/raid1/www/Hosts/bankrupt/TCR_Public/020719.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, July 19, 2002, Vol. 6, No. 142
Headlines
360NETWORKS INC: Subsidiaries File Reorg. Plans in US & Canada
AML COMMUNICATIONS: Auditors Express Going Concern Doubt
ANC RENTAL: Seeks Approval to Hire National Tax Resource Group
AAVID THERMAL: Hires Ernst & Young to Replace Arthur Andersen
ACCEPTANCE INSURANCE: Fitch Junks $95MM 9.0% Trust Securities
ADELPHIA COMMS: Secures Court Order Explaining Automatic Stay
AMERICAN HORIZON: S&P Revises Financial Strength Rating to R
AUCXIS: Auditors Doubt Company's Ability to Continue Operations
AVIATION SALES: Dimensional Fund Discloses 16.4% Equity Stake
BAC SYNTHETIC: S&P Cuts Class D Notes Rating Down to Junk Level
BCE INC: Denies Liability in Teleglobe Lending Syndicate's Suit
BIRMINGHAM STEEL: U.S. Trustee Amends Creditors' Committee
BRIDGE: State Farm Gets Nod to Commence Foreclosure Proceedings
CAPITAL ONE: S&P Says MOU with Regulators Will Not Affect Rating
CENDANT CORP: June 30 Working Capital Deficit Tops $800 Million
CHIVOR SA: Wins Approval to Hire Ordinary Course Professionals
COMDISCO INC: Applies for SEC Qualification of Trust Indentures
CONCERO INC: Will Not Further Refute Nasdaq Delisting Decision
CORRPRO: Continues Talks with Lenders re Covenant Noncompliance
COVANTA ENERGY: Court Okays Louglin Meghji as Business Advisors
DANA CORP: Restructuring Actions Yield Improved Q2 2002 Earnings
DIGEX INC: Falls Below Nasdaq Minimum Listing Requirements
DUNDEE: S&P Says Asset Acquisition Plan Won't Affect BB+ Ratings
EOS INT'L: Gets Extension of $6.5M Short-Term Notes Until Aug 14
ENRON: Sanders, et. al., Want to Retain Quinn Emanuel as Counsel
ENRON CORP: Craig Dean, et. al., Sign-Up Dyer Ellis as Counsel
EQUUS CAPITAL: S&P Further Junks Ratings on Class B & C Notes
EXIDE TECHNOLOGIES: Court Approves Key Employee Retention Plan
EXODUS COMMS: Has Until August 22, 2002 to Remove Actions
FLAG TELECOM: Court Fixes August 16, 2002 Claims Bar Date
FRIEDE GOLDMAN: Halter Marine Auction Will Continue on July 23
GENERAL BINDING: Reports Improved Results for Second Quarter
GLOBAL CROSSING: Settles Claim Dispute with Citizens Comms.
GLOBAL PAYMENTS: Has $18MM Working Capital Deficit at May 31
HAYES LEMMERZ: Seeks Approval of Sale Agreement with US Pipe
IMPSAT FIBER: Has Until July 26 to File Schedules and Statements
INFORMATION RESOURCES: Working Capital Deficit Tops $11 Million
INFU-TECH: Chapter 7 Trustee Hires Teich Groh as Special Counsel
KNOWLEDGE HOUSE: Continues to Defer Publishing Financial Results
MATTRESS DISCOUNTERS: S&P Drops Corp. Rating Down to D from CC
MED DIVERSIFIED: Expects Equity Deficit to Reach $190 Million
MPOWER HOLDING: Court Okays Pre-Negotiated Recapitalization Plan
NATIONAL STEEL: Seeks OK to Reject 3 Pellet Purchase Contracts
NATIONSRENT: Court OKs Stipulation for Production of Documents
NETWORK ACCESS: Signing-Up SSG Capital as Investment Bankers
NEWCOR INC: Keeps Exclusive Right to File Plan Until August 26
NORTEL NETWORKS: Doug Beatty Steps in as New Chief Fin'l Officer
NEW DEAN FOODS: Fitch Assigns BB+ Rating to Credit Facility
OCEAN POWER: Electryon Swaps Certain Assets for 3.5 Mil. Shares
PACIFIC GAS: Outlines Confirmation Objections to CPUC Plan
POINDEXTER JB: S&P Cuts Rating to B Over Weak Fin'l Performance
PORTA SYSTEMS: Fails to Meet AMEX Continued Listing Conditions
POTLATCH CORP: Net Loss from Operations Nearly Doubles in Q2
PSINET INC: Court Okays Sale of Shares in WorldPay to RBS Avanta
ROHN INDUSTRIES: Q2 2002 Results Swing-Down to $3.5MM Net Loss
REGAL CINEMAS: Launches Exchange Offer for 9-3/8% Debt Issues
RENT-A-CENTER: S&P Places BB- Corporate Rating on Watch Positive
SCIENT INC: Files for Chapter 11 Protection in New York
SOLID RESOURCES: Selling Well Testing Division for $4.5 Million
STARBAND COMMS: Seeking Court Approval to Hire Houlihan Lokey
TANGIBLEDATA: Auditors Doubt Company's Ability to Continue Ops.
TELEWEST COMMS: Liberty TWSTY Terminates Tender Offer for Notes
THOMSON KERNAGHAN: ASC Suspends Registration and Shares Trading
TRANSTECHNOLOGY: Taps Advisors to Assist in Fin'l Restructuring
TRANSTECHNOLOGY: Competes Recapitalization of UK Subsidiary
VELOCITA CORP: Committee Brings-In Wolff & Samson as Attorneys
VION PHARMACEUTICALS: Violates Nasdaq Listing Requirements
WEBB INTERACTIVE: Hires Ernst & Young Replacing Arthur Andersen
WILLIAMS COMMS: Obtains Open-Ended Removal Period Extension
WILLIAMS CONTROLS: Taps AIP Entity for Management Services
WILLIAMS CONTROLS: Completes Sale of 150,000 Preferred Shares
WORLDCOM: S&P Drops Ratings on 4 Related Synthetic Transactions
WORLDCOM INC: Sues Former Controller Over $800K Retention Bonus
WORLDCOM: The Deathwatch Continues
XO COMMS: Icahn Offers to Buy Up to $331MM of Senior Debt at 40%
ZIFF DAVIS: Soliciting Consents to Prepackaged Chapter 11 Plan
BOOK REVIEW: Bankruptcy Crimes
*********
360NETWORKS INC: Subsidiaries File Reorg. Plans in US & Canada
--------------------------------------------------------------
Subsidiaries of 360networks inc., are submitting proposed plans
of reorganization with the Supreme Court of British Columbia and
the U.S. Bankruptcy Court for the Southern District of New York.
The plans were developed in coordination with the company's
senior secured lenders, the court-appointed Monitor in Canada,
and the U.S. unsecured creditors' committee.
Under the proposed plans, the Canadian and U.S. subsidiaries
operating the company's North American network would emerge from
creditor protection with approximately $215 million in debt and
more than $50 million of cash on hand. Certain other liabilities
of these subsidiaries would be satisfied in cash or converted
into new common equity.
Upon approval of the respective plans in Canada and the U.S.,
the subsidiaries' senior secured lenders, led by JPMorgan Chase
Bank, would become majority shareholders in the reorganized
enterprise. Unsecured creditors of the subsidiaries and
employees would initially hold the remaining equity. The
reorganized enterprise intends to become listed on securities
exchanges in Canada and the United States, subject to approval
by the respective exchanges.
"Thanks to the diligent efforts of our employees to complete our
network, reduce costs, generate cash, and sign-up additional
customers and revenues, we can emerge as a viable business with
a vastly reduced debt load, and our business plan anticipates no
need for additional funding in the near term. As we emerge, we
expect our advanced network, low overhead, and reduced fixed
charges will give us an attractive competitive position," said
Greg Maffei, president and chief executive officer of
360networks. "I want to thank our employees, our creditors, and
our customers for their support and patience through this
process."
The reorganized enterprise expects to emerge from creditor
protection in September 2002. At that time, it is anticipated
that the former parent of the Canadian and U.S. subsidiaries,
360networks inc., would be liquidated under Canadian bankruptcy
laws. As a result, shareholders and unsecured creditors
(including bondholders) of 360networks inc. would not
participate in the reorganization plans or recover any value
from their investments.
360networks offers optical services and network infrastructure
to telecommunications and data communications companies in North
America. The company's optical mesh fiber network is one of the
largest and most advanced on the continent, spanning
approximately 40,000 kilometers (25,000 miles) and connecting 48
major cities in Canada and the United States.
On June 28, 2001, the company and several of its operating
subsidiaries voluntarily filed for protection under the
Companies' Creditors Arrangement Act (CCAA) in the Supreme Court
of British Columbia. Concurrently, the company's principal U.S.
subsidiary, 360networks (USA) inc., and 22 of its affiliates
voluntarily filed for protection under Chapter 11 of the U.S.
Bankruptcy Code in the U.S. Bankruptcy Court for the Southern
District of New York. In October 2001, four operating
subsidiaries that are part of the 360atlantic group of companies
also voluntarily filed for protection in Canada. Insolvency
proceedings for several subsidiaries of the company have been
instituted in Europe and Asia. Additional information is
available at http://www.360.net
AML COMMUNICATIONS: Auditors Express Going Concern Doubt
--------------------------------------------------------
AML Communications Inc., was incorporated in California in 1986
as Advanced Milliwave Laboratories, Inc. Early in 1994, the
name was changed to AML Communications, Inc. In December 1995,
in conjunction with the initial public offering of its common
stock, its state of incorporation was changed from California to
Delaware.
The Company designs, manufactures and markets RF and microwave,
power and low noise amplifiers for a variety of frequency ranges
and transmission protocols serving the defense microwave and
wireless communications markets. Its products are designed to
improve the quality and reliability within the given frequency
and transmission protocol. Its defense industry products are
used in communications equipment integrated into electronic
systems for tactical aircraft, ships, ground systems, and
missile systems. Its wireless products consist of an array of
low noise and power amplifiers serving the wireless, PCS, two-
way messaging market as well as Cellular Coverage Enhancement
amplifiers.
Net sales for fiscal 2002 were $5.9 million compared to $5.1
million in fiscal 2001. The increase in net sales is
attributable to greater shipments of the MIC amplifier products
(defense microwave and optical) which contributed $2.8 million,
or 48.4% of net sales for fiscal 2002, compared to $1.3 million,
or 25.5% of net sales in fiscal 2001. The increase in sales of
MIC products is the result of aggressive penetration of the
fractured MIC market and an increase in demand for defense
related MIC products related to the procurement of upgrade,
replacement, and spare parts for defense applications. As a
result of planned increase in defense spending, AML anticipates
that MIC sales will continue to be a significant portion of its
revenue.
Net sales of PCS and two-way messaging products totaled $2.4
million, or 40.9% of net sales in fiscal 2002, compared to $2.6
million, or 51.8% of net sales in fiscal 2001. Sales of PCS and
two-way messaging products decreased due to the current economic
slow down in the wireless, PCS and two-way messaging markets and
due to higher production volumes for newly developed PCS and
two-way messaging products during fiscal 2001. AML anticipates
that sales of its PCS and two-way messaging products will
continue to decrease due to reduced capital expenditures for new
equipment by OEM's and service providers given the current
economic conditions within the wireless market. Sales of
cellular and other products contributed $629,000, or 10.7% of
net sales in fiscal 2002 compared to $1.1 million, or 22.7 % of
sales in fiscal 2001. This decrease can be attributed to the
continued decrease in demand for the Company's legacy cellular
products as wireless services providers replace their cellular
equipment with newer non-cellular based equipment such as PCS.
Sales of products outside the United States represented
approximately 3.9% and 1.8% of net sales during fiscal 2001 and
2002, respectively.
Gross profit for fiscal 2002 was $1.7 million, or 28.6% of net
sales, compared to a gross loss for fiscal 2001 which was $1.5
million, or 29.7% of net sales. The increase in margin can be
attributed to higher shipment levels, increased material margins
within MIC product lines, and the effects of management's cost
cutting policies. AML expects pressure on selling prices in the
wireless markets to continue in fiscal 2003, while prices within
its defense products have begun to stabilize.
The Company generated a net loss in fiscal 2002 of $713,000, or
12.1% of net sales, compared to a net loss of $7.1 million, or
140.0% of net sales in fiscal 2001.
The Company's auditors have included an explanatory paragraph
relating to AML's ability to continue as a going concern as of
and for the year ended March 31, 2002, in their Report of
Independent Certified Public Accountants. For the year ended
March 31, 2002, the Company incurred a net loss of $713,000,
negative cash flows from operations of approximately $1.1
million primarily as a result of the reduction of accounts
payable balances. The auditors considered these factors,
combined with the current economic conditions and AML's ability
to comply with all of the listing requirements to remain on the
Nasdaq Small Cap Market, to raise substantial doubt about its
ability to continue as a going concern. Recovery of its assets,
and to a lesser extent its continued listing on the Nasdaq
SmallCap Market, is dependent upon future events, the outcome of
which is indeterminable.
ANC RENTAL: Seeks Approval to Hire National Tax Resource Group
--------------------------------------------------------------
ANC Rental Corporation, and its debtor-affiliates urge the Court
to approve their retention of the National Tax Resource Group as
Special Consultant on Property Tax Matters to provide ad valorem
tax services and appeal services to the Estates.
Jason Staib, Esq., at Blank Rome Comisky & McCauley LLP in
Wilmington, Delaware, informs the Court the Debtors want to
retain NTRG because of its previous success in reducing property
tax obligations. The Debtors believe in NTRG's qualifications
as a property tax consultant, its extensive knowledge of the ad
valorem valuation process, its understanding of the current
property tax environment, and its considerable experience in
representing various concerns on their ad valorem tax positions.
Mr. Staib claims that NTRG's new engagement under the Debtors
would be as special consultant to help the Debtors handle
property tax protests, administrative appeals, adversary
proceedings and related proceedings involving taxable property
of the Debtors in various states. As property tax program
consultants, NTRG will use locally qualified consultants who
have the ability to minimize the Debtors' property tax
obligation.
Mr. Staib relates that NTRG's ad valorem tax services consist of
three phases. First, NTRG personally inspects, gathers and
assembles data for a property tax file that is then used to
determine the accuracy of the assessment. If it is determined
that the assessment is too high, NTRG will prepare the necessary
information in report form. The information will be presented
to the assessing authorities by a local consultant with an
effort to secure a mutually acceptable assessment value prior to
a formal hearing. If the informal negotiation process does not
achieve the desired result, NTRG will proceed to the formal
appeal phase. NTRG will also pursue refunds of taxes paid in
previous years, permitted under Section 505 of the Bankruptcy
Code.
Mr. Staib states NTRG will receive compensation in the form of
commissions of 30% of the total tax savings obtained from appeal
efforts. NTRG will receive a commission of 33% of the tax
savings of all refunds resulting from the pursuit of assessment
reductions for taxes paid in previous years. NTRG's
compensation is on a contingency basis. Thus, if it is
unsuccessful in procuring tax savings for the Debtors, it will
not receive any compensation.
The Debtors request Court to allow NTRG to receive the fees as
structured without the need to file fee applications and that
because of the compensation structure, NTRG shall have no
obligation to maintain time records in accordance with United
States Trustee guidelines. However, if NTRG earns fees of over
$1,000,000 but do not result in actual cash payments to the
Debtors, NTRG will file a fee application with the Court.
Mr. Staib informs the Court that NTRG will employ Brusniak
Harrison & McCool PC as counsel but may also use other counsel.
NTRG will pay all fees incurred by its representing counsel
although the Debtors will file a separate application to retain
the firm.
Additionally, NTRG President and Chief Executive Officer Clayton
L. Wigley assures the Court the firm does not maintain any
relationship adverse to the Debtors' estates although NTRG may
have rendered services to, and may continue to render services
to, certain of the Debtors' creditors or other parties-in-
interest or interests in matters wholly unrelated to these
cases. (ANC Rental Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
AAVID THERMAL: Hires Ernst & Young to Replace Arthur Andersen
-------------------------------------------------------------
Upon approval of the Board of Directors of Aavid Thermal
Technologies, Inc., on July 10, 2002, the Company informed
Arthur Andersen , the Company's independent public accountants
for the fiscal year ended December 31, 2001, of its decision to
dismiss Arthur Andersen as the Company's independent public
accountants. Upon approval of the Board of Directors, the
Company has engaged Ernst & Young LLP to serve as the Company's
independent public accountants for the fiscal year ending
December 31, 2002.
Aavid Thermal Technologies, Inc., is a leading provider of
thermal management solutions for dissipating potentially
damaging heat from digital and industrial electronics, and
computational fluid dynamics (CFD) software, which permits
computer modeling and flow analysis of products and processes
that would otherwise require time-consuming and expensive
physical models and the facilities to test them.
As reported in Troubled Company Reporter's April 19, 2002,
edition, Aavid Thermal's March 31, 2002 balance sheet is upside-
down, showing a total shareholders' equity deficit of about $48
million.
ACCEPTANCE INSURANCE: Fitch Junks $95MM 9.0% Trust Securities
-------------------------------------------------------------
Fitch Ratings has assigned a 'B-' Long-Term issuer rating to
Acceptance Insurance Companies, Inc. and a 'CCC+' rating to
Acceptance's $94.875 million 9.00% Trust Preferred Securities,
due 2027. The Rating Outlook is Stable.
The rating considers the company's recent unfavorable, but
improving, overall earnings and resulting weak debt coverage,
the uncertainty of future earnings and cash flow to meet debt
servicing needs, as well as the company's concentration in the
crop insurance market.
Through its insurance subsidiary American Growers Insurance
Company, Acceptance offers a variety of crop insurance coverage.
This segment reported an underwriting profit in 2001 of $10.1
million, a marked improvement from the underwriting loss of
$22.6 million posted for the previous year. This improvement was
due in part to more favorable weather conditions in 2001
compared to the previous year.
Acceptance also has run-off property/casualty coverage through
subsidiary Acceptance Insurance Company. These operations
reported an underwriting loss of $34.0 million for 2001,
compared to an underwriting loss of $21.2 million for the
previous year. The increase in the loss was due in part to a
reserve strengthening that the company undertook in the general
liability lines of business.
Acceptance reported total assets of $703 million and
shareholders' equity of $151 million at the end of the first
quarter of 2002. The company also reported a net loss of $4.3
million for the first quarter of 2002, compared to a net loss of
$3.8 million for the same period of the previous year.
American Growers is a Nebraska domiciled insurer with statutory
total admitted assets of $193 million and policyholder's surplus
of $75.4 million at December 31, 2001. The company primarily
writes multi-peril crop insurance and other crop insurance
products. Net premiums written increased 51% in 2001 to
approximately $81 million, due in part to the acquisition of the
crop insurance assets of IGF Insurance Company during the year.
Acceptance carries some assets at the holding company. At the
end of the first quarter of 2002, Acceptance held approximately
$11.4 million of non-affiliated investments and an additional
$27.9 million of investments that are pledged for reinsurance.
This compares to total Trust Preferred obligations of
approximately $95 million and interest payments made by the
company in 2001 of $8.5 million.
Acceptance's debt to capital ratio was 38% at March 31, 2002.
The debt consists entirely of Trust Preferred securities and
because of the remaining time to maturity and the ability to
defer dividends up to five years Fitch gives partial equity
credit to these securities. Fixed charge coverage was negative
in each of the past three years, but is expected to improve
going forward.
Acceptance's total invested assets at year-end 2001 consisted of
bonds at 41%, cash and other short-term investments at 43%,
restricted short-term investments (for reinsurance) at 12% and
equities at 2%. The allocation to short-term investments has
increased recently relative to previous years. This change
better supports some of the transactions undertaken during 2001
and because of the run-off of the property/casualty operations.
Fitch expects that the interest payments on the Trust Preferred
Securities will remain current in the near term. Fitch also
expects that Acceptance will again report an underwriting profit
in the crop insurance segment for 2002. Additionally, the
company's market share of MPCI business should remain consistent
with that of 2001 and the property/casualty business will
continue to be operated in runoff mode and will not
significantly drag down overall earnings.
Acceptance Insurance Companies Inc.
--Long-term issuer rating Assign 'B-'/Stable;
AICI Capital Trust
--Trust Preferred rating Assign 'CCC+'/Stable.
ADELPHIA COMMS: Secures Court Order Explaining Automatic Stay
-------------------------------------------------------------
Adelphia Communications sought and obtained a restraining order
from the Court under which:
A. All persons, and all governmental units are stayed,
restrained and enjoined from:
* Commencing or continuing, including the issuance or
employment of process, any judicial, administrative or
other action or proceeding against any of the Debtors, that
was or could have been commenced before the commencement of
the Debtors' chapter 11 cases, or recovering a claim
against any of the Debtors that arose before the
commencement of their chapter 11 cases;
* Enforcing, against any of the Debtors or against property
of any of the Debtors, a judgment obtained before the
commencement of these chapter 11 cases;
* Taking any act to obtain possession of property of any of
the Debtors or of property from any of the Debtors or to
exercise control over any of the Debtors' property;
* Taking any act to create, perfect or enforce any lien
against property of any of the Debtors;
* Taking any act to create, perfect or enforce against
property of any of the Debtors, any lien to the extent that
the lien secures a claim that arose before the commencement
of their chapter 11 cases;
* Taking any act to collect, assess or recover a claim
against any of the Debtors that arose before the
commencement of their chapter 11 cases;
* Offsetting any debt owing to any of the Debtors which arose
before the commencement of their chapter 11 cases against
any claim against any of the Debtors; and
* Commencing or continuing any proceeding before the United
States Tax Court concerning the Debtors.
B. All persons and all governmental units, and all those acting
for or on their behalf, including sheriffs, marshals,
constables and other or similar law enforcement officers and
officials are stayed, restrained and enjoined from, in any
way, seizing, attaching, foreclosing upon, levying against or
in any other way interfering with any and all of the property
of any of the Debtors, wherever located.
C. All governmental units are prohibited and enjoined from
denying, revoking, suspending, or refusing to renew any
license, permit, charter, franchise or other similar grant,
or to condition that grant to, or discriminate with respect
to that grant against, any of the Debtors solely because one
or more of the Debtors are Debtors under the Bankruptcy Code;
may have been insolvent before the commencement of the
Debtors chapter 11 cases; or may be insolvent during the
pendency of the Debtors' chapter 11 cases.
Shelley C. Chapman, Esq., at Willkie Farr & Gallagher in New
York, New York, relates that as fundamental as the foregoing
protections may be, and notwithstanding that they arise as a
matter of law upon the commencement of a chapter 11 case, not
all parties affected or potentially affected by the commencement
of a chapter 11 case are aware of the Bankruptcy Code provisions
or cognizant of their impact. Experience has shown that it is
often necessary to advise third parties of the existence and
effect of Sections 362 and 525, and occasionally, it is
necessary to commence proceedings in the bankruptcy court to
enforce the protections contained therein.
Due to the size and nature of the Debtors' businesses, the
Debtors believe that many parties will be unaware of or simply
choose to ignore the automatic stay imposed by Section 362 of
the Bankruptcy Code or the protections of Section 525 of the
Bankruptcy Code. Indeed, the Debtors believe it is likely that,
given the opportunity, many parties may choose to exploit the
sizable nature of these cases and attempt to seize certain of
the Debtors' assets, or discriminate unfairly against one or
more Debtors, to the detriment of the estates and other
creditors. Accordingly, the Debtors believe that under the
circumstances here, entry of this order will increase
substantially the efficiency of the administration of these
cases. In short, the Debtors will have a Federal Court order to
put in creditors' hands rather than telling creditors to talk to
their lawyers about what the Bankruptcy Code says. (Adelphia
Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1),
DebtTraders says, are trading at 38 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
for real-time bond pricing.
AMERICAN HORIZON: S&P Revises Financial Strength Rating to R
------------------------------------------------------------
Standard & Poor's revised its financial strength rating on
American Horizon Insurance Co., to 'R' from double-'Bpi' after
learning that the Cook County Circuit Court issued a liquidation
order with a finding of insolvency against the company on July
11, 2002.
Before this court action, the Illinois Department of Insurance
determined that the company was operating in hazardous financial
condition. As of Dec. 31, 2001, American Horizon reported $3
million in capital and negative $962,204 in surplus, resulting
in a statutory surplus impairment of almost $1.5 million. As of
March 31, 2002, the company reported a negative policyholder
surplus of about $2.8 million. The company is also below the
mandatory control level under risk-based capital requirements.
American Horizon entered into an agreed corrective order with
the Illinois Department of Insurance on March 1, 2002. The
Illinois Insurance Guaranty Fund will be responsible for the
covered claims of the company's Illinois policyholders.
American Horizon Insurance Co., is a wholly owned subsidiary of
American Holdings Inc., domiciled in Delaware. The company is
licensed in 13 states and mainly writes private passenger
automobile insurance. The company has been in run-off since June
2001, and has not written new business in 2002. In assigning its
double-'Bpi' rating to American Horizon Insurance Co. (formerly
Arcadia National Insurance Co.), Standard & Poor's cited the
company's high operating ratio, which indicates weak financial
performance.
An insurer rated 'R' is under regulatory supervision owing to
its financial condition. During the pendency of the regulatory
supervision, the regulators may have the power to favor one
class of obligations over others or pay some obligations and not
others. The rating does not apply to insurers subject only to
nonfinancial actions such as market conduct violations.
AUCXIS: Auditors Doubt Company's Ability to Continue Operations
---------------------------------------------------------------
Aucxis Corp., changed its name from e-Auction Global Trading
Inc., in June 2001. The Company is currently developing e-
business services for the perishable commodity marketplace
primarily in Europe. In addition, through its subsidiary,
Aucxis Trading Solutions N.V. (formerly Schelfhout Computer
Systemen N.V.), the Company is engaged in the installation and
maintenance of auction clock and cooling systems for traditional
auction halls and the development of software for auctions,
including Internet-based auction systems. To date the Company
has not earned significant revenue from its Internet-based
auction systems and the success of these systems will depend
upon market acceptance of a commercially viable prototype and
obtaining adequate resources to complete and implement these
systems. The Company is not yet able to determine whether these
efforts will be successful.
In September 2001, the Company decided to discontinue its
financial support for its subsidiaries in The Netherlands,
including V-Wholesale N.V., Kwatrobox B.V., Palm Verlingsystemen
B.V., Scoop Software B.V., Automatiseringsbureau Palm N.V., and
Nieaf Systems B.V., as the businesses operated by these
companies no longer form part of the company's refocused
business strategy. As a result, Kwatrobox and its operating
subsidiaries, Automatiseringsbureau Palm N.V., and Nieaf Systems
B.V., filed for bankruptcy and under the bankruptcy laws of the
Netherlands, a trustee took control of Kwatrobox and its
subsidiaries in October 2001.
Aucxis has a serious working capital deficiency as at March 31,
2002 and has suffered recurring operating losses and has an
accumulated deficit as at March 31, 2002. These factors raise
substantial doubt about the ability of the Company to continue
as a going concern. The ability of the Company to continue as a
going concern is dependent upon effective implementation of
revenue and cost management alternatives and the success of
potential future external financing initiatives.
Revenue for the three months ended March 31, 2002 was $1,308,512
as compared to $1,966,17 in the same period in 2001. Gross
margin improved by 5% to 55% for the three months ended March
31, 2002 as compared to 50% in the same period last year.
Both the decrease in the revenue and the improvement in gross
profit were a direct result of managements' decision to
discontinue its financial support for the loss making Palm
Automatisering (Aucxis Business Solutions "ABS") and Nieaf
companies. ABS had continued to consume shareholder funds within
a business that no longer forms part of Aucxis' refocused
business strategy. Aucxis was unable to extract Nieaf from the
Kwatrobox failure in spite of the fact that it did fit with the
overall strategy. The assets of Nieaf were purchased from the
receiver in partnership with the two largest flower auctions in
the Netherlands. This is now operating as ATS Holland B.V.
Revenue for the quarter ended March 31, 2002 was driven entirely
by continued growth in the installation of auction clock
systems through ATS. ATS continues to derive its revenues from
the development and installation of clock systems, cooling
installations and associated maintenance contracts for auction
halls.
The loss for the three months ended March 31, 2002 was $292,511
as compared to $2,436,170 for the three months ended March 31,
2001. This significant improvement is attributed to the
Company's ongoing cost management initiatives.
As at March 31, 2002, the Company had a cash balance of $329,324
for a net increase of $19,000 from the cash balance on December
31, 2001. This increase is mainly due to additional borrowing
offset by the purchase of additional equipment (approximately
$1,400) and $2,000 utilized in operations. Aucxis' consolidated
financial statements are prepared on a going concern basis which
assumes that the Company will realize its assets and discharge
its liabilities in the normal course of business. The projected
cash flows for the Company are based upon assumptions that
include, amongst others, increased growth within ATS and the
success of future external financing initiatives. Management is
examining a variety of options to raise additional financing,
including but not limited to, consideration of merging
operations with another company. In June of 2002, the Company
was successful in raising $375,000 in the form of a convertible
loan for working capital to be utilized at the head office level
and at the level of its Belgian subsidiaries Aucxis NV and ATS,
if need be. Aucxis is continuing its revenue enhancement and
cost management initiatives, including working with creditors
regarding outstanding payables and decreasing operating costs.
