/raid1/www/Hosts/bankrupt/TCR_Public/020617.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Monday, June 17, 2002, Vol. 6, No. 118
Headlines
ANC RENTAL: Wants to Pay $12.5M Prepetition Customer Obligations
ADELPHIA: Intends to Replace Bond with $20MM Letter of Credit
ADELPHIA COMMS: Form 8-K Discloses Material Financial Changes
ADELPHIA COMMS: Brings-In PwC as New Independent Accountants
ANKER COAL: Expects to Begin Debt Workout Talks with Bondholders
ARTHUR ANDERSEN: Auditing Ends Aug. 31; Sentencing is on Oct. 11
AVATEX CORPORATION: Ability to Continue Operations Uncertain
BIRMINGHAM STEEL: Files Prepack. Plan and Disclosure Statement
CELLPOINT INC: Names Stephen Childs as New Board Chairman
CHROMAVISION: Safeguard Agrees to Invest $7MM + Debt Guarantees
COVANTA ENERGY: Wants to Fix August 9, 2002 as General Bar Date
DANA CORPORATION: Raises Second Quarter Earnings Expectations
DESA HOLDINGS: Seeks Approval for Kirkland & Ellis Engagement
EARTHCARE COMPANY: Gets Okay to Sell EarthLiquids to USFilter
ELECTROPURE INC: Independent Auditor Airs Going Concern Doubts
ENRON: Creditors' Panel Wants to Hire McKool Smith as TX Counsel
ENRON CORP: Rex Rogers Wants Enron to Pay for Separate Counsel
EXCHANGE APPLICATIONS: Nasdaq Delists Shares Effective June 12
FLAG TELECOM: Commences Trading on OTCBB Effective June 13, 2002
FRONTLINE CAPITAL: Case Summary & 20 Largest Unsec. Creditors
GLOBAL CROSSING: Federal Insurance Seeks Stay to Recover Claims
HA-LO INDUSTRIES: Hasn't Reached Agreement on Reorg. Plan Terms
HEADWAY CORPORATE: Sets Annual Shareholders' Meeting for July 15
HILB ROGAL: S&P Rates $260MM Senior Secured Bank Loan at BB-
IT GROUP: Seeking Court Okay to Pay for $8MM Vacation Benefits
INTEGRATED HEALTH: Committee Taps Eureka as Financial Advisors
INTEREP NAT'L: S&P Affirms Junk Rating Over Liquidity Concerns
KMART CORP: Gets Nod to Assume Sesame Street License Agreement
KMART: JPMorgan Resigning as Mortgage Bond Trustee by July 16
KMART CORP: First Quarter 2002 Net Loss Tops $1.45 Billion
KOMAG: Expects to Emerge from Bankruptcy Protection on June 30
LEAP WIRELESS: May Need Debt Refinancing to Meet Loan Covenants
LUCENT TECH: Fitch Hatchets Senior Unsecured Debt Rating to B+
LUCENT TECHNOLOGIES: Expects Revenues to Decline by 15% in Q3
MALAN REALTY: Inks Pacts to Sell 15 Properties to Retire Debt
MELTRONIX INC: CEO and Senior Executives Exercise Stock Options
MONTE CRISTO: TSX Delists Shares for Violating Listing Rules
MOTIENT: Will Hold Annual Meeting on July 11, 2002 in Virginia
NL INDUSTRIES: Fitch Rates Kronos Unit's Planned Notes at BB
NATIONSRENT: Wants to Bring-In Keen for Real Estate Consulting
NEENAH FOUNDRY: S&P Slashes Rating to B- Due to Liquidity Issues
NETWORK ACCESS: Wishes to Employ Adelman Lavine as Attorneys
NEWPOWER COMPANY: Bringing-In King & Spalding as Attorneys
OWENS CORNING: Seeks Court Nod to Expand PwC's Engagement Scope
PACIFIC GAS: Gains Okay to Retain LECG Following Amended Waiver
PACIFIC GAS: FERC Sets Schedule to Review Plan's Bilateral Pact
POLAROID: Stephen Morgan Loses Bid to Dismiss Chapter 11 Cases
POLAROID: Hearing for Assets Sale to One Equity Set for June 28
PRIME GROUP: Gets $15MM Additional Funding from Security Capital
RAMPART: Controlling Shareholder Agrees to Indemnify SLMsoft.com
ROADHOUSE GRILL: Florida Court Approves Disclosure Statement
ROMARCO MINERALS: Adding Two Independent Members to the Board
SILVER STATE: March 31, 2002 Working Capital Deficit Tops $1MM
SORRENTO NETWORKS: Has $3MM Working Capital Deficit at April 30
STARBAND: Sec. 341(a) Creditors' Meeting Convenes on July 3
SUNTERRA: Wins Nod to Obtain New Financing from Merrill Lynch
TRIZECHAHN: S&P Withdraws Ratings Following Debenture Redemption
TYCO INT'L: Will Streamline Corp. Operations & Reduce Staffing
VANTAGEMED CORP: Nasdaq SmallCap Trading Begins June 14, 2002
VELOCITA CORP: Engages Weil Gotshal as Bankruptcy Co-Counsel
VENTURE HOLDINGS: Working with Banks to Resolve Peguform Crisis
WEIRTON STEEL: Completes Year-Long Financial Restructuring Plan
WILLIAMS COMMS: Bags Okay to Hire Ordinary Course Professionals
* BOND PRICING: For the week of June 17 - 21, 2002
*********
ANC RENTAL: Wants to Pay $12.5M Prepetition Customer Obligations
----------------------------------------------------------------
ANC Rental Corporation and its debtor affiliates move the Court,
pursuant to Section 105(a) of the Bankruptcy Code, to authorize,
but not direct, the Debtors-in-Possession to pay certain
essential prepetition Customer/Partner Obligations in the
aggregate amount not to exceed $12,500,000.
On the Petition Date, the Debtors had sought for the Debtors-in-
Possession to honor prepetition obligations relating to certain
Vendors that Support Marketing and Sales Programs; Customer
Incentive Programs; Critical Contract Labor; and Employee-
Related Corporate Credit Card Programs. The motion sought
authorization to make payments in an amount up to approximately
$42,000,000. The Court entered an interim Order and a Final
Order allowing the payment in amount not to exceed $12,500,000.
Mark J. Packel, Esq., at Blank Rome Comisky & McCauley LLP in
Wilmington, Delaware, tells the Court the Debtors have honored,
or intend to honor in the near future, the prepetition payment
obligations of $12,500,000. As a condition to being granted
critical vendor status and receiving payment in respect of pre-
petition debt, each of the Program Partners that have received
payment entered into a new contract or extended their existing
contract with the Debtors on the same or more advantageous terms
to the Debtors. As a result of these agreements, the Debtors
are able to maintain their relationships with these valued
Program Partners, as well as provide for additional revenues.
It is projected that the payment of the obligations and the
related agreements with the Program Partners will result in
revenues of approximately $190,000,000 in 2002, which might
otherwise be lost to the Debtors' competitors.
The Court's prior Order, he states, has not been sufficient to
allow the Debtors to restructure their agreements with all of
their Program Partners, including:
A. Tour Operators: In the ordinary course of the Debtors'
business, a substantial percentage of the Debtors' revenue is
generated through business referred by leisure tour
operators. Most of these accounts operate in a shared
supplier environment which permit tour operators to shift
their business to the Debtors' competitors with relative
ease. The tour operators primarily direct business to the
Alamo brand and account for approximately 30% of Alamo's
revenue. Many of these contracts provide for annual rebates
and joint marketing programs tied to a committed sales
volume, payable at the end of the contract term.
B. Travel Agents: Travel agencies and other similar authorized
agents in respect of rental transactions represent a critical
component of both the commercial and leisure divisions of the
Debtors' business. If the Debtors cannot pay preferred travel
agency overrides (some of these overrides are quarterly or
annual payments), the Debtors believe that certain travel
agencies will direct their business to the Debtors'
competitors. In light of the fact that travel agency bookings
account for approximately 60% of the National brand revenue
and 25% of the Alamo brand revenue, the loss of these travel
agencies would be detrimental to the Debtors' reorganization
efforts.
C. Emerald Club: National's premier frequent customer program.
Emerald Club includes Emerald Aisle which allows customers to
bypass the counter and choose their car, which is one of the
key benefits that distinguishes National from other
business-oriented car rental companies. The Debtors request
the right to compensate certain frequent Emerald Club members
for points earned pre-petition, which will be the subject of
a future motion.
D. Affinity Groups: In the ordinary course of business, the
Debtors' derive substantial revenue from certain member-based
clubs and associations or the Affinity Groups. The Debtors
have negotiated arrangements to be preferred providers to
certain Affinity Groups that allow them opportunities to
reach their member base as a preferred provider, usually in
exchange for a rebate. The Debtors believe that absent
payment of the prepetition obligations owed to certain
Affinity Groups with which they have special preferred
status, these Affinity Groups will drop the Alamo and/or
National brand as a preferred customer and may discontinue
their programs with the Debtors or discontinue Debtors'
preferred status. The Debtors' programs with Affinity Groups
account for approximately 21 of the National brand revenue
and 17% of the Alamo brand revenue.
E. Corporate Partners: The Debtors maintain programs and
contracts with corporate partners that provide discounts,
rebates and offer incentives based on the level of business
provided. These corporate relationships are highly
competitive in that many of the Corporate Partners have
secondary providers that can replace the Debtors without
significant disruption. The Debtors' programs with their
Corporate Partners account for approximately 45% of the
National brand revenue and 15% of the Alamo brand revenue.
These percentages of the Debtors' revenue include certain
bookings with the Debtors' Corporate Partners or Affinity
Groups.
Mr. Packel states that in order to induce these Program Partners
to maintain their relationships with the Debtors and to maintain
or negotiate favorable extensions or new agreements, the Debtors
request authority to make the payments. With the agreements,
the Debtors will be able to maintain their relationships with
the valued Program Partners, as well as provide for additional
revenues. The payment of the prepetition payment obligations
and the related agreements with the Program Partners will result
in revenues of approximately $232,000 in 2002.
Mr. Packel asks the Court to grant the relief requested saying
that the success, viability and revitalization of the Debtors'
business is dependent upon the development and maintenance of
the Debtors' good relationship with their Program Partners. The
commencement of the Debtors' Chapter 11 cases, according to him,
has created apprehension on the part of many of the Program
Partners regarding their willingness to continue doing business
with the Debtors. The Debtors' competitors have used the
Chapter 11 proceedings to try to leverage business in their
direction.
Mr. Packel adds that the Debtors have negotiated contracts with
the Program Partners which can be terminated if prepetition
amounts cannot be paid. He fears that absent the relief
requested, the stability of the Debtors' businesses will be
significantly undermined, and otherwise loyal Program Partners
will cease doing business with the Debtors. Thus, the Debtors'
ability to honor, in their discretion, the prepetition
Obligations described in this Motion, is crucial to the
successful reorganization of the Debtors' business. (ANC Rental
Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ADELPHIA: Intends to Replace Bond with $20MM Letter of Credit
-------------------------------------------------------------
According to Harvey R. Miller, Esq., at Weil Gotshal & Manges
LLP in New York, on May 3, 2000, Adelphia Business Solutions of
Pennsylvania, Inc., an indirect non-debtor ABIZ subsidiary,
entered into a Contract to provide certain telecommunication
services for the Commonwealth of Pennsylvania. As an inducement
to the Commonwealth to enter into the Contract, and to provide
assurance to the Commonwealth that ABS Pennsylvania would timely
perform its obligations, the Contract required ABS Pennsylvania
to:
* secure a specific performance bond in the amount of
$20,000,000 and
* establish an escrow account at a commercial bank in the
amount of $75,000,000 pursuant to a mutually acceptable
escrow agreement.
Pursuant to the terms of the Contract, on June 8, 2000, Mr.
Miller relates that ABS Pennsylvania obtained a specific
performance bond in the amount of $20 million from The Hanover
Insurance Company and the Massachusetts Bay Insurance Company.
The Performance Bond secured various obligations of ABS
Pennsylvania arising under the Contract but expired, by its own
terms, on June 8, 2002.
To satisfy the escrow account requirement under the Contract,
Mr. Miller adds that ABIZ established an escrow account in the
initial amount of $75,000,000 at Wachovia Bank, National
Association, f/k/a First Union National Bank pursuant to a
written escrow agreement among ABIZ, the Commonwealth and
Wachovia. The Escrow Agreement provides Commonwealth with
assurance that the progress payments due under the Contract will
be timely made. Pursuant to the Escrow Agreement, funds are
disbursed to ABIZ on a quarterly basis as reimbursement for
progress payments made pursuant to the Contract. Currently,
there is approximately $20,000,000 in the Escrow Account.
In connection with obligations unrelated to the Contract, Mr.
Miller avers that Wachovia has issued, prior to the commencement
of these chapter 11 cases, 9 letters of credit for the benefit
of various subsidiaries of ABIZ. The Outstanding Letters of
Credit were intended to be collateralized by a blocked account
held in the name of Adelphia Business Solutions Operations,
Inc., one of the above named debtors (and the parent of ABS
Pennsylvania), which account currently contains approximately
$2,000,000.
Mr. Miller claims that the expiration of the Performance Bond
constitutes a default under the Contract. Commonwealth is
entitled to issue a notice of default and seek termination of
the contract while ABS Pennsylvania is entitled to a 30-day cure
period after any such notice of default is issued. The Debtors
sought to have the Performance Bond renewed and/or to seek a
replacement bond issued from another surety acceptable to the
Commonwealth. However, based upon the Debtors' current
financial condition and the commencement of these chapter 11
cases, the Debtors have been unsuccessful in obtaining an
appropriate replacement performance bond.
Mr. Miller tells the Court that Commonwealth is aware of the
Debtors' efforts to comply with the bonding requirement of the
Contract. In a concerted effort to avoid a default under the
Contract, Commonwealth has agreed to accept, in lieu of a new
performance bond, a letter of credit from a commercial bank in
the amount of $20,000,000. To avoid a default under the
Contract, the Debtors solicited a proposal from Wachovia to
provide for the issuance of a $20,000,000 letter of credit, upon
the following conditions:
A. that the Letter of Credit is secured by first priority lien
on the Escrow Account and
B. that Wachovia obtains a first priority lien on the ABS
Operations Account as collateral for the Outstanding Letters
of Credit.
In the event that the Debtors obtain interim Court approval of
this arrangement on or before 12:00 p.m. on June 14, 2002,
Commonwealth has agreed to forbear from issuing a notice of
default under the Contract.
In order accomplish the subject transaction, the Debtors propose
to execute a number of documents, including:
A. an amendment to the Escrow Agreement,
B. a guaranty agreement for each of the COPA Letter of Credit
and, collectively, the Outstanding Letters of Credit, and
C. a pledge agreement for each of the COPA Letter of Credit and,
collectively, the Outstanding Letters of Credit.
By this Motion, the Debtors seek entry of an order pursuant to
Sections 105, 363(b) and 364 of chapter 11 of title 11 of the
United States Code authorizing the replacement of the
Performance Bond with a cash collateralized letter of credit and
the execution of the Transaction Documents.
Mr. Miller contends that the Commonwealth Contract is the single
most important contract in the Debtors' estates as it generates
approximately $50,000,000 in annual revenue and produces
approximately $25,000,000 in annual EBITDA. The build-out of
infrastructure governed by the Contract is nearly finished -
anticipated completion of the infrastructure is scheduled for
the end of November or early December 2002. The Contract, and
the requirement to provide a performance bond, continue until at
least 2005. Failure to complete the infrastructure would be a
default under the Contract. Mr. Miller believes that it would
be a poor business decision to allow this lucrative contract to
terminate at this late stage. In the event that that the
Contract was terminated, the Debtors' business plan would be
severely affected. The proposal from Wachovia is the only
option available to the Debtors for preserving the Contract,
especially under the exigent circumstances facing the Debtors --
an expired Performance Bond and an imminent default notice.
Moreover, the issuance of a default notice would jeopardize the
Debtors pending negotiations with a potential post-petition
lender, which would not likely make a lending commitment in the
face of an impending default.
Mr. Miller contends that the ABS Operations Account is property
of the Debtors' estates and it could be argued that ABIZ has a
contingent property interest in the Escrow Account as well.
Pursuant to the interim order entered on April 1, 2002, ACOM was
granted a security interest in and lien upon substantially all
of the Debtors' property, arguably including the Escrow Account
and the ABSO Account. Nevertheless, because the Debtors have
been unable to obtain an unsecured performance bond or an
unsecured letter of credit, and because ACC is adequately
protected and has consented to the priming, if any, of its liens
on the Escrow Account and the ABSO Account, the Debtors may
grant first priority security interests in and liens upon the
funds in such accounts to Wachovia.
Mr. Miller asserts that the terms and conditions upon which
Wachovia is willing to issue a cash collateralized letter of
credit are fair and reasonable, and were negotiated by the
parties in good faith and at arms-length. Accordingly, Wachovia
should be accorded the benefits of section 364(e) of the
Bankruptcy Code in respect of such arrangements.
Pursuant to Bankruptcy Rules 4001(b) and 4001(c), the Debtors
request that the Court conduct an expedited preliminary hearing
on the Motion on or before noon on June 14, 2002, and enter an
interim order authorizing the Debtors:
A. to replace the expired Performance Bond with the Letter of
Credit, and to pledge the Escrow Account to collateralize
such letter of credit, and
B. to pledge the ABS Operations Account to collateralize the
Outstanding Letters of Credit, pending a final hearing on the
Motion.
Such relief will enable the Debtors to avoid the immediate and
irreparable harm and prejudice to the Debtors' estates and all
parties in interest that would result from a termination of the
Contract. (Adelphia Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ADELPHIA COMMS: Form 8-K Discloses Material Financial Changes
-------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELA) has filed a
Form 8-K with the Securities and Exchange Commission, disclosing
certain expected revisions to material financial information for
the years ended December 31, 2000 and 2001 and providing
financial guidance for 2002 in addition to other information.
Adelphia Communications Corporation, with headquarters in
Coudersport, Pennsylvania, is the sixth-largest cable television
company in the country.
* * *
Adelphia Communications Corporation reported that it overstated
its cash flow, subscriber totals and sales, DebtTraders reports.
As a result, the Company will restate its 2001 results using
more conservative accounting policies. The Company reported that
the restatement will reduce EBITDA by $210 million for 2001 and
$160 million for 2000.
A full-text copy of Adelphia Communications' Form 8-K is
available at no charge at:
http://www.sec.gov/Archives/edgar/data/796486/000079648602000020/0000796486-
02-000020-index.htm
DebtTraders reports that Adelphia Communications' 10.875% bonds
due 2010 (ADEL10USR1) are trading between the prices 73 and
75. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
ADELPHIA COMMS: Brings-In PwC as New Independent Accountants
------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELA) has selected
the firm of PricewaterhouseCoopers as the Company's independent
accountants. As previously announced, Adelphia terminated the
engagement of its long-time independent accountants, Deloitte &
Touche LLP, on June 9, 2002.
Adelphia Chairman and interim Chief Executive Officer Erland E.
Kailbourne said, "Our decision to retain PricewaterhouseCoopers
will provide Adelphia with a fresh and independent perspective
on the Company's financial situation. Bringing on new auditors
with such unassailable credentials is clearly in the best
interest of all Adelphia stakeholders as we work to provide a
full, prompt and candid disclosure of all material financial
information affecting the Company."
PricewaterhouseCoopers will immediately begin to assist the
Company with the preparation of its Form 10-K for the year ended
December 31, 2001, which will be completed and released as soon
as practicable. As previously announced, Deloitte & Touche's
ongoing audit work was suspended on May 14, 2002.
Adelphia Communications Corporation, with headquarters in
Coudersport, Pennsylvania, is the sixth-largest cable television
company in the country.
ANKER COAL: Expects to Begin Debt Workout Talks with Bondholders
----------------------------------------------------------------
Anker Coal Group, Inc. entered into a formal Forbearance
Agreement with its senior secured lenders and expects to
commence negotiations with its existing bondholders regarding a
significant restructuring of its outstanding bond obligations in
the near future. The Company did not make the scheduled
interest payment of approximately $6.6 million due to its
bondholders on April 1 and has received official notice of
payment default from the bond trustee. While the Company does
not currently know the prospect or form of a restructuring of
its existing bond indebtedness, representatives of holders of a
majority of the outstanding bonds have expressed their
intentions to work with the Company to restructure its
outstanding bond indebtedness, although there can be no
assurances that any agreement will be reached.
The Company confirmed that its independent public accountants
have not yet issued their opinion with respect to the Company's
Consolidated Financial Statements for the period ending December
31, 2001. Jack Teitz, recently appointed as the Company's
President and Chief Restructuring Officer, indicated that,
"Discussions with the Company's independent public accountants
are focused on asset impairment issues, the accountants'
willingness to issue an opinion with a going concern
qualification and the Company's plans to negotiate with its
senior secured lenders and bondholders regarding its capital
structure and debt service requirements."
The Company has not filed a Form 10-K for fiscal year 2001 with
the Securities and Exchange Commission and presently does not
intend to file any further reports or statements with the SEC.
The Company disclosed that coal sales and related revenues
totaled $202.0 million for the year ended December 31, 2001; a
decrease of 10.6% from $226.0 million for the year ended
December 31, 2000. This decrease in coal sales and related
revenues in 2001 was directly attributable to lower production
levels at the Company's coal mines and was partially offset by
favorable pricing changes for both company-produced and brokered
coal. Coal sales volume for the year ended December 31, 2001
was 7.8 million tons; a decrease of 17.9% from 9.5 million tons
for the year ended December 31, 2000. The Company's operating
expenses for 2001 totaled $192.8 million, exclusive of
depreciation, depletion, amortization expenses of $20.1 million
and asset impairment and restructuring charges of $51.4 million.
In addition, during 2001 the Company recognized other income of
$10.8 million, including a gain on the sale of contract rights
of approximately $6.6 million.
The 7.8 million tons of coal sold in 2001, included
approximately 3.4 million tons shipped under long-term contracts
with utilities, 3.0 million tons under long-term contracts with
independent power producers, and 700,000 tons under long-term
contracts with metallurgical, industrial and commercial
customers. Total coal production during 2001 was approximately
4.0 million tons; a decrease of 20% from the 5.0 million tons
produced in 2000. Approximately 77.8% of the Company's
production originated from deep mines and approximately 22.2% of
production originated from surface mines.
Teitz emphasized that any anticipated financial restructuring
negotiations with the bondholders will need to result in
significant reductions in the Company's total outstanding debt
obligations in order to allow the Company to service its debt
obligations. Teitz also indicated that the Company is
continuing to evaluate various options regarding the future
operations at two of the Company's mines in West Virginia that
were idled in April 2002 and is currently meeting with West
Virginia Development Office regarding a potential power plant
project to be located adjacent to the Company's coal reserves in
Upshur County, West Virginia.
Teitz emphasized that, "While the Company believes that its coal
business remains fundamentally sound and substantial coal
reserves are in place for the future, it appears that current
market conditions will continue to impede the Company's efforts
to generate the cash flow required to service its current debt
obligations."
Anker Coal Group, Inc. and its subsidiaries produce and sell
coal used principally for electric generation and steel
production in the eastern United States.
ARTHUR ANDERSEN: Auditing Ends Aug. 31; Sentencing is on Oct. 11
----------------------------------------------------------------
The 12-member jury impaneled in United States of America v.
Arthur Andersen, LLP, Cr. No. CR H-02-121 (S.D. Tex.), returned
a guilty verdict Saturday morning. The jury unanimously found
that:
On or about and between October 10, 2001, and November 9,
2001, within the Southern District of Texas and elsewhere,
including Chicago, Illinois, Portland, Oregon, and London,
England, ANDERSEN, through its partners and others, did
knowingly, intentionally and corruptly persuade and attempt
to persuade other persons, to wit: ANDERSEN employees, with
intent to cause and induce such persons to (a) withhold
records, documents and other objects from official
proceedings, namely: regulatory and criminal proceedings
and investigations, and (b) alter, destroy, mutilate and
conceal objects with intent to impair the objects,
integrity and availability for use in such official
proceedings.
Andersen's actions, a grand jury reviewing materials presented
by the Department of Justice's Enron Task Force concluded in an
indictment retuned on March 7, 2002, showed Andersen obstructed
justice and probably violated 18 U.S.C. Secs. 1512(b)(2) and
3551, et seq. After a six-week trial before U.S. District Judge
Melinda F. Harmon and following 70-some hours of deliberation
stretched over ten days, the jury voted to convict Andersen.
Foreman Oscar H. Criner (a professor in mathematics and computer
science at Texas Southern University) relates that the jury's
deliberative process started with six votes to convict and six
votes to acquit. As he and his five acquittal-proponents
continued to review the evidence, they concluded that the facts
militated in favor of a conviction.
Sentencing on October 11
With a jury verdict in hand, Judge Harmon will now hear any
post-trial and pre-sentence motions brought by the Government
and Andersen. Andersen has the opportunity during this period
to explain to Judge Harmon why judgment should not be entered
against it. Unless Rusty Hardin, Esq., the accounting firm's
lead criminal defense lawyer, can show sufficient cause why
judgment can't be pronounced, Judge Harmon will enter her order
adjudging Andersen guilty as charged and convicted. When that
judgment is entered, Andersen becomes a convicted felon. Judge
Harmon will impose sentence at a hearing on October 11.
Andersen Says It'll Appeal
"Today's verdict is wrong," Andersen said in a statement
immediately following announcement of the verdict. "In fairness
to the jury," Andersen said, "they were not permitted to know
the full truth about what happened last fall as a result of the
Justice Department's actions during this trial." Arthur
Andersen says it plans to appeal the conviction based on flawed
jury instructions and erroneous evidentiary rulings that
precluded the Firm from presenting its entire defense.
"The reality here is that this verdict represents only a
technical conviction -- based on the government's theory of
prosecution, any accounting firm or other business today could
face a similar punishment for discarding documents," Andersen
continued. "By this standard, any company could be prosecuted
for following standard document disposal practices, before
receiving a subpoena or even an informal request for documents
from a third party, even when no person involved in the matter
believed that anything they were doing was wrong. It is clear
that the government failed to uphold its moral responsibility to
the public by indicting and prosecuting a firm of 26,000
innocent people that self-reported its findings, fully
cooperated with the Department of Justice, the SEC, and
Congress, and worked in good faith to find a solution that would
have prevented this trial. Given these circumstances, there is
no rationale for indicting a cooperating Arthur Andersen as we
knew it."
