For the first three months of 2002,
investing activities included cash outflows of $101 million
related to capital expenditures. Capital expenditures included
$90 million for new aircraft (including purchase deposits) with
the balance related to rotables, ground equipment and
miscellaneous assets.
During the first quarter of 2002, US Airways entered into
agreements to sell 97 surplus DC-9, B737-200 and MD-80 aircraft.
Proceeds from disposition of property includes, among other
things, proceeds related to the surplus aircraft and related
parts delivered in the first quarter of 2002. The net cash
provided by investing activities for the quarter ended March 31,
2002 was $93 million. For the first three months of 2001,
investing activities included cash outflows of $566 million
related to capital expenditures. Capital expenditures included
$505 million for new aircraft (including purchase deposits) with
the balance related to rotables, ground equipment and
miscellaneous assets. The net cash used for investing activities
for the quarter ended March 31, 2001 was $450 million.
Net cash used by financing activities during the first three
months of 2002 was $18 million. US Airways received proceeds of
$38 million from the mortgage financing of one A321 aircraft.
These proceeds were offset by the scheduled principal repayments
of long-term debt in the amount of $56 million. Net cash
provided by financing activities during the first three months
of 2001 was $334 million. US Airways received proceeds of $412
million from the mortgage financing of six A320-family aircraft
and three A330 aircraft. US Airways also received $129 million
from sale leaseback transactions on three A320-family aircraft.
These proceeds were partially offset by the scheduled principal
repayments of long-term debt in the amount of $209 million,
including the February 1, 2001 repayment of US Airways' $175
million 9-5/8% Senior Notes. The Company continues to be highly
leveraged. It has a higher amount of debt compared to equity
capital than most of its principal competitors. Substantially
all of its aircraft and engines are subject to liens securing
indebtedness. The Company and its subsidiaries require
substantial working capital in order to meet scheduled debt and
lease payments and to finance day-to-day operations. The Company
has not generated positive operating cash flows since September
11, 2001. There can be no assurances that the Company can
achieve or sustain positive cash flow from 19 operations. In
addition, the Company expects there to be pressure on its cash
position later in the year, without taking into account the
restructuring plan mentioned in "Company Update" above.
In addition to being highly leveraged, the Company continues to
have a cost structure which is higher than its competitors and
continues to suffer the effects of the September 11, 2001
terrorist attacks to a greater extent than its competitors.
These factors have had a material adverse impact on the
Company's financial condition (including its liquidity
position), results of operations and prospects. In response, the
Company is developing the restructuring plan which is described
under "Company Update" above. As described below, the Company
intends to seek assistance under the Stabilization Act to
provide liquidity while implementing the restructuring plan.
There can be no assurance that the Company will reach an accord
with its key stakeholders and obtain assistance under the
Stabilization Act.
The Stabilization Act provides for $5 billion in payments to
compensate U.S. air carriers for losses incurred as a result of
the terrorist attacks on the United States that occurred on
September 11, 2001. Through March 31, 2002, the Company had
received approximately $264 million (US Airways received $255
million and the Company's Express subsidiaries received $9
million) from the U.S. Government under the Stabilization Act.
The Company expects to receive an additional $56 million in 2002
under this provision of the Stabilization Act. Proposed final
distribution rules were released in April 2002 and the Company
will apply for the final amount due, which will be paid out in
two installments based on the proposed final rules. Adjustments
to the amount of compensation received may be recognized in 2002
as the rules governing the distribution are finalized. The
payments will partially compensate the Company for its direct
and incremental losses incurred beginning on September 11, 2001
and ending on December 31, 2001. However, legislation has been
introduced in Congress to modify the Stabilization Act. If
enacted, remaining payments to the Company under this provision
of the Stabilization Act may be reduced or eliminated. The
Company cannot predict the outcome of this pending legislation.
The Stabilization Act also includes an Air Carrier Loan
Guarantee Program. This program is designed to assist viable
airlines that suffered financially as a result of September 11th
who do not otherwise have access to reasonable credit. The loan
guarantee is subject to certain conditions and fees, including
the potential requirement that the U.S. Government be issued
warrants or other equity instruments in connection with such
loan guarantees. The Company currently believes that access to
credit is not reasonably available and it intends to apply for
the loan guarantee. The program's current application deadline
is June 28, 2002. In addition, legislation has been introduced
in Congress to modify the Stabilization Act, including
accelerating the deadline for filing an application. In the
event this modification becomes law, the Company's ability to
receive assistance under the Stabilization Act may be reduced.
Additionally, there can be no assurance that this source of
financing will be available to the Company.
The Company's effort to develop a restructuring plan
contemplates a number of different possible scenarios. The
Company's preferred approach, which it is actively pursuing, is
to reach an accord with its key stakeholders and obtain
assistance under the Stabilization Act on a timely basis in
light of its significant liquidity issues. However, because
there is no assurance that this will occur, the Company also
recognizes that in order to successfully restructure the
Company, alternative restructuring scenarios in the context of a
judicial reorganization also must be considered. The Company is
addressing these scenarios on a
contingency basis.
Updated Outlook
US Airways expects an 11% reduction in available seat miles for
the year 2002 versus 2001. For the second quarter of 2002, US
Airways expects its capacity to be 20% lower on a year-over-year
basis, load factor to be up about 1 percentage point and
passenger revenue per available seat mile to be down 10% to 12%,
reflecting continued fare pressures and weak business travel.
Unit costs for the second quarter 2002, including fuel, are
anticipated to increase 2% to 4% over last year's second
quarter. For the second quarter 2002, the Company has currently
hedged 45% of its fuel consumption needs, which translates into
a projected price per gallon for the hedged fuel of 64 cents,
including taxes. Additionally, the Company has currently locked
in prices for approximately 27% and 4% of its projected
consumption needs for the third quarter and fourth quarter of
2002, respectively, which translates to a projected price of 69
cents per gallon for the third quarter of 2002 and 79 cents per
gallon for the fourth quarter of 2002, including taxes, for the
hedged fuel. Unit
costs, excluding fuel, are expected to increase 6% to 8% over
the second quarter of 2001. The Company estimates its financial
statement tax credit for the rest of 2002 to be between 15% to
20%. Additionally, the Company received a tax refund of $169
million in April 2002 primarily as a result of the recently
enacted Job Creation and Worker Assistance Act of 2002.
US Airways Group, Inc. reported an upside-down March 31, 2002
balance sheet, showing a total shareholders' equity deficit of
close to $3 billion.
UNIVERSAL AUTOMOTIVE: Posts Improved Q1 Net Sales of $1.6 Mill.
