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/raid1/www/Hosts/bankrupt/TCR_Public/020924.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, September 24, 2002, Vol. 6, No. 189 Headlines 360NETWORKS: Wants to Reclassify $3.4M Kajima Claim as Unsecured A-BEST PRODUCTS: Case Summary & Largest Unsecured Creditors ACANDS: Wants to Appoint Garden City as Notice & Claims Agent ACOUSTISEAL INC: Retaining W. Y. Campbell as Investment Banker AES CORP: Units Sell Gas-Fired Peaker Assets to Tenaska for $36M A.G. SIMPSON: Ontario Court Fixes Sept. 27, 2002 Claims Bar Date AMERISOURCE-BERGEN: Fitch Changes Outlook on Low-B Debt Ratings AMES DEPARTMENT: Seeks Okay to Continue Compensation Procedures BETHLEHEM STEEL: Intends to Amend Greenhill's Engagement Terms BETHLEHEM STEEL: Says New Labor Contract Essential for Emergence BUDGET GROUP: Committee Taps Ashby & Geddes as Delaware Counsel BULL RUN: Lenders Agree to Extend Credit Facility Until Oct. 15 CALPINE: Sells Additional 3.45M Canadian Power Income Fund Units CHAMPION ENT.: Says Restructuring Actions Begin to Yield Results CHEROKEE INT'L: Considering Debt Restructuring Alternatives CHESAPEAKE ENERGY: Taps Petrie Parkman to Sell Permian Assets CHINA ENTERPRISES: Fails to Meet NYSE Continued Listing Criteria CMS ENERGY: Closes Oil and Gas LDC Sale to Perenco Affiliate CORRPRO: Adjourns Annual Shareholders' Meeting Until October 11 CTN MEDIA: Selling College Television Network to MTV for $15MM CYANOTECH CORP: Nasdaq Okays Listing Transfer to SmallCap Market DEPOMED INC: AMEX Accepts Plan to Meet Listing Requirements EGAMES: Must Achieve Positive Cash Flow to Continue Operations EMPRESA ELECTRICA: Fitch Drops Ratings to D After Ch. 11 Filing EMPRESA ELECTRICA: Signs-Up Cleary Gottlieb for Legal Services ENRON CORP: Wants Okay to Vote Stock Share in Portland General FMC: Commences Refinancing via New Credit Facility & Debt Issues GEORGIA-PACIFIC: Says Procter & Gamble Lawsuit "Has No Basis" GLOBAL CROSSING: Court Sets Exclusivity Hearing for October 21 HARDWOOD PROPERTIES: Will Pay Cash Distributions to Shareholders IEC ELECTRONICS: Fails to Maintain Nasdaq Listing Requirements INTEGRATED HEALTH: Wants to Implement Litchfield Transfer Pacts KMART CORP: Court Approves Abacus to Render Consulting Services LIGHTHOUSE FAST FERRY: June 30 Balance Sheet Upside-Down by $8MM LODGIAN INC: Asks Court to Approve Management Incentive Program LOGIMETRICS: Board of Directors Okays Proposed Liquidation Plan LTV CORP: Wants to Keep Plan Exclusivity Until February 10, 2003 MEADOWCRAFT: Has Until October 2 to File Schedules and Statement MEDSOLUTIONS INC: Ability to Continue Operations Uncertain MEMC ELECTRONIC: Denies Bankruptcy Reports, but Still Insolvent METALS USA: Files First Amended Plan of Reorganization in Texas NCS HEALTHCARE: Omnicare Extends Tender Offer Until October 3 PACIFIC GAS: CPUC and Committee's Request to Open Voting Nixed PENTACON INC: Completes Sale of Assets & Operations to Anixter PEREGRINE SYSTEMS: Files for Chapter 11 Reorganization in Del. PEREGRINE SYSTEMS: Case Summary & 40 Largest Unsec. Creditors PEREGRINE SYSTEMS: Selling Remedy Unit's Assets + Debts to BMC PHOTRONICS INC: Buys-Back $33.2M of 6% Convertibles Below Par QWEST: AT&T Calls for Evaluation of Accounting Irregularities ROADHOUSE GRILL: Set to Emerge from Chapter 11 by September 30 SAFETY-KLEEN CORP: Wins Nod to Sell 3E Company Stake for $12MM SLI: Court OKs Access to $20MM Interim Post-Petition Financing STAR TELECOMMS: Sells Nationwide Fiber Network to IDT Corp. Unit TANDYCRAFTS INC: Committee Balks at Mibec Lease Agreement TANGER FACTORY: Tapped to Manage Existing Florida Factory Outlet TEREX CORP: Completes Acquisition of Genie Holdings Assets THOMSON KERNAGHAN: Court to Rule on Investors' Motion on Thurs. TYCO INT'L: Will Conduct Investors' Conference Call Tomorrow UNIROYAL: Gets Nod to Pay UEP Unit's Critical Vendors' Claims US AIRWAYS: Court Okays Otterbourg as Committee's Lead Counsel US SEARCH: Fails to Satisfy Nasdaq Minimum Listing Requirements VANGUARD AIRLINES: Hooters Air Offers to Acquire Certain Assets VIADOR INC: Enters into Definitive Merger Pact with MASBC, Inc. WEIRTON STEEL: Annual Shareholders' Meeting Scheduled in Nov. WHEELING-PITTSBURGH: Seeks $250M Fed. "Byrd Bill" Loan Guarantee WILLIAM CARTER: S&P Places B+ Long-Term Rating on Watch Positive WILLIAMS COMMS: UST Says Debtor's Plan Doesn't Comply with Code WINSTAR COMMS: Trustee Presses for Prompt Turnover of Documents WORLDCOM INC: MessagePhone Demands Prompt Decision on Contract WORLDCOM INC: Committee Continues to Work with Senior Management WORLDCOM INC: Pays GCI $3.5-Mill. Against Prepetition Obligation ********* 360NETWORKS: Wants to Reclassify $3.4M Kajima Claim as Unsecured ---------------------------------------------------------------- 360networks inc., and its debtor-affiliates ask the Court to reclassify Kajima Construction Services, Inc.'s Proof of Claim No. 862 as a general unsecured claim. Alan J. Lipkin, Esq., at Willkie Farr & Gallagher, in New York, relates that Kajima is a general contractor that performed prepetition construction services for 360networks (USA) inc. The Kajima Claim is secured by a mechanic's lien against the property known as Carrier Center LA, which is owned by another debtor, Carrier Center L.A., Inc -- CCLA. The asserted amount is $3,473,823. Mr. Lipkin explains that 360 USA holds a leasehold interest in the Carrier Center by oral agreement. Due to the absence of a specific term of years or a writing, at best, the lease effectively created a month-to-month tenancy terminable by either party. On September 14, 2000, CCLA filed a notice of non-responsibility to California Code Sections 3094, 3128 and 3129. Under the California law, Mr. Lipkin says, by a timely recording a notice of responsibility with the local county recording and posting the notice on site, a landlord can protect itself against the assertion of liens against its property based upon obligations that are the responsibility of the tenant. With the month-to-month term, even if the Kajima Claim were secured by 360 USA's leasehold interest at the Carrier Center, the security interest would be valueless. Accordingly, Mr. Lipkin asserts, the Kajima Claim should be reclassified as a general unsecured claim against 360 USA. (360 Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) A-BEST PRODUCTS: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------- Debtor: A-Best Products Company,Inc. 5405 East Schaaf Road Cleveland, Ohio 44131 Bankruptcy Case No.: 02-12734 Type of Business: The Debtor is a former manufacturer and seller of industrial safety clothing. Chapter 11 Petition Date: September 20, 2002 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtor's Counsel: Henry Jon DeWerth-Jaffe, Esq. Pepper Hamilton LLP 3000 Two Logan Square 18th & Arch Street Philadelphia, PA 19103 215-981-4796 Fax : 215-981-4750 Total Assets: $14,434,315 Total Debts: $575,398 Debtor's 2 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Buckley King & Bluso Attorney's Fees $1,878 Baker & Hostetler LLP Attorney's Fees $1,991 Debtor's 20 Largest Asbestos Injury Claimants' Lawyers: Amounts are unknown. Firm No. of Claimants ---- ---------------- Michael V. Kelley, Esq. 20,153 Kelley & Ferraro LLP 1300 East Ninth Street 1901 Penton Media Building Cleveland, Ohio 44115 Mark Coulter, Esq. 4,595 Pierce, Raimond & Coulter, PC 2500 Golf Tower 707 Grant Street Pittsburgh, PA Stuart Calwell, Esq. 3,642 Stuart Calwell, PLLC 405 Capitol Street, Suite 607 PO Box 113 Charleston, WV 52321 Mark C. Meyer, Esq. 2,781 Goldberg, Persky, Jennings & White 1030 Fifth Avenue Pittsburgh, PA 15219 Robert A. Pritchard, Esq. 2,593 PO Box 2184 Frayette, Ms. 39069 Christopher Hickey, Esq. 2,382 Wallace & Graham, PA 525 North Main Street Salisbury, NC 28144 Paul S. Lefkowitz, Esq. 2,069 Climaco, Lefkowitz, Peca, Wilcox & Garofoli, LPA 9th Floor The Halle Building 1228 Euclid Avenue Cleveland, Ohio 44115 Thomas W. Bevan, Esq. 1,998 Bevan & Associates LPA, Inc. 10360 Northfield Road Northfield, Ohio 44067 Robert P. Sweetney, Esq. 511 Robert E. Sweetney Co., LPA 1500 Illuminating Building 55 Public Square Cleveland, Ohio 44113 Law Office of Peter G. Angelos 500 One Charles Center 100 N. Charles Street 22nd Floor Baltimore, MD 21201 Angel M. Reyes 420 Ratiner Reyes & O'Shea, PA Suite 1601 1101 Bricknell Avenue Miami, FL 33131 James Hession, Esq. 317 202 North Saginaw Street PO Box 266 St. Charles, MI 48655 John I. Kittel, Esq. 265 Mazar, Morgan, Meyers & Kittel, PLC 1490 First National Building Detroit, MI 48226 David E. McClure, Esq. 261 Grover B. Davis, Esq. McClure, McClure & Kammen 235 N. Delaware Indianapolis, IN 46204 Todd B. Naylor, Esq. 253 Manley, Burke & Lipton 225 West Coast Street Cincinnati, OH 45202 Ladd Gibke, Esq. 146 Baron & Budd The Centrum, Suite 1100 3102 Oak Lawn Avenue Dallas, TX 75219 Paul Doolittle, Esq. 119 Ness, Motley, Loadholt, Richardson & Poole 28 Bridgeside Boulevard Mt. Pleasant, SC 29465 Michael Serling, Esq. 56 Michael B. Serling, PC 280 N. Old Woodward Avenue Birmingham, MI 48009 David M. Cook, Esq. 50 David M. Cook, LLC 22 West Ninth Street Cincinnati, OH 45202 Greitzer & Locks 44 1500 Walnut Street, 20th Floor Philadelphia, PA 19102 ACANDS: Wants to Appoint Garden City as Notice & Claims Agent ------------------------------------------------------------- ACandS, Inc., seeks authority from the U.S. Bankruptcy Court for the District Of Delaware to hire Garden City Group, Inc., as the official noticing, claims and balloting agent in the Company's chapter 11 cases. There are over 250,000 outstanding claims against the Debtor based upon or related to asbestos installation. Absent the appointment of Garden City as the Debtor's notice, claims and balloting agent, the Debtor believes that the hundreds of thousands of claimants involved in the Debtor's Chapter 11 case will impose substantial administrative burdens on this Court and the Office of the Clerk of the Court. The Debtor submits that the most effective and efficient manner by which to relieve the Clerk's Office of these burdens is to engage Garden City to act as the official noticing, claims and balloting agent. Garden City is fully equipped to handle the volume involved in properly sending the required notices to, and processing the claims of, creditors and other interested parties in this case. Garden City will follow the notice and claim procedures that conform to the guidelines promulgated by the Clerk's Office and the Judicial Conference. Garden City will: A) prepare and serve notices in this Chapter 11 Case which may include: 1) notice of the commencement of this Chapter 11 Case and the initial meeting of creditors under Section 341(c) of the Bankruptcy Code; 2) notice of the claims bar date; 3) notice of the objections to claims; 4) notice of any hearings pertaining to the adequacy of disclosure statement and/or confirmation of a plan(s) of reorganization; and 5) other miscellaneous notices to any entities; B) file with the Clerk's Office a certificate or affidavit of service that includes a copy of the notice involved, an alphabetical list of persons to whom the notice was mailed and the date and manner of mailing; C) conduct the reconciliation and resolution of claims; D) maintain copies of all proofs of claim and proofs of interest filed; E) maintain official claims registers, including, among other things, the following information for each proof of claim or proof of interest: 1) the name and address of the claimant/agent; 2) the date received; 3) the claim number assigned; and 4) the asserted amount and classification of the claims; F) implement necessary security measures to ensure the completeness and integrity of the claims register; G) transmit to the Clerk's Office a copy of the claims register on a monthly basis, unless requested by the Clerk's Office on a more frequent basis; H) act as the balloting agent in connection with a plan of reorganization, which will include: 1) printing of ballots including the printing of credit and shareholder specific ballots; 2) preparing the voting report for the plan by class, credits or shareholder for review and approval by the Debtor; 3) coordination of mailing of ballots, disclosure statement and plan to all voting and non-voting parties and provide affidavit of service; and 4) receiving ballots at a post office box, inspecting ballots for conformity to voting procedures, date stamping and numbering ballots consecutively and tabulating and certifying the results; I) maintain an up-to-date mailing list for all entities that have filed a proof of claim or proof of interest; J) provide access to the public for examination of copies of proofs of claim or interest without charge during regular business hours; K) record all transfers of claims pursuant to Bankruptcy Rule 3001(e) and provide notice of such transfers as required by Bankruptcy Rule 3001 (e); L) comply with all applicable federal, state, municipal and local statutes, ordinances, rules, regulations, orders and other requirements; and M) promptly comply with such further conditions and requirements as the Clerk's Office or the Court may at any time prescribe. The Debtors will pay Garden City for services at the Firm's customary hourly rates: - Create creditor file $160 per hour - Manual entry of creditor data $45 per hour - Produce schedules $125 to $250 per hour - Claims Processing and Docketing $60 per hour - Document Management $35 - $75 per hour - System Customization Programmer $125 to $150 per hour Senior Programmer $150 - $175 per hour - Standard Reports $65 per creation - Customized and Ad Hoc Reporting $125 - $175 per hour - Consulting & General Project Management Clerical $40 - $60 per hour Supervisor $75 - $95 per hour Senior Supervisor/ $95 - $125 per hour Bankruptcy Paralegal Project Manager $150 per hour Senior Project Manager $175 per hour Quality Assurance $175 per hour Senior VP Systems and Managing Director $250 per hour - Processing ballots $60 per hour AcandS, Inc., was an insulation contracting company, primarily engaged in the installation of thermal and mechanical insulation. In later years, Debtor also performed a significant amount of asbestos abatement and other environmental remediation work. The Company filed for chapter 11 protection on September 16, 2002. Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young & Jones represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $100 million. ACOUSTISEAL INC: Retaining W. Y. Campbell as Investment Banker -------------------------------------------------------------- Acoustiseal, Inc., wants to retain W. Y. Campbell & Company as Investment Banker to market and sell its business and assets as a going concern. The Debtor is seeking authority from the U.S. Bankruptcy Court for the Western District of Missouri for Campbell's retention. The Debtor submits that Campbell is well-qualified to serve as its investment banker in connection with a sale transaction. Campbell is in the business of providing such services and has extensive experience and a respected reputation, particularly in the automotive industry. Campbell is expected to: a) review the Debtor's businesses and operations, business plan and strategies and prospects; b) analyze the Debtor's current balance sheet and financial position and market performance; c) perform comparative market analyses as may be appropriate, contrasting the Debtor with other comparable companies; d) review the Debtor's articles of incorporation, corporate bylaws, recent Boards of Director's minutes, indentures and other relevant documents; e) meet with officials, legal counsel and other advisors and consultants as often and as necessary as both the Debtor and Campbell deem reasonable in order to assist the Debtor with the sale transaction; f) assist the Debtor in evaluating and selecting the structural alternative that will accomplish the sale transaction, including assisting in preparing and presenting relevant information to the Debtor's Board of Directors with respect to an authorization to proceed; g) assist the Debtor in preparing the necessary documentation description of the sale transaction; h) assist the Debtor in preparation of a "teaser" memorandum and request for expressions of interest; i) assist the Debtor in preparation and distribution of a confidential offering memorandum to potential bidders; j) on behalf of the Debtor, contact and meet with security holders, lenders and their legal, financial or other advisors, as appropriate, to provide information explaining the Debtor's proposed Sale Transaction; k) work with interested participants in the sale transaction and represent the Debtor in negotiations; l) participate in any due diligence process that may be conducted by participants in the sale transaction; m) work with the Debtor in selecting a "stalking horse" bid acceptable to the Pre-Petition Agent and the Post- Petition Agent; n) further assist the Debtor in seeking counterbids for the sale; and o) assist in the closing(s) of the sale transaction. Campbell has not received any retainer from the Debtor. The Debtor does not disclose the compensation it proposes to pay Campbell. AES CORP: Units Sell Gas-Fired Peaker Assets to Tenaska for $36M ---------------------------------------------------------------- On September 12, 2002 subsidiaries of AES (AES Greystone, LLC and its subsidiary Haywood Power I, LLC) sold the Greystone gas- fired peaker assets currently under construction in Haywood County, Tennessee to Tenaska Power Equipment, LLC. for $36 million including cash and assumption of certain obligations. With this sale, AES and its subsidiaries have eliminated any future capital expenditures related to the facility, and also settled all major outstanding obligations with parties involved in this project. The decision to sell the assets under construction was due in part to the changed economic circumstances related to forward power prices as well as AES' effort to reduce capital spending. AES will record an after tax charge of approximately $100 million associated with this sale, which will be classified as discontinued operations. AES Corporation develops, owns, and operates plants that generate more than 64,000 MW of electricity, which is primarily sold to power distributors. AES has interests in about 180 plants in the Americas, Europe, Asia, and Australia. AES also sells electricity directly to 18 million customers worldwide through its interests in distribution companies in nine countries, mainly in Latin America. In addition, the company is investing in telecommunications companies in Latin America. * * * As reported in Troubled Company Reporter's June 25, 2002 edition, Fitch Ratings lowered The AES Corp.'s senior unsecured debt to 'BB-' from 'BB' and has placed its ratings on Rating Watch Negative. The Rating Watch Negative reflects AES's constrained liquidity in the next 6-9 months and AES's dependence on dividends from Latin American subsidiaries. Due to Fitch's policy regarding the linkage of ratings of subsidiaries with those of a lower-rated parent, Fitch has also lowered the ratings of AES's subsidiaries IPALCO Enterprises and Indianapolis Power and Light, as shown by table below. These ratings are also placed on Rating Watch Negative, reflecting the companies' ongoing exposure to AES. The ratings of CILCORP and Central Illinois Light Company remained unchanged and on Rating Watch Evolving pending their announced sale to Ameren Corporation. The revised ratings of AES, IPALCO, IP&L, CILCORP and CILCO are as follows: AES Corp. -- Senior unsecured debt lowered to 'BB-' from 'BB'; -- Corporate revolver and ROARS lowered to 'BB-' from 'BB'; -- Senior subordinated debt lowered to 'B' from 'B+'; -- Convertible junior debentures and trust convertible preferred securities to 'B-' from 'B'; -- Rating placed on Rating Watch Negative. Indianapolis Power & Light Co. -- First mortgage bonds and secured pollution control revenue bonds lowered to 'BBB-' from 'BBB'; -- Senior unsecured debt lowered to 'BB+' from 'BBB-'; -- Preferred stock lowered to 'BB+' from 'BBB-'; -- Commercial paper lowered to 'B' from 'F2' and withdrawn; -- Ratings placed on Rating Watch Negative. IPALCO -- Senior unsecured debt lowered to 'BB+' from 'BBB-'; -- Commercial paper lowered to 'B' from 'F2' and withdrawn; -- Rating placed on Rating Watch Negative. CILCORP -- Senior unsecured debt 'BBB-'; -- Rating remains on Rating Watch Evolving pending consummation of AES sale of CILCORP to Ameren. CILCO -- First mortgage bonds and secured pollution control revenue bonds 'BBB'; -- Senior unsecured debt 'BBB-'; -- Preferred stock 'BBB-'; -- Commercial paper 'F2'; -- Ratings remain on Rating Watch Evolving pending the consummation of AES sale to Ameren. The lowered ratings, Fitch said, reflect the increasingly challenging business environment faced by the company in Latin America as well as other countries such as the US and the UK, high consolidated leverage and high parent company leverage. The Negative Watch is occasioned by the significant refinancing risk faced by the company in the next six to nine months and the importance of securing financing or consummating asset sales during this period. Fitch's ratings also take into consideration the benefits of diversification in AES' portfolio, recent announcements on asset sales and actions by AES management to tighten controls, conserve cash, and reduce strains on corporate liquidity. AES Corporation's 10.25% bonds due 2006 (AES06USR1), DebtTraders reports, are trading at 38 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AES06USR1for real-time bond pricing. A.G. SIMPSON: Ontario Court Fixes Sept. 27, 2002 Claims Bar Date ---------------------------------------------------------------- A.G. Simpson Automotive Inc. and A.G. Simpson Co. Limited ("collectively known as the Applicants") Notice to Creditors IN THE MATTER OF THE COMPANIES' CREDITORS ARRANGEMENT ACT AND IN THE MATTER OF A PLAN OF COMPROMISE OR ARRANGEMENT Re: Notice of Claims Procedure for the Applicants Pursuant to the Companies' Creditors Arrangement Act PLEASE TAKE NOTICE that this notice is being published pursuant to an Order of the Ontario Superior Court of Justice made on August 27, 2002. The Court has ordered that the Applicants send Proofs of Claim forms to their known creditors. Any person who have not received a Proof of Claim and believe that they have a claim against the Applicants, whether unliquidated, contingent or otherwise, should file a Proof of Claim with the Monitor on or before 5:00 p.m. (Toronto time) on September 27, 2002. Creditors who have not received a Proof of Claim from the Applicants should contact KPMG Inc., the Court-Appointed Monitor of the Applicants (Attention: Audrey Singels-Ludvik, Telephone (416) 777-3803 and Fax (416) 777-3364) to obtain a Proof of Claim document package. Creditors who fail to file a Proof of Claim on or before 5:00 p.m. (Toronto time) on September 27, 2002 shall not be entitled to vote at any Creditors Meeting which may be held to consider a Plan of Arrangement, to receive any distribution under a Plan of Arrangement or to any further notice in respect of these proceedings, the claims process or any such Plan of Arrangement. AMERISOURCE-BERGEN: Fitch Changes Outlook on Low-B Debt Ratings --------------------------------------------------------------- Fitch Ratings has changed the Rating Outlook on AmeriSource- Bergen Corp., to Positive from Stable. The change in Rating Outlook reflects stronger than anticipated financial performance and legitimate prospects for continued improvement in the company's credit profile. Ratings affected by the change in Outlook include the following: Security/Facility/Rating -- Senior Secured Credit Facilities ($300 million Senior Secured Term Loan A, $1.0 billion Senior Secured Revolving Credit Facility) 'BBB-'. Senior Debt: -- $500 million Senior Unsecured Notes due 2008 'BB+'; -- Senior Unsecured Notes ($150 million due 2003 & $100 million due 2005) 'BB+'. Subordinated Debt: -- $300 million Unsecured Convertible Subordinated Notes due 2007 'BB'; -- $8.4 million Unsecured Exchangeable Subordinated Debentures due 2011 'BB'; -- $300 million Trust Originated Preferred Securities (TOPrS) 'BB-'. Driven by strong pharmaceutical distribution revenue growth and savings from merger synergies, AmeriSource-Bergen continues to exceed expectations with credit metrics proving better than anticipated. Additionally, the company is positioned to capitalize on a robust generics market. -- Fitch anticipates that revenue growth for fiscal year 2002 will come in between 15% and 17% (ending September 30th) and strong synergy capture related to the integration of the former AmeriSource Health Corporation and Bergen Brunswig Corporation will increase profitability vs. pro forma 2001 and initial Fitch expectations. -- The integration of the two companies has gone extremely well with performance exceeding all expectations. The company has been successful in rapidly combining the predecessor companies and establishing a cohesive organization with many of the administrative integration hurdles successfully cleared. Part of the success is owed to ABC's senior management's early recognition of the importance of capturing synergies, acting quickly and incentivizing managers by tying bonuses to synergy capture -- Profitability gains appear sustainable given the efficiencies the integration creates, namely an aggressive distribution center rationalization strategy designed to position the company with a significantly more efficient distribution network. In addition to reducing operating costs, savings in procurement leverage and working capital management will be significant. Traditional synergy capture including headcount reduction and IT integration is also being exploited. In July 2002, ABC management reiterated that it remains on target to achieve $150 million in annual savings from merger synergies by September 2004. -- A robust generic drug market and ABC's ability to generate stronger margins from generics lends additional confidence to the sustainability of the company's recent profitability gains. Distributor margins are frequently 3-5 times greater on generics than on branded drugs and profitability gains offset reduced revenues associated with lower-priced generics. Fitch anticipates that at the close of fiscal year 2002 coverage (EBITDA/interest) will be approximately 5.6x versus earlier expectations of 4.0x. Fitch further anticipates FY 2002 leverage (total debt/EBITDA) will be approximately 2.3x versus an anticipated 2.7x. It is important to note however that the company does experience significant inter-period borrowing given its large working capital commitments. ABC's liquidity position is solid with approximately $1.7 billion available through various liquidity sources. While cash flows vary given working capital balances and related borrowings, Fitch anticipates ABC will generate approximately $200 million in free cash flow in FY 2002. Fitch further anticipates gradual improvement in credit statistics as synergies and generic opportunities are leveraged further. Credit concerns, from Fitch's perspective, include unseen integration costs and continued cost containment pressure from customers. AMES DEPARTMENT: Seeks Okay to Continue Compensation Procedures --------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates seek the Court's authority to continue reimbursing and compensating the professionals they retained in these Chapter 11 cases as well as those employed in the ordinary course of business during the wind down of their business. The payment will be made in accordance with the Court-approved Compensation Procedures. Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, in New York, argues that the professionals should continue to be paid in accordance with the Compensation Orders because they are already disadvantaged vis a vis other creditors, and their new services are critical. Unlike the Debtors' other postpetition creditors, who generally have been paid in full in less than 30 days from delivery of goods or services, the Debtors' professionals have been paid only 80% or 90% of their fees, with the unpaid amount 30% to 66% of their gross margin. Consequently, any additional holdback on professional fees would further disadvantage professionals who are providing critical services to the Debtors' estates. Mr. Bienenstock maintains that the efforts of professionals retained in these Chapter 11 cases are critical to an orderly wind down of the Debtors' business. The Debtors undoubtedly will require crucial, time-intensive, professional services while they conduct the GOB Sales, wind down their business, and close their estates. "Large law firms generally operate on 30% to 35% margins. This means the law firms have not been paid 30% to 66% of their profits for the duration of the case, while most all other creditors have been paid 100% of their accrued profits for the bulk of the case," Mr. Bienenstock says. Wings Mfg. & Shalom Object Wings Manufacturing Corporation and I. Shalom & Co., Inc. hold significant administrative claims against the Debtors. Because the Debtors' business is in a liquidation mode, Wings Manufacturing and Shalom believe that it is inappropriate for the Court to allow the Debtors to continue paying professionals. Joel M. Shafferman, Esq., at Robinson Brog Leinwand Greene Genovese & Gluck P.C., in New York, tells the Court that not all postpetition creditors were paid in full. The Debtors still have to pay: -- Wings Manufacturing $137,136 for its deliveries from July 24, 2002 through August 7, 2002; and -- Shalom $82,753 for deliveries from July 9, 2002 through and including August 5, 2002. (AMES Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) BETHLEHEM STEEL: Intends to Amend Greenhill's Engagement Terms -------------------------------------------------------------- To complement the employment of Credit Suisse, Bethlehem Steel Corporation and its debtor-affiliates decided to amend the terms of Greenhill & Co. LLC's employment. Senior Vice President, Chief Financial Officer and Treasurer of Bethlehem Steel Corp., Leonard M. Anthony, explains that, under the terms of the Amended Greenhill Engagement Letter, Greenhill will still provide the same financial advisory and investment banking services as principal advisor to the Debtors and their Board of Directors. However, Greenhill and the Debtors have agreed to reduce the Restructuring Fee to $6,000,000. In addition, the parties agree that any Restructuring Fees or transactional fees payable to Greenhill -- as well as to Credit Suisse -- may not exceed a total of $12,000,000. Any Restructuring Fee exceeding $8,000,000 would be subject to review under Section 330 of the Bankruptcy Code. The terms of the original engagement provides that if a Restructuring is consummated during the term of Greenhill's engagement or within 18 full months of the termination of its engagement, Greenhill could be entitled to a transaction fee equal to $12,000,000. (Bethlehem Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) BETHLEHEM STEEL: Says New Labor Contract Essential for Emergence ---------------------------------------------------------------- In response to media inquiries concerning Bethlehem's reaction to a statement by the United Steelworkers of America following the conclusion of the Basic Steel Industry Conference, the following statement is attributable to Robert S. Miller Jr., Bethlehem's chairman and chief executive officer: "For the past year, Bethlehem has been speaking with the United Steelworkers of America concerning the perilous conditions facing the company. We welcome the union's call to launch innovative new bargaining initiatives. "Although the industry has been seriously injured by unfair trade, Bethlehem has productivity disadvantages compared to certain of our domestic competitors as well. The key players in the domestic steel industry are no longer the old, stand-alone fully integrated firms like Bethlehem. Instead, newer, more nimble firms like Nucor and ISG are setting the standard for modern work practices, compensation packages that reward workers based on the success of their individual business units, outsourcing non-core work, absence of restrictive work rules, and appropriately staffed facilities. "Bethlehem has accumulated over $5 billion of unfunded retiree obligations that it simply can no longer afford. Among many difficult issues to be discussed between the company and the union is the resolution of how retirees can receive health care at an acceptable cost to Bethlehem. The union leadership, we believe, understands the enormity of this expense and that Bethlehem can not afford to continue to pay for these benefits as currently constituted. "Bethlehem has been advocating the much-needed consolidation of the industry. Key to consolidation is a labor package that recognizes the realities of the marketplace. For Bethlehem to emerge from bankruptcy protection and be attractive as a potential consolidation partner, an innovative and radically different contract must be achieved with the United Steelworkers of America. We look forward to further discussions with the USWA leadership toward that goal." Bethlehem Steel Corporation's 10.375% bonds due 2003 (BS03USR1) are trading at 7 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for real-time bond pricing. BUDGET GROUP: Committee Taps Ashby & Geddes as Delaware Counsel --------------------------------------------------------------- The Official Committee of Unsecured Creditors seeks the Court's authority to retain, effective August 8, 2002, Ashby & Geddes P.A. as the Delaware counsel to the Committee, in the chapter 11 cases involving Budget Group Inc., and its debtor-affiliates. Committee Chairperson Lisa A. Miller tells the Court the Committee wants to retain Ashby & Geddes because of its substantial experience in bankruptcy matters, including bankruptcies involving insolvency, corporate reorganization and debtor-creditor law and commercial law. It also has participated in numerous proceedings before the Court under Chapter 11 of the Bankruptcy Code. The services that Ashby & Geddes will be rendering these services to the Debtors will include, but will not be limited to: -- Providing legal advice as Delaware counsel regarding the rules and practices of this Court applicable to the Committee's powers and duties as an official committee appointed under Section 1102 of the Bankruptcy Code; -- Providing legal advice as Delaware counsel regarding the rules and practices of this Court applicable to any Disclosure Statement and Plan filed in these cases and with respect to the process for approving or disapproving Disclosure Statements and confirming or denying confirmation of a Plan; -- Providing legal advice as Delaware counsel regarding the Debtors' motions to establish bidding procedures and to sell assets and to obtain postpetition financing; -- Preparing and reviewing as Delaware counsel applications, motions, complaints, answers, orders, agreements and other legal papers filed on or behalf of the Committee for compliance with the rules and practices of this Court; -- Appearing in Court as Delaware counsel to present necessary motions, applications and pleadings and otherwise protecting the interests of the Committee and unsecured creditors of the Debtors; and -- Performing any other legal services for the Committee as the Committee believes may be necessary and proper in these proceedings. Ashby & Geddes will be working together with the Committee's lead counsel, Brown Rudnick Berlack Israels LLP to ensure that there will be no unnecessary duplication of effort on behalf of, or services rendered to, the Committee. Apart from being reimbursed for the actual, necessary expenses it incurs, Ashby & Geddes will be compensated on an hourly basis. The hourly rates applicable to Ashby & Geddes attorneys and paralegals that will represent the Committee are: Attorney Position Rate --------------------- ----------- ---- William P. Bowden Partner $350 Christopher S. Sonchi Partner 310 Ricardo Palacio Associate 250 Travis Vandell Associate 145 Christina M. Garvine Paralegal 130 Other professionals at Ashby & Geddes may perform services for the Committee. Christopher S. Sonchi, Esq., a member of Ashby & Geddes, informs the Court that Ashby & Geddes are currently representing these parties in other bankruptcy cases: JP Morgan Chase Bank, The Chase Manhattan Bank NA, Lyonnais, Lehman Brothers Inc. and Lehman Commercial Paper Inc., Deutsche Bank AG, Merrill Lynch, Pierce, Fenner & Smith, Incorporated, Wells Fargo Bank Minnesota N.A., Salomon Smith Barney Inc., Wachovia Bank NA, AT&T Broadband, Sabre Inc., TMP Worldwide, and CIT Group/Business Credit Inc. Mr. Sonchi adds that Ashby & Geddes formerly represented these parties in other bankruptcy cases as well: Cendant Corporation, General Electric Capital Business Asset Funding Corp., GE Capital Fleet Services, Wells Fargo Equipment Leasing, Wells Fargo Business Credit, Inc. f/k/a Norwest Business Credit Inc., Wells Fargo Leasing Corporation, Credit Lyonnais, The Chase Manhattan Bank n/k/a JP Morgan Chase Bank, Chase Manhattan Trust Company NA, Credit Suisse First Boston, Credit Suisse First Boston Management Corporation, Morgan Stanley and AT&T Corp. But Mr. Sonchi assures the Court that the firm is a does not hold or, represent any interest adverse to the Debtors' estates in matters upon which it is to be engaged. (Budget Group Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) BULL RUN: Lenders Agree to Extend Credit Facility Until Oct. 15 --------------------------------------------------------------- On September 13, 2002, Bull Run Corporation and its lenders amended the Company's bank credit facility in order to, among other things, change the facility's maturity date from September 13, 2002 to October 15, 2002. The Company has agreed to terms proposed by its lenders for an additional extension of the credit facility to September 30, 2003. The lenders are in the process of preparing documents for an amended and restated credit agreement with a view to executing the agreement prior to October 15, 2002. During the period prior to the execution of the amended and restated agreement, the Company is required to fulfill, and is in the process of fulfilling, certain conditions of closing, all of which it expects to meet prior to October 15, 2002. The Company believes that the agreed-upon terms of the amended and restated agreement, taken as a whole, are more favorable to the Company than the terms of its current agreement. Bull Run formerly relied on its Datasouth Computer subsidiary -- which makes heavy-duty dot matrix and thermal printers -- for nearly all of its sales. Bull Run sold Datasouth in late 2000 and now concentrates on its Host Communications sports and affinity marketing unit. It provides consulting; event hosting; member communication and recruitment; publishing; TV, radio, and Internet program production; and other services to college and high school sports teams, athletic conferences, and associations. Clients include the National Collegiate Athletic Association and the National Federation of State High School Associations. CALPINE: Sells Additional 3.45M Canadian Power Income Fund Units ---------------------------------------------------------------- Calpine Corporation (NYSE: CPN), a leading North American power producer, announced that the syndicate of underwriters, jointly led by Scotia Capital Inc. and CIBC World Markets Inc., has fully exercised the over-allotment option that it was granted as part of the initial public offering of Trust Units in the newly established Calpine Power Income Fund. As a result, the underwriters have acquired 3,450,000 additional Trust Units of the Fund at Cdn$10 per Trust Unit, generating Cdn$34.5 million. This brings the total gross amount of the initial public offering to Cdn$264.5 million. As an unincorporated open-ended trust, the Fund invests in electrical power generation, transmission and distribution assets. It indirectly owns interests in two power plants in British Columbia and Alberta and has a loan interest in a power plant in Ontario. The Fund is managed by Calgary, Alberta-based Calpine Canada Power Ltd. Trust Units are listed on the Toronto Stock Exchange under the symbol CF.UN. The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to buy these securities in any state of the United States or province of Canada. Based in San Jose, Calif., Calpine Corporation is an independent power company that is dedicated to providing customers with clean, efficient, natural gas-fired power generation. It generates and markets power through plants it develops, owns or operates in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine also is the world's largest producer of renewable geothermal energy, and it owns 1.0 trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its Web site at http://www.calpine.com Calpine's June 30, 2002 balance sheet shows a working capital deficit of about $369 million and a greater than 4:1 debt-to- equity ratio. CHAMPION ENT.: Says Restructuring Actions Begin to Yield Results ---------------------------------------------------------------- The following Management Report from Walter R. Young, Chairman, President and CEO of Champion Enterprises, Inc. (NYSE: CHB), was posted to Champion's Web site and sent to interested parties: "With this Management Report, I'll update you on the status of our restructuring actions, ongoing operations and financial position. Also, I'll discuss various industry issues which have affected our industry forecasts for this year and next. Restructuring and Operations Update "The benefits of our recent restructuring actions are beginning to show. Improvements are being realized in our ongoing operations and in our financial position. The costs of these actions are inline with what we had previously forecasted. An update for each of our segments follows. "Retail -- Results through August indicate that, as previously announced, the 117 retail sales locations we currently operate should be at breakeven in the third quarter. Since the end of June, we've liquidated 350 new homes at our company-owned stores, or more than $10 million of inventory. As to market conditions, retail traffic at our sales centers continues to hold up well and rose about 5% per average store year-over-year in August. "Manufacturing -- Excluding costs to close and consolidate manufacturing facilities in the third quarter, our manufacturing operations continue to be profitable. The 39 facilities we're operating are poised for improved margins and higher profits. Independent retailers remain conservative with their inventory levels, affecting wholesale sales in the short run but losses related to retailer defaults remain minimal. Retailers that have joined the Champion Home Center (CHC) distribution network total 627 locations, up from 473 at the beginning of the year. Growing this program remains a priority. "Finance -- At HomePride Finance we continue to be pleased with the volume and quality of loans originated. In the first two months of third quarter, loans generated totaled $15 million, bringing originations since inception to $21 million. With the uncertainty surrounding availability of chattel financing, we're especially glad to have HomePride for home-only loans to consumers who purchase Champion-built products. "Our recent joint venture with National City Mortgage Co., is a positive step in providing real estate financing for our customers. National City understands the mortgage process and has the resources and experience to provide CHC's with a dedicated source of real estate financing. This alliance is a great opportunity for company stores and independent locations to learn the real estate loan process and to offer conforming real estate mortgages to their customers. "Liquidity -- In July and August we generated $15 million in cash flow from operations even after using $2.5 million for closing-related expenses. We ended August with $94 million in unrestricted cash, which was $9 million more than we had at the end of the second quarter. This improved cash position is the result of our efforts to manage our businesses for cash and our restructuring actions. Industry Update "Deutsche -- On Monday Deutsche Financial Services announced that it is liquidating its manufactured housing floor plan lending portfolio estimated to be about $520 million. They will no longer approve loans after October 31 or fund loans after November 15. Although the impact of Deutsche exiting the industry is not known, the exit of Conseco Finance earlier this year has been orderly with more financing coming from not only the national lenders, but also local and regional banks. At the time of Conseco's exit, they had about $770 million of floor plan loans outstanding. Regardless, the industry sure didn't need this additional challenge! "As to our independent retailers, they have approximately $86 million of floor plan loans for Champion-built homes outstanding with Deutsche. These loans will either need to be transitioned to other lending sources or the homes liquidated. Of this total, about $66 million is still under our repurchase obligation. For our company stores we have a $5 million credit line with Deutsche and less than $2 million utilized. "Conseco -- Although no one knows how the issues regarding Conseco will unfold, we believe that a few things are highly probable. First, Conseco's lending volume will remain tight with the level of home-only loans they originate continuing to decrease. We expect that they will wholesale more of their repossessions, keeping them local and liquidating them quickly. Finally, we believe that their $25 billion loan portfolio will continue to be serviced on an orderly basis. "Industry Forecasts -- Due to uncertainty regarding wholesale and consumer financing, retailers continue to lower new home inventory levels. We estimate that inventories in the retail distribution channel will be reduced by 25,000 homes this year, or by more than 25% of the December 2001 total. As a result, we've lowered our 2002 industry wholesale shipment estimate to 170,000 homes from 180,000 previously. Our revised industry forecasts are as follows: 2001 2002 2003 (Homes, in 000's) Actual Est. Est. Repossessions 90 90 - 80 -11% New retail 212 195 -8% 205 +5% Total demand 302 285 -6% 285 - Inventories 97 72 -26% 62 -14% Shipments/production 193 170 -12% 195 +15% "To end on a positive note, we are pleased that one of the rating agencies recently acknowledged our restructuring actions and confirmed our ratings as previously assigned although they changed the outlook to negative. "We look forward to talking with you on October 16, 2002 when we release our third quarter results." Champion Enterprises, Inc., headquartered in Auburn Hills, Michigan, is the industry's leading manufacturer and has produced nearly 1.6 million homes since the company was founded. The company operates 39 homebuilding facilities and 117 retail locations. Independent retailers, including 627 Champion Home Center locations, and approximately 400 builders and developers also sell Champion-built homes. In addition, the company provides financing for retail buyers of its homes. Further information can be found at the company's Web site at http://www.championhomes.net * * * As reported in Troubled Company Reporter's Aug. 20, 2002 edition, Standard & Poor's Ratings Services placed its ratings on Champion Enterprises Inc., and its subsidiary, Champion Home Builders Co., on CreditWatch with negative implications. The CreditWatch placements follow Champion's recent announcement that it will incur significant restructuring charges as it attempts to further rationalize its operations in the face of a prolonged recession in the manufactured home building industry. The manufactured housing industry has entered its fourth year of a down cycle that was initially caused by poor lending practices. A previously anticipated recovery continues to be forestalled by the persistent scarcity of retail consumer financing. According to the Manufactured Housing Institute, manufactured home shipments were down another 2.6% during the first five months of 2002. The Institute's current projections of relatively flat shipments for the full year 2002 now appear overly optimistic, given the continued limited availability of consumer financing, and in particular, the present difficulties faced by Conseco Inc. ('SD'), the nation's largest supplier of retail consumer financing for the manufactured housing industry. Ratings Placed On CreditWatch Negative Rating To From Champion Enterprises Inc. Corporate Credit Rating BB-/Watch Neg BB- $200 mil. 7.625% senior unsecured notes due 2009 B/Watch Neg B Champion Home Builders Co. Corporate Credit Rating BB-/Watch Neg BB- $150 mil. 11.25% senior unsecured notes due 2007 B/Watch Neg B Champion Enterprises Inc.'s 7.625% bonds due 2009 (CHB09USR1), DebtTraders says, are trading at 30 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CHB09USR1for real-time bond pricing. CHEROKEE INT'L: Considering Debt Restructuring Alternatives ----------------------------------------------------------- Cherokee International LLC, a leading manufacturer of switch- mode power supplies, has fixed Sept. 12, 2002, as the record date for the purpose of establishing those holders entitled to notice of and to consider potential amendments to the indenture governing its 10-1/2 percent Senior Subordinated Notes due 2009. As previously disclosed, the company is reviewing and considering restructuring alternatives with respect to these notes. Although Cherokee has not yet finalized any restructuring plan, the company has established the record date to ensure its flexibility in considering alternatives. These alternatives may include, among other things, amending certain terms of the indenture governing the outstanding notes, which would require the solicitation of consents from the holders. CHESAPEAKE ENERGY: Taps Petrie Parkman to Sell Permian Assets ------------------------------------------------------------- Chesapeake Energy Corporation (NYSE: CHK) announced that its Board of Directors has declared a $0.03 per share quarterly dividend that will be paid on October 15, 2002 to common shareholders of record on October 1, 2002. Chesapeake has approximately 166,000,000 common shares outstanding. The expected annual cost of the common stock dividend will be about $20 million. In addition, Chesapeake's Board has declared a regular quarterly cash dividend on Chesapeake's 6.75% Cumulative Convertible Preferred Stock, par value $.01. The dividend for the preferred stock is payable on November 15, 2002 to preferred shareholders of record on November 1, 2002 at the quarterly rate of $0.84375 per share. Chesapeake has 2,998,000 shares of preferred stock outstanding with a liquidation value of $150 million. The annual cost of Chesapeake's preferred stock dividend is about $10 million. The company also announced that it intends to sell or trade its Permian Basin assets so that it can further tighten its focus on the Mid-Continent region, where 85% of its assets are presently located. The company will favor proposals that involve a trade of Mid-Continent assets for Permian assets. In the Permian, Chesapeake produces approximately 18 million cubic feet of gas equivalent per day (60% gas). By comparison, in the Mid- Continent the company is the region's largest producer with proved reserves exceeding 1,800 bcfe and daily production exceeding 450 million cubic feet of gas equivalent. Chesapeake has hired Petrie Parkman & Co., to assist it with the Permian asset sale or trade process. Management Comment Aubrey K. McClendon, Chesapeake's Chairman and Chief Executive Officer, commented, "We believe [Fri]day's announcements are beneficial to our shareholders for several reasons. First, our planned exit from the Permian reflects the reality that while Chesapeake is the largest gas producer in the Mid-Continent, we are a minor player in the Permian. We see many other companies in the reverse position and expect to execute a trade or series of trades that can be mutually beneficial for the companies involved. As a result of higher gas prices, lower operating costs, more accessible land and better drilling results, our returns on investment have been greater in the Mid-Continent than in the Permian. Chesapeake's unmatched regional scale has been an important key to delivering top-tier financial returns to our shareholders during the past four years. We intend to continue this strategy in the years ahead. "Secondly, the initiation of a common stock dividend reflects our confidence in Chesapeake's financial strength and the positive fundamentals we see for gas prices in the years ahead. In addition to the capital gains that we expect Chesapeake to generate for shareholders in the future, the common stock dividend should deliver further value to our shareholders. At today's stock price, the annualized dividend yield would be 1.9%, very competitive with the S&P 500's current dividend yield of 1.7%. The annual cost of this program is a modest $20 million per year and should not impact our ability to continue growing our company's assets at 5-15% per year, reducing relative or absolute debt levels and delivering one of the industry's leading total returns to shareholders." Chesapeake Energy Corporation is one of the largest independent natural gas producers in the U.S. Headquartered in Oklahoma City, the company's operations are focused on developmental drilling and property acquisitions in the Mid-Continent region of the United States. The company's Internet address is http://www.chkenergy.com * * * As reported in Troubled Company Reporter's Aug. 9, 2002 edition, Moody's Investors Service took several rating actions on Chesapeake Energy Corporation. Rating Assigned * B1 - $250 million senior unsecured notes, due 2012. Ratings Affirmed * B1 - $108 million 7.875% senior unsecured notes, due 2004, * B1 - $250 million 8.375% senior unsecured notes, due 2008, * B1 - 800 million 8.125% senior unsecured notes, due 2011, * B1 - $143 million 8.5% senior unsecured notes, due 2012, * Caa1 - $150 million 6.75% convertible preferred, * B1 - Senior Implied Rating, * B2 - Unsecured Issuer Rating. Ratings outlook is positive. Proceeds from the $250 million notes will be used to repay outstanding debts and fund three pending acquisitions. Fitch Ratings has assigned a 'BB-' rating to Chesapeake Energy's $250 million senior note offering. Fitch maintains its 'BB+' rating on its senior secured bank facility and a 'B' rating on its convertible preferred stock. The Rating Outlook for Chesapeake is Stable. CHINA ENTERPRISES: Fails to Meet NYSE Continued Listing Criteria ---------------------------------------------------------------- China Enterprises Limited (NYSE: CSH) announces that the New York Stock Exchange informed the Company that the NYSE intends to suspend trading in the Company's common stock prior to the Exchange's opening on Friday, September 27, 2002, for failure to meet the NYSE's continuing listing standards. The Company intends to request a review of the NYSE's decision according to NYSE appeal procedures. Following the review, if the Company is unsuccessful in its appeal, the NYSE may apply to the SEC to delist the common stock from the NYSE. As the Company previously announced on March 4, 2002, the Company received a notice from the NYSE that the Company was not in compliance with the NYSE requirement of an average global market capitalization of at least $15,000,000 over a consecutive 30 trading day period. The Company submitted a business plan to the NYSE designed to bring the Company into compliance with the continuing listing standards. Despite the plan, the Company has recently fallen below the NYSE's continuing listing standard requiring an average closing price of its common stock of at least $1.00 for a consecutive 30 trading day period. As of this time, the Company intends to appeal the NYSE's suspension and is exploring its options. The Company, formerly known as China Tire e-commerce.com Ltd., is a holding company for a number of Sino-foreign equity joint venture enterprises and two other international joint ventures, which manufacture and market tires in China and other countries abroad. The Company also has a substantial interest in an investment holding company the subsidiaries of which are principally engaged in the business of providing package tours, travel, transportation and other related services. CMS ENERGY: Closes Oil and Gas LDC Sale to Perenco Affiliate ------------------------------------------------------------ CMS Energy Corporation (NYSE: CMS) has closed a sale of the stock of CMS Oil and Gas (Venezuela) LDC to an affiliate of Perenco SA. The transaction is part of a previously announced sale of all of CMS Energy's exploration and production business for approximately $232 million. With the closing of the primary CMS Oil and Gas Company stock sales to Perenco announced earlier this week, sales covering substantially all of CMS Energy's oil and gas properties have been completed. Closing of the sale of its Colombian oil and gas properties, which is pending government approval, is expected by early October. CMS Energy Corporation is an integrated energy company, which has as its primary business operations an electric and natural gas utility, natural gas pipeline systems, independent power generation, and energy marketing, services and trading. For more information on CMS Energy, please visit its Web site at http://www.cmsenergy.com/ * * * As reported in Troubled Company Reporter's Sept. 6, 2002 edition, Fitch downgraded CMS Energy and its subsidiaries, Consumers Energy Co., and CMS Panhandle Eastern Pipe Line Co. The senior unsecured debt rating of CMS has been lowered to 'B+' from 'BB-'. The downgrades of Consumers and PEPL reflect Fitch's notching criteria with respect to parent and subsidiary ratings. CMS and Consumers will remain on Rating Watch Negative due to continuing concerns surrounding CMS' weak liquidity position, high parent debt levels and limited financial flexibility. The Rating Watch will remain in place pending a meeting with CMS management within the next several weeks to review the company's updated business plan. In addition, Fitch has revised the Rating Watch of PEPL to Evolving from Negative, reflecting the recent announcement by CMS that it is exploring the sale of PEPL and related assets, including CMS Field Services, Trunkline Pipeline and the LNG facility. The Rating Watch takes into consideration that CMS will ultimately divest of PEPL, and as such, the ratings of PEPL will no longer be tied to those of CMS. The revised ratings for CMS and Consumers reflect concerns regarding projected cash constraints at each of the companies for the remainder of the year. Consumers' operating cash flow is forecasted to be negatively impacted over the next several months due to high capital expenditure requirements for environmental compliance, gas purchases made during the summer months and a $103 million dividend to CMS in October. Consumers is expected to spend between $230-270 million between 2002 and 2004 on environmental compliance costs, and the utility is currently unable to recover these costs through rates due to the rate freeze in place through December 31, 2003. CORRPRO: Adjourns Annual Shareholders' Meeting Until October 11 --------------------------------------------------------------- Corrpro Companies Inc., (Amex: CO) convened its annual meeting of shareholders as scheduled on September 19, 2002 and reviewed the performance of its business over the past fiscal year, but adjourned the formal portions of the meeting to reconvene on Friday, October 11, 2002. The reconvened annual meeting of shareholders will be held at Corrpro's corporate headquarters located at 1090 Enterprise Drive, Medina, Ohio 44256 at 10:00 a.m. local time. Adjournment of the annual meeting was necessary because Corrpro had not yet attained a quorum for purposes of shareholder voting, and will allow additional time for its shareholders to receive and review proxy materials before Corrpro conducts its shareholder voting at the reconvened meeting. The previously scheduled formal agenda items will remain the same as described in Corrpro's proxy statement dated August 30, 2002. The record date will remain August 15, 2002. Corrpro will accept proxy cards received at or before the reconvened meeting. Corrpro, headquartered in Medina, Ohio, with over 60 offices worldwide, is the leading provider of corrosion control engineering services, systems and equipment to the infrastructure, environmental and energy markets around the world. Corrpro is the leading provider of cathodic protection systems and engineering services, as well as the leading supplier of corrosion protection services relating to coatings, pipeline