/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/020927.mbx T R O U B L E D C O M P A N Y R E P O R T E R Friday, September 27, 2002, Vol. 6, No. 192 Headlines ACOUSTISEAL: Court Okays Bryan Cave as Debtor's Ch. 11 Attorneys ADELPHIA COMMS: Committee Taps Neilson for Accounting Services AMERCO: Moody's Cuts Rating on Senior Unsecured Notes to Ba2 AMR CORP: Blaylock Initiates Coverage with "Hold" Ratings AT&T CANADA: Takes Steps to Establish Viable Capital Structure BANYAN STRATEGIC: Extends Northlake Closing Date to September 30 BETHLEHEM STEEL: Proposes Uniform Majestic Bidding Procedures BOOTS & COOTS: June 30 Working Capital Deficit Tops $5 Million BUDGET GROUP: Wants Okay to Hire Eversheds as Foreign Counsel CENTENNIAL COMMS: First Quarter EBITDA Climbs Up 21% to $75.8MM CHINA ENTERPRISES: Net Loss Widens 28.3% to $2.8MM in First Half COMDIAL CORP: Raises a Total of $3.95MM from Bridge Financing COMDISCO INC: Balks at Sungard's Move to Transfer Texas Property CONTINENTAL AIRLINES: Blaylock Begins Coverage with HOLD Rating COOKER RESTAURANT: Chapter 11 Bankruptcy Plan is Confirmed CORTECH: Fails to Fulfill Nasdaq Continued Listing Requirements DELTA AIRLINES: Blaylock Kicks-Off Coverage with "Hold" Rating DIVINE INC: Expects to Close Merger Transaction with Viant Today D.R. HORTON: Fitch Assigns Initial BB+ Senior Unsec. Debt Rating DYNEGY: S&P Says Accounting Fine Will Not Affect Credit Profile ENRON CORP: Goldendale Asks Court to Appoint NEPCO Examiner EXIDE TECHNOLOGIES: Court Extends Plan Exclusivity Until Dec. 11 FFP MARKETING: Accepting Sealed Bids for Non-Core Assets FLAG TELECOM: Restructures Lucent, Ciena & Other Contracts FLAG TELECOM: S.D.N.Y. Court Confirms Plan of Reorganization GROUP TELECOM: CCAA Protection Extended to November 4, 2002 GROUP TELECOM: Wins Extension of US Court Protection to Nov. 12 HA-LO INDUSTRIES: Will Not Hire New Accountants in the Interim HARDWOOD PROPERTIES: Confirms "Inactive Issuer" Status on TSX HORSEHEAD INDUSTRIES: Turns to Blackstone for Financial Advice INDYMAC MANUFACTURED: S&P Junks Rating on Class B-1 P-T Certs. INNOVATIVE CLINICAL: Signs-Up Vitale Caturano as New Auditors INNOVATIVE CLINICAL: Sells Wholly Owned Clinical Studies Unit INT'L THUNDERBIRD: Resolves Default on Prime & MRG Obligations KAISER ALUMINUM: Selling Pipeline Assets to Sorrento for $3 Mil. KMART: Moody's Further Junks Ratings on Four Lease-Backed Notes KNOLOGY BROADBAND: Seeking Nod to Pay Critical Vendors' Claims LEHMAN ABS: Fitch Drops Junk-Rated on Class B-2 Notes to D LODGIAN: CCA Asks Court to Extend Time for Sec. 1111(b) Election LORAL SPACE: Extends Preferred Share Exchange Offer to October 8 LTV CORP: Court Approves Nationwide Consulting as Appraisers MARK NUTRITIONALS: Seeks Okay to Use Hibernia's Cash Collateral MARTIN INDUSTRIES: Secures Interim Bank Financing from AmSouth MEASUREMENT SPECIALTIES: Sells Terraillon to Fukuda for $22.3MM MENTERGY: Files for Court Protection from Creditors in Israel METROCALL INC: Court Confirms Plan & Stage Set to Emerge in Oct. MILITARY RESALE: Cash Levels Insufficient to Fund Operations MTS SYSTEMS: Fails to Comply with Nasdaq Listing Requirements NATIONAL STEEL: Ziegler Wants to Recoup Assets from Nat'l Pellet NEPTUNE SOCIETY: KPMG LLP Articulates Going Concern Doubts NORTHWEST AIRLINES: Blaylock Initiates Coverage with Hold Rating OMEGA HEALTHCARE: S&P Affirms B Corporate Credit Rating OWENS CORNING: Jackson & Hancock Want to Recover Settlements PACIFIC GAS: Wants to Defray $5.6MM Additional Misc. Plan Costs PACIFIC GAS: Plan Confirmation Hearings to Begin on November 18 PENN MUTUAL: Fitch Ups Ratings on Series 1996-PML P-T Certs. PENN TRAFFIC: Ups Promo Spending to Combat Market Competition PENNEXX FOODS: Plans Equity Infusion to Dodge Potential Default PEREGRINE SYSTEMS: Look for Schedules & Statements around Nov. 5 PEREGRINE SYSTEMS: Receives Court Approval of First Day Motions POLAROID CORP: Wants More Time to Remove Prepetition Actions PREVIO INC: Files Cert. of Dissolution with Delaware State Sec. PURCHASEPRO.COM: Case Summary & 20 Largest Unsecured Creditors REUNION INDUSTRIES: Closes Sale of Kingway Division for $32 Mil. SAGENT: Nasdaq Approves Listing Transfer to SmallCap Market SERVICE MERCH.: Asks Court to Lift Claim Trading Restrictions SLI INC: Wins Nod to Pay Critical Vendors' Prepetition Claims SUNRISE TECHNOLOGIES: Files for Chapter 7 Liquidation in Calif. SYNTHONICS TECHNOLOGIES: Committee Wants to File a Better Plan TRICORD SYSTEMS: Receives Formal Notice of Patent Acceptance TRICORD SYSTEMS: Obtains Formal Notice of Patent Issuance UNITED AIRLINES: AFL-CIO Issues Comment on Union Coalition Plan UNITED AIRLINES: Blaylock Initiates Coverage with Sell Rating US AIRWAYS: Conditionally Seeks Okay to Reject Union Agreements US AIRWAYS: Blaylock Commences Coverage with SELL Rating VALEO ELECTRICAL: Court Clears Emergence from Ch. 11 Bankruptcy VIVENDI UNIVERSAL: Six Board of Directors Members Leave Seats WORLDCOM INC: Asks Court to Clear Pentagon Purchase Agreement WORLDCOM: ATLANTIC-ACM Says Bankruptcy Will Benefit IDT & Vartec ZIFF DAVIS: Commences Exchange Offer for Series E Preferreds * BOOK REVIEW: The Phoenix Effect: Nine Revitalizing Strategies No Business Can Do Without ********* ACOUSTISEAL: Court Okays Bryan Cave as Debtor's Ch. 11 Attorneys ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Western District of Missouri gave its permission to Acoustiseal, Inc., to employ and retain Mark G. Stingley, Esq., and the firm of Bryan Cave LLP as its attorneys. Mr. Stingley and other attorneys at Bryan Cave LLP are duly licensed and qualified attorneys and are amply qualified to act as counsel for the estate, the Company says in its papers. Specifically, Bryan Cave will: a. advise the Debtor with respect to its rights and obligations as Debtor in Possession and regarding other matters of bankruptcy law; b. prepare and file any petitions, schedules, motions, statement of affairs, plan of reorganization, or other pleadings and documents which may be required in these proceedings; c. represent the Debtor at the meeting of creditors, plan disclosure, confirmation and related hearings, and any adjourned hearings; d. represent the Debtor in adversary proceedings and other contested bankruptcy matters; and e. represent the Debtor in the above matter, and any other matter that may arise in connection with the Debtor's reorganization proceeding and its business operation. Bryan Cave will charge the Debtor at its customary hourly rates: Partners $250 - $400 per hour Counsel $150 - $250 per hour Associates $110 - 225 per hour Paralegals $ 75 - $120 per hour Document Clerks $ 75 per hour Acoustiseal, Inc., filed for chapter 11 protection on September 4, 2002 in the U.S. Bankruptcy Court for the Western District of Missouri (Kansas City). Cynthia Dillard Parres, Esq., and Mark G. Stingley, Esq., at Bryan, Cave LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated assets of $10-$50 million and estimated debts of over $50 million. ADELPHIA COMMS: Committee Taps Neilson for Accounting Services -------------------------------------------------------------- The Official Committee of Unsecured Creditors seeks to retain the firm of Neilson Elggren as accountants to perform the forensic and investigative accounting services that will be necessary during the Chapter 11 cases involving the Adelphia Communications Debtors. The Debtors ask the Court to approve the engagement nunc pro tunc to August 1, 2002. According to Adam L. Shiff, Esq., at Kasowitz Benson Torres & Friedman LLP, in New York, Neilson Elggren is a firm of 40 professionals and consultants including certified public accountants and consultants that specialize in, among other things, forensic accounting, litigation support, and other general bankruptcy accounting services including bankruptcy taxation and business valuation issues. Neilson Elggren maintains its primary place of business at 10100 Santa Monica Boulevard, Suite 410 in Los Angeles, California 90067 and maintains other offices in Salt Lake City, Utah and Wilmington, Delaware. The Committee seeks to retain the firm of Neilson Elggren as its forensic accountants because of the firm's extensive experience, expertise and knowledge with respect to the identification, detection and investigation of accounting- related frauds, as well as its capabilities in all aspects of bankruptcy accounting issues. The Committee believes that the hiring of a firm to provide forensic and investigative accounting services is necessary in these Chapter 11 cases due to the size, scope, and complexity of the Debtors' enterprise and the alleged frauds that were perpetrated by certain insiders of the ACOM Debtors. Mr. Shiff points out that no credible information exists with respect to the ACOM Debtors' accounting and finances. The Debtors' public filings state that they plan to restate their financial statements for the fiscal years 1999 and 2000. Additionally, the ACOM Debtors have yet to file financial statements for the fiscal year 2001 or for the first quarter of 2002 and do not anticipate doing so until the end of the third quarter of 2002. The services of Neilson Elggren are necessary for the Committee to: -- understand the Debtors' businesses on an operational and financial basis, -- to investigate potential claims against insiders of the Debtors and third parties, and -- to investigate other potential courses of action within these Chapter 11 cases. The Committee is aware that the Debtors have sought to retain the firm of PricewaterhouseCoopers to provide auditing and forensic accounting services to the Debtors and that other third parties may seek to employ forensic accounts to provide additional services in these Chapter 11 cases. Neilson Elggren has informed the Committee that it plans to work closely with PwC in order to: -- utilize the work product, which has already been produced by PwC regarding the Debtors, and -- minimize duplication of efforts between Neilson Elggren and PwC. The professionals presently designated to represent the Committee and their current standard hourly rates are: Partners $375 - 475 Managers 230 - 275 Seniors 190 - 220 Consultants 170 - 180 Accounting Technicians 90 - 125 Neilson Elggren is expected to: A. analyze and determine the appropriateness of the Debtors' accounting journal entries and other record keeping methods relating to inter/intra company transactions between its various legal entities and other entities which may be related to the Debtors through the Rigas family and determine whether the methodology used to charge or allocate expenditures was and currently is reasonable; B. obtain and analyze the Debtors' historical legal entity financial statements and determine that those financial statements fairly represent the financial performance of each legal entity; C. investigate the Debtors' accounting journal entries and other financial records with respect to the fiscal year 2001 and the first quarter of 2002; D. analyze the Debtors' historical financings and acquisitions and determine the appropriateness of those transactions on a legal entity-by-entity basis; E. gain an understanding of the Debtors' operating procedures and policies including: 1. Cash management system; 2. Inter/Intra company transactions; 3. Capital expenditure classification; 4. Significant accounting policies and procedures; 5. Acquisition accounting; and 6. Internal financial/tax restructuring programs. F. provide litigation support, including testimony, to the Committee as requested by counsel to the Committee; G. report to the Committee from time to time regarding work performed; and H. interact with other financial, accounting, and other professionals employed by the Debtors and related parties as well as law enforcement accounting professionals. R. Todd Neilson, a partner in the firm of Neilson Elggren LLP, assures the Court that the firm has not otherwise provided services to the Debtors, their creditors, equity security holders, or any other parties-in-interest, or their respective attorneys, in any matters relating to the Debtors or their estates. In addition, Neilson Elggren: -- does not hold or represent any interest adverse to the Committee in the matters for which it has been retained, -- Neilson Elggren is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, and -- has no connection with the Debtors, the creditors or any other party-in-interest. (Adelphia Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders says that Adelphia Communications' 9.50% bonds due 2005 (ADEL05USR1) are trading at 30.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL05USR1 for real-time bond pricing. AMERCO: Moody's Cuts Rating on Senior Unsecured Notes to Ba2 ------------------------------------------------------------ Moody's Investors Service took several downward ratings on AMERCO. Affected Ratings are: * Senior implied and senior unsecured and medium term notes to Ba2, * Subordinated shelf to (P)Ba3; and * Preferred shelf to (P)B1. Moody's says the ratings outlook is stable. Moody's says, "The downgrade is based on our expectation that adjusted debt will continue to be high while financial performance, which has recently been hurt by losses at its insurance operations, will continue to be weak. The downgrade also reflects weak cash flow from operations, which requires an ongoing sale of assets and access to financial markets for refunding, and a reduced liquidity position, which is aggravated by the high seasonality of its rental operations." The stable outlook assumes that the company can continue its efficient access to funding alternatives in order to meet near- term maturities. Revenues is growing in a lower but steady pace over the last three years. Profits from the company's core business have also been steady. AMERCO, a holding company based in Reno Nevada, has interests in consumer truck rental, storage, real estate and property & casualty and life insurance. AMR CORP: Blaylock Initiates Coverage with "Hold" Ratings --------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of AMR Corporation (NYSE: AMR) with "hold" ratings. Mr. Neidl delayed initiating coverage of the airline until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. In his equity reports, Mr. Neidl notes that AMR should rebound once the economy recovers. The airline has enough liquidity to carry it through to next year. Reasons for Mr. Neidl's "hold" recommendations include: -- AMR -- The airline has a good reputation for service, which attracts higher-yielding frequent flyers. AMR plans to restructure its large Dallas Fort-Worth hub and cut jobs and capacity, which will reduce annual costs by $1.1 billion. Mr. Neidl also cites the reasons why he is not optimistic on the industry in the short-term: -- The disappointing pace of economic recovery during the summer, and no clear direction yet as to when the full recovery will come -- General stock market weakness and continuing large institutional sellers -- The slowdown in the industry recovery as reflected in the continuing weak traffic and yield numbers -- Continuing high oil prices at around $30 barrel -- The threat of conflict in the Middle East and its possible effect on travel and oil prices -- Additional costs and inconvenience on the traveling public of beefed-up security procedures continue to affect operations -- A certain segment of the traveling public's continuing fear of flying due to terrorism -- The threat of a major industry player, UAL Corp., going bankrupt, and its possible effect on the rest of the industry -- The continuing uncertainty and increased costs of insurance -- The normally slow fall seasonal weakness of airline travel and stock prices will also probably have a continuing negative effect on stock prices Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P., has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P. is a member of the National Association of Securities Dealers, CRD number 35669. DebtTraders reports that AMR Corp.'s 9.0% bonds due 2012 (AMR12USR1) are trading at 56 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AMR12USR1for real-time bond pricing. AT&T CANADA: Takes Steps to Establish Viable Capital Structure -------------------------------------------------------------- AT&T Canada Inc., (NASDAQ: ATTC) (TSX: TEL.B) reported that, as part of its strategy to ensure its future as a strong and growing competitor, it has taken two important steps towards establishing a viable capital structure to support the strategic direction of its businesses. First, further to AT&T Canada's continuing discussions about its capital restructuring, the company has agreed to repay all amounts drawn from the company's bank credit facility upon the conclusion of the back-end transaction with AT&T Corp. The repayment of the CDN$200 million drawn will be funded with a portion of the approximately CDN$240 million in proceeds that the company expects to receive from the exercise of employee stock options. As the company has stated previously, the back- end is expected to close on October 8 but no later than October 23. After repaying the amount drawn under the bank credit facility, the company will continue to have liquidity in excess of CDN$400 million. Second, all of AT&T Canada's remaining currency swaps have been unwound in accordance with their terms with the company receiving approximately CDN$85 million in face amount of its outstanding bonds in satisfaction of the counterparties obligation to the company. The bonds received will be cancelled by the company. David Lazzarato, Executive Vice President and CFO, AT&T Canada said, "These actions are part of our strategy to put in place a viable capital structure that will support the potential of AT&T Canada's businesses. We believe our discussions with our bondholders and AT&T Corp., continue to be encouraging and we are on-track to achieve a consensual restructuring of our public debt by year-end or sooner." AT&T Canada is Canada's largest competitor to the incumbent telecom companies. With over 18,700 route kilometers of local and long haul broadband fiber optic network, world class managed service offerings in data, Internet, voice and IT Services, AT&T Canada provides a full range of integrated communications products and services to help Canadian businesses communicate locally, nationally and globally. AT&T Canada Inc. is a public company with its stock traded on the Toronto Stock Exchange under the symbol TEL.B and on the NASDAQ National Market System under the symbol ATTC. Visit AT&T Canada's Web site, http://www.attcanada.comfor more information about the company. AT&T Canada Inc.'s 9.95% bonds due 2008 (ATTC08CAR1), DebtTraders reports, are trading at 10 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ATTC08CAR1 for real-time bond pricing. BANYAN STRATEGIC: Extends Northlake Closing Date to September 30 ---------------------------------------------------------------- Banyan Strategic Realty Trust (OTC Bulletin Board: BSRTS) has entered into an amendment with the proposed purchaser of Banyan's ground lease interest in the Northlake Tower Festival Mall (suburban Atlanta, Georgia), extending the closing date from September 24, 2002 to September 30, 2002. The extension was necessitated by, among other things, the fact that the purchaser had not yet obtained all of the approvals of the required rating agencies necessary for closing. In addition, formal consent to the transaction has not yet been received from the owner of the land upon which the shopping center is situated. Rating agency approval is required for the purchaser's assumption of the first mortgage debt that encumbers the property, and the land owner's consent is required by the applicable ground lease. The amendment resolves certain disputed