It is not possible at this time to predict with any assurance
the success of any other initiatives; however, management
indicates that it is working diligently towards the goal of
self-sustainability.
AVIATION SALES: Dimensional Fund Discloses 16.4% Equity Stake
-------------------------------------------------------------
Dimensional Fund Advisors Inc., an investment advisor,
beneficially owns 246,563 of the common stock of Aviation Sales
Company, with voting and dispositive powers over the stock. The
amount held represents 16.4% of the outstanding common stock of
Aviation Sales.
Dimensional Fund Advisors Inc., furnishes investment advice to
four investment companies registered under the Investment
Company Act of 1940, and serves as investment manager to certain
other commingled group trusts and separate accounts. These
investment companies, trusts and accounts are the "Funds." In
its role as investment advisor or manager, Dimensional
possesses voting and/or investment power over the securities of
Aviation Sales that are owned by the Funds, and may be deemed to
be the beneficial owner of the shares of the Company held by the
Funds. However, all securities reported in this article are
owned by the Funds. Dimensional disclaims beneficial ownership
of such securities.
Aviation Sales provides maintenance, repair, and overhaul (MRO)
services to major commercial carriers, airline leasing
companies, and jet engine manufacturers (including Pratt &
Whitney). Aviation Sales is restructuring: It has sold its
redistribution business (to Kellstrom Industries), as well as
its manufacturing operations and other noncore businesses.
Proceeds from the deals will be used to pay down debt. With the
divestitures, MRO operations -- including aircraft heavy
maintenance, component repair and overhaul services, and
engineering services -- are now Aviation Sales' sole focus. The
company operates repair facilities in the US.
As of September 30, 2001, Aviation Sales reported a total
shareholders' equity deficit of about $100 million.
Aviation Sales Company's 8.125% bonds due 2008 (AVIO08USR1),
DebtTraders says, are trading at about 19. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AVIO08USR1
for real-time bond pricing.
BAC SYNTHETIC: S&P Cuts Class D Notes Rating Down to Junk Level
---------------------------------------------------------------
Standard & Poor's lowered its ratings on two tranches of BAC
Synthetic CLO 2000-1 Ltd.'s floating-rate notes. At the same
time, the rating on the class C tranche is removed from
CreditWatch negative, where it was placed on December 6, 2001.
The rating actions reflect the valuation prices of previously
defaulted reference credits as well as credit deterioration in
the $10 billion pool of reference credits. The notional amount
of the reference pool will be reduced as a result of the
defaults.
The ratings actions also reflect the level of credit enhancement
provided by subordination, BAC's ability to meet its payment
obligations as issuer of the notes, and BAC's commitment to
follow strict guidelines established for maintenance of the pool
of reference credits.
Rating Lowered and Remains On Creditwatch
BAC Synthetic CLO 2000-1 Ltd.
Rating
Class To From
D due February 2006 CCC-/Watch Neg CCC/Watch Neg
Rating Lowered and Removed From Creditwatch
BAC Synthetic CLO 2000-1 Ltd.
Rating
Class To From
C due February 2006 BB+ BBB-/Watch Neg
BCE INC: Denies Liability in Teleglobe Lending Syndicate's Suit
---------------------------------------------------------------
BCE Inc., announced that a lawsuit was filed in the Ontario
Superior Court of Justice late Friday, July 12, 2002, by
certain members of the Teleglobe Lending Syndicate which
advanced US$1.25 billion to Teleglobe Inc., and Teleglobe
Holdings (U.S.) Corporation. The plaintiffs seek damages from
BCE in the aggregate amount of US$1.19 billion. The plaintiffs
represent approximately 95.2% of the U.S.$1.25 billion advanced
by the members of the Teleglobe Lending Syndicate.
BCE denies any liability to any creditor of Teleglobe or its
subsidiaries, and strongly believes that the claims contained in
the lawsuit are without merit or foundation. BCE intends to take
all necessary steps to vigorously defend its position to the
fullest extent possible.
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: U.S. Trustee Amends Creditors' Committee
----------------------------------------------------------
The United States Trustee amends the membership of the Official
Unsecured Creditors' Committee in the chapter 11 cases involving
Birmingham Steel Corporation. The amended Creditors' Committee
is comprised of:
1. Regions Bank
P.O. Box 10247
Birmingham, AL , 35202
Attn: James E. Schmaltz
Vice President
Tel: 205-326-7905, Fax: 205-326-7840;
2. Sumitomo Mitsui Banking Corporation
227 Park Avenue, 6th Floor
New York, NY 10172
Attn: William M. Ginn
Tel: 212-224-5201, Fax: 212-224-5198;
3. Praxair, Inc.
900 Westpark Drive
Peachtree City, GA 30269
Attn: Kenneth M. Groover
Tel: 678-364-8085, Fax: 770-907-5599;
4. PSC Metals, Inc.
1300 Virginia Drive, Suite 230
P.O. Box 619, Fort Washington
PA 19034
Attn: Joseph M. Shevlin
Tel: 215-628-3229, Fax: 215-628-4667; and
5. Citizens Leasing Corporation
53 State Street, Boston, MA 02109,
Attn: Anne R. Hemmer
Tel: 617-994-7054, Fax: 617-742-9471.
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.
BRIDGE: State Farm Gets Nod to Commence Foreclosure Proceedings
---------------------------------------------------------------
State Farm Life Insurance Company entered into a transaction
with Bridge Information Systems, Inc., and its debtor-affiliates
wherein State Farm loaned $1,068,679 in conjunction with the
Debtors' purchase of certain real estate and improvements
located at 700 Office Parkway, St. Louis, Missouri.
Donald R. Carmody, Esq., at Carmody MacDonald, in Clayton,
Missouri, relates that in relation with this loan transaction,
the Debtors executed a Promissory Note payable to State Farm.
Furthermore, in order to provide State Farm with security for
the repayment of the loan, the Debtors executed a "Deed of Trust
and Security Agreement" relative to the Property, which was duly
recorded in the Office of the St. Louis County Recorder of
Deeds.
Under the terms of the Promissory Note, Mr. Carmody explains
that the Debtors were to make $8,828 monthly principal and
interest payments starting on June 1, 1999 and continuing
through June 1, 2007. On July 1, 2007, a final payment
constituting all outstanding principal and unpaid interest was
to be made. According to Mr. Carmody, the last monthly payment
received by State Farm was on or about March 1, 2001. Thus, the
Debtors are currently in default. The principal balance due and
owing under the Note is $1,017,147. In addition, Mr. Carmody
says that the Debtors also agreed to pay interest at the rate of
7.45% on the unpaid balance. The total amount of interest that
has accrued at this rate since March 1, 2001 is $74,092.
"Interest continues to accrue at the rate of $210 per day," Mr.
Carmody adds. The Note further provides for a default interest
rate, which is 5% in excess of the normal interest rate of
7.45%. This default interest, when calculated for the period
since April 1, 2001, is $45,489. This default interest
continues to accrue at the rate of $141 that the combined
interest amount continues to accrue at the rate of $352 per day.
Mr. Carmody tells Judge McDonald that the Note provides for the
recovery of attorney's fees and expenses incurred by State Farm
should the Debtors' indebtedness to State Farm become the
subject matter of any legal proceeding. For the period between
the filing of the Debtors' bankruptcy proceeding and December
31, 2001, State Farm has paid $18,261 in attorney's fees and
related expenses, with additional attorney's fees and expenses
having been incurred since that date. The combined amounts of
unpaid principal, interest, attorney's fees and costs owed by
the Debtors to State Farm are $1,154,989. This amount is
exclusive of the Prepayment Fee provided for in the Note in the
event of the Debtors' default.
In addition to the Debtors' monetary obligations secured by the
Deed of Trust, mechanic's liens totaling $588,378 have been
filed against the Property subsequent to the recording of State
Farm's Deed of Trust.
State Farm believes that the Debtors have no equity in the
Property in light of the sums owed to State Farm and the amounts
allegedly owed to mechanic's lien claimants and also considering
the current condition of the Property. Thus, sufficient grounds
exist for the Court to modify the automatic stay so as to allow
State Farm to initiate foreclosure proceedings on the Property
in accordance with the terms of the Deed of Trust.
Therefore, State Farm Life Insurance Company asks that the Court
modify the automatic stay so as to allow them to commence
foreclosure proceedings in accordance with the provisions of the
Deed of Trust.
McCarthy Building Objects
The Property is currently the subject of three adversary
complaints, which seek this Court's determination of the
validity, extent and priority of three mechanic's liens asserted
against the Property. McCarthy, Sachs Electric Company and Air
Masters Corporation are prosecuting the three adversary
complaints respectively.
Mark A. Menghini, Esq., at Greensfelder, Hemker & Gal, in St.
Louis, Missouri, relates that although the Debtors have
expressed a willingness to stipulate to the validity and extent
of the Mechanic's Liens, State Farm is unwilling to enter into a
stipulation. "The Mechanic's Lien Claimants and State Farm
dispute the relative security priorities held by each," Mr.
Menghini states. State Farm asserts that they possess a first
deed of trust on the Property prior to all other encumbrances,
including the Mechanic's Liens. On the other hand, McCarthy
asserts that the Mechanic's Lien claims, including their own,
are prior to all other encumbrances to the extent of the value
of the improvements added to the Property by the Mechanic's Lien
Claimants.
Finally, McCarthy disputes certain excessive amounts being
claimed by State Farm as unreasonable, inequitable and invalid.
This is including the additional 5% default interest totaling in
excess of $45,489, State Farm's alleged attorneys' fees totaling
in excess of $18,260, and the "Prepayment Fee" that has yet to
be quantified by State Farm for this Court. Mr. Menghini
believes that State Farm intends to seek a Prepayment Fee in an
amount in excess of $190,000, nearly 20% of the total principal
claimed due and owing under its Deed of Trust.
According to Mr. Menghini, State Farm has failed to carry its
burden of proof on the issue of the Debtors' lack of equity in
the Property in light of the sums owed to State Farm and the
amounts allegedly owed to mechanic's lien claimants, and also
considering the current condition of the Property. McCarthy
disputes State Farm's assertion that the Debtors have no equity
in the Property. In September 2001, McCarthy obtained an
appraisal of the Property quoting the current market value of
the Property as $2,830,000. State Farm is claiming $1,154,989,
exclusive of a Prepayment Fee. The total principal value of the
Mechanic's Lien claims is $588,378, exclusive of interest and
attorneys' fees. Together the State Farm claim and the
Mechanic's Lien claims, total $1,743,367, approximately
$1,000,000, less than the appraisal value. "Until all of the
amounts being claimed due and owing by State Farm and the
Mechanic's Lien Claimants have been quantified and determined as
valid or invalid by this Court, it is too early to definitively
decide that the Debtors have no equity in the Property," Mr.
Menghini asserts.
Thus, before lifting the automatic stay and allowing State Farm
to commence foreclosure proceedings against the Property,
McCarthy asks that this Court first sort out all of the
remaining issues related to validity, extent and priority of the
asserted secured claims against the Property.
* * *
The Court authorizes State Farm Life Insurance Company to
commence foreclosure proceedings and assert their right to the
Deed of Trust and Security Agreement. Judge McDonald further
rules that State Farm is restrained from asserting any claim
against the Debtors that may exist as a result of the sale of
the Property for an amount less than what the Debtors owe to
State Farm under the Promissory Note and Deed of Trust. (Bridge
Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
CAPITAL ONE: S&P Says MOU with Regulators Will Not Affect Rating
----------------------------------------------------------------
Capital One Financial Corp.'s (BB+/Negative/-) announcement that
it anticipates entering a Memorandum of Understanding (an MOU is
not considered a formal enforcement action) with its regulators
will have no immediate effect on Standard & Poor's outstanding
ratings on the company or on its subsidiaries, but does change
the rationale for its negative outlook somewhat. The nature of
the MOU appears to be that of a precautionary warning, and does
not address anything that could be considered irreparably wrong.
The primary stipulation of the MOU deals with industrywide
implementation of new and anticipated regulatory guidelines
relating to increased capital and reserves associated with its
subprime lending business, incremental capital for certain
finance charge and fee receivables related to securitized credit
card assets, and reserves for uncollectible finance charges and
fees. However, Capital One is already substantially in
compliance with these requirements. More specific to Capital One
is a stipulation to upgrade its policies, procedures, systems,
and controls. The evolution of these items has lagged while the
company focused on growth. Importantly, from Standard & Poor's
point of view, Capital One was not required to alter its credit
risk management or to restate earnings or desist from any
activities crucial to its fundamental strategy.
Capital One's initiatives to reduce growth rates (not expected
to be stipulated in the MOU) are not draconian, but prudent;
combined with stronger capital and reserve positions, they
promote a more comfortable profile from a credit risk
perspective. Nevertheless, Standard & Poor's will monitor the
financial impact of the company's plan for lower growth and
watch for any further signs of control issues.
CENDANT CORP: June 30 Working Capital Deficit Tops $800 Million
---------------------------------------------------------------
Cendant Corporation (NYSE: CD) reported record second quarter
2002 adjusted earnings per share (including income from
discontinued operations) of $0.40. The Company raised its
projection for adjusted earnings per share (including income
from discontinued operations) for 2002 to $1.45 from $1.36, a
38% increase over the results for 2001. The increased forecast
reflects better-than-expected second quarter results, continued
strength in the Company's real estate related businesses and
improving trends in certain of the Company's travel related
businesses.
Cendant's Chairman, President and CEO, Henry R. Silverman,
stated: "We are pleased to report another record-breaking
quarter with results that exceeded our projections despite a
challenging environment for commercial travel and corporate
spending. Strength in our residential real estate and vehicle
services divisions again proved the value of our diversified
portfolio of fee-for-service businesses. With demographic trends
for real estate expected to remain strong for years to come,
travel trends expected to continue to improve, and $2 billion
per year in free cash flow, we look forward to the future with
confidence."
Second quarter 2002 Adjusted EPS includes $0.38 from continuing
operations and $0.02 of income from discontinued operations
consisting of our recently sold National Car Parks business. The
increased Adjusted EPS forecast of $1.45 for full year 2002
includes $1.40 from continuing operations and $0.05 of income
from discontinued operations.
Reconciliation of Second Quarter
Reported EPS to Adjusted EPS
Adjusted EPS excludes items that are of a non-recurring or
unusual nature, including acquisition and integration related
costs consisting primarily of the non-cash amortization of the
pendings and listings intangible asset from real estate
brokerage acquisitions, securities litigation costs and, in
2001, Homestore.com-related items. Adjusted EPS is a non-GAAP
(generally accepted accounting principles) measure, but the
Company believes that it is useful to assist investors in
gaining an understanding of the trends and results of operations
for the Company's core businesses. Adjusted EPS should be viewed
in addition to, and not in lieu of, the Company's reported
results. The following table reconciles Reported EPS from
Continuing Operations to Adjusted EPS, identifying the items
reflected in reported results that are considered to be of an
unusual or non-recurring nature for purposes of deriving
Adjusted EPS.
Recent Developments
The Company had several important accomplishments in the second
quarter of 2002:
* Fully funded the remaining principal securities class
action litigation liability using $1.2 billion in cash.
* Acquired NRT Incorporated, the largest residential real
estate brokerage firm in the United States, for approximately
$230 million in Cendant common stock, plus the assumption and
subsequent repayment of approximately $320 million of net debt.
NRT subsequently acquired Arvida Realty Services, the largest
residential real estate brokerage firm in Florida, for
approximately $160 million in cash.
* Completed the sale of our National Car Parks subsidiary
for approximately 820 million pounds sterling (approximately
$1.2 billion) in cash. This resulted in a non-cash after tax
loss on the sale of discontinued operations of $256 million, or
$0.24 per share, substantially related to foreign currency
translation losses, which were previously recorded in
stockholders' equity.
* Completed the acquisition of Trendwest Resorts, Inc., a
leading timeshare developer, for approximately $900 million in
Cendant common stock plus the assumption and subsequent
repayment of approximately $90 million of net debt.
* Repurchased approximately $400 million face amount of our
zero coupon senior convertible contingent notes (CODES) due
February 2021 and approximately $80 million of our 7-3/4% notes
due December 2003, thereby reducing total net debt to $5.4
billion and removing approximately 13 million shares of
potential future equity dilution. This resulted in an after tax
extraordinary loss of approximately $27 million, or $0.02 per
share, related to the early extinguishment of debt.
Balance Sheet and Other Items
* As of June 30, 2002, the Company had approximately $500
million of cash and cash equivalents and $5.8 billion of debt
and preferred minority interest. In addition, the Company has
$863 million of mandatorily convertible Upper DECS securities
outstanding.
* As of June 30, 2002, the net debt to total capital ratio
was 35%. The ratio of Adjusted EBITDA to net non-program related
interest expense was 13 to 1 for second quarter 2002.
* As of June 30, 2002, the Company had undrawn credit
facilities of $2.6 billion (not including undrawn credit
facilities of $1.6 billion related to our PHH subsidiary).
* Weighted average common shares outstanding, including
dilutive securities, were 1.05 billion for second quarter 2002
compared with 905 million for second quarter 2001. The increase
was primarily from the issuance of common shares in connection
with the acquisitions of Galileo, Trendwest and NRT.
* As of June 30, 2002, the Company has a working capital
deficit of close to $800 million.
2002 Quarterly Outlook
The Company projects Adjusted EPS from continuing operations of
$0.42 for the third quarter of 2002 compared with $0.29 for
2001; $0.29 for the fourth quarter of 2002 compared with $0.21
for 2001; and $1.40 for full year 2002 compared with $0.96 for
2001. Adjusted EPS excludes results from discontinued operations
(National Car Parks) totaling $0.05 in 2002 and $0.09 in 2001.
Cendant Corporation is primarily a provider of travel and
residential real estate services. With approximately 70,000
employees, New York City-based Cendant provides these services
to businesses and consumers in over 100 countries.
More information about Cendant, its companies, brands and
current SEC filings may be obtained by visiting the Company's
Web site at http://www.cendant.comor by calling 877-4-INFOCD
(877-446-3623).
CHIVOR SA: Wins Approval to Hire Ordinary Course Professionals
--------------------------------------------------------------
Chivor S.A. E.S.P., sought and obtained authority from the U.S.
Bankruptcy Court for the Southern District of New York to employ
professionals in the ordinary course of business without the
submission of separate employment applications, affidavits, and
the issuance of separate orders for each individual
professional.
The services to be rendered by these ordinary course
professionals are not connected to the Debtor's chapter 11 case,
but include legal services with regard to specialized areas of
the law. The Court likewise authorized the Debtor to employ
other professionals in the ordinary course of business such as
real estate appraisers, brokers, auditors, actuaries and leasing
agents. The Debtor believes that the fees payable to the
Ordinary Course Professionals will not exceed, in the aggregate,
$18,000 per month.
The Debtor is a corporation (sociedad anonima) and public
services enterprise organized and existing under the laws of the
Republic of Colombia and is the fourth largest electric power
generator in Colombia. The Company, which owns the third largest
hydroelectric power generator station, located in east central
Colombia filed for chapter 11 protection on July 6, 2002. Howard
Seife, Esq., and N. Theodore Zink, Jr., Esq., at Chadbourne &
Parke LLP represent the Debtor in its restructuring efforts. As
of May 30, 2002, the Debtor listed $588,624,000 in assets and
$349,376,000 in debts.
COMDISCO INC: Applies for SEC Qualification of Trust Indentures
---------------------------------------------------------------
Comdisco, Inc., and its debtor-affiliates submitted their
applications for qualification of trust indentures to the
Securities and Exchange Commission on June 20, 2002.
The securities to be issued under the indentures are:
A. Variable Rate Senior Secured Notes due 2004 in the aggregate
amount of $400,000,000; and
B. 11% Subordinated Secured Notes due 2005 in the aggregate
amount of up to $500,000,000.
The salient terms and provisions of both applications are:
(a) Approximate date of proposed public offering: Upon the
Effective Date under the Plan, presently anticipated to be
on or about August 13, 2002;
(b) The Notes will be secured by a security interest in all
of the issued and outstanding capital stock of New Leasing
Company and New Ventures Company, a direct wholly-
owned subsidiary of New Leasing Company, "New Ventures,"
and in all other U.S. entities directly owned by either of
the Applicants. Under the Plan, on the Effective Date, or
as soon as practicable, the Notes will be issued to
holders of allowed Class C-4 Claims, consisting of general
unsecured claims against the Debtors, in partial
satisfaction of their claims against the Debtors;
(c) Directors and Executive Officers as of the Effective Date.
As of the Effective Date, the board of directors of the
Company initially will consist of five members. The
Official Committee of Unsecured Creditors will be
entitled to appoint four directors and the Chief Executive
Officer, who will be Chairman of the board of directors,
will be the fifth director. The board of directors of
NLC will consist of directors as determined by the
Company on the Effective Date;
(d) Principal Owners of Voting Securities.
Name Voting Security
---- ---------------
Nicholas K. Pontikes 22,850,447 shares of Common Stock
15.18% of Common Stock
Company Information regarding each person
owning 10% or more of the voting
securities of the Company will be
provided by amendment to this
application
New Leasing Information regarding each person
Company owning 10% or more of the voting
securities of the Company will be
provided by amendment to this
application
(e) Under the Plan, holders of allowed Class C-4 Claims will
receive a pro rata share, based on the respective amounts
of their claims, of New Common Shares to be issued and
outstanding following the Effective Date. For purposes of
the following calculations, the Applicants have assumed
that the total amount of the allowed Class C-4 Claims will
be $4,057,081,334. The Debtors estimate, however, that
the equity value of the New Common Shares will be
approximately $528,100,000, approximately 13.0% of the
total amount of allowed Class C-4 Claims;
(f) The initial distribution with respect to allowed Class C-4
Claims will be made only to the holders of allowed Class
C-4 Claims that have been allowed prior to the Effective
Date. Once the total amount of the allowed Class C-4
Claims has been determined, the shares of New Common
Shares and the Notes held in the Reserve will be
distributed pro rata on a quarterly basis among the
holders of the allowed Class C-4 Claims;
(g) The current holders of Existing Comdisco's Common Stock
are entitled to one vote for each share held of record on
all matters voted upon by stockholders, and a majority
vote is required for all action to be taken by
stockholders. Cumulative voting of shares is prohibited.
No holder of any other securities of Existing Comdisco is
entitled to vote on matters submitted to a vote of
stockholders. The voting rights of the New Common Stock of
the Company issued on the Effective Date will be identical
to the voting rights of Existing Comdisco's Common Stock.
Under the Plan, Existing Comdisco's existing Common Stock
will be cancelled as of the Effective Date. The
anticipated holder of New Leasing Company's Common Stock,
the Company, is anticipated to be entitled to one vote for
each share held of record on all matters voted upon by
stockholders, and a majority vote is anticipated to be
required for all action to be taken by stockholders. No
holder of any other securities of New Leasing Company is
anticipated to be entitled to vote on matters submitted to
a vote of stockholders. The voting rights of New Leasing
Company's Common Stock on and after the Effective Date
will be identical to the voting rights of New Leasing
Company's Common Stock;
(h) An "Event of Default" occurs under the Indenture if:
1. the Applicants default in the payment when due of
interest on the Notes and such default continues for a
period of 30 days;
2. the Applicants default in the payment when due of
principal of or premium, if any, on the Notes whether
at maturity, upon redemption;
3. the Applicants or certain of their subsidiaries fail
to comply with the restrictions concerning
modifications to corporate existence or mergers and
consolidations;
4. the Applicants fail to observe or perform any other
covenant, representation, warranty or other agreement
under the Indenture or the Notes for 60 days after
written notice to the Applicants by the Trustee or the
Applicants and the Trustee by the holders of at least
25% in aggregate principal amount of the Notes then
outstanding;
5. a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness for
money borrowed by the Applicants whether the
indebtedness or guarantee now exists, or is created
after the date of the Indenture. The default results
in the acceleration of the indebtedness prior to its
express maturity. In each case, the principal
amount of the indebtedness, together with the principal
amount of any other indebtedness where the maturity
has been so accelerated, aggregates $25,000,000
or more if the indebtedness is not paid or the
acceleration is not annulled within 10 days after
written notice to the Applicants of the acceleration;
6. the rendering of a final judgment or final judgments
for the payment of money are entered by a court or
courts of competent jurisdiction against either the
Company or New Leasing Company and the judgment remain
undischarged for a period of 60 days, provided that the
aggregate of all the undischarged judgments exceeds
$10,000,000;
7. the Company or New Leasing Company within the meaning
of any applicable U.S. Federal or State or other
applicable bankruptcy, insolvency, reorganization or
other similar law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief
against it in an involuntary case;
(iii) consents to the appointment of a custodian of it
or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of
its creditors;
(v) admits in writing its inability to pay its debts
as the same becomes due; or
(vi) generally is not paying its debts as they become
due; or
8. a court of competent jurisdiction enters an order or
decree under any applicable U.S. Federal or State or
other applicable bankruptcy, insolvency, reorganization
or other similar law that:
(i) is for relief against the Company or New Leasing
Company in an involuntary case;
(ii) appoints a custodian of the Company or New
Leasing Company or for all or substantially all
of the property of the Company or New Leasing
Company; or
(iii) orders the liquidation of the Company or New
Leasing Company other than pursuant to the Plan;
and the order or decree remains unstayed and in
effect for 60 consecutive days.
(i) The release of any Collateral from the terms of the
Indenture and of the Collateral Documents or the release
of the liens created by the Collateral Documents, or the
termination of the Collateral Documents, will not be
deemed to impair the lien on the Collateral in
contravention of any Indenture provision if and to the
extent the Collateral or liens are released, or the
Collateral Documents are terminated, pursuant to the
Indenture and the applicable Collateral Documents. The
Trustee and each of the holders acknowledge that a release
of Collateral or a lien strictly in accordance with the
terms of the Collateral Documents will not be deemed for
any purpose to be an impairment of the lien on the
Collateral in contravention of the terms of the Indenture.
(j) The Indentures will be discharged and will cease to be of
further effect as to all Notes issued, when:
1. either:
(i) all Notes that have been authenticated, except
lost, stolen or destroyed Notes that have been
replaced or paid and Notes for whose payment
money has been deposited in trust and have been
delivered to the Trustee for cancellation; or
(ii) all Notes that have not been delivered to the
Trustee for cancellation have become due and
payable by reason of the making of a notice of
redemption or will become due and payable within
one year and the Issuers have irrevocably
deposited or caused to be deposited with the
Trustee as trust funds in trust solely for the
benefit of the holders, cash in U.S. dollars,
non-callable government securities, in amounts
as will be sufficient without consideration of
any reinvestment of interest, to pay and
discharge the entire indebtedness on the Notes
not delivered to the Trustee for cancellation
for principal, premium and accrued interest to
the date of maturity or redemption;
2. no default or Event or Default can have occurred and
be continuing on the date of the deposit or will occur
as a result of the deposit and the deposit will not
result in a breach or violation of, or constitute a
default under, any other instrument to which either of
the Applicants is a party or by which either of the
Applicants is bound;
3. the Applicants have paid or caused to be paid all
sums payable by them under the Indenture; and
4. the Applicants have delivered irrevocable written
instructions to the Trustee under the Indenture to
apply the deposited money toward the payment of the
Notes at maturity or the redemption date, as the case
may be.
Full-text copies of the Applications for Qualification of Trust
Indentures are available from the Securities and Exchange
Commission at no charge at:
Indenture for 11% Subordinated Secured Notes due 2005:
http://www.sec.gov/Archives/edgar/data/722487/000095017202001364/ch328211.tx
t
and
Indenture for Variable Rate Senior Secured Notes due 2004:
http://www.sec.gov/Archives/edgar/data/722487/000095017202001363/s313194.txt
(Comdisco Bankruptcy News, Issue No. 31; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
CONCERO INC: Will Not Further Refute Nasdaq Delisting Decision
--------------------------------------------------------------
Concero Inc. (Nasdaq:CERO), a provider of interactive television
solutions, has postponed its scheduled release of financial
results and conference call for the second quarter ended June
30, 2002.
The Company will reschedule its quarterly conference call after
release of its results for the second quarter.
Additionally, the Company has decided not to further contest the
Nasdaq Staff Determination that the Company fails to meet
certain requirements for continued listing on the Nasdaq
National Market. The Company expects that its shares will trade
on the Over-the-Counter Bulletin Board after delisting from the
Nasdaq National Market.
Concero Inc. (Nasdaq:CERO), is a provider of interactive
television solutions. Concero provides systems integration
consulting services that enable cable operators, content
providers and application providers to deliver compelling
entertainment-on-demand services and other VOD-enabled
applications and intends to provide related software products.
Our solutions create engaging and entertaining user experiences
and drive profitable, on-demand interactive services.