integrity and reinforced concrete structures. * * * As reported in Troubled Company Reporter's Aug. 22, 2002 edition, Corrpro Companies continues to implement elements of its overall plan of business improvement and debt reduction. The Company's strategy includes a plan to divest of non-core and select international business units to accelerate debt reduction and improve the Company's operating performance. To assist these efforts, the Company has engaged the firm of Carl Marks Consulting Group LLC. P. Elliott Burnside, a managing director of Carl Marks, has joined the Company in the role of Chief Restructuring Officer to manage the plan's implementation. CTN MEDIA: Selling College Television Network to MTV for $15MM -------------------------------------------------------------- CTN Media Group, Inc., (OTC Bulletin Board: UCTN) has entered into a definitive asset purchase agreement to sell the College Television Network to MTV Networks, a division of Viacom Inc., (NYSE: VIA, VIA.B) for $15 million in cash, subject to certain adjustments. Under the transaction, Viacom will provide the Company with a prepayment of a portion of the purchase price to fund working capital of the Company up to the closing, which is expected in the fourth quarter of 2002. The closing of the transaction is subject to customary closing conditions. Contemporaneously with the execution of the asset purchase agreement, U-C Holdings, LLC, and Willis Stein & Partners, L.P., its managing member, entered into a voting agreement with Viacom which provides, among other things, that Holdings will vote in favor of the transactions contemplated by the asset purchase agreement. CTN will send an information statement relating to the sale to all of its stockholders. The sale is expected to be completed 20 days after mailing of the information statement. CTN intends to use the proceeds of the sale to Viacom to repay its secured indebtedness of approximately $11.5 million to LaSalle Bank and Holdings. The balance of the proceeds from the sale and proceeds from the collection of accounts receivable and other remaining assets will be used to pay unsecured creditors. The Company's common stockholders will not receive proceeds from this transaction. The College Television Network is CTN's sole remaining business. Tom Rocco, President of CTN Media Group, Inc., said, "With this acquisition, College Television Network will now gain the incredible resources MTV can provide to achieve its true potential as the premier network service, specifically created for the college market. We've worked hard over the past 8 years to build CTN, and now we have the perfect opportunity to make it a truly viable media outlet." CYANOTECH CORP: Nasdaq Okays Listing Transfer to SmallCap Market ---------------------------------------------------------------- Cyanotech Corporation (Nasdaq: CYAN) announced that Nasdaq approved its application to transfer its common stock from the Nasdaq National Market System to the Nasdaq SmallCap Market effective September 23, 2002. Cyanotech's common stock will continue trading under its current symbol: CYAN. Cyanotech Corporation, the world's leader in microalgae technology, produces high-value natural products from microalgae. Corporate and product information is available at http://www.cyanotech.com As reported in Troubled Company Reporter's June 20, 2002 edition, Cyanotech Corp., received a delisting warning letter from Nasdaq for failure to comply with the $1.00 minimum bid price. DEPOMED INC: AMEX Accepts Plan to Meet Listing Requirements ----------------------------------------------------------- DepoMed announced that on September 17, 2002, the Company received notice from the staff of the American Stock Exchange that the AMEX had accepted the Company's plan to regain compliance with AMEX listing standards and had granted the Company an extension until January 2004 to regain compliance with those standards. The Company will be subject to periodic review by the AMEX staff during the extension period. Failure to make progress consistent with the terms of the plan or to regain compliance with the continued listing standards by the end of the extension period could result in the Company being delisted from the AMEX. As previously disclosed, the AMEX staff notified the Company in June 2002 that the Company has fallen below Section 1003 (a)(i) of the AMEX Company Guide for having sustained losses in two of its three most recent fiscal years and stockholders' equity of less than $2,000,000 and below Section 1003 (a)(ii) of the AMEX Company Guide for having sustained losses in three of its four most recent fiscal years and stockholders' equity of less than $4,000,000. The Company was afforded the opportunity to submit a plan of compliance to the AMEX and presented its plan to the AMEX in July 2002. DepoMed, Inc., a development stage company, is applying its innovative oral drug delivery systems to the development of novel oral products and improved formulations of existing oral drugs. DepoMed's Gastric Retention System is a patented oral drug delivery technology designed specifically for drugs preferentially absorbed high in the gastrointestinal tract. Using normal physiological processes by which the stomach retains large objects for further digestion, the GR System swells following ingestion and is retained in the stomach for a number of hours, while it continuously releases the incorporated drug at a controlled rate to absorption sites in the upper intestinal tract. The controlled release of the drug at the preferred absorption site optimizes delivery of the drug during the "therapeutic window," potentially maximizing its therapeutic benefits. In addition to developing products jointly with other companies, DepoMed is developing its own line of proprietary products based on off-patent and over-the-counter drugs. Additional information about DepoMed may be found at the company's Web site at http://www.depomedinc.com EGAMES: Must Achieve Positive Cash Flow to Continue Operations -------------------------------------------------------------- eGames, Inc., formerly RomTech, Inc., is a publisher of consumer entertainment PC software games incorporated in Pennsylvania in July 1992. In August 1998, the Company acquired Software Partners Publishing and Distribution Ltd., a United Kingdom- based distributor of personal computer software for consumer entertainment and small office/home office applications. On March 31, 1999 Software Partners changed its name to eGames Europe Ltd. On May 11, 2001 it sold eGames Europe to Greenstreet Software Limited, a United Kingdom-based software publisher and distributor. eGames, Inc., sustained a significant loss during fiscal 2001, and achieved only minimal net income in fiscal 2002 exclusive of the non-cash impact from fiscal 2002 agreements with two national drug store retailers. The Company began operations in July 1992, and experienced significant losses from inception through the end of fiscal 1997. It earned approximately $253,000, $463,000 and $1,253,000 in fiscal 2000, 1999 and 1998, respectively, and in fiscal 2001, sustained a net loss of $5,933,000. Prior to fiscal 1998, the Company funded operations mostly through proceeds from the initial public offering of common stock in October 1995 and through the sale of preferred stock in private offerings in November 1996, and January and April 1997, in addition to proceeds from the exercise of various common stock warrants and stock options. It has since funded its business activities from cash generated from operations and bank borrowings. Currently, it does not have access to further bank borrowings. Net income in fiscal 2002 was $2,181,000. Exclusive of the non- cash impact from the fiscal 2002 agreements with two national drug store retailers, net income in fiscal 2002 was only $76,000.The accumulated deficit at June 30, 2002 was $9,768,000. Even though eGames achieved modest profitability in fiscal 2002, given current market conditions in the United States in general, and the effects from the significant loss sustained in fiscal 2001, there can be no assurance that the Company will be profitable in fiscal 2003. eGames operations today continue to be subject to all of the risks inherent in the operation of a small business, which has liquidity problems in a highly competitive industry dominated by larger competitors. These risks include, but are not limited to, development, distribution and marketing difficulties, competition, and unanticipated costs and expenses. eGames has experienced severe liquidity problems. On July 23, 2001, its commercial lender, Fleet Bank, notified it that because of its default of the financial covenants under its $2,000,000 credit facility as of June 30, 2001, and due to material adverse changes in the Company's financial condition, the bank would no longer continue to fund its credit facility. On November 2, 2001, eGames entered into an agreement with Fleet Bank to pay off the outstanding balance at that time of $1,400,000 owed to Fleet Bank over a twenty-two month period. The agreement also provides that, despite eGames' defaults under the loan documents, Fleet Bank would not enforce its rights and remedies under those loan documents as long as the Company remains in compliance with the terms of the agreement. As of June 30, 2002 and as of September 16, 2002, it was in compliance with the covenants of this agreement. Company shareholders would lose their entire investment if eGames defaulted under the agreement and Fleet Bank enforced its right to liquidate the Company. The terms of the agreement provide, among other things, for eGames to repay the remaining outstanding balance owed under the credit facility in 22 monthly installments, with interest at the prime rate plus three percent. Additionally, the terms of the agreement require it to achieve certain earnings benchmarks and to provide Fleet Bank with periodic financial and cash flow reporting. There can be no assurance eGames will be able to meet this agreement's covenants through June 30, 2003. As part of the agreement, it issued warrants to Fleet Bank for the purchase of 750,000 shares of its common stock. The warrants are exercisable until October 31, 2006 at an exercise price of $0.09 per share, and a separate registration rights agreement provides that the bank will have demand registration rights beginning on November 1, 2002. As of September 16, 2002, the principal balance outstanding on this term loan was $700,000. For the year ended June 30, 2002, eGames net sales increased by $4,023,000, or 59%, to $10,879,000, compared to $6,856,000 for the prior year. The $4,023,000 increase resulted from increases in net sales to drug store distributors and retailers of $3,176,000 and to traditional software distributors and retailers of $1,089,000, which increases were partially offset by net sales decreases to promotional and international customers of $225,000 and $17,000, respectively. eGames has indicated that as a result of its poor financial condition that was reflected in its financial statements for the fiscal year ended June 30, 2001, it implemented certain liquidity initiatives during the current fiscal year in an effort to generate sufficient cash from operations to stay in business. During fiscal 2002, it: -- Reduced its staff level to 16 full-time and 2 part-time employees, from 45 employees at the beginning of fiscal 2001. This action has helped reduce the cash consumption rate. -- Entered into a forbearance agreement with the Bank converting the credit facility into a twenty-two month amortizing term loan. -- Ended its sales and distribution relationships with drug store retailers, and entered into agreements with two drug store retailers which, among other things, modified the terms of previous product shipments which made all prior sales to these retailers final and eliminated further product returns. eGames also transitioned its prior direct distribution relationships with drug store retailers to a lower-risk, higher-margin licensing model with a third-party distributor who assumes the responsibilities and costs of inventory production, distribution, promotion and merchandising of eGames products to these drug store retailers. These changes contributed to reductions in marketing promotional costs. -- Converted $791,000 in end-of-life-cycle inventory titles into $862,000 of cash proceeds through various inventory liquidation sales. These cash proceeds were critical in the Company's ability to continue as a going concern during the early part of fiscal 2002. -- Converted certain trade accounts payable balances outstanding at June 30, 2001 to trade notes payable with monthly principal and interest payments ranging from six to twelve months and bearing interest at 6.75%. All outstanding amounts relating to these trade notes payable were settled as of June 30, 2002. -- Negotiated a cash payment discount with its largest trade vendor as part of a transaction that resulted in a $100,000 discount from its payable with this vendor, which benefit was reflected within the "cost of sales" section of its fiscal 2002 Statements of Operations. -- Refocused its efforts to serve the value-priced PC gaming software consumer. It has accomplished this transition by increasing third-party distribution of eGames products through its primary North American distributor, Infogrames, which services mass-merchant retailers, such as Wal-Mart, K-Mart, Target, and specialty retailers like Best Buy. eGames also improved its direct distribution relationships with major PC software retailers such as CompUSA and Office Depot. These mass- merchant, specialty, and PC software retailers have historically merchandised eGames products successfully to its target consumers. Liquidity Risk Since eGames no longer has a credit facility available to it, its ability to achieve and maintain positive cash flow is essential to survival as a going concern. Its ability to do this depends upon a variety of factors, including the timeliness and success of the collection of outstanding accounts receivable, the creditworthiness of the primary distributors and retail customers of its products, the development and sell-through of its products, and the costs of developing, producing and marketing such products. Management believes that the projected cash and working capital balances may be sufficient to fund operations for the next twelve months, but there are significant challenges that eGames will need to successfully manage in order to be able to fund operations over the next twelve months. These challenges include, but are not limited to: agreeing to and maintaining acceptable payment terms with vendors; increasing the speed of receivable collections from customers; and maintaining compliance under the covenants set forth in the forbearance agreement with the Bank. Additionally, there are market factors beyond Company control that could also significantly affect its operating cash flow. The most significant of these market factors are the market acceptance and sell-through rates of its current products, and the continued growth of the consumer entertainment software market. If any of its software titles do not sell through to end consumers at the rate anticipated, eGames could be exposed to product returns and a lack of additional orders for these products, which could severely reduce the accounts receivable that it would be able to collect from such retailers or distributors of its products. As a result of these factors, the Company may not be able to achieve or maintain positive cash flow. Outside financing to supplement cash flows from operations may not be available if and when needed. Even if such financing were available from a bank or other financing source, it may not be on terms satisfactory to the Company because of the dilution it may cause or other costs associated with such financing. Since the Company does not currently have access to a credit facility, its ability to continue operations requires it to generate sufficient cash flow from operations to fund its business activities. In the past it has experienced dramatic fluctuations in cash flows, so the Company cannot be sure it will be able to continue achieving sufficient cash flows to fund its future operations. eGames may need additional funds. As stated, its capital requirements are currently funded from the cash flow generated from its product sales. If we are not able to achieve cash flow from operations at a level sufficient to support our business activities, we may require additional funds. The degree to which we are indebted to our commercial lender, the first lien that the bank has on all of our assets, and our poor financial performance in fiscal 2001, could adversely affect our ability to obtain additional financing and could make us more vulnerable to industry downturns and competitive pressures. Additionally, we may only be able to raise needed funds on terms that would result in significant dilution or otherwise be unfavorable to existing shareholders. Our inability to secure additional funding when needed, or generate adequate funds from operations, would adversely impact our long-term viability. A significant part of eGames sales come from a limited number of customers. Due to the Company's decision during fiscal 2002 to stop selling its consumer entertainment PC software products directly to drug store retailers and distributors and to focus instead on selling its products to mass-merchant, specialty and PC software retailers that have traditionally sold value-priced PC entertainment software, eGames now relies primarily on a concentrated group of large customers. The majority of its current sales are to mass-merchant, specialty and PC software retailers, and distributors serving such retailers, and in particular to Infogrames. Infogrames is its primary North American distributor that services the major mass-merchant retailers in North America, such as Wal-Mart, K-Mart and Best Buy. eGames net sales to Infogrames during the fiscal year ended June 30, 2002 were $2,311,000 and represented 21% of its total net sales. Excluding net sales to drug store retailers and distributors, this $2,311,000 in net sales to Infogrames represented 46% of eGames net sales. eGames expects to continue depending upon a limited number of significant customers, and in particular Infogrames, for the foreseeable future. Most of eGames customers may terminate their relationship with the Company at any time. In the event that it loses its distribution capability through Infogrames or any of its other large customers, it would significantly harm its financial condition and its ability to continue as a going concern. EMPRESA ELECTRICA: Fitch Drops Ratings to D After Ch. 11 Filing --------------------------------------------------------------- Empresa Electrica del Norte Grande S.A., on September 17, 2002, filed a prepackaged plan of reorganization under chapter 11 of the US Bankruptcy Code. As a result, Fitch Ratings has downgraded the local and foreign currency ratings of to 'D' from 'C'. Approximately US$340 million of debt is affected. The existing rating reflects the Chapter 11 filing and resultant renegotiation of terms of Edelnor's international debt with bondholders. According to the company, as of September 16, holders of 98.7% of the total outstanding principal amount of the participation certificates voted to accept the reorganization plan. Since FS Inversiones acquired Mirant's 82% stake in Edelnor in January 2002, the investment firm has been trying to restructure the company's debt. Edelnor and its board of directors have decided to file for reorganization after receiving the necessary support from noteholders of the company's participation certificates to improve the company's financial position. Alternatives were limited since the company did not have sufficient cash balances nor the means to generate enough cash flow to continue meeting full debt service under its current debt structure. Under the proposed reorganization, debt holders elected to receive new 15 year senior secured participation certificates in principal amount equal to 92.14% of the principal amount of their participation certificates, a discounted cash payment equal to 38% of the principal amount of their participation certificates, or a combination of the two. Both options are slightly more favorable than terms originally offered to bondholders last year when both Tractebel and AES Gener had made competing offers to purchase the bonds. Edelnor is a Chilean electric generating and transmission company that supplies electricity under long-term purchased power agreements to distribution companies and large industrial consumers in Chile's northern region. Inversiones Mejillones, owned by Belgium's Tractebel and Codelco, is expected to buy FS Inversiones' shares in Edelnor upon completion of the debt restructuring. EMPRESA ELECTRICA: Signs-Up Cleary Gottlieb for Legal Services -------------------------------------------------------------- Empresa Electrica del Norte Grande S.A., seeks permission from the U.S. Bankruptcy Court for the Southern District of New York to employ the legal services of Cleary, Gottlieb, Steen & Hamilton as counsel in its bankruptcy case. The Debtor relates that it has selected Cleary, Gottlieb as counsel because of the Firm's knowledge of the Debtor, as well as the Firm's extensive experience and knowledge in the field of business reorganizations and other debt restructuring proceedings. The Debtor believes that the Firm is both well qualified and uniquely able to represent it in an efficient and timely manner. Cleary Gottlieb has been intensely involved in the Debtor's restructuring efforts. If the Debtor will retain counsel other than Cleary Gottlieb, the Debtor would be unduly prejudiced by the time and expense necessarily required by such new attorneys to familiarize themselves with the intricacies of the Debtor's businesses, operations and capital structure. Cleary Gottlieb will be required to: 1) provide legal advice with respect to the Debtor's powers and duties as debtor in possession in the continued operation of its business and management of its property; 2) prepare on behalf of the Debtor, as debtor in possession, necessary applications, motions, orders, reports and other legal papers in connection with the administration of its estate in this case; 3) represent the Debtor at all hearings on matters pertaining to its affairs as debtor in possession; 4) prosecute and defend litigated matters that may arise during this chapter 11 case; 5) counsel the Debtor with respect to various corporate and litigation matters relating to this chapter 11 case including, but not limited to, finance and tax matters; 6) perform all other legal services that are desirable and necessary for the efficient and economic administration of the Debtor's chapter 11 case; and 7) perform all assistance, necessary for the confirmation and consummation of the Plan. Cleary Gottlieb's hourly rates are: Partners $525 - $695 Special Counsel $505 - $695 Associates $225 - $495 Managing Attorneys $440 - $455 Law Clerks/Summer Associates $155 - $220 Paralegals/ Clerks $155 - $220 Empresa Electrica del Norte Grande SA is a partially integrated electric utility engaged in the generation, transmission and sale of electric power in northern Chile. The Company filed for chapter 11 protection on September 17, 2002. Lindsee Paige Granfield, Esq., Thomas J. Moloney, Esq., at Cleary, Gottlieb, Steen & Hamilton represent the Debtor in its restructuring efforts. When the Debtor filed for protection from its creditors, it listed $612,861,000 in total assets and $385,483,000 in total debts. ENRON CORP: Wants Okay to Vote Stock Share in Portland General -------------------------------------------------------------- Martin A. Sosland, Esq., at Weil, Gotshal & Manges, in New York, relates that on July 2, 1997, Portland General Corporation, the former parent of Portland General Electric merged with Enron Corp. Enron now owns all 42,758,877 shares of PGE's outstanding common stock. On October 5, 2001, Enron entered into Stock Purchase Agreement to sell PGE to NW Natural, a natural gas distribution company located in Portland, Oregon for $1,800,000. However, this Stock Purchase Agreement was terminated on May 17, 2002. Prior to the announcement of the sale of NW Natural, PGE's ratings were: Moody's S&P Fitch ------- --- ----- FMB A2 A AA- Senior Unsecured A3 A- A+ Prefer Stock A3 BBB+ A Commercial Paper P-1 A-1 F-1 After the Petition Date and until the termination of the Stock Purchase Agreement, PGE's ratings continued to be downgraded: Moody's S&P Fitch ------- --- ----- FMB Baa2 BBB+ BBB Senior Unsecured Baa3 BBB BBB- Prefer Stock Ba2 BBB- BB Commercial Paper P-3 A-2 F-3 On August 1, 2002, Mr. Sosland reports, Fitch further downgraded PGE debt to below investment grade due to uncertainties regarding the impact of Enron's Chapter 11 case. PGE has experienced higher costs of financing as a result of its current ratings levels. S&P, on the other hand, affirms its ratings for PGE because: (i) PGE's strong performance as a stand-along entity; (ii) Enron's senior management has no current intention of causing PGE to file a Chapter 11 petition for relief; (iii) no economic incentives exist that would likely cause PGE to seek Chapter 11 relief; and (iv) Enron's management representation it would seek to implement a structure like what is sought in this Motion. To reduce the risk of further downgrade in its credit ratings, PGE will create a bankruptcy remote structure through the issuance of junior preferred stock. The Share will have a par value of $1.00, a liquidation preference to the Common Stock as to par value but junior to existing preference stock, an option redemption right and certain restrictions of transfer. The Share will also have preferred voting rights, which will limit, subject to certain exception, PGE's right to commence any bankruptcy, liquidation, receivership or similar proceedings without the consent of the holder of the Share. Accordingly, Enron seeks the Court's authority to vote its shares of common stock to permit PGE to issue shares of junior preferred stock. If granted, Mr. Sosland says, PGE will then file Articles of Amendment with the Oregon Secretary of State and issue the Share to an independent person unaffiliated with Enron and acceptable to S&P, the Creditors' Committee and Enron. Mr. Sosland points out that the Court has the authority to grant the relief pursuant to Section 363(b) of the Bankruptcy Court. Mr. Sosland asserts Enron's voting will maximize the Debtors' estate assets in PGE. Furthermore, Mr. Sosland continues, Section 105(a) of the Bankruptcy Code provides that the Court may issue any order, process or judgment that is necessary to protect the value of the Debtors' assets. Thus, Mr. Sosland contends, the relief requested should be granted. (Enron Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) Enron Corp.'s 9.125% bonds due 2003 (ENRN03USR1), DebtTraders reports, are trading at 11.