The Government Says There's More
Leslie Caldwell, Esq., the head of the criminal division of the
Justice Department's San Francisco office and leader of its
national Enron Task Force expressed her delight with the jury's
verdict adding, without further elaboration, "We're not finished
with Arthur Andersen."
Deputy Attorney General Larry Thompson in Washington says that
prosecutors will seek more indictments. "This verdict confirms
that Andersen knew full well that these documents were relevant
to the inquiries into Enron's collapse and that Andersen
partners and employees personally directed these efforts to
destroy evidence," Mr. Thompson told Kristin Hays at the
Associated Press.
Auditing Ends on August 31
Andersen's rhetoric died-down Saturday afternoon as the reality
that convicted felons aren't allowed to audit public companies'
financial statements set in. In a second public statement
Saturday, Andersen acknowledged that the jury verdict will
effectively end the firm's audit practice.
Unless the jury verdict is set aside by the trial judge, a
judgment of conviction could be entered as early as August 31,
2002, depending on the amount of time needed for the Government
and Andersen to brief and argue post-trial motions. If entered,
the conviction would be grounds for automatic suspension of
Andersen's ability to practice before the Securities and
Exchange Commission.
Between now and August 31, Andersen said it will be working
actively to help transition its remaining clients to other
accounting firms. By August 31, the firm expects to cease
practicing before the Securities and Exchange Commission and
expects to begin immediately an orderly process for dealing
with state regulators leading to surrender of the firm's
licenses. In the meantime, Andersen expects to complete all of
its outstanding engagements to provide attest services to its
clients.
Andersen's Other Problems
Last month, the Texas State Board of Public Accountancy moved to
revoke Andersen's license to practice in that state and impose
$1 million in fines. Rusty Hardin, Andersen's lead defense
counsel, says that the firm will fight each and every attempt by
the 50 states to follow Texas' lead.
The Executive Committee of the American Institute of Certified
Public Accountants' SEC Practice Section -- of which Andersen
and other firms conducting audits of public companies are
members -- says it'll meet early this week to discuss what it
needs to do and how to treat Andersen going forward.
Settlement talks with the Enron Creditors' Committee came to a
halt last month. Andersen offered $350 million to settle all
claims and the Committee, represented by Luc A. Despins, Esq.,
at Milbank, Tweed, Hadley & McCloy LLP, said forget it. The
Enron Committee suggests that it can dig into 1,700 present and
former Andersen partners' pockets directly and recover
substantially more.
Since late-April, Bryan Marsal, co-director of New York
turnaround firm Alvarez & Marsal has been at Andersen in the
Chief Restructuring Officer's position. Mr. Marsal's stated
objectives are to "retool the company, maximize asset values and
see that creditors are paid." Mr. Marsal told Jeff St. Onge at
Bloomberg News in April that Andersen was not suffering from a
liquidity crisis and dismissed speculation about a chapter 11
filing.
Evan Flaschen, Esq., at Bingham Dana LLP, represents a group of
institutional investors owed $200 million. A $50 million
payment is due in May. If the noteholders don't get their money
from Andersen U.S., Andersen's overseas affiliates reportedly
guarantee payment of that debt -- and Mr. Flaschen's clients
will be calling to enforce those guarantees. Asset dispositions
to date and further transactions require approval from Mr.
Flaschen's noteholder clients.
In May, Andersen inked a $217 million settlement to settle civil
litigation brought by the liquidation trust established under
Baptist Foundation of Arizona's chapter 11 plan. That
settlement required monthly $10 million payments and a $156
million payment on October 25. On June 5, the Associated Press,
citing Sean Coffey, Esq., a BFA Trust attorney, reported that
Andersen's insurer wired the full amount into a Foundation
escrow account.
SEC Okays Andersen's August 31 Funeral
The Securities and Exchange Commission said in a separate
statement Saturday afternoon that it "is deeply troubled by the
underlying events that resulted in Andersen's conviction,
especially insofar as the verdict reflects the jury's conclusion
that Andersen engaged in conduct designed to obstruct SEC
processes."
Nevertheless, in light of the jury verdict and the underlying
events, Andersen has informed the Commission that it will cease
practicing before the Commission by Aug. 31, 2002, unless the
Commission determines another date is appropriate. The SEC said
that it would permit Andersen to continue to practice before the
SEC, including signing opinions for SEC Registrants until
August 31, 2002.
Between now and August 31, the Commission's orders and rules
announced on March 14 and released on March 18, 2002, following
Andersen's indictment remain in effect. Those rules are
available at http://www.sec.gov/rules/final/33-8070.htmat no
charge. Andersen may continue to make required filings on
behalf of its clients in compliance with those rules and orders,
which contain provisions ensuring continuing Andersen quality
control procedures. The Commission hopes this action will
minimize any potential disruption to the capital markets and the
affected issuers while those issuers complete certain pending or
future filings, offerings and other activities. This relief is
procedural in nature, is of finite duration and is intended
solely to address temporary disruptions that the affected
issuers may face as a result of Andersen's conviction. "We have
an obligation to protect investors, and, as we are announcing
today, we have taken necessary actions to assure a continuing
and orderly flow of information to investors and the capital
markets," the Commission stressed.
Roughly 700 of 2,300 publicly held audit clients have announced
that they've dumped Andersen and signed-up with one of the Final
Four or a smaller regional practitioner. Andersen's employee
headcount has dwindled to an estimated 10,000.
It's a Sad Day
Following the announcement of the Andersen verdict, The Illinois
CPA Society's president and CEO, Elaine Weiss, issued a
statement saying: "Today is a sad day for our colleagues at
Arthur Andersen. Although they were not involved with this case,
their personal and professional lives have been changed forever.
This trial notwithstanding, it is most important to remember
that this story is about a corporate failure not about the
accounting profession and its document cleanup policy. The
Justice Department focus on Andersen has sidetracked the legal
system from more aggressively pursuing the bigger, more
disturbing Enron aspects of this situation."
Nancy Temple Branded the Corrupt Persuader
Nancy Temple, Andersen's in-house counsel, is the person jurors
pointed to as the "corrupt persuader" referred to in the set of
instructions given to the jury. In exit interviews, jurors
indicated that a critical piece of evidence was Ms. Temple's
request that David Duncan excise paragraphs from a draft of an
October 16 memo and remove her name from the distribution list
to minimize the chance she'd ever be called as a witness.
Jurors suggested that they understood shredding redundant and
superfluous material is routine in professional firms, but
altering documents to rewrite history isn't and that crossed a
line. The Oct. 16 draft memo described a conversation Mr.
Duncan had with Richard A. Causey, Enron's chief accounting
officer, and Mr. Duncan's impressions that characterizing
certain losses as nonrecurring would be misleading to investors
if included in a quarterly earnings announcement. The draft
memo noted that recurring nonrecurring charges were raising red
flags at the SEC. The language at which Ms. Temple balked was
stricken from the final draft.
Invoking her Fifth Amendment privilege, Ms. Temple did not
testify in the Andersen trial. Prosecutors say that Ms.
Temple's now-famous October 12, 2001, e-mail message reminding
Andersen employees about the Firm's long-standing document
retention policy was a coded message directing Andersen
employees to shred documents the SEC might want produced in
connection with any Enron-related investigation. On November 9,
2002, Ms. Temple received an SEC subpoena in Chicago and left
Mr. Duncan a voice-mail message telling him to preserve all
Enron-related documents located in Houston and elsewhere. Mr.
Duncan's secretary, in turn, told everybody she could think of
to stop the shredding.
In mid-January, Andersen said in a public statement that its
internal investigation showed that "[n]othing in an Oct. 12
e-mail . . . or so far as we know, other conversations around
that time, authorized" the Enron document shredding activities.
Mr. Duncan's Future
The Acting U.S. Attorney for the Southern District of Texas
charged David B. Duncan with one count of obstruction of justice
in violation 18 U.S.C. Secs. 1512(b)(2) and 3551, et seq., in an
Information filed with the U.S. District Court on April 9, 2002.
Under a Cooperation Agreement dated April 6, 2002, Mr. Duncan
waived indictment, agreed to plead guilty to the Information,
agreed to serve as the Government's star witness against
Andersen, and promised not to collect any money from book or
movie deals.
David Staub, an Andersen partner who's called-in when fraud
issues arise, says that he went to see Mr. Duncan in Houston on
October 31. "Another smoking gun. We don't need this," Mr.
Staub says Mr. Duncan said about an Enron-related memo. Mr.
Staub says he saved the document from Mr. Duncan's shredder.
Andersen fired Mr. Duncan on January 15, 2002, saying that he
led an "expedited effort to destroy documents in Houston."
Judge Harmon will decide Mr. Duncan's sentence in United States
of America v. David Duncan, Crim. Action H-02-209 (S.D. Tex.).
Under the Cooperation Agreement, Mr. Duncan faces up to 10 years
in jail, a fine of up to $250,000, and a $100 special assessment
under 18 U.S.C. Sec. 3013. The Department of Justice has agreed
that it will not oppose a three-level downward adjustment (under
U.S. Sentencing Guideline Sec. 3E1.1) to Mr. Duncan's sentence
based on his acceptance of responsibility.
AVATEX CORPORATION: Ability to Continue Operations Uncertain
------------------------------------------------------------
Avatex Corporation is a holding company that, along with its
subsidiaries, owns interests in other corporations and
partnerships. It consolidated Chemlink Laboratories, LLC at
March 31, 2002 as a result of the control of 50% of the voting
interests of Chemlink through Avatex' 59% interest in Chemlink
Acquisition Company, LLC. Prior to March 31, 2002, Chemlink was
carried on an equity basis. Chemlink is primarily engaged in the
development, manufacture and distribution of effervescent tablet
and granule formulations for consumers and businesses for use in
cleaning, disinfecting and sterilization applications. Avatex
also owns 48% of Phar-Mor, Inc. which operates a chain of
discount retail drugstores. Phar-Mor filed for bankruptcy
protection under Chapter 11 of the Bankruptcy Code on September
24, 2001.
The Management of Avatex Corporation believes that the Company's
assets may be inadequate to retire the 6.75% notes issued by
Avatex Funding, and guaranteed by Avatex Corporation, at the
notes' maturity in December 2002, and it may be unable to
develop any strategies that will allow it to operate after that
date. In companies in which Avatex has invested, the Company
also face risks associated with competitive pressures; the
effects on its investment in Phar-Mor as a result of its
bankruptcy filing; the ability of the management of the
companies in which it has invested to develop, implement and
market their products and services; and other such risks. These
other risks include decreased consumer spending, decreased
availability of venture capital, customer concentration issues
and the effects of general economic conditions including the
changes resulting from the effects of the events of September
11, 2001 and their aftermath. In addition, Avatex' business,
operations and financial condition are subject to risks,
uncertainties and assumptions.
Equity in loss of affiliates was $14.4 million for the year
ended March 31, 2002 compared to equity in loss of affiliates of
$16.3 million for the year ended March 31, 2001. The decrease in
equity in loss of affiliates is attributable to:
(i) Equity in Phar-Mor's loss was $4,252,000 less than in
the prior year. The decrease was due primarily to
Phar-Mor's losses being recognized only until Avatex'
basis was reduced to zero in the current year compared
to a full year of equity in Phar-Mor's losses in the
prior year.
(ii) There was an increase in equity loss of $2,028,000 from
Avatex' investment in CLAC due primarily to the write-
down of the value of certain of Chemlink's patents.
(iii) Avatex recognized an equity loss of $474,000 from its
investment in Chemlink for the period since
September 1, 2001.
(iv) The equity loss from other investments decreased by
$134,000 primarily from losses incurred in the prior
year from its investment in Cyclone Acquisition
Company, LLC.
Management of Avatex has said the Company will likely continue
to report operating losses, which together with the remaining
pending litigation, continue to raise substantial doubt as to
Avatex' ability to continue as a going concern. In addition, the
6.75% notes issued by Avatex Funding, and guaranteed by Avatex
Corporation, mature in December 2002 and are now classified as
current liabilities. The Company had previously anticipated that
its lawsuit against McKesson and others, and its 48% ownership
interest in Phar-Mor, might generate funds to assist in funding
the retirement of the 6.75% notes in December 2002. During the
year ended March 31, 2002, however, Avatex settled the McKesson
lawsuit which resulted in Avatex retaining $2,562 after payment
of contingent litigation and other expenses and distributions.
Also, as previously reported, Phar-Mor filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code in
September 2001.
BCE INC: Says Price Caps Increase Incumbents' Financial Burdens
---------------------------------------------------------------
BCE Inc. (Bell Canada Enterprises) released its position on the
CRTC's recent decision on Price Caps.
INDUSTRY IMPACT
BCE recognizes that the decision upholds the principles of
facilities-based competition that has contributed to create one
of the best and most affordable telecom systems in the world.
"The decision benefits customers and has served to remove the
uncertainty that existed in the marketplace", said Michael
Sabia, President and Chief Executive Officer of BCE Inc. "We can
now address the future knowing the terms and conditions under
which we will operate."
"However, the Commission has opted for more regulation and
complexity by increasing the number of services under price caps
and by creating a deferral account," Mr. Sabia added. "And, it
places significant financial burdens on incumbents."
The decision provides new discounts to competitors in addition
to those mandated in previous decisions. These Commission-
mandated benefits have effectively transferred nearly half a
billion dollars a year from the incumbent Canadian telephone
companies to competitors. The magnitude of these transfers runs
the risk of hampering the ability of strong Canadian players to
continue to invest in this critical sector of the economy.
Mr. Sabia concluded, "The pendulum has swung far enough, perhaps
too far, and it's now time to restore greater balance so we can
continue to build a world-leading Canadian telecommunications
industry."
FINANCIAL IMPACTS
In the face of this decision, BCE will place even greater
emphasis on its strategic objective to increase gains from
productivity initiatives that will permit it to meet its 2002
financial targets. Consequently, BCE stated that it expects no
changes to its 2002 guidance.
For Bell Canada (including Aliant and other subsidiaries), the
decision will cost the company approximately $250 million in
EBITDA on an annualized basis. This amounts to a cumulative
financial impact of approximately $1 billion for the four-year
period covered by this decision (2002 to 2006).
"As a precaution, Bell had prudently planned for a negative
impact from the decision," said Mr. Sabia. "And, as driving
productivity improvement is a top priority, we will continue to
push hard to reduce costs."
Due to the impact of the Price Caps decision on Bell Canada
revenues and to slower business data growth, Bell is expecting
overall revenue growth of between 3 to 5 per cent, versus 5 to 7
per cent as originally planned. Through continued efforts on
cost containment and productivity initiatives, Bell's EBITDA
growth targets remain unchanged at 6 to 8 per cent. In addition,
Bell will reduce its capital expenditures by approximately $300
million in 2002, representing a decline in the ratio of capital
expenditures to revenues (capital intensity) to 20 to 21 per
cent from 22 to 23 per cent.
BCE is Canada's largest communications company. It has 23
million customer connections through the wireline, wireless,
data/Internet and satellite services it provides, largely under
the Bell brand. BCE leverages those connections with extensive
content creation capabilities through Bell Globemedia which
features some of the strongest brands in the industry - CTV,
Canada's leading private broadcaster, The Globe and Mail,
Canada's National Newspaper and Sympatico-Lycos, the leading
Canadian Internet portal. As well, BCE has extensive e-commerce
capabilities provided under the BCE Emergis brand. BCE shares
are listed in Canada, the United States and Europe.
BIRMINGHAM STEEL: Files Prepack. Plan and Disclosure Statement
--------------------------------------------------------------
Birmingham Steel Corporation and its debtor-affiliates filed
their Joint Plan of Reorganization and an accompanying
Disclosure Statement with the U.S. Bankruptcy Court for the
District of Delaware. Full-text copy of the Debtors' Chapter 11
Plan and Disclosure Statement are available at:
http://www.researcharchives.com/bin/download?id=020611005315
and
http://www.researcharchives.com/bin/download?id=020611005037
The Plan provides for the sale of substantially all of the
Debtors' assets to Nucor pursuant to the Asset Purchase
Agreement. The Plan also provides for the liquidation of the
Excluded Assets that are not being sold to Nucor. The liens of
the secured creditors in Class 2 will attach to the proceeds of
the sale. Such secured creditors hold liens in substantially all
assets of the Debtors and the aggregate amount of their claims
exceeds the expected amount of the proceeds of the sale of the
Debtors' assets.
Although secured parties are not being paid in full, pursuant to
the Plan Support Agreement, the secured creditors have agreed to
pay certain sums to unsecured and other creditors and interest
holders in Birmingham Steel Corporation. The Plan includes a
compromise between the Debtors and the Secured Parties that
allows certain proceeds of the proposed sale to be paid to
constituencies other than the Secured Parties.
Birmingham Steel Corporation manufacture and distribute steel.
Without limitation, the Debtors produce steel reinforcing bar
(rebar) for construction industry and merchant steel products
for fabricators and distributors across North America. The
Company filed for chapter 11 protection on June 3, 2002. James
L. Patton, Esq., Michael R. Nestor, Esq., Sharon M Zieg, Esq. at
Young Conaway Stargatt & Taylor, LLP and John Whittington, Esq.,
Patrick Darby, Esq., Lloyd C. Peeples III, Esq. at Bradley Arant
Rose & White LLP represent the Debtors in their restructuring
efforts. When the Company filed for protection from its
creditors, it listed $487,485,834 in assets and $681,860,489 in
total debts.
CAREERENGINE: Gets Time Extension to Meet AMEX Listing Standards
----------------------------------------------------------------
On March 15, 2002, CareerEngine Network, Inc. (AMEX/PCX: CNE)
received notice from the staff of the American Stock Exchange
indicating that the Company is below certain of the Exchange's
continuing listing standards.
Specifically, the Company has fallen below Section 1003(a)(i)
with shareholders' equity of less than $2,000,000 and losses
from continuing operations in two out of its three most recent
fiscal years; and Section 1003(a)(ii) with shareholders' equity
of less than $4,000,000 and losses from continuing operations in
three out of its four most recent fiscal years. On April 16,
2002, the Company submitted its plan to regain compliance to the
Exchange. On June 7, 2002, the Exchange notified the Company
that it accepted the Company's submitted plan and granted the
Company an extension of time to regain compliance with the
continued listing standards. The Company will be subject to
periodic review by the Exchange's staff during the extension
period. Failure to make progress consistent with the plan or to
regain compliance with the continued listing standards by the
end of the extension period could result in the Company being
delisted from the American Stock Exchange.
CELLPOINT INC: Names Stephen Childs as New Board Chairman
---------------------------------------------------------
CellPoint Inc. (Nasdaq: CLPT), a global provider of mobile
location software technology and platforms, announced that
Stephen Childs is the Company's new Chairman of the Board and
Carl Johan Tornell has taken over the day-to-day operations from
Mr. Childs as President of the Company.
Stephen Childs, will succeed Jan Rynning as the Chairman of the
Board. Mr. Rynning, a Swedish lawyer specializing in
reconstruction, served as Chairman through the recent financial
reconstruction of the Company. Mr. Childs has been a director of
CellPoint since May of 2000 and has more than 15 years of
international experience in the telecommunications industry.
Before joining CellPoint, he was Group Director, New Business
Ventures with Orange plc. Prior to this, Mr. Childs served as
Vice President International Business Development with Deutsche
Telekom and as CEO of Pakcom. "Now that the restructuring of
CellPoint has been completed successfully, the Company can
refocus on strategic and commercial opportunities," said Stephen
Childs, Chairman and CEO.
Carl Johan Tornell will take over from Mr. Childs as the
President of CellPoint. Mr. Tornell has been with Tornell and
Partenaris, where he was involved in numerous strategic and
corporate advisory activities. Prior to this, Mr. Tornell served
as Managing Director of Corona Petroleum, a publicly traded
company. "Through my external involvement with CellPoint over
the past year, I have seen CellPoint as a world leader in the
development of commercial location services for business and
consumer markets, and I am very excited about the opportunity to
bring my experience and focus to this team," said Tornell. "The
addition of Carl Johan Tornell marks an important step in the
evolution of CellPoint from a development company to a
commercial company," added Childs.
CellPoint has also hired additional senior management recently.
Richard Batty has been hired as the Vice President of Sales and
D. Shawn Rogers as Vice President of Communications. Richard
Batty was formerly the Global Account Director for Comverse
Technology Inc. (NASDAQ: CMVT), a world leading supplier of
software and systems enabling network-based multimedia enhanced
communications services where he was responsible for a global
sales unit accountable for over 100 hundred million dollars in
sales. D. Shawn Rogers served as Managing Partner for Celeritas
Group and also worked with Madison Securities in Chicago, were
he was involved in several financings for CellPoint and has
followed the Company very closely for over three years.
CellPoint Inc. (Nasdaq and Stockholmsborsen: CLPT) is a leading
global provider of location determination technology, carrier-
class middleware and applications enabling mobile network
operators rapid deployment of revenue generating location-based
services for consumer and business users and to address mobile
E911/E112 security requirements.
CellPoint's two core products, Mobile Location System (MLS) and
Mobile Location Broker (MLB), provide an open standard platform
adapted for multi-vendor networks with secure integration of
third-party applications and content. CellPoint's location
platform has a seamless migration path from GSM/GPRS to 3G,
supports 500,000 location requests per hour and can easily be
scaled-up to handle increased traffic throughput.
CellPoint's early entry and experience with European mobile
operators has allowed the development of products and features
that address key requirements such as active and idle mode
positioning, international roaming, multiple location
determination technologies and consumer privacy.
CellPoint is a global company headquartered in Kista, Sweden.
For more information, please visit http://www.cellpoint.com
CHROMAVISION: Safeguard Agrees to Invest $7MM + Debt Guarantees
---------------------------------------------------------------
ChromaVision Medical Systems, Inc. (Nasdaq: CVSN) and Safeguard
Scientifics, Inc. (NYSE: SFE) announced an agreement pursuant to
which Safeguard will invest up to $7 million in return for
shares of ChromaVision Common Stock, acquire shares of
ChromaVision's outstanding Series D Preferred Stock (having a
liquidation preference of $10.7 million) from current holders
and guarantee a line of credit in a follow-on debt transaction
in the amount of up to $3 million. Each of the holders of the
$12.5 million of the Series D Preferred Stock has agreed,
subject to certain exceptions, to convert its Series D holdings
into Common Stock after receipt of the requisite stockholder
approval, thereby eliminating the liquidation preferences and
other preferential rights of the Series D Preferred Stock. This
comprehensive $22.5 million debt and equity-refinancing package
substantially strengthens ChromaVision's financial position and
improves its capital structure.
The infusion of working capital will be used to fund operations
as ChromaVision continues to accelerate its sales and marketing
activities. Safeguard is a founding investor in ChromaVision and
a leader in building and creating long-term value in technology
companies. After completion of the transactions, Safeguard will
own approximately 54% of the outstanding common shares of
ChromaVision.
"ChromaVision fits our strategy of majority ownership in
companies with advanced proprietary software," said Anthony L.
Craig, President and CEO of Safeguard. "The company has made
tremendous progress in the market place over the last 18 months,
showing quarter over quarter growth of over 40% in fee-per-use
recurring revenue over this period. ChromaVision has
successfully commercialized the proprietary assets that it was
founded on in the form of the Automated Cellular Imaging System
(ACIS(R)). We believe that the comprehensive intellectual
property encapsulated in the imaging software will continue to
be a source of competitive differentiation for the company. As
the company enters its 'time-to-volume' stage of
commercialization, the combination of expansion capital and a
scalable business model will accelerate its growth."
ChromaVision President and CEO, Carl W. Apfelbach said,
"Safeguard's proven track record for bringing tangible value to
its partner companies will help us to continue to maintain our
market leadership position. The longevity of Safeguard's
support and their growing financial participation reflects
continued confidence and underscores the potential that
ChromaVision represents for its stockholders, including
Safeguard.
Apfelbach added, "While senior management has been working to
finalize this round of funding, the rest of the ChromaVision
team has remained highly focused on the execution of our
business. Results of these efforts are evident in
ChromaVision's progress through the first two months of this
second quarter. We secured more new customer contracts in the
first two months of the quarter than we have during the first
two months of any other quarter. At the same time, the volume
per unit placement and margins continue to be strong. We
expected the real impact of the newest additions to our sales
force to begin in the third quarter, but we are seeing some very
encouraging early success with these new representatives."
Of the $7 million to be provided to ChromaVision for Common
Stock, $6,425,021 is expected to be funded today and Safeguard
will receive approximately 4,053,641 shares of Common Stock, for
a per share purchase price of $1.585. This will increase
Safeguard's ownership of ChromaVision outstanding Common Stock
from 30% to approximately 42%. Safeguard also acquired Series D
Preferred Stock having a liquidation preference of $10.7 million
out of an aggregate of $12.5 million for all shares of Series D
Preferred Stock outstanding. Following receipt of requisite
stockholder approval, Safeguard has agreed to acquire an
additional 362,763 shares of Common Stock for $574,979, or
$1.585 per share. Each of the holders of the Series D Preferred
Stock has agreed to convert the Series D shares into
approximately 7.9 million shares of ChromaVision Common Stock
following the stockholder approval (subject to certain
exceptions). In connection with the transaction, ChromaVision
agreed to adjust the exercise price of warrants to purchase an
aggregate of 524,750 shares of Common Stock held by the holders
of the Series D Preferred Stock (other than Safeguard) from
$6.8604 per share to $2 per share. Immediately after these
transactions have been completed and assuming full conversion,
Safeguard's ownership of the outstanding ChromaVision Common
Stock will be approximately 54%. At that time, all of the
outstanding capital stock of ChromaVision will consist solely of
Common Stock, and ChromaVision will have received $7 million in
equity funding and a backup guarantee on a line of credit valued
at up to $3 million. The line of credit has not yet been
obtained, but ChromaVision is confident that, with Safeguard's
guarantee, it will be able to obtain the financing. In the
event that the requisite stockholder vote is not obtained, the
holders of the Series D Preferred Stock will be entitled to
require the Company to redeem the Series D Preferred Stock at
120% of the liquidation preference or $15 million and Safeguard
will be entitled to a payment from ChromaVision of $700,000.
Safeguard has committed to vote its shares in favor of the
conversion and additional common equity purchase and has
received proxies from each of the holders of the Series D
Preferred Stock enabling it to vote their shares in favor of the
transaction.
