/raid1/www/Hosts/bankrupt/TCR_Public/020827.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, August 27, 2002, Vol. 6, No. 169
Headlines
AIR 2 US: Weakening Market Spurs Fitch to Further Junk Ratings
ANC RENTAL: Asks Court to Okay Amendment to M-T Notes Term Sheet
ASSISTED LIVING: Selling Indiana Facility to A Local Operator
ANNUITY & LIFE: Fitch Withdraws BB+ Senior Debt Rating
BEN NEVIS: Fitch Further Junks Class B Notes to C from CC
BRILL MEDIA: Regent Pitches Best Bid to Buy 12 Radio Stations
BUDGET GROUP: Seeks Approval to Continue Operations at Airports
BURLINGTON: BI Transportation Taps Piedmont as Real Estate Agent
CAPRIUS: Auditors Doubt Company's Ability to Continue Operations
CARIBBEAN PETROLEUM: Examiner Gets Okay to Hire Young Conaway
CONSOLIDATED FREIGHTWAYS: Fails to Meet Nasdaq Listing Criteria
CONTOUR ENERGY: Court OKs Donlin Recano as Claims & Notice Agent
CORAM HEALTHCARE: Trustee Continues Ernst & Young's Employment
COVANTA ENERGY: Wants to Implement Key Employee Retention Plan
DAIRY MART: Wants to Retain Ernst & Young to Handle Tax Work
DLJ MORTGAGE: S&P Affirms B Series 1995-CF2 Class B-4 Notes
DOE RUN RESOURCES: Further Extends Exchange Offer to September 6
E-CITYSOFTWARE: May Cease Operations If Collection Efforts Fail
ENVIRONMENTAL SAFEGUARDS: Falls Below AMEX Listing Standards
ETOYS: Wants to Extend Exclusive Solicitation Period to Oct. 4
EXIDE TECHNOLOGIES: Wins Nod to Assume Daramic Supply Contracts
EXIDE TECHNOLOGIES: Inks New Contract with Volvo Truck Australia
EXODUS COMMS: EMC Pressing Debtors to Return Loaned Equipment
FISCHER IMAGING: Fails to Comply with Nasdaq Listing Guidelines
FOSTER WHEELER: Building 600 Megawatt Pennsylvania Power Plant
GALAXY: Plans to Commence Financial Workout Under BIA in Canada
GENERAL DATACOMM: Wants to Maintain Exclusivity Until November 1
GENTEK: Fitch Drops Senior Secured to D and Senior Sub to C
GENUITY INC: Board Opts to Stop Providing Financing to Integra
GLOBAL CROSSING: Rotating Equip. Wants Prompt Contract Decision
GOLFGEAR INT'L: Enters Licensing Agreement with Nike Golf
HOMEGOLD: Weak Financial Results Drag S&P Ratings to Junk Level
IMPSAT FIBER: New York Court Fixes Sept. 17 Claims Bar Date
INTEGRATED HEALTH: Five Star Takes Action to Pursue $2.4MM Claim
INTERNATIONAL TOTAL: Intends to Wind-Up as Soon as Possible
KMART CORP: S&P Further Junks Lease-Related Credit Deals
KMART CORP: Says It Doesn't Really Need a DIP Facility Increase
KNOLOGY INC: Extends Exchange Offer for 11-7/8% Notes to Sept. 6
LAIDLAW INC: Seeks Approval of Settlement Pact with Safety-Kleen
LAKES ENTERTAINMENT: Fails to Meet Nasdaq Listing Requirements
LEVEL 3 COMM: Completes Amendment to Sr. Secured Credit Facility
LTV: Parties Agree to Value Railroad Assets at $11.25 Million
LTV STEEL: Executives Won't Certify for SEC What they Won't File
LUMENON INNOVATIVE: Secures $14 Million Financing Commitment
MAJOR AUTOMOTIVE: Has Until Nov. 20 to Meet Nasdaq Requirements
METROCALL INC: Seeking Court Authority to Engage Ernst & Young
NATIONAL STEEL: Court Approves AFCO Insurance Finance Agreement
NATIONSRENT: Court Okays Bouchard Margules as Special Counsel
NEOTHERAPEUTICS: Streamlines Organization to Save $500K Monthly
NEW WORLD RESTAURANT: Expects Improved Adjusted EBITDA for Q2
NII HOLDINGS: Bondholders Balk at Panel's Hiring of Crossroads
OWENS CORNING: Executives File SEC-Mandated Sworn Statements
PINNACLE ENTERTAINMENT: Names John Godfrey as SVP & Gen. Counsel
PROBEX CORP: Appoints Roger Arnold as SVP and General Counsel
QPS INC: Case Summary & 20 Largest Unsecured Creditors
QSERVE COMMS: Chapter 11 Trustee Wants to Convert Case to Ch. 7
RELIANCE GROUP: Holding Carl Icahn at Bay Until Oct. 3, 2002
RUSSELL CORP: Acquires Moving Comfort As Part of Strategy
SECURITY ASSET: Must Resolve Liquidity Issues to Continue Ops.
SOUTHERN STATES POWER: Stonefield Raises Going Concern Doubt
TEAM AMERICA: Violates Nasdaq Continued Listing Requirements
TIME WARNER: Initiates Cost-Reduction Under Turnaround Drive
TRIMEDYNE INC: Fails to Meet Nasdaq Continued Listing Standards
UNIROYAL TECHNOLOGY: Files for Chapter 11 Reorg. in Delaware
UNIROYAL TECH: Case Summary & 20 Largest Unsecured Creditors
UNITED AIRLINES: Potential Bankruptcy May Affect Whirpool Corp.
UNITED AIRLINES: Flight Attendants Affirm Commitment to Workout
US AIRWAYS: Seeks Okay to Pay Prepetition Foreign Vendor Claims
US AIRWAYS: TWU Local 547 Ratifies Restructuring Plan Agreement
US STEEL CORP: Airs Disappointment Over Latest Import Exclusions
VIRTGAME COM: Accountants Express Going Concern Doubt
W.R. GRACE: PD Committee Wants to Tap Five Special Counsels
WEBLINK WIRELESS: Texas Court Confirms Plan of Reorganization
WHEELING-PITTSBURGH: Will Delay Filing Form 10-Q for 2nd Quarter
WILLIAMS COMMS: Court Approves Claim Transfer Restrictions
WORLDCOM: US Communications Seeks Stay Relief to Pursue Action
XO COMMS: CRT Capital Wants to Appoint Examiner in Debtor's Case
*********
AIR 2 US: Weakening Market Spurs Fitch to Further Junk Ratings
--------------------------------------------------------------
Fitch Ratings has taken the following rating actions for Air 2
US enhanced equipment notes:
-- Series C EENs downgraded to CCC from CCC+;
-- Series D EENs downgraded to CC from CCC;
-- Series A, B, C & D EENs placed on Rating Watch Negative.
The rating actions reflect concerns that have been heightened by
the recent deterioration of the North American air transport
markets. These concerns include the weakened credit quality of
the sublessees and the likelihood that the value of the
underlying aircraft collateral has become further impaired.
These factors have increased the possibility that scheduled cash
flows under the permitted investments could be diverted from the
EEN noteholders.
The ratings of the series A and series B EENs are primarily
based on:
-- the expected present value of sublease rental payments
from the sublessees;
-- the permitted investment scheduled payments;
-- the probability that the permitted investment payments
will be first directed to pay the scheduled sublease
rentals as per the Payment Recovery Agreement (PRA);
-- liquidity facilities to support EEN interest payments;
-- the ability of Airbus S.A.S. (Airbus) to provide support
to the transaction through the Airbus agreement and
related agreements; and,
-- the integrity of the EENs legal structure.
The rating of the series C EENs is supported by the factors
mentioned above, but is based primarily on the credit quality of
the lower rated of the two sublessees. The rating of the series
D EENs is solely based on the lower unsecured credit of the two
sublessees.
Air 2 US is a special purpose Cayman Islands company created to
issue the EENs, hold the proceeds as permitted investments, and
enter into a risk transfer agreement. AIR 2 US has entered into
the risk transfer agreement, the PRA, with a subsidiary of
Airbus. The primary provision of the PRA states that if American
Airlines, Inc. or United Air Lines, Inc. fail to pay scheduled
rentals under existing subleases of aircraft with subsidiaries
of Airbus, AIR 2 US will pay these rental deficiencies to a
subsidiary of Airbus.
ANC RENTAL: Asks Court to Okay Amendment to M-T Notes Term Sheet
----------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates ask the Court
to approve an amendment to the Term Sheet related to the
issuance of the 2002-2 Medium Term Notes placed with certain
investors by Deutsche Bank Securities Inc.
According to William J. Burnett, Esq., at Blank Rome Comisky &
McCauley LLP, in Wilmington, Delaware, the amendment to the MTN
Term Sheet provides that in certain circumstances, the MTN Notes
are subject to prepayment in full upon effectiveness of a
Reorganization Plan by the Debtors and related Amortization
Events. The amendment also provides for certain additional
bankruptcy-related Amortization Events.
Mr. Burnett relates the amendment is necessary to facilitate the
effective marketing, rating and issuance of the MTN Notes. DB
Securities and certain ratings agencies have requested the
Debtors to seek the Court's approval of the amendment.
The Debtors specifically want the inclusion of these
Amortization Events in the Term Sheet of the MTN:
A. Additional Amortization Events
-- Entry of an order by the Court which materially impairs or
materially adversely affects the Group IV Vehicles or the
Group IV Collateral and the order is not reversed or
vacated within 30 days;
-- The entry of an order (other than any order with respect
to a DIP financing or any Order which permits Liberty
Mutual Insurance Company to draw on cash collateral) with
the Bankruptcy Court granting relief from the automatic
stay and which permits a secured party to:
a. Foreclose on substantially all of the assets of Alamo
and National,
b. Permit action or foreclosure with respect to the
equity, partnership or other ownership interests of ANC
Rental or any Group IV Lessee in the Group IV Leasing
Companies or the General Partners and the order is not
reversed or vacated within 30 days;
-- The Court approves a disclosure statement for a
solicitation of acceptance of a plan of reorganization
that does not provide for repayment or refinancing of the
Series 2002-2 Notes in full;
-- Filing by ANC Rental or any Group IV Lessee of a motion
for a Bankruptcy Court to enter an Order or the actual
entry of an Order to, revoke, reverse, stay, modify,
supplement or amend the orders of the Bankruptcy Court
dated April 4, 2002, June 28, 2002 or August 2002, unless
the proposed or actual order does not and would not
reasonably be expected to have a material adverse effect
on the rights or interests of the Series 2002-2
Noteholders, as evidenced by an opinion of counsel for ANC
Rental addressed to and reasonably satisfactory in form
and substance to the Issuer and the Trustee.
B. Representations, Warranties & Covenants:
ANC Rental will not file any plan of reorganization and will
object to any plan of reorganization filed by any other
party, with the Bankruptcy Court, which does not provide for
repayment or refinancing of the Series 2002-2 Notes in full.
(ANC Rental Bankruptcy News, Issue No. 18; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
ASSISTED LIVING: Selling Indiana Facility to A Local Operator
-------------------------------------------------------------
Assisted Living Concepts, Inc. (OTB.BB:ASLC), a national
provider of assisted living services, has entered into an
agreement to sell an assisted living facility in Jeffersonville,
Indiana to a local operator.
This facility was closed in March 2002. Net proceeds after
closing costs will be applied against the Notes issued in
connection with the recent reorganization. Closing is subject to
numerous closing conditions and is expected to be finalized in
October 2002.
"This sale will reduce our interest expense and total debt, and
is consistent with our previously announced plan to improve cash
flow and profitability," said Steven Vick, President and Chief
Executive Officer. "We will continue to look for ways to
maximize the value of the company and become more efficient."
ALC is also pleased to announce the addition of Ms. Linda Martin
as Chief Operating Officer. Ms. Martin most recently served as
Vice President for a national assisted living provider, and was
responsible for operations of assisted living and alzheimer's
facilities, as well as contracts for pharmacy, ancillary and
other services. Mrs. Martin has over 16 years of experience in
the healthcare industry, and holds both a BS and MS from the
University of Wisconsin.
"Linda brings with her a wealth of experience in health care and
specifically in assisted living. She has a proven history of
improving operating results and cash flow, and focusing on
quality of care. Linda believes strongly in placing people and
culture first, and will be instrumental in the future
development of our company," said Steven L. Vick, President and
Chief Executive Officer.
Assisted Living Concepts, Inc., owns, leases and operates, prior
to pending sales, 183 assisted living residences with 7,081
units for older adults who need help with the activities of
daily living, such as eating, bathing, dressing and medication
management. In addition to housing, the Company provides
personal care, support services, and nursing services according
to the individual needs of its residents, as permitted by state
law. This combination of housing and services provides a home-
like setting and cost efficient alternative that encourages
independence for individuals who do not require the broader
array of medical and health services provided by skilled nursing
facilities. The Company currently has operations in Oregon,
Washington, Idaho, Nebraska, Iowa, Arizona, Texas, New Jersey,
Ohio, Pennsylvania, Indiana, Louisiana, Florida, Michigan,
Georgia, and South Carolina.
As of June 30, 2002, Assisted Living's balance sheet shows that
its total current liabilities exceeds its total current assets
by about $4 million.
ANNUITY & LIFE: Fitch Withdraws BB+ Senior Debt Rating
------------------------------------------------------
Fitch Ratings has lowered the insurer financial strength rating
of Annuity & Life Reassurance, Ltd., to 'BBB+' from 'A-'. Fitch
has also lowered to 'BB+' from 'BBB-', and withdrawn, its rating
on the senior debt included in Annuity & Life Re (Holdings),
Ltd.'s shelf registration. There is currently no debt
outstanding. The rating remains on Rating Watch Negative, on
which it was placed July 26, 2002.
Thursday's rating action reflects Fitch's view that ANR's
business model has become overly dependent on the company's
ability to obtain credit in various forms to allow it to provide
collateral to its U.S.-based ceding companies. Being Bermuda-
based, ANR is an unauthorized reinsurer in the U.S., and like
all unauthorized reinsurers, it must post collateral to the
benefit of its U.S. ceding companies per U.S. regulatory
requirements. Such collateral can be provided in the form of
trust deposits and/or letters of credit. The majority of said
collateral is used to support redundant reserves arising from
Triple-X life products. Management is reducing this dependency
going forward.
As of June 30, 2002, ANR had arranged secured and unsecured
letters of credit totaling $189 million as collateral for
various reinsurance transactions, of which $89 million was in
the form of unsecured letters of credit from Citibank. Citibank
has requested that unsecured letters of credit totaling $89
million be secured by October 31, 2002. Management is currently
in discussions with Citibank and Bank of America to extend the
$89 million capacity.
Fitch estimates that of $457 million of cash and invested assets
reported on ANR's balance sheet at June 30, 2002; $62 million in
such invested assets were unencumbered. Encumbrances include
approximately $294 million of invested assets placed in trust
deposits with ceding companies to collateralize other reinsured
balances, and approximately $100 million of assets pledged to
secure other letters of credit. In addition, a portion of the
$62 million in unencumbered assets is necessary for working
capital needs, and is thus not fully available to secure the
letters of credit.
In addition to letter of credit arrangements, ANR entered into a
finite risk reinsurance arrangement with a third party reinsurer
allowing ANR to cede certain excess U.S. Statutory reserves
associated with regulation Triple-X. ANR has classified the cash
deposits received from the third party reinsurer to fund the
collateral required for such excess reserves as deposit
liabilities.
ANR disclosed in it first quarter 2002 financial statements that
the reinsurer has the right to terminate the agreement with a
notice of 180 days, which would require ANR to return the
reinsurer's deposits. These deposits, which totaled $147 million
at June 30, 2002, are secured with a deposit ANR has placed with
the reinsurer of $41 million. Management indicates that it has
obtained agreement with principal parties to replace this 180-
day termination notice with various financial covenants that if
not met would require deposits to be repaid over a 5-year
period. Management expects that final terms of the revised
agreement will be executed over the next several weeks.
Management is currently in the process of raising additional
external capital to provide room for future growth. Fitch will
review its Rating Watch status after issues related to the
Citibank letters of credit and capital raising are resolved.
Annuity & Life Reassurance, Ltd.
-- Insurer financial strength Downgrade 'BBB+'/ Negative.
BEN NEVIS: Fitch Further Junks Class B Notes to C from CC
---------------------------------------------------------
Fitch Ratings, the international rating agency, downgraded Ben
Nevis One (Asset Backed Securities) Limited's Class B Secured
Floating Rate Notes from CC to C. The Class A Secured Floating
Rate Notes remain unchanged at BBB.
The underlying ABS portfolio has been closely monitored
following the downgrade of the class A notes in May 2002.
The downgrade reflects the further deterioration in credit
quality of the portfolio since May 2002. This deterioration has
been caused by the downgrade of Aeltus CBO to C and general
credit migration. The assets are primarily of a 1997 vintage. In
August 2001 the transaction changed from pro rata payment to
sequential payment which is benefiting the class A notes.
In May 1998, Ben Nevis One, a special purpose vehicle
incorporated under the laws of Jersey with limited liability,
acquired a portfolio of asset-backed securities from The Royal
Bank of Scotland Plc. At closing this acquisition was financed
by issuing USD475 million Class A Secured Floating Rate Notes
and USD35.5 million Class B Secured Floating Rate Notes.
BRILL MEDIA: Regent Pitches Best Bid to Buy 12 Radio Stations
-------------------------------------------------------------
Regent Communications, Inc., (Nasdaq: RGCI) has successfully bid
for the acquisition from Brill Media Company LLC and related
debtor entities of 12 radio stations.
Regent's bid has been accepted by the bankruptcy administrative
officer in connection with Brill Media's federal bankruptcy
proceeding. The acquisition is contingent upon the bankruptcy
court's final approval in a hearing anticipated to be held on
August 26, 2002. Regent's acquisition is also subject to receipt
of all required regulatory approvals. Regent anticipates closing
this transaction late in the fourth quarter of 2002 or the first
quarter of 2003.
Regent will pay approximately $62 million for the assets. Up to
one half of the acquisition price is expected to be paid in
Regent common stock, subject to Regent's option of substituting
cash for the stock portion of the transaction, in whole or in
part, if the market price of Regent's common stock is less than
$7.50 per share within the applicable time period preceding the
closing date. The non-stock portion of the purchase price will
be paid entirely in cash, and in no event will be less than
$31.0 million. Following the bankruptcy court's final approval
of the transaction, Regent will announce the impact of the
acquisition on its financial guidance.
Terry Jacobs, Chairman and Chief Executive Officer, commented,
"This acquisition matches our acquisition criteria. Located in
five very attractive middle markets, these stations have
leadership positions, strong technical facilities and the
ability to generate an internal rate of return in excess of 25%
over the next five years. We are also thrilled with the option
to finance a portion of this transaction with our stock, on
terms that provide anti-dilution protection to our
shareholders."
Regent is acquiring WIOV-FM and WIOV-AM serving Lancaster-
Reading, PA; WBKR-FM, WKDQ-FM and WOMI-AM serving the
Evansville, IN and Owensboro, KY markets; KTRR-FM and KUAD-FM
and a construction permit for an FM station serving Fort
Collins-Greeley, CO; and KKCB-FM, KLDJ-FM, KBMX-FM and WEBC-AM
serving Duluth, MN.
Regent Communications is a radio broadcasting company focused on
acquiring, developing and operating radio stations in middle and
small-sized markets. Upon the close of all announced
transactions, Regent will own and operate 73 stations located in
17 markets. Regent Communications, Inc., shares are traded on
the Nasdaq under the symbol "RGCI."
BUDGET GROUP: Seeks Approval to Continue Operations at Airports
---------------------------------------------------------------
Budget Group Inc., and its debtor-affiliates seek Judge
Walrath's permission to:
-- continue, in the ordinary course of business, their
operations at on-airport locations, and
-- pay prepetition due amounts owed to the various airport
authorities.
Of the Debtors' corporate-owned car rental locations in the
U.S., 25% primarily serve airport business and 75% primarily
serve local market facilities. However, about 75% of Budget
Rent A Car's car rental revenue in the U.S. is attributable to
the airport segment with Budget clinching 13% of the on-airport
market share.
MAG, Performance Bond, CFC
To operate at an airport location, Budget Group Inc., Executive
Vice President and Chief Financial Officer William Johnson
explains that car rental companies must apply for and enter into
concession agreements with the municipality or airport authority
that owns or operates the relevant airport. The Concession
Agreements typically grant a nonexclusive right to operate a car
rental concession a particular airport in exchange for payment
of a defined concession fee. In general, concession fees for
airport locations are based on a percentage -- typically 8 to
10% -- of total commissionable revenues as determined by each
Airport Authority, subject to Minimum Annual Guaranteed amounts.
The Debtors' Concession Agreements with the various Airport
Authorities generally impose certain minimum operating
requirements, provide for relocation in the event of future
construction and provide for abatement of the MAG in the event
of extended low passenger volume. The Debtors estimate that
$9,500,000 in Concession Fees is outstanding as of the Petition
Date.
Mr. Johnson points out that most Airport Authorities require
that the payment of the Concession Fees be secured by a
Performance Bond, which is usually provided by the Debtors in
the form of a commercial surety bond issued by Gulf Insurance
Company. The Debtors pay a premium to Gulf Insurance in
exchange for the posting of the Gulf Surety Bonds. In addition,
the Gulf Surety Bonds are supported by a $10,000,000 deposit in
a cash collateral account as security for the Debtors'
performance under the Concession Agreements. The Airport
Authority is named as the insured party under the Gulf Surety
Bonds, and in the event that the Debtors fail to make a
Concession Fee payment, the Airport Authority can draw the Gulf
Surety Bonds. Gulf Insurance would then have the right to draw
on the $10,000,000 cash collateral account. A draw on the Gulf
Surety Bonds could materially and negatively impact the Debtors'
ability to obtain bonds in the future at a reasonable premium
and would therefore materially impact the Debtors' ability to
obtain Concession Agreements.
Mr. Johnson relates that several Airport Authorities throughout
the country have constructed consolidated rental car facilities.
These facilities are designed to streamline the car rental
process for travelers and to provide common services, including
the shuttle service, for the customers of all participating
vehicle rental companies. The Debtors participate in 30 of
these arrangements.
To fund the consolidated facilities, Mr. Johnson explains that
each Airport Authority issues bonds, which are financed by a
Customer Facility Charge that the participating vehicle rental
companies charge to their customers. In effect, the Debtors act
as an instrumentality of the Airport Authority by collecting the
CFC from each rental customer and remitting the CFC to the
Airport Authority, who then uses the CFC proceeds to pay
interest and principal on the bonds. The Debtors typically
transfer CFC proceeds to the Airport Authorities on a monthly
basis. The Debtors estimate that they hold $1,800,000 in CFCs
as of the Petition Date.
Joseph A. Malfitano, Esq., at Young Conaway Stargatt & Taylor
LLP, in Wilmington, Delaware, explains that since operations at
the airports represent a substantive part of their revenue, the
Debtors need to maintain their ongoing relationships with the
airport authorities. The Debtors, in essence, could not
maintain a viable business without the ability to operate at
various airport locations. The Concession Agreements governing
the Debtors' ability to operate its on-airport locations are
typically awarded on a competitive bid basis every three to five
years and the payment of Concession Fees is an important factor
in determining whether the Airport Authorities will continue to
award concessions to the Debtors in the future.
Mr. Johnson estimates that aggregate prepetition amounts owed to
the Airport Authorities amount to $11,300,000 pursuant to the
Concession Agreements and with respect to the CFC charges.
(Budget Group Bankruptcy News, Issue No. 2; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Budget Group Inc.'s 9.125% bonds due 2006 (BD06USR1) are trading
at 18.5 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BD06USR1for
real-time bond pricing.
BURLINGTON: BI Transportation Taps Piedmont as Real Estate Agent
----------------------------------------------------------------
In connection with its efforts to sell the Gaston Terminal,
Debtor B.I. Transportation Inc., seeks the Court's authority to
employ Piedmont Properties of the Carolinas Inc. as its real
estate agent and broker, nunc pro tunc to December 12, 2001.
B.I. Transportation intends to retain Piedmont in accordance
with the Ordinary Course Professionals Order.
Rebecca L. Booth, Esq., at Richards, Layton & Finger, in
Wilmington, Delaware, informs the Court that B.I. Transportation
entered into identical nonexclusive letter agreements with four
local real estate agents and brokers, including Piedmont. Each
Agent was allowed to show the Gaston Terminal to their
respective clients and to solicit bids.
Ms. Booth believes that Piedmont is well qualified to serve as
B.I. Transportation's real estate agent and broker with respect
to the Gaston Terminal because the firm has extensive experience
working in the transportation industry and has successfully
completed over 150 transportation-related real estate
transactions valued over $81,000,000. Moreover, Piedmont has
been retained by numerous trucking companies as they ceased
operations or disposed of excess properties. This includes,
among others, Carolina Freight, Brown Trucking, Spartan Express,
Goggin Motor Lines and Fredrickson Motor Express.
Under the Letter Agreements, Piedmont agrees to:
(i) advertise the Gaston Terminal through promotional and
marketing activities;
(ii) distribute standard brokerage flyers; and
(iii) contact potential purchasers or lessors of the Gaston
Terminal regarding a potential sale.
According to Ms. Booth, an Agent would be entitled only to a
Broker's Fee in the event that that Agent's customer was the
ultimate purchaser of the Gaston Terminal. Hence, Piedmont is
entitled to a $90,030 Broker's Fee upon the Closing of the
Gaston Terminal Sale, which occurred on July 23, 2002, since USF
Dugan, Inc., the ultimate purchaser of the Gaston Terminal, was
its customer.
Piedmont currently holds $50,000 of the Broker's Fee in an
escrow account. Richards, Layton & Finger holds the remaining
$40,030 in an escrow account pending the Court's approval of the
distribution of the Broker's Fee.
Ms. Booth further contends that Piedmont's retention as an
Ordinary Course Professional is apt since Piedmont's involvement
in the Debtors' bankruptcy cases is in its services with respect
to the Gaston Terminal -- a non-core asset. Lester E. Osborn,
President of Piedmont, relates that Piedmont is not involved in
any material way in the administration of the Debtors' estates.
Besides, Ms. Booth says, the Broker's Fee to be paid to Piedmont
is well within the four-month average cap established under the
Ordinary Course Professionals Order.
In the alternative, B.I. Transportation seeks to employ Piedmont
pursuant to Section 327(a) of the Bankruptcy Code in the event
the Court declines to approve the firm's retention under the
Ordinary Course Professionals Order.
Mr. Osborn assures the Court that Piedmont has no adverse
interests to the Debtors and their estates and has no connection
with any creditor or other parties-in-interest, their respective
attorneys, accountants and the U.S. Trustee's office with
respect to the matters it is to be employed.
U.S. Trustee Objects
The U.S. Trustee contends that Piedmont is a professional as
contemplated by Section 327 of the Bankruptcy Code and Third
Circuit Law. According to Maria D. Giannirakis, Esq., in
Wilmington, Delaware, any employment of Piedmont by the estate
must be done by application in compliance with Section 327 and
Rule 2014 of the Federal Rules of Bankruptcy Procedure. "To do
anything to the contrary would be inconsistent with Third
Circuit Law," Ms. Giannirakis contends.
Ms. Giannirakis also notes that the Debtors seek to employ
Piedmont nunc pro tunc without establishing extraordinary
circumstances to justify the approval. (Burlington Bankruptcy
News, Issue No. 17; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
Burlington Industries' 7.25% bonds due 2005 (BRLG05USR1),
DebtTraders reports, are trading at 18 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG05USR1
for real-time bond pricing.
CAPRIUS: Auditors Doubt Company's Ability to Continue Operations
----------------------------------------------------------------
Caprius, Inc., was founded in 1983 and through June 1999
essentially operated in the business of medical imaging systems
as well as healthcare imaging and rehabilitation services. On
June 28, 1999, the Company acquired Opus Diagnostics Inc., and
began manufacturing and selling medical diagnostic assays. The
Company continues to own and operate a comprehensive breast-
imaging center located in Lauderhill, Florida.
Opus currently produces and sells 14 diagnostic assays, their
calibrators and controls for therapeutic drug monitoring which
are used on the Abbott TDx(R) and TDxFLx(R) instruments.
Therapeutic drug monitoring is used to assess medication
efficacy and safety of a given therapeutic drug in human bodily
fluids, usually blood. The monitoring allows physicians to
individualize therapeutic regimens for optimal patient relief.
The test kits are used for in vitro testing; i.e., the tests are
performed outside of the body.
Included in revenues of Caprius for three months ended June 30,
2002 are $513,436 of net product sales revenues for Opus'
therapeutic drug monitoring assays versus $520,952 for the three
months ended June 30, 2001. The cost of product sales for the
Opus business for the three months ended June 30, 2002 was
$148,111 versus $192,553 for the three months ended June 30,
2001. The cost of product sales decreased during the three
months ending June 30, 2002 versus the three months ending June
30, 2001 as a result of the Company's lower manufacturing costs.
Net patient service revenues at Strax totaled $401,228 for the
three months ended June 30, 2002 versus $393,534 for the three
months ended June 30, 2001. This increase resulted from higher
patient billings. The cost of service operations totaling
$268,047 for the three months ending June 30, 2002
approximated those of the corresponding prior period ending June
30, 2001 which totaled $273,991.
Net loss for the three months ended June 30, 2002, was $134,011,
compared to the net loss for the same three month period of 2001
of $119,243.
Net product sales revenues totaled $1,590,880 for the nine
months ended June 30, 2002 versus $1,447,287 for the nine months
ended June 30, 2001. The increase in net sales revenues for the
nine months ending June 30, 2002 versus the nine months ending
June 30, 2001 resulted from an increase in overseas sales and
higher sales of the Company's innovative products. The cost of
product sales for the Opus business for the nine months ended
June 30, 2002 was $423,555 versus $ 503,065 for the nine months
ended June 30, 2001 reflects lower manufacturing costs.