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1 for real-time bond pricing. FMC: Commences Refinancing via New Credit Facility & Debt Issues ---------------------------------------------------------------- FMC Corporation (NYSE: FMC) is commencing a refinancing that is expected to include: a new $550 million senior secured credit agreement, consisting of a three-year revolving credit facility and a five-year term loan; a $300 million offering of senior secured notes due in 2009; and a $40 million supplemental letter of credit facility. FMC intends to use borrowings under the new credit agreement and net proceeds of the senior secured notes offering to: (i) provide funds to repay its upcoming debt maturities, including its $99.5 million of 7.125 percent Medium-Term Notes due November 2002 and $160.5 million of 6.375 percent Debentures due September 2003; (ii) repay all borrowings under and terminate its existing revolving credit facility and cancel its existing accounts receivable securitization facility; (iii) replace with cash collateral certain standby letters of credit and surety bonds that presently secure environmental commitments to governmental agencies and certain other obligations and also cash collateralize its reimbursement obligations with respect to letters of credit that support outstanding floating rate industrial development bonds; and (iv) pay fees and expenses. Concurrently with this report, the Company filed a current report on Form 8-K to disclose certain corporate and other information it will provide to prospective investors in connection with the refinancing. Additional information concerning the terms and conditions of the refinancing is not currently available. The senior secured notes have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities laws. The senior secured notes will be offered and sold in reliance upon Rule 144A and Regulation S under the Securities Act. * * * As reported in Troubled Company Reporter's June 19, 2002, edition, FMC Corporation responded to the downgrade by Moody's Investors Service of FMC's credit ratings of its indebtedness from Baa3/Prime-3 to Ba1/Not-Prime. Moody's downgrade followed the action by Standard and Poor's Rating Services in which it reaffirmed its investment-grade credit rating and stable outlook for FMC. Chairman, President and CEO William G. Walter said that the company was "extremely disappointed by Moody's action." Mr. Walter continued, "Further, although we had no assurances, based upon our discussions with Moody's, we were led to believe that they would view an equity offering by FMC coupled with a refinancing of our debt later this year as sufficient to maintain our investment-grade rating. Clearly Moody's outlook for the economy and the chemical industry is much more negative than ours and the views of many others. The action by Moody's before we had the opportunity to take the next steps in our refinancing plan is surprising. Despite Moody's action, we are confident that FMC has adequate liquidity to support all our business operations and to complete our refinancing before upcoming maturities come due near year-end." GEORGIA-PACIFIC: Says Procter & Gamble Lawsuit "Has No Basis" ------------------------------------------------------------- Georgia-Pacific Corp., (NYSE: GP) said that the Procter & Gamble Company's lawsuit alleging that a former Procter & Gamble engineer hired by Georgia-Pacific in July of this year is disclosing Procter & Gamble trade secrets has no basis in fact. Georgia-Pacific said Procter & Gamble had never objected to the hiring. Moreover, Georgia-Pacific said it had taken all appropriate steps to instruct the employee not to reveal any Procter & Gamble trade secrets, and had confirmed in writing to Procter & Gamble that those instructions had been issued. Procter & Gamble had not responded to these assurances before filing the complaint it announced Thursday. "We are surprised that Procter & Gamble would take this action without communicating with us, especially given the correspondence between the companies on this subject," said James F. Kelley, Executive Vice President and General Counsel. "Georgia-Pacific has taken all appropriate steps to ensure this employee does not reveal any Procter & Gamble trade secrets regardless of the duties he has. We will review the complaint, which Procter & Gamble has not yet provided to us." Headquartered at Atlanta, Georgia-Pacific is one of the world's leading manufacturers and distributors of tissue, packaging, paper, building products, pulp and related chemicals. With annual sales of more than $25 billion, the company employs approximately 71,000 people at 600 locations in North America and Europe. Its familiar consumer tissue brands include Quilted Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n Gentle(R), Mardi Gras(R), So-Dri(R), Green Forest(R) and Vanity Fair(R), as well as the Dixie(R) brand of disposable cups, plates and cutlery. Georgia-Pacific's building products distribution segment has long been among the nation's leading wholesale suppliers of building products to lumber and building materials dealers and large do-it-yourself warehouse retailers. In addition, Georgia-Pacific's Unisource Worldwide subsidiary is one of the largest distributors of packaging systems, printing and imaging papers and maintenance supplies in North America. For more information, visit http://www.gp.com * * * As reported in Troubled Company Reporter's Sept. 18, 2002 edition, Fitch lowered the senior unsecured long-term debt ratings of Georgia-Pacific to 'BB+' from 'BBB-', the company's unsecured short-term ratings to B from 'F3', and assigned the ratings a Negative Rating Outlook. This action follows Georgia- Pacific's announcement that it has delayed its planned separation into an investment grade consumer products business and a non-investment grade building products business. The delay is being driven by sullen equity and high yield markets which were to have raised fresh capital to repay debt and refinance near short-term maturities. Although the consumer products end of Georgia-Pacific is performing and is expected to continue to perform well into next year, the markets for building products, save for the gypsum and resins businesses, have been underperforming. Prices for plywood, OSB and lumber continue in a slump amidst overcapacity in the industry and a poor commercial construction market but despite an otherwise good year for new housing. On a consolidated level Georgia-Pacific should show improving results for the balance of this year and into 2003; however, the cash generated by the businesses will fail to make significant inroads into debt reduction. In concert the uncertainty of the timing of the exchange of consumer products' securities for those of Georgia-Pacific heightens the risk profile of existing bondholders. The Negative Rating Outlook reflects concern regarding the refinancing of near-term obligations which were to have been repaid in the course of the separation. GLOBAL CROSSING: Court Sets Exclusivity Hearing for October 21 -------------------------------------------------------------- Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, in New York, tells the Court that Global Crossing Ltd., and its debtor- affiliates have made significant progress toward their reorganization, including negotiating and receiving Court approval of a purchase agreement among the Debtors and Singapore Technologies Telemedia Pte Ltd. And Hutchison Telecommunication Limited and formulating. The Debtors have also negotiated a consensual plan of reorganization and disclosure statement in consultation with the Investors, the official committee of unsecured creditors, and the Debtors' prepetition lenders. Despite the timeliness of the filing of the Plan, the Debtors still seek an additional extension of the Exclusivity Periods to protect them in case they are compelled to withdraw the Plan, or the Court does not approve the Plan. Insofar as consummation of the Purchase Agreement and the Plan is contingent upon approval from regulatory authorities and satisfaction of certain financial covenants, Mr. Walsh admits that there is a risk, albeit small, that the Exclusive Periods will lapse and the Plan will not be confirmed. The Debtors must protect themselves against this risk to ensure their successful emergence from Chapter 11. Specifically, the Debtors ask the Court to extend their Exclusive Filing Period until 60 days after the day upon which either: -- the Debtors are compelled to withdraw the Plan, or -- the Court denies the Plan. Similarly, the Debtors ask the Court to extend the Exclusive Solicitation Period until 60 days after the Extended Exclusive Filing Period. Mr. Walsh contends that these extensions will provide the Debtors with sufficient time to formulate and file a new plan of reorganization without the destabilizing effects of competing plans. According to Mr. Walsh, the Plan filed on September 16, 2002 is the direct result of intense negotiations with the Investors, culminating in the Purchase Agreement that was supported by the Debtors' creditor constituencies. The hearing date to approve the Disclosure Statement is set for October 21, 2002, and the Debtors are confident that the Plan will be adopted by the requisite number of creditors and approved by the Court and that they will emerge from Chapter 11 early in the first quarter of 2003. But cause still exists for extending the Exclusivity Periods. Mr. Walsh points out that the Debtors continue to implement expenditure reductions, analyze and reject executory contracts and leases, pursue and propose settlements with key vendors, and take the necessary steps toward emerging from chapter 11 as a viable and reorganized entity. Despite the Debtors' confidence that the Plan and the Disclosure Statement will be approved, Mr. Walsh insists that there is an unjustified risk that, if the Plan or Disclosure Statement are not approved by the Court, perhaps as a result of the failure to satisfy any of the Closing Conditions or for any other reason, the Exclusivity Periods will have expired in the interim period. In this scenario, the Debtors would be left to operate their business while scrambling to formulate and negotiate a new plan, assess competing plans that are filed, and contend with the destabilizing effect that these events would have on their business, employees, vendors, and customers. Therefore, the Debtors seek to maintain the healthy balance with its creditor constituencies that only an extension of the Exclusivity Periods can provide. "It would be nearly impossible for the Debtors to dedicate sufficient resources to formulating a new plan if the Debtors were required to focus on analyzing and responding to competing plans submitted by other parties," Mr. Walsh says. Moreover, the Exclusivity Periods has permitted the Debtors to negotiate and reach reasonable agreement with the Creditors' Committee and Prepetition Lenders without the pressure of entertaining competing plans of reorganization. If the Debtors cannot preserve the exclusive right to present and file a plan of reorganization, the balance that has permitted the parties in interest to forge reasonable terms of reorganization will be lost. Mr. Walsh assures the Court that the Debtors are not seeking to extend the Exclusivity Periods to pressure creditors to accede to the Debtors' reorganization demands. The Debtors and its major creditor constituencies have already reached agreement on the terms of the Plan. The Debtors are requesting an extension of the Exclusivity Period and the Solicitation Period to enable these parties to once again negotiate and reach accord on the terms of a new plan of reorganization without the pressure of competing plans if the Court does not ultimately approve the Plan. A hearing on the motion is scheduled on October 21, 2002. Accordingly, Judge Gerber extends the deadline of the Exclusive Filing Period until the conclusion of that hearing. (Global Crossing Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) Global Crossing Holdings Ltd.'s 9.625% bonds due 2008 (GBLX08USR1) are trading at 1.75 cents-on-the-dollar, DebtTraders reports. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1 HARDWOOD PROPERTIES: Will Pay Cash Distributions to Shareholders ---------------------------------------------------------------- Hardwood Properties Ltd.,(TSX:HWP) announced that an aggregate cash distribution of $4,042,000, or $0.30 per common share, will be paid on September 26, 2002 to shareholders of record on September 25, 2002. The cash payment represents an interim distribution pursuant to the previously announced and approved plan for the voluntary liquidation and dissolution of the Corporation. Hardwood is in the process of completing the sale of its remaining assets and the settlement of its outstanding obligations. To ensure that all bona fide claims against the Corporation are satisfied, the directors currently intend to wait until year end before effecting a final cash distribution to shareholders and completing the final dissolution of the Corporation. It is currently anticipated that the final distribution will be in the range of $0.05 per common share to $0.10 per common share. Hardwood Properties Ltd., is a Calgary based real estate company that specializes in the acquisition, re-construction, management and sale of multi-family residential properties. IEC ELECTRONICS: Fails to Maintain Nasdaq Listing Requirements -------------------------------------------------------------- IEC Electronics Corp., (NASDAQ: IECE) received a NASDAQ Staff Determination dated September 13, 2002 stating that the Company fails to comply with Marketplace Rule 4310(C)(2)(B), concerning minimum net tangible assets and minimum stockholders' equity requirements, and with Marketplace Rule 4310(C)(13) because of its dues delinquency. As a result, its common stock is subject to delisting from the NASDAQ SmallCap Market. IEC has requested a hearing before a NASDAQ Listing Qualifications Panel to review the Staff Determination, and its stock will continue to be listed on NASDAQ SmallCap Market until the panel has made a final determination regarding its appeal. There can be no assurance that the Panel will grant the Company's request for continued listing. IEC is a full service, ISO-9001 registered EMS provider. The Company offers its customers a wide range of services including design, prototype and volume printed circuit board assembly, material procurement and control, manufacturing and test engineering support, systems build, final packaging and distribution. Information regarding IEC can be found on its Web site http://www.iec-electronics.com INTEGRATED HEALTH: Wants to Implement Litchfield Transfer Pacts --------------------------------------------------------------- Litigation between Litchfield and the Integrated Health Services Debtors concerning the disposition of the Litchfield Facilities began in early 2001 and continues to this day. Among other things, the Debtors seek the return of Lease Deposits totaling in excess of $50,000,000. Litchfield contends that the Deposits are forfeited according to a provision in the Leases. Fighting back, the Debtors ask the Court to declare that the provision requiring forfeiture is void and unenforceable. In addition, the Debtors refused to transfer the Medicare Provider Agreements without some consideration from Litchfield or the new operators of the Facilities. Litchfield contends that the Debtors should simply assume and assign the agreements when they can do this at no cost because the HCFA has not demanded a cure payment. The parties contest strenuously over the value of the Facilities and, hence, the fair amount for use and occupancy by the Debtors in the post-rejection period. Throughout all this period marked by legal wrangling and acrimony, the Debtors, under Court order, have continued to pay full rent and deposits under the leases to Litchfield pending a determination of the appropriate use and occupancy rate in lieu of these amounts. Moreover, the Debtors and their counsel have to respond to due diligence requests by Litchfield. It is a costly transition period, the Debtors point out. After divesting one of the 43 Facilities in the portfolio, the Debtors believe they are now close to finalizing agreements to transfer all the remaining 42 Facilities to Litchfield or other new operators of Litchfield's choosing, effective October 1, 2002. Litchfield has negotiated a form of Operations Transfer Agreement with the Debtors that is consistent with Transfer Agreements that the Debtors have implemented with new operators of numerous other facilities in the Debtors' Chapter 11 cases. The Debtors and Litchfield agree that this will be used as a template for Transfer Agreements with all the New Operators. In addition, the Debtors believe that they are now in a position to finalize an agreement with the HCFA, which would permit them to retain a Medicare underpayment claim for $3,000,000. The Debtors point out that, due to this underpayment, they could not have simply assumed and assigned the Medicare provider agreements in the way Litchfield alleged. The agreement with HCFA, if finalized, would enable the Debtors to assume and assign the Medicare provider agreements while retaining the $3,000,000 net Medicare underpayment claim. A major possible stumbling block to smooth transition is the absence of a new lease for each of the Facilities between Litchfield and the respective New Operator. The Debtors suspect that Litchfield may not like to finalize leases with New Operators because it has been receiving rents and deposits from the Debtors at the annual rate of $19,000,000, at least $4,000,000 in excess of Litchfield's underlying debt service, and Litchfield is certainly going to make less from its new tenants after the transition is complete. If there is no new lease, it is quite possible that the Debtors will not be able to transfer a facility even when there is a Court-approved Transfer Agreement. The Debtors have this painful experience with their Cherry Creek Facility, which is owned by the principals of Litchfield. Apart from the new lease issue, the dispute as to the fair market value of the Debtors' use and occupancy of the Facilities and certain other post-rejection issues remain sub judice. If for any reason, one or more of the Facilities are not transferred, the Debtors believe they have no other choice but to close the un-transferred Facilities. Accordingly, pursuant to Sections 105(a), 363(b) and (m), 365 (a), (b), (f) and (k) and 1146(c) of the Bankruptcy Code, and Rules 6004 and 6006 of the Federal Rules of Bankruptcy Procedure, the Debtors seek Court's authority to: (a) implement the four Transfer Agreements with the four New Operators, which provide for orderly transfer of the Facilities; (b) implement the Medicare Stipulation by and among the Debtors, the United States of America and the New Operators, which provides for assumption and assignment of the Medicare provider reimbursement agreements and provider reimbursement numbers to the New Operators; and (c) close any of the Facilities at the Debtors' sole discretion if transfer cannot be effected. According to applicable, non-bankruptcy law, any closure will take several months to accomplish. The Debtors indicate that they remain willing to transfer the subject Facilities to Litchfield or some other new operator during that time period. Alternatively, the Debtors would consider entering into an appropriate interim services or back-office agreement with Litchfield, provided the economic risk of operating the Facilities is shifted to Litchfield while Litchfield continues to try to find a new operator. In the Debtors' business judgment, transfer of the operations of the facilities is in the best interest of their creditors and estate, but if all or some of the Facilities cannot be transferred to new operators on October 1, 2002, a closure will then be the only possible avenue open to them because they must divest themselves of the financial burdens of the Leases. The Debtors remind Judge Walrath of the poor performance of the 42 Facilities: -- The aggregate Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) for the year 2001 was a disappointing $540,899; -- EBITDA has declined significantly this past year because of unexpectedly steep increases in PL/GL expenses; year to date EBITDA was negative $3,732,235; and -- EBITDA for the year 2003 is projected to be negative $6,425,782. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP, tells Judge Walrath that the Debtors and their creditors should not have to continue bearing the financial burdens of the Leases which they rejected, with Court approval, more than 8 months ago. "The Debtors have done everything they can do, or should be expected to do, to facilitate a transfer of the Facilities," Mr. Brady says. Litchfield has had ample time to reach agreements with new operators for each of its Facilities. If Litchfield has been unable or unwilling to do so, Mr. Brady asserts that should not be the problem of the Debtors and their creditors. Arrangement Agreed So Far The Debtors anticipate that they can transfer the operations of the 42 Facilities to 42 single-purpose entities, which are either affiliates or subsidiaries of these four companies: * Health Prime, Inc. (HP) * Peak Medical * Nexion Health * Litchfield Litchfield has advised that the Litchfield portfolio is being divided among these four companies: -- HP has agreed to acquire the operations of a total of 9 Facilities, 1 in the state of Alabama, 2 in Georgia, 2 in Kansas, and 1 each in the states of Kentucky, North Carolina, Tennessee, and West Virginia; -- Peak has agreed to acquire a total of 5 Facilities, all of which are located in the state of Colorado; -- Nexion has agreed to acquire total of 20 Facilities, 15 of which are located in the state of Louisiana, and 5 of which are located in Texas; and -- Litchfield will be taking over the operations of 8 Facilities, all of which are located in the state of Florida. The parties expect that, as a result of separate negotiations between the Debtors and the respective New Operators, individual Transfer Agreements will differ somewhat but not substantively from the Litchfield Transfer Agreement. Each of the Transfer Agreements contemplates a transition date of October 1, 2002. The Lease Termination and Operations Transfer Agreements The Transfer Agreement provides for the termination of the nonresidential real property leases and certain other agreements between Litchfield and IHS-Lester. The Transfer Agreement provides that IHS-Lester's rights with respect to the subject Medicare Provider Agreements will be assigned to Litchfield at the Effective Time. If any payments are required in order to cure any defaults as a condition to the assumption of the Medicare Provider Agreements, then Litchfield is required to pay them. Litchfield has decided not to take an assignment of the Facilities' respective Medicaid Provider Agreements. Accordingly, the Debtors do not seek to assume the Medicaid Provider Agreements and will proceed to terminate them. Litchfield assumes all risk arising out of failure to obtain new Medicaid provider numbers or agreements with respect to the Facilities. Litchfield has agreed not to discharge or cause to discharge any Medicaid beneficiaries who are residents or patients of the Facilities immediately prior to the Effective Time by reason of Litchfield's inability to bill Medicaid with respect to the residents or patients. Litchfield further agrees to indemnify IHS-Lester and IHS from and against all damages (including reasonable attorney's fees and expenses), incurred by IHS-Lester, which arise out of Litchfield's failure to accept assignment of the Medicaid Provider Agreements. The Transfer Agreement provides for IHS-Lester to transfer to the New Operators all of IHS-Lester's right, title and interest in certain defined assets that are located at the Facilities in connection with the operation of the Facilities, including, all inventory, resident lists and records, furniture, fixtures, equipment, supplies, operating contracts, the names of the Facilities as they existed prior to August 30, 1994, and originals or copies of IHS-Lester's books and records which are located at the Facilities. In addition, the Transfer Agreement sets forth the procedures applicable to: a. the transfer of Resident Trust Funds; b. the employment by the New Operators of IHS-Lester's employees; c. the disposition of uncollected accounts receivable; d. prorations of utility charges, real and personal property taxes, and any other items of revenue or expense attributable to the respective Facilities; e. access to records; and f. the assumption by the new Operator of various unexpired vendor and service contracts related to the Facilities' operations. The Transfer Agreement further requires IHS-Lester to provide a copy of IHS-Lester's operating procedures manual to the New Operators. The Transfer Agreement permits the New Operator to take an assignment of some or all of the Operating Contracts. The New Operator will bear sole responsibility for curing any defaults existing under the Operating Contracts, which it seeks to obtain. Finally, the Transfer Agreement provides that if the Transfer Agreement is terminated for a variety of reasons as set forth in it, IHS-Lester is entitled to take all actions to wind down and close any or all of the Facilities affected by the termination. Agreements that will be terminated pursuant to the Litchfield Transfer Agreement are: 1. The Facilities Agreement, dated as of August 31, 1994, by and among Litchfield's predecessor, IHS and IHS-Lester, amended by the Facilities Agreement, dated as of September 30, 1997; 2. The Purchase Option Agreements, dated as of September 30, 1997, between Litchfield and IHS-Lester, in respect of the Facilities; 3. Amended and Restated Non-Competition and Secrecy Agreement, by and among Litchfield, IHS-Lester, IHS, Michael S. McGee, Eugene H. Rosen and Bruce Weinstein, dated as of September 30, 1997; 4. The Security Agreement/Proceeds, by and between IHS-Lester and Litchfield, dated as of September 30, 1997; 5. The Memoranda of Options to Purchase Real Estate, by and between IHS-Lester and Litchfield, dated as of September 30, 1997 in respect of the Facilities; 6. The Memoranda of Leases, by and between IHS-Lester and Litchfield, dated as of September 30, 1996; 7. Subordination, Non-Disturbance and Attornment Agreements, by and among IHS-Lester, Litchfield and German American Capital Corp. (Lender), dated as of September 30, 1997 in respect of the Facilities; 8. Amended and Restated Participation Agreement, by and between IHS-Lester and Litchfield, dated as of September 30, 1997; and 9. Any other agreement between IHS-Lester and Litchfield or between IHS and Litchfield. Although the parties have agreed to the termination of the agreements, no party has agreed to release any other party with respect to any obligations or liabilities incurred under any of the agreements. The Medicare Stipulation The Medicare Stipulation, by and among the Debtors, the United States of America and the New Operators, will be substantially in the form as that by the Court in connection with the Debtors' transfer of its Woodbridge Nursing and Rehabilitation Center. The stipulation provides for the Debtors' assumption and assignment of the Medicare Provider Agreements to the New Operators. No Cure Payment will be required. All claims that the Centers for Medicare & Medicaid Services may have against the Debtors for monetary liability arising under the Medicare Provider Agreement before the Effective Time will be satisfied, discharged and released upon the Effective Date. (Integrated Health Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Court Approves Abacus to Render Consulting Services --------------------------------------------------------------- Kmart Corporation and its 37 subsidiaries obtained supplemental authority from the Court to employ and retain Abacus Advisory & Consulting Corp., LLC to assist in the Debtors' rent and occupancy expense reduction program, nunc pro tunc to August 1, 2002. The current engagement of Abacus contemplates these services: (a) Develop store information package that will include information culled from Kmart data and data already developed by other Kmart professionals as well as additional information that Abacus and Kmart view as relevant and necessary to thorough preparation for occupancy concession negotiations; (b) Negotiate with landlords, mortgagees, and other relevant parties to obtain rent and other concessions on the Properties; (c) Provide expert testimony at court hearings, Board of Directors' meetings, and Creditors' Committee meetings as requested by Kmart; and (d) Abacus will act as an independent contractor and nothing in the Agreement will create an agency relationship between Kmart and Abacus. Abacus understands that it has no authority to make or imply any commitments that are binding upon Kmart. Abacus agrees that it will act only at Kmart's direction and that Kmart will have full decision-making authority, to be made in its sole discretion, with respect to any assumption or rejection of a lease, acceptance or rejection of any occupancy savings proposal, and any other matters within the scope of the services to be rendered. Abacus' professionals who will render these services include: * Alan Cohen, the Chairman of Abacus, as well as * Jack Rapp, * Terrence Corrigan, * Jim Goldbach and * Spencer Heine. As compensation for Abacus' services, the Debtors will pay: (i) A base fee of $200,000 at the beginning of each month, effective August 1, 2002, and continuing until substantially all of the work is completed, up to a maximum base fee payment of $1,200,000 in the aggregate; (ii) An incentive fee based on a percentage of monetary occupancy savings it achieves for Kmart, as follows: --- 2% of the monetary and occupancy savings up to $50,000,000 in annual monetary occupancy savings; --- an additional 1/2% of monetary and occupancy savings from $50,000,000 to $75,000,000 in annual monetary occupancy savings; and --- an additional 1/2% of the annual monetary occupancy savings in excess of $75,000,000; Monetary and occupancy savings will include, but not be limited to, reduction in rent, taxes, and CAM charges. The incentive fee percentage due Abacus will be capped so that Abacus will be entitled to its percentage for each lease only for that period Kmart actually receives and is entitled to retain the occupancy savings up to a maximum of 18 months and will not include any additional "present value" of occupancy savings upon assumption of any lease or the recapture of any occupancy savings upon rejection of any lease; and (iii) A reimbursement of its reasonable out-of-pocket expenses. (Kmart Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) LIGHTHOUSE FAST FERRY: June 30 Balance Sheet Upside-Down by $8MM ---------------------------------------------------------------- Lighthouse Fast Ferry, Inc., has sustained substantial losses for the six months ended June 30, 2002 and the year ended December 31, 2001. In addition, at June 30, 2002 the Company has working capital and stockholders' capital deficiencies of $11,318,087 and $8,099,662, respectively. Future viability of the Company is dependent upon the Company's ability to obtain additional funding and achieve profitable operations. In the six months ended June 30, 2002, the Company received cash of $1,190,000 from convertible promissory notes, $652,500 from short-term loans and $81,500 from the sale of its common stock. The proceeds were used to provide working capital for the Company's ongoing operations, to meet certain obligations and to fund its expansion plans. In May 2002, the Company commenced a private offering of up to $3,000,000 of its common stock. There can be no assurance that the Company will be successful in its efforts to raise capital through this offering. Management is aggressively pursuing federal funding that is presently available for ferry service operators in the metropolitan New York area. Federal funds are also available through the Federal Emergency Management Agency (FEMA). The Company has submitted to FEMA an application for reimbursement of approximately $500,000 of expenditures related to the start- up of the Keyport operation. Additionally, a federally sponsored bill through an emergency appropriations funding included in the Department of Defense Appropriations has allocated $100 million specifically to expand ferry service between New York and New Jersey. While the Company does not expect to receive funds directly from this appropriation, Perth Amboy Redevelopment Agency (PARA) has been identified as one of the expansion projects. Any funds PARA receives will reduce the amount of funds the Company will need to rehabilitate the planned Perth Amboy ferry site and to develop landside ferry facilities. The Company has been advised that these funds should be disbursed by the end of October 2002. In addition, PARA has authorized the sale of $14 million in tax- free municipal bonds to be used specifically for the development of high-speed ferry service that will be provided exclusively by the Company through its operating subsidiary. The Company has received all necessary approvals to proceed with the transaction and is in discussions with financial institutions that have expressed interest in acting as the Company's agent. However, the Company has received a notice of default and termination from PARA. The Company is attempting to cure the claimed default. However, no assurance can be given that the Company will be successful in these efforts. Although there can be no assurances that the Company will be successful in obtaining funding from any of these sources, management is confident that as a currently operating