ChromaVision Medical Systems, Inc., of San Juan Capistrano,
California, markets its Automated Cellular Imaging System
(ACIS(R)), a versatile digital microscope system with the
ability to detect, count and classify cells of clinical interest
based on color, size and shape to assist pathologists in making
critical medical decisions. Peer-reviewed clinical data and
publications have demonstrated that ACIS is able to
substantially improve the accuracy, sensitivity, and
reproducibility of cell imaging. Unlike manual methods of
viewing and analysis, the ACIS system combines proprietary
software, color-based imaging technology with automated
microscopy and commercially available stains and reagents. The
ACIS system has been adopted by many of the top medical
organizations in the United States and Europe.
At March 31, 2002, ChromaVision Medical Systems has a total
shareholders' equity deficit of about $300,000.
For more information, visit the company's Web site at
http://www.chromavision.com
Safeguard Scientifics (NYSE: SFE) is an operating company that
creates long-term value by focusing on technology-related
companies that are developed through superior operations and
management support. Safeguard acquires and operates companies
in three principal areas: business and IT services, software and
emerging technologies. For more information, please visit
http://www.safeguard.com
COVANTA ENERGY: Wants to Fix August 9, 2002 as General Bar Date
---------------------------------------------------------------
James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton,
in New York, relates that for Covanta Energy Corporation and its
debtor-affiliates to formulate a plan of reorganization, the
number, amount, nature and character of all claims against the
Debtors must be ascertained. Mr. Bromley states that a General
Bar Date will allow the Debtors to timely estimate the aggregate
amounts of claims against each Debtor's estate, to file
objections as necessary and to confirm a Plan prior to the
termination of the DIP Facility.
Accordingly, the Debtors ask the Court to establish a Bar Date
for Creditors to file proofs of claim on these dates, terms and
conditions:
A. General Bar Date
The General Bar Date will be on August 9, 2002 and would apply
to all prepetition claims asserted by Entities, except those who
need not file proofs of claim:
(a) the Entity that has already properly filed with the Court
or Bankruptcy Services LLC a proof of claim against one
or more of the Debtors;
(b) the Entity whose claims are not listed as "disputed",
"contingent" or "unliquidated" in the Schedules and who
agrees with the nature, classification and amount of
claim set forth in the Schedules;
(c) the Entity whose claim previously has been allowed by, or
paid pursuant to, an order of this Court, including the
prepetition claims of the Debtors' postpetition
employees and certain of their critical trade creditors;
(d) the Debtors or any non-Debtor affiliate of any Debtor,
for claims held against any Debtor; and
(e) the holders of equity interests in any of the Debtors,
including holders of:
-- any share in a corporation, whether common or
preferred, and whether or not transferable or
denominated "stock" or similar security;
-- an interest of a limited partner in a limited
partnership; and
-- a warrant or right to purchase, sell, or subscribe to
a share, security or interest of a kind specified in
paragraph (e) that are record holders of interests
with respect to the equity interests. This is
provided, however, that each Equity Holder is required
to file a Proof of Claim Form on or before the General
Bar Date with respect to any securities fraud claim of
any Equity Holders against the Debtors or any claim of
any Equity Holder that the Equity Holder may have a
right to require one or more Debtors to purchase or
otherwise acquire or guarantee the equity interests of
the Equity Holder, to the extent the claim may exist.
B. Bar Date for Government Units:
Any claim of a government unit will be filed on or before 4:00
p.m. on September 30, 2002. However, this deadline will not
apply to entities that are not government units even if the
claim is on behalf of a government unit.
C. Rejection Bar Date
For executory contracts and unexpired leases that will be Court
approved for rejection after the Bar Date Order and before the
confirmation of a plan of reorganization, the Rejection Bar Date
will be the later of:
(a) the General Bar Date and
(b) 30 days after the Debtors send a notice of the Order
authorizing the Debtors' rejection of a contract to the
affected lessor or party.
D. Amended Schedule Bar Date
For the disputed, contingent or unliquidated claims listed on
any amended schedule will be 30 days after the Debtors send a
notice of the relevant Amended Schedule identifying the claim
via first class U.S. mail. Otherwise, the Entity must file the
proof of claim on or before the applicable Bar Date. However,
the Debtors retain the right to:
(a) dispute, or assert offsets or defenses against, any filed
claim or any claim listed on the Schedules at to amount,
liability, classification or otherwise; or
(b) subsequently designate any claim as disputed, contingent
or unliquidated. This is provided, however, that if the
Debtors amend the Schedules to designate a claim as
disputed,contingent or unliquidated or to change the
amount, nature or classification of a claim therein, then
the affected claimant will have until the Amended
Schedule Bar Date to file a proof of claim or to amend
any previously filed proof of claim in respect to the
amended claim. Nothing herein will preclude the Debtors
from objecting to any claim, whether scheduled or filed,
on any grounds.
E. Failure to File a Proof of Claim
Pursuant to Bankruptcy Rule 3003(c)(2), any Entity that fails to
timely file a proof of claim will be forever barred, estopped
and enjoined from:
(a) asserting any claim against the Debtors that the Entity
has that is in excess of the amount set forth in the
Schedules as liquidated, undisputed and not contingent,
or is of a different amount, nature or classification;
and
(b) voting upon, or receiving distributions under, any plan
or reorganization in the Debtors' Chapter 11 cases with
respect to the Unscheduled Claim.
F. Procedures for Providing Notice
The Debtors will service to all known Entities holding potential
prepetition claims as appropriate:
(a) a notice of the Bar Dates which will include
instructions explaining the procedures for filing proofs
of claims and
(b) a proof of claim form substantially in the form of the
Official Form No. 10.
The Debtors intend to mail the Bar Date Notice and the Proof of
Claim Form by first class U.S. mail to:
-- the U.S. Trustee,
-- the District Director of Internal Revenue for the Southern
District of New York,
-- all parties currently listed on the Notice List, which
includes all persons or entities requesting notice
pursuant to Bankruptcy Rule 2002,
-- all known holders of claims, including those listed on
the Schedules at the addresses stated therein,
-- all record holders of Covanta stock as of the Petition
Date and
-- all other persons, whether or not parties in interest,
as the Debtors may elect.
The notice will be served no later than June 26, 2002, which,
consistent with Bankruptcy Rule 2002(a)(7), is not less than 20
days notice of the Bar Dates. Moreover, the Proof of Claim Form
will indicate whether the Entity's claim is listed on the
Schedules and whether the claim is listed as disputed,
contingent or unliquidated.
G. Publication Notice
To provide a notice to all parties in interest that the Debtors
are unaware of, the Debtors will publish the Bar Date Notice on
or prior to July 11, 2002 in the national editions of The Wall
Street Journal, USA Today and other publications the Debtors may
elect.
H. Procedure for Filing a Proof of Claim
Every Entity holding a claim against the Debtors that is
required to file a proof of claim will deliver the Proof of
Claim Form, together with the supporting documents, if any, by
first class U.S. mail, postage prepaid, to:
Ogden New York Services, Inc. Claims Processing/BSI
Bowling Green Station
P.O. Box 5-44
New York, NY 10274-5044
or hand delivered or recognized overnight courier to:
Office of the Clerk of Court
United States Bankruptcy Court
for the Southern District of New York
Re: In re Ogden New York Services, Inc., et. al.
One Bowling Green
Room 534
New York, New York 10004-1402
The Proof of Claim will be appropriately completed and signed so
as to be received on or before the applicable Bar Date. Proof
of Claim forms sent by facsimile or telecopy will not be
accepted.
All proofs of claims must specifically identify on the first
page the particular Debtor the claim is asserted. Claims
asserted against more than one Debtor must be clearly indicated
or the Entity may file a separate Proof of Claim Forms for each
Debtor. Failure to satisfy these conditions will deem the claim
to be improperly filed pursuant to Bankruptcy Rule 3003(c).
(Covanta Bankruptcy News, Issue No. 7; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DANA CORPORATION: Raises Second Quarter Earnings Expectations
-------------------------------------------------------------
Dana Corporation (NYSE: DCN) said that it now expects its
second-quarter earnings before non-recurring items to be in the
range of 41 to 45 cents per share. The company had previously
said it expected earnings of 33 to 35 cents per share before
non-recurring items. The increase was attributed to continued
operating improvements and even stronger North American vehicle
production during the quarter than the company had previously
anticipated.
Dana Corporation is one of the world's largest suppliers of
components, modules, and complete systems to global vehicle
manufacturers and their related aftermarkets. Founded in 1904
and based in Toledo, Ohio, the company operates some 300 major
facilities in 34 countries and employs approximately 70,000
people. The company reported sales of $10.3 billion in 2001.
Dana's Internet address is http://www.dana.com
As reported in the March 01, 2002 edition of Troubled Company
Reporter, Standard & Poor's has assigned a BB rating to Dana's
new $250 million debt issue.
DESA HOLDINGS: Seeks Approval for Kirkland & Ellis Engagement
-------------------------------------------------------------
DESA Holdings Corporation and its debtor-affiliates want to hire
Kirkland & Ellis as their attorneys. The Debtors explain to the
U.S. Bankruptcy Court for the District of Delaware that Kirkland
& Ellis is well-qualified to represent them because of the
firm's extensive experience and expertise in chapter 11
bankruptcy matters.
Kirkland & Ellis intends to apply for compensation for
professional services rendered in connection with the chapter 11
cases, subject to this Court's approval and in compliance with
applicable provisions of the Bankruptcy Code. The firm will
request compensation on an hourly basis (which are not
disclosed), plus reimbursement of actual, necessary expenses and
other charges that the firm incurs. Kirkland & Ellis states that
these charges are consistent with the rates they charge in
bankruptcy and non-bankruptcy matters of this type.
Specifically, Kirkland & Ellis will:
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 negotiates 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
commences against the Debtors, and objections to claims
filed against the estate;
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/documents, and 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 loan;
g) advise the Debtors in connection with any potential sale
of assets;
h) appear before this Court and any appellate courts, and
protect the interests if the Debtors' estates before
such Courts;
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.
To date, Kirkland & Ellis received approximately $765,000 for
its prepetition restructuring and related non-restructuring
services, including fees and expenses. Kirkland & Ellis received
an advance payment retainer of approximately $35,000 for its
prepetition and postpetition services and expenses to be
rendered or incurred in behalf of the Debtors.
DESA, a leading manufacturer, distributor and marketer of vent-
free heating appliances, outdoor heaters, motion sensor
lighting, wireless doorbells, lawn and garden electrical
products and consumer fastening systems in the United States,
filed for chapter 11 protection on June 8, 2002. Laura Davis
Jones, Esq. at Pachulski, Stang, Ziehl Young & Jones represents
the Debtors in their restructuring efforts.
EARTHCARE COMPANY: Gets Okay to Sell EarthLiquids to USFilter
-------------------------------------------------------------
The U.S. Bankruptcy Court for the Northern District of Texas
(Fort Worth Division) last week approved the acquisition of
EarthLiquids by USFilter Recovery Services, Inc. EarthLiquids
specializes in the collection and management of used oil and
oily wastewaters. EarthLiquids' parent company, The EarthCare
Company (OTC Bulletin Board: ECCO), filed for Chapter 11
bankruptcy protection earlier this year.
USFilter Recovery Services plans to complete the acquisition by
June 29 and is presently directing the day-to-day operations of
the company under a management services agreement.
United States Filter Corporation, a Vivendi Environnement
company, is North America's largest water company providing
comprehensive water and wastewater systems and services to
commercial, industrial, municipal and residential customers.
Vivendi Environnement (Paris Bourse: VIE and NYSE:VE), comprised
of Vivendi Water (worldwide water products and services), Onyx
(solid waste and industrial services), Dalkia (energy
management), Connex (transportation and logistics) and FCC
(Spanish company engaged in environmental and construction
related industries), is the largest environmental services
company in the world with more than 295,000 employees, including
FCC, in about 100 countries and annual revenues of more than
$25.6 billion. Visit the company's Web sites at
http://www.usfilter.comor http://www.vivendienvironnement-
finance.com
ELECTROPURE INC: Independent Auditor Airs Going Concern Doubts
--------------------------------------------------------------
Electropure Inc. has two reportable segments: water purification
("EDI/Membrane"), and fluid monitoring ("MI", a start up
segment). The EDI segment produces water treatment modules for
sale to manufacturers of high purity water treatment systems.
The Membrane segment formerly produced ion exchange membranes
for outside customers for use in electrodialysis,
electrodeionization, electrodeposition and general
electrochemical separations. The MI segment is developing
technology that is anticipated to enable real time
identification of contamination in fluids. Reportable segments
are strategic business units that offer different products, are
managed separately, and require different technology and
marketing strategies.
Electropure Inc.'s net sales for the six months ended April 30,
2001 and 2002, respectively, showed sales increased in fiscal
2002 by $442,037 as compared to fiscal 2001 which reflects the
strong demand for ElectroPure's EDI products and an increased
penetration of the expanding ultrapure water market. For the
three months ended April 30, 2002, net sales increased by
$27,956 over the comparable prior year period. Sales revenues
were lower by 54% during the last three months of the quarter
ended April 30, 2002 as compared to the first three months. The
Company believes that the decrease results from the fiscal or
quarterly budgeting cycles of the end-user of its products
coupled with a general economic downturn.
At April 30, 2002, Electropure had a working capital deficit of
$21,569. This represents a working capital decrease of $61,149
compared to that reported at October 31, 2001. The decrease
primarily reflects a decrease in accounts receivables
principally due to a reduction in sales volume experienced
during the three months ended April 30, 2002 from the prior
quarter. Cash from the sale of common stock during the six
months ended April 30, 2002 provided $550,000 in net proceeds
which was utilized, in part, to increase inventories and reduce
accounts payable and other current liabilities.
The Company will be required to raise substantial amounts of new
financing in the form of additional equity investments, loan
financings, or from strategic partnerships, to carry out its
business objectives. There can be no assurance that it will be
able to obtain additional financing on terms that are acceptable
to it and at the time required by it, or at all. Further, any
financing may cause dilution of the interests of its current
shareholders. If unable to obtain additional equity or loan
financing, Electropure's financial condition and results of
operations will be materially adversely affected. Moreover,
estimates of its cash requirements to carry out its current
business objectives are based upon various assumptions,
including assumptions as to revenues, net income or loss and
other factors, and there can be no assurance that these
assumptions will prove to be accurate or that unbudgeted costs
will not be incurred. Future events, including the problems,
delays, expenses and difficulties frequently encountered by
similarly situated companies, as well as changes in economic,
regulatory or competitive conditions, may lead to cost increases
that could have a material adverse effect on the Company and its
plans. If not successful in obtaining loans or equity financing
for future developments, it is unlikely that it will have
sufficient cash to continue to conduct operations, particularly
research and development programs, as currently planned.
Electropure indicates that in order to raise needed capital, it
may be required to issue debt at significantly higher interest
rates or equity securities at selling prices that are
significantly lower than the current market price of its common
stock.
No assurances can be given that currently available funds will
satisfy working capital needs for the period estimated, or that
the Company can obtain additional working capital through the
sale of common stock or other securities, the issuance of
indebtedness or otherwise or on terms acceptable to it.
In the opinion of management, available funds, funds anticipated
to be realized on the refinancing of the Company's building, and
proceeds to be realized from the sale of EDI products currently
on order, are expected to satisfy working capital requirements
through September 2002. The Company's independent auditor has
included an explanatory paragraph in its report on the financial
statements for the year ended October 31, 2001 which raises
substantial doubt about Electropure's ability to continue as a
going concern.
ENRON: Creditors' Panel Wants to Hire McKool Smith as TX Counsel
----------------------------------------------------------------
The Official Committee of Unsecured Creditors in the Chapter 11
cases of Enron Corporation and its debtor-affiliates seek the
Court's authority to retain McKool Smith, nunc pro tunc to April
15, 2002, as their special Texas litigation counsel.
Creditors' Committee co-chair Julie J. Becker of Wells Fargo
Bank Minnesota tells the Court that:
-- it may be necessary to file one or more actions against
certain parties on behalf of unsecured creditors, and
-- proper venue for the actions may be in Texas.
In consultation with its counsel -- Milbank, Tweed, Hadley &
McCloy LLP, the Creditors' Committee contends that they would
need a local Texas firm to prosecute any Texas Litigation.
"McKool Smith was selected to serve as special Texas Litigation
counsel because the Committee believes the Firm has extensive
knowledge and experience in complex, commercial litigation in
the State of Texas," Ms. Becker explains.
McKool Smith has 56 attorneys and is one of the largest
commercial litigation firms in the State of Texas. The Firm
maintains three Texas offices in Dallas, Austin and Marshall.
According to Mike McKool, Jr., a shareholder and chairman of the
McKool Smith, the Firm has a broad-based commercial litigation
practice and has extensive experience representing plaintiffs
and defendants in areas including complex fraud, securities
violations, antitrust law, patent infringement, breaches of
trust and of fiduciary duty, oil and gas litigation, and other
areas that would likely be significant in connection with any
potential litigation on behalf of the Committee.
McKool Smith is expected to render legal services in any Texas
Litigation and as requested by the Creditors' Committee.
Specifically, McKool Smith will:
(a) investigate, file and prosecute litigation on behalf of
the Committee in the State of Texas;
(b) assist the Committee in its analysis of and negotiations
with the Debtors or any third party concerning matters
related to Texas Litigation;
(c) appear on behalf of the Committee at Bankruptcy Court
hearings and other proceedings in connection with Texas
Litigation; and
(d) perform other legal services as may be required and are
deemed to be in the interests of the Committee in
accordance with the Committee's powers and duties.
"Milbank, Squire Sanders and McKool Smith have informed the
Committee that they will coordinate their activities in order to
avoid duplication of efforts," Ms. Becker relates.
In return for its services, McKool Smith will be compensated at
its standard hourly rates, which are based upon the
professionals' level of experience. At present, Mr. McKool
reports that the Firm's hourly rates range from:
$325 - 550 partners
175 - 375 counsel and associates
55 - 125 paralegals
These rates are subject to change.
McKool Smith intends to maintain detailed time records, which it
will submit with its interim and final fee applications. The
Firm also plans to seek reimbursement of its actual and
necessary expenses related to its engagement. McKool Smith will
bill these expenses separately on a monthly basis. Normal and
reasonable expenses include, travel, accommodations, out-of-town
meals, overnight delivery, database access charges, telephone,
facsimile, postage, printing and duplication.
Mr. McKool tells the Court that the Firm has conducted a
conflicts check through its client database regarding its
connections with the Debtors, the individual members of the
Committee and other parties-in-interest. "To the best of my
knowledge, neither McKool Smith nor any attorney at the Firm
holds or represents an interest adverse to the Committee or to
the Debtors' estates, except as disclosed to the Court," Mr.
McKool asserts.
However, out of an abundance of caution, Mr. McKool says, an
"Ethical Wall" has been established to separate attorneys and
employees that previously represented or previously employed
with Enron, from all other McKool Smith personnel who will
represent the Committee. Mr. McKool explains that this Ethical
Wall supplements the pre-existing responsibility of every
attorney at McKool Smith under the codes and rules of
professional ethics:
-- not to reveal a confidence or secret of a client,
-- not to use a confidence or secret of a client to the
disadvantage of a client, and
-- not to use a confidence or secret of a client for the
attorney's own advantage or the advantage of a third
person.
Thus, Mr. McKool says, the Screened Individuals will have no
involvement in the Firm's representation of the Committee.
Mr. McKool assures the Court that the Firm will maintain an
ongoing inquiry regarding the Potential Parties in Interest and,
if appropriate, will file supplemental disclosure with the
Court. (Enron Bankruptcy News, Issue No. 32; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
DebtTraders reports that Enron Corp.'s 9.125% bonds due 2003
(ENRON2) are trading between 12.5 and 13.5 . See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRON2for
some real-time bond pricing.
ENRON CORP: Rex Rogers Wants Enron to Pay for Separate Counsel
--------------------------------------------------------------
Rex R. Rogers is currently the Vice President and Associate
General Counsel of Enron Corporation, and has been an in-house
legal counsel for the Debtors since 1985.
The Subcommittee on Oversight and Investigations of the United
States House of Representatives asked Mr. Rogers to appear on a
panel on March 14, 2002 and give his testimony about certain
matters related to the Debtors' business practices. To prepare
for the testimony, Mr. Rogers sought legal representation of
Swidler Berlin Shereff Friedman LLP, which is the Special
Employees Counsel approved by the Court. Swidler told Mr.
Rogers that the firm could not represent him due to an actual or
potential conflict of interest. Instead, Swidler suggested that
Mr. Rogers retain a separate counsel.
Mr. Rogers did just that.
Mr. Rogers asks the Court to authorize the Debtors to retain
Manatt, Phelps & Phillips LLP, nunc pro tunc to March 8, 2002,
as his counsel in connection with the investigations conducted
by various government entities. Mr. Rogers wants the Debtors to
pay Manatt's legal fees and disbursements.
B. Michael Rauh, Esq., at Manatt, Phelps & Phillips LLP, in
Washington, D.C., asserts that the representation will be in
accordance with the Court's Orders governing retention, and
interim and final compensation of professionals, as long as Mr.
Rogers is only a "witness" in the Investigations.
Accordingly, Mr. Rogers asks the Court to direct that:
(a) except to the extent there are objections, the Debtors
pay 80% of Manatt's $37,648 in attorneys' fees billed
through April 30, 2002 and all of its $456 in expenses
incurred through April 30, 2002, promptly after the
expiration of 15 days from the entry of an Order granting
this application; and
(b) Manatt thereafter petition this Court for any further
fees and costs incurred in accordance with the procedures
set forth in the Court's Administrative Order pursuant to
Sections 105(a) and 331 of the Bankruptcy Code
Establishing Procedures For Interim Compensation and
Reimbursement Of Expenses Of Professionals.
Manatt and Mr. Rogers entered into a retainer agreement dated
March 13, 2002. Pursuant to the Agreement, Manatt represented
Mr. Rogers before the Subcommittee and will continue to
represent Mr. Rogers with respect to all other matters in
connection with the ongoing Investigations. Mr. Rogers and
Manatt have the right to terminate their relationship in
accordance with the terms of the Agreement.
Although Mr. Rogers is requesting that the Debtors be
responsible for Manatt's reasonable attorneys' fees and
expenses, Mr. Rauh clarifies that Manatt represents only Mr.
Rogers and his interests alone. Thus, Mr. Rauh notes, the
attorney-client relationship only exists and will continue to
exist solely between Mr. Rogers and Manatt, and Manatt's ethical
responsibilities in connection with this matter run and will
continue to run only to Mr. Rogers. Among Manatt's
responsibilities include the attorney-client and work-product
privileges. Mr. Rauh emphasizes that Manatt will only be
obligated to act in accordance with Mr. Roger's instructions,
not the Debtors'. Moreover, Mr. Rauh continues, if Mr. Rogers'
current employment with the Debtors ceases for any reason, the
relief sought by this Application will not be impacted.
Pursuant to the Agreement, Mr. Rauh relates, Mr. Rogers agreed
to pay Manatt's hourly billing rates that are generally in
effect from time to time and reimburse Manatt for its out-of-
pocket costs. Mr. Rogers paid an initial retainer fee in the
amount of $10,000. However, Manatt agreed to seek full
reimbursement of Mr. Rogers' fees and expenses from the Debtors.
Manatt's current regular hourly rates range from:
$350 to $600 for partners
$190 to $325 for associates
$60 to $325 for paraprofessionals
For the individual attorneys who represented Mr. Rogers before
the Subcommittee, their billing rates are:
B. Michael Rauh - $475
Pamela J. Marple - $375
Lindsey W. Cooper, Jr. - $230
Manatt also regularly charges for out-of-pocket expenses,
including secretarial overtime, travel, copying ($0.20 per
page), outgoing facsimiles ($1.00 per page), document
processing, court fees, transcript fees, long distance phone
calls, postage, messengers, overtime meals, and transportation.
Mr. Rauh assures the Court that Manatt is a "disinterested
person" as that term is defined in Section 101(14) of the
Bankruptcy Code. Mr. Rauh admits that Manatt may have
previously represented, currently represent, and may in the
future represent entities (or their affiliates) that may be
interested parties, in matters totally unrelated to the Debtors'
Chapter 11 cases.
"Should Manatt become aware of past or existing conflict, Manatt
will supplement this affidavit when the conflicts check is
complete," Mr. Rauh says. (Enron Bankruptcy News, Issue No. 32;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXCHANGE APPLICATIONS: Nasdaq Delists Shares Effective June 12
--------------------------------------------------------------
Exchange Applications, Inc., doing business as Xchange, Inc.,
received on June 11, 2002 a letter from the Nasdaq Listing
Qualifications Panel stating that the Panel determined to delist
the Company's securities from The Nasdaq Stock Market effective
with the open of business on June 12, 2002. The Panel based its
decision on the Company's failure to meet the timely filing,
market value of publicly held share and net tangible
assets/shareholders' equity/market value of listed
securities/total assets and total revenue requirements, as set
forth in Nasdaq Marketplace Rules 4310(C)(14), 4450(a)(2) and
4450(a)(3)/4450(b)(1). The Company's securities are eligible to
trade on the OTC Bulletin Board.
Xchange solutions enable large global companies to lower costs
and maximize profits by Capturing Value in Play through
continuous customer conversation across all channels. Xchange 8
features the depth and open architecture large companies require
to extract more value from their existing CRM investments by
synchronizing online and offline multi-channel customer
campaigns that are integrated with call centers and all other
customer touch-points in real-time. This smarter, analytic
approach to each customer interaction delivers strategic
customer insights and profits. For more information on Xchange
or to learn about our customer-focused software and services
solutions, visit our Web site at http://www.xchange.com
FLAG TELECOM: Commences Trading on OTCBB Effective June 13, 2002
----------------------------------------------------------------
FLAG Telecom Holdings Limited (LSE: FTL), announced the
company's common stock began trading Over the Counter ("OTC") in
the United States, effective as of the opening of business on
June 13, 2002, under its current ticker symbol FTHLQ. The
company has been notified by the Nasdaq Qualifications Hearing
Panel of its decision to delist the company's common stock from
the Nasdaq National Market effective from the open of business
on June 13, 2002. The move will not have any impact on business
operations or customer service.