Net patient service revenues totaled $1,231,066 for the nine
months ended June 30, 2002, versus $1,151,511 for the nine
months ended June 30, 2001. This increase resulted from higher
patient billings. Cost of service operations totaled $855,515
for the nine months ended June 30, 2002 versus $ 811,182 for the
nine months ended June 30, 2001. The increase in cost of service
operations was consistent with the increase in billings.
Again, net loss for the nine months ended June 30, 2002, was
$197,063, while the net loss for the same nine month period of
2001 was $245,832.
During the three months ended June 30, 2002, the Company
obtained the Company Loan in the principal amount of $250,000,
with interest at prime plus 3% per annum and due on September
30, 2003. In the event that the Company pursues the investment
in MCM in accordance with the Letter of Intent with MCM, then
the Company Loan will automatically convert into equity of the
Company on the same terms as any new equity raised for the
investment. The proceeds of the Company Loan were used to fund a
loan to MCM of up to $250,000, of which $245,000 had been
advanced as of June 30, 2002. The MCM Loan is secured by MCM's
intellectual properties, bears interest at the rate of prime
plus 2% per annum, and is due on June 10, 2003, subject to
conversion to equity of MCM upon the consummation of the
Company's investment in MCM.
The Company continues in its efforts to secure the sale of the
Strax Institute.
In June 2002, the Company signed a Letter of Intent to enter
into an agreement whereby it has the right to acquire 51% of the
outstanding stock on a fully diluted basis of MCM Environmental
Technologies Inc., a private U.S. Company engaged in the medical
infectious waste disposal business. Concurrent with the signing
of the Letter of Intent, Caprius provided MCM with a loan
totaling $245,000. Should a definitive agreement be consummated,
the loan will convert into MCM equity. Subject to Board approval
and execution of a definitive agreement, including customary
conditions and the satisfactory outcome of due diligence by the
Company, the transaction is expected to close by the end of
August.
In the event the Company proceeds with the MCM transaction, the
Company intends to raise the balance of the required funds
through issuance of equity in Caprius. In addition, the Company
may also attempt to secure loans for the new business. In view
of the current market conditions and the Company's low stock
price, the Company has found it difficult at this time to obtain
additional equity funding from outside sources. However, the
Company will continue its efforts to seek additional funds
through funding options, including banking facilities,
government-funded grants and private equity offerings in order
to provide capital for future expansion. There can be no
assurance that such funding initiatives will be successful, and
in light of the current low market price any equity placement
would result in substantial dilution to current stockholders.
Consequently, the Company's viability could be threatened. In
addition, the Company has incurred substantial losses in recent
years. Accordingly, the auditors' report on the 2001 financial
statements contains an explanatory paragraph expressing
substantial doubt about the Company's ability to continue as a
going concern.
CARIBBEAN PETROLEUM: Examiner Gets Okay to Hire Young Conaway
-------------------------------------------------------------
Benito Romano, Esq., the court-appointed examiner in the chapter
11 cases involving Caribbean Petroleum LP, sought and obtained
approval from the U.S. Bankruptcy Court for the District of
Delaware to retain and employ Young Conaway Stargatt & Taylor,
LLP as his local counsel.
The principal attorneys and paralegals presently designated to
represent the Examiner and their current standard hourly rates
are:
Brendan Linehan Shannon $380 per hour
Matthew B. Lunn $220 per hour
Debbie Laskin (paralegal) $140 per hour
Young Conaway is expected to:
a) provide legal advise and assistance in the investigation
and report on operations of the Debtors;
b) prepare on behalf of the Examiner necessary
applications, motions, answers, orders, reports and
other legal papers;
c) appear in court on behalf of the Examiner; and
d) perform all other legal services for the Examiner which
may be necessary and proper in these proceedings.
Caribbean Petroleum LP distributes petroleum products and
owns/leases real property on which service stations selling
petroleum products are stored and sold to retail customers. The
Debtors filed for chapter 11 protection on December 17, 2001.
Michael Lastowski, Esq., and William Kevin Harrington, Esq., at
Duane, Morris & Heckscher LLP represent the Debtors in their
restructuring efforts.
COMPUTER SUPPORT: Files Chapter 11 Plan of Reorganization
---------------------------------------------------------
Proxity Digital Networks Inc., (OTC Pinksheets:PDNW) announces
its wholly owned subsidiary Computer Support Associates, Inc.,
currently operating under Chapter 11 bankruptcy protection, has
filed its plan of reorganization.
The plan calls for a 100% pay out to creditors in the form of a
convertible preferred stock and a negotiated settlement with the
IRS. The plan has not been approved by the courts. "If approved
this action will remove approximately $1,500,000 in debt from
the balance sheet of PDNW. This now allows CSA to focus on the
GSA1 contract which ends in December unless renewed by the GSA
and additional opportunities in bidding on future government
work," CEO Billy Robinson said.
Proxity Digital Networks, Inc., (OTC Pinksheets:PDNW) is a New
Orleans based integrated entertainment and technology company,
with offices in Costa Mesa, CA and a Joint Venture office in
Dallas, TX. PDNW's -- http://www.proxity.com-- three divisions
specialize in ISP, web hosting, online games, site development
and end-to-end online solutions for the small-to-midsize e-
business market -- http://www.linksimple.com
http://www.triviaspot.com-- Government contract fulfillment,
high speed internet access and sales --
http://www.csa-solutions.com-- and new technologies --
http://www.proxitydigital.com
CONSOLIDATED FREIGHTWAYS: Fails to Meet Nasdaq Listing Criteria
---------------------------------------------------------------
Consolidated Freightways Corporation (Nasdaq:CFWYE) said today
that it has been notified by The Nasdaq Stock Market (Nasdaq)
that, because of NASD Marketplace Rule 4310(C)(14) requiring
timely filing of the company's Form 10-Q, and because of
previously announced company delays in filing its second quarter
Form 10-Q, the company's ticker symbol has today been changed
from CFWY to CFWYE.
In addition, for the same reasons stated above, the company was
notified through a letter from Nasdaq that its common stock is
subject to Nasdaq delisting. The company will request an appeal
hearing, which will stay a delisting.
The company stated in a press release on August 19 that, because
Chief Executive Officer John Brincko recently joined the company
on May 28, 2002 and Chief Financial Officer Steve Sokol was
appointed on July 1, 2002, the company has not had sufficient
time to complete second quarter financial statements and the
related management's discussion and analysis of financial
condition and results of operations. As previously reported, the
company continues to work on the Form 10-Q and expects to file
within approximately two weeks.
The company said that its expected 10-Q filing will cure what is
the only alleged deficiency and will allow the company's
securities to remain listed on Nasdaq.
Consolidated Freightways Corporation is comprised of national
less-than-truckload carrier Consolidated Freightways, third-
party logistics provider Redwood Systems, Canadian Freightways
LTD, Grupo Consolidated Freightways, the company's subsidiary in
Mexico, and CF AirFreight, an air freight forwarder.
CONTOUR ENERGY: Court OKs Donlin Recano as Claims & Notice Agent
----------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of Texas
gave its permission to Contour Energy Co., and its debtor-
affiliates, to retain Donlin, Recano & Company, Inc., as the
official claims and noticing agent for the Bankruptcy Court in
the Company's chapter 11 cases.
Under the Agreement, Donlin Recano will:
a) receive, docket, maintain, photocopy and transmit all
proofs of claim file;
b) maintain a proof of claim docket for each Debtor;
c) transmit to the Clerk's Office a copy of the Claims
Register on a monthly basis, unless requested in writing
by the Clerk's Office on a more or less frequent basis;
d) furnish, to each creditor notified of the filing, a bar
date notice approved by the Court for the filing of a
proof of claim and a form for filing a proof of claim;
e) file with the Clerk's Office a certificate of service,
as soon as practicable after each service, which
includes a copy of the notice served, a list of persons
to whom it was mailed, and the date such notice was
mailed;
f) maintain an up-to-date mailing list for all entities
that have filed a proof of claim, which shall be
available upon request by a party in interest or the
Clerk's Office;
g) record all transfers of claims and provide notice as
required in Bankruptcy Rule 3001(e);
h) comply with applicable state, municipal and local laws
and rules, orders, regulations and requirements of
Federal Government Departments and Bureaus;
i) promptly comply with such further conditions and
requirements as the Clerk's Office may prescribe; and
j) provide such other claims processing, noticing and
related administrative services as may be reasonably
requested from time to time by the Debtors.
In addition, Donlin Recano will assist the Debtors in fulfilling
their claims-related obligations, including:
a) providing the Debtors with training and consulting
support necessary to enable the Debtors to effectively
manage and reconcile claims and to provide the requisite
notices throughout these chapter 11 cases;
b) tabulating acceptances/rejections to the Debtors' plan/s
of reorganization; and
c) providing such other administrative services that may be
requested by the Debtors.
Donlin Recano will bill the estates for:
Database Maintenance $200 per creditor per month
Data Input (Other Formats) $100 per hour
Special Consulting/
Administrative Services $120 per hour average;
$65 to $210 per hour for
principals
Contour Energy Co., a company engaged in the exploration,
development acquisition and production of oil and natural gas
primarily in south and north Louisiana, the Gulf of Mexico and
South Texas, filed for chapter 11 protection on July 15, 2002.
John F. Higgins, IV, Esq., and Porter & Hedges, LLP represents
the Debtors in their restructuring efforts. When the Company
filed for protection from its creditors, it listed $153,634,032
in assets and $272,097,004 in debts.
CORAM HEALTHCARE: Trustee Continues Ernst & Young's Employment
--------------------------------------------------------------
Arlin M. Adams, the Chapter 11 Trustee of the bankruptcy estates
of Coram Healthcare Corp. tells the U.S. Bankruptcy Court for
the District of Delaware that he desires to continue the
services of Ernst & Young LLP. E&Y was previously employed by
the Debtors, as their accountant, auditor and tax services
provider.
Ernst & Young is very familiar with the Debtors' books, records,
financial information and other data maintained by the Trustee
and the Debtors. Ernst & Young's professional services will
include:
a. Reporting to the trustee regarding the financial status
of the Debtors' Estates;
b. Auditing and reporting on the consolidated financial
statements of the Debtors' Estates;
c. Assisting the Trustee and the Debtors' in-house
accounting personnel, if required, in preparing filings
with the Securities and Exchange Commission;
d. Assisting the Trustee with his supervision of the
Debtors' in-house accounting personnel;
e. Assisting the Trustee and the Debtors' in-house
accounting personnel, if required, in preparing and
filing the periodic reports required by the Office of
the United States Trustee;
f. Assisting the Trustee and the Debtors' in-house
accounting personnel, if required, in preparing and
filing any necessary tax returns and providing
bankruptcy tax consulting services;
g. Assisting the Trustee and the Debtors' in-house
accounting personnel, if required, in connection with
the administration of the Debtors' 401(k) plan(s); and
h. Providing such other accounting, auditing and tax
services as may be required from time to time.
Ernst & Young's current hourly rates are:
Accounting and Auditing Services
--------------------------------
Partner and Principals $440 - $581
Senior Managers $340 - $495
Managers $245 - $414
Seniors $165 - $276
Staff $120 - $201
Bankruptcy Tax and Other Tax Consulting Services
------------------------------------------------
Partner and Principals $440 - $650
Senior Managers $465 - $535
Managers $360 - $420
Seniors $250 - $290
Staff $189 - $215
Coram Healthcare, a provider of home infusion-therapy services
filed for Chapter 11 bankruptcy protection on August 8, 2000.
Goldman Sachs and Cerberus Partners each own about 30% of the
firm. Kenneth E. Aaron, Esq., at Weir & Partners LLP and Barry
E. Bressler, Esq., at Schnader Harrison Segal & Lewis LLP
represent the Chapter 11 Trustee in these proceedings.
COVANTA ENERGY: Wants to Implement Key Employee Retention Plan
--------------------------------------------------------------
Covanta Energy Corporation and its debtor-affiliates seek the
Court's authority to establish and implement a retention program
for eligible employees who provide essential services to the
Debtors, which would be comprised of:
(a) the retention bonus plan;
(b) the severance plan; and
(c) the long-term incentive plan.
James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton,
in New York, outlines these basic terms of the Key Employee
Retention Plan:
1. Special Retention Bonus Plan
The Special Retention Bonus Plan would cover 72 key
employees, including the Chief Executive Officer. Under this
plan, eligible employees would receive a base award under
certain limited circumstances, from an aggregate pool of
$3,600,000, equal to a percentage of a base salary, depending
on the employee's position -- Base Awards:
Percentage
Category of Employee of Salary
-------------------- ----------
Tier I - CEO 75%
Tier II - certain executives reporting 67%
directly to CEO (6 individuals)
Tier III - selected other executives and 18%-35%
key employees (26 individuals)
Tier IV - selected other executives 10%-17%
(39 individuals)
With respect to Tiers III and IV, the specific percentage
would be as established by the Compensation Committee of
Covanta's Board of Directors -- the Committee.
The Base Awards become vested and payable in installments,
subject to the participant's continued employment with the
Company until the applicable vesting date:
Installment Percentage Payable On
----------- ---------- ----------
First 33.3% the earlier of September 30,
2002 and the date a Trigger
event occurs
Second 33.3% the earlier of September 30,
2002 and the date a Trigger
event occurs
Third 33.4% when a Trigger Event occurs
If a Trigger Event occurs prior to April 1, 2003, additional
cash bonuses, in an aggregate amount of $1,000,000 would be
paid to eligible participants on the date the Trigger Event
occurs in a lump sum and in amounts to be determined by the
Committee -- the Supplemental Award.
In the event of a termination Without Cause, for Mutual
Benefit, or due to the participant's death or disability, a
pro rata share of the participant's unpaid award would become
immediately vested and payable, unless the unpaid portion is
the full, final installment, in which case the award is
payable on the date the Trigger Events occurs. In the event
of any other termination prior to a vesting date, the unpaid
portion of any award is forfeited.
2. Key Employee Severance Plan
The Key Employee Severance Plan would cover 74 employees
including all of the participants in the Special Retention
Bonus Plan and two other key employees. Only a participant
who is terminated Without Cause or for Mutual Benefit after
the Petition Date would be eligible to receive a severance
benefit under the Key Employee Severance Plan. Cash
severance benefits would be paid in a single lump sum
payment, determined as:
Category of Employees Lump Sum Severance
--------------------- ------------------
Tier I - CEO 200% of base salary
Tier II - certain executives 150% of base salary
reporting to CEO
(6 persons)
Tier III - other executives and key 100% of base salary
employees (28 persons)
Tier IV - other key employees greater of 50% of
(39 persons) base salary and two
weeks' base salary
year of service but
not more than 52
weeks
Participants would also receive continued medical and dental]
coverage, provided that the participant pays the regular
employee co-payments, for the period corresponding to the
percentage of salary payable as cash severance benefits,
subject to an 18-month cap. A participant's right to
continue to receive medical or dental coverage will stop
immediately if the participant is offered or becomes eligible
for coverage under a medical or dental plan of any subsequent
employer. In addition, payments under the severance plan
would be reduced, if the aggregate amount paid would trigger
the federal excise tax on parachute payments.
Participants would be required to sign a general release of
claims against the Company and comply with other covenants,
including confidentiality covenants, non-solicitation and
non-disparagement covenants and litigation support
commitments.
The Debtors cannot yet estimate the aggregate cost of the Key
Employee Severance Plan. However, the Debtors believe that
the aggregate benefits offered are less than those provided
under prepetition severance programs since, prior to the
filing, a number of employees eligible to participate in the
Key Employee Severance Plan were covered by employment
agreements or severance agreements that provided for
severance payments of up to five times a participant's base
salary plus annual bonus.
3. Long-Term Incentive Plan
The Long-Term Incentive Plan -- LTIP -- would cover the six
senior executives and up to two additional key management
employees selected by the Committee, based on the advice of
the CEO.
The purpose of the LTIP is to provide appropriate incentives
to senior management to remain with the Debtors throughout
the reorganization process, to devote all of their attention
and energy to the preservation of the value of the business
and assets of the Debtors during the Chapter 11 proceedings
and to maximize the value realized by the Debtors for the
benefit of their creditors without the distraction associated
with the uncertainty of their future employment. The Plan
will become effective upon release of Court Order and would
terminate immediately after payment of all amounts due in
satisfaction of any awards that have not been forfeited or
expired.
Each participant will receive an award, in cash, equal to the
participant's percentage interest in the LTIP Pool multiplied
by the aggregate amount allocated to the only upon the
occurrence of an LTIP Trigger Date. A participant's
percentage interest in the LTIP Pool would be established by
the Committee, in consultation with the CEO, on or abut the
each participant's LTIP Trigger Date; provided that in no
event would:
-- be less than the minimum or more than the maximum
percentage interest established for the participant as of
the Effective Date; and
-- subject to the reversion of a participant's minimum
percentage interest to Covanta, the sum of the percentage
interests of all participants receiving payment in
respect of LTIP awards exceed 100%.
On the Effective Date, the Committee would establish a
notional book entry account on the books and records of
Covanta to record the total amount available for payment
in satisfaction of awards granted under the LTIP and paid
in connection with a Corporate Event. The Committee will
allocate an amount to the LTIP Pool after the occurrence of
each Corporate Event:
-- for the first aggregate amount of Value Realized of
$250,000,000 or more, the Committee will allocate
$2,000,000 to the LTIP Pool; and
-- if the Value Realized in respect of Corporate Events
exceeds $460,000,000, the Committee will allocate an
additional $19,000 to the LTIP Pool for each $1,000,000
of Value Realized in excess of $460,000,000.
In the event of:
(i) a Kohlberg Kravis Roberts & Co. -- KKR -- investment
of new equity capital in the Company in exchange for
beneficial ownership of equity securities of Covanta; or
(ii) Covanta's emergence from chapter 11 as a stand-alone,
going concern entity including,
a participant, in lieu of his Percentage Interest Amount,
would receive an amount in satisfaction of his LTIP award
equal to the product of 200% in the case of the CEO and 150%
in the case of all other participants, multiplied by the sum
of the participant's Salary and Average Bonus minus any
amounts paid to the participant under the Key Employee
Severance Plan.
A participant's right to receive payment under the LTIP would
vest in full on the effective date of a termination of the
participant's employment by the Company Without Cause or by
the participant for Mutual Benefit; provided that the
termination occurred after the Effective Date and prior to
the twelve-month anniversary of the date of entry of a Court
order confirming the Debtors' plan or plans of
reorganization. If the participant's termination is for
Mutual Benefit by reason of the failure of any successor of
Covanta to assume, in writing, the LTIP and, at any time
during the six month period after the participant's date of
termination for Mutual Benefit, the participant is rehired by
the Debtor in effectively the same position and at the same
or a higher rate of compensation as in effect immediately
prior to termination, the participant would forfeit any right
to receive payment in respect of his LTIP award and would be
required to promptly repay to the Debtor any amount
previously paid to a participant in satisfaction of the LTIP
award -- the Clawback Requirement.
All payments would be made as soon as reasonably practicable
after:
(i) if a participant's LTIP Trigger Date occurred prior
to the date of an entry of a confirmation order, the
closing of the last transaction resulting in a Sale of
the Energy Business or the closing of the KKR
Investment, whichever is applicable, and
(ii) if a participant's LTIP Trigger Date occurred on or
after that date, the participant's LTIP Trigger Date,
subject in each case to the Clawback Requirement.
A participant would forfeit an award upon the termination of
a participant's employment with the Company for Cause or the
participant's resignation from the Company other than for
Mutual Benefit. In the event of forfeiture, the
participant's minimum percentage interest in the LTIP Pool
would revert to the Company.
Mr. Bromley contends that the Key Employee Retention Plan would
provide important retention incentives to ensure that key
employees will remain with the Company through consummation of a
plan or plans of reorganization. The key employees are
essential to the ongoing operation and the ultimate success of
the Debtors' reorganization.
In addition, Mr. Bromley adds, the establishment of the
Retention Plan would help assure key employees who
understandably have heightened concerns over continued
employment and compensation. Thus, granting the motion would
boost the morale of key employees and encourage them to continue
their efforts toward reorganizing the Company. Without the
additional compensation, Mr. Bromley fears, there is a
substantial risk that key employees would seek or accept outside
offers of employment at a time when their continued loyalty,
focus and service is most vital.
Lastly, Mr. Bromley insists that the payments under the Key
Employee Retention Plan should be treated as administrative
expenses since they are "actual, necessary cost and expenses of
preserving the estate" under Section 503(b)(1)(A) of the
Bankruptcy Code. (Covanta Bankruptcy News, Issue No. 12;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
DAIRY MART: Wants to Retain Ernst & Young to Handle Tax Work
-------------------------------------------------------------
Dairy Mart Convenience Stores, Inc., and its debtor-affiliates
sought and obtained authority from the U.S. Bankruptcy Court for
the Southern District of New York to employ Ernst & Young LLP as
their Tax Advisors.
Ernst & Young was retained by the Debtors as an ordinary course
professional. Ernst & Young's compensation cap exceeds the
stipulated maximum cap for OCPs. Dairy Mart needs Ernst & Young
to prepare and review certain tax filings . . . and needs to pay
E&Y more money.
Since the Petition Date, Dairy Mart paid Ernst & Young, as an
ordinary course professional, $146,265 for the preparation and
review of federal income tax returns for fiscal years ending
January 31, 2001 and 2002, state income and franchise tax
returns for fiscal year ending January 31, 2002 and other
services related to examinations and resultant amended state
returns, research of other tax issues as requested.
Ernst & Young's services have consisted, and will continue to
consist, primarily of the preparation and review of certain tax
filings for Dairy Mart, including preparation of forty-four
state income and franchise tax returns for the year ending
January 31, 2002.
Ernst & Young's hourly rates are:
Other Tax Services
------------------
Partners and Principals $520 - $540
Senior Managers $390 - $410
Managers $345 - $365
Seniors $240 - $260
Tax Compliance Managers $235 - $255
Tax Compliance Specialists $145 - $165
Tax Compliance Staff $110 - $130
Dairy Mart Convenience Stores, Inc. filed for chapter 11
protection on September 24, 2001. Dennis F. Dunne, Esq., at
Milbank, Tweed, Hadley & McCloy LLP represents the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed debts and assets of
over $100 million.
DLJ MORTGAGE: S&P Affirms B Series 1995-CF2 Class B-4 Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its rating on class
B-4 of DLJ Mortgage Acceptance Corp.'s series 1995-CF2 and
removed it from CreditWatch negative, where it was placed on
June 11, 2001.
Rating Affirmed & Removed From Creditwatch Negative
DLJ Mortgage Acceptance Corp.
Commercial mortgage pass-thru certs series 1995-CF2
Rating
Class To From
B-4 B B/Watch Neg
The CreditWatch removal reflects the improving performance of
the largest mortgage in the pool ($32 million balance, or 8.1%
of the pool), which is secured by a 285,178-square-foot (sq.
ft.) retail strip, located in Islip, N.Y. The rating was placed
on CreditWatch negative on June 11, 2001, after Pergament, one
of the strip's major tenants, filed for bankruptcy and vacated
the premises, leaving the center 64% occupied. A forbearance
agreement was entered into with the borrower in October 2001,
which required repayment of the loan by March 2003, or the
property would become REO through an uncontested foreclosure.
The borrower has recently signed a lease with a new anchor, Wal-
Mart, which will level the old Pergament building and construct
a new 128,000-sq.-ft. store. Wal-Mart will begin paying rent in
December 2002. This will bring physical occupancy levels for the
mall to approximately 97%. As a part of the workout, the
borrower is required to repay the full principal balance and all
accrued debt service shortfalls created by the loss of the
tenant. However, the borrower will not be required to pay a
prepayment premium or yield maintenance if it refinances before
March 2003. The anticipated debt service coverage is projected
to be sufficient to allow refinancing.
In addition, none of the other REO, specially serviced, or
watchlist loans are expected to have a near-term material impact
on the credit support for the B-4 class. There is a $4.4 million
mortgage (1.1% of the pool), which has been categorized as REO
since February 2000. The mortgage is secured by a retail
property located in Bakersfield, Calif. The 57,282-sq.-ft.
retail property, built in 1989, suffered occupancy declines,
which resulted in a default and foreclosure. The property has
been REO since February 2000. In July 2002, Michael's vacated
the center. Leasing has been slow. A portion of the Michael's
space may be rented to a catering hall, pending city approval;
this would bring occupancy to 59%. An appraisal reduction amount
of $539,000 was taken, based on a 1999 appraisal with a value of
$4.4 million. Additionally, there have been advances of
$542,000. There is no updated appraisal at this time. DSC for
the mortgage was 1.04x as of June 2002.
The Lodgian Inc., properties are being specially serviced,
although the mortgages have remained current. The $38 million
mortgage (9.9% of the pool) is secured by 10 hotel properties.
Nine out of the 10 properties are cross-collateralized and
cross-defaulted. Lodgian filed for Chapter 11 bankruptcy
protection in December 2001, and plans to emerge from bankruptcy
in late 2002. The bankruptcy court ordered a cash-collateral
order, which requires the borrower to make interest payments
through December 2002, with the anticipation that principal
payments will resume after that period. The borrower will
continue making escrows for tax and insurance, and contributions
to the FF&E (furniture, fixtures, and equipment) reserves. The
June 2002 appraisal valued the property at $74.5 million. Based
on this appraisal, the loan-to-value is 50%. The weighted
average DSC for the properties was reported at 1.50x as of
December 2001. Through the servicer, Standard & Poor's will
continue to monitor the bankruptcy proceedings, although the low
LTV coverage gives Standard & Poor's added comfort.
Midland Loan Services Inc., the master servicer, reported 10
mortgages on its internal watchlist, which total $50.2 million
(12.9% of the pool balance). Six are on the watchlist for near-
term maturities, but are not expected to have any problems
refinancing. Two are on the watchlist for administrative
reasons. The remaining two mortgages are a concern, but are
relatively small balances. One is a $2.5 million mortgage
secured by a multifamily property suffering from low DSC because
of increased competition. The other is a $1.2 million mortgage
secured by a limited-service hotel, located in Illinois. The
hotel is suffering from low occupancy levels of 48%, but has
been showing signs of improvement more recently. Well-located,
the property is in good condition. Management reports an
increase in business account reservations. Consequently, Midland
remains optimistic about the property.
DOE RUN RESOURCES: Further Extends Exchange Offer to September 6
----------------------------------------------------------------
The Doe Run Resources Corporation is extending the expiration
time of its Exchange Offer, Cash Offer and Exchange/Loan Offer
until 5:00 P.M. New York City Time on Friday, September 6, 2002.
Doe Run has received tenders from, to the best of Doe Run's
knowledge, 95% of the aggregate principal amount of its
outstanding Notes, an amount sufficient to satisfy the minimum
tender conditions required for consummation of the Offers in
their current form. Continuing market price erosion of Doe
Run's primary product, lead metal, has resulted in a decline in
Doe Run's available liquidity. Prices have failed to recover to
the extent forecasted by Doe Run in the offering memorandum
setting forth the Offers, dated June 6, 2002, the supplemental
disclosure to such offering memorandum distributed on July 9,
2002, and in Doe Run's press release issued on August 2, 2002.
Doe Run and The Renco Group, Inc., Doe Run's parent corporation,
believe that consummating the Offers in their current form will
not provide adequate liquidity to Doe Run. Doe Run and Renco
are discussing with Doe Run's US working capital lenders and
bondholders a restructuring of the Offers. There can be no
assurance that any such discussions will continue or that the
Offers will be consummated or that the parties will reach an
agreement as to any other possible restructuring of the Offers.
Holders with questions concerning how to participate in the
Offers or wishing to obtain copies of the Offering Memorandum,
additional Letters of Transmittal or any other documents
relating to the various offers should direct all inquiries to
the information agent, MacKenzie Partners, Inc., at (212) 929-
5500 or (800) 322-2885 (toll-free). Beneficial owners may also
contact their broker, dealer, commercial bank or trust company
for assistance concerning the Offers.
E-CITYSOFTWARE: May Cease Operations If Collection Efforts Fail
---------------------------------------------------------------
E-City is a software company that produces computer maps and
related software. Computer mapping uses digital versions of maps
to produce maps on computer, which may be viewed on cd-rom or
over the internet or which may in turn be developed into
digitally produced paper maps for publication and sale. Some
computer mapping technology allows users to interact with the
maps in limited ways, allowing them to zoom in closer or farther
away from a particular object or section of the map using
functions contained on the computer map. Users can also
customize some computer maps to their preferences, specifying
scale, how roads are identified, or other features, such as
color. E-City has produced a style of computer mapping which
includes drawings of buildings, features and landscapes on to
the computer map of streets and cities. These buildings and
landmarks are easy to recognize and facilitate the ability of
drivers, pedestrians or tourists to orient themselves and
navigate a particular urban area. E-City has produced these
computer maps for eight major US cities, 4 Canadian cities as
well as Munich, Germany. In general, the computer mapping
industry has focused on developing maps that depict streets and
intersections without buildings or landmarks, or with only a
symbol indicating a building or landmark. E-City has taken the
approach that consumers would desire a city view that contains
certain building and landmark information in a way that is easy
to recognize. The computer mapping industry is a fairly new
industry. Most computer maps are viewed on a free-of-charge
basis to consumers visiting websites or requesting driving
directions on the internet. These maps are developed and paid
for generally either by websites who charge a fee to advertisers
to show advertisements to consumers who are looking for maps or
by businesses operating a website on the internet who pay
computer mapping providers to provide location and direction
maps to visitors to their corporate sites.