---------------------------------------------------------------
Universal Automotive Industries, Inc. is a manufacturer and
distributor of brake rotors, drums, disc brake pads, relined
brake shoes, non-asbestos friction lining, and a complete line
of hydraulic parts. The Company believes that it is the leading
supplier of "value line" brake parts (brake parts sold at prices
significantly below those of certain leading national brand name
brake parts) to mass-market retailers, traditional warehouse
distributors and specialty undercar distributors in North
America.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2002 Compared To Three Months Ended
March 31, 2001
Net sales for the three months ended March 31, 2002 increased
$1,616,000, or 10.1%, over the same quarter in 2001 to
$17,644,000. The increased sales of brake parts are consistent
with the strengthening experienced throughout the automotive
aftermarket.
Gross profits for the three months ended March 31, 2002 were
$3,216,000, or 18.2%, of net sales compared to $2,485,000, or
15.5%, in the same period of 2001, an increase of $731,000, or
29.5%. Approximately $400,000 of the increase is attributable to
increased sales. The remainder of the increase is primarily due
to increased efficiency and overhead absorption over 2001 levels
at the Company's manufacturing facilities.
Net income for the three months ended March 31, 2002 was
$152,000 compared to net loss of $1,085,000 for the same period
in 2001. This increase in net income is attributed to increased
sales, higher efficiencies and overhead absorption at the
Company's manufacturing facilities, reduced selling, general and
administrative expenses resulting from cost containment and
reduction programs and lower interest expense.
Net cash used in operating activities for the three months ended
March 31, 2002 was $640,000 which was primarily due to (a) an
accounts receivable increase of $1,013,000 from December 31,
2001 due to seasonality and increased sales (b) reduction in
accounts payable of $ 471,000 and (c) reduction in accrued
expenses of $476,000 through the payment of rebates accrued as
of December 31, 2001. The foregoing items were partially offset
by net income and non-cash items (principally depreciation and
amortization) of $438,000 and a decrease in inventory of
$936,000.
Net cash used in investing activities was $127,000, which is
attributable primarily to acquisition of various items of
tooling, manufacturing equipment and warehouse equipment.
Net cash used by financing activities was $63,000, consisting
primarily of reductions in borrowings under the Company's
revolving credit agreement of $368,000, scheduled payments under
term and subordinated debt of $291,000, offset by cash received
by the exercise of certain of the Company's options and warrants
of $596,000.
The Company expects to continue to finance its operations
through cash flow generated from operations, borrowings under
the Company's bank lines of credit and credit from its
suppliers.
Universal Automotive Industries, founded in 1981 as a general
auto parts distributor, makes and distributes aftermarket brake
products, including drums, rotors, disc pads, relined brake
shoes, and hoses. Universal Automotive sells its value-line
brake parts under the Universal Brake Parts (UBP) brand and
private labels; it sells premium products under the Ultimate
name. Products are sold to national retailers and warehouse and
specialty distributors in North America. The firm's eParts
eXchange (EPX) subsidiary operates a B2B Internet platform for
buyers and sellers of automotive aftermarket parts. Executives
Arvin Scott, Yehuda Tzur, and Sami Israel own about 45% of the
company.
USEC INC: S&P Cuts Rating to BB on Lower than Expected Earnings
---------------------------------------------------------------
On May 7, 2002, Standard & Poor's lowered its ratings on USEC
Inc. to double-'B' from double-'B'-plus and removed them from
CreditWatch, where they were placed on January 25, 2002. Outlook
is negative.
The downgrade reflected Standard & Poor's expectation that
USEC's earnings will be significantly weaker than previously
supposed. USEC has experienced protracted delays in obtaining
modifications to a long-term contract under which it sources
enriched uranium from the Russian company, Techsnabexport Co.
Ltd. (Tenex). The contract changes would put pricing on a market
basis, replacing a fixed-price approach that has been
problematic for USEC. Previously, management had anticipated
that a revised contract would be in place for calendar year
2002, but necessary approvals from the U.S. and Russian
governments were not received. Management has recently indicated
that government approvals should be forthcoming in the near
future. However, the contract modifications now contemplated
would not take effect until calendar year 2003. In addition, a
proposed provision whereby USEC would have been able to purchase
certain material has been dropped. Partly as a result of these
developments, USEC's profitability has deteriorated markedly.
Management has stated that net earnings for the fiscal year
ending June 30, 2002, are expected to total only $9 million to
$12 million, down from $41 million in fiscal 2001, and compared
with a range of $35 million to $40 million indicated at the
start of the year. Management has also suggested that earnings
in fiscal 2003 are expected to remain at a weak level. For the
longer term, although USEC's profitability could benefit from
implementation of proposed revisions to the Russian contract, as
well as from higher market prices and the company's extensive
cost cutting efforts, Standard & Poor's believes the need to
increase spending toward the development and implementation of a
new production technology could well offset much of the
improvement.
The revised ratings continue to reflect USEC Inc.'s position as
the largest producer in the world of enriched uranium. The
company provides uranium enrichment services, a step in
transforming natural uranium into fuel for nuclear reactors
producing electricity. The company has leading market shares in
North America and globally, but has little influence on prices.
Competitive pressure from European-based producers caused prices
for separative work units (SWUs, the standard unit of measure
for uranium enrichment) to decline significantly during the late
1990s, but prices have recently improved, reflecting better
demand, the effect of favorable rulings in trade cases filed by
USEC, and USEC's production capacity rationalization. Standard &
Poor's now expects prices to be stable at recent levels.
Apart from selling its own output, USEC serves as a selling
agent under the agreement with Tenex, which is a Russian
government entity. In coming years, material supplied by Tenex
is expected to account for about one half of USEC's sales.
Modifications to the contract being sought by USEC are critical
if the arrangement is to become more economic for USEC. In the
meantime, management has initiated aggressive cost-cutting
actions, including consolidating of USEC's production at a
single plant. To further improve its cost-competitiveness, USEC
may ultimately need to implement a new production technology,
which could entail an investment in excess of $1 billion.
USEC's earnings have deteriorated in the past four years. If
higher prices persist and the new arrangement with Tenex is
finalized as proposed, USEC's profitability should at least
stabilize. USEC continues to generate surplus cash flow,
reflecting in part the liquidation of its excess natural uranium
inventory. USEC disclosed last year, however, that a portion of
its uranium inventory may be unmarketable due to contamination.
If this is the case, USEC expects the Department of Energy,
which had transferred the material to USEC, to compensate the
company. Standard & Poor's assumes this matter will be resolved
in a manner that will enable USEC to continue relying on natural
uranium sales to bolster its cash flow over the next several
years, as planned. While USEC presently has a sizeable cash
position and moderate debt-leverage, these advantages must be
weighed against the ultimate expenditure that may be necessary
to construct a new production facility.