The company expects that its shares will commence trading on the
Over the Counter Bulletin Board in due course. The OTCBB is a
regulated quotation service that displays real-time quotes,
last-sale prices and volume information in OTC equity
securities. OTCBB securities are traded by a community of market
makers that enter quotes and trade reports. Investors should
call their brokers for daily pricing and volume information.
In accordance with the Listing Rules of The Financial Services
Authority of the United Kingdom, FLAG Telecom Holdings Limited
hereby gives notice of the delisting of its common stock from
the Official List and from the London Stock Exchange. Such
delisting will take effect on the later of July 11, 2002 or the
date upon which the Bermuda Court grants its approval of further
transfers of the company's shares. However, The Financial
Services Authority may delist the company's shares at any time
at its discretion.
FLAG Telecom Holdings Limited intends to seek promptly the
Bermuda Court's approval of any transfer of the company's shares
following the delisting of FLAG Telecom's shares from both
Nasdaq and the London Stock Exchange. In the event that such
approval is not obtained following the delisting from both
Nasdaq and the London Stock Exchange then any share transfers
after such delisting shall be void.
The company is currently in chapter 11 and is planning to apply
with both the United States and Bermuda bankruptcy courts for a
plan to restructure its obligations.
The FLAG Telecom Group is a leading global network services
provider and independent carriers' carrier providing an
innovative range of products and services to the international
carrier community, ASPs and ISPs across an international network
platform designed to support the next generation of IP over
optical data networks. On April 12 and April 23, 2002, FLAG
Telecom Holdings Limited and certain of its subsidiaries filed
voluntary petitions for reorganization under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York. Also, FLAG Telecom
Holdings Limited and the other companies continue to operate
their businesses as Debtors In Possession under Chapter 11
protection. FLAG Telecom Holdings Limited and certain of its
Bermuda-registered subsidiaries - FLAG Limited, FLAG Atlantic
Limited and FLAG Asia Limited - filed parallel proceedings in
Bermuda to seek the appointment of provisional liquidators to
obtain a moratorium to preserve the companies from creditor
actions. Provisional liquidators were appointed and part of
their role is to oversee and liaise with the directors of the
companies in effecting a reorganization under Chapter 11. Recent
news releases and further information are on FLAG Telecom's Web
site at: http://www.flagtelecom.com
FRONTLINE CAPITAL: Case Summary & 20 Largest Unsec. Creditors
-------------------------------------------------------------
Debtor: FrontLine Capital Group
405 Lexington Avenue
26th Floor
New York, NY 10174
Bankruptcy Case No.: 02-12909
Chapter 11 Petition Date: June 12, 2002
Court: Southern District of New York (Manhattan)
Judge: Robert D. Drain
Debtors' Counsel: John Edward Westerman, Esq.
Westerman Ball Ederer & Miller, LLP
600 Old Country Road
Suite 502
Garden City, NY 11530
(516) 622-9200
Fax : (516) 622-9212
Total Assets: $264,374,000 (as of March 31, 2002)
Total Debts: $781,374,000 (as of March 31, 2002)
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
BT Holdings (NY), Inc. 20.51% common ownership $250,000,000
c/o Jeffrey Baevsky, Interest in shares of HQ
Managing Director Global; HQ Global is the
31 West 52nd Street, Subject of a chapter 11
7th Floor Proceeding and, the shares
New York, NY 10019 Have little to no value;
This claim is also scheduled
As a secured claim. Plus
Interest
Reckson Operating Loan $183,000,000
Partnership, LP
225 Broadhollow Road
Melville, NY 11747
Sidley Austin Brown & Wood Legal Services $1,235,000
875 Third Avenue
New York, NY 10022
Openwave Systems Security Deposit $109,000
FTI Consulting Consulting Services $75,000
Catellus Development Consulting Services $72,000
Corporation
National Rural Utilities Office Space - Lease $71,063
Cooperative Term 6/00 - 5/03
Salomon Smith Barney Consulting Services $57,000
Bain & Company Consulting Services $50,000
Doug Sgarro Board/Committee Fees $50,000
New York City Department Taxes $45,000
of Finance
New York State Corporate Taxes $45,000
Tax Processing Unit
Paul Amoruso Board/Committee Fees $25,000
Ronald Cooper Board/Committee Fees $25,000
Sid Braginsky Board/Committee Fees $25,000
Canon Financial Services Copier Machine & $2,140
Facsimile Machine; HQ Global
Workplaces has assumed the
Obligation of the Canon
Copier machine and is utilizing
the asset and making payments.
Joseph Kaidanow Unknown
Metro Corporate Center, Unknown
LLC
The Bank of Nova Scotia Unknown
Robert Arcuro Unknown
GLOBAL CROSSING: Federal Insurance Seeks Stay to Recover Claims
---------------------------------------------------------------
Federal Insurance Company moves the Court for an order granting
relief from the automatic stay to permit the advancement and/or
payment, under certain insurance policies issued to Global
Crossing Ltd., of defense costs being incurred by present and
former officers and directors, Employee Benefit Plan committee
members, and other trustees, fiduciaries, administrators, and
employees of Global Crossing, in pending and future lawsuits and
other proceedings.
David M. Posner, Esq., at Hogan & Hartson LLP in New York, New
York, informs the Court that Federal has issued two insurance
policies to the Debtors, which collectively provide coverage to
certain of the Debtors' past, present, and future directors,
officers, and employees, and to the Debtors themselves. Federal
issued an Executive Protection Policy No. 8159-75-02 to Global
Crossing for the period from September 28, 1999 through
September 28, 2002. The D&O Policy provides coverage for Loss,
including Defense Costs, that Global Crossing and Global
Crossing's former, current, and future officers and directors
become legally obligated to pay on account of any Claim for a
Wrongful Act. The D&O Policy has a Limit of Liability of
$10,000,000.
Mr. Posner notes that Federal also issued a Fiduciary Liability
Insurance Policy No. 8151-95-14 to the Debtors for the period
from November 1, 2001 through November 1, 2002. The Fiduciary
Policy, provides $25,000,000 in coverage for "Loss," including
"Defense Costs," that Global Crossing, any past, present or
future trustee, director, officer or employee of Global Crossing
or any Employee Benefit Plan operated by Global Crossing, and
any past, present or future fiduciaries of any Employee Benefit
Plan operated by Global Crossing become legally obligated to pay
on account of any "Claim" for a "Wrongful Act," as those terms
are defined in the Fiduciary Policy. The Fiduciary Policy
further provides that Federal "shall have the right and duty to
defend any Claim" covered by the Policy.
In addition to providing coverage to certain of the Debtors'
past, present, and future directors, officers, and employees,
Mr. Posner relates that the Fiduciary and D&O Policies both
provide entity coverage to the Debtors themselves. The Fiduciary
Policy provides coverage to Global Crossing in its capacity as
the sponsor of any Employee Benefit Plan, as that term is
defined in the ERISA. The D&O Policy provides coverage to the
Debtors for covered claims related to Securities Transactions
and for Investigation Costs incurred because of a shareholder
derivative demand.
According to Mr. Posner, as of this time, 67 lawsuits have been
filed against certain of the current and former directors,
officers, and employees of the Debtors, which includes one case
in which the Debtors are named as a defendant, alleging, among
other things, securities violations, breaches of fiduciary duty,
and violations of the requirements under ERISA. Specifically,
there have been 47 putative class action lawsuits filed by
purchasers of Global Crossing securities during various
purported class periods against several current or former
officers and directors of Global Crossing. Of these, one
complaint names Global Crossing as an additional defendant. The
Securities Actions generally allege that the defendants caused
Global Crossing to issue misleading financial statements and
made misrepresentations in reports, news releases, and other
communications concerning Global Crossing's financial health and
prospects in violation of the federal securities law.
In addition, Mr. Posner states that 15 putative class action
lawsuits have been filed by participants and beneficiaries of
the Global Crossing Employees' Retirement Savings Plan against
current or former officers, directors and employees of the
Debtors. The Fiduciary Actions generally allege that the
defendants, as managers and administrators of the Savings Plan,
breached their fiduciary duties, and other disclosure
requirements, under ERISA by, inter alia, allowing excessive
investment in Global Crossing's stock as a percentage of the
Saving Plan's portfolio and by failing to provide the Plan
participants and beneficiaries with complete and accurate
information about Global Crossing.
Mr. Posner points out that two other putative class action
lawsuits have been filed in a California state court against
current and former officers of Global Crossing alleging that the
defendants breached their fiduciary duties to Global Crossing's
shareholders in connection with the proposed sale of Global
Crossing. Another action has been filed by Roy L. Olofson, the
former Vice-President of Finance at Global Crossing,
individually and on behalf of the "general public" against
current and former officers of Global Crossing, alleging that
the defendants engaged in a scheme to artificially prop up the
price of Global Crossing's stock by engaging in misleading
transactions and using improper accounting methods similar to
those alleged in the Securities Actions.
In addition to the Lawsuits, Mr. Posner submits that Global
Crossing has received a demand letter from Phillip Cirella, a
shareholder who has threatened to file suit against Global
Crossing and certain officers and directors for alleged breaches
of fiduciary duties and securities violations. Global Crossing
has also received notice that one of its former directors,
Canning Fok Kinning, may be named as a defendant in the
Securities Actions. Finally, by letter dated March 13, 2002,
Federal received notice from Global Crossing's defense counsel
that the SEC has issued an investigative order in connection
with the purchase and sale of Global Crossing stock and other
alleged securities violations.
By Order dated March 25, 2002, Mr. Posner recounts that the
Court authorized the Debtors to employ and retain the law firm
of Debevoise & Plimpton as special counsel to advise and
represent the Debtors in connection with the Lawsuits, agency
investigations, criminal investigations, and other related
matters as they arise "in accordance with the terms of the
Application" filed by the Debtors. The Court also ordered that
Debevoise will be compensated in accordance with the Bankruptcy
Code and other applicable rules and procedures. Since the Order
was issued, Debevoise has submitted bills for attorneys' fees
and costs and has requested that Federal pay, pursuant to the
Policies, defense costs incurred thus far in connection with the
Lawsuits and the SEC Investigative Order.
Mr. Posner tells the Court that Federal is concerned that making
any payment under the Policies for Defense Costs for Global
Crossing or for any Insured Persons would violate the automatic
stay in the bankruptcy proceeding. Although the Order authorizes
Debevoise's compensation "in accordance with the terms of the
Application," and although the Application explicitly identifies
the Debtors' directors and officers liability insurance policies
as an initial source of funds for the compensation of Debevoise,
the Order itself does not specifically provide that the proceeds
from insurance policies that may be property of the estate may
be used to pay for and/or advance those defense costs. Moreover,
four participants and beneficiaries of the Savings Plan filed
objections to the Debtors' application to retain Debevoise as
special counsel on the grounds that the proceeds from the D&O
and Fiduciary Policies should not be used to pay defense costs
and expenses of litigation unless and until the Debtors show the
use of the Policies' proceeds for defense costs is appropriate
under the Policies' terms and conditions.
Absent a ruling from the Court providing relief from the
automatic stay to permit advancement of Defense Costs, Mr.
Posner contends that Federal may not pay or advance Defense
Costs without running the risk that the payments or advancements
may be determined to violate the automatic stay.
Mr. Posner claims that certain Individual Defendants, as well as
the Debtors, have requested payment of defense costs under the
D&O Policy and the Fiduciary Policy. The Debtors have advised
Federal that they explicitly agreed, post-Petition, to pay the
defense costs of the Individual Defendants, looking to the D&O
Policy and the Fiduciary Policy for coverage of those costs. To
the extent that coverage for those costs exists under either or
both of those policies, those costs should be paid or advanced,
as appropriate. However, Federal cannot make any of these
payments without the risk of violating the automatic stay and
incurring the penalties available for a stay violation,
including being held in contempt of court.
Mr. Posner notes that the Fiduciary Policy further provides that
Federal "shall have the right and duty to defend any Claim"
covered by the Policy. In that regard, Federal has retained the
law firm of Sonnenschein Nath & Rosenthal to defend its Insureds
in connection with matters potentially covered under the
Fiduciary Policy. While Federal believes that it may exercise
its contractual right to defend without violating the automatic
stay, it nonetheless asks that relief from the stay be granted
to provide a defense to Global Crossing and other Insureds under
the Fiduciary Policy, to the extent the relief might be deemed
required. (Global Crossing Bankruptcy News, Issue No. 11;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
HA-LO INDUSTRIES: Hasn't Reached Agreement on Reorg. Plan Terms
---------------------------------------------------------------
HA-LO Industries, Inc. (OTC Bulletin Board: HMLOQ), a
promotional products company, announced that to date, although
discussions in the bankruptcy cases have commenced between HA-LO
and two of its subsidiaries Lee Wayne Corporation and
Starbelly.com, Inc., who are all debtors, and the Official
Committee of Unsecured Creditors regarding the form and content
of a plan or plans of reorganization, the discussions are in
their early and preliminary stages without any agreed upon terms
and conditions, and no plan or plans of reorganization have been
filed or confirmed by the Bankruptcy Court.
HA-LO further noted that it appears at present, absent a
substantial recovery on potential litigation claims that HA-LO
has not yet asserted and may never assert, and that will
undoubtedly be vigorously contested if asserted, the holders of
equity interests in HA-LO are not likely to receive or retain
anything on account of their interests in HA-LO in the
bankruptcy cases.
HA-LO, Lee Wayne and Starbelly.com each previously filed a
Chapter 11 case on July 30, 2001 in the United States Bankruptcy
Court for the District of Delaware, which cases were
subsequently procedurally consolidated and transferred to the
United States Bankruptcy Court for the Northern District of
Illinois (Eastern Division), based in Chicago, Illinois, where
they are presently pending as case number 02 B 12059.
Persons interested in obtaining more information concerning the
Chapter 11 cases, or the debtors' financial performance, may
review the pleadings, reports and other papers on file in the
Office of the Clerk of the United States Bankruptcy Court for
the Northern District of Illinois, Everett McKinley Dirksen
Federal Building, 219 S. Dearborn Street, Chicago, Illinois.
HALO Industries, Inc. (OTC Bulletin Board: HMLOQ), based in
Deerfield, IL with offices worldwide, is a promotional products
leader.
HEADWAY CORPORATE: Sets Annual Shareholders' Meeting for July 15
----------------------------------------------------------------
The Annual Meeting of the Stockholders of Headway Corporate
Resources, Inc., a Delaware corporation, will be held at 3:30
p.m., on July 15, 2002, at 850 Third Avenue, 11th Floors in New
York City, New York.
The purpose of the Annual Meeting is to propose and vote on
the following items:
(1) Election of Gary S. Goldstein and Barry S. Roseman as
Class 1 Directors of Headway to serve for a term of
three years and until their successors are duly
elected and qualified;
(2) A proposal to amend Headway's Certificate of
Incorporation to increase the number of authorized
shares of common stock, par value $0.0001, to
80,000,000;
(3) Ratification of the appointment of Ernst & Young LLP
as independent auditors of Headway for 2002; and
(4) All other business as may properly come before the
Annual Meeting or any adjournments thereof.
Headway Corporate Resources, Inc. is a leader in providing
strategic staffing solutions and personnel worldwide. Its
operations include information technology staffing, temporary
staffing, executive search, permanent placement and outsourced
human resources administration. As of March 31, 2002, the
company posted a total stockholders' equity deficit of about $22
million.
HILB ROGAL: S&P Rates $260MM Senior Secured Bank Loan at BB-
------------------------------------------------------------
Standard & Poor's assigned its double-'B'-minus senior secured
debt rating to Hilb, Rogal and Hamilton's (HRH) $260 million
bank loan because of HRH's status as the seventh largest broker
in the U.S. and strong operating margins.
HRH has completed more than 200 independent agency acquisitions
and more than 80 smaller books of business since it was founded
in 1982. "This business model contains above-average risk
because of its reliance on acquisitions to achieve strategic and
financial goals," noted Standard & Poor's credit analyst Matthew
T. Coyle. "Also, this business model is expected to add a high
degree of variability to future operating results."
Notwithstanding, operating margins have been strong in recent
years. However, Standard & Poor's remains concerned about the
sustainability of those margins given potential integration
issues with past acquisitions and the anticipated acquisition of
Hobbs Group LLC, which is expected to be finalized before the
end of the June 2002.
Although HRH has access to the public equity markets and will
have about $70 million of unused capacity on its $100 million
bank loan revolver after the transaction is complete, Standard &
Poor's expects the company to service its debt obligations
through normal operating cash flow activity. As a result, it is
critical for management to achieve its operating objectives,
especially given the short-to-intermediate term of HRH's debt
maturities.
The bank loan--which consists of a $30 million term loan
(Tranche A) facility due in 2004, a $130 million term loan
(Tranche B) facility due in 2007, and a $100 million bank
revolver due in 2004--is jointly and severally guaranteed by the
capital stock of HRH's subsidiaries.
IT GROUP: Seeking Court Okay to Pay for $8MM Vacation Benefits
--------------------------------------------------------------
The IT Group, Inc. and its debtor-affiliates, ask the Court to
permit them to make prepetition payments on account of accrued
and unpaid vacation to Eligible Employees under the Debtors'
Modified Paid Time Off Benefit (PTO) Program and the Asset
Purchase Agreement with The Shaw Group. The Debtors expect to
pay about $8,000,000 for these unpaid vacations to about 5,700
employees who are qualified to participate under the program.
Marion M. Quirk, Esq., at Skadden Arps Slate Meagher & Flom LLP
in Wilmington, Delaware, tells Judge Walrath that those entitled
to participate in the Modified PTO Program are the Debtors'
aggregate workforce, which consists of approximately 5,100
employees who have rendered service since May 3, 2002, the
closing of the asset sale to Shaw. Additionally, there are
about 600 employees who were terminated prior to the Closing due
to the Debtors' Reduction In Force (RIF) efforts. These RIF
Employees are also entitled to participate in the program.
"The Debtors estimate that the total accrued unpaid prepetition
PTO aggregates to approximately $8,000,000, which amounts to an
average of approximately $1,400 per Eligible Employee," informs
Mr. Quirk. A further breakdown of the $8,000,000 of accrued
unpaid PTO reflects that:
A. approximately $7,400,000 is attributable to those Eligible
employees who accepted Shaw's offer of employment;
B. approximately $100,000 covers those Eligible Employees that
remain employees of the estates; and,
C. approximately $500,000 is for those Eligible Employees who
are RIF Employees.
Any employees who were terminated for cause (other than the
Debtors' reduction in work force efforts) or left voluntarily
prior to May 3, 2002, are not entitled to any "cash payout" of
the accrued prepetition PTO.
Mr. Quirk explains that, under the Asset Purchase Agreement,
Shaw has agreed to pay cash to the Debtors at the Closing, for,
among other things, accrued and unpaid vacation -- less an
amount equal to one week's vacation pay -- for the Debtors'
employees as of the Closing Date as part to a retention plan.
The Debtors and Shaw have also decided to compensate those
employees who were terminated prior to closing due to the
Debtors' RIF efforts for their accrued and unpaid vacation.
Mr. Quirk further states that, before the Petition Date, a
majority of the Debtors' employees were entitled to participate
in the PTO Program. For the most part, the PTO Program is
similar to a traditional vacation program with a limited number
of additional hours to allow employees to handle short-term
illness or personal absences. Employees accrued PTO, which
consists of time, accrued each pay period to be used (subject to
supervisory approval), for vacation, illness or injury,
religious observances and certain other purposes. Under the PTO
Program, employees were entitled to cash out all but 40 hours of
their existing PTO accruals once annually.
"The PTO Program has been a successful program for the Debtors
and its employees to accrue and manage their PTO, the Debtors
have been able to attract and retain skilled, experienced
employees," Mr. Quirk remarks. "Through dedication, loyalty and
years of services to the Debtors, the employees have relied upon
the accumulated PTO for normal vacations and to supplement their
financial security."
Mr. Quirk contends that the continued service and dedication of
the Eligible Employees through the Closing Date or through the
date of their termination (as applicable) were critical to the
Debtors' ability to maintain their business operations and
preserve value for their estates and to the successful Closing
of the Sale. (IT Group Bankruptcy News, Issue No. 12; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
INTEGRATED HEALTH: Committee Taps Eureka as Financial Advisors
--------------------------------------------------------------
David Weidner, Chief Financial Officer of PharMerica, Inc., and
Co-Chairperson of the Official Unsecured Creditors Committee in
the Chapter 11 cases of Integrated Health Services, Inc. and its
debtor-affiliates, asks the Court for authorization to retain
Eureka Capital Markets, LLC as the Committee's Financial
Advisors. The Committee wants Eureka to provide professional
corporate finance services in place of Andersen Corporate
Finance, effective as of May 1, 2002. The Committee seeks the
approval pursuant to, inter alia, 11 U.S.C. Section 327(a),
328(a), 331 and 1103(a) of the Bankruptcy Code.
Andersen's retention by the Committee in the Debtors' cases
includes:
* general corporate finance consulting,
* general accounting and
* general restructuring.
In rendering these services, Andersen's restructuring group and
Andersen's corporate finance group became active and involved in
the Debtors' bankruptcy cases. Generally, Andersen
Restructuring primarily performs the general accounting and
restructuring services for the Committee from its Miami, Florida
office. The corporate financing services were primarily
performed by Andersen Corporate Finance from its office in New
York City.
General Accounting and Restructuring
by Andersen Will Continue
At this juncture, Andersen Restructuring continues to provide
the Committee with general accounting and restructuring advice
in these cases and this Application does not in any way seek to
modify or change Andersen Restructuring's retention in these
cases.
Eureka Will Take Up Corporate Finance Services
As Leslie H. Feldman, a principal of Eureka and formerly an
Andersen employee from its Andersen Corporate Finance office in
New York City, reveals, due to circumstances surrounding the
bankruptcy filing by Enron, various employees of Andersen who
previously provided the primary Andersen Corporate Finance
services to the Committee in the IHS Debtors' bankruptcy cases
have left Andersen and joined Eureka, effective as of May 1,
2002.
Eureka is a consulting and financial advisory firm that
specializes in, inter alia, consulting for health care companies
concerning business strategy, growth needs, and mergers and
acquisitions.
It is the Committee's understanding that none of the individuals
who joined Eureka provided professional services to Enron while
employed by Andersen.
Andersen Corporate Finance had been very actively involved in
the spinoff and reorganization of the Debtors' Rotech
subsidiaries and had been active in the ongoing sale/restructure
process for the Debtors' long term care and rehabilitation
subsidiaries. The Committee tells Judge Walrath that continued
services by professionals fully familiar with the Debtors' cases
is crucial at this time, because the Debtors and Committee are
striving to formulate and file a plan of reorganization for the
remaining subsidiaries by summer's end.
In order to provide the Committee with the uninterrupted
continuation of corporate finance services, Eureka has performed
such work for the Committee since May 1, 2002.
By letter dated May 17, 2002, Andersen has agreed to transition
Andersen Corporate Finance's financial advisory work for the
Committee in these cases to Eureka, effective as of May 1, 2002,
the date when the transition occurred, and Andersen Corporate
Finance's services to the Committee in these cases shall cease
effective as of April 30, 2002 so that there will be no
duplication of effort.
To the best of Applicant's knowledge, and except as disclosed
herein or in the Feldman Affidavit, Eureka does not have any
connection with the Debtors, their creditors or any other party-
in-interest. The Committee is satisfied that Eureka represents
no adverse interest to the Committee which would preclude it
from acting as a financial advisor to the Committee in matters
upon which it is to be engaged and that its employment will be
in the best interest of the estates.
The Committee believes that Eureka is qualified to represent it
in these cases in a most cost-effective, efficient and timely
manner. The professionals who have joined Eureka and will work
on this engagement are familiar with the Debtors' businesses and
financial affairs. These professionals have worked closely with
the Committee, the Debtors' management, financial staff and
other professionals and have become acquainted with the Debtors'
corporate financing needs.
Eureka will assist and advise the Committee in matters
including:
a. the assessment of strategic alternatives for the various IHS
businesses;
b. the valuation of the Debtors' long term care facilities and
other IHS business operations;
c. establishing a process to maximize the value of the IHS
businesses;
d. plans of reorganization for IHS and negotiation of such
plans with various parties-in-interest;
e. the valuation of securities to be issued to creditors;
f. evaluating proposals with regard to merger and acquisition
transactions; and
g. evaluating proposals in connection with any financings.
In accordance with the Committee's agreement with Eureka,
Eureka's compensation for professional services to be rendered
to the Committee shall be, for the first six months of the
engagement, a monthly advisory fee of $100,000, plus
reimbursement and out-of-pocket expenses. According to the
Committee, this Advisory Fee is less than the average monthly
compensation for Andersen Corporate Finance.
After the initial six-month period, if the Committee still needs
Eureka's services and if the Committee and Eureka have not
reached a mutual agreement for another compensation arrangement,
Eureka's compensation for professional services rendered to the
Committee shall be computed at Eureka's customary hourly rates
charged for such services. The current range of customary hourly
rates charged by Eureka for such services are $400 to $800 per
hour. These rates are subject to revision in the normal course
of business.
Eureka intends to apply to the Court for allowance of quarterly
interim and final compensation and reimbursement of expenses in
accordance with applicable provisions of the Bankruptcy Code,
the applicable Federal Rules of Bankruptcy Procedure and rules
and orders of the Bankruptcy Court. (Integrated Health
Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
INTEREP NAT'L: S&P Affirms Junk Rating Over Liquidity Concerns
--------------------------------------------------------------
Standard & Poor's has affirmed its ratings, including its
triple-'C'-plus corporate credit rating, on radio ad sales
representation firm Interep National Radio Sales Inc. The
affirmation follows a modest improvement in the company's
liquidity following its sale of $11 million in convertible
preferred stock in the past month.
Standard & Poor's said that the ratings have also been removed
from CreditWatch where they were placed on October 10, 2001. The
current outlook is negative.
Interep, of New York, New York, is the leading independent radio
advertising representation firm, with about 50% of the national
spot radio market. The company had $99 million in debt as of
March 31, 2002.
"The new capital provides much needed cash to help Interep meet
its near-term obligations," according to Standard & Poor's
analyst Steve Wilkinson. He added, "The company's liquidity had
been largely depleted as a result of a severe decline in
profitability and a high level of contract buyout payments in
2001. Even with initial indications of a recovery, continuing
high contract buyouts are likely to translate into Interep's
cash flow remaining negative in 2002."
Standard & Poor's noted that the ratings could be lowered if
Interep's cash flow and liquidity do not improve in the near-
term.