issues between Banyan and the purchaser. Banyan allowed a price concession of $110,000 (reducing the total purchase price to $20,390,000), in exchange for the purchaser's willingness to accept certain tenant estoppel letters that the purchaser contended were not in acceptable form. The price reduction is also intended to compensate the purchaser for the financial impact of certain concessions that the purchaser may be required to make to the lessor under the ground lease, in order to obtain the ground lessor's consent to the transaction. Banyan indicated that both the company and the purchaser intend to work together to accomplish the remaining steps in order to close on or prior to the September 30, 2002 closing date. If the rating agency approvals are not received by such time, or other conditions precedent to closing are not satisfied, the purchaser may terminate the contract without penalty. Banyan Strategic Realty Trust is an equity Real Estate Investment Trust that adopted a Plan of Termination and Liquidation on January 5, 2001. On May 17, 2001, the Trust sold approximately 85% of its portfolio in a single transaction. Other properties were sold on April 1, 2002 and May 1, 2002. Banyan now owns a leasehold interest in one (1) real estate property located in Atlanta, Georgia, representing approximately 9% of its original portfolio. This property is subject to a contract of sale, currently scheduled to close on September 30, 2002. Since adopting the Plan of Termination and Liquidation, Banyan has made liquidating distributions totaling $5.45 per share. As of this date, the Trust has 15,496,806 shares of beneficial interest outstanding. See Banyan's Web site at http://www.banyanreit.comfor more information about the Company. BETHLEHEM STEEL: Proposes Uniform Majestic Bidding Procedures ------------------------------------------------------------- Although Bethlehem Steel Corporation and its debtor-affiliates have a definitive agreement with Majestic Realty Co., with respect to the sale of the Bethlehem Commerce Center, the Debtors believe that they can still fetch an even better offer. Accordingly, the Debtors sought and obtained the Court's permission to implement these bidding procedures: (a) All bidders must sign an agreement in a form no less favorable to the Debtors in the aggregate than the Purchase and Sale Agreement with Majestic; (b) A bidder must submit to the Debtors' counsel a written bid for the properties for at least $16,456,729 and deliver an earnest money deposit to the Debtors' counsel of no less than $500,000. The deposit will be in the form of a certified check or wire transfer payable to the trust account of the Debtors' counsel not later than October 3, 2002 at 4:00 p.m. The bid must identify the bidder and contain documents and information establishing the bidder's financial ability to close. The Debtors' counsel will provide Majestic's counsel with copies of any competing bids; (c) Bids must not be subject to financing or any other contingencies not otherwise expressly contained in the Majestic Agreement; (d) If higher or better bids are submitted timely, the Auction will be conducted at the law offices of Weil, Gotshal & Manges, LLP 767 Fifth Avenue New York, New York 10153 on the October 17, 2002 at 11:00 a.m. Qualified Bidders who have complied with the bidding procedures delineated herein may improve their bids at the Auction in increments of $250,000. Should overbidding occur, Majestic has the right, but not the obligation, to participate in the bidding and to be approved as the successful bidder at the Sale Hearing based on any subsequent overbid. The bidding will be continuous and competitive and will not end until all bidders have submitted their last and best offers; (e) At the conclusion of the Auction, the Debtors will announce the highest or best bid; (f) A hearing to confirm the results of the Auction will be held before Judge Lifland on October 10, 2002, at 10:00 a.m., Eastern Time; (g) All Deposits will be held by the Debtors' counsel in an interest-bearing bank account, assuming the Qualified Bidder provides a Tax ID number, with interest for the accounts of the bidders. Within four business days after entry of the Order approving the assumption, assignment and sale of the Acquired Assets, Deposits, plus accrued interest, if any will be returned to all Qualified Bidders except the Successful Bidders. If the assumption, assignment and sale of the Acquired Assets to the Successful Bidder closes, the Successful Bidder's Deposit plus accrued interest, if any, will be applied to the purchase price at closing. The Debtors will also provide notice of the Sale Hearing to: 1. Majestic Realty Co.; 2. The U.S. Trustee; 3. The attorneys for the Debtors' lenders; 4. The attorneys for the Unsecured Creditors Committee; 5. All parties who are known to assert a security interest, lien or claim in the properties; 6. Qualified parties who have expressed interest in acquiring the properties within 1 year before the date of the Sale Motion; 7. All appropriate federal, state and local taxing authorities, and environmental authorities; 8. All government agencies required to receive notice under the Bankruptcy Rules; and 9. All parties that have filed a notice of appearance in the Debtors' chapter 11 cases pursuant to Bankruptcy Rule 2002. The Debtors will also publish a notice of the Sale Hearing at least 15 days before the Auction in the national edition of The Wall Street Journal. Moreover, the Debtors sought and obtained the Court's authority to afford Majestic a $360,000 expense reimbursement, which will be paid: (i) in the event a higher or better transaction is approved by the Bankruptcy Court; and (ii) the approved higher or better transaction actually closes, in which event the Expense Reimbursement will be paid to Majestic in cash concurrently with the closing on the sale of that higher or better transaction; If the Successful Bidder is a party other than Majestic, the Debtors will file with the Court, one business day after the Auction, a First Supplement outlining: * the identity of the Successful Bidder; * the relevant terms of the proposed sale agreement; and * the purchase price received; The First Supplement will also contain a copy of the transcript, if applicable, from the Auction. (Bethlehem Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) Bethlehem Steel Corp.'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. BOOTS & COOTS: June 30 Working Capital Deficit Tops $5 Million -------------------------------------------------------------- During the first half of 2002, demand for Boots & Coots International Well Control's services declined as overall industry conditions weakened. In response, the Company discontinued certain of its operations resulting in a loss from discontinued operations of $7.2 million. The Company's continuing operations incurred a $1.8 million loss for the six months ended June 30, 2002. These losses further impair the Company's liquidity position and hamper the Company's capacity to pay vendors on a timely basis, obtain materials and supplies, and otherwise conduct effective or efficient operations. To date, however, the Company has not been limited in its ability to respond to critical well events. The Company continues to experience severe working capital constraints. As of June 30, 2002, the Company's current assets totaled approximately $6,721,000 and current liabilities were $11,617,000, resulting in a net working capital deficit of approximately $4,896,000 (compared to a beginning year working capital of $3,285,000). The Company's highly liquid current assets, represented by cash of $262,000 and receivables and restricted assets of $4,228,000 were collectively $7,127,000 less than the amount of current liabilities at June 30, 2002 (compared to a beginning year deficit of $4,452,000). The Company is actively exploring new sources of financing, including the establishment of new credit facilities and the issuance of debt and/or equity securities. During April and May 2002, the Company entered into loan participation agreements with certain parties under which it borrowed an additional $1,000,000 under the Senior Secured Loan Facility. The participation agreements have an initial maturity of 90 days, which have been extended for an additional 90 days at the Company's option. Prevention revenues were $4,266,000 for the six months ended June 30, 2002, compared to $1,615,000 for the six months ended June 30, 2001, representing an increase of $2,651,000 (164%) in the current year. The increase was primarily the result of service fee increases associated with the WELLSURE program, increased project management work in Venezuelan operations and expanded services and equipment sales provided under the Company's Safeguard program. Response revenues were $3,728,000 for the six months ended June 30, 2002, compared to $7,595,000 for the six months ended June 30, 2001, a decrease of $3,867,000 (51%) in the current year. The decrease is primarily the result of a lack of emergency response services as overall industry conditions weakened. Moreover, the 2001 period contained three significant WELLSURE events while the Company had no major critical well events during the 2002 period. Prevention cost of sales were $1,588,000 for the six months ended June 30, 2002, compared to $469,000 for the six months ended June 30, 2001, an increase of $1,119,000 (238%) in the current year. The increase was due to manufacturing costs incurred from an international equipment sale under the Safeguard program. Response cost of sales were $1,671,000 for the six months ended June 30, 2002, compared to $979,000 for the six months ended June 30, 2001, an increase of $692,000 (71%) in the current year. The increase was a result of higher than usual third party costs associated with one response project during the first six months of 2002. Consolidate operating expenses were $3,373,000 for the six months ended June 30, 2002, compared to $2,299,000 for the six months ended June 30, 2001, an increase of $1,074,000 (47%) in the current year. This increase was primarily a result of expanding engineering staffing levels, increases in support staff for the WELLSURE program and business development costs associated with the Safeguard program. Also included were increases in operating overhead associated with higher insurance premiums, professional fees and other personnel expenses. Consolidated selling, general and administrative expenses were $1,413,000 for the six months ended June 30, 2002, compared to $1,551,000 for the six months ended June 30, 2001, a decrease of $138,000 (9%) from the prior year. These reductions were primarily a result of decreased payroll and rent requirements in the continuing operation. Consolidated depreciation and amortization expenses were $574,000 for the six months ended June 30, 2002, compared to $661,000 for the six months ended June 30, 2001, a decrease of $87,000 (13%) from the prior year due to a lower asset base. The increase in interest and other expenses of $497,000 for the six months ended June 30, 2002, as compared to the prior year period is primarily a result of legal settlements of $800,000, of which $234,000 was allocated to discontinued operations during the current period. The six months ended June 30, 2001 included $350,000 for potential claims in the ITS bankruptcy proceeding and $143,000 in financing costs related to the KBK financing that commenced during the period. Income taxes for the six months ended June 30, 2002 are a result of taxable income in the Company's foreign operations. The uncertainties surrounding the sufficiency and timing of its future cash flows and the lack of firm commitments for additional capital raise substantial doubt about the ability of Boots & Coots to continue as a going concern. BUDGET GROUP: Wants Okay to Hire Eversheds as Foreign Counsel ------------------------------------------------------------- Budget Group Inc., and its debtor-affiliates seek the Court's authority to employ and retain Eversheds as their special counsel to foreign matters pursuant to Section 327 of the Bankruptcy Code and Federal Rules of Bankruptcy Procedure 2014. Robert L. Aprati, the Debtors' Executive Vice President, General Counsel and Secretary, tells the Court that Eversheds will provide the required legal and litigation support to the Debtors concerning foreign legal matters. Eversheds will bring: -- expertise with respect to English insolvency/bankruptcy related issues, -- expertise with respect to French insolvency/bankruptcy related issues, -- commercial, corporate, employment and property law advice in respect of assets of the Debtors situated in the United Kingdom and in France, and -- expertise with respect to international franchise arrangements and related issues governed by English law. Mr. Aprati relates that since May 24, 1996, Eversheds has represented the Debtors in litigation and transactional matters in both the United Kingdom and France. Through their representation of the Debtors, the professionals at Eversheds have become uniquely and thoroughly familiar with the Debtors and their business affairs. The partners, assistance solicitors and trainee solicitors of Eversheds -- who will represent the Debtors in connection with the matters that Eversheds is to be retained -- have extensive knowledge and expertise in all aspects of foreign law and the treatment of the issues in the context of a Chapter 11 bankruptcy. The Debtors intend to compensate Eversheds based on the standard hourly rates of its professionals: Partners - 365 Pounds Assistant Solicitors - 165 to 275 Pounds Trainee Solicitors - 110 Pounds Eversheds customarily charges its clients for all costs and expenses incurred, including without limitation, travel costs, telecommunications, express mail, messenger service, document processing, photocopying costs, temporary employment of additional staff, overtime meals, court fees, transcript costs and, in general, all identifiable expenses that would not have been incurred except for representation of a particular client. Mr. Aprati reports that Eversheds has received 404,415 Pounds -- or $629,270 -- as retainer in connection with its representation of the Debtors. Aleen Gulvanessian, a Partner at Eversheds, tells the Court that the firm represented or currently represents these parties-in- interest in the Debtors' cases on unrelated matters: A. Known Institutional Lenders: Credit Suisse, Credit Suisse Asset Management Ltd, Credit Suisse First Boston, Merrill Lynch Investment Managers Ltd., Merrill Lynch, Merrill Lynch Europe PLC, Commerzbank Aktiengellschaft, Commerzbank (South East Asia) Limited, Commerzbank International Trust (Singapore) Ltd., GE Capital, GE Capital Papas, GE Capital Europe Ltd, GE Capital Services, GE Aircraft Division, GE Power System, GE Energy Services, GE Plastics and GE Power System, GE Capital Fleet Services Limited and GE Capital TLS Limited GE Global consumer finance, Sumitomo Mitsui Banking Corporation, Sumitomo Trust & Banking Company Ltd., Mitsui Sumitomo Insurance, Goldman Sachs Asset Management International Goldman Sachs International, Bank of Tokyo-Mitsubishi Ltd., Fuji Bank, IBNP Paribas, General Electric International (Benelux) BV, BNP Paribas Merchant Banking Asia Ltd., Credit Agricole Indosuez, British American Securities Inc. and Bank of Nova Scotia Asia Limited. B. Top 50 Largest Creditors: GE Capital Papas, GE Capital Europe Ltd., GE Capital Insurance, GE Capital Services, GE Aircraft Division, GE Power System, GE Capital Real Estate, GE Energy Services, GE Plastics and GE Power System, GE Aircrafts Engines GE Capital Fleet Services Limited and GE Capital, TLS Limited, GE Global consumer finance, GE Capital Commercial Finance, Global Consumer Finance, Leasecontracts Limited, Sabre Insurance Company Ltd., Sabre Employment Ltd, Sabre International Ltd., Sabre Rail Services, Sabre Corporation Property Ltd, JP Morgan Fleeting, JP Morgan Investment Management Inc., Morgan Stanley & Co. International Ltd., Morgan Morgan Stanley, Investment Management Ltd. Morgan Chase Associates Limited, JP Morgan Fleeting (Funds) Ltd., JP Morgan PLC Morgan Stanley Asia Ltd., AT &T BCS-E, AT&T Global Network Services, AT&T Business EMEA, AT&T Istel, Goldman Sachs Asset Management International, Goldman Sachs International, Prudential Assurance Company, Prudential Unit Trusts Ltd., Prudential Assurance, British Telecom Plc, BT Brightstar, BT Ignite, BT Exact Technologies Ltd, Citibank International Plc Citibank, Citibank International Personal Banking, The Citibank Ptd Ltd., Citibank N.A., Citibank, Citibank Finance Limited, Citibank NA, Citibank Finance Limited, Bear Stearns International and Bear Steams International Trading Limited, Bear Stearns Home Loans Ltd, Deutsche Bank AG, Deutsche Genossenschatts-hypobank AG, Deutsche Hypothekenbank (a-g) and Deutsche Hypothekenbank Frankfurt-Hamburg, Deutsche Bank Aktiengesellschaft, Charles Schwab Europe Limited, Charles Schwab Europe, UBS Fund Services Luxemborg AG, UBS Ltd., UBS Monaco, UBS AG/Formerly SBC Warburg Dillon Read, Schroder Investment Management (Hong Kong) Ltd., Schroder Investment Management Luxembourg, Scluoder Investment Management, (Guernsey) Ltd, Schroder Saloman Smith Barney, National Leasing & Finance Co., American Securities BD Co LP, State Street Bank and Trust Company and Credit Lyonnaise. C. Insurers: CAN Executive Search Limited, Lancer UK Limited XL Prevent, XL Refrigeration Limited, Federal Finance Ltd. Finance, Lloyds TSB Motovent Limited, Lloyds TSB TSB Education Motolease Ltd., Motolease Ltd., Lloyds Bank Mortgage Limited and Lloyds TSB, TSB Commercial Finance, Zurich Financial Services, American Life Insurance Company, AIG Insurance Management Services, AIG Europe Limited, Liberty Mutual Insurance Company, Limited and Liberty Underwriters Canada, The USF Environmental Pension Scheme Trustee and USF. D. Major Customers (excluding gasoline vendors): Daimler Chrysler Capital Services (Debris) UK, Daimler Benz AG, Daimler Chrysler Daimler Chrysler UK Ltd, Ford Motor Company, Ford Components Manufacturing Limited, Ford Motor Company Ltd., Nissan Motor Manufacturing UK, Hyundai, Hyundai Micro Electronic Wales Ltd. and Hyundai Mipo Dockyard Co. Ltd. E. Known Shareholders Holding More Than [S%] of Debtors Common Equity: Deutsche Bank A.G, Deutsche Genossenschatts - hypobank AG, Deutsche Hypothekenbank (a-g) and Deutsche Iiypothekenbanh Frankfurt - Hamburg and Deutsche Bank Aktiengesellschaft. F. Parties to Significant Litigation: Ryder Truck Rental Ltd. and Ryder Consulting Limited. G. Known Indenture Trustees to Debtors: Credit Suisse, Credit Suisse Asset Management, Credit Suisse Securities Ltd., Funds Services, Credit Suisse Asset Management Ltd., Credit Suisse (UK) Limited, Chase Manhattan Expatriate Division, Chase Manhattan Bank London office, JP Morgan Fleming, JP Morgan Fleeting (Funds) Ltd., Stanley Dean Witter and Morgan Stanley Investment Management Ltd., Morgan Stanley Asia Ltd., State Street Bank and Wilmington Trust. H. Retained Professionals: KMPG, Buck Consultants, Ernst & Young, Sidley Austin Brown, Jeffries Solicitors, Standard Banks Offshore Trust Company Jersey Ltd. and Shandwick International Ltd. I. Other Significant Relationships: Cendant Europe Limited Cendant Corporation and Cendant Intercultural, The Bennett Group. Mr. Gulvanessian assures the Court that Eversheds, its members, counsel and trainees do not represent or hold any interest adverse to the Debtors or their estates, with respect to the matters upon which the firm is to be employed. Furthermore, Eversheds does not have any material connection with the Debtors, their officers, affiliates, creditors or any other party-in-interest, or