Outlook
The ratings could be lowered again if the proposed agreement
providing for market-based pricing for the enriched uranium USEC
purchases from Russia is not finalized, or if the apparent
contamination of a substantial portion of the company's natural
uranium inventories leads to a material writedown. The limited
leeway the company has under a net worth covenant related to its
bank credit facility is an additional cause for concern.
Rating List: To From
* Corporate credit rating BB/Negative/-- BB+/WatchNeg/--
* Senior unsecured debt BB BB+
* Bank loan rating BB BB+
VERADO HOLDINGS: Committee Retains Alvarez & Marsal for Advice
--------------------------------------------------------------
The Official Committee of Unsecured Creditors wants the U.S.
Bankruptcy Court for the District of Delaware to approve hiring
of Alvarez & Marsal, Inc. as its financial advisors, nunc pro
tunc to March 11, 2002.
As financial advisors to the Committee, Alvarez & Marsal will
assist by:
a) analyzing the forecasts and liquidation plans of the
Debtors;
b) analyzing the financial statements of the Debtors;
c) assisting with the claims reconciliation process;
d) assisting with the collection of amounts owed to the
Debtors;
e) assisting with the analysis of potential preference
payments, fraudulent conveyances and other causes of
action;
f) reviewing and analyzing the plan of reorganization and
disclosure statement; and
g) providing the Committee with any other necessary
services as the Committee of the Committee counsel may
request from time to time and to which Alvarez & Marsal
may agree.
The Committee believes that Alvarez & Marsal possesses extensive
knowledge and expertise in the areas relevant to these chapter
11 cases and is well qualified to represent the Committee.
Alvarez & Marsal will bill for services by the hour at its
customary rates:
Managing Director $525 per hour
Directors $350 per hour
Associates $275 per hour
Analysts $125 per hour
Verado Holdings, Inc., through its subsidiaries, provides
outsourced services as well as professional services, data
center, and application hosting solutions for various
businesses. The Company filed for chapter 11 protection on
February 15, 2002. When the Debtors filed for protection from
its creditors, it listed $61,800,000 in assets and $355,400,000
in liabilities.
W.R. GRACE: Court Fixes March 31, 2003 General Claims Bar Date
---------------------------------------------------------------
The United States Bankruptcy Court for the District of Delaware
has set a Bar Date for certain claims to be filed in the W.R.
Grace Bankruptcy. W.R. Grace, its predecessors, subsidiaries,
and other related entities filed for protection under Chapter 11
of the U.S. Bankruptcy Code on April 2, 2001. To preserve a
claim against Grace all individuals and entities with Asbestos
Property Damage Claims or certain Other Claims, including trade
and Medical Monitoring Claims, must file these claims on or
before March 31, 2003. The Bar Date does not apply to Asbestos
Personal Injury Claims, Settled Asbestos Claims, or Zonolite
Attic Insulation Claims. These Claims will be subject to a
separate claims submission process and should not be filed at
this time.
Asbestos Property Damage Claims are claims for the cost of
removal, diminution of property value, or economic loss, etc.,
caused by asbestos in products manufactured by Grace or from
vermiculite mined, milled, processed, or sold by Grace. Grace
produced and marketed vermiculite products containing added
asbestos for use primarily in commercial, public and high-rise
residential buildings. From 1959 to 1973, Grace marketed Mono-
Kote 3 (MK-3), an asbestos-containing, wet, spray-applied
fireproofing product used to provide fire protection for the
enclosed steel structures of large buildings. Other Grace
products included Zonolite Acoustical Plastic and other
acoustical plasters and texture products used primarily on
interior ceilings and walls.
Grace mined, produced and marketed vermiculite products, some of
which may have contained naturally occurring asbestos. The
products were sold to the building construction, agricultural/
horticultural and consumer markets. These products included
Monokote Fireproofing, Zonolite Concrete Roof Decks and Zonolite
Masonry Insulation.
Other Claims are claims against W. R. Grace other than Asbestos
Personal Injury Claims. These include general unsecured trade
claims, contract claims, environmental claims, and Medical
Monitoring Claims, which allege no current personal injury, but
significant exposure to Grace asbestos or vermiculite products
requiring the Claimant to be medically examined or tested to
detect possible future injury.
For complete information, including a Claims Bar Date Notice,
Proof of Claim Forms and instructions for filing a claim, call
1-800-432-1909, visit http://www.graceclaims.comor write to
Claims Agent, Re: W.R. Grace & Co. Bankruptcy, P.O. Box 1620,
Faribault, MN 55021-1620.
WARNACO GROUP: Seeks to Enter into Agreement with Floor Ready
-------------------------------------------------------------
The Warnaco Group, Inc., with its debtor-affiliates, and Floor
Ready Apparel Company, LLC are parties to a Distribution
Agreement dated September 7, 1997 to which Floor will provide
the merchandise processing and distribution services on CK Jeans
products. The Agreement has been amended and extended every
year, except for the year 2002.
Kelly A. Cornish, Esq., at Sidley Austin Brown & Wood LLP, in
New York, relates that in conjunction with the Distribution
Agreement, Floor entered into a Lease Agreement with ProLogis
Trust on November 1996. The Lease is good for 10 years. To
assure ProLogis of payment, the Debtors were guarantors to the
Lease.
When the Debtors filed for Bankruptcy, Ms. Cornish informs the
Court that Floor filed two Proofs of Claim:
Claim No. Amount Cause of Claim
--------- ------ --------------
1855 $93,500,000 rejection damages of the
Distribution Agreement, it being
co-terminus with the Lease
1865 64,521 unpaid pre-petition amounts
Ms. Cornish says that the Debtors are contesting Claim No. 1855.
Upon negotiation with Floor, Floor agrees to withdraw the two
Proofs of Claim if the Debtors agree to renew the Distribution
Agreement.
Accordingly, the Debtors request the Court to authorize the
Debtors to enter into a Logistics Services Agreement with Floor.
Under the Agreement, Floor will provide the logistic and
distribution services for the Debtors' Calvin Klein men's,
women's and children's jeans and sportswear products.