The Company has been heavily dependent on its customer,
Cityscape.com, Inc., for a large portion of its sales to date.
It is also dependent on its distributor Orion Technologies for
additional computer mapping services sales, as its German
distributor does not currently appear to be soliciting customers
for E-City. While the Company anticipates identifying and
securing other distributors and customers, it has had limited
success in doing so. Although E-City has completed all of the
work required under its development contract with Cityscape.com,
it has not received full payment for services rendered there
under. Cityscape owes a total remaining outstanding balance
under the contract of approximately $416,000. E-City has serious
concerns about collecting this remaining balance. Although, E-
City is not relying upon Cityscape for future sales, E-City is
heavily dependent on its current and ongoing cash needs upon
receipt and payment in full of the Cityscape receivable. As
Cityscape appears to be no longer actively engaged in the
business for which services were engaged, there remains a
considerable concern by management of the collectability of the
balance. E-City has been unsuccessful to date in receiving
assurances from Cityscape regarding future payment and has been
unable to gather any further information on the current
financial condition of Cityscape.
Revenues were $0 during the three months ended June 30, 2002 and
$500,000 during the three months ended June 30, 2001. This
decrease in comparable fiscal periods resulted mainly from E-
City's failure to replace Cityscape with another customer after
services were completed on that contract. Due to its financial
constraints, E-City has not been able to market its products
actively and have not had the requisite financial stability to
be an attractive service provider to its customer base. As a
result of these developments and of a worsening economic
environment amongst major airlines, demand for its services has
also decreased compared with the previous period.
Historically, E-City's revenues have come from a combination of
sources, including the sale of 10 interactive maps of North
American cities to Cityscape, a related party. E-City does not
anticipate receiving any revenue in the future unless it is able
to collect on its accounts receivable and therefore improve its
financial stability, develop an active sales and marketing
capability and have sufficient liquidity to finance work-in-
progress should it be approached by potential customers.
There were no revenues received during the period ended June 30,
2002. Every effort was made during the period to contain costs,
including a reduction in the staff, in the size of E-City's
Vancouver facility, in the deferral of payments to service
providers. However, a relatively long sales cycle in computer
mapping services, combined with a worsening economic climate for
its customers and its financial instability and lack of a well-
financed sales and marketing effort, resulted in its failure to
close any sales during the period. Although it had several
projects in negotiation during the period, it was unable to
successfully compete for these contracts. Negotiations with two
of these customers remain ongoing.
For the period ended June 30, 2002, E-City had a net loss of
$148,930 while for the period ended June 30, 2001, the Company
had net income of $138,685. Also, for the period ended June 30,
2002, the Company had a working capital surplus of $186,374
while for the period ended June 30, 2001, the Company had a
working capital surplus of $109,116.
E-City's current financial condition makes it impossible to
continue normal operations. E-City does not have sufficient cash
to continue to operate, other than to maintain its website. It
has no cash available to pay employee salaries or to service its
accounts payable or other obligations. The company has limited
prospects for new revenues from sales due to its lack of cash
resources for sales or operations. Although the company has
sufficient accounts receivable to substantially improve its
financial condition, there can be no assurance that any of these
accounts receivable will prove to be ultimately collectible.
There can be no assurance that E-City will develop any new
customers, or that its pricing arrangement with such customers,
if located, will be sufficient to provide E-City with the
financial resources necessary to continue operation.
If E-City is unsuccessful in collecting on accounts receivable
or in being approached by customers willing to finance future
computer map development, it will probably cease operations
altogether. Management has not developed any other contingencies
at this time.
ENVIRONMENTAL SAFEGUARDS: Falls Below AMEX Listing Standards
------------------------------------------------------------
On August 21, 2002, Environmental Safeguards, Inc.,(Amex: EVV)
received a letter from the American Stock Exchange advising that
the Exchange had determined that Environmental Safeguards, Inc.,
is below one of the Exchange's continued listing standards. The
letter stated, in the opinion of the Exchange, that the Company
has sustained losses which are so substantial in relation to its
overall operations or its financial resources, or its financial
condition has become so impaired, that it appears questionable,
in the opinion of the Exchange, as to whether the Company will
be able to continue operations or meet its obligations as they
mature. The Company has been requested to contact the Exchange
by September 2, 2002, to discuss the submission by the Company
of a plan of compliance. The plan of compliance must be
submitted by the Company by September 20, 2002. The Exchange
stated that if a plan of compliance is accepted by the Exchange,
then the Company may continue its listing on the Exchange for up
to 18 months, during which time the Company's compliance status
with the Exchange will be subject to periodic review.
ETOYS: Wants to Extend Exclusive Solicitation Period to Oct. 4
--------------------------------------------------------------
eToys, Inc., asks the U.S. Bankruptcy Court for the District of
Delaware for an extension, through October 4, 2002, to solicit
acceptances of its chapter 11 Plan and seek confirmation of that
Plan.
The Debtors point out to the Court that since the Petition Date,
they have extensively marketed their assets and businesses,
entered into and consummated numerous transactions involving the
sale or other disposition of their assets and businesses and
otherwise administered their estates for the benefit of their
creditors and stakeholders.
The Debtors relate that they have been consumed with the orderly
wind-down of their businesses and operations and the sale and
other disposition of their assets for the benefit of their
creditors. As the Debtors completed the wind-down of their
businesses and operations and the sale or other disposition of
their assets, they rechanneled their efforts to working closely
with the Committee to formulate a chapter 11 plan designed to
maximize value for their creditors. As previously reported in
the Troubled Company Reporter's July 2, 2002 edition, the
Debtors filed their Joint Liquidating Plan and Disclosure
Statement with the Court.
eToys, Inc., now known as EBC I Inc, operated a web-based toy
retailer based in Los Angeles, California. The Company filed a
Chapter 11 Petition on March 7, 2001. When the company filed
for protection from its creditors, it listed $416,932,000 in
assets and $285,018,000 in debt. eToys sold its assets and name
to toy retailer KB Toys. The Company's SEC report on February
28, 2002, the Debtors listed 32,091,918 in total assets and
192,396,702 in total liabilities. Robert J. Dehney, Esq., at
Morris, Nichols, Arsht & Tunnell and Howard Steinberg, Esq., at
Irell & Manella represent the Debtors as they wind-up their
financial affairs.
EXIDE TECHNOLOGIES: Wins Nod to Assume Daramic Supply Contracts
---------------------------------------------------------------
Exide Technologies and its debtor-affiliates sought and obtained
the Court's authority to assume certain prepetition contracts
with Daramic, Inc.
According to Christopher J. Lhulier, Esq., at Pachulski Stang
Ziehl Young & Jones, P.C., in Wilmington, Delaware, Daramic is
the Debtors' exclusive supplier of polyethylene separators used
in the manufacture of most of the Debtors' batteries.
Separators, a necessary component in all batteries manufactured
by the Debtors, separate the positive and negative plates of the
battery to allow the free flow of ions necessary to generate
electrical current. All batteries require separators to
function. Daramic is the largest separator manufacturer and
supplier in the world.
Daramic sells separators to the Debtors under the terms of three
prepetition supply contracts each of which expire on December
31, 2009. The Supply Contracts generally provide that the
Debtors will purchase from Daramic all of the Debtors'
requirements for polyethylene separators for the Debtors' North
American, Australian and New Zealand manufacturing facilities.
The Supply Contracts are:
A. "North American, Australian and New Zealand Supply Agreement
for Automotive Separators dated December 15, 999 and amended
on July 2001;"
B. "Golf Cart Separator Supply Contract" dated July 2001; and
C. "Automotive and Industrial Supply Agreement" dated January
1996 and amended in July 2001.
Mr. Lhulier relates that Daramic controls a significant portion
of the current global capacity of polyethylene separators, which
is the type used in the majority of the Debtors' transportation
batteries and certain types of industrial batteries. There is
only one other North American manufacturer of the polyethylene
separator that Daramic currently supplies to the Debtors. The
total available worldwide capacity for polyethylene separators
by producers other than Daramic is estimated to be 600,000,000
linear feet. The Debtors' global polyethylene separator
requirement is 1,600,000 linear feet annually.
In North America, Mr. Lhulier says, Daramic supplies 100% of the
polyethylene separators to the Debtors for the manufacture of
transportation batteries. This represents $35,000,000 annual
purchase by the Debtors from Daramic for the Debtors' plants in
North America. In 2001, the Debtors' transportation battery
manufacturing facilities in North America purchased over
900,000,000 linear feet of polyethylene separators; and in the
first four months of 2002, the Debtors' transportation battery
manufacturing facilities purchased 250,000,000 linear feet of
polyethylene separators.
In late May 2002, Mr. Lhulier recounts that Daramic moved for an
order compelling the Debtors to immediately assume or reject the
Supply Contracts. In the Daramic Motion, Daramic indicated that
the Debtors would have to pay Daramic's prepetition claim for
$11,200,000 to cure the monetary default under the Supply
Contracts. At the same time, Daramic communicated its intention
to conduct itself in accordance with the strict terms of the
Supply Contracts, including adherence to contractual delivery
terms less favorable than the Debtors had previously received
from Daramic.
Following receipt of the Daramic Motion, Mr. Lhulier states that
the Debtors commenced negotiations with Daramic in an effort to
secure the supply of separators under terms previously received
from Daramic to avoid supply interruptions to the Debtors'
global customers and mitigate the impact to the Debtors' planned
reorganization. These negotiations led the parties to enter
into a stipulation pursuant to which the Debtors agreed to pay
Daramic's reconciled prepetition claim in return for an
extension of time, through July 30, 2002, to determine whether
to assume or reject the Supply Contracts.
The critical issues considered by the Debtors in determining
whether to assume or reject the Supply Contracts were:
-- the ability to secure an immediate alternative supply of
polyethylene separators to replace the lost separator volume
if the Supply Contracts were rejected; and
-- whether they could succeed in working with Daramic to improve
the terms of the Supply Contracts in they event they elected
to assume them.
Mr. Lhulier relates that the Debtors investigated and analyzed
the commercial and technical alternatives available to support
the recommendation and decision to assume or reject the Supply
Contracts. The Debtors examined the advantages and
disadvantages of the Supply Contracts. During this period, the
Debtors continued negotiations with Daramic in an effort to
modify the Supply Contracts in the event the Debtors elected to
assume them. By undertaking all of these efforts, the Debtors
were able to obtain sufficient information to exercise sound
business judgment in making the decision to assume or reject the
Supply Contracts.
As a result of this examination and analysis, the Debtors
determined that there were no other suppliers available to meet
the Debtors' requirements in the required time frame. Based
upon information presently available, Mr. Lhulier believes that
Daramic is the only supplier who has the available capacity and
ability to meet the Debtors' current worldwide volume and
delivery requirements for transportation and industrial
polyethylene separators in the required time frame.
Mr. Lhulier claims that the Debtors were able to achieve
improvements to their position under the Supply Contracts
through their negotiations with Daramic. The negotiated
modifications to the Supply Contracts are set forth in both a
Letter Agreement dated July 11, 2002, and the Amendment No. 2 To
Supply Contracts entered into between the parties. The
principal benefits to the Debtors under these modified terms
include:
-- Additional lump sum credits of $3,000,000, over the life of
the contracts;
-- Volume credits in the event certain business segments are
sold;
-- Daramic's commitment to engage in cost reduction activities
including value engineering and lean manufacturing concepts
and activities;
-- "Visibility" into Daramic's financial situation and certain
notification standards regarding same;
-- A "new technology" credit on certain separators;
-- Daramic's agreement that if it sells its battery separator
business then the buyer of that business will accept an
assignment of the Supply Contracts; and
-- improved product delivery terms. (Exide Bankruptcy News,
Issue No. 9; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
EXIDE TECHNOLOGIES: Inks New Contract with Volvo Truck Australia
----------------------------------------------------------------
Exide Technologies has been selected as the exclusive battery
supplier to Volvo Truck Australia. Exide Technologies (OTC
Bulletin Board: EXDTQ) is a global leader in stored electrical
energy solutions. Volvo Truck Australia, a fully owned
subsidiary of AB Volvo and Volvo Global Trucks, is the second
largest manufacturer of heavy trucks in the world. The two-year
agreement calls for Exide to supply OEM starting batteries for
the heavy trucks produced by Volvo Truck Australia. The
agreement covers both the Volvo and Mack brands of heavy trucks,
with each brand being supported by an extensive dealer network
across the country.
The new agreement gives Exide Technologies a 74 percent share of
the OE battery market for heavy trucks manufactured in
Australia. Volvo is one of the four brand leaders that
dominates heavy truck manufacturing in the country, and Exide is
the exclusive supplier to three of these four leading producers.
The Exide Technologies heavy duty product line selected by Volvo
Truck Australia is based on the Exide Extreme(R) technology now
available in the aftermarket. The Exide Extreme(R) technology,
introduced in 1999, features reinforced heavy-duty grids, thick
robust plates wrapped in glass-mat separators and "No-Vibe"(TM)
bonding, all of which provide superior vibration resistance.
The Exide Extreme(R) also features flameproof vents for safer
operation.
Volvo selected Exide Technologies as an OEM supplier after a
comprehensive review of the technology behind its heavy-duty
product line. Australia, with its high heat, long distances and
sometimes unpredictable road conditions, presents special
challenges to truckers and the batteries in their rigs.
"All three of our Australian trucking customers conducted
independent research and reviews of the Exide technology," said
David Enstone, president of the Exide Technologies
Transportation Business Group. "They all concluded that the
Exide heavy duty product lines are capable of enduring the
grueling conditions inherent in Australia's heavy truck market."
Exide Technologies, with operations in 89 countries and fiscal
2002 net sales of approximately $2.4 billion, is one of the
world's largest producers and recyclers of lead-acid batteries.
The company's three global business groups -- motive power,
network power and transportation -- provide a comprehensive
range of stored electrical energy products and services for
industrial and transportation applications.
Industrial uses include network power applications such as
telecommunications systems, electric utilities, railroads,
photovoltaic (solar-power related) and uninterruptible power
supply (UPS); and motive-power applications for a broad range of
equipment uses, including lift trucks, mining vehicles and
commercial vehicles.
Transportation applications include automotive, heavy-duty
truck, agricultural and marine, as well as new technologies
being developed for hybrid vehicles and new 42-volt automotive
applications. The company supplies both aftermarket and
original-equipment transportation customers.
Further information about Exide Technologies, its financial
results and other information can be found at
http://www.exide.com
Exide Technologies' 10% bonds due 2005 (EXDT05FRR1) are trading
at 15 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=EXDT05FRR1
for real-time bond pricing.
EXODUS COMMS: EMC Pressing Debtors to Return Loaned Equipment
-------------------------------------------------------------
EMC Corporation and Exodus Communications, Inc., its debtor-
affiliates are parties to a prepetition Master Lease Agreement
No. 12376 and four related equipment Supplement #29, Supplement
#31, Supplement #32 and Supplement #34, pursuant to which the
Debtors leased data storage equipment from EMC.
Wilmer C. Bettinger, Esq., at Pepper Hamilton LLP, in
Wilmington, Delaware, reminds the Court that pursuant to the
January 17, 2002 Sale Order, the Court ordered EXDS to make all
postpetition rent payments due to EMC under any non-rejected
lease supplements, subsequent to the 60-day period following the
Petition Date. Mr. Bettinger states that despite the Order, EMC
has only made payment to EMC for the month of January 2002 and
half of the month of February 2002. To date, EMC is owed these
amounts by the Debtors:
Supplement #29 - $617,781.61
Supplement #31 - $115,123.84
Supplement #32 - $11,230.08
Supplement #34 - $277,226.80
By this motion, EMC Corporation asks the Court to:
-- compel the Debtors to return a Loaned Equipment that is not
subject to any executed lease supplement;
-- compel immediate payment of $1,021,362.33 in postpetition
rents, plus interest, postpetition property taxes and
maintenance fees; and
-- award attorney's fees for $7,200 in favor of EMC for EXDS'
failure to abide by an existing Court Order to make payments.
Specifically, Mr. Bettinger relates that EMC is seeking the
return of a $2,000,000 Symmetrix 8430 Equipment. It delivered
by EMC for the Debtors to evaluate whether they preferred it
over the less expensive Symmetrix 3830. The Debtors concluded
that the Loaned Equipment was too expensive for their needs.
EMC agreed to take back the Loaned Equipment and replace it with
the much less expensive Symmetrix 3830 plus supporting cards.
However, before the equipment swap could take place and before
any lease documentation was signed, the Debtors filed their
Chapter 11 Petitions. The Debtors have since continued to use
the Loaned Equipment in order to provide postpetition services
to Sony.
Mr. Bettinger points out that, pursuant to the Sale Agreement
between the Debtors and Cable & Wireless, the equipment subject
to the EMC Master Lease and Equipment Supplements was exempted
from the sale. Nevertheless, the Loaned Equipment, along with
all other EMC Equipment, was transferred to the possession of
EXDS pursuant to a Transition Services Agreement.
Since this is the third time that EMC has been forced to file
papers with the Court requesting that the Debtors be compelled
to abide by its duties under Section 365(d)(10) of the
Bankruptcy Code, Mr. Bettinger insists that it is only right for
the Court to award EMC attorney's fees over $7,200. (Exodus
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FISCHER IMAGING: Fails to Comply with Nasdaq Listing Guidelines
---------------------------------------------------------------
Fischer Imaging Corporation (Nasdaq:FIMG), announced that the
Company received a Nasdaq Staff Determination on August 21, 2002
indicating that the Company's failure to comply with the Form
10-Q filing requirement for the quarter ended June 30, 2002
violates Marketplace Rule 4310(C)(14) and that the Company's
securities are subject to delisting from the Nasdaq SmallCap
Market.
The Company will respond by requesting a hearing before the
Nasdaq Listing Qualifications Panel to review the Staff
Determination, and this request for a hearing will stay the
delisting pending the outcome of the hearing. There can be no
assurance the Panel will grant the Company's request for
continued listing.
Gerald D. Knudson, chief executive officer of Fischer Imaging
stated, "The receipt of this notice is part of normal Nasdaq
operating procedures when a delay in filing critical
documentation occurs and was expected by Fischer Imaging. The
Company is working diligently together with its independent
auditors and legal counsel to ensure the proper filing of its
Form 10-Q. Upon filing of the Company's 10-Q, Fischer Imaging
will apply to the Nasdaq Listing Qualifications Panel to cancel
the hearing."
On August 13, 2002, Fischer Imaging announced a delay in the
filing of its report on Form 10-Q for the quarter ended June 30,
2002. This delay is attributable to the inability of Ernst &
Young LLP to obtain and review the predecessor auditor work
papers in compliance with professional standards and thus
complete its SAS-71 review, and to the reassessment by
management of all elements of the Company's business, including
a review of inventory levels and potential applicable
restructuring charges. Fischer anticipates a write-down of
inventory as a result of management's review.
Fischer Imaging Corporation designs, manufactures, and markets
specialty digital mammography and general-purpose x-ray imaging
systems for the diagnosis and treatment of disease. The
Company's principal product lines are directed toward medical
specialties in which minimally invasive techniques are replacing
open surgical procedures. For more information visit
http://www.fischerimaging.com
FOSTER WHEELER: Building 600 Megawatt Pennsylvania Power Plant
--------------------------------------------------------------
Foster Wheeler Ltd., (NYSE:FWC) announced that its subsidiary,
Foster Wheeler Power Group, Inc., was awarded a contract valued
at approximately $200 million by LMB Funding, Limited
Partnership, to engineer, procure and construct a nominal 600
megawatt capacity combined-cycle natural gas-fired power plant.
Construction is underway at the Lower Mount Bethel project
located in Bangor, Pa.
The project will include two gas-turbine generators and one
steam-turbine generator designed for high efficiency operation
with very low levels of emissions from the combustion process.
The power island turbine generator and steam generator equipment
have been pre-purchased by the plant owner and delivery of
components has already begun. Operation of the plant is
scheduled to begin at the end of 2003.
Foster Wheeler Ltd., is a global company offering, through its
subsidiaries, a broad range of design, engineering,
construction, manufacturing, project development and management,
research, plant operation and environmental services. The
corporation is based in Hamilton, Bermuda, and its operational
headquarters are in Clinton, N.J. For more information about
Foster Wheeler, visit its World-Wide Web site at
http://www.fwc.com
LMB Funding, Limited Partnership, is a project company owned by
PPL Global of Fairfax, Va. PPL Global is a subsidiary of PPL
Group in Allentown, Pa.
* * *
As reported in Troubled Company Reporter's July 13, 2002
edition, Foster Wheeler obtained further extensions through July
31, 2002 of both its waiver under its current revolving credit
facility and the forbearance of remedies for its lease financing
facility.
The company signed a term sheet with its bank lending group for
a $289.9 million bank credit facility on June 5, 2002. This
further extension of its current facility is necessary in order
to finalize the terms of a definitive agreement.
Foster Wheeler is exercising its right to defer the payment of
interest on the Junior Subordinated Debentures by extending the
interest period of such debentures for three quarterly periods
from January 15, 2002 until October 15, 2002. This will defer
the dividend on the FW Preferred Capital Trust I 9% Preferred
Securities for the same time period, which includes deferral of
the July 15, 2002 payment.
According to a company spokesperson, the decision to defer
interest payments was part of ongoing efforts to realign the
company's capital structure.
Foster Wheeler Corporation's 6.75% bonds due 2005 (FWC05USR1)
are trading at 60 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=FWC05USR1for
real-time bond pricing.
GALAXY: Plans to Commence Financial Workout Under BIA in Canada
---------------------------------------------------------------
Galaxy intends to initiate a financial restructuring by
utilizing the proposal process under Part III, Division I of the
Bankruptcy and Insolvency Act. The proposal will provide for the
orderly liquidation of Galaxy's operating assets and the
distribution of the proceeds to Galaxy's creditors. The value of
Galaxy's assets may be sufficient to support a recovery for
Galaxy's current shareholders, but that will depend on the
outcome of, among other things, the proposal process.
On August 21, 2002, Galaxy filed with the Alberta and British
Columbia Securities Commissions, on a confidential basis, a
material change report containing the following disclosure:
"Galaxy is, and has been for the last 15 years, the exclusive
Canadian distributor of Umbro branded soccer uniforms, footwear,
apparel and equipment under a license agreement with Umbro
Worldwide Limited, of Cheadle, England. Since July 2001, Galaxy
has also distributed Umbro products in the United States under
license to Big Box accounts, department stores, retail factory
outlet stores and certain other accounts. Galaxy is also the
Canadian distributor of the "SPY" brand of sunglasses, sport
goggles and related soft goods.
"In 2001, a license under which a third party distributed Umbro
products in the United States was terminated. With a view to
revitalizing the Umbro brand in the United States, Umbro
Holdings Limited, an affiliate of UWL, informed Galaxy that it
was prepared to expand the scope of the Big Box License to cover
the outlets previously covered by the Team Channel License. This
meant that Galaxy would be the distributor for all United States
sales using, initially, certain inventory that UHL had purchased
from the former licensee. In October 2001, Galaxy and UHL signed
a non-binding letter of intent with reference to these matters.
The letter of intent contemplated that Galaxy would pay UHL for
the inventory purchased from the former Team Channel licensee
over a six month period. The letter of intent was, however,
subject to Galaxy securing adequate financing to enable it to
purchase the inventory and finance the expansion of the
additional business contemplated by the amendment of the License
Agreement.
"Although the letter of intent formally expired on November 30,
2001, both parties continued to conduct themselves on the basis
that the letter of intent would govern their future actions.
Relying on this understanding, in December 2001 UHL arranged for
some US$2,600,000 of inventory it had purchased from the former
Team Channel licensee to be shipped to Galaxy's warehouse in
Washington State; at the beginning of this year, Galaxy
commenced sales and marketing activities to service the Team
Channel accounts and began selling the inventory to the
customers previously handled by the former Team Channel
licensee.
"Early in 2002, UHL proposed a going-private transaction under
which UHL would acquire all of the outstanding shares of Galaxy
at a price per share of $1.10 and provide the necessary
financing to undertake the United States market expansion. An
agreement on all of the principal business aspects of the
transaction was reached with UHL in the first quarter of 2002.
The going- private transaction and financing to which UHL had
agreed was predicated on Galaxy continuing to expand into the
United States. Accordingly, Galaxy continued the expansion with
UHL's full knowledge that it was doing so on the strength of
UHL's financing commitment, and on the implicit understanding
that Galaxy's willingness to do so was based in part on the
goodwill that had developed between UHL and Galaxy over the
course of 15 years of good relations between them.
"In May, 2002, after most of the definitive documentation
required to complete the transaction had been settled but before
it had been signed, UHL advised that it would not complete the
transaction. Thereafter, UHL committed itself to one other
transaction that would have resulted in Galaxy receiving
adequate financing, but it once again reneged on its commitment.
"The failure of UHL to complete the above-noted financings, and
on the strength of which Galaxy had in good faith assumed
various obligations, has left Galaxy undercapitalized, unable to
purchase inventory to meet fall orders for both the United
States and Canadian markets and unable to pay for product that
it previously ordered. Galaxy is in arrears in paying royalties
to UHL in the amount of $1,246,000 (inclusive of royalties owed
by Galaxy's United States subsidiary) and UHL has demanded
payment for the inventory purchased from the former Team Channel
licensee which has been sold by Galaxy, aggregating
approximately US$1,018,000. On August 19, 2002, UWL gave notice
of termination of the Big Box License and the license under
which Galaxy distributes Umbro products in Canada. In addition,
some suppliers have begun making demands for payment for goods
that have been shipped. Galaxy's working capital as at July 31,
2002 was approximately $6000.
"Galaxy has been exploring ways to satisfy its working capital
requirements, but to date its efforts have proven unsuccessful.
Although it is currently in compliance with its covenants under
its banking facility, if Galaxy does not secure the needed
financing before the end of August it might cease to be in
compliance with its banking covenants.
"It is unlikely that Galaxy will be able to continue as a going
concern. Accordingly, Galaxy has initiated steps designed to
preserve its cash while it continues to pursue discussions with
potential strategic investors and other parties, including its
bankers, and to allow itself time to evaluate its legal options.
Galaxy has today terminated all further business operations
related to the Team Channel License in the United States and
laid off all employees involved in those operations, in both the
United States and Canada. It has agreed with Spy Optics, Inc.,
the licensor, to an early termination of the SPY distribution
agreement and an orderly transition of the business. The other
planned initiatives will significantly reduce the size and scope
of Galaxy's operations in both Canada and the United States.
Once they have been fully implemented, Galaxy expects that
staffing levels will have been reduced by approximately 80-90%.
"Galaxy expects that it will seek some form of statutory
protection from creditors. It is consulting with legal counsel
in this regard.
"The offering of common shares announced in January 2002 has
expired, with no shares having been sold."
GENERAL DATACOMM: Wants to Maintain Exclusivity Until November 1
----------------------------------------------------------------
General DataComm Industries, Inc., and its affiliated debtors
ask the U.S. Bankruptcy Court for the District of Delaware to
give them an extension of their exclusive periods to propose and
file a plan of reorganization. The Debtors tell the Court that
they need until November 1, 2002 to get their plan together.
The Debtors ask for a concomitant extension of their exclusive
period during which to solicit acceptances of a plan until
January 3, 2003.
The Debtors, with a new management team headed by Howard Modlin,
outline these accomplishments since the Petition Date:
i) Aggregate net income in May and June, 2002 of $206,000;
ii) An increase of cash on hand of approximately $1,837,000
for April 2002 to July 2002;
iii) Payments to the Lenders in the aggregate of
$1,903,929.70 since April 30, 2002, in reduction of the
Lenders' claims;
iv) An increase in the Lenders' collateral base of
approximately $293,000 from April 30 to June 30, 2002;
v) Reduced operating expenses from $2,049 in October 2001
to 41,033,000 in June 2002;
vi) The award of a contract by the Federal Aviation
Administration to a group led by Harris Corporation with
an aggregate value of $1.7 billion, with respect to
which GDC is a member and expects to supply a
substantial amount of equipment over an 18-month period;
vii) Introduction by the Debtors' newly formed product
development program of the Debtors' first IP product in
May 2002, which product has received significant
interest from prospective customers including 2 of the 4
major telecommunications providers;
viii) A settlement with Lucent Technologies of a pending
lawsuit, pursuant to which Lucent to pay the Debtors
$2.5 million in cash and withdraw its unsecured claims
filed in these cases in the approximate amount of
$200,000;
ix) Settlement with JPMorgan, as agent, of their claims in
excess of $9.5 million for payout of $7.45 million.
After the sale of Debtors' property located in
Middlebury, Connecticut, the Debtors expect that the
remaining balance on the JPMorgan Claims will be
approximately $600,000;
x) Settlement with Cignal Global Communications Carrier
Services, Inc., under which the Debtors and Cignal
terminated the rental agreement between the parties and
Cignal agreed to pay the Debtors $900,000 and return
certain leased equipment to the Debtors;
xi) Formulation of a comprehensive business plan and
negotiations with the Lenders and Committee of a term
sheet for a chapter 11 Plan; and
xii) Filing of omnibus objections to claims with respect to
over $9.5 million in claims, and negotiated with the
Lenders on the amount of their claims as well as the
settlement of their lawsuit which was commenced to fix
the amount of such claims.
General DataComm Industries, Inc., a worldwide provider of wide
area networking and telecommunications products and services,
filed for Chapter 11 protection on November 2, 2001. James L.
Patton, Esq., Joel A. Walte, Esq., and Michael R. Nestor, Esq.,
represent the Debtors in their restructuring effort. When the
Company filed for protection from its creditors, it listed
$64,000,000 in assets and $94,000,000 in debts.
GENTEK: Fitch Drops Senior Secured to D and Senior Sub to C
-----------------------------------------------------------
Fitch Ratings downgraded GenTek Inc.'s senior secured bank
facility rating to D from CCC and the rating on the senior
subordinated notes to C from CCC-. The ratings remain on Rating
Watch Negative.