their respective attorneys and accountants, or the United States Trustee. (Budget Group Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) CENTENNIAL COMMS: First Quarter EBITDA Climbs Up 21% to $75.8MM --------------------------------------------------------------- Centennial Communications Corp., (NASDAQ: CYCL) -- whose May 31, 2002 balance sheet records a total shareholders' equity deficit of about $470 million -- announced results for the quarter ended August 31, 2002. Consolidated revenues grew 10% from the same quarter last year to $191.9 million, and earnings before interest, taxes, depreciation, amortization and gain on disposition of assets ("EBITDA") increased 21% from the same quarter last year to $75.8 million. Basic and diluted loss per share for the first quarter was $0.00. During the quarter, the Company announced: - The sale of its 51% interest in its Jamaica wireless business and an agreement to sell its 60% interest in its Jamaica Internet service provider business. The sale reduced consolidated debt by $45.1 million. The Jamaica operations incurred EBITDA losses of approximately $0.9 million in the first quarter. The Company recorded a $2.4 million gain on the sale of the Jamaica wireless business. - The appointment of Thomas J. Fitzpatrick to the position of executive vice president and chief financial officer. The Company's wireless subscribers at August 31, 2002 were 883,800, compared to 803,200 on the same date last year, an increase of 10%. Caribbean Wireless subscribers decreased 16,700 during the quarter due primarily to the loss of 30,200 subscribers in the divested Jamaica operation. U.S. Wireless subscribers decreased by 6,300 during the quarter due primarily to a reduction in prepaid subscribers. Caribbean Broadband switched access lines reached 36,000 and dedicated access line equivalents were 165,200 at quarter end, up 46% and 15%, respectively, from the same quarter last year. "We are very pleased with the significant year-over-year improvement in financial performance. Targeting the most profitable customers with superior service was the critical driver of this growth," said Michael J. Small, chief executive officer. "We are pleased to welcome Tom Fitzpatrick to Centennial." For the quarter, U.S. Wireless revenues were $93.1 million and EBITDA was $45.1 million. EBITDA increased by 18% from the prior year due to significantly improved margins on retail revenue. Approximately 80% of our U.S. Wireless subscribers now use a digital phone, which has facilitated a 43% increase in average minutes of use per customer over the last year. Also for the quarter, total Caribbean revenues were $98.8 million and EBITDA was $30.7 million, up 19% and 25%, respectively from the same quarter last year. Caribbean Broadband revenues for the quarter reached $35.7 million and EBITDA reached $9.8 million, up 12% and 47% respectively from same quarter last year. The Company adopted Statement of Financial Accounting Standards No. 142 effective June 1, 2002. As a result, previously recorded goodwill and other intangible assets with indefinite lives will no longer be amortized but will be subject to impairment tests. Depreciation and amortization expense for the quarter ended August 31, 2002 would have been $6.1 million higher in the absence of SFAS No. 142. The aggregate effect of ceasing amortization decreased net loss and loss per basic and diluted share by $4.5 million and $0.05, respectively. Centennial is one of the largest independent wireless telecommunications service providers in the United States and the Caribbean with approximately 17.1 million Net Pops and approximately 883,800 wireless subscribers. Centennial's U.S. operations have approximately 6.0 million Net Pops in small cities and rural areas. Centennial's Caribbean integrated communications operation owns and operates wireless licenses for approximately 11.1 million Net Pops in Puerto Rico, the Dominican Republic and the U.S. Virgin Islands, and provides voice, data, video and Internet services on broadband networks in the region. Welsh, Carson Anderson & Stowe and an affiliate of the Blackstone Group are controlling shareholders of Centennial. For more information regarding Centennial, please visit its Web sites at http://www.centennialcom.comand http://www.centennialpr.net CHINA ENTERPRISES: Net Loss Widens 28.3% to $2.8MM in First Half ---------------------------------------------------------------- China Enterprises Limited (NYSE: CSH) announced its unaudited condensed consolidated results for the six months ended June 30, 2002. Revenues for the six months ended June 30, 2002 slide-up 7.2% to Rmb1,46 million (US$176.4 million) from Rmb1,363.1 million recorded in the same period last year. Total net loss reaches Rmb23.1 million (US$2.8 million), up 28.3% from Rmb18 million in the corresponding year-ago period. Revenues, operating income, loss from continuing operations and loss from discontinued operations for the six months ended June 30, 2001 have been restated from amounts previously reported to reflect the effect of discontinued operations as of June 30, 2001. Please refer to Note 1 to the attached Financial Highlights for details. For the period under review, the Company has successfully diversified its business outside the tire manufacturing and trading sectors through the acquisition of a substantive stake in Ananda Wing On Travel (Holdings) Limited, a leading travel operator based in Hong Kong whose shares are listed on The Stock Exchange of Hong Kong Limited. The investment was accounted as an investment in affiliate companies in the interim results. In the fourth quarter of fiscal 2001, the Company entered into a share transfer agreement with a third party to dispose of its entire interest in Yantai CSI and the respective shareholder's advance of Rmb20.2 million for an aggregate consideration of Rmb25.5 million. The approval from the relevant governmental authorities has been obtained in late January 2002 and the Company transferred substantially all its risks and benefits of ownership of Yantai CSI to the buyer. The Company recognized a net realized gain on such disposition of Rmb7.8 million and has ceased to account for the results of operations and the assets and liabilities of the factory from the disposal date. The sale proceeds were fully received by the Company in cash in August 2002. In January 2002, the Company also signed a transfer agreement to sell its entire interest in Shandong Synthetic to its Chinese joint venture partner for a consideration of Rmb10,000. The sale was considered as completed in July 2002 as approval from the relevant governmental authorities has been obtained and the Company transferred substantially all its risks and benefits of ownership of the factory to the buyer in early July 2002. During the period, tire prices remained flat amidst the highly competitive tire market but the prices of major raw materials such as natural rubber and nylon cord have moved up. Despite the above, the Company was able to maintain a 7.2% revenue growth with revenue climbed up to Rmb1.46 billion as compared to the Rmb1.36 billion recorded in the same period last year due to the Company efforts to reorganize its product strategy into marketable and higher margin products and discontinue those of lower profit margins. There was a notable increase in the sales of radial tires of 22.1% and bicycle tires of 18.3%. Gross profit margin improved from 12.97% to 13.49%. The Company was able to control the rising cost of production while benefiting from the sales of higher margin products at the same time. However, it is worth noting that the tension in the Middle East may lead to an upward trend in crude oil prices as well as a continuing price increase in the natural rubber prices. In view of the above, the present profit margin achieved for these six months may not be maintained unless general market selling prices can be adjusted to compensate for the rising production costs. Compared to the same period last year, selling and administrative expenses decreased by 27.6% to Rmb114.9 million. This significant improvement can be attributed to: the discontinuance of free delivery services, management's stringent cost cutting efforts and the implementation of more efficient and effective administrative and marketing strategies. Loss from continuing operations increased to Rmb27.0 million compared to Rmb1.5 million last year. It comprises an impairment loss provision for the long-lived assets of Yinchuan CSI amounting to Rmb174.4 million due to continued recurring losses incurred by Yinchuan CSI, a gain of Rmb37.1 million upon an increase in fair value of the convertible options in the convertible note of Ananda and the Company's share of losses of Ananda in an amount of Rmb3.6 million since its acquisition on April 19, 2002. The downturn of the Hong Kong economy and the September 11, 2001 incident led to a general decrease in consumer consumption in Hong Kong and a change of customer's preference to short distance journeys. In addition, the second quarter of a year is generally a low season in the travel industry. All these facts contributed to affect the performance of Ananda in the quarter results. Income from discontinued operations increased to Rmb3.9 million in the half year ended 2002 compared with a loss of Rmb16.6 million in the half year ended 2001. It represented the operating results of the radial tire factory of Double Happiness, Shandong Synthetic and Yantai CSI up to the disposal date and a gain on disposal of Yantai CSI amounting to Rmb7.8 million in the first half year of 2002. For the half-year ended June 30, 2002, the Company recorded a consolidated net loss of Rmb23.1 million (2001: Rmb18.0 million). In late August 2002, the Company decided to reengineer the operation of Yinchuan CSI. The Company is actively engaged in negotiations with its Chinese joint venture partner to formulate different alternatives for the future operations of Yinchuan CSI. No concrete plan has yet been agreed among all parties as at the report date. The New York Stock Exchange informed the Company on September 19, 2002 that the NYSE intends to suspend trading in the Company's Common Stock prior to the Exchange's opening on September 27, 2002 for a 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. COMDIAL CORP: Raises a Total of $3.95MM from Bridge Financing ------------------------------------------------------------- As previously disclosed Comdial Corporation conducted closings on its private placement of 7% senior subordinated secured convertible promissory notes in the aggregate principal amount of $3,475,000.00 pursuant to Subscription Agrements which provide for up to $4 million of bridge financing to the Company. On September 9, 2002, the Company closed on an additional $475,000 of Bridge Notes. This sale brings the total raised to date from the Bridge Financing to $3,950,000.00. Proceeds from this sale will be used for working capital and product development and delivery. The holders of the Bridge Notes are eligible to convert 13.33% of the principal amount of the Bridge Note into shares of common stock at a conversion price of $0.01 per share. Pursuant to the terms of the previously disclosed advisory agreement between the Company and Commonwealth Associates, LP, and as a result of the most recent closing of the Bridge Notes, the Company issued additional warrants to Commonwealth to acquire 242,017 shares of common stock at an exercise price of $0.01 per share. Comdial Corporation, headquartered in Sarasota, Florida, develops and markets sophisticated communications solutions for small to mid-sized offices, government, and other organizations. Comdial offers a broad range of solutions to enhance the productivity of businesses, including voice switching systems, voice over IP (VoIP), voice processing and computer telephony integration solutions. For more information about Comdial and its communications solutions, please visit its Web site at http://www.comdial.com * * * Debt Restructuring On June 21, 2002, ComVest entered into an agreement with Comdial's senior bank lender to purchase the bank's approximately $12.7 million senior secured debt position, outstanding letters of credit of $1.5 million, and 1,000,000 shares of Series B Alternate Rate Convertible Preferred Stock (having an aggregate liquidation preference of $10.2 million) for a total of approximately $8.0 million. Although there can be no assurances, it is expected that this buy-out by ComVest, which is subject to closing conditions, will be completed during 2002. In connection with its debt restructuring, Comdial will seek additional longer term financing which it expects will be in the form of a new senior bank loan and other debt or equity funding to be raised during 2002. It is anticipated that the Bridge Financing will be replaced by or convert into this subsequent longer term financing. There can be no assurance that the Company will be successful in obtaining additional financing or that the terms on which any such funding may be available will be favorable to the Company. Nasdaq Delisting As a result of its immediate convertibility into shares of common stock, the issuance of the Bridge Notes required shareholder approval under the corporate governance requirements of Nasdaq's Marketplace Rules. The failure to obtain shareholder approval prior to the issuance of the Bridge Notes has resulted in the Company's shares being delisted from the Nasdaq SmallCap Market(R). The Company anticipates that its common stock will be quoted on the NASD's OTC-BB. Nasdaq determined that the Company was not eligible for immediate listing on the OTC-BB because part of the delisting order related to public interest concerns regarding the substantial dilution. Accordingly, the Company's stock currently trades on the Pink Sheets Electronic Quotation Service. The application to be quoted on the OTC-BB must be filed by one or more broker-dealers and the Company must meet certain requirements, including that its filings under the Exchange Act must be current. There can be no assurance that the Company's stock will be quoted on the NASD's OTC-BB in the future, in which case the Company's stock will continue to trade through the pink-sheets. COMDISCO INC: Balks at Sungard's Move to Transfer Texas Property ---------------------------------------------------------------- Pursuant to the Acquisition Agreement between SunGard and the Reorganized Comdisco, Inc., the Debtors agreed to transfer the Availability Solutions facility and real property located at 3001 Red Hawk Drive in Grand Prairie, Texas to SunGard. SunGard now claims that a two-acre parcel of real property located at 2900 Eagle Drive in Grand Prairie, Texas should have been included in the Agreement and conveyed along with the Red Hawk Property. SunGard contends that the Eagle Drive Property was held "primarily for use" in the Debtors' Availability Solutions business and should have been conveyed pursuant to Section 1.1 of the Agreement. Felicia Gerber Perlman, Esq., at Skadden, Arps, Slate, Meagher & Flom, in Chicago, Illinois, argues that SunGard's Motion should be denied for these reasons: -- the Agreement provided for the conveyance of the Red Hawk Property only, and not the Eagle Drive Property. The Agreement contemplated the transfer of all property held primarily for use in the Reorganized Debtors' Availability Solutions business. Considering that SunGard had professionals conducting multiple reviews of the Debtors' assets and attended tours of the facilities used in the Reorganized Debtors' Availability Solutions business, SunGard should have known what real property was included in the Agreement; -- the Eagle Drive Property is a separate, undeveloped piece of property and should not be conveyed. The two parcels of land are located on different roads, have different addresses and separate legal descriptions and are separated by a curb. Both properties are taxed separately and have separate tax identification numbers. The Reorganized Debtors' purchase of the Red Hawk Property is separated by five years from the purchase of the Eagle Drive Property; -- the Eagle Drive Property was not used in the Reorganized Debtors' Availability Solutions business. The Eagle Drive Property was not used and was never intended to be used as a parking lot. The Eagle Drive Property was purchased by the Debtors for use in their leasing business which is distinct and separate from the Availability Solutions business; and -- specific performance is not warranted because the Agreement clearly specified the Red Hawk Property, but not the Eagle Drive Property. Therefore, the Debtors ask the Court to deny SunGard's request. (Comdisco Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONTINENTAL AIRLINES: Blaylock Begins Coverage with HOLD Rating --------------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of Continental Airlines Inc. (NYSE: CAL) with "hold" ratings. Mr. Neidl delayed initiating coverage of Continental Airlines until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. In his equity reports, the Company has enough liquidity to carry it through to next year. Reasons for Mr. Neidl's "hold" recommendations include: -- CAL -- Continental has code-sharing and marketing agreements with Northwest and Delta which help cut costs and increase revenues. Its hubs at Newark Liberty Airport, Houston InterContinental Airport and Cleveland Airport can support growth in a stronger economy. Mr. Neidl also cites the reasons why he is not optimistic on the industry in the short-term: -- The disappointing pace of economic recovery during the summer, and no clear direction yet as to when the full recovery will come -- General stock market weakness and continuing large institutional sellers -- The slowdown in the industry recovery as reflected in the continuing weak traffic and yield numbers -- Continuing high oil prices at around $30 barrel -- The threat of conflict in the Middle East and its possible effect on travel and oil prices -- Additional costs and inconvenience on the traveling public of beefed-up security procedures continue to affect operations -- A certain segment of the traveling public's continuing fear of flying due to terrorism -- The threat of a major industry player, UAL Corp., going bankrupt, and its possible effect on the rest of the industry -- The continuing uncertainty and increased costs of insurance -- The normally slow fall seasonal weakness of airline travel and stock prices will also probably have a continuing negative effect on stock prices. Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P., has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P., is a member of the National Association of Securities Dealers, CRD number 35669. Continental Airlines' 8% bonds due 2005 (CAL05USR1) are trading at 94.281 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CAL05USR1for real-time bond pricing. COOKER RESTAURANT: Chapter 11 Bankruptcy Plan is Confirmed ---------------------------------------------------------- The Cooker Restaurant Corporation's (OTC Bulletin Board: CGRT) plan of reorganization was approved by the Federal Court in Columbus, Ohio on Wednesday, September 11, 2002. CRC entered Chapter 11 in May of 2001 with a total debt of $85 million. The new Company has debt of $34 million. The Company owns and operates 35 restaurants in Tennessee (Nashville & Murfreesboro - 7), in Ohio (Cleveland - 7, Columbus - 5, Cincinnati - 3, Dayton - 2 & Toledo- 2) and in Michigan (Detroit - 6 & Ann Arbor - 1), in Virginia (Chesapeake 1) and in Florida (Orlando - 1). The Company also has raised $4 million in new equity capital, including a large infusion from River Capital Partners, Atlanta, Georgia. The Cooker specializes in recipes made from scratch and serves lunch and dinner daily. The Cooker menu features innovative recipes for traditional products like meatloaf and pot roast, along with a variety of sandwiches, salads, fish, steaks, appetizers and desserts. The Cooker has over 2800 employees in the core markets of Tennessee, Ohio and Michigan. Henry Hillenmeyer, Chairman & CEO, notes, "Our emergence from Chapter 11 allows us to build on the great and already established Cooker reputation for delicious home-styled foods at very moderate prices. Our team of managers and employees are totally customer focused. We encourage everyone to come on by The Cooker ... where everything's in great taste!" Dan Clay, COO, offers, "We are very grateful to all of the managers and crew members who have worked so hard over the past 16 months to improve upon our made-from-scratch tradition. We remain committed to Cooker's original vision of home-styled foods in a comfortable setting with fast friendly service, all backed by our 100% satisfaction guarantee." The Cooker Restaurant Corporation is headquartered in Nashville, Tennessee, under the same roof as the original Cooker Restaurant. CORTECH: Fails to Fulfill Nasdaq Continued Listing Requirements --------------------------------------------------------------- Cortech Inc., (NASDAQ: CRTQ) received a Nasdaq Staff Determination on September 24, 2002 indicating that the Company fails to comply with the Minimum Market Value of Publicly Held Shares requirement for continued listing set forth in Marketplace Rule 4450(e)(1), and that its securities are, therefore, subject to delisting from The Nasdaq National Market. Cortech has applied to transfer its securities to The Nasdaq SmallCap Market. The initiation of the delisting proceedings will be stayed pending the Nasdaq Staff's review of the Company's transfer application. While the Company believes it meets the current requirements for inclusion on The Nasdaq SmallCap Market, there can be no assurance that the Nasdaq Staff will approve the transfer application. Cortech has 3,616,380 shares of common stock outstanding. DELTA AIRLINES: Blaylock Kicks-Off Coverage with "Hold" Rating -------------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of Delta Airlines, Inc. (NYSE: DAL) with "hold" rating. Mr. Neidl delayed initiating coverage of the airline until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. In his equity reports, Delta Airlines should rebound once the economy recovers. The airline has enough liquidity to carry them through to next year. Reasons for Mr. Neidl's "hold" recommendations include: -- DAL -- EBITDA is expected to increase in 2002 to $369 million and in 2003 to $1.2 billion (before CAPEX). Delta's code-sharing and marketing agreements with Northwest and Continental are expected to increase its revenues. Mr. Neidl also cites the reasons why he is not optimistic on the industry in the short-term: -- The disappointing pace of economic recovery during the summer, and no clear direction yet as to when the full recovery will come -- General stock market weakness and continuing large institutional sellers -- The slowdown in the industry recovery as reflected in the continuing weak traffic and yield numbers -- Continuing high oil prices at around $30 barrel -- The threat of conflict in the Middle East and its possible effect on travel and oil prices -- Additional costs and inconvenience on the traveling public of beefed-up security procedures continue to affect operations -- A certain segment of the traveling public's continuing fear of flying due to terrorism -- The threat of a major industry player, UAL Corp., going bankrupt, and its possible effect on the rest of the industry - The continuing uncertainty and increased costs of insurance - The normally slow fall seasonal weakness of airline travel and stock prices will also probably have a continuing negative effect on stock prices Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P., has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P. is a member of the National Association of Securities Dealers, CRD number 35669. DIVINE INC: Expects to Close Merger Transaction with Viant Today ---------------------------------------------------------------- Viant Corporation (Nasdaq: VIAN), a provider of digital business solutions, and divine, inc. (Nasdaq: DVIN), a leading provider of solutions for the extended enterprise, announced that the per share cash distribution to be paid in connection with Viant's pending merger with divine will be $1.4625, assuming that the merger closes on September 27, 2002, as is currently anticipated by the parties. The aggregate cash distribution payable to each Viant stockholder will be rounded to the nearest whole cent. If the merger closes on September 27 as anticipated, the payment date for the cash distribution is expected to be October 3, 2002, and the distribution will be paid to all Viant stockholders of record as of September 27, 2002. If the closing of the merger is delayed, Viant will establish new record and payment dates for the cash distribution. If the merger does not close, the cash distribution will not be paid. The final per share stock consideration to be paid in connection with the pending merger, assuming that the merger closes on September 27, will be available on Viant's toll-free number, 877 842-6824 (outside the U.S.: 617 531-3606) following the close of business on September 25, 2002. Viant, a professional services organization providing digital business solutions, applies industry insight and technology understanding to help clients leverage assets for better business performance. Founded in 1996, Viant employs professionals from the creative, technology and strategy disciplines and maintains offices in Boston, Los Angeles and New York. More information about Viant can be found at http://www.viant.com divine, inc., (Nasdaq: DVIN) is focused on extended enterprise solutions. Through professional services, software services and managed services, divine extends business systems beyond the edge of the enterprise throughout the entire value chain, including suppliers, partners and customers. divine offers single-point accountability for end-to-end solutions that enhance profitability through increased revenue, productivity, and customer loyalty. The company provides expertise in collaboration, interaction, and knowledge solutions that enlighten, empower and extend enterprise systems. Founded in 1999, divine focuses on Global 5000 and high-growth middle market firms, government agencies, and educational institutions, and currently serves over 20,000 customers. For more information, visit the company's Web site at http://www.divine.com divine, inc.'s June 30, 2002 balance sheet shows that its total current liabilities exceeds total current assets by about $50 million. D.R. HORTON: Fitch Assigns Initial BB+ Senior Unsec. Debt Rating ---------------------------------------------------------------- Fitch Ratings initiates coverage of D.R. Horton, Inc. Fitch assigns a 'BB+' rating to the senior unsecured debt. The rating applies to approximately $1.87 billion in outstanding senior notes as well as the company's $805 million revolving credit agreement. A rating of 'BB-' has been assigned to the company's outstanding $495 million senior subordinated notes. The Rating Outlook is Stable. Ratings for DHI are based on the company's above average growth during the recent economic expansion, execution of its business model, steady capital structure and geographic and product line diversity. The company has been an active consolidator in the homebuilding industry which has kept debt levels a bit higher than its peers. But management has also exhibited an ability to quickly and successfully integrate its many acquisitions. The company is currently digesting its largest acquisition (Schuler Homes) and is unlikely to make additional acquisitions over the coming twelve months. Risk factors include the inherent (although somewhat tempered) cyclicality of the homebuilding industry. The ratings also manifest the company's aggressive, yet controlled growth strategy, moderate bias towards owned as opposed to optioned land and its relatively heavy speculative building activity (which has lessened of late). The company has expanded EBITDA margins over the past several years on healthy price increases, volume improvements and steady operating expense ratios and has produced record levels of home closings, orders and backlog in excess of expectations for this unprecedented lengthy upswing in the housing cycle. EBITDA margins have increased from 9.5% in 1997 to 12.6% in 2001 and are 11.9% currently, including Schuler Homes which was acquired in February of 2002. Although DHI has benefited from strong economic conditions, a degree of margin enhancement is also attributable to broadened new product offerings. In addition, margins have benefited from purchasing, access to capital and other scale economies that have been captured by the large national homebuilders in relation to smaller builders. These economies, greater geographic diversification (than in the past), consistency of performance over an extended period of time, low cost operating structure and a return-on-capital focus provide the framework to soften the margin impact of declining market conditions when they occur. During the past five years acquisitions have accounted for half of DHI's growth. That pattern is expected to continue in the future. DHI's inventory consistently has been 1.6x to 1.8x homebuilder debt. The company's inventory turns are a bit low relative to its peers, reflecting some bias towards owned lots. As of 6/30/02 57.1% of its 140,054 lot supply was owned with the balance controlled through options. Total lots owned and controlled represent a 4.5 year supply based on current production rates. Debt-to-capital pretty consistently declined from 61.0% at the end of 1998 to 56.0% at present. DHI's debt-to-EBITDA remains somewhat high relative to its peers. However, absent major acquisitions and given high cash flow trends, DHI's leverage ratios are likely to decline. DHI maintains an $805 million revolving credit facility of which $550 million were available at the end of the second quarter. The revolving credit agreement matures in January 2006. The company has irregularly purchased moderate amounts of its stock in the past. DHI has $150 million in long term debt maturing in 2004 and $200 million maturing in 2005. DYNEGY: S&P Says Accounting Fine Will Not Affect Credit Profile --------------------------------------------------------------- Standard & Poor's Ratings Services said that Dynegy Inc.'s (B+/Watch Neg/--) agreement to pay $3 million in fines related to its accounting and financial reporting practices will not affect the firm's credit profile. Although the fines are a cash outlay, the amount is not material. Dynegy Holdings Inc.'s 8.75% bonds due 2012 (DYN12USR1), DebtTraders reports, are trading at 32 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=DYN12USR1for real-time bond pricing. ENRON CORP: Goldendale Asks Court to Appoint NEPCO Examiner ----------------------------------------------------------- Goldendale Energy Inc., an affiliate of Calpine Corporation, asks the Court to direct the appointment of an examiner pursuant to Sections 105 and 1104(c) of the Bankruptcy Code for the estate of National Energy Production Corporation. Martin G. Bunin, Esq., at Thelen, Reid & Priest LLP, in New York, reminds the Court that NEPCO commenced its Chapter 11 case on May 20, 2002. It was procedurally consolidated for administrative purposes with the Chapter 11 cases of Enron Corp. et al. Three other affiliates of Enron filed Chapter 11 petitions on May 20, 2002: -- NEPCO Power Procurement Company, -- NEPCO Services International Inc., and -- Enron Power & Industrial Construction Company According to Mr. Bunin, NEPCO is primarily engaged in the business of lump sum engineering, procurement construction of electrical power generation stations in North America. NEPCO continues to operate its business and manage its properties as a debtor in possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. In March 2002, Mr. Bunin informs the Court that GEI commenced an arbitration proceeding in the State of Washington against NEPCO. GEI seeks to arbitrate a dispute arising from an engineering, procurement and construction contract dated February 13, 2001 pursuant to which NEPCO, as contractor, agreed to design and construct a power plant located in Goldendale, Washington for GEI, as owner. In April 2002, NEPCO and GEI executed an agreement to arbitrate the dispute. GEI seeks to recover $39,619,036 in the arbitration, consisting of: -- amounts paid to NEPCO that NEPCO was required to pay to subcontractors, suppliers and others, but failed to pay, and -- overpayments by GEI to NEPCO. Mr. Bunin tells Judge Gonzalez that while NEPCO acknowledges that it was overpaid, "it disagrees as to the amount and has refused to make any payments to GEI". Mr. Bunin also notes that over $39,000,000 of unsecured claims is listed against the NEPCO Debtors and yet GEI's claim does not appear on the List of Creditors Holding 20 Largest Unsecured Claims against NEPCO. NEPCO Chief Executive Officer G. Brian Stanley, in his Affidavit, admits that "more than $360,000,000 in payments to the NEPCO Debtors, made by customers pursuant to the [engineering, procurement and construction contracts] were transferred to Enron Corp., as a result of cash sweeps under the centralized cash management system." These cash sweeps occurred shortly before the filing of Enron Corp.'s Chapter 11 petition on December 2, 2001. Together with the other effects of Enron Corp.'s loss of credit rating and Chapter 11 filing, "the loss of these substantial funds through the centralized cash sweep . . . caused incurable events of defaults under the [engineering, procurement and construction contracts]." These defaults made it "increasingly difficult for the NEPCO Debtors to continue business operations" and resulted in their chapter 11 filings. Based on the Stanley Affidavit, GEI contends that an examiner should be appointed for NEPCO pursuant to Section 1104(c) of the Bankruptcy Code to investigate the admitted prepetition cash sweeps by Enron Corp., of more than $360,000,000 from NEPCO and/or the NEPCO Debtors and the return by Enron Corp. to NEPCO and/or the other NEPCO Debtors of those funds for the benefit of the creditors of NEPCO and/or the other NEPCO Debtors. GEI asserts that an examiner should, at a minimum, investigate: (i) when and in what amounts Enron made the cash sweeps totaling more than $360,000,000 shortly before Enron Corp. filed its Chapter 11 petition, (ii) the sources of the NEPCO cash that was swept, (iii) the disposition of the cash by Enron Corp., including but not limited to where it was deposited and the details of its use, if any, (iv) whether any fraud, dishonesty, incompetence, misconduct, mismanagement or irregularity by NEPCO or Enron Corp. occurred in connection with the cash sweeps or any use of the cash, (v) whether or not the swept cash can be traced, (vi) whether or not the factual and legal predicates exist for the imposition of a constructive trust on the more than $360,000,000 swept, and (vii) how funds returned by Enron Corp. to NEPCO should be distributed to the creditors of NEPCO. Section 1104(c) of the Bankruptcy Code provides that: "On request of a party in interest or the United States trustee, and after notice and a hearing, the court will order the appointment of an examiner to conduct such an investigation of the debtor as is appropriate, including an investigation of any allegations of fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor of or by current or former management of the debtor, if -- (1) such appointment is in the interests of creditors, any equity security holders, and other interests of the estate; or (2) the debtor's fixed, liquidated, unsecured debts, other than debts for goods, services, or taxes, or owing to an insider, exceed $5,000,000. Mr. Bunin clarifies that GEI's fixed, liquidated, unsecured claim against NEPCO of $39,619036 for the return of overpayments is not a claim for goods, services, taxes or amounts owing to an insider and far exceeds the $5,000,000 statutory floor set forth in Section 1104(c)(2) of the Bankruptcy Code. GEI believes that there are other fixed, liquidated, unsecured claims against NEPCO, not for goods, services, taxes or amounts owing to insiders, that individually or in the aggregate exceed $5,000,000. Mr. Bunin notes that: -- J.P. Morgan Chase Bank has an unsecured claim against NEPCO for $140,000,000 arising from the draw down of letters of credit issued by J.P. Morgan Chase Bank on behalf of NEPCO; and -- Westdeutsche Landesbank Girozentrale has an unsecured claim against NEPCO for $19,954,000 arising from the draw down of a letter of credit it issued for the benefit of TPS McAdams LLC on behalf of NEPCO and NEPCO Power. (This claim is the subject of adversary proceeding no. 02-02009 pending in the Enron Corp. Chapter 11 cases and entitled "Westdeutsche Landesbank Girozentrale v. Enron Corp.") Accordingly, Mr. Bunin asserts, the appointment of an examiner for the estate of NEPCO is mandatory under Section 1104(c)(2) of the Bankruptcy Code. GEI further contends that the appointment of an examiner for the estate of NEPCO warranted because NEPCO: -- has, in effect, been in liquidation since the admitted $360,000,000 in cash sweeps occurred prior to Enron Corp.'s Petition Date, -- has no current construction projects underway, -- is proposing to sell substantially all its remaining assets, and -- has insufficient staff to investigate and recover the $360,000,000 swept by Enron Corp. Moreover, Mr. Bunin continues, NEPCO is controlled by its parent, Enron Corp.: -- the sweeper of the cash, -- the sole beneficiary of the sweeps, and -- the entity which, by reason of the cash sweeps, forced NEPCO out of business. "Enron Corp. can't be relied on to investigate this matter and return the funds to NEPCO," Mr. Bunin says. (Enron Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE TECHNOLOGIES: Court Extends Plan Exclusivity Until Dec. 11 ---------------------------------------------------------------- Exide Technologies and its debtor-affiliates obtained extension of its Exclusive Periods. The U.S. Bankruptcy Court for the District of Delaware grants the Debtors the exclusive right to file and propose a Chapter 11 plan until December 11, 2002, and the exclusive right to solicit acceptances of that plan from their creditors until February 10, 2003. Exide Technologies is the world's largest industrial and transportation battery producer and recycler, with operations in 89 countries. The Debtors filed for Chapter 11 reorganization on April 14, 2002. FFP MARKETING: Accepting Sealed Bids for Non-Core Assets -------------------------------------------------------- FFP Marketing, which operates 424 convenience stores, truck stops and gas-only fuel concessions in 11 states, is selling 96 service stations, 65 c-stores and five truck stops, in a sealed bid offering National Real Estate Clearinghouse scheduled for December 5, 2002, F&D Reports said. Alimentation Couche-Tard, a Canadian convenience store operator, is reported to be eyeing on the units. FFP Marketing owns 424 convenience stores, truck stops, and retail fuel concessions at Company-operated and independently operated stores in Texas and 10 other central, southern, and southwestern states. The Company also sells motor fuel on a wholesale basis, operates a fuel processing plant and terminal, and sells money orders under the name Financial Express Money Orders. Its common stock is listed