T R O U B L E D C O M P A N Y R E P O R T E R Monday, June 3, 2002, Vol. 6, No. 108 Headlines 360NETWORKS: Seeks 3rd Exclusivity Extension Until August 26 ADELPHIA COMMUNICATIONS: Nasdaq Delists Today & Triggers Default ALGOMA STEEL: Issues Revised 1st Quarter Report To Shareholders ARTHUR ANDERSEN: Eight Partners Join Navigant Consulting AT&T CANADA: Lashes At CRTC Ruling As Unfair to Local Services AKORN, INC.: Reports $26.1MM Working Capital Deficit at March 31 AMERICAN CLASSIC: Wants to Extend Exclusivity through July 30 ANALYTICAL SOFTWARE: Violates TSX Exchange Listing Requirements AREMISSOFT: Chapter 11 Plan Confirmation Hearing Set For June 28 BERRY PLASTICS: S&P Maintains Watch on B+ Corp. Credit Rating BETHLEHEM STEEL: Court Approves Amendment to PwC Retention Deal BIRMINGHAM STEEL: Signs $615 Million Asset Sale Pact With Nucor BURLINGTON: Court Okays Yantek as Executory Contract Consultant BURLINGTON: Wins Final Nod For Upholstery Fabrics Business Sale COMPLETEL: Voluntarily Delists Ordinary Shares From Nasdaq COMTREX SYSTEMS: Fails to Comply with Nasdaq Listing Criteria COSERV TELECOM: Secures $7.8 Million DIP Financing From CFC COVANTA: Court Issues Interim Approval to Hire Arnold & Porter ECOGEN: Certis USA Enters Pact to Acquire Bt Biopesticide Assets ENRON: Employee Committee Hires Crossroads as Financial Advisor ENRON: Gains Court Nod to Pay Pre-Petition Headquarters Taxes EXIDE TECH: Gets Court Okay to Hire Kirkland & Ellis as Counsel FARMLAND INDUSTRIES: Files for Chapter 11 Reorg. in Kansas City FARMLAND INDUSTRIES: Voluntary Chapter 11 Case Summary FEDERAL-MOGUL: Wishes to Employ Garden City as Claims Agent FORMICA: Committee Taps Dewey Ballantine as Bankruptcy Counsel GALEY & LORD: Seeks Court Nod to Tap Garden City as Claims Agent GRAHAM PACKAGING: S&P Places B Credit Rating on Watch Positive ICH CORPORATION: Secures Okay to Sign-Up BSI as Claims Agent INTERMET CORPORATION: S&P Assigns BB- Corporate Credit Rating INT'L FIBERCOM: Looks to PricewaterhouseCoopers for Fin'l Advice INTERVOICE-BRITE: Completes 3 Debt Restructuring Transactions IRON AGE: S&P Junks Rating Due to Weaker Operating Performance KAISER ALUMINUM: Retirees' Committee Retains Brobeck as Counsel KELLSTROM: Committee Wants Jefferies to Render Financial Advice KMART: Myrick Construction Seeks Stay Relief to Enforce Liens KMART CORP: Offering Free BlueLight Internet Access To Shoppers LANTRONIX: Fails To Comply With Nasdaq Listing Requirements METALS USA: U.S. Trustee Alters Unsecured Committee Membership NATIONAL STEEL: Signs-Up Ernst & Young as Consultants NATIONSRENT INC: Taps Ritchie Bros. as Equipment Appraisers OSE USA: Says Cash Balances Ample to Meet Working Capital Needs OWENS CORNING: Seeks Approval of Settlement Pact with Bank Group PHYCOR INC: Exclusive Period Remains Intact through July 30 PSINET INC: Wants to Sell TX Assets for 11MM+ at Public Auction QWEST COMMS: Expresses Disappointment over Moody's Downgrade RESIDENTIAL ACCREDIT: Fitch Places 2 Bonds on Rating Watch Neg. SAFETY-KLEEN: Clean Harbors Completes Due Diligence Process SECURITY ASSET: Pursuing Debt Financing to Maintain Operations SIMMONS: S&P Raises Corp. Credit & Secured Debt Ratings to BB- SMARTSERV: Asks For Review Of Nasdaq Delisting Determination TELEGLOBE: Seeking Authority to Pay Critical Vendors' Claims TIMCO AVIATION: March 31 Balance Sheet Upside-Down by $82 Mill. UNITED DEFENSE: Fitch Affirms Senior Secured Facilities at BB WASH DEPOT: Plan Confirmation Hearing Scheduled for July 31 WEBLINK WIRELESS: Ability to Continue Operations Still Uncertain WHEELING-PITTSBURGH: Tatum's Retention Not to Prejudice Others WHISPERING OAKS: Working Capital Deficit Tops $693K at Dec. 31 WKI HOLDING: Files for Chapter 11 Reorganization in Illinois WKI HOLDING: Case Summary & 50 Largest Unsecured Creditors * BOND PRICING: For the week of June 3 - 7, 2002 ********* 360NETWORKS: Seeks 3rd Exclusivity Extension Until August 26 ------------------------------------------------------------ For a third time -- 360networks inc. and its debtor-affiliates seek an extension of their exclusive periods to: (i) file a plan of reorganization through August 26, 2002; and (ii) solicit acceptances of that plan through October 28, 2002. Alan J. Lipkin, Esq., at Willkie Farr & Gallagher, in New York, says that the sheer size and complexity of these cases warrant an extension for the Debtors, reminding the Court that these cases include 23 Debtors, over $1,200,000,000 in pre-petition bank facilities, and thousands of creditors owed hundreds of millions of dollars. "The cases are further complicated by cross-border issues involving the Canadian Debtors," Mr. Lipkin adds. The facts and circumstances of these cases demonstrate that the requested extensions are appropriate and necessary to afford the debtors sufficient time to evaluate strategic and financial alternatives and negotiate distributions to creditors and parties in interest. The Debtors' initial 120 day exclusive period was dominated by their transition to Chapter 11 while the Debtors' first Exclusive Period extension was largely devoted to their ongoing efforts to develop and fine tune their business plan, explore third party interest, renegotiate key third party relationships and dispose of non-core assets. The second Exclusive Period extension has been devoted to similar matters as well as in developing a detailed plan term sheet that would form the basis of a reorganization plan. Accordingly, Mr. Lipkin reports that the Debtors have made a substantial progress in laying a foundation for confirmation of a plan. Nevertheless, substantial work remains to be done, including full evaluation of all claims filed in these cases, obtaining another extension for use of cash collateral and completion of the negotiation of a plan of reorganization. Termination of the Debtors' Exclusive Periods would adversely affect the Debtors' business operations and the progress of these cases. Mr. Lipkin states that if this Court were to deny the request for an extension, any party in interest then would be free to propose a plan of reorganization. Hence, a chaotic environment would develop with no central focus. "An extension of exclusivity would enable the Debtors to harmonize the diverse and competing interests that exist and attempt to resolve conflicts in a reasonable manner," Mr. Lipkin says. Judge Gropper will convene a hearing on the Debtors' request on June 4, 2002 and the Debtors' exclusive period is extended through the conclusion of that hearing. (360 Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMUNICATIONS: Nasdaq Delists Today & Triggers Default ---------------------------------------------------------------- The Nasdaq Stock Market, Inc. announced that it will delist the securities of Adelphia Communications Corporation (Nasdaq: ADLAE) based upon its failure to timely file its periodic reports with the Securities and Exchange Commission as required by Nasdaq rules and based upon public interest concerns. The delisting will be effective upon the open of business on Monday, June 3, 2002, in order to provide for an orderly transition of index components in the Nasdaq 100 Index. The Nasdaq's delisting action triggers an event of default under certain of Adelphia's public bond indentures. Adelphia now faces the obligation to buy-back some $1.4 billion of its bonds. Adelphia is already in technical default on $7 billion of bank debt for failing to timely deliver audited financial statements, and the banks are doling-out short-term waivers. Late Friday, talks with Charter Communications, Inc., broke down. Charter was reportedly offering $2,700 per subscriber for Adelphia's California cable operations and Adelphia wants $3,600 per subscriber. ALGOMA STEEL: Issues Revised 1st Quarter Report To Shareholders --------------------------------------------------------------- Algoma Steel Inc. (TSE:AGA.) reissued its First Quarter Report to Shareholders for the period ended March 31, 2002. The reissuance is necessary to comply with certain regulatory requirements to include comparative financial statements, excepting the statement of financial position, for periods prior to the Company's restructuring on January 29, 2002 and application of fresh start accounting at January 31, 2002. Results for the two-month post-restructuring period ended March 31, 2002 are unchanged. This report includes results for January 2002 and certain comparative financial information for the first quarter of 2001. The reissued First Quarter Report to Shareholders will be available on SEDAR and will be mailed to shareholders along with the Second Quarter Report. 2002 First Quarter Report To Shareholders (Unaudited) for the period ended March 31, 2002 Summary The first quarter results for 2002 are being reissued with certain comparative financial statements pursuant to regulatory requirements. The financial results for the two-month period ended March 31, 2002 are unchanged, but results for January, 2002 are being disclosed. The implementation of the restructuring plan on January 29, 2002 and related "fresh start accounting" resulted in a number of adjustments to the opening balance sheet of the restructured Company. Algoma is now positioned with a much improved capital structure resulting in lower interest and depreciation costs. The restructuring also resulted in reduced operating costs due mainly to lower wage and benefit costs. These factors contributed to positive operating income of $3.0 million for the two-month post-reorganization period ended March 31. A net loss of $4.4 million was incurred during these two months. The outlook for steel markets for the next six months is positive and is expected to result in improving financial results. Management's Discussion And Analysis Introduction The Company completed its restructuring on January 29, 2002 and has presented its financial results on the basis of "fresh start accounting" which requires assets and liabilities to be comprehensively revalued. The financial position of the Company at December 31, 2001 has not been exhibited because it is not considered comparable due to the significant changes resulting from the restructuring. The opening balance sheet as of January 31 includes various adjustments to reflect the reorganization transactions and the fresh start accounting. The reorganization adjustments reflect the new capital structure from the restructuring process. In applying the principles of fresh start accounting, the Company has restated all assets and liabilities at estimated fair values. The net result of these adjustments was that Algoma recorded $300 million of shareholders' equity at January 31, 2002. Comparative financial statements, excepting the statement of financial position, for periods prior to January 31, 2002 have been presented pursuant to regulatory requirements. In reviewing the comparative financial statements, readers are reminded that they do not reflect the effects of the financial reorganization or the application of fresh start accounting. Financial statements for 2001 have been restated to reflect the retroactive application of the change in accounting policy in respect of foreign currency translation as outlined in note 1. Financial and Operating Results The net loss for the two-month post-restructuring period was $4.4 million. A net loss of $30.5 million was incurred in the first quarter of 2002 compared with a loss of $136.7 million in 2001. The January, 2002 results include a $6.8 million loss on the disposal of the joint venture interest in the Tilden Mine and $3.3 million in reorganization expenses. The reclassification of the First Mortgage Notes as a current liability in March, 2001 resulted in $36.7 million of unamortized original issue discount and issue costs being charged to income as reorganization expenses. Operating income for the two-month post-restructuring period was $3.0 million. The loss from operations was $7.5 million in the quarter, an improvement of $45.5 million over the $53.0 million loss reported