Important terms and conditions of the Agreement are:
(a) The Initial Term of the Agreement is from January 6, 2002
through November 30, 2002;
(b) Floor is allowed to utilize the equipment and machinery
found at the Leased Facility and those owned by the
Debtors;
(c) The Debtors has the option to renew the Agreement if
written notice is provided to Floor on or before July 31,
2002 that:
(1) it wishes to extend the Agreement through January 3,
2004 under the same terms and conditions; or
(2) it wishes to extend the Term of the Agreement but to
terminate on a date not later than May 31, 2003, at
sole option of the Debtors -- Transition Period;
(c) During the initial term, the Debtors agree to pay Floor
an $260,784 per week for the processing of up to
17,500,000 units of Debtors' Products and the amount of
$0.56 for the processing of each unit of the Product
above 17,500,000 units;
(d) The Debtors may also be obligated to pay Floor these
amounts:
(1) If the Debtors renew the Agreement through January
3, 2004, the Debtors will pay Floor the amount of
$0.74 per unit of Product processed for a minimum of
19,000,000 units;
(2) If the Debtors exercise its option to extend the
Agreement no later than May 31, 2003, the Debtors
will pay Floor an amount computed in a manner
consistent with their past practice under a cost plus
formula. The formula is Floor's actual costs incurred
in the ordinary course of the service plus 13%. This
is provided that the payment of such is subject to
the condition that Floor will use its best efforts to
utilize the appropriate number and type of personnel
to process the number of units of Product based on
forecasts provided by the Debtors;
(e) In the event the Debtors will not renew the Agreement
through January 3, 2004, the Debtors agree to:
(1) transfer all of its right, title and interest in the
Equipment to Floor by delivery of a duly executed
bill of sale to Floor; and
(2) pay a "Termination Payment" to Floor in the amount of
$4,000,000 to be paid at the rate o $500,000 per
month during the Transition Period and with any
unpaid remainder to be paid at the end of the
Transition Period. Upon the earlier of any sale of
the CK Jeans business or approval of a plan of
reorganization, any unpaid amount of the Termination
Payment will be placed in a segregated account to
assure payment to Floor;
(f) After execution of the Agreement, both Parties will
execute a general release from all claims of whatever
nature that they may have against each other and their
affiliates; and
(g) Floor will file a notice to withdraw with prejudice its
claims with respect to Proofs of Claim #1855 and 1856.
Ms. Cornish argues that pursuant to Section 363(b) of the
Bankruptcy Court, the Agreement should be granted because the
continuation of Floor's services waives the huge claimed amounts
under the two Proofs of Claim. Moreover, Ms. Cornish asserts
that the motion is only sought as an abundance of caution
because the distribution services are part of the Debtors'
ordinary course of business matters. (Warnaco Bankruptcy News,
Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900)
WAREFORCE: Will File Chapter 11 to Sell All Assets to PC Mall
-------------------------------------------------------------
PC Mall, Inc. (Nasdaq:MALL) a leading rapid response supplier of
technology solutions for business, government and educational
institutions, has signed a definitive agreement to acquire
substantially all of the assets of Wareforce, Inc. Wareforce is
a publicly traded technology solutions provider serving large
corporations in the Southern California marketplace. For fiscal
2001, Wareforce sales from continuing operations were $89
million.
Upon the closing of the acquisition, Wareforce clients will have
access to a broader range of business and enterprise products,
direct relationships with most key vendors, much larger stocked
inventory levels, rapid fulfillment, and state of the art
configuration and logistics systems. PC Mall clients will be
able to take advantage of the professional and engineering
services, solutions and expertise provided by Wareforce to solve
today's complex IT challenges.
Frank Khulusi, Chairman and CEO of PC Mall said, "We are excited
to have Wareforce joining the PC Mall team. Our combined
organizations will provide our customers with a comprehensive
solution and access to one of the largest selections of product
and services in the marketplace. We are pleased that Wareforce
customers can now take advantage of one of the most efficient
procurement and deployment systems in the industry."
Khulusi continued, "We believe that Wareforce, Inc. is
considered to be one of the top solution providers in Southern
California and fits very well with our vision to grow our
professional and engineering services business, as well as
increase our penetration in the higher end enterprise market."
The acquisition of substantially all the assets of Wareforce is
contemplated through a United States Bankruptcy proceeding under
Chapter 11 of the United States Bankruptcy Code. This
transaction is subject to the United States Bankruptcy Court's
approval and bidding procedures and is contingent upon customary
closing conditions for similar transactions.
PC Mall is a leading rapid response supplier of technology
solutions for business, government and educational institutions
as well as consumers. More than 100,000 different products from
companies such as Compaq, Microsoft, Apple, IBM and Hewlett-
Packard are marketed to business customers using relationship
based outbound telemarketing, catalogs and the Internet --
http://www.pcmall.com,http://www.macmall.com,
http://www.ecost.com,http://www.elinux.com.Customer orders are
rapidly filled by the Company's distribution center
strategically located near FedEx's main hub or by PC Mall's
extensive network of distributors, one of the largest networks
in the industry.
WESTPOINT STEVENS: Jeffrey Feinberg Discloses 5.23% Equity Stake
----------------------------------------------------------------
Jeffrey Feinberg, (c/o JLF Asset Management, LLC) beneficially
owns 5.23% of the common stock of WestPoint Stevens Inc.,
represented in the 2,598,000 shares of stock held. Mr. Feinberg
shares powers of voting and disposition of the stock.
As previously reported (Troubled Company Reporter April 22, 2002
Edition), WestPOint Stevens recorded a $773 million total
shareholders' equity deficit at March 31, 2002.
WHEELING-PITTSBURGH: Resolves TECO's Disputed $1.4M Admin. Claim
----------------------------------------------------------------
Wheeling-Pittsburgh Steel Corporation asks Judge Bodoh to
approve the terms of its proposed settlement of an
administrative expense claim in he amount of $1,373,001 asserted
collectively by Electro-Coal Transfer Corporation and Mid-South
Towing Company, affiliates of TECO Transport Corporation.
WPSC reminds Judge Bodoh that in May he approved WPSC's entry
into new barge and stevedoring contracts relating to the
transportation of iron ore pellets. At that same time, Judge
Bodoh approved an agreement between Electro-Coal and Mid-South,
and WPSC regarding TECO's objections to the new stevedoring and
barge transportation contacts. Under the settlement and order,
TEOC reserved the right to file, and WPSC reserved the right to
oppose, a motion for administrative expenses arising before May
25, 2001.
In its Motion seeking allowance and payment of its
administrative claim, TECO said it was entitled to the claim
amount based on "dead freight" provisions in its stevedoring and
barge transportation contract with WPSC relating to two vessels
originally scheduled to arrive at TECO's docks in April 2001.
WPSC opposed this request and it was originally set for trial in
April 2002.