under the symbol "FMM" on the American Stock Exchange. * * * As reported in the June 12, 2002 issue of the Troubled Company Reporter, FFP Marketing, at year end 2001 and the end of the first quarter of 2002, was not in compliance with a financial covenant contained in the loan agreements for its long-term notes payable. The Company has made all payments required under its loan documents and is currently seeking to obtain, and expects to obtain, a waiver of such non-compliance in the next two weeks. At that time the Company anticipates filing its Form 10-K annual report for 2001 and its Form 10-Q quarterly report for the first quarter of 2002. The failure to meet the above financial covenant under its long-term notes payable also causes the Company to be in non-compliance under its revolving credit facility, although the Company is in compliance with its financial covenant under the loan agreement for that facility. The Company anticipates that funding will be continued under its revolver until the waiver is obtained. There can be no assurance at this time, however, that the waivers will be obtained. FLAG TELECOM: Restructures Lucent, Ciena & Other Contracts ---------------------------------------------------------- FLAG Telecom Holdings Limited and its debtor-affiliates seek the Court's authority certain amended executory contracts with KT Corporation and Reach Networks Hong Kong Ltd., Ciena Communications Inc., Lucent Technologies, and Tyco Contracting Ltd. At the same time, the Debtors ask the Court to approve the related settlement agreements with these major creditors. Conor D. Reilly, Esq., at Gibson, Dunn & Crutcher LLP, explains that these creditor compromises reflect the results of the Debtors' efforts to: -- restructure their major payment obligations to certain creditors, -- resolve significant claims asserted in these cases, and -- avoid large up-front cure costs in connection with the assumption of certain critical executory contracts. Approval of the creditor compromises, Mr. Reilly asserts, represents a key component to the feasibility of the Plan, because it will allow the Debtors to continue to maintain important contractual relationships and to receive services and products important to their business operations going-forward while reducing the amount of creditor claims, stretching out payment schedules, and generally reducing future operational costs. The Agreements Specifically, the Debtors ask the Court to approve these four creditor compromises: (1) Amendment and Assumption of Agreements with KT Corp., formerly known as Korea Telecom The Debtors seek the Court's authority to amend and assume certain contracts with KT Corp. that pertain to the Debtors' use of Korean landing stations that represent components of both the FLAG North Asian Loop and FLAG Europe-Asia Network submarine fiber optic cable systems. With respect to the FNAL system, the Debtors seek the Court's authority to assume the FNAL Landing Station Agreement among FLAG Asia Limited, KT Corp. and REACH NETWORKS HONG KONG LTD., as successor-in-interest to Level 3 Communications Holdings (Korea) Ltd., dated May 28, 2001, pursuant to the Letter Amendment to Landing Station Agreement among FASL, KT, and REACH, dated September 13, 2002. The FNAL Letter Amendment amends and restates the FNAL Landing Station Agreement and reschedules certain payment obligations of FASL to KT with respect to the construction of the Landing Station in Busan, Korea amounting to $3,012,897. Pursuant to an invoice issued by KT on April 12, 2002, FASL owes KT $2,875,000 for prepetition construction services performed by KT pursuant to the FNAL Landing Station Agreement. In addition, FASL owes KT $137,897 for additional prepetition work requested of KT during the construction of the FNAL Landing Station. Pursuant to the FNAL Letter Amendment, FASL, KT and REACH have agreed to make the remaining payments in five monthly installments of $602,580, free of interest. The first two FNAL monthly payments are due on September 30, 2002, and the remaining three FNAL monthly payments thereafter will be due on the last business day of each of October 2002, November 2002, and December 2002. The FNAL Letter Amendment also refers to an Operation and Maintenance Escrow Agreement between Reach and FASL, which requires FASL to fund an escrow account to cover certain expenses related to the FNAL Landing Station. The FNAL Letter Amendment provides that Reach agrees to step in and apply the monies in the escrow account to make p payment of any of the FNAL monthly payments under the amended FNAL Landing Station Agreement, upon non-payment by FASL, within 10 business days of receiving a written notice of any payment default from KT. The FNAL Letter Amendment also entitles KT to suspend any services at the FNAL Landing Station in the event that: (a) FASL defaults on any of the FNAL monthly payments, (b) Reach has not exercised its step in rights under the Escrow Agreement, and (c) the FNAL monthly payments have not been made in full by January 31, 2003. FEA Landing Party Agreement; FEA Access Charges Agreement --------------------------------------------------------- The Debtors seek the Court's authority to assume, as amended, a Landing Party Agreement, dated December 14, 1994 between Flag Limited and KT and an Access Charges Letter Agreement, dated April 4, 2001, between FL and KT pursuant to the FEA Amendment Letter, dated September 13, 2002, between FL and KT. The FEA Letter Amendment reschedules certain payments, totaling $1,182,041, payable by FL to KT under the FEA Landing Party Agreement and the FEA Access Charges Agreement. Pursuant to the FEA Landing Party Agreement, KT agreed to construct the FEA Landing Station in exchange for certain payments from FL. Under an invoice issued by KT to FL on August 25, 2000, FL owes KT $854,787, which derives from certain charges related to FL's obligations to pay capital and other costs related to the FEA Landing Station. In addition, pursuant to invoices issued by KT on November 15, 2000, February 10, 2001, May 25, 2001, December 17, 2001, and March 18, 2002, FL owes KT $327,254 for operation and maintenance fees related to the FEA Landing Station. The FEA Letter Amendment reschedules the payment of these obligations totaling $1,182,041 so that they are payable in five monthly installments of $236,408, free of interest and other charges. The first two FEA monthly payments will be due on September 30, 2002 and the remaining three FEA monthly payments thereafter will be due on the last business day of each month following September 2002. Full payment of the five monthly payments will be deemed to discharge FL from all and any obligations it may have under the Original Agreements with respect to the FEA Original Payments and the related original payment schedule. Finally, the FEA Letter Amendment provides that in the event that FL defaults in any payment on any of the FEA Monthly Payments and the FEA Monthly Payments have not been made in full by January 31, 2003, KT has the right to suspend its services with respect to the FEA Access Charges Agreement. (2) Amendment and Assumption of Agreement with Ciena Communications, Inc. The Debtors seek the Court's authority to amend and assume the Agreement of Sale By and Between Ciena Communications, Inc. and FASL dated May 10, 2001, as amended to date, and as amended pursuant to Amendment No. 3 to Agreement of Sale By and Between Ciena and FASL, dated as of September 13, 2002. The Ciena Amendment amends and restates the Ciena Agreement to clarify the purchase and sale obligations thereunder and to define further the maintenance relationship between the parties intended to support fault diagnosis, resolution and repair of equipment purchased by FASL from Ciena pursuant to the Agreement. Pursuant to the Ciena Agreement, Ciena agreed, among other things, to sell and ship to FASL certain equipment and software used in, among other things, undersea landing stations in the FNAL system. Ciena also agreed to provide certain installation, training, and maintenance services related to the equipment sold to FASL. In consideration, FASL agreed to purchase a defined amount of equipment, software and related services pursuant to purchase orders submitted to Ciena. Ciena has asserted claims, based on products and services provided by Ciena to FASL through June 30, 2002 under the Ciena Agreement totaling $12,992,000. In consideration for the compromise of these claims, FASL has agreed to assume the Ciena Agreement, as amended by the Ciena Amendment, and to distribute to Ciena pursuant to the Plan 1.58% of the primary common stock of reorganized FLAG Telecom Holdings Limited issued on the effective date of the Plan. In addition, the Debtors have agreed to pay Ciena $1,020,000 on the effective date of the Plan and to issue to Ciena an unsecured note issued by Reorganized Holdco in the amount of $1,000,000, with an interest rate of 7.0% (payable monthly in arrears), payable in 18 monthly installments of principal and interest beginning 30 days from the Effective Date. Finally, the Debtors have agreed to waive and release any preference actions of their estates assertable against Ciena and to exchange general mutual releases with Ciena. (3) Settlement Agreement with Lucent and Assumption of Lucent Contract The Debtors also the Court to approve their settlement agreement with Lucent Technologies, Inc. and Lucent Technologies BV, dated September 13, 2002, that calls for, among other things, the Debtors' agreement to become additional parties to the FNS Point of Presence Frame Agreement, dated August 20, 2001 by and between Lucent BV and FLAG Telecom Ireland Network Limited, a non-debtor affiliate of the Debtors. The Lucent Contract provides the overall framework for the supply by Lucent BV and its affiliates of telecommunications hardware, equipment and parts thereof, software and other licensed materials and related services to FTINL and its affiliates for use in operation of various points-of- presence within the FLAG Telecom global network, including those forming part of the FNAL cable system. Lucent Technologies, on behalf of Lucent BV and its other affiliates that supplied the Debtors under the Lucent Contract, asserted a claim against the Debtors for $5,759,471, which includes all amounts through July 31, 2002, owing under the Lucent Contract. The Debtors have disputed the claim on the basis that, among other things, it is not properly assertable against the Debtors (or payable in full under the Plan) as it arises under the Lucent Contract with FTINL, a non-Debtor. Lucent asserts that the Lucent Contract with FTINL provided only a framework for the relationship between Lucent and its affiliates and the Debtors and their affiliates and that in actual practice, the Purchase Orders created contractual relationships with various Debtors. The Debtors believe that settling the claim with Lucent as part of the bankruptcy process benefits their estates because it allows them to consensually settle this claim against an affiliate, which will further the implementation of the Plan by allowing the Debtors and FTINL to continue their operations at a reduced cost. The Debtors have agreed that the claim will be allowed for $5,420,000. On account of the claim, a non-Debtor paid Lucent, and Lucent acknowledged receipt of, $1,000,000 in June 2002, in relation to amounts due from the non-Debtor under purchase orders placed by it, pursuant to the Lucent Contract. In addition, the Debtors will pay to Lucent on the Effective Date an additional cash sum of $1,000,000. The Debtors will also issue to Lucent a $3,420,000 note. The Lucent Note will be payable in 12 monthly installments each for $285,000, commencing on the 13th day subsequent to the Plan's Effective Date. Pursuant to the Lucent Settlement Agreement, the Debtors have also agreed to assume the Lucent Contract and, thus, become additional parties thereto, and Lucent has reaffirmed its obligations to honor all warranty obligations under the Lucent Contract. Lucent has also agreed to file a Stipulation withdrawing its claim. Finally, Lucent and the Debtors have agreed to negotiate in good faith a support agreement pursuant to which Lucent will provide certain support services described in the Lucent Settlement Agreement for a fixed price capped at $18,000 per calendar month for a period of one year commencing on the Effective Date. (4) Settlement Agreement and Release with Tyco Contracting Ltd. The Debtors ask the Court to approve the Settlement Agreement and Release by and among Flag Atlantic Limited, FTHL and Tyco Contracting Ltd., dated September 13, 2002. FLAG Atlantic and Tyco are parties to a Marine Maintenance Service Agreement for the Flag Atlantic-1 Cable Network, dated June 1, 2001. Since the Debtors' Petition Dates, various disputes have arisen among FAL and Tyco as to their respective rights, duties, obligations and liabilities to one another pursuant to the Tyco Maintenance Agreement. Tyco has asserted claims against the Debtors. The Debtors have disputed the existence, amount, extent and priority of the Tyco Claims. The Debtors have negotiated a compromise of the Tyco Claims pursuant to the Tyco Settlement Agreement that calls for the: (a) affirmation, by assumption, of the Tyco Maintenance Agreement by FAL and entry into the Tyco Maintenance Agreement by FTHL, as modified as set forth in the Tyco Settlement Agreement, (b) certain payments by the Debtors to Tyco, (c) the exchange of general mutual releases between FAL, FTHL and Tyco, and (d) the assurance of the continued performance of the Repairs by Tyco for the benefit of FAL and FTHL. Pursuant to the Tyco Maintenance Agreement, Tyco has agreed to provide a program of maintenance services on a 24 hours a day, 365 days a year basis for the Debtors' undersea fiber optic cable systems. Tyco, thus, provides critical marine maintenance cable ships for the repair of defaults on the system. The Tyco Settlement Agreement calls specifically for cash payments to be made to Tyco in the amount of: (a) $1,187, and (b) payments required in accordance with certain provisions of the Settlement Agreement amending the obligations under the Tyco Maintenance Agreement. The Debtors have agreed that Tyco will be granted an Allowed Administrative Expense Claim in an amount equal to that portion of the Total Cash Consideration that is not paid when such amount is due. The Tyco Settlement Agreement also calls for FAL's assumption of and FTHL's entry into the Tyco Maintenance Agreement, as amended by the Tyco Settlement Agreement, to modify certain of FAL's payment obligations to Tyco and to suspend four months of fees otherwise due to Tyco during the bankruptcy cases. In addition, pursuant to the Tyco Settlement Agreement, certain other obligations arising under the Tyco Maintenance Agreement will be modified effective after the Effective Date as set forth in Amendment No. 1 to the Tyco Maintenance Agreement. The Amendment will result in a 30% reduction in fees payable to Tyco by the Debtors and a more flexible approach for the provision of important repair and maintenance services for the Debtors' undersea cable networks. The Settlement Agreement provides further that if the Court does not approve the Settlement Agreement, then the Debtors will support an Allowed Administrative Expense Claim in favor of Tyco in an amount equal to the Annual Fee under the unamended Maintenance Agreement prorated from July 1, 2001 through the date that of entry of the Confirmation Order, i.e. $19,904 per day. (Flag Telecom Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLAG TELECOM: S.D.N.Y. Court Confirms Plan of Reorganization ------------------------------------------------------------ FLAG Telecom Holdings Limited (OTC: FTHLQ), along with its group companies, announced that the U.S. Bankruptcy Court for the Southern District of New York has confirmed its Chapter 11 Plan of Reorganization, less than six months after FLAG Telecom filed for Chapter 11 protection. The Plan significantly reduces the Company's debt levels, provides for FLAG Telecom's worldwide business to emerge intact from Chapter 11 and will result in creditors owning the equity of the reorganized Company. As a result of this order, FLAG Telecom anticipates that the Plan of Reorganization will become effective on or about October 7, 2002, at which point FLAG will emerge from Chapter 11. About the FLAG Telecom Group The FLAG Telecom Group is a leading global network services provider and independent carriers' carrier providing an innovative range of products and services to the international carrier community, ASPs and ISPs across an international network platform designed to support the next generation of IP over optical data networks. On April 12 and April 23, 2002, FLAG Telecom Holdings Limited and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York. Also, FLAG Telecom Holdings Limited and the other companies continue to operate their businesses as Debtors In Possession under Chapter 11 protection. FLAG Telecom Holdings Limited and certain of its Bermuda-registered subsidiaries - FLAG Limited, FLAG Atlantic Limited and FLAG Asia Limited - filed parallel proceedings in Bermuda to seek the appointment of provisional liquidators to obtain a moratorium to preserve the companies from creditor actions. Provisional liquidators were appointed and part of their role is to oversee and liaise with the directors of the companies in effecting a reorganization under Chapter 11. Recent news releases and further information are on FLAG Telecom's Web site at http://www.flagtelecom.com GROUP TELECOM: CCAA Protection Extended to November 4, 2002 ----------------------------------------------------------- GT Group Telecom Inc., (TSX: GTG.B, GTG.A) has sought and obtained, from the Ontario Superior Court of Justice, an order granting it and its affiliates an extension of protection under the Companies' Creditors Arrangement Act to November 4, 2002. The purpose of the extension is to allow the Company additional time to complete a review of all of its available alternatives. Group Telecom continues to pursue a number of alternatives including a restructuring. However, as part of its application, the Company sought and obtained approval for a merger and acquisition process that will be led jointly by its Special Committee and the Monitor, PricewaterhouseCoopers. The Company has put in place with its senior lenders a protocol to manage the M&A process and that process has been implemented. Letters that outline this protocol have been sent to all qualified parties that have expressed interest in the M&A process. In addition, the Court approved a key employee retention plan as well as revised compensation arrangements for members of its Board of Directors. An extension of the U.S. preliminary injunction will be sought from the U.S. Bankruptcy Court later this morning. If obtained, a further release will be issued at that time. The Company currently has sufficient cash on hand to permit it to continue to carry on its business in the ordinary course during the restructuring period. Group Telecom is Canada's largest independent, facilities-based telecommunications provider, with a national fibre-optic network linked by 454,125 strand kilometres of fibre-optics, at March 31, 2002. Group Telecom's unique backbone architecture is built with technologies such as Gigabit Ethernet for delivery of enhanced network performance and Synchronous Optical Network (SONET) for the highest level of network reliability. Group Telecom offers next-generation high-speed data, Internet, application and voice services, delivering enhanced communication solutions to Canadian businesses. Group Telecom operates with local offices