in 2001. An improvement in selling prices and lower unit costs resulted in inventory valuation adjustments which improved earnings by approximately $6 million in the two- month post-restructuring period. Operating costs declined significantly from 2001 due mainly to favourable inventory adjustments, lower natural gas prices and the effect of restructuring savings (particularly lower wage and benefit levels). Raw steel production was 591,000 tons in the quarter compared with 496,000 tons in 2001 and shipments increased to 544,000 tons from 490,000 tons in the previous year. Revenue was $241.9 million for the quarter with average selling prices of $445 per ton compared with revenue of $227.5 and average selling prices of $464 per ton in 2001. A price increase of $30 per ton was implemented on hot rolled sheet products in February, 2002. Financial expense for the quarter of $12.3 million was significantly lower than the restated $46.5 million in 2001 due mainly to a foreign exchange gain of $1.4 million compared with an exchange loss of $25.3 million in 2001 and reduced interest expense on the lower levels of long-term debt in the post- restructuring period. Liquidity Cash flow from operations before the effects of changes in operating working capital improved to negative $8.3 million in the quarter compared with negative $54.0 million in 2001 due to the improvement in operating results. There was a $32.7 million reduction in operating working capital, with $11.6 million resulting from the disposal of the Tilden joint venture interest and the remaining $21.1 million due primarily to reduced inventory levels. Capital expenditures were $3.2 million compared to $7.1 million in 2001. In addition, $50 million in proceeds from the new term loan contributed to a decrease in bank indebtedness of $71.2 million in the quarter. Unused availability at March 31 was $83 million. The restructuring provided the Company with new arrangements with the banking syndicate which expire on December 30, 2003. The Company has a revolving credit facility with availability limited to the lesser of $180 million and a borrowing base determined by the levels of accounts receivable and inventories, a federal loan guarantee, less certain reserves. The arrangement also provides the Company with a $50 million term loan to be repaid in $10 million quarterly installments commencing in September, 2002 and ending in September, 2003. A detailed description of the banking arrangements is included in note 2. Trade The global safeguard investigation in the United States against imports of many steel products (under Section 201 of the Trade Act of 1974) has been concluded. President Bush announced a range of remedies including varying rates of tariffs and quotas. All steel products from Canada have been excluded from the current remedies. In response to the Section 201 action by the U.S., other jurisdictions such as the European Union and Mexico have implemented similar safeguard actions. The Canadian industry is concerned that restrictions on the global importation of steel into the U.S. will cause diversion of that steel to Canada. In response to these concerns, the government of Canada, under international agreements and Canadian law, has commenced a safeguard investigation into the importation of steel into Canada, similar to that completed by the U.S. government. A public hearing before the Canadian International Trade Tribunal (CITT) will commence on June 10, 2002 with an injury determination due by July 4. On August 19, the CITT will issue their reasons for any determination and any recommendations regarding remedy. An anti-dumping order covering imports of certain hot rolled carbon steel plate originating in or exported from Mexico, the People's Republic of China, the Republic of South Africa and the Russian Federation is due to expire in late October, 2002. The CITT has initiated an expiry review to determine whether the order should be renewed. This process may not be concluded until late in the year. Outlook Current strong order intake levels are expected to continue through the second quarter. Price increases of $30 per ton have been announced for each of April, May and June for hot rolled sheet with further increases of $40 per ton for each of July and August. Similar price increases have been announced for cold rolled sheet, while increases of $130 per ton have been announced for carbon plate products during the same period. There are several projected cost increases with the most significant being higher natural gas prices. The cost of scrap and power is also projected to increase. The benefits from higher selling prices are expected to exceed the cost increases for natural gas, scrap and power resulting in improved financial results for the second quarter. Financial reorganization On April 23, 2001, Algoma Steel Inc. obtained protection under the Companies' Creditors Arrangement Act ("CCAA") in the Ontario Superior Court of Justice. The Court subsequently granted extensions of the CCAA protection until January 31, 2002. This allowed the Corporation to continue operating its business as it negotiated a restructuring plan with its stakeholders by preventing legal action being brought against the Corporation and by staying substantially all unsecured and under-secured claims as of the Filing Date. Additional financing was obtained providing for continuing operations through the anticipated restructuring period. On October 24, 2001, the Corporation filed an initial Plan of Arrangement and Reorganization with the Court. A second and third amended and restated Plan of Arrangement and Reorganization were filed on November 8, 2001 and December 10, 2001, respectively. The third amended and restated Plan of Arrangement and Reorganization was voted upon and approved by each Class of Affected Creditors on December 10 and December 17, 2001 and on December 19, 2001, the Court issued a Final Order sanctioning the Plan. The Corporation subsequently emerged from CCAA protection and the Plan was implemented on January 29, 2002. The significant provisions of the Plan are as follows: -- the cancellation of all currently outstanding common shares and employee voting shares for no consideration and the issuance of new common shares as set out below; -- the settlement of the First Mortgage Notes (U.S. $349.4 million) and related interest obligation (U.S. $47 million) in exchange for U.S. $125 million of 11% Notes maturing in 2009, U.S. $62.5 million of 1% convertible Notes maturing in 2030 and 15 million new common shares; -- a cash payment of $0.8 million and 1 million new common shares in satisfaction of all claims of the unsecured creditors; -- options for 4 million new common shares issued to employees for nominal consideration and new collective bargaining agreements which include wage and benefit reductions, reduced vacation, pension benefit changes and manning reductions. The pension obligations were restructured through the new collective bargaining agreements and an arrangement with the Superintendent of the Financial Services Commission of Ontario; -- new financing facilities and a $50 million loan guarantee provided by the Government of Canada; and -- a new Board of Directors comprised of 7 nominees of the holders of the First Mortgage Notes and 3 nominees of the United Steelworkers of America. Algoma Steel Inc., based in Sault Ste. Marie, Ontario, is Canada's third largest integrated steel producer. Revenues are derived primarily from the manufacture and sale of rolled steel products, including hot and cold rolled sheet and plate. DebtTraders reports that Algoma Steel Inc.'s 12.375% bonds due 2005 (ALGC05CAR1) are quoted between 25 and 30. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ALGC05CAR1 for real-time bond pricing. ARTHUR ANDERSEN: Eight Partners Join Navigant Consulting -------------------------------------------------------- Navigant Consulting, Inc. (NYSE: NCI) announced that it has acquired the practices of eight partners, together with 82 other client service professionals, from Arthur Andersen LLP. "The current consulting environment represents a unique opportunity to build an outstanding specialty consulting firm, and we are extremely pleased to have a strong group of Andersen professionals joining us," stated William M. Goodyear, Chairman and Chief Executive Officer of Navigant Consulting. "These teams fit directly within a core competency of our organization, enhance practice areas we feel are strategically important to our expansion plans, and confirm the attractive nature of our platform for growth." The teams joining Navigant Consulting come from five different Andersen practice areas, and will primarily integrate into the Company's Financial & Claims business unit, Peterson Consulting. The Financial Analytics practice, led by Tim Hart along with Mike Maloney, David Moes, Tony Creamer and Steve Stanton, will join current litigation support practices in Washington, D.C., Chicago and Philadelphia. Dan Williams, formerly the Central and West Region Managing Partner for Andersen's Corporate Finance practice, will be based in Chicago and will lead a team of professionals in launching a national restructuring practice. Tom Mulhare will be joining the Princeton, N.J. office to enhance the insurance, reinsurance and claims practice. In Nashville, Irene Torino, with a team of 12 client service professionals, will be joining to expand Navigant Consulting's healthcare practice, and in Los Angeles, Larry Oliva, formerly the Andersen partner in charge of its energy consulting group's Power Transmission consulting practice, will be joining to fill a key role in Navigant Consulting's Electric Generation and Transmission consulting practice. "The Andersen practices we are acquiring represent some of the leading experts in their respective fields, and their skill sets are an exceptionally strong complement to our existing practices," stated Doug Reichert, Executive Managing Director of Navigant Consulting's Financial & Claims practice. "We are excited about the experience the Andersen professionals bring to our practice, and we are looking forward to expanding our reach into new markets." "All of these Andersen teams have a record of high performance and strong profitability," stated Ben W. Perks, Executive Vice President and Chief Financial Officer. "Once integrated, we anticipate these practices will have a strong impact on our revenue and EBITDA generation." The transaction was effective as of May 24, 2002. Further terms were not announced. Navigant Consulting, Inc. -- http://www.navigantconsulting.com -- is a specialized consulting firm providing services to Fortune 500 companies, government agencies, law firms, and regulated and network industries. The Company is comprised of two business units - Financial & Claims and Energy & Water. The Financial & Claims practice, consisting of Peterson Consulting and PENTA Advisory Services, provides consultation to clients facing the challenges of dispute, litigation, bankruptcy, regulation and change in analyzing complex accounting, finance, economic, operations and information management issues. The Energy & Water practice provides consulting services to the energy and electric, gas, and water utility industries, focusing on M&A/divestiture financial advisory services, reliability regulatory and optimization reviews, electric generation and transmission assessments, including energy market assessments, and energy regulatory-related litigation support. "Navigant" is a service mark of Navigant International, Inc. Navigant Consulting, Inc. (NCI) is not affiliated, associated, or in any way connected with Navigant International, Inc. and NCI's use of "Navigant" is made under license from Navigant International, Inc. AT&T CANADA: Lashes At CRTC Ruling As Unfair to Local Services -------------------------------------------------------------- AT&T Canada Inc. (NASDAQ:ATTC),(TSE: TEL.B), Canada's largest facilities-based competitor, issued the following statement by Vice Chairman & CEO John McLennan in response to the ruling by the CRTC: "[Thurs]day's CRTC ruling fails to achieve the Federal government's stated policy goal of a competitive telecom industry. The regulator appears to have fundamentally misjudged the reality of the current state of competition in the Canadian telecom industry. This is a disappointing decision for competition. It is a disappointing decision for consumers and customers who would benefit from a more competitive environment in local service. And it is a disappointing decision for AT&T Canada, which is doing everything in its power to help establish a strong competitive position for itself and its customers. "From a business perspective, this ruling represents a marginal improvement over the status quo as it fails to adequately address the insurmountable cost advantage enjoyed by the former monopolies over new entrant competitors. By failing to achieve a level playing field, the CRTC's decision preserves an inequitable marketplace that denies Canadian telecom customers the full benefits of true competition. "Accordingly, we are reviewing the decision in detail and will explore all options available to us with respect to this decision, including a possible appeal. After undertaking a thorough evaluation of the ruling, as it now stands, we will determine its impact on our business plan. "As previously indicated, we will then assess our capital structure to ensure that it provides the necessary liquidity and flexibility for AT&T Canada to grow as a profitable and effective competitor. We expect to update all of our stakeholders on the results of this review by the time of our Annual General Meeting on June 18th." 