After "considerable negotiations," TECO and WPSC have agreed to
resolve this dispute. The salient terms of the agreement are:
(1) WPSC will pay TECO $100,000 as an administrative
expense claim, with payment to be made by June 7, 2002;
(2) TECO will have an allowed, unsecured prepetition claim
against WPSC in the net amount of $1,200,000 by reason of the
matters asserted in TECO's motion for an administrative expense
claim, which will be treated in WPSC's chapter 11 case and under
the applicable provisions of the Bankruptcy Code as an allowed,
unsecured prepetition claim that accrued prior to the Petition
Date; and
(3) The settlement is without prejudice to the proof of
claim filed by TECO in the amount of $1,406,366.72 in which TECO
contends that sums are due and owing to TECO by reason of events
occurring before the Petition Date. TECO and WPSC reserve their
respective rights and defenses regarding this claim.
WPSC says it had asserted defenses to the administrative expense
claims and was prepared to litigate them. However, WPSC
believes that the proposed settlement and consent order are
appropriate, given the uncertainties as to the amount of
administrative expense that might have been awarded after trial,
and to save WPSC from the expense of completing discovery and
preparing for trial. Accordingly, WPSC urges Judge Bodoh to
approve the proposed settlement and to authorize WPSC to enter
into the proposed Consent Order. (Wheeling-Pittsburgh Bankruptcy
News, Issue No. 21; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
WINSTAR: Trustee Asks Court to Fix August 30 Claims Bar Date
------------------------------------------------------------
Chapter 7 trustee Christine C. Shubert asks the Court to fix
August 30, 2002, as the last date for the filing of proofs of
claim against Winstar Communications, Inc.'s and its debotr-
affiliates' estates for administrative expenses.
Michael G. Menkowitz, Esq., at Fox Rothschild O'Brien & Frankel
LLP in Wilmington, Delaware, tells the Court the Trustee has
reason to believe that, between the Petition Date and the
conversion date of the Debtors' cases to Chapter 7, a multitude
of parties may have rendered services, furnished property, or
provided other benefits or accommodations to the estates. These
may constitute actual, necessary costs and expenses in
connection with preserving the estates. The Trustee believes it
is now necessary and appropriate for the Court to set a deadline
for the filing of proofs of claim so that the Trustee can
identify the universe of administrative claims against the
Debtors' estate. This will also help expedite the claims
reconciliation process and distributions that will eventually be
made to creditors in these cases.
Mr. Menkowitz defines an administrative claim as:
A. The right to payment, whether or not the right is reduced to
judgment, liquidated, un-liquidated, fixed, contingent,
matured, un-matured, disputed, undisputed, legal, equitable,
secured or unsecured, which arose or accrued on and between
April 18, 2001 and January 24, 2002. These are entitled to
priority in accordance with Sections 503 and 507(a)(1) of the
Bankruptcy Code; or
B. The right to an equitable remedy for breach of performance if
the breach gives rise to a right of payment, whether or not
the right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, un-matured, disputed, undisputed,
secured or unsecured, which arose or accrued on and between
April 18, 2001 and January 24, 2002. These are entitled to
priority in accordance with Sections 503 and 507(a)(1) of the
Bankruptcy Code.
Mr. Menkowitz asks the Court to exclude these claimants from
filing proofs of claim by the Administrative Bar Date:
A. Any person or professional holding an Administrative Claim
for compensation or reimbursement of expenses pursuant to
Sections 327, 328, 330, 331 or 503(b) of the Bankruptcy Code;
B. Any holder of an Administrative Claim which arose or accrued
or otherwise became due and payable subsequent to the
Administrative Bar Date;
C. Any Administrative Claim of any of the Debtors or their
affiliates against one or more of the Debtors;
D. Any holder of an Administrative Claim that has been allowed
By order of this Court, or who has previously filed proof of
such Administrative Claim with the Court; and
E. The Office of the United States Trustee with respect to
Administrative Claims that arise in connection with fees due
under Section 1930 of title 28 of the United States Code.
The Trustee proposes, consistent with the established practice
and procedure in this district, that all potential holders of
Administrative Claims be required to file their respective
proofs of Administrative Claim on or before the Administrative
Bar Date. They must be mailed or delivered in this manner:
A. Filing by mail: by first class United States mail to,
Bankruptcy Services, LLC, c/o Winstar Communications, Inc.,
et al., Claims Processing, P.O. Box 5287, FDR Station, New
York, New York 10150-5287; and
B. Filing by hand delivery or private courier: Bankruptcy
Services, PH1 381155v1 04/23/02 LLC, c/o Winstar
Communications, Inc., et al., Claims Processing, Heron Tower,
70 East 55th Street, Sixth Floor, New York, New York 10022.
The proofs of claim will be considered properly filed only if
they are actually received by BSI, not later than 5:00 p.m.
Eastern Time on the Administrative Bar Date.
The Trustee further proposes that, consistent with Bankruptcy
Rule 2002, to assure that all Administrative Claimants receive
notice of the Administrative Bar Date, the Court authorize a
notice be sent to:
A. the Office of the United States Trustee;
B. counsel for pre-petition bank group;
C. counsel for the post-petition bank group;
D. counsel for the Committee;
E. all persons or entities who have filed notices of appearance;
F. all persons or entities listed in the Debtors' schedules and
statement of financial affairs, or any amendments thereto, as
holding "claims," as that term is defined in Section 101(5)
of the Bankruptcy Code, against the Debtors;
G. all persons or entities listed in the Schedules as being a
party to an executory contract or un-expired lease with the
Debtors;
H. the Director of the Internal Revenue Service for the District
of Delaware;
I. the Securities and Exchange Commission;
J. the United States Attorney for the District of Delaware; and
K. all other persons or entities whom the Debtors believe may
hold an Administrative Claim.
The Trustee also proposes, pursuant to Bankruptcy Rule 2002(l),
to supplement the aforementioned direct mail service of the
Notice and Proof of Claim Form by publishing the Notice once in
the national edition of The New York Times and/or The Wall
Street Journal (or similar publication), on or before June 25,
2002.
The Trustee submits that the form, manner and extent of notice
proposed herein is reasonably calculated to provide
Administrative Claimants with notice of the Administrative Bar
Date and the need to file proofs of claim prior to the deadline.
(Winstar Bankruptcy News, Issue No. 27; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WISER OIL: Has $9 Million Working Capital Deficit at March 31
-------------------------------------------------------------
The Wiser Oil Company (NYSE:WZR) reported a net loss for the
first quarter of 2002 of $4.9 million, compared with net income
of $5.8 million in the first quarter of 2001, excluding the
effects of financial derivative activities and unusual and non-
recurring items. Including the effects of financial derivative
activities and unusual and non-recurring items, the net loss for
the first quarter of 2002 was $14.1 million.
The Company reported EBITDAX for the first quarter of 2002 of
$6.0 million, down $9.7 million from first quarter 2001 EBITDAX
of $15.7 million. The decline in net earnings and EBITDAX was
primarily attributable to the decreases in both oil and gas
prices that were prevalent during the first quarter of 2002.