in 17 markets across nine provinces in Canada. Group Telecom's national office is in Toronto. For more information about Group Telecom, visit its Web site at http://www.gt.ca GROUP TELECOM: Wins Extension of US Court Protection to Nov. 12 --------------------------------------------------------------- GT Group Telecom (TSX: GTG.B, GTG.A) announced that the preliminary injunction issued on July 29, 2002 by the United States Bankruptcy Court in favor of it and its affiliates, has been further extended from September 25, 2002 until November 12, 2002. Group Telecom is Canada's largest independent, facilities-based telecommunications provider, with a national fibre-optic network linked by 454,125 strand kilometres of fibre-optics, at March 31, 2002. Group Telecom's unique backbone architecture is built with technologies such as Gigabit Ethernet for delivery of enhanced network performance and Synchronous Optical Network (SONET) for the highest level of network reliability. Group Telecom offers next-generation high-speed data, Internet, application and voice services, delivering enhanced communication solutions to Canadian businesses. Group Telecom operates with local offices in 17 markets across nine provinces in Canada. Group Telecom's national office is in Toronto. HA-LO INDUSTRIES: Will Not Hire New Accountants in the Interim -------------------------------------------------------------- HA-LO Industries, Inc., had previously engaged Arthur Andersen LLP as its independent public accountant. In July 2002, HA-LO was verbally informed by the engagement partner at Andersen that Andersen could not continue to serve as HA-LO's independent public accountant because of Andersen's business problems and its inability to comply with the provisions of the applicable securities rules and regulations. In addition, the engagement partner informed HA-LO that Andersen was submitting a proof of claim in HA-LO's pending bankruptcy case, which act also precludes Andersen from continuing to serve as HA-LO's independent public accountant under applicable law. HA-LO does not intend to retain new independent accountants at this time due to its current financial condition and status as a company in bankruptcy. HA-LO cannot at this time project when it might retain new independent accountants, if at all. HA-LO does not at this time intend to restate its financial results despite its prior intention to do so. As indicated above, HA-LO currently does not intend to retain new independent accountants, which would be necessary to complete an audit of its financial statements and restate its financial results. HA-LO earlier this year completed the sale of its business division based in Troy, Michigan and all of the stock of its wholly owned subsidiary HA-LO Canada, Inc. to The Beanstalk Group for an aggregate of $10 million in cash and promissory notes. The Michigan based business division had satellite offices in Orlando, Florida and Norfolk, Virginia. HA-LO Canada had offices in Toronto, Vancouver and Calgary. This sale was approved by the Delaware Bankruptcy Court on January 16, 2002. In August 2002, HA-LO engaged, subject to the approval of the Bankruptcy Court, Lincoln Partners LLC to explore a potential sale of the balance of HA-LO's business. The process is currently in the early stages and no potential buyers have been definitively identified. On May 28, 2002, an Amended Consolidated Class Action Complaint was filed in the United States District Court for the Northern District of Illinois, Eastern Division, against various former and current officers and directors of HA-LO, alleging that such individuals violated (i) Section 10(b) of the Securities Exchange Act of 1934, as amended and Rule 10b-5 promulgated thereunder and (ii) Section 20(a) of the Exchange Act, and requesting compensatory damages in an amount to be proven at trial and related costs and expenses. On July 3, 2002, HA-LO and the Official Committee of Unsecured Creditors filed a Verified Complaint in the United States Bankruptcy Court for the Northern District of Illinois, Eastern Division, against the plaintiffs in the Class Action Suit, for (i) a preliminary and permanent injunction against further prosecution of the Class Action Suit and (ii) a declaratory judgment that any proceeds from any director and officer insurance policy carried by HA-LO are the sole and exclusive property of HA-LO's bankruptcy estate. The plaintiffs in the Class Action Suit were scheduled to answer the Injunction Complaint in the Bankruptcy Court on September 18, 2002. On August 30, 2002, HA-LO filed a complaint against its former Chief Executive Officer John R. Kelley in the United States District Court for the Northern District of Illinois for breach of the fiduciary duties of care and loyalty and for waste, in connection with his role in HA-LO's acquisition of Starbelly.com, Inc. in 2000 for $240 million in cash and stock. Mr. Kelley is scheduled to answer on October 14, 2002. Since filing bankruptcy on July 30, 2001, HA-LO has undertaken various actions to improve its financial health, including reductions in force and resultant closures of various office locations. On August 1, 2001, HA-LO entered into a Revolving Credit Agreement with LaSalle Bank National Association, which has been subsequently amended and presently provides a credit facility of $3 million reflecting its decreasing borrowing needs. HA-LO is considering various types of actions to facilitate its emergence from bankruptcy, including but not limited to the sale of the company. HA-LO remains a debtor, with two of its subsidiaries, Lee Wayne Corporation and Starbelly.com, Inc., in three separate, although jointly administered, Chapter 11 cases in case number 02 B 12059, and continues to work towards emerging from bankruptcy. To date, although discussions have commenced between the Debtors and the Official Committee of Unsecured Creditors regarding the form and content of a plan or plans of reorganization, no plan or plans of reorganization have been filed or confirmed by the Bankruptcy Court. The parties have not yet agreed upon any terms and conditions of any consensual plan. Even with the actions taken above and the discussions to date, the holders of equity interests in HA-LO remain unlikely to receive or retain anything of value on account of their interests in HA-LO in the bankruptcy. HARDWOOD PROPERTIES: Confirms "Inactive Issuer" Status on TSX ------------------------------------------------------------- Hardwood Properties Ltd., (TSX:HWP) confirms that it has been designated as an "inactive issuer" by the TSX Venture Exchange. Pursuant to the Exchange's Policy 2.6, the "inactive issuer" status will not affect trading in Hardwood's common shares until August 28, 2003. However, pursuant to Hardwood's previously announced and approved plan for the voluntary liquidation and dissolution of the Corporation, management may seek to voluntarily de-list Hardwood's common shares from trading on the Exchange subsequent to the Corporation's final cash distribution. 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. HORSEHEAD INDUSTRIES: Turns to Blackstone for Financial Advice -------------------------------------------------------------- Horsehead Industries, Inc., has signed an agreement to retain The Blackstone Group as financial advisor to assist the company in formulating its plan to successfully emerge from Chapter 11 bankruptcy. The Blackstone Group, based in New York, New York, is a leading advisor to companies in restructurings and bankruptcies. "The Blackstone Group has a tremendous amount of experience in successfully handling the issues we are currently facing. They are regarded as one of the most seasoned and experienced firms on Wall Street in this field," said James Carpenter, Chief Executive Officer for Horsehead. "We feel confident that with their assistance Horsehead will be positioned as a very viable company as we emerge from the current situation." Blackstone will assist with negotiating Debtor in Possession (DIP) financing, formulating continuing business and reorganization plans, and plans for a successful exit from the bankruptcy filing. As these Court filing related plans are developed, Horsehead's multi-state zinc production and zinc-waste recycling operations continue. "Our operations continue to run 24 hours a day for seven days a week. This is because of the work ethic of our employees and the resolve of this company," said Mr. Carpenter. "We continue to serve our customers, continue to provide the steel industry with the United States Environmental Protection Agency's Best Demonstrated Available Technology for environmentally-sound recycling of hazardous zinc-containing wastes, and continue to produce quality zinc products as the largest zinc producer in the United States and the world's foremost manufacturer of value-added zinc products including zinc oxide, zinc dust, and zinc powder." More information on The Blackstone Group can be found at http://www.blackstone.com Horsehead Industries Inc. (Horsehead), has seven operations in six states with primary operations in Monaca and Palmerton, PA, making it the world leader in the recycled production of zinc. Horsehead is comprised of two vertically integrated operating companies. Zinc Corporation of America operates a state-of-the- art, highly flexible electrothermic zinc refinery that is the largest manufacturer in the world of value-added zinc products and Prime Western zinc metal. Horsehead Resource Development Company is the world leader in recycling zinc bearing hazardous Electric Arc Furnace dust derived from the steel industry through use of its proprietary technology designated "Best Demonstrated Available Technology" by the EPA. Horsehead and its predecessors have been technological leaders and innovators in the zinc industry for more than 100 years. INDYMAC MANUFACTURED: S&P Junks Rating on Class B-1 P-T Certs. -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on class B-1 of IndyMac Manufactured Housing Contract Pass-Thru Trust 1998-2 to triple-'C'-minus from single-'B'-minus. The lowered rating reflects the likelihood of investors receiving timely interest, and the ultimate repayment of original principal investment. Standard & Poor's expects Indymac 1998-2 to experience an outstanding liquidation loss interest shortfall on the B-1 class in the near future. Standard & Poor's defaulted Indymac 1998-2's class B-2 certificates in December 2001 based on an interest shortfall as a result of writedowns on class B-2. Currently, interest on class B-2 is only being paid on the reduced class balance, and class B-2 deferred interest on the written-down portion is low on the payment waterfall. As a result of high losses in the transaction, deferred interest is not being paid. Once class B-2 is reduced to zero, class B-1 will begin to be written down, likely resulting in a default on interest for class B-1. Standard & Poor's will continue to monitor this transaction closely. Rating Lowered Indymac Manufactured Housing Contract Pass-Thru Trust 1998-2 Manufactured housing contract pass-thru certs series 1998-2 Rating Class To From B-1 CCC- B- INNOVATIVE CLINICAL: Signs-Up Vitale Caturano as New Auditors ------------------------------------------------------------- On September 18, 2002, the Board of Directors of Innovative Clinical Solutions, Ltd., engaged the services of Vitale, Caturano & Company as its new independent auditors. VCC will audit the financial statements of the Company for the fiscal year ending January 31, 2003. Innovative Clinical Solutions, Ltd., headquartered in Providence, Rhode Island, provides services that support the needs of the pharmaceutical and managed care industries. As reported in Troubled Company Reporter's August 13, 2002 edition, the Securities and Exchange Commission notified Innovative Clinical Solutions that the SEC had been notified by Arthur Andersen LLP, the Company's auditor of record, that Arthur Andersen LLP is unable to perform future audit services for the Company and, as a result its relationship with the Company is effectively terminated. The audit reports of Arthur Andersen LLP on the consolidated financial statements of Innovative Clinical for the fiscal years ended January 31, 2002 and 2001 contained a going concern opinion explanatory paragraph. The Company has attempted to obtain a letter from Arthur Andersen indicating its concurrence with the disclosure, however, Arthur Andersen LLP has closed its Boston office, which had responsibility for the audit of Innovative Clinical Solutions' financial statements and, accordingly, the Company is unable to provide such a letter from Arthur Andersen. INNOVATIVE CLINICAL: Sells Wholly Owned Clinical Studies Unit ------------------------------------------------------------- As previously reported, on February 7, 2002, Innovative Clinical Solutions Ltd., sold its wholly owned subsidiary, Clinical Studies, Ltd., to Comprehensive Neuroscience, Inc., in exchange for CNS common stock. The sale was effected through the merger of CSL with a subsidiary of CNS. Subsequent to the Merger, a dispute arose between CNS and ICSL involving CSL liabilities and post-closing adjustments to the CNS stock escrows. On September 10, 2002, in connection with the settlement of the Gillheeney litigation described below, ICSL and CNS entered into a Settlement Agreement providing for settlement of the Gillheeney litigation on the terms described below and mutual releases by the parties of all claims except as may be asserted pursuant to the indemnification and escrow provisions of the Merger Agreement. In addition, the provisions of the Escrow Agreement entered into in connection with the Merger were amended to provide that up to 2,330,278 of the 7,767,593 shares of common stock held in the Litigation Escrow (with a valuation of $1.5 million for purposes of the Merger Consideration) would be available for satisfaction of any CSL Working Capital Deficiency to the extent the Working Capital Escrow, Contingent Liabilities Escrow and General Escrow are insufficient to satisfy such deficiency. The CNS Settlement Agreement also provides that, subject to the closing of a new convertible note financing of at least $2.5 million by CNS, ICSL will make the following payments to CNS: (i) $125,000 upon closing of the New CNS Financing and (ii) subject to the resolution of certain ICSL contingent liabilities and available cash, $125,000 by March 31, 2003. These amounts as well as approximately $142,000 for CSL liabilities paid or reimbursed by ICSL following the closing of the Merger will be treated as current assets of CSL as of December 31, 2001 for purposes of determining the CSL December Net Working Capital and calculating any CSL Working Capital Deficiency under the Merger Agreement. Under the CNS Settlement Agreement, subject to the consummation of the New CNS Financing as described below, ICSL has agreed to invest all Excess Cash in CNS securities. "Excess Cash" is defined as all ICSL cash or cash equivalents that are (i) derived from currently existing ICSL assets and (ii) not needed to pay or provide for the payment of ICSL liabilities and obligations, all as determined in good faith by the ICSL Board. ICSL shall have no obligation to invest any Excess Cash if CNS is not solvent or is in default under its senior credit facility. If ICSL makes any investment of Excess Cash within six months of the closing of the New CNS Financing, ICSL will be issued convertible secured notes having the same terms and pricing as the notes being sold in the New CNS Financing. If ICSL makes any investment of Excess Cash after such six month period, it will be issued unsecured convertible notes of CNS, bearing interest at CNS's senior debt borrowing rate then in effect, compounded semi-annually and payable in cash or to accrue (at CNS's option). If CNS consummates a financing within six months prior to or six months after the issuance of Later Notes in which the gross proceeds to CNS are at least $3 million, the Later Notes will be convertible into the same type of securities as sold by CNS in the Qualifying Financing at the same pricing as CNS obtains in the Qualifying Financing. If no Qualifying Financing is consummated within such 12-month period, and ICSL and CNS have not mutually agreed upon a conversion price prior to the expiration of such 12-month period, then CNS will engage and pay for an investment banking firm or other independent valuation expert approved by ICSL to perform a valuation analysis and provide a range for the then fair market value of the CNS common stock, whereupon ICSL will propose to CNS the per share price of CNS common stock, within such range, at which the Later Notes will be convertible. CNS must either accept ICSL's proposal or redeem the Later Notes within 30 days of ICSL's proposal, in cash, for a price equal to face amount of the Later Notes, plus accrued and unpaid interest thereon, plus a premium equal to interest accrued at the interest rate of the Later Note calculated on the face amount for the period that the Later Note has been outstanding. If CNS redeems the Later Notes, ICSL shall have no further obligation to invest Excess Cash. Until the conversion ratio of the Later Notes is determined in accordance with the foregoing, ICSL will have voting rights in respect of the Later Notes on an as-converted basis, assuming the same conversion price as the convertible secured notes issued in the New CNS Financing, up to the greater of (i) 5% of the total voting power of all CNS voting securities or (ii) the number of votes determined using a conversion price equal to twice the conversion price of the convertible secured notes issued in the New CNS Financing. In the CNS Settlement Agreement, ICSL has agreed to enter into a voting agreement with CNS and other securityholders of CNS under which the parties will agree to (i) vote in favor of all matters required to effectuate the recapitalization of CNS as contemplated by the term sheet for the New CNS Financing and for which securityholder approval is required and (ii) waive all rights of dissent and claims against CNS (and its affiliates, directors and officers) in respect of the New CNS Financing. The CNS Settlement Agreement provides that ICSL shall retain its two CNS Board designees until the settlement of the Merger escrows. Thereafter, ICSL shall be entitled to one CNS Board designee, provided that ICSL has invested at least $1 million of Excess Cash as contemplated by the CNS Settlement Agreement, and two CNS Board designees, provided ICSL holds voting securities in excess of 25% of all outstanding voting securities. All persons designated by ICSL to serve on the ICSL Board shall be subject to the approval of CNS, which approval shall not be unreasonably withheld. Upon execution of the CNS Settlement Agreement, CNS assumed financial responsibility for costs and expenses associated with or related to the preparation and filing with the SEC of any and all annual, quarterly, periodic or other reports required to be filed by ICSL. CNS has not yet provided ICSL with certain financial statements of CNS that were contemplated by the Merger documents to have been provided to ICSL. In the CNS Settlement Agreement, CNS has agreed to provide audited December 31, 2001 financial statements and unaudited quarterly financial statements to ICSL promptly following the consummation of the New CNS Financing, together with any other information reasonably requested by ICSL to comply with its reporting obligations under the securities laws. ICSL has agreed to use all commercially reasonable efforts to effectuate the deregistration of ICSL's common stock as soon as practicable after the receipt of the CNS financial statements. Upon deregistration, ICSL