Concero possesses unique delivery capabilities for supporting
interactive television solutions. In conjunction with Motorola's
Horizon and Scientific-Atlanta's CreativEdge developer programs,
Concero operates state-of-the-art integration facilities with
head-ends, set-top boxes, VOD servers, operating systems and
middleware from Motorola, Scientific-Atlanta, SeaChange,
Concurrent and other major technology providers. These assets
combined with our dedicated and experienced team of interactive
television consultants and software engineers offer customers
substantial cost savings and rapid time-to-market benefits.
CORRPRO: Continues Talks with Lenders re Covenant Noncompliance
---------------------------------------------------------------
Corrpro Companies, Inc. (Amex: CO), the leading provider of
corrosion protection engineering services, systems and
equipment, reported preliminary unaudited revenue and net income
results for its fiscal year ended March 31, 2002.
Based on preliminary unaudited results, the Company expects to
report revenues in the range of $171.7 million to $172.7
million. Operating income, excluding the impact related to the
Australian subsidiary's accounting irregularities and associated
write down of its value, for the twelve months ended March 31,
2002 is expected to be in the range of $6.4 to $7.4 million. As
set forth below, the Company expects to incur charges related to
the Australian subsidiary's accounting irregularities, and
associated write down of its value, of up to $12 million. The
Company expects that, of the $12 million aggregate charge, $3.4
million of it was incurred in the fiscal year ended March 31,
2001 and the remainder is attributable to the fiscal year ended
March 31, 2002. In addition, the Company expects to take a non-
cash charge for the value of certain deferred tax assets. The
Company estimates that such additional charges would be in the
range of $10.2 to $11.2 million. Accordingly, the Company
expects that its net loss for the fiscal year ended March 31,
2002 would be in the range of $19.2 to $20.2 million.
The above information is based on the investigation to date of
previously reported accounting irregularities at its Australian
subsidiary involving the overstatement of revenues and the
understatement of expenses. Further, as previously announced,
to the extent that the accounting irregularities materially
affect previously filed financial statements, the Company
expects that it will restate its audited financial statements
for its fiscal year which ended March 31, 2001 as well as its
previously released unaudited financial information for the
first nine months through December 31, 2001 of its fiscal year
ended March 31, 2002. Accordingly, the financial statements for
those affected periods and accompanying auditor's report should
no longer be relied upon.
As previously reported, commenting on the Company's current
fiscal year, Joseph W. Rog, Chairman, CEO, and President stated,
"Revenues for April and May 2002 met our expectations and
operating income exceeded internal projections. While the
anticipated lower revenues and unusual consulting costs are
impacting the bottom line, we have achieved a gross margin
improvement and reduced our operating expenses compared with the
prior-year period."
In addition, as previously reported, the Company is not in
compliance with certain provisions of its existing senior
secured credit agreement and its senior note facility. The
Company continues to hold discussions with its bank group and
the holder of its senior notes concerning the Company's non-
compliance and its plans for operational changes and debt
reduction. With the assistance of strategic financial advisors,
the Company has developed and is implementing plans for
operational changes and debt reduction, which form the basis for
ongoing discussions with its senior lenders concerning
previously reported covenant violations and other alternatives
for financing the business on an ongoing basis. There can be no
assurance, however, that the Company will be able to complete
negotiations or amendments to its existing loan agreements, and
failure to do so will have a material adverse effect on the
Company's liquidity and financial condition and may have an
impact on its ability to operate as a going concern.
The Company had filed a Notification of Late Filing with the
Securities and Exchange Commission relating to its Form 10-K for
the year ended March 31, 2002 which extended the filing date for
the Form 10-K to July 16, 2002. As previously reported by the
Company, after the discovery of accounting irregularities at the
Company's Australian subsidiary, voluntary administration
proceedings were filed in Australia on behalf of the subsidiary,
which delayed the Company's ability to prepare financial
statements for the subsidiary. In addition, also as previously
reported, the Australian Securities and Investments Commission
and the Audit Committee of the Company's Board of Directors are
investigating the accounting irregularities. As a consequence
of the ASIC investigation, the Company and its auditors have
only recently been able to access certain records of the
subsidiary which were in ASIC's possession, which has further
delayed the completion of the Company's financial statements for
the fiscal year ended March 31, 2002, and the related audit and
other disclosures. The audit of the financial statements
remains in process and is yet to be completed. Further, the
findings of the Audit Committee's investigation of the
accounting irregularities at the Australian subsidiary could
impact the disclosures to be included in the Company's Annual
Report on Form 10-K.
As a consequence of these events, the Company is unable at this
time to file certain portions, including its financial
statements, of its annual report on Form 10-K with the
Securities and Exchange Commission. Upon completing its
financial statements, the related audit and other disclosures
necessary to comply with these respective Items, the Company
will file these portions by amendment, which the Company expects
to be able to file by July 31, 2002; there can be no assurance
that it will be able to do so.
Corrpro, headquartered in Medina, Ohio, with over 60 offices
worldwide, is the leading provider of corrosion control
engineering services, systems and equipment to the
infrastructure, environmental and energy markets around the
world. Corrpro is the leading provider of cathodic protection
systems and engineering services, as well as the leading
supplier of corrosion protection services relating to coatings,
pipeline integrity and reinforced concrete structures.
COVANTA ENERGY: Court Okays Louglin Meghji as Business Advisors
----------------------------------------------------------------
Judge Blackshear authorizes Covanta Energy Corporation and its
debtor-affiliates to employ and retain Louglin Meghji as their
business advisors effective April 1, 2002. Furthermore, Judge
Blackshear rules that all compensation and reimbursement of
expenses to be paid to Louglin shall be subject to prior
approval of the Court in accordance with the requirements under
Section 330 and 331 of the Bankruptcy Code the Court Order. The
terms of the Monthly Fees, Out-of-Pocket Expenses and Value
Added Adjustment defined in the Engagement Letter shall not be
subject to challenge except under the standard review provided
in Section 328(a) of the Bankruptcy Code.
* * *
As previously reported, LM will be:
(a) assisting the Debtors in preparing, reviewing, and
evaluating business and financial forecasts, including
short-term cashflow projections;
(b) advising and assisting the Debtors in negotiations
with existing and potential new lenders;
(c) assisting the Debtors with the implementation and
management of non-core asset divestiture program;
(d) assisting the Debtors with the refinancing and/or
restructuring of debt obligations;
(e) advising the Debtors in developing potential solutions
for any financial and operational issues;
(f) advising the Debtors in explaining and evaluating
various business and financial restructuring
alternatives;
(g) such other, valuation, and/or financial advisory as
may be mutually agreed upon by the Debtors and LM;
(h) testifying in connection with court proceedings as
reasonably requested by the Debtors; and
(i) assisting the Debtors with implementation of an over-
head reduction program.
Mr. Horowitz relates that LM's rates are:
Principals $550/hour
Managing Directors $450/hour
Directors $350/hour
Associates $250/hour
Paraprofessionals $100/hour
(Covanta Bankruptcy News, Issue No. 9; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DANA CORP: Restructuring Actions Yield Improved Q2 2002 Earnings
----------------------------------------------------------------
Dana Corporation (NYSE: DCN) announced improved second-quarter
earnings, largely due to the benefits of its restructuring
actions.
Second-quarter sales were $2.8 billion, comparable to sales for
the same period last year. Net income totaled $52 million. This
compares with net income of $14 million during the second
quarter of 2001, which included goodwill amortization of $8
million after tax.
Net income this quarter included $42 million of charges related
to Dana's restructuring plan announced last October. These
charges were partially offset by a $27 million gain from the
sale of selected subsidiaries of its Dana Credit Corporation
leasing services unit.
Exclusive of the non-recurring items, Dana's net income totaled
$67 million, or 45 cents per share, in line with its previously
announced expectations. Net income during the second quarter of
2001, excluding non- recurring items, was $26 million, or 17
cents per share.
"Operating income for the quarter doubled in comparison to last
year on essentially the same level of sales. These improved
results are primarily attributable to our restructuring
initiatives," said Dana Chairman and CEO Joe Magliochetti. "This
is particularly evident in our automotive aftermarket and engine
parts operations, which have improved their performance
significantly this quarter.
"In addition, light-duty and commercial-vehicle production
remained strong during the quarter, exceeding our projections
and further supporting our results," he said. "We also benefited
from stronger earnings from affiliates and currency effects."
First-Half Recap
Dana's six-month consolidated sales were $5.3 billion, down
slightly from $5.5 billion in the same period last year.
Excluding non-recurring items, net income was $95 million, or 63
cents per share, compared with $27 million, or 18 cents per
share, in 2001.
The company adopted new accounting standard FAS 142, which
resulted in an after-tax charge of $220 million during the first
quarter of 2002. Dana also recorded $79 million in restructuring
charges during the first six months of the year and benefited
from a $27 million gain on the sale of certain DCC subsidiaries.
As a result, the reported net loss for the first six months of
2002 was $177 million, or $1.19 per share. In the same period
last year, the reported net loss was $13 million, or 8 cents per
share, including net, non- recurring charges of $40 million, or
26 cents per share, and goodwill amortization of $15 million
after tax.
Restructuring Update
During the second quarter, Dana recorded after-tax charges of
$42 million related to its $445 million restructuring plan
announced last October, bringing the total charges recorded to
date to $358 million, or approximately 80 percent of the total
anticipated program.
Among the elements of the restructuring are a workforce
reduction of more than 15 percent and the planned closure or
consolidation of more than 30 facilities. Through June 30, Dana
had reduced its permanent workforce by approximately 8 percent,
closed 14 facilities, and announced plans to close 14 others.
The company expects to record substantially all of the charges
and complete most of the actions related to this restructuring
plan by the end of 2002.
Strong Cash Flow
During the second quarter, the company reported strong cash flow
from operations due to improved working capital efficiencies and
tight control of capital expenditures.
"Our operations continue to make outstanding progress on the
working-capital front," said Chief Financial Officer Bob
Richter, "and we now expect the total reduction in working
capital for the year to be at least $200 million. This, coupled
with other cash from operating activities, divestitures, and
asset sales, should allow us to reduce debt by more than $500
million this year. This is even after allowing for up to $300
million in cash payments for restructuring."
Outlook
Commenting on the company's outlook for the balance of the year,
Mr. Magliochetti said, "With regard to our markets, we now
believe 2002 North American light-vehicle production will be
about 15.8 million units. This reflects the stronger-than-
expected first-half production, combined with our cautious
forecast for volumes in the second half. Production is typically
lower in the third and fourth quarters, and we remain concerned
that significant sales may have been pulled forward as a result
of light-vehicle incentives.
"On the commercial vehicle side, we now expect North American
Class 8 vehicle builds to be 150,000 to 155,000 units for the
full year," he added. "We saw about 80,000 units built during
the first half of the year, largely due to pre-buying of Class 8
trucks. We expect that this will continue into the third
quarter, with fourth-quarter demand being decidedly weaker.
"With all of this said, we expect to continue realizing benefits
from our restructuring efforts," Mr. Magliochetti said. "As a
result, we look to have a solid second half, with earnings per
share in the range of 50 to 55 cents before non-recurring items.
And, we expect to be very well positioned for a strong 2003."
Dana Corporation is a global leader in the design, engineering,
and manufacture of value-added products and systems for
automotive, commercial, and off-highway vehicle manufacturers
and their related aftermarkets. The company employs
approximately 70,000 people worldwide. Founded in 1904 and based
in Toledo, Ohio, Dana operates hundreds of technology,
manufacturing, and customer service facilities in 34 countries.
The company reported sales of $10.3 billion in 2001.
As reported in the March 1, 2002 edition of Troubled Company
Reporter, Standard & Poor's has assigned a BB rating to Dana's
new $250 million debt issue.
DIGEX INC: Falls Below Nasdaq Minimum Listing Requirements
----------------------------------------------------------
Digex, Incorporated (Nasdaq: DIGX) has received correspondence
from Nasdaq indicating that the price of the Company's common
stock has closed below the minimum USD$1.00 per share
requirement for continued inclusion under Nasdaq Marketplace
Rule 4450(a)(5), and therefore in accordance with Marketplace
Rule 4450(e)(2), it will have until September 5, 2002 to regain
compliance.
According to the Nasdaq rule, compliance will entail the bid
price of the Company's common stock to close at USD$1.00 per
share or more for a minimum of ten consecutive trading days
before September 5, 2002. Under certain circumstances, to ensure
that the Company can sustain long-term compliance, Nasdaq may
require that the closing bid price equals USD$1.00 per share or
more for more than ten consecutive trading days before
determining the Company complies.
Digex currently expects to apply for transfer to The Nasdaq
SmallCap Market. To transfer, the Company must satisfy the
continued inclusion requirements for the SmallCap Market, which
makes available an extended grace period for the minimum
USD$1.00 bid price requirement. If the transfer application is
approved, the Company will be afforded the 180-calendar day
SmallCap Market grace period, or until December 4, 2002, to
demonstrate compliance. The company may also be eligible for an
additional 180 calendar day grace period provided that it meets
the initial listing criteria for the SmallCap Market under
MarketPlace Rule 4310(C)(2)(A). If Nasdaq determines that the
Company does not qualify for an extension under MarketPlace Rule
4310(C)(2)(A), the Company will be provided with written
notification that its securities will be delisted. At that time,
the Company may appeal the Staff Determination to delist its
securities to a Nasdaq Listing Qualification Panel.
Digex is a leading provider of managed services. Digex
customers, from mainstream enterprise corporations to Internet-
based businesses, leverage Digex's services to deploy secure,
scaleable, high performance e-Enablement, Commerce and
Enterprise IT business solutions. Additional information on
Digex is available at http://www.digex.com
DUNDEE: S&P Says Asset Acquisition Plan Won't Affect BB+ Ratings
----------------------------------------------------------------
Standard & Poor's said Dundee Bancorp Inc.'s (BB+/Stable/--)
announced plans to acquire StrategicNova Inc., would not affect
the ratings or outlook on the company. StrategicNova is a
Montreal, Quebec-based load mutual fund company with around
C$2.4 billion in assets under management. The transaction, which
is expected to be completed primarily with equity, will see the
Caisse de depot et placement du Quebec (CDP) take an 18.3%
interest in Dundee's wealth management operations in exchange
for cash, its debt and 95% equity interest in StrategicNova.
Standard & Poor's views this transaction as strategic, as it
will increase the size of Dundee's mutual fund operations by
about 35%, bringing total mutual fund assets under management to
about C$9.5 billion, and it will bring in the StrategicNova
brand, state-of-the-art back-office systems, and the CDP with
its deep pockets as a new partner. The offset is StrategicNova's
business position has been in a state of decline, with assets
under management declining by 25% in the past two years.
EOS INT'L: Gets Extension of $6.5M Short-Term Notes Until Aug 14
----------------------------------------------------------------
Eos International, Inc. (OTCBB: EOSI), has secured an extension
of its $6.5 million of short term notes issued to DL Holdings I,
L.L.C. and Weichert Enterprises, LLC until August 14, 2002. The
short term notes were furnished as part of the company's
acquisition of Regal Greetings & Gifts Corporation last year and
had been due on July 15, 2002.
The agreement terms extend the maturity date of the short term
notes until August 14, 2002 and will allow Eos International to
continue to pursue additional sources of capital or alternate
financing sources for future strategic acquisitions and
repayment of the notes. The company also amended the warrants to
purchase company common stock issued to the holders and the
"put" and "call" provisions covering those warrants.
Eos International, Inc., is a company whose mission is to
acquire and grow consumer product companies. In July 2001, the
company acquired Discovery Toys, a leading direct seller of
educational toys, books and software. On December 17, 2001, Eos
International announced that it had completed its purchase of
Regal Greetings & Gifts, Inc., one of Canada's leading direct
selling organizations.
Discovery Toys is the leading direct seller of educational toys,
books and software and sells its products through approximately
30,000 Educational Consultants in the U.S. and Canada. Discovery
Toys offers more than 200 products and each product is tested to
ensure the highest standards of educational quality, play value,
durability and safety. Categorized by age level, each item is
hand-picked to grow with a child's natural interests,
development levels and evolving learning styles.
Regal Greetings & Gifts is one of Canada's leading direct
selling organizations with a mission to support, service and
provide unique, quality, value-priced products to Canadian
consumers through its more than 450,000 Independent Sales
Representatives. The Regal product line includes its high
quality greeting cards and gift wrap as well as innovative items
for personal and home use.
* * *
As reported in Troubled Company Reporter's May 24, 2002,
edition, Eos International Inc.'s independent auditors state in
their reports that the Company's operations are constrained by
an insufficient amount of working capital. At March 31, 2002,
the Company had working capital of $5,526,000. The Company has
experienced negative cash flows and net operating losses for the
three months ended March 31, 2002. Due to the seasonal nature of
the Company's business, the Company expects to generate positive
operating cash flows during the fourth quarter of 2002. However,
there can be no assurances that future income will be sufficient
to fund future operations. Eos has short term notes in the
amount of $3.0 million payable to Weichert Enterprises, LLC and
$3.5 million payable to DL Holdings I, LLC plus accrued interest
which become due May 15, 2002. The Company needed to raise
sufficient capital or arrange additional financing terms by May
15, 2002 to satisfy these obligations. The Company has
restrictions from lenders and certain note holders of its
subsidiaries that limit advances that Discovery Toys and Regal
may make to Eos to cover its corporate overhead and operating
expenses. There can be no assurance that operating cash flows
generated from future sales will be sufficient to fund the
Company's operations. For these reasons, there is uncertainty as
to whether the Company can continue as a going concern beyond
May 15, 2002. The Company's independent auditors indicated that
substantial doubt exists as to the Company's ability to continue
to operate as a going concern in their report included in the
Company's 2001 Annual Report filed on Form 10-K.
ENRON: Sanders, et. al., Want to Retain Quinn Emanuel as Counsel
----------------------------------------------------------------
Richard Sanders, Christian Yoder and Mary Hain, current or
former employees of Enron Corporation, and its debtor-
affiliates, want to retain the law firm of Quinn Emanuel
Urquhart Oliver & Hedges LLP effective May 7, 2002 to represent
them in connection with certain government and other
investigations relating to the Debtors and their energy trading
and marketing practices.
To date, Robert Juman, Esq., at Quinn Emanuel Urquhart Oliver &
Hedges LLP, in New York, tells the Court that Richard Sanders
and Christian Yoder have testified before Senate committees and
sub-committees. Mr. Yoder and Ms. Hain have also been asked by
the Attorneys General of California, Washington, and Oregon,
Federal Energy Regulatory Commission, and the Commodities
Futures Trading Commission to provide sworn testimony. Mr.
Yoder has provided sworn testimony to FERC, the CFTC and to
state Attorneys General.
As the Investigations proceed, Mr. Juman notes, additional
current and former employees of the Enron Companies may be asked
to participate in, and assist with, one or more of the
Investigations.
Mr. Juman justifies the relief sought citing a previous Court
Order approving Swidler Berlin Shereff Friedman LLP's employment
as Special Counsel for certain Enron Companies' employees in
matters relating to the Enron Companies' employee benefit plans
and other governmental investigations. Mr. Juman recounts that
the Order also made provision for the application for the
employment of professionals for other employees.
Because the testimony and other evidence the employees may offer
concern, for the most part, energy trading and marketing by the
Enron Companies in California, Mr. Juman says, a California
counsel would be best able to represent them. "We understand
that Swidler Berlin Shereff Friedman, LLP does not have an
office in California," Mr. Juman notes. Quinn Emanuel, on the
other hand, maintains an office at 867 South Figueroa Street,
10th Floor in Los Angeles, California. The firm has also five
other offices, including one in New York City.
As Special Employees' Counsel, Quinn Emanuel will be responsible
for:
(a) representing the Employees as witnesses in connection with
specific civil, criminal, and administrative
Investigations or other regulatory matters relating to the
Debtors involving any branches and agencies of the United
States Government, as well as similar matters initiated by
foreign or domestic state or local governmental entity;
(b) representing the Employees as witnesses in any litigation
or arbitration matters related to the Investigations;
(c) attending meetings with third parties on behalf of the
Employees related to the Investigations;
(d) appearing before the Bankruptcy Court, any district or
appellate courts, and the United States Trustee on behalf
of the Employees;
(e) facilitating and coordinating communications between the
Employees and other parties in connection with the
Investigations; and
(f) performing on behalf of the Employees the full range of
legal services normally associated with the
Investigations.
Mr. Juman assures the Court that Quinn Emanuel will work closely
with other professionals as may be retained by the Debtors and
others in connection with the Investigations in order to
facilitate the Employees' participation in the Investigations,
to protect the legal rights of the Employees, and to take the
necessary and appropriate steps to avoid any unnecessary
duplication of effort with the other professionals. Mr. Juman
emphasizes that Quinn Emanuel will not represent Richard
Sanders, Christian Yoder, or Mary Hain in matters that are
unrelated to the Investigations.
Except for Richard Sanders, Christian Yoder and Mary Hain are no
longer employed with the Debtors.
If Quinn Emanuel's employment is not approved, the Employees may
be unwilling or unable to obtain adequate representation in
connection with the Investigations. "This would, in all
likelihood, cause substantial delay to the progress of the
Investigations and possibly prevent the Investigations from
coming to a fair conclusion and thereby harm the Debtors'
reorganization efforts," Mr. Juman says.
For their services, Quinn Emanuel will charge by the hour at
these rates:
$355 to $550 for partners
$300 to $400 for counsel
$215 to $355 for associates
$135 for legal assistants
These rates are subject to adjustments. Furthermore, Quinn
Emanuel charges for reimbursement of out-of-pocket expenses
including photocopying, telephone and telecopier, toll and other
charges, travel expenses, expenses for "working meals,"
computerized research, transcription costs, and non-ordinary
overhead expenses like secretarial and other overtime.
According to Mr. Juman, Quinn Emanuel currently has outstanding
invoices to the Debtors in the total amount of $153,010, which
it agrees to waive if the Court grants this Application. Quinn
Emanuel has also devoted certain attorney time and expenses for
services rendered to date in connection with the Investigations.
If retained, Mr. Juman says, Quinn Emanuel will apply to the
Court from time to time for allowances of compensation and
reimbursement of expenses. In light of privilege and
confidentiality considerations, however, Quinn Emanuel reserves
the right to redact its time and expense records and to seek
authority from the Court to file the time and expense records
under seal.
Christopher Tayback, a member of Quinn Emanuel Urquhart Oliver &
Hedges LLP, informs Judge Gonzalez that a large number of the
firm's attorneys have worked for federal and state governments
as prosecutors or civil attorneys, including more than ten who
are former Assistant United States Attorneys. Quinn Emanuel
attorneys have extensive experience in representing individuals
and businesses in civil and criminal investigations by federal,
state, and local governments and administrative entities. In
addition to Mr. Tayback, Steven G. Madison will be representing
Messrs. Sanders and Yoder and Ms. Hain.
Mr. Tayback assures the Court that Quinn Emanuel does not hold
or represent an interest adverse to the Debtors or their estates
with respect to the matters on which the firm is to be retained,
except that certain attorneys may hold, or have held, a
relatively significant number of shares of preferred stock and
common stock of Enron.
"Neither Quinn Emanuel nor any attorney at the Firm is or was a
creditor or an insider of the Debtors, except that Quinn Emanuel
previously rendered legal services to the Debtors for which it
was compensated and, subject to receipt of a final order
approving the Application, Quinn Emanuel has agreed to waive
collection of $153,010 owed by the Debtors on account of legal
services previously rendered to, and charges and disbursements
incurred on behalf of, the Debtors prior to the Petition Date,"
Mr. Tayback asserts.
The firm acknowledges that it may have represented or currently
represents various creditors of the Debtors. But results of a
conflicts search show that this representation is only in
matters unrelated to the Debtors' cases and the Investigations.
Mr. Tayback insists that Quinn Emanuel is a "disinterested
person" as the term is defined in Section 101(14) of the
Bankruptcy Code. (Enron Bankruptcy News, Issue No. 36;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
Enron Corp.'s 9.125% bonds due 2003 (ENRN03USR1), DebtTraders
says, are quoted at a price of 12.5 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1
for real-time bond pricing.
ENRON CORP: Craig Dean, et. al., Sign-Up Dyer Ellis as Counsel
--------------------------------------------------------------
About 20 Managers, Directors, Traders and Specialists currently
employed by Enron Corporation, and its debtor-affiliates, or by
UBS Warburg Energy LLC earlier sought legal representation from
Swidler Berlin Shereff Friedman LLP. But they were instead
asked to retain a separate counsel. The Officers were able to
obtain the services of Jane F. Barrett, Esq., a shareholder in
Dyer Ellis & Joseph PC.
Dyer Ellis agreed to represent the Officers and the parties
immediately entered into retainer agreements.
The Officers are: Craig Dean, Phillip Allen, Robert Badeer, Sean
Crandall, Frank Ermis, Mark Fischer, Randall Gay, Jeff Gray,
Keith Holst, Tori Kuykendall, Matthew Lenhart, Matthew Motley,
James W. Reitmeyer, Diana Scholtes, Hunter Shively, Ryan M.
Slinger, Steve South, Michael J. Swerzbin, Jane Tholt and Jason
Wolfe.
Lawrence S. Sher, Esq., at Dyer Ellis & Joseph PC, in
Washington, D.C., emphasizes that the firm will not represent
any Officer who becomes the target of an Investigation. Mr.
Sher also clarifies that while the Debtors pay the bills, Dyer
Ellis' ethical obligations run directly and solely to the
Officers.
Dyer Ellis' hourly rates currently range from:
$275 to $450 for partners
$225 to $335 for counsel
$140 to $240 for associates
$90 to $135 for legal assistants
The firm will also charge for reimbursement of out-of-pocket
expenses including photocopying, telephone and telecopier, toll
and other charges, travel expenses, expenses for "working
meals", computerized research, transcription costs, and non-
ordinary overhead expenses like secretarial and other overtime.
By this application, the Officers ask the Court to authorize the
Debtors to retain Dyer Ellis & Joseph to represent them in
connection with the ongoing Investigations, nunc pro tunc to May
1, 2002.
Jane F. Barrett, Esq., assures the Court that Dyer Ellis neither
holds nor represents an interest adverse to the Debtors or the
estates with respect to the matters on which it is to be
retained, except that certain attorneys may hold, or may have
held, a relatively insignificant number of shares of common or
preferred stock of Enron Corp. (Enron Bankruptcy News, Issue No.
36; Bankruptcy Creditors' Service, Inc., 609/392-0900)
EQUUS CAPITAL: S&P Further Junks Ratings on Class B & C Notes
-------------------------------------------------------------
Standard & Poor's lowered its ratings on the class A-2, B, and C
notes issued by Equus Capital Funding Ltd., an arbitrage CBO
transaction originated in June of 2000. At the same time, the
triple-'A' rating on the class A-1 notes is affirmed based on a
financial guarantee insurance policy issued by MBIA Insurance
Corp. The ratings on the class A-2, B, and C notes were
previously lowered on February 20, 2002.
The lowered ratings reflect factors that have negatively
affected the credit enhancement available to support the rated
notes since the February 2002 rating action was taken. These
factors include a continuing par erosion of the collateral pool
securing the rated notes and the fact that the transaction will
be significantly over-hedged in a LIBOR-down environment as the
class A notes principal balances amortize more quickly than the
notional balance on Equus Capital Funding Ltd.'s swap agreement.
Standard & Poor's notes that $42.32 million (or approximately
18.9%) of the assets currently in the collateral pool come from
obligors rated 'D' or 'SD', and that more than $21.00 million in
asset defaults have occurred since the February 2002 rating
action. As a result of these asset defaults, the
overcollateralization ratios for the transaction have
deteriorated. As of the most recent monthly trustee report (May
31, 2002), the class A overcollateralization ratio was at
112.7%, versus the minimum required ratio of 128% and 120.78% at
the time of the February 2002 rating action. The class B ratio
(at 102.53% versus its minimum required ratio of 118.75%) and
the class C ratio (at 99.36% versus its minimum required ratio
of 102%) were also out of compliance. Standard & Poor's noted
that Equus Capital Funding Ltd. would face an event of default
if the class B overcollateralization ratio went below 100%.
Additionally, as the class A-1 and A-2 notes continue to
amortize due to mandatory redemptions caused by coverage test
failures, the transaction will likely become over-hedged. Equus
Capital Funding Ltd., has a swap with a current notional balance
of $141.6 million; this notional balance is not scheduled to
begin decreasing until after the November 2007 payment date. In
a LIBOR-down environment, the swap may become an increasing
liability as the transaction is forced to make hedge payments
based on a notional balance that is amortizing much more slowly
than the balance of Equus Capital Funding Ltd.'s floating-rate
liabilities.
Standard & Poor's has reviewed the results of current cash flow
runs generated for Equus Capital Funding Ltd., to determine the
level of future defaults the rated tranches can withstand under
various stressed default timing scenarios and LIBOR paths while
still paying all of the interest and principal due on the notes.
