/raid1/www/Hosts/bankrupt/TCR_Public/020816.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, August 16, 2002, Vol. 6, No. 162
Headlines
360NETWORKS INC: New York Court Approves Disclosure Statement
ANC RENTAL: Receives Approval of Agreement Protecting Creditors
ADELPHIA BUSINESS: Committee Taps Klee Tuchin as Special Counsel
ADELPHIA COMMS: Court Okays Willkie Farr as Debtors' Attorneys
ADELPHIA COMMS: Files Statements with SEC Certified by CEO & CFO
ADVANCED GLASSFIBER: Lenders Agree to Forbear Until September 27
ADVOCAT INC: Working Capital Deficit Reaches $61MM at June 30
AMES DEPARTMENT: Will Liquidate & Close All 327 Store Locations
AMERICAN HOMEPATIENT: Retaining Ordinary Business Professionals
APPLEBEE'S: Franchisee Selling Real and Personal Property Assets
ARCH WIRELESS: June 30 Working Capital Deficit Tops $25 Million
ARMSTRONG: Wants to Assume Amended Supply Pact with ExxonMobil
AVATEX: May File for Bankruptcy If Fund-Raising Options Fail
BGF INDUSTRIES: Inks Forbearance Agreement with Senior Lenders
BEVSYSTEMS INTL: Independent Auditors Doubt Ability to Continue
BOMBARDIER CAPITAL: Fitch Lowers Ratings Over Poor Performance
BROADWAY TRADING: Wants More Time to File Schedules & Statements
BUDGET GROUP: Final Hearing on $100M DIP Facility on August 20
CONCERO: Board Decides to Cease Operations & Liquidate Assets
CONSECO INC: Threatens Bankruptcy Filing to Restructure Debts
CONSECO: A.M. Best Hatchets Insurance Units Rating to B from B++
CYTOGEN CORP: Falls Below Nasdaq Continued Listing Standards
EOTT ENERGY: Second Quarter Results Swing-Down to $7MM Net Loss
EMERGING VISION: Hires Miller Ellin as Independent Accountants
EMERGING VISION: Horizons Investors Discloses 18.8% Equity Stake
ENRON CORP: Settles Merger-Related Litigation with Dynegy
FEDERAL-MOGUL: Gets Okay to Expand Scope of Stout's Engagement
FIBERNET TELECOM: Working Capital Deficit Balloons to $108 Mill.
FLAG TELECOM: What to Do with Undeliverable Solicitation Packs
FRANK'S NURSERY: Obtains $80MM Exit Facility from Congress Fin'l
GLOBAL CROSSING: Gets Okay to Sell IRU Assets at Private Auction
HARKEN ENERGY: Working Capital Deficit Tops $43 Mill. at June 30
HENRY MAYO: State Blocks Move to Force Settlement with Workers
HIGH SPEED ACCESS: Board Adopts Liquidation & Dissolution Plan
ICH CORP: Asks Panel to Provide J.H Cohn's Detailed Time Record
ITC DELTACOM: Initiates Search for new Independent Accountants
IBASIS INC: Fails to Maintain Nasdaq Continued Listing Criteria
INTEGRATED INFORMATION: Violates Nasdaq Listing Requirements
KAISER ALUMINUM: Wants to Assume 1998 Bauxite Purchase Agreement
KEY3MEDIA GROUP: James Moore Resigns as Director
KMART CORP: Court Nixes Application to Hire Dewey Ballantine
KMART: U.S. Government Seeks More Time to File Proofs of Claim
LTV CORP: Steel Debtor Sues General Electric to Pursue Claims
LAIDLAW: Classification & Treatment of Claims Under Joint Plan
METALS USA: Selling Southwest Plates & Shapes' Assets for $27MM
NTL INC: Obtains Open-Ended Extension of Lease Decision Period
NTL INC: Uncertain About Ability to Continue Operations
NATIONAL AIRLINES: Has Alternative Plan if ATSB Declines Loan
NEXELL THERAPEUTICS: Considering Options to Effect Wind-Down
NORTH ADAMS: Fitch Hatchets $9.9 Million Revenue Bonds to BB+
NORTHLAND CRANBERRIES: Ability to Continue Operations Uncertain
NUEXCO TRADING: NTC Liquidating Trust Appointed to Manage Assets
OLYMPUS HEALTHCARE: Blocks NLRB's Request for Admin. Expenses
ONVANCE LP: Case Summary & 20 Largest Unsecured Creditors
PNC MAC: Fitch Affirms Low-B Ratings on 2 Certificates Classes
PENTACON INC: Court to Consider Chapter 11 Plan on September 9
PHILIP SERVICES: June 30 Balance Sheet Upside-Down by $18 Mill.
PRIME RETAIL: New Capital Needed to Evade Default on Loan Pact
SAFETY-KLEEN: Dismisses Arthur Andersen as Independent Auditors
SPATIALIGHT INC: Auditors Express Going Concern Doubt
SPECIAL METALS: Brings-In Rothschild Inc. as Investment Bankers
SUNBEAM: Wants Exclusive Periods Stretched to December 15
TELIGENT: Has Until October 15 to Make Lease-Related Decisions
TRI-UNION DEV'T: Defaults on Waiver and Supplement to Indenture
TRISM: Seeks to Stretch Exclusive Period until December 20
UAL CORP: Updating Application for Federal Loan Guarantees
US AIRWAYS: Machinists Applaud Texas Pacific's $200MM Investment
US AIRWAYS: NYSE Suspends Trading & Initiates Removal from List
UNIFAB INT'L: Defaults on Senior Secured Credit Agreement
V. FUND: TSX Delists Shares for Failing to Maintain Requirements
VERTEL CORP: Fails to Comply with Nasdaq Listing Requirements
WARNACO GROUP: Wins Approval to Expand BDO Seidman's Services
WORLDCOM INC: Signing-Up Simpson Thacher as Bankruptcy Counsel
WORLDCOM INC: Looks to Lazard Freres for Financial Advice
XETEL: Withdraws Application to Transfer Listing to SmallCap
XO: Hearing on Lease Decision Period Extension Set for Aug. 26
XO COMMUNICATIONS: Second Quarter EBITDA Swings-Up to $3 Million
* BOOK REVIEW: The Phoenix Effect: Nine Revitalizing Strategies
No Business Can Do Without
*********
360NETWORKS INC: New York Court Approves Disclosure Statement
-------------------------------------------------------------
360networks announced that its disclosure statement has been
approved by the United States Bankruptcy Court for the Southern
District of New York. The Company expects to distribute the
disclosure statement and ballots to creditors of the Company's
U.S. subsidiaries next week. The Court has set September 24,
2002 as the deadline for creditors to vote on the U.S. plan. The
U.S. plan confirmation hearing is October 1, 2002.
Last month, on July 24th, the Supreme Court of British Columbia
approved the information circular and proxy statement relating
to the Canadian plan, and these materials have been distributed
to creditors of the Company's Canadian subsidiaries. The
creditors' meetings to vote on the Canadian plan are scheduled
for August 27, 2002. The hearing date for Court confirmation of
the Canadian plan is August 30, 2002.
"This is another positive step in our reorganization," said Greg
Maffei, president and chief executive officer of 360networks.
"We continue to work closely and consensually with all
interested parties, and remain on track to emerge from both
Chapter 11 and CCAA protection in early October."
360networks offers network services and 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
ANC RENTAL: Receives Approval of Agreement Protecting Creditors
---------------------------------------------------------------
Acting U.S. Trustee Donald F. Walton asks the Court to deny ANC
Rental Corporation, and its debtor-affiliates' motion regarding
the Inter-Debtor Agreement Alamo Rent-A-Car and National Car
Rental System Inc., unless clarification is made on certain
parts of the agreement.
Don A. Beskrone, Esq., in Wilmington, Delaware, argues that the
Debtors' motion fails to disclose the nature and extent of the
contemplated adjustments.
"If the Debtors are attempting at substantive consolidation, the
motion cannot have that effect," Mr. Beskrone says. But if the
Debtors intend to re-apportion rejection damages resulting from
the Court's approval of the rejection of leases of Alamo Rent-A-
Car LLC, among the various Debtors, Mr. Beskrone asserts that
the issues should be brought on directly so that creditors and
parties-in-interest will have the opportunity to squarely
address the issue at a time when it is meaningful.
Until and unless an Order granting substantive consolidation is
entered, Mr. Beskrone contends that the Debtors should be
required to strictly account for income, expenses and claims on
an entity-by-entity basis so that any adjustments intended to be
made at a future time are properly analyzed and evaluated. This
will prevent an "unscrambling the egg" type of dilemma. Mr.
Beskrone also suggests that certain Debtors, depending on the
nature and extent of the contemplated adjustments, retain
separate counsel for reconciling inter-corporate disputes.
National Franchisees Says Agreement Is Unfair
Kenneth E. Aaron, Esq., at Weir & Partners LLP, in Wilmington,
Delaware, dismisses the Debtors' Inter-Debtor Agreement as:
-- illusory,
-- made with a lack of good faith, and
-- does not provide National with a fair market value for the
assets that were either assumed and assigned to ANC or
compensation for damages caused to National as a result of
National's rejecting its concession agreement solely for
ANC's benefit.
Thus, the National Franchisees ask the Court to deny the
Debtors' motion. They also ask Judge Walrath to consider the
appointment of an examiner under Section 1104(c) of the
Bankruptcy Code to determine a fair and equitable methodology of
compensating National for the rejection damages incurred and the
loss of assets and operating businesses inherent in the airport
consolidation program.
* * *
After due deliberation, Judge Walrath grants the Debtors the
authority to enter into the Inter-Debtor Agreement. The
Agreement will ensure that the standing of the individual
creditors of each Debtor would not be affected with the
consolidated operations of Alamo and National at airports
nationwide.
As previously reported the agreement protects the creditors (and
as a matter of course is in the best interest of the Debtors and
their estates) by making sure ANC will be indebted to Alamo or
National for:
A. Any decrease in the net asset value at an individual airport
as of the effective date of the consolidation of that airport
from the net asset value that existed on the day prior to
consolidation; and,
B. The net profit that Alamo or National would have earned at
that airport had there not been consolidation. That net
profit will be determined by reference to the budgeted, stand
alone projections for Alamo and National for the year 2002.
The Court further rules that any party-in-interest will not be
barred from exercising its right to:
-- evaluate the allocations contemplated by the Inter-Debtor
Agreement and any and all related issues, including
issues with respect to the value of ANC's use of the Alamo
and National trademarks, and file objections with the Court
with respect thereto; or
-- propose the need for separate representation of certain
Debtors.
Judge Walrath makes it clear that:
(a) the Debtors will seek Court approval of the final
allocations contemplated by the Inter-Debtor Agreement in
a future motion or Reorganization Plan, and
(b) the Court's Order should not, in anyway, be construed as
granting consolidation of the Debtors' assets. (ANC Rental
Bankruptcy News, Issue No. 17; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ADELPHIA BUSINESS: Committee Taps Klee Tuchin as Special Counsel
----------------------------------------------------------------
There will be matters where Kasowitz Benson Torres & Friedman
LLP won't be able to represent the Official Committee of
Unsecured Creditors, in the chapter 11 cases involving Adelphia
Business Solutions, Inc., and its debtor-affiliates, due to a
conflict of interest.
Thus, the Committee seeks the Court's permission to retain Klee
Tuchin Bogdanoff & Stern LLP as special conflicts counsel, nunc
pro tunc to July 11, 2002.
According to Committee Chairperson Joseph Thornton, Klee Tuchin
is composed of 15 lawyers with offices at 1880 Century Park
East, Suite 200 in Los Angeles, California.
As special conflicts counsel to the Committee, Klee Tuchin's
responsibilities will include:
A. investigation and potential pursuit of one or more claims
against Salomon Smith Barney Inc.;
B. representing the Committee in matters where Kasowitz Benson
Torres & Friedman LLP has a conflict of interest or is unable
to represent the Committee; and
C. other matters in which the Committee determines.
The Committee seeks to retain Klee Tuchin as special conflicts
counsel because of the firm's extensive experience and knowledge
in the field of debtors' and creditors' rights, and business
reorganizations under Chapter 11 of the Bankruptcy Code. In
addition, the firm has become familiar with the Debtors'
financial condition and business as a result of its co-
representation of an ad hoc committee of bondholders prior to
the Petition Date. Accordingly, the Committee believes that the
firm is well qualified and uniquely able to represent the
Committee effectively in these cases.
Klee Tuchin professionals will be compensated on an hourly basis
and reimbursed for actual, necessary expenses incurred. The
current standard hourly rates of the firm's professionals are:
Partners $350 - 675
Associates 225 - 305
Paralegals/Law Clerks 135 - 150
Klee Tuchin Partner David M. Stern assures the Court that the
firm does not hold or represent any interest adverse to the
Committee in matters for which it has been retained. Klee
Tuchin is a "disinterested person" as defined in Section 101(14)
of the Bankruptcy Code, Mr. Stern asserts. However, the firm
currently represents in matters unrelated to these cases
Paramount Pictures Corp., Viacom Inc., and Kmart Corp. (Adelphia
Bankruptcy News, Issue No. 14; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
ADELPHIA COMMS: Court Okays Willkie Farr as Debtors' Attorneys
--------------------------------------------------------------
Adelphia Communications and its debtor-affiliates obtained
permission from the Court to employ Willkie Farr & Gallagher as
their attorneys under a general retainer to perform the legal
services necessary to prosecute their chapter 11 cases.
The Debtors desire to retain Willkie to continue to provide such
other legal services as are necessary and requested by the ACOM
Debtors, including, without limitation, tax, real estate,
corporate finance, employee benefits and litigation services
relating to the Debtors' reorganization.
Specifically, Willkie will:
A. provide advice, representation, and preparation of necessary
documentation regarding financing, real estate, employee
benefits, business and commercial litigation, tax, debt
restructuring, bankruptcy and, if requested, asset
dispositions;
B. take all necessary actions to protect and preserve the
Debtors' estates during the pendency of their chapter 11
cases, including the prosecution and defense of actions in
which the Debtors are parties, negotiation concerning
litigation in which the Debtors are involved, and prosecution
of objections to claims filed against the estates;
C. prepare necessary motions, applications, answers, orders,
reports and papers in connection with the administration of
these chapter 11 cases;
D. assist in the negotiation and preparation of a plan of
reorganization and accompanying disclosure statement;
E. counsel the Debtors with regard to their rights and
obligations as debtors in possession; and
F. perform all other necessary legal services.
Compensation will be payable to Willkie on an hourly basis, plus
reimbursement of actual and necessary expenses incurred. Willkie
attorneys that are likely to represent the Debtors in these
cases have current standard hourly rates ranging between $205
and $695. The paralegals that likely will assist the attorneys
who will represent the Debtors have current standard hourly
rates ranging between $105 and $145. (Adelphia Bankruptcy News,
Issue No. 14; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ADELPHIA COMMS: Files Statements with SEC Certified by CEO & CFO
----------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELQ) has filed
statements with the U.S. Securities and Exchange Commission
affirming that the Company is "not able to state and attest"
that recent SEC filings contain no "untrue statement of a
material fact" or "omitted to state a material fact" because
the Company does not yet have audited financial results for
recent reporting periods.
The statements were signed by Erland "Erkie" Kailbourne,
Adelphia's Chairman and interim Chief Executive Officer, and
Christopher Dunstan, the Company's Chief Financial Officer.
This action is in response to the SEC order of June 27, 2002
that requires companies with annual revenues exceeding $1.2
billion to certify the accuracy of financial reports.
Mr. Kailbourne said, "We will not have audited results for
recent periods until later this year, when our new auditor,
PricewaterhouseCoopers, completes its review. An investigation
by the Special Committee of the Adelphia Board of Directors into
the Rigas family's breach of fiduciary duties and mismanagement
is also under way at this time. As previously stated, we
believe the ongoing audit and the findings from these
investigations will result in a restatement of Adelphia's
financial statements for 1999 and 2000, as well as of interim
financial statements for 2001. Other periods may also be
restated."
As previously announced, Adelphia selected the firm of
PricewaterhouseCoopers as the Company's independent accountants
on June 14, after terminating the engagement of Deloitte &
Touche LLP on June 9, 2002. PricewaterhouseCoopers has begun to
assist the Company with the preparation of its Form 10-K for the
year ended December 31, 2001, which will be completed and
released as soon as practicable.
Adelphia Communications Corporation, with headquarters in
Coudersport, Pennsylvania, is the sixth-largest cable television
company in the country. It serves 3,500 communities in 32 states
and Puerto Rico. It offers analog and digital cable services,
high-speed Internet access (Adelphia Power Link), and other
advanced services.
Adelphia Communications' 10.50% bonds due 2004 (ADEL04USR1),
DebtTraders reports, are trading at 44 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL04USR1
for real-time bond pricing.
ADVANCED GLASSFIBER: Lenders Agree to Forbear Until September 27
----------------------------------------------------------------
Advanced Glassfiber Yarns LLC has entered into an additional
amendment and forbearance agreement with its senior secured
lenders under an initial $315 million revolving credit and term
loan facility.
Previously, the Company had announced that it was in discussions
with its lenders regarding a consensual restructuring of
approximately $180 million of indebtedness outstanding under
such facility, and had obtained an initial agreement from its
lenders to forbear from exercising rights and remedies under
such facility until August 13, 2002. Under the latest amendment
and forbearance agreement, the Company's senior secured lenders
agreed, among other things, to extend the forbearance period
until September 27, 2002, while the parties continued
restructuring discussions.
Separately, the Company announced that it will not be making the
approximately $7.4 million interest payment on its $150 million
of 9-7/8% senior subordinated notes that is due upon the
expiration of a 30-day grace period provided under the indenture
governing the notes. Previously, the Company had announced that
it intended to use this grace period to enter into consensual
restructuring discussions with the noteholders. The Company
stated that, although the grace period has expired, it has
commenced discussions with a steering committee of the holders
of the notes, and intends to continue its efforts to achieve a
consensual restructuring of such indebtedness.
The Company noted, however, that there can be no assurance that
it will be successful in achieving a consensual restructuring of
its bank or bond indebtedness, in which event, the Company will
explore all viable alternatives.
Advanced Glassfiber Yarns, headquartered in Aiken, SC, is one of
the largest global suppliers of glass yarns, which are a
critical material used in a variety of electronic, industrial
construction and specialty applications.
ADVOCAT INC: Working Capital Deficit Reaches $61MM at June 30
-------------------------------------------------------------
Advocat Inc., (OTC Bulletin Board: AVCA) announced its results
for the second quarter ended June 30, 2002. The Company
reported a loss of $1.2 million in the second quarter of 2002
compared with a loss of $2.4 million for the same period in
2001. Net revenues for the second quarter ended June 30, 2002,
were $49.5 million compared with net revenues of $50.2 million
in 2001.
The loss for the second quarter includes approximately $1.1
million of non-recurring charges related primarily to the
termination of leases on 16 U.S. assisted living facilities.
The non-recurring charges include $661,000 related to the
remaining net book value of the 16 facilities and $404,000
write-down of assets held for sale to their net realizable
value. Thirteen of the leases were terminated effective April
30, 2002, two additional leases terminated effective May 31,
2002, and one lease was terminated effective June 30, 2002. The
Company is currently negotiating a similar termination of the
remaining leased assisted living facilities in the U.S. and
expects this to occur during the third quarter of 2002.
U.S. nursing homes net revenues increased 4.4% to $40.2 million
in the second quarter of 2002 compared with $38.5 million in the
second quarter of 2001 as a result of increased Medicare
utilization, Medicare rate increases, higher Medicaid rates in
certain states, partially offset by a 1.2% decline in occupancy
and nursing home lease terminations in the fourth quarter of
2001. Net revenues for U.S. assisted living facilities declined
34.2% to $5.2 million compared with net revenues of $7.8 million
in 2001 and was primarily due to lease terminations during the
quarter. Canadian operation revenue increased 8.4% to $4.1
million compared with net revenues of $3.8 million in the second
quarter of 2001 due to higher census compared with the second
quarter of the prior year.
Operating expenses decreased 3.9% to $39.5 million in the second
quarter compared with $41.1 million in 2001. The decrease was
primarily due to reduced bad debt expense and the lease
terminations associated with the nursing homes and assisted
living facilities.
At June 30, 2002, Advocat had negative working capital of $60.8
million primarily due to $55.8 million of debt being classified
as current liabilities resulting from the Company's covenant
non-compliance and other cross-default provisions. Based on
regularly scheduled debt service requirements, the Company has
$34.2 million of debt that must be repaid or refinanced in the
next 12 months.
As of June 30, 2002, the Company is engaged in 63 professional
liability lawsuits, including 21 in Florida, 17 in Arkansas, and
11 in Texas. The Company has recorded $26.2 million of total
liabilities for incurred but unreported claims related to
reported professional liability claims and estimates.
Advocat Inc., operates 100 facilities including 63 skilled
nursing facilities containing 7,198 licensed beds and 37
assisted living facilities with 3,704 units as of June 30, 2002.
The Company operates facilities in ten states, primarily in the
Southeast, and four provinces in Canada.
For additional information about the Company, visit Advocat's
Web site at http://www.irinfo.com/avc
AMES DEPARTMENT: Will Liquidate & Close All 327 Store Locations
---------------------------------------------------------------
Ames Department Stores, Inc., announced that the discount retail
chain will liquidate and close all of its 327 store locations,
and that management and the Board of Directors have determined
that asset values can best be maximized for the benefit of all
creditors by terminating operating losses and winding down the
business.
"This was a wrenching decision, but the right course to take.
Continued softness in sales, combined with tightening terms and
slower shipments from our suppliers, have reduced our funds
availability below critical levels," said Ames chairman and CEO
Joseph R. Ettore. "To ensure the greatest possible value for our
various stakeholders - including our associates - Ames
management has resolved to pursue an orderly liquidation of the
company now, rather than continue along a path that would
further diminish our resources and lead Ames to default on its
lending agreements."
Subject to the approval of the Bankruptcy Court, the company
expects to promptly designate a liquidator to conduct "Going Out
of Business" sales at all Ames store locations. Stores are
expected to remain open for approximately ten weeks during this
process.
"Our associates and managers have worked long and hard, trying
to restore the viability of Ames. But despite those efforts, and
the efforts of management to control costs and restructure our
operations, the difficult environment for discount retailing and
the continued slowness in the economy have made it impossible
for us to deliver the sales volume we need to meet our
obligations. I want to thank our associates for their hard work
during this last trying year, and thank our loyal customers for
the continued support they have shown our company," Mr. Ettore
concluded.
Founded in 1958, Ames is a regional, full-line discount retailer
with an associate base of 21,500 and annual sales of
approximately $2.7 billion. Ames operates 327 stores in the
Northeast, Mid-Atlantic and Mid-West. More information about
Ames, including a list of store locations, can be found at
http://www.AmesStores.com
Ames Department Stores' 10% bonds due 2006 (AMES06USR1) are
trading at 1 cent-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMES06USR1
for real-time bond pricing.
AMERICAN HOMEPATIENT: Retaining Ordinary Business Professionals
---------------------------------------------------------------
American Homepatient, Inc., and its debtor-affiliates sought and
obtained approval from the U.S. Bankruptcy Court for the Middle
District of Tennessee to retain Professionals utilized in the
ordinary course of the Company's business, without the necessity
of filing separate, formal retention applications with the
Court.
The Debtors customarily retain the services of various
independent financial consultants, attorneys or law firms and
other professionals in the ordinary course of business to
represent them in matters arising in their home health care
operations.
After determining that the requested relief is well-taken, the
Court granted the Debtors authority to pay the Ordinary Business
Professionals, upon appropriate invoice, fees and disbursements,
not exceeding 115% of the estimated maximum billings per
professional. The estimated maximum 12-month period billing for
all Ordinary Business Professionals is approximately $487,000.
American Homepatient, Inc., provides home health care services
and products consisting primarily of respiratory and infusion
therapies and the rental and sale of home medical equipment and
home care supplies. The Company filed for chapter 11 protection
on July 31, 2002. Glenn B. Rose, Esq., at Harwell Howard Hyne
Gabbert & Manner, PC represents the Debtors in their
restructuring efforts. When the Company filed for protection
from its creditors, it listed $269,240,077 in assets and
$322,129,850 in debts.
APPLEBEE'S: Franchisee Selling Real and Personal Property Assets
----------------------------------------------------------------
APPLEBEE'S NEIGHBORHOOD BAR & GRILL RESTAURANTS
FOR SALE
Surrounding D.C. Area
BANKRUPTCY SALE
Franchisee of Applebee's filed for protection under Chapter 11
of the Bankruptcy Code and, conditioned upon obtaining approval
of the Bankruptcy Court, intends to sell the real and personal
property associated with its stores at the Auction. There are 21
stores available for sale, which are located in Delaware,
Maryland, Pennsylvania, Virginia & West Virginia.
Contact:
Harry Rosenfeld
Apple Capitol Group, LLC, 954.851.9494
ARCH WIRELESS: June 30 Working Capital Deficit Tops $25 Million
---------------------------------------------------------------
Arch Wireless, Inc. (OTC Bulletin Board: AWIN), a leading
wireless messaging and mobile information company, announced
consolidated net income of $1.7 billion for the second quarter
ended June 30, 2002, compared to a net loss of $1.1 billion for
the second quarter of 2001. Net income was $1.7 billion for the
six months ended June 30, 2002, compared with a
net loss of $1.3 billion for the same period of 2001. Net
income for the three and six months ended June 30, 2002 reflects
various bankruptcy-related items including a $1.6 billion gain
from the discharge and termination of debt upon Arch's emergence
from bankruptcy on May 29, 2002.
Consolidated revenues for the second quarter totaled $200.8
million, compared to $303.4 million for the second quarter of
2001. For the six months ended June 30, 2002, consolidated
revenues totaled $434.3 million, versus $630.8 million in the
same period of 2001.
Arch's financial results for the three and six months ended June
30, 2002 include separate operating results and cash flows prior
to its emergence from bankruptcy (the Predecessor Company), as
well as operating results and cash flows after its emergence
from bankruptcy (the Reorganized Company), reflecting the
application of "fresh-start" accounting that resulted from
Arch's Chapter 11 reorganization. Although May 29, 2002 was the
effective date of Arch's Chapter 11 plan of reorganization, Arch
accounted for the consummation of the plan as of May 31, 2002
for financial reporting purposes.
In connection with Arch's emergence from Chapter 11, the
Reorganized Company applied "fresh-start" accounting in
accordance with SOP 90-7. Under SOP 90-7, the value of the
Reorganized Company was allocated to its assets in accordance
with Statement of Financial Accounting Standards (SFAS) No. 141
"Business Combinations" and its liabilities were stated at their
present values.
In its June 30, 2002 balance sheet, Arch Wireless records a
working capital deficit of about $25 million.
Consequently, and due to other reorganization-related events and
adjustments, the Predecessor Company's financial statements for
the two- and five-month periods ended May 31, 2002, are not
comparable to the Reorganized Company's financial statements for
the one-month period ended June 30, 2002. In addition, the
Predecessor Company's financial results and the Reorganized
Company's financial results, individually or collectively,
are not comparable to the projections contained in the
Disclosure Statement filed in connection with Arch's Chapter 11
reorganization. As a result, Arch has discontinued the use of
the long-term financial projections contained in the Disclosure
Statement.
J. Roy Pottle, executive vice president and chief financial
officer, said: "Among other differences, the long-term
projections contained in the Disclosure Statement exclude the
results of Arch's Canadian subsidiaries and exclude from the
calculation of earnings before interest, taxes, depreciation and
amortization (EBITDA) certain operating expenses such as
severance payments and other expenses." He further noted that
"certain adjustments and transactions reflected in the
Predecessor Company's financial statements, resulting either
directly or indirectly from the bankruptcy, make comparisons to
the Disclosure Statement projections inappropriate."
Despite the foregoing, Pottle generally reaffirmed guidance for
2002. "Although the Disclosure Statement for 2002 had projected
net revenue of $823 million and EBITDA of $205 million," he
said, "we now expect consolidated net revenue of approximately
$800 million to $815 million and EBITDA of $210 million to $215
million as we expect reductions in various operating expenses to
more than offset the slightly lower revenue."
Pottle added: "The guidance provided above is consistent with
the Reorganized Company's accounting treatment of EBITDA.
However, for comparative purposes, EBITDA for the three months
ended March 31, 2002 and June 30, 2002 were approximately $63
million and $58 million, respectively, had EBITDA been
calculated without regard to the reorganization-related
adjustments and consistent with the presentation in the
Disclosure Statement."
Arch reported a net decline of 739,000 one-way messaging units
for the quarter ended June 30, 2002, and net additions of 5,000
two-way units. More than half the decrease in units came from
indirect channels of distribution. Total units in service at
June 30, 2002 were 7,007,000.
"We continued to experience weak demand for one-way and two-way
messaging services during the second quarter," said C. Edward
Baker, Jr., chairman and chief executive officer, "due both to
competitive pressures from shared wireless voice and data
services as well as a sluggish economy. However, we are
encouraged that the pace at which one-way units are declining
appears to be slowing. Overall, the quarter was largely
consistent with our expectations as we continued to reduce
operating expenses to partially offset declining revenues."
Baker added: "Despite the industry slowdown, we continue to
provide quality service to a core group of wireless data
customers who benefit from the reliability, coverage and price
advantages of Arch's nationwide messaging networks."
Other recent company highlights:
In July, Arch Wireless:
* Announced that its subsidiary, Arch Wireless Holdings,
Inc., had completed the redemption, at par value, of principal
amount totaling $10,000,000 of 10% Senior Subordinated Secured
Notes due 2007. AWHI had issued $200 million of Senior
Subordinated Secured Notes on May 29, 2002 in connection with
its Chapter 11 reorganization. In addition, AWHI gave notice to
The Bank of New York, the indenture trustee for the Notes, of
its intention to redeem an additional $15,000,000 in 10% Senior
Subordinated Secured Notes due 2007 on August 30, 2002 to
holders of record as of August 15, 2002.
* Announced enhanced support for the Microsoftr Exchange
component of its Arch Wireless Enterprise Solution (AWES),
Arch's wireless enterprise server that was launched nationwide
in February 2002. By incorporating new Microsoft Exchange
support into AWES, remote users are able to access additional
resources, including email filters, improved calendar
capabilities, and the ability to receive and view additional
file types.
* Announced that it had donated two months of service for
687 two-way wireless messaging devices to the United Way of Palm
Beach County in Florida. The United Way is using the devices
for communication between approximately 60 affiliated non-profit
organizations in Palm Beach County.
Arch Wireless, Inc., headquartered in Westborough, Mass., is a
leading wireless messaging and mobile information company with
operations throughout the United States. The company offers a
full range of wireless messaging and wireless e-mail services,
including mobile data solutions for the enterprise, to business
and retail customers nationwide. Arch provides wireless
services to customers in all 50 states, the District of
Columbia, Puerto Rico, Canada, Mexico and in the Caribbean
principally through a nationwide sales force, as well as through
resellers, retailers and other strategic partners. Additional
information on Arch is available on the Internet at
http://www.arch.com
ARMSTRONG: Wants to Assume Amended Supply Pact with ExxonMobil
--------------------------------------------------------------
Armstrong World Industries Inc., seeks the Court's authority to
assume an amended executory contract with Exxon Chemical
Company, a division of Exxon Corporation, now known as
ExxonMobil Chemical Company.
Rebecca L. Booth, Esq., at Richards Layton & Finger, in
Wilmington, Delaware, relates that AWI and ExxonMobil entered
into a supply agreement in October 1999. ExxonMobil agreed to
sell AWI over 70,000,000 pounds of "Jayflex" plasticizer, a
material used in the manufacture of AWI's floor products
throughout North America, including residential and commercial
sheet goods, residential tile, and commercial tile. The parties
modified provisions of the agreement by letter dated September
29, 2000.