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. DebtTraders reports that AT&T Canada Inc.'s 10.750% bonds due 2007 (ATTC07CAR1) are trading between 8 and 12. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC07CAR1 for some real-time bond pricing. AKORN, INC.: Reports $26.1MM Working Capital Deficit at March 31 ---------------------------------------------------------------- Akorn, Inc. operates in three separate segments: the ophthalmic segment manufactures, markets and distributes diagnostic and therapeutic pharmaceuticals and surgical instruments and related supplies; the injectable segment manufactures, markets and distributes injectable pharmaceuticals, primarily in niche markets; and the contract services segment provides manufacturing services to unaffiliated companies in the ophthalmic and injectable markets. Akorn, Inc.'s consolidated net sales increased 124% in the quarter ended March 31, 2002 compared to the same period in 2001 due to fact that the net sales for the first quarter 2001 were negatively impacted by several non-recurring charges related to chargebacks, rebates and returned goods. The allowance for chargebacks, rebates and returned goods are recorded as reductions to gross sales in computing net sales. Excluding these non-recurring charges, consolidated net sales for the first quarter of 2002 decreased by $1,193,000, or 8.1%. This decrease is mainly concentrated in the injectable line of business as anticipated due to abnormally high injectable sales in the first quarter of 2001 due to a product shortage, which did not reoccur in the first quarter of 2002. Ophthalmic segment sales increased primarily due to the non-recurring charges noted above as well as strong angiography and ointment product sales. Contract Services sales decreased by 11.4% due mainly to customer inventory issues as the Company has not lost any major customer's business. Consolidated gross margin was $6,499,000, or 47.8%, for the 2002 first quarter as compared to a gross margin loss of $5,783,000 in the same period a year ago. Excluding the non-recurring charges discussed above, the first quarter 2001 gross margin was $4,457,000, or 30.1%. The significant improvement in gross margin in the first quarter of 2002 was driven by the Company's continued focus on manufacturing costs, operational efficiencies as well as a shift in product mix to higher gross margin products in the angiography and ointment product lines. The Company reported a net income of $191,000 for the three months ended March 31, 2002, compared to a net loss of $12,977,000 for the comparable prior year quarter. Excluding the non-recurring charges discussed above, the net loss for the first quarter of 2001 would have been $1,276. Working capital at March 31, 2002 was a deficit $26.1 million compared to a deficit $26.7 million at December 31, 2001. Working capital is negative primarily due to the $44.8 million in long-term debt that is due within twelve months of the balance sheet reporting date of March 31, 2002. Future working capital needs will be highly dependent upon the Company's ability to control expenses and manage its accounts receivables. Management believes that existing cash and cash flow from operations will be sufficient to meet the cash needs of the business for the immediate future, but that additional financing will be needed to refund the current bank debt. If available funds and cash generated from operations are insufficient to meet immediate liquidity requirements, further financing and/or reductions of existing operations will be required. There are no guaranties that such financing will be available or available on acceptable terms. Further, such additional financing may require the granting of rights, preferences or privileges senior to those rights of the common stock and existing stockholders may experience substantial dilution of their ownership interests. The Company will need to refinance or extend the maturity of the bank credit agreement as it does not anticipate sufficient cash to make the June 30, 2002 scheduled payment. For the quarter ended March 31, 2002, the Company provided $389,000 in cash from operations to finance its working capital requirements, primarily from a decrease in accounts receivable balances. Investing activities, which primarily relate to purchase of equipment and in progress construction, required $974,000 in cash. Investment activities provided $138,000 in cash, primarily due to the exercise of stock options. Akorn, Inc.'s ophthalmic unit produces anesthetic and diagnostic products, as well as antibiotics, steroids, glaucoma treatments, and surgical and eye care products. Its injectable unit makes generic drugs and anesthetics for arthritis and pain management. Akorn provides contract manufacturing services to other drug and biotech firms; it also markets its own ophthalmic and injectable products, which are sold to physicians, optometrists, wholesalers, retailers, and pharmacies. AMERICAN CLASSIC: Wants to Extend Exclusivity through July 30 ------------------------------------------------------------- American Classic Voyages Co. is seeking approval from the U.S. Bankruptcy Court in Delaware for a 90-day extension of the company's exclusive right to file a plan and lobby creditors for support, reported Dow Jones. The company said it wants until July 30 to file a reorganization plan and up to September 28 to get creditor approval. A hearing on the extension is scheduled for June 21 with objections due on June 17. (ABI World, May 30, 2002) ANALYTICAL SOFTWARE: Violates TSX Exchange Listing Requirements --------------------------------------------------------------- Effective at the close of business May 31, 2002, the common shares of Analytical Software, Inc. ("AYL") were delisted from TSX Venture Exchange for failing to maintain Exchange Listing Requirements. The securities of the Company have been suspended in excess of twelve months. AREMISSOFT: Chapter 11 Plan Confirmation Hearing Set For June 28 ---------------------------------------------------------------- AremisSoft Corporation announced that the U.S. District Court for the District of New Jersey approved the disclosure statement in connection with its previously announced Plan of Reorganization. The disclosure statement was approved without objection, and AremisSoft may now begin soliciting acceptances for its proposed Plan of Reorganization. The confirmation hearing on the Plan of Reorganization is scheduled for June 28, 2002. AremisSoft also announced that the official equity committee and the representatives of the plaintiff class in the pending class- action litigation have expressed strong support for the Plan of Reorganization. Under the Plan of Reorganization, AremisSoft's shareholders at June 27, 2002 will receive 39.5% of the stock of SoftBrands, Inc., AremisSoft's wholly-owned operating subsidiary, and members of the plaintiff class will receive 60.5% of the stock of SoftBrands. The plaintiff class will also receive all of the interests in a liquidating trust being formed to pursue litigation claims on behalf of AremisSoft and to liquidate other non-operating assets of AremisSoft. SoftBrands will be entitled to 10% of the net proceeds from the liquidating trust. George Ellis, CEO of SoftBrands, indicated that, "We are pleased that this important step in the reorganization has been completed and that the confirmation date has been scheduled. We look forward to being able to operate SoftBrands as an independent entity and to generate value for our shareholders through what we believe is a solid business with a bright future." BERRY PLASTICS: S&P Maintains Watch on B+ Corp. Credit Rating ------------------------------------------------------------- Standard & Poor's said that its single-'B'-plus corporate credit rating on Berry Plastics Corp. remains on CreditWatch with developing implications following the announcement that First Atlantic Capital, JPMorgan Partners, and Aetna Life Insurance Co. signed a definitive agreement to sell Berry to GS Capital Partners 2000 L.P. for $837.5 million, including repayment of existing indebtedness. Developing means ratings could be raised, lowered, or affirmed. At the same time, the single-'B'-plus corporate credit rating on Berry's parent company, BPC Holding Corp., remains on CreditWatch with developing implications. Evansville Ind.-based Berry is a leading manufacturer and supplier of rigid thin-wall open top containers, plastic injection molded aerosol overcaps, closures, drinking cups, and housewares. The company had outstanding debt of about $493 million as at March 31, 2002. GS Capital Partners is a private equity investment fund managed by Goldman, Sachs & Co. The transaction, subject to customary closing conditions, is expected to close in the third quarter of 2002. "Although no details of the forthcoming transaction have been disclosed, a strengthened financial profile could result in higher ratings. Conversely, initiatives that would deteriorate the firm's financial profile could result in a downgrade," said Standard & Poor's analyst Liley Mehta. Standard & Poor's will meet with management to resolve the CreditWatch as more information is made available. In assessing the impact on the ratings, Standard & Poor's will examine the implications for the financial profile, and review the company's business and financial strategies. BETHLEHEM STEEL: Court Approves Amendment to PwC Retention Deal --------------------------------------------------------------- Pursuant to Section 327(a) of the Bankruptcy Code and Bankruptcy Rule 2014(a), Bethlehem Steel Corporation and its debtor- affiliates seek the Court's authority to amend the terms of the Retention Agreement with PricewaterhouseCoopers LLP as auditors, tax advisors, bankruptcy and reorganization consultants. Harvey R. Miller, Esq., at Weil, Gotshal & Manges, LLP, in New York, informs the Court that the Debtors wish to amend the services PwC will render to the Debtors, to include: (a) Audit of Schedule II: Valuation and Qualifying Accounts and Reserves, including in Bethlehem's 2002 Annual Report on Form 10-K; (b) Debt compliance letter required by the General Electric Capital Corporation Revolving Credit and Guaranty Agreement; (c) Audit of compensation and medical payments included in Form LS-513, Report of