After comparing the results of these cash flow runs with the
projected future default performance of the assets currently in
the collateral pool, Standard & Poor's determined that the
ratings previously assigned to the class A-2, B, and C notes
were no longer consistent with the credit enhancement available,
resulting in the lowered ratings. Standard & Poor's will
continue to monitor the performance of the transaction to ensure
that the ratings assigned to the notes remain consistent with
the credit enhancement available.
RATINGS LOWERED
Equus Capital Funding Ltd.
Rating
Class To From Balance (mil $)
A-2 BB+ A 85.699
B CCC- BB- 17
C CC CCC+ 6
RATING AFFIRMED
Equus Capital Funding Ltd.
Class Rating Balance (mil $)
A-1 AAA 85.699
EXIDE TECHNOLOGIES: Court Approves Key Employee Retention Plan
--------------------------------------------------------------
Exide Technologies and its debtor-affiliates obtained Court
approval of its a key employee restructuring milestone incentive
and income protection program designed to stabilize Exide's key
management force and to accomplish and promote the Company's
successful reorganization.
As previously reported, the Debtors' senior management has
identified three important objectives of the Program:
A. Retain management and professional teams essential to driving
the implementation of the restructuring and Reorganization
process;
B. Retain management and professional teams essential to the
continuing operations of the business; and
C. Continue its income protection program (and extend its
benefits for certain employees) to create a stronger sense of
security through the Chapter 11 Cases.
The Program consists of three components:
A. the restructuring milestone incentive plan,
B. a discretionary reserve fund and
C. the income protection plan.
The Restructuring Milestone Incentive Plan
The Incentive Plan provides incentives to Key Employees to
remain with the Debtors throughout the Reorganization and to
implement the changes needed to successfully complete the
Reorganization. Under the Incentive Plan, participants can earn
an additional bonus equal to 10 - 100% of their annual base pay.
Approximately $940,000 has already been paid under the Incentive
Plan. These are the tiers and bonus eligibilities:
Participating Employee Incentive Payment
Tier (Number of Participants) (Annualized % of Salary)
---- -------------------------------- ----------------------
I Chief Executive Officer (1) 100%
II Direct Reports to CEO (5) 80%
III Vice Presidents (19) 20%-35%
IV Directors/Plant Managers (44) 15%-30%
V Managers/Other Key Employees (11) 10%-20%
Each Program participant received 25% of their Incentive Plan
bonus after completing the Debtors' 5-Year Business Plan. This
was one of the key steps to developing a restructuring process
and was completed and paid on March 1, 2002.
Each participant will receive the second 25% of their Incentive
Plan bonus if and only if they meet certain operational and
restructuring commitments that have been assigned to each
participant. The commitments are based upon operational
activities designated in the Debtors' 5-year business plan that
are to be completed on or before December 2002. Assuming
successful attainment of the goals set for the Key Employees,
the Debtor anticipates a payment effective date on or before
December 2002.
The final 50% of their Incentive Plan bonus will be paid to
eligible employees on the day the plan of reorganization is
approved. However, the plan of reorganization must be approved
on or before June 30, 2003 to qualify for the third phase of the
payment. Thus, because a portion of a participant's payout is
contingent upon continuing service through most-and hopefully
all-of the Reorganization process, the participant will be
motivated to stay with the Debtors and to assist in the Debtors'
efforts during these Chapter 11 Cases. Employees who voluntarily
terminate their employment prior to the Reorganization shall not
be entitled to receive any remaining portion of their bonuses
under the Program. Additionally, money allocated to the
Incentive Plan, but not used due to Key Employee attrition or
other extenuating circumstances will be transferred to the
Reserve Fund.
The Reserve Fund
A Reserve Fund will be available at the discretion of the Chief
Executive Officer of the Debtors to be used to encourage
retention of other employees whose actions benefit the
restructuring. This fund is generally open to employees who are
observed making substantial operating and restructuring
contributions. Approximately $113,000 has already been used for
payment of certain one-time discretionary bonuses paid for
extenuating circumstances and extraordinary work efforts. A
recommendation form must be submitted stating the amount that is
recommended and the action that the manager witnessed as a
rationale for distributing a one-time bonus. All recommendations
must be approved by the relevant Division President and must
have approval of the Chief Executive Officer of the Debtors.
The Debtors estimate that the cost of the Incentive Plan and
Reserve Plan combined during the course of the Chapter 11 Cases
will be approximately $4.563 million. Funds not used in
conjunction with the Incentive Plan will be transferred to the
Reserve Fund for use as an award for actions as previously
described.
The Income Protection Plan
In the ordinary course of their businesses, the Debtors have in
place an income protection program designed to retain employees
and induce new employees to accept employment. The benefits of
this plan are provided to salaried employees who are terminated
from the Debtors employ for reasons other than cause, i.e.,
position elimination or reduction in staff. Income Protection is
based on length of service, salary grade, and position within
the management structure and ceases when payments are provided
for a specific period or the former salaried Employee obtains
other employment with a salary equal to or greater than the
Income Protection amount during the Income Protection.
Therefore, Income Protection accrues only if and when an
employee is terminated without cause. Income Protection is made
up of two components:
A. The Debtors pay the former employee his or her entire salary
until the date that the former employee obtains new
employment or the expiration of the Income Protection Period.
If the former employee obtains new employment at a salary
less than his or her salary with the Debtors, the Debtors
will pay the difference between the former employee's salary
with the Debtors and the former Employee's new salary for the
Income Protection Period.
B. The Debtors will provide the former employee with health
benefits until the former employee obtains new employment
that provides health insurance or until the Income Protection
Period expires. (Exide Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
EXODUS COMMS: Has Until August 22, 2002 to Remove Actions
---------------------------------------------------------
The period within which Exodus Communications, Inc., and its
debtor-affiliates must file notices of removal under Bankruptcy
Rule 9027(a)(2) is extended to August 22, 2002. This extension
gives the Company additional flexibility in determining which,
if any, prepetition lawsuits against the estate should be
transferred and removed to the District of Delaware for
continued litigation and resolution. (Exodus Bankruptcy News,
Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900)
FLAG TELECOM: Court Fixes August 16, 2002 Claims Bar Date
---------------------------------------------------------
Judge Allan L. Gropper directs creditors holding or wishing to
assert claims against FLAG Telecom Holdings Limited and any of
its related Debtors to file their proofs of claim on or before
5:00 p.m. on August 16, 2002.
Holders of:
(1) Claims listed in the Schedules or any amendments thereto
that are not listed therein as "contingent,"
"unliquidated" or "disputed," where the holders thereof do
not dispute the amount or classification of the claim or
the Debtor designated as obligor;
(2) Claims on account of which a proof of claim already has
been filed, against the correct Debtor, with the Court;
(3) Claims previously allowed by order of the Court;
(4) Claims allowable under sections 503(b) and 507(a)(1) of
the Bankruptcy Code as expenses of administration;
(5) Claims of current officers or directors of a Debtor for
indemnification and/or contribution arising due to such
officer's or director's service to a Debtor;
(6) Claims of one Debtor against any of the other Debtors;
(7) Claims held by any direct or indirect non-debtor
subsidiary of FTHL assertable against any of the Debtors;
(8) Claims in respect of principal and accrued interest
arising under any public debt securities of the Debtors;
provided, however, that any such holder who wishes to
assert a claim against any of the Debtors other than in
respect of principal and accrued interest arising under
such public debt securities must file a proof of claim on
or before the Bar Date; and
(9) Claims held by any governmental unit (as that term is
defined in section 101(27) of the Bankruptcy Code;
are not required to file formal proofs of claim at this time and
are excluded from the General Bar Date Order.
Governmental Units
Governmental units must file proofs of claim on or before
October 12, 2002, for claims against FLAG Telecom Holdings Ltd.,
FLAG Ltd., FLAG Pacific USA Ltd., FLAG Atlantic Holdings Ltd.,
and FLAG Atlantic Ltd., and October 23, 2002, for claims against
FLAG Telecom Group Services Ltd., FLAG Telecom Ltd., FLAG
Telecom USA Ltd., FLAG Asia Ltd., and FLAG Atlantic USA Ltd.
Claims arising from the rejection of an unexpired lease or
executory contract of a Debtor must be filed by the later of (a)
the date provided in any order authorizing the Debtor to reject
such Agreement or, if no such date is provided, then 30 days
after the date of any such order; or (b) the Bar Date; provided,
however, that if an Agreement is not rejected by the Debtor
prior to the time such Agreement expires, then such Claim must
be filed by the later of (a) the Bar Date, or (b) 30 days after
such date of expiration.
Claims (other than Excluded Claims) with respect to any leases
or contracts of a Debtor not listed in the preceding paragraph
must be filed by the Bar Date.
Procedure
Each proof of claim form must specifically set forth the full
name and proper Chapter 11 case number of the applicable Debtor,
and a separate proof of claim must be filed with respect to each
Debtor against which a claim is asserted.
Creditors, except governmental units, that assert a claim
arising prior to the Petition Date, must file an original,
written proof of the claim so as to be received on or before
5:00 p.m. on August 16, 2002, by either:
(1) mailing the original proof of claim to:
Poorman-Douglas Corporation
C/O The United States Bankruptcy Court
Southern District of New York
PO Box 62
Bowling Green Station
New York, NY 1027 004-0062
or
(2) delivering the proof of claim by messenger or overnight
courier to the Court.
A proof of claim will be deemed timely filed only if the
original is actually received on the bar date. Proofs of claim
sent by facsimile or telecopy will not be accepted.
Disqualification
Any creditor who is required to file, but fails to file, a proof
of claim on or before the bar date will be barred, estopped and
enjoined from asserting this claim, and the Debtors and their
estate may be discharged from indebtedness or liability with
respect to the claim. Further, such holder may not be permitted
on account of such claim to vote on any plan or participate in
any distribution in the Debtors' Chapter 11 cases;
If the Debtors amend the Schedules subsequent to having given
notice of the bar date, the Debtors must give notice of any
amendment to the holders of claims affected thereby and the
holders will be afforded the later of (a) the Bar Date; or (b)
30 days from the date such notice is given to file proofs of
claim, if necessary, or be barred from doing so. (Flag Telecom
Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FRIEDE GOLDMAN: Halter Marine Auction Will Continue on July 23
--------------------------------------------------------------
Friede Goldman Halter, Inc. (OTCBB:FGHLQ), has continued the
auction process related to the Halter business unit, originally
scheduled to commence on July 16th, to the morning of July 23rd.
On the afternoon of July 23rd a hearing will take place on the
sale of the Halter unit to the successful bidder as determined
at the auction. This revised process keeps the sale of Halter on
schedule and the original timeline remains valid with the
closing expected to take place in mid-August.
"This process of ensuring all bids for a company the size of
Halter are compliant and balanced is complicated," said Jack
Stone, Principal, Glass & Associates, Inc. and Chief
Restructuring Advisor to FGH. "To make sure the auction is fair
and equitable to all parties, we will take the time needed to
ensure the final action is quick and the successful bid is
accepted."
Friede Goldman Halter is a leader in the design and manufacture
of equipment for the maritime and offshore energy industries.
Its core operating units are Friede Goldman Offshore
(construction, upgrade and repair of drilling units, mobile
production units and offshore construction equipment) and Halter
Marine, Inc., (a significant domestic and international designer
and builder of small and medium sized vessels for the
government, commercial, and energy markets).
GENERAL BINDING: Reports Improved Results for Second Quarter
------------------------------------------------------------
General Binding Corporation (Nasdaq: GBND) reported results for
the second quarter of 2002. While sales for the quarter were
slightly lower relative to last year due to ongoing weakness in
the economy, the Company continued to meet its profitability and
debt reduction targets during the quarter through the ongoing
successful implementation of its Operational Excellence Program.
Quarterly Results
Financial results for the second quarter included the following
highlights:
-- Sales in the quarter totaled $174 million, down 3.5%
from the second quarter of 2001, due primarily to continued
weakness in the sale of binding and laminating products and
commercial laminating films.
-- Gross profit margins, excluding $0.6 million of
inventory rationalization and write-down charges in 2002, were
flat or higher in each of the Company's four business groups,
resulting in a 40.4% margin for the Company in the quarter, up
from 38.4% last year. The bulk of the improvement in these
margins was attributable to continuing progress in certain
pricing and cost reduction initiatives related to the Company's
Operational Excellence Program.
-- Selling, service and administrative expenses totaled
$58.3 million, slightly higher than the $57.3 million for the
second quarter of 2001.
-- Interest expense for the quarter was $10.0 million,
slightly higher than the $9.3 million reported last year due to
a higher interest margin paid in 2002.
-- Restructuring and other special charges, including the
$0.6 million inventory charge noted above, totaled $1.7 million
($0.06 per share) for the quarter and were primarily related to
severance expenses. The prior year results included a special
charge of approximately $4.4 million (or $0.27 per share)
related to transition expenses for the Company's new Chairman
and former CFO as well as restructuring expenses related to the
closure of warehouse and administrative facilities in Germany.
-- Included in the results for the quarter was a benefit
arising from the settlement of a U.S. Federal income tax refund
claim of $0.9 million, or $0.06 per share.
-- Other income includes a net $0.8 million, or $0.03 per
share, cash interest receipt arising from the settlement of the
refund claim described above.
-- Net income reported for the quarter was $0.13 per share
(basic), compared to a net loss of $(0.27) per share last year.
Excluding special charges of $0.06 per share and the impact of
the tax adjustments of $(0.09) per share, net income for the
quarter was $0.10 per share. On a comparable basis, net income
for last year's second quarter was $0.15 per share, excluding
special charges of $0.27 per share and goodwill amortization of
$0.15 per share.
-- Cash flow, as measured by adjusted EBITDA (earnings
before interest, taxes, depreciation, amortization and certain
special items, all as specifically defined in the Company's
primary credit facility), was $21.2 million (12.1% of sales),
compared to adjusted EBITDA of $19.5 million (10.8% of sales)
for the same period last year.
-- Total debt, net of cash and investments, at the end of
the quarter was $341 million, an improvement of $17.8 million
from the beginning of the year and $9.8 million from March 31,
2002. As a result of this debt reduction, the Company has
reduced the size of its primary credit facility by $20 million
since the beginning of the year.
"We are pleased to see continued progress with our Operational
Excellence Program across all of our business units," said
Dennis Martin, Chairman of the Board, President and CEO. "As
expected, this program is beginning to generate meaningful
improvements in our gross margins as our pricing initiatives and
cost reduction measures gain traction. Each of the business
units has been implementing a comprehensive set of such
initiatives, with improved gross margins as a result. The
success in implementing this program has been the primary driver
in attaining our corporate profitability targets to date,
despite the weak sales environment we continue to face."
"Overall, our sales were slightly down from last year," he
continued, "and roughly flat to this year's first quarter. The
weak economy continues to restrain sales in certain capital-
related items such as our binding and laminating equipment, as
well as in commercial laminating films sold through the sluggish
publishing industry. However, the largest of our business units,
the Office Products Group, is seeing some continuation of the
promising improvement in day-to-day sales patterns that we noted
last quarter, and their sales were up 4% over last year and 5.5%
over this year's first quarter."
"We continue to expect that our sales will be affected by a very
uncertain economic environment over the second half of the year.
Nonetheless, we remain confident that we can continue to improve
the efficiency and profitability of our businesses as we move
into next year through the aggressive implementation of our
Operational Excellence Program."
Six-Month Results
For the first six months of 2002, sales were $347 million,
compared to $372 million for the same period last year. Net
income for the period was $0.10 per share, before special items
and tax adjustments totaling $0.34 per share and the cumulative
effect of the accounting change for SFAS No. 142 of $4.99 per
share (described below). For the same period last year, net
income, on a comparable basis, was $0.29 per share, excluding
special items of $0.37 per share and goodwill amortization of
$0.26 per share.
SFAS No. 142
As previously announced, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets," during the first quarter
of 2002. This standard subjects goodwill to an annual fair-value
based impairment test and eliminates the amortization of
goodwill for periods beginning with the quarter the standard was
adopted. During the second quarter, the Company completed its
final calculation of impairment and, as of January 1, 2002,
recorded an after-tax charge of $79 million, or $4.99 per share,
for the cumulative effect of adopting the standard. This charge
is non-cash and has no impact on the Company's operations.
GBC is an innovative global technology leader in document
finishing, film lamination, visual communications and paper
shredder products. GBC's products are marketed in over 115
countries under the GBC, Quartet, Ibico, and Pro-Tech brands,
and are used in the commercial, business, educational, home
office and governmental markets.
* * *
As reported in Troubled Company Reporter's March 7, 2002,
edition, Standard & Poor's affirmed its B+ rating on General
Binding Corp. on March 4, 2002.
General Binding's corporate credit rating is based on the
company's leveraged financial profile, mitigated by its service
revenues, and leading worldwide positions in office products
(including the GBC and Quartet brands), office equipment, and
thermal laminating films.
GLOBAL CROSSING: Settles Claim Dispute with Citizens Comms.
-----------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates ask the Court
for Court approval of a settlement agreement and release with
Citizens Communications Company and the disposition of related
real property leases.
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP in New York,
New York, recounts that on June 29, 2001, GCNA sold all of its
stock interests in companies that operated as incumbent local
exchange carriers (ILECs) to Citizens Communications Company.
Under the terms of the Sale, the Parties entered into a
transition services agreement under which Citizens agreed to
provide services to Global Crossing through the ILECs, and a
carrier service agreement under which Citizens agreed to
purchase long distance services from the Debtors. In the course
of conducting their businesses, the Parties have accumulated
claims against each other for nonpayment of amounts due and the
failure to provide certain services under the Operational
Arrangements through March 31, 2002. Many of these claims
relate to the Debtors' sale of the ILECs to Citizens, while
others arose under existing contractual relationships between
the Debtors and Citizens and from services provided by Citizens
to the Debtors.
According to Mr. Basta, Citizens asserts claims under the
Operational Arrangements in excess of $40,000,000 against the
Debtors for its failure to provide access and other utility
services; billing, engineering, and maintenance services; and
certain other services. On the other hand, the Debtors assert
claims under the Operational Arrangements in excess of
$28,000,000 against Citizens for nonpayment of long distance
transport services under the Carrier Service Agreement and a
variety of services provided under the Transition Services
Agreement. Citizens asserts that it has the right to set off
the amount they owe the Debtors prepetition against Citizens'
prepetition claims and that they have the right to recoup
certain of their prepetition claims against amounts the Debtors
owe Citizens postpetition. The Debtors dispute the extent, if
any, of Citizens' set-off rights and deny that Citizens has any
right of recoupment.
Prior to the ILEC Sale, Mr. Basta tells the Court that the
Debtors had leased properties to operate and manage their ILECs.
Pursuant to the ILEC Sale, Global Crossing and Citizens entered
into certain agreements with respect to the occupancy and
disposition of these properties. The Debtors have vacated and
no longer require certain of these properties and seek to
terminate their interests and obligations with respect to those
properties.
On June 18, 2002, after arm's length and good faith negotiations
subject to the approval of this Court, Mr. Basta states that the
Parties reached a Settlement Agreement and Release with respect
to the claims arising under the Operational Arrangements. The
salient terms of the Settlement Agreement and Carrier Amendment
are:
A. Set Off and Settlement of Claims: Under the Settlement
Agreement, the Debtors and Citizens agree to set off their
claims arising under the Operational Arrangements through
March 31, 2002. After giving effect to the set off, Citizens
will pay the Debtors $3,862,716 five business days after the
Court approves the Settlement Agreement, and Citizens will be
entitled to a prepetition claim of no more than $15,807,045.
With the exception of the capped claim of $15,807,045, the
Parties agree to release each other's prepetition claims
arising under the Operational Arrangements.
B. Payables Beginning April 1, 2002: Pursuant to a prior
agreement of the Parties and the Stipulation deeming Citizens
adequately assured of future performance, the Debtors are
obligated to pay all undisputed consolidated bills for
utility services within 14 days after those bills are
received by the Debtors. In addition, the Settlement
Agreement requires that both Parties pay to the other all of
their respective accounts receivable generated during the
period from April 1, 2002 through the Effective Date within 5
business days after the Effective Date. Because the Debtors
were largely current with Citizens, principally as a result
of the Debtors' compliance with the Stipulation and Order,
this provision of the Settlement Agreement will result in
Citizens paying substantial amounts to the estates and will
not result in significant cash outflows to Citizens from the
estates. For all other non-utility services accruing under
the Operational Arrangements on and after April 1, 2002, the
Parties will pay each other according to the terms of the
Operational Arrangements.
C. Lock Box: Prior to the execution of the Settlement Agreement
and pursuant to the Transition Service Agreement and the
Carrier Service Agreement, the Debtors billed and collected
payment from Citizens' ILEC customers. Customers of the
ILECs would deposit payments into a bank account under the
control of the Debtors. The Debtors would periodically sweep
the account but did not transfer the funds to Citizens. The
Settlement Agreement amends the mechanism for receiving the
payments of the ILEC customers to ensure that Citizens
maintains ownership, dominion, and control of the deposits.
Under the Settlement Agreement, customers will deposit
payments into a lock box account controlled by Citizens.
D. Real Estate: Global Crossing is the lessee of office space
located at 180 South Clinton Avenue, Rochester, New York
under a lease dated January 1, 1998 between GCNA and Three
City Centre Company. Contemporaneously with the ILEC Sale,
GCNA subleased a portion of the Clinton Office Space to
Citizens and pursuant to an assignment and assumption
agreement dated June 29, 2001, executed contemporaneously
with the ILEC Sale, GCNA agreed to assign the Clinton Lease
to Frontier Telephone of Rochester Inc., a Citizens
affiliate, by December 31, 2002. The Debtors no longer
require the Clinton Office Space and have vacated all the
space occupied by them in the premises.
In addition, contemporaneously with the ILEC Sale, GCNA
entered into a lease dated June 27, 2001 with Frontier
Telephone pursuant to which Global Crossing leased office
space at 111 Field Street, Rochester, New York. Due to the
significant reduction in the Debtors' work force and their
concomitant office consolidations, the Debtors no longer
require the Field Street Premises which they had vacated by
April 19, 2002.
The Carrier Amendment
Under the original Carrier Service Agreement, Mr. Basta avers
that Citizens committed to purchase long distance services
exclusively from the Debtors with respect to telecommunication
traffic that originated within the territories of the Citizens'
ILECs. In return, Global Crossing agreed to provide a credit of
$20,000,000 annually to Citizens for five years to apply to
their long distance charges. Citizens has the right to apply
the Annual Credit during the applicable contract year at its
discretion to fees, charges and expenses in lieu of cash
payments otherwise required by any long distance agreements
between Global Crossing and Citizens. The Settlement Agreement
provides for the execution of the Carrier Amendment, which
changes the terms of this relationship. Under the Carrier
Amendment:
* the Debtors immediately waive their right to be the
exclusive provider of long distance data services to
Citizens and agree to waive their right to be the exclusive
provider of long distance voice services by July 1, 2003;
* the Annual Credit is reduced to $15,000,000 for the year
commencing July 1, 2002 and $10,000,000 each year thereafter
for the remainder of the term of the Carrier Service
Agreement, which is extended to June 30, 2005; and
* Citizens guarantees that it will use a minimum of $2,700,000
of services each month under the Carrier Services Agreement.
If Citizens uses only the guaranteed minimum of $2,700,000
monthly, the reduction of the Annual Credit will improve the
Debtors' revenue margin over the life of the agreement. The
Debtors, however, anticipate that Citizens' monthly usage will
exceed $2,700,000, further increasing their revenue margin.
Mr. Basta contends that the Settlement Agreement is fair and
equitable and in the best interests of the Debtors' estates.
Pursuant to the Settlement Agreement, the Debtors receive from
Citizens an immediate cash influx of $3,862,716 and a guaranteed
minimum monthly usage guarantee of $2,700,000 for services
provided under the Carrier Service Agreement. In the light of
the potential risks attendant to Citizens' assertion of claims
against the Debtors, it is in the best interests of the Debtors'
estates to set off those claims in the manner agreed to under
the Settlement Agreement.
Mr. Basta notes that the Settlement Agreement resolves a number
of disputes between the Parties that could have lead to
litigation against the estates. Given the complex business
relationships between the Debtors and Citizens and the highly
intricate nature of the Parties' business transactions, any
litigation stemming from these relationships and transaction
would be complex and expensive and would require extensive
discovery, including document production and numerous
depositions. These undertakings would be an unnecessary drain
on the Debtors' monetary resources and divert the attention of
the Debtors' management and legal personnel from their
reorganization efforts.
Mr. Basta points out that the Settlement Agreement also
rationalizes the Debtors' current real estate needs. The
Debtors have vacated and no longer require the space they leased
pursuant to the Clinton Prime Lease and the Field Street Lease.
Therefore, it is within the Debtors' best business interests to
terminate any of their interests and obligations with respect to
these properties, as provided in the Settlement Agreement.
Mr. Basta claims that the Settlement Agreement stabilizes the
business relationship between the Debtors and Citizens. Absent
the Settlement Agreement, potentially beneficial transactions
between the Parties would be impeded by unresolved disputes.
Resolving the disputes via the Settlement Agreement will permit
the Parties to normalize their relationship in a manner that
will allow the Debtors to enjoy a stable revenue stream from its
future transactions with Citizens. (Global Crossing Bankruptcy
News, Issue No. 15; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
Global Crossing Holdings Ltd.'s 9.625% bonds due 2008 (GBLX3),
DebtTraders says, are quoted at 2.125 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX3for
real-time bond pricing.
GLOBAL PAYMENTS: Has $18MM Working Capital Deficit at May 31
------------------------------------------------------------
Global Payments Inc. (NYSE: GPN), announced results for the
fourth quarter and fiscal year ended May 31, 2002. Global's
financials are stated below on a GAAP basis and also on a
normalized basis. Management believes the normalized financials
more clearly reflect comparative operating performance because
current and prior year GAAP results include certain one-time
items, which are described below and on the attached
reconciliation schedules.
Normalized Results
For the fourth quarter, revenue grew 18% to $121.0 million
compared to $102.7 million in the prior year. Net income for the
fourth quarter of $11.8 million compared to $8.7 million in the
prior year for a 36% increase. Diluted earnings per share were
$0.31, compared to $0.25 in the prior year for growth of 24%.
Global reported EBITDA growth of 23% to $28.7 million compared
to $23.4 million for last year.
For the fiscal year, revenue was $462.8 million, a 32% increase
from $350.3 million in the prior year. Net income grew 51% to
$46.6 million from $30.9 million in the prior year; and diluted
earnings per share were $1.23 compared to $1.06 in the prior
year. EBITDA was $112.0 million, or 36% growth over prior year's
EBITDA of $82.5 million. Global also reported strong cash flow
with $160.5 million in net cash provided by operating activities
compared to $78.6 million last year for growth of 104%. In
addition, Global achieved $51.0 million in net line of credit
repayments during the year.
At May 31, 2002, Global Payments' balance sheet shows that its
total current liabilities exceeded its total current assets by
about $18 million.
GAAP Results
Fourth quarter GAAP revenue, net income, and diluted earnings
per share were $121.0 million, $5.0 million, and $0.13,
respectively, compared to $102.7 million, $0.8 million, and
$0.02, respectively, in the prior year. For the fiscal year,
GAAP revenue, net income, and diluted earnings per share were
$462.8 million, $23.8 million, and $0.63, respectively, compared
to $353.2 million, $23.7 million, and $0.82, respectively, for
the prior year.
The GAAP basis fiscal year 2002 results include a $24.6 million
trademark impairment charge (or $16.0 million after-tax)
relating to a change in accounting principle. This change was
required due to the adoption of SFAS 142, "Goodwill and Other
Intangible Assets," and as a result of the MasterCard buyout.
Global has determined it will no longer be marketing under
MasterCard's Merchant Automated Point-of-Sale Program ("MAPP")
brand. The charge is reported as of June 1, 2001, the date the
SFAS 142 was adopted. This event is more fully disclosed in
Global's recently filed Form 8-K.
In addition, GAAP fourth quarter and full fiscal year results
include restructuring and other charges relating to the
consolidation of redundant activities and acquisition
integrations, totaling $11.0 million (or $6.8 million after-
tax), of which $4.2 million is non-cash. These charges include
$8.2 million relating to severance and facility closures and
$2.8 million for the write-off of non-cash assets deemed
unrecoverable after Global's purchase of MasterCard's remaining
partnership interest in Global Payment Systems LLC.
Comments and Outlook
President and CEO, Paul R. Garcia, stated, "Fiscal 2002 marks
our first full year as an independent public company. I am
pleased to report that it has been a very successful one
highlighted by many accomplishments, including completing
accretive acquisitions and progressing on the related
integrations, achieving significant new merchant signings,
strengthening our product offerings and customer service
capabilities, and implementing ongoing facility consolidations
and cost control initiatives."