will no longer be required to file annual or quarterly reports with the securities and exchange commission and, accordingly, investors will no longer have access to current financial information regarding ICSL. As a result, stockholders' ability to trade ICSL common stock will be materially and adversely affected. Subsequent to the Merger, CNS determined that due to unanticipated declines in projected revenues and increases in expenses and liabilities, its working capital would be insufficient to sustain and grow its business. To address its working capital deficiency, CNS has secured preliminary commitments for the New CNS Financing on the terms described below from certain of its existing securityholders (other than ICSL). The New CNS Financing contemplates the issuance by CNS of Tranche B1 Convertible Secured Notes and Tranche B2 Convertible Secured Notes. Each holder of old CNS Notes, which were issued in connection with the Merger, who purchases New Money Notes with a value equal to or greater than 50% of such Old Note investor's preemptive pro rata share of the aggregate value of the New Money Notes, will be entitled to exchange his/her Old Notes for a Swap Note equal in amount to the face amount plus all accrued and unpaid interest of the Old Note at closing. The Notes will bear the same interest as CNS senior debt in effect at the closing date of the New CNS Financing, which will be compounded semi-annually and payable in cash or accrue, at CNS's option. The collateral securing the Notes is all current and future assets of CNS, except those pledged as part of an existing asset backed lease obligation or equipment or other capital leases incurred in the ordinary course of business. The Notes will be subject to redemption by CNS at the higher of fair market value, as determined by the same appraisal process as provided under the terms of the Old Notes, on an as converted basis, or at the Accreted Value on February 7, 2006. Also, CNS may repurchase all New Money Notes at any time prior to the six- month anniversary of the closing of the New CNS Financing at a price equal to 110% of the face amount of the New Money Notes. In connection with the New CNS Financing, CNS will effect a 10- for-1 reverse stock split. The Notes will be convertible into a number of shares of CNS common stock determined by dividing the Accreted Value by $0.484831 at the holder's option at any time. CNS currently has outstanding Old Notes with a face value of $3,354,000, which are convertible into 5,210,502 shares of CNS common stock, based upon the $0.6437 per share conversion ratio established in connection with the Merger. The current conversion ratio of the Old Notes is approximately 1553.5 shares (pre-Reverse Split) for each $1,000 of Accreted Value. The conversion ratio of the Swap Notes, which will be exchangeable for Old Notes in the New CNS Financing, is approximately 2062.6 shares (post-Reverse Split) for each $1,000 of Accreted Value (which equates to 20,626 shares (pre-Reverse Split) for each $1,000 of Accreted Value). Prior to the issuance of the Notes, the holders of Old Notes will waive any anti-dilution adjustment under such notes in respect of future issuances by CNS of equity securities or equity-linked securities at a price per share equal to or greater than $0.484831. Holders of the Notes will have the right to vote with the CNS common stock on an as- converted basis, and protective provisions relating to debt issued or incurred, declarations of dividends, changes in the current business or structure of CNS, and interested party transactions will require the approval of 66.67% of the holders of the Notes and Old Notes. In addition to the Notes, the purchasers of the Notes will be issued seven year warrants which entitle the holder to purchase an amount of Series A Preferred Stock equal to 60% of the face amount of the New Money Notes purchased at an exercise price equal to the liquidation preference for the Series A Preferred Stock. However, in the event that CNS exercises its right to repurchase the New Money Notes, CNS will have the right to cancel 50% of these warrants. CNS presently has outstanding 10,400,000 shares of Series A Convertible Preferred Stock convertible into 16,516,918 shares of CNS common atock based upon the $0.6437 per share conversion ratio established in connection with the Merger. In connection with the New CNS Financing, the terms of the Series A Preferred Stock will be amended to provide for "full ratchet" rather than "weighted average" anti-dilution rights, thereby resulting in an adjusted conversion price of $0.484831 upon the issuance of the New Money Notes (after giving effect to the Reverse Split). As a result the Series A Preferred Stock will be convertible into 21,450,773.5 shares of CNS common stock (which equates to 214,507,735 shares pre-Reverse Split). CNS is also negotiating $600,000 of additional financing from Heller Healthcare Finance, Inc. In connection with securing such additional financing, the holders of certain Old Notes have agreed to guarantee the repayment of up to $1 million of the Heller Line in excess of the borrowing base. In consideration for this guarantee, CNS has agreed to issue seven year warrant, at an exercise price of $0.001 per share, to acquire an aggregate of 7,200,000 shares of CNS common stock (pre-Reverse Split) or a proportional number if the initial amount of the guarantee is other than $600,000. CNS has advised ICSL that it anticipates closing the New CNS Financing by the end of September, but there can be no assurance that the New CNS Financing will be consummated. Consummation of the New CNS Financing will result in substantial dilution of ICSL's equity interest in CNS. Following the Reverse Split contemplated by the New CNS Financing, ICSL will hold 2,237,406 shares of CNS common stock, of which 1,712,970 shares will be held in escrow to satisfy ICSL's indemnification obligations, if any, pursuant to the Merger Agreement and to satisfy possible adjustments to the Merger consideration based upon resolution of certain CSL litigation and any CSL Working Capital Deficiency. Assuming $2.5 million is invested in the New Money Notes and an equal amount of Old Notes are exchanged for Swap Notes, ICSL's equity and voting interest will be substantially diluted from 42.4% to approximately 5.9% of CNS's common equity determined on an "as converted" basis. The dilution will be greater if CNS issues additional New Money Notes and if CNS issues the common stock Warrant in connection with the guarantee of the Heller Line. CNS has experienced a serious working capital shortfall during the second and third quarter of 2002, which has adversely impacted its operations. Absent the consummation of the CNS New Financing, the significant working capital deficit raises substantial doubt as to CNS's ability to continue as a going concern. CNS has represented that upon consummation of the New CNS Financing its current assets will exceed its current liabilities and that it will be solvent. CNS has advised ICSL that it has received commitments to purchase $2.7 million of New Notes and is confident that it will be able to consummate the New CNS Financing. CNS has also indicated that it believes it will obtain an increase in the Heller Line. However, there can be no assurance that CNS will consummate such financings. Furthermore, CNS has not yet achieved profitability for any period after the closing of the Merger and there can be no assurance that it will achieve a profitable level of operations or that the funds from the New CNS Financing will be sufficient to sustain CNS's operations or grow its business. Should additional funds be required to finance CNS operations, there can be no assurance that such funds would be available when required on terms acceptable to CNS, if at all. In such event, CNS may be required to discontinue its operations and ICSL's investment in CNS would have little or no value. Moreover, even if available, such additional financing is likely to dilute ICSL's equity interest in CNS, which dilution may be substantial. INT'L THUNDERBIRD: Resolves Default on Prime & MRG Obligations -------------------------------------------------------------- International Thunderbird Gaming Corporation (TSX:INB) previously reported that its "going concern" challenges may be overcome in part if the Company's major creditors were willing to enter into "work-outs" with the company. The Company is no longer in default with respect to the Prime Receivables and MRG loans. Prime has agreed to a payment plan on the $730,000 balance whereby the Company will begin payments of $10,000 per month for 73 months. No interest will be charged on the $730,000 current balance unless the Company collects on one or more of its receivables, including the lawsuit filed by the Company against the Spotlight 29 tribe. The Company has entered into a Memorandum of Understanding with MRG whereby all amounts owed to MRG (approximately $3,000,000) will be re-paid over a period of 48 months at 14% interest. $235,000 of the loan can be converted into 2,350,000 shares of Thunderbird at US$0.10 per share. This conversion feature will increase the fully diluted number of shares outstanding to 25,865,868 from 23,515,868 currently. MRG is currently holding 2,330,000 convertible warrants at a conversion price of .65USD for 2,000,000 shares and .35USD for 330,000 shares. These warrants will be terminated and replaced with the new warrants. In no event shall such conversion rights result in MRG owning greater than 10% of the outstanding common shares. This conversion feature is subject to approval by the Toronto Stock Exchange. The new MRG loan will be secured by the Company's 50% interest in the Panama operation and will be contingent on approval by the Panama Gaming Board. The MRG "work-out" is also contingent on the Company raising $1,400,000 for use in the Company's Venezuelan operation. The $1,400,000 will be used in conjunction with other funds to pay- off the "Del Sur Bank" loan in Venezuela. The Company's affiliate, Fiesta Casino Guayana is being charged 50% to 60% interest rates and the new funding will substantially improve FCG's cash flow which in turn will improve the Company's cash flow. The "work-out" will also improve the Company's working capital deficiency by 33%. The Company is pursuing the renewal of its concession in Guatemala and hopes to have an arbitration decision by September 30, 2002. The Company filed its NAFTA claim against the Mexico government on August 23, 2002 and expects to be engaged in a long and tedious arbitration process. The Company continues to pursue collection on other receivables. The Company is preparing to open a fifth Casino in the Republic of Panama. In addition, the completion of the El Panama Casino expansion is ahead of schedule. On Oct 15, 2002 Fiesta Chitre will open in the Province of Los Santos, Republic of Panama located in the Barcelo Los Guayacanes Hotel. Fiesta Chitre will be home to 66 state of the art Slot machines and 5 tables representing 35 positions. This casino will cater to the local markets of Chitre, Aguadulce and Las Tablas, Panama. On Nov 15, 2002 the second expansion of Fiesta Casino El Panama in Panama City will open. This addition of 6,000 square feet will house approximately 120 new slots, 4 new table games and a luxurious VIP gaming area. In addition, the upgrade of the entire facility is expected to fortify Fiesta's dominant market share position. The Company's CFO, Dave Michelson has submitted his resignation effective October 1, 2002. The Company wishes Mr. Michelson success in his future endeavors as he pursues other interests and thanks him for his dedicated service to the Company over the past five years. The Company's board of directors has elected Booker T. Copeland III to fill the position of CFO. Mr. Copeland has functioned with distinction as the Company's controller for the past four years. Based on this performance and his 18 years of diverse accounting and financial management experience, the Company is confident that Mr. Copeland's financial leadership will offer significant contributions to the Company's future development. The Company will not add additional executive staff in the San Diego office and will continue to move management offshore. There are currently seven employees in the San Diego corporate office, including the Company's President, Legal Counsel, Chief Financial Officer and Administrative Staff. The Company has laid off its Development Director and will pursue development with its existing staff. International Thunderbird Gaming Corporation is an owner and manager of international gaming facilities. Additional information about the Company is available on its World Wide Web site at http://www.thunderbirdgaming.com KAISER ALUMINUM: Selling Pipeline Assets to Sorrento for $3 Mil. ---------------------------------------------------------------- Adjacent to Kaiser Aluminum Corporation's Gramercy Facility in Louisiana is a caustic/chlorine facility that is no longer operated. Patrick M. Leathem, Esq., at Richards, Layton & Finger, in Wilmington, Delaware, relates that this caustic/chlorine facility includes a 13-mile pipeline that was used primarily to carry brine from a distant well to the caustic/chlorine facility. Previously, small amounts of brine were also delivered through the Brine Line to the Gramercy Facility. Although the Debtors require brine for the operation of the Gramercy Facility, Mr. Leathem says they have obtained the necessary brine from other sources. The Brine Line was constructed to deliver substantially higher amounts of brine for use in the caustic/chlorine facility. In view of the smaller amounts of brine needed by the Gramercy Facility, the operation of the Brine Line, which includes maintaining the mineral rights, is not cost effective. Hence, the Debtors ceased utilizing the Brine Line. In September 2001, the Debtors commenced efforts to sell the Brine Line and the other surplus assets associated with the caustic/chlorine plant. After several failed marketing efforts, continues Mr. Leathem, the Debtors managed to negotiate with Enterprise Products Operating, L.P., which expressed interests in the Brine Line. Since that time, the Debtors have been in discussions with Enterprise and its affiliate, Sorrento Pipeline Company, LLC, to reach an acceptable agreement for the sale of the Brine Line. Subsequently, the Debtors have agreed to enter into a purchase and sale agreement with Sorrento on September 24, 2002. Subject to Court approval, the salient terms of the purchase agreement are: Property: -- 11.09 miles of the Brine Line; -- all records and permits in connection with the ownership, operation and maintenance of the Brine Line. The assets will be sold free and clear of liens, claims and Encumbrances. The Debtors do not believe that any liens against these assets exist other than the lien granted in connection with the Debtors' postpetition financing. Buyer: Sorrento Pipeline Company, LLC; Price: $3,000,000 in cash; The Purchase Price will be paid at the closing of the transaction. The Purchase Price does not include sales, use, excise or other taxes payable on account of the transaction, which, if applicable, will be paid by Sorrento. Sorrento is assuming no liabilities of the Debtors under the Sale Agreement other than future obligations arising under certain permits designated by Sorrento; Indemnification: The parties are required to indemnify the other to the extent and as described in the Sale Agreement. The Debtors will indemnify Sorrento from and against: -- any breaches of the Debtors' representations and warranties; and -- any losses relating to any claims arising from activities of the Debtors relating to the Pipeline Assets prior to the closing date. Sorrento will indemnify the Debtors from and against: -- any breaches of Sorrento's representations and warranties; and -- any losses relating to any claims arising from activities of Sorrento relating to the Pipeline Assets after the closing date; Other Bid: The Debtors are not permitted to solicit other bids for the Pipeline Assets unless the solicitation is required by the Court. The Debtors, however, do not believe further solicitation of bids will result in higher value to their estates since: -- due to the immovable nature and few potential uses of the Pipeline Assets, the market for the Pipeline Assets is very limited; -- the Debtors believe that their efforts to market the Pipeline Assets have been thorough and have resulted in a fair and reasonable price for the Pipeline Assets; and -- negotiations with Enterprise and Sorrento have continued over the course of several months and during that time no other party has expressed an interest in the Pipeline Assets. By this Motion, the Debtors seek authority to consummate the sale of the Pipeline Assets. Mr. Leathem assures the Court that the sale of the Pipeline Assets justifies sound business judgment because the Debtors no longer need large enough volumes of brine at the Gramercy Facility to make the ownership and operation of the Brine Line cost effective. In addition, the sale of the Pipeline Assets will generate revenue that will be used to the benefit of the Debtors' estate. The Debtors also deem the purchase price fair and reasonable considering that the sale was negotiated at arm's length over several months. (Kaiser Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) Kaiser Aluminum & Chemicals' 12.75% bonds due 2003 (KLU03USR1), DebtTraders reports, are trading at 17 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KLU03USR1for real-time bond pricing. KMART: Moody's Further Junks Ratings on Four Lease-Backed Notes --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of four lease- backed notes supported by Kmart Corporation's lease obligations or lease obligations guaranteed by Kmart. Rating Action To From * Pass Through Trusts 1995-K1/K2, Ca Caa2 * Pass Through Trusts 1995-K3/K4, Ca Caa2 * Kmart Funding Corporation Secured Ca Caa2 Lease Bonds, Series F and G, * KMS III Realty Limited Partnership Ca Caa2 7.78% Lease Backed Notes, Series A due 1/2009, 8.16% Lease Backed Notes, Series B due 7/2011, 8.58% Lease Backed Notes, Series C due 1/2015, The securities are collaterized by multiple Kmart stores. The rating actions reflect that each transaction has suffered from at least one rejected lease and that three of the four transactions have experienced interest shortfalls. KNOLOGY BROADBAND: Seeking Nod to Pay Critical Vendors' Claims -------------------------------------------------------------- Knology Broadband, Inc., tells the U.S. Bankruptcy Court for the Northern District of Georgia the it needs to pay its critical vendors' prepetition claims and authority to maintain and extend postpetition credit agreements. Maintenance of uninterrupted payments on account of Trade Claims, whether owing by the Debtor or by one of its Operating Subsidiaries, is of extreme importance to the Debtor's reorganization, the Company says. In order to maintain trade credit, Trade Creditors require assurance of payment. Otherwise, Trade Creditors will most likely stop providing goods and services on credit. If that happens, the pre-negotiated restructuring will be impossible. Furthermore, if the Debtor is not authorized to pay the Trade Claims on which its Operating Subsidiaries are liable, the Operating Subsidiaries will not be able to continue to transfer the revenues to the Debtor in accordance with past practice. The Operating Subs will be required to retain their revenues for the payment of its own accounts payable, all at increased costs and expense, without particular benefit to the Debtor's estate. The Debtor points out that it is vital to the success of