The principal terms of the ExxonMobil Agreement are:
(1) Quantity. ExxonMobil sells AWI 72,500,000 pounds of
plasticizer per year. The plasticizer is delivered
to AWI manufacturing plants located in Pennsylvania,
Mississippi, Oklahoma, Illinois, California, New
Jersey and Montreal, Canada;
(2) Price. The net invoice price AWI pays ExxonMobil
under this agreement is dependent upon the grade of
plasticizer purchased and the location to which the
plasticizer is shipped. The actual agreement
containing these prices is filed under seal and
unavailable;
(3) Term. The original term of the ExxonMobil agreement
expired on December 31, 2001, but extends
automatically from year to year after that, subject
to the right of either party to terminate the
agreement upon 90 days' prior written notice;
(4) Payment. AWI receives proximo 15-day terms
with a cash discount, or proximo 30-day terms.
(5) Volume Performance Allowance. ExxonMobil provides
AWI with a volume performance or rebate equal to
up to $0.01 per pound of plasticizer purchased
from Exxon. The VPA is calculated for each
manufacturing plant based upon the amount of
plasticizer AWI purchases for each plant;
(6) Product Warranty. ExxonMobil warrants that the
product delivered to AWI under this agreement
-- will conform with the specifications set out
in the ExxonMobil/AWI agreement,
-- are of merchantable quality, and
-- as delivered to AWI, do not infringe on the
patents, technical know-how, or other
intellectual properties of third parties.
To the extent any products do not conform to the
specifications set out in the agreement, AWI is
entitled to return the products to ExxonMobil
for replacement at ExxonMobil's expense;
(7) Indemnity. To the extent any claims, liabilities
or obligations arise as a result of any breach of
warranty by ExxonMobil or by the failure of any
product to satisfy the warranties set out in the
agreement, ExxonMobil is required to indemnify AWI
in an amount not to exceed $1,000,000 in any
calendar year. ExxonMobil has no liability for
special, incidental, consequential or exemplary
damages unless such damages are caused by gross
negligence or willful misconduct;
(8) Price Adjustments. Upon 15 days' prior written
notice, ExxonMobil may change any price, freight,
and/or payment term on the first day of January,
April, July or October; and
(9) Competitive Adjustments. If a North American
competitor of ExxonMobil offers to sell AWI at
least 10,000,000 pounds of plasticizer that is:
(i) of equal quality to that supplied by
ExxonMobil, and
(ii) at a price greater than or equal to half
a cent below ExxonMobil's net price
(including the VPA) per pound,
ExxonMobil is entitled to submit revised
pricing to address the competitive situation.
Alternatively, ExxonMobil may modify this
agreement to permit AWI to accept the
competitive offer and deduct the quantity to be
purchased from the competitor from the total
quantity to be delivered to AWI under this
agreement. In the case of DINP purchases,
however, AWI may purchase up to 10,000,000
pounds of plasticizer from an ExxonMobil
competitor without expecting ExxonMobil to meet
the competitive price.
AWI currently owes ExxonMobil prepetition amounts totaling
between $1,515,000 and $1,690,000 under this Agreement.
The Amendments
Under a 2002 Letter Agreement amending the ExxonMobil/AWI
Agreement, AWI and ExxonMobil have agreed to several new
provisions relating to, among other things:
-- AWI's prepetition debt under the ExxonMobil agreement,
-- the establishment of a global volume performance
allowance or rebate, and
-- the transition to a contingent billing arrangement for
certain AWI warehouse facilities.
The 2002 Letter Agreement provides that:
(1) Prepetition Debt. ExxonMobil will reduce the amount
of AWI's prepetition debt by $1,000,000;
(2) Global Volume Performance Allowance. AWI and its
affiliates will receive a global volume performance
allowance based upon annual worldwide sales of
plasticizer to AWI and its affiliates. Based upon
AWI's current annual volume of 72,500,000 pounds,
the Global VPA will be equal to 0.5% for each pound
of plasticizer purchased from ExxonMobil. AWI
estimates this will result in annual savings of
$135,000;
(3) Consignment Billing Arrangement. AWI and ExxonMobil
have agreed to work towards implementing a consignment
billing arrangement, under which ownership of, and
financial responsibility for, the materials shipped by
ExxonMobil to certain warehouse locations will be
transferred to AWI upon AWI's use of the materials.
The consignment billing arrangement contemplates the
establishment of a monitoring system that will enable
ExxonMobil to manage the inventory shipped to AWI's
warehouses for billing purposes. The consignment
billing arrangement will alter the current billing
arrangement under the ExxonMobil/AWI agreement under
which AWI takes ownership of, and financial
responsibility for, the materials shipped by
ExxonMobil when they are delivered to AWI; and
(4) Credit. ExxonMobil may:
(i) demand advance cash payment or satisfactory
security if the financial responsibility of
AWI becomes impaired or unsatisfactory to
ExxonMobil, and
(ii) withhold shipments until payment or security
is received.
The 2002 Letter Amendment also replaces the payment, term and
price provisions in the ExxonMobil/AWI agreement. Specifically,
the 2002 letter amendment modifies the ExxonMobil/AWI agreement
by providing that:
(1) AWI will receive monthly summary bills with net
25-day payment terms for all consignment billing
locations and net 30-day payment terms for all
other locations;
(2) The term of the ExxonMobil/AWI agreement will
expire on December 31, 2004, and extend from year
to year thereafter, subject to the right of either
party to terminate the agreement on December 31,
2004, or any anniversary of that date upon 90 days'
prior written notice; and
(3) ExxonMobil will reduce the net invoice price by
$0.01 for each pound of plasticizer AWI purchases
from ExxonMobil and issue a credit to AWI in the
amount of $0.01 per pound for all volumes purchased
between July 1, 2002, and the date AWI's assumption
of the ExxonMobil/AWI agreement, as amended, is
approved by Judge Newsome. AWI estimates that this
will result in a net savings of $450,000 per annum.
Moreover, the 2002 Letter Agreement amends a portion of the
ExxonMobil/AWI agreement governing price adjustments.
Specifically, the 2002 letter provides that AWI may, in its
discretion, purchase up to 10% of its prior 12 months'
plasticizer purchases from ExxonMobil from any of ExxonMobil's
North American competitors without expecting ExxonMobil to meet
the competitive price offered by any competitor.
Since the Petition Date, Ms. Booth relates that AWI has spent a
significant amount of time and resources in an effort to develop
and implement a restructuring program designed to reduce costs,
improve cash flow, and achieve profitability. In that
connection, AWI has begun the process of, inter alia, evaluating
its executory contracts and unexpired leases, including its
supply agreements. Although this review continues, AWI contends
that assumption of this ExxonMobil/AWI Agreement, as modified,
will benefit its estate and creditors.
According to Ms. Booth, the amended ExxonMobil agreement
contains terms very favorable to AWI, so much so that the
agreement will be "a significant component" of any business plan
to be developed. Because ExxonMobil has agreed to reduce AWI's
debt by $1,000,000, AWI will be able to cure its default under
the amended ExxonMobil/AWI Agreement with a single payment
between $515,000 and $690,000.
In addition, Ms. Booth notes that the amended agreement provides
AWI with better payment terms and greater flexibility by
extending AWI's existing payment terms from proximo 15 days to
net 25 days or net 35 days. This flexibility is further
enhanced by the implementation of the consignment billing
arrangement that permits AWI to accept delivery of the materials
supplied by ExxonMobil for the cost of these materials until
they are actually used by AWI in its products. This arrangement
greatly benefits AWI's estate because it will enable AWI to
reduce the amount of AWI's working capital, thereby:
(i) increasing the amount of cash available for investment
in other assets or business endeavors, and
(ii) improving AWI's balance sheet, which may have tangential
benefits in credit markets going forward.
Moreover, Ms. Booth continues, Exxon's agreement to extend AWI's
payment terms and to reduce the net invoice price for all
plasticizers purchased by AWI will result in annual savings to
AWI of $450,000. Similarly, AWI will be eligible to receive
significant annual rebates equal to up to 0.75% of AWI's annual
purchase revenue as a result of the Global VPA. "These
favorable terms will necessarily increase AWI's profitability
and ultimately benefit its estate and creditors," Ms. Booth
says.
Finally, Ms. Booth explains, AWI's assumption of the amended
ExxonMobil/AWI agreement will benefit its estate and creditors
because it will enable AWI to continue its long-standing
association with ExxonMobil, the leading supplier of
plasticizers in North America. (Armstrong Bankruptcy News, Issue
No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900)
AVATEX: May File for Bankruptcy If Fund-Raising Options Fail
------------------------------------------------------------
Avatex Corporation (OTC Bulletin Board: AVAT) announced
financial results for the first quarter of fiscal 2003 ending
June 30, 2002.
The Company reported a loss before extraordinary item of $2.0
million for the quarter ended June 30, 2002, compared with a
loss before extraordinary item of $12.0 million for the same
period last year. The principal components of the difference in
loss before extraordinary item for the first quarter this fiscal
year compared to the same period for the prior year were: i) the
elimination of loss from equity investment in Phar-Mor, Inc.
which filed for bankruptcy protection under Chapter 11 of
the Bankruptcy Code on September 24, 2001, ii) other expense of
$0.2 million principally related to a reduction in the carrying
value of investment in iLife Solutions, Inc. compared to other
income in the prior period of $1.4 million, and iii) a decrease
in interest and dividend income.
The net loss of $2.0 million for the quarter ended June 30, 2002
was after minority interest of $0.1 million representing the
approximate 41% interest in Chemlink Acquisitions Company, LLC
and the related 50% interest in Chemlink Laboratories, LLC that
the Company does not own. This compares to a net loss for the
quarter ended June 30, 2001 of $9.5 million which included an
extraordinary gain of $2.5 million on the early extinguishments
of certain of the 6.75% notes due in December 2002 issued by the
Company's wholly owned subsidiary, Avatex Funding, Inc., and
guaranteed by the Company.
At June 30, 2002, the Company's balance sheet shows a total
shareholders' equity deficit of about $7 million, and a working
capital deficit of about $10 million.
It is possible that the Company will not have sufficient cash to
pay the $14.3 million face amount of the 6.75% notes issued by
Avatex Funding, Inc., when they mature on December 7, 2002.
Management continues to investigate strategies and alternatives
to address this issue. However, should the Company not be able
to generate sufficient cash flows from its investments,
restructure its liabilities, and/or obtain additional
financing, the Company may have to seek protection under the
federal bankruptcy laws.
BGF INDUSTRIES: Inks Forbearance Agreement with Senior Lenders
--------------------------------------------------------------
On August 13, 2002, BGF Industries, Inc., and its senior lenders
executed a forbearance agreement with respect to breaches of
certain financial covenants under BGF's senior credit facility.
This forbearance agreement is effective until March 31, 2003. As
a result, the senior lenders have rescinded their payment
blockage notice prohibiting BGF from making the required
interest payment on its 10-1/4% Series B Senior Subordinated
Notes due 2009 on July 15, 2002. Accordingly, BGF has today made
the interest payment on the notes that was previously required
on July 15, 2002.
BGF, headquartered in Greensboro, NC, manufactures specialty
woven and non-woven fabrics made from glass, carbon and aramid
yarns for use in a variety of electronic, filtration, composite,
insulation, construction, and commercial products.
BEVSYSTEMS INTL: Independent Auditors Doubt Ability to Continue
---------------------------------------------------------------
BEVsystems International, Inc., produces and markets bottled
water infused with dissolved oxygen in concentrations up to
approximately 15 times greater than that found in ordinary
bottled water. Its core product, trademarked as Life O2,
combines water and oxygen, the two essential requirements for
human life. Its products and manufacturing processes are
protected under 7 U.S. and 18 international patents, and are
marketed under various registered trademarks. The Company
believes that consumption of oxygen-enriched water can be shown
to improve performance and well being. According to the Company,
in a variety of studies, athletes that consumed Life O2 bottled
water were shown to measurably improve their performance.
Over the last four years Life O2 bottled water has been sold in
18 international markets, making Life O2 bottled water the
global category leader in super oxygenated water. Currently,
BEVsystems has agreements in Europe, Japan, Canada and Latin
America. In international markets, it sells and license its
products to bottlers and distributors, who bottle and sell
either Life 02 branded products or co-branded products that are
produced using BEVsystems' equipment and processes. In November
2001, the Company began to launch its products into the United
States market and are currently selling its products in Florida,
the greater New York City metropolitan area and selected other
markets. In the United States, it bottles its products in its
own Clearwater, Florida bottling facility and under co-packing
arrangements with independent bottlers and sells them to
distributors under its Life O2 label.
The Company's acquisition of Aqua Clara Bottling & Distribution,
Inc. and Subsidiaries was effective on February 25, 2002, and
under Generally Accepted Accounting Principles, BEVsystems
International, Ltd. was recapitalized. From a legal perspective,
Aqua Clara (renamed BEVsystems International, Inc.) was the
surviving company and thus continues its public company
reporting obligations. However, from an accounting perspective,
BEVsystems International, Ltd. acquired Aqua Clara. As a result,
all financial information is presented using the purchase method
of accounting for the acquisition of Aqua Clara under generally
accepted accounting principles. The financial results includes
BEVsystems results from April 1, 2001 to March 30, 2002 and Aqua
Clara's results only from the five week period February 25, 2002
to March 30, 2002. Since BEVsystems had no operations prior to
April 1, 2001, there are no comparative financial results to
disclose.
The net sales for the fiscal year ending March 30, 2002 were
$1,379,384 after allowance for recalled products of $250,000.
The Gross Margin for the fiscal year ended March 30, 2002 was $
172,030, less the allowance of $250,000 related to a recall of
product from Nihon Shoken, for a gross margin of $(77,970). The
net loss was $4,585,208. Selling and general administrative
expenses for the fiscal year ended March 30, 2002 were
$4,507,238. The introduction and branding of a new beverage
product in the domestic United States is an expensive
undertaking. The Company incurred $1,216,023 in sales and
marketing expense launching Life O2 in the south Florida market.
The current year net loss includes a charge of $625,316 related
to accrued bonuses to directors and officers. Subsequent to
March 30, 2002, 1,203,493 shares of stock were issued as payment
for this accrual. The remaining cash portion $191,935 is
carried as an accrual and has not been paid.
Prior to the acquisition of the Life O2 assets from Life
International, Life O2 and private labeled products were
produced by third party contractors under co-packaging licensing
agreements including, among others, World Choice Bottling Corp.
in Vancouver B.C. World Choice Bottling Corp. produced Balance
Date +O2 bottled water for Life International's Japanese
customer Nihon Shokken. Subsequent to the acquisition of the
Life O2 assets, the Balance Date + O2 bottled water product was
recalled due to the growth of mould in the product produced by
World Choice Bottling Corp. The recalled product was produced
prior to and subsequent to the Life O2 asset acquisition. The
Company is indemnified against this recall by Life
International. Furthermore, the Company has initiated legal
proceedings against World Choice Bottling Corp. The Company has
determined that the exposure against any future claims from
Nihon Shokken to be $250,000.
The Company entered into a master distribution agreement with
StonePoint Group, Ltd., for the territory of Asia. The Company
received $400,000 as a one-time license fee. Management
believes that StonePoint will receive the new order from Nihon
Shokken during fiscal 2nd quarter however, there can be no
assurances that this will occur.
The Company does not intend to manufacture bottled water
products without firm orders in hand for its products. The
Company intends to expend costs over the next twelve months in
advertising, marketing and distribution, which amounts are
expected to be expended prior to the receipt of significant
revenues. There can be no assurance that the Company will
generate significant revenues as a result of its investment in
advertising, marketing and distribution and there can be no
assurance that the Company will be able to continue to attract
the capital required to fund its business plan.
Under date of July 8, 2002 the Company's independent auditors
have issued a going concern statement.
BOMBARDIER CAPITAL: Fitch Lowers Ratings Over Poor Performance
--------------------------------------------------------------
Fitch Ratings downgrades the following Bombardier Capital
Manufactured Housing Contracts due to the poor performance of
the underlying manufactured housing loans in the transactions:
--Series 1998-A class B-1 to 'B' from 'BB';
--Series 1998-A class B-2 to 'CCC' from 'B';
--Series 1998-B class M-1 to 'A-' from 'AA' (removed from
Rating Watch Negative);
--Series 1998-B class M-2 to 'BB' from 'BBB' (removed from
Rating Watch Negative);
--Series 1998-B class B-1 to 'CCC' from 'B';
--Series 1998-C class M-1 to 'A-' from 'AA';
--Series 1998-C class M-2 to 'BBB-' from 'A-';
--Series 1998-C class B-1 to 'B' from 'BB';
--Series 1998-C class B-2 to 'CCC' from 'B';
--Series 1999-B classes A-1 through A-6 to 'AA' from 'AAA';
--Series 1999-B class M-1 to 'BBB' from 'A';
--Series 1999-B class M-2 to 'B' from 'BBB-' (removed from
Rating Watch Negative);
--Series 2000-A classes A-1 through A-5 to 'AA' from 'AAA';
--Series 2000-A class M-1 to 'A' from 'AA';
--Series 2000-A class M-2 to 'B' from 'BBB-' (removed from
Rating Watch Negative);
--Series 2000-A class B-1 to 'CCC' from 'B';
--Series 2000-A class B-2 to 'D' from 'CCC'.
These rating actions reflect the poor performance of the
underlying manufactured housing loans in the transactions.
Higher than expected losses have resulted in reduction of the
amount of overcollateralization. As of the distribution date on
July 15, 2002, the overcollateralization amounts for these
transactions have fully depleted. The original o/c target for
series 1998-A, 1998-B, 1998-C, 1999-B and 2000-A is equal to
$8,258,024 (4.25%), $13,528,046 (4.50%), $9,003,765 (4.75%),
$24,563,064 (5.25%) and $21,881,416 (5.25%) respectively.
On August 11, 2000, letters of credit were issued to provide
additional credit enhancement for a number of the company's
securitizations. For series 1998-A, a $20 million LOC was
provided. For series 1998-B and 1998-C, $18 million and $15.2
million was provided. Additionally, on Dec. 1, 2000 an
additional LOC for $16.6 million was provided for additional
credit support for series 1998-C. As of July 15, 2002, these
balances were reduced to $15,590,794 (1998-A), $5,416,118 (1998-
B) and $19,194,491 (1998-C).
Although the company exited the manufactured housing lending
business in September 2001, it continues to service its
approximately $1.8 billion manufactured housing loan portfolio.
The departure form the lending business has had an adverse
impact on already deteriorating performance. As a result of
exiting the manufactured housing lending business the company is
now heavily reliant upon wholesale liquidations of repossessed
homes. Recovery rates on wholesale liquidations are generally
substantially lower than retail liquidation recoveries.
Cumulative losses to date are 14.51%, 15.07%, 15.12%, 10.72% and
11.50% of the original collateral balance for series 1998-A,
1998-B, 1998-C, 1999-B and 2000-A, respectively. Fitch will
continue to monitor the performance of the collateral pools
backing the securities as well as the status of the servicing
platform.
BROADWAY TRADING: Wants More Time to File Schedules & Statements
----------------------------------------------------------------
Broadway Trading, LLC and its debtor-affiliates ask for more
time from the U.S. Bankruptcy Court for the Southern District of
New York to file their schedules and statements.
The Debtors acknowledge the importance of their respective
schedules of assets and liabilities, schedules of current income
and expenditures, schedules of executory contracts and unexpired
leases, and statements of financial affairs in these
proceedings. The Debtors tell the Court that they need until
the earlier of:
a) September 25, 2002 or
b) three business days prior to an auction for the sale of
all or substantially all of the assets of the Debtors
pursuant to section 363 of the Bankruptcy Code.
The Debtors relate that they were unable to assemble all of the
information necessary to complete and file their Schedules and
Statements before the Petition Date because of:
- the substantial size and scope of the Debtors'
businesses;
- the complexity of their financial affairs;
- the limited staffing available to perform the required
internal review of their accounts and affairs;
- the burden on the Company's limited financial,
accounting, and legal staff in meeting numerous, ongoing
reporting obligations, including reporting requirements
under applicable securities laws and regulations; and
- business exigencies incident to the commencement of these
chapter 11 cases.
The Debtors are in the process of attempting to sell certain of
its assets at an auction to be held pursuant to section 363 of
the Bankruptcy Code.
The primary services of the Company are provided by BTLLC. BTLLC
is an "introducing broker" which provides customers with stock
quote information and Internet trading capability through the
Mach(TM) platform software. William F. Gray, Esq., at Torys LLP
represents the Debtors in their restructuring efforts. When the
Debtors filed for protection from its creditors, it listed an
assets and debts of between $10 to $50 million.
BUDGET GROUP: Final Hearing on $100M DIP Facility on August 20
--------------------------------------------------------------
Judge Walrath authorizes Budget Group Inc., and its debtor-
affiliates to enter into the primary DIP facility on an interim
basis. The Debtors are authorized to obtain up to $71,000,000
for Postpetition Enhancement Letters of Credit and up to
$24,000,000 for working capital purposes.
The final hearing on the motion is scheduled for August 20,
2002. (Budget Group Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CONCERO: Board Decides to Cease Operations & Liquidate Assets
-------------------------------------------------------------
Concero Inc., (OTCBB:CERO) announced that its board of directors
has decided to cease Concero's operations and liquidate the
corporation, subject to required stockholder approval.
Following an orderly disposition of Concero's assets and
liabilities, the board of directors expects to declare a cash
distribution to stockholders. Concero has released all but a
small number of employees who will help manage the liquidation.
Timothy D. Webb will assist Concero with the sale of its Marquee
software product and continue in his capacity as Chief Executive
Officer until Sept. 6, 2002, at which time he will leave Concero
to pursue other endeavors. Kevin B. Kurtzman, a Concero
director, will serve as Chief Executive Officer upon Webb's
departure.
CONSECO INC: Threatens Bankruptcy Filing to Restructure Debts
-------------------------------------------------------------
Conseco, Inc., announced earnings from operations of $1.3
million for its second quarter ended June 30, 2002, compared
with earnings from operations of $69.6 million for the same
period last year.
In its second quarter, the company took a charge of $1,003
million on its deferred tax asset, which together with charges
for other non-operating items in the quarter, resulted in a net
loss of $1.3 billion.
Additionally, the company announced that its goodwill impairment
under Statement of Financial Accounting Standards No.142 (SFAS
142) would be $2.9 billion. Under the transitional rules for
this accounting change, the effect of the goodwill adjustment is
reflected as a cumulative effect of accounting change in the
consolidated financial statements for 1Q02.
The combined effect of operating results and these non-operating
charges reduces the shareholders' equity of the company from
more than $4.7 billion at December 31, 2001 to $533 million at
June 30, 2002.
As announced last Friday, Conseco, Inc., has begun to pursue a
financial restructuring to address the parent company's current
leverage and liquidity problems, which are described in the
Conseco, Inc., Form 10-Q, filed. The company has begun speaking
with its creditors to attempt to achieve a consensual
restructuring. If it is unable to achieve restructuring out of
court, the company may use Chapter 11 to achieve that goal.
Gary Wendt, Chairman and CEO of Conseco, Inc., said, "Over the
past two years, we have made significant progress in a number of
areas. We have good, solid businesses with excellent people and
an outstanding customer base. We remain committed to fixing the
parent company's overleveraged balance sheet.
Separately, the company indicated that it received word
Wednesday that A.M. Best would downgrade the company's insurance
financial strength rating from B++ (Very Good) to B (Fair), with
status changed from negative to developing. Mr. Wendt said that
the goal of the restructuring is to regain a strong financial
position and to restore strong ratings. "We have made the
decision to pursue restructuring to dramatically improve the
parent company's financial position," said Wendt.
Wendt also said that the company has met this week with
insurance regulators from around the country. He expressed
appreciation for positive public comments from several insurance
departments that were published Wednesday by National
Underwriter.
Conseco said that pre-tax operating earnings from Finance
operations were $40.6 million, up 23% over 1Q02. Pre-tax
operating earnings from the Insurance segment were $92.3
million, down 44% from 1Q02.
Finance Segment
Pre-tax operating earnings in the Finance segment totaled $40.6
million in 2Q02, an increase of $7.5 million or 23% from 1Q02.
On-balance sheet receivables decreased slightly to $17.6 billion
at June 30, 2002. Its net interest margin increased from 5.20%
in 1Q02 to 5.33% in 2Q02. Other key earnings drivers and
important points in 2Q02 relating to the Finance segment were as
follows:
-- Asset-backed securitization spreads improved in 2Q02.
The home equity transaction spread increased from 6.24% in 1Q02
to 6.41% in 2Q02. The manufactured housing spread increased from
4.09% in the April 2002 transaction to 5.43% in the June
transaction. The MH proceeds execution rates also increased from
90.9% in April to 96.3% in June. We did not complete a MH
securitization in 1Q02.
-- The 2% decrease in average on-balance sheet receivables
from $18.8 billion in 1Q02 to $18.4 billion in 2Q02 was due to
the planned liquidation of receivables associated with our MH
dealer floorplan financing. The Consumer businesses (home
equity, private label credit card, and consumer finance)
accounted for 54% of on-balance sheet receivables, up slightly
from 1Q02.
-- Loan originations were $2.03 billion, down 5% from 1Q02
and down 35% from 2Q01, due primarily to the planned 83%
decrease in dealer floorplan originations. The Consumer business
originations increased 17% from 1Q02, while manufactured housing
(MH) originations decreased 3%. MH originations comprised 16% of
2Q02 originations, down from 21% in 2Q01. The company's planned
target share for MH in 2002 is 15% of total originations.
-- The above-mentioned 13 basis point improvement in net
interest margin for 2Q02 is due to the repayment of more
expensive public debt and improved yield on Home Equity
portfolio, as risk based pricing initiatives continue to have an
impact on margins.
-- Operating expenses in 2Q02 decreased nearly $7 million
or 4% from 1Q02 as the Finance segment continued to implement
cost savings initiatives throughout its organization.
Loss reserve balances increased 6% to $466 million, up from $440
million at March 31, 2002. This increase strengthened the
overall reserve position for the on-balance sheet receivables to
2.65% from 2.44% at March 31, 2002 and 1.89% at June 30, 2001.
Although some positive trends have been seen, management remains
guarded in our near-term outlook regarding credit quality,
especially as it relates to our MH portfolio. Managed 60+ days
delinquencies rose for our MH portfolio from 2.33% at March 31,
2002 to 2.57% at June 30, 2002. On-balance sheet 60+ days
delinquencies in MH rose from 3.11% at March 31, 2002 to 3.44%
at June 30, 2002. Retail credit managed 60+ days delinquency was
reduced from $82 million (3.16%) at March 31, 2002 to $66
million (2.40%) at June 30, 2002, reflecting enhanced credit
controls that have been implemented to improve delinquency and
address customer bankruptcy issues.
In 2Q02, Conseco Finance retired $221 million of its public
debt, leaving only $8.2 million outstanding at June 30, 2002. Of
that amount, $5.5 million was redeemed in July, leaving Conseco
Finance with only $2.7 million of outstanding public debt, which
will be due in September 2002.
Insurance Segment
Pre-tax operating earnings from the Insurance segment in 2Q02
totaled $92.3 million, a decrease of $71.4 million or 43.6% from
1Q02 and a decrease of $139.3 million or 60.2% from 2Q01. The
2Q02 earnings were negatively impacted by the following:
-- changes in lapse rate assumptions on certain universal
life policies which resulted in additional nonrecurring
amortization expense of $47 million;
-- increased surrenders on equity-indexed annuity
products, driven in part by equity market declines, which
resulted in additional nonrecurring amortization expense of $20
million;
-- the impact of completed reinsurance agreements which
reduced 2Q02 pre-tax operating earnings by approximately $12
million;
-- overall declines in our traditional life business in-
force;
-- declines in assets under management related to our
fixed annuity business.
The Company's supplemental health products - Medicare
supplement, long-term care, specified disease, and group
disability and dental insurance lines - continued to demonstrate
steady revenues, stable or improving loss ratios, and stable
earnings.
New sales were up year over year by 5%. However, total collected
premiums in the continuing lines decreased by $131 million or
11% from 1Q02 and by $124 million or 10% compared to 2Q01. The
decreases were due to decreases in equity-indexed annuity,
variable annuity and traditional life products. Collected
premiums in fixed annuity products were down slightly ($198
million in 2Q02, $204 million in 1Q02 and $202 million in 2Q01).
Collected premiums in our supplemental health products totaled
$596 million in 2Q02 compared to $610 million in 1Q02 and $578
million in 2Q01.
CONSECO: A.M. Best Hatchets Insurance Units Rating to B from B++
----------------------------------------------------------------
Effective immediately, A.M. Best Co., has downgraded the
financial strength ratings of Conseco, Inc.'s principal
insurance subsidiaries to "B" (Fair) from "B++" (Very Good).
The ratings remain under review; however, the status is changed
to developing from negative. This rating action follows a
decision on July 12, 2002 to downgrade the ratings of the
Conseco insurance subsidiaries from A- to B++, and to maintain
the rating under review with negative implications. In its July
12th press release, A.M. Best indicated further rating
reductions were possible because of uncertainties that could
negatively impact the execution and timing of Conseco's ongoing
financial restructuring initiatives.
The ratings downgrade follows Conseco's public announcement of
its second quarter financial results and additional disclosures
about its revised financial restructuring initiatives. A.M. Best
has reviewed management's revised plans in the context of the
announcement last week that Conseco had chosen not to make
interest payments on certain of its financial obligations. This
statement also indicated that the organization would
dramatically accelerate its efforts in reorganizing its capital
structure.
A.M. Best's rating decision is based on the rating agency's view
of the uncertainty surrounding Conseco's accelerated
restructuring initiatives, and the potential adverse financial
impact on the subsidiaries if negotiations are protracted and
execution of the restructuring plan is delayed. These rating
actions do not indicate that the rating agency has immediate
concerns about the financial condition of the Conseco insurance
subsidiaries.
In fact, A.M. Best expects that the financial position of the
insurance subsidiaries will remain stable over the near-term, as
demands for cash dividends from the insurance subsidiaries are
eliminated and proceeds from previous cash raising initiatives
are retained in the operating units. A.M. Best expects only
minimal cash payments will be made to the holding company until
a restructuring plan is agreed upon with Conseco's creditors.
Any future disbursements may be subject to regulatory approval.
Discussions held with domiciliary regulators suggest that they
are also comfortable with the current financial condition of
Conseco's operating subsidiaries, noting levels of risk-based
capital, absolute capital and compliance with other
requirements. In the past regulators have allowed financially
viable insurance subsidiaries to operate without substantive
operating restrictions as distressed parent companies are
restructured. A.M. Best does not expect these regulators
to deviate from their past practices.
The financial restructuring of Conseco Inc., must be agreed upon
by a number of different classes of creditors. Consequently, the
ultimate resolution of an agreed upon restructuring plan is
highly complex and could entail an extended period of
negotiations. These conditions raise the potential for material
operational disruption. A.M. Best believes that the timely
agreement of a restructuring plan is essential to preserving the
financial condition of the operating subsidiaries over the near-
term.
The rating outlook for the insurance companies will be positive,
and their ratings could be raised, should Conseco, Inc., execute
a favorable and timely reorganization.
However, the outlook on the ratings will be negative, and the
ratings downgraded further, if the present uncertainty continues
and/or Conseco experiences difficulty in executing a financially
viable resolution to the parent company's financial
difficulties.