The ratings downgrade is based upon the recent payment blockage
relating to GenTek's scheduled August 1, 2002 interest payment
on the 11% senior subordinated notes; the violation of certain
credit facility financial covenants and default on the credit
facility; and potential default on the senior subordinated
notes. GenTek's default on the credit facility came about when
the company's independent auditors issued with the 2001 10k
filing an explanatory paragraph with respect to GenTek's ability
to continue as a going concern.
In addition, GenTek violated certain financial covenants related
to the credit agreement at the end of the first quarter and
second quarter of 2002. More recently, GenTek's senior lenders
issued a payment blockage notice pursuant to its senior credit
facility preventing GenTek from paying interest due to the
senior subordinated noteholders. If GenTek is not permitted to
make the scheduled interest payment on or before August 31,
2002, then they will have defaulted on the senior subordinated
notes and these noteholders may accelerate payment of the
outstanding principal and accrued interest. At that time, Fitch
will downgrade the rating on the senior subordinated notes to D.
The ratings remain on Rating Watch Negative status, indicating a
concern that GenTek may default on its senior subordinated
notes, discussions with lenders regarding an credit facility
amendment and restructuring may be unsuccessful, and a
bankruptcy filing may occur.
GenTek is a diversified manufacturer with business segments
focused on manufacturing, performance products, and
communications. In 2001, GenTek had $1.2 billion in revenue and
$143 million in EBITDA.
GENUITY INC: Board Opts to Stop Providing Financing to Integra
--------------------------------------------------------------
The majority of Genuity Inc.'s contracts consist of separate
agreements to provide Internet access, web hosting, transport or
value-added eBusiness services to customers.
On July 24, 2002 Verizon converted all but one of its
outstanding shares of Class B common stock of Genuity into
shares of Class A common stock and terminated its existing
credit facility with the Company. After giving effect to this
conversion, Verizon holds approximately a 10% ownership interest
in Genuity, but no longer has the right to convert to
approximately an 80% controlling interest in the Company. As a
result of the termination by Verizon of the credit facility,
Genuity cannot borrow the remaining amounts available under that
facility and the $1.15 billion currently outstanding under the
Verizon Facility is callable by Verizon at any time. To date,
Verizon has not demanded payment of the outstanding amounts.
Aside from the Verizon Facility, the commercial arrangements
between Verizon and Genuity have not been affected by Verizon's
termination of the right to convert its Class B shares into a
controlling interest in Genuity. The Company also announced on
July 29, 2002 that Michael Masin, a vice chairman of Verizon
Communications, has resigned from Genuity's board of directors.
Verizon, as a Class B stockholder, has retained its right to a
seat on the Genuity board of directors and may appoint a new
director in the future. This right exists as long as any share
of the Class B common stock is outstanding. As the holder of
Class B common stock, Verizon maintains certain consent rights
related to, among other things, any dissolution or liquidation
of the Company, the right to consent to any significant
acquisitions or dispositions, major business combinations, or
incurring indebtedness or issuing additional equity securities
in excess of specified limits. In accordance with Genuity's
certificate of incorporation, Verizon's investor safeguards will
remain in effect until it converts all of its Class B shares or
no longer has the possibility of converting into more than a 10%
ownership interest.
On July 22, 2002, the Company provided notice to draw the
remaining $850.0 million available under the existing $2.0
billion revolving line of credit facility with a consortium of
nine banks and thereafter received $723 million of that request.
Deutsche Bank is the only member of the consortium of banks that
has failed to fulfill its obligation under the credit facility
and the Company has undertaken legal action to require them to
satisfy this obligation.
Verizon's termination of the right to convert their Class B
shares into a controlling interest in Genuity resulted in a
default under the Bank Facility. While the default permitted the
banks to accelerate Genuity's payment obligations under the
facility, the banks did not immediately demand payment of the
$1.9 billion outstanding under the facility, including a $1.15
billion letter of credit to back a private placement bond
transaction and $723 million in additional advances. On July
29, 2002, the Company entered into a standstill agreement with
the lenders of the Bank Facility who had funded the $723 million
whereby they agreed not to accelerate the payment of the amounts
outstanding thereunder until August 12, 2002 and to continue
negotiations with the Company. In consideration for this two-
week standstill agreement, the Company repaid $100 million of
the $723 million advance to the members of the bank group, which
had funded the $723 million.
On August 13, 2002, the Company was granted an additional 30-day
extension to the standstill agreement, which expired on August
12, 2002. In connection with this extension, Genuity will make a
payment of $50 million to the members of the bank group which
funded the $723 million. Genuity is continuing discussions with
the banks and Verizon with respect to existing commercial and
other relationships.
Genuity has retained Lazard Freres & Co. as the Company's
financial advisors to assist it in developing a restructuring
plan to meet these significant challenges. It is undertaking
discussions with Verizon and the banks to restructure its
obligations under the Verizon Facility and Bank Facility, but it
may not be able to obtain satisfactory waivers or amendments to
either or both of the facilities. In the event either Verizon or
the banks accelerate the payment obligations under the
respective facility, Genuity indicates that it would not have
sufficient liquidity to satisfy the claims and would need to
seek the protection afforded debtors under the bankruptcy laws.
Genuity is in the process of evaluating its strategy in light of
the debt defaults, and its business plan, under various possible
scenarios. The Company continues to incur significant losses and
negative cash flow from operations and would expect to continue
to do so in the future. While it has recently reduced expenses
to conserve cash, its business plan prior to the action of
Verizon would have required funding of these additional losses
and of capital expenditures. Absent satisfactory restructuring
of the Company's existing credit facilities, currently in
default, the Company's ability to find other financing to cover
repayment of the existing credit facilities and funding of
operational needs would not seem likely in view of the Company's
situation and the difficulties in the telecommunications market
in general. Further, in the current telecommunications market,
establishment of a valuation of assets for a company is very
difficult, and in general it is to be expected that there could
be periodic impairment charges incurred in the future with
respect to the Company's assets.
On July 25, 2002, Moody's Investor Services and Standard &
Poor's Rating Services announced a reduction of Genuity's credit
rating from Ba1 to Ca and from BB to CCC-, respectively, as a
result of Verizon's decision to cancel its option to reintegrate
Genuity and the subsequent default under the Company's credit
facilities. This reduction will result in an increase in the
facility fee for Genuity's Bank Facility from 25 to 50 basis
points per annum and an increase in the fee for the letter of
credit issued under its Bank Facility from 160 to 385 basis
points per annum payable quarterly in arrears. Based on these
fee increases and the current amounts outstanding under the Bank
Facility, the Verizon Facility and the private placement bonds,
annual interest expense for these obligations will be
approximately $160.9 million.
The Company expects that its stock may be delisted from the
Nasdaq National Market's quotation system in the near future,
which may limit the liquidity of an investment in the Company's
shares.
Genuity has a 93% ownership interest in Integra S.A. The
operations of this entity are funded through borrowings made by
Genuity. Based on the events, which have occurred subsequent to
June 30, 2002, the Company has been assessing all of its future
funding requirements. On August 10, 2002, Genuity's Board of
Directors approved management's recommendation to no longer
provide funding to Integra S.A, which could cause Integra to
become insolvent and seek the protection afforded debtors under
the bankruptcy laws. The estimated loss associated with the
write-off of Genuity's investment in Integra is $80.0 million,
which will be recorded in the third quarter of 2002.
GLOBAL CROSSING: Rotating Equip. Wants Prompt Contract Decision
---------------------------------------------------------------
Rotating Equipment Corporation asks the Court to compel Global
Crossing Ltd., and its debtor-affiliates to assume or reject a
Construction Contract. It also seeks the allowance and payment
of its administrative expense claim.
Lawrence J. Kotler, Esq., at Duane Morris LLP, in New York,
informs the Court that prior to the Petition Date, Rotating
Equipment and the Debtors entered into a Construction Contract.
Pursuant to the Construction Contract, the Rotating Equipment
was to construct and build a concrete box trench containing
communication conduits, which would function as part of a fiber
optic cable route in the Debtor's communications network. The
total cost for construction of the Communications Conduit was
$1,810,421.33. The Construction Contract provided that the
Construction Costs would be paid with an initial deposit of 35%;
a second payment of 55% and a final payment of 10% of the
Construction Costs.
Other than receiving the Deposit, Mr. Kotler claims that
Rotating Equipment has not been paid for its performance under
the Construction Contract. The Debtors are currently indebted
to Rotating Equipment for $1,269,080.70, net of interest,
collection costs, and other damages arising from the Debtor's
defaults under the Construction Contract. However, the Debtors'
filing of these bankruptcy cases and the resulting imposition of
the automatic stay under Section 362 of the Bankruptcy Code
stayed Rotating Equipment's lawful efforts to pursue its rights
and remedies against the Debtors.
Mr. Kotler points out that Rotating Equipment's performance
under the Construction Contract has created the Communications
Conduit, which is a highly valuable asset of the Debtors' estate
-- a value that far exceeds the amount of the Claim. In
accordance with the terms of the Construction Contract, upon
remitting payment of all amounts due and owing under the
Construction Contract to Rotating Equipment, title to the
Communications Conduit would pass to the Debtors' estate,
thereby further benefiting the Debtors' estate. Should the
Debtors reject the Construction Contract, Rotating Equipment
would be free to transfer title to the Communications Conduit to
a third party, thereby mitigating its damages, which would also
benefit the Debtors' estate.
Mr. Kotler asserts that Rotating Equipment is greatly prejudiced
by the Debtors' failure to perform under the Construction
Contract. Rotating Equipment relies on timely payment of its
receivables in order to meet its obligations to its own
creditors. The Claim represents a significant outstanding
receivable, the immediate payment of which is necessary for it
to maintain its ongoing operations and its own financial
stability. With each passing day, the possibility that Rotating
Equipment will be able to successfully market the Communications
Conduit to a third party grows more uncertain due to:
* changes in the telecommunications market,
* changes in the underlying technology, and
* the threat posed to the integrity of the Communications
Conduit as a result of the conduit not being properly
operated or maintained.
Rotating Equipment does not believe that the relief requested
will prejudice the Debtors.
Mr. Kotler informs the Court that Rotating Equipment -- with the
Debtors' knowledge, permission and acceptance -- performed
postpetition services for the benefit of the Debtors in
connection with the Construction Contract. As a result,
Rotating Equipment incurred costs and expenses amounting to
$522,281.91. These postpetition services rendered by Rotating
Equipment preserved the value of the Debtors' estate.
Accordingly, Rotating Equipment is entitled to an administrative
claim. (Global Crossing Bankruptcy News, Issue No. 16;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
GOLFGEAR INT'L: Enters Licensing Agreement with Nike Golf
---------------------------------------------------------
GolfGear International, Inc. (OTCBB:GEAR), and Nike, Inc.
(NYSE:NKE), jointly announced that effective August 21, 2002,
GolfGear has granted Nike Golf a non-exclusive, long-term,
worldwide license to manufacture and sell golf clubs under
GolfGear's patents covering its proprietary forged-face insert
technology. The license agreement grants Nike Golf the right to
institute litigation against third parties for infringement of
GolfGear's patents. Economic terms of the license agreement were
not announced, nor were Nike Golf's future plans regarding the
manufacture and sale of woods and irons using the licensed
technology.
Founded in 1989 by Don Anderson, GolfGear invented forged-face
insert technology and has been issued seven domestic and two
foreign patents related to insert technology. Designed by
Anderson, GolfGear's entire line of state-of-the-art Tsunami
drivers, fairway woods and irons uses forged-face insert
technology.
GolfGear's world-class Tsunami driver, available in 340 c.c.,
360 c.c. and 400 c.c. sizes, has a double-forged 10-2-3 beta
hybrid titanium alloy face plate attached to a titanium cast
body, resulting in maximum energy transfer and one huge sweet
spot. All GolfGear products comply with the most recent USGA and
R&A rulings relating to Coefficient of Restitution ("COR").
Peter H. Pocklington, GolfGear's new chairman and chief
executive officer, said, "We are delighted that a company of the
caliber and reputation of Nike has chosen to establish a
business relationship with GolfGear. This license agreement
validates Nike Golf's commitment to becoming a market leader in
the golf club segment and to providing golfers with world-class
products."
Pocklington added, "This agreement further validates the fact
that Nike Golf does business in a very ethical manner,
respecting the intellectual property rights of other companies.
We look forward to a long and prosperous relationship with Nike
Golf."
Anderson, GolfGear president, said, "We are honored that Nike
Golf has chosen to license GolfGear's patents covering its
proprietary forged-face insert technology. We believe that
forged-face insert technology is the best way to build high-
performance golf clubs for golfers of all levels, and we are
confident that this technology will have a major impact on
Nike's golf club design and manufacturing capabilities."
"Nike Golf is committed to providing golfers with the best
possible equipment available, both exclusively and through
partnerships with other industry leaders," said Mike Kelly,
category business director for Nike Golf clubs. "We are
evaluating applications for GolfGear's forged face insert
technology with some of the 100 club projects we currently have
in the works."
GolfGear, headquartered in Huntington Beach, Calif., offers a
full line of golf equipment under various brand names, including
"GolfGear," "Leading Edge," "Claw" (putters), "Players Golf"
(junior clubs) and "Diva" (women's clubs). GolfGear's products
are sold principally in the United States through pro shops and
golf specialty stores, as well as in Europe and Asia through
foreign distributors. For more information on GolfGear products,
visit http://www.golfgearint.com
GolfGear's patent portfolio with respect to insert technology is
the largest and most comprehensive in the golf industry, with
seven domestic and two foreign patents issued related to forged-
face insert technology, and additional patents pending. These
patents incorporate a wide variety of forged-face insert
materials, including titanium, beryllium copper, stainless
steel, carbon steel, aluminum, and related alloys, and include
technology for variable face thickness of the insert.
Nike Golf equipment is available at on-course and off-course
specialty shops and selected sporting goods retailers in a
variety of specifications to meet every golfer's needs. Nike
Golf, located in Beaverton, Ore., is passionately dedicated to
honoring and respecting the traditions and heritage of the game,
and to providing committed golfers with the absolute best
equipment in the game in every product category. For more
information on Nike Golf products, visit http://www.nikegolf.com
* * *
As reported in Troubled Company Reporter's June 25, 2002
edition, GolfGear International Inc.'s Los Angeles, California
based independent auditors, in their Auditors Report dated April
4, 2002, state that "the Company has incurred recurring
operating losses and requires additional financing to continue
operations. These conditions raise substantial doubt about the
Company's ability to continue as a going concern."
The Company is attempting to increase revenues through various
means, including expanding brands and product offerings, new
marketing programs, and possibly direct marketing to customers,
subject to the availability of operating working capital
resources. To the extent that the Company is unable to increase
revenues in 2002, the Company's liquidity and ability to
continue to conduct operations may be impaired.
The Company will require additional capital to fund operating
requirements and is exploring various alternatives to raise
this required capital. It has entered into a subscription
agreement to raise from $2,000,000 to $4,000,000 of new capital,
but there can be no assurances that the Company will be
successful in this regard. To the extent that the Company is
unable to secure the capital necessary to fund its future cash
requirements on a timely basis and/or under acceptable terms
and conditions, the Company may have to substantially reduce its
operations to a level consistent with its available working
capital resources. The Company may also be required to consider
a formal or informal restructuring or reorganization.
HOMEGOLD: Weak Financial Results Drag S&P Ratings to Junk Level
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its long-term
counterparty credit and senior unsecured debt ratings on
HomeGold Financial Inc. to triple CCC- from CCC. The outlook
remains negative.
"The ratings actions reflect concern over the continuing
deterioration of Columbia, S.C.-based HomeGold's financial
performance, which has sustained substantial operating losses in
recent years, and, as a result, had a shareholders' deficit of
$110.7 million at June 30, 2002," said Standard & Poor's credit
analyst Steven Picarillo. The company, which has total assets of
$200.1 million, incurred a net loss of $24.1 million for the
first six months of 2002, on the heels of a net loss of $73.6
million and $30.4 million for the years 2001 and 2000,
respectively.
At June 30, 2002, HomeGold had $6.3 million of the original $125
million of senior notes outstanding, as the company has been
repurchasing its debt at a discount.
IMPSAT FIBER: New York Court Fixes Sept. 17 Claims Bar Date
-----------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
orders that September 17, 2002, is the date by which all
creditors of Impsat Fiber Networkers, Inc., holding or wishing
to assert a claim against the estates, must file a proof of
claim or be forever barred from asserting that claim.
Seven categories of claims are excluded from this sweeping
decree:
i) Claims against the Debtors are not listed as "disputed",
"contingent" or "unliquidated" in the Debtors'
Schedules; and
ii) Claims already properly filed with this Court;
iii) Claims previously allowed by this Court;
iv) Holders of equity of interests in the Debtor;
v) Claims of current officers or directors of the Debtors;
vii) Claims held by any direct or indirect non-Debtor
subsidiary; and
viii) Claims that are based solely on any holder's holding or
ownership of the:
a) 2003 Notes,
b) 2005 Notes, or
c) 2008 Notes.
All claims, to be deemed properly filed must be received not
later than 5:00 p.m. of the Bar Date by:
Office of the Clerk of Court
United States Bankruptcy Court for the
Southern District of New York
Re: In re Impsat Fiber Networks, Inc.,
Case No. 02-1288
One Bowling Green
Room 534
New York, NY 10004-1408
Impsat Fiber, a provider of broadband Internet, data, and voice
services in Latin America, filed for chapter 11 protection on
June 11, 2002. Anthony D. Boccanfuso, Esq., and Michael J.
Canning, Esq., at Arnold & Porter represent the Debtor in its
restructuring efforts. When the Company filed for protection
from its creditors, it listed $667,189,368 in total assets and
$1,334,732,793 in total debts.
INTEGRATED HEALTH: Five Star Takes Action to Pursue $2.4MM Claim
----------------------------------------------------------------
FSQ, Inc., formerly known as Five Star Quality Care, Inc., an
SNH Entity, complains that Integrated Health Services, Inc., and
its debtor-affiliates have not acted in accordance with the
terms of their Settlement Agreement with Senior Housing
Properties Trust and Related Entities, which was approved by the
Court in July 2000.
Specifically, Five Star reports that the Debtors did not
turnover the Receivables in connection with the transfer of
Facilities. Five Star seeks payment for $2,420,265 plus
interest, attorneys' fees, costs and other relief.
As previously reported, the Settlement Agreement resolves
disputes over the Debtors' rights with respect to 48 facilities
owned by or mortgaged to the SNH Entities. The Settlement
provides for the transfer of many of the Facilities to the SNH
Entities or their designees and the retention of others by IHS.
Five Star is the relevant SNH Entity with respect to certain
Transfer Facilities located in the states of Colorado, Georgia,
Iowa, Michigan, Missouri, Nebraska and Wyoming. Five Star has
acquired all Licenses with respect to each of these Transfer
Facilities.
In connection with the transfer, the Settlement Agreement
provides that each of the IHS Debtors that is a licensee of a
Transfer Facility will enter into a management and servicing
agreement with the Manager. The Management Agreement provides
that each of these IHS Debtors retain authority and
responsibility for the facilities pending approval of the
transfer of the Licenses to the relevant SNH Entities by the
applicable state and federal regulatory agencies.
In the transition process, the delivery of Receivables to Five
Star was not smooth. Despite repeated requests, Five Star was
not able to receive a substantial portion of the proceeds of
Post-Effective Time Receivables, which it sought under the
Management Agreement.
The parties decided to reconcile the accounts. As a result, in
October 2001, the parties stipulated in a Letter Agreement the
amounts due and payable in connection with the Medicare Periodic
Interim Payments or PIP Receivables and the Medicaid Holdbacks.
IHS agreed to pay, and did pay immediately, to the SNH Entities
a fixed sum constituting a full and final reconciliation of all
Medicare and Medicaid funds previously received or to be
received in the future pursuant to the Settlement Agreement with
specified exceptions.
However, disputes arose after the Stipulation. Five Star
alleges that IHS has failed to make any payment to Five Star for
amounts past due pursuant to the Letter Agreement.
Five Star asserts that payment is due -- or past due -- from IHS
to Five Star with respect to:
PIP Receivable (calendar 2000) $1,043,975
PIP Receivable (calendar 2001) 811,290
Medicaid Holdbacks 565,000
------------
Total payments due: $2,420,265
For failure to comply with the Approval Order, Five Star asks
the Court to:
-- enforce all applicable terms and conditions of the Approval
Order against IHS; and
-- award attorneys' fees and costs of this action and civil
sanctions to be assessed against IHS as administrative
costs of the IHS estate.
Five Star asserts that it is entitled to an immediate accounting
as to all Post-Effective Time Receivables. Accordingly, Five
Star asks the Court to:
-- direct IHS to perform or cause to be performed an
accounting immediately;
-- authorize immediate retention, if necessary, of an
independent accounting firm to be approved by the Court, to
review and audit the accounting prepared by, or on behalf
of, IHS.
Clearly, Five Star points out that IHS is in breach of the
Settlement Agreement, the Management Agreement and the Letter
Agreement. Thus, Five Star seeks:
-- payment of compensatory damages in the amount to be
determined by an independent auditing firm of an audit,
including $2,420,265, plus interest accruing at the legal
rate from the date each payment was due, within three
business days following delivery of the accounting and
audit of Post-Effective Time Receivables and proceeds;
and
-- an award of attorneys' fees and costs of this action
pursuant to the Settlement Agreement, as administrative
costs of the IHS estate.
By reason of wrongful actions and inaction, Five Star argues
that IHS has been unjustly enriched. So if the Court won't
grant Five Star compensatory damages and attorneys' fees, Five
Star instead asks the Court to:
-- direct IHS to make prompt restitution to Five Star,
following delivery of an audit by an independent auditing
firm, of all Post-Effective Date Receivables, including
the PIP Receivable and Medicaid Holdbacks, and proceeds
as determined to be due to Five Star, plus interest; and
-- award Five Star attorneys' fees and costs of this action,
as administrative costs of the IHS estate. (Integrated
Health Bankruptcy News, Issue No. 41; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
INTERNATIONAL TOTAL: Intends to Wind-Up as Soon as Possible
-----------------------------------------------------------
Until the end of fiscal 2002 (March 31, 2002), International
Total Services, Inc., was a significant domestic provider of
aviation contract support services and also a provider of
commercial security staffing services. The Company provided
services to customers in more than 150 cities in the United
States and the United Kingdom. Aviation services offered by the
Company included pre-board screening, skycap, baggage handling
and aircraft appearance services, and wheelchair and electric
cart operations. The Company's security services extended beyond
aviation security, and included the provision of commercial
security staffing services to government and business clients,
hospitals, arenas and museums.
On September 13, 2001, International Total Services, Inc. and
six of its wholly-owned subsidiaries filed voluntary petitions
for reorganization under Chapter 11 of the Federal Bankruptcy
Code in the United States Bankruptcy Court in the Eastern
District of New York. The Company's subsidiaries in the United
Kingdom were not included in the Chapter 11 Filing. The Chapter
11 Filing was not related in any way to the terrorist attack on
September 11, 2001.
The terrorist attack on September 11, 2001 has led to a complete
reevaluation of the respective roles of the federal government
and the private sector in providing security services at
airports. The President of the United States has signed
legislation to make all airport pre-board screeners federal
employees before the end of 2002.
Because the Company did not believe that it could reduce
administrative costs enough to offset the elimination of pre-
board screening revenues and margin due to the Federal Takeover
Legislation, in early 2002, the Company, through the Bankruptcy
Court, marketed and sold the Aviation Services business, the
Commercial Security business and the United Kingdom operations.
The results of the Company's operations are thus no longer
comparable in any meaningful way to the results in prior
reporting periods.
The Company's only remaining business is providing pre-board
screening services to the federal government, and this revenue
is temporary as the federal government is required by law to
take over the pre-board screening process with federal employees
by November 18, 2002. Since, among other reasons, this source of
revenue has a fixed termination, the Company believes that the
proper financial presentation for the Company is now a
liquidation format, adding to the effort and expense of
preparing financial statements, and making them even less
comparable with prior periods. Under any reasonable assumptions,
the Company's current liquidation analyses cause it to believe
that its shareholders will not be entitled to any recovery for
their shares of the Company's stock.
On or about August 1, 2002, the Company ceased its client-
auditor relationship with Arthur Andersen, LLP, the independent
accountant which had been engaged by the Company for prior
fiscal years. This change occurred as a result of Andersen being
unable to perform future audit services for the Company.
Applicable regulations under the federal securities laws require
review of interim financial statements (including those
ordinarily filed with a Form 10-Q) by a reporting issuer's
outside independent accountants. The Company does not believe
that it can reasonably expend the funds necessary to pay for the
requisite review of the required financial statements or to
otherwise pay to engage new independent accountants especially
since the Company will cease receiving revenues prior to the end
of this fiscal year and intends to wind up its affairs as soon
as possible.
Senior management of the Company, already at significantly-
reduced staffing levels, have been and continue to be fully
occupied by (1) matters relating to the asset sales and
associated transitional service periods, (2) the contract with
the federal government, which involves substantial amounts of
paperwork and intense management during the wind-down phase in
which the federal government is steadily taking over the
screening workforce, and (3) administration of the Chapter 11
case, including the attempted negotiation of a plan of
reorganization and resolutions of all pertinent claims.
For all the foregoing reasons, the Company has omitted all
current financial data required to be prepared and filed with
the SEC. For each month after the filing of this statement, the
Company intends to file, pursuant to Item 5 of Form 8-K under
the Securities Exchange Act of 1934, as amended, on a monthly
basis, a copy of the monthly operating report (other than
exhibits providing copies of individual bank account statements
and reconciliations and listings of aged accounts payable and
accounts receivable) filed by the Company with the Bankruptcy
Court.
KMART CORP: S&P Further Junks Lease-Related Credit Deals
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on three
DR Structured Finance Corp., credit lease transactions related
to Kmart Corp., to single-'C' from triple-'C'.
At the same time, the ratings are removed from CreditWatch with
negative implications, where they were placed Jan. 15, 2002.
The rating actions are due to underlying lease payment defaults,
which have resulted in the undercollateralization of the
securities. It is anticipated that the undercollateralization
will increase going forward, and that ultimate principal losses
will likely be experienced on one or more classes of the
certificates.
In each transaction, Kmart net leased properties that secure the
mortgage notes that collateralize the rated securities. Fifteen
of the leases were rejected in conjunction with Kmart's
bankruptcy filing. The rejections resulted in payment shortfalls
on the underlying mortgage notes. A portion of the principal
payments received on the mortgage loans were diverted to pay
full and timely interest on the certificates, which resulted in
the transactions becoming undercollateralized.
In series 1993 K-1, four of 27 leases were rejected; in series
1994 K-1, nine of 34 leases were rejected; and in series 1994 K-
2, two of 10 leases were rejected. The shortfalls occurred when
full principal and interest payments were not received on the
mortgage loans, which were impacted by the lease rejections.
The next scheduled payment for all of the transactions is Feb.
15, 2003.
Ratings Lowered and Removed From Creditwatch Negative
DR Structured Finance Corp.
Lease trust pass-thru certs series 1993 K-1
Rating
Class To From
A-1, A-2 C CCC-/Watch Neg
DR Structured Finance Corp.
Lease trust pass-thru certs series 1994 K-1
Rating
Class To From
A-1, A-2, A-3 C CCC-/Watch Neg
DR Structured Finance Corp.
Lease trust pass-thru certs series 1994 K-2
Rating
Class To From
A1, A2 C CCC-/Watch Neg
KMART CORP: Says It Doesn't Really Need a DIP Facility Increase
---------------------------------------------------------------
Kmart Corporation (NYSE: KM) will not seek authority to increase
the size of its DIP facility. The Company also reaffirmed its
belief that its current $2 billion debtor-in-possession credit
facility will provide more than sufficient liquidity during its
peak borrowing period. Kmart's latest projections show that at
the peak of its seasonal inventory build the Company will have
$1.1 billion of cash and available credit under the DIP
facility, allowing Kmart to continue to meet its post-petition
obligations to vendors on a timely basis.
Earlier this month Kmart announced that it intended to seek
authority from its existing DIP lenders to increase the maximum
size of the DIP facility in an amount to be designated by the
Company, not to exceed $500 million, in order to provide
additional comfort to suppliers and the factoring community.
Upon completion of an amendment to the DIP agreement regarding
facility size, the syndication of additional financing would
have been pursued in a separate transaction. However, following
an assessment of current conditions in the retail financing
market after review with the three statutory committees in the
Company's reorganization case, Kmart has determined that the
expansion of the DIP facility is unnecessary and unwarranted.
Kmart said it expects to receive approval this month of an
amendment to the DIP agreement that would adjust the covenant
pertaining to the Company's cumulative earnings before interest,
taxes, depreciation, amortization and other charges (EBITDA)
over specified periods to provide Kmart with additional
flexibility and better reflect the Company's sales performance
since the commencement of its chapter 11 reorganization case.
Kmart noted that its filing with the Bankruptcy Court in Chicago
last week provided for separation of the proposed covenant
amendment from the proposed facility sizing amendment.
"We are pleased with the significant progress Kmart has achieved
since its voluntary chapter 11 reorganization filing in January
2002, particularly in addressing the needs and concerns of our
vendors," said Kmart Chairman and Chief Executive Officer James
B. Adamson. "Substantially all of our vendors have resumed
shipments to us under normal terms, our outstanding accounts
payable are being processed on a more efficient and timely
basis, and our inventory levels are being managed effectively.
At the same time, we have aggressively pursued opportunities to
reduce costs and attack the systemic problems that have impacted
sales. As a result of these actions, we expect to achieve a
significant improvement in EBITDA for the year."