"During fiscal 2003, we will continue to focus on growing our
domestic and Canadian presence, assess opportunities for
profitable international growth, pursue enhanced products and
services for our customers, and leverage our existing business
model. Consistent with this strategy, we are providing annual
fiscal 2003 revenue guidance of $495 million to $514 million, or
7% to 11% growth, versus $463 million in 2002 and annual
guidance for fiscal 2003 diluted earnings per share of $1.35 to
$1.41 for growth of 10% to 15% versus normalized diluted
earnings per share of $1.23 in 2002. We are pleased with our
year-end results and our strong balance sheet position, and we
look forward to continued execution of our strategy during this
new fiscal year," said Garcia.
Global Payments Inc. (NYSE: GPN), is a leading provider of
electronic transaction processing services to merchants,
Independent Sales Organizations (ISOs), financial institutions,
government agencies and multi-national corporations located
throughout the United States, Canada, the United Kingdom and
Europe. Global Payments offers a comprehensive line of payment
solutions, including credit and debit cards, business-to-
business purchasing cards, gift cards, Electronic Benefits
Transfer (EBT) cards, check guarantee, check verification and
recovery, terminal management and funds transfer services.
Global's Web address is http://www.globalpaymentsinc.com
HAYES LEMMERZ: Seeks Approval of Sale Agreement with US Pipe
------------------------------------------------------------
Hayes Lemmerz International, Inc., and its debtor-affiliates ask
the Court to authorize and approve a sale agreement with United
States Pipe and Foundry Company.
Anthony W. Clark, Esq., at Skadden Arps Slate Meagher & Flom LLP
in Wilmington, Delaware, relates that Wheland was a major
producer of cast-iron brake and other automotive components and
that the Debtors' Commercial Highway Division relied on Wheland
as sole source vendor of several critical automotive component
products. For example, Wheland produced all of the light-weight
centrifuse drums needed by Hayes' Commercial Highway Division.
The centrifuse drums are used in the manufacture of commercial
trucks. The centrifuse brake drum is a very profitable product
in the commercial highway market, and accounts for a
considerable component of this divisions' revenue and profit.
The Debtors currently enjoy a good market share with this
product. However, others make similar products, and a slow down
in the manufacturing process could cause the Debtors to be
displaced by other manufacturers.
Prior to the Debtors' purchase of the Wheland Foundry, Mr. Clark
states that the Debtors relied on Wheland to supply the molten
iron metal used in connection with the manufacture of centrifuse
brake drums. However, in purchasing the Wheland Foundry, the
Debtors did not purchase all of Wheland's property and
equipment, including the equipment used to produce molten metal,
because the property ultimately would not be beneficial to the
Debtors' estates. Instead, the Debtors only purchased the
foundry that produced brake components for the Debtors'
Commercial Highway Division. In connection with Wheland's own
winding down, it ceased producing and supplying the molten iron
metal to the Debtors. Without this raw material, the Debtors
cannot produce centrifuse brake drums at the Wheland Foundry.
Mr. Clark explains that the Agreement with US Pipes provides
that US Pipes will sell molten iron metal to the Debtors for use
in their manufacturing of centrifuse brake drums. The price of
the metal is $210 per net ton, subject to certain price
adjustments and pricing reviews. The Debtors take delivery and
possession of the molten metal at US Pipes' plant and are
responsible for transporting it to the Debtors' Wheland Foundry.
The term of the US Pipes Agreement is one year, commencing on
March 4, 2002, subject to the right of either party to terminate
without cause upon six months written notice. After the initial
term, the US Pipes Agreement continues from month to month
unless terminated by either party upon 30 days written notice.
The US Pipes Agreement also expressly provides that it remains
subject to Court approval.
In connection with the transportation of the molten metal, Mr.
Clark submits that the Debtors will be responsible for all
handling and transportation, including compliance with relevant
laws and regulations. The Debtors also must maintain policies
of commercial general liability insurance, umbrella liability
insurance, worker compensation insurance, employer liability
insurance, and automotive and equipment liability insurance.
Other than the workers compensation policy, the Debtors must
name US Pipes as an additional insured under these policies.
Additionally, the Debtors indemnify US Pipes with respect to
legal proceedings, losses, liabilities, costs, etc. in
connection with the Debtors' purchase of the molten iron metal
from US Pipes and transportation of the same to the Debtors'
premises.
Although the Debtors' Wheland Foundry is less than one mile away
from the US Pipes plant, the Debtors acknowledge that the
transportation of the molten iron metal is dangerous and
involves significant risks. Accordingly, Mr. Clark informs the
Court that the Agreement is intended only to be an interim
arrangement, ensuring that the Debtors will be able to continue
to obtain certain raw materials necessary to produce the
centrifuse brake drums until the Debtors are able to develop and
finalize a long-term solution with respect to the acquisition of
the raw materials. The Debtors currently are analyzing their
options with respect to these matters, including potentially
constructing a blast furnace on the premises of the Wheland
Foundry, and expect to settle upon a course of action in the
near future.
In the near-term, Mr. Clark believes that the product obtained
from US Pipes would be very difficult, if not impossible, to
obtain from a different source. Molten iron metal is generally
obtained only from blast furnaces, which are very large and
complex pieces of equipment. Additionally, the molten iron
metal has a limited shelf life, in that, once it solidifies, it
cannot be used in the manufacturing process. Accordingly, the
molten iron metal must be obtained from a vendor that not only
operates a blast furnace, but also one that is near the Wheland
Foundry.
The Debtors believe that the US Pipes foundry is the only
facility that could feasibly provide them with their requisite
molten iron metal. Additionally, given the risks involved in
the transportation of molten iron metal, a supplier that is
close to the Wheland Foundry is significantly preferable.
Overall, the Debtors believe that obtaining the molten iron
metal from US Pipes under the Agreement is the only viable way
of sustaining production of the centrifuse brake drums at the
Wheland Foundry until the Debtors determine a long-term solution
with respect to the acquisition of necessary raw materials.
If the Wheland Foundry were to cease producing and supplying
automotive component products needed by its Commercial Highway
Division, Mr. Clark fears that the resulting damage would be
substantial. The Debtors' centrifuse brake drums are a very
profitable items in the commercial trucking industry. Although
the Debtors currently enjoy a good share of the market with
respect to these products, there are others that make similar
products. If the Debtors' Commercial Highway Division loses the
ability to produce these drums, it may lose its market share of
a very profitable market, thereby considerably deceasing its
revenues. Moreover, much of the recently acquired materials and
real estate at the Wheland Foundry, as well as the manufacturing
equipment, would set idle.
The Debtors have determined that a sound business justification
exists to enter into the US Pipes Agreement and undertake the
transactions contemplated thereby. Due to the nature of the
Debtors' businesses, it is essential that they be able to
continue to procure from US Pipes the raw materials needed by
the Debtors' Commercial Highway Division. Obtaining replacement
product would be difficult, if not impossible, without causing
substantial damage to the Debtors' Commercial Highway Division.
Additionally, any suspension - - or even a slow down - - of
production of the centrifuse drum brakes could cause the Debtors
to lose valuable market share of a very profitable product. The
Debtors believe that the US Pipes is the only viable supplier of
the raw materials needed in the Debtors' operations at the
Wheland Foundry, and that the terms of the US Pipes Agreement
are fair and reasonable. (Hayes Lemmerz Bankruptcy News, Issue
No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900)
DebtTraders reports that Hayes Lemmerz Int'l Inc.'s 11.875%
bonds due 2006 (HAYES1) are trading at about 67. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=HAYES1for
real-time bond pricing.
IMPSAT FIBER: Has Until July 26 to File Schedules and Statements
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
extends Impsat Fiber Networks, Inc.'s time period to file its
schedules of assets and liabilities, and statement of financial
affairs, as required by 11 U.S.C. Sec. 521(1) and Rule 1007 of
the Federal Rules of Bankruptcy Procedure.
The Court gives the Debtor until July 26, 2002 to file its list
of creditors, a list of equity security holders, schedules of
assets and liabilities, a schedule of current income and
expenditure, schedules of executory contracts and unexpired
leases, and a statement of financial affairs.
Impsat Fiber, a provider of broadband Internet, data, and voice
services in Latin America, filed for chapter 11 protection on
June 11, 2002. Anthony D. Boccanfuso, Esq., and Michael J.
Canning, Esq. at Arnold & Porter represent the Debtor in its
restructuring efforts. When the Company filed for protection
from its creditors, it listed $667,189,368 in total assets and
$1,334,732,793 in total debts.
DebtTraders reports that Impsat Corp.'s 13.75% bonds due 2005
(IMPT05ARR1) are trading at 2 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=IMPT05ARR1
for real-time bond pricing.
INFORMATION RESOURCES: Working Capital Deficit Tops $11 Million
---------------------------------------------------------------
Information Resources, Inc. (Nasdaq: IRIC), reported results for
the second quarter of 2002.
Second Quarter 2002 Results
For the quarter ended June 30, 2002, IRI reported net income,
before restructuring and other charges, of $1.4 million. This
compares to net income, before restructuring and other charges,
of $1.5 million for the second quarter of 2001. Including the
impact of restructuring and other charges, IRI reported net
income of $0.3 million compared to a net loss of $1.2 million in
2001. Results for the quarter also include a $1 million charge
for the write off and closure of IRI's investment in a joint
venture in the U.K.
Consolidated revenue of $139.8 million was 1% lower than prior
year. U.S. revenue was $104.8 million, or 2% lower than last
year, while international revenue increased 3% to $35.1 million.
Excluding the impact of currency, international revenue declined
1% over the prior year.
The Company's June 30, 2002, balance sheet shows that its total
current liabilities eclipsed its total current assets by about
$11 million.
"With the exception of the one-time charge we recorded in the
U.K., results for the quarter were about in line with our
expectations," said Joe Durrett, Chairman and Chief Executive
Officer. "In the U.S., our panel and analytics business had a
record quarter while the retail tracking business continues to
operate under some pressure. However, U.S. based expenses
including corporate were down by 4%, resulting in an overall
improvement in U.S. based contribution. In Europe, the
contribution was significantly below last year, the result of
the one-time charge in the U.K., and the performance of our
German business, which continues to work its way through a
difficult transition to a new product model. The remaining
markets in Europe performed satisfactorily in a tough business
climate, reporting higher profit contributions in most markets,"
Durrett said.
Year-to-Date 2002 Results
For the six months ended June 30, 2002, the Company reported net
income, before restructuring and other charges and the
cumulative effect of an accounting change for goodwill, of $2.4
million. This compares to $1.5 million for the six months ended
June 30, 2001. In accordance with the new accounting rules for
goodwill, the Company performed an impairment test in the second
quarter to determine the fair value of the goodwill recorded on
its books. Based on this test, the Company wrote off all of its
goodwill in order to comply with the new accounting rules. The
result is a $7 million charge recorded in accordance with
Generally Accepted Accounting Principles (GAAP) as the
cumulative effect of an accounting change in the financial
statements. GAAP requires this charge to be taken in the first
quarter of 2002. Including the impact of the goodwill charge, as
well as restructuring and other costs, the Company reported a
net loss of $9.1 million for the six months versus a net loss of
$3.7 million for the prior year.
Consolidated revenue of $273.0 million for the six months ended
June 30, 2002, was 2% lower than prior year. U.S. revenue of
$204.8 million was 3% lower than last year while international
revenue of $68.1 million was up 2% over last year. The impact of
currency was negligible on prior year revenue comparisons.
Information Resources, Inc., is a leading provider of UPC,
scanner-based business solutions to the consumer packaged goods
(CPG) industry, offering services in the U.S., Europe and other
international markets. The Company supplies CPG manufacturers,
retailers and brokers with information and analysis critical to
their sales, marketing and supply chain operations. IRI provides
services designed to deliver value through an enhanced
understanding of the consumer to a majority of the Fortune 500
companies in the CPG industry.
INFU-TECH: Chapter 7 Trustee Hires Teich Groh as Special Counsel
----------------------------------------------------------------
Michael B. Kaplan, Esq., the Chapter 7 Trustee in Infu-Tech,
Inc.'s chapter 7 bankruptcy proceeding, obtained approval from
the U.S. Bankruptcy Court for the District of New Jersey to
employ Teich, Groh, Frost and Zindler as his special counsel.
The law firm's rates are not disclosed.
Basing on the results of his investigation, the Trustee learned
that the estate in this case includes claims against various
officers and directors of Infu-Tech as well as against the
Debtor's former accountants. Thus, the Trustee says that he
requires the employment of special counsel for advice and
representation on those pending matters.
Teich Groh will:
a) render advice to the Trustee with respect to various
claims against officers and directors of the Debtor as
well as the Debtor's former accountants;
b) commence all appropriate litigation an any and all
appropriate courts in connection with the various claims
against officers and directors of the Debtor as well as
the Debtor's former accountants; and
c) prepare all pleadings and other related legal papers
necessary and appropriate for the litigation.
Infu-Tech provides infusion therapy to patients at home, in
nursing homes or subacute care facilities. Its specialty
pharmaceutical unit provides such services as chemotherapy,
enteral and parenteral nutrition, chronic pain management, and
hydration therapy.
KNOWLEDGE HOUSE: Continues to Defer Publishing Financial Results
----------------------------------------------------------------
Knowledge House Inc. (TSX VEN:KHI), advises that it will not be
able to file its Annual Financial Statements for the fiscal year
ended December 31, 2001 or the Interim Financial Statements for
the first quarter ended March 31, 2002 by July 21, 2002 as
provided in the management cease trade order issued by the Nova
Scotia Securities Commission on May 22, 2002. KHI has requested
that the Nova Scotia Securities Commission and other securities
commissions and regulatory authorities impose an issuer cease
trade order that all trading in securities of the Company cease
as of July 21, 2002 until such time as the required filings are
completed.
The Company advises that while it has reached an agreement with
an auditor to complete the Audited Statements and Interim
Financial Statements, it has not yet secured the financial
resources to complete the audit. Knowledge House will continue
its efforts to secure the funding required for completion of the
audited and other financial statements and for the other aspects
of its re-organization process.
On May 22, 2002, the Company obtained from the Nova Scotia
Securities Commission a management cease trade order pursuant to
Section 134 of the Securities Act (Nova Scotia) and CSA Staff
Notice 57-301 with respect to securities of the Company and
issued a Notice of Default in relation thereto. The order placed
restrictions on the trading of the Company's securities by
certain persons who have been directors, officers or insiders of
the Company since the Company's most recent financial statements
were filed in accordance with prescribed filing requirements.
CSA Staff Notice 57-301 requires the filing and dissemination of
a Default Status Report on a bi-weekly basis disclosing, among
other things, whether or not there has been a material change in
the information contained in the Notice of Default.
In accordance with OSC Policy 57-603, Knowledge House intends to
satisfy the provisions of the alternate information guidelines
until it has satisfied its financial statement filing
requirements by filing with the relevant securities regulatory
authorities, throughout the period in which it is in default,
the same information it provides to all of its creditors at the
time the information is provided to the creditors and in the
same manner as it would file a material change report pursuant
to applicable securities legislation.
As noted in material change reports and press releases issued by
the Company, on November 26, 2001, KHI's unsecured creditors
approved its proposal filed on October 26, 2001, under the
Bankruptcy and Insolvency Act (Canada). The proposal has not yet
been approved by the Supreme Court of Nova Scotia and remains
subject to court, shareholder and other required regulatory
approvals. On June 5, 2002, the Company advised that the board
of directors was being reduced in size given that the Company is
currently inactive.
MATTRESS DISCOUNTERS: S&P Drops Corp. Rating Down to D from CC
--------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on bedding
retailer Mattress Discounters Corp., to 'D' from double-'C'
following the company's failure to remit its June 15, 2002,
interest payment on its $140 million 12.625% senior unsecured
notes due in 2007.
"Mattress Discounters has been operating with very limited
liquidity and has not been able to generate positive cash flow,"
Standard & Poor's credit analyst Robert Lichtenstein said.
"Operating performance deteriorated due to significant and
prolonged comparable-store sales declines throughout the
company's markets. Moreover, operating difficulties occurred at
a time when a softening in the economy contributed to an overall
industry slowdown."
Upper Marlboro, Maryland-based Mattress Discounters is a leading
bedding retailer with stores in 12 U.S. markets. The company
sells both Sealy manufactured bedding products and its own
private-label Comfort Source products.
MED DIVERSIFIED: Expects Equity Deficit to Reach $190 Million
-------------------------------------------------------------
Med Diversified, Inc. (Pink Sheets:MDDV), a leading provider of
home and alternate site health care services, announced plans to
delay filing its annual report, Form 10-K, for the fiscal year
ended March 31, 2002, pending resolution of a possible extension
of its $70 million Debentures and other matters. The principal
reason for the delay is the uncertainty relative to the possible
extension and amendment of the Company's $70 million principal
amount of Debentures issued to Private Investment Bank Limited,
a Bahamian bank and trust company ("PIBL") in December 2001. The
Debentures were due and payable by their terms on June 28, 2002.
The Company has been involved in extensive negotiations with
PIBL contemplating resolution of a proposed amendment to the
Debentures and an extension of their due date.
No assurance can be given that a resolution will be reached or
that any of the conditions related to such resolution will be
fulfilled in the near future. However, if the conditions are
met, the Company is hopeful that the amendment and extension can
be consummated before the end of this month.
Furthermore, the Company also anticipates being able to file its
annual report by the end of this month. It is expected that the
annual report will reflect net losses from continuing operations
in fiscal year 2002 of $331 million as compared to losses of
$259 million in 2001. Losses from continuing operations are
expected to include asset impairment charges of $173 million, as
compared to $201 million, for the fiscal years ended March 31,
2002, and 2001, respectively. The Company is also expected to
report a deficit stockholders' equity of $190 million and a
negative working capital of $232 million (excluding $10.3
million of negative working capital from discontinued
operations) for the fiscal year end. These estimates do not
include any adjustments relating to the recovery and
classifications of recorded asset amounts or the amounts and
classifications of liabilities that might be necessary should
the Company be unable to continue as a going concern.
Additionally, after voluntarily delisting its common shares
(AMEX: MED) from the American Stock Exchange on July 15, 2002,
the Company is now trading on the "Pink Sheets" under the ticker
"MDDV". Appropriate forms have been filed on behalf of the
Company to facilitate trading on the NASD's Over the Counter
Bulletin Board (OTCBB). It is anticipated that quotation could
commence once the Company files its Form 10-K and meets the
requirements of the OTCBB. Further information regarding trading
of securities on the "Pink Sheets" is available on the web at
http://www.pinksheets.com
Med Diversified operates companies in various segments within
the health care industry, including pharmacy, home infusion,
multi-media, management, clinical respiratory services, home
medical equipment, home health services and other functions. For
more information, see http://www.meddiversified.com
MPOWER HOLDING: Court Okays Pre-Negotiated Recapitalization Plan
----------------------------------------------------------------
Mpower Holding Corporation (OTC Bulletin Board: MPWRQ), a
facilities-based broadband communications provider, announced
that the U.S. Bankruptcy Court for the District of Delaware has
approved its pre-negotiated recapitalization plan which will
retire approximately 90% of the company's debt and 100% of its
preferred stock. As a result, Mpower Holding and its subsidiary
Mpower Communications Corp., expect to emerge from Chapter 11 on
or about July 30, the date its recapitalization plan is
scheduled to become effective.
Mpower's pre-negotiated recapitalization plan, which was filed
with the court on April 8, 2002 with the support of the
company's 2010 Senior Noteholders and preferred shareholders,
eliminates $583.4 million in debt and preferred stock, as well
as the associated annual interest and dividend payments. In
exchange, Mpower Holding's 2010 Senior Noteholders received $19
million in cash, and 85% of the recapitalized company's
outstanding common stock. The company's preferred and common
stockholders receive 13.5% and 1.5% respectively of the common
stock of the recapitalized company. In addition, the
recapitalization plan provides for an employee stock option plan
for up to 10% of the common stock of the recapitalized company,
including existing options issued and outstanding on the
effective date of the plan.
"We are pleased to have successfully completed our goal of
strengthening Mpower's balance sheet while maintaining our
commitment to our customers," stated Mpower Holding Chairman and
Chief Executive Officer Rolla P. Huff. "With a well-conceived,
pre-negotiated recapitalization plan, we have been able to
advance through the process quickly and efficiently and we
believe we will emerge as a financially stronger company. We
extend our greatest appreciation to our employees, customers and
suppliers, whose support has been essential to the success of
this process. We expect our renewed financial health will be
helpful in our discussions with our existing and potential new
equity holders, as well as potential new lenders, as we pursue
additional financing opportunities to support our future
growth."
Mpower Holding's new common stock will be listed on the NASD
Over the Counter Bulletin Board and is expected to be open for
trading on the effective date of the plan. Any Mpower Holding
stock purchased prior to the effective date will be subject to
the dilution associated with the recapitalization plan. Mpower
Holding and Continental Stock Transfer and Trust Company, the
transfer agent for Mpower Holding's common stock, will be
sending to the registered holders of Mpower Holding's 2010
Notes, preferred stock and common stock, instructions on how to
exchange their existing notes and stock certificates to receive
the common stock of the recapitalized company.
Upon the effectiveness of the recapitalization plan, Mpower
Holding's Board of Directors will consist of the following
members: Rolla P. Huff, Chairman of the Board and Chief
Executive Officer of Mpower Holding and Mpower Communications;
Joseph M. Wetzel, President and Chief Operating Officer of
Mpower Holding and Mpower Communications; Michael E. Cahr,
President and CEO of Saxony Consultants, Inc.; Michael M.
Earley, a business consultant; Robert M. Pomeroy, former senior
analyst at Goldman Sachs and CPA; Richard L. Shorten, Jr.,
Managing Director of Pacific Alliance Limited, LLC.
Mpower Holding Corporation is the parent company of Mpower
Communications Corp., a facilities-based broadband
communications provider offering a full range of data,
telephony, Internet access and Web hosting services for small
and medium-size business customers. Further information about
the company can be found at http://www.mpowercom.com
NATIONAL STEEL: Seeks OK to Reject 3 Pellet Purchase Contracts
--------------------------------------------------------------
National Steel Corporation and its debtor-affiliates want to
reject three "burdensome and overpriced" contracts related to
the purchase of iron ore pellets with Iron Ore Company of Canada
and Seaway Self Unloaders.
Mark P. Naughton, Esq., at Piper Marbury Rudnick & Wolfe, in
Chicago, Illinois, lists the three contracts to be rejected as:
(i) Second Amended and Restated Pellet Purchase Contract
between the Debtors and Iron Ore;
(ii) Supplemental Pellet Purchase Contract between the Debtors
and Iron Ore; and
(iii) Contract of Affreightment between the Debtors and Seaway.
Under the Pellet Contract and Supplemental Pellet Contract, Iron
Ore is to provide the Debtors specified amounts of iron ore
pellets for purchase, which are to be shipped by Seaway under
the Shipping Contract. The Pellet Contract expires by its terms
on December 31, 2004. "Although the Supplemental Pellet Contract
expires December 31, 2011, it does not obligate the Debtors to
purchase any pellets after December 31, 2004," Mr. Naughton
explains.
The Shipping Contract relates exclusively to the shipment of
pellets from Iron Ore's facility to the Debtors. Naturally, if
no pellets are purchased from Iron Ore, then no shipping
services are necessary from Seaway. The Shipping Contract
expires by its terms on December 31, 2003.
The Debtors are in the process of reviewing the terms of their
executory contracts and unexpired leases in order to determine
whether the contracts and leases add value to their estate.
According to Mr. Naughton, the Debtors' approximate annual
obligation under the Pellet Contract to Iron Ore is $60,000,000
through 2004. "The Debtors discontinued their purchase of iron
ore pellets from Iron Ore at the Petition Date," Mr. Naughton
reports. Since then, the Debtors have been purchasing iron ore
pellets from MINNTAC by issuing purchase orders. In the event
that the Debtors continues to purchase from MINNTAC, the
approximate annual savings to the Debtors will be $15,000,000
which reflects both a lower commodity price and an absolute
reduction in the gross commodity being purchased. Naturally,
Mr. Naughton explains, if the Iron Ore contracts are rejected,
then the Seaway Shipping Contract must be rejected as well since
its sole purpose is the transportation of Iron Ore's product to
the Debtors.
Mr. Naughton relates that if the Contracts are rejected, the
Debtors' cast savings is not speculative, but quite real
instead. Moreover, the Debtors are confident that they can
continue to obtain a ready supply of the iron ore commodity from
other suppliers at a reduced cost, as they deem necessary.
(National Steel Bankruptcy News, Issue No. 11; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
National Steel Corp.'s 9.875% bonds due 2009 (NSUS09USR1),
DebtTraders reports, are trading at 36 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NSUS09USR1
for real-time bond pricing.
NATIONSRENT: Court OKs Stipulation for Production of Documents
--------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates obtained Court
approval of a Stipulation with the Unsecured Creditors'
Committee and Fleet National Bank regarding certain procedures
that will govern the production of documents and exchange of
information relevant to the Committee's Investigation of:
A. the validity, extent, perfection or priority of the mortgage,
security interests and liens of the Prepetition
Administrative Agent' in and to the Prepetition Collateral;
and
B. the validity, allowability, priority, status or size of the
Prepetition Indebtedness.
With the Court's approval, these procedures are:
A. Counsel for any party, person or entity subject to discovery
in the Investigation may designate any documents, deposition
testimony or other information taken, given or exchanged in
the course of discovery in the Investigation as
"Confidential" when that entity in good faith believes that
that document, material or information constitutes or reveals
confidential trade secrets or other proprietary business
information or personal financial information that requires
the protections or that the entity previously agreed to keep
confidential;
B. Materials that may be designated as Confidential Discovery
Materials include, but are not limited to, documents
containing the following information:
a. Non-public financial projections or other non-public
financial data;
b. Non-public acquisition offers or expressions of interest;
c. Non-public information relating to proposed strategic
transactions or other business combinations;
d. Trade secrets, including business strategies, customer
lists, and the like;
e. Non-public studies or analyses by internal or outside
experts;
f. Personal tax returns and other financial information;
g. Non-public information regarding fee arrangements with
financial advisors and other professionals; and,
h. Board meeting minutes and presentations.
C. Confidential Discovery Materials will be used by the
receiving party solely in connection with the Investigation,
and shall not be used for any other purpose, including,
without limitation, any business or commercial purpose;
D. Documents made available for inspection will be deemed
confidential, and it will not be necessary to designate or
otherwise identify documents made available for inspection
with any legend and failure to designate materials as
Confidential Discovery Materials at the time of production
may be remedied by supplemental written notice;
E. Any deposition or other testimony may be designated as
Confidential Discovery Materials by:
a. stating orally on the record of a deposition or other
proceeding that certain information or testimony is either
Confidential or that the entire deposition transcript is
so designated; or,
b. sending written notice within four business days of
receipt of the transcript of the deposition or other
proceeding designating all or a portion of the transcript
as Confidential; and,
c. in any case, directing the court reporter that the
appropriate confidentiality legend be affixed to the first
page and all portions of the original and all copies of
the transcript containing any Confidential Discovery
Materials;
F. Discovery materials designated "Confidential" will not be
disclosed by the entity receiving the materials to persons
other than:
a. the Court, persons employed by the Court and stenographers
transcribing the testimony or argument at any proceedings
in connection with the Investigation;
b. counsel of record to the Committee and its professionals
who the counsel determines in good faith reasonably need
access to the materials in connection with the
Investigation;
c. the financial advisors to the Committee and their
employees who the financial advisors determine in good
faith reasonably need access to the materials in
connection with the Investigation;
d. representatives of members of the Committee;
e. authors and recipients of the Confidential Discovery
Materials; and,
f. counsel, employees, agents or experts of the entity who
produced the Confidential Discovery Materials.
G. Confidential Discovery Materials may be provided to
consultants or experts retained in connection with the
Investigation by an entity receiving the Confidential
Discovery Materials or that entity's counsel to the extent
necessary for the consultant or expert to:
a. prepare a written opinion;
b. prepare to testify; or,
c. assist counsel in connection with the Investigation;
Provided that that consultant or expert:
a. is not advising any business competitor of the Debtors or
of any other Person disclosing Confidential Discovery
Materials;
b. is using said information solely in connection with the
Investigation;
c. signs an undertaking, agreeing in writing to be bound by
the terms and conditions of this Stipulation and
consenting to the jurisdiction of this Court for purposes
of enforcement of the terms of this Stipulation; and,
d. agrees not to disclose or use the Confidential Discovery
Materials for purposes other than those permitted
hereunder;
H. If any receiving party objects to the designation of any
discovery materials as "Confidential," the receiving party
will state the objection by letter to the counsel for the
entity making the designation and if the counsel are then
unable promptly to resolve the objection, any entity may ask
the Court to determine that the materials were not properly
designated as "Confidential";
I. In the event that any Confidential Discovery Materials are
used in any Court proceeding in connection with the
Investigation, they will not lose their status as
Confidential Discovery Materials through that use, and the
entity using said information shall take all steps necessary
to protect their confidentiality during that use, including,
but not limited to requesting the Court to hear counsel with
respect to that information in camera;
J. Any entity may seek further, greater or lesser protection
with respect to the use of any Confidential Discovery
Materials in connection with the Investigation, or to prevent
Confidential Discovery Materials from being provided to
persons identified in this Stipulation;
K. In the event that counsel for any receiving party determines
to submit to the Court any Confidential Discovery Materials
or information derived therefrom in connection with the
Investigation, or any papers containing or making reference
to the material or information, the original of any of that
submission must be hand delivered to Court chambers or to the
Clerk of the Court, as required, in sealed envelopes and
labeled as "Confidential -- Subject to Court Order," and
electronic notice of that submission filed with the Clerk of
Court, who will provide notice to all entities required to
receive that notice, and the original submission will be
released only upon further Order of the Court; and,
L. Within 10 days after notice of the termination of the
Investigation, or confirmation of a plan of reorganization in
the bankruptcy case, whichever occurs later, the counsel will
return all Confidential Discovery Materials (including
excerpts and summaries) to counsel for the producing party,
or, instead, certify in writing that that Confidential
Discovery Materials have been destroyed. (NationsRent
Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
NationsRent Inc.'s 10.375% bonds due 2008 (NATRENT), DebtTraders
says, are trading at 1 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NATRENTfor
real-time bond pricing.