The financial strength ratings of the following insurance
subsidiaries of Conseco, Inc., have been downgraded and are
placed under review with developing implications:
-- Conseco Annuity Assurance Company
-- Conseco Direct Life Insurance Company
-- Conseco Variable Insurance Company
-- Conseco Medical Insurance Company
-- Conseco Life Insurance Company
-- Conseco Senior Health Insurance Company
-- Conseco Health Insurance Company
-- Conseco Life Insurance Company of New York
-- Bankers Life & Casualty Company
-- Pioneer Life Insurance Company
-- Washington National Insurance Company
The rating of Conseco Variable Insurance Company will be
reviewed for potential upgrade upon completion of its pending
sale. A.M. Best Co., established in 1899, is the world's oldest
and most authoritative insurance rating and information source.
For more information, visit A.M. Best's Web site at
http://www.ambest.com
Conseco Inc.'s 10.75% bonds due 2008 (CNC08USR1), DebtTraders
reports, are trading at 27 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC08USR1for
real-time bond pricing.
CYTOGEN CORP: Falls Below Nasdaq Continued Listing Standards
------------------------------------------------------------
Cytogen Corporation (Nasdaq: CYTO), a biopharmaceutical company
with an established and growing product line in oncology, has
been notified by The Nasdaq Stock Market, Inc., that the
Company's common stock has closed for more than 30 consecutive
trading days below the minimum $1.00 per share requirement for
continued inclusion on the Nasdaq National Market.
In accordance with Nasdaq rules, the Company has been afforded
90 calendar days, or until November 12, 2002, to regain
compliance with the minimum bid price requirements. If, at
anytime before November 12, 2002, the bid price of the Company's
common stock closes at $1.00 per share or more for a minimum of
10 consecutive trading days, The Nasdaq Stock Market, Inc.,
staff will provide written notification that the Company
complies with Marketplace Rule 4450(a)(5). If the Company cannot
demonstrate compliance by that date, the Company's common stock
is subject to being delisted from the Nasdaq National Market
pending other options the company may enact at that time.
"Management will consider all available options in order to
regain full compliance with the Nasdaq listing requirements,"
said H. Joseph Reiser, Ph.D., Cytogen's president and chief
executive officer.
Cytogen Corporation of Princeton, NJ, is a biopharmaceutical
company with an established and growing product line in prostate
cancer and other areas of oncology. Currently marketed products
include ProstaScint(R) (a monoclonal antibody-based imaging
agent used to image the extent and spread of prostate cancer);
BrachySeed(TM) I-125 and Pd-103 (two uniquely designed, next-
generation radioactive seed implants for the treatment of
localized prostate cancer); and Quadramet(R) (a skeletal
targeting therapeutic radiopharmaceutical marketed for the
relief of bone pain in prostate and other types of cancer).
Cytogen is evolving a pipeline of oncology product candidates by
developing its prostate specific membrane antigen, or PSMA,
technologies, which are exclusively licensed from Memorial
Sloan-Kettering Cancer Center. For more information, visit
http://www.cytogen.com
AxCell Biosciences of Newtown, PA, a subsidiary of Cytogen
Corporation, is engaged in the research and development of novel
biopharmaceutical products using its growing portfolio of
functional proteomics solutions and collection of proprietary
signal transduction pathway information. Through the systematic
and industrialized measurement of protein-to-protein
interactions, AxCell is assembling ProChart(TM), a proprietary
database of signal transduction pathway information that is
relevant in a number of therapeutically important classes of
molecules including growth factors, receptors and other
potential protein therapeutics or drug targets. AxCell's
database content and functional proteomics tools are available
on a non- exclusive basis to biotechnology, pharmaceutical and
academic researchers. AxCell is expanding and accelerating its
research activities to further elucidate the role of novel
proteins and pathways in ProChart(TM), through both external
collaborations and internal data mining. As previously
announced, Cytogen is reviewing strategic alternatives for
AxCell Biosciences that would allow Cytogen to reduce its cash
burn in order to leverage its prostate cancer franchise. For
additional information on AxCell Biosciences, visit
http://www.axcellbio.com
EOTT ENERGY: Second Quarter Results Swing-Down to $7MM Net Loss
---------------------------------------------------------------
EOTT Energy Partners, L.P., (NYSE: EOT) reported a net loss of
$7.3 million for the second quarter of 2002 compared to net
income of $4.1 million for the second quarter of 2001. The
second quarter net loss includes a $1.2 million noncash asset
impairment charge related to certain marine facilities.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $15.5 million for the second quarter of 2002
compared to $20.8 million in 2001. Interest and letter of
credit costs, net for the second quarter of 2002 increased $3.9
million over the second quarter of 2001.
The lower second quarter results reflect the impact of the
significant decline from a year ago in the crude oil lease
purchase and pipeline throughput volumes due to the Enron
bankruptcy, as well as EOTT's affiliation with Enron, and the
higher cost of supplier credit under EOTT's current letter of
credit facility. Additionally, market conditions for the crude
oil gathering and marketing operations were significantly weaker
during the second quarter of 2002 when compared to the second
quarter of 2001.
OPERATING RESULTS
Operating income for the second quarter of 2002 was $4.9
million, a decrease of $7.4 million from the second quarter of
2001. Income from the North America -- East of Rockies and
Pipeline segments was $15.3 million below a year ago reflecting
lower volumes and significantly weaker market conditions. For
the second quarter of 2002, crude oil lease volumes purchased
and pipeline throughput volumes averaged 287,300 barrels per day
and 422,700 barrels per day, respectively, representing declines
of approximately 20 percent from a year ago, but only slightly
down from the first quarter of 2002. Offsetting these lower
results was $6.1 million of operating income from the Liquids
assets and an increase in income from the West Coast segment of
$1.6 million. Corporate and other costs increased $1.5 million
for legal, accounting and insurance costs related to the Enron
bankruptcy, partly offset by a $1.3 million gain from the sale
of certain assets. Sales from the Liquids facilities averaged
14,600 barrels per day of MTBE equivalent, a 44% increase above
the first quarter of 2002, reflecting the impact of a 30-day
turnaround completed during the first quarter of 2002. Margins
were down approximately 17% from the first quarter of 2002 and
significantly below expectations reflecting higher feedstock
costs.
Operating cash flow -- defined as net income (loss) excluding
noncash depreciation and amortization and loss on impairment of
assets -- totaled $3.3 million for the second quarter of 2002, a
decrease of $9.2 million from the same quarter of 2001,
reflecting the impact of the lower operating income and higher
interest and credit costs under EOTT's third party credit
facilities.
OTHER INFORMATION
EOTT continues to be adversely impacted by the effects of the
Enron bankruptcy and its Enron affiliation. EOTT is currently
implementing plans to immediately reduce the operating and
administrative cost of its business. Additionally, EOTT is
evaluating alternatives to restructure its debt and credit
facilities and to resolve the issues with Enron. The
Restructuring Committee has retained Glass and Associates to
review restructuring options and to assist in the resolution of
Enron issues.
EOTT's results for the second quarter did not meet the financial
targets set forth in its working capital and letter of credit
facility. Standard Chartered Bank has agreed not to take any
action resulting from covenant noncompliance until September 16,
2002, to allow time to discuss possible modifications of the
credit facility. EOTT will be required to modify its credit
facility by such date in order to meet its near term liquidity
requirements.
Reference should be made to the Form 10-Q filed Wednesday, which
includes the newly required officer certifications for
additional information. The Form 10-Q may be accessed via the
internet at http://www.eott.comor at http://www.sec.gov
EOTT Energy Partners, L.P., is a major independent marketer and
transporter of crude oil in North America. EOTT transports most
of the lease crude oil it purchases via pipeline that includes
8,000 miles of active intrastate and interstate pipeline and
gathering systems and a fleet of 260 owned or leased trucks.
EOTT Energy Corp, a wholly owned subsidiary of Enron Corp., is
the general partner of EOTT Energy Partners, L.P., with
headquarters in Houston. The Partnership's Common Units are
traded on the New York Stock Exchange under the ticker symbol
"EOT".
Eott Energy Partner's 11% bonds due 2009 (EOT09USR1),
DebtTraders reports, are trading at 86 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=EOT09USR1for
real-time bond pricing.
EMERGING VISION: Hires Miller Ellin as Independent Accountants
--------------------------------------------------------------
As previously reported, on April 29, 2002, the Audit Committee
of the Board of Directors of Emerging Vision Inc., recommended
that the Company discontinue the retention of Arthur Andersen
LLP for future audits of its financial statements and, on June
18, 2002, the Company formally dismissed Andersen as its
independent public accountants.
On August 5, 2002, the Audit Committee recommended to the Board
of Directors that it select Miller Ellin & Company LLP as its
new independent public accountants, which recommendation was
accepted and unanimously passed by the Board and, on August 7,
2002, Emerging Vision engaged Miller Ellin as its new
independent public accountants for the year ended December 31,
2002.
Emerging Vision (formerly Sterling Vision) owns about 30 optical
outlets and franchises about 200 others under the Sterling
Optical, Sight for Sore Eyes, and other names in 26 states, the
US Virgin Islands, and Ontario, Canada. Emerging Vision scrapped
its plans to sell its retail chain operations and establish
itself as an Internet portal supply chain serving businesses
within the optical industry. It's refocused on its optical
businesses once again to create brand awareness. To that end, it
has sold its outpatient ambulatory surgery center in New York, a
part of its wholly owned subsidiary, Insight Laser Centers
(laser vision correction centers), which it is planning to sell.
At June 30, 2001, Emerging Vision had a working capital deficit
of about $400,000.
EMERGING VISION: Horizons Investors Discloses 18.8% Equity Stake
----------------------------------------------------------------
Horizons Investors Corp., of Albany, New York, beneficially owns
5,477,075 shares of the common stock of Emerging Vision, Inc.,
representing 18.88% of the outstanding common stock of Emerging
Vision. The total investment was reached in a transaction
involving 2,020,000 shares in the past 60 days at an average
$1.10 per share pursuant to a Private Agreement in which no
actual funds were expended by Horizons. The investor has
requested a seat on Emerging Vision's Board of Directors. While
there rests no power of disposition with the shareholder,
Horizons does have sole power to vote, or direct the voting of
the entire 5,477,075 shares held.
Emerging Vision (formerly Sterling Vision) owns about 30 optical
outlets and franchises about 200 others under the Sterling
Optical, Sight for Sore Eyes, and other names in 26 states, the
US Virgin Islands, and Ontario, Canada. Emerging Vision scrapped
its plans to sell its retail chain operations and establish
itself as an Internet portal supply chain serving businesses
within the optical industry. It's refocused on its optical
businesses once again to create brand awareness. To that end, it
has sold its outpatient ambulatory surgery center in New York, a
part of its wholly owned subsidiary, Insight Laser Centers
(laser vision correction centers), which it is planning to sell.
The company posted a working capital deficit of about $1.5
million on March 31, 2002.
ENRON CORP: Settles Merger-Related Litigation with Dynegy
---------------------------------------------------------
Enron Corp., (ENRNQ) and Dynegy Inc., (NYSE:DYN) have reached a
settlement of litigation arising from the failure of the
November 2001 merger of the two companies. The settlement
agreement has been approved by the boards of both companies.
Under the terms of the agreement, Dynegy will pay Enron $25
million to settle the lawsuit Enron had filed alleging breach of
contract for wrongful termination of the merger. Enron has
agreed to release Dynegy from any and all claims relating to the
terminated merger and to dismiss such litigation.
In addition, Dynegy has agreed not to pursue any claims for
working capital adjustments relating to its acquisition of
Northern Natural Gas Company from Enron last February. This will
result in the release of funds to Enron that had been escrowed
in connection with the sale of NNG, pending a review of working
capital as of the closing date. The settlement amount and the
release of escrowed funds are subject to bankruptcy court
approval.
Enron has agreed to continue providing transition services to
NNG once MidAmerican Energy Holdings Company's purchase of the
pipeline from Dynegy is completed later this month. Enron has
been providing services on a transition basis under an agreement
established between the two companies when Dynegy acquired NNG.
Enron has agreed to allow the assignment of that agreement,
which runs until Jan. 31, 2003, to MidAmerican Energy.
"We are pleased to have reached a settlement that enables both
companies to move forward without the shadow of protracted
litigation. This settlement maximizes value for our creditors,
which is Enron's top priority at this time," said Enron Interim
CEO Stephen F. Cooper. "Through the transition services
agreement, we will continue to work with Dynegy and MidAmerican
Energy to ensure that the NNG transition goes smoothly and that
NNG's customers continue to receive safe and reliable service."
Dan Dienstbier, interim CEO of Dynegy Inc., said, "This
settlement resolves a matter that has been weighing on our
company and our stakeholders, and we are pleased to have done so
on terms that are reasonable for Dynegy. The transfer of the
transition services agreement is an important step in the timely
completion of our sale of NNG to MidAmerican Energy."
Enron has significant natural gas and electricity assets in
North and South America. Enron's Internet address is
http://www.enron.com
Dynegy Inc., is a global energy merchant. Through its owned and
contractually controlled network of physical assets and its
marketing, logistics and risk management capabilities, Dynegy
provides solutions to customers in North America, the United
Kingdom and continental Europe. The company's Web site is
http://www.dynegy.com
FEDERAL-MOGUL: Gets Okay to Expand Scope of Stout's Engagement
--------------------------------------------------------------
Judge Newsome allows Federal-Mogul Corporation and its debtor-
affiliates to expand the scope of Stout Risius Ross Inc.'s
employment to include a valuation analysis of the Debtors'
goodwill impairment in accordance with SFAS No. 142.
The Court requires the Debtors to provide copies of the final
written product generated by Stout Risius in performing the
Additional Services, including, opinion letters and memoranda
supporting the opinion letters relating to Stout Risius'
valuations, to:
1. the prepetition lenders,
2. the postpetition lenders,
3. the Creditors' Committee,
4. the Asbestos Committee, and
5. the Representative of the Future Claimants
* * *
According to David M. Sherbin, vice president, deputy general
counsel and secretary, for Federal-Mogul Corporation, the
Debtors will require expanded services of Stout Risius in order
to comply with this newly adopted standard:
A. Phase I: performing a valuation of each of Federal-Mogul's
reporting units, by estimating the Fair Value of each
reporting unit based on consideration of the discounted Cash
Flow Method, the Guideline Public Company Method, and the
Market Transaction Method and on consideration of any
applicable control premiums;
B. Phase II: performing a valuation of the tangible and
intangible assets of certain reporting units, with the
ultimate scope of Phase II to be determined by working with
the Debtors and Ernst & Young after Phase I, based on the
results of Phase I testing; and,
C. Providing any additional related valuation services as may be
agreed upon by Stout Risius Ross, Inc. and the Debtors.
Stout Risius estimates that it will charge the Debtors
approximately $60,000 to $80,000, plus out-of-pocket expenses
related to the services, for Phase I of its valuation services,
barring unforeseen complications. In addition, any subsequent
consultation and additional analysis will be billed at the
firm's most current standard hourly rate. The firm will meet
with the Debtors at the end of Phase I to determine the scope
and fee arrangement for Phase II, consistent with its standard
hourly rates. Stout Risius will also seek reimbursement for
reasonable and necessary expenses incurred in connection with
the services rendered, in addition to the hourly rates.
(Federal-Mogul Bankruptcy News, Issue No. 21; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
FIBERNET TELECOM: Working Capital Deficit Balloons to $108 Mill.
----------------------------------------------------------------
FiberNet Telecom Group, Inc. (Nasdaq: FTGX), a leading provider
of metropolitan optical connectivity, announced financial
results for the second quarter ended June 30, 2002.
Revenues for the three months ended June 30, 2002 were $6.4
million, compared to $7.0 million for the three months ended
March 31, 2002 and $8.2 million for the three months ended June
30, 2001. The decrease in revenues was partially due to the
elimination of certain reciprocal agreements that were
terminated by the Company during the first quarter of 2002.
Excluding revenues from reciprocal agreements that were
eliminated during the first quarter of 2002, revenues for the
three months ended June 30, 2002 were $6.4 million, compared to
$6.7 million for the three months ended March 31, 2002 and $6.9
million for the three months ended June 30, 2001.
The Company generated an EBITDA (as defined) profit of $1.3
million for the second quarter of 2002, compared to an EBITDA
(as defined) profit of $0.4 million for the first quarter of
2002 and an EBITDA (as defined) loss of $5.5 million for the
second quarter of 2001. The marked improvement was a result of
the Company's ongoing cost savings initiatives in both cost of
services and selling, general and administrative expenses.
However, in the second quarter of 2002 cost of services was
reduced by $0.7 million due to certain, non-recurring
concessions that the Company negotiated from vendors. Excluding
this one-time savings, EBITDA (as defined) for the second
quarter of 2002 was $0.6 million.
"Our financial results for the second quarter reflect the
challenges that we are facing in this unprecedented environment
and our commitment to being a survivor," said Michael S. Liss,
President and CEO. "Although the overall tone of our business
was better in the second quarter than the first quarter, we
continue to labor with the dynamic of gaining new customers and
incremental business from existing customers while losing
revenues from the ongoing disconnections of service, primarily
due to customers' bankruptcy filings or other financial
distress. To combat this reality, we are intensifying our focus
on selling the value proposition of our services to
international carriers and Tier 1 customers that need
connectivity in New York City."
Mr. Liss added, "We are bolstered by the success that we have
experienced in our cost reduction initiatives that have enabled
us to increase EBITDA and our gross margin in this quarter.
These positive results reflect our ability to effectively manage
costs and control cash flows.
"Most importantly, we have announced that we have reached a
conditional agreement with our lenders to recapitalize the
Company. The proposed conversion of $66 million of bank debt
for common stock and the raising of additional equity capital
will significantly strengthen our financial position."
On August 12, 2002 the Company executed a non-binding letter of
intent with the lenders under its senior secured credit
facility. Under the terms set forth in the letter of intent and
subject to a number of conditions, the lenders would convert $66
million of bank debt into shares of common stock at an effective
conversion price of approximately $0.15 per share. As a
condition to the debt conversion, FiberNet has executed a non-
binding term sheet with prospective investors, including certain
members of executive management and existing institutional
investors in FiberNet, pursuant to which the investors will
purchase shares of common stock at approximately $0.10 to $0.15
per share with net proceeds to the Company of at least $3.5
million. There are a number of conditions to closing each of
these transactions. FiberNet has filed a proxy statement with
the SEC seeking stockholder approval of the series of
transactions discussed above and related matters. It is
anticipated that the closing with respect to these transactions
will occur prior to September 30, 2002; provided, however, there
can be no assurance that the Company will be able to
successfully effectuate any or all of the transactions described
above. Should FiberNet succeed in doing so, these transactions
will be substantially dilutive to its existing stockholders.
Transport services remain the most significant component of
FiberNet's revenues, accounting for 61.9% of total revenues
generated in the second quarter of 2002. Colocation services,
and access management and other services represented 19.7% and
18.4% of revenues, respectively for the period. During the
second quarter of 2002, FiberNet continued to attract new
customers for its services, particularly for transport and
colocation services in its premier carrier hotel facilities in
New York City.
As of June 30, 2002 the Company had 91 customers. Based upon
current credit ratings by Moody's Investors Service,
approximately 19% of the Company's customers were rated
investment grade, and those customers represented 32% of the
Company's net accounts receivable. FiberNet also achieved days
sales outstanding of 37 days at June 30, 2002, compared to 40
days at March 31, 2002.
The net loss applicable to common stockholders for the second
quarter of 2002 was $4.2 million compared to $4.5 million for
the first quarter of 2002. The net loss applicable to common
stockholders for the second quarter of 2001 was $9.7 million.
Cost of services for the second quarter of 2002 were $1.1
million, compared to $2.4 million for the first quarter of 2002
and $3.9 million for the second quarter of 2001. The reduction
in cost of services from the first quarter of 2002 to the second
quarter 2002 was achieved primarily through the elimination of
reciprocal agreements that were terminated during the first
quarter of 2002 and the termination of several property leases
in non-core markets, in addition to the non-recurring
concessions discussed above. As a result, gross margin, defined
as revenues less cost of services as a percentage of revenues,
was 83.3% in the second quarter of 2002 compared to 65.7% for
the first quarter of 2002 and 52.7% in the second quarter of
2001. Excluding the one-time concessions recorded during the
second quarter of 2002, the gross margin was 72.5%.
Selling, general and administrative expenses for the second
quarter of 2002 were $4.0 million, compared to $4.2 million in
the first quarter of 2002 and $9.8 million in the second quarter
of 2001. The significant reduction in selling, general and
administrative expenses was the result of the Company's
aggressive cost savings initiatives to reduce all categories of
corporate overhead. The greatest savings were achieved in
personnel costs, as the Company reduced its headcount from 108
at the beginning of 2002 to 82 at the end of the second quarter.
Capital expenditures for the first six months of 2002 were $1.8
million, resulting primarily from the completion of the Meet-Me-
Room, investments in equipment for the implementation of
customer specific orders and general network maintenance. As of
June 30, 2002, the Company was operating fiber optic transport
infrastructure in 15 major carrier hotels in New York City,
Chicago and Los Angeles and FiberNet In-building Networks in 20
commercial office properties in New York City and Chicago. The
Company also operates the Meet-Me-Room at 60 Hudson Street in
New York City, providing customers with a single location within
a premier carrier hotel to facilitate network cross connections.
As of June 30, 2002, FiberNet had total assets of $129.0 million
and total stockholders' equity of $16.4 million. In addition,
the Company had 64.3 million shares of common stock outstanding,
or 126.5 million shares of common stock outstanding, assuming
the exercise of all outstanding options and warrants and the
conversion of all convertible securities.
In addition, its working capital deficiency reaches $108
million, as of June 30, 2002.
As of June 30, 2002, the outstanding borrowings under FiberNet's
credit facility were $96.0 million, and the weighted average
interest rate on our outstanding borrowings under the facility
was 6.6%. During the second quarter, the Company continued to
receive periodic extensions of the due dates of its interest
payments under the credit facility, as part of the ongoing
negotiations with its lenders with respect to its proposed
recapitalization, as discussed above. In addition, the lenders
waived the Company's minimum cumulative revenue requirement as
of June 30, 2002. As a result, there are currently no events of
default under our credit agreement. However in accordance with
Emerging Issues Task Force Issue 86-30, "Classification of
Obligations When a Violation Is Waived by the Creditor," the
Company determined that the debt under the credit facility
should be classified as a current liability even though the
Company obtained a waiver for the covenant requirement and has a
proposed financing agreement to refinance the debt on a long-
term basis.
As presented in its quarterly report on Form 10-Q for the
quarter ended June 30, 2002, the Company restated its
consolidated financial statements for the quarter ended March
31, 2001 to record a beneficial conversion feature of $21.0
million in connection with the reduction of the conversion price
on its series H and I preferred stock on February 9, 2001. Other
than with respect to the consolidated financial statements for
the quarter ended March 31, 2001, this restatement has no impact
on the Company's assets or total stockholders' equity, and it
resulted in an increase in additional paid-in-capital and an
increase in net loss. The change increased net loss by $21.0
million and increased net loss applicable to common stockholders
per share by $0.56 for the three months ended March 31, 2001.
The change has no impact on the Company's cash flows. This
correction was already reflected in the Company's Annual Report
on Form 10-K for 2001, as amended.
FiberNet Telecom Group, Inc., enables carriers to connect
directly with one another with unprecedented speed and
simplicity over its 100% fiber optic networks. FiberNet manages
high-density short-haul networks between carrier hubs within
major metropolitan areas. By using FiberNet's next-generation
infrastructure, carriers can quickly and efficiently deliver the
full potential of their high bandwidth data, voice and video
services directly to their customers.
FiberNet has lit multiple strands of fiber on a redundant and
diversely routed SONET ring and IP architecture throughout New
York City. In addition, the Company also provides services in
Chicago and Los Angeles. FiberNet sets a new standard for the
fastest local loop delivery and connectivity in carrier hubs and
Class A commercial buildings, at speeds up to OC-192 SONET and
Gigabit Ethernet. For more information on FiberNet, please
visit the Company's Web site at http://www.ftgx.com
FLAG TELECOM: What to Do with Undeliverable Solicitation Packs
--------------------------------------------------------------
FLAG Telecom Holdings Limited and its debtor-affiliates seek the
Court's permission to dispense with the mailing of solicitation
packages, information packages, shareholder information packages
to entities from which notices of the Disclosure Statement
hearing are returned as "undeliverable".
The Court has previously authorized the Debtors to retain
Poorman-Douglas Corp. and Innisfree M&A Inc. as their noticing,
balloting and tabulation agents. Poorman and Innisfree will
inspect, monitor and supervise the solicitation process,
tabulate the ballots and certify to the Court the results of the
balloting.
Poorman and Innisfree have mailed notices of the Disclosure
Statement hearing to all known creditors of the Debtors. The
Debtors expect that a number of notices will be returned as
undeliverable.
The Debtors propose that Poorman and Innisfree may attempt to
locate the correct address and resend -- prior to the September
20, 2002 voting deadline -- solicitation packages, information
packages, and shareholder information packages that are returned
as undeliverable. (Flag Telecom Bankruptcy News, Issue No. 13;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
FRANK'S NURSERY: Obtains $80MM Exit Facility from Congress Fin'l
----------------------------------------------------------------
FRANK'S NURSERY & CRAFTS
has obtained
$80,000,000
in Credit Facilities in connection
with its Emergence from Bankruptcy
$50,000,000
Revolving Credit Facility
Provided by
Congress Financial
A Wachovia Company
Offices in principal cities throughout the United States,
Canada and the United kingdom
1-800-441-2793 http://congressfinancial.com
GLOBAL CROSSING: Gets Okay to Sell IRU Assets at Private Auction
----------------------------------------------------------------
Global Crossing Ltd., and its debtor-affiliates sought and
obtained the Court's authority to privately sell and auction its
indefeasible right to use assets.
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York,
relates that Global Crossing constructed a worldwide fiber-optic
Network by:
-- building 75% of the Network,
-- acquiring an additional 20% through the acquisition of
Frontier Corporation in 1999, and
-- obtaining the remaining 5% through the acquisition of
other telecommunications providers.
In addition, Global Crossing also expanded its presence in
certain markets, deepened its Network and broadened its service
platforms by the acquisition of IRUs.
When it purchased these IRUs, the Debtors intended to utilize
those assets in a variety of different ways, including:
* to enhance its Network by increasing its efficiency,
reliability, and to lower costs;
* to extend the reach of its Network to new territories; and
* to provide assets that could be packaged for sale, including
to carrier customers.
According to Mr. Basta, the IRUs are located throughout the
United States and the world. The IRUs provide the Debtors with
rights to use telecommunications capacity and other assets owned
by various telecommunications carriers. In certain instances,
all of the rights associated with the IRUs are contained in the
agreements in which the IRUs were acquired. In other instances,
certain of the rights are set forth in separate and additional
agreements. The law is not clear as to whether the rights
granted under these types of agreements are simply contractual
and of an executory nature or include fee interests in property.
As a direct result of its new business plan, the Debtors do not
plan to integrate the IRUs into the Network. Upon consideration
of its current needs and growth plans, the Debtors have
determined that a sale of the IRUs is warranted.
The Debtors have determined that a two-stage process,
encompassing both private sales and a public auction, will
enable them to obtain the highest and best offer for the IRUs
and maximize the value of their respective estates. In the
first stage, Mr. Basta explains that the Debtors will market the
IRUs to prospective purchasers for Private Sale. If any IRUs
remain after the first stage, or if the Debtors choose to use
any preliminary bids as stalking horse bids, the Debtors will
conduct the Auction process. The Debtors will conduct the
Auction of the IRUs at the offices of Weil, Gotshal & Manges LLP
at 767 Fifth Avenue in New York, New York 10153 on September 10,
2002 at 10:00 a.m.
The sale of IRUs to the parties submitting the highest and best
offers at a Private Sale or at the Auction will culminate in the
execution of sale agreements.
Mr. Basta relates that the sale of these assets is likely to be
highly complex given:
* the technical nature of the IRUs,
* the contractual complexity associated with the assets,
* the negotiations that may be necessary with the
counterparties to some of the IRUs,
* the due diligence that may be required by purchasers of
certain of the IRUs, and
* the geographic distribution of both the IRUs and prospective
bidders. (Global Crossing Bankruptcy News, Issue No. 16;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
HARKEN ENERGY: Working Capital Deficit Tops $43 Mill. at June 30
----------------------------------------------------------------
Harken Energy Corporation (Amex: HEC) announced its financial
results for the three months and six months ended June 30, 2002.
Harken's negative working capital of $43 million at June 30,
2002 reflects approximately $41.2 million of Harken's
outstanding convertible notes that are due in May 2003 and
therefore are classified as current liabilities at June 30,
2002. These obligations were long-term liabilities and did not
reduce working capital at December 31, 2001. Because of the
reclassification of these convertible notes at June 30, 2002,
Harken required and received a waiver of the current ratio
covenant for the Bank One facility for the quarter ended June
30, 2002. Due to the uncertainty of Bank One's November 1, 2002
borrowing base redetermination and whether additional waivers of
Harken's current ratio requirement will be obtained from Bank
One, the balance of the Bank One facility has also been
reflected as a current liability as of June 30, 2002.
Harken also recorded a net $1.2 million expense which reduced
its EBITDA as shown above during the second quarter of 2002
relating to the settlement of certain litigation and
contingencies resolved during the second quarter of 2002.
Harken accrued and expensed approximately $2.2 million related
to its mediation agreement signed on August 1, 2002 to resolve a
previously disclosed judgment for $4.1 million against a wholly-
owned subsidiary of Harken. That expense of $2.2 million was
reduced by approximately $1 million related to other accrued
liabilities which were settled during the second quarter of 2002
for amounts less than the amounts previously accrued.
Harken's domestic operations during the six months ended June
30, 2002 reflect the decrease in crude oil and natural gas
prices compared to the prior year period. In addition, domestic
revenues declined due to reduced production volumes during the
first six months of 2002, due to sales of domestic producing
properties during 2001 and 2002. These declines were mitigated
by the acquisition of the Republic Properties in April 2002.
Reduced general and administrative costs for the six months
ended June 30, 2002 as compared to prior year period reflect the
reduction in personnel as well as the salary reductions taken
during this period.
Harken's Middle American operations, as conducted through its
subsidiary, Global Energy Development PLC (AIM: "GED"), also
reflect reduced crude oil prices during the first six months of
2002 compared to the prior year period. Global's net cash flows
for the first six months of 2002 have improved, due to increased
production rates, reductions in operating expenses related to
its Colombia producing fields and through continuing efforts to
reduce operating and administrative costs.
Mikel D. Faulkner, Harken's Chairman, stated, "The restructuring
of Harken's 5% Convertible Notes due in 2003 remains the
Company's highest priority toward preserving and ultimately
enhancing the value of Harken's common stockholders. To date,
much has been accomplished in this regard, as a total of $57
million of the original $97 million of the 5% Convertible Notes
has now either been repurchased, redeemed or restructured. The
Company intends to continue to resolve its capital structure
issues through next year's maturity dates for these Notes.
Despite reduced commodity prices compared to the first half of
last year, Harken's production operations remain steady,
enhanced by recent significant administrative cost reductions,
and strengthened by the acquisition of the Republic Properties
during the quarter. Still, it is the Company's capital
restructuring that is its most important initiative as Harken's
June 30, 2002 balance sheet clearly demonstrates." Based in
Houston, Texas, Harken Energy Corporation is an oil and gas
exploration and production company whose corporate strategy
calls for concentrating its resources on acquisition and
development of domestic properties in the Gulf Coast regions of
Texas and Louisiana.
HENRY MAYO: State Blocks Move to Force Settlement with Workers
--------------------------------------------------------------
The California Department of Industrial Relations and its Office
of Self Insurance Plans is opposing the bankrupt Henry Mayo
Hospital's attempt to force injured workers to resolve unpaid
workers' compensation claims in U.S. bankruptcy court rather
than before the state's Workers' Compensation Appeals Board.