Adamson continued, "Upon further analysis of the potential cost
of expanding the DIP facility, particularly since we do not
envision a need for the additional funds, we concluded that it
would not be in the best interest of the Company or our
stakeholders to proceed further with the potential increase."
Kmart's liquidity continues to be strong. As previously
reported, the Company had approximately $2.5 billion in cash on
hand and available credit under the DIP facility as of the end
of July 2002. Earlier this week Kmart announced cost reduction
initiatives that are expected to achieve savings of $66 million
this year and $130 million annually thereafter.
Kmart Corporation is a mass merchandising company that serves
America with more than 1,800 Kmart and Kmart SuperCenter retail
outlets. Kmart in 2001 had sales of $36 billion.
Kmart Corp.'s 9% bonds due 2003 (KM03USR6), DebtTraders says,
are trading at 17 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for
real-time bond pricing.
KNOLOGY INC: Extends Exchange Offer for 11-7/8% Notes to Sept. 6
----------------------------------------------------------------
Knology, Inc., is extending its exchange offer for the 11-7/8%
Senior Discount Notes due 2007 issued by Knology's subsidiary,
Knology Broadband, Inc. The exchange offer, as extended, will
expire at 5:00 p.m., New York City time, on September 6, 2002,
unless extended by the Company.
As of August 22, 2002, the Company had received tenders of
$353.3 million principal amount at maturity of Old Notes,
including guarantees of delivery, representing 93% of the $379.9
million aggregate principal amount at maturity of Old Notes
subject to the exchange offer. An additional $64.2 million
principal amount at maturity of Old Notes outstanding are held
by Valley Telephone Co., Inc., a subsidiary of Knology, and will
be canceled at the completion of the exchange offer. The
exchange offer is subject to certain conditions, including the
exchange of 100% of the outstanding Old Notes (other than those
held by non-accredited investors and Valley), which condition
may be waived under certain circumstances.
In connection with the exchange offer, the Company also
solicited consents to amend the terms of the indenture governing
the Old Notes. As of August 22, 2002, the Company had received
sufficient consents to amend the indenture, and has amended the
indenture to remove certain covenants, thereby terminating the
ability of holders of Old Notes to withdraw Old Notes once
tendered.
If the conditions to the exchange offer are not satisfied or
waived, the Company will seek to restructure the Old Notes
pursuant to a prepackaged plan of reorganization of Broadband
under the Bankruptcy Code. The Company has conducted a
solicitation of acceptances with respect to the prepackaged plan
of reorganization, and, as of August 22, 2002, the Company had
received sufficient acceptances to obtain approval of the
prepackaged plan by the bankruptcy court on a consensual basis.
Accordingly, the solicitation of acceptances with respect to the
completion of the prepackaged plan has been completed and will
not be extended.
Offers to exchange Old Notes are made only by the Offering
Circular and Solicitation Statement, which can be obtained by
calling MacKenzie Partners, Inc., the Information Agent, at +1-
212-929-5500 (call collect) for banks and brokers or +1-800-322-
2885 (toll-free) for all others. In addition, holders of the
Old Notes may contact Credit Suisse First Boston Corporation,
the Dealer Manager, at +1-212-538-0653 (call collect), attention
David Alterman, with questions regarding the exchange offer.
Knology and Broadband, headquartered in West Point, Georgia, are
leading providers of interactive voice, video and data services
in the Southeast. Their interactive broadband networks are some
of the most technologically advanced in the country. Knology
and Broadband provide residential and business customers over
200 channels of digital cable TV, local and long distance
digital telephone service featuring the latest enhanced voice
messaging services, and high speed Internet service, which
enables consumers to download video, audio and graphic files at
fast speeds via a cable modem. Broadband was initially formed in
1995 by ITC Holding Company, Inc., a telecommunications holding
company in West Point, Georgia, and South Atlantic Venture
Funds, and Knology was formed in 1998. For more information,
please visit its Internet site at http://www.knology.com
LAIDLAW INC: Seeks Approval of Settlement Pact with Safety-Kleen
----------------------------------------------------------------
Laidlaw and its debtor-affiliates ask the U.S. Bankruptcy Court
for the Western District of New York to approve a comprehensive
Settlement Agreement resolving claims by and against Safety-
Kleen Corp., under Rule 9019 of the Federal Rules of Bankruptcy
Procedure.
Richard M. Cieri, Esq., at Jones, Day, Reavis & Pogue, tells
Judge Kaplan that resolving the various claims relating to
Safety-Kleen pursuant to terms of the Settlement Agreement is a
cornerstone of Laidlaw's restructuring efforts. With the
resolution of these multi-billion dollar claims, cross-claims,
counter-claims and every other kind of claim imaginable, Laidlaw
can quickly move to confirm their Plan of Reorganization and
emerge from Chapter 11 well before the year ends.
Laidlaw is convinced that the terms and conditions set forth in
the Settlement Agreement represent a reasonable Settlement of
Laidlaw's disputes with Safety-Kleen and the related Safety-
Kleen Parties. The Settlement Agreement is the product of
months of intense negotiations aided by the Court-supervised
mediation process. Litigating each of the various underlying
claims would require the resolution of an extraordinarily
complicated set of facts and legal issues, cost Laidlaw
significant amounts of time and money and expose them to
potentially large adverse judgments.
The Global Settlement Pact provides for:
(a) the settlement and dismissal of Proofs of Claims and
Adversary Proceedings, specifically:
-- Proofs of Claim in Laidlaw's Chapter 11 cases filed
by Safety-Kleen and the Safety-Kleen Creditors'
Committee, including Safety-Kleen Claim Nos. 556 and
704;
-- Proofs of Claim filed in Laidlaw's Chapter 11 cases
by certain Safety-Kleen Directors, including Safety-
Kleen Director Claims;
-- Proofs of Claim filed in the Laidlaw's Chapter 11
cases by Cole Taylor, as indenture trustee for the
9.25% Safety-Kleen senior notes due 2009, including
Safety-Kleen Noteholder Claims;
-- the Safety-Kleen Adversary Proceeding;
-- Proofs of Claim filed in the Safety-Kleen Chapter 11
Cases by:
(a) the Laidlaw Companies, including Proof of
Claim Nos. 15600 and 17127;
(b) James R. Bullock, including Proof of Claim No.
11389;
(c) John R. Grainger, including Proofs of Claim
Nos. 13036 through 13104 and 13113 through 13117;
(d) Leslie W. Haworth, including Proof of Claim
No. 14345; and
(e) Peter Widdrington, including proof of Claim
Nos. 11155 and 11156;
(b) Safety-Kleen's $225,000,000 claim will be allowed as a
general unsecured claim in Class 6 of the Plan against
Laidlaw;
(c) Laidlaw will assign to Toronto Dominion, Inc. any and
all rights it may have to the funds contained in
account number 1065366 at Bank One, 1 Bank One Plaza in
Chicago, Illinois, which has a value of $2,500,000. In
addition, Laidlaw Inc. agrees not to make any draws upon
the Dai-Ichi Kangyo Bank Letter of Credit and to execute
any documentation reasonably necessary to release any and
all rights it may have under the letter of credit.
Furthermore, Laidlaw agrees to waive any rights it may
have against Safety-Kleen for payments of any amounts due
under or to seek reimbursement for any amounts that have
been paid or may in the future be paid by Laidlaw Inc.,
under the Safety-Kleen Corp. Insurance & Claims Handling
Program;
(d) each of Safety-Kleen, its Directors, Toronto Dominion,
Inc., each member of the Steering Committee of the
Safety-Kleen Lenders and Laidlaw will execute and
exchange Releases. Toronto Dominion, in its capacity as
Administrative agent for the Safety-Kleen Lenders, has
the authority to bid itself and all of the Safety-Kleen
Lenders to the Settlement Agreement and the release to be
executed by Toronto Dominion on behalf of the Safety-
Kleen Lenders;
(e) the $71,400,000 Westinghouse Note Claim will be allowed
as a general unsecured claim pursuant to Class 6 of the
Plan;
(f) the resolution of additional claims involving Laidlaw
and the Safety-Kleen Debtors, which will be filed under
seal;
(g) participation of the Subcommittee of Laidlaw Bank
Creditors and the Subcommittee of Laidlaw Bondholder
Creditors in the mediation proceedings and the
negotiation of the Settlement Agreement, as well as
supporting the motion seeking Court approval of the
Settlement Agreement; and
(h) certain restrictions on the use of materials discovered
during the Mediation.
The Settlement Agreement will become effective upon the
satisfaction or waiver of these conditions:
-- Approval by the Delaware Bankruptcy Court and the
Canadian Court of the Settlement Agreement;
-- confirmation of Laidlaw's Chapter 11 Plan and the
occurrence of the Plan's Effective Date;
-- the Parties respective obligations under Article II of
the Settlement Agreement will be satisfied or
waived by the parties entitled to performance thereof;
-- each of the Laidlaw Directors will execute and
exchange a release; and
-- each of the releases provided for in the Settlement
Agreement will be executed and exchanged as
specified in the Settlement Agreement.
Thus, Mr. Cieri contends that the terms and conditions of the
Settlement Agreement are fair and reasonable and therefore, the
Court should approve Laidlaw's request.
Confidential Documents Filed Under Seal
Laidlaw sought and obtained the Court's approval to:
(a) file Exhibit F to the Settlement Agreement under seal;
(b) file the Supplement under seal;
(c) require that any other papers filed with respect to the
relief requested in the Settlement Motion that discuss
the contents of Exhibit F likewise be filed under the
seal; and
(d) provide that any proceedings concerning the Confidential
Pleadings or its contents occur under seal.
In addition, Judge Kaplan rules that the confidential Pleadings
will not be made available to the general public but only to:
(i) counsel to the Laidlaw debtors;
(ii) the US trustee;
(iii) counsel to the Creditor's Committee;
(iv) counsel to the Subcommittee of Laidlaw Bank
creditors;
(v) counsel to the Subcommittee of Laidlaw bondholder
creditors; and
(vi) counsel to the parties to the Settlement Agreement.
Garry M. Graber, Esq., at Hodgson Russ LLP, in Buffalo, New
York, explains that Exhibit F to the Settlement Agreement
contains a covenant by Safety-Kleen that is of significant value
to Laidlaw. This covenant only has value to the extent that it
remains confidential. Accordingly, in order to maintain the
value of this covenant, Safety-Kleen and the Laidlaw must keep
this small piece of the Settlement Agreement secret. (Laidlaw
Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
LAKES ENTERTAINMENT: Fails to Meet Nasdaq Listing Requirements
--------------------------------------------------------------
Lakes Entertainment, Inc. (Nasdaq:LACO), announced that on
August 21, 2002, Lakes Entertainment, Inc., received a Nasdaq
Staff Determination letter indicating that the Company does not
comply with the continued listing standard set forth in Nasdaq
Marketplace Rule No. 4310(c)(14), which requires companies to
file all reports under the Securities Exchange Act of 1934 on a
timely basis. As a result, Lakes' securities are subject to
delisting from the Nasdaq National Market and the fifth
character "E" has been appended to the trading symbol for the
Company's securities. The delisting will be stayed pending a
hearing to be requested by the Company as described below.
Lakes previously announced on August 8, 2002 that it had engaged
Deloitte & Touche, LLP to re-audit the Company's 2001 financial
statements in anticipation of restating its financial statements
for the year ended December 30, 2001. Due to the time involved
in conducting the re-audit, the Company was not able to file its
Quarterly Report on Form 10-Q for the quarter ended June 30,
2002 on a timely basis.
The Company intends to request a hearing before a Nasdaq Listing
Qualifications Panel to review the Staff Determination request
continued listing on the Nasdaq National Market. There can be no
assurance that the Panel will grant the Company's request for
continued listing.
Lakes Entertainment, Inc., currently has development and
management agreements with four separate Tribes for four new
casino operations, one in Michigan, two in California and one
with the Nipmuc Nation on the East Coast. Lakes Entertainment
also has agreements for the development of one additional casino
on Indian-owned land in California through a joint venture with
MRD Gaming. Additionally, the Company owns approximately 80% of
World Poker Tour, LLC, a joint venture formed to film and
produce poker tournaments for television broadcast.
Lakes Entertainment, Inc., common shares are traded on the
Nasdaq National Market under the trading symbol "LACOE".
LEVEL 3 COMM: Completes Amendment to Sr. Secured Credit Facility
----------------------------------------------------------------
Level 3 Communications, Inc., (Nasdaq: LVLT) has amended the
terms of its existing Senior Secured Credit Facility.
The Credit Facility was originally signed in September 1999 and
increased to $1.775 billion in March 2001. The Credit Facility
previously consisted of $1.125 billion in term loans and a $650
million undrawn revolving credit facility. The Credit Facility
contained certain financial covenants, including two revenue-
based covenants.
Modifications to the Credit Facility, per the terms of the
amendment, include the following:
-- Increased ability for the company to pursue
acquisitions for cash consideration;
-- Removal of the two revenue-based financial covenants;
and
-- Modification of an Adjusted EBITDA-based covenant in
accordance with the company's current business plan.
In return for these modifications, the company has agreed to the
following:
-- Reduction of the $650 million undrawn revolving credit
facility by $500 million to $150 million, with
restrictions on availability;
-- Maintenance of a minimum cash balance, generally equal
to $525 million; and
-- Increase of 0.5% per year to the cost of borrowing.
"Our bank agreement previously contained certain restrictions
that might have inhibited our ability to capitalize fully on
consolidation opportunities," said Sureel Choksi, CFO of Level
3. "While this amendment was not necessary, it provides Level 3
with additional operating and financial flexibility, while
preserving our cash position and fully funded business plan. We
are particularly pleased that we were able to achieve this
outcome and that we have the support of our bank group in
pursuing industry consolidation opportunities."
Financial Covenants
The Minimum Telecom Revenue covenant and the Total Debt to
Telecom Revenue covenant from the original credit facility were
removed. Additionally, the remaining covenants are now
calculated on a consolidated basis, excluding the company's toll
road operations. Certain modifications were also made to the
Total Leverage Ratio covenant (Total Debt to Adjusted EBITDA) in
accordance with the company's current business plan. The
covenant will now be tested on a twelve month trailing basis
beginning on June 30, 2004, with a maximum allowable level of
11.5x, versus the original credit facility, which had a maximum
allowable level of 6.0x beginning on December 31, 2004. Certain
other covenants have also been modified.
Liquidity
As part of the amendment, the company agreed to reduce the
amount of its undrawn revolving facility from $650 million to
$150 million. Of the $150 million, $50 million is available
immediately for letters of credit and the remaining $100 million
becomes available at the end of one year, subject to the company
satisfying certain financial criteria. As previously stated, the
company is and remains fully funded through free cash flow
breakeven, excluding the $650 million revolving facility.
The company has agreed to maintain minimum consolidated cash
balances generally equal to $525 million throughout the life of
the Credit Facility. The company had $1.55 billion in cash at
the end of the second quarter; pro forma for the $500 million in
junior convertible subordinated notes it sold in July 2002. No
pay down of outstanding loan amounts was required under the
amendment.
Other
Other changes made to the Credit Facility include, but are not
limited to, increasing the amount of collateral pledged to the
senior secured lenders, certain limitations on the company's
ability to repurchase debt for cash and the ability to incur
certain types of other indebtedness and liens.
The amended and restated credit facility will be filed with the
SEC on a Current Report on Form 8-K.
Level 3 (Nasdaq: LVLT) is an international communications and
information services company offering a wide selection of
services including IP services, broadband transport, colocation
services and the industry's first Softswitch based services.
Its Web address is http://www.level3.com
The company offers information services through its wholly-owned
subsidiaries (i)Structure and Software Spectrum. (i)Structure
is an Application Infrastructure Provider that provides managed
IT infrastructure services and enables businesses to outsource
IT operations. Its Web address is www.i-structure.com .
Software Spectrum is a global business-to-business software
services provider specializing in enterprise software
management, licensing and support. Its Web address is
http://www.softwarespectrum.com
Level 3 Communications' 11.25% bonds due 2010 (LVLT10USR1),
DebtTraders says, are trading at 36.5 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LVLT10USR1
for real-time bond pricing.
LTV: Parties Agree to Value Railroad Assets at $11.25 Million
-------------------------------------------------------------
To recall, LTV Corp.'s Railroad Subsidiaries produced an
independent appraisal of $17.7 million for their railroad
assets, while LTV Steel came up with an appraisal of $6.8
million for the same assets. After extensive negotiations, and
before any decision by Judge Bodoh on the valuation issue, LTV
Steel and the Railroad Subsidiaries agreed to compromise and
settle their differences regarding the value of the Railroad
Assets. The parties have set the value at $11.25 million.
Accordingly, LTV Steel Company asks Judge Bodoh to approve its
settlement with River Terminal Railway Company, Chicago Short
Line Railway Company, and The Cuyahoga Valley Railway Company.
Nicholas M. Miller, Esq., at Jones Day Reavis & Pogue, in
Cleveland, Ohio, asserts that the Court should approve this
settlement because the terms are beneficial to LTV Steel's
estate and creditors:
(1) The Railroad Settlement reflects the good faith,
arm's-length negotiations on both parties that resulted
in the compromise value that is:
(a) $6.45 million less than the independent appraisal
value of the Railway Subsidiaries, and
(b) $1 million less than the mean average of the
competing independent appraisals.
(2) The Railroad Subsidiaries Settlement eliminates all
uncertainty and the attendant delay associated with a
full evidentiary hearing involving the inherent
uncertain and imprecise subject of valuation. The
time and expense required of the Debtors in other
valuation hearings and trials evidence the difficulties
and delays that would attend an appraisal hearing
in this matter; and
(3) The Railroad Settlement benefits the creditors of
LTV Steel's estate by:
(a) reducing the proposed allocation to the Railroad
Assets by $6.45 million, and
(b) thus, increasing the pro rata allocation of the
net proceeds to the other acquired assets.
Moreover, Mr. Miller relates, the Creditors' Committee and LTV
Steel's postpetition lenders have consented to the Railroad
Settlement. (LTV Bankruptcy News, Issue No. 35; Bankruptcy
Creditors' Service, Inc., 609/392-00900)
LTV STEEL: Executives Won't Certify for SEC What they Won't File
----------------------------------------------------------------
The LTV Corporation was incorporated in the State of Delaware in
1958 as a successor to a California corporation organized in
1953. Prior to filing for bankruptcy under chapter 11 of the
United States Bankruptcy Code and obtaining authorization from
the Bankruptcy Court to implement an asset protection plan, the
Company was an integrated steel producer and a producer of
mechanical and structural steel tubing products, bimetallic wire
products and pre-engineered metal buildings systems. The Company
is currently in the process of liquidating and has publicly
announced that its common stock is worthless.
On December 29, 2000, the Company and forty-eight of its wholly
owned direct and indirect subsidiaries filed voluntary petitions
for reorganization under chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Ohio, Eastern Division. At that time, the
Company anticipated that it would be possible to reorganize its
businesses. Accordingly, the Company maintained its full
complement of accounting systems and continued to file all
reports required to be filed with the Securities and Exchange
Commission. However, the nine months ended September 30, 2001
was the last period for which the Company filed financial
statements with the Securities and Exchange Commission. In
November 2001 the Company began to liquidate its integrated
steel operations and to market its other businesses for sale.
The Company continues to manage its business as a debtor-in-
possession pursuant to sections 1107 and 1108 of the Bankruptcy
Code. As a debtor-in-possession, the Company is required to file
monthly operating reports with the U.S. Trustee and the
Bankruptcy Court until the conclusion of the case or until the
U.S. Trustee modifies the Company's reporting obligations.
LTV Steel has stated that the information contained in the
Bankruptcy Reports is sufficient disclosure for the protection
of investors while the Company is subject to the jurisdiction of
the Bankruptcy Court.
1. THE COMMON EQUITYHOLDERS WILL NOT RECEIVE ANY
PROCEEDS FROM THE DISPOSITION OF THE COMPANY'S ASSETS OR OTHER
RECOVERY IN THE COMPANY'S CHAPTER 11 CASE. There is no set of
facts known to management that will result in proceeds of asset
sales exceeding the Company's known liabilities. Thus, there
will be no recovery to the Company's stockholders. Therefore, on
December 18, 2001, the Company's Board of Directors adopted
resolutions authorizing the Company's officers to make public
announcements to the effect that the Company does not expect the
holders of its outstanding common stock to obtain any value in
the bankruptcy proceedings in light of the implementation of the
Asset Protection Plan, and that the Company's common stock thus
should be viewed by the stockholders as worthless. The Board of
Directors continues to stand behind this resolution.
2. THE COMPANY IS NO LONGER PURSUING A COURSE OF ACTION
THAT WILL RESULT IN AN ONGOING, OPERATING LTV CORPORATION, BUT
IS INSTEAD SELLING OR OTHERWISE DISPOSING OF ALL ITS REMAINING
ASSETS. On November 20, 2001, the Company filed motions in the
Bankruptcy Court requesting approval to implement a winddown
plan referred to as the Asset Protection Plan, reject labor
agreements and take other actions necessary to idle the
operations of its largest reportable segment, its integrated
steel operations, and prepare the facilities for sale. By order
of the Bankruptcy Court entered on December 7, 2001, the Company
was authorized to implement the Asset Protection Plan. The
implementation of the Asset Protection Plan began on December 7,
2001 and is continuing today.
Although the Company is currently operating as a
debtor-in-possession, its only operating assets are those
related to its mechanical, structural tubing and bimetallic wire
products businesses. The Company is currently marketing the
assets associated with these businesses for sale and intends to
divest itself of these businesses for the benefit of creditors.
Proceeds from the sale of these businesses are not expected to
be available for the benefit of the common stockholders.
3. COMPLIANCE WITH THE EXCHANGE ACT'S REPORTING
REQUIREMENTS WOULD BE COSTLY. THE COMPANY HAS EXTREMELY LIMITED
FINANCIAL RESOURCES AND IS PRECLUDED FROM MAKING CURRENT
PAYMENTS TO THOSE SERVICE PROVIDERS THAT WOULD ASSIST THE
COMPANY IN COMPLYING WITH ITS REPORTING OBLIGATIONS. Preparation
of the periodic reports is not possible with the Company's
current internal resources and without external support. As a
result of, and following the Bankruptcy Court's authorizing the
Company to implement the Asset Protection Plan, substantially
all of the Company's employees were laid off and will not be
rehired by the Company. The Company asked permission of its
creditors (which is required under the court approved Asset
Protection Plan) to expend the funds necessary to complete the
work necessary for filing the Form 10-K, but the Company's
request was denied. The creditors have taken the position that
any professional who acts to help the Company in preparing a
Form 10-K will be doing so at the risk of zero compensation. The
Company's small staff would have an enormous burden in
attempting to comply with the Exchange Act's reporting
requirements.
Furthermore, the market capitalization, at current (and
inflated) market prices of 0.006 cents per share aggregates to
less than $0.6 million. The Company does not believe the cost of
completing reports on Forms 10-K or 10-Q to be justified in
light of the serious and difficult financial situation of the
Company at this time and the lack of value of the common stock.
In view of the foregoing the chief executives of the Company
have pleaded exception to the requirement of sworn statements
regarding the current financial condition of the Company.
LUMENON INNOVATIVE: Secures $14 Million Financing Commitment
------------------------------------------------------------
Lumenon Innovative Lightwave Technology, Inc. (NASDAQ: LUMM), a
photonic materials science and process technology company
offering high-quality optical devices for the global
telecommunications market, has secured a financing commitment
from a private institutional investment fund.
Under the terms of the common stock purchase agreement, Lumenon
has the option to obtain a maximum of US$14,000,000 by issuing
shares of its common stock in a series of periodic draw downs of
funds. The draw downs are subject to certain limitations and the
fulfillment of certain conditions, including a provision which
limits the investor's holdings to 9.999% of the outstanding
shares of Lumenon common stock at any given time and the receipt
of stockholder approval for draw downs which will result in the
issuance of common stock in excess of 19.9% of the common stock
issued and outstanding as of the date of the agreement. These
limitations and conditions will limit the amount which Lumenon
may draw down from time to time.
The price of the shares of common stock to be issued to the
investor will be based on a discount from 5% to 10% of the
volume weighted average price of the common stock during the
draw down period. Lumenon has no obligation to draw down the
full amount of the commitment.
In connection with the agreement, Lumenon issued a warrant to
the investor to purchase 140,000 shares of Lumenon's common
stock at an exercise price of $0.21 per share and within 30 days
of the agreement, Lumenon has undertaken to issue to the
investor an additional warrant to purchase 140,000 shares of
Lumenon common stock at an exercise price of $0.21 per share.
Gary Moskovitz, Lumenon's President and CEO, stated, "We are
very pleased with this financing arrangement. The financing
facility is only one component of an overall financing strategy
Lumenon is currently implementing and is essentially a back up
facility that we intend to use if necessary. This financing
facility is intended to give Lumenon financial flexibility to
accelerate the development, manufacture and distribution of our
products."
Lumenon Innovative Lightwave Technology, Inc., a photonic
materials science and process technology company, designs,
develops and builds optical components and integrated optical
devices in the form of packaged compact hybrid glass and polymer
circuits on silicon chips. These photonic devices, based upon
Lumenon's proprietary materials and patented PHASIC(TM) design
process and manufacturing methodology, offer system
manufacturers greater functionality in smaller packages and at
lower cost than incumbent discrete technologies. Lumenon(TM) is
a trademark of Lumenon Innovative Lightwave Technology Inc.
For more information about Lumenon Innovative Lightwave
Technology, Inc., visit the Company's Web site at
http://www.lumenon.com
* * *
As reported in Troubled Company Reporter's June 10, 2002,
Lumenon Innovative Lightwave Technology, Inc., received approval
from the Nasdaq Stock Market, Inc., to transfer the listing of
the Company's common stock from The Nasdaq National Market to
The Nasdaq SmallCap Market effective at the opening of business
Friday, June 7, 2002. The Company's common stock will continue
to trade under its current symbol "LUMM".
In announcing the approval, Gary Moskovitz, President and Chief
Executive Officer of Lumenon, said, "We are pleased to have
received approval for listing on The Nasdaq SmallCap Market.
This listing allows us to continue trading on an electronic,
well-regulated market and provides us with a grace period until
August 13, 2002, to comply with Nasdaq's $1.00 minimum bid price
requirement. If we do not meet this requirement by August 13,
2002, Nasdaq may grant us an additional 180 day grace period to
regain compliance, until February 10, 2003, as long as we
continue to meet the initial listing requirement for The Nasdaq
SmallCap Market which may be met by a public float of $5 million
in stockholders' equity.
"If, at any time during this period, we achieve the $1.00
minimum bid requirement for 30 consecutive days, provided that
we have maintained compliance with the listing requirements of
The Nasdaq National Market, other than bid price, at all times,
we may be eligible to transfer back to The Nasdaq National
Market."
MAJOR AUTOMOTIVE: Has Until Nov. 20 to Meet Nasdaq Requirements
---------------------------------------------------------------
The Major Automotive Companies, Inc. (Nasdaq NM: MAJR), has
received a Notification of Deficiency from Nasdaq indicating
that the Company is not in compliance with Nasdaq Marketplace
Rule 4450(a)(5) relating to minimum bid price per share ($1.00)
that is required for continued listing on the Nasdaq National
Market.
The Company has until November 20, 2002 to demonstrate
compliance with this rules or face delisting. Alternatively, the
Company may apply to transfer its securities to the Nasdaq
SmallCap Market, which, if such application is accepted, will
grant the Company an extended grace period, until February 18,
2003 to demonstrate compliance with the $1.00 minimum bid
requirement.
The Company is evaluating all alternatives.
The Major Automotive Companies is a holding company for the
Major Automotive Group, a leading consolidator of automobile
dealerships in the New York metropolitan area.
For additional information, visit the Company's Web site at
http://www.majorworld.com
METROCALL INC: Seeking Court Authority to Engage Ernst & Young
--------------------------------------------------------------
Metrocall, Inc., and its debtor-affiliates want to utilize the
professional services of Ernst & Young LLP to provide audit,
accounting and tax services. The Debtors are asking authority
from the U.S. Bankruptcy Court for the District of Delaware to
employ the firm.
Ernst & Young has been engaged by the Debtors to replace Arthur
Andersen, LLP. Certain members of Ernst & Young team were
previously employed by Arther Andersen, and have worked with the
Debtors for several years.
Ernst & Young is expected to provide:
a) audit and report on the consolidated financial
statements of Metrocall, Inc. for the year ending
December 31, 2002;
b) review the Debtor's unaudited quarterly information in
accordance with applicable professional standards
consisting primarily of inquiries and analytical
procedures;
c) advise the Debtor regarding specific accounting matters
it may encounter;
d) advise the Debtor regarding specific tax matters it may
encounter;
e) provide services inconnection with preparation of
Federal and state income and franchise tax returns as
indicated in attached addendum; and
f) prepare business personal property tax returns.
The Debtors agree to pay:
a) Ernst & Young's fees for audit and review services will
be a fixed fee arrangement of $310,000 for December 31,
2002 audit, and $18,500 for each quarterly review.
b) Ernst & Young's fees for 2001 federal, state and local
tax return services are estimated to be $94,500,
depending on the number of state returns.
c) Ernst & Young's fees for remaining 2002 property tax
services, will be a fixed fee arrangement of $130,000.
Metrocall, Inc., is a nationwide provider of one-way and two-way
paging and advanced wireless data and messaging services. The
Company filed for chapter 11 protection on June 3, 2002. Laura
Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$189,297,000 in total assets and $936,980,000 in total debts.
NATIONAL STEEL: Court Approves AFCO Insurance Finance Agreement
---------------------------------------------------------------
Pursuant to Section 364(c)(2) of the Bankruptcy Code, National
Steel Corporation and its debtor-affiliates obtained the Court's
authority to enter into a Premium Financing Agreement with AFCO
Credit Corporation, wherein AFCO will finance National Steel's
insurance property premiums.