Payments, for the purpose of complying with the Longshore and Harbor Workers' Compensation Act; (d) Audit of the Debtors' profit sharing calculation as required by the 1999 Bethlehem/USWA agreement; (e) Audits the employee benefit plans for 2001: -- The Savings Plan for Salaried Employees of Bethlehem Steel Corporation and Subsidiary Companies, -- 401(k) Retirement Savings Plan of Bethlehem Steel Corporation and Subsidiary Companies, -- Bethlehem Steel Corporation Employee Stock Ownership Plan, -- Bethlehem Steel Corporation Special Profit Sharing Plan, -- Bethlehem Steel Corporation Special Profit Sharing Plan, -- The Pension Plan of Bethlehem Steel Corporation and Subsidiary Companies, -- Bethlehem Supplemental Unemployment Benefit Plan, -- Bethlehem Railroads Supplemental Unemployment Benefit Plan, -- Bethlehem Supplemental Unemployment Benefit Plan (short plan year), -- Bethlehem Railroads Supplemental Unemployment Benefit Plan (short plan year), -- The Social Insurance Plan of Bethlehem Steel Corporation and Subsidiary Companies, and -- Supplemental Unemployment Benefit Plan for Employees of Lukens, Inc. (hourly); and (e) from time to time, upon the Debtors' request, consulting services with respect to bankruptcy issues related to credit claims, voidable transactions, vendor relations, analysis of the business, operations and financial plans, and other bankruptcy and reorganization consulting as may be necessary. As compensation for the services, the Debtors will pay PwC a fixed fee of $925,000 to be paid on: Date Amount ---- ------ May 31, 2002 $185,700 June 30, 2002 77,700 July 31, 2002 105,000 August 31, 2002 85,000 September 30, 2002 85,000 October 31, 2002 148,500 November 30, 2002 75,000 December 31, 2002 20,000 January 31, 2003 143,100 Mr. Miller adds that PwC will also be reimbursed for its reasonable out-of-pocket expenses. * * * Judge Lifland approves the amendment to the Debtors' Retention Agreement with PricewaterhouseCoopers LLC. PriceWaterhouseCoopers will be entitled to seek periodic interim basis payment of 100% for professional services rendered in connection with the Fixed Fee Services and 80% for professional services rendered in connection with the Reorganization Services as well as reimbursement for its reasonable expenses. (Bethlehem Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Bethlehem Steel Corporation's 10.375% bonds due 2003 (BS03USR1) are quoted between the prices 10 and 13.5. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1 BIRMINGHAM STEEL: Signs $615 Million Asset Sale Pact With Nucor --------------------------------------------------------------- Birmingham Steel Corporation (OTC BB:BIRS) announced it has signed a definitive agreement to sell substantially all of its assets to Nucor Corporation for $615 million. Previously, in a press release on May 24, the Company disclosed it would make a pre-arranged filing pursuant to the reorganization provisions of Chapter 11 of the U.S. Bankruptcy Code in order to effect the sale to Nucor. The Company also announced today that its secured lenders have signed binding agreements to support the sale to Nucor, and that Bank of America, N.A., as agent for the Company's bank group, has committed to provide $40 million of post-petition debtor in possession financing through closing of the transaction. Subject to the approval of the Delaware bankruptcy court, the agreements reached with secured lenders also provide for prompt and uninterrupted payments of all pre- petition payables to scrap suppliers, utility providers, freight carriers and other suppliers of essential goods and services. John D. Correnti, Chairman and Chief Executive Officer of Birmingham Steel, commented, "We are pleased to have completed definitive documentation with Nucor and our secured lenders. We believe the Nucor transaction provides the best value for our stakeholders, which include lenders, shareholders, customers, suppliers and employees. We believe the Birmingham Steel operations and workforce will be tremendous additions to the Nucor organization." Correnti continued, "With the support of our secured lenders, we expect to continue operations in the normal course while we work to close the sale to Nucor." Correnti said closing of the transaction will take place upon receipt of approvals from the bankruptcy court and necessary regulatory agencies. The Company said the closing was expected to occur late in calendar 2002. The Company noted that the $615 million purchase price is less than the full amount of the Company's secured debt. The Company said the secured lender group has agreed to distribute a portion of the proceeds from the transaction to unsecured creditors and $15 million, or approximately $0.47 per share, to shareholders. The assets to be acquired by Nucor include Birmingham Steel's four operating mills in Birmingham, Alabama; Kankakee, Illinois; Seattle, Washington; and its 85%-owned BSE facility in Jackson, Mississippi. The transaction also includes the corporate headquarters in Birmingham, Alabama; the idled melt shop in Memphis, Tennessee; the assets of Port Everglades Steel Corporation; the assets of the Klean Steel division; Birmingham Steel's interest in Richmond Steel Recycling Limited; and accounts receivable and inventory related to the acquired assets. Correnti concluded, "Our directors, management and employees will work diligently to support efforts to complete the transaction as soon as possible. We will also focus on supporting the needs of our customers and suppliers until the transaction closes." Birmingham Steel operates in the mini-mill sector of the steel industry and conducts operations at facilities located across the United States. The common stock of Birmingham Steel is traded on the over the counter bulletin board under the symbol "BIRS." BURLINGTON: Court Okays Yantek as Executory Contract Consultant --------------------------------------------------------------- The Court approves Burlington Industries, Inc.'s and its debtor- affiliates' application to retain Yantek Consulting Group Inc. as their Executory Contract Consultants, nunc pro tunc to March 19, 2002. As previously reported, the Debtors asked to retain and employ Yantek Consulting Group Inc. as their executory contract and unexpired lease consultants in the Chapter 11 cases. Specifically, the Debtors need Yantek's assistance in: (a) designing an executory contract database; (b) educating operational parties of Burlington; (c) collecting data; (d) assuming or rejecting priority contracts; (e) linking scheduled and claimed items to specific executory contracts; (f) reconciling cure payments and sending cure notices; (g) negotiating settlements with various creditors relating to executory contracts and leases; (h) analyzing and re-characterizing lease agreements; and (i) providing such other and further services as the Debtors may request in these cases. The Debtors need Yantek to: -- determine the appropriate treatment of numerous Contracts in these cases, -- minimize claims arising from the assumption and rejection of certain Contracts, and -- renegotiate certain of the Contracts on terms favorable to the Debtors. In return, Yantek intends to: (1) charge for its professional services on an hourly basis in accordance with its ordinary and customary hourly rates in effect on the date services are rendered, and Yantek's current hourly rates are: $160 for services provided by Frank Yantek, and a maximum of $160 for services provided by all other professionals employed by Yantek. (2) seek reimbursement of actual and necessary out-of-pocket expenses. (Burlington Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) BURLINGTON: Wins Final Nod For Upholstery Fabrics Business Sale --------------------------------------------------------------- As a part of the final reorganization activities of the Burlington House Division, Burlington Industries, Inc. (OTC Bulletin Board: BRLG) received Court approval to sell its residential upholstery fabric business to Tietex International Ltd. Under the terms of the agreement, Tietex will purchase the Sheffield facility in Rocky Mount, North Carolina as an on-going operation and lease a portion of the company's weave capacity at the Williamsburg facility in Matkins, North Carolina. Burlington will continue to operate the majority of the capacity at Williamsburg. Tietex expects to employ the majority of the employees at Sheffield and those associated with upholstery production at Williamsburg. The terms of the agreement also include inventories, intellectual properties and a license to use the Burlington House(R) name for upholstery fabrics. The sale is expected to close on June 28, 2002. "This is a very positive outcome for both Burlington and Tietex," said George W. Henderson, III, Chairman and Chief Executive Officer. "Tietex is a strong and growing market leader and we are confident in their ability to grow this business and represent the Burlington House name in the market. We are pleased that many of our upholstery employees will have continued employment with Tietex. We also look forward to our continued relationship with Tietex as we coordinate operations at Williamsburg and serve as a supply partner for Sheffield." Going forward, the Burlington House division will supply fabrics for mattress coverings, bedding and window products and high- performance commercial fabrics for hospitality and corporate customers. Burlington Industries, Inc. is one of the world's largest and most diversified manufacturer and marketer of softgoods for apparel and interior furnishings. Burlington Industries filed voluntary petitions for Chapter 11 under the U.S. Bankruptcy Code on November 15, 2001. Tietex International Ltd. is a leading manufacturer of engineered fabrics for different industrial and commercial applications, home furnishings, decorative applications and specialty products. Tietex is a privately held corporation headquartered in Spartanburg, SC with operations in the United States, Mexico, Australia and Thailand. DebtTraders report that Burlington Industries's 7.250% bond due 2027 (BRLG27USR1) are quoted at prices between 16 and 17.5. http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG27USR1 for real-time bond pricing. COMPLETEL: Voluntarily Delists Ordinary Shares From Nasdaq ---------------------------------------------------------- Completel announced it would voluntarily delist its Ordinary Shares from the Nasdaq National Market, effective at the start of trading on Friday, May 31, 2002. Completel reached this decision primarily as a result of the small number of record holders of the Ordinary Shares in the United States, the low trading volume of the Ordinary Shares on Nasdaq as compared to Euronext Paris, and the relatively high costs of continuing to be a reporting company under the U.S. securities laws. Completel intends to maintain its listing on Euronext Paris. Currently, Completel's Ordinary Shares trade on Nasdaq in the form of Ordinary Shares of New York Registry. Following the delisting date, Completel anticipates that there will be little or no public market for its New York Shares. Moreover, as soon as practicable after the delisting, and in any event in connection with its previously announced recapitalization, Completel intends to terminate its status as a reporting company under US securities laws. The Company, however, intends to continue to make public quarterly and annual financial statements and related information. Under the terms of the New York Shares, holders are entitled to convert their New York Shares into Ordinary Shares of Dutch Registry, the form in which trades in Completel's Ordinary Shares are settled on the French market. This conversion may be effected by presenting a written request for such exchange and surrendering the certificates representing the New York Shares at the offices of JPMorgan Chase Bank. As a courtesy to holders of Completel's New York Shares, the exchange fee for exchanging New York Shares into Ordinary Shares will be paid