Henry Mayo Newhall Memorial Hospital, Valencia, in Chapter 11
bankruptcy proceedings since November 2001, stopped paying
workers' compensation benefits to its injured employees in May.
The hospital has filed an emergency motion that would remove
jurisdiction of those workers' appeals from the WCAB to the U.S.
bankruptcy court. The motion also seeks sanctions against DIR
for ordering the remaining self insured claim files turned over
for payment by the Self Insurers' Security Fund along with the
security deposit posted by the hospital for this purpose. A
ruling in their favor could seriously jeopardize the integrity
of California's self insurance program by defeating the purpose
of the deposit.
"Self insurance statutes protect injured workers by requiring
self insured employers to post a security deposit to pay their
workers' compensation liabilities if the employer is unable to
pay benefits due for any reason," said SIP Manager Mark
Ashcraft. "Henry Mayo stopped payment of their workers'
compensation benefits, causing DIR to turn over both the
security deposit and the workers' compensation liabilities of
the hospital to the Security Fund. The Security Fund was created
to ensure continued payment of self insured workers'
compensation benefits to the injured workers."
Henry Mayo and its related companies were self insured from 1983
to 1997. The hospital filed for bankruptcy in November 2001 but
continued paying on its self insured benefits to injured
employees through its third-party administrator, RSKCo, until
May 17, 2002 without lifting the automatic stay on payment of
pre-petition liabilities caused by filing a bankruptcy petition.
After learning of the hospital's bankruptcy in March 2002, SIP
repeatedly asked whether they intended to lift the automatic
stay, to continue paying benefits, or if they intended to
default on their self insured workers' compensation obligations.
As is customary when a self insurer files a bankruptcy petition
but does not seek court permission to continue paying benefits,
SIP conducted a special audit of remaining liabilities and found
Henry Mayo had under-reported their potential liabilities in the
hospital's annual report to SIP. The employer was ordered by SIP
to increase their security deposit more than $1.3 million.
Ceasing to pay claims benefits put Henry Mayo in default,
triggering DIR to order the security deposit and all liability
for the claims be turned over to the Security Fund, as permitted
by the California Labor Code. Disputes involving workers'
compensation claims and their settlement fall under the
jurisdiction of the WCAB within DIR.
Henry Mayo alleges the workers' compensation security deposit
and claims files are property of the estate, subject to the
automatic stay, and wants sanctions imposed against DIR and the
Security Fund for taking action to insure continued payment of
benefits, which also prevents Henry Mayo from forcing the
remaining injured workers into bankruptcy court with all the
other creditors to settle their claims.
"To my knowledge, this is the first time since the Security Fund
was created in 1984, in over 50 self insured insolvencies, that
an employer has attempted to change the court of jurisdiction
for payment of self insured workers' compensation claims from
the WCAB to bankruptcy court or objected to the Security Fund
performing its statutory duties," Ashcraft said.
HIGH SPEED ACCESS: Board Adopts Liquidation & Dissolution Plan
--------------------------------------------------------------
High Speed Access Corp., (OTC Bulletin Board: HSAC) announced
that its board of directors has determined that it is advisable
and in the best interests of HSA to liquidate and dissolve. The
board of directors has unanimously approved a plan of
liquidation and dissolution and adopted a resolution
recommending the plan of liquidation and dissolution be
submitted to its stockholders for approval. Under Delaware law,
holders of a majority of HSA's common stock must approve a plan
of liquidation and dissolution.
HSA is not soliciting the vote of any stockholders with respect
to the plan of liquidation and dissolution pursuant to this news
release. Rather, HSA intends to provide stockholders, as soon
as reasonably practicable, a proxy statement relating to a
meeting of stockholders at which, among other things, the plan
of liquidation and dissolution will be considered. No date for
the dissemination of such a proxy statement nor the date of such
a stockholder's meeting has been set.
HSA also announced that it has filed its Form 10-Q for the
quarterly period ended June 30, 2002 with the Securities and
Exchange Commission.
ICH CORP: Asks Panel to Provide J.H Cohn's Detailed Time Records
----------------------------------------------------------------
ICH Corporation and its debtor-affiliates submit a limited
objection to the U.S. Bankruptcy Court for the Southern District
of New York concerning the First Interim Application of J.H.
Cohn LLP serving as accountants and financial advisors to the
Official Committee Of Unsecured Creditors.
J.H. Cohn submitted a Fee Application in the total amount of
$232,196.92. The period for which the allowance has been sought
is slightly less than three months -- March 5, 2002 through May
31, 2002. The Debtors point out that the time reports that are
attached to the Fee Application detail the time billed by each
timekeeper, but do not summarize the time spent by all
timekeepers on each activity day by day. This prevents the
Debtors from evaluating and analyzing the work performed by J.H.
Cohn and the actual benefit conferred to the bankruptcy estates,
the Debtors say.
Specifically, the Debtors need further detail regarding the
amount of time spent by J.H. Cohn devoted to an analysis of a
"stand-alone" plan of reorganization, analyzing the financial
components of the various offers received by Debtors for the
purchase of their restaurant operations, and evaluating the
proposed distributions to unsecured creditors resulting from
those offers if consummated. The Debtors want J.H. Cohn to
provide detailed time records on a daily basis and assure the
Court that they will withdraw this objection once the requested
information are in.
ICH Corporation, a Delaware holding corporation, which operates
Arby's restaurants, located primarily in Michigan, Texas,
Pennsylvania, New Jersey, Florida and Connecticut. The Company
filed for chapter 11 protection on February 05, 2002. Peter D.
Wolfson, Esq. at Sonnenschein Nath & Rosenthal represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed debts and assets of
over $50 million.
ITC DELTACOM: Initiates Search for new Independent Accountants
--------------------------------------------------------------
On August 5, 2002, ITC DeltaCom, Inc., received a letter from
the staff of the Securities and Exchange Commission advising the
Company that Arthur Andersen LLP, the Company's independent
accountant, had informed the Commission that Arthur Andersen is
unable to perform future audit services for the Company because
of the publicly announced wind-down of Arthur Andersen's
business. The Commission staff advised the Company in its letter
that, as a result of this notification, Arthur Andersen's
relationship with the Company had been effectively terminated.
As of August 5, 2002, Arthur Andersen had not resigned or
declined to stand for re-election as the Company's independent
accountant, nor had the Company's Board of Directors or Audit
Committee dismissed Arthur Andersen.
Arthur Andersen's reports on the Company's consolidated
financial statements for the fiscal years ended December 31,
2001 and 2000 were unqualified, but the former report stated
that the Company's ability to continue as a going concern was
uncertain. Except to the extent described in the
preceding sentence, neither of these reports contained an
adverse opinion or disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting
principles.
Arthur Andersen no longer employs an engagement partner or
manager for the Company's account. Accordingly, the Company will
be unable to obtain from Arthur Andersen a letter, otherwise
required for purposes of the Company's response to the SEC,
addressed to the Commission, stating whether or not Arthur
Andersen agrees with the statements by the Company included in
its letter to the SEC.
The Company is in the final phase of a lengthy selection process
to retain an independent accountant to succeed Arthur Andersen
and expects to select a new independent accountant during August
2002.
ITC Delatacom, Inc., an exempt telecommunications company and a
holding company, filed for chapter 11 protection on June 25,
2002. Rebecca L. Booth, Esq., Mark D. Collins, Esq., at
Richards, Layton & Finger, P.A., and Martin N. Flics, Esq.,
Roland Young, Esq., at Latham & Watkins represent the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed $444,891,574 in total
assets and $532,381,977 in total debts.
IBASIS INC: Fails to Maintain Nasdaq Continued Listing Criteria
---------------------------------------------------------------
iBasis, Inc., (NASDAQ: IBAS) has received a Nasdaq Staff
Determination letter notifying the Company that it does not
comply with the minimum bid price requirement of $1 per share
for continued listing set forth in Marketplace Rule 4450(a)(5)
and that it does not currently meet the continued inclusion
requirements for the SmallCap market set forth in Marketplace
Rule 4310(C)(2)(B).
The Company's securities are subject to delisting from the
Nasdaq National Market if by August 20, 2002 it does not request
a hearing before a NASDAQ Listing Qualifications Panel to review
the Staff Determination. The Company intends to request such a
hearing. There can be no assurance that the Panel will grant the
Company's request for continued listing.
Founded in 1996, iBasis (Nasdaq: IBAS) iBasis is one of the 20
largest carriers of international voice traffic in the world. A
leading driver of the telecommunications network of the future,
the company commands 13% share of all international VoIP
traffic(1). iBasis was named the #1 international wholesale
carrier in Atlantic-ACM's 2002 International Wholesale Carrier
Report Card. iBasis provides international voice services for
many of the largest carriers in the world, including AT&T, Cable
& Wireless, China Mobile, China Unicom, Concert, Sprint,
Telefonica, Telenor, Telstra, and WorldCom. The company's global
VoIP infrastructure, The iBasis Network, spans more than 85 on-
net countries and is the world's largest international Cisco
Powered Network(TM) for Internet Telephony. The company can be
reached at its worldwide headquarters in Burlington,
Massachusetts, USA at 781-505-7500 or on the Internet at
http://www.ibasis.com
INTEGRATED INFORMATION: Violates Nasdaq Listing Requirements
------------------------------------------------------------
Integrated Information Systems, Inc. (Nasdaq:IISX), an
innovative technology and business consultancy, received a
Nasdaq Staff Determination on August 14, 2002, indicating that
IIS fails to comply with the minimum bid price per share
requirement and that its common stock will be delisted from The
Nasdaq SmallCap Market effective with the opening of business on
August 22, 2002.
IIS currently intends to file an appeal on or before August 21,
2002 and ask for a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff's Determination. Under
Nasdaq Marketplace Rules, the hearing request will stay the
delisting of IIS' common stock pending the Panel's decision.
The delisting notice states that IIS had been granted a grace
period, through August 13, 2002, to regain compliance with the
minimum $1.00 bid price per share requirement of Marketplace
Rule 4310(C)(8)(D), that IIS had not regained compliance with
that Rule and that IIS was not eligible for an additional 180-
day grace period to regain compliance because it did not meet
the stockholders' equity, the market value of listed securities
or the net income from continued operations requirements for
initial inclusion on The Nasdaq SmallCap Market under
Marketplace Rule 4310(C)(2)(A). While IIS currently intends to
appeal the Staff Determination, there can be no assurance that
the Listing Qualifications Panel will grant IIS' request for
continued listing on The Nasdaq SmallCap Market.
Integrated Information Systems(TM) is an innovative technology
and business consultancy specializing in providing fully
integrated and secure extended enterprise solutions. For
companies who seek measurable results by delivering accurate,
timely and secure information to their employees, customers,
partners and suppliers, IIS offers cost-conscious, profit-minded
solutions across the entire value chain with single provider
accountability.
Founded in 1989, IIS employs approximately 210 employees, with
offices in Bangalore, India; Boston; Denver; Madison; Milwaukee;
Phoenix; and Portland, Oregon. Integrated Information Systems'
common stock is traded on Nasdaq under IISX.
For more information on Integrated Information Systems, please
visit its Web site at http://www.iis.com
KAISER ALUMINUM: Wants to Assume 1998 Bauxite Purchase Agreement
----------------------------------------------------------------
Kaiser Aluminum Corporation and its debtor-affiliates seek the
Court's authority to assume a 1998 Bauxite Purchase Agreement,
subject to modifications.
During the 1950s, the General Services Administration purchased
4,700,000 long dry tons of bauxite from Kaiser Aluminum &
Chemical Corp., which it stockpiled at Kaiser's Gramercy,
Louisiana refinery. The GSA is the predecessor-in-interest to
the Defense Logistics Agency, Defense National Stockpile Center.
In the early 1990s, however, the U.S. government determined that
the Gramercy Stockpile was no longer necessary. Hence, the
Defense National Stockpile Center and Kaiser entered into an
agreement to allow Kaiser to mine 1,500,000 LDT of bauxite from
the Gramercy Stockpile. The parties also inked another contract
on September 4, 1998, which requires Kaiser to purchase
3,200,000 LDT of bauxite from the Gramercy Stockpile. This
quantity is estimated to constitute the remainder of the
stockpile.
Under the 1998 Contract, beginning fiscal year 1998 and
continuing through fiscal year 2002, the National Stockpile
Center was to release to Kaiser 670,000 LDT of bauxite. In
turn, Kaiser would pay $5.15 per LDT. The terms of the contract
imposed a "take or pay" obligation on Kaiser. Kaiser was
required to pay the full price for any release no later than 18
months from the release date, regardless of whether it had
actually mined the bauxite.
When the Gramercy Facility exploded on July 1999, Kaiser was
prevented from consuming any bauxite, including those under the
1998 Contract, for several years while the plant was
reconstructed. Despite this, the 1998 Contract did not relieve
Kaiser of the obligation to "take or pay". According to Paul N.
Heath, Esq., at Richards, Layton & Finger, P.A., in Wilmington,
Delaware, Kaiser currently is in default on two payments due
under the 1998 Contract. Additionally, interest continues to
accrue on the missed payments at a specified statutory rate.
The interest is presently well over $500,000. In total, Kaiser
currently owes the National Stockpile Center over $7,500,000
under a strict application of the terms of the 1998 Contracts.
The 18-month "take or pay" time period for a third release
likewise will come due in mid-2003, long before Kaiser could
consume the material at current rates. The 1998 Contract also
gives National Stockpile the right to sell Kaiser's annual
allotments of bauxite to a third party since Kaiser failed to
make those timely payments.
Subsequently, the Debtors' management held negotiations with the
National Stockpile Center to resolve issues concerning the 1998
Contract. As a result, the parties have agreed to modify the
1998 Contract, so that:
A. The price that Kaiser will pay for bauxite under the 1998
Contract will be reduced from $5.15 per LDT to $4.70 per LDT;
B. The National Stockpile Center will waive and forgive all
interest accrued prior to the date the Court enters an Order
permitting Kaiser's assumption of the 1998 Contract. As of
that date, no payments will be considered past due;
C. The removal and payment schedules and procedures are also
modified:
1. Kaiser will make its payments within one month after the
end of every calendar quarter within which Kaiser removes
the bauxite. Kaiser will pay the contract price for the
full quantity taken during that quarter. Should Kaiser
fail to remove at least the Minimum Quantity by the
corresponding Take or Pay deadline as reflected, Kaiser
instead will pay for that period's minimum quantity,
rather than the quantity actually taken, not later than
the related Payment Due Date:
Minimum Take or Pay Payment
Quantity (LDT) Deadline Due Date
-------------- ----------- --------
167,645.50 3/31/03 4/30/03
167,645.50 6/30/03 7/31/03
167,645.50 9/30/03 10/31/03
167,645.50 12/31/03 1/31/03
167,645.50 3/31/04 4/30/04
167,645.50 6/30/04 7/31/04
167,645.50 9/30/04 10/31/04
167,645.50 12/31/04 1/31/04
167,645.50 3/31/05 4/30/05
167,645.50 6/30/05 7/31/05
167,645.50 9/30/05 10/31/05
167,645.50 12/31/05 1/30/05
167,645.50 3/31/06 4/30/06
167,645.50 6/30/06 7/31/06
167,645.50 9/30/06 10/31/06
167,645.50 10/31/06 1/30/06
167,645.50 3/31/07 4/30/07
167,645.50 6/30/07 7/31/07
167,645.50 9/30/07 10/31/07
14,735.50 12/31/07 1/30/07
2. The quantities taken by Kaiser will cumulate so that
Kaiser will receive credit for excess quantities taken in
prior periods against the current period's Minimum
Quantity, reducing or eliminating that period's Take or
Pay obligation to the extent of any cumulated excess
quantities from prior periods;
D. Although title to the bauxite will not pass to Kaiser until
removal to Kaiser's bauxite storage building, once Kaiser has
paid for material, it will not be offered for sale to any
other party and Kaiser may direct its disposition; and
E. The National Stockpile Center will continue to hold the
Louisiana Department of Environmental Quality air permit
necessary for mining of bauxite from the Gramercy Stockpile
and will work with Kaiser to expand the capacity of that
permit as may be required and requested.
Mr. Heath contends that the 1998 Contract provides the Debtors
with the most economical and readily available source of bauxite
after the material available under the 1993 Contract is
exhausted. The Debtors currently obtain the remainder of
bauxite processed at the Gramercy Facility from Jamaica. Due
principally to additional transportation expenses and to taxes
levied by the Jamaican government, the cost of bauxite mined in
Jamaica far exceeds the price under the 1998 Contract.
Mr. Heath believes that without the agreed-upon Modification,
assuming the 1998 Contract to obtain its long-term benefits
would require significant cash payments in the short term. The
Modification allows Kaiser to delay those payments to better
correspond to its actual anticipated bauxite usage. It also
reduces the price from $5.15 per LDT to $4.70 per LDT, thereby
facilitating Kaiser's ability to maximize its usage of the
bauxite from the Gramercy Stockpile. (Kaiser Bankruptcy News,
Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KEY3MEDIA GROUP: James Moore Resigns as Director
------------------------------------------------
Effective August 6, 2002, James E. Moore resigned as a director
of Key3Media Group, Inc. He did not give any reasons for his
resignation.
Key3Media owns and produces about 60 trade shows and conferences
for the information technology industry, including the annual
COMDEX show held in Las Vegas. In addition to the popular US
event, Key3Media puts on nearly 20 other COMDEX shows in 16
countries. (COMDEX shows account for almost 35% of sales.) Other
events include Networld, Seybold Seminars, SOFTBANK
Forums, and JavaOne. Key3Media's events draw about 1.5 million
participants each year. The company was spun off from publisher
Ziff-Davis (now part of CNET Networks) in 2000. Japan's SOFTBANK
owns about 55% of Key3Media.
* * *
As reported in the August 7, 2002 issue of the Troubled Company
reporter, Key3Media Group, Inc., (NYSE: KME) is undertaking a
strategic review of its operations in response to the sustained
economic downturns being experienced in the information
technology, networking and trade show industries.
In addition, the New York Stock Exchange has announced that it
will suspend trading of Key3Media Group, Inc.'s common stock
commencing on Monday, July 29, 2002 and seek to delist the
shares from the exchange. The NYSE said it was taking this
action due to the abnormally low recent selling prices of the
shares. The Company has discussed these matters with the NYSE
and has decided not to challenge the NYSE's actions. The Company
intends to apply to have its shares included in the over-the-
counter bulletin board to facilitate future trading. A new
trading symbol for the Company's shares will be announced as
soon as it is available.
KMART CORP: Court Nixes Application to Hire Dewey Ballantine
------------------------------------------------------------
Judge Sonderby denies Kmart Corporation and its debtor-
affiliates' application to employ Dewey Ballantine LLP as
special counsel for the Debtors' independent directors.
According to Bloomberg, Judge Sonderby emphasized that the
professionals employed in these cases should have "undivided
loyalty." (Kmart Bankruptcy News, Issue No. 30; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
KMART: U.S. Government Seeks More Time to File Proofs of Claim
--------------------------------------------------------------
Thomas L. Sansonetti, Assistant Attorney General for the
Environmental and Natural Resources Division of the U.S.
Government Department of Justice, informs the Court that Kmart
Corporation and its debtor subsidiaries and affiliates have
failed to provide environmental information required by Question
17 of the Statement of Financial Affairs. Question 17 requires
the Debtors to provide information regarding:
* every site for which they have received written notice of
potential liability from the government;
* every site for which they have provided notice of a hazardous
release to the government; and
* all judicial and administrative proceedings to which they are
or were a party under any environmental law.
The Statement of Financial Affairs is supposed to serve the
important purpose of ensuring that adequate information is
available for those interested in the administration of the
bankruptcy estate. But according to Mr. Sansonetti, the Debtors
supplied almost none of the information asked for. The Debtors
only list the names and addresses of certain environmental
creditors and describe these creditors' claims as "active." The
Debtors have not provided site names and addresses, relevant
environmental laws and liability notice dates, or docket numbers
for judicial and administrative proceedings, as required by
Question 17.
Mr. Sansonetti points out that even the Debtors' list of
environmental creditors is not complete. While the Debtors'
answer to the Question identifies specific agency creditors,
including the Environmental Protection Agency, they fail to
entirely mention Department of Interior and National Oceanic and
Atmospheric Administration of the United States Department of
Commerce. As a result, these agencies were not given
appropriate notice that they may have claims against the
Debtors. The EPA, as well, was not given appropriate notice,
since the Debtors' answer to the Question does identify specific
sites and environmental proceedings.
Accordingly, the U.S. Government seeks an amended and complete
answer to Question 17 from the Debtors. Currently, the U.S.
Government is waiting for the Debtors' counsel to reply to a
July 17, 2002 letter which requested "a formal amendment to the
... answer to Question 17." The letter also warned: "If such an
amendment is not made within a reasonable period of time, the
United States may file a motion to compel its production."
While the U.S. Government has been able to identify certain EPA
claims against Kmart Corporation, and file a proof of claim by
the July 31, 2002 bar date in connection with those claims, Mr.
Sansonetti contends that the government is nevertheless entitled
to the information required by Question 17, so that it can
determine if it has other claims. In view of that, the U.S.
Government asks the Court to allow it to file any further proofs
of claim on behalf of the EPA, DOI and NOAA within 45 days from
the date the Debtors file an amended and complete answer to the
Question. The government further seeks permission to amend,
within the same time period, the proof of claim that it filed on
behalf of EPA against Kmart so it can assert additional claims
on behalf of the three government agencies.
Mr. Sansonetti tells Judge Sonderby that the Debtors' failure to
properly complete the Statement of Financial Affairs violates
Rule 1007(b)(1) of the Federal Rules of Bankruptcy Procedure.
Hence, the Debtors should not be rewarded for their
nondisclosure and allowed to escape environmental claims by
creditors who were not provided with the required information.
Nor should the EPA, DOI and NOAA be prejudiced because the
Debtors failed to provide them with the information. (Kmart
Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
LTV CORP: Steel Debtor Sues General Electric to Pursue Claims
-------------------------------------------------------------
LTV Steel Company, Inc., asks Judge Bodoh to:
(a) disallow Administrative Expense Trade Claim Nos. 627
through 630 and 824 filed by General Electric Company;
(b) require the turnover of all sums owing to LTV Steel
and all estate property held by GE and its agents; and
(c) grant declaratory relief in favor of LTV Steel
relating to GE's attempt to setoff certain claims.
Bennett J. Murphy, Esq., at Hennigan Bennett & Dorman, in Los
Angeles, California, relates that LTV Steel and General Electric
Company have maintained a 20-year commercial relationship. GE
would place numerous orders with LTV Steel for flat-rolled steel
products while LTV Steel would purchase various goods and
services from GE, including maintenance services, motors and
engineering services and supplies. As a result of a series of
orders placed by GE, LTV Steel's regularly maintained books and
records reflect an account receivable for over $12,509,457.79:
-- $6,844,175.16 in prepetition receivables, and
-- $5,665,282.63 in postpetition receivables.
Despite demands for payment, Mr. Murphy says, GE refused to pay
for the goods delivered.
Shortly after the Petition Date, and continuing through April
2002, GE and LTV Steel unsuccessfully attempted to resolve the
dispute. On May 17, 2002, GE filed five "Administrative Expense
Trade Claims" numbered 627-630 and 824, which LTV Steel seeks to
disallow through this Complaint.
GE maintains it is entitled to setoff against the LTV
receivables an amount purportedly owed by LTV to GE that exceeds
in amount the LTV receivables. According to Mr. Murphy, GE has
asserted three distinct bases for setoff of its claims, none of
which permit GE to recover the amounts claimed:
(1) GE asserted that it is entitled to setoff any claims
against LTV Steel held by a subsidiary, General
Electric Capital Corporation. GECC has:
-- filed proofs of claim totaling $11,965,879.22,
and Administrative Expense Trade Claims totaling
$25,535.98,
-- retained separate counsel (not GE's retained
counsel), and
-- separately negotiated with LTV Steel regarding
GECC's claims.
Mr. Murphy argues that setoffs based on GE's
subsidiary's claims are not permitted under Section
553 of the Bankruptcy Code or under applicable
non-bankruptcy law;
(2) GE asserted that it is entitled to setoff amounts
purportedly owed by LTV Steel to GE for goods and
services allegedly provided by GE to LTV Steel.
But Mr. Murphy points out that GE has not provided
backup documentation to prove that the subject goods
were delivered to LTV Steel or that the services
were provided to LTV Steel. Moreover, Mr. Murphy
reports that LTV Steel has already paid certain of
the invoices for which GE currently seeks payment;
and
(3) GE asserted that it is entitled to administrative
priority on a $1,600,000 claim arising from a
contract that obligated GE to provide equipment for
and perform services at one of LTV Steel's mills.
According to Mr. Murphy, LTV Steel rejected the
contract on January 8, 2002, leaving GE with, at
most, a prepetition unsecured claim based on
damages in an undetermined amount arising from LTV
Steel's rejection of the contract.
Based on these impermissible setoffs, Mr. Murphy notes, GE has
refused to pay the LTV receivables. "GE has intentionally
withheld from LTV Steel over $5,300,000 in checks issued by GE
and made payable to LTV Steel," Mr. Murphy tells Judge Bodoh.
Accordingly, LTV Steel seeks to disallow the GE claims due to
GE's failure to provide sufficient backup documentation for its
claims and to the extent that LTV Steel has paid certain of the
invoices included in those claims. LTV Steel also seeks
disallowance under the Bankruptcy Code based on GE's failure to
turn over estate property, as required by the Bankruptcy Code.
Mr. Murphy informs the Court that LTV Steel disputes and will
file separate objections to the GECC claims:
Claim No. Claim Amount Date of Filing
--------- ------------ --------------
604 $674,430.04 March 29, 2001
605 1,838,594.50 March 29, 2001
739 8,159,829.96 May 3, 2001
740 1,293,024.72 May 3, 2001
838* 12,324.50 May 17, 2002
840* 8,250.44 May 17, 2002
* Administrative Expense Trade Claim
GECC has also filed an additional Administrative Expense Trade
Claim for $643,888.60 relating to two equipment lease
agreements, based on a stipulation approved by Judge Bodoh,
wherein the parties agreed to a compromised claim amount for
$643,888.60. (LTV Bankruptcy News, Issue No. 34; Bankruptcy
Creditors' Service, Inc., 609/392-00900)
LAIDLAW: Classification & Treatment of Claims Under Joint Plan
--------------------------------------------------------------
According to Garry M. Graber, Esq., at Hodgson Russ LLP, in
Buffalo, New York, Laidlaw Inc.'s Joint Plan of Reorganization
provides that holders of Allowed Claims in certain Classes will,
in respect of their Claims, be entitled to distributions of Cash
and New Common Stock:
A. Unclassified Claims
(a) Payment of Administrative Claims. Each holder of an
Allowed Administrative Claim will receive, in full
satisfaction of the Claim, Cash equivalent to the allowed
amount either on the Effective Date or 30 days after the
date on which an order allowing the Administrative Claim
becomes Final Order or a Stipulation of Amount and Nature
of Claim is executed by New LINC or the applicable
Reorganized Debtor and the holder of the Administrative
Claim;
(b) Statutory Fees. On or before the Effective Date,
Administrative Claims for fees payable pursuant to
Section 1930 of the Judiciary and Judicial Procedure
Code, as determined by the Bankruptcy Court at the
Confirmation Hearing, will be paid in cash equal to the
amount of the Administrative Claims. All other fees
payable pursuant to Section 1930 of the Judiciary and
Judicial Procedure Code that are will be determined at a
later date will be paid by the Reorganized Debtors
until the closing of the Reorganized Cases pursuant to
Section 350(a) of the Bankruptcy Code;
(c) Ordinary Course Liabilities. Administrative Claims based
on liabilities incurred by a Debtor in the ordinary
course of its business will be paid by the applicable
Reorganized Debtors pursuant to the terms and conditions
of the particular transaction giving rise to the
Administrative Claims, without further action by the
holders of Administrative Claims;
(d) Claims Under the DIP Facility. Unless otherwise agreed
by the DIP Lenders, on the Effective Date, Allowed
Administrative Claims under or evidenced by the DIP
Facility will be either paid in cash equal to the amount
of the Allowed Administrative Claims or upon the
agreement of the holders of the Claims, refinanced in
connection with the establishment of the Exit Financing
Facility;
(e) Claims for Substantial Contribution. No party shall be
permitted to assert a Claim for substantial contribution
pursuant to Section 503(b) of the Bankruptcy Code and,
upon the Effective date, all Claims for substantial
contribution shall be deemed disallowed without further
order of the Bankruptcy Court;
(f) Bar Dates for Administrative Claims. Unless previously
filed, requests for payment of Administrative Claims must
be filed and served on New LINC and the Reorganized
Debtors, pursuant to the procedures specified in the
Confirmation Order and the notice of entry of the
Confirmation Order, no later than 30 days after the
Effective Date. Failure to do so will forever bar the
Claimants to assert the Administrative Claims.
Objections to payment requests must be filed and served on
the Reorganized Debtors and the requesting party by the
later of 150 days after the Effective Date or 90 days
after the filing of the applicable request for payment of
Administrative Claims;
Mr. Graber adds that for Professionals or other entities
asserting a Fee Claim for services rendered before the
Effective Date must file and serve on the Reorganized
Debtors an application for final allowance of the Fee
Claim no later than 60 days after the Effective Date;
provided, however, that any professional who may receive
compensation or reimbursement of expenses pursuant to the
Ordinary Course Professionals Order may continue to
receive compensation and reimbursement of expenses for
services rendered before the Effective Date, without
further Bankruptcy Court review or approval, pursuant to
the Ordinary Course Professionals Order. Objections to
any Fee Claim must be filed and served on the Reorganized
Debtors by the later of 90 days after the Effective Date
or 30 days after the filing of the applicable request for
payment of the Fee Claim.
For holders of Administrative Claims based on liabilities
the Debtors incurred in the ordinary course of its
business, including Administrative Trade Claims,
Administrative Claims of Governmental Units for Taxes,
Administrative Claims arising under contracts and leases,
Administrative Claims of the Indenture Trustee, the
Administrative Agent and the professionals retained by
the Subcommittees, Mr. Graber says, they will not be
required to file or serve any request for payment of
these Administrative Claims.
Also, Holders of Administrative Claims under or evidenced
by the DIP Facility will not be required to file or serve
any request for payment of their Claims.
(g) Payment of Priority Tax Claims. Each holder of an
Allowed Priority Tax Claim will receive, in full
satisfaction of its Claim, payment in full in Cash either
on the effective Date or in deferred Cash payments over a
period not exceeding six years from the date of
assessment of the Priority Tax Claim. Deferred payments
will be made in equal annual installments of principal,
plus simple interest accruing from the Effective Date at
the Priority Tax Interest Rate per annum on the unpaid
portion of each Allowed Priority Tax Claim. Unless
otherwise agreed by the holder of the Priority Tax Claim
and the applicable Debtor and the consent of the
Subcommittees has been obtained, Mr. Graber clarifies,
the first payment on account of the Priority Tax Claim
will be payable one year after the Effective Date or, if
the Priority Tax Claim is not allowed within one year
after the Effective Date, the first Quarterly Distribution
Date after the date on which an order allowing a
particular Priority Tax Claim becomes a Final Order or a
Stipulation of Amount and Nature of Claim is executed by
the applicable Reorganized Debtor and the holder of the
Priority Tax Claim.