ferry service with over three years of operational history, it is favorably positioned to secure some funding from these sources. Moreover, management believes that through the sales of its common stock and other financing arrangements the Company will continue to be successful in raising sufficient funds to meet the Company's obligations as they become due. However, the conditions previously mentioned raise substantial doubt about the Company's ability to continue as a going concern. In August 2002, the Company received proceeds from 10.5% CPNs aggregating $40,000. In connection therewith, the Company issued to the note holders 1,500 shares of its restricted common stock, having an allocated fair market value of $850 on the dates of issuance. In July and August 2002, holders of two 90-day promissory notes totaling $50,000 extended the notes' maturity dates sixty days to October 5, 2002. As consideration for the loan, the Company issued 1,000 shares of its restricted common stock to the two note holders and granted both holders three-year warrants to purchase 10,000 shares of its restricted common stock at an exercise price of $0.70 per share, the market value on date of issuance. The Company also prepaid the interest through the October maturity date on the notes totaling $1,200. In August 2002, the Company sold a total of 307,692 shares of its restricted common stock at a price of $0.65 per share to a current stockholder for total cash proceeds of $200,000. In July 2002 the Company advised the Perth Amboy Redevelopment Agency that when trying to establish a service schedule it had encountered resistance from the New Jersey state authority that controlled the train bridge under which the Company's vessels must travel when servicing the proposed Perth Amboy ferry site. The Company further advised that this circumstance could impede its progress in developing the site and commencing service. Even though the water traffic has the right-of-way, without a favorable resolution of the issue resulting in a definitive schedule for opening the bridge during peak commuter times, the Company advised PARA that it could not proceed. The Company is negotiating a resolution of this matter with the applicable state authority. No assurance can be given, however, that the Company will be able to achieve a successful resolution of this issue. Also in July, the Company had become delinquent in its rent payments to PARA and PARA sent the Company a demand letter. The Company was given ten days to respond with a payment plan to address the arrearages. In August the Company received a notice of default and termination of agreement from PARA. According to its agreement with PARA, the Company has sixty days from the notice to pay the arrearages and cure the default. Total revenues for the three months ended June 30, 2002 totaled $1,315,680 as compared to $1,017,643 for the same period ended in 2001, a 28.80% increase. The increase is primarily attributable to an increase in passenger ticket sales of approximately $250,000 to $1,107,367 for the period ended June 30, 2002 from $853,916 for the same period in 2001. Other revenues for the three months ended June 30, 2002 were $75,000 as compared to $1,300 for the same period in 2001, as a result of a consulting engagement. In the three months ended June 30, 2002 increased passenger ticket sales resulted from the addition of its Keyport operation, which commenced service on October 15, 2001. For the six months ended June 30, 2002, total revenues increased to $2,721,104 from $1,849,548, a 47.12% increase. The increase is primarily attributable to an increase in passenger ticket sales of approximately $795,621 to $2,438,066 for the period ended June 30, 2002 from $1,642,445 for the same period in 2001. Galley sales increased by 26.40% to $118,470 for the six months ended June 30, 2001 as compared to $93,725 for the same period in 2001. Other revenues for the six months ended June 30, 2002 were $75,000 as compared to $5,381 for the same period in 2001, as a result of a consulting engagement. In the six months ended June 30, 2002 increased passenger ticket sales result from increased ridership at the Highlands operation and the addition of its Keyport operation, which commenced service on October 15, 2001. Net losses for the periods were: $ 3,473,588 for the three months ended June 30, 2002 as compared to a net loss of $2,786,632 for the same three months of 2001; and a net loss of $6,106,760 for the six months ended June 30, 2002 as compared to the net loss of $4,996,506 for the same six month period of 2001. LODGIAN INC: Asks Court to Approve Management Incentive Program --------------------------------------------------------------- Lodgian, Inc., and its debtor-affiliates ask the Court to approve, pursuant to Sections 105 and 363 of the Bankruptcy Code, a certain management incentive program in connection with the confirmation of the Debtors' Joint Plan of Reorganization in these Chapter 11 Cases. The Management Incentive Program was negotiated with the Committee and reflects a consensual compensation and incentive Plan that: -- compensates certain members of Management for their dedication towards a speedy resolution of these Chapter 11 Cases, and -- continues to incentivize members of Management towards an expeditious and orderly emergence from Chapter 11. Lisa A. Thompson, Esq., at Cadwalader Wickersham & Taft, in New York, points out that unlike many other comparable Chapter 11 debtors, the Debtors did not seek to implement a "key employee" retention program during the initial stages of these Chapter 11 Cases. Rather, the Debtors determined that it was more appropriate to wait until the Plan process had sufficiently proceeded to approach the Committee in the development of a customary incentive and compensation program. In an exercise of their reasonable business judgment, the Debtors, in conjunction with the Committee, have deemed it appropriate to establish a management incentive program to compensate Management for their dedication and efforts throughout the Chapter 11 cases and, importantly, to assure the continued availability of their services through the Effective Date of the Plan. The Management Incentive Program is also tied directly to proceeding expeditiously towards an Effective Date of the Plan. The salient terms of the Management Incentive Program are: A. Reorganization Bonuses for Management: On or as soon as reasonably practicable after the Effective Date, the reorganized Debtors will pay bonuses to these members of the Debtors' management: Plan is confirmed -------------------------------------------- by 11/15/02 11/16/02-12/15/02 after 12/15/02 ----------- ----------------- -------------- David Hawthorne $1,000,000 $950,000 $900,000 President & CEO Richard Cartoon 500,000 450,000 400,000 CFO Mike Amaral 500,000 450,000 400,000 COO In addition, on or as soon as reasonably practicable after the Effective Date, five members of the Debtors' management will share in a $500,000 bonus pool funded by the Reorganized Debtors. The amount to be paid to these five members of Management does not vary based upon the Plan confirmation date; B. Modification of David Hawthorne's Employment Contract: By Order dated April 17, 2002, this Court previously approved the Debtors' assumption of an employment contract with Mr. Hawthorne as their President and Chief Executive Officer. As part of the proposed program negotiated between the Debtors and the Committee, Mr. Hawthorne's Employment Contract will be modified so that the minimum severance payment Mr. Hawthorne will receive from the Debtors upon termination of his employment for death, disability, or retirement, should be equal to his base salary for a period of 24 months. Additionally, if Mr. Hawthorne and the Board of Directors of the Reorganized Lodgian, Inc. do not reach an agreement on a mutually satisfactory long-term contract and long-term incentive compensation agreement within six months from the Effective Date, it has been agreed that Mr. Hawthorne may, at his discretion, voluntarily terminate his employment and collect an amount equal to his severance, as provided by the Employment Contract, as if he were terminated without cause; C. Discretionary Bonuses for Employees: On or as soon as reasonably practicable after the Effective Date, Reorganized Lodgian, Inc., will have a $200,000 discretionary emergence bonus pool to reward certain other employees who are not members of Management for their services throughout the Chapter 11 Cases. It is currently contemplated that not less than ten employees would be eligible to participate in the Discretionary Bonuses and that no individual employee would receive more than $30,000. Management will not be entitled to receive any portion of the Discretionary Bonuses and the Discretionary Bonuses will require Board approval prior to issuance. Ms. Thompson points out that this program was developed with the Committee at a point in time in which the Committee and its professionals were better able to assess the potential successes of these Chapter 11 Cases in a specific context of the Plan process. Unlike other "key employee" programs, no bonuses will be paid prior to the Plan's Effective Date. This treatment directly aligns Management's incentive with the end-goal of an expeditious confirmation of the Plan. Ms. Thompson contends that the proposed Management Incentive Program will enable the Debtors to retain the knowledge, experience and loyalty of Management members who are crucial to the Debtors' emergence from Chapter 11. If members of Management were to leave their current positions today, it is likely that the Debtors would not be able to attract replacement employees of comparable quality, experience, knowledge and character to fill the various roles that Management must play in seeing the Chapter 11 Cases through to completion and maximizing the enterprise values of the reorganized Lodgian Group. This, in turn, could delay the Debtors' emergence from Chapter 11, thus increasing the overall cost to the Debtors' estates and, possibly, deteriorating the ultimate returns to creditors under the Plan. The potential time and cost required in hiring replacement management, including, recruiting fees and sign-on bonuses, clearly outweighs the cost of the Management Incentive Program. Moreover, Ms. Thompson points out that the success of these Chapter 11 Cases would be dubious without Management's dedication and hard work over the past nine months. Since the Management Incentive Program is appropriate and needed to retain Management -- who in turn are necessary for the preservation of the Debtors' estates -- the proposed reorganization bonuses under the Management Incentive Program are "actual, necessary costs and expenses of preserving the Debtors' estate[s]" and should be accorded administrative expense priority under Section 503(b)(1)(A) of the Bankruptcy Code. (Lodgian Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) LOGIMETRICS: Board of Directors Okays Proposed Liquidation Plan --------------------------------------------------------------- LogiMetrics, Inc., (OTCBB: LGMTA) announced that its Board of Directors has approved the liquidation of the Company. As previously announced, a Special Committee of the Board was established to evaluate the Company's strategic alternatives in light of declining market conditions. Because the Company has been unable to obtain capital sufficient to fund its operating needs, and the Special Committee was unable to identify a viable source of additional financing or an alternative transaction that would enhance the Company's value, the Special Committee recommended to the Board that the Company be liquidated and the Board accepted the recommendation of the Special Committee. The Company does not expect that stockholders will receive any liquidating dividend or distribution in connection with the liquidation of the Company's business. Accordingly, the Company believes that its common stock is now worthless. LTV CORP: Wants to Keep Plan Exclusivity Until February 10, 2003 ---------------------------------------------------------------- For the fifth time, LTV Steel Company Inc., and debtor- affiliates ask the Court to extend their exclusive periods to file a chapter 11 plan. The Debtors ask that their exclusive period to propose and file a plan be extended to February 10, 2003 and that they retain the exclusive right to solicit acceptances of that plan until April 11, 2003. David G. Heiman, Esq., Heather Lennox, Esq., and Nicholas M. Miller, Esq., at Jones Day Reavis & Pogue, in Cleveland, Ohio, and Jeffrey B. Ellman, Esq., in Columbus, Ohio, relate that, as the APP slowly wends its way toward a conclusion, the most critical element of these cases is stability. Maintaining the status quo will preserve the extant knowledge base of the Debtors' current management, which, in turn, will promote the most efficient, economic and timely resolution of these cases. Although much has been accomplished to facilitate the APP process in the past few months, much remains to be done before a clear "end game" can or will emerge in these cases. Today, no other constituency is in as good a position as the Debtors to complete the APP process, evaluate other potential sale or reorganization alternatives, and formulate a strategy for concluding these cases. Although the Debtors have worked, and will continue to work, closely with their primary creditor constituencies on all of the critical issues involved in resolving these cases, no other party is currently in a central position as the Debtors to facilitate the resolution process. Ms. Lennox reminds Judge Bodoh that the Debtors made significant strides in implementing the key elements of the APP. Ms. Lennox also reports that the Debtors have made progress towards determining how to maximize the value of the Metal Fabrication Business, comprised of the LTV Tubular division of LTV Steel and the assets of Copperweld Corporation and its affiliates. The LTV Tubular Assets and the Copperweld Assets constitute the primary remaining operating assets of the Debtors' estates. The Debtors carefully evaluated the appropriate treatment of the LTV Tubular Assets and the Copperweld Assets in these cases and initially determined that completing a going-concern sale of some or all of these assets may provide the best mechanism to maximize their value for the benefit of the Debtors' estates and creditors. Thus, the Debtors have engaged in extensive marketing efforts to sell the LTV Tubular Assets and the Copperweld Assets during the past several months. These efforts have included, among other things: (a) preparing and distributing to certain potential purchasers detailed offering memoranda describing the LTV Tubular Assets and the Copperweld Assets; (b) organizing and maintaining an extensive data room with related due diligence information; (c) conducting sit visits and management presentations for certain Potential Purchasers; (d) receiving and analyzing preliminary bid information from Potential purchasers; (e) evaluating actual bids received; (f) discussing bids with the Committees and all postpetition lenders; and (g) engaging in further discussions with certain Potential Purchasers. To assist the completion of a sale of some or all of the LTV Tubular Assets and the Copperweld Assets, the Debtors also obtained approval of the asset sale procedures designed to provide a framework for the competitive bidding process and permit the Debtors the option of granting certain bid protections to a successful bidder. The Debtors expect to determine in the next few weeks, in consultation with their creditors, which, if any, bids for some or all of the LTV Tubular Assets and the Copperweld Assets they will accept. Ms. Lennox further reports that the Debtors have: (a) substantially completed an analysis of various intercompany claims, which they have shared with the Committees; and (b) made "considerable progress" in retiring the LTV Steel postpetition financing facility by reducing $422 million of the LTV Steel DIP Facility, as of August 23, 2002. The Debtors expect to pay or otherwise satisfy the remaining $35.8 million balance of the LTV Steel DIP Facility on or before December 13, 2002. In addition to bringing these tasks to completion, the Debtors must begin to formulate a future strategy with respect to any operating assets that remain. In any event, during the next several months, the Debtors will likely commence a process to formulate any plan or plans of reorganization to be proposed in these cases. But until such time as any sale determinations have been made, any sale processes have concluded, LTV Steel's administrative claims have been resolved, and the APP Period has expired, Ms. Lennox says, any Plan that may be proposed by the Debtors or any other party would be premature. In fact, it is not clear at this juncture whether any Plan filing will be possible at all, Ms. Lennox admits, although the Debtors have begun investigating the possibility as to some or all of the operating companies. "Clarity will only be possible after the bid evaluations have concluded and further resolution of administrative claims has occurred," Ms. Lennox contends. Thus, the Exclusive Periods should be extended to provide the Debtors with an opportunity to accomplish these tasks, continue their efforts to maximize value, and provide a period of 60 days beyond the expiration of the APP Period to assess the results of the APP and any further asset sales, and determine whether a Plan will be appropriate or feasible, and if so, to commence the Plan formulation process. (LTV Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-00900) LTV Corporation's 11.75% bonds due 2009 (LTVC09USR1) are trading at less than penny to the dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=LTVC09USR1 for real-time bond pricing. MEADOWCRAFT: Has Until October 2 to File Schedules and Statement ---------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Northern District of Alabama stretched the Schedules filing deadline of Meadowcraft, Inc. The Debtor has until October 2, 2002 to file its schedules of assets and liabilities, and statement of financial affairs, as required by 11 U.S.C. Sec. 521(1) and Rule 1007 of the Federal Rules of Bankruptcy Procedure. Meadowcraft, Inc., a leading domestic producer of casual outdoor furniture and the largest manufacturer of outdoor wrought iron furniture in the world, filed for chapter 11 protection on September 2, 2002. Sherry T. Freeman, Esq., Edward J. Peterson, III, Esq., and Lloyd C. Peeples, III, Esq., at Bradley Arant Rose & White LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated assets of over $50 million and debts of over $100 million. MEDSOLUTIONS INC: Ability to Continue Operations Uncertain ---------------------------------------------------------- MedSolutions, Inc., was incorporated in Texas in 1993, and through its wholly owned subsidiary, EnviroClean Management Services, Inc., collects, transports and disposes of regulated medical waste in north and south Texas. The Company has incurred consolidated net losses. Additionally, the Company has significant deficits in both working capital and stockholders' equity. Further, the Company is delinquent in paying its payroll taxes to the IRS. These factors, raise substantial doubt about the Company's ability to continue as a going concern. In response to certain comments raised by the Securities and Exchange Commission with respect to the Company's originally filed registration statement and amendments thereto, the Company has elected to restate certain of the financial information appearing in its latest consolidated financial statements for the year ended December 31, 2001 and the quarters ended March 31, 2002 and 2001. Accordingly, the consolidated financial statements have been restated to reduce previously recorded amounts of other income of $70,000 and $245,000 for the years ended December 31, 2001 and 1999, respectively; to increase the litigation provision expense by $230,000 related to a lawsuit for the year ended December 31, 2000; and to record additional interest expense of $30,000 and $44,000 for the years ended December 31, 2001 and 2000 and for the three months ended March 31, 2002 and 2001, respectively, related to such litigation provision expense. There has been no significant change in the status of litigation since the Company filed the Annual Report with the SEC for the year ended December 31, 2001. However, the Company has reevaluated the status of the lawsuit filed by the State of Texas and has retroactively increased the litigation provision expense by $230,000, which was charged to expense in the fourth quarter of the year ended December 31, 2000, and has recorded an accrual for prejudgment interest expense of $30,000 and $44,000 for the years ended December 31, 2001 and 2000, respectively, and $7,500 in each of the three-month periods ended March 31, 2002 and 2001. Net losses were $212,668 during the three months ended March 31, 2002 compared to $295,565 during the three months ended March 31, 2001. Management does not believe the Company's existing cash position and cash flow from operations will enable us to satisfy the current cash requirements. MedSolutions will be required to obtain additional financing to implement its business plan. Historically, the Company has met its cash requirements from a combination of revenues from operations (which by themselves have been insufficient to meet such requirements), shareholder loans and advances, and proceeds from the sale of its debt and equity securities. Going concern The following factors raise substantial doubt about the Company's ability to continue as a going concern. As indicated in its consolidated financial statements, the Company incurred consolidated net losses of $2,007,861 and $2,747,923 for the years ended December 31, 2001 and 2000, respectively, which losses have continued into the first quarter of 2002. Additionally, the Company has significant deficits in both working capital and stockholders' equity at December 31, 2001 and March 31, 2002. Further, although current with its payroll taxes for the year 2002, EMSI has a substantial payroll tax obligation for the years ended December 31, 2001 and 2000, which continues to accrue interest. MEMC ELECTRONIC: Denies Bankruptcy Reports, but Still Insolvent --------------------------------------------------------------- MEMC Electronic Materials, Inc., (NYSE: WFR) -- with a June 30 balance sheet showing liabilities exceeding assets by $38 million -- in response to an incorrect comment in The Wall Street Journal, stated that it has not filed for bankruptcy protection. For the 2002 second quarter, the Company reported net income available to common stockholders of $6.0 million, which is after cumulative preferred stock dividends. In addition, as of June 30, 2002, the Company's cash, cash equivalents and short-term investments totaled approximately $111.1 million. Total liabilities stand at $613 million at June 30. MEMC is a leading worldwide producer of silicon wafers for the semiconductor industry. Silicon wafers are the fundamental building block from which almost all semiconductor devices are manufactured, such as are used in computers, mobile electronic devices, automobiles, and other consumer and industrial products. Headquartered in St. Peters, MO, MEMC operates manufacturing facilities directly in every major semiconductor manufacturing region throughout the world, including Europe, Japan, Malaysia, South Korea, Taiwan and the United States and through a joint venture in Taiwan. METALS USA: Files First Amended Plan of Reorganization in Texas --------------------------------------------------------------- In a Form 8-K report filed with the Securities and Exchange Commission, Metals USA Senior Vice President, Treasurer, and Chief Accounting Officer Terry L. Freeman discloses that: "On September 18, 2002, Metals USA, Inc., a Delaware corporation filed its proposed plan of reorganization and the related disclosure statement with the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. The Company together with all of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code on November 14, 2001. "The Reorganization Plan calls for the Company's existing equity be extinguished and for the unsecured creditors to receive 100% of the New Common Stock in the reorganized Company in exchange for the discharge of approximately $380.0 million of unsecured claims. Holders of the existing equity will receive five-year warrants to purchase an aggregate of up to 15% of the New Common Stock of the reorganized Company. The warrants will have an exercise price calculated at full recovery for all unsecured creditors. In addition, the Company will seek listing of the New Common Stock on a nationally recognized market or exchange. The Company cannot provide any assurance as to whether a market will develop for the warrants. All currently outstanding options of the Company will be cancelled on the effective date of the Reorganization Plan. The Reorganization Plan will provide for the establishment of a new equity incentive plan for employees to be administered by the Board of Directors of the newly reorganized Company. The Board of Directors of the newly reorganized Company will initially consist of six members, and a seventh director to be named within six months from the effective date of the Reorganization Plan who will be an executive officer from the reorganized Company. "The Bankruptcy Court has approved the Disclosure Statement as having adequate information to permit an informed vote to accept or reject the Reorganization Plan. The Company will mail copies of the Disclosure Statement to the claim and interest holders, and the impaired claim and interest holders will have an opportunity to vote to either accept or reject the Reorganization Plan. At the Reorganization Plan confirmation hearing, which is scheduled for October 18, 2002, the Bankruptcy Court will determine whether the voting classes have accepted the Reorganization Plan or may rule that it is otherwise confirmable under applicable bankruptcy law. If the Reorganization Plan is confirmed, the Company will then be permitted to consummate the transactions described in the Reorganization Plan to emerge from bankruptcy. This is generally done between ten to fifteen days following the confirmation of the Reorganization Plan. Assuming the Reorganization Plan is accepted by the impaired claim and interest holders and the Bankruptcy Court grants the confirmation order within the time table set forth, it is possible that the Company could emerge from bankruptcy on or about October 31, 2002." Free copies of the Debtors' Amended Disclosure Statement and Amended Plan of Reorganization are available at the Securities and Exchange Commission at: http://www.sec.gov/Archives/edgar/data/1038363/000091205702036227/0000912057 -02-036227.txt The Debtors' First Amended Plan provides for certain modifications to the estimated recovery amounts of certain classes of claimants. The Amended Plan specifically provides for the issuance of 149,510 shares of New Common Stock to CIBC World Markets in accordance with the terms of their retention as financial advisors to the Holders of General Unsecured Claims. The Debtors propose to make these cash payments on the Effective Date: Cash Payment Cash Payment Amount ------------------ ------------------- Debtor-in-Possession Loan Claim $130,000,000 to $150,000,000 Administrative Claims $3,400,000 KERP Payments $5,000,000 Other Priority Claims $100,000 Priority Tax Claims $200,000 Other Secured Claims $100,000 Assumed Contracts $600,000 Convenience Claims $700,000 (Metals USA Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) NCS HEALTHCARE: Omnicare Extends Tender Offer Until October 3 ------------------------------------------------------------- Omnicare, Inc. (NYSE: OCR), a leading provider of pharmaceutical care for the elderly, has extended its $3.50 per share fully financed, all cash tender offer for all of the outstanding shares of Class A common stock and Class B common stock of NCS HealthCare, Inc. (NCSS.OB). The offer, which was scheduled to expire at 12:00 Midnight, New York City time, on Thursday, September 19, 2002, has been extended until Thursday, October 3, 2002, unless further extended. Omnicare's offer represents more than twice the value of the proposed transaction between NCS and Genesis Health Ventures, Inc., (Nasdaq: GHVI) and nearly five times the value of NCS's closing stock price of $0.74 on July 26, 2002, the last trading day before Omnicare announced its acquisition proposal. The proposed NCS/Genesis transaction, based on yesterday's closing stock price, is worth approximately $1.60 per share or 28% below the current value of NCS common stock. As of the close of business on September 19, 2002, a total of 10,792,553 shares of Class A common stock of NCS had been tendered, which represents approximately 58% of the outstanding shares of Class A common stock, and a total of 26,141 shares of Class B common stock had been tendered, which represents less than 1% of the outstanding shares of Class B common stock. Jon H. Outcalt, chairman of the board of NCS, and Kevin B. Shaw, president, chief executive officer and a director of NCS, own approximately 88% of the outstanding shares of Class B common stock. Messrs. Outcalt and Shaw have entered into illegal voting agreements pursuant to which they have agreed, among other things, to support the proposed NCS/Genesis transaction and to vote all of their shares of NCS Class A common stock and Class B common stock in favor of the proposed transaction. Dewey Ballantine LLP is acting as legal counsel to Omnicare and Merrill Lynch is acting as financial advisor. Innisfree M&A Incorporated is acting as information Agent. Omnicare, based in Covington, Kentucky, is a leading provider of pharmaceutical care for the elderly. Omnicare serves approximately 738,000 residents in long-term care facilities in 45 states, making it the nation's largest provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers. Omnicare also provides clinical research services for the pharmaceutical and biotechnology industries in 28 countries worldwide. For more information, visit the company's Web site at http://www.omnicare.com NCS HealthCare, Inc., is a leading provider of pharmaceutical and related services to long-term care facilities, including skilled