NETWORK ACCESS: Signing-Up SSG Capital as Investment Bankers
------------------------------------------------------------
Network Access Solutions Corporation and NASOP, Inc., seek
authority from the United States Bankruptcy Court for the
District of Delaware to retain SSG Capital Advisors, LP to
provide necessary investment banking and financial advisory
services.
SSG Capital's professionals have extensive restructuring, merger
and acquisition, and capital markets expertise and the Debtors
believe that the firm is well qualified to represent them in
these cases.
SSG's responsibilities will involve providing investment banking
services to the Debtors on an exclusive basis, focusing on:
a) a sale of all or part of the Debtors, and/or
b) raising debt and/or equity capital in order to
recapitalize the Debtors' businesses, and/or
c) a financial restructuring of the Debtors' balance sheet
with existing stakeholders.
The Debtors agree to pay SSG:
a. A Monthly Fee of $20,000 per month;
b. A Financing Fee computed as:
i) 2.5% of Senior Debt
ii) 5.0% of Tranche B/Secured Subordinated Debt
ii) 7.5% of Traditional Subordinated Debt/Equity
c. An Advisory Fee of 2.5% of Total Consideration in
connection with a sale or transfer, directly or
indirectly, of all or a significant portion of the
assets or securities, of the business of the Debtors or
any other extraordinary corporate transaction involving
the Debtors;
d. A Restructuring Fee of $650,000 in connection with a
successful reorganization of the Debtors; and
e. An Opinion Fee of $100,000 in connection with the
preparation and delivery of a formal opinion by SSG
concerning the fairness of a proposed transaction.
Network Access Solutions Corporation, provider of broadband
network solutions and internet service to business customers,
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.
NEWCOR INC: Keeps Exclusive Right to File Plan Until August 26
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Delaware extends
Newcor, Inc., and its debtor-affiliates' exclusive periods. The
Court gives the Debtors until August 26, 2002, the exclusive
right to file their plan of reorganization, and until October
25, 2002, to solicit acceptances of that Plan from creditors.
Newcor, Inc., along with its subsidiaries, design and
manufacture a variety of products, principally for the
automotive, heavy-duty, capital goods, agricultural and
industrial markets. The Company filed for chapter 11 protection
on February 25, 2002 Laura Davis Jones, Esq., at Pachulski,
Stang, Ziehl Young & Jones P.C., represents the Debtors in their
restructuring efforts. When the Debtors filed for protection
from its creditors, it listed $141,000,000 in total assets and
$181,000,000 in total debts.
NORTEL NETWORKS: Doug Beatty Steps in as New Chief Fin'l Officer
----------------------------------------------------------------
Frank A. Dunn, president and chief executive officer of Nortel
Networks Corporation [NYSE/TSX: NT], announced that the
company's board of directors has appointed Douglas C. Beatty,
47, to the position of chief financial officer, effective
immediately. Beatty has been the company's controller since
1999, responsible for all external and management reporting
requirements. Dunn has been serving as chief financial officer
as well as president and chief executive officer since February
2002.
As CFO, Beatty will be responsible for the functions of
treasury, control, investor relations, tax, financial operations
and planning, general auditor, and corporate development.
Commenting on the Beatty appointment, Dunn said: "We are
extremely pleased to announce that Doug is our new CFO. We
conducted an extensive search for a new CFO, interviewing a
number of excellent candidates. It became clear that Doug is the
ideal executive for the role. He has proven himself to be a
critical member of our executive team, helping formulate and
execute our strategy to return the company to profitability. He
has in-depth knowledge of our company and our industry. As a
seasoned and highly respected finance executive, Doug has
consistently demonstrated outstanding achievement, commitment,
leadership and personal integrity."
Beatty joined Nortel Networks in 1985 after spending six years
in control and treasury positions with a large diversified
Canadian investment company. Over the next nine years, he held
progressively senior financial positions in Nortel Networks.
In 1995, Beatty joined Sprint Canada Inc., as vice president,
finance. He returned to Nortel Networks in March of 1999 as
controller.
"I am honored by my appointment and looking forward to my new
role as CFO of Nortel Networks," said Beatty. "It is an
excellent opportunity to make a major contribution on several
fronts as the company moves forward."
Beatty, who holds a Bachelor of Commerce degree from the
University of Toronto and is a chartered accountant, will
continue to be based out of the Brampton, Ontario headquarters
of Nortel Networks. Beatty has also been appointed CFO of Nortel
Networks Limited, Nortel Networks Corporation's principal
operating subsidiary.
Nortel Networks is an industry leader and innovator focused on
transforming how the world communicates and exchanges
information. The company is supplying its service provider and
enterprise customers with communications technology and
infrastructure to enable value-added IP data, voice and
multimedia services spanning Metro and Enterprise Networks,
Wireless Networks and Optical Long Haul Networks. As a global
company, Nortel Networks does business in more than 150
countries. More information about Nortel Networks can be found
on the Web at http://www.nortelnetworks.com
* * *
As reported in the April 8, 2002 issue of the Troubled Company
Reporter, Moody's Investors Service lowered the ratings on
senior long term debt issued or guaranteed by Nortel Networks
Limited, the rating on the company's preferred stock and the
company's rating for commercial paper. Moody's has also assigned
a Ba3 senior implied rating to the company.
Rating Action To From
Nortel Networks Limited:
* Commercial paper Not Prime Prime 3
* Senior debt Ba3 Baa3
* Preferred stock B3 Ba2
Nortel Networks Capital Corporation (Guaranteed by Nortel
Networks Limited):
* Senior debt Ba3 Baa3
* Senior shelf (P)Ba3 (P)Baa3
Nortel Networks Corporation (Guaranteed by Nortel Networks
Limited):
* Senior debt Ba3 Baa3
Nortel Networks Inc. (Guaranteed by Nortel Networks Limited)
* Commercial paper Not Prime Prime 3
"The downgrades reflect the continued decline in spending by
telecom carriers which is expected to be deeper and more
protracted than previously anticipated," Moody's declares. "The
timing of the rating change is not focused on anticipated
results for the first quarter but rather our expectation that
Nortel's operating performance will remain under pressure for an
extended period and that it will prove difficult for the company
to return to profitability this year," Moody's adds.
* * *
Nortel Networks Ltd.'s 6.125% bonds due 2006 (NT06CAN1),
DebtTraders says, are quoted at 58 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NT06CAN1for
real-time bond pricing.
NEW DEAN FOODS: Fitch Assigns BB+ Rating to Credit Facility
-----------------------------------------------------------
Fitch Ratings has initiated coverage of the New Dean Foods
Company assigning a 'BB+' secured credit facility rating and
'B-' trust convertible preferred securities rating. Fitch's
rating of the senior unsecured notes that were outstanding prior
to Suiza Foods Corporation (Suiza) acquisition, and on Rating
Watch Negative have been downgraded to 'BB-' from 'BBB+'. Fitch
has also withdrawn the Old Dean Foods commercial paper rating of
'F2', which was also on Rating Watch Negative. The Rating
Outlook is Stable Suiza completed its acquisition of the Old
Dean Foods Company on December 21, 2001, and immediately after
the completion of the merger, changed its name to Dean Foods
Company. The aggregate purchase price was $1.7 billion, which
included $756.8 million of cash paid to Old Dean stockholders,
common stock valued at $739.4 million and estimated transaction
costs of $55.7 million. In connection with the acquisition,
Suiza purchased the 33.8% stake that Dairy Farmers of America
had in Suiza's Dairy Group for $145.4 million in cash and other
consideration. Debt assumed was approximately $956 million
including $654 million was the Old Dean senior unsecured notes.
The total acquisition cost of Dean was $2.7 billion or 8.3 times
EBITDA. Approximately $1.9 billion was financed with borrowings
from Suiza's secured credit facility. The new Dean expects to
achieve cost savings of $80 million per year beginning in 2002
increasing to $120 million by the end of 2004. Assuming the
acquisition occurred at the beginning of 2001 EBITDA-to-interest
incurred including dividends on the preferred securities was
approximately 3.6x and total debt including preferred
securities-to-EBITDA was 4.1x.
The ratings consider the New Dean Foods Company leading market
share in the fluid milk industry (of approximately 30%), its
proprietary national refrigerated distribution system, increased
geographic diversification, which also provides it with national
scale and capabilities. In addition, the New Dean Foods
Company's management team has a solid track record of
effectively integrating acquisitions and achieving cost savings.
The company has also been successful with new product
innovations. These positives are weighted against high leverage
due to acquisitions, decreasing per capita consumption of fluid
milk in the United States, the New Dean Foods Company's key
profit contributor, and integration risk associated with the
acquisition of the Old Dean Foods Company.
For the latest 12 months ended March, 31 2002, total debt
including preferred securities-to-EBITDA was 5.6x and EBITDA-to-
interest incurred, including dividends on the preferred
securities was 3.9x. Credit protection measures are expected to
improve from current levels, reflecting the full operating
earnings and cash flow contribution from the Old Dean Foods
Company and cost synergies. While the company is expected to
continue to participate in the consolidation of the dairy
industry, in the near term, Fitch does not anticipate any
sizeable debt financed acquisition.
Dean Foods Company is the largest processor of milk and third
largest producer of ice cream in the United States. In addition
the company is the leading producer, distributor and marketer of
value-added dairy and non-dairy products and the largest
processor of private label pickles in the United States. The
company also has several joint ventures and sell products under
partnerships and licensed brands such as Borden, Land O' Lakes,
Hershey's, NesQuik, Coffeemate, Folgers Jakada, and Pet. The
company has operations in 39 states, Puerto Rico, Spain, and the
U.K.
OCEAN POWER: Electryon Swaps Certain Assets for 3.5 Mil. Shares
---------------------------------------------------------------
On June 26, 2002, Elektryon, Inc., executed a Bill of Sale,
whereby for consideration of 3,5000,000 shares of common stock
of Ocean Power Corporation, a Delaware corporation, Elektryon
sold, assigned and transferred to Ocean Power (i) all rights,
title and interest of Elektryon to the inventory and equipment
owned by Elektryon as set forth on the Asset Inventory Schedule
attached to the Bill of Sale and (ii) all intellectual property
owned by Elektryon, including, but not limited to, customer
lists, vendor lists, engineering documentation and drawings,
assembly documentation, quality control records, patents,
patent applications and inventories.
Ocean Power intends to value the assets acquired at $385,000
which represents the closing price of $0.11 per common share on
June 26, 2002 times 3,500,000 common shares issued for the
acquisition. The purchase price of $385,000 will be allocated
to the various assets acquired from Elektryon by the officers of
Ocean Power using their industry experience. Ocean Power
anticipates that the majority of the purchase price will be
allocated to the tangible fixed assets and acquired power units.
Some of the purchase price will be allocated to the acquired
patents and technology.
Ocean Power has determined that the assets acquired from
Elektryon do not constitute a business combination as determined
by 17 CFR Section 210.11-01 (Rule 11-01). Accordingly, no
proforma financial statements or audited financial statements of
Elektryon are or will be presented.
Ocean Power Corporation is developing modular seawater
desalination systems integrated with environmentally friendly
power sources. At March 31, 2002, the Company's balance sheet
shows a total shareholders' equity deficit of about $9.4
million.
PACIFIC GAS: Outlines Confirmation Objections to CPUC Plan
----------------------------------------------------------
As requested by the U.S. Bankruptcy Court, PG&E Corporation
(NYSE: PCG) and Pacific Gas and Electric Company submitted a
summary of their principal objections to confirmation of the
California Public Utilities Commission's (CPUC) alternative plan
of reorganization.
The filing identifies elements of the plan that PG&E believes
are not lawful or financially feasible. These include:
-- A proposed stock sale that would violate various
sections of bankruptcy law requiring a plan of reorganization to
be "fair and equitable" in its treatment of equity holders. The
CPUC plan's proposed stock sale would significantly dilute
shareholder equity and illegally confiscate considerable value
from shareholders, many of whom are current and retired PG&E
employees and others whose pension portfolios include holdings
in PG&E Corporation.
-- A $3.8 billion new debt offering and the failure to
restore the utility's investment-grade credit rating. The debt
issued under the CPUC's plan likely would be non-investment
grade bonds -- junk bonds. The recent debt financing under the
settlement agreement with Southern California Edison failed to
receive investment-grade ratings. PG&E believes it is doubtful
that the bond markets would be capable of supporting a junk bond
offering that would be more than twice as large as Southern
California Edison's financing and would be the largest such bond
sale in the last five years.
PG&E believes it has developed the only feasible solution that
allows the utility to emerge from Chapter 11 as an investment-
grade company, gives the State of California a clearly defined
path to exit the power buying business and provides for
continued environmental protections. The company's plan of
reorganization achieves these objectives without asking the
Bankruptcy Court to raise rates or the State for a bailout.
POINDEXTER JB: S&P Cuts Rating to B Over Weak Fin'l Performance
---------------------------------------------------------------
Standard & Poor's lowered its corporate credit rating on
commercial van body manufacturer J.B. Poindexter Co., Inc., to
single-'B' from single-'B'-plus due to financial performance
well below Standard & Poor's previous expectations.
The Houston, Texas-based company has about $85 million in rated
outstanding debt securities. The outlook is negative.
"The ratings on Poindexter reflect its niche positions in
volatile markets, its aggressive financial profile, and modest
size," said Standard & Poor's analyst Eric Ballantine.
Cash generation continues to weaken, with EBITDA declining more
than 66% to $2.3 million in the first quarter of 2002, compared
with $6.8 million in the first quarter of 2001, resulting in
total debt to EBITDA of 5.4 times, versus Standard & Poor's
previous expectations of total debt to EBITDA in the 3x to 4x
range. Financial leverage is not expected to improve in the near
term because many of Poindexter's markets are soft.
Additionally, Poindexter faces significant refinancing risk
during the next 24 months as its $85 million senior unsecured
notes and $40 million bank credit facility mature. At March 31,
2002, Poindexter had just $19 million in availability under the
company's $40 million revolving credit facility.
Poindexter continues to be negatively impacted by the current
weakness in the van body market, resulting from the soft U.S.
economy and the reduction in capital spending by several of the
company's largest customers. Other important markets such as oil
& gas and foam packaging are weak, more than offsetting the
firms cost reduction initiatives. Management is expected to
continue to focus on improving the company's cost structure and
lowering its breakeven levels.
The ratings could be lowered in the near term should the company
experience a protracted decline in end-market demand or if
liquidity becomes constrained further.
PORTA SYSTEMS: Fails to Meet AMEX Continued Listing Conditions
--------------------------------------------------------------
Porta Systems Corp. (ASE:PSI, has been notified by the American
Stock Exchange that it intends to delist Porta's common stock
from the Exchange.
The proposed delisting of the common stock from the American
Stock Exchange is based on the failure of Porta to meet several
of the Exchange's conditions for continued listing.
Specifically, Porta does not meet two tests based on
stockholders' equity and losses. Under one test, Porta has
stockholders' equity of less than $2,000,000 and has sustained
losses in at least two of its three most recent fiscal years.
Under a second test, Porta has stockholders' equity of less than
$4,000,000 and losses in at least three of its four most recent
fiscal years. In addition, Porta's independent auditors, in
their report on Porta's 2001 financial statements, discussed,
among other things, Porta's substantial losses from operations
for 2001, 2000 and 1999, stockholders' deficit and working
capital deficiency and concluded that there is substantial doubt
about the ability of Porta to continue as a going concern. In
view of these factors, the Exchange has advised Porta that it
appears that Porta has sustained losses which are so substantial
in relation to its overall operations or its existing financial
resources, or its financial condition has become so impaired
that it appears questionable, in the opinion of the Exchange, as
to whether Porta will be able to continue operations and/or meet
its obligations as they mature. Porta also failed to pay certain
listing fees to the Exchange. Finally, the Exchange remains
concerned about Porta's stock price which was $.08 per share as
of July 8, 2002.
Porta has requested a hearing; however, no assurance can be
given that the results of the hearing will change the view of
the Exchange. If its common stock is delisted from the American
Stock Exchange, Porta will seek to have its stock listed on the
OTC Bulletin Board.
Porta Systems Corp., designs, manufactures, markets and supports
communication equipment used in telecommunications, video and
data networks worldwide.
POTLATCH CORP: Net Loss from Operations Nearly Doubles in Q2
------------------------------------------------------------
Potlatch Corporation (NYSE:PCH) reported a loss for the second
quarter of 2002, largely as a result of poor market conditions
for the company's wood products, costs related to the repayment
of debt and a charge taken for the scheduled closure of a
sawmill in Arkansas.
The company incurred a net loss from continuing operations of
$6.6 million for the second quarter of 2002, compared to a loss
of $3.9 million for the same period in 2001. The $6.6 million
loss includes a debt financing cost write-off of $3.9 million
and a one-time early debt pre-payment fee of $2.0 million, both
before taxes ($3.6 million net of taxes). Including discontinued
operations, the company incurred a net loss of $20.1 million for
the second quarter of 2002, compared to a net loss of $9.8
million for the second quarter of 2001. Excluding discontinued
operations, net sales for the second quarter of 2002 were $333.2
million, down slightly from $335.0 million recorded in the
second quarter of 2001.
The company's net loss from continuing operations for the first
half of 2002 totaled $21.5 million. The net loss from continuing
operations for the first half of 2001 was $33.7 million.
Including discontinued operations, the loss for the first half
of 2002 totaled $187.5 million compared to a loss of $41.2
million in 2001. Excluding discontinued operations, net sales
for the first half of 2002 were $651.4 million, compared with
$647.9 million for 2001's first half.
The Resource segment reported operating income of $12.5 million
for the second quarter of 2002, an increase from the $10.0
million earned in the second quarter of 2001. The results
reflect improved earnings for the segment's Idaho region, which
benefited from higher net sales realizations for logs.
Operating income for the Wood Products segment was $.9 million
for the second quarter of 2002, significantly below the $7.6
million earned in the second quarter of 2001. "Lower net sales
realizations for all of our wood products, with the exception of
plywood, were the primary reason for the unfavorable comparison
to the prior year," stated L. Pendleton Siegel, Potlatch
chairman and chief executive officer. "A significant amount of
wood products was shipped into the United States from Canada
early in the second quarter, ahead of a U.S.-imposed duty,
causing prices to weaken," Siegel added. Increases in lumber and
oriented strand board shipments helped to partially offset the
decline in net sales realizations.
The Pulp and Paper segment reported operating income for the
second quarter of $5.2 million, compared to $4.7 million for
2001's second quarter. "The modestly improved results were
primarily due to decreased production costs compared to the
second quarter of 2001, with energy costs in particular lower
than in 2001," Siegel noted. "However, these benefits were
largely offset by lower net sales realizations for paperboard,
which decreased 10 percent on a comparative basis," he added.
Markets for consumer tissue have remained steady, with an
increase in shipments offsetting lower net sales realizations.
The company announced in June that it will close its Bradley
hardwood lumber mill in Warren, Arkansas, and exit the hardwood
lumber business. A $9.4 million pre-tax charge was recorded for
estimated closure costs and asset write-downs. The company is
seeking a buyer for the facility. Operating results for the mill
during the second quarter and first six months of 2002 are
presented as discontinued operations in the statements of
operations, along with results for the Printing Papers segment.
A majority of the Printing Papers assets were sold in May and
the company exited the printing papers business. Prior year
amounts have been reclassified for comparability.
The company's discontinued operations, which include the
Printing Papers segment and the Bradley lumber mill, reported a
second quarter loss of $13.5 million, net of tax. The amount
includes results for the winding down of manufacturing
operations in the Printing Papers segment prior to completion of
the sale in May and a full quarter's operations at the Bradley
lumber mill, which is scheduled for closure in August. The loss
also includes a one-time charge of $9.4 million ($5.7 million
net of tax) for asset write-downs and other costs related to the
Bradley closure.
The company incurred significantly lower interest expense in the
second quarter of 2002 compared to the same period last year.
The reduced interest expense was due to the repayment of debt
during the quarter, using a portion of the proceeds from the
sale of a majority of the Printing Papers segment assets to
Sappi Limited. However, the write-off of related debt financing
costs totaling $3.9 million, which are normally amortized over
the period the debt is outstanding, and a one-time fee of $2.0
million for early pre-payment more than offset the benefits of
lower interest expense for the quarter.
Potlatch is a diversified forest products company with
timberlands in Arkansas, Idaho and Minnesota.
* * *
As reported in Troubled Company Reporter's March 21, 2002,
edition, Fitch Ratings affirmed Potlatch Corp.'s ratings of
senior secured at 'BBB', senior unsecured at 'BBB-', senior
subordinated notes at 'BB+', and commercial paper at 'F3'. The
Rating Outlook for PCH is Stable.
The ratings reflect PCH's announcement that it is selling its
printing paper assets in Cloquet, MN.
PSINET INC: Court Okays Sale of Shares in WorldPay to RBS Avanta
----------------------------------------------------------------
PSINet, Inc., and its debtor-affiliates obtained Court approval,
pursuant to 11 U.S.C. Secs. 363(b), (f) and 1146(c), to
liquidate their investment in WorldPay by the sale of their
shares in WorldPay to RBS Advanta free of liens, claims,
encumbrances and transfer taxes.
PSINet expects to receive approximately US$9.5 million for the
Shares.
About WorldPay
WorldPay is a Jersey company (Jersey No. 69490) that processes
international Internet payments and provides e-commerce
services. PSINet holds 100 percent of the outstanding B Shares
issued by WorldPay constituting a 17 percent equity ownership in
WorldPay. PSINet acquired the B Shares for investment purposes
in 1998 and 1999, at prices ranging from 1000 British sterlings
per share in April 1998 to 3115 sterlings per share in August
1999. PSINet's holdings were subsequently increased as a result
of the effect of certain anti-dilution protections in November
1999, a 100-to-1 stock split in December 1999, and an option
exercise in April 2000.
Since its incorporation in 1997, WorldPay has never recorded a
profit and is currently operating at a loss. WorldPay had
planned an initial public offering on the London Stock Exchange
to take place in 2000, but the flotation was delayed initially
due to issues relating to compliance with certain operating
regulations that govern card-based payment processing services.
Subsequently, stock market conditions changed adversely and the
IPO was further delayed. As a result, WorldPay's financial
resources were significantly constrained and its directors
sought other options to raise capital. (PSINet Bankruptcy News,
Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ROHN INDUSTRIES: Q2 2002 Results Swing-Down to $3.5MM Net Loss
--------------------------------------------------------------
ROHN Industries (Nasdaq: ROHN), a leading provider of
infrastructure equipment for the telecommunications industry,
announced financial results for the second quarter ended June
30, 2002.
Net sales for the second quarter were $31.9 million, a 57%
decrease compared to $73.5 million for the same quarter a year
ago. The Company's net earnings for the second quarter of 2002
were a loss of $3.5 million compared to net income of $5.0
million for the second quarter of 2001. Net income for the
second quarter of 2002 included charges (net of tax effects) of
$1.7 million for the testing and repairs of internal flange
poles and $0.5 million for the restructuring of the Company's
Mexico operations.
Revenue for the second quarter of $31.9 million reflects an
increase of 9% over revenue of $29.3 million for the first
quarter of 2002. "The telecommunications markets we serve
remain very challenging," said Brian B. Pemberton, President and
Chief Executive Officer, ROHN Industries. Pemberton added that,
"We are continuing to take appropriate steps to control costs."
Horace Ward, Senior Vice President and Chief Operating Officer
of ROHN, said: "We have refocused our operations in Mexico to
concentrate on selling towers in the Mexican marketplace. As
part of this shift in focus we have transferred the turn-key
construction portion of the business to a third party wireless
services firm, which has allowed us to reduce our employment by
84%, or 30 employees, in Mexico." In addition, Ward indicated
that the Company would continue its efforts to develop new
sources of revenue.
As previously announced, during the second quarter, the Company
initiated a program to test and repair all internal flange poles
that it has fabricated and sold since 1999. "The internal
flange pole project is substantially complete," said Ward. "We
expect the total cost of the program to be within the original
estimated cost of $3 million. All of these costs have been
reflected in our results as of the end of June."
On July 1 the Company announced that it had entered into an
amendment to its credit agreement with its bank lenders that
reduced the Company's revolving loan facility from $25 million
to $23 million and provided the Company with up to $1,500,000 of
additional liquidity, and an amendment to its forbearance
agreement with its bank lenders that extended the forbearance
period in respect of existing defaults until August 31, 2002.
In addition, on July 1 the Company announced that it has engaged
Peter J. Solomon Company Limited to assist the Company in
exploring strategic alternatives. "We are in the early stages
of exploring strategic alternatives for the Company," said
Pemberton. "The amendments to our credit and forbearance
agreements should provide us adequate liquidity to pursue this
process through the end of the forbearance period."
On June 20 the Company announced it had received a letter dated
June 13 from the NASDAQ National Market, Inc. (Nasdaq) advising
the Company that unless the price per share of the Company's
common stock closed at $1.00 or more on the Nasdaq National
Market for at least 10 consecutive trading days before September
11, 2002, the Company's common stock would be delisted from the
Nasdaq National Market. The Company is considering various
options in response to the possible delisting from the Nasdaq
National Market, including listing its common stock on the
Nasdaq SmallCap Market. The Company will make an announcement
at the appropriate time regarding which course of action it
intends to follow.
ROHN Industries, Inc., is a leading manufacturer and installer
of telecommunications infrastructure equipment for the wireless
and fiber optic industries. Its products are used in cellular,
PCS, fiber optic networks for the Internet, radio and television
broadcast markets. The company's products and services include
towers, equipment enclosures, design and construction, cabinets,
poles and antennae mounts. ROHN has manufacturing locations in
Peoria, Illinois; Frankfort, Indiana; and Bessemer, Alabama,
along with a sales office in Mexico City, Mexico.
REGAL CINEMAS: Launches Exchange Offer for 9-3/8% Debt Issues
-------------------------------------------------------------
Regal Cinemas Inc., is offering to exchange all of its
outstanding Series A 9-3/8% senior subordinated notes due 2012,
which it refers to as the old notes, for its registered Series B
9-3/8% senior subordinated notes due 2012, which it refers to as
the exchange notes. The terms of the exchange notes are
substantially identical to the terms of the old notes to be
exchanged, except that the exchange notes have been registered
under the Securities Act of 1933, as amended, and will not bear
any legend restricting their transfer.
The exchange offer will expire at 5:00 p.m., New York City time,
on August 13, 2002, unless extended. All old notes that are
validly tendered and not validly withdrawn will be exchanged.
Tenders of old notes may be withdrawn at any time prior to the
expiration of the exchange offer. Those persons not tendering
the old notes, will continue to hold unregistered notes which
they will not be able to transfer freely. There is no
established trading market for the exchange notes or the old
notes. The Company does not intend to list the exchange notes on
any securities exchange, and therefore no active public market
is anticipated. Further, the Company will not receive any cash
proceeds from the exchange offer.
Founded in November 1989, Regal Cinemas, Inc., is the largest
film exhibitor in the United States. The Company primarily shows
first run movies and currently has 3,831 screens in operation at
328 theatres. The Company filed for Chapter 11 Reorganixation on
October 11, 2001, in the U.S. Bankruptcy Court for the Middle
District of Tennessee.
Regal Cinemas Inc.'s 9.50% bonds due 2008 (REGCIN2), DebtTraders
says, are trading at 18 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=REGCIN2for
real-time bond pricing.
RENT-A-CENTER: S&P Places BB- Corporate Rating on Watch Positive
----------------------------------------------------------------
Standard & Poor's placed its double-'B'-minus corporate credit
rating on Plano, Texas-based specialty rent-to-own retailer
Rent-A-Center Inc. on CreditWatch with positive implications.
The CreditWatch placement is based on the potential significant
reduction in the company's leverage due to the likely conversion
of its series A preferred stock to common equity and its
announcement that it prepaid $128 million of debt in the second
quarter.