by Completel. Additional information regarding the exchange of New York Shares for Dutch Shares can be obtained by contacting JPMorgan Chase Bank at 1-781-575-4328 or visiting their ADR market website at http://www.adr.com Completel is a facilities-based provider of fiber optic local access telecommunications and Internet services to business end- users, carriers and ISPs with activities predominantly located in France. COMTREX SYSTEMS: Fails to Comply with Nasdaq Listing Criteria ------------------------------------------------------------- Comtrex Systems Corporation (Nasdaq: COMX) reported receipt of a Nasdaq Staff Determination letter on May 23, 2002, notifying the Company that it fails to comply with Marketplace Rule 4310(C)(7), the requirement to maintain a minimum market value of publicly held shares of $1,000,000. As a result, the Company's common stock will be delisted from the Nasdaq SmallCap Market at the opening of business on May 31, 2002. Jeffrey C. Rice, Comtrex President and CEO, stated "While the total number of outstanding shares of Comtrex common stock is 1,417,120, only approximately 804,000 shares are considered by Nasdaq as being publicly held. The Board of Directors of the Company has determined that, since the common stock of the Company has failed to satisfy not only Marketplace Rule 4310(C)(7), but also failed to regain compliance with such requirement during a subsequent ninety (90) calendar day period under Marketplace Rule 4310(C)(8)(B), there is insufficient basis to support a successful appeal of the Nasdaq Staff delisting determination. We remain extremely confident in the future business prospects for the Company, particularly in light of the forthcoming release of our next generation Windows point- of-sale product series, designed to work in conjunction with our Odyssey BackOffice Suite. We are anxious to begin the implementation of our sales and marketing plans for these world- class products." The Company also announced that it will seek to continue trading in its common stock in over-the-counter markets. The Company's common stock will, however, then be subject to the risk that it could become characterized as a low-priced or "penny stock," which characterization could have a material adverse effect on the market liquidity and price of the Company's common stock. However, no assurances can be given that the Company's common stock will be traded on any other exchange or in any other market at any time in the future. If the Company's common stock does not trade on any exchange or in any other market in the future, then stockholders of the Company may lose all or a portion of their investment in the Company. Comtrex Systems Corporation is a software developer, systems integrator and designer of point-of-sale (POS) electronic information systems for the restaurant and quickservice food industry. Company information can be obtained through the worldwide web by visiting http://www.comtrex.com COSERV TELECOM: Secures $7.8 Million DIP Financing From CFC ----------------------------------------------------------- CoServ Telecom Holdings, L.P. announced that a Debtor-in- Possession (DIP) financing commitment for $7.8 million has been secured from the National Rural Utilities Cooperative Finance Corporation that will fund its telephone and cable businesses into next year. The telephone and cable businesses of CoServ filed for Chapter 11 reorganization protection on November 30, 2001 while a buyer for these businesses was sought. On February 25, the company announced an agreement to negotiate a restructure of the telephone and cable companies, and the new financing agreement is the result of that negotiation process. "The DIP financing provides the resources for our operational needs as we emerge from the reorganization process and move forward serving our customers," said Jim Chism, Division President of CoServ Communications. "This financing is therefore an important part of providing our telephone and cable customers with continued high levels of service. Additionally, we continue to evaluate potential purchasers for these businesses, and we remain optimistic that we will complete in the near future our search for a buyer that meets our high standards of customer service." For nearly 65 years, CoServ Electric has provided dependable, affordable, electric power to thousands of homes. In 1998, CoServ Electric expanded both its service area and its service offerings to include a broad range of services, including telephone and cable. Further information on CoServ Electric is accessible at http://www.coserv.comand information on its telephone and cable companies can be found at http://www.coservcom.com COVANTA: Court Issues Interim Approval to Hire Arnold & Porter -------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Chapter 11 cases of Covanta Energy Corporation and its debtor-affiliates asks the Court to allow them to retain Arnold & Porter as its attorneys, nunc pro tunc to April 8, 2002. Brad Tirpak, Chairman of the Official Committee of Unsecured Creditors, tells Judge Blackshear that Arnold & Porter has considerable experience and expertise in the debtor-creditor matters, particularly Chapter 11 bankruptcy cases. Arnold & Porter has also represented committees and other parties in a variety of Chapter 11 cases, including complex cases. Thus, the Committee believes, the retention of Arnold & Porter is in the best interest of the Debtors' unsecured creditors. Michael J. Canning, Esq., a partner at Arnold & Porter, in New York, reports that as attorneys, Arnold & Porter will render: (a) legal advice to the Committee with respect to its powers and duties; (b) legal advice to the Committee regarding the administration of the Debtors' estates; (c) legal advice concerning the Committee's investigation of the acts, conduct, assets and liabilities, and financial condition of the Debtors; (d) legal advice relating to transactions in the energy industry, tax, securities and corporate law issues that may arise in connection with these bankruptcy cases; (e) legal advice concerning the operation of the Debtors' businesses and the desirability and profitability of continuing and/or modifying such businesses; (f) legal advice to the Committee with respect to all matters relating to any proposed disposition of assets or any plan of reorganization, including negotiation of a plan and possible formulation and proposal of a plan; (g) assistance to the Committee in its negotiations with the Debtors and other creditors concerning any matter in this case, including the terms of any proposed plan; (h) assistance to the Committee in making reports to creditors regarding the progress of the cases; (i) legal advice to the Committee with respect to applications for relief sought by the Debtors and other parties-in-interest; (j) appearance on behalf of the Committee to support the Committee's position on various matters in the bankruptcy cases and any contested matters or adversary proceedings filed therein, including the preparation of all necessary applications, motions, answers, complaints, orders, reports and other legal papers and participation in discovery and other litigation activity where necessary or appropriate to protect the interests of unsecured creditors; (k) legal advice regarding any possible merger, acquisition or other transaction involving the Debtors; (l) coordination with the other professionals retained by the Committee with respect to those matters that require legal and economic, business, market or other related expertise; and (m) performance of all other appropriate legal services for the Committee. In exchange of the services to be rendered, Arnold and Porter will bill the Debtors based on the firm's hourly rates: Partners and of Counsels $355 - 650 Associates 195 - 375 Paraprofessionals 40 - 130 Arnold & Porter will also seek for a reimbursement of out-of- pocket expenses to include, but not limited to, long distance telephone charges, postage, overnight delivery charges, telecopy charges, messenger and courier charges, computerized legal research charges, mileage and travel expenses and court costs and disbursements. Mr. Canning assures the Court that Arnold & Porter will not be employed by any other entity having an adverse interest to the Debtors in connection with the Chapter 11 cases. Mr. Canning says that Arnold & Porter, nor any of its partners or associates have any connection with the Committee, the Debtors in the Chapter 11 cases, their creditors, any other party-in-interest, their attorneys and accountants, the United States Trustee, or any person employed in the office of the United States Trustee, except: (a) for Mark Stumpf, a partner of the firm, who has held stock in Broad Street Resources, Inc. since January 14, 1994. Mr. Stumpf will be actively involved in the Committee's representation, however, he will not trade his shares in Broad Street throughout the course of Arnold & Porter's engagement as counsel to the Committee; (b) representations to certain Pre-petition Lenders in various matters that are unrelated to the Debtors' bankruptcy cases, which includes: -- ABN AMRO Bank N.V., for which Arnold & Porter has an advance waiver that does not permit it to sue ABN; -- Bank of America, N.A., for which Arnold & Porter has obtained a waiver specific to its representation of the Committee; -- Credit Suisse First Boston, Arnold & Porter recently represented; -- the Industrial Bank of Japan, for which Arnold & Porter has an advance waiver; and -- SunTrust Bank, for which Arnold & Porter has obtained a waiver specific to its representation of the Committee that does not permit it to sue SunTrust Bank individually; (c) representation with the 30 largest unsecured creditors in various matters, again all of which are completely unrelated to the Debtors or to this bankruptcy case, including Citibank N.A. and Dravo Lime Company; (d) previously represented Broad Street, one of the 30 largest unsecured creditors, in various matters related to the Debtors prior to the commencement of these bankruptcy proceedings; (e) represents certain professionals in various matters all of which are completely unrelated to the Debtors or to this bankruptcy case, for which Arnold & Porter's annual billings in connection with each such representation are less than 0.6% of its annual gross fee income. Those professionals that we have been able to identify thus far include: Arthur Andersen, LeBoeuf, Lamb Greene & McRae, Deloitte & Touche, Hogan & Hartson and Ernst & Young; (f) Arnold & Porter represents certain potential Parties-in- Interest in various matters all of which are completely unrelated to the Debtors or to this bankruptcy case, for which Arnold & Porter's annual billings in connection with each such representation constitute less than 0.5% of its annual gross fee income. Those that we have been able to identify thus far include: Wells Fargo; Alfa Alfa S.A., Kendall Corporation, American Insurance Group and Bristol-Myers Squibb Company; and (g) Arnold & Porter represents certain potential Parties-in- Interest in various matters all of which are completely unrelated to the Debtors or to this bankruptcy case, for which Arnold & Porter's annual billings in connection with each such representation are in excess of 1% of its annual gross fee income. These are substantial clients for Arnold & Porter. In an abundance of caution, Arnold & Porter has obtained a waiver from each such Party-in- Interest. Those that we have been able to identify thus far include: -- General Electric Company, for which Arnold & Porter has obtained a waiver specific to its representation of the Committee that does not permit Arnold & Porter to sue General Electric; -- Phillip Morris Capital Corporation, for which Arnold & Porter has obtained a waiver specific to its representation of the Committee that does not permit Arnold & Porter to sue PM. In accordance with Section 504 of the Code, Mr. Canning says, Arnold & Porter has not entered into and will not enter into any