nursing centers, assisted living facilities and hospitals. NCS serves approximately 206,000 residents of long- term care facilities in 33 states and manages hospital pharmacies in 14 states. At June 30, 2002, NCS' balance sheet shows a total shareholders' equity deficit of about $108 million. PACIFIC GAS: CPUC and Committee's Request to Open Voting Nixed -------------------------------------------------------------- Pacific Gas and Electric Company issued the following statement after the U.S. Bankruptcy Court denied the request by the California Public Utilities Commission and Official Creditors' Committee to reopen the voting period and allow creditors and equity holders to revote on competing plans of reorganizations in PG&E's bankruptcy proceeding: "The Bankruptcy Court [Fri]day denied the CPUC and Creditors' Committee's motion to reopen the voting period saying, 'that at some point you have to close the voting booth.' "The case will now proceed to the confirmation trial on November 12, 2002. "The Court left open the details of a procedure that would be used to consider the preference of creditors who voted affirmatively for both plans, if both plans emerge from the November hearings as confirmable. "[The other] week, the results of the voting by creditors were submitted to the U.S. Bankruptcy Court, which showed PG&E's plan of reorganization received overwhelming support from creditors, and the CPUC's alternative plan did not. PG&E's plan received approval in nine of the ten voting classes, while the CPUC's alternative was approved by only one of the eight voting classes, despite the Creditors Committee's recommendation that creditors vote for both plans. "PG&E continues to believe it has developed the only practical solution that allows the utility to emerge from Chapter 11 as an investment-grade company, pays all valid claims in full with interest and achieves these goals without asking the Bankruptcy Court to raise rates or customers for a bailout." PENTACON INC: Completes Sale of Assets & Operations to Anixter -------------------------------------------------------------- Anixter International Inc. (NYSE: AXE), the world's leading distributor of communication products and a leading distributor of "C" Class inventory components to Original Equipment Manufacturers, has completed the purchase of the operations and assets of Pentacon, Inc. Headquartered in Chatsworth, California, Pentacon is a leading distributor of fasteners and other small parts to Original Equipment Manufacturers and provider of inventory management services. Pentacon has 30 distribution and sales facilities in the United States, along with sales offices and agents in Europe, Canada, Mexico and Australia. Anixter paid a total of $108.2 million for accounts receivable, inventory, office and warehouse equipment and furnishings together with select other assets. Anixter also assumed pre- bankruptcy trade liabilities of Pentacon totaling $16.5 million. Lastly, Anixter has agreed to hire the existing Pentacon employees and assume the lease obligations for current operating facilities. The purchase was funded using a combination of invested cash balances and borrowings under existing working capital and accounts receivable securitization facilities. As of the closing date Anixter's total outstanding debt balances, including amounts outstanding under its accounts receivable securitization facility, was $353.2 million. As of the same date, the Company's debt to total capitalization ratio is now 36.6 percent as compared to 40.6 percent at the end of December 2001. When Anixter reports its results of operations for the third quarter it will include the operating results of Pentacon from September 20 through September 27, 2002, the end of its current fiscal quarter. The inclusion of Pentacon's results for that period of time is not expected to have a material effect on the Company's results for the quarter. Commenting on the acquisition, Bob Grubbs, President and CEO of Anixter said, "I would first like to compliment the Pentacon management team for the excellent job they did in steering the Pentacon business through the bankruptcy process. Through the hard work and extra efforts of all of the Pentacon employees the reorganization under Chapter 11 of the United States Bankruptcy Code was completed with a minimum of disruption to the business." "At the same time I would like to thank all of the customers and suppliers of Pentacon who stayed the course through this period of uncertainty," said Grubbs. "As we said at the outset, Pentacon's business model and position as a value-added distributor are perfect complements to our current specialty wire and cable OEM business. I can assure you that the employees of both Pentacon and Anixter are excited about providing the best service levels in the industry and working with you to grow your business as we go forward." Grubbs continued, "We are excited about the positive impact Pentacon's operations should have on our business. We expect Pentacon to begin adding to our earnings, starting in the fourth quarter. Furthermore, we anticipate sales from Pentacon during the quarter ending January 3, 2003 to be between $48 and $52 million, which is expected to add between 2 and 3 cents to earnings per share for the period." Anixter International is a leading distributor of communication products and a leading distributor of "C" Class inventory components to Original Equipment Manufacturers. The company adds value to the distribution process through its valued added service and logistics programs and by providing its customers access to 1) more than 185,000 products and approximately $500 million in inventory, 2) 125 warehouses with more than 4.4 million square feet of space, and 3) locations in 193 cities in 40 countries. Founded in 1957 and headquartered near Chicago, Anixter trades on The New York Stock Exchange under the symbol AXE. PEREGRINE SYSTEMS: Files for Chapter 11 Reorganization in Del. -------------------------------------------------------------- Citing the financial and legal issues raised by the company's inability to file audited financial reports for the 2000, 2001, and 2002 fiscal years, among other reasons, Peregrine Systems, Inc., (OTC: PRGNQ) has filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code. Excluded from the filing are all of Peregrine's other subsidiaries, including those located outside of the United States, and Peregrine Solutions, a new wholly owned subsidiary established to enhance customer relationships. Peregrine also announced that it has entered into an agreement whereby BMC Software, Inc., (NYSE: BMC) will acquire all of the assets and assume substantially all of the liabilities of its Remedy business unit for $350 million. To facilitate the transaction, Peregrine Remedy, Inc., has also filed a voluntary Chapter 11 petition. The sale agreement is subject to approval by the U.S. Bankruptcy Court for the District of Delaware, under Section 363 of the U.S. Bankruptcy Code. Peregrine said that the company has received a commitment for up to $110 million in debtor-in-possession financing from BMC Software. The DIP financing will replace the company's existing senior credit facility. These funds will be used to enable the company to meet its commitments to its employees, to fund vendor obligations going forward, and to assure uninterrupted business operations. The proceeds from the sale of Remedy will be used to pay back the DIP financing and to settle past debts. The remaining proceeds from the sale will provide the company with funds to continue operating its business. The company also announced that its board has directed outside counsel to file a lawsuit against Arthur Andersen, LLP, Arthur Andersen Germany and Arthur Andersen Worldwide S.C., Daniel Stulac, the audit partner on the account, and other defendants to be named later, seeking damages in excess of $250 million for each of the four causes of action in the complaint. The lawsuit alleges that the aforementioned defendants were negligent, engaged in fraud and breached their audit and accounting duties and responsibilities. Gary Greenfield, Peregrine's CEO, stated, "These actions represent a significant milestone in our strategic initiatives to take control of our own destiny. We have already accomplished a great deal in our planned reorganization initiatives. We have successfully negotiated a forbearance agreement with our factor banks and divested non-core business units. Chapter 11 represents the next step in this process. It provides us with the time and the means to complete the resolution of our financial and legal issues, while we maintain normal business operations. "[Sun]day's actions represent a new beginning that will allow a financially stable Peregrine to put the challenges of the past behind it, so that the company can take full advantage of its acknowledged leadership position in developing and marketing software to manage the business of technology infrastructure. We have the largest installed base in the IT Infrastructure Management space in the world, and we fully intend to leverage that leadership position going forward," Greenfield said. Commenting on the sale of Remedy, Greenfield stated, "In June we made the decision to operate Remedy as a separate business unit. The sale of Remedy to BMC provides security for the employees and customers of both Peregrine and Remedy into the future. Now, Peregrine customers know that their investment in our software is protected. And Remedy customers and employees will be in good hands with BMC Software. We intend to work closely with BMC to assure a smooth transition of all aspects of the Remedy business, and support those customers who use both Peregrine and Remedy products. We are confident that our customers and partners will be supportive of our efforts." Uninterrupted Business Operations Daily operations at Peregrine's business units, Peregrine and Remedy, will continue as usual. Employees will continue to report to work and will be paid as always; suppliers will be paid in the ordinary course of business for goods and services provided following the filing. Peregrine plans to seek and expects to receive the court's immediate permission to continue to pay employee wages, salaries, incentive pay, and reimbursable expenses, as well as to continue all employee medical, workers' compensation and similar benefits without any interruption. Greenfield stated, "Our number one priority is to continue to serve the Infrastructure Management software needs of our customers, and to demonstrate why these solutions remain worthy of the high regard and dominant leadership position that they have attained in the marketplace. Our consolidated service desk and asset management suites create operational efficiencies that reduce costs and maximize return, enabling better informed management decisions. Going forward we intend to build upon our products, expertise and the high-profile customer base to enhance our leadership position. "With up to $110 million in DIP financing and the protections provided under the Bankruptcy Code for post-petition purchases, we are confident our suppliers will continue to support us while we complete our restructuring," Greenfield added. Peregrine Solutions In an effort to make it easier for our customers to do business with the company, Peregrine also has formed a new subsidiary -- Peregrine Solutions. It will be dedicated to assuring stability and continuity for ongoing customer relationships. "Peregrine Solutions provides customers with the opportunity to enter into new license and support agreements for Peregrine and Remedy products with a business that is not included in the Chapter 11 filing," Greenfield stated Arthur Andersen LLP Lawsuit The company has directed its counsel to file a lawsuit in the Superior Court for the State of California in San Diego, seeking damages of more than $250 million for each of the four causes of action cited in the suit. The lawsuit alleges that, among other things, "As a result of the negligence, fraud and the breach of audit and accounting duties and responsibilities by Andersen, [Arthur Andersen Germany, Andersen Worldwide] and Stulac, two of Peregrine's previously audited statements have been withdrawn and Peregrine is in the process of re-auditing those years of operations. The Defendants' conduct has also resulted in a delay in completing Peregrine's audit of the last financial year. The negative impact of these events, caused by the conduct of Andersen, Andersen Worldwide, and Stulac has been significant." Commenting on the lawsuit, Greenfield stated: "The board trusted our former independent auditors, Arthur Andersen, and they failed to live up the responsibilities required in that relationship." Looking Ahead Peregrine has been a pioneer in developing the service and asset management software required for companies to successfully manage their IT infrastructure. In business for more than 20 years, Peregrine was the first to extend the traditional help desk software to consolidated service management. It was also the first to integrate asset management solutions by providing information related to availability and total cost of ownership. Peregrine products continue to be ranked by industry analysts as the leader in these software categories. Greenfield noted that the results of the company's independent investigation into accounting irregularities in financial statements for fiscal years 2000, 2001 and the first three quarters of fiscal year 2002 have been communicated to the staff of the Securities and Exchange Commission (SEC) and that the company is making progress on its restatement of financial results for the three fiscal years. "Looking ahead we fully expect to emerge from Chapter 11 as a financially stable company, better positioned than ever to meet the infrastructure software management needs of our customers," he concluded. Peregrine filed its voluntary petition under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware in Wilmington. Founded in 1981 and headquartered in San Diego, Calif., Peregrine Systems is the leading global provider of Infrastructure Management software. Market-leading application suites delivered by Peregrine and Remedyr product lines address diverse customer needs to better manage and extend the life of infrastructure and manage business services. Peregrine's Service Management and Asset Management solutions empower companies to support and manage assets with best practice processes. Remedy's comprehensive suite of packaged applications, including IT Service Management and Customer Support solutions, enable customers to improve reliability and quality of service for both internal and external service management. Remedy's Action Request System(R) provides a comprehensive platform to deliver business process authoring capabilities to meet the unique requirements of organizations today and into the future. Peregrine Systems, Remedy, and Action Request System are registered trademarks of Peregrine Systems, Inc., or its wholly owned subsidiaries. All other marks are the property of their respective owners. PEREGRINE SYSTEMS: Case Summary & 40 Largest Unsec. Creditors ------------------------------------------------------------- Lead Debtor: Peregrine Systems, Inc. 3611 Valley Centre Drive San Diego, California 92130 Bankruptcy Case No.: 02-12740 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Peregrine Remedy, Inc. 02-12741 Type of Business: Peregrine Systems is the leading global provider of Infrastructure Management software. Chapter 11 Petition Date: September 22, 2002 Court: District of Delaware (Delaware) Debtors' Counsel: Laura Davis Jones, Esq. Pachulski, Stang, Ziehl Young & Jones 919 North Market Street 16th Floor Wilmington, Delaware 19899-8705 302 652-4100 Fax : 302-652-4400 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtor's 40 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Pioneer Investment Bondholder 5.5% Senior $51,700,000 Management Subordinated Note Due Margaret D. Patel Nov. 15, 2007 60 State Street, 18th Floor Boston, MA 2109 Tel: 617-422-4839 Fax: 617-422-4276 Q Investments Bondholder 5.5% Senior $15,448,000 Tim O'Connor Subordinated Note Due 301 Commerce Street November 15, 2007 #2975 Fort Worth, TX 76102 Putnam Investments Bondholder 5.5% Senior $15,448,000 David King Subordinated Note Due One Post Office Square - November 15, 2007 9th Floor Boston, MA Tel: 617-292-1000 Fax: 617-760-7355 T. Rowe Price Bondholder 5.5% Senior $14,008,000 Stephen W. Boesel Subordinated Note Due 100 East Pratt Street, November 15, 2007 9th Floor Baltimore, MD 21202 Deutsche Bank AG Bondholder 5.5% Senior $11,500,000 15 Austin Friars, EC@N Subordinated Note Due ZHE November 15, 2007 London, UK Tel: 44 207 54 58000 Fax: 44 207 54 56155 Argent Capital Management Bondholder 5.5% Senior $10,575,000 Bob Richardson Subordinated Note Due 500 West Putnam Avenue, November 15, 2007 3rd Floor Greenwich, CT 6830 Tel: 919-403-2644 Fax: 919-403-2788 Fidelity Investments Bondholder 5.5% Senior $10,000,000 Robert Bertelson Subordinated Note Due 82 Devonshire Street November 15, 2007 Boston, MA 2189 Tel: 617-563-7542 Fax: 617-476-0495 Ramius Capital Group Bondholder 5.5% Senior $8,971,000 Bill Griffin Subordinated Note Due 666 Third Avenue, 26th Fl. November 15, 2007 New York, NY 10017 Credit Suisse First Boston Bondholder 5.5% Senior $8,971,000 11 Madison Avenue Subordinated Note Due New York, NY 10017 November 15, 2007 Tel: 212-325-2000 Fax: 212-325-8215 Sidus Investment Bondholder 5.5% Senior $7,500,000 Management Subordinated Note Due Jacob Broff November 15, 2007 767 Third Avenue New York, NY 10017 Tel: 212-751-6644 Fax: 212-751-6647 Bank of America Bondholder 5.5% Senior $6,000,000 Keith Wirtz Subordinated Note Due 101 Tryon Street, November 15, 2007 Suite 1000 Charlotte, NC 28255 Tel: 704-386-6528 Fax: 704-386-9939 Perot Investments Bondholder 5.5% Senior $5,650,000 12377 Merit Drive, Suite Subordinated Note Due 1700 November 15, 2007 Dallas, TX 75251 CRT Capital Group Bondholder 5.5% Senior $5,000,000 Michael Vaughn Subordinated Note Due 262 Harbor Street, 2nd Fl. November 15, 2007 Stanford, CT 6902 Highbridge Capital Bondholder 5.5% Senior $5,000,000 Andy Martin Subordinated Note Due 9 West 57th Street November 15, 2007 New York, NY 10019 Tel: 212-287-7435 Fax: 312-755-4250 Glenn & Karen Doshay Bondholder 5.5% Senior $5,000,000 Trust-Smith Barney Subordinated Note Due 6006 El Tordo November 15, 2007 Rancho, Santa Fe, CA 92091 Tel: 858-756-1161 Wellington Management Co. Bondholder 5.5% Senior $4,930,000 Paul Kaplan Subordinated Note Due 75 State Street November 15, 2007 Boston, MA 2109 Tel: 617-951-2038 Fax: 617-263-4033 MPS Institutional Advisors Bondholder 5.5% Senior $4,730,000 Robert Manning Subordinated Note Due 500 Boylston Street, November 15, 2007 25th Floor Boston, MA 2116 Tel: 617-954-5952 Fax: 617-954-6607 HBV Capital Management Bondholder 5.5% Senior $3,738,774 200 Park Avenue, Subordinated Note Due Suite 3300 November 15, 2007 New York, NY 10166 Tel: 212-808-3950 Fax: 212-808-3953 U.S. Trust Co. - NV Bondholder 5.5% Senior $3,685,000 Ray Cassasova Subordinated Note Due 114 West 47th Street November 15, 2007 New York, NY 10036 Tel: 212-852-3930 Fax: 212-852-3414 Markston International Bondholder 5.5% Senior $3,000,000 Michael Mullarkey Subordinated Note Due 50 Main Street, November 15, 2007 Mezzanine Level White Plains, NY 30606 Tel: 914-761-4700 Fax: 414-761-4746 Dresdner Kleinwort Bondholder 5.5% Senior $2,500,000 Wasserstein Subordinated Note Due 1301 Ave. of the Americas November 15, 2007 New York, NY 10019 Tel: 212-969-2700 Fax: 212-429-2127 JP Morgan Chase - Bondholder 5.5% Senior $2,500,000 Luxembourg Subordinated Note Due Luxembourg, Luxembourg November 15, 2007 Tel: 35 25 6268 5238 Prescott Group Capital Bondholder 5.5% Senior $2,000,000 Management Subordinated Note Due Lee Brewer 1924 November 15, 2007 1924 South Utica, Suite 1120 Tulsa, OK 74104 Tel: 918-747-3412 Fax: 918-742-7303 Barclays Global Investors Bondholder 5.5% Senior $2,000,000 Lois Towers Subordinated Note Due 45 Freemont Street November 15, 2007 San Francisco, CA 94105 Investment Council of Bondholder 5.5% Senior $2,000,000 South Dakota Subordinated Note Due c/o Office of State November 15, 2007 Treasurer State Capitol Bldg., #212 500 E. Capitol Avenu Pierre, SD 57201 Tel: 605-772-3378 Canyon Capital Advisors Bondholder 5.5% Senior $2,000,000 Mitchell Julis Subordinated Note Due 9665 Wilshire Boulevard, November 15, 2007 Suite 200 Beverly Hills, CA 90212 Tel: 310-247-2700 Fax: 310-247-9484 Robeco Group Bondholder 5.5% Senior $1,600,000 Coolsingel 120 Subordinated Note Due Postbus 973 November 15, 2007 Botterdam, Netherlands Tel: 31 10 224 1224 Arbitex MasterFund Bondholder 5.5% Senior $1,500,000 c/o Arbitex Asset Mgt., LP Subordinated Note Due 1601 Elm St., 4000 November 15, 2007 Thanksgiving Tower Dallas, TX 75201 Tel: 214-720-1659 Robertsons Stephens - Bondholder 5.5% Senior $1,113,000 Trading Account Subordinated Note Due 555 California Street November 15, 2007 San Francisco, CA 94104 Tel: 415-781-9700 First Clearing Corp. Bondholder 5.5% Senior $1,020,000 10700 Wheat First Drive Subordinated Note Due Glen Allen, VA 23060 November 15, 2007 Tel: 804-649-2311 Libertyview Capital Mgt. Bondholder 5.5% Senior $1,000,000 Richard Meckler Subordinated Note Due 101 Hudson Street, 37th Fl November 15, 2007 Jersey City, NJ 7302 Tel: 201-200-1199 Fax: 201-216-8615 AMR Investments Bondholder 5.5% Senior $1,000,000 Michael Fields Subordinated Note Due 4333 Amon Carter Boulevard November 15, 2007 Fortworth, TX 76155 Tel: 817-963-3500 Fax: 817-963-3902 Marriot Hotel, Inc. A/P Vendor $960,041 Mike Ludwick 600 Marriot Drive Nashville, IN 37214 Tel: 615-889-9300 Fax: 615-889-9313 Infosystems, Inc. A/P Vendor $858,800 204 North Center Drive Brunswick, NJ 08902 Tel: 732-297-9972 Fax: 732-297-9182 Payrolling.Com A/P Vendor $829,763 318 Seaboard Lane Bldg. 100, Suite 110 Franklin, TN 37067 Attn: Russell Hyde 8333 Clairemont Mesa Blvd. San Diego, CA 92111 Tel: 858-278-4045 Fax: 858-278-5577 Axis Capital Bondholder 5.5% Senior $652,547 George Phillips Subordinated Note Due 622 West 2nd Street, November 15, 2007 PO Box 2555 Grand Island, NE 68802 Tel: 800-994-0016 Fax: 308-384-9547 IBM Global Services A/P Vendor $614,994 PO Box 98880 Chicago, IL 60693 Attn: Legal Tel: 312-245-5788 Fax: 312-245-2076 HFR Asset Management/ Bondholder 5.5% Senior $608,679 Consulting Subordinated Note Due 10 South Riverside Plaza, November 15, 2007 Suite 1450 Chicago, IL 60606 Tel: 312-327-8430 Fax: 312-327-8435 Zurich Capital Markets Bondholder 5.5% Senior $575,000 Garry Crowder Subordinated Note Due One Chase Manhattan Plaza November 15, 2007 New York, NY 10005 Tel: 212-208-3600 Fax: 212-208-3601 KPMG, LLP A/P Vendor $446,366 Bill Ruzzamenti 400 Capitol Mall, Suite 800 Sacramento, CA 93814-4407 Attn: Thomas Richards The: 916-448-4700 Fax: 916-554-1199 PEREGRINE SYSTEMS: Selling Remedy Unit's Assets + Debts to BMC -------------------------------------------------------------- BMC Software, Inc. (NYSE: BMC), a leader in enterprise management, has agreed to acquire the Remedyr assets from Peregrine Systems, Inc., for $350 million in cash and the assumption of liabilities of Remedy. BMC Software has also agreed to provide Peregrine Systems with debtor-in- possession financing of up to $110 million, to be netted against the purchase price. These transactions are subject to a number of conditions, including U.S. Bankruptcy Court and regulatory approvals. Remedy is a leading provider of service management software solutions. Under the terms of the agreement, BMC Software will acquire substantially all of Remedy's assets including the Remedy applications -- IT Service Management and Customer Service and Support solutions -- and the Action Request System(R), a comprehensive development platform. Following the acquisition close, Remedy will operate as a separate business unit within BMC Software. The acquisition is a major step in BMC Software's successful evolution from a best-in-class tools and utilities vendor to a leader in the enterprise management space. Remedy's service management solutions coupled with BMC Software's comprehensive enterprise management solutions will enable customers to manage their business with a truly integrated service management approach. The combined product offerings will allow customers to increase both employee productivity and customer satisfaction while improving IT performance and lowering operational costs. "BMC is very well positioned to deliver what today's business leaders demand -- an integrated IT and service process view for running their business," said Bob Beauchamp, president and CEO, BMC Software. "We have long recognized the strength and market leadership of Remedy, even under difficult circumstances, and the value that our complementary solutions bring customers. This acquisition is about fostering growth, and with the financial strength of BMC, customers can be assured that Remedy is better positioned now more than ever to continue to deliver value-added solutions to the market." Remedy's 6,000 strong worldwide customer base utilizes Remedy's packaged solutions such as service desk, change management, and asset management, and also customizes individual solutions built on the Action Request System to meet their service management needs. In addition to Remedy's leadership position in the service management market, the company has extremely talented and experienced employees. Beauchamp added, "After months of due diligence, we have come to know the management at Remedy and are extremely impressed with the entire organization. We believe that the acquisition will provide Remedy a supportive environment in which they can once again flourish." "Remedy looks forward to the opportunities BMC will provide us to continue to deliver the highest quality solutions to the Remedy community and the market at large," said Harold Goldberg, vice president, Remedy Sales and Marketing. "We believe that Remedy employees, customers, and partners will benefit greatly from this acquisition." Remedy generated approximately $250 million in revenues in the twelve-month period ending June 30, 2002, with positive cash flow from operations and attractive operating margins. The transaction is expected to be accretive to BMC Software's earnings within twelve months of the closing of the transaction. Morgan Stanley has acted as financial advisor to BMC Software in this transaction. BMC Software, Inc., (NYSE: BMC) is a leader in enterprise management. The company focuses on Assuring Business Availability(R) for its customers by helping them proactively improve service, reduce costs and increase value to their business. BMC Software solutions span enterprise systems, applications and databases. Founded in 1980, BMC Software has offices worldwide and is a member of the S&P 500, with fiscal year 2002 revenues of approximately $1.3 billion. Visit http://www.bmc.comto learn more. Remedy automates service-related business processes through a complete suite of best practice service management applications, including IT Service Management and Customer Service and Support solutions. All Remedy products leverage the highly flexible Action Request System(R), a comprehensive development environment that delivers business process authoring capabilities to meet the unique requirements of organizations today and into the future. PHOTRONICS INC: Buys-Back $33.2M of 6% Convertibles Below Par ------------------------------------------------------------- Photronics, Inc. (Nasdaq: PLAB), the leading worldwide sub- wavelength reticle solutions supplier, has repurchased $33.2 million in principal amount of its 6% convertible subordinated notes for a total consideration of $30.8 million, or at an average discounted amount of $927 for every $1,000 in principal amount of notes. At the end of the Company's fiscal third quarter ended July 31, 2002, long-term debt totaled $351.4 million. The debt repurchase transactions were funded through the use of working capital and were completed at prevailing market prices in the open market. As a result of reducing the Company's long-term debt, annual cash interest payments are expected to be reduced by approximately $2 million. Issued in May 1997, the notes, which carry a conversion price of $27.98 per share and are due in June 2004, are rated B2 by Moody's Investor Service and B by Standard & Poor's. Sean T. Smith, Chief Financial Officer commented, "Photronics is deeply committed to strengthening its balance sheet and generating value for its shareholders. The discount at which we were able to repurchase these notes represents an excellent opportunity to achieve both these ends." He added, "The reduction of our long-term debt and interest carrying costs are a critical part of this management team's broader strategy to reduce the overall cost of capital and improve the Company's position to generate increasing levels of free cash flow in the near future." Additional debt repurchases may be made from time to time at prices Photronics considers to be attractive. The timing and amount of such additional repurchases, if any, will depend on many factors, including but not limited to, the availability of capital, prevailing market price of its debt, and overall market conditions. No assurance can be given that the Company will repurchase any additional debt. Additional information concerning the Company's outstanding convertible note issues can be found in the Company's filings with the Securities and Exchange Commission. Photronics is a leading worldwide manufacturer of photomasks. Photomasks are high precision quartz plates that contain microscopic images of electronic circuits. A key element in the manufacture of semiconductors, photomasks are used to transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits. They are produced in accordance with circuit designs provided by customers at strategically located manufacturing facilities in Asia, Europe, and North America. Additional information on the Company can be accessed at http://www.photronics.com QWEST: AT&T Calls for Evaluation of Accounting Irregularities ------------------------------------------------------------- AT&T (NYSE: T) filed motions with nine state commissions urging regulators to reopen the record on Qwest's long distance application and require Qwest to provide evidence that it's new subsidiary is in compliance with section 272 of the Telecom Act. AT&T filed the motions in the states where Qwest withdrew its applications, including Colorado, Washington, Utah, Idaho, Iowa, Nebraska, North Dakota, Montana and Wyoming. Section 272 requires a local telephone company's long distance affiliate to "maintain books, records, and accounts in the manner prescribed by [GAAP]." AT&T maintains that Qwest's financial restatement should be considered with the new Qwest subsidiary and that all records must be reviewed by the states. "We are simply asking each state commission to follow the process previously prescribed," said Tom Pelto, AT&T vice president of law and government affairs. "You start with a tainted parent that can't certify its books, add in an illegitimate affiliate that specialized in sham transactions, and now Qwest proposes to remedy substantial accounting irregularities by creating a completely new entity out of thin air. It doesn't require above average powers of observation to spot issues here, especially when Qwest made misrepresentations to these same states on the identical issue the last time around." Pelto added "Qwest obviously intends to paper over the issue, bypass the states, treat GAAP compliance as an annoyance, and rush this mess back to the FCC. We are instead suggesting that the states pick up their tools, take a look at this new shell company, verify the accuracy of the information Qwest files, and decide whether such a flimsy solution makes any sense." "The states are in charge, not Qwest, and there is no obvious, compelling, or apparent reason to rush to reward such a clear case of corporate misconduct," said Pelto. Last week, Qwest withdrew all nine of its applications at the FCC because it could not demonstrate compliance with section 272 due to its pending restatement of financials for past periods and has now announced plans to create a wholly new separate subsidiary that it claims will meet those requirements. Qwest has also announced plans to bypass each of the state commissions in evaluating whether it has taken corrective measures to resolve its accounting problems in setting up its separate subsidiary. Qwest Corp.'s 7.25% bonds due 2007 (QUS07USR3), DebtTraders reports, are trading at 27.