"The conversion of the preferred stock to common equity would
eliminate $205 million of debt-like preferred shares whose
dividends are payable in cash in August 2003," Standard & Poor's
credit analyst Robert Lichtenstein said. "This would reduce the
company's leverage, with pro forma total debt to EBITDA of 2.4
times, compared with 3.0x."
Standard & Poor's said the series A preferred stock is
redeemable in August 2002 at the company's option, at a
conversion price of about $29 for a total of about $205 million.
It said that because the company's stock is currently trading at
about $50, the preferred shareholders are expected to convert
their shares to common equity rather than have their shares
redeemed at $29.
Rent-A-Center also prepaid $128 million of senior debt in the
second quarter after experiencing increased profitability due to
higher-than-anticipated revenues and the benefit of cost-control
programs.
SCIENT INC: Files for Chapter 11 Protection in New York
-------------------------------------------------------
Scient, Inc. (Nasdaq: SCNT), announced that SBI and Company, a
leading professional services firm, has signed an agreement with
Scient to acquire certain assets and operations as a result of
Scient's financial restructuring process. These assets include
talented and experienced employees from across the U.S. and the
U.K. and expertise in industry vertical markets. This
acquisition will enhance Scient's ability to deliver superior
services to its clients with an even greater range of
capabilities, combined with being part of a firm with strong
financial performance and solid financial backing.
"We are excited about this acquisition because it allows us to
continue working with our clients in a seamless manner to
deliver the results they expect from us," said Bob Howe,
Chairman for Scient. "If you take away the burden of our long-
term financial obligations, Scient is a very experienced and
extremely capable organization with enduring relationships with
top-tier clients. Scient and SBI and Company also have a similar
approach to business- we both have in-depth industry experience
and use technology to solve business problems for our clients."
"SBI and Company continues to execute on its long-term strategy
of building a business composed of world-class professionals
serving clients they are deeply committed to," said Ned
Stringham, president and CEO of SBI and Company. "SBI has proven
we can successfully grow our business through a balanced
combination of organic growth and strategic acquisitions, and we
are confident that the addition of the people and client
relationships from Scient will be just as successful. We welcome
Scient's people and clients to SBI."
Building a Formidable Services Company
SBI and Company's service offerings, coupled with Scient's
strength in customer experience management services, will result
in an even stronger combination of customer-, enterprise- and
supplier-facing capabilities. These offerings are planned to
include business assessment, business process optimization,
enterprise application deployment and integration, supply chain
management, customer collaboration, user experience, branding,
visual design, technical architecture design and
onsite/offsite/offshore application development.
The acquisition will also create a company that has deep
experience, expertise and focus on the manufacturing, retail,
transportation, telecommunications, financial services and
consumer packaged goods industries.
Finally, Scient's alliance partner relationships complement and
strengthen SBI and Company's existing partner relationships with
leading technology companies.
Acquisition Details
Concurrent with this news release, Scient has announced it has
filed a voluntary petition with the U.S. Bankruptcy Court in New
York for relief under Chapter 11 of the U.S. Bankruptcy Code.
SBI and Scient management have worked together to sign an
agreement whereby SBI and Company will purchase certain assets
of Scient, and SBI has committed to provide to Scient debtor-in-
possession financing of up to $4.9 million (borrowing
availability to be dependent on regular budgeting) pending the
completion of the asset purchase. The two companies will jointly
present the proposed purchase to the U.S. Bankruptcy Court and
expect it to be approved. These actions will allow Scient to
continue to deliver services to its clients without interruption
until court approval of SBI and Company's acquisition is
received.
Once the deal is finalized, Scient will cease to operate as a
separate company and the assets will be integrated into SBI and
Company. SBI expects this acquisition to be accretive to
earnings in its first quarter of operations inside SBI. "All of
our earlier acquisitions have been profitable from day one and
we expect this to be no different," added Stringham.
Organizational Changes
Scient President and CEO, Christopher M. Formant, has decided to
step down as CEO, but will remain on the Scient Board. "We want
to thank Chris for his leadership and dedication to Scient
through our merger of the past year and through the acquisition
process with SBI. We are pleased that he will continue to help
us through the transition, and appreciate his support," said
Howe.
Stephen Mucchetti, Vice Chairman of the Board of Scient, will
become President and Chief Executive Officer for Scient, Inc.
"We are very pleased that an executive of Steve's caliber,
experience, and close relationship with Scient can lead the firm
through the restructuring process and successful completion of
the sale to SBI and Company. Our clients, colleagues, partners
and creditors will benefit from the continuity in leadership and
the experience Steve brings in restructuring companies, and we
are confident that Scient will continue to provide outstanding
support to them," added Howe.
SBI and Company is a leading professional services firm that
helps clients leverage technology, business process optimization
(BPO) solutions, and creative services to improve their
businesses. SBI's customer-, enterprise-, and supplier-facing
solutions help clients acquire, retain and extend customer
relationships, improve collaboration and coordination across
their value chain, enhance operational productivity and
efficiency, and gain more value from their enterprise resource
planning (ERP) systems. The company's vertical market, business
process, technology and creative expertise coupled with proven
delivery methodologies, enable it to provide solutions on time
and on budget. SBI and Company, headquartered in Salt Lake
City, has offices in most major cities across the U.S. For more
information, visit http://www.sbiandcompany.com
Scient is a leading consulting and professional services company
focused on transforming clients' businesses through the creation
of multi-channel experiences that strengthen connections among
people, businesses and communities. Scient's industry-focused
teams of strategists, user experience experts, designers and
engineers have together delivered thousands of projects for some
of the world's largest and most respected companies, helping
them to realize cost efficiencies, generate revenue and
strengthen customer relationships. Founded in 1996, Scient is
headquartered in New York with offices in London and key regions
throughout the United States. For more information, please go to
http://www.scient.comor call (212) 500-4900.
Applied Precision CEO Ron Seubert says, "Our intellectual
property portfolio is one of Applied Precision's greatest
assets, and this patent is the latest in our stable of
innovative, proprietary technologies. We will continue the
intense R&D work that led to the development of the waferWoRx
system, and expand upon our patented methods to provide ever
better ways to improve process control and fab yield for our
worldwide base of semiconductor customers."
Applied Precision develops measurement, analysis and process
control systems for semiconductor wafer test, biomedical and
biotechnology imaging, and precision motion control components.
Applied Precision's specialized products are based on
precisionware(TM), the company's unique convergence of
mechanics, electronics, optics and software. Applied Precision
has been enabling advancements in the world's core technologies
since its inception in 1985. Applied Precision --
http://www.appliedprecision.com-- can be reached in the United
States at (425) 557-1000 or in the United Kingdom at +44 1672
518350.
SOLID RESOURCES: Selling Well Testing Division for $4.5 Million
---------------------------------------------------------------
Alvin Harter, President and CEO of Solid Resources Ltd.,
(TSXV:SRW) announced that a formal Purchase and Sale agreement
has been signed for the divestiture of the Company's Canadian
well testing services division. The sale is subject to Court
approval. The division is being sold as a going concern for
$4,500,000 and closing is anticipated on July 31, 2002. It is
anticipated that the proceeds will be dispersed as part of the
Plan of Arrangement.
Spanish Drilling Delayed
The Company also announces that it will delay the start of
drilling in Spain until September, 2002. Unforeseen
administrative and financial matters have caused this delay. The
Company is currently mapping and sampling on the surface and
underground to better define the diamond drill targets.
Spanish Assay Results Delayed
It was previously reported that the Company completed an
extensive sampling program of the Northern Zone within the
Doade-Presqueira Tantalum, Lithium and Tin pegmatite belt and
that assay results were to be made public in July, 2002. The
release of the assay results will be delayed due to the
financial constraints experienced during the current C.C.A.A.
process. The results are now expected to be made public in the
near future.
STARBAND COMMS: Seeking Court Approval to Hire Houlihan Lokey
-------------------------------------------------------------
StarBand Communications, Inc., seeks permission from the U.S.
Bankruptcy Court for the District of Delaware to employ Houlihan
Lokey Howard & Zukin Capital as financial advisors and
investment bankers.
Houlihan Lokey will:
a) advise the Debtor of available capital restructuring
and financing alternatives, including recommendations of
specific courses of action, and assisting the Debtor
with the structure, implementation and closing of one or
more of alternative Transactions structures and any debt
and equity securities to be issued in connection with a
Transaction;
b) assist the Debtor in their discussions with lenders,
bondholders, preferred shareholders and other interested
parties regarding the Debtor's operations and prospects
and any potential Transactions;
c) assist the Debtor with the development, negotiation
and implementation of a Transaction, including
participation as a representative of the Debtors in
negotiations with creditors and other parties involved
in a Transaction;
d) assist the Debtor in valuing the Debtor and/or, as
appropriate, valuing the Debtor's assets or operations;
provided that any real estate or fixed asset appraisals
needed would be executed by outside appraisers selected
and paid for by the Debtor;
e) at any time prior to consummation of a Transaction,
provide expert advice and testimony relating to
financial matters related to a Transaction, including
the feasibility of any Transaction and the valuation of
any securities issued in connection with a Transaction;
f) advise the Debtor as to potential mergers or
acquisitions, and the sale or other disposition of any
of the Debtor's assets or businesses;
g) assist the Debtor in preparing proposals to
creditors, employees, shareholders and other parties-in-
interest in connection with any Transaction;
h) assist the Debtor's management with presentations
made to the Debtor's Board of Directors and/or creditors
regarding potential Transactions or other relates
issues;
i) if requested by the Debtor's board of directors and if
reasonably appropriate under the circumstances, and for
no additional consideration, issue a fairness of the
Transaction in form and substance customary in the
industry and acceptable to Houlihan Lokey; and
j) render such other financial advisory and investment
banking services as may be mutually agreed upon by
Houlihan Lokey and the Debtors.
Houlihan Lokey is entitled to be paid:
a) an initial payment of $300,000,
b) a monthly fee of $100,000 starting in September 2002,
c) reimbursement of reasonable out-of-pocket expenses,
d) a Transaction (any merger, consolidation,
reorganization, recapitalization, business combination
or acquisition) Fee of $1,200,000.
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.
TANGIBLEDATA: Auditors Doubt Company's Ability to Continue Ops.
---------------------------------------------------------------
TangibleData provides alternative manufacturing and fulfillment
solutions to users of traditional CD duplication. TangibleData's
proprietary technology allows customers to bring digital data to
a web-integrated fulfillment center where they can obtain on-
demand manufacturing and distribution of CDs and other media,
such as DVDs, along with additional value-added services such as
content hosting and storage, order processing and fulfillment
and database marketing.
On April 20, 2000, TangibleData (then named "Kimbell DeCar
Corporation") acquired all of the outstanding stock of YGCD
Assets, Inc., a Colorado corporation, which was developing the
business. In connection with this transaction, TangibleData
issued 12,113,489 shares of its common stock (approximately 96%
of the shares then outstanding) to the former shareholders of
YGCD Assets, Inc., and cancelled 2,400,000 shares of common
stock previously outstanding. The name of the Company was
changed to "TangibleData, Inc.", and new officers and directors
were elected.
Net Revenue for the twelve months ended March 31, 2002 was
$867,000 compared to $70,000 for the twelve months ended March
31, 2001. The Company was in its start-up phase during the year
ended March 31, 2001 and sales were just commencing. Sales
increased steadily during the year ended March 31, 2002 with
sales increasing in each three-month period during the year.
Sales for the final three months of the fiscal year were
approximately $393,000.
However, the Company has had losses since inception.
Additionally, the funds raised from private placements may not
be sufficient to fund its business plan for the entire year.
Management has said it is actively pursuing additional equity
financing which will enable the Company to continue its
accelerated development plan.
There can be no assurance that TangibleData will raise
additional equity financing or that its business plan or
marketing strategy will be successful, and any delays in the
successful execution and subsequent revenue growth could delay
or frustrate Company ability to achieve profitable operations.
In its report accompanying TangibleData's audited financial
statements, the Company auditors have expressed substantial
doubt about its ability to continue as a going concern.
TELEWEST COMMS: Liberty TWSTY Terminates Tender Offer for Notes
---------------------------------------------------------------
Liberty TWSTY Bonds, Inc., a wholly owned subsidiary of Liberty
Media Corporation (NYSE: L, LMC.B), has terminated its tender
offer in respect of notes and debentures of Telewest
Communications plc. The Offer had been scheduled to expire at
5:00 p.m., New York City time, this Friday. In terminating the
Offer, Liberty TWSTY Bonds noted the deterioration in the US and
UK securities markets and the significant fall in the trading
price of Liberty Media's common stock since the commencement of
the Offer on June 12th.
Notes and debentures that have been tendered pursuant to the
Offer will be promptly returned by Mellon Investor Services LLC,
the depositary for the Offer.
Robert R. Bennett, Liberty Media President and CEO, stated, "The
continuing decline in world markets has caused us to review our
priorities for additional investments. In the context of this
review, we have concluded that Liberty Media's interests are
best served by terminating the tender offer. We continue to hold
our equity position and the bonds we have acquired separately
and we look forward to working with Telewest and its debtholders
to explore the possibility of a mutually agreeable
restructuring."
Additionally, Liberty Media announced that it has informed
Telewest that it is removing its three representatives from the
Telewest board of directors, effective Wednesday. Mr. Bennett
further commented, "We are taking this action to eliminate any
potential conflict of interest or appearance of a conflict in
any upcoming restructuring discussions. The management and the
remaining directors of Telewest continue to have our full
support."
Liberty Media Corporation owns interests in a broad range of
video programming, broadband distribution, interactive
technology services and communications businesses. Liberty Media
and its affiliated companies operate in the United States,
Europe, South America and Asia with some of the world's most
recognized and respected brands, including approximately 25.1%
of the share capital of Telewest.
* * *
As reported in Troubled Company Reporter's June 21, 2002,
edition, the informal Committee of the holders of notes issued
by Telewest Communications PLC (NASDAQ:TWSTY) (LSE:TWT),
representing over 50% of the notes subject to the tender offer
launched last week by Liberty TWSTY Bonds, Inc., announced that
they do not intend to participate in the Liberty tender offer.
Members of the Committee consider that acceptance of the Liberty
tender offer is not in their best interests.
As stated in its press release of June 17, 2002, the Committee
wishes to discuss with Liberty and Telewest its proposals for a
restructuring. The Committee is also seeking disclosure by
Liberty of details of the restructuring plan which Liberty has
stated, in its tender offer, that it intends to propose to
Telewest.
The Committee has retained UBS Warburg LLC as its financial
advisor and Cadwalader, Wickersham & Taft as its legal counsel.
Bondholders wishing to participate in the Committee or to obtain
information on its activities should contact Andrew Wilkinson or
James Douglas at Cadwalader, Wickersham & Taft in London or
Richard Nevins at Cadwalader, Wickersham & Taft in New York.
THOMSON KERNAGHAN: ASC Suspends Registration and Shares Trading
---------------------------------------------------------------
The Alberta Securities Commission has issued a temporary order
that suspends the registration of Thomson Kernaghan Co., &
Limited and prevents the firm from trading in securities.
The action was taken following the issuance of an order on July
12th by the Investment Dealers Association of Canada which
suspended Thomson Kernaghan's IDA membership for failure to
maintain prescribed risk adjusted capital.
Investors with accounts at Thomson Kernaghan should contact
Ernst & Young Inc., Thomson Kernaghan's trustee in bankruptcy at
(416) 943-2156.
The Alberta Securities Commission is the industry funded
regulatory agency responsible for administering the Alberta
Securities Act. Its mission is to foster a fair and efficient
capital market in Alberta and, together with the other members
of the Canadian Securities Administrators, develop and operate
the Canadian Securities Regulatory System.
TRANSTECHNOLOGY: Taps Advisors to Assist in Fin'l Restructuring
---------------------------------------------------------------
TransTechnology Corporation (NYSE:TT) reported income from
continuing operations of $424,000 for the first quarter of the
fiscal year ending March 31, 2003 compared to $28,000 for the
first quarter of the prior fiscal year.
Net sales for the fiscal 2003 first quarter increased 7% to
$19.9 million from $18.6 million for the corresponding period a
year ago. After recognition of a loss from the disposition of
discontinued operations of $1.2 million, the company reported a
net loss of $750,000 for the first quarter of fiscal 2003. In
the prior year's first quarter the company reported income from
discontinued operations of $778,000 and net income of $806,000
income.
The company reported that the loss from discontinued operations
in the current quarter included operating income from
discontinued businesses of $129,000; allocated interest expense
of $779,000; a $1,033,000 non-cash charge to recognize increased
loss reserves associated with units previously divested; and, a
cash charge of $241,000 from the final settlement of interest
rate swap contracts, which were offset by a tax benefit of
$750,000.
Michael J. Berthelot, Chairman, President and Chief Executive
Officer of the company, said, "Our aerospace businesses
performed well in the first quarter, posting significant
increases in both sales and operating income. Each of our
aerospace operations exceeded their operating targets for the
quarter. Corporate office expenses decreased 26%, or $616,000,
from $2,327,000 last year to $1,711,000 in this year's first
quarter. As a result of this strong performance by our operating
units coupled with the benefits of our corporate office
restructuring, earnings before interest and taxes (EBIT)
increased 80% from last year's first quarter and earnings before
interest, taxes, depreciation and amortization (EBITDA)
increased 42% to $5 million. The operations of our company are
clearly very strong."
Mr. Berthelot continued, "Our restructuring program is now
virtually complete. All of our fastener businesses have been
divested save our Brazilian retaining ring operation and TCR,
the sales of which are being pursued. In the interim, TCR
continues to operate at a significant level of profitability,
with its operating income and cash flow covering its allocated
interest charge by a two to one margin and operating above
targeted fiscal 2003 sales and profit levels. We expect to
complete the sale of our Brazilian operation within the next few
weeks. Our aerospace businesses, which draw 78% of their
revenues from government or defense customers, have a positive
outlook for the future. Although we continue to see slowness in
the commercial airframe, airline, and medical products pieces of
our business, which provides 22% of our revenues, we expect the
strength of our defense business to offset those weaknesses so
that we will remain on course to achieve our operating targets
for the fiscal year."
The company said that it continued to work with new senior
lenders and expected to complete the previously disclosed re-
financing of its existing senior debt later this week with the
proceeds of a new $32 million revolving credit and term loan
facility from The CIT Group/Business Credit, Inc. and Ableco
Finance LLC.
The company also reported that it had retained separate advisors
to assist it in evaluating a restructuring of its balance sheet
and its strategic alternatives relative to the maximization of
shareholder value.
Michael J. Berthelot, Chairman, President and CEO, said "As I
wrote in my letter to shareholders in this past year's annual
report, as last year was a year focused on improving our
operations, this fiscal year will be a year in which we focus on
improving our balance sheet and shareholder value. With the
restructuring of our senior debt imminent and our divestiture
and restructuring programs almost completed, we are now at a
critical juncture in our company's development. It is clear to
us that, from a purely business perspective, we should retire
our almost $80 million of 16% subordinated notes. Completely
eliminating the sub-debt would reduce interest expense by $12.8
million, of which over $10 million is cash, and would also allow
us to begin using our $70 million tax loss carry-forward to
shelter those savings. Under almost any scenario, we would
expect such a restructuring to be very accretive to earnings and
cash flow. We have retained Friedman, Billings, Ramsey & Co.,
Inc., a nationally known investment banking firm headquartered
in Arlington, Virginia, to assist us in this endeavor."
Mr. Berthelot continued, "At the same time, now that the
pressure we have been under from our banks for the past eighteen
months is nearly behind us, today may be the appropriate time to
determine just what we have here. We have retained Quarterdeck
Investment Partners LLC, a nationally recognized investment
banking firm with a very strong middle market aerospace defense
practice, to assist us in analyzing the various strategic
alternatives that may be available to us."
TransTechnology Corporation -- http://www.transtechnology.com--
headquartered in Liberty Corner, New Jersey, is the world's
leading designer of helicopter rescue hoists, cargo hooks, and
aircraft engine nacelle hold open rods through its Breeze
Eastern and Norco operations with over 300 people at its
facilities in New Jersey and Connecticut. Revenues for the
fiscal year ended March 31, 2002 were $72.3 million.
TRANSTECHNOLOGY: Competes Recapitalization of UK Subsidiary
-----------------------------------------------------------
TransTechnology Corporation (NYSE:TT) has completed the
recapitalization of TransTechnology (GB) Ltd., its UK subsidiary
that manufactures retaining rings.
Under the terms of the recapitalization, local management of the
company acquired 81% of the equity interests of the company for
(pound)81 ($121) and TransTechnology retained 19%.
TransTechnology also converted $2 million of unsecured inter-
company debt into a $2 million loan secured by a first lien on
TTGB's real property in Glusburn, England.
As a result of the completion of the recapitalization, TTGB will
no longer be subject to consolidating its financial results of
operations or financial position with TransTechnology, as it
will not be an affiliated subsidiary. Under the terms of the
recapitalization, TransTechnology has indemnified TTGB for
certain amounts that may become due under the terms of an earn-
out agreement related to TTGB's acquisition of Ellison Holdings
in 1999. TransTechnology has included the amount of such
indemnification in its balance sheet.
TransTechnology previously announced a restructuring program
through which it planned to exit the manufacture of specialty
fasteners and other industrial products in order to focus solely
on the design and manufacture of defense and aerospace products.
In July 2001 the company sold its Breeze and Pebra hose clamp
businesses for $48 million, in December 2001, sold its
Engineered Components business for $96 million, in February 2002
sold its German retaining ring business for $20 million, in May
2002 sold its aerospace rivet business for $3.2 million, and in
June 2002 sold its US retaining ring business for $3.7 million.
The company has used the proceeds of these divestitures and its
internally generated cash flow to reduce its debt from $273
million at March 31, 2001 to its current level of $105 million.
The company stated that it remained in negotiations with third
parties relative to the sale of its retaining ring operation in
Brasil and was seeking buyers for its TCR cold-headed products
business in Minneapolis.
Following the completion of its divestiture and restructuring
programs, TransTechnology Corporation will be solely a
manufacturer of aerospace equipment, with a concentration in the
military and defense industries.
TransTechnology Corporation -- http://www.transtechnology.com--
headquartered in Liberty Corner, New Jersey, designs and
manufactures aerospace products through its Breeze Eastern and
Norco operations with over 300 people at its facilities in New
Jersey and Connecticut.
VELOCITA CORP: Committee Brings-In Wolff & Samson as Attorneys
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of New Jersey
approved the Official Unsecured Creditors Committee's
application to employ Wolff & Samson, PA as counsel, in the
chapter 11 cases involving Velocita Corp., and its debtor-
affiliates, nunc pro tunc to June 7, 2002.
In addition to acting as primary spokesman to the Committee,
Wolff & Samson will assist, advise and represent the Committee
in:
a) the administration of this case and the exercise of
oversight with respect to the Debtor's affairs including
all issues arising from or impacting the Debtor or the
Committee in this Chapter 11 case;
b) the preparation on behalf of the Committee of all
necessary applications, motions, orders, reports and
other legal papers;
c) appearances in Bankruptcy Court and at statutory
meetings of creditors t represent the interests of the
Committee;
d) the negotiation, formulation, drafting and confirmation
of any plan of reorganization and matters related
thereto;
e) the exercise of oversight with respect to any transfer,
pledge, conveyance, sale or other liquidation of he
Debtor's assets;
f) such investigation, if any, as the Committee may desire
concerning, among other things, the assets, liabilities,
financial condition and operating issues concerning the
Debtor that may be relevant to this case;
g) such communication with the Committee's constituents and
others as the Committee may consider desirable in
furtherance of is responsibilities; and
h) the performance of all of the Committee's duties and
powers under the Bankruptcy Code and the Bankruptcy
Rules and the performance of such other services as are
in the interests of those represented by the Committee
or as may be ordered by the Court.
Wolff & Samson indicates its willingness to serve the Committee
at these hourly billing rates:
Robert E. Nies Partner $325
Karen L. Gilman Partner $325
George Talarico Senior Attorney $250
Jaimie A. Rothman Associate $165
Sally Jameson Associate $165
Diana Boungiomo Associate $165
John Lukanski Associate $175
Denise Pipersburgh Associate $155
Marie Brockway Paralegal $115
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 in the U.S. Bankruptcy Court for the District of New
Jersey. 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.
VION PHARMACEUTICALS: Violates Nasdaq Listing Requirements
----------------------------------------------------------
Vion Pharmaceuticals, Inc. (Nasdaq: VION), received a letter,
dated July 15, 2002, from The Nasdaq Stock Market, Inc.,
notifying Vion that during the preceding 30 consecutive trading
days, the bid price of Vion's common stock had closed below the
minimum bid price of $1.00 per share as required by the Nasdaq
National Market under Nasdaq Marketplace Rule 4450(a)(5). The
letter stated that Vion has until October 14, 2002 to
demonstrate compliance with the Rule (i.e. the bid price of the
Vion common stock must close at $1.00 per share or more for a
minimum of 10 consecutive trading days, and under certain
circumstances, more than 10 trading days) and that, if Vion is
not in compliance by that date, Nasdaq will notify Vion that its
securities will be delisted from the Nasdaq National Market. If
such event occurs, Vion may appeal the decision to a Nasdaq
Listing Qualifications Panel.
The letter also stated that Vion could apply to transfer the
listing of its common stock to the Nasdaq SmallCap Market. To
transfer, Vion would be required to satisfy the continued
listing requirements for the Nasdaq SmallCap Market, which makes
available an extended grace period for the minimum $1.00 per
share bid price requirement. If Vion submits a transfer
application to Nasdaq and pays the applicable listing fees to
Nasdaq by October 14, 2002, initiation of delisting proceedings
will be stayed pending the Nasdaq's staff's review of the
transfer application. If the transfer application is approved,
Vion will be afforded the 180 calendar day grace period
available to companies listed on the Nasdaq SmallCap Market
which commences with the July 15, 2002 letter, or until January
13, 2003. Vion may also be eligible for an additional 180
calendar day grace period provided that it meets the initial
listing requirements for the Nasdaq SmallCap Market under Nasdaq
Marketplace Rule 4310(C)(2)(A). This rule states that for
initial inclusion, the issuer shall have: (i) stockholders'
equity of $5 million; or (ii) market value of listed securities
of $50 million ... ; or (iii) net income of $750,000 (excluding
extraordinary or non-recurring items) in the most recently
completed fiscal year or in two of the three most recently
completed fiscal years.
The letter also stated that if Vion were to transfer the listing
for its common stock to the Nasdaq SmallCap Market, Vion may be
eligible to transfer the listing for its common stock back to
the Nasdaq National Market, without paying initial listing fees,
if by July 10, 2003, the bid price of Vion's common stock
maintains the $1.00 per share requirement for 30 consecutive
trading days and Vion maintains compliance with all other
continued listing requirements for that market.
If Vion applied to transfer the listing of its common stock to
the Nasdaq SmallCap Market and the Nasdaq staff does not approve
such application, Nasdaq would at that time notify Vion that its
securities will be delisted from the Nasdaq National Market. If
such event occurs, Vion may appeal the decision to the Nasdaq
Listing Qualifications Panel.
If a delisting from the Nasdaq National Market were to occur,
shares of Vion's common stock could trade on the Nasdaq SmallCap
Market as discussed above, or in the over-the-counter market in
the "pink sheets" maintained by Pink Sheets LLC or on the
National Association of Securities Dealers' OTC Bulletin Board,
which was established for securities that do not meet the Nasdaq
listing requirements. Such alternative trading markets are
generally considered less efficient than the Nasdaq National
Market. Consequently, selling Vion's common stock would be more
difficult because smaller quantities of shares would likely be
bought and sold, transactions could be delayed, and securities
analysts' and news media coverage of Vion may be reduced. These
factors could result in lower prices and larger spreads in the
bid and ask prices for shares of common stock.
Vion Pharmaceuticals, Inc., is a biotechnology company
developing novel agents for the treatment of cancer. Vion's
portfolio of agents includes: Triapine(R), a potent inhibitor of
a key step in DNA synthesis and repair, currently in Phase I
combination studies and Phase II single agent trials; VNP40101M,
a unique DNA alkylating agent currently in Phase I clinical
trials and TAPET(R), a modified Salmonella vector used to
deliver anticancer agents directly to tumors. For additional
information on Vion and its research and product development
programs, visit the company's Internet Web site at
http://www.vionpharm.com
WEBB INTERACTIVE: Hires Ernst & Young Replacing Arthur Andersen
---------------------------------------------------------------
On July 1, 2002, Arthur Andersen LLP was dismissed as
independent accountant for Webb Interactive Services, Inc., and
Ernst & Young LLP was appointed as the new independent
accountant for the Company to replace Andersen for the year
ending December 31, 2002. The decision to dismiss Andersen and
to appoint Ernst & Young LLP was recommended by the Audit
Committee of the Board of Directors and was approved by the
Board of Directors on July 1, 2002.
Andersen's report on the Company's financial statements for the
fiscal year ended December 31, 2000, did contain a going concern
uncertainty modification.