The holder of an Allowed Priority Tax Claim will not be
entitled to receive any payment on account of any penalty
arising with respect to or in connection with the Allowed
Priority Tax Claim. Any Claim or demand for any penalty
(i) will be subject to treatment in Class 8; and
(ii) the holder of that Claim will not assess or attempt
to collect penalty from the Reorganized Debtors or
their property;
B. Secured Claims and Unimpaired Classes of Unsecured Claims
(a) Class 1 Claims are unimpaired. On the Effective Date,
subject to the consent of the Subcommittees and unless
otherwise agreed by the holder of an Allowed Secured
Claim and the applicable Debtor or Reorganized Debtor,
each holder of an Allowed Claim in Class 1 will receive
treatment on account of the Allowed Claim in the manner
set forth in Option A, B, C or D, at the election of the
applicable Debtor:
Option A: Allowed Claim in Class 1 will be paid in Cash,
in full, by the Debtor.
Option B: Allowed Claim in Class 1 will be Reinstated;
Option C: Allowed Claim in Class 1 will be satisfied by
the return of the collateral securing the
applicable Secured Claim to the claimant; and
Option D: Allowed Claim in Class 1 will be satisfied in
accordance with other terms and conditions as
may be agreed upon by the applicable Debtor
and the holders of the Allowed Claims.
(b) Class 2 Claims are unimpaired. On the Effective Date,
each holder of an Allowed Priority Claim will receive
Cash equal to the Claim amount; and
(c) Class 3 Claims are unimpaired. On the Effective Date,
each holder of an allowed Claim will be paid in full in
cash, subject to the Unsecured Trade Debt Claims Cap.
C. Impaired Classes of Unsecured Claims and Interests
Mr. Graber states that each holder of an Allowed Claim in
Class 4, 5 and 6 will receive a Pro Rata share of up to
$950,000,000 in cash, any Excess Cash and all of the
Distributable New Common Stock, it being understood that the
term loan portion of the Exit Financing Facility, prior to
any reduction pursuant to the Excess Cash Reduction, will
equal at least $950,000,000. In addition, Mr. Graber
continues, the holders of the Allowed Claims in Classes 4 and
5 will receive Pro Rata shares of the Guaranty Coverage
Dispute Settlement Distribution of $88,000,000 in cash for
holders of Allowed Claims in Class 4 and $22,000,000 in cash
for holders of Allowed Claims in Class 5. Any distribution
of Excess Cash will result in a dollar-for-dollar reduction
of up to $75,000,000 in the aggregate principal amount of New
LINC's post-Effective Date indebtedness. In the event of any
Excess Cash Reduction, the Debtors will reduce the term loan
portion of the Exit Financing Facility, subject to the
$75,000,000 aggregate cap.
(a) Class 4 Claims are impaired. On the Effective Date,
holders of Allowed Unsecured Bank Debt Claims will
receive a Pro Rata share of $88,000,000 in Cash. In
addition, on the Effective Date, each holder of an
Allowed Unsecured Bank Debt Claim will receive a Pro Rata
share, measured according to the Adjusted Amount of
Allowed Claims in Classes 4 and 5 and the aggregate
amount of Allowed Claims in Class 6, as estimated by the
Bankruptcy Court in the Class 6 Estimation Order,
collectively, of:
(i) Excess Cash,
(ii) the Term Loan Facility Proceeds, and
(iii) the Distributable New Common Stock;
(b) Class 5 Claims are impaired. On the Effective Date,
holders of Allowed Prepetition Noteholder Claims will
receive a Pro Rata share of $22,000,000 in Cash. In
addition, on the Effective Date, holders of Allowed
Prepetition Noteholder Claims will receive a Pro Rata
share, measured according to the Adjusted Amount of
Allowed Claims in Classes 4 and 5 and the aggregate
amount of Allowed Claims in Class 6, as estimated by the
Bankruptcy Court in the Class 6 Estimation Order,
collectively, of
(i) Excess Cash,
(ii) the Term Loan Facility Proceeds, and
(iii) the Distributable New Common Stock;
(c) Class 6 Claims are impaired. On the Effective Date,
holders of Allowed General Unsecured Claims will receive
a Pro Rata share, measured according to the Adjusted
Amount of Allowed Claims in Classes 4 and 5 and the
aggregate amount of Allowed Claims in Class 6, as
established by the Safety-Kleen Settlement Agreement, by
Stipulation of Amount and Nature of Claim or otherwise
and as estimated by the Bankruptcy Court in the Class 6
Estimation Order, collectively, of
(i) Excess Cash,
(ii) the Term Loan Facility Proceeds, and
(iii) the Distributable New Common Stock;
(d) Class 7 Claims are impaired. Except as otherwise
provided in the Plan, no property will be distributed to,
transferred to or retained by the Laidlaw Companies on
account of Claims in Class 7 as part of any of the
Restructuring Transactions or otherwise, and, except as
specified. The Claims will be discharged as of the
Effective Date. Notwithstanding this treatment of Claims
in Class 7, each of the Laidlaw Companies holding an
Intercompany Claim in Class 7 will be deemed to have
accepted the Plan;
(e) Class 8 Claims are impaired. No property will be
distributed to or retained by the holders of Allowed
Claims in Class 8 on account of their Claims;
(f) Class 9A Claims are impaired. No property will be
distributed to or retained by the holders of Allowed
Claims or Interests in Class 9A on account of their
Claims or Interests;
(g) Class 9B Claims are impaired. No property will be
distributed to or retained by the holders of Allowed
Claims or Interests in Class 9B on account of their
Claims or Interests.
(h) Class 10 Claims are impaired. Except to the extent
impaired pursuant to the Restructuring Transactions,
Interests in Class 10 will be Reinstated. Each of the
holders of Interests in Class 10 will be deemed to have
accepted the Plan.
D. Special provisions regarding the Treatment of Allowed
Secondary Liability Claims
Mr. Graber explains that the classification and treatment of
Allowed Claims under the Plan take into consideration all
Allowed Secondary Liability Claims. On the Effective Date,
Allowed Secondary Liability Claims will be treated as:
(a) Allowed Secondary Liability Claims arising from or
related to any Debtor's joint or several liability for
obligations under any:
(i) Allowed Claim that is being Reinstated under the
Plan; or
(ii) Executory Contract or Unexpired Lease that is being
assumed or deemed assumed by another Debtor or
under any Executory Contract or Unexpired Lease
that is being assumed by and assigned to another
Laidlaw Company will be Reinstated.
(b) Except as provided in the Plan or as otherwise
specifically provided herein, holders of Allowed
Secondary Liability Claims will be entitled to only one
distribution in respect of the underlying Allowed Claim.
No multiple recovery on account of any Allowed Secondary
Liability Claim will be provided or permitted.
E. Special Provisions Regarding Indenture Trustees' Claims
In full satisfaction of each Indenture Trustee's Claims,
including Claims secured by any charging lien under the
applicable Prepetition Indenture and including Claims for
reasonable fees, costs and expenses attributable to the
period prior to the Petition Date and through the Effective
Date, Mr. Graber informs Judge Kaplan that each Indenture
Trustee will receive from the Reorganized Debtors Cash equal
to the amount of their Claims and any charging lien held by
the Indenture Trustee will be deemed released as of the
Effective Date. Distributions received by holders of Allowed
Claims in Class 5 pursuant to the Plan will not be reduced on
account of the payment of the Indenture Trustees' Claims
under this Section.
On the Effective Date, the Debtors shall pay in Cash and in
full all amounts outstanding with respect to reasonable fees
for services and expenses incurred by and owed to each
Indenture Trustee prior to the Petition Date and through the
Effective Date under the terms of the applicable Prepetition
Indenture.
Specifically, each Class shall be entitled to:
Entitled
Class Description to Vote Recovery
----- ---------------- -------- ---------
- Administrative no 100%
Claim
Class 1 Secured Claims no 100%
Class 2 Priority Claims no 100%
Class 3 Unsecured Trade no 100%
Debt Claims
Class 4 Unsecured Bank yes 64.9%
Debt Claims
Class 5 Prepetition Noteholder yes 62.7%
Claims
Class 6 General Unsecured yes 62.3%
Claims
Class 7 Intercompany Claims no 0
Class 8 Penalty Claims no 0
Class 9 Subordinated Debtholder no 0
(A & B) Claims
Class 10 Other Interests no reinstated
For purposes of computations of Claim amounts, administrative
and other expenses and for similar computational purposes, the
Effective Date is assumed to occur on October 31, 2002. There
can be no assurance, however, when or if the Effective Date will
actually occur. (Laidlaw Bankruptcy News, Issue No. 21;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
METALS USA: Selling Southwest Plates & Shapes' Assets for $27MM
---------------------------------------------------------------
Metals USA, Inc. (OTC Bulletin Board: MUINQ), a Houston-based
metals processor and distributor, has entered into an asset
purchase agreement for the sale of substantially all of the
assets of three of its Southwest Plates and Shapes' operations.
Proceeds from the disposition of these operations will total
approximately $27 million.
An asset purchase agreement has been entered into with Triple-S
Steel Supply Co., headquartered in Houston, Texas. The asset
purchase agreement provides for the purchase by Triple-S of
substantially all of the assets of Metals USA Plates and Shapes'
operations located in Houston, Texas, San Antonio, Texas and
Shreveport, Louisiana. Proceeds from the disposition will total
approximately $20 million, not including approximately $7
million of receivables.
J. Michael Kirksey, Metals USA's chairman, president and chief
executive officer, stated, "The proceeds from this sale, as well
as the other asset sales of approximately $50 million announced
last week, will allow us to further reduce our bank debt aiding
our progress towards exiting Chapter 11 Court protection as
scheduled."
The company added that this asset purchase agreement is subject
to a thirty day Bankruptcy Court required auction process that
will conclude by mid-September 2002. During this period,
superior bids can be made for these operations. The asset
purchase agreement is contingent and shall become effective upon
the final approval of the Bankruptcy Court.
Metals USA, Inc., is a leading metals processor and distributor
in North America. With a customer base of more than 45,000,
Metals USA provides a wide range of products and services in the
Carbon Plates and Shapes, Flat-Rolled Products, and Building
Products markets. For more information, visit the Company's Web
site at http://www.metalsusa.com
NTL INC: Obtains Open-Ended Extension of Lease Decision Period
--------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the Southern District
of New York, NTL Incorporated and its debtor-affiliates obtained
an extension of their lease decision period. The Court gives
the Debtors until the date of entry of an order confirming a
plan of reorganization in the Debtors' cases to determine
whether to assume, assume and assign or reject unexpired
nonresidential real property leases.
NTL is the largest cable television operator and a leading
provider of business and broadcast services in the UK, and the
owner of 100% of Cablecom in Switzerland and Cablelink in
Ireland. Kayalyn A. Marafioti, Esq., Jay M. Goffman, Esq., and
Lawrence V. Gelber, Esq., at Skadden, Arps, Slate, Meagher &
Flom LLP represent the Debtors in their U.S. Bankruptcy
proceedings and Jeremy M. Walsh, Esq. at Travers Smith
Braithwaite serves as U.K. Counsel. At December 31, 2001, the
Company's books and records reflected, on a GAAP basis,
$16,834,200,000 in total assets and $23,377,600,000 in
liabilities.
NTL INC: Uncertain About Ability to Continue Operations
-------------------------------------------------------
NTL Incorporated (OTC BB: NTLD; NASDAQ Europe: NTLI) announced
on May 8, 2002 that it had filed in a U.S. Court its previously
announced Chapter 11 "prearranged" plan of reorganization under
U.S. law. Just prior to the filing, the Company, a steering
committee of our lending banks and an unofficial committee of
our public bondholders (holding over 50% in the aggregate of the
face value of NTL and our subsidiaries' public bonds) had
reached an agreement in principle on implementing the terms of
the recapitalization plan to strengthen our balance sheet,
reduce debt and put an appropriate capital structure in place
for our business. In addition, France Telecom and another
significant holder of our preferred stock also agreed to the
plan at that time. As previously announced, under the proposed
recapitalization plan, approximately $10.9 billion in debt will
be converted to equity in two reorganized companies - NTL UK and
Ireland and NTL Euroco. That agreement in principle forms the
basis of the Company's Second Amended Joint Plan of
Reorganization that was filed with the Court on July 15, 2002,
and will be the basis on which the Company intends to emerge
from Chapter 11.
On July 3, 2002 we announced that NTL had obtained final
approval from the Court in which its United States Chapter 11
cases are pending for the previously announced Debtor-in-
Possession ("DIP") financing. The Court approved the $630
million DIP facility, which included $500 million in new
financing provided by certain of the Company's bondholders or
their affiliates. This financing has provided the Company
sufficient liquidity to continue ordinary operations throughout
the Chapter 11 process.
On July 12, 2002, the Court approved the Company's previously
filed amended disclosure statement, subsequently amended on July
15, 2002, which has been distributed to stakeholders in
connection with the Company's solicitation of votes to accept
the plan of reorganization. On the same date the Court also set
September 5, 2002 as the date for the hearing to consider
confirmation of the plan. If confirmed, the Company's
recapitalization plan could be consummated shortly thereafter,
subject to satisfying certain remaining conditions as set out in
the plan, at which time the Company would emerge from Chapter
11.
BUSINESS REVIEW
NTL continues to concentrate on delivering solid operational
results against the challenging backdrop of the recapitalization
process combined with a continued negative climate for telecoms.
During the second quarter of 2002, NTL made steady progress and
maintained a ``business as usual' approach with existing and
potential customers, NTL associates and suppliers.
Revenues of (pound)627 million ($915m) and EBITDA of (pound)174
million ($254m) from continuing operations represent a revenue
increase of 3% and an EBITDA increase of 58%, compared with
revenue of (pound)608 million ($857m) and EBITDA of (pound)110
million ($155m) in the second quarter of 2001.
Capital expenditures were (pound)138 million ($201m) in the
second quarter of 2002 as compared to (pound)115 million ($164m)
in the first quarter of 2002.
NTL Home
NTL Home's second quarter results from continuing operations
included revenues of (pound)334 million ($488m) and EBITDA of
(pound)141 million ($206m). Our results were in line with our
stated intentions of conserving cash and reducing costs and
capital expenditures. Q2 2002 EBITDA was 45% higher than in Q2
2001.
Monthly ARPU (average revenue per unit) was (pound)40.54 for the
quarter, an increase of (pound)1.18 per month as compared with
Q2 2001. On an annualized basis, ARPU stands at (pound)486.48.
NTL ended the quarter serving approximately 2.7 million on-net
customers, 102,000 off-net customers and providing 5.5 million
services to these customers. During the recapitalization
process, we are continuing to focus on:
(i) the provision of broadband services;
(ii) cost reduction; and
(iii) improving the quality of the customer experience.
NTL continues to see strong growth in the take up of its
high-speed, always-on broadband Internet products; ending the
quarter with over 275,000 broadband customers. As of August 1st,
NTL had over 300,000 broadband customers in the UK which, based
on ITC statistics, results in a market share of approximately
37%.
Churn was reduced to 17.1% (on an annualized basis) in the
quarter, as a result of ongoing customer service improvements.
Total disconnects were 119,000 in Q2 2002, down from 127,000 in
Q1 2002 while gross additions in Q2 were 49,000 down from 54,000
in Q1. Subscriber additions were in line with expectations.
NTL Business
NTL Business' second quarter results from continuing operations
included revenues of (pound)148 million ($216m), an increase of
6% over the prior year, and EBITDA of (pound)59 million ($86m),
an increase of 31% on Q2 2001. The recapitalization process and
the general climate for competitive telecoms service providers
has had a larger impact on NTL's Business revenues than on any
of the other operating divisions. P. New business successes
included signing an (pound)8 million ($12m) agreement with
Maritime and Coastguard Agency and an agreement with Freeserve
to deliver Freeserve Broadband services via NTL's next
generation cable network.
NTL Broadcast
NTL Broadcast's second quarter results from continuing
operations included revenues of (pound)52 million ($76m), an
increase of 6% over the prior year, and EBITDA of (pound)28
million ($41m), an EBITDA increase of 12% over Q2 2001,
excluding the Australian business.
New contracts within the quarter include a 10-year contract to
insert and transmit a new text service on Channel 5 and a number
of contracts from Channel 4 television, to provide a digital
compression system for additional channels on the direct to home
digital satellite platform.
TV Programming
Revenue for our TV programming subsidiary in Q2 2002 of (pound)6
million ($9m) represents a 20% increase from Q2 2001, and EBITDA
was (pound)15 million ($22m) negative. These results reflect the
fact that in June 2002 NTL's wholly owned subsidiary, Premium TV
Limited, initiated discussions with the Football League with a
view to restructuring the joint venture between the parties for
the provision of an Internet platform for the 72 soccer clubs
which are members of the Football League. The outcome of these
discussions is still uncertain; therefore, in Q2 2002, NTL's TV
programming division recorded a non-recurring operating expense
of approximately (pound)14 million ($20m) to reflect the write
down of certain assets relating to the joint ventures.
Shared Services
Shared services costs of (pound)64 million ($93m) in Q2 2002
declined by 14% as compared to Q2 2001, as a result of cost
reduction and efficiency improvements in Networks, IT, Finance,
HR and properties. The focus on cost reduction will continue
with additional opportunities to reduce costs through the
rationalisation of our IT assets and property portfolio.
Capital Expenditure - UK
UK capital expenditure from continuing operations was (pound)108
million ($158m) in the second quarter 2002. NTL's customer
acquisition capital spending is focussed upon our high value
subscribers, those who are defined as "low capex customers"
(i.e., pre-wired homes, triple play customers, on-net buildings
etc). The Company has virtually eliminated all discretionary
spend and is implementing only currently contracted spending
commitments. The above amounts reflect our capital expenditures
as accounted for under the accrual method of accounting. This
method provides a more accurate measurement of our capital
expenditure requirements during the reported quarter, as
compared to the cash spend on capital expenditures, which would
differ as a result of timing between capital commitments and
disbursements of cash (actual supplier payments) for these
commitments.
NTL Europe
NTL Europe's second quarter results from continuing operations
included revenues of (pound)87 million ($127m), a 12% increase
from Q2 2001, and EBITDA of (pound)25 million ($37m), a 32%
increase from Q2 2001. P. NTL Europe currently consists of
wholly owned Cablecom (Switzerland), and NTL Ireland
(Cablelink), as well as equity investments in B2 in Sweden
(34%), Noos in France (27%) and iesy (formerly known as eKabel)
in Germany (32.5%). Under the proposed terms of the
recapitalization plan, NTL's investment in Noos will be
transferred to France Telecom and NTL Ireland will become part
of the new NTL UK and Ireland company.
Cablecom
Continuing focus on EBITDA growth and return on investment were
the priority throughout the European franchises for Q2 2002.
EBITDA improvement is a result of increased focus on a
profitable revenue mix, as well as the impact of process
improvement in network operations and cost reduction programs.
During the second quarter, Cablecom increased its broadband
customer base to 100,000. P. In May 2002, in conjunction with
NTL's recapitalization plan, the banking syndicate for Cablecom
agreed a plan for the continued funding of Cablecom until April
30, 2003, which may be extended by the relevant banks to
December 31, 2003. In addition, the agreement reached with
the banking syndicate requires NTL to engage UBS Warburg by
August 31, 2002 to advise in connection with an outside
investment in or sale of all or part of the Cablecom group.
NTL Ireland
NTL Ireland's digital television penetration continues to grow
with 22,000 digital customers at the end of the second quarter.
Following the success of the cable modem trial in Q1, a
residential broadband product was launched into a target area of
7,000 households. The business-to-business sector continues to
be a growth area for NTL Ireland with strong sales on voice,
data and Internet products.
Capital Expenditure- Europe
Capital expenditure at NTL Europe from continuing operations
amounted to (pound)30 million ($44m) for Q2 2002. The Company
has virtually eliminated all discretionary spend and is
implementing only currently contracted spending commitments. The
above amounts reflect the Company's capital expenditures as
accounted for under the accrual method of accounting. This
method provides a more accurate measurement of the Company's
capital expenditure requirements during the reported quarter, as
compared to the cash spend on capital expenditures, which would
differ as a result of timing between capital commitments and
disbursements of cash (actual supplier payments) for these
commitments.
Equity Investments
iesy, NTL Europe's 32.5% owned asset in Germany, has suspended
its network upgrade program (which is focussed on the expansion
of its cable network in Hessen to provide broadband cable modem
services initially, and later digital television) pending
progress of a potential restructuring of iesy's capital
structure. iesy has recently retained advisors to assist it in a
restructuring of its outstanding debt.
B2, NTL Europe's 34% owned asset in Sweden ended the second
quarter with approximately 80,000 customers and with penetration
of approximately 35% of homes marketed.
Noos, NTL Europe's 27% owned asset in France, ended Q2 2002 with
127,000 cable modem subscribers and over 366,000 digital TV
subscribers. These results reflect the contribution of the NTL
1G Networks assets to Noos in November 2001.
Other Q2 Developments
On June 28, 2002, NTL confirmed that its restructuring plan,
with the support of the Official Committee of its unsecured
creditors, will provide for the continuation of Barclay Knapp
and his management team to lead the newly formed NTL companies
after emergence from the US Chapter 11 cases. As part of the new
management structure, John Gregg, currently CFO of NTL
Incorporated, will become co-Managing Director
and CFO of NTL Euroco upon emergence, and will also serve as CFO
of NTL UK and Ireland until a CFO for NTL UK and Ireland is
named.
Discussion of Second Quarter Results
We provide a broad range of communication services, including:
(i) consumer telecommunications and television, (ii) business
telecommunications and (iii) broadcast transmission and other
related services. Our consumer telecommunications and television
services include broadband services to consumer markets
comprising residential telephone, analog and digital cable
television, narrowband and broadband Internet access, and
interactive services. Business telecommunications consist of
broadband services to business markets, comprising business
telecommunications, national and international carrier
telecommunications, narrowband and broadband Internet services,
and managed network services. Our broadcast transmission and
other services include digital and analog television and radio
broadcast transmission services, satellite and media services
for programmers, news agencies, sports broadcasters and
production companies, and tower site rental and associated
services to a variety of carriers operating wireless networks.
As expected, our growth in 2002 has been curtailed by funding
constraints. Although our current business plan includes a
reduction in the number of new customers and an increase in
revenue from existing customers, our cash constraints present
many challenges to the successful execution of the plan. We are
conserving cash through a reduction in capital expenditures
including expenditures to connect new customers to our network.
In order to maintain revenues and cash from operations while
reducing the number of new customers, we must reduce and limit
customer churn. We intend to continue to improve our customer
service and increase our service offering to customers in an
effort to curtail and reduce churn. We are in the process of
integrating our various billing systems and customer databases
in an effort to improve one of the main tools we use to provide
customer service. This effort is beginning to achieve results as
the first franchise area was successfully migrated to the new
billing platform in June 2002. We expect to substantially
complete the project by the second quarter of 2003. The total
project cost is estimated to be approximately (pound)45.0
million, of which we have incurred approximately (pound)5.0
million through June 30, 2002.
Our plan to reduce churn and to increase ARPU includes an
increase in broadband services to our existing customers. We
believe that our triple play offering of telephony, broadband
access to the Internet and digital television will continue to
prove attractive to our existing customer base, which will
result in higher ARPU as revenues per existing customer
increase. We may also benefit from the financial difficulties
exhibited by some of the newer companies that compete with us
through churn of their customers. However, there is still
significant competition in our markets, through digital
satellite and digital terrestrial television and through
alternative Internet access media, such as DSL offered by BT. If
we are unable to charge the prices for these services in the
future that we anticipate in our business plan in response to
competition or if our competition is able to attract our
customers, our results of operations will be adversely affected.
Media speculation regarding our financial condition and
potential outcomes of the recapitalization process could have an
adverse effect on parts of our business. Similarly, negative
press about the financial condition of alternative telecom
carriers in general may effect our reputation. One of the key
strategies in our business plan is to increase our penetration
of higher value small to medium size enterprises (or SMEs) and
provide increased retail services of bundled voice, data and
Internet services for SMEs. However, due to the negative
publicity surrounding our financial condition and the effect
of that publicity on our brand name, we have found it difficult
to convince SMEs to become our customers. We believe our
recapitalization process and the general climate for alternative
telecom carriers effected our revenues in the first half of 2002
as prospective customers began deferring orders beginning in the
fourth quarter of 2001. Even if we successfully complete the
recapitalization process, there is no assurance that the
negative publicity will not adversely impact our results of
operations or have a long-term negative effect on our brand.
In addition, this uncertainty may adversely affect our
relationships with suppliers. If suppliers become increasingly
concerned about our financial condition, they may demand faster
payments or not extend normal trade credit, both of which could
further adversely affect our cash conservation measures and our
results of operations. However, this did not have any
significant effect on our results of operations or cash flows in
the first half of 2002.
There can be no assurance that we will successfully complete the
proposed recapitalization plan in a timely manner in order to
sustain our operations.
On April 2, 2002, we announced the completion of the sale of our
Australian broadcast business. NTL Australia is accounted for as
a discontinued operation, and accordingly, NTL Australia is
excluded from the results of continuing operations for the three
and six months ended June 30, 2002 and 2001.
The results of continuing operations on pages 9-10 for the three
and six months ended June 30, 2001 include CWC Off-Net and 1G
networks, both of which were sold in the fourth quarter of 2001.
Consolidated revenues increased by 3.6% to $916.4 million in
three months ended June 30, 2002, as compared to $884.4 million
in the three months ended June 30, 2001. Revenue growth was
achieved by improving our product offers, increasing our
broadband and digital TV customer base, raising prices and by
serving new customers and signing new contracts in our Broadcast
and Business telecoms divisions. Revenue growth in the Business
telecoms division was also the result of the acquisition of
Viatel UK in the third quarter of 2001.
In the three months ended June 30, 2002 and 2001, the United
Kingdom accounted for 86.0% and 87.1%, respectively, Switzerland
accounted for 11.5% and 10.8%, respectively, and other
geographic regions accounted for 2.5% and 2.1%, respectively of
total consolidated revenues.
In the three months ended June 30, 2002 and 2001, consumer
telecommunications and television revenues were 68.1% and 69.9%,
respectively, business telecommunications revenues were 23.5%
and 22.4%, respectively and broadcast transmission and other
revenues were 8.4% and 7.7%, respectively of total consolidated
revenues.
Consumer telecommunications and television revenues increased to
$624.3 million from $618.4 million primarily as a result of
changes in foreign currency exchange rates. These revenues in UK
pounds decreased to (pound)427.0 million from (pound)435.8
million. The decrease in revenues was primarily due to the sale
of part of our indirect access telephony business in October
2001 that accounted for (pound)13.8 million of consolidated
revenues in the three months ended June 30, 2001. Consumer
telecommunications and television revenues have also been
affected by a reduction in the customer base due to disconnects,
lower telephony usage and fewer premium package television
customers. This decrease was partially offset by price increases
and upselling new services to customers.
Business telecommunications revenues increased to $215.6 million
from $197.6 million. The acquisition of the assets and contracts
of Viatel UK in the third quarter of 2001 accounted for $32.1
million of the revenue in the three months ended June 30, 2002.
The reduction in revenue after excluding the Viatel revenue
primarily results from a lack of major installations and orders
and a decline in carrier revenues.
Broadcast transmission and other revenues increased to $76.5
million from $68.4 million. The increase reflects increases in
the number of broadcast television and FM radio customers and
accounts, which exceeded price cap reductions in our regulated
services, and increases in satellite and media services used by
broadcast and media customers. We expect growth in broadcast
services to be driven primarily by contracts related to the
increased demand for tower infrastructure by wireless services
operators expanding and upgrading their networks for wireless
broadband, the digitalization of analog television and radio
signals and the further development of programming for the
European markets requiring satellite and terrestrial
distribution services.
Operating expenses (including network expenses) decreased to
$413.7 million from $435.4 million primarily as a result of
decreases in telephony interconnection and television
programming costs. The acquisition of the assets and contracts
of Viatel UK in the third quarter of 2001 accounted for $29.2
million of the operating expenses in the three months ended June
30, 2002. Operating expenses as a percentage of revenues
declined to 45.1% in 2002 from 49.2% in 2001.
Selling, general and administrative expenses decreased to $248.5
million from $290.8 million, which reflects various cost savings
efforts including restructurings announced in the fourth quarter
of 2001. Selling, general and administrative expenses in the
three months ended June 30, 2002 include a non-cash reserve of
$19.6 million for certain assets of Premium TV Limited (our
television programming subsidiary) that reduced their carrying
value to $3.2 million. Selling, general and administrative
expenses as a percentage of revenues decreased to 27.1% in 2002
from 32.9% in 2001.
Other charges of $16.7 million in the three months ended June
30, 2002 include asset impairment charges of $12.9 million,
restructuring charges of $2.1 million and costs incurred for
information technology integration and for business
rationalization consulting of $1.7 million. Other charges of
$17.9 million in the three months ended June 30, 2001 were for
information technology integration and for business
rationalization consulting incurred by NTL UK. Asset impairment
charges of $12.9 million in 2002 are non-cash charges to write-
down certain long-lived assets to their estimated fair values
based on our assessment that their carrying value was not
recoverable. This charge includes fixed assets of $1.0 million
and other assets of $11.9 million, all of which relates to our
consumer segment. Restructuring charges of $2.1 million in 2002
include severance and related expenses of $1.0 million and costs
of $1.1 million to shutdown a non-critical operation in the UK.
The information technology integration and business
rationalization consulting costs of $1.7 million were incurred
by Cablecom in 2002.
Corporate expenses decreased to $8.0 million from $19.3 million
due to a decrease in legal, accounting, other professional and
employee related costs. In addition, corporate expenses in the
three months ended June 30, 2001 included a write-down of
certain investments of $5.9 million.
Depreciation and amortization decreased to $419.8 million from
$801.2 million. Depreciation expense increased to $385.4 million
from $359.2 million primarily due to an increase in depreciation
of telecommunications and cable television equipment.
Amortization expense decreased to $34.4 million from $442.0
million due to the adoption of SFAS No. 142 on January 1, 2002
which ended the amortization of goodwill and other indefinite
lived intangible assets. Amortization expense in the three
months ended June 30, 2001, after deducting the amortization of
goodwill and other indefinite lived intangible assets of $406.1
million, would have been $35.9 million.
Interest income and other, net increased to $9.7 million from
$5.2 million primarily as a result of an increase in cash
available for investment. Interest expense decreased to $269.3
million from $329.7 million as a result of our application of
AICPA Statement of Position 90-7, Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code ("SOP 90-
7"). Pursuant to SOP 90-7, interest expense is included in the
results of operations only to the extent that it will be paid
during the proceeding or that it is probable that it will be an
allowed priority, secured or unsecured claim. In accordance with
the proposed recapitalization plan, we do not plan to make
future interest payments on our outstanding publicly traded
notes, except notes issued by NTL Triangle (a non-debtor) and,
upon emergence from the Chapter 11 proceedings, Diamond Holdings
Limited. Our contractual interest for the three months ended
June 30, 2002 was $405.6 million. The increase in contractual
interest expense in 2002 as compared to 2001 is primarily due to
additional borrowings under credit facilities subsequent to June
30, 2001 and the issuance of additional notes in May and June
2001. Interest of $59.7 million and $243.7 million was paid in
cash in the three months ended June 30, 2002 and 2001,
respectively.
Share of losses from equity investments decreased to $37.3
million from $57.6 million primarily due to a reduction in the
net loss of B2 (due to an adjustment to our estimate of B2's
loss in the three months ended June 30, 2001) offset by an
increase in share of loss of Noos. We acquired our interest in
Noos in May 2001.
Foreign currency transaction (losses) gains were losses of $59.3
million in the three months ended June 30, 2002 and gains of
$22.6 million in the three months ended June 30, 2001. The
change is primarily due to the effect of changes in exchange
rates. We and certain of our subsidiaries have cash, cash
equivalents and debt denominated in non-U.S. dollar currencies
that are affected by changes in exchange rates. In addition,
certain of our foreign subsidiaries whose functional currency is
not the U.S. dollar have cash, cash equivalents and debt
denominated in U.S. dollars which are affected by changes in
exchange rates.