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=QUS07USR3for real-time bond pricing. ROADHOUSE GRILL: Set to Emerge from Chapter 11 by September 30 -------------------------------------------------------------- Roadhouse Grill Inc., (GRLLQ.PK) says it will emerge from Chapter 11 by Sept. 30. Under the company's reorganization plan, all Roadhouse Grill shareholders of record on Sept. 30 will receive an additional 0.15 shares of the company's common stock for each share they hold of record on that date. These additional shares, along with the currently outstanding shares of Roadhouse Grill common stock, will total 11,165,052 shares, or 38.21 percent of the common stock, in reorganized Roadhouse Grill. An aggregate of 13,888,889 new shares will be issued to new investors in exchange for a $5 million investment in the reorganized Roadhouse Grill, and 4,166,667 shares will be issued to a creditor in exchange for retiring $1.5 million of pre-petition debt. Effectuation of the reorganization will result in the company having 29,220,608 shares issued and outstanding. As soon as practicable thereafter, stock certificates for the additional shares will be delivered to the holders of record as of 5 p.m. EDT on Sept. 30. "Integrity is a core value that we enforce at Roadhouse Grill, and we've made it a top priority to preserve a significant equity position for our shareholders and commit to payment in full of our creditors," said Ayman Sabi, chief executive officer of Roadhouse Grill. "We're very happy that we'll emerge from Chapter 11 by September 30, and that we'll be able to move forward into a bright future for Roadhouse Grill." The U.S. Bankruptcy Court for the Southern District of Florida confirmed Roadhouse's reorganization plan on Aug. 21 after an overwhelming majority of Roadhouse Grill's creditors voted to accept the plan and the CNL creditors that had forced Roadhouse into reorganization in April withdrew their objections to the plan under a settlement reached with the company. Roadhouse Grill Inc. is based in Pompano Beach, Fla., and owns and operates 69 full-service, casual-dining restaurants and eight franchises. The company's restaurants, which offer a "rambunctious" style consistent with Roadhouse Grill's motto: "Eat, drink and be yourself," are located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, New York, North Carolina, Ohio and South Carolina. For more information or to find a Roadhouse Grill near you, call (954) 957-2600 or visit http://www.roadhousegrill.com SAFETY-KLEEN CORP: Wins Nod to Sell 3E Company Stake for $12MM -------------------------------------------------------------- Safety-Kleen Systems Inc., obtained permission from the U.S. Bankruptcy Court for the District of Delaware to: (i) vote its 604,000 shares of stock in 3E Company -- Environmental, Ecological and Engineering -- approving the sale of substantially all of the assets of 3E Company to New 3E Company Acquisition Corporation under an Asset Purchase Agreement, and (ii) enter into an Asset Purchase Agreement providing for the sale of substantially all of the assets of 3E Company and the purchase of 24.22% of 3E Company stock by SKS, and (iii) assume and assign 3E's contracts and unexpired leases. The Asset Purchase Agreement After good faith and arm's-length negotiations between the Debtors, 3E Company, the Minority Shareholders, and the Purchaser, the parties agreed that: (1) Purchase Price: The total purchase price to be paid by the Purchaser is $12,639,218. Of the total, $9,389,218 of the price will be paid in cash at the closing of the transaction contemplated by the APA. The Purchaser will sign and deliver to 3E Company a subordinated secured promissory note for $3,250,000 at the Closing. The Note will bear interest at the rate of 9% per annum and will be secured by all of New 3E's assets, subordinated only to the acquisition financing and a working capital line of credit not to exceed $3,750,000. (2) Purchased Assets: -- the lease of real property at 1905 Aston Avenue, Carlsbad, California, dated December 17, 1998, between EGLL Development LLC of San Diego, CA, and Systems; -- all equipment and furniture; -- all inventories and cash; -- all rights under 3E company contracts; -- certain intellectual property rights; and -- all permits, licenses, certifications and approvals from all permitting, licensing, accrediting and certifying agencies. The Purchased Assets will not include items like: -- income tax refunds and tax attributes, -- documents relating solely to the organization, maintenance and existence of 3E Company as a corporation, and -- any rights of 3E Company under the APA. (3) Assumed Liabilities: At the Closing, the Purchaser will assume and undertake to pay, perform and discharge when due or required to be performed (without duplication) all of 3E Company's liabilities, mortgages, indentures, claims, liens, expenses or obligations, whether actual or contingent, accrued or unaccrued, matured or unmatured, relating to agreements, facts, conduct, conditions or circumstances in existence on or before the Closing, except for Excluded Liabilities. (4) Excluded Liabilities: The Purchaser does not assume and is not otherwise responsible for liabilities, expenses or obligations arising out of occurrences before, on or after the Closing which include: -- any liabilities or obligations owed to SKS or any of its affiliates, except for liabilities and obligations under the Marketing Agreement dated as of December 31, 2001, between 3E Company and SKS, which the Purchaser assumes; -- any an all ERISA liabilities and certain liabilities for taxes; -- liabilities payable to First Analysis; -- liabilities of 3E Company arising under guarantees or similar instruments relating to indebtedness for borrowed money incurred by SKS or its affiliates, other than 3E Company, other than for 3E Company's direct benefit, including liabilities of 3E Company as a guarantor under the Amended And Restated Credit Agreement among LES, Inc., Laidlaw Environmental Services (Canada) Ltd., and the lenders and agents under that Agreement; and -- certain claims covered by insurance policies held by SKS or any of its affiliates. (5) Purchase of Minority Stockholders' Shares: SKS will purchase all 193,000 shares held by Minority Shareholders free and clear of all options, proxies, voting agreements, judgments, pledges, charges, escrows, rights of first refusal or first offer, mortgages, and all other types of encumbrances. The aggregate purchase price for these shares will be $625,062.08. Following this purchase, SKS will own 100% of the equity interests of 3E Company. (Safety- Kleen Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) SLI: Court OKs Access to $20MM Interim Post-Petition Financing -------------------------------------------------------------- SLI, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware for interim authority to borrow up to $20,000,000 from their DIP Lenders under a Postpetition Credit Agreement pending a Final Hearing. When the DIP Facility is approved on a final basis, the Debtors will have access to secured postpetition financing up to an aggregate principal amount not to exceed $35,000,000. The principal amount will be comprised of a committed United States facility of about $25,000,000 and a discretionary, controlled disbursement non-United States facility of about $10,000,000 from Fleet National Bank, as administrative agent, and a syndicate of other financial institutions constituting a subset of the Prepetition Lenders. The Final Hearing is scheduled before the Honorable Mary Walrath on October 7, 2002 at 2:00 p.m. Pursuant to the Second Amended and Restated Credit Agreement dated October 29, 1999, the Debtors admit they owe the Prepetition Lenders $367,143,418 plus accrued and unpaid interest. The Prepetition Obligations are secured by valid, perfected, enforceable, first-priority liens and security interests. The Debtors tell the Court that they do not have sufficient available sources of working capital and financing to continue the operation of their businesses without the Postpetition Financing and the use of the Cash Collateral. The Debtors' ability to maintain business relationships with their vendors, suppliers and customers, to pay their employees, to purchase and supply new inventory and otherwise finance their operations, is essential to the Debtors' continued viability. On top of this, the Debtors' critical need for financing is immediate. In the absence of the Postpetition Financing and the use of the Cash Collateral serious and irreparable harm to the Debtors and their estates would occur. The preservation, maintenance and enhancement of the going concern value of the Company and the other Debtors are of the utmost significance and importance to a successful reorganization of the Debtors under Chapter 11 of the Bankruptcy Code. The Debtors further report that given their current financial condition, financing arrangements and capital structure, they cannot obtain unsecured credit allowable under Bankruptcy Code as an administrative expense. The Court is convinced that the terms of the Postpetition Financing appear to be fair and reasonable, reflecting the Debtors' exercise of prudent business judgment and are supported by reasonably equivalent value and fair consideration. STAR TELECOMMS: Sells Nationwide Fiber Network to IDT Corp. Unit ---------------------------------------------------------------- IDT Corporation (NYSE: IDT.B; NYSE: IDT), a leading multinational carrier and telephone company, announced that it's IDT Telecom subsidiary has acquired certain Indefeasible Rights of Use and equipment from the estate of Star Telecommunications, Inc. IDT completed the acquisition after the United States Bankruptcy Court in Wilmington, Delaware selected IDT as the winning bidder and entered an Order authorizing the purchase. The assets acquired represent long-term capacity on US nationwide fiber networks operated by Qwest and Broadwing. The original IRU's were purchased by Star Telecommunications in 1998 for approximately $68 million. "We got this fiber network at a great price and just in the nick of time. At the rate we're growing, we need to get our hands on as much bandwidth as we can," said Howard Jonas, IDT's Chairman. "With all of the well publicized woes being experienced by so many other telecom companies, new customers have been flocking to IDT's Winstar and Telecom businesses. Additionally, the new capacity will allow IDT to expand its enterprise and pre-paid phone card businesses into many new US markets." Under the terms of the deal, IDT paid cash for the right of use of the capacity on the network for the remainder of the term (most are in excess of 16 years), operations and maintenance and certain equipment. IDT expects to recoup the cost of this acquisition in under a year solely on the basis of costs avoided, representing the money saved by moving traffic onto its own network in lieu of leasing network capacity from other carriers. "This acquisition is just another example of IDT's ability to obtain valuable telecom assets for a fraction of their original cost and put them into immediate, profitable use," said James Courter, IDT's CEO. "IDT will be better positioned to deliver high quality, low cost telecommunications services to our rapidly growing customer base." The fully operational 20-leg network of OC3 and OC12 bandwidth allows IDT to carry increased voice and data traffic into 13 major metropolitan cities in the United States, including Boston, New York City, Washington, DC, Atlanta, Miami, Houston, Dallas, El Paso, Phoenix, San Diego, Los Angeles, San Francisco, and Las Vegas. "While the purchase price was less than a penny on the dollar of the original cost of the network," said Motti Lichtenstein, CEO of IDT Telecom, "the true value lies in our ability to procure bandwidth at a significant discount to even today's depressed market rates for leasing a similar amount of capacity." IDT, through its IDT Telecom subsidiary, is a leading facilities-based, multinational carrier that provides a broad range of telecommunications services to its retail and wholesale customers worldwide. Through its own national telecommunications backbone and fiber optic network infrastructure, IDT Telecom provides its customers with integrated and competitively priced international and domestic long distance telephony and prepaid calling cards. IDT and Liberty Media own 95% and 5 % of IDT Telecom, respectively. IDT Media is the IDT subsidiary principally responsible for the Company's initiatives in media, new video technologies and print media. IDT Corporation common shares trade on the New York Stock Exchange under the ticker symbols IDT.B and IDT. As of June 10, 2002, there were about 53.4 million shares of Class B common stock (IDT.B) outstanding, and about 24.9 million shares of common stock (IDT). Of these, approximately 4.0 million shares of Class B common stock and approximately 5.4 million shares of common stock were held by units of IDT Corporation. TANDYCRAFTS INC: Committee Balks at Mibec Lease Agreement --------------------------------------------------------- The Official Committee of Unsecured Creditors pertaining to the chapter 11 cases of Tandycrafts, Inc., and its debtor- affiliates, objects to the Debtors' commercial lease agreement with Mibec Limited Partnership. The Committee relates to the U.S. Bankruptcy Court for the District of Delaware that the Debtors' executive management team is currently headquartered in a facility that the Debtors own in Fort Worth, Texas. The Debtors' only manufacturing and distribution operations are located in Pocahontas and Piggott, Arkansas. The Debtors previously entered into a contract to sell their existing facility in Fort Worth, but the sale failed due to environmental concerns. The Committee determined that Fort Worth property continues to be saddled with costs and expenses and must be abandoned. After the Petition Date, the Debtors downsized their business but continued to assert (over the objection of the Committee) that duplicative executive management with offices in the Dallas/Fort Worth area is necessary for continued operations. The Committee believes that executive management should be situated in the same location as the Debtors manufacturing and distribution operations. The Committee objects to the Motion, because it is clearly unnecessary and a waste of the Estates' assets for the Debtors to maintain corporate offices in Ft. Worth, Texas, while all manufacturing and distribution operations are located near the Debtors' most significant customer in Arkansas. Tandycrafts, a leading manufacturer and marketer of picture frames, mirrors and other wall decor products, filed for chapter 11 protection on May 15, 2001. Mark E. Felger, Esq., at Cozen and O'Connor, represents the Debtors in their restructuring efforts. Michael L. Vild, Esq., at The Bayard Firm and Jeffrey D. Prol, Esq., at Lowenstein Sandler PC serve as counsel to the Official Unsecured Creditors Committee. When the Company filed for protection from its creditors, it listed assets of $64,559,000 and debts of $56,370,000. TANGER FACTORY: Tapped to Manage Existing Florida Factory Outlet ---------------------------------------------------------------- Tanger Factory Outlet Centers, Inc., (NYSE: SKT) announced that John Hancock Life Insurance Company has retained Tanger as the exclusive manager of an existing 326,000 square foot factory outlet shopping center located in Vero Beach, Florida. The property will be renamed Tanger Outlet Center at Vero Beach. Tanger will manage the day-to-day operations, marketing and leasing of the established outlet center. "We are very pleased that John Hancock has selected the Tanger management team to oversee this outlet center," stated Stanley K. Tanger, Founder, Chairman of The Board and Chief Executive Officer of Tanger Factory Outlet Centers, Inc. "The center has a solid brand name tenant mix in a proven region where we have operated for years. We believe we can add value through capitalizing on the Tanger brand, increasing consumer traffic and continuing to improve the tenant mix at the center. Furthermore, with our established infrastructure, this strategic management agreement will add incrementally to our earnings and provide potential portfolio growth opportunities for Tanger in the future." The management agreement is part of Tanger's ongoing growth strategy driven by outlet center acquisitions, expansions of proven operating properties, new development, third party management contracts and aggressive asset management of all Tanger properties. The property is located in the heart of Vero Beach in Indian River County. The county offers 70 miles of beaches from the Jupiter Inlet to the Sebastian Inlet, boating on the St. Lucie River, Indian River, Lake Okeechobee, Intracoastal Waterway and the Atlantic Ocean, 166,683 acres of city, county and state parks, and over 100 public and private golf courses open all year. Vero Beach is located 70 miles south of Cape Kennedy and 65 miles north of West Palm Beach and within 150 miles of 90% of Florida's entire population. The property totals approximately 326,000 square feet and features over 55 upscale brand name outlet stores including: Versace Ann Taylor Bass Shoes Jones New York Liz Claiborne Nautica Polo Ralph Lauren Carter's Childrenswear Dooney & Burke The Bombay Company Mikasa Reebok Tanger Factory Outlet Centers, Inc., a publicly-traded REIT, currently owns, operates or manages 31 factory outlet shopping centers in 21 states coast to coast, totaling approximately 6.1 million square feet of gross leasable area. For a complete listing of Tanger Outlet Centers visit http://www.tangeroutlet.com * * * As reported in Troubled Company Reporter's Sept. 20, 2002 edition, Standard & Poor's affirmed its double-'B'-plus corporate credit rating on Tanger Factory Outlet Centers Inc., and its operating partnership, Tanger Properties L.P. At the same time, the double-'B'-plus senior unsecured rating and the double-'B'-minus preferred stock rating were affirmed. The outlook is stable. The ratings acknowledge Tanger's success to date in repositioning its portfolio toward a more upscale tenancy base, and reflect the company's established business position, solid operating profitability, and improving same-space sales performance. These strengths are offset by the company's lower debt coverage measures, moderate encumbrance levels, and relatively small (and highly concentrated) portfolio. TEREX CORP: Completes Acquisition of Genie Holdings Assets ---------------------------------------------------------- Terex Corporation (NYSE: TEX) has completed its previously announced acquisition of Genie Holdings, Inc. Genie is a leading worldwide manufacturer of aerial work platforms with 2001 sales of $575 million. Consideration for the acquisition is $75 million, payable $10.1 million in cash and $64.9 million in Terex common stock (approximately 3.2 million shares of Terex common stock). In addition, Terex will refinance approximately $175 million in Genie indebtedness with the proceeds of its recently announced incremental term loan. "We are very excited to welcome Genie to the Terex family." commented Ronald M. DeFeo, Terex Chairman and Chief Executive Officer. "Genie, with its strong global brand name and market share, positions us as one of the very few significant players in the aerial work platform business. Adding Genie to the Terex franchise increases our product and geographic diversification and creates one of the broadest product offerings in the construction equipment sector." Mr. DeFeo added, "Along with significant growth opportunity, Genie brings with it a talented management team. Bob Wilkerson, President of Genie, will continue to lead and grow this business and become part of the Terex senior management team as President-Terex Aerial Work Platforms." "This is a great opportunity for Genie and Terex," said Mr. Wilkerson. "Being part of a larger company will provide us a stronger financial and manufacturing platform to continue to grow the Genie franchise, especially in Europe." Mr. Wilkerson continued, "There are a lot of similarities between the two companies and how they operate, and I am excited to join Terex both as a shareholder and as a member of the senior management team." Terex Corporation is a diversified global manufacturer based in Westport, Connecticut, with 2001 annual revenues in excess of $1.8 billion. Terex is involved in a broad range of construction, infrastructure, recycling and mining-related capital equipment under the brand names of Advance, American, Amida, Atlas, Bartell, Bendini, Benford, Bid-Well, B.L. Pegson, Canica, Cedarapids, Cifali, CMI, Coleman Engineering, Comedil, CPV, Demag, Fermec, Finlay, Franna, Fuchs, Grayhound, Hi-Ranger, Italmacchine, Jaques, Johnson-Ross, Koehring, Lectra Haul, Load King, Lorain, Marklift, Matbro, Morrison, Muller, O&K, Payhauler, Peiner, Powerscreen, PPM, Re-Tech, RO, Royer, Schaeff, Simplicity, Square Shooter, Telelect, Terex, and Unit Rig. More information on Terex can be found at http://www.terex.com As reported in Troubled Company Reporter's Sept. 18, 2002 edition, Standard & Poor's assigned its double-'B'-minus secured bank loan rating to Terex Corp.'s proposed $210 million new term loan C maturing in December 2009. Proceeds from this loan and about $60 million in Terex common stock will be used to finance the acquisition of Genie Holdings Inc. for $270 million. In addition, the double-'B'-minus corporate credit rating was affirmed on Westport, Connecticut-based Terex, a manufacturer of construction and mining equipment. Total rated debt is $1.6 billion. The outlook is stable. "Terex has a highly leveraged capital structure due to its aggressive growth strategy. However, the company's cash flow generation and sizable cash balances, along with its use of equity as currency for acquisitions, should permit Terex to continue to make moderate-size acquisitions without material deterioration in its financial profile," said Standard & Poor's credit analyst John Sico. Terex maintains a $300 million revolving credit facility and has a cash position of more than $200 million. The bank loan is rated the same as the corporate credit rating. The total senior secured credit facility of $885 million is comprised of a revolving credit facility of $300 million, a term loan B of $375 million, and the new term loan C of $210 million. The facility is secured by substantially all of the company's assets. Under Standard & Poor's simulated default scenario, the company's cash flows were stressed and the resulting enterprise value would not be sufficient to cover the entire bank loan in the event of a default. However, there is reasonable confidence of meaningful recovery of principal, despite potential loss exposure. THOMSON KERNAGHAN: Court to Rule on Investors' Motion on Thurs. --------------------------------------------------------------- The Ontario Superior Court of Justice will hear a motion on September 26, 2002 to amend a claim, originally filed against Thomson Kernaghan and Co. Ltd., to also include the Investment Dealers Association of Canada. The IDA, which is a private association of Canadian securities dealers, has advised that they do not owe a "duty of care" to protect individual investors. Thomson Kernaghan was petitioned into bankruptcy in July 2002. To date, the Canadian Investor Protection Fund has advanced $18,100,000 to cover shortfalls in TK client accounts. Hearing to be held: September 26th at 10:00 a.m. 393 University Ave, Toronto, Ontario Court File 01-CV-203394: Christopher Morgis et .al. vs. Thomson Kernaghan and Co. Ltd. TYCO INT'L: Will Conduct Investors' Conference Call Tomorrow ------------------------------------------------------------ Tyco International Ltd., (NYSE: TYC, LSE: TYI, BSX: TYC) will hold a conference call tomorrow, Wednesday, September 25, 2002 at 8:00 am EDT. The call will consist of an update on recent events at Tyco followed by a question and answer session with Chairman and CEO Ed Breen. The call can be accessed in three ways: -- At the following Web site: http://investors.tycoint.com/medialist.cfm A replay of the call will be available through October 2 at the same Web site. -- By telephone dial-in with the capability to participate in the question and answer portion of the call. The telephone dial in number for the participants in the United States is: (800) 288-8976. The telephone dial-in number for the participants in International locations is: (612) 326-1011. Due to capacity limitations on the part of its teleconference service provider, the number of lines available is limited. If these lines have reached their limit, investors will need to call the "listen-only" number provided below. -- By telephone dial-in to participate in a "listen-only" mode. The telephone dial-in number for the participants in the United States is: (800) 260-0702. The telephone dial in number for the participants in International locations is: (612) 326-1000 The participants' code for all callers is: 653044. Investors who do not intend to ask questions should dial this number directly. The replay is scheduled to be available later in the day on September 25, 2002 until 11:59 PM on October 2, 2002. The dial- in numbers for the replay are as follows: (U.S.): (800) 475- 6701. International: (320) 365-3844. The replay access code for all callers is: 653035. Tyco International Ltd., is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2001 revenues from continuing operations of approximately $34 billion. Tyco International Group's 6.875% bonds due 2002 (TYC02USR1), DebtTraders reports, are trading at 96 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=TYC02USR1for real-time bond pricing. UNIROYAL: Gets Nod to Pay UEP Unit's Critical Vendors' Claims ------------------------------------------------------------- Uniroyal Technology Corporation and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to pay, in their sole discretion, prepetition claims of critical trade vendors of Uniroyal Engineered Products, LLC. Uniroyal Engineered tells the Court that payment of the Critical Trade Claims is vital to the Company's reorganization efforts. Nonpayment may result to Critical Trade Vendors' terminating, or severely restricting, the provision of goods and/or services to Uniroyal Engineered. The Debtors wish to maintain the advantageous terms Uniroyal Engineered has had with the Critical Vendors. Uniroyal Engineered tells the Court that it wants to pay approximately $2 million to 175 vendors -- substantially all of Uniroyal Engineered's active trade vendors with which Uniroyal Engineered intends to conduct business prospectively. The Debtors believe that payment of the Critical Trade Claims is a necessary step to effect Uniroyal Engineered's successful reorganization. Importantly, as of the Petition Date, UEP continued to enjoy substantial trade credit and UEP was substantially current with respect to amounts owing to Critical Trade Vendors. 