KMART CORP: Gets Nod to Assume Sesame Street License Agreement
--------------------------------------------------------------
Kmart Corporation and its debtor-affiliates ask and obtained
Court approval to assume its Workshop License Pact with Sesame
Street.
* * * *
As previously reported in the May 16, 2002 issue of the Troubled
Company Reporter, Kmart and Sesame Workshop have enjoyed a
mutually beneficial business relationship. Kmart holds a nine-
year exclusive license of the trademark "Sesame Street",
together with certain intangible intellectual property relating
to Sesame Street, including, without limitation,
characters, likenesses, logos, marks, names and materials,
associated with the television series Sesame Street, for use in
connection with the development and sale of education and
entertaining products and infant, toddler and preschool
children's apparel. Furthermore, J. Eric Ivester, Esq., at
Skadden, Arps, Slate, Meagher & Flom, in Chicago, Illinois,
continues, Kmart has an exclusive license to create, develop,
manufacture and produce and advertise, promote, distribute and
sell the Licensed Products among mass market retailers and mid-
tier department stores.
In return, Kmart has to pay Sesame Street a minimum annual
royalty for each 12-month period of the term. "In each
subsequent 12-month period, the Minimum Annual Royalty paid
during the prior 12-month period shall be adjusted for positive
changes in the Consumer Price Index," Mr. Ivester relates. The
Minimum Annual Royalty for product categories is based on a
percentage of net sales of Licensed Products. Mr. Ivester
emphasizes that Kmart has consistently paid the Minimum Annual
Royalty. In addition, Mr. Ivester says, Kmart is obligated to
reimburse Sesame Street for one half of the costs of the salary,
overhead and other costs for Sesame Street's primary liaison
with Kmart.
According to Mr. Ivester, Kmart delivers a certified royalty
report within 30 days following the end of each calendar
quarter. "Kmart then pays the royalties due for such quarter,"
Mr. Ivester relates. Kmart also usually pays Sesame Street an
additional payment each June to ensure that the Minimum Annual
Royalty is met, Mr. Ivester adds.
The Debtors sought the Court's authority to assume the License
Agreement with Sesame Street dated July 1, 1996, as amended
pursuant to letter agreements dated July 1, 1998, July 1,
2000, August 1, 2001, and May 8, 2002.
In connection with the assumption of the License Agreement, Mr.
Ivester told the Court that the Debtors will immediately pay the
outstanding royalty payment of $5,072,631 (less any royalty
payments on products within the Minimum Annual Royalty actually
paid for the 12-month period ending June 30, 2002). Mr. Ivester
explains that the Cure Amount will be in full satisfaction of
any outstanding monetary obligations for the 12-month period
ending June 30, 2002 (other than those royalty obligations with
respect to sales of non-exclusive products outside the Minimum
Annual Royalty).
The initial term of the License Agreement ends on June 30, 2005.
According to Mr. Ivester, the License Agreement may be
immediately terminated by either party, if either party:
(i) assigns the License Agreement in whole or in part without
the other party's consent, or
(ii) is in breach or default of any of its obligations,
representations, warranties or agreements under the
License Agreement and such default remains for 30 days
after such notice. (Kmart Bankruptcy News, Issue No. 24;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART: JPMorgan Resigning as Mortgage Bond Trustee by July 16
-------------------------------------------------------------
NOTICE OF RESIGNATION AND
IRREVOCABLE ASSIGNMENT
OF TRUSTEESHIPS
KMART CORPORATION
J.P. Morgan Trust Company, National Association
("JPMorgan") is the Trustee for thirty-five series of bonds (the
"Bonds") which are either (i) secured by a feehold or leasehold
mortgage on property which is leased by Kmart Corporation
("Kmart") (or an affiliate) and/or (ii) guaranteed by Kmart.
JPMorgan hereby gives notice of its resignation as Trustee under
the Indentures (the "Indentures") pursuant to which the Bonds
were issued. JPMorgan has assigned its trusteeships under the
Indentures to Bank One Trust Company, National Association. By
its terms, however, the assignment is expressly conditioned upon
the holders of a majority in aggregate principal amount of the
outstanding Bonds not appointing a successor Trustee. If the
holders do appoint a successor Trustee, such successor will
succeed JPMorgan. For those Indentures which provide that a
resignation will take effect on the date specified in the notice
of resignation, JPMorgan's resignation was expected to become
effective no later than July 16, 2002.
For more information concerning the Bonds, holders may
contact Mr. Jeffrey A. Ayres, Vice President of Bank One Trust
Company, National Association, 1111 Polaris Parkway, Suite K1,
Columbus, Ohio 43240 (or by fax at (614) 248-2566, or by e-mail
at Jeffrey a ayres@bankone.com).
KMART CORP: First Quarter 2002 Net Loss Tops $1.45 Billion
----------------------------------------------------------
Kmart Corporation (NYSE: KM) announced the financial results for
its first quarter of fiscal 2002. This period covers the first
three full months following Kmart's voluntary Chapter 11 filing
on January 22, 2002. Operating reports for each of these three
months have previously been filed with the U.S. Bankruptcy Court
in Chicago and the Securities and Exchange Commission.
For the 13 weeks ended May 1, 2002, Kmart reported a net loss of
$1.45 billion versus a net loss of $233 million for the 13 weeks
ended May 2, 2001. Excluding non-comparable and reorganization
items, the Company's net loss was $408 million in the first
quarter of 2002 compared with a net loss of $218 million in the
first quarter of 2001.
Net sales for the 13-week period ended May 1, 2002 were $7.64
billion, a decrease of 8.4 percent from $8.34 billion in 2001.
On a same-store basis, sales declined 8.8 percent from the first
quarter of 2001. Excluding the 283 stores that were closed this
year, the same-store sales decline was 11.7 percent.
James B. Adamson, Chairman and Chief Executive Officer of Kmart,
said, "Kmart's significant losses and sales decline in the first
quarter reflect the many challenges the Company faced in the
period following our voluntary Chapter 11 filing. These
challenges included reduced inventory levels as vendors withheld
shipments in the early days of the reorganization and reduced
store traffic arising from the bankruptcy filing."
Excluding non-comparable and reorganization items, gross margin
as a percentage of sales increased to 18.3 percent for the 13
weeks ended May 1, 2002, from 18.0 percent in the first quarter
of 2001. This increase is attributable to decreased sales, as a
percent of total sales, of food and consumables, which carry
lower margin rates, and a shift from clearance sales to regular
sales, partially offset by reduced retail pricing and decreased
vendor allowances.
Selling, General and Administrative expenses (SG&A) increased
$79 million from the year-ago quarter. SG&A, as a percent of
sales, was 23.4 percent in the first quarter of 2002 compared
with 20.5 percent in the first quarter of 2001. This increase
is due primarily to severance and contractual obligations,
increased bonus accruals, utility rate increases, decreased co-
op recoveries, and increased expenses for general liability
claims. These were partially offset by the elimination of a
previous bonus program for store associates.
Adamson said, "While there is still much hard work ahead, we are
pleased with the early progress we are making in addressing in-
stock levels, customer service and store traffic. Nearly all of
our vendors have resumed shipments to us and in-stock levels in
the stores have improved. Likewise, our focus on improving the
physical condition of our stores and enhancing customer service
helped produce a successful Customer Appreciation sale in early
June."
As of May 1, 2002, Kmart had approximately $1.1 billion in
available cash and approximately $1.6 billion available under
its debtor-in-possession credit facility.
During the first quarter of fiscal 2002, Kmart recorded a charge
of $758 million to write-down inventory in the 283 stores that
were closed in May and June, and inventory transferred from the
remaining stores to the closing stores. Of this charge, $384
million relates to the write-down of inventory at the closed
stores to estimated selling value. Another $266 million relates
to the write-down of inventory that was transferred from other
Kmart stores to the closed stores and included in the
liquidation sales. The remaining $108 million of the charge
related to liquidation fees and expenses associated with the
store closing sales.
Kmart recorded a total charge of $265 million for reorganization
items in the first quarter of 2002, including a store-closing
charge of $233 million for lease terminations and other costs
associated with the 283 closed stores.
KOMAG: Expects to Emerge from Bankruptcy Protection on June 30
--------------------------------------------------------------
Komag, Incorporated, a Delaware corporation, proposes to issue,
as part of the Further Modified First Amended Plan of
Reorganization dated May 7, 2002, its Senior Secured Notes Due
2007. Pursuant to the Plan of Reorganization, the creditors of
the Company will receive Notes and common stock of the newly
reorganized Company, in the amounts specified in the Plan of
Reorganization. On November 16, 2001, the United States
Bankruptcy Court for the Northern District of California
approved the Company's Disclosure Statement as containing
"adequate information" for the purposes of soliciting votes of
holders of claims against the Company for acceptance or
rejection of the Plan of Reorganization (Case Number 01-54143-
JRG). On May 9, 2002, the Plan of Reorganization was confirmed
at a confirmation hearing of the Bankruptcy Court. The Company
expects that the Plan of Reorganization shall become effective
on or about June 30, 2002, at which time the Company shall
emerge from bankruptcy, with an amended charter, new
capitalization and new board of directors.
Komag is a producer of media for disk drives. The company filed
for Chapter 11 protection on August 24, 2001 at the Northern
District of California.
LEAP WIRELESS: May Need Debt Refinancing to Meet Loan Covenants
---------------------------------------------------------------
Leap Wireless International, Inc. (Nasdaq: LWIN) reported
significant progress in mitigating the effects of fraud on its
business. The Company has seen a significant reduction in
fraudulent activity after taking aggressive steps to implement
processes, systems and controls designed to detect fraud and
screen out customers and dealers who engage in fraudulent
activity. Also, in response to investor questions regarding the
Company's ability to meet its minimum EBITDA covenants, Leap
stated that given its progress in mitigating fraud and its
expectations that the business will continue to perform
consistent with plan, the Company anticipates it will meet all
of its minimum EBITDA covenants added to its vendor facilities
earlier this year.
"After developing and testing a series of new policies and
procedures, we completed their implementation in April and have
since seen a significant positive operational and financial
impact from the work we have done to combat fraud," said Harvey
P. White, Leap's chairman and CEO. "While we are reporting
[Thurs]day on our current progress in containing fraud, our
efforts and focus on this issue have been and will be ongoing.
We continue to carefully scrutinize our existing customer and
dealer base in an effort to identify and eliminate fraudulent
activity."
Leap has taken the following actions to combat fraud by
customers and dealers:
-- To contain credit card fraud, in which a person pays
for service with the credit card of another, Leap has
implemented improved credit card validation systems and
processes at both the point of sale and at Cricket's customer
care centers. This has reduced the percentage of credit card
transaction charge backs by nearly 80 percent since January, and
Leap believes that the Company's results are now consistent with
industry standards. This type of fraud decreases reported
service revenue and average revenue per user (ARPU) because
revenue associated with charge backs is reversed out in the
month the charge back is received.
-- To prevent subscription fraud, in which a person who
already owns a Cricket phone activates service with false
information and thereby obtains an additional month of service
free, the Company has implemented new customer validation
systems and processes at the point of activation. Leap believes
these actions have prevented the activation of or otherwise
cleared from its system more than 20,000 customers in the second
quarter who were potentially involved in fraud. In addition,
the Company believes that virtually all of the customers
involved in fraud at the end of the first quarter have been
removed from its system or turned into paying customers, because
nonpaying customers are automatically removed from its system
after 30 days. This type of fraud decreases reported service
revenue and ARPU due to the free month of service provided to
these customers.
-- To rein in distribution fraud, in which a third-party
dealer or distributor reports a handset as sold and activates
the service in a fictitious person's name, Leap has reviewed
dealer performance and eliminated approximately 15 percent of
the indirect sales locations that were under-performing or
suspected of potentially fraudulent activity. As a result, Leap
currently markets its Cricket service through over 5,100
indirect points of sale in addition to its direct retail
locations. The Company has also instituted more timely and
targeted dealer performance and inventory monitoring systems
that provide the Company with near-real time reporting. Leap
will continue to utilize these systems to identify and mitigate
potential fraudulent activity. This type of fraud increases the
amount of equipment subsidy reported and cost per gross addition
(CPGA) because, like all wireless carriers, the Company sells
its handsets at a loss and gives market development funds and
volume incentives to its indirect dealers.
With the exception of some normal delays in the reporting of
credit card misuse, which the Company does not believe is
material, Leap believes that the financial costs related to the
fraudulent activity that occurred during the first quarter were
included in the financial results reported for that quarter. As
the Company stated in the last quarterly conference call and in
its Quarterly Report on Form 10-Q for the first quarter of 2002,
it expects to see a negative impact on the calculated revenue
per user, acquisition cost and churn metrics during the second
quarter of 2002, with improvement in these metrics expected
later in the year as the new programs, systems and processes
continue to mitigate the effects of fraud.
"We have instituted the necessary steps to reduce the effects of
fraud while remaining focused on the growth and cost performance
of our business," said Susan G. Swenson, Leap's president and
chief operating officer. "We have ceased doing business with a
number of indirect dealers and we have been working with law
enforcement as appropriate throughout this process to prosecute
those who steal from our company. Based on results [Thurs]day,
we are encouraged that we have the right systems and processes
in place to mitigate the fraud issue."
In addition, White commented on the requirements of the Total
Debt to Total Capitalization covenant contained within its
vendor financing agreements as measured on January 1, 2004.
"As we previously reported, to meet this particular covenant we
either will need to refinance the indebtedness, obtain a waiver
of the covenant from our lenders, or raise $225 million in
additional capital to pay down indebtedness," White said.
"However, if we continue to execute on our business plans as we
anticipate, our operations will generate sufficient cash flow
for the operation of our 40 market plan and to make required
principal and interest payments to the lenders. We are
optimistic that the vendors will work with us as they have done
in the past, and we will be able to refinance our the market
for wireless services."
LUCENT TECH: Fitch Hatchets Senior Unsecured Debt Rating to B+
--------------------------------------------------------------
Fitch Ratings has downgraded Lucent Technologies Inc.'s senior
unsecured debt to 'B+' from 'BB-', the senior secured credit
facility to 'BB-' from 'BB', and convertible preferred stock and
trust preferred to 'CCC+' from 'B'. The Rating Outlook remains
Negative.
Lucent announced that it expects revenues for the third fiscal
quarter ending June 30, 2002, to decline sequentially by 10%-15%
from $3.5 billion compared to previous estimates of flat
sequential growth. In addition, financial flexibility remains
strained despite an amendment to its $1.5 billion bank credit
facility which provides additional room for operational
shortfalls as quarterly minimum consolidated operating EBITDA
levels have been reduced significantly. The ratings reflect the
company's weak credit protection measures, limited financial
flexibility, and a continued difficult environment for the
company's end markets, which are expected to decline in excess
of 30% in 2002 and remain pressured thereafter, delaying
Lucent's return to profitability until at least 2003. The
company continues to experience operating losses, requiring
financing for its operating deficit and cash requirements for
the restructuring programs. Given this limited financial
flexibility, it is critical for Lucent to continue to be
aggressive in reducing costs while realizing the cost savings
from the previous restructuring programs and executing the
planned financing transactions, in order to return to
profitability.
The negative rating outlook reflects the uncertain capital
expenditure patterns of the company's customer base and the risk
that further reductions from both wireless and wireline
operators will continue to pressure Lucent's revenues and cash
flow. The operational issues and the execution risks surrounding
the company's restructuring strategy continue to include
significant headcount reductions and organizational changes.
Lucent has indicated that it will take additional actions, if
necessary, to align its cost structure in order to improve
profitability and cash flow sequentially. In addition, while the
company has clearly reduced its vendor finance exposure and has
improved the credit profile of the portfolio, Fitch believes it
remains a risk as the company continues to utilize it to market
products.
Total debt as of the second quarter ending March 31, 2002, was
approximately $3.0 billion of long-term senior unsecured notes,
$330 million of senior secured debt, and $1.8 billion of
convertible trust preferred securities. Lucent has no
significant long-term debt maturities until 2006, when
approximately $1.1 billion of notes are due. The company has
$1.5 billion of lending commitments from its banks that expire
in February 2003. Also, a $500 million securitization facility
expiring in June 2004 exists of which $136 million was
outstanding as of March 31, 2002. Cash as of March 31, 2002, was
approximately $4.8 billion, an increase from $2.4 billion at the
end of fiscal 2001. The successful execution of the company's
$1.8 billion convertible trust preferred issuance in March 2002,
$1.9 convertible preferred stock issuance in August 2001, and
asset sales, including $2.5 billion from the sale of the optical
fiber business and outsourcing contracts, has clearly improved
Lucent's liquidity. However, the company's liquidity
requirements will continue to be affected by the execution risks
surrounding the restructuring and weak end-market conditions. In
conjunction with cost savings from the restructuring programs,
product line consolidation and top line growth are the most
important factors for the return to profitability.
Fitch continues to recognize Lucent's competitive product
portfolio, the progress in its restructuring activities, and
improved liquidity. With expected continuation of pressures on
revenues and margins, Lucent has responded with two major
restructuring programs, including ultimately reducing its
workforce by more than 40%. As a result of meeting certain
operational performance criteria set by its previously amended
bank facility, the company was also recently able to spin-off
the remainder of Agere Systems, Inc. that it owned.
The telecommunications equipment market continues to experience
a sharp decline in sales, resulting in significantly lower gross
margins, lower EBITDA margins, substantial writedowns of
goodwill from overly aggressive acquisitions, and deteriorating
credit statistics. Companies continue to have limited visibility
regarding revenue growth, earnings, and orders and have
continued to reduce capital spending estimates.
DebtTraders reports that Lucent Technologies' 7.700% bonds due
2010 (LUCENT5) are quoted between 67 and 72. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LUCENT5for
real-time bond pricing.
LUCENT TECHNOLOGIES: Expects Revenues to Decline by 15% in Q3
-------------------------------------------------------------
Lucent Technologies (NYSE: LU) announced that, due to continuing
market softness, it expects revenues for the third fiscal
quarter of 2002 to decline on a sequential basis by
approximately 10-15 percent from the $3.52 billion recorded in
the second fiscal quarter. (All revenue and loss per share
figures in this news release are on a pro forma(1) basis.) The
company previously said it would not provide top line guidance
for the third fiscal quarter of 2002 in light of market
uncertainty.
At its April 23, 2002 earnings announcement, the company said
that, assuming no significant change in revenue levels, it
expected modest sequential improvement, on a pry grow the
business."
Lucent's Chief Financial Officer Frank D'Amelio indicated that
the company remains on track with its restructuring efforts and
still expects to reach an employee base closer to 50,000 by the
end of its fiscal year, which ends on September 30, 2002. He
also said that the company would provide an update on its
efforts to reduce its breakeven point at its July 23, 2002
earnings announcement. The company continues to target a return
to profitability and positive cash flow during fiscal 2003.
Lucent continues to have more than sufficient liquidity to fund
its operations and business plans and has no outstanding balance
on its credit facility. Certain financial covenants of the
company's credit facility have been amended to provide
additional flexibility in an uncertain market. The company today
filed the amendment with a Form 8-K with the Securities and
Exchange Commission.
Lucent Technologies, headquartered in Murray Hill, N.J., USA,
designs and delivers networks for the world's largest
communications service providers. Backed by Bell Labs research
and development, Lucent relies on its strengths in mobility,
optical, data and voice networking technologies as well as
software and services to develop next-generation networks. The
company's systems, services and software are designed to help
customers quickly deploy and better manage their networks and
create new, revenue-generating services that help businesses and
consumers. For more information on Lucent Technologies, visit
its Web site at http://www.lucent.com
MALAN REALTY: Inks Pacts to Sell 15 Properties to Retire Debt
-------------------------------------------------------------
Malan Realty Investors, Inc. (NYSE: MAL), a self-administered
real estate investment trust, has signed contracts for the sale
of 15 properties and is in negotiations for the sale of 17
additional properties.
The 15 properties under contract total approximately 2.1 million
square feet of gross leasable area and include a mix of shopping
centers and single- tenant properties. The properties are the
Orchard-14 Shopping Center in Farmington Hills, Michigan;
Clinton Pointe Shopping Center in Clinton Township, Michigan;
Pine Ridge Plaza in Lawrence, Kansas; Bricktown Square in
Chicago and properties leased to Kmart in Chicago, Franklin
Park, Lansing and Springfield, Illinois; Merrillville, Indiana;
Salina and Wichita, Kansas; Jefferson City and Kansas City,
Missouri; and Milwaukee and Hales Corner, Wisconsin. Malan
closed the sale of a Kmart-leased property in Janesville,
Wisconsin last month, with net proceeds of $1.1 million.
The contracts have scheduled closing dates within the next 90
days, subject to due diligence by the acquirers. Net proceeds
to the company are estimated at approximately $94 million before
debt repayment. Malan intends to use these proceeds to retire
debt including $57.9 million of securitized mortgage debt
encumbering 23 properties that matures in August 2002. To the
extent that the property sale closings do not occur by the
maturity date, the company said it will use bridge financing to
retire the mortgage debt and subsequently retire the bridge
financing with the proceeds from the property sales.
"We are also in negotiations for the sale of an additional 17
properties anchored by Wal-Mart, including 13 centers in which
the Wal-Mart is owned and operated by independent third
parties," said Jeffrey Lewis, president and chief executive
officer of Malan Realty Investors. "Projected proceeds from the
sale of these properties before debt repayment are approximately
$50 million.
"In order to keep shareholders informed throughout the property
liquidation process, we will announce future sales that are
material to the portfolio as soon as a contract is executed,"
said Lewis.
The company announced it will file its definitive proxy
statement shortly with the Securities and Exchange Commission in
connection with its annual meeting of shareholders, tentatively
scheduled for August 28, 2002 in Birmingham, Michigan. Included
in the items for shareholder approval is the plan for the
complete liquidation of the company. The proxy statement will
also contain an estimate of expected cash distributions from the
liquidation of the company on a per-share basis.
Malan Realty Investors, Inc. owns and manages properties that
are leased primarily to national and regional retail companies.
The company owns a portfolio of 57 properties located in nine
states that contains an aggregate of approximately 5.5 million
square feet of gross leasable area.
MELTRONIX INC: CEO and Senior Executives Exercise Stock Options
---------------------------------------------------------------
MeltroniX, Inc. (OTC Bulletin Board: MTNX), a leader in high-
density semiconductor interconnect solutions, announced that
three of the company's senior executives have exercised options
to purchase shares of MeltroniX, Inc. common stock. Robert
Czajkowski (CEO & President), Richard Ausbrook (VP,
Administration & Investor Relations), and Stuart Shanken (VP,
Marketing & Business Development), have exercised options to
purchase 1 million shares each under the outstanding Stock
Option Plan. The purchase price was $.10 per share. The
MeltroniX, Inc. Board of Directors recently granted these
options.
"Our management team is committed to continuing our program to
re-define MeltroniX businesses around a balanced portfolio of
customers focused on commercial, military and space
applications," stated Robert Czajkowski, CEO of MeltroniX.
"Management's goal is to achieve profitability in the most
expeditious manner possible," he added.
The shares have been pledged as collateral for a loan to
MeltroniX, to be used on its behalf to support ongoing and
future operations. This financing arrangement is part of a
larger effort, expected to include both Solana Capital Partners,
Inc. and US Semiconductor Corp., who continue to provide funding
as part of the restructuring plan. At a Special Meeting of the
Shareholders scheduled for July 9th, MeltroniX shareholders will
be voting on an increase in authorized shares that will allow
MeltroniX to pursue this restructuring.
MeltroniX (OTC Bulletin Board: MTNX), founded in 1984, is a
premier provider of Advanced Electronic Manufacturing Services,
Products, Design, and Testing to high growth industries and
applications including: Internet equipment;
wireless/telecommunication; medical; satellites and military
systems; and broadband communication and other electronic
systems manufacturers. MeltroniX is placing renewed emphasis on
military and space applications by leveraging its capabilities
in offering devices which are radiation tolerant and qualified
to military specifications. The company provides design,
assembly and test services based on advanced electronic
manufacturing technologies, including BGA, flip chip, and multi-
chip modules (MCMs). Headquartered in San Diego, MeltroniX has
on-site manufacturing facilities, including a class 10,000 clean
room. Please visit the company's Web site at www.meltronix.com .
At December 31, 2001, MeltroniX reported a total shareholders'
equity deficit of about $8 million.
MONTE CRISTO: TSX Delists Shares for Violating Listing Rules
------------------------------------------------------------
Effective at the close of business June 13, 2002, the common
shares of Monte Cristo Capital Inc. ("MCP") were delisted from
the TSX Venture Exchange for failing to meet Exchange Listing
Requirements by failing to complete a qualifying transaction
within 18 months of listing. The securities of the Company have
been suspended since June 12, 2001.
MOTIENT: Will Hold Annual Meeting on July 11, 2002 in Virginia
--------------------------------------------------------------
The 2002 annual meeting of stockholders of Motient Corporation
will be held at the Bechtel Building, 1801 Alexander Bell
Drive, Reston, Virginia, on Thursday, July 11, 2002, at 9:00
a.m., local time. At the meeting, stockholders will act on the
following matters:
1. Election of seven directors;
2. Approval of the "Motient Corporation 2002 Stock
Option Plan;" and
3. Any other matters that properly come before the
meeting or any postponements or adjournments
thereof.
Holders of record of Motient's common stock at the close of
business on May 31, 2002 will be entitled to notice of and to
vote at the meeting or any adjournments or postponements
thereof.
NL INDUSTRIES: Fitch Rates Kronos Unit's Planned Notes at BB
------------------------------------------------------------
Fitch Ratings has assigned a rating of 'BB' to the proposed
offering of senior secured notes by Kronos International Inc.
(KII), a wholly owned subsidiary of NL Industries. Fitch has
concurrently affirmed NL Industries' (NL) senior secured rating
of 'BB'. The Rating Outlook is Stable.
Proceeds from the proposed offering of Euro 270 million in
senior secured notes due 2009 are expected to be used to fund
the redemption of the remaining $169 million of NL senior
secured notes due 2003. Additionally, cash proceeds and KII cash
balances will fund the repayment of $82 million in KII notes
payable to Kronos, KII's parent company. The remaining portion
of $201 million notes payable to affiliate will be contributed
to KII's stockholder's equity. In conjunction with the above,
approximately $691 million in redeemable preferred stock and
profit participation certificates will be converted into common
stock in KII. Upon completion of the above transactions, KII
would have had pro forma debt of $273 million and shareholder's
equity of $75 million at March 31, 2002. On a last-12-month
basis for the quarter ended March 31, 2002, KII EBITDA was
approximately $123 million, which approximates the average KII
EBITDA for the five-year period 1997-2001. Upon redemption of
the NL senior secured notes, Fitch will likely withdraw the NL
rating.