As previously reported, the Debtors need to maintain various
insurance policies consisting primarily of general property
coverage. Some of these policies have to be replaced, which
require payment, by July 30, 2002. The policies' total annual
premium is $8,809,998.
Thus, the Debtors obtained $6,256,838 financing of the premium
payments. AFCO offers a 3.87% annual percentage rate charge,
which, the Debtors believed, is commercially reasonable, to
finance the policy premium payments.
The Premium Finance Agreement grants AFCO a security interest in
the gross unearned premiums that would be payable in the event
of the policies' cancellation. It further authorizes AFCO to
cancel the financed insurance policies and obtain the return of
any unearned premiums in the event of a default in the payment
of any installment due. (National Steel Bankruptcy News, Issue
No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900)
NATIONSRENT: Court Okays Bouchard Margules as Special Counsel
-------------------------------------------------------------
NationsRent Inc. and its debtor-affiliates obtained permission
from the Court to retain and employ Bouchard Margules &
Friedlander as their conflict and special litigation counsel
with respect to certain discrete matters.
The Debtors retain Bouchard with respect to discrete issues that
have and will arise with regard to the Debtors' cases where
their current counsel -- Jones, Day, Reavis & Pogue and
Richards, Layton & Finger, P.A. -- may have a conflict.
The Debtors have selected Bouchard's David J. Margules and
Joanne P. Pickney as their conflicts counsel because these
professionals are experienced practitioners in the Delaware
Courts.
Accordingly, these professionals will be paid for the legal
services in accordance with the firm's ordinary and customary
hourly rates:
David J. Margules $340 per hour
Joanne P. Pickney 275 per hour
They will also be entitled to reimbursements of expenses
incurred. (NationsRent Bankruptcy News, Issue No. 17; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NEOTHERAPEUTICS: Streamlines Organization to Save $500K Monthly
---------------------------------------------------------------
NeoTherapeutics, Inc. (Nasdaq: NEOT) announced a reorganization
of the Company which will bring the expected monthly expenses,
or burn rate, down to less than a half million dollars per
month. The changes are intended to allow the Company to focus on
the development of its phase 3 anti-cancer drug, Satraplatin,
and to negotiate alliance agreements for the development of its
neurology products.
As part of the reorganization, the Company plans to consolidate
its activities into the parent company, eliminate operations at
all subsidiaries and focus its research efforts. In addition,
the Company has eliminated 23 positions and currently employs
the equivalent of 21 full time employees. Together, the changes
are expected to result in significant savings.
The following personnel will head the NeoTherapeutics team:
Luigi Lenaz, M.D., will oversee the development of the Company's
anti-cancer drug portfolio. Dr. Lenaz, an oncologist, spent
nearly 20 years in various executive positions at Bristol-Myers
Squibb in the anti-cancer drug development area, where he played
a key role in bringing numerous anti-cancer drugs to market
including Taxol(R), Cisplatin and Carboplatin.
John McManus will manage financing and financial planning
activities and play an active role in corporate strategic
planning. John played a key role in our efforts to raise money
from long-term oriented investors when he was with the Company
previously, and he will lead our efforts to shore up the
Company's financial condition. John has over ten years of
experience in advising and assisting numerous public companies
in financial, strategic, accounting and reorganization matters.
Martyn Gunning will be responsible for business development,
where he will pursue alliance discussions and manage existing
alliance arrangements for the Company. Martyn has served as the
Director of European New Product Development for Allergan
Europe, an affiliate of the U.S. multi-national company
Allergan, Inc., where he played a leading role in the
integration of research and development, marketing, operations
and logistics efforts for their European operations. Prior to
Allergan, Mr. Gunning was with Beaufour Ipsen in Paris, where he
was also involved in business development and licensing.
David Helton will oversee research and pre-clinical activities
and alliances. Dave and his team are responsible for the
development of the Company's anti-psychotic platform and other
new neurological drug candidates. He will also work closely with
Martyn Gunning in pursuing pharmaceutical partners for the
development of these products. Dave has extensive experience in
pharmacology and toxicology and has held various positions for
Eli Lilly and Company.
Ashok Gore, Ph.D., will oversee compliance, quality assurance
and manufacturing. Dr. Gore held various positions in the field
of pharmaceutical development for Bristol-Myers Squibb, R.W.
Johnson Research Institute, Knoll Pharmaceuticals, Hoechst
Pharmaceuticals, Block Drug, Miles Pharmaceuticals and
SmithKline Beecham Pharmaceuticals over his thirty-year career.
Most recently while at SuperGen, Dr. Gore played a key role in
the development of chemotherapy drugs such as paclitaxel and
daunorubicin. Dr. Gore also holds several patents.
Michael Volk, C.P.A., will manage the accounting and SEC
reporting functions. Michael has served as the Company's
Controller for the past year and has managed the Company's SEC
compliance. He previously spent seven years with Ernst & Young,
working his way to the level of audit manager at the firm.
"I have a high level of confidence in our restructured
management team," stated Rajesh C. Shrotriya, M.D., Chairman and
Chief Executive Officer of NeoTherapeutics. "We have assembled a
group of highly skilled and motivated people who are committed
to the execution of our new strategy. The reduction in expenses
and sharpened focus we have announced today are just the first
signs of what we hope to accomplish together going forward."
NeoTherapeutics seeks to create value for shareholders through
the out-licensing and commercialization of anti-cancer drugs and
the discovery and out-licensing of drugs for central nervous
system disorders. Satraplatin, the Company's lead oncology drug,
is being prepared for a phase 3 study in prostate cancer.
Additional anti-cancer drugs are in phase 1 and 2 stages of
development for bladder cancer and non-Hodgkin's lymphoma. The
Company has pre-clinical neurological drug candidates for
disorders such as attention deficit hyperactivity disorder,
schizophrenia, dementia, mild cognitive impairment and pain. For
additional information visit the Company's Web site at
http://www.neot.com
As reported in Troubled Company Reporter's July 25, 2002,
NeoTherapeutics Inc., said its Board of Directors voted to
authorize a 25-for-1 share reverse split of its outstanding
common stock, subject to stockholder approval.
NEW WORLD RESTAURANT: Expects Improved Adjusted EBITDA for Q2
-------------------------------------------------------------
New World Restaurant Group (Pink Sheets: NWCI) expects adjusted
EBITDA for the quarter ended July 2, 2002, to approximate $11.4
million. Adjusted EBITDA excludes unusual charges and legal
expenses. The company also announced that the filing of its Form
10-Q for the second quarter of fiscal 2002 will be delayed by
anticipated restatements of its financial statements for the
four trailing quarters. On July 29, 2002, the company replaced
its independent auditors for those historical periods, Arthur
Andersen, LLP, with new independent auditors, Grant Thornton,
LLP. A review by its new auditors of the accounting treatment
in those periods of the company's increasing rate indebtedness,
Series F preferred stock and related warrants has led to the
anticipated restatements, which are expected to involve non-cash
components of interest expense, preferred dividends and
accretion, and earnings per share. The company does not
currently anticipate that these restatements will have any
material effect on its income/loss from operations for any of
the periods involved.
The anticipated restatements cover the quarters ended July 3,
2001, October 2, 2001, January 1, 2002, and April 2, 2002, and
the fiscal year ended January 1, 2002. "Because these
anticipated changes apply to non-cash items, we do not expect
these restatements to have any material effect on our revenues,
EBITDA or income/loss from operations," said New World chief
financial officer Max Craig, who joined the company in June
2002. "Given the complexity of the computations related to these
issues, we cannot provide a reasonable estimate of the impact,
positive or negative, on our financial statements for the
affected periods at this time."
The issues related to the restatements were fully disclosed in a
Form 12b-25 Notification of Late Filing filed by New World with
the Securities and Exchange Commission on August 16, 2002.
"The expected second quarter performance demonstrates the
continued strength of our core business," said New World
chairman and CEO Anthony Wedo. "The successful results also are
evidence of our ability to achieve important synergy savings
from the consolidation of the New World and Einstein/Noah
organizations." Second quarter same-store sales in company-
operated Einstein/Noah locations rose 1.7% over the
corresponding 2001 period. Wedo added that same-store sales
continue to increase during this year's third quarter.
New World is continuing the ongoing review of its second quarter
results, in consultation with its new auditors. Until this
review is completed, the company's results are subject to
change. Because of the change in auditors, the company cannot
say with certainty when the review will be completed.
New World is a leading company in the quick casual sandwich
industry, the fastest-growing restaurant segment. The company
operates locations primarily under the Einstein Bros and Noah's
New York Bagels brands and primarily franchises locations under
the Manhattan Bagel and Chesapeake Bagel Bakery brands. As of
July 2, 2002, the company's retail system consisted of 460
company-owned locations and 290 franchised and licensed
locations in 34 states. The company also operates one dough
production facility and one coffee roasting plant.
* * *
As reported in Troubled Company Reporter's June 6, 2002,
edition, Standard & Poor's lowered its corporate credit rating
on New World Restaurant Group Inc., to triple-'C'-plus from
single-'B'-minus based on Standard & Poor's concern that the
company is increasingly challenged to refinance its $140 million
senior secured notes due in June 2003.
The rating was also removed from CreditWatch, where it had been
placed April 5, 2002. The outlook is negative. Eatontown, New
Jersey-based New World had $158 million total debt outstanding
as of January 1, 2002.
NII HOLDINGS: Bondholders Balk at Panel's Hiring of Crossroads
--------------------------------------------------------------
The informal committee of certain of the largest holders of the
prepetition Notes issued by NII Holdings, Inc., objects to the
Official Committee of Unsecured Creditors' application to employ
Crossroads, LLC as its financial advisor.
The Ad Hoc Bondholders Committee objects to the Application
arguing that:
- Crossroads' services are unnecessary,
- Crossroads is incapable of performing the types of
restructuring services as outlined in the Retention
Agreement, and
- retention of a financial advisor will only delay the plan
confirmation process to the detriment of the Debtors'
estates and creditors.
The Ad Hoc Bondholders Committee says that the Debtors have
negotiated with their major creditor constituencies to devise a
viable plan of reorganization that would be most beneficial to
the estates. Because no new money could be obtained despite the
efforts, NCI, Motorola and certain noteholders have agreed to
act as "backstop funders" in the event that the rights offering
results in insufficient working capital to pay the trade debt.
It is apparent that no alternative sources of funds or plans of
reorganization exist that would provide the Debtors with a
better outcome because, if such alternatives existed, the
companies' creditors would be unwilling to infuse new equity and
new money in the midst of such financial uncertainty.
The Ad Hoc Bondholders Committee believes that the Creditors'
Committee is fully capable of discussing the merits of the
Proposed Restructuring, without the assistance and related
expense of Crossroads since it has been provided with all of the
documentation necessary to understand the deal.
NII Holdings, Inc., along with its wholly-owned non-debtor
subsidiaries, provides wireless communication services targeted
at meeting the needs of business customers in selected
international markets, including Mexico, Brazil, Argentina and
Peru. The Company filed for chapter 11 bankruptcy protection on
May 24, 2002. Daniel J. DeFranceschi, Esq., Michael Joseph
Merchant, Esq., and Paul Noble Heath, Esq., at Richards, Layton
& Finger represent the Debtors in their restructuring efforts.
When the Company filed for protection from its creditors, it
listed $1,244,420,000 in total assets and $3,266,570,000 in
total debts.
OWENS CORNING: Executives File SEC-Mandated Sworn Statements
------------------------------------------------------------
In separate but identical statements dated August 9, 2002, Owens
Corning Principal Executive Officer David T. Brown and Principal
Financial Officer Michael H. Thaman attest that:
1. Based upon a review of the covered reports of Owens Corning:
-- no covered report contained an untrue statement of a material
fact as of the end of the period covered by such report -- or
in the case of a report on Form 8-K or definitive proxy
materials, a of the date on which it was filed; and
-- no covered report omitted to state a material fact necessary
to make the statements in the covered report, In light of the
circumstances under which they were made, not misleading as
the end of the period covered try such report -- or in the
case of a report on Form 8-K or definitive proxy materials,
as of the date on which it was filed.
2. The contents of the each covered report have been reviewed
with the Company's audit committee.
3. Each of these items, if filed on or before August 9, 2002, is
a covered report:
-- Annual Report on Form 10-K of Owens Coming for the fiscal
year ended December 31, 2001, filed with the Commission on
March 21, 2002;
-- All reports on Form 10-Q, all reports an Form 8-K and all
definitive proxy materials of Owens Corning filed with the
Commission subsequent to the filing of the Form 1O-K; and
-- Any amendments to any of the foregoing.
On June 27, 2002, the Securities and Exchange Commission ordered
CEOs and CFOs of large companies to file sworn statements
attesting to the accuracy of their employer's financial
statements pursuant to Section 21(a)(1) of the Securities
Exchange Act of 1934.
SEC Order No. 4-460 requires the principal financial officer and
the principal executive officer of the Companies to personally
attest that the Companies' most recent periodic reports are
materially truthful and complete or explain why a statement.
The Order required the same officers to:
(a) file a written statement, under oath, including a statement
declaring whether or not the contents of that statement have
been reviewed with the company's audit committee, or
(b) file a written statement, under oath, describing the facts
and circumstances that would make such a statement incorrect
and declaring whether or not the contents of that statement
have been reviewed with the company's audit committee.
(Owens Corning Bankruptcy News, Issue No. 36; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
PINNACLE ENTERTAINMENT: Names John Godfrey as SVP & Gen. Counsel
----------------------------------------------------------------
Pinnacle Entertainment, Inc., (NYSE: PNK) announced that John
Godfrey will become the Senior Vice President and General
Counsel on August 29, 2002. Mr. Godfrey, 52, is a partner of
the Las Vegas-based law firm Schreck Brignone Godfrey where he
serves as a member of the Executive Committee. His practice is
devoted to gaming law with an emphasis on publicly traded
corporations, financing, compliance and licensing
investigations.
Mr. Godfrey has served as an outside gaming counsel to Pinnacle
Entertainment, Inc. from 1996 to the present.
In addition to representing numerous gaming clients, Mr. Godfrey
has served as counsel to the Nevada Resort Association. Prior
to entering private practice in 1984, he served as Deputy State
Industrial Attorney for the State of Nevada from 1977-1980, as
Deputy Attorney General, Nevada Attorney General's Office,
Gaming Division from 1980-1983, and as Chief Deputy Attorney
General, Gaming Division from 1983-1984. Mr. Godfrey is a
Trustee of the International Association of Gaming Attorneys and
served as that organization's President for the 1996-1997 term.
He has recently been appointed for a three-year term on the
Executive Committee of the Nevada State Bar's Gaming Law
Section.
Mr. Godfrey received his B.A. degree in 1973 from the University
of South Florida and his J.D. degree in 1976 from the University
of San Diego, School of Law.
Mr. Godfrey replaces Loren Ostrow who has decided to leave the
Company to pursue other interests. "We are very grateful for
Loren Ostrow's knowledge and guidance during his time with the
Company. We wish him well in his future endeavors" commented
Pinnacle Entertainment, Inc.'s Chairman and Chief Executive
Officer, Daniel R. Lee."
"We are pleased to have Jack join our management team as our
General Counsel," further commented Mr. Lee. "Jack's experience
will be of immeasurable benefit to our Company. Jack brings to
the job the same drive and strong sense of ethics as Mr. Ostrow,
which will help us achieve our objectives of growing our company
and being a responsible corporate citizen in the communities
where we operate."
Pinnacle Entertainment is a diversified gaming Company that owns
and operates seven casinos (four with hotels) in Nevada,
Mississippi, Louisiana, Indiana and Argentina, and receives
lease income from two card club casinos, both in the Los Angeles
metropolitan area.
* * *
As previously reported in the Troubled Company Reporter,
Standard & Poor's lowered its corporate credit and senior
secured bank loan ratings on Pinnacle Entertainment Inc., to
single-'B' from single-'B'-plus. Standard & Poor's also lowered
its subordinated debt rating on the company to triple-'C'-plus
from single-'B'-minus.
The actions followed Glendale, California-based Pinnacle's
lower-than-expected 2001 operating results, further
deterioration of credit measures, and Standard & Poor's
expectation that near-term debt leverage would remain high on
continued competitive pressures for the owner and operator of
casino facilities.
PROBEX CORP: Appoints Roger Arnold as SVP and General Counsel
-------------------------------------------------------------
Probex Corp. (AMEX:PRB), a technology-based, renewable resource
company, announced that Roger D. Arnold, 47, has joined the
company as General Counsel and Senior Vice President. Mr. Arnold
most recently served as a Partner, Corporate and Securities
Practice, in the law firm of Akin, Gump, Strauss, Hauer & Feld
LLP in Dallas.
Probex Chairman, President and Chief Executive Officer, Charles
M. Rampacek, noted that: "Roger brings solid experience gained
through a broad-based corporate practice covering a wide range
of business transactions and concerns. These activities included
mergers and acquisitions, contract negotiations and analysis,
debt and equity issuance, commercial credit arrangements,
complex financial transactions, shareholder meetings and other
corporate governance matters. His expertise should prove
invaluable as we work to complete our project financing process
and we are pleased to welcome him to our management team."
Mr. Arnold joined Akin Gump as an associate in 1984, becoming a
partner in 1991. He left Akin Gump in 1992 to join the Dallas
law firm of Kuntz and Bonesio as a partner, returning to Akin
Gump in 1995. Mr. Arnold has been a member of the State Bar of
Texas since 1984 and received his Juris Doctor, cum laude, in
1984 from the University of Texas at Austin. He holds a Bachelor
of Arts degree in Philosophy, summa cum laude, 1978, from the
University of Houston.
Probex is a technology-based, renewable resource company that
specializes in the production of high quality lubricating base
oils and associated products from collected used lubricating
oils. The Company's patented, environmentally beneficial
ProTerra(R) technology has demonstrated unparalleled advantages
in the highly economic creation of high quality lubricating base
oils capable of meeting new and evolving lubricating oil
standards without creation of waste by-products, other than
easily treatable waste water. The goal of Probex is to become a
world leader in the production of high quality lubricating base
oils and associated products from collected used lubricating
oils through timely commercialization of its ProTerra
technology. For more information about Probex, visit the
company's Web site at http://www.probex.com
The Company's June 30, 2002 balance sheet shows a total
shareholders' equity deficit of about $5.1 million.
QPS INC: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------
Debtor: QPS Inc
8015 E Crystal Drive
Anaheim, California 92807
Bankruptcy Case No.: 02-16187
Chapter 11 Petition Date: August 12, 2002
Court: Central District of California, Santa Ana
Judge: James N. Barr
Debtor's Counsel: Edward A. Weiss, Esq.
Edward A. Weiss Attorney at Law
700 S. Macduff
Anaheim, California 92804
Estimated Debts: $1 to $10 Million
Estimated Debts: $10 to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
IBM Credit Corporation Trade Debt $6,663,262
600 Executive Parkway,
Suite 450
San Ramon, California 94583
(800) 678-6900
Artronix Technology, Inc. Trade Debt $1,144,200
Linhart
350 Ranger Avenue, Unit C
Brea, California 92821
(714) 854-7738
Part II Research Trade Debt $937,486
Joey Chan
15861 Tapia Sty.
Irvindale, California 91706
(626) 336-8787
Cypress Semiconductor Bank Loan $925,060
Julie Omen
File No. 11688
PO Box 6000
San Francisco, CA 94169
(949) 960-2017
MCE US, Inc. Trade Debt $810,100
Rowena Catap
3049 Independence Dr.,
Unit D
Livermore, CA 94550
(925) 960-2017
Philips Components Trade Debt $567,000
Optical Sto
Tom Finnegan
Philips Silicon Valley Center
1000 Maude Avenue
Sunnyvale, California 94086
(408) 617-5786
Avnet Trade Debt $500,190
Leilani Cannon
140 Technology Drive
#400
Irvine, California 92618
Pioneer Electronics $370,500
(USA Inc.)
PO Box 100322
Pasadena, California 91189-0322
Acer Communications Trade Debt $350,430
Yi Yi Chien
157 Shanying Road, Gueishan
Taoyuan 333, Taiwan, ROC
TCA Fulfillment Service Trade Debt $321,200
145 Huguenot St., Suite 105
New Rochelle, NY 10801
(914) 633-7888
Aopen America Trade Debt $260,000
Jackie Pan
1911 Lundy Avenue
San Jose, CA 95131
(403) 232-1276
L.A. Depot Trade Debt $249,000
Kent Landsberg Bank Loan $144,839
Synnex Information Trade Debt $71,000
Technologies
HQ Printers Trade Debt $70,858
Initio Corporation Trade Debt $66,335
Roxio, Inc. Trade Debt $63,690
Circuit City Trade Debt $59,529
Ahead Software GMPH Trade Debt $57,996
Stevens Air Transport Trade Debt $46,690
QSERVE COMMS: Chapter 11 Trustee Wants to Convert Case to Ch. 7
---------------------------------------------------------------
George Johnson, the Chapter 11 Trustee for qSERVE
Communications, Inc.'s bankruptcy estates, tells the U.S.
Bankruptcy Court for the Western District of Missouri that the
Debtor is unable to effectuate a plan. The Trustee tells the
Court that the best and most beneficial step to take is to
convert this Chapter 11 proceeding to a case under Chapter 7 of
the U.S. Bankruptcy Code.
The Trustee relates that this case was initially filed by the
Debtor as a reorganization, but its anticipated debtor-in-
possession financing did not materialize and its remaining
officers and directors resigned.
The Chapter 11 Trustee is in the process of closing the Debtor's
remaining offices, securing its assets and securing its books
and records. The Trustee expects to have that work concluded on
or before August 15, 2002.
The Trustee argues that the continued operation of the Debtor
without generation of any new accounts receivable results in a
diminution of the available estate for unsecured creditors.
Moreover, the Trustee points out that there is no likelihood of
rehabilitation.
The Debtor was an engineering and construction firm serving the
wireless and broadband industries . . . and that industry is
presently severely depressed. As a result, the Trustee has been
unable to locate any potential purchasers for the assets of the
Debtor.
qServe Communications, Inc., filed for chapter 11 protection on
June 21, 2002. When the Company filed for protection from its
creditors, it listed an estimated debt of over $10 million.
Frank Wendt, Esq., at Niewald, Waldeck & Brown serves as Counsel
to the Chapter 11 Trustee.
RELIANCE GROUP: Holding Carl Icahn at Bay Until Oct. 3, 2002
------------------------------------------------------------
Carl Icahn-affiliate High River Limited Partnership is a
creditor and party-in-interest in RGH's Chapter 11 cases,
holding a sizeable chunk of Reliance Financial Services' Bank
Debt.
Edward S. Weisfelner, Esq., at Brown, Rudnick, Berlack &
Israels, in New York, argues that the Debtors have failed to
demonstrate cause for an extension. In the 13 months since
these cases began, the Debtors have accomplished virtually
nothing to move the proceedings towards completion. Instead,
Reliance Group Holdings, Inc., and RFS have been engaged in
contentious litigation with the Pennsylvania Insurance
Liquidator and have incurred millions of dollars in professional
fees for three "teams" of litigators. Given the Debtors'
demonstrated inability to resolve disputes with the Liquidator
and to effectively administer their Chapter 11 cases, the real
parties-in-interest should be given the opportunity to forge a
direction for RGH that may lead to an expeditious and equitable
conclusion.
Mr. Weisfelner notes that Section 1121(d) of the Bankruptcy Code
provides that:
"On the request of a party-in-interest made within the
respective periods specified in subsections (b) and (c) of
this section and after notice and a hearing, the court may
for cause reduce or increase the 120-day period or the 180-
day period."
According to Mr. Weisfelner, the Code does not define "cause"
for extending the exclusive periods. Nevertheless, courts have
distilled certain facts to consider when deciding whether to
extend exclusivity. While not all courts agree on the precise
formulation, most rely upon the same factors. Those factors are:
a. The size and complexity of the case;
b. The necessity of sufficient time to permit the debtor
to negotiate a plan of reorganization and prepare
adequate information;
c. The existence of good faith progress toward
reorganization;
d. The fact that the debtor is paying its bills as they
come due;
e. Whether the debtor has demonstrated reasonable
prospects for filing a viable plan;
f. Whether the debtor has made progress in negotiations
with its creditors;
g. The amount of time elapsed in the case;
h. Whether the debtor is seeking an extension of
exclusivity in order to pressure creditors to submit to
the debtor's reorganization demands; and
i. Whether an unresolved contingency exists.
Mr. Weisfelner explains that virtually all of the factors
militate in favor of terminating the Debtors' exclusivity.
These cases are neither particularly large nor significantly
complex to justify the lack of progress to date. Despite being
in Chapter 11 for more than a full year, RGH and RFS have made
no effort to negotiate a plan. In particular, Mr. Weisfelner
says, the Debtors have yet to approach High River to seriously
discuss a plan. High River is among the Debtors' largest
creditors and is a party whose affirmative vote would be
required in order to confirm any plan.
Mr. Weisfelner further notes that the Debtors have simply failed
to administer their cases in a productive manner. For example,
Mr. Weisfelner illustrates, an egregious amount of time and
money has been spent in contentious litigation with the
Insurance Liquidator procedurally jockeying over the venue of
the constructive trust adversary proceeding, Koken v. Reliance
Group Holdings, Inc., Adversary No. 01-558(KJC) (E.D. Pa.).
Contrary to the Debtors' assertions, Mr. Weisfelner asserts that
the final resolution of the Constructive Trust Action should not
be a precondition to formulating a plan. "The funds at issue in
the Constructive Trust Action are not the only assets of the
Chapter 11 estates," Mr. Weisfelner says. There are, for
example, tax attributes belonging to the Debtors with
significant value that could be made available to creditors
under a plan. Indeed, these tax attributes were the focus of
long-since abandoned prepetition plan negotiations.
Since it appears that the Debtors are not prepared to move
forward with the administration of their estates until the
Constructive Trust Action is resolved, Mr. Weisfelner contends
that other parties-in-interest should be given this opportunity.
The Debtors have already received two extensions of exclusivity,
yet the cases are in the same procedural posture that they were
in on the filing day. Given that the Debtors appear to have no
present intention to put forward a plan, their requested
extension of exclusivity is unwarranted. Further extending
exclusivity can only serve to force creditors to continue to sit
idly by while the Debtors and the Committees continue to do
battle with the Insurance Liquidator and straddle these estates
with mounting administrative expenses. Mr. Weisfelner asserts
that, "the time has come for creditors to have the opportunity
to pursue an alternative in these cases."
Debtors' Stipulation with Committees
The Debtors tell the Court that the Official Unsecured
Creditors' Committee and the Official Unsecured Bank Committee
were not in total agreement with the requested extensions.
After discussions with the Committees, the Debtors agree to
alter their request to:
* extend the exclusive period to file a Chapter 11 plan to
October 3, 2002 and
* extend the exclusive period to solicit acceptances of a
plan to November 4, 2002.
With the shortened request, the Committees agreed to the
extension. The Stipulation is without prejudice to Debtors'
rights to seek a further extension of the exclusive periods or
to the rights of the Committees to seek to terminate the
Debtors' exclusive periods. Judge Gonzalez approved the
parties' stipulation in all respects. (Reliance Bankruptcy News,
Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900)
RUSSELL CORP: Acquires Moving Comfort As Part of Strategy
---------------------------------------------------------
Russell Corporation (NYSE: RML) has acquired Moving Comfort, a
leading brand of women's performance activewear, based in
Chantilly, Va. Terms of the agreement were not released.
"Moving Comfort has been a leader in developing technically
superior athleticwear for women since 1977. Because of their
positioning and the continued interest in fitness, we believe
there is a tremendous opportunity to expand their sales and
market share," said Jack Ward, chairman and CEO. "Additionally,
this acquisition fits our strategy to build brands with value
added products that support our authentic athletic heritage."
Moving Comfort will now become a line of business within
Russell's department and sports specialty stores channel. Its
products include performance sport underwear, shorts, pants,
tops and outerwear that support the company's slogan "A fit
woman is a powerful woman.(R)"
Moving Comfort was a privately owned company founded in 1977.
Co-founders Ellen Wessel and Elizabeth Goeke will remain with
the organization as president and executive vice president
respectively and long-time partner, Andy Novins, will continue
as vice president of finance.
"We believe that being physically fit improves every aspect of a
woman's life," said Wessel. "We have spent 25 years working
diligently to design products that help inspire women to get fit
and stay fit through whatever her activities might be.
"Moving Comfort has reached the point that we need the
additional resources Russell can provide," Wessel added. Most
importantly, Russell and Moving Comfort share the same high
regard for our employees, accounts, vendors and, of course, our
consumers. Russell also shares our athletic heritage and our
commitment to quality. We helped lead the way in apparel for
women's fitness, and clothes for women runners in particular,
while Russell Athletic has been on athletic playing fields for
nearly 70 years."
Russell Corporation is a leading branded apparel company
marketing activewear, casualwear and athletic uniforms under
widely-recognized brands, including: Russell Athletic(R),
JERZEES(R), Mossy Oak(R), Cross Creek(R), and Discus(R). The
Company's common stock is listed on the New York Stock Exchange
under the symbol RML and its Web site address is
http://www.russellcorp.com
* * *
As reported in Troubled Company Reporter's April 4, 2002
edition, Standard & Poor's assigned a corporate credit
rating of 'BB+' to apparel manufacturer Russell Corp. It also
assigned ratings to the company's proposed $375 million senior
secured credit facility and proposed $200 million senior
unsecured note issue at 'BB+' and 'BB' respectively.
The ratings reflect Atlanta, Georgia-based Russell's
participation in the highly competitive and volatile apparel
industry, which is subject to changing consumer preferences and
a consolidating retailer base. Somewhat mitigating these factors
are the company's well known brand name, its strong market
position, and its moderate financial profile.