Increases in oil and gas production partially offset the
effects of the price declines.
During the first quarter of 2002, Wiser produced 2.7 BCF of gas
and 474,000 barrels of oil and NGL's for a daily average of
10,314 BOEPD, up 18% from 8,726 BOEPD in the first quarter of
2001. First quarter 2002 oil production was up 16% and gas
production was up 27% over the first quarter of 2001. Currently,
the Company is producing approximately 6,000 BOPD and 36 MMCFPD,
or 12,000 BOEPD. The Company estimates total second quarter
production will be approximately 1,090,000 BOE.
Oil and gas revenues for the first quarter 2002 were $14.4
million, down 40% or $9.5 million from first quarter 2001.
Realized oil prices for the quarter averaged $18.82 per barrel,
down 29% from first quarter 2001. Realized gas prices for the
quarter averaged $2.03 per MCF, down 65% from first quarter
2001. First quarter 2002 oil and gas revenues includes $0.4
million of non-cash hedging gain and excludes $0.9 million of
hedge cash settlements received by Wiser in the first quarter.
Realized oil and gas prices in the first quarter 2002, after
adjusting hedges to a cash settlement basis, were $18.22 per
barrel for oil and $2.31 per MCF for gas. Average prices
received by the Company in the first quarter of 2002 were
approximately $3.29 per barrel less than the average NYMEX oil
price and $0.43 per MCF less than the average NYMEX gas price,
due to quality and location differentials.
Capital and exploration expenditures during the first quarter of
2002 were $23.0 million, consisting primarily of $12.6 for
drilling and facilities on the properties acquired in the
Invasion acquisition, $4.3 for Gulf of Mexico activity and $1.7
million for Hayter, the oil field acquired from Pan Canadian in
2001. Substantially all of the 2002 capital spending program for
the Invasion properties was completed in the first quarter of
2002 due to the fact that this area in northern Alberta is
accessible for drilling operations only during the winter
months. The Company anticipates its total 2002 capital and
exploration expenditures will be in the range of $30 to $35
million.
Wiser received $2.2 million in proceeds from small property
sales in Canada during the first quarter of 2002 and also
borrowed $4.0 million under its revolving credit facility to
fund capital expenditures. Wiser's cash balance at March 31,
2002 was $10.7 million.
Borrowing Base Review
In April 2002, the Company's borrowing base under its revolving
credit facility was reviewed and has been conditionally
increased from $50 million to $60 million, subject to final
approval by all members of the bank group. This increase in
availability, once approved, should be effective in May of
2002.
Operations Update
Gulf of Mexico - Wiser initiated its first sales of production
from our 2001 drilling program in the Gulf of Mexico on April
15, 2002. On that date, sales commenced from two wells in the
East Cameron Block 184 Field at a rate of 36 MMCFPD of gas and
1,050 barrels of condensate per day or 42 MMCFEPD, 3.6 MMCFPD of
gas and 105 barrels of condensate per day net to Wiser. Plans
include an additional development well on the three-block
complex (East Cameron Blocks 179, 184 and 185) later this year.
Wiser owns a 12.5% working interest in these three blocks.
Remington Oil and Gas Corporation (Nasdaq: ROIL) is the operator
and owns a 57.5% working interest. Magnum Hunter Resources
(Amex: MHR) owns the remaining 30% working interest.
On Eugene Island Block 302 Field, first sales from the A-1
discovery well occurred on April 30, 2002. It is expected that
this well's production will exceed 1,000 BOPD and 1.0 MMCFPD of
gas when all the modifications of the surface equipment have
been completed. In addition, production casing has been set on
the A-2 development well on this block at a total depth of 9,960
feet and it is currently being completed. Production at rates of
over 500 BOPD and 0.5 MMCFPD of gas are expected and sales will
commence as soon as completion operations are finished. The
production from these two wells should add 150 BOPD and 0.15
MMCFPD of gas net to Wiser's interest. Wiser owns a 12.5%
working interest in Eugene Island Block 302. Remington Oil and
Gas Corporation, the operator, and Magnum Hunter Resources own
57.5% and 30% working interest respectively.
Wiser also has a 12.5% working interest in South Marsh Island
Block 93 Field, which was flow tested at 1,630 BOPD and 2.7
MMCFPD of gas, and a 25% working interest in West Cameron Block
417 Field which was tested at a combined rate of 21 MMCFPD of
gas from three separate gas sands. Both wells are expected to
have first sales before the end of the second quarter of 2002.
It is also anticipated that a development well will be drilled
at the South Marsh Island Block 93 Field later this year.
At this time, Wiser is participating in two additional
exploration wells drilling in the Gulf of Mexico. The Ship Shoal
Block 164 #1 well is drilling below 15,000 feet, while the West
Cameron Block 347 #1 well is drilling below 7,500 feet. Wiser
owns a 25% working interest in both Ship Shoal Block 164 and
West Cameron Block 347. Remington Oil and Gas Corporation and
Magnum Hunter Resources own 50% and 25% working interest
respectively. The Company also anticipates that it will
participate with a 25% working interest in an exploration well
to be drilled in Vermilion Block 100 later this year. Remington
Oil and Gas Corporation will be the operator.
At the Central Gulf of Mexico Federal Sale 182 held on March 20,
2002, Wiser was the apparent high bidder on 12 out of 17 total
bids. Wiser's working interest on 11 of the blocks was 25% while
the interest on the remaining
block was 12.5%. Wiser bid on these blocks pursuant to its Joint
Venture Agreements with Remington Oil and Gas Corporation and
Magnum Hunter Resources, Inc. Assuming all successful bids are
accepted by the Minerals Management Service, Wiser's share of
the lease acquisition cost is approximately $927,000. With the
addition of these 12 new blocks, Wiser now has an interest in 43
Gulf of Mexico Blocks. The Company has a 25% working interest in
34 blocks (1 held by production) and a 12.5% working interest in
9 blocks (4 held by production).
U.S. Onshore - On the Fitzsimmons Ranch prospect located in Jim
Wells County, Texas, the Goldapp #2 well has now been completed.
This well, in which the Company has a 40% working interest, was
perforated and fracture stimulated in a lower Yegua zone and is
currently producing at a rate of 1.3 MMCFPD of gas with a
flowing tubing pressure of 3,000 psi. At least one additional
development well is planned for this prospect.
In Goliad County, Texas, the Company is participating in the
Stockton #1. This well will test a large Wilcox structure and is
permitted to a depth of 16,000 feet. It is currently drilling at
below 11,800 feet. Wiser has a 20 percent working interest in
this well and US Enercorp is the operator.