While KII's and NL's recent historical credit statistics have
been strong for the ratings assigned, an acquisition or a
restructuring transaction affecting NL could change the credit
profile of NL and potentially the credit profile of the various
subsidiaries, including KII. However, the current transaction
structure and covenant provisions mitigate some of these
uncertainties, particularly with respect to KII. KII also
generates slightly less EBITDA than NL, however the benefit to
KII bondholders of being structurally senior to expenses and
obligations of NL outweighs the slightly diminished EBITDA.
NL's credit statistics were strong for the rating level in 2001
but are expected to weaken moderately in the near term as a
result of deterioration in titanium dioxide pricing over the
course of 2001 and in the first quarter of 2002. Major producers
announced significant titanium dioxide price increases in the
second quarter and as a result, Fitch expects improving titanium
dioxide profitability in 2002 relative to the first quarter of
2002. Continued recovery in profitability at the KII and NL
levels will be linked to continuing global economic recovery and
the resulting strength in cyclically sensitive titanium dioxide
demand. Fitch's outlook for profitability in the titanium
dioxide business is favorable, given the significant
consolidation that has taken place and the fundamentally well-
balanced demand and supply.
Titanium dioxide industry profitability is related to capacity
utilization rates. Titanium dioxide prices were on a positive
trend in 2000 before declining in 2001 as cyclically sensitive
demand declined. Fitch's 2002 outlook is for end market demand
to trend back upwards, leading to increasing prices. Overall
operating income for NL and KII should be slightly down in 2002,
relative to 2001.
NL is named in a variety of lead paint related lawsuits
initiated by the State of Rhode Island, the City of Milwaukee
and other cities. Several other former lead pigment producers
are also named in the lawsuits. Lead paint litigation of this
nature has been ongoing since the 1980's with limited success.
NL has never lost or settled any lead paint related lawsuits and
KII has never been named as a defendant in any of these
lawsuits. As a result, the ratings do not anticipate significant
net cash outflows in the near term for NL.
NATIONSRENT: Wants to Bring-In Keen for Real Estate Consulting
--------------------------------------------------------------
NationsRent Inc. and its debtor-affiliates ask the Court to
permit them to retain and employ Keen Realty, LLC as special
real estate consultant in these Chapter 11 cases, nunc pro tunc
to May 20, 2002, and in accordance with a real estate retention
agreement dated as of May 20, 2002.
According to Michael J. Merchant, Esq., at Richards, Layton &
Finger P.A. in Wilmington, Delaware, the Debtors are currently
in the process of evaluating their unexpired non-residential
real property leases to determine which leases they would
assume, assume and assign or reject. As part of this
comprehensive review, it is crucial that the Debtors determine
the fair market value for the leases and, accordingly, whether
assumption, assignment or rejection of each lease is in the best
interest of the Debtors' estates. In particular, the Debtors
want Keen Realty to:
A. assist the Debtors in evaluating the fair market rental value
of the Debtors' leased properties; and,
B. if necessary, testify at depositions or Court hearings as to
the fair market rental value of the Debtors' leased
properties.
Mr. Merchant submits that Keen Realty is particularly well
suited to serve as the Debtors' real estate consultants.
Founded in 1982, Keen Realty specializes in advising clients
with respect to their real property interests. The firm advises
these clients with respect to fair market evaluations, lease
dispositions and renegotiations. Keen Realty has substantial
experience providing real estate services to clients in similar
situations as the Debtors, including Crown Books Corporation,
Family Golf Centers, Inc., Filene's, Inc., Hechinger Stores
Company, LearningSmith, Inc., Mondi of America, Inc., Pic 'N
Pay Stores, Inc. Service Merchandise Company, Inc. and others.
Mr. Merchant informs the Court that Keen Realty intends to
charge the Debtors for its professional services on these Fee
Structures, subject to Court approval and pursuant to the terms
and conditions of the Retention letter:
A. the Debtors will pay Keen Realty an initial retainer worth
$10,000 upon the Court's approval of Keen Realty's retention;
B. in the event that Keen Realty is asked to provide testimony
or other services on an hourly basis, the Debtors will pay
Keen Realty an additional retainer in the amount of $10,000
without the need to seek additional Court approval;
C. Keen Realty will be paid a flat fee, inclusive of all
expenses, for each lease that the Debtors provide to Keen
Realty for evaluation, in this manner:
a. Keen Realty will receive $750 for each lease for the first
52 leases; and,
b. Keen Realty will receive $700 for each lease thereafter;
and,
D. Keen Realty will be paid an hourly fee for certain
professional services provided to the Debtors in connection
with testimony services in accordance with the Retention
Letter plus allowance of expenses related to these services.
The consultants anticipated to provide testimony services to the
Debtors with their corresponding hourly rates are:
Consultants Position Rate
----------------- -------------- ------
Moe Bordwin Chairman $450
Harold Bordwin President 450
Chris Mahoney Vice President 350
Craig Fox Vice President 350
Mike Matlat Vice President 350
Matt Bordwin Vice President 350
Keen Realty's Vice-President, Matthew Bordwin, ascertains the
Court that Keen Realty has no connection with the Debtors, their
creditors, the U.S. Trustee or any other party with an actual or
potential interest in the Debtors' Chapter 11 cases.
Accordingly, Keen Realty is a "disinterested person" as defined
in the Bankruptcy Code. (NationsRent Bankruptcy News, Issue No.
13; Bankruptcy Creditors' Service, Inc., 609/392-0900)
NEENAH FOUNDRY: S&P Slashes Rating to B- Due to Liquidity Issues
----------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on
castings and forging manufacturer Neenah Foundry Co. to single-
'B'-minus from single-'B' due to very constrained liquidity,
meaningful and increasing debt amortization, and near-term
refinancing risk.
At the same time, Standard & Poor's removed the rating on the
Neenah, Wisconsin-based company from CreditWatch. The rating
action affects about $450 million in outstanding debt
securities. The outlook is negative.
Neenah has limited liquidity, with about $10 million in cash and
no availability on the company's $29.6 million revolving bank
credit facility as of March 31, 2002 (which was recently reduced
from $50 million as part of its April 2002 bank amendment).
"Neenah faces heavy debt maturities in the near term with about
$12.5 million coming due in 2003 and about $62.5 million in
2004, further straining liquidity," said Standard & Poor's
analyst Eric Ballantine. Additionally, in September 2003, the
company's secured revolving credit facility matures, increasing
refinancing risk.
Neenah continues to be negatively affected by the weak North
American industrial markets, especially the volatile heavy-duty
truck, and heating, ventilation, and air conditioning (HVAC)
markets. Although the company has seen an increase in sales in
the heavy-duty truck market, this increase is expected to be
temporary, as heavy-duty truck sales are expected to soften in
late calendar 2002 following the "pre-buy" of trucks related to
the new emission standards.
Further erosion in the company's liquidity position or cash
generation will further strain the financial profile,
potentially leading to lower ratings.
NETWORK ACCESS: Wishes to Employ Adelman Lavine as Attorneys
------------------------------------------------------------
Network Access Solutions Corporation and its debtor-affiliate
want the U.S. Bankruptcy Court for the District of Delaware to
authorize their retention of Adelman Lavine Gold and Levin, a
Professional Corporation, as attorneys.
The Debtors relates they wish to employ Adelman Lavine because:
i) Adelman Lavine has extensive experience with the
prosecution and knowledge in the field of debtors and
creditors rights;
ii) the Debtors believe that Adelman Lavine is well
qualified to represent the Debtors as debtors-in-
possession in these chapter 11 cases; and
iii) Adelman Lavine's bankruptcy and restructuring attorneys
have developed a familiarity with the Debtors' assets,
affairs and businesses, having been engaged in early
March this year.
Adelman Lavine will be engaged to:
a) provide legal advice with respect to the Debtors' powers
and duties as debtors-in-possession in the continued
operation of their businesses and management of their
property;
b) take necessary action to protect and preserve the
Debtors' estates, including the prosecution if actions
on behalf of the Debtors and the defense of actions
commenced against the Debtors;
c) prepare, present and respond to, on behalf of the
Debtors, necessary applications, motions, answers,
orders, reports and other legal papers in connection
with the administration of their estates;
d) negotiate and prepare, on the Debtors' behalf, plan of
reorganization, disclosure statement, and all related
agreements/documents, and take any necessary action on
behalf of the Debtors to obtain confirmation of such
plan;
e) attend meetings and negotiations with representatives of
creditors and other parties in interest and advising and
consulting on the conduct of the case;
f) advising the Debtors with respect to bankruptcy law
aspects of any proposed sale or other disposition of
assets; and
g) perform any other legal services for the Debtors, in
connection with these chapter 11 cases, except those
requiring specialized expertise which Adelman Lavine is
not qualified to render and for which special counsel
will be retained.
Subject to Court approval, Adelman Lavine will charge the
Debtors for its legal services on an hourly basis in accordance
with its ordinary and customary rates. Adelman Lavine has
informed the Debtors that the Firm's current hourly rates are:
Shareholders $305 to $390
Associates $130 to 295
Legal Assistants $105 to $120
Network Access Solutions Corporation is a provider of broadband
network solutions and internet service to business customers and
filed for chapter 11 protection on June 4, 2002. Bradford J.
Sandler, Esq. at Adelman Lavine Gold and Levin, PC represent the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $58,221,000 in
assets and $84,946,000 in debts.
NEWPOWER COMPANY: Bringing-In King & Spalding as Attorneys
----------------------------------------------------------
The NewPower Company and its debtor-affiliates seeks permission
from the U.S. Bankruptcy Court for the District of Georgia to
retain King & Spalding as their attorneys in their chapter 11
bankruptcy cases.
The Debtors submit that the partners, counsel and associates of
King & Spalding who will be principally assigned in these cases
have considerable knowledge and experience in the field of
bankruptcy law, business reorganizations and liquidations under
chapter 11 of the Bankruptcy Code, as well as in other areas of
law related to these chapter 11 cases, such as corporate and
securities laws, litigation and regulatory matters. The Debtors
believe that King & Spalding is well qualified to represent them
in these cases.
The Debtors assert that it is necessary for them to employ this
firm in addition to employing Sidley Austin Brown & Wood LLP as
counsel because King & Spalding is experienced in practicing
before this Court, which will prove to be cost effective and
beneficial to the Debtors.
King & Spalding is expected to assist the Debtors by:
a) advising the Debtors with respect to their powers and
duties as debtors and debtors-in-possession in the continued
management and operation of their business and properties;
b) attending meetings and negotiating with representatives
of creditors and other parties in interest and advising and
consulting on the conduct of the case, including all of the
legal and administrative requirements of operating in chapter
11;
c) taking all necessary action to protect and preserve the
Debtors' estates, including the prosecution of actions commenced
under the Bankruptcy Code on their behalf, and objections to
claims filed against the estates;
d) preparing on behalf of the Debtors all motions,
applications, answers, orders, reports and papers necessary to
the administration of the estates;
e) negotiating and preparing on the Debtors' behalf sales
or other disposition of assets, plan(s) of reorganization,
disclosure statement(s) and all related agreements and/or
documents and taking any necessary action on behalf of the
Debtors to obtain confirmation of such plan(s);
f) appearing before this Court, any appellate courts, and
the U.S. Trustee, and protecting the interests of the Debtors'
estates before such courts and the U.S. Trustee; and
g) performing all other necessary services in connection
with these chapter 11 cases.
Before the Petition Date, King & Spalding received a $100,000
retainer. King & Spalding will charge the Debtors for its legal
services on an hourly basis:
attorneys $135 - $650 per hour
document clerks
and legal assistants $74 - $160 per hour
The Debtors, a provider of electricity and natural gas to
residential and small commercial customers in markets that have
been deregulated to permit retail competition, filed for chapter
11 protection on June 11, 2002. Paul K. Ferdinands, Esq. at King
& Spalding and William M. Goldman, Esq. at Sidley Austin Brown &
Wood LLP represent the Debtors in their restructuring efforts.
When the Company filed for protection form its creditors, it
listed $231,837,000 in assets and $87,936,000 in debts.
OWENS CORNING: Seeks Court Nod to Expand PwC's Engagement Scope
---------------------------------------------------------------
Owens Corning and its debtor-affiliates ask the Court for
permission to expand the employment and retention of
PricewaterhouseCoopers LLP (PwC), the Debtors' Special Financial
and Tax Advisor, nunc pro tunc to April 4, 2002. In addition to
the advisory services it has rendered, the Debtors seek to
engage PwC as the Debtors' independent public accountants,
replacing Arthur Andersen LLP.
Maria Aprile Sawczuk, Esq., at Saul Ewing LLP in Wilmington,
Delaware, tells the Court that the Debtors are contemplating
having PwC render these additional services in the Debtors'
cases:
A. Audit the consolidated financial statements of the Company at
December 31, 2002 and for the year ending or those other
years as the parties agree in future engagement letters;
B. Review the Company's un-audited quarterly financial
statements and related data;
C. Provide information to be included in the Company's reports
filed with the Securities and Exchange Commission;
D. Audit the financial statements of the Company's employee
benefit plans for the year ended December 31, 2001 and other
years as the parties agree in future engagement letters; and,
E. Provide other assurances related services including carve-out
audits and other special projects as requested by the
Debtors' management.
Ms. Sawczuk says that the decision to expand PwC's engagement
was made following an extensive evaluation process that
considered proposals from PwC and other major audit firms. She
assures that the costs for PwC's audit services will be the same
as, or even less than, the costs of the audit services
previously provided by Andersen.
According to Ms. Sawczuk, the professional fees and related
costs incurred by the Debtors because of services rendered by
PwC will continue to be paid as administrative expenses of the
Debtors' estates, in accordance with the Amended Compensation
Order. This is pending PwC's application for compensation and
reimbursement of expenses in accordance with applicable
provisions of the Bankruptcy Code, the Bankruptcy Rules, and
Local Rules of the United States Bankruptcy Court for the
District of Delaware.
PwC will be paid in accordance with the hourly rates of its
professionals, who will be paid in accordance with billing
category range of the firm:
Position Range
-------- -----
Partner and Principals $580-889
Senior Managers and Managers 425-698
Staff and Senior Associates 180-469
Support/Administrative Staff 89-103
These professionals are expected to have primary responsibility
for providing the additional services to the Debtors, with their
hourly rates:
Peter Kelley $682
Sharad Jain 682
Ted Young 733
PwC will also be paid its annual fees for auditing services,
pegged at $1,750,00, exclusive of out-of-pocket expenses. This,
according to Ms. Sawczuk, is less than the amount actually paid
to the Debtors' prior auditor.
Ms. Sawczuk tells the Court that the retroactive appointment of
PwC as auditor is warranted since the firm had to begin working
immediately on the Debtors' first quarter filing with the SEC.
PwC partner Peter Kelley, meanwhile, assures the Court that PwC
is a "disinterested person" within the meaning of Sections
101(14) and 327 of the Bankruptcy Code. (Owens Corning
Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
DebtTraders reports that Owens Corning's 7.500% bonds due 2005
(OWENC2) are quoted between the prices 41.75 and 43. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=OWENC2for
more real-time bond pricing.
PACIFIC GAS: Gains Okay to Retain LECG Following Amended Waiver
---------------------------------------------------------------
The Court approved the application of Pacific Gas and Electric
Company and its debtor affiliates with respect to five of the
Consulting Firms proposed for retention, but declined to approve
the application with regard to LECG based upon the scope of the
requested waiver.
LECG and PG&E agreed to a waiver of conflicts of interest which
is narrower than the waiver initially requested by LECG, and
which resolves the UST's objections and addresses the Court's
concerns. The Court issued a Second Order authorizing PG&E to
employ and retain LECG as consultant for the purposes set forth
in the Application and pursuant to the terms of the Application
and the Employment Agreements.
* * * *
It was previously reported in the February 27, 2002 issue of the
Troubled Company Reporter that PG&E applied to the Court for
approval to employ and retain as consultants for professional
services to be performed under the direction and supervision of
PG&E's attorneys for the following purposes:
The Brattle Group
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Lexecon, Inc.
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
LECG, LLC
- in connection with the reorganization of PG&E in the
pending PG&E bankruptcy proceeding, in connection with
proceedings in various forums, including but not limited
to FERC.
NERA Economic Consulting
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Charles River Associates
- in anticipation and in preparation for litigation and/or
regulatory proceedings relating to the implementation of
PG&E's bankruptcy Plan of Reorganization;
Brown, Williams, Moorhead & Quinn, Inc.
- in anticipation and in preparation for PG&E's application
to the Federal Energy Regulatory Commission (FERC) under
section 7 of the Natural Gas Act (NGA) for a certificate
of public convenience and necessity and under section 4
of the NGA for rates, terms and conditions of service.
The Court's Tentative Ruling and Order
The Court issued a Tentative Ruling and Order in which the Court
tentatively sustained the Objections and deny the Application
unless the Debtor provides more information as requested by the
United States Trustee in the Objections.
The court agreed with the United States Trustee that the
retainer agreements have to be disclosed. While Debtor contends
that the descriptions of the services to be provided by the
consultants must be generic in order to protect confidentiality,
the court doubts that the Debtor and the consultants, aided by
able counsel, are unable to set forth accurate descriptions of
the work to be performed while at the same time protecting
confidences. "There is no good reason why these retainer
agreements should not be examined just as are engagement letters
with attorneys, accountants and investment advisors," the Court
opined.
The Court also agreed with the United States that the Debtor had
not met the burden of disclosure because the Application is
deficient because it does not provide sufficient information
concerning what entities are also represented by the
consultants, and what work is being or has been done for them.
Although the court does not necessarily agree with the United
States Trustee that LECG, LLC and The Brattle Group, Inc. are
disqualified because of the expectation that their prepetition
unsecured claims will be purchased by PG&E Corporation, the
Court held that the Application will have to be supplemented to
set forth the precise terms of any agreement between those
entities and PG&E Corporation.
The court could not determine whether LECG, has a conflict of
interest as contended by the United States Trustee. "If the
consultant's general counsel does not know what his firm is
doing, and for whom it is doing it, how can the court, the
United States Trustee, or other parties in interest know," the
Court tentatively ruled, "LECG, LLC will have to provide in much
greater detail information about its past or present services
regarding the California energy crisis to parties who are
adverse, to Debtor. Once that information is available, the
court will be able to make a judgment on whether there is an
irreconcilable conflict of interest and, if not, whether the
implementation of confidentiality walls adequately protects
Debtor's data."
Finally, the court was not inclined to give the Debtor an open-
ended procedure for engagement of additional consultants as
professionals under 11 U.S.C. Sec. 327(a). Unless convinced that
there is some particular reason why the specific applications
and proper disclosures cannot be presented for each future
consultant, the court will deny that portion of the Application
that seeks. the "Rolling Employment Order" procedure.
The Court then directed Debtor to file its supplement to the
Application, with any retainer agreements, additional
disclosures, and, in the case of LECG, LLC and The Brattle
Group, Inc., any agreements between those entities and PG&E
Corporation.
PG&E's Supplemental Memorandum
At the Court's direction, the Debtor filed supplemental
declarations of the Consulting Firms each with a copy of the
respective retain agreement attached and a Supplemental
Memorandum in further support of its application to employ and
retain the consulting firms.
The Debtor tells the Court that none of the Consulting Firms are
providing services that clearly are "central to the
administration of the bankruptcy estate and in the bankruptcy
proceedings"; rather, the Consulting Firms have been retained by
the Debtor to act as expert witnesses in connection with
applications that were being filed with the Federal Energy
Regulatory Commission (FERC) for approval of certain
transactions contemplated by the Debtor's Plan of
Reorganization.
The Debtor notes that the Consulting Firms Have Been Retained
Pursuant To Standard Retention Agreements That Do Not Contain
Provisions Inimical To Chapter 11.
PG&E represents that the Consulting Firms conducted significant
conflicts checks, as set forth in the supplemental declarations.
The Debtors submits that the Consulting Firms are
"disinterested" under Section 327(a). The Debtors reminds Judge
Montali that, as numerous courts have recognized, the Consulting
Firms are not prohibited from representing creditors and the
Debtor simultaneously unless there is an actual conflict of
interest. The Debtor points out that because the Consulting
Firms are respected consultants in the energy industry, they are
frequently retained by companies in the energy industry and it
is inevitable that PG&E would be required to retain consulting
firms that perform services for energy companies that happen to
be creditors of PG&E.
The Debtor points out that, as the supplemental declarations
demonstrate, the vast majority of the Consulting Firms'
engagements for creditors and affiliates have terminated and
thus do not raise any conflict problems. Even with respect to
those terminated engagement, the Debtor says, almost all of the
Consulting Firms' work in connection with those engagements did
not relate to PG&E or its bankruptcy case. In the few instances
in which some of the Consulting Firms are currently providing
services to creditors, those matters are unrelated to the expert
testimony that those Consulting Firms will be providing in the
FERC proceeding on the PG&E bankruptcy, the Debtor adds.
The three remaining engagements, detailed in the
Declaration, consist of:
(1) performing consulting services for a generator with
regard to the defense of class action litigation in
which PG&E is not a party against generators of
electricity in the Caiifornia markets;
(2) advising another generator with regard to litigation
involving the conduct of generators of electricity in
the California market in which PG&E is a co-defendant
of LECG's client; and
(3) performing consulting services for a client with regard
to transmission owners contracting for generation and
recovering costs in transmission rates and the Advance
Congestion Cost Mitigation Program of the California
ISO.
As noted in the Declaration, confidentiality obligations
presently prohibit LECG from disclosing the names of the
above-mentioned clients absent a court order. Nevertheless,
although services to these creditors may potentially touch
upon matters concerning the California energy crisis, none
of the services LECG has been called upon to perform by
these companies "impact [] the actual bankruptcy estate,"
and are thus not disqualifying.
The Debtor also represents that assignment of Brattle's and
LECG's pre-petition claims to PG&E Corporation does not render
those firms "interested". The Debtor cites several reasons.
First, these firms do not receive any consideration from Corp.
with respect to the sale of their claims until distributions are
made to Corp. by the Debtor with respect of such claims. Thus,
from a timing perspective, these firms fare no better -- and,
indeed, no worse -- than other unsecured creditors, the Debtor
points out.
With respect to the Trustee's second objection, the Debtor notes
that Brattle and LECG meet the test under Section 327(a) of the
Bankruptcy Code which requires that professionals be
disinterested and not hold or represent an interest adverse to
the estate. It is well accepted that a professional can agree to
waive its pre-petition claim as a means of making itself
disinterested, the Debtor argues. The rationale underlying these
cases is that because the professional no longer would hold a
pre-petition claim at the time it is retained, the professional
is disinterested and capable of being retained. The Trustee
contends Brattle and LECG somehow would not be independent
because LECG and Brattle will accept payment from Corp. "These
allegations must be considered in context," the Debtor tells the
Court, "Because the Debtor is a solvent corporation, the Plan
provides for all creditors to be paid in full and for equity
holders to receive a distribution. Because all creditors will be
paid in full under the Plan, the fact that LECG and Brattle will
accept payment from Corp. is of no consequence -- whether they
sell their claims or retain them, they will be paid the full
amount of their claims with interest."
For these reasons, the Debtor urges the Court to approve the
retention of BMWQ, Brattle, CRA, LECG, Lexecon, and NERA.
The Court's Final Order
Following PG&E's submission it its Supplemental Memorandum in
further support of earlier application, and Declarations and
Supplemental Declarations supplying further disclosures by the
Consultants in the application, the Court authorizes PG&E to
employ and retain as consultants The Brattle Group, Lexecon,
Inc., NERA Economic Consulting, Charles River Associates, and
Brown, Williams, Moorhead & Quinn, Inc. (Pacific Gas Bankruptcy
News, Issue No. 38; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
PACIFIC GAS: FERC Sets Schedule to Review Plan's Bilateral Pact
---------------------------------------------------------------
Pacific Gas and Electric Company issued the following statement
after the Federal Energy Regulatory Commission issued an order
setting a schedule to review one of the key elements of the
utility's plan of reorganization.
Wednesday, the Commission issued an order establishing a hearing
schedule to review PG&E's request for approval of a 12-year
power sales agreement between the reorganized Pacific Gas and
Electric Company and the new generation company created under
the plan. The proposed contract would be for the 7,100
megawatts of power generated from Diablo Canyon, hydroelectric
facilities, and irrigation district agreements. The contract
will provide the utility's customers a stable source of power at
reasonable prices -- averaging about 5 cents per kilowatt-hour
over the life of the contract. Most important, PG&E's plan of
reorganization, including the bilateral contract, will be
accomplished without an increase in existing rates.
"Pacific Gas and Electric Company is pleased with the
Commission's schedule to review this element of our plan of
reorganization. The hearing schedule set by FERC is consistent
with the company's goal to implement its plan by January 1,
2003.
"Governor Davis and other California officials have expressed a
desire to end the state's role in purchasing power and return
that function to the utilities by the beginning of next year.
Returning the utilities to an investment-grade credit rating is
essential to allowing them to resume buying power.
"In the FERC proceeding, PG&E will demonstrate the many benefits
that this contract will provide its customers and creditors. By
ensuring stability and reasonable prices for a significant
portion of the electricity used by the utility's customers, this
contract will go a long way toward preventing any return of the
dramatic price fluctuations California endured during 2000 and
2001."
The Commission's action comes in response to applications
submitted by the utility on November 30, 2001, seeking federal
regulatory approval of transactions proposed under the plan of
reorganization. The utility's FERC applications seek these
regulatory approvals under provisions of the Federal Power Act
and Natural Gas Act.
POLAROID: Stephen Morgan Loses Bid to Dismiss Chapter 11 Cases
--------------------------------------------------------------
Pursuant to Section 1112(b) of the Bankruptcy Code, Stephen J.
Morgan asked the U.S. Bankruptcy Court for the District of
Delaware to dismiss Polaroid Corporation's Chapter 11
proceedings for lack of good faith. Judge Walsh declined the
invitation.