agreements to share compensation for services rendered and reimbursement of expenses with any other person. Moreover, Mr. Canning adds, Arnold & Porter has made no undisclosed agreement for compensation with any entity and will apply to the Court for compensation of services rendered and reimbursement of actual and necessary expenses consistent with the requirements of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and the Local Rules of the Court. * * * Judge Blackshear issues an interim order approving Arnold & Porter's retention. The interim order shall become final if no objection is filed by June 5, 2002. (Covanta Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) ECOGEN: Certis USA Enters Pact to Acquire Bt Biopesticide Assets ---------------------------------------------------------------- Certis USA, LLC, a subsidiary of Mitsui & Co., Ltd., entered into an agreement to purchase certain assets of the Bt biopesticide and insecticidal nematode businesses owned by Ecogen, Inc. of Langhorne, PA. Certis USA, one of the world's leading producers of biological pesticides, will add CryMax(R), Lepinox(R), Condor(R) and other Bt biological insecticides to its Integrated Pest Management (IPM) product line. Under a business transition arrangement between Certis USA and Ecogen, Certis USA will immediately begin manufacturing and selling certain of the Ecogen Bt products. Certis USA expects volume quantities of the products will be available to the growers of high-value crops as soon as July. In addition to the biological insecticides, Certis USA will also purchase Ecogen's rights in Bt strain libraries for use for microbial applications, and its related product registrations, trademarks, patents or licenses and certain fixed assets. Dennis Banasiak, president and CEO of Certis USA, said, "Certis USA will be purchasing some of the most potent strains of Bacillus thuringiensis (Bt). We'll apply our formulation know- how to these strains and be able to offer growers an ever- expanding product line of improved Bt products in the near future." Bt bioinsecticides are the most widely used biological pesticides. Bt products are characteristically low in risk to humans, animals and the environment, yet they are highly lethal to Lepidopteran (caterpillar) pests, the primary insect threat to crop production. Certis USA was established by Mitsui in April 2001. Its products were previously sold under the name of Thermo Trilogy Corporation. Mitsui & Co., Japan's largest trading company, markets and distributes crop protection products and services directly and through its Certis marketing subsidiaries in Europe, Japan, Africa and the U.S. Global crop protection sales exceed $400 million annually. Headquartered in Columbia, MD, Certis USA manufactures environmentally friendly crop protection products for vegetable, tree fruit, nut, grape, citrus and mushroom crops grown both conventionally and organically. Certis USA product brands include: Agree(R), Deliver(R), Javelin(R), Teknar(R) and Thuricide(R) bioinsecticides; Azatin(R) and Neemix(R) botanical insect growth regulators; Trilogy(R) botanical fungicide/miticide; BioVector(R) insecticidal nematode, and GemStar(R) and Spod-X(R) insecticidal virus products. Ecogen Inc. is a biotechnology company specializing in the development and marketing of environmentally compatible products for the control of pests in agricultural and related markets. * * * As reported in the May 29, 2002 issue of the Troubled Company Reporter, Ecogen Inc. has not yet achieved profitable operations for any of its fiscal years and there is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company's future operations are dependent, among other things, on the success of the Company's commercialization efforts and market acceptance of the Company's products. The Company has reported net losses allocable to common stockholders of $2.5 million and $4.0 million for the six-month periods ended April 30, 2001, and 2000, respectively. The loss from inception in 1983 to April 30, 2001 amounted to $135.6 million. Further, the Company has a working capital deficit, a stockholders' deficit and limited liquid resources. These factors raise substantial doubt about the Company's ability to continue as a going concern. Net product sales were $1.6 million and $3.5 million for the first six months of fiscal 2001 and 2000, respectively, representing a decrease of 54%. Sales of the Company's Bt product line, representing 92% of Company's product sales in the first six months of fiscal 2001, decreased 49%. Biofungicide product sales, which represented 9% of product sales in fiscal 2001, decreased $.2 million from the year-ago period. Other product sales, representing 9% of Company's product sales, decreased $.2 million in the first half of fiscal 2001 when compared to the comparable quarter in fiscal 2000. The decrease in product sales were primarily the result of the Company's limited ability to fund production and the purchase of finished goods from Dow AgroSciences LLC. due to the Company's limited liquid resources. Contract research revenues increased $.2 million due to grants funded in fiscal 2001. Net loss allocable to common stockholders for the six months ended April 30, 2001 were $2.5 million, compared to a net loss allocable to common stockholders of $4.0 million for the same period in fiscal 2000 substantially as a result of lower expenses. The Company's continued operations will depend on its ability to raise additional funds. The Company has financed its working capital needs primarily through private and public offerings of equity and debt securities, revenues from research and development alliances and product sales. In addition, the Company has a working capital line of credit, which originally expired in August 2000 but was extended to June 29, 2001, a term loan of $1.5 million and promissory notes aggregating $1.0 million that are due on June 23, 2002. However, in the event that the Company receives net proceeds in excess of $50 thousand from non-operating activity prior to June 23, 2002, the holders of the term loan and the promissory notes may elect to require a prepayment of the balance due on the loan and/or the notes. The Company currently is not in compliance with the covenants of its working capital line of credit. This line of credit had a balance of $.2 million as of April 30, 2001 and a balance of $29 thousand at June 14, 2001. As a result of the Company's non- compliance with the covenants, the working capital lender has discontinued making loans and may, at its option, liquidate the collateral including inventory and accounts receivable. ENRON: Employee Committee Hires Crossroads as Financial Advisor --------------------------------------------------------------- The Official Employment-Related Issues Committee of the Chapter 11 cases of Enron Corporation and its debtor-affiliates seeks the Court's authority to retain and employ Crossroads LLC, nunc pro tunc to April 18, 2002, as their financial advisors. Michael P. Moran, Co-Chair of the Employee Committee, relates of all the financial advisors they interviewed, Crossroads has the experience and knowledge to best advise the Employee Committee on the bankruptcy and employee issues likely to arise in these Chapter 11 cases. Dennis I. Simon, Managing Principal of Crossroads, further tells the Court that their firm has worked for a number of creditors' committees in significant reorganizations under chapter 11 of the Bankruptcy Code. Mr. Simon relates that Crossroads has advised official creditors' committees in numerous Chapter 11 cases throughout the country including: Learnout & Hauspie Speech Products N.V. (Dictaphone Corporation), Delaware; Medpartners Provider Network, Inc., California; Einstein/Noah Bagel Corp., Arizona; At Home Corporation (Excite @ Home), California; PSINET Consulting Solutions Holdings, Inc., New York; Edwards Theatres Circuit, Inc., California; etc. Mr. Simon asserts that Crossroads has the expertise and experience that will enable the Employee Committee to function immediately and effectively. The professional services Crossroads will render are: a. Analyzing and developing potential areas and opportunities of recovery for the Employee Committee and the Employee Committee's various employee constituencies; b. Assisting in the proper, fair and acceptable value recovery process available for the Employee Committee's various employee constituencies; c. Advising the Employee Committee on certain proposed asset sales and divestitures that effect the various employee constituencies; d. Assisting in negotiations; e. Investigating claims; f. Preparing litigation support and expert witness testimony, all in accordance with direction from the Employee Committee or its counsel; g. Attending the meetings of the Employee Committee to receive and communicate information concerning the interests of the Employee Committee in these cases; h. Conferring with the Debtors' management and counsel and the Official Committee of Unsecured Creditors and various employee groups regarding severance and other related issues; i. Reviewing the Debtors' activities and motions and third party filings and advising the Employee Committee as to the ramifications regarding employee-related activities and motions; j. Conferring with third party fiduciaries and governmental entities regarding employee-related issues; k. Reviewing benefit plans and the Debtors' oversight and compliance; and l. Performing such other financial advice for the Employee Committee as may be necessary or proper in these proceedings. Crossroads intends to apply to the Court for payment of compensation and reimbursement of expenses in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the guidelines promulgated by the office of the U.S. Trustee and the local rules and orders of the Court, and pursuant to any additional procedures that may be or have been established by the Court in these cases. According to Mr. Moran, Crossroads will be compensated at its standard hourly rates for certain professionals and discounted rates for other of its professionals, which rates are based on the professionals' level of experience. At present, Mr. Moran says, the hourly rates range from $550 for certain principals to $100 for certain analysts. "These hourly rates are subject to periodic firm-wide adjustments in the ordinary course of Crossroads' business, but will not be adjusted prior to January 1, 2003," Mr. Moran explains. Specifically, the Crossroads professionals who will be working with the Employee Committee and their hourly rates are: Principals: Ruth E. Ford Lawrence D. Morriss, Jr. Dennis I. Simon Joel M. Simon Independent Contractors: DeFrain, Mayer, a division of Palmer & Cay Roland G. Simpson Principals, Managing Directors & Directors $300 - $550 Senior Consultants, Consultants & Actuaries $175 - $350 Associates & Accountants $100 - $150 Financial & Actuarial Analysts $100 - $150 Administrators $90 Mr. Simon also relates that it is the firm's policy to charge its clients for all disbursements and expenses incurred in the rendition of services. These disbursements and expenses include, among other things, long distance telephone and outgoing facsimile charges, photocopying, travel, business meals, computerized research, messengers, couriers, postage, witness fees and other fees related to trials and hearings, which are charged at cost or based on formulas that approximate actual cost where the actual cost is not readily ascertainable. According to Mr. Simon, the members and associates of Crossroads do not have any connection with the Debtors, its creditors, or any other party in interest, their respective attorneys and accountants. But, Mr. Simon says, Crossroads is currently working on some unrelated matters for some parties in interest. Mr. Simon assures Judge Gonzalez that Crossroads do not represent any other entity having an adverse interest in connection with these cases. However, Mr. Simon admits that the firm is unable to state