Canada - Wiser has begun the first phase of its planned
development program at its Wild River Prospect. The Wild River
2-32, which was drilled in 2000 for a deeper objective, has now
been recompleted to the Cadomin formation. Testing operations
are underway at this location.
Two additional wells have now been drilled at Wild River and
production casing has been set on both wells. The Wild River 8-
29 and Wild River 12-21 wells encountered multiple pay zones in
the Cretaceous section. Completion operations are underway on
the Wild River 8-29 well and flow testing is expected to
commence soon. As soon as weather conditions improve, completion
operations will also begin on the Wild River 12-21 well.
Production rates from offsetting operator's wells completed in
the same geologic section vary from 2.0 to 7.5 MMCFPD of gas.
The Company expects the results from these three wells to fall
within that range.
Plans are being developed to tie in these wells to Wiser's
gathering system. If early encouraging test rates hold up,
further development will be scheduled to exploit the full
potential of Wiser's substantial land position in this area
which amounts to some 17,440 gross (9,497 net) acres. Wiser, as
operator, and ExxonMobil each have a 50% working interest in the
wells and acreage which make up this project.
As reported earlier, Wiser had a successful winter drilling
program on our Invasion properties in northern Alberta. Wiser
operates these properties with a 100% working interest. A total
of 25 wells were drilled and 15 were completed as gas producers.
In addition, two water disposal wells were drilled and equipped.
A total of $12.6 million was spent, including $5.1 million in
well reworks and facility upgrade costs. The reworks and
upgrades will allow for optimization of production and water
disposal operations and result in lower operating costs going
forward. The field currently has gross production rates before
royalties of 13 to 15 MMCFPD of gas.
The Company has just acquired the remaining 50% working interest
in two of our properties in the Provost Area. The net reserves
acquired total 314,000 barrels of oil and the purchase price was
$1.27 million, or $4.05 per barrel. The net production from
these properties amounts to 125 BOPD.
Commenting, George K. Hickox, Jr., Company Chairman and CEO
said, "The results of the first quarter were disappointing,
primarily as a result of the collapse in commodity prices and,
to a lesser degree, an increase in the operating expenses at the
properties acquired in the Invasion purchase. On a positive
note, the Company's production has increased some 43% over this
time last year and should continue to increase with the addition
of production from the Company's Gulf of Mexico discoveries and
our Canadian operations."
Hedging Update
The Company is continuing to pursue collection of its $6.1
million claim against Enron through the bankruptcy proceedings
and anticipates that a portion of the amount owed to Wiser will
be recovered within the next year. The Enron hedge position was
100% written-off in 2001. As a result of the Enron bankruptcy in
December 2001, the Company entered into replacement hedges with
other counterparties at less favorable prices and granted
extension options to certain counterparties in order to obtain
better pricing. Virtually all of Wiser's current hedges are
accounted for as fair value hedges and changes in fair value are
recognized in the income statement. The former Enron hedges were
accounted for as cash flow hedges.
Preferred Stock
The Board of Directors approved the payment of quarterly
dividends on the preferred stock for the first quarter of 2002
in the amount of $431,507. The annual dividend rate on the
preferred stock is 7% and was paid on April 1, 2002. Half of the
dividend was paid in cash of $215,754 and half was paid by the
issuance of 40,479 shares of Wiser's common stock based on an
average price for the last 10 trading days of the quarter of
$5.33 per share.
Unusual and Non-recurring Items
The Company focuses heavily on cash flow and EBITDAX from its
basic exploration and production activities as primary
indicators of financial performance and the Company has several
unusual or non-recurring financial reporting items, including
financial derivatives, that significantly impact the calculation
of these indicators. Below is a table showing the calculations
of several financial indicators before and after unusual and
non-recurring items (000's).
In its March 31, 2002 unaudited consolidated balance sheet, the
company recording having a working capital deficit of about $9
million.
WORLDCOM: Fitch Downgrades Several Debt Ratings to Low-B Level
--------------------------------------------------------------
Fitch Ratings has downgraded the senior unsecured debt ratings
for WorldCom, Inc. to 'BB' from 'BBB-'. The ratings on its
preferred securities and quarterly income preferred securities
have been lowered to 'B+' from 'BB+'. In addition WorldCom's
commercial paper rating has been lowered to 'B' from 'F3'. The
rating action also applies to Intermedia Communications senior
unsecured debt, which has been lowered to 'BB-' from 'BB+'. The
Rating Outlook is Negative for all of the ratings.
This rating action reflects the company's triggering of its
accounts receivable program, which will stress the company's
ability to amend this program, and complete a renewal of its
bank revolver in a credit neutral manner. The company still may
be successful in amending its program and removing the rating
triggers, but this will require greater structural enhancements.
Anticipated structural enhancements are expected to reduce the
size of the accounts receivable program and increase pressure on
the company's liquidity absent an offsetting event.
Fitch expects that the company's revenue and EBITDA profile will
continue to deteriorate during the balance of 2002 and into
2003. Revenue growth within the company's data and Internet
services segments has been impacted by weak demand from large
enterprise customers. Revenue growth within these businesses
have also been impacted by existing customers re-grooming their
networks and continued exposure to emerging carrier market
segment. Demand for these products have become increasingly
cyclical, which increases WorldCom's business risk considering
the company's narrow product portfolio and debt level.
Generation of free cash flow will be critical for the company as
approximately $3.2 billion of maturities, including
approximately $1.5 billion of re-marketable or putable
securities, will need to be addressed in 2003 and an additional
$2.6 billion in 2004. Fitch anticipates that, at the current
debt rating level, the company will have limited access to
capital markets and will rely on its bank agreements (assuming
they will be amended) and improvements in cash flow from
operations to meet debt service obligations.
Fitch expects WorldCom to generate $1.0 billion of free cash
flow during 2002. The major tool employed by WorldCom has been a
reduction in capital spending. Spending levels peaked in 2000 at
$11.5 billion and declined materially in 2001 to $7.9 billion.
The company anticipates approximately $4.9 billion of capital
spending during 2002. In Fitch's view, the near-term reduction
in capital spending is manageable in the short term in view of
the less than robust demand for services and because of the fact
that previous higher levels have left WorldCom with capacity to
meet lower near term growth in demand.
Fitch's negative outlook is reflective of the company's expected
weak operating performance during 2002, the uncertain timing of
recovery within the company's data and internet products
portfolio as well as its voice long distance business. In
addition, the company's ability to generate consistent
meaningful free cash flow, amendment of the company's bank
facilities and accounts receivable securitization program and
the significant debt service requirements scheduled during 2003
and 2004 reflect Fitch's negative outlook.