C. Peter R. Gossels, Esq., in Boston, Massachusetts, contends
that the Debtors have acted in bad faith through their non-
disclosure or erroneous disclosure of assets when they filed the
Schedule of Assets and Liabilities and the Statement of
Financial Affairs. Some discrepancies Mr. Morgan found are:
(a) The omission of five parcels of real property having an
assessed value of $747,277:
Address Area (acres) Assessed Value
------- ----------- --------------
1306 Main Street 0.297 $196,100
Waltham, MA
Old Country Road 2,881 213,700
Waltham, MA
Old Country Rd, Ext. 4.09 61,100
Waltham, MA
Clapboard Tree St. 23.2 235,900
Westwood, MA
Cherry Ave., NE 3 bldgs. 40,477
Salem, OR and land
(b) The non-disclosure of the Debtors' right "to share in
proceeds from potential additional development of the
site" from the sale of and office and manufacturing
complex in Waltham, MA for $70,000,000;
(c) The book value is used in its reporting the value of its
assets. However, book value is not a valuation standard
for a debtors' statements and schedules but the market
value of the assets;
(d) The Debtors book value of its machinery and equipment is
$150,281,639 but the balance sheet filed with the SEC
values the personal property at $1,924,000;
(e) $25,000,000 worth of inventory is being held for
subsidiaries that may in fact be Debtors' assets;
(f) the "undetermined" value, which is pegged as zero, of
personal property, such as books, pictures, other
collections, stock interests, contingent and unliquidated
claims, and patent and copyrights;
(g) the proposed trademark license agreement with Concord
proves that the Debtors have, in fact, determined a value
for its trademark and the value is not "undetermined" as
reported;
(h) the "undetermined" value of its foreign subsidiaries
which historically represents half of its value or at
least $155,900,000 as reported with the SEC in 2000;
(i) The July 1, 2001 balance sheet shows a total asset of
$1,8010,000 but only reported a total asset of $715,000
to the Court;
(j) Confidential information on principal assets appraisal
shows a higher market value than the values previously
provided; and
(k) The Debtors have increased their liabilities by more than
$100,000 by including amounts owed to their own foreign
subsidiaries.
Mr. Gossels notes that the Official Committee of Unsecured
Creditors and the Official Retirees' Committee both agree with
the Debtors' failure to fully disclose their assets. However,
Mr. Gossels states, the Debtors never made any attempt to revise
their Schedules of Assets and Liabilities.
By these facts, Mr. Gossels contends that there are grounds to
dismiss the Debtors' Chapter 11 cases.
Objections
(1) The Debtors
Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom,
LLP, in Wilmington, Delaware, notes that, pursuant to Section
1112(b) of the Bankruptcy Court, a bankruptcy case may be
dismissed for the best interests of creditors and the estate.
However, Mr. Galardi contends, Mr. Morgan failed to demonstrate
cause to dismiss the bankruptcy cases. He cannot show any
failure by the Debtors to disclose assets or any attempt by the
Debtors to conceal assets. Mr. Morgan also failed to show any
abuse of the bankruptcy process or blatant disregard for the
interests of other parties or the Orders of the Court.
Contrary to what Mr. Morgan alleged, Mr. Galardi asserts that
the Debtors have appropriately disclosed the five properties in
the Schedules and Statements or the properties are no longer
owned by the Debtors:
(a) The Cherry Avenue property in Salem, Oregon was leased by
Polaroid ID Systems, Inc. from 3B Investments. The
lease was reflected on Schedule G1 filed in the
bankruptcy case of Polaroid ID Systems;
(b) The 1306 Main Street, Waltham, Massachusetts property was
included in the description of the property identified as
134 Stow Street, Waltham, Massachusetts in Polaroid's
Schedule A;
(c) The Clapboard Tree Street, Westwood, Massachusetts
property was included in the Schedules and identified as
One Upland Road, Norwood, Massachusetts in Polaroid's
Schedule A; and
(d) The properties in Old Country Road, Waltham,
Massachusetts and Old County Road Ext., Waltham,
Massachusetts were sold in 1997, thus, not included in
the Schedules and Statements.
For the valuation of the assets, Mr. Galardi believes that the
Debtors' use of book value is appropriate given that Section
521(1) of the Bankruptcy Code and Bankruptcy Rule 1007(b)(1)
does not indicate the form of valuation to be used in its
Schedules and Statements. Mr. Galardi explains that the Debtors
used the book value because it provides a valuation method that
reports true economic value of assets in use. The use of book
value when compiling schedules and statements is also customary
in this jurisdiction.
The differences in the valuation method prior to Petition Date,
Mr. Galardi clarifies, is that prior to Petition Date, the
Schedules and Assets include the assets of the non-debtor
affiliates which the Debtors have no duty to report to the Court
postpetition.
Furthermore, Mr. Galardi adds, that the term "undetermined" is a
sufficient disclosure under Bankruptcy Code. In any case, under
the Generally Accepted Accounting Principles, the book value of
the Debtors' assets as "undetermined" would be nominal.
Mr. Galardi continues that the Debtors are not preventing access
to information concerning their assets to interested parties, as
what Mr. Morgan contends, provided that the parties execute a
Confidentiality Agreement with the Debtors. However, to date,
Mr. Morgan has not executed one.
Accordingly, Mr. Galardi says, the motion is procedurally
improper, and thus, should be denied. Mr. Morgan has failed to
comply with the Bankruptcy Rules, the Local Rules or the Local
District Rules for filing and serving the Motion. The Motion
was served less than 20 days prior to the hearing date and there
was a failure to notify all the Parties on the Notice List as
required by Bankruptcy Rule 2002(a)(4).
Although Mr. Morgan later filed a motion to shorten the Notice
Period, he has failed to establish the "exigencies" required by
Local Rule 9006-1(e) to justify the shortened notice. The
reason for him not receiving any requested documents from the
Debtors is because of his refusal to execute a Confidentiality
Agreement with the Debtors.
The Official Committee of Unsecured Creditors agrees with the
Debtors' objections.
(2) JP Morgan Chase Bank
Pursuant to Section 1112(b) of the Bankruptcy Code, the Agent
does not believe that Mr. Morgan has shown cause for dismissing
the Debtors' cases and believes that substantial hardship will
befall the Debtors' creditors and employees should the Motion be
granted. Thus, the Agent asks Judge Walsh to deny the Motion.
(Polaroid Bankruptcy News, Issue No. 18; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
Judge Walsh Rules
Hearing nothing more than the unhappiness of an out-of-the-money
shareholder, Judge Walsh rejected Mr. Morgan's motion. If the
case is dismissed, Judge Walsh observes, liquidation will be the
next step . . . and nobody, shareholder, unsecured creditor or
bank lender, recovers more under that scenario.
Judge Walsh said Morgan and his attorneys failed to prove their
accusations. "The record is devoid of any suggestion of a bad
faith (chapter 11) filing. Clearly this debtor was required to
file to have the protection of chapter 11 and to salvage the
value of its estate for its creditor constituencies," said Judge
Walsh. Polaroid filed for chapter 11 protection with 20
affiliates on Oct. 12, 2001, listing consolidated assets of
$1.81 billion and $948 million in liabilities as of July 1,
2001. (ABI World, June 13, 2002)
POLAROID: Hearing for Assets Sale to One Equity Set for June 28
---------------------------------------------------------------
As previously reported, on October 12, 2001, Polaroid
Corporation and its U.S. subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
The filings were made in the United States Bankruptcy Court for
the District of Delaware in Wilmington, Delaware.
On April 18, 2002, Polaroid Corporation and its U.S.
subsidiaries entered into a definitive agreement for the
purchase of substantially all of its domestic assets and
businesses, and the common stock of its foreign subsidiaries by
an investor group led by One Equity Partners, the private equity
arm of Bank One Corporation. This agreement was amended on May
14, 2002, after a hearing before the Bankruptcy Court. The sale
transaction is subject to Bankruptcy Court approval at a hearing
scheduled for June 28, 2002 and other closing conditions,
including the expiration or termination of the waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act. It is
anticipated that this transaction could close early in the third
quarter of 2002.
DebtTraders reports that Polaroid Corporation's 11.500% bonds
due 2006 (PRD3) are quoted between the prices 1.25 and 2.25 .
See http://www.debttraders.com/price.cfm?dt_sec_ticker=PRD3for
real-time bond pricing.
PRIME GROUP: Gets $15MM Additional Funding from Security Capital
----------------------------------------------------------------
Prime Group Realty Trust (NYSE: PGE) has entered into an
agreement with Security Capital Preferred Growth Incorporated to
obtain $15.0 million of additional liquidity and to redeem the
Company's Series A preferred shares held by SCPG (which
currently have a ten-day put right) in exchange for two notes to
be issued by the Company's operating partnership. The Series A
preferred shares are being redeemed at their liquidation value
of $40.0 million plus accrued distributions. The notes will
have an initial term of one year, with two six-month renewal
options subject to certain conditions. The notes will have a
weighted average interest rate over the initial term of 13.8%,
plus a fee of 0.75% for any principal repayments, whether at
maturity or earlier.
"We believe that these transactions, along with the previously
announced pending sale of certain suburban office properties,
will allow the Company to resolve its short-term liquidity issue
without compromising our core property portfolio," stated Louis
G. Conforti, Co-President and Chief Financial Officer.
In connection with this transaction, the Company's Board of
Trustees has conditionally declared distributions on its
publicly traded Series B preferred shares for the first and
second quarters of 2002, at the quarterly rate of $0.5625 per
share, which declaration will be effective only upon the closing
of the redemption of the Series A preferred shares. The record
and payment dates for these distributions will be announced in
connection with the closing of the transaction. The
transactions are expected to close by the end of June 2002.
Under the terms of the agreement, the Company will not be
permitted to declare or pay any additional distributions on its
outstanding equity securities while the indebtedness is
outstanding, except for future distributions on the Company's
Series B preferred shares provided the Company prepays the notes
in an amount equal to such distributions. Except for the
foregoing conditional declaration on its Series B preferred
shares, the Company's existing suspension of quarterly
distributions on its preferred and common shares remains
unchanged.
As a part of this transaction, the Company has agreed to issue
to SCPG warrants, with a five year term, to purchase up to
500,000 common shares at $9.00 per share ($7.50 per share if the
notes are not repaid by April 1, 2003), up to 250,000 common
shares at $10.00 per share and up to 250,000 common shares at
$12.50 per share. The $10.00 and $12.50 warrants are not
exercisable if the notes are repaid by April 1, 2003.
The agreement between the Company and SCPG is subject to various
closing conditions including receipt of consents from several
third-party lenders and the satisfaction of other customary
conditions. Either SCPG or the Company may terminate the
agreement if the transactions are not completed by June 28,
2002. The Company can give no assurances that the conditions to
the closing of the transactions will be satisfied or waived.
Prime Group Realty Trust is a fully-integrated, self-
administered, and self-managed real estate investment trust
(REIT) that owns, manages, leases, develops, and redevelops
office and industrial real estate, primarily in the Chicago
metropolitan area. The Company owns 24 office properties
containing an aggregate of approximately 7.8 million net
rentable square feet and 30 industrial properties containing an
aggregate of approximately 3.9 million net rentable square feet.
In addition, the Company has joint venture interests in two
office properties containing an aggregate of approximately 1.3
million net rentable square feet. The portfolio also includes
approximately 202.1 acres of developable land and the Company
has the right to acquire more than 31.6 additional acres of
developable land which management believes could be developed
with approximately 5.0 million rental square feet of office and
industrial space. In addition to the properties described
above, the Company is developing Dearborn Center in downtown
Chicago, a Class A, state-of-the-art office tower containing 1.5
million rentable square feet of office space. The Company also
owns a joint venture interest in a new office development
consisting of 0.1 million of rentable square feet in suburban
Chicago.
* * *
As reported on April 10, 2002 in Troubled Company Reporter,
Daniel Kaufman, Chairman of the Committee to Restore Shareholder
Value, said, "...[F]or the past three months, PGE has faced the
risk of involuntary bankruptcy due to the potential redemption
of $40 million of PGE's Preferred A shares. Inexplicably, the
Board has left Mssrs. Reschke and Curto to negotiate with
creditors who are fully aware of how the parties chose to deal
with another creditor. Mr. Reschke recently stated that he
hopes to solve PGE's liquidity crisis with asset sales. Given
PGE's outstanding tax indemnification agreements, asset sales
may be inferior to completing an entity-level transaction or
issuing additional debt or equity."
RAMPART: Controlling Shareholder Agrees to Indemnify SLMsoft.com
----------------------------------------------------------------
SLMsoft.com Inc. (TSE: ESP.a, ESP.b), a leading global provider
of e-financial solutions, announced an update on the matters
involving the bankruptcy of Rampart Securities Inc.
To protect the Company and its shareholders Mr. Govin Misir,
Chief Executive Officer of the Company has agreed to indemnify
the Company from any losses that could result from the alleged
corporate guarantees of the Rampart trading accounts maintained
by the Company's controlling and related shareholders. The
indemnity is secured, in part, by shares in the capital of the
Company owned by Govin Misir and his holding companies. If the
alleged corporate guarantees are determined to be valid and
enforceable, the Company estimates its potential loss will be in
the range of $9-11 million, which loss will be subject to this
personal indemnity and security.
In addition, Mr. Dev Misir will not stand for re-election to the
board at the upcoming annual shareholders' meeting to be held on
June 14, 2002 and has tendered his resignation as Chief
Financial Officer and Executive Vice- President of the Company.
These suggestions were dealt with by the Special Independent
Committee relating to the Rampart Matter and were approved by
the Board. The Special Independent Committee is now disbanded
its mandate having been fulfilled, however, the board will keep
under active review of the Rampart matter and the issues raised
by the Special Independent Committee Report. In addition to
their recommendations, the Company shall continue to pursue
legal proceedings against the estate of Rampart Securities, the
estate of St. James Capital Corporation and the estate of John
Illidge, a former director of both SLM and Rampart's sole
shareholder, and the estates of some of his related companies to
recover all the funds deposited with Rampart.
"My personal indemnity reassures shareholders of my commitment
to and confidence in the future of SLM" states Govin Misir. "In
the first quarter of 2002, we were pleased to report an increase
of 240% in revenue and a reduction in our operating costs of
more than 10% over the same period of 2001. For 2002, our goal
is to increase revenue by 45% and reduce operational costs by at
least 20% over 2001. We intend to accomplish these goals by
staying committed and focused on the strategies implemented in
2001 and look forward to a bright future."
Founded in 1986, SLMsoft.com is a leading developer of
electronic payment systems and transaction processing solutions,
including e-commerce applications with a focus on the financial
services industry. SLMsoft.com provides real-time end-to-end e-
banking solutions that include Internet banking, interactive
voice recognition, debit and credit card issuing, automated
teller machines and point-of-sale network management, retail
branch management, and e-CRM enabling technology. SLMsoft.com
also provides investment brokerage client and portfolio
management applications for the brokerage industry; e-health
solutions which enable health insurance claims to be evaluated
at the point of service, processed and settled in real time; and
e-government solutions which enable consumers to pay fees for
government services in person, at kiosks, through IVR systems or
the Internet. For more information, please visit the Company's
Web site at http://www.slmsoft.com
SLMsoft.com, ESP-Link and EC-street are trademarks of
SLMsoft.com Inc. All other product and company names mentioned
herein may be trademarks of their respective owners.
ROADHOUSE GRILL: Florida Court Approves Disclosure Statement
------------------------------------------------------------
Roadhouse Grill Inc. (OTCBB:GRLLQ.PK) said the U.S. Bankruptcy
Court for the Southern District of Florida has approved
Roadhouse's disclosure statement and set an Aug. 21 confirmation
hearing on the company's reorganization plan.
Prior to the hearing, Roadhouse Grill will send its
reorganization plan and disclosure statement to its creditors
and shareholders for a ballot vote. The company is optimistic
that the plan will be accepted by its constituencies and
confirmed by the court.
"Obtaining expedited approval of our disclosure statement is a
major coup for Roadhouse Grill," said Ayman Sabi, chief
executive officer of Roadhouse Grill. "Though we must await the
outcome of the vote and the court's decision at the confirmation
hearing, we are optimistic the company is on track now to emerge
from Chapter 11 in August. Most of our creditors have been
supportive of our reorganization efforts, and we're moving
forward with many new initiatives that will further strengthen
our company."
Roadhouse Grill Inc. is based in Pompano Beach, Fla., and owns
and operates 69 full-service, casual-dining restaurants and
eight franchises. The company's restaurants, which offer a
"rambunctious" style consistent with Roadhouse Grill's motto:
"Eat, drink and be yourself," are located in Alabama, Arkansas,
Florida, Georgia, Louisiana, Mississippi, New York, North
Carolina, Ohio and South Carolina. For more information or to
find a Roadhouse Grill near you, call 954/957-2600 or visit
http://www.roadhousegrill.com
ROMARCO MINERALS: Adding Two Independent Members to the Board
-------------------------------------------------------------
ROMARCO MINERALS INC. (TSXV: "R") announces that two new
independent board members, Robert van Doorn and Leendert Krol,
will stand for election at the Company's upcoming annual and
special shareholders' meeting. Both Mr. van Doorn and Mr.
Leendert Krol have extensive experience in the precious metals
sector and would serve the Romarco Board as independent
unrelated directors together with Ms. Diane Thomas Garrett, who
joined the Board in 1999. Management of Romarco is excited about
the prospect of their future contributions in the refocus of
Romarco in the precious metals sector.
Robert van Doorn (M.Sc. Mining Engineering, MBA) is a senior
mining consultant and was a mining specialist at Loewen,
Ondaatje, McCutcheon ("LOM") from 1993-1995 and from 1997 to
2002. From 1995 to 1997, Mr. van Doorn was the global gold
analyst at Morgan Stanley & Co. in New York. He has more than 20
years of experience in the mining industry, including 31/2 years
in the business development group of Billiton International
Metals.
Leendert G. Krol (M.Sc. Geology) is an independent mining
consultant and has 34 years of diversified experience in the
mining industry, including 15 years with Newmont Mining
Corporation, where Mr. Krol was in charge of international
exploration. Prior thereto, Mr. Krol was with Anglo American
Corporation of South Africa Ltd., De Beers and Anaconda Minerals
Company and worked as an independent consultant for The Dow
Chemical Company.
Diane Thomas Garrett (M.A., Ph.D. Mineral Economics) will stand
for re-election at the Company's upcoming annual and special
meeting. Ms. Garrett has more than 10 years of senior management
and financial expertise in the field of natural resources. Ms.
Garrett is currently Vice President, Corporate Development of
Idaho Consolidated Metals Corp., a platinum exploration company.
Prior thereto, Ms. Garrett was Vice President Corporate
Development of Dayton Mining Corp. and held the position of
Senior Mining Analyst with U.S. Global Investors.
In addition to Messrs. van Doorn and Krol and Ms. Garrett, Mr.
Joseph van Bastelaar, C.E.O. and President of Romarco and Mr.
Gary Nobrega, C.F.O. of Romarco will stand for re-election at
the upcoming meeting. Ms. Judith Robinson will not be standing
for re-election. The professionalism, skills and expertise that
this new board possesses will be extremely valuable to the
Company in its future growth.
Corporate Update
On May 16 and 22, 2002 Romarco announced, among other things,
that it would not be proceeding with the share exchange
agreement in connection with the acquisition of Pocketop shares.
In these press releases, Romarco announced a restructuring plan
pursuant to a statutory plan of arrangement (the "Arrangement").
The Arrangement will consist of (i) the unwinding of Romarco's
agreement with GMS Worldwide Inc. ("GMS") and the subsequent
cancellation of 5 million common shares of Romarco currently
held in escrow for the benefit of the former GMS shareholders;
(ii) the distribution of the Tullaree shares held by Romarco to
its shareholders; and (iii) Romarco's intention to exclusively
focus on the precious metals industry.
As a result of the proposed restructuring, the annual and
special meeting of shareholders (the "Meeting") has been
postponed to the end of July 2002. A new meeting date will be
scheduled and announced at a later date. Romarco has submitted
to the Toronto Stock Exchange and the TSX Venture Exchange its
management information circular in connection with the Meeting
(at which shareholders will be asked to vote on the proposed
restructuring and other matters) for their review and approval.
Following receipt of regulatory approval, Romarco will be making
application to the Court for an interim order in connection with
the statutory plan of arrangement which forms part of its
restructuring plan.
Romarco will have approximately CDN$2.4 million in cash and no
debt following the restructuring and is presently actively
pursuing precious metals opportunities.
SILVER STATE: March 31, 2002 Working Capital Deficit Tops $1MM
--------------------------------------------------------------
For the three months ended March 31, 2002, Silver State Vending
Corporation showed operating losses of $540,166, and accumulated
deficit of $1,634,604 at December 13, 2001. Its financial
statements indicate that current liabilities exceed current
assets by $1,593,687 for the three months ended March 31, 2002.
The Company's negative working capital, losses from operations,
and cash used in operations raise substantial doubt about its
ability to continue as a going concern. Management's plan in
regard to these matters includes raising working capital to
assure the Company's viability and the management believes that
the actions being taken allow the Company to continue as a going
concern.
On May 6, 2002, the Company, in an effort to avoid legal claims,
cancelled 7,753,187 (as restated for the recapitalization)
shares of common stock issued to the former president & CEO. The
Company intends to issue approximately 12,539,065 shares of this
common stock to pay various claims against the Company and to
reduce the possibility of litigation.
Silver State Vending Corporation was organized as a Nevada
corporation on September 30, 1996. In 1997, the Company began
providing coin-operated vending services to the city of Las
Vegas, Nevada, concentrating on the sale of bulk candy. No
significant revenues were generated from these activities and,
in 2000, the Company ceased these operations and began a search
for a new business opportunity.
On October 17, 2001, the Company, through a wholly owned
subsidiary, Silver Pony Express, Inc., a Nevada corporation
purchased the assets and business of Link Worldwide Logistics,
Inc., a Florida corporation. The assets purchased by the Company
from Link consist primarily of the Florida based assets and
operations of Pony Express, a long-established, well-recognized
and respected transportation company. As a result of this
acquisition, the Company now operates a parcel delivery service
with complete zip-code coverage throughout the state of Florida
and certain segments of Georgia.
Since taking over control of the Company in December, 2001,
present management of the Company has reviewed the Company's
pricing structure and instituted increases as appropriate to
bring the Company's pricing structure up to market. The price
increases are expected to increase the Company's revenues from
existing customers by approximately 20%. The Company has also
begun actively seeking new accounts, and is about to initiate a
new sales program. In May, 2002, the Company hired William
Burbank as its Sales Manager in an effort to further increase
the Company's revenues.
In order to facilitate expansion of the Company's markets, the
Company must be able to deliver packages to destinations
anywhere in the world. To accomplish this, the Company has
forged an alliance with International Bonded Courier (IBC). With
this alliance, the Company will be able to ship express packages
overnight to destinations all over the United States and express
to the rest of
the world.
Revenues were $1,250,599 for the first quarter of 2002 and were
$382,260 for the same time period in 2001. This represents a
substantial ramp-up of operations for the Company. The Company
expects revenues to continue to grow through the near future.
Selling, general, and administrative expenses were $1,750,122
for the first quarter of 2002 and $369,512 for the same time
period in 2001. The dramatic increase in expenses reflect the
continued ramp-up of operations for the Company. The Company
expects increased expenses through 2002 because of the continued
expansion of the Company.
The Company had other expenses of $40,603 in the first quarter
of 2002 compared to $17,154 in the same time period of 2001.
These expenses reflect mainly interest expenses and losses on
disposal of equipment. For future quarters, the Company believes
that these expenses' impact will be limited and, as the Company
continues to grow, it's materiality will decline.
The Company's financial condition is burdened primarily by two
large debts. The Company owes $977,000 to Skynet Holdings, Inc.,
the owner of the Business prior to its acquisition by Link. This
debt is represented by a promissory note, is secured by
essentially all of the assets of the Company other than its
vehicles, requires monthly payments of $10,000, and is payable
in full on February 20, 2003.
The Company also owes approximately $600,000, plus penalties and
interest, in unpaid withholding taxes from periods prior to
current management taking control of the Company. The Company is
in discussions with the Internal Revenue Service seeking to
obtain an affordable payment plan and a waiver or abatement of
interest and penalties.
SORRENTO NETWORKS: Has $3MM Working Capital Deficit at April 30
---------------------------------------------------------------
Sorrento Networks, a leading supplier of end-to-end, intelligent
optical networking solutions for metro and regional applications
(Nasdaq NM: FIBR), announced financial results for its first
quarter of fiscal year 2003.
For the quarter ended April 30, 2002, the company reported
revenues of $6.0 million, compared to revenues of $8.3 million
for the previous quarter and $14.5 million for the same quarter
of the prior fiscal year, a 27% and 59% revenue decrease,
respectively.
The company reported net income of $4.0 million for the quarter,
principally due to an $11.7 million dollar gain realized from
the sale of Net Silicon securities associated with Net Silicon's
merger with Digi International. The quarter's net income of $4.0
million compares to a net loss of $10.5 million in the previous
quarter and a net loss of $5.8 million for the same quarter of
the prior fiscal year. Net income per common share was $0.28
compared to a net loss of $0.45 in the first quarter of the
prior fiscal year.
Operating expense for the quarter totaled $8.0 million, a
decrease of $3.5 million or 30% when compared to operating
expense of $11.5 million in the fourth quarter of fiscal year
2002 and a reduction of $2.7 million or 25% when compared to the
same quarter of the prior year. In response to the significant
decreases in capital expenditure spending in the telecom sector,
the company continues to make expense reduction a top priority.
"In view of the tough economic environment and the negative
short-term outlook for a quick rebound in carrier spending, the
company has made significant progress in bringing down its
operating expense base and in improving the associated long-term
outlook for surviving a continued slow recovery," stated Phil
Arneson, chairman and chief executive officer of Sorrento
Networks. "We have already aggressively scaled down our business
to bring spending levels more in line with revenues and we
continue to remain vigilant to ensure that we stay a fiscally
healthy, competitive survivor."
"Though the general economic climate remains quite challenging,"
added Arneson, "we are fortunate to be the incumbent with over
1500 nodes in service with a strong and loyal customer base that
includes major Cable/MSO, Utilicom and PTT customers. In
addition, we see our products being short-listed with major new
customers. Despite aggressive competition from major vendors, we
are confident that that we are well positioned for the
inevitable capital spending recovery."