SECURITY ASSET: Must Resolve Liquidity Issues to Continue Ops.
--------------------------------------------------------------
Security Asset Capital Corporation was founded on September 22,
1993 and has operated within the asset liquidation industry. Its
historic primary operations through its wholly owned subsidiary
Security Asset Management, Inc., have been the management of
debt receivable portfolios, buying and selling of portfolios on
a wholesale and retail level. The Company is in the process of
developing the operations of The Debt Registry, Inc., a wholly
owned subsidiary of the Company that is developing a database
which is an asset ownership registration and tracking system for
the asset liquidation and purchasing industry as well as for
financial institutions. The Company's revenues in 2002 have
resulted from the collections on and sales of debt portfolios.
The Company is anticipating a shift in its operations whereby a
majority of its future revenue will be generated through its
wholly owned subsidiary, The Debt Registry, Inc,and related
companies and Broadband Technologies, Inc., which holds several
patents in connection with full screen, on demand video to be
delivered via the Internet. Although the Company cannot
guarantee, it expects to generate revenue through the Debt
Registry by the end of 2002 and through Broadband Technologies
by the end of 2003.
Results Of Operations For Each Of The Three Months
Ended June 30, 2002 And 2001
Revenues for the three months ended June 30, 2002 were derived
completely from collections on and sales of loan portfolio
assets, which amounted to $25,757 as compared to $57,165 for the
same period during 2001, which revenue was derived from the
management of the Company's debt portfolio. The decrease in
revenues resulted from the slowdown within the United State's
economy as well as the decrease in loan portfolio sales due to
management's emphasis on the development of the Debt Registry
and fund raising efforts. The slowdown of the United States
economy has resulted in an increase in defaults in connection
with the debt receivables managed by Security Management Asset,
Inc., the Company's wholly owned subsidiary.
Net loss for the three months ended June 30, 2002 was $544,021
as compared to $2,149,212 for the same period during 2001. This
decrease is primarily due to the decline in general and
administrative expenses resulting from decreased costs
associated with the issuance of common stock for services, and
the decrease in interest expense resulting from the conversion
of approximately $5.2 million of notes payable to preferred
stock at the end of 2001.
Results Of Operations For Each Of The Six Months
Ended June 30, 2002 And 2001
Revenues for the six months ended June 30, 2002 were derived
completely from collections on and sales of loan portfolio
assets, which amounted to $36,903 as compared to $108,378 for
the same period in 2001, which revenue was derived from the
management of the Company's debt portfolios. The Company also
earned rental revenues in the amount of $68,922 during the six
months ended June 30, 2001 from its wholly owned subsidiary,
Securities Asset Properties, Inc., which was sold on March 28,
2001. The decrease in revenues resulted from the same factors
that affected the revenues during the three month period shown
above.
Net loss for the six months ended June 30, 2002 was $1,071,974
as compared to $3,091,089 for the same period during 2001. Here
again this decrease is primarily due to the same conditions that
caused the decrease in the three month period shown above.
Liquidity and Capital Resources
The Company has only a limited operating history and revenues
and has had net losses from operations. The Company's continued
existence is dependent upon its ability to resolve its liquidity
problems, principally by obtaining additional debt financing and
equity capital until such time the Company becomes profitable.
The lack of financial resources and liquidity raises substantial
doubt about its ability to continue as a going concern. The
Company plans to continue funding its operations and proceeds
from the further sale of its debt receivables portfolio and
additional debt and equity capital offerings. There is no
assurance that management will be successful in these endeavors.
SOUTHERN STATES POWER: Stonefield Raises Going Concern Doubt
------------------------------------------------------------
Southern States Power Company, Inc., is business development
company that has elected to be regulated pursuant to Section 54
of the Investment Company Act of 1940. The Company intends to
focus its investments in companies engaged in the production,
sale and distribution of biodiesel fuel and other alternative
energy solutions. Biodiesel is a diesel fuel made from a
vegetable oil, rather than petrochemical oil, and is officially
designated by the EPA as an alternative fuel under the Energy
Policy Act. Biodiesel is a unique alternative fuel because it
can be used in diesel engines without any change or
modifications to the engines, vehicles, or ground fueling
equipment.
The Company was incorporated in Delaware on August 31, 1988, and
adopted its present name on June 1, 1998. During fiscal year
2001, Southern States relocated its headquarters from
Shreveport, Louisiana to Riverside, California, and established
a regional office in Phoenix Arizona.
Net revenues increased to $492,000 for the year ended April 30,
2002, compared with revenues of $33,000 in the prior year,
largely as a result of revenues generated from the rental of
power generators under a contract with University of California
at Riverside. The Company's rental program was discontinued in
December 2001 and the generators were held for sale as of year
end. The Company incurred a net loss of $3,577,000 for the year
ended April 30, 2002, compared with a loss of $4,365,000 in the
prior year. The decrease in loss was primarily attributed to a
decrease in operating expenses.
The Company's working capital on April 30, 2002 was negative
$1,403,000, which results primarily from the classification of a
long-term debt obligation of $1,103,000 as a current liability
since the Company was in default on the obligation as of April
30, 2002.
Southern States Power Co.'s independent auditors, Stonefield,
Josephson, Inc., CPA, of Santa Monica, California, in their July
10, 2002 statement concerning the financial condition of the
Company at the period ended April 30, 2002, said: "In our
opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Southern States Power Company, Inc. as of April 30, 2002, and
the results of its operations and its cash flows for the two
years then ended in conformity with accounting principles
generally accepted in the United States of America."
"The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As
shown in the financial statements, the Company has incurred net
losses from operations, has negative cash flows from operations,
and its current liabilities exceeds its current assets. These
factors raise substantial doubt about the Company's ability to
continue as a going concern."
TEAM AMERICA: Violates Nasdaq Continued Listing Requirements
------------------------------------------------------------
TEAM America, Inc. (Nasdaq: TMOS) received a Nasdaq Staff
Determination on August 21, 2002, indicating that the Company's
failure to file its Form 10-Q for the period ended June 29, 2002
was a violation of the continued listing requirements set forth
in Marketplace Rule 4310, and that its common stock, therefore,
is subject to delisting from The Nasdaq SmallCap Market. As a
result of the delinquency, the trading symbol for the Company's
common stock will be changed from "TMOS" to "TMOSE" at the
opening of business on August 23, 2002.
On or before 4:00 p.m. on August 28, 2002, the Company may
request a hearing before a Nasdaq Listing Qualifications Panel
to review the Staff Determination. The Company presently
intends to request a hearing. If the request for a hearing is
made no later than 4:00 p.m. on August 28, 2002, the delisting
will be stayed pending the Panel's determination. The Company
can provide no assurance the Panel will grant the Company's
request for continued listing.
On August 14, 2002, the Company filed a Notification of Late
Filing on Form 12b-25 relating to its Report on Form 10-Q for
the quarter ended June 29, 2002. On August 23, 2002, the
Company is filing its Report on Form 10-Q/A for the quarter
ended June 29, 2002, but, for the reasons described below, the
interim financial statements included with the Form 10-Q/A were
not reviewed by an independent public accountant, as required
under SEC regulations.
As previously disclosed, on April 17, 2002, the Company
terminated its former independent public accountant, Arthur
Andersen LLP, and engaged Ernst & Young LLP as its new
independent public accountant. Subsequent to engaging Ernst &
Young LLP, the Company determined that its prior accounting
treatment of its December 29, 2000 issuance of 100,000 Series A
Preferred Shares with detachable warrants did not comply with
generally accepted accounting principles. As a result, the
Company reclassified certain accounts and restated its fiscal
2000 and 2001 consolidated balance sheets and statements of
changes in shareholders' equity, its fiscal 2000 consolidated
statement of operations and corresponding disclosures, all of
which were included in the Company's Amendment No. 1 to Annual
Report on Form 10-K/A filed on August 13, 2002. The Company
also filed Amendment No. 1 to Quarterly Report on Form 10-Q/A
for the period ended March 30, 2002 on August 13, 2002 to
reflect the restatement and reclassifications in its first
quarter interim financial statements.
Both Arthur Andersen LLP and Ernst & Young LLP are aware of the
restatement and the reclassifications. However, Arthur
Andersen's inability to certify the restatements and
reclassifications are due to extraordinary circumstances beyond
the Company's control. In addition, although Ernst & Young has
performed certain review procedures for the first and second
quarters, it will be unable to complete its review of those
interim financial statements until it has completed audits for
fiscal 2000 and 2001. S. Cash Nickerson, Chairman and CEO, has
stated that "the Company is working diligently with Ernst &
Young to complete the audit of the Company for the years ended
2000 and 2001, and to certify the restated year end financial
statements for those years, and complete its review of the
interim financial statements for the year 2002."
TEAM America, Inc. (Nasdaq: TMOS) is a leading Business Process
Outsourcing Company specializing in human resources. TEAM
America is a pioneer in the Professional Employer Organization
industry and was founded in 1986. With 16 sales and service
offices nationwide, the Company is one of the ten largest PEOs
in the country serving more than 1,500 small businesses in all
50 states. The Company is engaged in a "build up" of the
consolidating industry and is the leading acquirer of quality,
positive cash flow, independent PEOs in urban markets. For more
information regarding the company, visit
http://www.teamamerica.com
TIME WARNER: Initiates Cost-Reduction Under Turnaround Drive
------------------------------------------------------------
Time Warner Telecom Inc. (Nasdaq: TWTC), a leader in providing
metro and regional optical broadband networks and services to
business customers, announced efforts to reduce costs and
maximize free cash flow. Free cash flow is defined as EBITDA
less capital expenditures.
"Time Warner Telecom is financially strong, but we believe that
we must take the next step to demonstrate a clear path to
profitability," said Larissa Herda, Time Warner Telecom's
Chairman, CEO and President. "We have accomplished the first
step by achieving sustained positive EBITDA results and now we
are ready to take the next step toward maximizing free cash
flow. Our ability to internally fund growth and new business
opportunities is extremely important in today's environment, and
allows us to control our own destiny," said Herda.
Driving ever-greater efficiencies, the Company expects to
accomplish these goals by streamlining operations and
consolidating internal organizations while maintaining
excellence in customer service. Acquiring new customers and
continuing to provide the highest level of customer service will
continue to be the Company's top priority.
Time Warner Telecom has identified near-term opportunities for
cost reductions and today reduced its workforce by approximately
230. The Company estimates an annual EBITDA contribution from
this action of $13-$15 million per year, with anticipated
savings beginning in the fourth quarter. Subsequent to this
headcount reduction, Time Warner Telecom employs over 1,900
employees. The Company expects to continue to hire in areas
where new positions are needed to support its future growth.
The Company intends to evaluate additional initiatives with the
objective of further reducing costs, optimizing operating
efficiencies and refining its focus on market opportunities.
"Streamlining our operations and eliminating overhead will allow
us to focus our financial resources toward business
opportunities which have the greatest return possibilities,"
said David Rayner, Time Warner Telecom's Senior Vice President
and Chief Financial Officer.
"These efforts complement our near and long-term vision, which
is return on investment," said Rayner. "We are very pleased
with our strong track record to date, however, we are committed
to maximizing free cash flow results." This focus builds on the
Company's consistent financial accomplishments, which include 13
consecutive quarters of positive EBITDA, and free cash flow
results for the first six months of 2002.
The Company continues to execute a success-based capital-
spending plan, which resulted in a more than a 70% reduction of
capital expenditures for the first six months of 2002, as
compared to the same period last year. As of June 30, 2002, the
Company reported $324 million of cash and equivalents.
"I believe these efforts will improve Time Warner Telecom's
position as a key telecommunications player with highly valuable
metropolitan fiber networks and a strong business plan," said
Herda.
Time Warner Telecom Inc., headquartered in Littleton, Colo.,
delivers "last-mile" broadband data, dedicated Internet access
and voice services for businesses. Time Warner Telecom Inc.,
one of the country's premier competitive telecom carriers,
delivers fast, powerful and flexible facilities-based metro and
regional optical networks to large and medium customers. Please
visit http://www.twtelecom.comfor more information.
* * *
As reported in the March 8, 2002 edition of Troubled Company
Reporter, Standard and Poor's revised the outlook on competitive
local exchange carrier Time Warner Telecom Inc., to negative
from stable. S&P also affirmed the company's B+ credit rating.
Total debt outstanding for Littleton, Colorado-based TWT was
$1.1 billion at December 31, 2001.
The outlook revision was based on the company's increased
business risk resulting from the impact the weakening domestic
economy has had on its business base. Many of TWT's carrier
customers have reduced their purchases as they have groomed and
resized their networks to control spending in the face of
weakening demand for telecom services. Moreover, certain
carriers and large enterprise customers have either filed for
bankruptcy or experienced other financial difficulties, causing
them to disconnect from TWT's network. Because of these factors,
prospects over the next few years are somewhat uncertain,
despite the company's ability to generate a relatively healthy
level of growth in revenues and operating cash flows in 2001.
TRIMEDYNE INC: Fails to Meet Nasdaq Continued Listing Standards
---------------------------------------------------------------
Trimedyne Inc., (Nasdaq:TMED) announced revenues of $1,896,000
and $5,408,000 for the quarter and nine month period ended June
30, 2002, respectively, compared with revenues of $1,829,000 and
$5,445,000 for the quarter and nine month period ended June 30,
2001, respectively.
For the quarter and nine month period ended June 30, 2002, net
losses were $287,000 and $1,050,000, respectively. Included in
the above results were $97,000 and $173,000, respectively, of
non-cash, stock-based compensation. For the same quarter and
nine month period of the prior year, the net losses were
substantially higher, $2,191,000 and $6,362,000, respectively.
While revenues for these periods were flat, gross profits
increased to $961,000 and $2,437,000, for the current quarter
and nine month period, respectively, from gross profits of
$575,000 and $1,175,000, respectively, for the same quarter and
nine month period of the prior year. By tight control of costs,
operating expenses were reduced to $1,276,000 and $3,615,000,
respectively, for the current quarter and nine month period,
from $1,913,000 and $5,943,000, respectively, for the same
quarter and nine month period a year ago.
Marvin P. Loeb, chairman and CEO of Trimedyne, said: "We have
significantly reduced our expenses and improved our product mix,
concentrating on the sale of higher margin disposable devices
used in our outpatient laser procedures for treating herniated
and ruptured lumbar (lower back) discs. This has enabled us to
significantly improve our gross profits."
"We have filed an application with the FDA for clearance to
market our lasers and disposable devices for the outpatient
treatment of cervical (neck) and thoracic (mid-back) discs, with
clinical data showing success rates of 95%. If and when FDA
clearance for these applications is received, the potential
market for our lasers and disposables in the treatment of
herniated and ruptured discs is expected to double.
"Approximately 540,000 conventional surgeries to treat herniated
and ruptured discs are performed each year in the United States
at a cost of approximately $16 billion annually."
"I recently demonstrated my confidence in Trimedyne by
purchasing $200,000 of its 12% Senior Secured Convertible Notes
in February and April 2002, and I agreed to accept shares of
common stock of Trimedyne, valued at the closing price on the
last business day of each month, in lieu of cash compensation.
"Through June 30, 2002, I am being issued 225,400 shares of
Trimedyne in lieu of cash compensation of approximately
$120,000. Also, in August 2001, I exercised stock options to
purchase 332,000 shares of Trimedyne's common stock, all of
which are still being held.
"The current market environment is making it difficult for
companies with promising products to raise capital to market
their wares. As a result, we are exploring marketing alliances
with established companies to distribute our products and make a
significant investment in Trimedyne. Our objective is to expand
our sales and return to profitability."
On Aug. 14, 2002, Trimedyne received written notice of the
Nasdaq staff's determination that Trimedyne fails to meet the
minimum $1 bid price per share requirement set forth in
Marketplace Rule 4310(C)(8)(D) and the $2,500,000 of
stockholders' equity requirement for continued listing set forth
in Marketplace Rule 4310(C)(2)(B), and that its shares are,
therefore, subject to delisting from the Nasdaq Small Cap
Market. Trimedyne has requested a hearing before a Nasdaq
Listing Qualifications Panel to review the Nasdaq staff's
determination. There can be no assurance the panel will grant
Trimedyne's request for continued listing.
Trimedyne is a leading manufacturer of surgical lasers and
proprietary disposable and reusable fiber optic devices for
applications in a variety of minimally invasive surgical
procedures in orthopedics, urology, ENT surgery, gynecology,
gastrointestinal surgery and general surgery. For product,
financial or other information, visit Trimedyne's Web site at
http://www.trimedyne.com
UNIROYAL TECHNOLOGY: Files for Chapter 11 Reorg. in Delaware
------------------------------------------------------------
Uniroyal Technology Corporation (Nasdaq: UTCI) announced that,
in order to facilitate a restructuring of debt and relieve cash-
flow issues, the Company and its subsidiaries have filed
voluntary petitions for reorganization under Chapter 11 of the
U.S. Bankruptcy Code.
To ensure that customer and vendor relationships remain intact
during the process, Uniroyal has received a commitment for up to
$15 million in debtor-in-possession financing from The CIT Group
Inc., subject to Court approval.
"[Mon]day's action provides us with time to restructure our
balance sheet while continuing to operate our businesses without
interruption," said Uniroyal Chairman and Chief Executive
Officer Howard R. Curd. "We hope to emerge from this process
quickly as a stronger, more competitive organization."
He added that customers, vendors and employees should notice no
difference in the Company's operations during the process.
"The reorganization proceeding should have virtually no impact
on daily operations," Mr. Curd said. "Our facilities will
remain open, and transactions will proceed in the ordinary
course of business. Our customers should experience no
interruption in the supply of our products. Vendors can be
assured that they will be paid for all post-petition goods and
services. Employees can expect to continue being paid and
receiving benefits."
The Company is seeking Court permission to pay pre-petition
claims in the ordinary course of business to vendors who agree
to continue providing goods and services on normal and customary
trade terms to the Company's strongest operating subsidiary,
Uniroyal Engineered Products LLC (UEP/Naugahyde). The Company
expects to file soon a plan of reorganization with the Court
that provides full recovery for all creditors of UEP. Pre-
petition claims of the Company's other three operating
subsidiaries -- Sterling Semiconductor, Uniroyal Optoelectronics
and NorLux Corp. -- will be resolved through the Chapter 11
process.
Because the Bankruptcy Code gives priority status to post-
petition claims, the Company intends to pay in the ordinary
course of business for goods and services received after the
Chapter 11 filing for all business segments.
"The Company is seeking to make the transition as smooth as
possible and will work with creditors to resolve any issues,"
Mr. Curd said.
The Company filed its Chapter 11 petition in the U.S. Bankruptcy
Court for the District of Delaware in Wilmington. The Company's
lead legal bankruptcy counsel is White & Case LLP.
Uniroyal Technology's Compound Semiconductors & Optoelectronics
business segment includes Uniroyal Optoelectronics, LLC,
Sterling Semiconductor, Inc., and NorLux Corp. Uniroyal
Optoelectronics manufactures high brightness light emitting
diodes, a rapidly growing market with applications such as
traffic signals, indoor/outdoor signage and automotive
applications. Brand names include POWER-Ga(i)N and POWER-
BR(ite). Sterling Semiconductor is a producer of silicon
carbide substrates, epitaxial thin films on SiC substrates and
is developing SiC devices for wireless communications,
industrial process control, and power amplification. NorLux
Corp. specializes in the design and manufacture of custom
lighting solutions utilizing light emitting diodes. The
Company's Coated Fabrics Segment includes the well-known brand
name Naugahyde. The Company has a total of approximately 400
employees at offices and manufacturing operations in six states.
The Company's common stock and warrants trade on the Nasdaq
SmallCap market under the symbols UTCI and UTCIW, respectively.
UNIROYAL TECH: Case Summary & 20 Largest Unsecured Creditors
------------------------------------------------------------
Lead Debtor: Uniroyal Technology Corporation
Two North Tamiami Trail
Suite 900
Sarasota, Florida 34236
Bankruptcy Case No.: 02-12471
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Uniroyal Engineered Products, Inc. 02-12472
Sterling Semiconductor, Inc. 02-12473
NorLux Corp. 02-12474
Uniroyal Optoelectronics, Inc. 02-12475
Uniroyal Compound Semiconductors, Inc. 02-12476
UEP Holdings, Inc. 02-12477
UnitechNJ, Inc. 02-12478
UnitechOH, Inc. 02-12479
UnitechIND, Inc. 02-12480
Uniroyal Liability Management Company, Inc.02-12481
ULMC2CORP. 02-12482
Uniroyal HPP Holdings, Inc. 02-12483
High Performance Plastics, Inc. 02-12484
UNR Service Corporation 02-12485
Type of Business: Uniroyal Technology Corporation and its
subsidiaries are engaged in the development,
manufacture and sale of a broad range of
materials employing compound semiconductor
technologies, plastic vinyl coated fabrics
and specialty chemicals used in the
production of consumer, commercial and
industrial products.
Chapter 11 Petition Date: August 25, 2002
Court: District of Delaware (Delaware)
Judge: Peter J. Walsh
Debtors' Counsel: Eric Michael Sutty, Esq.
Jeffrey M. Schlerf, Esq.
The Bayard Firm
222 Delaware Avenue
Suite 900
Wilmington, De 19899
302-655-5000
Fax : 302-658-6395
Total Assets: $85,842,000
Total Debts: $68,676,000
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Keith McIntosh Revocable Irrevocable Trust $1,250,015
Trust
Keith McIntosh, Trustee
16968 Passage South
Jupiter, FL 33470
Phone: (315) 536-8553
Fax: (315) 536-8559
Uniroyal Retiree Contractual Settlement $920,609
Benefits, Inc.
Charles Leone
PO Box 1256
Mishawaka, IN
Phone: (574) 234-3900
Spartech Corporation Asset Purchase Settlement $792,421
Jeff Fisher
20 S. Central Avenue,
Suite 1700
Clayton, MO 63105-1705
Phone: (314) 721-4242
Fax: (314) 721-1447
Sullivan & Cromwell Legal Service $455,866
Gerrard R. Beeney
125 Broad Street
New York, NY 1004-2498
Phone: (212) 558-3737
Fax: (212) 556-3588
Friedman, Billings, Financial Consultants $280,000
Ramsey Co.
Karen Tan
SAP America, Inc.
PO Box 7780-4024
Philadelphia, PA 19182-4024
Phone: (703) 312-1805
Deloitte and Touche LLP Auditors $267,722
Loreen Spencer
PO Box 406838
Atlanta, GA 30364-0838
Phone: (888) 256-4772
Fax: (813) 229-7698
SAP America Inc. Software Maintenance $257,404
Debra Thomas
PO Box 7750-4024
Philadelphia, PA 19192-4024
Phone: (708) 947-3496
One Sarasota Tower, Inc. Building Lease $127,617
Delaware Secretary Franchise Tax $71,060
of State
Richartz Fuss Clark & Pope Public Relations $65,100
Kramer, Levin, Naftalis Legal Services $68,067
McGuire Woods Legal Service $61,089
Reliance Standard Life Life Insurance $24,619
Insurance
Richard Kimbel Consulting Services $20,695
Bames and Thornburg Legal Services $17,095
Sprint Telephone $16,284
Ron E. Bower Legal Services $15,045
Bank of America Credit Card $12,816
Time Services Temporary Services $12,603
IBM Corporation MIS Support $11,133
Willis of New York Insurance $10,000
CCH Corporate Legal Services $9,459
UNITED AIRLINES: Potential Bankruptcy May Affect Whirpool Corp.
---------------------------------------------------------------
Following news of deteriorating U.S. airline industry
conditions, Whirlpool Corporation (NYSE:WHR) advised that the
value of its previously disclosed leveraged lease assets could
be adversely affected.
Approximately $68 million of Whirlpool's $96 million aircraft
lease assets in discontinued operations could be reduced in
value if United Airlines files for bankruptcy protection. At
this time, Whirlpool cannot determine the effect, if any, that
the potential bankruptcy would have on lease payments or on the
value of the company's aircraft lease assets.
An actual reduction in the value of the lease assets, should it
occur, would be a non-cash charge against discontinued
operations and have no impact on Whirlpool's appliance business.
The company currently anticipates no significant risk for its
other aircraft assets, which are leased to a profitable airline
based outside the United States.
The aircraft leases are part of Whirlpool's $120 million
leveraged lease portfolio in discontinued operations. The
portfolio had been held by Whirlpool Financial Corporation, the
company's financial services subsidiary that was discontinued in
1997. Additional information about the portfolio is provided in
the company's annual report.
Whirlpool Corporation is the world's leading manufacturer and
marketer of major home appliances. Headquartered in Benton
Harbor, Michigan, the company manufactures in 13 countries and
markets products under 11 major brand names in more than 170
countries. Additional information about the company can be found
on the Internet at http://www.whirlpoolcorp.com
UNITED AIRLINES: Flight Attendants Affirm Commitment to Workout
---------------------------------------------------------------
The Association of Flight Attendants, AFL-CIO, United Airlines
Master Executive Council met with their legal and financial
advisors on Thurs., Aug. 22 and passed a resolution strongly
stating that talks concerning Flight Attendant participation in
a much needed restructuring of the airline hinge on United
providing the Flight Attendants with a "comprehensive vision for
a full recovery of the airline through operational changes that
increase United's ability to generate revenue to prevent a
bankruptcy filing, and not just a demand for employee
concessions."
The resolution, which passed unanimously, directs United MEC
President Greg Davidowitch to once again "request a viable
business plan from United management." Full text of the
resolution can be viewed at http://www.unitedafa.org
"United's dire financial condition was brought on by
management's strategic short-comings," said Davidowitch.
"Continuing to push Flight Attendants to change our contract is
a waste of time as long as management has failed to address the
airline's most fundamental failure -- its inability to generate
revenue in today's industry."
The United AFA MEC again questioned management's demand for
changes to the current Flight Attendant labor contract. Demands
for labor concessions assume that labor costs are United's
primary problem. However, the current Flight Attendant
contract, which runs to March 2006, is unique in the industry.
It measures each year and contractually fixes United's Flight
Attendant costs at the AVERAGE of United's competitors through
an arbitration process. The most recent arbitration ruled that
United enjoyed a $48 million advantage in its Flight Attendant
costs over the AVERAGE of its competitors in 2001.
The cost-competitive nature of the Flight Attendant agreement is
an asset to the airline that should help United's application to
the Air Transportation Stabilization Board for a loan guarantee
backed by the federal government.
"United's Flight Attendant costs represent approximately only
seven cents of every dollar of revenue," Davidowitch said.
"Unless management makes significant improvements in our
airline's operations, Flight Attendants could work for free and
we could not save this airline."
More than 50,000 Flight Attendants, including the 26,000 Flight
Attendants at United, join together to form AFA, the world's
largest Flight Attendant union. Visit AFA at
http://www.unitedafa.org
US AIRWAYS: Seeks Okay to Pay Prepetition Foreign Vendor Claims
---------------------------------------------------------------
US Airways Group Inc., and debtor-affiliates provide
international flight service to Canada, Mexico, the Caribbean
and Europe. The Debtors' international service is critical to
their future and is conducted under route authority granted by
the Department of Transportation. The DOT has the authority to
suspend and reallocate routes of air carriers whose operations
have been discontinued. As the Debtors' foreign routes are
extremely valuable assets of the Debtors' estates, they must be
protected.
Accordingly, US Airways Group seeks the Court's authority to pay
prepetition claims owed to foreign vendors, service providers,
regulatory agencies and governments. The Foreign Entities
include:
(a) foreign airports;
(b) foreign professionals;
(c) foreign vendors; and
(d) foreign taxing authorities.
The Debtors have reviewed disbursements made from January
through June 2002 to Foreign Entities. The total average
monthly payments to Foreign Entities were $15,000,000 per month.
The Debtors believe this amount is representative of the
outstanding prepetition obligations to Foreign Entities as of
the Petition Date.
John Butler, Esq., at Skadden, Arps, Slate, Meagher & Flom,
relates that the Debtors usually make payments to the Foreign
Entities on a regular basis. If the Foreign Claims are not
paid, the Foreign Entities could cause an interruption of
service on the Debtors' foreign routes and may take precipitous
action based upon an erroneous belief that they are not subject
to the jurisdiction of this Court and, thus, not subject to the
automatic stay provisions of Section 362(a) of the Bankruptcy
Code. Mr. Butler notes that the Foreign Entities could sue in a
foreign court and obtain a judgment against the Debtors to
collect prepetition amounts owed to them. They could
immediately seek to seize the Debtors' foreign assets even prior
to obtaining a judgment. Foreign suppliers could refuse to do
business with the Debtors, grounding the Debtors' foreign
operations. Foreign governmental authorities could also revoke
the Debtors' landing rights.
"This would strand the Debtors' customers overseas, create
operational chaos, and could also lead to the suspension of the
Debtors' route authority by the DOT," Mr. Butler says. This
would severely damage the Debtors goodwill amongst the flying
public and jeopardize the Debtors' reorganization prospects.
Thus, it is important to satisfy the Foreign Claims. "It is
absolutely critical to maintain the confidence of the flying
public in the Debtors' operations," Mr. Butler asserts. In
addition, Mr. Butler continues, the Debtors' route
authorizations are valuable assets of their estates and must be
preserved from forfeiture. Some of the Foreign Claims may be
priority claims under Section 507(a)(8) of the Bankruptcy Code.
However, irrespective of the possible application of Section
507(a)(8), Mr. Butler notes that the risks associated with non-
payment of Foreign Entities justifies the payment of the Foreign
Claims in the ordinary course of business.