Factors that could contribute to a stabilization of the
company's credit rating include material progress in achieving
EBITDA, free cash flow and capex targets, return of revenue and
EBITDA growth within the company's core data and Internet
product segment, stabilization within the company's voice long
distance business, and a favorable resolution to the SEC
inquiry, bank agreements, and accounts receivable program.
Contact: David Peterson 1-312-368-3177 John Culver, CFA 1-312-
368-3216 or Michael Weaver, 1-312-368-3156, or Chicago.
XEROX: Fitch Places Ratings on Outlook Neg Over Refinancing Deal
----------------------------------------------------------------
Fitch Ratings has changed its Rating Outlook on Xerox Corp. and
its subsidiaries to Negative from Stable. The company's and its
subsidiaries' 'BB' senior unsecured debt and 'B+' convertible
trust preferred ratings are affirmed.
The Rating Outlook Negative reflects the company's on-going
negotiations with its bank group to refinance the $7.0 billion
revolver due October 2002 which Fitch expects will ultimately be
successful, the potential that Xerox's core operating cash flow
could limit access to the capital markets and the delay of the
company's public annual and quarterly filings following the
settlement with the Securities and Exchange Commission (SEC)
that will include financial restatements. As revenues are
forecasted flat to down, it is crucial that Xerox continues
executing its cost cutting programs in order to return the core
operations to consistent profitability levels. Cash flow remains
strained and will have to increase significantly in order to
support debt obligations.
The ratings also consider the company's weakened credit
protection measures, refinancing risk of the revolver,
significant debt maturities for the next three years, the
competitive nature of the printing industry, the necessity for
constant new product introductions, and overall weak economic
conditions. Fitch continues to recognize the company's improving
operational performance, strong, technologically competitive
product line and business position, completed asset sales,
execution of the cost restructuring program, and progress in
exiting the financing business. Xerox continues to improve its
core operations as core EBITDA for the fourth quarter of 2001
was approximately $420 million, compared to $61 million in the
third quarter, mainly as a result of higher gross margins and a
lower cost structure.
As of March 30, 2002, Xerox's cash position was $4.7 billion
with total debt of approximately $17 billion, of which more than
half is from customer financing, supported by significant
financing receivables. The company has a finance receivable
monetization program with GECC which could provide an additional
$1.6 billion in funding in 2002. Debt maturities for second
quarter of 2002 are $1.3 billion and $1.5 billion for the second
half of the year. The company's $7 billion revolver expires on
October 22, 2002, and Xerox is currently in compliance with all
covenants and refinancing is expected to occur by late June
2002. Any extension of this timeline could result in negative
rating actions. Fitch anticipates core credit protection
measures will continue to be challenged for the near term,
despite continued anticipated cost reductions from the company's
ongoing restructuring programs.
Xerox continues to make progress in exiting the customer
financing business, with GECC eventually being the primary
source of customer financing in the U.S., Canada, Germany, and
France, and De Lage Landen International BV managing equipment
financing for Xerox customers in the Netherlands. The company
has also made arrangements for third-party financings in Nordic
Region, Italy, Mexico, and Brazil. In addition, Xerox has made
significant progress with its turnaround strategy as the
previously announced $1 billion cost cutting program was
achieved ahead of schedule and larger than anticipated,
including a more than 10% headcount reduction from year-end
2000. Asset sales have totaled more than $2.0 billion, including
an agreement to outsource approximately half of its
manufacturing, the common stock dividend has been eliminated,
and the company exited the ink-jet market, which was a
significant cash drain. In addition to Xerox Corp., the ratings
affected are: Xerox Credit Corp. and Xerox Capital (Europe)
plc's rated senior debt.
ZENITH INDUSTRIAL: Gets OK to Tap Young Conaway as Co-Counsel
-------------------------------------------------------------
Zenith Industrial Corporation wins authority from the U.S.
Bankruptcy Court for the District of Delaware to employ and
retain Young Conaway Stargatt & Taylor, LLP as their local
co-counsel in Wilmington.
The Debtor proposes to pay Young Conaway at its customary hourly
rates:
Robert S. Brady $400 per hour
Edward J. Kosmowski $280 per hour
Joseph A. Malfitano $260 per hour
Steve Kirsch (paralegal) $110 per hour
The professional services that Young Conaway will render to the
Debtors include:
a) providing legal advice with respect to its powers and
duties as a debtor in possession in the continued
operation of its business and management of its
properties;
b) negotiating, prepare and pursue confirmation of a plan
and approval of a disclosure statement, and all related
reorganization agreements/documents;
c) preparing on behalf of the Debtors necessary
applications, motions, answers, orders, reports, and
other legal papers;
d) appearing in Court and to protect the interests of the
Debtors before the Court; and
e) performing all other legal services for the Debtors
which may be necessary and proper in this proceeding.
Zenith Industrial Corporation, a leading worldwide, full-service
Tier 1 supplier of highly engineered metal-formed components,
complex modules and mechanical assemblies for automotive OEMs
filed for chapter 11 protection on March 12, 2002. Joseph A.
Malfitano, Esq., Edward J. Kosmowski, Esq., Robert S. Brady,
Esq., at Young Conaway Stargatt & Taylor, LLP and Larry S.
Nyhan, Esq., Matthew A. Clemente, Esq., Paul J. Stanukinas, Esq.
at Sidley Austin Brown & Wood represent the Debtor in its
restructuring efforts. When the Company filed for protection
from its creditors, it listed estimated debts and assets of more
than $100 million.
* BOND PRICING: For the week of May 13 - May 17, 2002
------------------------------------------------------
Following are indicated prices for selected issues:
Amresco 9 7/8 '05 23 - 25(f)
AES 9 1/2 '09 77 - 79
AMR 9 '12 96 - 97
Asia Pulp & Paper 11 3/4 '05 25 - 26(f)
Bethlehem Steel 10 3/8 '03 11 - 12(f)
Enron 9 5/8 '03 11 - 12(f)
Global Crossing 9 1/8 '04 2 - 3(f)
Level III 9 1/8 '04 46 - 48
Kmart 9 3/8 '06 50 - 52(f)
NWA 8.70 '07 90 - 92
Owens Corning 7 1/2 '05 40 - 41(f)
Revlon 8 5/8 '08 44 - 46
Trump AC 11 1/4 '07 75 - 77
USG 9 1/4 '01 80 - 82(f)
Westpoint Stevens 7 3/4 '05 55 - 57
Xerox 7.15 '04 94 - 95
*********
Bond pricing, appearing in each Monday's edition of the TCR, is
provided by DLS Capital Partners in Dallas, Texas.
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related conferences are encouraged. Send announcements to
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Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
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unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
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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
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Copyright 2002. All rights reserved. ISSN: 1520-9474.
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