Recapitalization items, net was $37.8 million in the three
months ended June 30, 2002 including $10.2 million for employee
retention related to substantially all of our UK employees and
$29.6 million for financial advisor, legal, accounting and
consulting costs. These costs are net of $2.0 million of
interest earned on accumulated cash since the Chapter 11 filing
on May 8, 2002. We expect to incur approximately $50.0 million
in additional recapitalization costs until we complete the
process.
Gain on sale of NTL Australia of $8.4 million, net of income tax
expense of $4.5 million, is the result of the April 2, 2002 sale
of our Australian broadcast business to Macquarie Communications
Infrastructure Holding Pty Limited for A$850.0 million (US$451.3
million). The net proceeds from the sale after the repayment of
the outstanding bank credit facility and transaction related
costs were A$575.3 million (US$304.5 million).
Net loss was $550.4 million and $1,029.2 million in the three
months ended June 30, 2002 and 2001, respectively. This change
was the result of the factors discussed above, particularly the
$407.6 million reduction in amortization expense.
NATIONAL AIRLINES: Has Alternative Plan if ATSB Declines Loan
-------------------------------------------------------------
"Don't count us out," stated Michael J. Conway, president and
CEO of Las Vegas-based National Airlines.
"We are working diligently on an alternative plan and will issue
a statement in that regard shortly." Conway's comments followed
the denial of the carrier's loan guarantee application by the
Air Transportation Stabilization Board. The CEO also noted that
National would exhaust all viable alternatives and continue to
operate its normal flight schedule while doing so.
National filed its loan guarantee application on May 3, 2002,
requesting a government guarantee of $50.5 million of a $60
million loan from Foothill Capital, a wholly owned subsidiary of
Wells Fargo. National had received commitments to guarantee the
remaining $9.5 million from entities in the private sector. In
addition to the $60 million loan from Foothill Capital, National
had secured additional equity investment commitments of $28.5
million.
Conway said, "I am absolutely appalled by the decision made by
the ATSB. Not only did our application request that the
government guarantee a smaller percentage of a loan than what
other carriers have requested and received, but to my knowledge,
National was the only airline to secure a significant amount of
additional equity investment from the private sector. The ATSB
stated that they weren't confident National could pay back the
loan. That is a subjective stretch, at best. National has met
the forecasts included in our business plan for the past nine
months and we have no reason to believe that we will deviate
from this positive trend, a trend that is running counter to
what almost all other carriers are experiencing. (The five-year
business plan National provided the ATSB covers the period from
October 2001 through September 2006.) Nor has the ATSB provided
us with any substantive evidence in support of their assertion
as to why they think otherwise. Using conservative forecasting
assumptions, our business plan shows that National's cash
balance would be well in excess of the government's exposure at
all times. Our application also would have paid back the loan
within a five-year period, two years faster than the one
application approved thus far."
"National was never granted an audience with the voting members,
despite numerous requests," Conway said. "We did, however, meet
several times with ATSB staff members who represent the voting
members. It has been apparent to us for some time that unless
you're both big and in desperate straits, you're facing an
uphill battle.
"The manner in which the ATSB has conducted the application
process is replete with conflicts. Some of these conflicts were
perhaps unavoidable, but all warrant scrutiny. America West's
application and loan was approved and funded in rapid fashion in
January, even before the ATSB staff was in place. America West
is National's largest competitor and the government now has an
equity interest in that carrier through the issuance of
warrants, that if exercised, would result in the government
owning approximately one-third of the airline.
"In addition, since receiving its funding under the government
guaranteed loan, America West has followed a strategy that, in
our opinion, is contrary to the very business plan they
submitted in support of their application. We advised the ATSB
that since receiving the government guaranteed loan, America
West has increased their service by approximately 50% in Las
Vegas markets where they compete with National. At the same
time, they only increased their operations by approximately 5%
in non-National Las Vegas markets. This, and other related
actions by America West, is included in a formal complaint that
National filed with the Department of Justice (DOJ) on July 26,
2002. We are awaiting a response from the DOJ.
"The consulting firm being utilized by the ATSB in the review of
the revenue forecasting techniques of applicants is GRA, which
is partially owned by General Electric. General Electric,
through their aircraft leasing division GECAS, is one of the
largest creditors of America West and US Airways, the only
successful applicant and conditionally-approved applicant,
respectively. Surely, with the number of reputable financial
consulting firms specializing in these matters, the ATSB could
have and should have selected a firm with more independent
credentials.
"The ATSB has stated that 'The Board determined that National's
proposal does not provide a reasonable assurance that National
will be able to repay the loan.' On July 10, 2002, just five
weeks following the formal application filed by US Airways on
June 7, 2002, the ATSB provided a conditional loan guarantee in
the amount of $900 million. The ATSB made it quite clear to
National that no such conditional approval was in the offing,
and was unwilling to provide National with any indication as to
what it would take to get approved, conditional or otherwise.
"Considering the complexities involved in the US Airways
restructuring, it is not clear to us what comfort level the ATSB
and GRA assumed when the conditional approval was granted in
such an expeditious manner. Nor is it clear how the ATSB could,
within less than 24 hours following US Airways Chapter 11
filing, affirm their conditional approval of US Airways without
any additional commitments that a bankruptcy filing would
necessitate.
"This is not about the merits of who is getting approved, it's
about the blatant, inconsistent and even arrogant manner in
which smaller carriers are being dismissed as not being 'a
necessary part of maintaining a safe, efficient and viable
commercial aviation system' as the ATSB has stated. The bias
being demonstrated by the ATSB in favor of larger carriers runs
completely counter to the dynamic changes taking place in the US
airline industry.
"There is a significant transition occurring that is being
driven by a more discerning consumer. Irrational and illogical
disparities between business and leisure fares are finally
getting a long overdue restructuring. Fortress hubs, dominated
by large high-cost carriers that perpetuated these pricing
disparities, are now being tested by a new and growing breed of
competition from efficient, low-fare airlines. National is such
a carrier. It is unfortunate that the ATSB and its advisors are
unable to understand and accept that efficient low-fare carriers
are the future of the US aviation industry."
Conway concluded, "Despite my frustration and anger, I would
like to extend a heartfelt thanks to National's 1,500 employees,
the Company's aircraft lessors, and our creditors. Their support
continues to fuel our efforts. Since National's inaugural flight
in May 1999, National has flown almost seven million passengers.
This month, we expect our passenger volume to exceed 300,000,
the highest in our history."
NEXELL THERAPEUTICS: Considering Options to Effect Wind-Down
------------------------------------------------------------
Nexell Therapeutics Inc., (Nasdaq:NEXL) announced its results
for the second quarter ended June 30, 2002.
Second Quarter 2002 Results
As previously disclosed, on May 15, 2002 the Company's Board of
Directors authorized management to immediately begin an orderly
wind down of operations. This included a headcount reduction
from 23 to 3 permanent full-time employees, one of whom
subsequently resigned. Since that time management has focused on
paying creditor obligations, reducing and eliminating future
commitments, selling certain fixed assets and exploring the
liquidation of other assets.
The Company is continuing to consider alternatives available to
it in effecting the wind-down, which may involve liquidation or
reorganization under the federal bankruptcy code, dissolution
under Delaware law or other process or transaction. In any such
procedure or transaction, in light of the liquidation preference
of the Company's outstanding Series A and Series B Preferred
Stock in the aggregate amount of approximately $151 million,
absent the consent of the preferred shareholders there will be
no remaining value available for distribution to the holders of
Common Stock. There have been discussions with the holders of
the Company's Preferred Stock about a possible limited cash
distribution to holders of Common Stock but no agreement has
been reached and there can be no assurance of such an agreement.
All financial results were impacted significantly by the above
decision and by the sale of the Company's former Toolbox
business to Baxter Healthcare Corp., that was completed as of
August 31, 2001 and resulted in the cessation of substantially
all revenue-producing activities. Results for the second quarter
of 2002 were also significantly impacted by certain transactions
related to the wind down that are non-recurring in nature and,
accordingly, these results should not be viewed as indicative of
future financial performance.
For the quarter ended June 30, 2002, total revenues were zero
compared to $4.9 million in 2001. Gross profit, which was $2.2
million for the quarter ended June 30, 2001, likewise declined
to zero in the comparable period of the current year. These
decreases were the result of the August 2001 agreement with
Baxter described above.
Operating expenses in the second quarter of 2002 were $35.1
million compared to $6.8 million in 2001, an increase of $28.3
million. This increase was the result of a $33.6 million asset
impairment charge. As a result of the decision to wind down
operations, the Company has adopted a policy to value all non-
monetary assets based on bona fide written offers received to
date and management's estimates of potential liquidation values.
Management continues to explore transactions that may maximize
cash value of intangibles and other assets and any resultant
gain will be recognized when realized. Exclusive of the asset
impairment charge, operating expenses declined by approximately
$5.3 million as a result of expense reductions associated with
the Baxter transaction and the subsequent decision to wind down
operations.
The Company incurred a net loss of $35.0 million in the second
quarter of 2002 compared to a net loss of $4.7 million in the
comparable period of the prior year. The net loss applicable to
common stock increased in the three months ended June 30, 2002
to $36.7 million or $1.75 per share, versus $6.3 million or
$0.30 per share, in 2001. Weighted average shares outstanding
were 20.9 million for each of the quarters ended June 30, 2002
and June 30, 2001.
Comparison with First Half of 2001
Total revenues were $9.8 million for the six months ended June
30, 2001, compared to $3.0 million for the same period in 2002,
a decrease of $6.8 million. Current year revenues were
attributable to a one-time sale to Baxter of inventory that had
been fully reserved and the realization of deferred revenue upon
finalization of a transaction with Baxter in March 2002 related
to an agreement assigned to Baxter. Gross profit was $2.8
million on sales in the first six months of 2002, a decrease of
$1.6 million over the same period in 2001. The Company does not
anticipate that it will generate further revenue or gross profit
in future periods.
Operating expenses of $36.8 million for the first half of 2002
were $21.6 million higher than those reported for the same
period in 2001 due to the asset impairment charge described
above partially offset by expense reductions associated with the
Baxter transaction and the subsequent decision to wind down
operations.
The net loss applicable to common stock for the first six months
of 2002 was $37.2 million, or $1.78 per share, versus a net loss
applicable to common stock of $14.1 million or $0.69 per share
in the same period of 2001.
Liquidity
Cash and cash equivalents at June 30, 2002, were $3.7 million
versus $5.1 million at December 31, 2001, a decrease of $1.4
million. The Company's net worth is $3.2 million at June 30,
2002 and the Company believes, based on current information and
estimates, that cash and cash equivalents combined with expected
proceeds from the liquidation of remaining assets, would be
sufficient to fund the wind down of operations and meet creditor
obligations.
Recent Developments
The Company's Common Stock is currently traded on the Nasdaq
National Market, which imposes, among other requirements,
listing maintenance standards, minimum bid and public float
requirements. As announced on May 23, 2002, the Company received
notification from NASDAQ that its Common Stock had failed to
maintain a minimum bid price of $1.00 over the last 30
consecutive trading days, as required under NASDAQ rules. The
Company has until August 19, 2002 to regain compliance or
written notification will be given that the Company's securities
will be delisted. The Company has the right to appeal such a
decision; however the Company believes it will not be able to
regain compliance with these listing requirements. The Company
also has been advised by NASDAQ that its Common Stock fails to
meet the minimum market value of publicly held shares of $5
million as required by Nasdaq National Marketplace Rules. If the
Company's securities are delisted, the ability of stockholders
to obtain price quotations and buy and sell shares may be
materially impaired. It is possible that the Common Stock may be
eligible for trading on the OTC bulletin board.
The Company elected not to declare or pay at this time the semi-
annual cash dividends to holders of its Series B Preferred Stock
totaling $945,000 that were due on May 24, 2002. Penalties
accrue at an annual rate of 6% on such unpaid dividends.
On August 13, 2002, Eric Rose resigned as a member of the
Company's Board of Directors.
Located in Irvine, California, Nexell Therapeutics Inc.,
(Nasdaq:NEXL) is a biotechnology company that was focused on the
modification or enhancement of human immune function and blood
cell formation utilizing adult hematopoietic (blood-forming)
stem cells and other specially prepared cell populations. Nexell
was developing proprietary cell-based therapies that address
major unmet medical needs, including treatments for genetic
blood disorders, autoimmune diseases, and cancer. The Company is
currently in the process of winding down all operations.
NORTH ADAMS: Fitch Hatchets $9.9 Million Revenue Bonds to BB+
-------------------------------------------------------------
Fitch Ratings downgraded to 'BB+' from 'BBB-' the rating on the
outstanding $9,900,000 Massachusetts Health and Educational
Facilities Authority revenue bonds, North Adams Regional
Hospital Issue, series C. In addition, the bonds are removed
from Rating Watch Negative. The Rating Outlook is Stable.
The rating downgrade reflects North Adams Regional Hospital's
continued weak financial performance with a negative 3%
operating margin and negative 2.4% excess margin through the
nine months ended June 30, 2002. However, this represents a
slight improvement from fiscal year end 2001 with a negative
3.9% operating margin and negative 2.6% excess margin. Liquidity
has also declined due to spending on property, plant, and
equipment, leaving NARH with thin financial flexibility. Capital
investment through the nine months ended June 30, 2002 has
totaled $1.8 million and includes a new parking structure. As of
June 30, 2002, NARH had 59 days cash on hand compared to 96 days
at Sept. 30, 2001. Maximum annual debt service coverage remains
low at 1.2 times through the nine months ended June 30, 2002,
but management expects to meet its rate covenant of 1.3x at
fiscal year end 2002.
Inpatient volume through the nine months ended June 30, 2002
continues to lag from prior year's discharges, however,
outpatient volume has been increasing. Additional concerns
include ongoing losses at the non-obligated affiliates, Sweet
Brook (184 bed skilled nursing facility) and Sweetwood (70
independent living units), two long term care facilities. Fitch
is concerned with the weak operating performance exhibited by
the non-obligated entities as they had a combined bottom line
loss of negative $761k through the nine months ended June 30,
2002. The system's financial performance mirrors that of NARH's
with a negative 4.6% operating margin and 70 days cash on hand
as of June 30, 2002.
Ongoing credit strengths include dominant market share of 73.7%
in NARH's primary service area and the successful recruitment of
several physicians, including primary care physicians and
hospitalists. NARH has constructed a new medical office building
that is expected to open in mid August 2002. Several group
practices have already committed to leasing space (accounting
for 41,000 sq ft. out of an available 47,000 sq ft.), including
the largest practice in town of 20 physicians. Of concern is
NARH's contingent liability on any unleased space for a period
more than six months, which, if all space available remained
unoccupied, could reach a maximum of $644,000 annually.
The Stable Outlook reflects Fitch's belief that NARH's financial
performance will stabilize at its current level. Management
closed its 20-bed transitional care unit and reduced its
workforce by approximately 40 full time equivalents in November
2001, which led to a $2 million reduction in its cost structure.
In the near term, reimbursement changes and revenue cycle
initiatives should benefit financial performance. NARH expects
Medicaid payors to reimburse significantly more as enrollees are
converted to a managed care plan.
North Adams Regional Hospital is an 85 staffed bed community
hospital located in North Adams, Mass. (110 miles west of
Boston). North Adams Regional Hospital had $35 million in total
operating revenue in fiscal year 2000. NARH's financial
statement disclosure to Fitch is excellent in terms of content
and timeliness.
NORTHLAND CRANBERRIES: Ability to Continue Operations Uncertain
---------------------------------------------------------------
In fiscal 2001 and the first two months of fiscal 2002,
Northland Cranberries, Inc., continued to experience substantial
difficulty generating sufficient cash flow to meet obligations
on a timely basis. It failed to make certain scheduled monthly
interest payments under its revolving credit facility, and was
not in compliance with several provisions of its former
revolving credit agreement and other long-term debt agreements
through November 5, 2001. It was often delinquent on various
payments to third party trade creditors and others. The
industry-wide cranberry oversupply had continued to negatively
affect cranberry prices. Continued heavy price and promotional
discounting by Ocean Spray and other regional branded
competitors, combined with Northland's inability to fund a
meaningful marketing campaign, resulted in lost distribution and
decreased market share of its products in various markets. The
Company had reached the maximum on its then existing line of
credit.
Although successful in retaining distribution in many markets,
the lack of sufficient working capital limited Northland's
ability to promote its products. The Company says it had reached
the point where it felt it was imperative to reach an agreement
with its then-current bank group and to refinance its bank debt,
or else it believed it was faced with liquidating or
reorganizing the Company in a bankruptcy proceeding in which
creditors would have likely received substantially less value
than Northland says it felt they could receive in a
restructuring transaction and shareholders would have likely
been left holding shares with no value.
On November 6, 2001, Northland consummated a series of
transactions with Sun Northland, LLC (an affiliate of Sun
Capital Partners, Inc., a private equity investment firm
headquartered in Boca Raton, Florida), which we refer to as "Sun
Northland", and with members of its then-current bank group and
its new secured lenders, Foothill Capital Corporation and Ableco
Finance LLC, that resulted in the restructuring of the debt and
equity capital structure and a change of control of the Company.
Generally speaking, in the Restructuring, Sun Northland entered
into certain Assignment, Assumption and Release Agreements with
members of Northland's then-current bank group which gave Sun
Northland, or its assignee, the right to acquire Northland's
indebtedness held by members of its then-current bank group in
exchange for a total of approximately $38.4 million in cash, as
well as Northland's issuance of a promissory note in the
principal amount of approximately $25.7 million and 7,618,987
Class A common shares to certain bank group members who decided
to continue as lenders after the Restructuring. Sun Northland
did not provide the foregoing consideration to the former bank
group; instead, Sun Northland entered into a Stock Purchase
Agreement with Northland, pursuant to which Sun Northland
assigned its rights to the Assignment, Assumption and Release
Agreements to Northland and gave the Company $7.0 million in
cash, in exchange for (i) 37,122,695 Class A Common shares, (ii)
1,668,885 Series A Preferred shares (each of which converted
into 25 Class A common shares, or a total of 41,722,125 Class A
common shares, on February 4, 2002), and (iii) 100 shares of
Northland's newly created Series B Preferred Stock (which were
subsequently transferred to a limited liability company
controlled by Northland's Chief Executive Officer). Using
funding provided by its new secured lenders and Sun Northland,
Northland acquired a substantial portion of its outstanding
indebtedness from the members of its then-current bank group
(under the terms of the Assignment, Assumption and Release
Agreements that were assigned to it by Sun Northland) in
exchange for the consideration noted above, which resulted in
the forgiveness of approximately $81.2 million (for financial
reporting purposes) of Northland's outstanding indebtedness (or
approximately $89.0 million of the aggregate principal and
interest due the then-current bank group as of the date of the
Restructuring).
Northland also issued warrants to acquire an aggregate of
5,086,106 Class A common shares to Foothill Capital Corporation
and Ableco Finance LLC, which warrants are immediately
exercisable and have an exercise price of $.01 per share.
In addition to the Restructuring, Northland also restructured
and modified the terms of approximately $20.7 million in
outstanding borrowings under two term loans with an insurance
company, consolidating those two term loans into one new note
with a stated principal amount of approximately $19.1 million
and a stated interest rate of 5% for the first two years of the
note, increasing by 1% annually thereafter, with a maximum
interest rate of 9% in the sixth and final year. The Company
also renegotiated the terms of its unsecured debt arrangements
with certain of its larger unsecured creditors, resulting in the
forgiveness of approximately $3.5 million of additional
indebtedness previously owing to those creditors.
As a result of the Restructuring, Sun Northland controls
approximately 94.4% of Northland's total voting power through
(i) the Class A common shares, including the Series A Preferred
shares subsequently converted into Class A common shares, issued
to Sun Northland, and (ii) the additional 7,618,987 Class A
common shares over which Sun Northland exercises voting control
pursuant to a Stockholders' Agreement that Northland entered
into with Sun Northland and other shareholders in connection
with the Restructuring. Assuming full vesting over time of the
options to acquire Class A common shares that Northland issued
to key employees in the Restructuring, Sun Northland owns
approximately 77.5% of its fully-diluted Class A common shares.
On May 31, 2002, Northland closed its Cornelius, Oregon
concentrating facility. It intends to sell the facility and has
transferred cranberry concentrate production to its Wisconsin
Rapids, Wisconsin concentrating facility. On June 28, 2002, the
Company discontinued operations at its bottling plant located in
Dundee, New York. It intends to sell the facility and have moved
additional production to its Jackson, Wisconsin facility. The
Company intends to utilize various co-packers for the balance of
the Dundee production and expects that the closures will reduce
operating costs and provide cash flow for use in operations.
With the new debt and equity capital structure following the
Restructuring, Northland believes it is in a position to build
on the operational improvements it implemented in fiscal 2001
and the first three quarters of fiscal 2002. The Company
believes that it has sufficient working capital and borrowing
capacity to once again market and support the sale of its
Northland and Seneca brand juice products. The focus for the
remainder of fiscal 2002 continues to be on improving
operations, reducing debt and implementing a balanced marketing
approach with an emphasis on profitable growth.
Total net revenues for the three months ended May 31, 2002 were
$24.2 million, a decrease of 11.3% from net revenues of $27.3 in
the prior year's third quarter. Net revenues for the nine months
ended May 31, 2002 were $78.5 million, a decrease of 20.2% from
net revenues of $98.4 million in the prior year's nine month
period. The decrease resulted primarily from (i) reduced sales
of Northland and Seneca branded products; and (ii) the sale of
the Company's cranberry sauce business and a manufacturing
facility in June 2001, which reduced co-packing revenue and
revenue from cranberry sauce sales and which accounted for
approximately $1.7 million and $8.7 million of net revenues
respectively, for the three month and nine-month periods ended
May 31, 2001. These net revenue decreases were partly offset by
(i) increased sales of cranberry concentrate; and (ii) reduced
trade spending and consumer coupons (which are reported as a
reduction of gross revenues). Trade industry data for the 12-
week period ended May 19, 2002 showed that the Northland brand
100% juice products achieved a 5.6% market share of the
supermarket shelf-stable cranberry beverage category on a
national basis, down from a 6.8% market share for the 12-week
period ended May 20, 2001. The total combined market share of
supermarket shelf-stable cranberry beverages for Northland and
Seneca branded product lines was 5.6% for the 12-week period
ended May 19, 2002 compared to a 7.6% market share for the 12-
week period ended May 20, 2001.
On January 25, 2002, Northland was notified by Nestle USA, a
customer for whom it produces and packages juice beverages, of
its intention to transfer production and packing of bottled
beverages to its principal competitor, Ocean Spray Cranberries,
Inc., by September 30, 2002. Nestle has notified the Company
that it does not intend to transfer production of canned juice
beverages, so Northland anticipates that it will continue to
produce and package canned juice beverages for Nestle. The
Company had net revenues from production and packing of bottled
beverages for Nestle of approximately $1.7 million and $4.8
million in the three and nine-month periods ended May 31, 2002,
respectively, and is currently reviewing alternatives for
replacing the lost Nestle business and maximizing utilization of
the Company's Jackson, Wisconsin manufacturing facility.
Northland's net income for the three- and nine-month periods
ended May 31, 2002 was $1,944 and $53,852, respectively.
NUEXCO TRADING: NTC Liquidating Trust Appointed to Manage Assets
----------------------------------------------------------------
David J. Beckman, the Liquidating Trustee for the NTC
Liquidating Trust, announced that the NTC Liquidating Trust has
sold, through The Toronto Stock Exchange, 5,500,000 common
shares of Rio Narcea Gold Mines Ltd. The NTC Liquidating Trust
now holds less than 10% of the outstanding common shares of Rio
Narcea. The Liquidating Trustee has been mandated to manage all
of the assets of the bankruptcy estate of Nuexco Trading
Corporation, which assets are now held by the NTC Liquidating
Trust.
OLYMPUS HEALTHCARE: Blocks NLRB's Request for Admin. Expenses
-------------------------------------------------------------
The Liquidating Supervisor of Olympus Healthcare Group, Inc.,
and its debtor-affiliates objects to the Application of the
National Labor Relations Board for Administrative Expenses and
wants the U.S. Bankruptcy Court for the District of Delaware to
deny the application.
The Debtors relate that NLRB alleges that:
1) 2 employees of the Pegasus facilities were wrongfully
discharged. The Administrative Requests seeks
administrative status for $59,000 estimated back pay for
the two employees (Karen Mitchell and Paula Jones).
2) Uniform Longevity Allowance payments were not made on
behalf of Pegasus employees and requests $72,346 estimated
Uniform Allowance payment for all employees.
The Debtors point out that while Federal labor law determines
whether an unfair labor practice claims exists, it is the
Bankruptcy Code which determines the priority and allowability
of any and all claims file in a bankruptcy proceeding.
Pegasus was dismissed from these cases in October 2001. Both the
claims for back pay and Uniform Allowance claim involve the
employees of Pegasus, not employees of the current Debtors. The
Debtors argue that their claims for back pay cannot constitute
administrative expenses because Mitchell and Jones were both
terminated pre-petition, the Debtors illustrate.
Olympus Healthcare Group, Inc. filed for chapter 11 protection
on May 25, 2001. Michael Lastorwki, Esq., at Duane, Morris &
Hecksher represents the Debtors in their restructuring efforts.
This Court confirmed the Debtors' Second Amended Joint Plan of
Reorganization on May 6, 2002. When the Company filed for
protection from its creditors, it listed estimated assets of not
more than $50,000 and estimated debts of $10 million to $50
million.
ONVANCE LP: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------
Debtor: Onvance, LP
1230 Peachtree Street NE
Promenade II Bldg., 19th Floor
Atlanta, Georgia 30309
404-942-2699
Bankruptcy Case No.: 02-12399
Chapter 11 Petition Date: August 15, 2002
Court: District of Delaware (Delaware)
Judge: Mary F. Walrath
Debtor's Counsel: Michael Gregory Wilson, Esq.
Hunton & Williams
951 E. Byrd Street
Richmond, Virginia 23219
804-788-8200
Fax: 804-788-8218
Estimated Assets: $1 to $10 Million
Estimated Debts: $1 to $10 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
BTV Systems Trade Debt $347,410
Gary Ruffing (Equipment and
8601 Boulder Court Installation)
Walled Lake, MI 48390
MCPC Trade Debt (Equipment $231,251
and Installation)
RMS Trade Debt (Consent $194,700
InsStore Network)
McKinsey & Company Trade Debt (Consulting) $157,000
Diamond Cluster Int'l Trade Debt (Consulting) $150,293
Trumpet Advertising Trade Debt (Advertising $88,020
Agency)
Brett Bonthron Severance Payment $87,500
Gerard Coelsch Severance Payment $87,500
Point of Purchase Trade Debt (Research $65,000
Study
Alexander Ogilvy Trade Debt (Public $53,513
Relations)
Regus Trade Debt (Office Rent) $51,600
Target Cast TCM, Inc. Trade Debt (Advertising $38,167
Sales
National Personnel Trade Debt (Executive $30,000
Recruiters Recruitment)
CSP Information Group Trade Debt (Advertising) $25,000
BB&T Bankcard Group Credit Card Debt $23,465
St. Clair Interactive Trade Debt (Software $20,000
Development)
Wagerly Group Trade Debt (Promotional $10,405
Booth)
OMS Trade Debt (Recruitment) $8,750
InterAcer Trade Debt (Accounting $8,156
Support Service)
Vedo System Solutions Trade Debt (Software $6,000
Corp. Development)
PNC MAC: Fitch Affirms Low-B Ratings on 2 Certificates Classes
--------------------------------------------------------------
PNC Mortgage Acceptance Corp.'s commercial mortgage pass-through
certificates, series 1999-CM1, $103.1 million class A-1A, $433.7
million class A-1B, and interest-only class S are affirmed at
'AAA' by Fitch Ratings. In addition, the following certificates
are affirmed: $39.9 million class A-2 at 'AA'; $34.2 million
class A-3 at 'A'; $13.3 million class A-4 at 'A-'; $24.7 million
class B-1 at 'BBB'; $9.5 million class B-2 at 'BBB-'; $10.5
million class B-6 at 'B+'; and $5.7 million class B-8 at 'B-'.
Fitch does not rate class B-3, B-4, B-5, B-7, C, and D
certificates. The affirmations follow Fitch's annual review of
the transaction, which closed in December of 1999.
Midland Loan Services, Inc., the master servicer, collected
year-end 2001 operating statements for 95% of the loans by
outstanding balance. The comparable weighted average debt
service coverage ratio for these loans is 1.53 times for year-
end 2001 versus 1.50x at year-end 2000 and 1.34x at closing.
The certificates are collateralized by 207 commercial and
multifamily mortgage loans. As of the August 2002 distribution
date, the pool's collateral balance has been reduced by
approximately 2.7% to $740.2 million from $760.4 million at
closing. The pool is well diversified by property type and
geographic location.
Three loans (0.58% by balance) are in special servicing. One
loan, an office property, was recently brought current and is
pending return to the master servicer. The other two loans in
special servicing are both multifamily properties. The larger of
the two represents 0.29% of the outstanding balance and is
located in Meridian, Mississippi. The loan is 90 days
delinquent, mostly due to a decline in the property's occupancy.
Fitch applied various hypothetical stress scenarios taking into
consideration all of the above concerns. Even under these stress
scenarios, subordination levels remain sufficient to affirm the
ratings. Fitch will continue to monitor this transaction, as
surveillance is ongoing.
PENTACON INC: Court to Consider Chapter 11 Plan on September 9
--------------------------------------------------------------
Pentacon, Inc. (OTC Bulletin Board: PTAC), a leading distributor
of fasteners and other small parts and provider of related
inventory management services, announced results for the second
quarter and six months ended June 30, 2002.
As previously announced, the Company signed an agreement to sell
substantially all of its assets to Anixter International, Inc.,
(NYSE: AXE) and filed for protection under Chapter 11 on May 23,
2002. The transaction is part of a plan of reorganization which
has the support of the holders of a majority of the Company's
$100 million of Senior Subordinated Notes and the Committee of
Unsecured Creditors. In connection with the transaction with
Anixter, existing employees will be retained and all trade
obligations will be assumed and paid in full so that the Company
will continue to provide uninterrupted service to its customers.
The Company has prepared and distributed to its creditors a Plan
of Reorganization and accompanying Disclosure Statement which
must be voted on by August 28, 2002. A Plan confirmation
hearing is scheduled to be heard in the United States Bankruptcy
Court for the Southern District of Texas on September 9, 2002.
The acquisition of Company assets by Anixter is scheduled to
close approximately eleven days later.
Results of Operations
For the quarter ended June 30, 2002, Pentacon reported revenues
of $52.3 million compared to $70.2 million in the prior year
period. Excluding nonrecurring charges, EBITDA (earnings before
interest, income taxes, depreciation and amortization) was $4.6
million in the quarter compared to $7.2 million in the
comparable 2001 quarter. Nonrecurring charges of $2.3 million
recognized in the quarter primarily relate to professional fees
and costs resulting from the Chapter 11 filing. Before
nonrecurring charges, the Company reported net income of $0.7
million or $0.04 per share for the quarter ended June 30, 2002.
In the prior year second quarter, the Company reported a net
loss of $4.9 million or $0.29 per share after nonrecurring
charges of $5.6 million for the write down in value of certain
aerospace inventory and $1.3 million of costs related to the
relocation of its corporate office and cost reduction
initiatives in the Industrial Group.
Revenues for the six months ended June 30, 2002 were $108.1
million compared to $141.5 million reported for the same period
in the prior year. Excluding nonrecurring charges, EBITDA was
$9.6 million for the six-month period, compared to $13.5 million
reported in the corresponding period of 2001.