Webb Interactive Services' AccelX division helps local
businesses establish an e-commerce presence with a suite of XML-
based applications for Web site building, lead generation, and
customer management. Through its Jabber.com subsidiary, Webb
offers an open source instant messaging application. Unlike most
of its competitors in the instant messaging market, which focus
on consumers, Jabber.com focuses on messaging for businesses and
service providers. Webb's services (nearly half of sales)
include consulting, implementation, and training. The company's
top three customers (VNU Publitec, VetConnect, and Switchboard)
collectively account for 65% of sales.
WILLIAMS COMMS: Obtains Open-Ended Removal Period Extension
-----------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
extends Williams Communications Group, Inc., and its debtor-
affiliates' time period during which the Debtors may remove
pending claims and civil actions to federal court pursuant to
Section 1452 of the Judicial Code and Bankruptcy Rule 9027. The
Debtors' removal period is extended until the date on which an
order is entered confirming a Chapter 11 Plan.
WILLIAMS CONTROLS: Taps AIP Entity for Management Services
----------------------------------------------------------
Williams Controls, Inc., has entered into a Management Services
Agreement with American Industrial Partners, a Delaware general
partnership, an affiliate of AIP. Under the terms of the
Management Services Agreement, American Industrial Partners has
agreed that it will provide advisory and management services to
the Company and its subsidiaries as requested by the Company and
as Advisor agrees to provide from time to time. Advisor has the
right, but not the obligation, to elect to act as sole advisor
to the Company and its subsidiaries with respect to these
significant business transactions.
In exchange for the services provided by American Industrial
Partners under the Management Services Agreement, Williams
Controls has agreed to pay to Advisor:
(a) an advisory fee of $850,000, which was paid on July 1,
2002 at the closing of the Stock Purchase Agreement;
(b) when billed by Advisor, an annual management fee, equal
to $400,000, plus 3% of any debt outstanding (including accrued
interest thereon) of the Company or its subsidiaries as of the
first day of the applicable quarterly payment period which is
owned or guaranteed by AIP or any of its affiliates, payable in
quarterly installments in advance on January 1, April 1, July 1
and October 1 of each year, commencing July 1, 2002 and
(c) advisory and/or structuring fees in connection with
significant business transactions of the Company (including,
without limitation, acquisitions, investments and financings) in
amounts comparable for similarly situated companies.
The Annual Fee will be reduced by 50% beginning the first day of
any quarterly period following the conversion of all shares of
the AIP's Series B Preferred into the Company's common stock.
In addition, Advisor and its affiliates will be entitled to
reimbursement of all of their out-of-pocket expenses incurred in
performing services under the Management Services Agreement.
The Management Services Agreement may be terminated by Advisor
at any time by written notice to the Company. In addition, the
Management Services Agreement will terminate automatically as of
the earlier of (1 the seventh (7th) anniversary of the date of
the agreement and (2) the end of the fiscal year in which AIP
and its affiliates own, directly or indirectly, less than
5,000,000 shares of the common stock of the Company on a fully
diluted basis.
* * *
As previously reported, Williams Controls, Inc., entered into a
new five-year revolving credit and term loan agreement with its
existing primary lender, Wells Fargo Credit, Inc. The Company's
prior loan agreement with Wells Fargo expired in July 2001 and
the Company had been operating under a series of forbearance
agreements with Wells Fargo since that time. Under the terms of
the new loan agreement, Wells Fargo agreed to loan the Company
an aggregate principal amount of up to $12,200,000, consisting
of a revolving credit line of up to $10,000,000 and two term
loans in the aggregate principal amount of $2,200,000. This
does not represent any increase in the amounts available under
the Company's prior loan agreement with Wells Fargo. The
proceeds from the revolving credit line may be used for ongoing
working capital purposes. The proceeds from the term loans are
to be used to restructure existing loans with Wells Fargo. The
Company's obligations to Wells Fargo under the Loan Agreement
are secured by a first priority lien on all of its business
assets.
WILLIAMS CONTROLS: Completes Sale of 150,000 Preferred Shares
-------------------------------------------------------------
On July 1, 2002, Williams Controls, Inc., a Delaware
corporation, completed the sale of 150,000 shares of its Series
B Preferred Stock, 15% Redeemable Convertible Series, par value
$.01, to American Industrial Partners Capital Fund III, L.P., a
Delaware limited partnership, and Dolphin Offshore Partners L.P.
purchasers. AIP purchased a total of 130,000 shares of the
Company's Series B Preferred for a total purchase price of $13
,000,000, less its fees and expenses. It is believed that AIP
paid the purchase price from committed equity capital
contributed by its partners. Dolphin purchased a total of
20,000 shares of the Series B Preferred for a total purchase
price of $2,000,000. Dolphin paid for the shares purchased
with the proceeds of the repayment of $2,000,000 in principal
outstanding under a 12% Secured Subordinated Debenture, due
March 1,2002, issued by the Company to Dolphin.
The holders of Series B Preferred, voting as a separate class,
are entitled to elect a majority of the Company's Board of
Directors. Concurrently with the closing of the sale of the
Series B Preferred, the Company, AIP, Dolphin and Eubel, Brady
& Suttman Asset Management, Inc., as an entity with voting
control over the shares of certain of Williams Control's holders
of Series A Preferred, entered into a Shareholders Agreement.
The Shareholders Agreement provides, among other things, that
(a) until July 1, 2003, each of Dolphin and Brady will vote all
of the shares of Series B Preferred and any of the Company's
Series A-1 Preferred Stock over which Dolphin or Brady has
voting control with AIP on all matters related to the election
of directors to the Board, (b) until July 1, 2004, each of
Dolphin and Brady will vote all of the shares of Series B
Preferred over which Dolphin or Brady has voting control with
AIP on all matters related to the election of directors to the
Board, and (c) until the date on which AIP no longer owns a
majority of the Company's Series B Preferred, each of Dolphin
and Brady will vote all of the Series B Preferred over which
Dolphin or Brady has voting control with AIP on all other
matters. To give effect to these voting provisions, each of
Dolphin and Brady have appointed representatives of AIP as their
attorneys-in-fact to vote the shares over which Dolphin or Brady
has voting control in accordance with the Shareholders
Agreement. The Shareholders Agreement gives AIP voting control
over all of the Company's outstanding Series B Preferred, which
represents approximately 43% of the Company's outstanding
voting securities, on an as-converted to common stock basis.
Thus, the Shareholders Agreement, together with the shares of
Series B Preferred held by AIP, gives AIP the right to elect a
majority of the members of the Company's Board of Directors. To
the knowledge of the Company, prior to the closing of the sale
of Series B Preferred to AIP and Dolphin, no person or group
controlled the Company.
Immediately prior to the closing of the sale of Series B
Preferred, the Board increased the number of directors on the
Board of Directors to seven, as permitted under the Company's
bylaws. Effective upon the closing of sale of the Series B
Preferred to AIP and Dolphin, directors H. Samuel Greenawalt,
David Eberly and Gary Arnold resigned, and W. Richard Bingham,
R. Eugene Goodson and Kirk R. Ferguson were appointed to fill
three of the vacancies on the Company's Board of Directors.
Thomas Ziegler, President and Chief Executive Officer of the
Company, has indicated that he intends to imminently terminate
his employment with the Company. R. Eugene Goodson, Ph.D. has
been elected by the Board as the Chairman of the Board of
Directors. Dennis E. Bunday, the Company's Chief Financial
Officer, has been elected as Treasurer and Secretary at a
meeting of the Company's Board on June 28, 2002.
Williams Controls' biggest business is making electronic
throttles, exhaust brakes, and pneumatic controls for trucks and
other heavy equipment. Other operations include microcircuits,
cable assemblies (Aptek Williams), and global positioning
systems (GeoFocus -- which Williams Controls is selling). The
company also makes plastic parts (Premier Plastic Technologies,
which is being sold) and compressed natural gas conversion kits
for cars (NESC Williams). Major customers include Freightliner,
Navistar, and Volvo.
WORLDCOM: S&P Drops Ratings on 4 Related Synthetic Transactions
---------------------------------------------------------------
Standard & Poor's lowered its ratings on four synthetic
securities related to WorldCom Inc. to single-'C' from double-
'C'. At the same time, the ratings remain on CreditWatch with
negative implications, where they were placed on April 17, 2002.
The rating actions follow the lowering of WorldCom Inc.'s senior
unsecured debt ratings on July 17, 2002.
These synthetic securities are weak-linked to the underlying
collateral, WorldCom Inc. debt. The lowered ratings reflect the
credit quality of the underlying securities issued by WorldCom
Inc.
RATINGS LOWERED AND REMAIN ON CREDITWATCH NEGATIVE
Corporate Backed Trust Certificates, Series 2001-17 Trust
$28.000 million corporate-backed trust certs
Rating
Class To From
A-1 C/Watch Neg CC/Watch Neg
PreferredPLUS Trust Series WCM-1
$80.703 million corporate bond-backed trust certs
Rating
Class To From
Certs C/Watch Neg CC/Watch Neg
CorTS Trust For WorldCom Notes
$57.156 million corporate-backed trust securities
Rating
Class To From
Certs C/Watch Neg CC/Watch Neg
SATURNS Trust No. 2001-5
$26.023 million debenture-backed securities
Rating
Class To From
Units C/Watch Neg CC/Watch Neg
DebtTraders says that Worldcom Inc.'s 11.25% bonds due 2007
(WCOM07USR4) are quoted at 29.5 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOM07USR4
for real-time bond pricing.
WORLDCOM INC: Sues Former Controller Over $800K Retention Bonus
---------------------------------------------------------------
WorldCom Inc., wants its former controller to repay nearly
$800,000 the company gave him two years ago to retain his
services, reported the Associated Press. According to the
newswire, the Clinton, Mississippi-based company filed suit on
Monday against David F. Myers, who resigned from WorldCom on
June 25 when the telecom revealed it had disguised nearly $4
billion in expenses. When Myers accepted the $795,000 cash-
retention bonus in May 2000, he agreed to remain with WorldCom
through July 2002, reported Dow Jones. According to the
company's lawsuit, by leaving early Myers violated terms of the
agreement and must repay the money. WorldCom has said that it
may soon file for bankruptcy. (ABI World, July 17, 2002)
WORLDCOM: The Deathwatch Continues
----------------------------------
Ad hoc groups of the Company's creditors have organized and
turned to top bankruptcy lawyers for advice and counsel:
* Daniel H. Golden, Esq., at Akin, Gump, Strauss, Hauer &
Feld represents a group of WorldCom bondholders;
* Alan W. Kornberg, Esq., at Paul, Weiss, Wharton &
Garrison is making the unique concerns of Intermedia
Communications Inc. creditors known to everyone who'll
listen; and
* David S. Rosner, Esq., at Kasowitz, Benson, Torres &
Friedman represent a consortium of MCI Bondholders.
Jeff St. Onge at Bloomberg News reports that people he's talked
to say WorldCom will file chapter 11 petitions on Sunday -- the
way Enron did on Sunday, Dec. 2. Dow Jones and Reuters, making
reference to other "people familiar with the situation," say
petitions will be delivered to the U.S. Bankruptcy Court for the
Southern District of New York on Monday.
Grace periods triggered when WorldCom failed to make semi-annual
interest payments on July 15 to holders of the Company's:
* $1 billion of 7.375% Notes due 2003 and
* $1 billion of 7.735% Notes due 2006, for which J.P.
Morgan serves as Indenture Trustee; and
* $124 million of 8.500% Notes due 2008 for which Sun
Trust Bank serves as Indenture Trustee.
expire on August 14. Another interest payment is due on July 20
to holders of $200 million of 8.25% Notes due 2023. No rational
8.25% noteholder expects to receive that payment.
With $104 billion of assets on its balance sheet, WorldCom will
rank as the largest chapter 11 filing in U.S. history if --
okay, when, most people now say -- it tumbles into a chapter 11
proceeding.
All of the pieces are now in place to present a $2 billion
superpriority debtor-in-possession financing arranged by J.P.
Morgan Chase & Co., Citigroup Inc., and General Electric Capital
Corp to a bankruptcy judge for approval, press reports indicate,
citing people close to the vortex of WorldCom's whirlwind of
activity. That facility may roll-up some of WorldCom's
unsecured obligations to its bank lenders. Importantly, that
DIP financing will provide WorldCom with access to working
capital financing to cash -- the lifeblood of any business -- to
fund post-petition obligations throughout a chapter 11
proceeding. Accorded superpriority secured status under 11
U.S.C. Sec. 364, the DIP Lenders are paid first under a
confirmed plan or in the event of a liquidation.
As reported in Monday's edition of the Troubled Company
Reporter, 25 of WorldCom's 27 lenders under the $2.65 billion
loan facility filed suit in the New York Supreme Court. That
suit asked the Court to impose a constructive trust on all
traceable funds and send those funds back to the Lenders. The
Lenders shouted fraud. The case was transferred to the U.S.
District Court for the Southern District of New York. Judge
Rakoff approved a consensual 80-day standstill agreement
yesterday that restricts WorldCom's ability to dissipate assets.
WorldCom is being advised by armies of lawyers led by Marcia
Goldstein, Esq., at Weil, Gotshal & Manges LLP.
With the handwriting on the wall that a bankruptcy filing is
imminent, WorldCom's called-in Frank Savage and James Millstein
from Lazard Freres LLC as their new restructuring and financial
adviser. Goldman Sachs was called on to provide WorldCom with
financial advisory services and out-of-court restructuring ideas
weeks ago.
As previousuly reported, various bondholders have filed
securities fraud lawsuits against the Company. WorldCom common
stock now trades at pennies per share. Scads of shareholder
securities fraud lawsuits are pending against the Company,
Bernard J. Ebbers, Scott D. Sullivan, other officers and
directors, Arthur Andersen, and everybody else the
plaintiffs' lawyers think might contribute a dime to a
settlement fund.
XO COMMS: Icahn Offers to Buy Up to $331MM of Senior Debt at 40%
----------------------------------------------------------------
High River Limited Partnership, an affiliate of Carl C. Icahn,
announced today that it has commenced a tender offer to purchase
up to an aggregate of $331 million in principal amount of
Tranche A Term Loans, Tranche B Term Loans and Revolving Loans
of XO Communications, Inc. issued under a Credit and Guaranty
Agreement, dated as of February 3, 2000, as amended, among XO
Communications, Inc., formerly known as Nextlink Communications,
Inc., certain of its subsidiaries, as guarantors, the lenders
party thereto from time to time, and others, upon the terms and
subject to the conditions set forth in the Offer to Purchase and
in the related Letter of Transmittal and related documents and
exhibits thereto. High River is offering $0.40 per $1.00 in
principal amount for the Senior Secured Loans. The Offer will be
conducted on a "first-come, first-served" basis. Under that
procedure, High River will accept Senior Secured Loans validly
tendered (and not properly withdrawn) in the order in which they
are tendered.
If on or prior to July 17, 2002, the Requisite Lenders (as
defined in the Credit Agreement) rescind Section 1 of the
purported amendment to the Credit Agreement dated as of June 11,
2002, then the Offer will be deemed to be made for any and all
of the Senior Secured Loans. That section purports to restrict
transfers of Senior Secured Loans.
In connection with the Offer, High River is requiring that
tendering Senior Secured Lenders execute and deliver an
agreement pursuant to which they will consent to the recission
of Section 1 of the purported amendment to the Credit Agreement
dated as of June 11, 2002. High River will also execute and
deliver its consent to such recission with respect to the Senior
Secured Loans that High River owns. If the Offer is fully
subscribed, then, together with the Senior Secured Loans owned
by High River, sufficient consents will have been obtained to
cause Section 1 of the Amendment to cease to be in effect.
Withdrawal rights will only be available on and after August
21, 2002.
The Offer is not conditioned upon Purchaser obtaining financing.
Requests for copies of the documents relating to the Offer
and any questions or requests for assistance may be directed to
High River Limited Partnership, c/o Icahn Associates Corp., 767
Fifth Avenue, Suite 4700, New York, New York, 10153 or by
calling 212-702-4329 or 212-702-4361. (XO Bankruptcy News, Issue
No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ZIFF DAVIS: Soliciting Consents to Prepackaged Chapter 11 Plan
--------------------------------------------------------------
Ziff Davis Media Inc., reported operating results for the second
quarter ended June 30, 2002 for Ziff Davis Publishing Inc., its
established business segment, and for Ziff Davis Development
Inc., and Ziff Davis Internet Inc., its developing business
segment. Ziff Davis Publishing Inc. reported earnings before
interest expense, provision for income taxes, depreciation,
amortization and restructuring charges ("EBITDA") of $6.2
million for the quarter ended June 30, 2002, representing an
increase of 77.1% compared to the $3.5 million of EBITDA for the
same period last year. The Company also exceeded its previously
announced business outlook of $3.0 to $5.0 million of EBITDA for
the second quarter of 2002.
"While the technology market continues to be one of the hardest
hit sectors in this difficult economy, we are starting to see
some fundamental improvement in the bottom line performance of
our traditional businesses," said Robert F. Callahan, Chairman
and CEO. "Our developing businesses are also starting to gain
traction. The management team and employees have done an
excellent job staying on-course executing our operational and
financial restructuring plan. We are pleased to report that we
are making steady progress in delivering the value we promised
for our customers and employees."
Established Business Segment
(Ziff Davis Publishing Inc.)
Total revenue for the quarter ended June 30, 2002 was $47.6
million, down 37.3% compared to $75.9 million in the same prior
year period. The decrease was due to a 34.4% decline in
advertising pages, resulting primarily from discontinued
publications and the effects of a weak advertising market, along
with decreased royalty revenue related to the termination of an
Internet content licensing agreement.
Cost of production for the quarter ended June 30, 2002 was $18.5
million, down 33.7% or $9.4 million compared to $27.9 million in
the same prior year period. The decrease primarily relates to a
decline in the total number of pages produced in the Company's
publications resulting from discontinued operations, together
with the impact of the weak advertising market.
Selling, general and administrative expenses, excluding
restructuring charges, were $22.8 million in the recent quarter
ended June 30, 2002, down 48.5% or $21.5 million from $44.3
million in the same prior year period. This decline is
primarily the result of cost reductions related to discontinued
publications as well as the impact of streamlining the Company's
infrastructure.
Developing Business Segment
(Ziff Davis Development Inc. and
Ziff Davis Internet Inc.)
Revenue and EBITDA losses were $9.2 million and $(6.7) million
for the quarter ended June 30, 2002 compared to $6.0 million and
$(17.4) million, respectively, for the same prior year period.
The increase in revenue primarily relates to advertising revenue
from the Company's developing publications, CIO Insight and
Baseline, and from its Internet properties which were started-up
in 2001.
Cost of production was $1.5 million for the quarter ended June
30, 2002 compared to $2.7 million for the same prior year
period. The decrease relates to higher technology production
costs in the prior year period as the Company was building out
its Internet ventures which were in their start-up phase. This
decrease in costs was partially offset by volume related cost
increases in the second quarter of 2002 related to the Company's
new publications, CIO Insight and Baseline, which were in their
early development stages during the prior year period.
Selling, general and administrative expenses were $14.5 million
and $20.7 million for the quarter ended June 30, 2002 and 2001,
respectively. The decrease relates primarily to the Company's
Internet ventures, which were in their early development stages
during the same prior year period and incurred significant
start-up costs that did not reoccur in the current year period.
Financial Restructuring Update
and Extension of Bond Exchange Offer
On May 1, 2002 the Company reported that bondholders
representing approximately 60.0% of its $250.0 million of 12.0%
Senior Subordinated Notes due 2010 agreed in principle to
participate in a comprehensive financial restructuring plan
under which the Company would reduce its Senior Notes by
approximately $155.0 million and its cash debt service
requirements over the next several years by over $30.0 million
annually by exchanging cash and new securities for the Senior
Notes. In conjunction with this financial restructuring plan
being completed, Willis Stein & Partners, III, L.P., the
controlling stockholder of the Company's parent, also agreed in
principle to make an equity infusion of $80.0 million. Lastly,
the Company also indicated that in connection with the Exchange
Offer, it would simultaneously solicit consents to implement the
same financial restructuring plan through a prepackaged plan of
reorganization (the "Prepackaged Plan") which, if used, would
result in the Company's business operations continuing
uninterrupted and with customers, trade creditors and employees
being unaffected.
On June 17, 2002 the Company formally commenced the solicitation
of acceptances and consents for the Exchange Offer and
Prepackaged Plan by issuing an Offering Memorandum and
Disclosure Statement to all of its bondholders and senior bank
lenders. The Company also reported that it had reached an
agreement in principle with holders of approximately 90.0% of
the outstanding loans under its Senior Credit Facility regarding
a proposed amended and restated credit agreement.
As of July 16, 2002 preliminary tabulations reflect that over
87.0% of the aggregate face amount of bonds have now formally
accepted the Exchange Offer. In addition, over 95.0% of
bondholders and senior bank lenders who voted have also
consented to the Prepackaged Plan.
Based on these positive results and the continued strong support
for the Company's financial restructuring plan, the Company has
decided to formally extend the Exchange Offer and solicitation
of consents for the Prepackaged Plan through 9:00 a.m. on July
23, 2002. In addition, the $15.0 million bond interest payment
that was due on July 15, 2002 will be included as part of the
total value of cash and new securities that will eventually be
issued once the Exchange Offer or Prepackaged Plan is completed.
"We are pleased with the continued support and positive response
by our bondholders and banks in accepting our Exchange Offer and
believe that the extension of our offer will give sufficient
time to add a number of additional participants to the roster.
Most importantly, now that we have the necessary consents to
implement the Prepackaged Plan, we are more confident than ever
that we will quickly proceed with our financial restructuring
plan and are looking forward to completing this process by late
September," said Mr. Callahan.
Continued Cost Reduction Program
and Restructuring Charges
Reflecting the continued difficult economic climate and magazine
advertising marketplace, the Company also made several recent
decisions to further improve its operating effectiveness and
results of operations for both the short and long-term.
In May, the Company discontinued Ziff Davis Smart Business due
to the significant advertising decline of the business and new
economy categories. Also in May, the Company formed a strategic
alliance with Advanstar Communications, whereby it agreed to
sell the assets of The Net Economy to Advanstar Communications.
In June, the Company decided to invest in the consolidation and
relocation of its Game Group editorial staff from Oakbrook,
Illinois to the Company's San Francisco, California office,
where the majority of the Game Group is located.
In July, the Company suspended publication of Yahoo! Internet
Life due to its lack of marketplace support. Yahoo! Internet
Life's year-to-date market share decreased over 52.0% from the
prior year. Also in July, the Company sold its subsidiary,
eTesting Labs Inc, to Lionbridge Technologies Inc (Nasdaq:
LIOX). The Company further agreed to license its proprietary
benchmark software to Lionbridge for its commercial testing
purposes and also entered into a multi-year alliance and
agreement with Lionbridge for reciprocal software development,
testing and marketing services.
"The difficult technology and advertising markets continue to
challenge us to make the necessary course corrections and
business decisions to position ourselves for continued long-term
growth," said Mr. Callahan. "Our focus is now squarely on the
technology and game industries where our products are strong.
These are large and exciting markets where we have leading
business and consumer titles that we plan on investing behind
for many years to come."
As a result of the recent operating and financial restructuring
decisions, the Company recorded a pre-tax restructuring charge
of $22.5 million in the second quarter ended June 30, 2002.
This charge reflects employee severance and consolidation costs
for certain office locations, certain transaction costs
associated with the Company's financial restructuring
initiatives, and $16.8 million of non-cash expenses associated
with the write-off of intangible and fixed assets related to
discontinued publications.
Second Quarter Operating Highlights and Milestones
* PC Magazine maintained its strong #1 market share
position ending the second quarter with a 62.0% market share,
almost double its competitor's share.
* PC Magazine's Editor-in-Chief, Michael J. Miller, and
eWEEK's Editor-in-Chief, Eric Lundquist, were named as top media
influencers by Technology Marketing magazine.
* Ziff Davis Media Game Group continued to grow its #1
market share position within the games category and reported a
36.5% increase in advertising pages versus the second quarter
last year.
* eWEEK, the largest enterprise newsweekly with award-
winning editorial content, gained market share, reporting 20.3%
share for the second quarter.
* CIO Insight, which celebrated its one-year anniversary in
May, has grown market share every quarter since its inception
and garnered 33.0% share for year-to-date June.
* Baseline continued to demonstrate its strong editorial
leadership; in May it was named by B-to-B magazine as one of the
Top 50 business publications.
* Ziff Davis Internet increased revenue by over 63.0%
versus first quarter 2002.
* PC Magazine, Electronic Gaming Monthly and CIO Insight
earned Circulation Excellence awards from Circulation Management
magazine.
* Ziff Davis Media launched Microsoft Watch, a paid online
newsletter featuring inside news and analysis about Microsoft.
Ziff Davis Media Inc. -- http://www.ziffdavis.com-- is the
information authority for buying and using technology. In the
United States, the company publishes 9 industry leading business
and consumer publications: PC Magazine, eWEEK, Baseline, CIO
Insight, Electronic Gaming Monthly, Official U.S. PlayStation
Magazine, Computer Gaming World, GameNow, and Xbox Nation.
There are 48 foreign editions of Ziff Davis Media's publications
distributed in 78 countries worldwide. In addition to producing
companion web sites for its magazines, the Company develops tech
enthusiast sites such as ExtremeTech.com. It provides custom
publishing and integrated marketing solutions through Ziff Davis
Custom Media and industry analyses through Ziff Davis Market
Experts. The company also produces seminars and webcasts.
BOOK REVIEW: Bankruptcy Crimes
------------------------------
Author: Stephanie Wickouski
Publisher: Beard Books
Softcover: 395 Pages
List Price: $124.95
Review by Gail Owens Hoelscher
Order your personal copy today at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
Did you know that you could be executed for non-payment of debt
in England in the 1700s? Or that the nailing of an ear was the
sentence for perjury in bankruptcy cases in 1604? While ruling
out such archaic penalties, Stephanie Wickouski does believe "in
the need for criminal sanctions against bankruptcy fraud and for
consistent, effective enforcement of those sanctions." She
decries the harm done to individuals through fraud schemes and
laments the resulting erosion in public confidence in the
judicial system. This leading authoritative treatise on the
subject of bankruptcy fraud, first published in August 2000 and
updated annually with new material, will prove invaluable for
bankruptcy law practitioners, white collar criminal
practitioners, and prosecutors faced with criminal activity in
bankruptcy cases. Indeed, E. Lawrence Barcella, Jr. of Paul,
Hastings, Janofsky, and Walker, in Washington, DC, says, "If I
were a lawyer involved in a bankruptcy matter, whether civil or
criminal, and had only one reference work that I could rely
upon, it would be this book." And, Thomas J. Moloney with
Cleary, Gottlieb, Steen & Hamilton describes the book as "an
essential reference tool."
An estimated ten percent of bankruptcy cases involve some kind
of abuse or fraud. Since launching Operation Total Disclosure in
1992, the U.S. Department of Justice has endeavored to send the
message that bankruptcy fraud will not be tolerated. Bankruptcy
judges and trustees are required to report suspected bankruptcy
crimes to a U.S. attorney. The decision to prosecute is based on
the level of loss or injury, the existence of sufficient
evidence, and the clarity of the law. In some cases, civil
penalties for fraud are deemed sufficient to punish and deter.
Ms. Wickouski suggests that some lawyers might not recognize
criminal activity that the DOJ now targets for investigation.
She gives several examples, including filing for bankruptcy
using an incorrect Social Security number, and receiving
payments from a bankruptcy debtor that were not approved by the
bankruptcy court. In both of these real life examples, DOJ
investigations led to convictions and jail time.
Ms. Wickouski says that although new schemes in bankruptcy fraud
have come along, others have been around for centuries. She
takes the reader through the most common traditional schemes,
including skimming, the bustout, the bleedout, and looting, as
well as some new ones, including the bankruptcy mill.
The main substance of Bankruptcy Crimes is Ms. Wickouski's
detailed analysis of the U.S. Bankruptcy Criminal Code, chapter
9 of title 18, the Federal Criminal Code. She painstakingly
analyzes each provision, carefully defining terms and providing
clear and useful examples of actual cases. She ends with a good
chapter on ethics and professional responsibility, and provides
a comprehensive set of annexes.
Bankruptcy Crimes is never dry, and some of the cases will make
you nostalgic for the days of ear-nailing. This comprehensive,
well researched treatise is a particularly invaluable guide for
debtors' counsel in dealing with conflicts, attorney-client
relationships, asset planning, and an array of legal and ethical
issues that lawyers and bankruptcy fiduciaries often face in
advising clients in financially distressed situations.
Stephanie Wickouski is a partner in the Washington, D.C. firm of
Arent Fox Kintner Plotkin & Kahn, PLLC. Her practice is
concentrated in business bankruptcy, insolvency, and commercial
litigation.
This book may be ordered by calling 888-563-4573 or through your
favorite Internet bookseller or through your local bookstore.
*********
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 ***