with certainty whether one of its clients or an affiliated entity holds a claim or is a party in interest in these Chapter 11 cases. "If Crossroads discovers any information that is contrary to these disclosures, the firm will immediately provide such information to the Court, the U.S. Trustee, the Fee examiner, the Employee Committee and its legal counsel, and the Creditors' Committee," Mr. Simon says. (Enron Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: Gains Court Nod to Pay Pre-Petition Headquarters Taxes ------------------------------------------------------------- Enron Corporation and its debtor-affiliates sought and obtained the Court's authority to pay the Year 2001 property taxes -- $3,862,132 -- assessed against its corporate headquarters at 1400 Smith Street in Houston, Texas. JPMorgan Chase, as agent for a syndicate of lenders (which includes JPMorgan Chase), is a lender in connection with that certain Land and Facilities Lease Agreement, dated as of April 8, 1997, between Brazos Office Holdings, L.P. and Enron Leasing Partners, L.P. Subsequent to the execution of the Lease, Enron Leasing entered into a sublease with Enron Corporation, which subsequently assigned its interest in the Lease to Enron Property & Services Corp. According to Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, Enron and Enron Property are Debtors in these Chapter 11 cases, but not Enron Leasing. The property subject to the Lease is the Debtors' corporate headquarters. Mr. Rosen relates that Section 3.02(b) of the Lease provides that the Lease is to be characterized for all purposes of Federal, state, and local law as a financing transaction and not a lease. "JPMC has taken the position that the Lease contains adequate provisions to permit JPMC to exercise non-judicial remedies including non-judicial foreclosure of Enron Leasing's interest in the Property, including termination of the Lease," Mr. Rosen tells the Court. However, Enron, Enron Property, and Enron Leasing dispute this position and have asserted that JPMC's remedies as a lender are limited to those permitted to be exercised by a mortgagor of real property, which include judicial foreclosure of Brazos' interest in the Property and, if properly drafted, non-judicial foreclosure, but not termination of the leases. Moreover, Mr. Rosen continues, although the Lease grants JPMC a security interest, Enron, Enron Property and Enron Leasing assert that the Lease does not contain provisions adequate to grant JPMC the power to conduct a non-judicial foreclosure sale. Year 2001 property taxes assessed against the Property total approximately $3,862,132. The taxes were payable without penalty or interest until January 31, 2002, and accrues interest until satisfied in full. Mr. Rosen points out that the claims of the various taxing authorities in respect of unpaid property taxes are secured by the Property. "The statutory liens in respect of such claims are senior to any contractual lien," Mr. Rosen notes. Under the Lease, Mr. Rosen says, Enron Leasing, Enron and Enron Property are obligated to pay the property taxes. In light of the uncertainties of litigation over the positions advanced by JPMC, Enron Leasing, Enron, and Enron Property, Mr. Rosen informs Judge Gonzalez that the Parties have been negotiating the terms of a Standstill Agreement that would include forbearance agreement from JPMC in exchange for certain payments by the Debtors. Pending finalization of the Standstill Agreement, the Debtors sought authority to pay the 2001 property taxes against the Property in exchange for JPMC not sending a notice of intent to commence non-judicial foreclosure that would have asserted the Property could be subject to non-judicial foreclosure as early as April 2, 2002, and that would have compelled the Debtors to commence litigation of this issue. (Enron Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE TECH: Gets Court Okay to Hire Kirkland & Ellis as Counsel --------------------------------------------------------------- Exide Technologies and its debtor-affiliates obtained court approval to employ and retain the law firm of Kirkland & Ellis in Chicago, Illinois, as their lead counsel to file prosecute these Chapter 11 Cases and all related matters, effective as of the Petition Date. The Debtors will look to Kirkland & Ellis to, among other things: A. advise the Debtors with respect to their powers and duties as Debtors In Possession in the continued management and operation of their businesses and properties; B. attend meetings and negotiate with representatives of creditors and other parties in interest; C. take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on the Debtors' behalf, the defense of any action commenced against the Debtors, and objections to claims filed against the estates; D. prepare on behalf of the Debtors all motions, applications, answers, orders, reports, and papers necessary to the administration of the estates; E. negotiate and prepare on the Debtors' behalf a plan of reorganization, disclosure statement, and all related agreements and/or documents, and also take any necessary action on behalf of the Debtors to obtain confirmation of such plan; F. represent the Debtors in connection with obtaining post- petition loans; G. advise the Debtors in connection with any potential sale of assets; H. appear before this Court, any appellate courts, and the United States Trustee and protect the interests of the Debtors' estates before these Courts and the United States Trustee; I. advise the Debtors regarding the maximization of value of the estates for their creditors; and J. perform all other necessary legal services and provide all other necessary legal advice to the Debtors in connection with the Chapter 11 Cases. K&E will bill for services on an hourly basis, and expect reimbursement of actual, necessary expenses and other charges that the Firm incurs. Information on K&E's professionals' hourly rates was not provided. (Exide Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) FARMLAND INDUSTRIES: Files for Chapter 11 Reorg. in Kansas City --------------------------------------------------------------- Spurred by continued adverse market conditions in the nitrogen fertilizer business and recent increases in cash demands, Farmland Industries, Inc., has filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Farmland will maintain its current business operations while it continues ongoing efforts to reposition the company to support its core businesses. Meanwhile, the company plans to continue to grow its successful foods businesses; pursue the sale of non- strategic assets; further reduce debt; and seek additional ways to cut costs. The company will reduce its workforce as it reorganizes and repositions assets. Farmland President and CEO Bob Terry said, "This was a difficult decision for us. Our farmer-owned roots run deep, making Farmland a company with an independent streak and a strong work ethic. We fought to pull ourselves through this time of tight liquidity. Regrettably, we were unable to overcome one significant challenge-aggressive early redemption demands from our subordinated debt holders. This activity drained our cash liquidity and was expected to continue indefinitely. Our banks were hesitant to continue lending in the face of ongoing redemption payments to subordinate creditors." Farmland has secured a debtor-in-possession financing facility from a group of leading financial institutions led by Deutsche Bank. This financing will be used to supplement the company's existing cash flow during the reorganization process and ensures post-petition payment of payroll and benefits, payments to vendors and producers, as well as other normal operating costs. Terry said Farmland will continue business operations, including buying hogs from its producer-owners and supplying Farmland Foods retail and foodservice customers with high-quality, wholesome meat products. Farmland's Refrigerated Foods businesses have reported strong performance, with earnings in the first half of fiscal 2002 more than double the same period last year, while its fertilizer business has continued to struggle. "We are processing and selling more branded meat products than ever before, as Farmland Foods continues to make gains in both market share and earnings. Consumers will continue to see Farmlandr branded products in their grocer's meat case and on restaurant menus. We value their support in choosing the Farmland brand today more than ever," Terry added. While Farmland reduced its debt by more than $500 million in the last 18 months, a high debt-to-equity ratio incurred in a period of expansion in the 1990s has been difficult to overcome. Continued losses in the company's Crop Production businesses, coupled with planned maintenance on its Coffeyville, Kansas, refinery, significantly hampered cash flow through the spring season, leading the company to state in its quarterly filing with the Securities and Exchange Commission that seeking protection from creditors was an option if conditions did not improve. This led to increased cash demands, including demands for early redemptions of subordinated debt, which the company was unable to satisfy. Farmland's subordinated debt program, a steady source of financing for the company since 1948, currently provides $570 million in debt financing to the company. The bonds are held by approximately 20,000 individuals who purchased the securities through licensed dealers. Because the company currently is unable to sell new subordinated debt, the early redemption activity greatly aggravated Farmland's liquidity issues. Farmland Industries holds an ownership position in several business entities that are not included in this action because their operations and financing are handled separately. They include: Farmland National Beef Packing Company L.P., the nation's fourth largest beef packer; Agriliance, a fertilizer marketing joint venture with CHS Cooperatives and Land O'Lakes; Land O'Lakes Farmland Feed, an animal feed joint venture with Land O'Lakes. ADM-Farmland, a grain marketing company formed one year ago, is also a separate company not included in this action. Terry said Farmland's strong brand equity and leadership in the meat business, coupled with its $2 billion asset base and the support of 600,000 farmer-owners, are strengths that will help ensure Farmland emerges as a stronger company. "Farmland has overcome a number of obstacles in our 73-year history. This step will enable us to meet today's challenges as well, as we structure a long-term strategy that addresses our financial obligations and sets the course for a stronger Farmland," Terry said. Farmland has also named company veteran Steve Rhodes as Executive Vice President and Chief Financial Officer. Rhodes, 48, has been with Farmland and the cooperative system since 1979, most recently serving as Farmland Industries Vice President and Controller. Rhodes earned a bachelor's degree in accounting from Northwest Missouri State University, Maryville, Missouri, and a master's degree in business administration from Rockhurst College, Kansas City, Missouri Rhodes replaces John F. Berardi who has left the company. The company filed its voluntary petition in the U.S. Bankruptcy Court in the Western District of Missouri, located in Kansas City, Missouri. Farmland Industries, Inc., Kansas City, Missouri, -- http://www.farmland.com-- is a diversified farmer-owned cooperative with an asset base of more than $2 billion. Focused on meeting the needs of its local cooperative- and farmer- owners, Farmland and its joint venture partners supply local cooperatives with agricultural inputs, such as crop nutrients, crop protection products, and animal feeds. As part of its farm- to-table mission, Farmland adds value to its farmer- owners' grain and livestock by processing and marketing high-quality grain, pork, beef, and catfish products throughout the United States and around the world. FARMLAND INDUSTRIES: Voluntary Chapter 11 Case