The Debtors ask the Court to require banks to honor any
prepetition checks drawn or fund transfer requests made for
payment of claims owing to Foreign Entities. In addition, the
Debtors seek the Court's authority to issue postpetition checks
and to make postpetition fund transfer requests to replace any
prepetition checks and prepetition transfers to Foreign Entities
that may be dishonored by the banks. (US Airways Bankruptcy
News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
US AIRWAYS: TWU Local 547 Ratifies Restructuring Plan Agreement
---------------------------------------------------------------
US Airways' Transport Workers Union of America, Local 547,
representing 110 flight crew training instructors ratified its
agreement on the Company's restructuring plan by a favorable
92-7 vote.
"We are pleased with this decision by our flight crew training
instructors to ratify an agreement that is so vitally important
to our recovery plans," said Jerry A. Glass, US Airways senior
vice president of employee relations.
US Airways now has ratified restructuring plan agreements with
its pilots, represented by the Air Line Pilots Association;
flight attendants, represented by the Association of Flight
Attendants; simulator engineers, dispatchers, and the flight
crew training instructors, each represented by the TWU. US
Airways' machinists and fleet service workers, represented by
the International Association of Machinists, are expected to
vote on the Company's proposal by Aug. 28, 2002. No agreement
has yet been reached with the Communications Workers of America.
US Airways Inc.'s 10.375% bonds due 2013 (U13USR2), DebtTraders
reports, are trading at 10 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR2for
real-time bond pricing.
US STEEL CORP: Airs Disappointment Over Latest Import Exclusions
----------------------------------------------------------------
The U.S. Trade Representative and the U.S. Department of
Commerce today announced 178 additional exclusions from the
Section 201 remedy. Of these, 104 exclusions were over the
objection of the domestic steel industry. Thursday's
announcement, which will be the final list of exclusions for
this year, brings the total number of exclusions from the steel
safeguard relief to 727.
Thomas J. Usher, chairman, CEO and president of United States
Steel Corporation (NYSE: X), said, "We are disappointed by a
number of the exclusions announced [Thurs]day. The domestic
industry only objected to those exclusion requests where we
currently make or have the capability to make the product in
question. Unfortunately, a number of the exclusions granted
[Thurs]day are for products we produce every day."
Mr. Usher added, "I know the Commerce Department and USTR have
worked very hard throughout this process. Unfortunately,
pressure by foreign governments for unjustified exclusions from
the Section 201 remedy has been very strong."
Before considering new requests for exclusions next year, the
domestic industry believes the exclusions process should be
reformed to ensure that no further exclusions are granted for
products than are or can be made domestically, and to ensure
that the integrity and effectiveness of the President's relief
is maintained.
A number of the exclusions granted Thursday were subject to
quantitative caps. The industry urges the Administration to
impose quantitative limits on all exclusions made over the
objections of domestic producers. It will also be imperative
that the Administration swiftly and fully implement an effective
import licensing system and anti-surge mechanism, providing
sufficient public information to monitor imports of excluded
products and ensure that such imports are not acting to
undermine relief.
The domestic industry also urges the Administration to provide
adequate resources to the U.S. Customs Service for monitoring
and enforcement. Every effort must be made to ensure that
products that are subject to Section 201 relief are not allowed
to enter the United States misclassified as excluded products.
"The President's plan has been showing some positive results,"
said Mr. Usher. "It is critical going forward that no further
erosion of this relief be permitted, that the integrity of the
President's program be maintained, and that the industry be
given the opportunity it needs and deserves to adjust and
recover."
* * *
As reported in Troubled Company Reporter's August 12, 2002
edition, Fitch Ratings affirmed the senior unsecured long-term
ratings of U.S. Steel at 'BB' and assigned a 'BB+' rating to the
company's senior secured revolver. The Rating Outlook is Stable.
Since the beginning of the year, the prices of hot-rolled and
cold rolled steel sheet have risen dramatically and with them
U.S. Steel's profits. On shipment increases of 619 thousand tons
and price realizations of $12/ton more, U.S. Steel has turned an
operating loss of $61 million in the first quarter of 2002 into
an operating profit of $47 million in the second quarter. Price
increases have been announced effective in August and September;
the company's order book is extended into October; and the
weaker dollar in concert with 30% disputed steel tariffs should
temper future imports. U.S. Steel's seven domestic furnaces are
operating at near capacity, and the company is projecting a
profit for the year. Liquidity is strong following the company's
mid-May stock offering.
U.S. Steel will likely somehow figure into the politically
encouraged consolidation going on in the steel industry
(Nucor/Trico/Birmingham and Corus/CSN). Recent discussions have
included a potential combination with National Steel, and U.S.
Steel is continuing discussions with third parties. The company
purchased U.S. Steel Kosice (Slovak Republic) in November 2000.
Any substantive change in the business profile of U.S. Steel
could impact the company's ratings.
VIRTGAME COM: Accountants Express Going Concern Doubt
-----------------------------------------------------
VirtGame has built comprehensive and scalable client/server
software platforms for lottery, casino, sports wagering and
racing software applications that are customizable for private
label use. The Company is leveraging its technology and know-how
to develop and provide innovative solutions to licensed land
based casinos and lottery operators around the world. Gaming has
developed into a highly specialized industry. Gaming companies'
expertise in branding, logistics, customer relationship
management, statistics, new distribution channels and expansion
into new marketplaces has created a need for new and highly
integrated technology products to help it meet the demands of
the next generation marketplace. To meet these demands,
regulatory frameworks are evolving rapidly to meet the
technological changes currently taking place in the software and
telecommunication arenas. VirtGame's goal is to develop and
integrate various solutions to comply with the regulatory
concerns relating to the new software technology and
telecommunication developments.
The Company offers an online distribution channel for
traditional brick-and-mortar gaming companies. Utilizing an
Internet e-BorderControl technology, VirtGame can design and
construct private-label online casinos and sports books
available exclusively for online users in Nevada. The Company
has developed an over-the-counter solution that integrates
conventional Nevada-style casino sports books with the
Internet/Intranet. The Company has developed PrimeLine, an over-
the-counter sports book that is approved in Nevada, which is
operational at a Las Vegas casino and is capable of seamless
integration with the Company's e-BorderControl technology to
offer sports wagering on the Company's proprietary Nevada
Intranet system.
On August 5, 2002 the Company announced it had signed a five-
year exclusive distributorship agreement with Las Vegas
Dissemination Company to distribute its race and sports book
software in the state of Nevada. LVDC is the exclusive pari-
mutuel systems operator for Nevada casino race books, and is the
only company ever to be licensed by the Nevada gaming
authorities to serve in this capacity.
Revenues from software application services were $103,043 for
the three months ending June 30, 2002 and $119,486 for the prior
year quarter ended June 30, 2001. Revenues for the six months
ending June 30, 2002 and June 30, 2001 were $191,940 and
$370,285 respectively. The decrease in revenues for the first
half of this year versus the prior year's same period was due to
lower initial software licensing fees from new customers as the
Company focused most of its efforts in regulatory licensing and
system software integration and customization in anticipation of
entering into the Nevada and Ontario markets.
Operating expenses increased by 38% to $560,004 for the three
months ended June 30, 2002 compared to $404,871 during the prior
year quarter. The increase in operating expenses was primarily
due to, non-cash expenses of $115,000 relating to issuance of
shares and options to consultants in the second quarter of year
2002 as well as gaming licensing and related attorney's
expenses. For the six months ended June 30, 2002 operating
expenses increased by 119% from the previous first six months
primarily due to investigation fees relating to gaming licensing
applications for Nevada, U.S.A and Ontario, Canada during the
first half of year 2002, non-cash expenses of approximately
$293,000 relating to issuance of shares of common stock to
consultants in the first half of year 2002. Also during the
first half of 2002, the Company expensed almost all software
development costs as operating expenses while during the same
period last year about $210,000 of operating expenses were
capitalized as Software.
Interest expense decreased to $5,611 for the three months ended
June 30, 2002 from $13,080 for the prior three months ended June
30, 2001 and to $14,349 for the first six months ended June 30,
2002 from $21,495. The reason for the drop in the interest
expense was that due to partial cancellation of a note by the
founder of the Company. During the quarter ending June 30, 2002,
the founder of the Company agreed to waive all of the $28,966
interest accrued on his original $85,000 notes. It was further
agreed that the remaining $85,000 indebtedness would not accrue
any further interest, be payable on May 15, 2003 and if not paid
by that date to start accruing interest at the original 12% per
year as of that date.
Net loss from operations for the three months ended June 30,
2002 was $431,918 compared to net loss from operations of
$301,477 for the three months ended June 30, 2001. For the six
months ended June 30, 2002 net loss from operation was
$1,161,455 compared to net loss of $280,224 for the six months
ended June 30, 2001.
As of June 30, 2002 the Company had $97,086 in cash and cash
equivalents compared to $12,045 at December 31, 2001. Working
capital deficit at June 30, 2002 improved by $169,924 to
negative working capital of $370,779 from $540,703 on December
31, 2001. The increase in working capital was due to proceeds of
sale of shares of common stock during the period. The Company
believes that it will require, at least, an additional
$1,000,000 of capital over the next 12 months in order to fund
its gaming software development and to finance possible future
losses from operations as the Company endeavors to build
revenue, enhance its existing software or develop new software.
As of June 30, 2002, the Company had shareholders' equity of
$490,074 compared to $469,154 at December 31, 2001.
There can be no assurance that the Company will be able to
obtain sufficient additional capital, either through the present
private placement or otherwise, in order to fund the Company's
working capital requirements in a timely manner. The report of
the Company's independent accountants for the fiscal year ended
December 31, 2001 states that due to recurring losses from
operations, the absence of significant operating revenues and
the Company's limited capital resources, there is substantial
doubt about the Company's ability to continue as a going
concern.
W.R. GRACE: PD Committee Wants to Tap Five Special Counsels
-----------------------------------------------------------
The Official Committee of Asbestos Property Damage Claimants of
W. R. Grace & Co., and debtor-affiliates, seek the Court's
authority to retain five Special Counsels to defend objections
to Zonolite Attic Insulation's proofs of claim.
To recall, the Court ruled that the Debtors' estates would be
responsible for the fees and expenses of counsel for the ZAI
Claimants in defending the objections to the ZAI proofs of
claim. The Court directed the PD Committee to either:
(a) inform the Court that Bilzin Sumberg Dunn Baena Price &
Axelrod, presently representing the PD Committee as lead
counsel, would be counsel to the ZAI Claimants in defense
of the Debtors' objections to their proofs of claim, or
(b) submit a motion to retain Special Counsel.
The PD Committee has chosen the latter course.
The PD Committee and its counsel are unable to represent the
interests of individual claimants. As a Section 1103 committee,
the PD Committee is charged with representing the interests of
asbestos property damage claimants, and thus, has a fiduciary
duty to all PD Claimants and the Court. Conversely, counsel to
any particular claimant owes a duty only to that claimant.
The Court has ruled that only the ZAI Claimants, or any other
claimants with ZAI Claims that filed proofs of claim by May 30,
2002, would be entitled to participate in the ZAI "science"
trial. Although the process that the Court has set in place may
well be illuminating on class certification, bar date and notice
program issues with respect to ZAI claims, the fact remains that
the process only implicates, at most, claims of a limited number
of specific ZAI Claimants. Consequently, the PD Committee is
legally powerless to undertake representation of the cause.
However, the Court gave the PD Committee an alternative --
select Special Counsel to defend objections to the ZAI
Claimants' proofs of claim, subject to each Claimants' right to
engage his or her own counsel -- to serve as a "gatekeeper" of
sorts to ensure that the Court's directive that there be a ZAI
"science" trial is facilitated. To further facilitate the
"science trial," the Court, recognizing the inherent unfairness
of requiring some 10 ZAI Claimants to "bear the brunt" of
litigating the "science" trial, ordered that the Debtors'
estates would be responsible for the costs of the trial for the
ZAI Claimants' counsel.
The PD Committee is prepared to serve in the role of
"gatekeeper," expressly without waiving the substantive rights
of any particular property damage claimant. To that end, the PD
Committee has designated a list of the law firms nominated by
the ZAI Claimants to serve as Special Counsel. The PD Committee
will leave it to Special Counsels to designate who will be "Lead
Counsel" among them.
These various Special Counsels specialize in the areas of
product liability and consumer protection litigation, with a
particular expertise in toxic torts, including asbestos. The
lawyers who will be principally responsible for these matters
have served as lead or co-lead counsel in numerous Federal or
State certified class actions. The Special Counsels have been
actively involved in litigating claims related to ZAI for two
years prior to the Debtors' bankruptcy.
The PD Committee anticipates that Special Counsel will provide
services to the ZAI Claimants as needed throughout the course of
the "science" trial with respect to ZAI, including:
(a) representation of the ZAI Claimants with respect to all
aspects of the ZAI "science trial" -- including
representation of the ZAI Claimants in any ensuing
appeals;
(b) selection of experts and consultants; and
(c) other services as are necessary during the course of the
ZAI "science" trial.
Special Counsel has agreed to be compensated for its services on
an hourly basis, in accordance with its normal billing
practices, subject to allowance by the Court in accordance with
the Administrative Fee Order governing compensation of
professionals and reimbursement of expenses, as amended. The
current hourly rates of Special Counsel are:
Lukins & Annis, PS
- Darrell Scott $300
- Burke Jacowich $130
Lieff, Cabraser, Heimann & Bernstein, LLP
- Elizabeth Cabraser $650
- Thomas Sobol $550
- Jeniene Matthews $300
Richardson, Patrick, Westbrook, Brickman
- Ed Westbrook $650
Ness, Motley, Loadholt, Richardson & Pole
- Robert Turkewitz $400
McGarvey, Heberling, Sullivan & McGarvey, P.C.
- Allan McGarvey $200
The aggregate amount of fees and expenses that Special Counsels
expect to incur during the course of their representation of the
ZAI Claimants will not exceed $4,229,000.
None of the firms comprising Special Counsel represents or holds
any interest adverse to the Debtors' estates or their creditors
in the matters upon which the firms are to be engaged. They are
"disinterested". However, each firm is a multi-lawyer firm with
a national practice and may represent or may have represented
certain of the Debtors' creditors or equity holders in matters
unrelated to these Chapter 11 Cases.
Objections
(1) PI Committee
The Official Committee of Asbestos Personal Injury Claimants
opposes the retention of McGarvey, Heberling, Sullivan &
McGarvey, P.C. as Special Counsel for the ZAI Claimants.
PI Committee member, Royce N. Ryan, has authorized McGarvey,
Heberling to act as his attorney for purposes of participation
in the PI Committee. As a result of that representation and the
corresponding fiduciary duties owed to all personal injury
creditors, McGarvey, Heberling is apparently conflicted from
serving as Special Counsel for the PD Committee.
The question as to whether McGarvey, Heberling is able to serve
as Special Counsel to the PD Committee is answered by an
analysis as to whether the PD Committee and the individual ZAI
Claimants have an "adverse interest" to either Mr. Ryan or the
asbestos personal injury creditors. In this matter, an adverse
interest appears to exist due to the competing financial
interests between Mr. Ryan, by and through the PI Committee, and
the individual constituents of the PI Committee and the PD
Committee.
To the extent that McGarvey, Heberling is successful in
assisting the individual ZAI Claimants achieve a successful
result in the ZAI "science trial", McGarvey, Heberling will
directly impact the ability of all of the asbestos personal
injury claimants to maximize their recovery from the estates'
limited resources.
Thus, the PI Committee contends that McGarvey, Heberling should
be prohibited from serving as Special Counsel to the PD
Committee unless and until the apparent conflict is resolved.
(2) Debtors
The Debtors asserts that the PD Committee has violated both the
spirit and a letter of special counsel appointment by:
-- seeking to retain six different law firms to represent the
claimants, and
-- proposing a $4.2 million budget.
The Debtors suggest that a modified contingent fee arrangement
is more appropriate, reasonable.
The Debtors recognize that Mr. Westbrook of Richardson Patrick
Westbrook Brickman and Mr. Turkewitz of Ness Motley Loadholt
Richardson & Poole used to be with the same law firm; and have
worked together on property damage cases against the Debtors.
Thus, the Debtors announce they "can accept those individuals
and their respective firms working together on the science
trial. In fact, they are the logical choice to act as special
counsel at the science trial".
All of the proposed firms are essentially mass tort plaintiffs'
firms who have contingent fee arrangements with the claimants.
While Judge Wolin's suggested that the Debtors bear the out-of-
pocket costs of the science trial, he did not suggest that the
Debtors' estates would have to bear the full hourly fees of
these attorneys. The Debtors propose to pay special counsel's
out-of-pocket costs, if "reasonable".
(3) Unsecured Committee
The Creditors' Committee has no objection to the appropriate
utilization of counsel already familiar with the facts and legal
issues relevant to the ZAI claims asserted against the Debtors'
estates, and welcomes a cost-effective and efficient conduct of
the science trial by all parties. However, the Committee does
object to the purported utilization of five law firms. The
Retention Motion is totally devoid of any explanation to support
the extraordinary proposed retention of so many law firms, and
there does not appear to be any reasonable justification for
authorizing so many firms to so participate and be compensated
by these estates.
The Unsecured Committee also proposes that lead and local
counsel be designated now, and that the firms involved
demonstrate that the workload is to be divided so that there
will not be overlapping or duplication of costs. (W.R. Grace
Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
WEBLINK WIRELESS: Texas Court Confirms Plan of Reorganization
-------------------------------------------------------------
WebLink Wireless Inc., announced that its Second Amended Plan of
Reorganization was confirmed by the United States Bankruptcy
Court for the Northern District Texas. WebLink Wireless expects
to emerge from the Chapter 11 process in early September when
the plan becomes effective.
"We are pleased that our plan has been confirmed by the Court,"
said N. Ross Buckenham, president and CEO of WebLink Wireless.
"The plan was approved by an overwhelming majority of the voting
creditors. All voting classes approved the plan. We are
looking forward to completing our financial reorganization and
emerging from Chapter 11."
As previously announced, under the plan of reorganization, the
Company will emerge from bankruptcy with $40 million in debt.
Interest on $20 million will be payable in cash and interest on
the other $20 million will be payable in kind by the issuance of
additional notes. All of the cash pay notes, $17.8 million of
the PIK notes, 2,403,000 shares of new common stock of the
reorganized Company and an estimated $7 million of cash will be
distributed to the Company's secured creditors. The remaining
$2.2 million of PIK notes, 297,000 shares of the reorganized
company's new common stock and warrants to purchase 12 million
shares of new common stock will be distributed to the Company's
unsecured creditors. The warrants will have a term of 10 years
and the initial exercise price is expected to be approximately
$13.64 per share, which will increase by 9% each year. An
additional 300,000 shares of the reorganized Company's new
common stock will be issued or reserved for issuance pursuant to
a management stock incentive program. The current equity
holders of the Company will receive no distributions under the
plan of reorganization and their stock, and all options,
warrants and other rights to acquire equity services will be
canceled when the plan of reorganization becomes effective.
Throughout the financial reorganization process, WebLink
continued to provide first class service to its strategic
alliance reseller partners and to its direct business customers
that include Fortune 1000 companies. WebLink is committed to
offering comprehensive and top quality services to its strategic
and business wireless data customers.
"Our network strength continues to be best of class and our
strategic and business customers have continued to support
WebLink Wireless throughout our financial reorganization because
of our superior network coverage and services," said N. Ross
Buckenham. "We appreciate the loyalty of our partners and
customers and we look forward to continuing to work for and with
them."
WebLink Wireless, Inc., a leader in the wireless data industry,
operates the largest ReFLEX network in the United States. The
Dallas-based company provides 2way wireless messaging, wireless
email, mobile Internet information, customized wireless business
solutions, telemetry and paging to more than 1.2 million
business and consumer customers. WebLink Wireless is the
preferred wireless data network provider for many of the largest
telecommunication companies in the United States who resell
services under their own brand names. WebLink's reliable
simulcast network covers approximately 90 percent of the U.S.
population and, through roaming agreements, extends throughout
most of North America. For more information on WebLink Wireless
please visit http://www.weblinkwireless.com
WHEELING-PITTSBURGH: Will Delay Filing Form 10-Q for 2nd Quarter
----------------------------------------------------------------
On behalf of Wheeling-Pittsburgh Corporation, Executive
Vice President and CFO Paul J. Mooney advises the Securities and
Exchange Commission that WPC was unable to file its 10-Q report
for the second quarter ending June 30, 2002 without unreasonable
effort or expense due to delays in gathering information for
inclusion in the report associated with it. Mr. Mooney admits
that Form 10-K for periods ending December 31, 2000 and December
31, 2001, and Forms 10-Q for periods ending March 31, 2001, June
30, 2001, September 30, 2001 and March 31, 2002 have not been
filed either.
Mr. Mooney reports that when filed, the Form 10-Q Results of
Operation will reflect a Net Loss of $10,500,000 for the quarter
ended June 30, 2002, as compared to a Net Loss of $41,500,000
for the quarter ended June 30, 2001. In addition, the Company
expects to show an Operating Loss of $8,200,000 for the second
quarter of 2002, as compared to an Operating Loss of $50,000,000
for the second quarter of 2001. (Wheeling-Pittsburgh Bankruptcy
News, Issue No. 25; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
WILLIAMS COMMS: Court Approves Claim Transfer Restrictions
----------------------------------------------------------
Williams Communications Group, Inc., its debtor-affiliates and
the Official Unsecured Creditors' Committee obtained
authorization from the Court, pursuant to Sections 362 and
105(a) of the Bankruptcy Code, to notify holders of claims
against the Debtors that certain transfers of their claims are
enjoined by virtue of the automatic stay. They will also notify
the Claimants of the procedures that must be satisfied before
certain sales or transfers may be deemed effective.
Specifically, the notice procedures will advise Claimants of the
following:
* Any person or entity who does not own any Company Claims, or
who owns less than $200,000,000 in the aggregate face amount
of Company Claims, is stayed, prohibited, and enjoined,
from purchasing, acquiring, or otherwise obtaining Ownership
of an amount which, when added to that person's or entity's
total Ownership, equals or exceeds $200,000,000 in the
aggregate face amount of claims;
* Except as otherwise specifically provided by an authorized
resolution of the Company's Board of Directors, any person
or entity who owns Company Claims equal to or exceeding
$200,000,000 in the aggregate face amount, and proposes or
intends to sell, acquire, trade, or otherwise transfer or
effectuate any claims, must file with this Court and serve
on the Debtor, counsel to the Debtor, and Counsel to the
Committee, a Claims Trading Notice at least 30 days prior to
the transaction. After receipt of the Trading Notice, the
Debtors will have 30 days to object to the transaction. If
the Debtors file an objection, then the transaction will not
be effective unless approved by the Court. If the Debtors
do not object during the Waiting Period, then the
transaction may proceed as set forth in the Claims Trading
Notice.
* For purposes of this motion, "Ownership" of a claim against
the Debtor will include, direct and indirect ownership,
ownership by members of the person's family and persons
acting in concert, and in certain cases, the creation or
issuance of an option, and any variation of the term
"Ownership" shall have the same meaning.
According to the Debtors' current estimate, it will have tax net
operating losses (NOLs) of $1,300,000,000 and built-in losses of
$2,800,000,000, upon emergence from chapter 11 proceeding. Under
the Plan, the reorganized entity will succeed to these NOLs.
The NOLs are a valuable asset of the Debtors estate, which they
intend to utilize to offset future income and thereby
significantly reduce New WCG's federal income tax liability,
under applicable rules of the Internal Revenue Code.
Specifically, in the Debtors' case, it is anticipated that the
smallest claim that could be reasonably anticipated to lead to a
distribution of 5% of the reorganized entity would be
$200,000,000. In addition, proposed amendments to the Plan will
provide for the disallowance of claims to the extent that they
would entitle the holder to a distribution of 5% or more of the
value of the reorganized entity. To preserve the benefit of its
NOLs through the Bankruptcy Exception, therefore, and to give
fair notice to potential purchasers of claims about the risk of
disqualification, transfers of claims that would result in the
transferee holding claims equal to or exceeding $200,000,000 in
the aggregate face amount must be made subject to the Approval
Procedures. (Williams Bankruptcy News, Issue No. 9; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WORLDCOM: US Communications Seeks Stay Relief to Pursue Action
--------------------------------------------------------------
US Communications Inc., wants to continue the prosecution of an
action styled, MCI WorldCom NetworkServices, Inc. v. Twister
Communications Network, Inc., Case No. 00-05-03124-CV before the
Judicial District Court of Montgomery County, Texas.
Thomas M. Fountain, Esq., at Bair & Fountain P.C., in Houston,
Texas, relates that the action was initiated when the Debtors
filed a lawsuit against Twister Communications Network, Inc. for
an alleged debt totaling $33,000,000. WorldCom is still
asserting that this debt is valid and owing to WorldCom.
Subsequent to the filing of that initial cause of action in the
State District Court of Montgomery County, Texas, US
Communications intervened in that cause of action asserting its
$8,000,000 claim against WorldCom. Along with the other parties
in this case, US Communications has secured 15 to 20
depositions, and this case was on the verge of being tried in
Montgomery County, Texas on August 19, 2002.
The State Court Action, which has been pending for more than two
years, was nearing trial when the Debtors filed its bankruptcy
case. Discovery is nearly completed, and trial is set to occur
on August 19, 2002.
Mr. Fountain assures the Court that US Communications is not
seeking to attach assets, impose liens, or interfere with the
"orderly asset distribution" in this case. It seeks only to
liquidate its claim. The action does not have an immediate
impact on the administration of the Debtors' estate. Further,
liquidation of US Communications' claims is inevitable in any
event, and WorldCom would have to incur at least some litigation
expenses to achieve the end result.
Mr. Fountain notes that WorldCom is a plaintiff in the State
Court Action, and as a result, is not subject to the automatic
stay of its own bankruptcy case. Severe and irreparable harm
would result to US Communications if WorldCom were to proceed
with its case on August 19 while shielding itself from liability
by use of the automatic stay. That result is clearly
inequitable, and constitutes extraordinary circumstances for
lifting the automatic stay. Little harm will result in allowing
the State Court Action to proceed at this time. (Worldcom
Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
XO COMMS: CRT Capital Wants to Appoint Examiner in Debtor's Case
----------------------------------------------------------------
CRT Capital Group, LLC, tells Judge Gonzalez that he should
appoint an examiner in XO's case to investigate factual
allegations of fraud, self-dealing and breaches of fiduciary
duty committed by XO Communications, Inc., and its directors
since January 12, 2001.
XO issued $517,500,000 of 5.75% Convertible Subordinated Notes
pursuant to an indenture, dated as of January 12, 2001, and a
prospectus, dated as of August 30, 2001.
CRT purchased Subordinated Notes based on facts and
representations contained in the Indenture and the Prospectus.
CRT says it was misled because the Subordinated Notes became
virtually worthless in a few months' time.
CRT recounts the events that lead to a series of questions to
which CRT wants answers:
-- According to the Shareholders' Complaint, the entire process
through which the Investment Agreement was reached was
designed to favor Forstmann Little's proposal at the expense
of XO's public shareholders and creditors.
-- According to the Shareholders' Complaint, Forstmann owned
directly or indirectly, in excess of 34% of XO's common
equity, but CRT does not know how much of the Debtor's common
equity is currently held by Forstmann.
-- Daniel Francis Akerson, a defendant in the Shareholder
Action, is the Chairman of the Board and Chief Executive
Officer of XO. From 1993 to 1996, Akerson was also a general
partner of Forstmann.
-- Sandra J. Horbach, a defendant in the Shareholder Action, has
served as a director of XO since January 2000. Horbach is a
general partner of Forstmann and sits on the XO board as a
Forstmann designee.
-- Craig O. McCaw, a defendant in the Shareholder Action, has
been a director of XO since January 1997 and was Chief
Executive Officer of the XO from September 1994 through July
1997. In 2000, McCaw sold $117,000,000 of XO common stock.
-- In addition to the Shareholder Action, a lawsuit was
commenced in February of 2002 against Forstmann by the
Treasurer of the State of Connecticut, in connection with
Forstmann's investments in XO and McLoedUSA, another
telecommunications company. The Connecticut Action has not
yet been resolved.
-- XO's most recent Form 10-Q filed with the Security Exchange
Commission disclosed that XO is being investigated by the SEC
in connection with XO's accounting methods regarding tax
obligations.
-- Under the Settlement with the Shareholders, the Debtor has
agreed to pay $20,000,000 to the Shareholders, in exchange
for dismissing the Shareholder Action and for granting the
directors of the Debtor releases from all claims and causes
of action, but the Settlement does not provide for a
distribution to the holders of the Subordinated Notes.
CRT tells the Court an examiner is necessary in this case to
determine:
(a) whether the Settlement in any way enhances the value of the
Debtor's estate, as required under Rule 9019 of the Federal
Rules of Bankruptcy Procedure;
(b) what portion of the $20,000,000 being awarded to
Shareholders is consideration for the releases being given
to the directors of the Debtor;
(c) whether releases given to the Debtor's directors by the
Shareholders in any benefit the Debtor's estate;
(d) how the Settlement facilitates XO's ability to satisfy the
litigation condition of the Investment Agreement, especially
if the Connecticut Litigation is still pending;
(e) how may shares of common stock Forstmann controlled at the
time the Settlement was being negotiated; and
(f) whether the negotiation of the Investment Agreement between
Forstmann and XO was conducted at arms-length?
These questions must be fully investigated and resolved prior to
confirmation of any plan of reorganization, CRT insists.
Christopher R. Donoho, III, Esq., at Stroock & Stroock & Lavan,
LLP, CRT's counsel, argues that the plain meaning of section
1104(c)(2) requires that the Court appoint an examiner in this
case because CRT's fixed, liquidated, unsecured claims against
the Debtor exceeds $5,000,000. (XO Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
*********
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
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re-mailing and photocopying) is strictly prohibited without
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contained herein is obtained from sources believed to be
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*** End of Transmission ***