Industrial Group
Pentacon Industrial Group's second quarter revenues of $31.4
million resulted in operating income of $3.1 million. Compared
to the prior year quarter, revenue declined 7 percent, however,
operating income, before charges in each quarter, declined only
3 percent. The second quarter operating results were affected
by decreased demand from the Company's telecommunications, heavy
truck and certain of its transportation customers.
Revenues in the Industrial Group were $61.6 million for the six-
month period compared to $70.2 million in the prior year period.
The Industrial Group's operating income before nonrecurring
charges was $5.6 million compared to $6.4 million in the prior
six-month period. Operating income as a percentage of revenues
improved in the current year six-month period as a result of
cost savings measures.
Aerospace Group
Pentacon Aerospace Group's second quarter revenues and operating
income were $20.9 million and $1.4 million, respectively.
Revenues were 18% lower than the March 31, 2002 quarter and 42%
lower than the prior year period. The reduction was caused by
lower levels of non-contract business resulting from the overall
reduction in aerospace activity levels due to the events of
September 11th and the impact of the Company's Chapter 11
filing. Operating income declined 45 percent in comparison to
the March 31, 2002 quarter, and 64% compared to the prior year
quarter.
Revenues for the six-months ended June 30, 2002 in the Aerospace
Group were $46.5 million compared to $71.3 million in the prior
year period. The Aerospace Group's operating income before
charges decreased to $4.0 million from $7.4 million in the prior
year six-month period.
Operational Comments
Rob Ruck, Chief Executive Officer, commented, "Our Industrial
Group had another solid quarter in a difficult environment. As
a result of cost saving measures and operational efficiencies,
operating income remained relatively flat in spite of a decline
in revenues. Our Aerospace Group's results for the quarter were
impacted by an overall 25% decrease in Aerospace activity levels
and sales reduction following the Company's Chapter 11 filing.
"The Company is on schedule to emerge from Chapter 11 and
consummate the Anixter transaction. The Asset Purchase
Agreement requires us to meet certain earnings targets as a
condition of closing, as of now we expect to meet those targets
which will enable us to successfully complete the transaction."
Non-Comparable Items
In connection with the Company's restructuring efforts and
Chapter 11 filing, it has engaged advisors and incurred costs
with respect to professionals engaged by its lenders and
potential lenders and investors in performing due diligence and
complying with the requirements of a Chapter 11 filing. In
addition, the Company has further reduced its workforce. The
Company recognized $2.3 million and $3.9 million in the second
quarter and six-months ended June 30, 2002, respectively, for
those nonrecurring fees and costs. In the second quarter of
2001, the Company recorded charges of
$6.9 million related to the writedown of Aerospace inventory,
the relocation of its corporate office and Industrial Group cost
reduction initiatives.
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 modifies
the accounting and reporting of goodwill and intangible assets.
The pronouncement requires entities to discontinue the
amortization of goodwill, to reallocate all existing goodwill
among reporting segments based on criteria in the Statement and
to perform initial impairment tests by applying fair-value-based
analysis on the goodwill in each reporting segment.
At December 31, 2001, the Company's net goodwill was
approximately $125.9 million, and annual amortization of such
goodwill was approximately $3.5 million. The Company adopted
SFAS No. 142 effective January 1, 2002 and recorded a noncash
goodwill impairment charge of $88.8 million. The adoption does
not impact the Company's free cash flows or its EBITDA.
The Job Creation and Workers Act, which was enacted in March
2002, provides that net operating loss carry-back claims for the
years ended December 31, 2001 and 2002 are extended from two
years to five years. As a result, the Company will receive $1.7
million of additional income tax refunds. This benefit was
recorded in the quarter ended March 31, 2002.
Headquartered in Chatsworth, California, Pentacon is a leading
distributor of fasteners and other small parts and provider of
related inventory management services. Pentacon presently has
30 distribution and sales facilities in the U.S., along with
sales offices in Europe, Canada, Mexico and Australia. For more
information, visit the Company's Web site at
http://www.pentacon.com
PHILIP SERVICES: June 30 Balance Sheet Upside-Down by $18 Mill.
---------------------------------------------------------------
Philip Services Corporation (TSX:PSC) announced its consolidated
financial results for the quarter ended June 30, 2002.
PSC continued its improvement in operating results over the
prior year with second quarter operating income of $12.4 million
compared to $4.7 million in the same period of 2001. The
improvement was achieved despite a reduction in revenue compared
with the same period a year ago. The company also reported a net
loss for the second quarter of $6.3 million primarily due to an
increase in interest expense and losses on discontinued
operations.
"The improvement in operating income comes in the midst of
industry-wide softness in our key industrial outsourcing
markets, most notably refining and petrochemical," said Michael
W. Ramirez, chief financial officer for the company. "We
continue to manage through a difficult economy with a clear
focus on client service and the implementation of programs to
reduce costs, improve our balance sheet and exit unprofitable
businesses."
Highlights for the Three and Six Months Ended June 30, 2002:
-- Revenue for the three-month period ending June 30,
2002, was $351.7 million compared to $391.3 million for the same
period in 2001. For the six-month period ending June 30, 2002,
revenue was $712.6 million compared to $799.4 million for the
same period in 2001. The reduction in revenue for the three and
six months ending June 30, 2002, is due primarily to the decline
in market conditions surrounding the refining, petrochemical,
power, pulp/paper, manufacturing and waste industries, partially
offset by the increased revenue associated with price increases
for ferrous scrap metal.
-- Income from operations was $12.4 million or 3.5% of
revenue for the three-month period ended June 30, 2002, compared
with $4.7 million or 1.2% of revenue for the same period of
2001. For the six-month period ended June 30, 2002, income from
operations was $14.7 million or 2.1% of revenue compared with
$4.5 million or 0.6% of revenue for the same period of 2001.
Income from operations for the three- and six-month periods
ended June 30, 2002, was positively impacted by a $19.8 million
insurance settlement involving certain environmental sites of
the Company offset by a $5.0 million charge for incremental
environmental liabilities. Income from operations was also
positively impacted by improved ferrous scrap metal prices.
Conversely, the company recognized $4.1 million in bad debt
charges during the second quarter of 2002 related primarily to
the bankruptcy of certain customers. Operating income also
includes the impact of special charges totaling $2.8 million and
$7.4 million for the three- and six-month periods ended June 30,
2002. These special charges relate to the restructuring of the
Company's corporate office in the first half of the year and the
Company's ongoing business process re-engineering project, PSC
Way.
-- Net loss was $6.3 million for the three-month period
ended June 30, 2002, compared with net income of $0.6 million
for the same period of 2001. For the six-month period ended June
30, 2002, net loss was $15.0 million compared with a net loss of
$8.7 million for the same period of 2001. The increase in the
net loss was primarily due to an increase in interest expense
and losses on discontinued operations. Additionally, for the
three- and six-month period ended June 30, 2001, the Company
recorded gains on the sale of certain assets.
At June 30, 2002, the Company's balance sheet shows a total
shareholders' equity deficit of about $18 million.
Industrial Outsourcing
(Includes industrial cleaning and maintenance, mechanical
services, piping and fabrication services, turnaround and outage
services, electrical contracting and instrumentation,
refractory, catalyst and remediation services.)
Revenue for the three-month period ending June 30, 2002, was
$138.2 million compared to $186.2 million for the same period in
2001. For the six-month period ending June 30, 2002, revenue was
$326.9 million compared to $386.6 million for the same period in
2001. The reduction in revenue for the three and six months
ending June 30, 2002, is due primarily to the significant
postponement, rescheduling or reduction in scope of certain
large-scale maintenance and capital projects by the Company's
customers. The decline in market conditions surrounding the
refining, petrochemical, power and pulp/paper industries were
key contributors. Specifically, the decline in demand for
refined petroleum products, in conjunction with the weak
economy, has influenced a reduction in market pricing for
refined petroleum products, in turn driving a conscious and
marked cutback in the amount of maintenance spending by many
clients. In addition, during the first quarter of 2002, certain
operations which produced $8.1 million and $17.2 million in
revenue for the three- and six-month periods ending June 30,
2001, respectively, were divested.
Loss from operations was $2.5 million or 1.8% of revenue for the
three-month period ending June 30, 2002, compared with $7.1
million or 3.8% of revenue for the three-month period ending
June 30, 2001. For the six-month period ended June 30, 2002,
income from operations was $8.3 million or 2.5% of revenue
compared with $14.9 million or 3.9% of revenue for the same
period of 2001. The reduction in operating income for the three
and six months ending June 30, 2002, is directly related to the
decline in revenue indicated above, thus causing unabsorbed
operating expenses and reducing gross margins. Additionally, a
bad debt charge of $2.0 million was recorded relating to a
receivable from a customer that filed for bankruptcy protection
in June 2002.
Environmental Services
(previously known as the By-Products Services Group): (Includes
commercial and industrial waste collection, transportation,
processing and disposal, container and tank cleaning services
and environmental analytical services.)
Revenue for the three-month period ending June 30, 2002, was
$71.6 million compared to $70.2 million for the same period in
2001. For the six-month period ending June 30, 2002, revenue was
$134.6 million compared to $138.9 million for the same period in
2001. Revenue continues to be affected by the economic slowdown
in the general manufacturing, chemical and waste industries.
Income from operations was $16.8 million or 23.5% of revenue for
the three-month period ending June 30, 2002, compared with $2.0
million or 2.8% of revenue for the three-month period ending
June 30, 2001. For the six-month period ending June 30, 2002,
income from operations was $17.4 million or 12.9% of revenue
compared with $4.5 million or 3.2% of revenue for the same
period of 2001. Income from operations for the three- and six-
month periods ending June 30, 2002, was positively impacted by a
$19.8 million insurance settlement involving certain
environmental sites of the Company offset by a $5.0 million
charge for incremental environmental liabilities.
Metals Services
(Includes collection and processing of ferrous and non-ferrous
scrap, brokerage and transportation, on-site mill services, and
steel processing and distribution.)
Revenue was $141.9 million for the three-month period ending
June 30, 2002, compared to $134.9 million for the same period of
2001. The increase in revenue is due to a 24% improvement in
ferrous scrap metal prices for the current period compared to
last year. The volumes of scrap managed by the Group decreased
4% compared to the same period last year. The increase in
ferrous scrap metal prices is directly related to the reduction
in foreign steel imports, the improvement in the U.S. steel
industry operating rate and the corresponding increase in demand
for ferrous scrap.
Revenue was $251.1 million for the six-month period ending June
30, 2002, compared to $273.9 million for the same period of
2001. The decline in revenue is due to a 10% reduction in
volumes managed by the Group, partially offset by a 10% increase
in ferrous scrap metal prices.
Income from operations was $5.2 million or 3.7% of revenue for
the three-month period ending June 30, 2002, compared to $0.6
million or 0.4% of revenue for the three-month period ending
June 30, 2001. The improvement in income from operations for the
quarter is due to the improved ferrous scrap metal prices,
continued cost reductions and increased demand over the first
quarter.
Income from operations was $3.9 million or 1.6% of revenue for
the six-month period ending June 30, 2002, compared with a loss
of $5.8 million or 2.1% of revenue for the same period of 2001.
The increase in income from operations for the six-month period
ending June 30, 2002, is due to the improved ferrous scrap metal
prices and significant bad debt charges in the prior year. In
the first quarter of 2001, income from operations was reduced by
$7.6 million as a result of the bankruptcy of two major steel
company customers.
Shared Services and Eliminations
(Includes administrative costs of the operations, the retained
liabilities of the captive insurance company and other non-
operating entities.)
Shared services costs increased by $2.1 million and $5.8 million
for the three and six months ended June 30, 2002, compared to
the same periods in 2001. The increases were due to corporate
level-bad debt charges, and special charges associated with the
restructuring of the Company's corporate office and business
process re-engineering project, which, in the aggregate were
$3.8 million and $8.4 million, respectively.
March 31, 2002 Form 10-Q/A:
The Company's Form 10-Q for the period ended March 31, 2002, as
filed with the Securities and Exchange Commission on May 13,
2002, has been amended in a Form 10-Q/A filed on August 14,
2002. The Form 10-Q, as originally filed had not been reviewed
by the Company's independent accountants due to the resignation
in April 2002, of PricewaterhouseCoopers (not as a result of a
disagreement with management). In July, the Company retained
KPMG LLP as its independent public accountants. KPMG has
reviewed the Form 10-Q/A for the quarter ending March 31, 2002,
and the Form 10-Q for the quarter ending June 30, 2002.
The Form 10-Q/A reflects the Company's adoption of Statement of
Financial Accounting Standards No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." The adoption of
Statement No. 144 resulted in a decrease to income from
continuing operations of $1.7 million and a decrease to net
income of $2.0 million for the period ended March 31, 2002. The
Form 10-Q/A also contains certain conforming changes including a
discussion of critical accounting policies.
PSC is an industrial services and metals recovery company with
operations throughout North America. PSC provides diversified
industrial outsourcing, environmental and metals services to all
major industry sectors.
PRIME RETAIL: New Capital Needed to Evade Default on Loan Pact
--------------------------------------------------------------
Prime Retail, Inc., (OTC Bulletin Board: PMRE, PMREP, PMREO)
announced its operating results for the second quarter ended
June 30, 2002.
FFO Results:
Funds from Operations was $2.3 millionfor the quarter ended June
30, 2002 compared to $7.1 million for the same period in 2001.
FFO was $9.2 million for the six months ended June 30, 2002
compared to $14.4 million for the same period in 2001.
The decrease in FFO and FFO per diluted share for the quarter
and six months ended June 30, 2002 compared to the same periods
in 2001 is primarily due to (i) a loss in net operating income,
partially offset by interest expense savings, resulting from
dispositions of properties, (ii) reduced occupancy in the
Company's portfolio during the 2002 periods, (iii) economic
changes in rental rates and (iv) a second quarter non-recurring
charge of $3.0 million for pending and potential tenant claims
with respect to lease provisions related to pass-through charges
and promotional fund charges.
The following eight operating properties were disposed of during
2001 and through June 30, 2002:
Property Name Date of Disposition
------------- -------------------
Northgate Plaza February 2, 2001
Prime Outlets at Silverthorne March 16, 2001
Prime Outlets at New River May 8, 2001
Prime Outlets at Conroe January 1, 2002
Prime Outlets at Hagerstown January 11, 2002
Prime Outlets at Edinburgh April 1, 2002
Phases II & III of Bellport Outlet Center April 19, 2002
The Shops at Western Plaza June 17, 2002
GAAP Results:
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." In accordance
with the requirements of FAS No. 144, the Company has classified
the operating results, including gains and losses related to
dispositions, for those properties either disposed of or
classified as assets held for sale during 2002 as discontinued
operations in its Consolidated Statements of Operations for all
periods presented.
In accordance with accounting principles generally accepted in
the United States, the GAAP loss from continuing operations
before minority interests was $20.5 million and $6.0 million for
the quarters ended June 30, 2002 and 2001, respectively. For
the quarter ended June 30, 2002, the net loss applicable to
common shareholders was $35.9 million. For the quarter ended
June 30, 2001, the net loss applicable to common shareholders
was $12.5 million.
The GAAP results for the quarter ended June 30, 2002 include (i)
a non- recurring loss on the sale of real estate of $0.7
million, or $0.02 per share, attributable to the sale of an
ownership interest in a joint venture partnership, (ii) the
aforementioned non-recurring charge of $3.0 million and (iii) a
non-recurring provision for asset impairment on two properties
of $12.2 million. During the quarter ended June 30, 2002, the
Company also reported a loss from discontinued operations of
$9.7 million including a net loss related to dispositions of
$8.2 million. The net loss on dispositions consists of (i) a
loss of $10.3 million to write-down the carrying value of six
outlet centers to their estimated net realizable value based on
the terms of a sales agreement, partially offset by (ii) a gain
of $2.1 million related to the sale of the Shops at Western
Plaza.
The GAAP results for the quarter ended June 30, 2001 include a
non- recurring loss of $0.2 million related to the sale of a
property. During the quarter ended June 30, 2001, the Company
also reported a loss on discontinued operations of $1.2 million.
The GAAP loss from continuing operations before minority
interests was $25.0 million and $10.4 million for the six months
ended June 30, 2002 and 2001, respectively. For the six months
ended June 30, 2002, the net loss applicable to common
shareholders was $39.8 million. For the six months ended June
30, 2001, the net loss applicable to common shareholders was
$23.8 million.
The GAAP results for the six months ended June 30, 2002 include
the above noted second quarter non-recurring losses and charges
aggregating $15.9 million. During the six months ended June 30,
2002, the Company also reported a loss from discontinued
operations of $3.5 million, including a net loss related to
dispositions of $1.0 million. The net loss on dispositions
during the six months ended June 30, 2002 consists of (i) a
first quarter gain of $16.8 million on the sale of a 70% joint
venture interest in Prime Outlets at Hagerstown, (ii) a first
quarter loss of $9.6 million related to the write-down of the
carrying value of Prime Outlets at Edinburgh to its net
realizable value based on the terms of a sales agreement and
(iii) the above noted second quarter net loss on dispositions of
$8.2 million.
The GAAP results for the six months ended June 30, 2001 included
a non- recurring gain on the sale of real estate of $0.6
million, resulting from the sale of three properties. During
the six months ended June 30, 2001, the Company also recorded a
loss from discontinued operations of $2.5 million.
Merchant Sales:
Same-store sales in the Company's outlet centers decreased by
3.6% and 2.7%, respectively, for the second quarter ended and
six months ended June 30, 2002 compared to the same periods in
2001. "Same-store sales" is defined as the weighted-average
sales per square foot reported by merchants for stores opened
and occupied since January 1, 2001. For the fiscal year ended
December 31, 2001, the weighted-average sales per square foot
reported by all merchants was $241.
Going Concern:
As previously announced, under the terms of a modification to
its mezzanine loan completed on January 31, 2002, the Company is
required to make mandatory principal payments with net proceeds
from asset sales, excluding the January 11, 2002 sale of a 70%
interest in the Hagerstown Center, or other capital
transactions, of not less than (i) $8.9 million by May 1, 2002,
(ii) $24.4 million, inclusive of the $8.9 million, by July 1,
2002 and (iii) $25.4 million, inclusive of the $24.4 million, by
November 1, 2002. The July 1, 2002 deadline could be extended
to October 31, 2002 provided certain conditions were met to the
lender's satisfaction. Through June 30, 2002, the Company has
made mandatory principal payments aggregating $10.3 million.
On July 1, 2002, the Mezzanine Loan lender elected to extend the
July 1, 2002 mandatory principal payment due date to the earlier
of (i) August 15, 2002 or (ii) the occurrence of an event of
default under the Mezzanine Loan. Additionally, upon
satisfaction of certain conditions, the Extended Date can be
automatically extended again to the earlier of (i) October 31,
2002, (ii) the occurrence of an event of default under the
Mezzanine Loan, or (iii) the closing or termination of certain
asset sales. There can be no assurance that these conditions
will be met.
Although the Company continues to seek to generate additional
liquidity through new financings and the sale of assets, there
can be no assurance that it will be able to complete asset sales
or other capital transactions within the specified periods or
that such asset sales or other capital transactions, if they
should occur, will generate sufficient proceeds to make the
remaining mandatory payments of $15.0 million due in 2002 under
the Mezzanine Loan. Any failure to satisfy these mandatory
principal payments within the specified time periods will
constitute a default under the Mezzanine Loan.
Based on the Company's results for the three months ended June
30, 2002, it is not in compliance with respect to the debt
service coverage ratio under its fixed rate tax-exempt revenue
bonds in the amount of $18.4 million. As a result of the such
noncompliance, the holders of the Affected Fixed Rate Bonds may
elect to put such obligations to the Company at a price equal to
par plus accrued interest. If the holders of the Affected Fixed
Rate Bonds make such an election and the Company is unable to
repay such obligations, certain cross-default provisions with
respect to other debt facilities, including the Mezzanine Loan
may be triggered.
The Company is working with holders of the Affected Fixed Rate
Bonds regarding potential resolution, including waiver or
amendment with respect to the applicable provisions. If the
Company is unable to reach satisfactory resolution, it will look
to (i) obtain alternative financing from other financial
institutions, (ii) sell the projects subject to the affected
debt or (iii) explore other possible capital transactions to
generate cash to repay the amounts outstanding under such debt.
There can be no assurance that the Company will obtain
satisfactory resolution with the holders of the Affected Fixed
Rate Bonds or that it will be able to complete asset sales or
other capital raising activities sufficient to repay the amount
outstanding under the Affected Fixed Rate Bonds.
As of June 30, 2002, the Company was in compliance with all
financial debt covenants under its recourse loan agreements
other than the Affected Fixed Rate Bonds. Nevertheless, there
can be no assurance that the Company will remain in compliance
with its financial debt covenants in future periods because its
future financial performance is subject to various risks and
uncertainties, including, but not limited to, the effects of
current and future economic conditions, and the resulting impact
on its revenue; the effects of increases in market interest
rates from current levels; the risks associated with existing
vacancy rates or potential increases in vacancy rates because
of, among other factors, tenant bankruptcies and store closures,
and the resulting impact on its revenue; risks associated with
litigation, including pending and potential tenant claims with
respect to lease provisions related to their pass-through
charges and promotional fund charges; and risks associated with
refinancing its current debt obligations or obtaining new
financing under terms less favorable than the Company has
experienced in prior periods.
These above listed conditions raise substantial doubt about the
Company's ability to continue as a going concern.
Prime Retail is a self-administered, self-managed real estate
investment trust engaged in the ownership, leasing, marketing
and management of outlet centers throughout the United States
and Puerto Rico. Prime Retail currently owns or manages 41
outlet centers totaling approximately 11.6 million square feet
of GLA. The Company also owns one community shopping center
totaling 27,000 square feet of GLA and 154,000 square feet of
office space. Prime Retail has been an owner, operator and a
developer of outlet centers since 1988. For additional
information, visit Prime Retail's Web site at
http://www.primeretail.com
SAFETY-KLEEN: Dismisses Arthur Andersen as Independent Auditors
---------------------------------------------------------------
In a regulatory filing delivered to the Securities and Exchange
Commission, Safety-Kleen Senior Vice President, General Counsel
and Secretary James K. Lehman discloses that the Company has
dismissed Arthur Andersen as its independent accountants.
Subject to Bankruptcy Court approval, Safety-Kleen has retained
Deloitte & Touche as its new auditors. 1(Safety-Kleen Bankruptcy
News, Issue No. 43; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
SPATIALIGHT INC: Auditors Express Going Concern Doubt
-----------------------------------------------------
SpatiaLight, Inc., is in the business of designing high-
resolution microdisplays, which consist of liquid crystals and a
glass cover on top of a silicon chip. These displays are also
known as and commonly referred to as Liquid Crystal Displays
(LCD), Active Matrix Liquid Crystal Displays (AMLCD), Liquid
Crystal on Silicon (LCOS), and Spatial Light Modulators (SLM).
These displays provide high-resolution images suitable for
applications such as rear projection computer monitors, high
definition television and video projectors and potential
applications such as those used in wireless communication
devices, portable games and digital assistants. The Company has
recently entered into five agreements with six original
equipment manufacturers in China to provide display units for
use in their products. In the event that the display units meet
certain technical criteria satisfactory to the manufacturer upon
the conclusion of the respective test periods specified in these
agreements, as to which there can be no assurance, the Company
expects to obtain substantial purchase orders from these
manufacturers for these display units. These agreements are
subject to various technical contingencies and there can be no
assurance that these agreements will result in significant
revenues, if any.
The Company's operations are constrained by an insufficient
amount of working capital. As of March 31, 2002 the Company has
sustained recurring losses and had a net capital deficiency of
$1,334,674, and a net working capital deficiency of $1,997,131.
These conditions raise substantial doubt about the ability of
the Company to continue as a going concern. During 2002 the
Company plans to meet its working capital and other cash
requirements through the exercise of warrants held by existing
investors including a trust for the benefit of one of the
Company's directors (of which the director is not a trustee).
The Company's continued existence is dependent upon its ability
to successfully market and sell its products and obtaining
additional financing. However, there can be no assurance that
the Company's efforts will be successful. The Company continues
its efforts to locate sources of additional financing, however,
there can be no assurance that additional financing will be
available to the Company. For this reason, there is uncertainty
whether the Company can continue as a going concern. Further,
the Company's auditors included a paragraph in their report on
the audited financial statements for the year ended December 31,
2001, indicating that substantial doubt exists as to the
Company's ability to continue as a going concern.
As of March 31, 2002, Spatialight had approximately $1,255,000
in cash and cash equivalents, and, as stated above, the net
working capital deficit at March 31, 2002 was approximately
$1,997,000. Additionally, as of March 31, 2002, the accumulated
deficit was approximately $41,830,000. Spatialight has realized
significant losses in the past and expects that these losses
will continue at least through 2002. It is likely that the
Company will experience quarterly and annual losses in 2002 and
beyond. There has been limited revenues generated to date, and
no profits from operations. The development, commercialization
and marketing of Spatialight products will require substantial
expenditures for the foreseeable future. Consequently, the
Company may continue to operate at a loss for the foreseeable
future and there can be no assurance that its business will
operate on a profitable basis or will be able to continue as a
going concern.
SPECIAL METALS: Brings-In Rothschild Inc. as Investment Bankers
---------------------------------------------------------------
Special Metals Corporation (OTC: SMCXQ), the world's largest and
most-diversified producer of high-performance nickel-based
alloys, reported financial results for the quarter ended June
30, 2002.
Consolidated net sales for the second quarter ended June 30,
2002 were $140.2 million, a 23.3% decrease from net sales of
$182.7 million recorded during the same period in 2001. The
Company reported a second quarter net loss of $10.7 million,
compared with a net loss of $2.7 million in the comparable 2001
period.
For the six months ended June 30, 2002, the Company reported
consolidated net sales of $298.9 million, a 20.9% decrease from
net sales of $377.8 million recorded during the first six months
of 2001. The Company realized a net loss of $23.3 million for
the six months ended June 30, 2002, compared with a net loss of
$6.5 million, during the same period a year ago.
Although demand for the Company's strip and wire rod products
strengthened as market conditions improved for consumer-related
goods, these gains were more than offset by the significant
decline in demand for the Company's vacuum-melted products, most
evident in the commercial aerospace and power generation
markets. The depressed market conditions in these key segments
adversely impacted Special Metal's operating performance during
the three month and six month periods ended June 30, 2002.
During the second quarter of 2002, the Company incurred
reorganization and restructuring related expenses in the amount
of $4.1 million. These charges principally consist of
professional fees and expenses related to the filing of
voluntary petitions for reorganization by the Company and its
U.S. subsidiaries under Chapter 11 of the U.S. Bankruptcy Code.
Special Metals President T. Grant John said: "Despite
challenging business conditions, the Company has made
substantial progress in the Chapter 11 process. We have a new
$60 million debtor-in-possession revolving credit facility, we
are engaging, subject to final bankruptcy court approval,
Rothschild Inc., as our financial advisor and investment banker,
and we are moving forward with the next phase of the
restructuring process, the creation of a Plan of Reorganization,
so that we may emerge as a stronger, financially viable
organization."
"Special Metals continues its normal day-to-day operations
including receiving materials and supplies, manufacturing
products, serving our customers, and shipping quality products.
From an operational standpoint, improvements have been made in
both cycle time, on-time delivery performance, manufacturing
efficiencies and fixed costs at each of the Company's primary
manufacturing facilities," Dr. John stated. "In spite of the
tough business conditions the industry is currently
experiencing, the Company continues to generate sufficient cash
from operations and the use of cash collateral to support our
businesses in the ordinary course. With the exception of
obtaining various letters of credit totaling approximately $4.1
million, the Company has not drawn upon the debtor-in-possession
credit facility."
Special Metals is the world's largest and most-diversified
producer of high-performance nickel-based alloys. Its specialty
metals are used in some of the world's most technically
demanding industries and applications, including: aerospace,
power generation, chemical processing, and oil exploration.
Through its 10 U.S. and European production facilities and a
global distribution network, Special Metals supplies over 5,000
customers and every major world market for high-performance
nickel-based alloys.
SUNBEAM: Wants Exclusive Periods Stretched to December 15
---------------------------------------------------------
Sunbeam Americas Holdings, LTD., and its debtor-affiliates ask
the U.S. Bankruptcy Court for the Southern District of New York
to further extend their Exclusive Periods. The Debtors ask the
Court to enlarge their exclusive time periods to propose and
file a chapter 11 plan and solicit acceptances of that plan
through December 15, 2002.
The Debtors remind the Court that the confirmation hearing on
the Debtors' Second Amended Plan of Reorganization is scheduled
on November 4, 2002. The Debtors' exclusive period, however,
will expire prior to the Confirmation Hearing, if not extended.
The Debtors relate that the past year has been one of intense
work by them to:
- stabilize operations and relationships with their vendors,
customers and employees from the chapter 11 filing and the
inability to emerge within the original timeline,
- restructure Sunbeam's businesses so they are less
susceptible to the market conditions that have delayed
Sunbeam's emergence from chapter 11, and
- pursue confirmation of a plan of reorganization with the
support of those of the Debtors' creditors that have an
economic interest in this case, i.e., the Debtors'
prepetition secured lenders.
The time and effort spent over the past year is beginning to
show results, the Debtors contend. The Subsidiary Debtors are
running ahead of their FY 2002 business plan, the Debtors point
out. The Debtors concede that additional time is required for
Sunbeam to reach consensual agreement with the Banks on the
terms and conditions of third amended plans of reorganization
for the Subsidiaries and Sunbeam Corporation that will enable
Sunbeam to emerge from chapter 11 as a viable entity.
The Debtors tell the Court that they are doing their utmost to
bring these cases to a successful conclusion as soon as
practicable and have made substantial progress. Currently, theyr
are negotiating with the Banks on the terms of a third amended
plan and will file an amended disclosure statement shortly. The
new plan, the Debtors explain, will take into account revised
projections for 2002 through 2005 and will also provide for a
capital structure that will allow the Debtors to emerge
successfully from chapter 11 with a deleveraged balance sheet.
Sunbeam Corporation, the largest manufacturer and distributor of
small appliances, sells mixers, coffeemakers, grills, smoke
detectors, toasters and outdoor & camping equipment in the
United States, filed for chapter 11 protection on February 6,
2001 in the Southern District of New York. George A. Davis,
Esq., of Weil Gotshal & Manges LLP, represents the Debtors in
their restructuring effort. As of filing date, the company
listed $2,959,863,000 in assets and $3,201,512,000 in debt.
TELIGENT: Has Until October 15 to Make Lease-Related Decisions
--------------------------------------------------------------
Teligent, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Southern District of New York to extend
their time period to decide on unexpired nonresidential real
property leases. The Debtors want the Court to give them until
October 15, 2002 to determine whether to assume, assume and
assign, or reject unexpired leases.
The Debtors tell the Court that they have made substantial
progress in resolving the remaining Unexpired Leases since the
Last Extension. The Debtors remind the Court that since the Last
Extension, the Debtors have identified and rejected
approximately 50 Unexpired Leases. Currently, there are about
25 remaining Unexpired Leases awaiting their decision. The
Debtors tell the Court that the vast majority of these Unexpired
Leases are directly related or necessary for their remaining
wholesale operations.
The Debtors remind the Court that they filed their proposed Plan
of Reorganization recently. The original confirmation hearing
was scheduled for August 14, 2002, but the Debtors have
requested that the hearing be adjourned until early September.
Accordingly, the Debtors will not be able to determine whether
the remaining Unexpired Leases will be assumed or rejected prior
to the current expiration date under section 365(d)(4) of the
Bankruptcy Code.