Summary ------------------------------------------------------ Lead Debtor: Farmland Industries, Inc. 12200 N. Ambassador Drive Kansas City, Missouri 64163 800-822-8263 ext 5053 dba Livestock Services Division dba Farmland Livestock Services dba Honor Pet Products Co. dba Premier Farmtech dba Marco Polo Salame Company dba Souza's Sausage Company Bankruptcy Case No.: 02-50557 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Farmland Foods, Inc. 02-50561 Farmland Transportation, Inc. 02-50564 Farmland Pipe Line Company 02-50565 SFA, Inc. 02-50562 Type of Business: Farmland Industries, Inc., a Kansas corporation headquartered in Kansas City, Missouri, is organized and operated as a cooperative system of agricultural and food related businesses. Farmland, in conjunction with the other debtor subsidiaries and others, as well as through joint venture relationships, manufactures and markets fertilizer, operates a petroleum refinery, and operates an integrated food and food processing business. Farmland, in conjunction with the other debtor subsidiaries, also engages in the wholesale and retail farm supply business and transportation brokerage business. Chapter 11 Petition Date: May 31, 2002 Court: Western District of Missouri (St. Joseph) Judge: Jerry W. Venters Debtors' Counsel: Laurence M. Frazen, Esq. Bryan Cave LLP 1200 Main St, Suite 3500 Kansas City, Missouri 64105 816-855-3903 Fax : 816-374-3300 Total Assets: $2.7 Billion Total Debts: $1.9 Billion FEDERAL-MOGUL: Wishes to Employ Garden City as Claims Agent ----------------------------------------------------------- Federal-Mogul Corporation ask the Court to approve their appointment of The Garden City Group, Inc. to perform claims and noticing functions as the official claims agent of the Clerk of Court with respect to the Debtors' Chapter 11 cases. By employing Garden City Group, the Clerk's Office is thereby relieved of the administrative burden of processing the claims that will be filed. David M. Sherbin, Vice President and Deputy General Counsel and Secretary of Federal-Mogul Corporation, foresees that hundreds of thousands of claimants and other parties-in-interest involved in the Debtors' Chapter 11 cases may impose heavy administrative and other burdens on this Court and the Clerk's Office. This may be especially true in light of the burden already imposed upon the Clerk's Office by the large number of cases pending in the District of Delaware. The most effective and efficient manner by which to facilitate the process of receiving, docketing, photocopying, and transmitting proofs of claim in these cases is to engage Garden City Group, an independent third party, to act as a claims agent of the Court. Mr. Sherbin accords that the Court is empowered to utilize outside agents and facilities for these purposes, provided that the cost of such services are paid by the Debtors' estates. Furthermore, the appointment of a Claims agent is customary in Chapter 11 cases of this magnitude and is contemplated by the local rules of this Court. As described in the Bankruptcy Administration Agreement and subject to court approval, the Claims Agent will provide these services: a. provide notice of any and all bar dates established by the Court; b. maintain copies of all proofs of claim and proofs of interest filed in these cases; c. maintain an official claims register in these cases by docketing all proofs of claim and proofs of interest in a claims database that includes the following information: 1. the name and address of the claimant or interest holder and any agent thereof, if the proof of claim or proof of interest was filed by an agent; 2. the date the proof of claim or proof of interest was received by Garden City Group and, if applicable, the Court; 3. the claim number assigned to the proof of claim or interest; 4. the asserted amount and classification of the claim; and, 5. the applicable Debtors against which the claim or interest is asserted; d. implement necessary security measures to ensure the completeness and integrity of the claims registers; e. transmit to the Clerk's Office a copy of the claims registers on a weekly basis unless requested by the Clerk's Office on a more or less frequent basis; f. maintain an up-to-date mailing list of all entities that have filed proofs of claim and proofs of interest in these cases and make the list available upon request to the Clerk's Office or at the expense of any party in interest; g. provide access to the public for examination of copies of the proofs of claim or proofs of interest filed in these cases without charge during regular business hours; h. record all transfers of claims and provide notice of such transfers to the extent required by Bankruptcy Rule 3001(e); i. promptly comply with such further condition and requirements as the Clerk's Office or the Court may at any time prescribe; j. provide such other claims processing and related administrative services as may be required from time to time by the Debtors; and, k. assist the Debtors, among other things, the reconciliation of claims and technical support in connection with the foregoing. Mr. Sherbin indicates that the Debtors agree to compensate Garden City Group for its services in accordance with the terms of their Bankruptcy Administration Agreement with a 10% discount on Garden City Group's standard hourly rates. The firm's current hourly rates are: Professionals Hourly Rates ------------------------------------- ------------ Supervisor $88.50 Quality Assurance $72.00-112.50 Senior Supervisor/Bankruptcy paralegal $112.50 Senior Project Manager $135 Systems Management $148.50-202.50 Senior VP Systems & Managing Director $225 U.S. Trustee Sees Too Many Hats Frank J. Perch, III, Esq., in Wilmington, Delaware, argues that Garden City Group's simultaneous adversarial and ministerial duties create a conflict. The U.S. Trustee is not aware of any case in which a professional acting as a consultant for one party in a case on any issue, let alone claims related issues, has simultaneously acted as the impartial claims agent. The U.S. Trustee submits that acting in such dual capacities constitutes an actual conflict as well as creating an appearance of impropriety. Creditors may question the integrity of the system if a party appointed to assist the court in performing ministerial functions is also the hired hand of the creditors' adversary, the debtor. Therefore, at most, only one of the Applications can be approved. Garden City Group can act as consultant or as claims agent, but not both. Mr. Perch reminds the Court that that a claims agent provides assistance to the Court by performing functions that would otherwise need to be performed by the Clerk of the Court. The Clerk is, of course, a non-adversarial and impartial party. The Clerk does not take sides in favor of one party or the other in any contested matter. The function of docketing proofs of claim and maintaining a database of filed claims is a ministerial one. A claims agent makes no value judgments regarding the validity of any claim or the adequacy of documentation submitted in support of a claim. Indeed, a claims agent does not even make a value judgment as to the timeliness of a claim. Claims received after a filing deadline are docketed, not thrown away. The debtor is the party that seeks an order disallowing the late claims. On the other hand, Mr. Perch continues, a noticing consultant is rendering professional advice to one party (in this case, the debtor) on how to design a bar date notification program. This is a contested matter in many cases and particularly in mass tort cases. Creditors typically want broader and more detailed notice than debtors propose to give. These disputes are sometimes resolved by negotiation, but sometimes they are litigated. Even if they are negotiated, Garden City Group will be acting on behalf of the Debtors adversely to the representatives of the creditors for whose claims Garden City Group is supposed to be the impartial repository. Mr. Perch contends that Debtors have already retained a noticing agent, the R.R. Donnelley & Sons Co. Although Debtors aver that Garden City Group, acting as claims agent, and Donnelley will avoid duplicating their services, the U.S. Trustee does not understand how that is reasonably possible. Donnelley has already been providing noticing services since the beginning of the case. Therefore, Donnelley must already be using and maintaining a database of creditors. Garden City Group proposes to create its own database. Thus, it appears that the debtor will be paying for two databases instead of one. Even if Garden City Group and Donnelley seek to combine or share their databases, the costs of the combination and communication process are extra costs that would not be incurred if one party handled both tasks. Further, any discrepancies between the databases may create issues as to the adequacy of notice. The Debtors' allegation that there will be no duplication does not satisfy their burden to explain why two parties should be retained to perform the work of one. (Federal-Mogul Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) FORMICA: Committee Taps Dewey Ballantine as Bankruptcy Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors appointed in Formica Corp.'s chapter 11 cases sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to retain and employ Dewey Ballantine LLP as counsel. Dewey Ballantine will: a) assist, advise and represent the Committee with respect to the administration of these cases, as well as issues arising from or impacting the Debtors, the Creditors or these chapter 11 cases; b) provide all necessary legal advice with respect to the Committee's powers and duties; c) assist the Committee in maximizing the value of the Debtors' assets for the benefit of all creditors; d) pursue confirmation of a plan of reorganization; e) investigate, as the Committee deems appropriate, among other things, the assets, liabilities, financial condition and operations of the Debtors; f) commence and prosecute necessary and appropriate actions/proceedings on behalf of the Committee that may be relevant to these cases; g) review, analyze or prepare, on behalf of the Committee, all necessary applications, motions, answers, orders, reports, schedules and other legal papers; h) communicate with the Committee's constituents and others as the Committee may consider desirable in furtherance of its responsibilities; i) appear in Court to represent the interest of the Committee; j) confer with professional advisors retained by the Committee so as to more properly advise the Committee; k) advise the Committee with respect to local practices and procedures as well as the rules of the Southern District of New York; and l) perform all other legal services for the Committee that are appropriate and necessary in these chapter 11 cases. Dewey Ballantine will seek compensation from the Debtors' estates at its regular hourly rates: Members $485 to $720 per hour Counsel and associates $260 to $505 per hour Paraprofessionals $140 to $225 per hour Formica, together with its debtor and non-debtor-affiliates is a preeminent worldwide manufacturer and marketer of decorative surfacing materials. The company filed for chapter 11 protection on March 5, 2002. Alan B. Miller, Esq. and Stephen Karotkin, Esq. at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. As of September 30, 2001, the Company reported a consolidated assets of $858.8 million and liabilities of $816.5 million. DebtTraders reorts that Formica Corp.'s 10.875% bonds due 2009 (FORMICA1) are traded between 18.5 and 22.5 . See http://www.debttraders.com/price.cfm?dt_sec_ticker=FORMICA1for some real-time bond pricing. GALEY & LORD: Seeks Court Nod to Tap Garden City as Claims Agent ---------------------------------------------------------------- Galey & Lord, Inc. and its debtor-affiliates obtained authority from the U.S. Bankruptcy Court for the Southern District of New York to employ The Garden City Group, Inc. as their claims agent. As cla