The company announced in mid-May the implementation of
substantial expense reduction measures with respect to personnel
and discretionary spending levels. Most of these expense control
measures have already been put into place, and are expected to
yield additional savings of more than $3 million per quarter.
In other developments, the company continued to strengthen its
channels to market, especially in the Far East, and to enhance
and expand its product line offerings. The first quarter of
fiscal 2003 saw continued shipments of the recently released
Gigabit Ethernet GigaMux multiplexer modules, as well as initial
shipments of the 2.5 Gbps SONET/SDH GigaMux sub-rate multiplexer
modules. The company also saw strong interest, as well as
initial shipments to Europe and the Far East, of its CWDM
(JumpStart-400) products.
Sorrento Networks, headquartered in San Diego, is a leading
supplier of end-to-end, intelligent optical networking solutions
for metro and regional applications worldwide. Sorrento
Networks' products support a wide range of protocols and network
traffic over linear, ring and mesh topologies. Sorrento
Networks' existing customer base and market focus includes
carriers in the telecommunications, cable TV, fixed wireless and
utilities markets. The storage area network market is addressed
through alliances with SAN system integrators.
Recent news releases and additional information about Sorrento
Networks can be found at http://www.sorrentonet.com
STARBAND: Sec. 341(a) Creditors' Meeting Convenes on July 3
-----------------------------------------------------------
The United States Trustee will convene a meeting of StarBand
Communications Inc.'s creditors on July 3, 2002 at 10:00 a.m.,
US District Court, 844 King St., Room 2112, Wilmington,
Delaware. This is the first meeting of creditors
required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases.
All creditors are invited, but not required, to attend. This
Meeting of Creditors offers the one opportunity in a bankruptcy
proceeding for creditors to question a responsible office of the
Debtor under oath about the company's financial affairs and
operations that would be of interest to the general body of
creditors.
StarBand Communications Inc. currently provides two-way, always-
on, high-speed Internet access via satellite to residential and
small office customers nationwide. The Company filed for chapter
11 protection on May 31, 2002. Thomas G. Macauley, Esq. at
Zuckerman and Spaeder LLP represents the Debtor in its
restructuring efforts. When the Company filed for protection
form its creditors, it listed $58,072,000 in assets and
$229,537,000 in debts.
SUNTERRA: Wins Nod to Obtain New Financing from Merrill Lynch
-------------------------------------------------------------
Sunterra Corporation announced that the United States Bankruptcy
Court in Baltimore approved a proposed $300 million financing
commitment from Merrill Lynch Mortgage Capital Inc. The Court's
approval of the new financing is a crucial milestone in
achieving Sunterra's goal of reorganizing and emerging from
Chapter 11.
"There is no doubt that our ability to secure this level of
capital commitment from a leading global financial institution
such as Merrill Lynch reflects their confidence in our business
plan. It is also a direct reflection of the tireless efforts of
the Company's employees and advisors during the last two years
to restructure and prepare the Company for emergence from
Chapter 11," said Nick Benson, CEO of Sunterra.
The new financing will be utilized to retire Sunterra's existing
debtor-in-possession facility, fund other bankruptcy related
items and provide a revolving line of credit to fund post-
emergence operations. The commitment provided by Merrill Lynch
is subject to execution of mutually acceptable loan
documentation and certain other closing conditions.
In addition, Sunterra has entered into an amendment to its
debtor-in-possession financing agreement with Greenwich Capital
Markets, Inc. that provides for an extension of the maturity
date of that financing until July 31, 2002.
Chanin Capital Partners, Sunterra's investment banker, advised
Sunterra in structuring the new financing commitment.
Sunterra Corporation is one of the world's largest vacation
ownership companies, with owner families and resorts in North
America, Europe, the Pacific and the Caribbean.
TRIZECHAHN: S&P Withdraws Ratings Following Debenture Redemption
----------------------------------------------------------------
Standard & Poor's withdrew its triple-'B'-minus corporate credit
rating on TrizecHahn Corp., following the redemption of all
outstanding rated unsecured debentures on June 7, 2002, and the
completion of the shareholder approved plan of arrangement,
whereby a new and unrated real estate investment trust, Trizec
Properties Inc., was launched. At the same time, Standard &
Poor's withdrew its double-'B'-plus ratings on C$550 million
senior unsecured notes issued by TrizecHahn Corp. and US$167.5
million senior notes issued by its subsidiary, Trizec Finance
Ltd., following the redemption.
RATINGS WITHDRAWN To From
Corporate credit rating N.R. BBB-
C$125 mil. 7.45% sr unsecd nts due 2004
issued by TrizecHahn Corp. N.R. BB+
C$250 mil. 6.0% sr unsecd nts due 2002
issued by TrizecHahn Corp. N.R. BB+
C$175 mil. 7.95% sr unsecd nts due 2007
issued by TrizecHahn Corp. N.R. BB+
US$167.5 mil. 10.875% sr unsecd nts due 2005
issued by Trizec Finance Ltd. N.R. BB+
TYCO INT'L: Will Streamline Corp. Operations & Reduce Staffing
--------------------------------------------------------------
Tyco International Ltd. (NYSE: TYC, LSE: TYI, BSX: TYC)
announced that it is streamlining its corporate operations.
Tyco will consolidate its headquarters facilities in Exeter, New
Hampshire, New York City and Europe, and reduce corporate
staffing by eliminating nonessential corporate functions.
Nearly all of Tyco's more than 250,000 employees worldwide work
in the diversified company's operating units and will not be
affected by the moves.
John F. Fort, Tyco's Lead Director, said, "We are moving quickly
to streamline our corporate operations to ensure that we manage
Tyco with financial discipline and a relentless focus on support
of our operating businesses, which are the heart of the company.
While Tyco is run very efficiently at the operating level, we
have identified areas where we can streamline functions and
eliminate nonessential costs. These actions underscore our
commitment to financial prudence and discipline. We will
continue to take every opportunity to improve Tyco's advantage
of fundamentally strong businesses with solid finances."
According to Chief Financial Officer Mark H. Swartz, these
actions are expected to result in a reduction of approximately
115 corporate staff positions and savings of approximately $125
million annually.
Specifically, Tyco plans to make the following changes:
* In Exeter, N.H., the company's corporate employees as well
as employees of Engineering Products and Services will
move to the Tyco Telecommunications building. The
company's three buildings at Tyco Park in Exeter will be
sold. This move will be completed by September 1.
* The company will move its New York City offices at 9 West
57th Street to a much smaller and more cost-effective
location at 712 Fifth Avenue. This move also will be
completed by September 1.
* Tyco's London corporate office will be consolidated with
other existing Tyco operations in the U.K., and its
Luxembourg corporate office will be consolidated into a
more cost-effective location.
* A number of corporate departments will be eliminated and
their assets sold, including all company aircraft.
* Corporate staffing will be reduced, beginning immediately,
in each of the company's corporate offices among all
relevant departments.
Tyco International Ltd. is a diversified manufacturing and
service company. Tyco is the world's largest manufacturer and
servicer of electrical and electronic components; the world's
largest designer, manufacturer, installer and servicer of
undersea telecommunications systems; the world's largest
manufacturer, installer and provider of fire protection systems
and electronic security services; and the world's largest
manufacturer of specialty valves. Tyco also holds strong
leadership positions in disposable medical products, financing
and leasing capital, plastics and adhesives. Tyco operates in
more than 100 countries and had fiscal 2001 revenues in excess
of $36 billion.
DebtTraders reports that Tyco International Group's 6.875% bonds
due 2002 (TYC02USR1) are quoted between 96 and 98. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=TYC02USR1for
more real-time bond pricing.
VANTAGEMED CORP: Nasdaq SmallCap Trading Begins June 14, 2002
-------------------------------------------------------------
VantageMed Corporation (Nasdaq:VMDCE) announced restructuring
plans aimed at significantly reducing its monthly cash burn
while refocusing on the delivery of superior customer service
and quality HIPAA compliant products. The restructuring plan
includes re-evaluating all strategic development initiatives,
consolidating certain operating facilities and reducing
personnel by approximately 85 people or 30% of the Company's
total workforce. The restructuring efforts should be
substantially complete by September 30, 2002. The Company
expects that these actions, along with other anticipated expense
reductions, will substantially decrease the Company's monthly
cash burn by the fourth quarter of 2002.
The Company also announced that the Nasdaq Listing
Qualifications Panel has determined to transfer VantageMed's
common stock to The Nasdaq SmallCap Market from The Nasdaq
National Market effective as of the open of business on June 14,
2002. The Company's stock is listed on The Nasdaq SmallCap
Market subject to the Company meeting certain conditions,
including timely filing of all periodic SEC reports, evidencing
net tangible assets of at least $2,000,000 or shareholders'
equity of at least $2,500,000 as of June 30, 2002, and
demonstrating a closing bid price of at least $1.00 per share on
or before September 18, 2002, and for a minimum of 10
consecutive trading days thereafter. Additionally, because the
Company has complied with Nasdaq's requirements for filing
quarterly and annual reports with the SEC, the "E" will be
removed from the Company's trading symbol and its common stock
will trade under the symbol "VMDC" beginning June 14, 2002.
Rich Brooks, Chairman and Chief Executive Officer, said "We're
making bold moves to improve the Company's performance and
achieve profitability. These moves are essential to improving
shareholder value and providing a platform for long-term growth.
We are committed to maintaining the highest level of customer
service and to providing quality products that not only comply
with HIPAA regulations but also bring additional value to our
customers. We are also pleased that our stock will continue to
be listed on Nasdaq."
In connection with the restructuring, the Company also announced
the appointment of Rajiv Donde as Chief Information Officer. Mr.
Donde was previously co-founder, Chief Information Officer and
EVP of AnyTime Access, an e-commerce company providing
outsourced on-line and call-center based loan processing
services to financial institutions nationwide, and more recently
Managing Member of Brooks and Donde, LLC, providing technology
and operational consulting services. Mr. Donde earned his
Bachelor and Master of Arts degrees in Economics from the Delhi
School of Economics, as well as, an MBA in Information Systems
and Finance from Case Western Reserve University.
VantageMed is a provider of healthcare information systems and
services distributed to over 11,000 customer sites through a
national network of regional offices. Our suite of software
products and services automates administrative, financial,
clinical and management functions for physicians, dentists, and
other healthcare providers and provider organizations.
VELOCITA CORP: Engages Weil Gotshal as Bankruptcy Co-Counsel
------------------------------------------------------------
Velocita Corp. and its debtor-affiliates ask the U.S. Bankruptcy
Court for the District of New Jersey for authority to employ
Weil, Gotshal, & Manges LLP, as their co-attorneys to perform
the extensive legal services that will be required during these
chapter 11 cases.
The Debtors inform the Court that Gary T. Holtzer, Esq., a
member of Weil Gotshal, as well as other members of, counsel to,
and associates of Weil Gotshal will be employed in these chapter
11 cases, or will be admitted to practice before this court.
As Co-counsel, Weil Gotshal is expected to:
a. take all necessary or appropriate actions to protect and
preserve the Debtors' estates, including the prosecution
of actions on the Debtors' behalf, the defense of any
actions commenced against the Debtors, the negotiation
of disputes in which the Debtors are involved, and the
preparation of objections to claims filed against the
Debtors' estates;
b. prepare on behalf of the Debtors, as debtors in
possession, all necessary or appropriate motions,
applications, answers, orders, reports, and other papers
in connection with the administration of the Debtors'
estates;
c. negotiate and prepare on behalf of the Debtors any
plan(s) of reorganization and all related documents; and
d. perform all other necessary or appropriate legal
services in connection with these chapter 11 cases.
Although Weil Gotshal does not have an office in New Jersey, it
will represent the Debtors in coordination with the New Jersey
law firm of Ravin Greenberg PC. The two firms have discussed a
division of responsibilities in connection with representation
of the Debtors.
Weil Gotshal's current customary hourly rates, subject to change
from time to time, are:
members and counsel $410 - $700 per hour
associates $200 - $450 per hour
paraprofessionals $50 - $175 per hour
Velocita Corp. is in the business of building a nationwide
broadband fiber-optic network aimed at serving communications
carriers, internet service providers, data providers, television
and video providers, as well as corporate and government
customers. The Company filed for chapter 11 protection on May
30, 2002. Howard S. Greenberg, Esq., Morris S. Bauer, Esq. at
Ravin Greenberg PC and Gary T. Holtzer, Esq. at Weil, Gotshal &
Manges LLP represent the Debtors in their restructuring efforts.
As of March 31, 2002, the Company listed $482,807,000 in total
assets and $827,000,000 in total debts.
VENTURE HOLDINGS: Working with Banks to Resolve Peguform Crisis
---------------------------------------------------------------
Venture Holdings LLC is currently working, in accordance with
the court order, cooperatively with the temporary administrator,
banks, customers and suppliers to resolve the situation in
Germany. No insolvency proceedings have been instituted against
Peguform, GmbH. The temporary administrator is investigating
the situation to assess what capital injection is needed to
continue the operation in the future.
Venture Holdings LLC is confident to keep the group together as
it is to maintain a global presence, which is in the best
interest of all customers and its 18,000 employees around the
world. Venture is working with its banks and financial advisors
on how the liquidity situation in Germany can best be addressed
and the necessary funds be provided.
During a press conference on May 31, Dr. Jobst Wellensiek, the
temporary administrator, indicated that he is "realistically
optimistic" and has no reason to doubt the continued existence
of the company based on his current assessment. The customers
have also signaled willingness to cooperate in order to support
Peguform operations. Peguform currently continues to meet all
customer manufacturing schedules without interruption.
Representatives of Venture Holdings LLC, its banks, and several
German and U.S. automakers will be meeting with the temporary
administrator next week to move forward with plans for resolving
the Peguform situation.
As reported in the June 6, 2002 edition of Troubled Company
Reporter, Standard & Poor's lowered its corporate credit rating
on Fraser, Michigan-based Venture Holdings Co. LLC to triple-'C'
from single-'B'-plus following the insolvency filing of its
European subsidiary. The rating remains on CreditWatch with
negative implications, where it was placed December 19, 2001.
Venture, a manufacturer of plastic automotive components, has
total debt of about $877 million.
"The rating action follows the insolvency filing of Venture's
European subsidiary, Peguform GmbH," said Standard & Poor's
credit analyst Martin King. According to news reports,
Peguform's advisory board approved the insolvency filing due to
the cancellation of its line of credit and its inability to pay
suppliers. Peguform makes up the bulk of Venture's European
operations, which generated about 70% of the company's sales
during 2001. Venture's North American operations have struggled
during the past few years due to reduced automotive production
and pricing pressures, while the European operations have
continued to perform adequately. "The inability to access cash
flows generated by Peguform will severely impair Venture's
ability to meet its debt service obligations," Mr. King noted.
In addition, Venture's liquidity position is unclear. Although a
recent bank financing provided additional borrowing capacity
under the company's revolving credit facility, access to the
facility may be limited as a result of Peguform's insolvency
filing.
WEIRTON STEEL: Completes Year-Long Financial Restructuring Plan
---------------------------------------------------------------
Weirton Steel Corporation (OTC Bulletin Board: WRTL) announced
the successful completion of the exchange offers relating to a
total of approximately $300 million of three issues of its
publicly held long-term debt, thus concluding its year-long
financial and operational restructuring plan in a difficult
industry environment. The Company expects to close the exchange
offers on June 18, 2002.
John H. Walker, President and CEO, noted: "Weirton Steel has
executed its plan in the face of the most challenging
operational, financial and political environment to have plagued
the steel industry in recent history, including adverse market
conditions due to a slowing U.S. economy. With the completion
of its restructuring plan, the Company will now focus on
fundamentally repositioning its business through strategic
acquisitions and targeted investments in the tin mill and other
higher margin value-added products. We would like to thank our
employees, customers, suppliers and our financial stakeholders
for the sacrifices they have all made during this process and
for their continuing confidence in Weirton Steel. In addition,
we greatly appreciate the continuing support that we have
received from area governmental officials."
The exchange offers were part of a broader restructuring plan
initiated by the Company in mid-2001 which involved the close
cooperation of the Independent Steelworkers Union and Weirton's
vendors and creditors. The Company's restructuring plan was
designed to improve near-term liquidity, lower its leverage, and
obtain additional financial flexibility to permit the Company to
refocus its business around higher margin value-added products.
As a result, Weirton has significantly improved its liquidity by
reducing annualized operating costs through renegotiated
collective bargaining agreements, employment cost reductions and
changes in operating practices by approximately $51 million, by
negotiating improvements through its vendor/supplier programs by
approximately $40 million, by increasing its borrowing
availability through a new secured credit facility by
approximately $35 million, and by reducing interest on its long-
term debt for the next three years by approximately $27 million.
As a result of the exchange offers, the Company will reduce
leverage by approximately $115 million in indebtedness by
exchanging $261 million of its outstanding debt for $146 million
of new secured notes and shares of non-dividend paying Preferred
Stock with a mandatory redemption price in 2013 of $48 million.
The Company's annual cash interest obligation will be reduced by
84% from approximately $32 million to approximately $5 million
per year through 2004.
The Company offered to exchange up to $134.2 million in
aggregate principal amount of new 10% Senior Secured Notes due
2008 and shares of new Series C Convertible Redeemable Preferred
Stock for all of its outstanding unsecured 11-3/8% Senior Notes
due 2004 and 10-3/4% Senior Notes due 2005. The City of Weirton
offered, at the Company's request, to exchange all of its
outstanding Series 1989 Pollution Control Revenue Refunding
Bonds for its new Series 2002 Secured Pollution Control Revenue
Refunding Bonds, which are secured on a parity with the
Company's new Senior Secured Notes due 2008.
The Company will accept valid tenders of approximately 87% of
all outstanding notes and bonds, consisting of approximately 90%
of the Senior Notes due 2004, 87% of the Senior Notes due 2005,
and 81% of the Series 1989 Pollution Control Revenue Refunding
Bonds. Together with its financial advisor, Lehman Brothers,
who also served as Dealer Manager on the offers, the Company had
negotiated an agreement and consent solicitation with an
informal committee of noteholders representing 58% of the
outstanding Senior Notes.
Weirton Steel is a major integrated producer of flat rolled
carbon steel with principal product lines consisting of tin mill
products and sheet products. The Company is the second largest
domestic producer of tin mill products with approximately 25% of
the domestic market share.
DebtTraders reports that Weirton Steel Corporation's 11.375%
bonds due 2004 (WEIRT2) are quoted between the prices 17 and
21. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WEIRT2for
more real-time bond pricing.
WILLIAMS COMMS: Bags Okay to Hire Ordinary Course Professionals
---------------------------------------------------------------
Williams Communications Group, Inc. and its debtor-affiliates
ask and obtained Court approval to retain, employ, and pay
certain professionals in the ordinary course of business without
further order of the Court, pursuant to the following
procedures:
A. Each Ordinary Course Professional will complete:
a. a retention affidavit stating that such professional does
not represent or hold any interest adverse to the Debtors
or their estates and
b. a retention questionnaire, summarizing the nature of their
retention.
B. The Debtors will serve by first-class mail, Retention
Affidavits and Retention Questionnaires for each Ordinary
Course Professional within 15 days of any order granting this
Motion or within 15 days following the professional's
retention, whichever is later, on:
a. The Office Of The United States Trustee for the Southern
District of New York;
b. Clifford Chance Rogers & Wells, counsel to the Agent for
the Debtors' prepetition secured lenders; and
c. Kirkland & Ellis, counsel to the Official Committee of
Unsecured Creditors.
C. Unless an objection to a retention is filed within 15 days of
service of the applicable Retention Affidavit and Retention
Questionnaire, the Debtors may pay all fees and expenses
incurred by an Ordinary Course Professional:
a. so long as the amounts do not exceed $25,000 per month, on
average, during the pendency of the Chapter 11 cases and
b. the professional has no material involvement in the
administration of the Debtors' estates. All such payments
may be made without further application to, or approval
by, the Court.
D. To the extent an Ordinary Course Professional incurs average
monthly fees in excess of the $25,000 limit set forth above,
such professional will file an application for approval of
fees.
E. If an Ordinary Course Professional becomes materially
involved in the administration of a Debtor's estate, the
Debtors will apply to retain that professional pursuant to
Section 327 of the Bankruptcy Code. (Williams Bankruptcy
News, Issue No. 5; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
* BOND PRICING: For the week of June 17 - 21, 2002
--------------------------------------------------
Issuer Coupon Maturity Price
------ ------ -------- -----
ABGenix Inc. 3.500% 03/15/07 74
Adelphia Communications 7.875% 05/01/09 45
Adelphia Communications 8.375% 02/01/08 46
Adelphia Communications 9.875% 03/01/07 46
Adelphia Communications 10.250% 06/15/11 47
Adelphia Communications 10.875% 10/01/10 47
AES Corporation 4.500% 08/15/05 57
AES Corporation 8.000% 12/31/08 70
AES Corporation 8.750% 06/15/08 74
AES Corporation 8.875% 02/15/11 67
AES Corporation 9.375% 09/15/10 71
AES Corporation 9.500% 06/01/09 70
Alternative Living Services (Alterra) 5.250% 12/15/02 4
American Tower Corp. 9.375% 02/01/09 64
American & Foreign Power 5.000% 03/01/30 61
Armstrong World Industries 9.750% 04/15/08 50
Atlas Air Inc. 9.250% 04/15/08 51
AT&T Corp. 6.500% 03/15/29 74
Bethlehem Steel 8.450% 03/01/05 14
Borden Inc. 7.875% 02/15/23 60
Borden Inc. 9.250% 06/15/19 61
Boston Celtics 6.000% 06/30/38 65
Burlington Northern 2.625% 01/01/10 75
Burlington Northern 3.200% 01/01/45 49
Burlington Northern 3.800% 01/01/20 68
Case Corp. 7.250% 01/15/16 74
Centennial Cell 10.750% 12/15/08 60
Century Communications 8.875% 01/15/07 34
Charter Communications, Inc. 5.750% 10/15/05 60
Cincinnati Bell Telephone (Broadwing) 6.300% 12/01/28 70
CIT Group Holdings 5.875% 10/15/08 74
Comcast Corp. 2.000% 10/15/29 24
Comforce Operating 12.000% 12/01/07 60
Cox Communications Inc. 0.348% 02/23/21 68
Cox Communications Inc. 0.426% 04/19/20 41
Cox Communications Inc. 3.000% 03/14/30 27
Cox Communications Inc. 7.750% 11/15/29 29
Cox Communications Inc. 7.750% 11/15/29 29
Critical Path 5.750% 04/01/05 63
Critical Path 5.750% 04/01/05 63
Crown Castle International 9.000% 05/15/11 74
Crown Castle International 9.375% 08/01/11 73
Crown Castle International 9.500% 08/01/11 73
Crown Cork & Seal 7.375% 12/15/26 61
Cubist Pharmacy 5.500% 11/01/08 55
Dana Corp. 7.000% 03/01/29 73
Dana Corp. 7.000% 03/15/28 73
Equistar Chemicals 7.550% 02/15/26 67
Finisar Corp. 5.250% 10/15/08 55
Foster Wheeler 6.750% 11/15/05 54
Gulf Mobile Ohio 5.000% 12/01/56 61
Hasbro Inc. 6.600% 07/15/28 71
Human Genome 3.750% 03/15/07 68
Huntsman Polymer 11.750% 12/01/04 20
Inland Steel Co. 7.900% 01/15/07 50
Level 3 Communications 11.250% 03/15/10 46
Lucent Technologies 6.450% 03/15/29 64
Lucent Technologies 6.500% 01/15/28 64
Missouri Pacific Railroad 4.750% 01/01/20 65
Missouri Pacific Railroad 4.750% 01/01/30 62
Missouri Pacific Railroad 5.000% 01/01/45 57
MSX International 11.375% 01/15/08 70
Nextel Communications 9.375% 11/15/09 63
Nextel Partners 11.000% 03/15/10 59
Northern Pacific Railway 3.000% 01/01/47 46
Northern Pacific Railway 3.000% 01/01/47 46
Pegasus Satellite 12.375% 08/01/06 49
Primedia Inc. 7.625% 04/01/08 66
Public Service Electric & Gas 5.000% 07/01/37 71
Qwest Capital 7.625% 08/03/21 69
Qwest Capital 7.750% 02/15/31 70
Rural Cellular 9.625% 05/15/08 57
SBA Communications 10.250% 02/01/09 68
Silicon Graphics 5.250% 09/01/04 69
Solutia Inc. 7.375% 10/15/27 70
Time Warner Telecom 9.750% 07/15/08 54
Tribune Company 2.000% 05/15/29 65
Ugly Duckling 11.000% 04/15/07 56
United Air Lines 9.125% 01/15/12 60
United Air Lines 10.250% 07/15/21 60
Universal Health Services 0.426% 06/23/20 62
US Timberlands 9.625% 11/15/07 64
US West Capital 6.875% 07/15/28 67
Vesta Insurance Group 8.750% 07/15/25 74
Viropharma Inc. 6.000% 03/01/07 36
Weirton Steel 10.750% 06/01/05 51
Weirton Steel 11.375% 07/01/04 49
Westpoint Stevens 7.875% 06/15/08 58
Wind River System 3.750% 12/15/06 73
Worldcom Inc. 6.400% 08/15/05 58
XO Communications 5.750% 01/15/09 1
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices
are obtained by TCR editors from a variety of outside sources
during the prior week we think are reliable. Those sources may
not, however, be complete or accurate. The Monday Bond Pricing
table is compiled on the Friday prior to publication. Prices
reported are not intended to reflect actual trades. Prices for
actual trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy
or sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers'
public debt and equity securities about which we report.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com.
Bond pricing, appearing in each Thursday's edition of the TCR,
is provided by DebtTraders in New York. DebtTraders is a
specialist in global high yield securities, providing clients
unparalleled services in the identification, assessment, and
sourcing of attractive high yield debt investments. For more
information on institutional services, contact Scott Johnson at
1-212-247-5300. To view our research and find out about private
client accounts, contact Peter Fitzpatrick at 1-212-247-3800.
Real-time pricing available at http://www.debttraders.com/
Each Friday's edition of the TCR includes a review about a book
of interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published by
Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard
Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette
C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter
A. Chapman, Editors.
Copyright 2002. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without
prior written permission of the publishers. Information
contained herein is obtained from sources believed to be
reliable, but is not guaranteed.
The TCR subscription rate is $625 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Christopher
Beard at 240/629-3300.
*** End of Transmission ***