Teligent, Inc., a provider of broadband communication services
offering business customers local, long distance, high-speed
data and dedicated Internet services over its digital SmartWave
local networks in major markets throughout the United States,
filed for chapter 11 protection on May 21, 2001. James H.M.
Sprayregen, Esq., Matthew N. Kleiman, Esq., and Lena Mandel,
Esq., at Kirkland & Ellis represent the Debtors in their
restructuring effort. When the Company filed for protection from
its creditors, it listed $1,209,476,000 in assets and
$1,649,403,000 debts.
TRI-UNION DEV'T: Defaults on Waiver and Supplement to Indenture
---------------------------------------------------------------
Tri-Union Development Corporation notified the holders of its
senior secured notes that it did not obtain title to an oil and
gas well in the 30-day period required pursuant to the Waiver,
Agreement and Supplement to the Indenture. The Company continues
to use its best efforts to obtain clear title to the oil and gas
well.
The failure to obtain title to an oil and gas well constitutes
an event of default pursuant to the terms of the Waiver and the
Indenture. If any event of default occurs and is continuing, the
noteholders may by notice to the Company, declare all the notes
then outstanding to be due and payable upon demand. No such
declaration or demand has been made upon the Company by the
noteholders.
TRISM: Seeks to Stretch Exclusive Period until December 20
----------------------------------------------------------
Trism, Inc., and its debtor affiliates tell the U.S. Bankruptcy
Court for the Western District of Missouri that they need more
time to file their Chapter 11 Plan and solicit acceptances of
that plan -- and they don't want the distractions of any
competing plans to disrupt that process.
In order for Debtors to obtain acceptance by each class of
impaired claims and interests, they must amend their Plan and
Disclosure Statement to include descriptions and projections for
various newly considered Plan features, including modifications
to the alternative dispute resolution process for tort
claimants. Due to the necessity of obtaining input from
numerous practices, the ADR Plan may not be considered for at
least 60 days. The Debtors believe that an extension of their
exclusive periods until December 20, 2002 is a justified
request.
The Debtors reminds the Court that since they have been
operating as Debtors-in-Possession since filing this bankruptcy
petition, they are in a unique position to assess their economic
condition and viability and are best qualified to propose a plan
and develop a comprehensive disclosure statement.
Trism, Inc., the nation's largest trucking company that
specializes in the transportation of heavy and over-dimensional
freight and equipment, as well as material such as munitions,
explosives and radioactive and hazardous waste, filed for
chapter 11 protection on December 18, 2001 in Western District
of Missouri. Laurence M. Frazen, Esq., at Bryan Cave LLP
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed $155
million in assets and $149 million in debts.
UAL CORP: Updating Application for Federal Loan Guarantees
----------------------------------------------------------
Responding to changes in the airline industry and feedback on
its loan guarantee application with the Air Transportation
Stabilization Board, UAL Corporation (NYSE: UAL), whose
principal operating company is United Airlines, announced today
it is changing its business plan to build a stronger, more cost-
competitive airline. As a result, the company is updating its
application with the ATSB to include significantly broader,
deeper and longer-term cost savings.
"The world has changed," said Jack Creighton, chairman and chief
executive officer. "Revenue isn't coming back the way the
industry expected. Demand isn't returning, fares remain low,
and the industry is grappling with how to respond. At United,
we have determined that we must make improvements in our
business plan to ensure we get the cost savings we need to
compete in an industry that has fundamentally changed. And our
conclusions are consistent with the feedback we're getting from
Washington."
The enhanced plan will supplement United's work over the past 11
months to cut expenses, boost revenue and retool its operation.
Since Sept. 11, United has:
-- Reduced its schedule, furloughed employees, retired
fleets and made dramatic cuts in capital spending.
-- Eliminated base commissions.
-- Formulated a plan to increase network efficiency, reduce
the cost of sales, better manage air traffic, focus on under-
performance of certain distribution channels and customer
segments; realign premium customer products; and improve
processes and productivity.
-- Announced a code-share agreement with US Airways that is
expected to generate more than $200 million in annual revenue.
"Despite those efforts, we have to do more," Creighton said.
"We are facing debt payments of $875 million in the fourth
quarter and we have insufficient access to the public capital
markets to repay them. To avoid this liquidity crisis, Jake
Brace, our executive vice president and chief financial officer,
has been asked to lead the company's intensified recovery
effort.
"We have given ourselves a very short timeframe -- 30 days -- to
conclude our discussions with all stakeholders," Creighton said.
"As a result, the changes we need to make are urgent,
significant and immediate. Simultaneously, we are preparing for
the potential of a Chapter 11 bankruptcy filing this fall, due
to our fourth quarter debt payments. Unless we lower our costs
dramatically, filing for bankruptcy protection will be the only
way we can ensure the company's future and the continued
operation of our airline."
As part of these intensified efforts, the company in the coming
days will present new cost-saving proposals to employee
representatives and other stakeholders.
"Whatever course we take, we have one message for customers: our
recovery efforts are about the long-term health of United
Airlines," Creighton said. "We will do whatever it takes to
continue to meet the needs of our customers for many years to
come."
US AIRWAYS: Machinists Applaud Texas Pacific's $200MM Investment
----------------------------------------------------------------
Robert Roach Jr., General Vice President of the International
Association of Machinists and Aerospace Workers, made the
following statement regarding the announcement that Texas
Pacific Group will make a $200 million investment in US Airways
upon its emergence from Chapter 11 protection:
"With the experience of representing employees through
previous airline restructurings, the IAM recognizes the
importance of securing financing to successfully exit
bankruptcy. The equity investment provided by Texas Pacific
Group is an important first step for the carrier to successfully
emerge from bankruptcy with the capability of competing in
today's volatile airline industry."
"Texas Pacific Group is known for investing in good
companies that have fallen on hard times and playing an
instrumental role in their successful restructuring. At a time
when others on Wall Street are predicting the demise of US
Airways, Texas Pacific Group sees the value of the airline."
"The IAM will request a meeting with Texas Pacific Group to
ensure that its investment is not only in the airline, but the
airline's most important asset, our members."
The IAM is the largest transportation union in North America
representing 150,000 airline and railroad employees in the
United States and Canada, including US Airways' 12,250 Mechanic
and Related and Fleet Service employees. Please visit
http://www.goiam.orgfor more information about the Machinists
Union.
US Airways Inc.'s 10.375% bonds due 2013 (U13USR2) are trading
at 81.5 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR2for
real-time bond pricing.
US AIRWAYS: NYSE Suspends Trading & Initiates Removal from List
---------------------------------------------------------------
The New York Stock Exchange determined that the common stock of
US Airways Group, Inc. -- ticker symbol U - should be suspended
immediately. The Company has a right to a review of this
determination by a Committee of the Board of Directors of the
Exchange. Application to the Securities and Exchange Commission
to delist the issue is pending the completion of applicable
procedures, including any appeal by the Company of the NYSE
staff's decision.
As previously announced, the NYSE did not open trading on
Monday, August 12, 2002 as it was evaluating the Company's
continued listing status. The NYSE has now determined to suspend
trading because of the fact that on August 11, 2002 the Company
announced that it and certain of its subsidiaries had filed
voluntary petitions for reorganization under Chapter 11 of the
Bankruptcy Code. Additionally, the Exchange noted that in its
announcement the Company stated that, "(t)he Company presently
contemplates that one of the elements of any plan of
reorganization may be the cancellation of the Company's existing
equity securities without the prospects of any distribution to
existing holders. There is no assurance as to what values, if
any, will be ascribed in the Chapter 11 cases as to the value of
the Company's existing common stock and/or other equity
securities. Accordingly, the Company urges that the appropriate
caution be exercised with respect to existing and future
investments in any of these securities as the value and
prospects are highly speculative."
The Exchange notes that it may make an appraisal of, and
determine on an individual basis, the suitability for continued
listing of an issue in light of all pertinent facts whenever it
deems such action appropriate, and that the Exchange may, at any
time, suspend a security if it believes that continued dealings
in the security on the NYSE are not advisable. In light of all
the circumstances presented by the Company and its bankruptcy,
the Exchange has determined that the Company's securities are no
longer suitable for trading on the NYSE.
The NYSE noted that it may, at any time, suspend a security if
it believes that continued dealings in the security on the NYSE
are not advisable.
UNIFAB INT'L: Defaults on Senior Secured Credit Agreement
---------------------------------------------------------
UNIFAB International, Inc., (Nasdaq:UFAB) reported net loss of
$3.4 million on revenue of $8.4 million for the three months
ended June 30, 2002, compared to net loss of $591,000 on revenue
of $22.9 million for the three months ended June 30, 2002.
Depreciation and amortization for the quarter was $638,000
compared to $654,000 in the June quarter last year. The Company
reported backlog of approximately $7.2 million at June 30, 2002.
At June 30, 2002 the Company is in default under the terms of
its Senior Secured Credit Agreement and consequently has
classified $22,667,000 outstanding under the agreement as a
current liability.
Included in cost of revenue in the June quarter, are valuation
reserves of $408,000 on inventory, mainly waste processing
modules manufactured by the Environmental Division, asset
impairment costs of $252,000 related to certain assets acquired
in the OBI acquisition which have no remaining utility, and
$550,000 in reserves related to contract disputes arising in the
quarter. Included in SG&A for the June quarter are payments
totaling $150,000 related to settlement of employment contracts
with former corporate executives. Other expense includes a
$477,000 loss on the transfer of buildings and other leasehold
improvements in full settlement of all obligations under and
cancellation of the leases on the drilling rig repair facility
in the Port of Iberia net of $126,000 gain on the sale of assets
formerly used in plant maintenance operations. Drilling rig
repair services will be performed at the Company's main facility
in the Port of Iberia and at the Company's deepwater facility in
Lake Charles, Louisiana.
UNIFAB International, Inc., is a custom fabricator of topside
facilities, equipment modules and other structures used in the
development and production of oil and gas reserves. In addition,
the Company designs and manufactures specialized process
systems, refurbishes and retrofits existing jackets and decks,
provides design, repair, refurbishment and conversion services
for oil and gas drilling rigs and performs offshore piping hook-
up and platform maintenance services.
V. FUND: TSX Delists Shares for Failing to Maintain Requirements
----------------------------------------------------------------
Effective at the close of business August 15, 2002, the common
shares of V. Fund Investments Limited were delisted from TSX
Venture Exchange for failing to maintain Exchange Listing
Requirements. The securities of the Company have been suspended
in excess of twelve months.
VERTEL CORP: Fails to Comply with Nasdaq Listing Requirements
-------------------------------------------------------------
Vertel Corporation (Nasdaq:VRTL), a leading provider of
convergent service management mediation solutions, received a
Nasdaq Staff Determination letter today indicating that the
Company fails to comply with the minimum bid price requirements
as set out in Marketplace Rule 4450(a)(5) for continued listing
from the SmallCap Market, and that its common stock is,
therefore, subject to delisting.
Nasdaq also advised the Company that it had not yet paid the
balance of its SmallCap Market entry fee of approximately
$32,000 and thus was not in compliance with Marketplace Rule
4500 Series. As a result of the minimum bid price and entry fee
matters, Nasdaq indicated that the Company's shares are subject
to delisting on August 22, 2002. The Company is currently
evaluating its options, including appealing Nasdaq's
determination. The Company would have to pay the SmallCap Market
entry fee prior to any appeal. If the Company appeals the
delisting determination and the appeal is unsuccessful, or if
the Company chooses not to appeal, the common stock would be
delisted from The Nasdaq SmallCap Market.
Vertel is a leading provider of convergent service management
mediation solutions. Vertel's high performance solutions enable
customers to quickly and cost effectively introduce new
services, networks and OSSs while leveraging existing
investments. Using the M*Ware driven Development Environment,
Vertel has created a full suite of mediation based applications
that can address protocol translation, data transformation,
element and network management, OSS application integration, and
OSS exchange services.
Vertel's product offerings allow seamless management in multi-
technology and multi-vendor environments. Vertel also develops
communications software solutions that fit individual customer
requirements through its Professional Services organization. For
more information on Vertel or its products, contact Vertel at
21300 Victory Boulevard, Suite 700, Woodland Hills, California
91367; telephone: 818/227-1400; fax: 818/598-0047 or visit
http://www.vertel.com
WARNACO GROUP: Wins Approval to Expand BDO Seidman's Services
-------------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates obtained
permission from the Court to expand the scope of BDO Seidman's
employment, nunc pro tunc to July 3, 2002, so that the firm may
assist them in formulating and confirming a plan of
reorganization.
BDO Seidman's expanded duties will include:
(a) an analysis of the financial condition, operating results
and prospective results of the Company, including:
(i) The Plan and prospective financial information
prepared by the Company and its financial advisors;
(ii) Balance Sheets, historical and at the projected
effective date of a plan, assets, liabilities and
book value;
(iii) historical operating results, particularly profits
generated and factors affecting profits;
(iv) dividends paid historically, if any, and dividend-
paying capacity; and
(v) outlook at the Valuation Date;
(b) interviews and correspondence with the Company's
management. BDO will interview the Company's executives
and financial advisors to augment its knowledge of the
Company, including its history and management, the
nature of its business, and factors affecting its
business going forward;
(c) a review of published market data and other available
public information relating to the Company and the
apparel industry, including:
(i) relevant historical trends, current performance
indicators, and outlook at the Valuation Date for
the economy and the apparel industry;
(ii) bases of investors' appraisal, at the Valuation
Date, of publicly traded shares of companies that
can be used for comparative purposes; and
(iii) acquisitions of companies that can be used for
comparative purposes; and
(d) presentation of its opinion, observation and
conclusions in a narrative report with related schedules
and exhibits and, if necessary, in a sworn statement or
oral testimony to be provided in support of the Company's
plan or plans of reorganization in these cases.
BDO Seidman will be compensated for the Valuation Services on an
hourly basis based on these current rates:
Partners $330 - 550
Senior Managers 215 - 480
Managers 195 - 330
Associates 140 - 245
Staff 85 - 185
BDO Seidman will also be reimbursed for its reasonable out-of-
pocket expenses. The firm estimates that the total cost for the
additional services will range from $75,000 to $85,000. The
out-of-pocket reimbursement is expected not to exceed 7% of the
estimated fees. (Warnaco Bankruptcy News, Issue No. 30;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
WORLDCOM INC: Signing-Up Simpson Thacher as Bankruptcy Counsel
--------------------------------------------------------------
Worldcom Inc., and its debtor-affiliates seek the Court's
authority to retain and employ Simpson Thacher & Bartlett as
their special counsel in these Chapter 11 cases.
WorldCom Senior Vice President Susan Mayer informs the Court
that until 1998, Simpson Thacher represented MCI (a predecessor-
in-interest) in connection with significant merger and
acquisitions matters. Following WorldCom's acquisition of MCI
in 1998, the Debtors have used Simpson Thacher primarily in
connection with several securities and ERISA litigations and
certain corporate transactions, including an exchange offer for
tracking stock and the adoption of the rights agreements.
In April 2002, WorldCom retained Simpson Thacher to advise the
audit committee of the board of directors and the independent
outside directors regarding various issues, including:
-- the resignation of the former CEO, Bernard J. Ebbers,
-- the pending SEC investigation of the board, and
-- various securities and ERISA litigation matters.
Ms. Mayer relates that Simpson Thacher will continue to render
general corporate and litigation services, unrelated to the
conduct of the Debtors' Chapter 11 cases, including:
1) representing the Debtors and the members of the board of
directors (solely in each member's role as a director, and
not individually for any other purpose or on any matter
adverse to the Debtors) in respect of:
a. securities and ERISA litigation matters; and
b. the pending investigation of the Debtors' affairs by the
SEC and the Department of Justice; and
2) representing the Debtors in respect of possible assets sales
and other corporate merger and acquisitions transactions.
For its services, Simpson Thacher shall be recompensed in an
hourly basis and reimbursed of actual necessary expenses. The
professionals, who will work for the Debtors, and their current
billing rates, are:
Partners Department Rate
------------------ ---------- ------
Richard I. Beattie Corporate 700
Philip T. Ruegger III Corporate 700
Paul C. Curnin Litigation 660
George M. Newcombe Litigation 690
Michael J. Chepiga Litigation 690
Associates
------------------
Thomas P. Briody Litigation 425
Harold Dichter Corporate 470
David Elbaum Litigation 450
Adam T. Greene Corporate 375
Tushar J. Sheth Litigation 280
Michael A. Klein Litigation 375
Justin Stern Litigation 280
Simona G. Strauss Litigation 425
Ms. Mayer further relates that Simpson Thacher has been paid for
its previous services. The Debtors have also provided the firm
with a $250,000 retainer for this engagement. Simpson Thacher,
nevertheless, will require the Debtors to replenish this
retainer, as necessary, to maintain the $250,000 amount.
Simpson Thacher's partner Paul C. Curnin, Esq., assures the
Court that his firm does not hold or represent any interest
adverse to the Debtors, their creditors, or any other party-in-
interest, or their respective attorneys and accountants, with
respect to the matters for which it is engaged. (Worldcom
Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
Worldcom Inc.'s 11.25% bonds due 2007 (WCOM07USR4), DebtTraders
says, are trading at 23 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOM07USR4
for real-time bond pricing.
WORLDCOM INC: Looks to Lazard Freres for Financial Advice
---------------------------------------------------------
Lori R. Fife, Esq., at Weil Gotshal & Manges LLP in New York,
informs the Court that WorldCom wants to retain Lazard Freres &
Co. LLC as their financial advisors and investment bankers.
Among other things, Ms. Fife says, Lazard and its senior
professionals have an excellent reputation for providing high
quality financial advisory and investment banking services to
debtors and creditors in bankruptcy reorganizations and other
debt restructures. Lazard is also knowledgeable of WorldCom's
financial and business operations.
Lazard's focus is on providing financial and investment banking
advice and transaction execution on behalf of its clients.
Lazard's broad range of corporate advisory services includes
services pertaining to: general financial advice; domestic and
cross-border mergers and acquisitions; divestitures;
privatization; special committee assignments; takeover defenses;
corporate restructurings; and strategic partnerships/joint
ventures. The firm also maintains a presence in capital markets
and has a significant asset management business. It is a
registered broker-dealer and an investment adviser with the
United States Securities and Exchange Commission. Lazard is
also a member of the New York, American and Chicago Stock
Exchanges, the National Association of Securities Dealers, among
others.
Ms. Fife explains that Lazard developed its knowledge of
WorldCom's financial and business operations when it assisted
WorldCom in preparing for a Chapter 11 filing. Lazard met with
WorldCom's Board of Directors and Committees and helped in
reviewing and analyzing various financial matters. Lazard also
assisted the Debtors in preparing financial information in
support of the debtor-in-possession financing and in negotiating
and communicating with holders of WorldCom's various debt issues
with respect to various matters.
Accordingly, Lazard has developed significant relevant
experience and expertise regarding WorldCom that will assist it
in providing effective and efficient services in these cases.
In addition to the Lazard's understanding of WorldCom's
financial history and business operations and the
telecommunications industry, the firm has extensive experience
in the reorganization and restructuring of troubled companies,
both out-of-court and in chapter 11 proceedings. Since 1990,
Lazard has been involved in over 175 restructurings,
representing over $300,000,000,000 in restructured debt,
including troubled companies like: Adelphia Communications,
Hayes Lemmerz, Kaiser Aluminum, Metrocall, 360networks, Exodus
Communications, Teleglobe, National Steel, Formica, Owens
Corning, Fruit of the Loom, Vlasic Foods International,
Armstrong Worldwide Industries, Loews Cineplex, American Pad &
Paper, Stone & Webster, and Safety-Kleen, Inc.
The Debtors now ask the Court to approve Lazard's retention.
Specifically, Lazard will perform a review and analysis of the
Debtors' business operations and financial projections by:
a. Evaluating the Debtors' potential debt capacity in light of
its projected cash flows;
b. Assisting in the determination of a capital structure for
the Debtors;
c. Determining a range of values for the Debtors on a going
concern basis;
d. Advising the Debtors on tactics and strategies for
negotiating with the holders of the Existing Obligations
(Stakeholders);
e. Rendering financial advice to the Debtors and participating
in meetings or negotiations with the Stakeholders or
rating agencies or other appropriate parties in connection
with any restructuring, modification or refinancing of the
Debtors' Existing Obligations;
f. Advising the Debtors on the timing, nature, and terms of
new securities, other consideration or other inducements to
be offered pursuant to the Restructuring Transaction;
g. If requested by WorldCom, advising and assisting the
Debtors in evaluating potential capital markets
Transactions of public or private debt or equity offerings,
including any DIP financing by the Debtors, and, on behalf
of the Debtors, evaluating and contacting potential sources
of capital and assisting the Debtors in negotiating like a
Financing Transaction;
h. Assisting the Debtors in preparing documentation within
our expertise required in connection with the Restructuring
of the Existing Obligations;
i. If requested by the Debtors, assisting in identifying and
evaluating candidates for a potential Business Combination,
advising the Debtors in connection with negotiations and
aiding in the consummation of a Business Combination;
j. Advising and attending meetings of the Debtors' Boards of
Directors and their committees;
k. Providing testimony and other evidence, as necessary, in
any proceeding before the bankruptcy court; and
l. Providing the Debtors with other general restructuring
advice.
Terry (Frank) A. Savage, a Managing Director of Lazard, assures
Judge Gonzalez that the firm is a "disinterested person". The
firm and its professionals hold no interest adverse to the
Debtors, their estates, their creditors, or any other party-in-
interest, or their respective attorneys and accountants.
Lazard will charge the Debtors:
(1) A $300,000 Monthly Advisory Fee, payable in cash on the
1st day of each month thereafter until the earlier of the
completion of the Restructuring Transaction or the
termination of Lazard's engagement;
(2) A $15,000,000 Restructuring Fee, payable in cash
upon the consummation of a Restructuring Transaction;
(3) A cash-based Business Combination Fee in case WorldCom
requests Lazard to assist in connection with any
proposed Business Combination and that Business
Combination is consummated. The fee shall be paid
promptly upon the closing of that Business Combination;
A cash-based Sale Transaction Fee in case WorldCom asks
Lazard to assist in connection with any transaction
involving the sale of certain of WorldCom's business
lines, divisions or operating groups. The fee is
payable promptly upon the closing of the sale deal;
One-half of any fee payable pursuant to this clause will
be credited against the Restructuring Fee if, as and when
that fee is payable to Lazard;
(4) More than one fee may be payable pursuant to clauses (2)
and (3).
Lazard also will seek reimbursement for reasonable out-of-pocket
expenses, and other fees and expenses, including reasonable
expenses of counsel, if any.
Ms. Fife assures the Court that this compensation structure is
comparable to compensation generally charged by financial
advisory and investment banking firms of similar stature to
Lazard, both in and out of court.
In addition, Ms. Fife reports that WorldCom has paid Lazard
$300,000 as Monthly Advisory Fee for July. WorldCom also paid
Lazard another $300,000 as retainer. This retainer will be
credited against any unpaid pre-petition invoices and unbilled
fees, charges and disbursements, it being agreed and understood
that the unused portion of the retainer shall be held by Lazard
and applied against any of the fee applications filed and
approved by the Court. (Worldcom Bankruptcy News, Issue No. 3;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
XETEL: Withdraws Application to Transfer Listing to SmallCap
------------------------------------------------------------
XeTel Corporation (Nasdaq:XTEL) announced its notification to
The Nasdaq Stock Market that it is withdrawing its application
to transfer the listing of its common stock from the Nasdaq
National Market to the Nasdaq Small Cap Market.
The withdrawal of the application is effective immediately.
The Company received notification dated Feb. 14, 2002, from the
Nasdaq National Market that its common stock would be delisted
if the Company did not meet specific requirements.
Founded in 1984, XeTel Corporation is ranked among the top 50
electronics manufacturing services industry providers in North
America. The company provides highly customized and
comprehensive electronics manufacturing, engineering and supply
chain solutions to Fortune 500 and emerging original equipment
manufacturers primarily in the networking, computer and
telecommunications industries. XeTel provides advanced design
and prototype services, manufactures sophisticated surface mount
assemblies and supplies turnkey solutions to original equipment
manufacturers. Incorporating its design and prototype services,
assembly capabilities, together with materials and supply base
management, advanced testing, systems integration and order
fulfillment services; XeTel provides total solutions for its
customers. XeTel employs over 300 people and is headquartered in
Austin, Texas, with manufacturing services operations in Austin
and Dallas, Texas.
For more information, visit XeTel's Web site at
http://www.xetel.com
XO: Hearing on Lease Decision Period Extension Set for Aug. 26
--------------------------------------------------------------
Judge Gonzalez issued a Bridge Order extending the time within
which XO Communications, Inc., must decided to assume or reject
the KDC-Sunset Lease, through and including August 26, 2002.
Accordingly, the hearing on the motion with respect to the KDC-
Sunset Lease is adjourned to August 26, 2002 at 9:30 a.m. (XO
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
XO COMMUNICATIONS: Second Quarter EBITDA Swings-Up to $3 Million
----------------------------------------------------------------
XO Communications, Inc., (OTCBB:XOXOQ) announced financial
results for the three and six month periods ended June 30, 2002.
Total revenue was $325.5 million in the second quarter of 2002,
a 6.1 percent increase over revenue reported in the second
quarter of 2001. Year-to-date revenue for the six months ended
June 30, 2002 totaled $658.9 million, a 12.8 percent increase
over the comparable period in 2001.
Of the total revenue reported in the second quarter of 2002,
$174.9 million was derived from voice services, which includes
revenue from local, long distance and other enhanced voice
services, and $118.6 million was attributable to data services,
which includes Internet access, network access, and web hosting.
Revenue from integrated voice and data services totaled $31.5
million and other revenue totaled $0.4 million in the second
quarter of 2002.
The company reported positive EBITDA of $2.9 million in the
second quarter of 2002, compared to an EBITDA loss of $70.7
million in the second quarter of 2001.
XO said that it has continued to make progress in reducing the
rate that it uses cash noting that it used $53.0 million of cash
in the second quarter of 2002 compared to $166.2 million in the
first quarter of 2002. This improvement was primarily
attributable to significantly lower capital expenditures as well
as a series of expense reduction and cash conservation
initiatives.
Capital expenditures decreased to $37.4 million in the second
quarter of 2002 from $136.5 million in the first quarter of 2002
largely due to the completion of several significant technology
and network enhancements and reduced success-based capital
spending.
At the same time, selling, operating and general expenses
continued to decrease, in both absolute dollars and as a
percentage of revenue, to $188.3 million for the second quarter
of 2002, an 8.3 percent decrease from the first quarter of 2002.
As of June 30, 2002, XO had approximately $535.9 million in cash
and marketable securities on hand. Under its current business
plan, XO currently estimates that the cash and marketable
securities on hand as of June 30, 2002 will be sufficient to
fund its operations well into 2003.
On June 17, 2002, XO took an important step in its efforts to
implement its balance sheet restructuring when XO
Communications, Inc. filed a voluntary petition to reorganize
under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the Southern District of New York.
Because the Chapter 11 proceedings are limited to the parent
company, the filing is not expected to affect the services
provided by XO's operating subsidiaries. XO also has filed a
proposed plan of reorganization with the Bankruptcy Court that
includes two alternative restructuring scenarios.
The first alternative would implement the previously announced
investment agreement with Forstmann Little & Co., and Telefonos
de Mexico S.A. de C. V. (Telmex) while the second alternative
would implement a "stand-alone" contingency plan, if required.
The company has developed this contingency plan in light of the
expressed uncertainty of Forstmann Little and Telmex to close
the transactions under the investment agreement and the
possibility that one or more of the conditions to closing will
not be met. Both alternatives are designed to result in a
substantial reorganization and restructuring of the company's
balance sheet.
Since those initial filings, XO has made significant progress in
its restructuring process, including having now obtained the
support of both the Official Committee of Unsecured Creditors
representing, among others, XO's bondholders and representatives
of XO's banks for both alternatives under the proposed plan of
reorganization.
On July 26, 2002, XO began the process of soliciting its
creditors to obtain the approvals needed to implement the
restructuring. Additionally, the Bankruptcy Court established
August 26, 2002 as the date for the hearing at which XO expects
to seek confirmation of the first alternative under its plan of
reorganization that would implement the Forstmann Little/Telmex
investment.
XO Communications is one of the world's leading providers of
broadband communications services offering local and long
distance voice communication services, Digital Subscriber Line
(DSL) access, Web hosting and e-commerce service, Virtual
Private Networks (VPNs), dedicated access, global transit and
application infrastructure services for delivering applications
over the Internet or a VPN.
XO has assembled an unrivaled set of facilities-based broadband
networks and Tier One Internet peering relationships throughout
the United States. XO currently offers facilities-based
broadband communications services to business customers in over
20 states and the District of Columbia, including 25 of the 30
largest metropolitan areas in the United States.
* BOOK REVIEW: The Phoenix Effect: Nine Revitalizing Strategies
No Business Can Do Without
----------------------------------------------------------------
Authors: Carter Pate and Harlann Platt
Publisher: John Wiley & Sons, Inc.
Softcover: 244 Pages
List Price: $27.95
Review by Gail Owens Hoelscher
Buy a copy for yourself and one for a colleague on-line at
http://amazon.com/exec/obidos/ASIN/0471062626/internetbankrupt
Think of all the managers of faltering companies who dream of
watching those companies rise from the ashes all around them!
With a record number of companies failing in 2001, and another
record-setting year expected for 2002, there are a lot of ashes
from which to rise these days.
Carter Pate and Harlan Platt highly value strong leadership able
to sharpen a company's focus and show the way to the future.
They believe that all too often, appropriate actions required to
improve organizations are overlooked because upper management
either isn't aware of the seriousness of the issues they face or
they don't know where to turn for accurate information to best
address their concerns. In the Phoenix Effect, the authors
present their ideas to "confront, comprehend, and conquer a
company's ills, big and small."
These ideas are grouped into nine steps: (i) Find out whether
the company needs a tune-up, a turnaround, or crisis management.
Locate the source of "the pain." (ii) Analyze the true scope of
the company's operations. Decide whether to stay in the same
businesses, withdraw from existing businesses, or enter new
ones. (iii) Hold the company to its mission statement. If it
strives to be "the most environmentally friendly." Figure out
how. (iv) Manage scale. Should the company grow, stay the same
size, or shrink? (v) Determine debt obligations and work toward
debt relief. (vi) Get the most from the company's assets.
Eliminate superfluous assets and evaluate underused assets.
(vii) Get the most from the company's employees. Increase output
and lower workforce costs. (viii) Get the most from the
company's products. Turn out products that are developed and
marketed to fill actual, current customer needs. (ix) Produce
the product. Search for alternate ways to create the product:
owning or leasing facilities, outsourcing, etc.
The authors believe that "how you're doing is where you're
going." They assert that the "one fundamental source of life in
companies, as in people,.is the capacity for self-renewal, the
ability to excite your team for game after game. to go for broke
season after season." This ability can come from "(g)enetics,
charisma, sheer luck, stock options - all crucial, yes, but the
best renewal insurance is a leader who always knows exactly how
his or her company is doing."
There are a lot of books written on this topic. Pate and Platt
successfully bridge the gap between overgeneralization and too
detail. They are equally adept at advising on how to go about
determining a business's scope and arguing for Monday rather
than Friday for implementing layoffs. They don't dwell on sappy
motivational techniques. They don't condescend to the reader or
depend too much on folksy vernacular and clich,. Their message
is clear: your company's phoenix, too, can rise from its ashes.
* Carter Pate is a well known turnaround expert at
PricewaterhouseCoopers with more than 20 years experience
providing strategic consulting and implementation strategies.
* Harlan Platt is a professor of finance at Northeastern
University and author of the book Principles of Corporate
Renewal.
*********
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-
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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 ***