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. The Company filed for chapter 11 protection on August 25, 2002 Eric Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at The Bayard Firm represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $85,842,000 in assets and $68,676,000 in debts. US AIRWAYS: Court Okays Otterbourg as Committee's Lead Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors, in the chapter 11 cases involving US Airways Group Inc., and its debtor- affiliates, sought and obtained the Court's authority to retain Otterbourg, Steindler, Houston & Rosen to serve as lead counsel. Chairman R. Douglas Greco of Airbus North America Holdings informs the Court that the Committee also selected Vorys, Sater, Seymour & Pease as local counsel. An application to retain Vorys will be filed with the Court soon. As the Committee's lead counsel, Otterbourg is expected to: a. assist and advise the Committee in its consultation with in the administration of these cases; b. attend meetings and negotiate with representatives of the Debtors; c. assist and advise the Committee in its examination and analysis of the conduct of the Debtors' affairs; d. assist the Committee in the review, analysis and negotiation of any plan(s) of reorganization that may be filed and to assist the Committee in the review, analysis and negotiation of the disclosure statement; e. assist the Committee in the review, analysis and negotiation of any financing agreements; f. take all necessary action to protect and preserve the interests of the Committee, including: (i) the investigation and prosecution of certain actions, on the Committee's behalf, (ii) negotiations concerning all litigation in which the Debtors are involved, and (iii) if appropriate, review, analyze and reconcile claims filed against the Debtors' estates; g. generally prepare on behalf of the Committee all necessary motions, applications, answers, orders, reports and papers in support of positions taken by the Committee; h. appear before this Court, Appellate Courts and other courts and the U.S. Trustee and to protect the interests of the Committee before these bodies; and i. perform all other necessary legal services in these cases. Scott L. Hazan, Esq., at Otterbourg, assures the Court that the firm will work closely with Vorys, Sater and other professionals to ensure there is no unnecessary duplication of services performed or charged to the Debtors' estates. Otterbourg will charge for its services on an hourly basis in accordance with rates in effect when services are rendered. The firm will bill its time in one-tenth hour increments. Position Hourly Rate -------- ----------- Partner $400 - 595 Associate 195 - 425 Paralegal/Legal Assistant 155 According to Mr. Hazan, it is Otterbourg's policy to charge clients for all other expenses incurred in connection with the cases. These include telephone and telecopier toll, mail and express mail charges, special or hand delivery charges, photocopying, travel expenses, working meals, committee meetings, computerized research, transcription costs and other non-ordinary overhead expenses. Mr. Hazan informs the Court that he compiled a computerized master client database to ascertain whether his firm possessed any potential conflicts of interest or other connection. "Otterbourg professionals may have represented potential parties in interest, but will refrain from expanding that involvement into these proceedings. In all other regards, Otterbourg qualifies as a disinterested professional," Mr. Hazan asserts. (US Airways Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) US SEARCH: Fails to Satisfy Nasdaq Minimum Listing Requirements --------------------------------------------------------------- US SEARCH (NASDAQ:SRCH), a leader in location and verification services, received a NASDAQ Staff Determination on September 12, 2002 indicating that the Company fails to comply with the minimum bid price requirement for continued listing set forth in Marketplace Rule 4450(a)(5), and that its securities are, therefore, subject to delisting from the NASDAQ National Market. US SEARCH is in compliance with the remaining requirements for continued listing set forth in Marketplace Rule 4450(a), including the net tangible assets and market value of the public float requirements. The Company has requested an oral hearing before a NASDAQ Listing Qualifications Panel to review the Staff Determination. Pending a determination by the Panel, the Company's common stock will continue to trade on the NASDAQ National Market. The Company intends to vigorously defend its NASDAQ listing. There can be no assurance, however, that the Panel will grant the Company's request for continued listing. If necessary, the Company's board of directors has authorized a reverse stock split, to maintain its listing, subject to approval by the Company's stockholders. The Company has approximately 97.4 million common shares outstanding. Founded in 1994, US SEARCH (Nasdaq:SRCH) is an Internet-based trust and risk management services company, supplying consumer and enterprise clients with Web-enabled location, verification and screening services using its proprietary intelligent software platform. US SEARCH has extended its employment screening and background check product lines to provide identity verification services and fraud prevention tools to Global 2000 companies and is a leader in finding people. US SEARCH aims to give its customers peace of mind by providing the right information to make faster, safer, smarter decisions(SM). Additional information can be found at http://www.ussearch.com 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. VANGUARD AIRLINES: Hooters Air Offers to Acquire Certain Assets --------------------------------------------------------------- Hooters Air, LLC delivered Friday an offer to buy designated assets of Vanguard to the company's Board of Directors. This offer is considered a first step in pursuing the objective of establishing a new commercial airline operation to serve the Kansas City market. Hooters considers this offer a very small part, but the beginning of the overall investment required, to fund the airline startup. Hooters Air has been working through the bankruptcy court in Kansas City in evaluating the assets of Vanguard. After many weeks of study and approximately $500,000 in cost, Hooters Air has determined that it will proceed forward with the purchase of designated Vanguard's assets and, hopefully, will utilize many of Vanguard's personnel in building a new Hooters Airlines in Kansas City. The designated assets include spare airplane parts, ground equipment, furniture, fixtures and intellectual property. Hooters Chairman, Bob Brooks, stated, "I am approaching the Vanguard transaction a little differently than when I first started. I now believe I will require support from other sources to build the kind of airline I desire. I have, however, become more committed than ever to the goal of providing quality air service for Kansas City, which I found to be a great city, with a lot of good people, and a strong economy. It is well centered in more than just geographic terms." As commonly known, and despite the financial problems of many airlines, the focus of Hooters Air has been to find value in a company and maximize its potential, with a goal of bringing Hooters service principles of quality and friendliness to the airline industry in Kansas City. "I believe that building a new airline is the best way to serve the Kansas City community," stated Brooks. VIADOR INC: Enters into Definitive Merger Pact with MASBC, Inc. --------------------------------------------------------------- Viador, Inc., (OTC Bulletin Board: VIAD) has entered into a definitive merger agreement with MASBC, Inc., and MASBC Acquisition Corporation. The merger agreement contemplates that, at the closing, all outstanding shares of Viador will convert into a right to receive $0.075 in cash. As a result of the merger, Viador will become a privately-held company, wholly owned by MASBC, Inc. Accordingly, upon the closing, Viador's registration under the Securities Act of 1933, as amended, will terminate. The closing of the merger is subject to various conditions, including stockholder approval. The stockholders of MASBC, Inc. include Suma Ventures, LLC and Heungyeung Yeung, an existing stockholder of Viador. It is anticipated that members of Viador's management, including Stan X. Wang, its current Chief Executive Officer, will continue as members of Viador's management team after the closing. Viador Inc., combines proven experience, technology and partnerships to deliver self-service portals for leading businesses and organizations worldwide. The Viador E-Portal facilitates enterprise-wide productivity gains, including increased revenue from new e-services, improved partner communications, better customer relationships and retention, and streamlined, paperless information distribution at lower cost. Over 350 leading companies have chosen Viador for their self- service portal needs, including Citigroup, the Department of Defense, Putnam, UBS Bank, Verizon and Xerox. Viador is headquartered in Sunnyvale, Calif. For more information, call 408-735-5956 or visit the Viador Web site at http://www.viador.com * * * As reported in Troubled Company Reporter's Sept. 18, 2002 edition, Viador initiated efforts to raise additional financing to fund its operations. There can be no assurance that it will be successful in its efforts to reduce expenses or to obtain additional financing. Failure to reduce and control expenses, generate sufficient revenue and/or to obtain additional financing will result in a material adverse effect on the Company's ability to meet its business objectives and continue as a going concern. Based on its assumptions, which it believes are reasonable, the Company believes it may have sufficient cash to reach profitability provided that it meets the revenue and expense goals contained in its business plan. WEIRTON STEEL: Annual Shareholders' Meeting Scheduled in Nov. ------------------------------------------------------------- An Annual Meeting of Stockholders of Weirton Steel Corporation, a Delaware corporation, will be held at The Serbian-American Cultural Center, 1000 Colliers Way, Weirton, West Virginia 26062, on Wednesday, November ___, 2002, (date yet to be announced) at 6:00 p.m., for the following purposes: 1. To elect six directors to the Board of Directors, consisting of three Class II Directors to serve for a two-year term until the 2004 Annual Meeting of Stockholders, or until their respective successors are duly elected and qualified, and three Class III Directors to serve for a three-year term until the 2005 Annual Meeting of Stockholders, or until their respective successors are duly elected and qualified. 2. To approve an amendment to Article Fifth of the Restated Certificate of Incorporation, as amended, and a related change to the By-Laws, to reduce the size of the Board of Directors from 14 persons to nine persons consisting of five independent directors, two management directors and two union directors, to become effective immediately following the Annual Meeting. 3. To approve a contingent amendment and restatement of the stated Certificate of Incorporation and By-Laws, as amended, to be contingent and effective only upon the occurrence of a "transformative event", which means a significant acquisition or investment in steel industry assets or businesses resulting in a change of control of the Company which is approved by at least 90% of the Board of Directors. 4. To ratify the appointment of KPMG LLP as independent public accountants for the fiscal year ending December 31, 2002. 5. To consider and act upon any other matters which properly may come before the meeting or any adjournment thereof. Weirton Steel is the seventh largest U.S. integrated steel company and the nation's second largest producer of tin mill products. * * * As reported in Troubled Company Reporter's August 20, 2002 edition, Standard & Poor's raised its corporate credit rating on integrated steel producer Weirton Steel Corp., to triple-'C' from 'D' following the company's debt restructuring. Standard & Poor's also assigned its triple-'C'-minus rating to the Weirton, West Virginia-based company's new senior secured facilities. The current outlook is developing. The restructuring involved Weirton's exchange of its existing senior notes for a combination of senior notes and preferred stock. The company also replaced its senior secured borrowing base facility with a larger facility, which is also secured and subject to a borrowing base. Weirton Steel Corporation's 11.375% bonds due 2004 (WRTL04USR1), DebtTraders says, are trading at 34.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WRTL04USR1 for real-time bond pricing. WHEELING-PITTSBURGH: Seeks $250M Fed. "Byrd Bill" Loan Guarantee ---------------------------------------------------------------- Wheeling-Pittsburgh Steel Corporation announced that the Royal Bank of Canada, has filed an application on behalf of the company with the Emergency Steel Loan Guarantee Board to obtain a $250 million federal steel loan guarantee. RBC Capital Markets will underwrite the loan. RBC Dain Rauscher is acting as advisor to the company in connection with its restructuring. "Making an application under the Emergency Steel Loan Guarantee program is a milestone event for Wheeling-Pittsburgh Steel. It is the beginning of a process that will change the DNA of the company," said James G. Bradley, President and CEO. "The loan guarantee will help ensure that Wheeling- Pittsburgh Steel has the financing to emerge from bankruptcy and invest in state-of- the-art technology that will improve its manufacturing efficiency. In addition, the company's plan is consistent with the Bush Administration's goal of eliminating old, inefficient production capacity and investing in new, highly-efficient technology." Bradley commended the United Steelworkers of America, the states of West Virginia and Ohio, RBC Dain Rauscher and vendors for their involvement in the application process. Bradley also applauded the company's employees who have continued to work to improve the company's performance even while making personal sacrifices, including significant pay reductions. "By writing The Emergency Steel Loan Guarantee Act and working for its passage, Sen. Robert Byrd has again demonstrated the importance of his leadership to the nation and especially to the Ohio Valley," Bradley said. "The federal loan guarantee that the Byrd Bill provides is the cornerstone for our emergence as a new, more efficient and financially stable company." The Emergency Steel Loan Guarantee Program provides a minimum of 85 percent federal loan guarantee for the lender. In addition to the federal loan guarantee, the states of Ohio and West Virginia have agreed to provide financing of $12 million and $15 million, respectively, as part of the loan package. Suppliers have agreed to finance up to an additional $8 million of the non-guaranteed portion of the loan. "The participation of West Virginia, Ohio and our suppliers reflects the broad level of support for the company's reorganization," Bradley said. "Gov. Bob Wise of West Virginia and Gov. Bob Taft of Ohio have been valued partners of Wheeling- Pittsburgh Steel throughout our bankruptcy proceedings and have played key roles during the process of putting together our Byrd Bill application. In addition, Sen. Jay Rockefeller has supported in countless ways the company's efforts to successfully emerge from bankruptcy. And certainly without the ongoing, constructive participation of the USWA, Wheeling- Pittsburgh Steel's Byrd Bill application would not have been possible." Bradley also noted that Rep. Alan Mollohan, Sen. Mike Dewine, Rep. Bob Ney and Rep. Ted Strickland also provided significant assistance to the company during its fight against illegal imports and its effort to emerge from bankruptcy. A major component to the company's Byrd Bill loan application and plan of reorganization is the investment in a $109 million electric arc furnace at the company's Mingo Junction facility. The EAF would replace one of the company's two operating blast furnaces. An EAF typically uses recycled scrap steel and scrap alternatives as 100 percent of its feedstock. Wheeling- Pittsburgh Steel, however, will have the capability to feed both scrap and liquid iron from its remaining blast furnace into its EAF. In addition, the company plans to complete the installation of automatic roll changers at its 80" Hot Strip Mill, substantially increasing its efficiency, and upgrade the quality capability of its Allenport cold finishing facility. Wheeling-Pittsburgh is the nation's eighth largest domestic steel producer. It filed for Chapter 11 bankruptcy protection in November 2000. WILLIAM CARTER: S&P Places B+ Long-Term Rating on Watch Positive ---------------------------------------------------------------- Standard & Poor's placed its single-'B'-plus long-term corporate credit and double-'B'-minus senior secured debt ratings for Morrow, Georgia-based William Carter Co., on CreditWatch with positive implications. The single-'B'-minus subordinated debt rating was also placed on CreditWatch. Total debt outstanding at June 29, 2002, was about $298 million. "The CreditWatch placement reflects the company's intention to sell shares of common stock and use the majority of proceeds for debt reduction, as well as for its improving operating performance, which has exceeded Standard & Poor's expectations," said Standard & Poor's credit analyst Susan Ding. Standard & Poor's will meet with management and review William Carter Co.'s operating and financial plans. Carter's is one of the largest manufacturers and marketers of baby and young children's apparel in the U.S., selling its products under the well-recognized Carter's and Carter's Classics brand names. WILLIAMS COMMS: UST Says Debtor's Plan Doesn't Comply with Code --------------------------------------------------------------- Carolyn S. Schwartz, the United States Trustee for the Southern District of New York, asserts that Williams Communications Group, Inc.'s proposed Plan of Reorganization does not meet the confirmation requirement outlined in 11 U.S.C. Sec. 1129(a)(1) because it violates the Bankruptcy Code. The United States Trustee supports that portion of the Wilmington Trust Company's objection, which asserts that the inclusion of the Lock-Up Noteholder Consideration provision of the Plan violates Sections 1123(a)(4) and 1129(a)(1) of the Bankruptcy Code. The United States Trustee also objects to the Plan provisions that seek to release and discharge third parties other than the Debtors from various claims and liability. Pamela J. Lustrin, Esq., in New York, points out that Section 524(e) of the Bankruptcy Code provides that the discharge of a debtor does not affect the liability of any other entity for the debt. Thus, the provisions, seeking to discharge numerous third parties other than the Debtors, violate Section 524(e). The release may also be in contravention to the fiduciary duties owed by these third parties to the Debtors, Ms. Lustrin adds. The United States Trustee further objects to the exculpation provision of the Plan, to the extent that it is overbroad, exceeding the scope of Section 1125(e) of the Bankruptcy Code. The United States Trustee also objects to the releases afforded to the attorneys to the extent that these releases seek to limit the professional's liability to their clients contrary to the requirements of the Code of Professional Responsibility. (Williams Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WINSTAR COMMS: Trustee Presses for Prompt Turnover of Documents --------------------------------------------------------------- L. Jason Cornell, Esq., at Fox Rothschild O'Brien & Frankel LLP, in Wilmington, Delaware, informs the Court that on July 17, 2002, Winstar Communications' Chapter 7 Trustee's counsel participated in a meeting with representatives from Winstar Holdings and its legal counsel, McDermott Will & Emery, to discuss the rights and obligations of the parties under the Asset Purchase Agreement, Sale Order and related agreements. A subsequent meeting was held on July 31, 2002 in an effort to reconcile balances among the parties. During the meeting, Winstar Holdings was presented with a reconciliation demonstrating that Winstar Holdings actually owes the Debtors' estate significant amounts pursuant to the Asset Purchase Agreement and the Sale Order. This, after deducting from the excluded cash assets all legitimate amounts payable from the Debtors' estate to Winstar Holdings under the Asset Purchase Agreement. The amounts total $2,484,722. Since the July 31 meeting, the Chapter 7 Trustee has made numerous attempts to consensually resolve the matter, but Winstar Holdings has avoided commencing negotiations and failed to adequately respond to the Chapter 7 Trustee. Winstar Holdings also has failed to respond to requests for information necessary for the Chapter 7 Trustee to: -- comply with the Court's orders, -- prosecute claims held by the Debtors' estate including preference and fraudulent conveyance claims, -- prosecute adversary proceedings, -- prepare tax returns and obtain tax refunds, and -- liquidate assets of the Debtors' estate. By this motion, Chapter 7 Trustee Christine C. Shubert asks the Court to compel Winstar Holdings LLC to: -- grant her access to the Debtors' Business Information that are necessary to expeditiously liquidate the Debtors' estate, and -- turnover $2,484,722 in property that is in Winstar Holdings' possession representing the balance of the cash held by the Debtors on the Closing Date, which were Excluded Assets under the Asset Purchase Agreement. The Chapter 7 Trustee's retained accountants and business advisors have repeatedly requested and have been refused access to the Debtors' business information in connection with the: * preparation of various tax returns for the Debtors' businesses for periods prior to the Closing Date, * prosecution of tax refunds due to the estate, and * disputing of claims for taxes filed by various taxing authorities against the estate. * analysis of potential preferential transfers or fraudulent conveyances and resulting claims that may be held by the estate, and * prosecution of claims retained by the estate as part of the excluded assets. Besides denying access to business information, Mr. Cornell continues that Winstar Holdings has also instructed its employees not to respond to the Chapter 7 Trustee's queries. An e-mail dated August 21, 2002 had this message to all of the Winstar's employees: "Please do not release any documents, stored or otherwise, to any third party including, but not limited to, the Estate/Trustee of Winstar Communications, Inc., and its affiliates." Mr. Cornell insists that Winstar Holdings' persistent refusal to cooperate with the Chapter 7 Trustee and her professionals is a patent violation of the Asset Purchase Agreement and the Sale Order. Winstar Holdings' breach of its duty has resulted in additional more litigation and unnecessary expenses, to the detriment of the creditors. The Chapter 7 Trustee has had to answer to the motion by the Corporate Telecommunications Group and resort to examinations of third parties. (Winstar Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service, Inc., 609/392-0900) Winstar Comms.' 12.50% bonds due 2008 (WCII08USR1) are trading at less than a penny on the dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCII08USR1 for real-time bond pricing. WORLDCOM INC: MessagePhone Demands Prompt Decision on Contract -------------------------------------------------------------- According to Richard G. Dafoe, Esq., in New York, MessagePhone Inc., as licensor, entered into a nonexclusive License Agreement with MCI WorldCom Networks Service Inc., as licensee, on December 28, 1999, under which the Debtors would pay MessagePhone a royalty for use of its Message Service technology. The Message Service technology has been designed to allow a customer placing a call through 1-800-COLLECT or a calling or credit card to leave a message on the Debtors' server in the event of a busy signal or no answer. This service then will make a number of attempts to deliver the message to the intended recipient. The term of the License Agreement was for the length of the term that MessagePhone held the patent rights, which is through 2005. The License Agreement is an Executory Contract to be assumed or rejected by the Debtors. Mr. Dafoe tells the Court that the Debtors paid an initial license fee for the Message Service technology usage of $237,500 to cover pre-2000 sales of its Message Service. The Debtors then paid an additional $430,310 related to pre-2000 sales. Subsequent to that, the Debtors paid additional quarterly royalty payments totaling $1,159,762. The Debtors now owes MessagePhone over $1,403,069 as of December 31, 2000. There has been no exact calculation of the amount of the underpayment of royalties for the quarter after December 31, 2000. Mr. Dafoe continues that the Debtors are required in the License Agreement to provide and maintain records in "sufficient detail" to allow MessagePhone to audit the records of the Debtors for the purpose of verifying the accuracy of the royalty payments made to MessagePhone. However, as determined by an auditor, the records maintained by the Debtors related to the royalty payment are not maintained in "sufficient detail." The records have been discarded and destroyed by the Debtors. This destruction of the underlying competent data is a violation of the License Agreement. Until the Debtors are compelled to assume or reject the Executory Contract with MessagePhone, Mr. Dafoe contends that MessagePhone cannot take action to minimize the damage it will suffer from lack of payment of royalties. The Debtors are obligated to make postpetition Chapter 11 royalty payments to MessagePhone or be enjoined from using the service and technology that is owned by MessagePhone. The Debtors have not indicated if and when it will assume or reject the License Agreement. Time is of the essence for MessagePhone. "The Debtors have and continue to destroy records used to provide the measure of royalties owing," Mr. Dafoe tells the Court. To assume the Contract, the Debtors must meet all statutory requirements including its compliance with the non-monetary provisions of the License Agreement. The Debtors' assumption of this agreement would not be burdensome to the estate, as the License Agreement has been highly profitable to the Debtors and can not be replaced without infringing on the MessagePhone patents. Mr. Dafoe believes that no prejudice to Debtors or its estate should result if the Court compels the assumption or rejection of the License Agreement. On the other hand, MessagePhone is continuously prejudiced by the Debtors' failures. "The Court should not permit the Debtors to continue to use the license without assuming it," Mr. Dafoe argues. MessagePhone has invested a substantial amount of time and effort in attempting to recover payments from the Debtors. Thus, MessagePhone asks the Court to set a time for the Debtors to assume or reject the License Agreement, and if assumed, then require the Debtors to comply with the requirements of the Section 365 of the Bankruptcy Code. (Worldcom Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Committee Continues to Work with Senior Management ---------------------------------------------------------------- Van Greenfield of Blue River L.L.P. and Mark Neporent of Cerberus Capital Management, L.P., the co-chairmen of the Official Committee of Unsecured Creditors of WorldCom, Inc., issued the following statement: "We are perplexed as to the source and content of positions attributed to the Committee regarding its relationship with Company management in recent press reports. Contrary to the suggestion in Friday's New York Times, the Committee has been working harmoniously and amicably with John Sidgmore and Bert Roberts and the Company's management and professionals in connection with the Company's reorganization. An agreed upon search process for a new CEO is underway and a nationally recognized executive recruitment firm has been identified and is in the process of being retained. The Committee has formed a sub-committee to participate in the search process and anticipates that the search will be concluded on an expedited basis. Accordingly, the Committee expects that the new CEO will have the support of both the Company and the Committee. The Committee appreciates the manner in which Messrs. Sidgmore and Roberts have cooperated with the Committee in both the search process and in the restructuring efforts to date." Worldcom Inc.'s 11.25% bonds due 2007 (WCOM07USA1), DebtTraders reports, are trading at 22.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOM07USA1 for real-time bond pricing. WORLDCOM INC: Pays GCI $3.5-Mill. Against Prepetition Obligation ---------------------------------------------------------------- General Communication Inc., (Nasdaq: GNCMA) has received a $3.5 million payment against its pre-petition receivable from WorldCom. The payment was received from a third party obligor that determined it was ultimately liable for services provided by GCI to the third party under a contract that had been assigned to WorldCom. The payment reduces the amount that WorldCom owes to GCI for services provided to WorldCom by GCI prior to WorldCom's filing of bankruptcy on July 21, 2002. During its second quarter conference call on August 8, 2002 GCI discussed its exposure to the WorldCom bankruptcy. GCI reported that it had reserved $9.7 million against its second quarter results to cover services that had been billed to WorldCom during the second quarter but for which payment had not been received prior to WorldCom's bankruptcy filing. GCI also estimated that it would reserve up to $6.7 million against its third quarter results to cover additional services billed to WorldCom in the third quarter prior to WorldCom's filing. GCI had previously reserved approximately $0.6 million of disputed billings. The $3.5 million received directly reduces the estimated third quarter charge. GCI now has a pre-petition receivable of $13.5 million from WorldCom of which $10.3 million has been reserved. GCI also owes WorldCom approximately $1 million that it believes it may be entitled to offset against the amounts due to GCI. Thus, the residual exposure to GCI that has not already been reserved has been reduced to $2.2 million. GCI is currently evaluating how much, if any, value should be assigned to the total $13.5 million receivable that it holds from WorldCom and will reserve any additional amounts against its third quarter results. At this time, the amount of the third quarter reserve increase is expected to be between zero and $2.2 million. GCI also announced that it has received timely payment for all presently due invoices that have been rendered to WorldCom since its filing. GCI has received more than $4 million to date for post petition services provided through August 31, 2002. Finally, GCI reported that WorldCom traffic levels are running consistently above the levels reported last year. Based on revenues GCI is the largest Alaska-based and operated integrated telecommunications provider and provides local, wireless, and long distance telephone, cable television, Internet and data communication services. More information about the company can be found at http://www.gci.com ********* 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. 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