this case that the Debtor and the Operating Subs be able to maintain trade credit during the duration of the case and following confirmation of the Prepackaged Plan. The Debtor estimates that the amount of Trade Claims owing to Critical Vendors is approximately $3,000,000 per week, of which $500,000 is owing to Trade Creditors of the Debtor and $2,500,000 is owing to Trade Creditors of the Operating Subs. Knology Broadband, Inc., provides services to certain of its affiliates which are providers of cable TV, telephone and high speed Internet access to business and residential customers. The Debtor filed for chapter 11 protection on September 18, 2002. Barbara Ellis-Monro, Esq., Michael S. Haber, Esq., and Ronald E. Barab, Esq., at Smith, Gambrell & Russell, LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $43,646,524 in total assets and $473,814,416 in total debts. LEHMAN ABS: Fitch Drops Junk-Rated on Class B-2 Notes to D ---------------------------------------------------------- Fitch Ratings has downgraded the following residential mortgage- backed securitization: Lehman ABS Corporation, series 1998-1 --Class B-2 ($849,385 outstanding) downgraded to 'D' from 'CCC'; --Class B-1 ($991,388 outstanding) downgraded to 'BB' from 'BBB' and removed from Rating Watch Negative; --Class M-2 ($1,983,503 outstanding) downgraded to 'BBB' from 'A'; --Class M-1 ($10,166,272 outstanding) downgraded to 'A' from 'AA'. Due to an ongoing reporting error, cumulative losses are understated on the monthly distribution statements. As a result of the extensive review, the current rating actions reflect the actual cumulative losses incurred to date which is $2,125,029, as well as the high level of delinquencies relative to the remaining credit support levels as of the Aug. 25, 2002, distribution. Lehman ABS Corp., series 1998-1 remittance information indicates that 8.41% of the pool is over 90 days delinquent and cumulative losses are $2,125,029 or 1.56% of the initial pool. Currently, class B-2 has 0% of credit support, class B-1 has 2.61% of credit support remaining, class M-2 has 5.66% of credit support remaining, and class M-1 has 11.76% of credit support remaining. LODGIAN: CCA Asks Court to Extend Time for Sec. 1111(b) Election ---------------------------------------------------------------- The Capital Company of America, LLC, a secured creditor of debtors -- IMPAC Hotels II, L.L.C and IMPAC Hotels III, L.L.C, asks the Court to extend its time to make an election under Section 1111(b) of the Bankruptcy Code. Andrew A. Kress, Esq., at Kaye Scholer LLP, in New York, tells the Court that CCA holds a valid and perfected: -- first mortgage on one deed of trust on each of 18 hotels owned by IMPAC located in various locations, -- assignment of leases and rents with respect to each of the Hotel Properties, -- security interest in and lien on all personal property located at the Hotel Properties, and -- assignment of agreements, licenses, permits and contracts from IMPAC. CCA is owed $109,000,000 in principal and prepetition interest and fees. A portion of the CCA loan is guaranteed by IMPAC Hotel Group, L.L.C and Lodgian, Inc. CCA's loan matured on September 11, 2002. On August 21, 2002, Mr. Kress recounts that the Debtors filed a proposed Plan under which the CCA Mortgage Financing would receive a treatment, which has yet to be determined by the Debtors. In that regard, the proposed Disclosure Statement explains that the treatment of the CCA Mortgage Financing will be affected by the resolution of certain disputes between CCA and the Debtors, which are scheduled for mediation. Thus, the proposed treatment of CCA is left unclear. According to Mr. Kress, the Plan and Disclosure Statement expressly provide that a hotel lender will receive, at the relevant debtor's option, either cash equal to 100% of its allowed claim, the net proceeds of the sale of the collateral, the return of its collateral, a new note in the amount of its allowed claim, or any other treatment allowed by the Bankruptcy Code. The Plan further provides that if a lender rejects the Plan, the Debtors then may seek to have the Court determine the value of the collateral, bifurcating the lender's claims under Section 506(a). Certainly, a lender like CCA cannot reasonably analyze this Plan. CCA does not know what it will receive. In the event that a secured creditor is found to be undersecured after a valuation of its collateral for purposes of a particular proposed Plan, Mr. Kress notes that Section 1111(b) of the Bankruptcy Code provides two options to the secured creditor in connection with the proposed Plan of reorganization, namely: -- to retain the secured and unsecured claims that resulted from a Section 506(a) valuation, or -- to forgo its unsecured claim and instead have its claim treated under the Plan as fully secured by the collateral to the full extent of its allowed claim. Mr. Kress explains that the purpose of the second option -- the Section 1111(b)(2) election -- is to prevent a secured creditor from bearing the risk of and being "cashed out" under a Plan at a low judicial valuation. The option exercised under Section 1111(b) also impacts the secured creditor's treatment under the proposed Plan and in particular the "cramdown" provisions of Sections 1129(b)(1) and (b)(2)(A)(i). Rule 3014 of the Federal Rules of Bankruptcy Procedures provides that the election must be made no later than at the conclusion of the hearing on the approval of the proposed Disclosure Statement or at a later time as fixed by the Court. CCA would have to decide whether to make a Section 1111(b)(2) election in connection with the Debtors' proposed Plan at the Disclosure Statement hearing on September 24, 2002, prior to knowing: -- the specific treatment it will receive under the Debtors' proposed Plan, and -- whether: a. IMPAC will elect to have the Court value CCA's collateral in an attempt to bifurcate CCA's claim under the proposed Plan into secured and unsecured components and in that event, and b. the Court's valuation of CCA's collateral in connection with the Debtors' proposed Plan. Mr. Kress notes to Bankruptcy Rule 3014 makes it clear that the secured creditor must know how it will be treated in a Plan before it should be forced to decide and determine its rights under Section 1111(b). Furthermore, the Section 1111(b) election comes into relevance only if the Court is required to value the collateral in connection with the Plan and the result is a bifurcation of the secured creditor's claim into two parts under the Plan: a secured portion limited to the value of the collateral and an unsecured deficiency portion. Thus, a Section 1111(b) election should await a court's determination of the value of the collateral in connection with a proposed Plan. Whether IMPAC will seek to value CCA's collateral in connection with its proposed Plan, and if it does, the outcome of the Court's valuation, are critical components in any secured creditor's decision under Section 1111(b) in respect of a particular Plan. As presently structured, Mr. Kress points out that CCA will not know whether IMPAC will proceed in this fashion and whether the Court's valuation will result in a deficiency claim until after the Disclosure Statement is approved, making the present deadline under Bankruptcy Rule 3014 inapposite. Moreover, the Section 1111(b) election may not be implicated at all in the event a consensual arrangement is reached, the Debtors otherwise propose proper treatment for CCA in the Plan, or the Debtors decide not to seek to value the collateral in connection with CCA's treatment under the proposed Plan. Therefore, Mr. Kress insists that it is premature to consider issues with respect to a Section 1111(b) election. For these reasons, the Court should extend CCA's right to make an election under Section 1111(b) until 10 days after a valuation, if any, of CCA's collateral made for purposes of CCA's treatment under the Debtors' proposed Plan. (Lodgian Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) LORAL SPACE: Extends Preferred Share Exchange Offer to October 8 ---------------------------------------------------------------- Loral Space & Communications (NYSE: LOR) has amended certain terms of the exchange offer for all of its outstanding preferred stock, and therefore has extended the expiration date of the offer to 11:59 p.m., New York City time, October 8, 2002, unless extended. The offer, which had been scheduled to expire last midnight, is part of Loral's ongoing strategy to reduce debt and increase its financial flexibility. Under its improved offer, Loral is to exchange $1.92 in cash and 6.54 shares of Loral common stock for each share of its Series C and Series D preferred stock. This represents an increase from the four shares of common stock in the original offer; there is no change in the cash portion of the offer. Further, the company has removed its condition for 50 percent minimum participation, in the aggregate, of all outstanding shares of the two series of preferred stock. The company does not expect to offer any further improvements to the economics of the offer. The terms of Loral's bond indenture prevent it from increasing the cash component of this offer, and New York Stock Exchange rules preclude Loral from issuing more common shares without shareholder approval. Moreover, the previously announced indefinite suspension of dividends for both series of preferred stock will apply to the dividends that otherwise would have been paid in November. Accordingly, the company will be prohibited from offering cash in future preferred exchanges. If all of the preferred shares participate, Loral will exchange $22 million in cash and 75.1 million common shares for preferred stock that has a liquidation preference of $574 million. As of June 30, 2002, there were 8,084,174 outstanding shares of the Series C preferred stock and 3,391,688 outstanding shares of the Series D preferred stock. As of the close of business on September 24, 2002, 286,440 shares of Series C preferred stock and 1,132,700 shares of Series D preferred stock had been tendered. Documents describing the amended exchange offer in greater detail are being mailed to holders of Series C and Series D Preferred Stock. Series C and D shareholders who wish to participate in the exchange offer should contact the company's information agent, Morrow & Co., Inc., at (800) 607-0088. Exchanges will be effected by The Bank of New York, the exchange agent for the offer. Loral Space & Communications is a high technology company that concentrates primarily on satellite manufacturing and satellite- based services. For more information, visit Loral's Web site at http://www.loral.com * * * As reported in Troubled Company Reporter's Monday edition, Standard & Poor's lowered its senior unsecured debt rating on Loral Space & Communications Ltd. to triple-'C'-minus from triple-'C'-plus and its senior unsecured debt rating on the company's wholly-owned subsidiary Loral Orion Inc., to triple- 'C'-plus from single-'B'. These downgrades were based on concern about Loral's liquidity and weak customer demand in the company's satellite leasing and manufacturing businesses. Standard & Poor's also lowered its corporate credit rating on Loral to double-'C' from single-'B' and its preferred stock rating on the company to single-'C' from triple-'C', and placed the ratings on CreditWatch with negative implications. These rating actions follow the company's commencement of an offer to exchange cash and common stock for each share of its series C and series D preferred stock. LTV CORP: Court Approves Nationwide Consulting as Appraisers ------------------------------------------------------------ LTV Steel Company and its debtor-affiliates obtained the Court's authority to employ Nationwide Consulting Company Inc., as appraisers, nunc pro tunc to July 9, 2002. As previously reported, the Debtors have engaged Nationwide as an "ordinary course professional" to perform appraisal services for their businesses on an ad hoc basis. As these cases progressed, the Debtors asked Nationwide to perform appraisals of their personal property in connection with their application for a $250 million loan from National City Bank and KeyBank, N.A. This loan was to be guaranteed in part under the Federal Emergency Steel Guaranteed Loan Program. The Loan Guaranty Appraisal was required under this program. But the loan guaranty did not push through, forcing the Debtors to seek authority to implement the APP. Nationwide also performed appraisal for the Debtors in connection with the sale of certain assets owned by non-debtor affiliates -- the River Terminal Railway Company, Chicago Short Line Railway Company, and the Cuyahoga Valley Railway Company -- as part of the Integrated Steel Sale. Specifically, the need for the Railroad Appraisal arose from the obligations of LTV Steel and the Railroad Subsidiaries under the Allocation Agreement dated February 26, 2002, which has now been approved. The Debtors foresee the need for Nationwide's appraisal services in connection with the APP and the Debtors' marketing of the Metal Fabrication Business. The Debtors expect that the total cost of the nationwide Appraisals will exceed the $25,000 average monthly fee limitation per fee reporting period established by the Ordinary Course Professionals Order. While the Debtors believe that Nationwide is a Service Provider -- not a Covered Professional -- and therefore, not subject to the fee cap, the Debtors nonetheless make this Application out of an abundance of caution. Nationwide will render Future Appraisals and in that connection will: (1) advise and assist the Debtors and their professionals in preparing machinery and equipment appraisals to assist them in implementing the APP and related asset sales; (2) advise and assist the Debtors and their professionals in their negotiation and due diligence efforts with other parties; (3) attend and participate in hearings and meeting on matters within the scope of Nationwide's retention; and (4) advise and assist the Debtors with respect to such other related matters as the Debtors or their professionals may request from time to time. Payment of Nationwide Fees Nationwide intends to: (a) charge for its professional services on an hourly basis in accordance with its ordinary and customary hourly rates in effect on the date services are rendered; and (b) seek reimbursement of actual and necessary out-of-pocket expenses. Nationwide's hourly rates vary with the experience and seniority of the individuals assigned, and may be adjusted by Nationwide from time to time. (LTV Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-00900) MARK NUTRITIONALS: Seeks Okay to Use Hibernia's Cash Collateral --------------------------------------------------------------- Mark Nutritionals, Inc., seeks authority from the U.S. Bankruptcy Court for the Western District of Texas to use its lenders' cash collateral. The Debtors tells the Court that it need to use an immediate $600,000 of cash collateral to avoid irreparable harm to the estate. Absent such use would require the Debtor to cease operations. The Debtor tells the Court that it need to continue its business to be able to propose a Plan of Reorganization. The Debtor has no alternative borrowing source and to remain in business, it must be permitted to sell its inventory to the retail trade cash and on credit and to use the cash proceeds of inventory and accounts to pay its employees and purchase new inventory. The Debtor reports that Hibernia National Bank asserts a security interest in all of the Debtor's accounts receivable and related books arising from retail sales. The Debtor proposes to provide adequate protection to Hibernia by affirming the existing lien and granting to Hibernia a security interest in all new accounts generated by the Debtor by granting senior liens against the Collateral and priority and administrative expense status and assuming factoring agreement with Hibernia. Mark Nutritionals, Inc., filed for chapter 11 protection on September 17, 2002. William H. Oliver, Esq., and Marvin G. Pipkin, Esq., at Pipkin, Oliver & Bradley LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors it listed estimated debts of over $10 million. MARTIN INDUSTRIES: Secures Interim Bank Financing from AmSouth -------------------------------------------------------------- Martin Industries, Inc. (OTCBB:MTIN), a manufacturer of premium gas fireplaces and home heating appliances, has arranged temporary financing from its primary lender, AmSouth Bank, to restart limited operations. As previously reported, the Company had suspended operations on September 17 due to a lack of working capital. Under the new financing arrangement, the Company will be entitled to borrow up to an additional $750,000 under its line of credit with AmSouth until the earliest of (i) October 14, 2002, or (ii) further default by the Company of its agreements with AmSouth, or (iii) the Company again suspends operations or files for bankruptcy protection. The Company expects to immediately resume limited manufacturing operations in order to fill existing customer orders and is considering the feasibility of future orders. The Company has engaged Philip + Company Inc. to oversee the resumption of the manufacturing operations. Philip + Company Inc., specialize in assisting businesses who are in under-funded or distressed situations. Philip + Company Inc. will also be working with the Company's Board of Directors and President and CEO, Jack Duncan, in exploring available alternatives, including a possible sale of the Company or the Company's assets. The Company intends to utilize a portion of the $750,000 under the line of credit to pay a portion of past due wages owed to hourly employees. The payment of those wages will be dependent of the Company's compliance with the terms of its agreements with AmSouth. In connection with this new agreement with AmSouth, the maturity date for the Company's indebtedness to AmSouth has been moved from November 4 to October 14, 2002. As of September 20, 2002, the amount outstanding under the Company's line of credit with AmSouth was $6.4 million. As previously reported, the Company had considered the possibility of pursuing a reorganization plan pursuant to a Chapter 11 bankruptcy filing. If current strategy fails to find a reasonable solution to the Company's circumstances, a bankruptcy filing remains an option. Martin Industries designs, manufactures and sells high-end, pre-engineered gas and wood- burning fireplaces, decorative gas logs, fireplace inserts and gas heaters and appliances for commercial and residential new construction and renovation markets in the U.S. Additional information on Martin Industries and its products can be found at its Web site http://www.martinindustries.com MEASUREMENT SPECIALTIES: Sells Terraillon to Fukuda for $22.3MM --------------------------------------------------------------- Measurement Specialties (Amex: MSS) announced the sale of Terraillon Holdings Limited (Terraillon), a wholly owned subsidiary of MSS, to Fukuda (Luxembourg) S.a.r.l., an investment holding company incorporated in Luxembourg, for $22.3 million in cash plus the assumption of $4.8 million in debt. SSG Capital Advisors acted as financial advisor to MSS. MSS will use the net closing proceeds ($16.7 million after fees and escrowed proceeds) to reduce senior debt as required under the previously executed Forbearance Agreement. "Terraillon is a great brand and great asset," commented Frank Guidone, CEO. "We received strong response to the proposed sale and are pleased with the outcome. As previously disclosed, selling Terraillon is a critical step in our restructuring plan announced several months ago. The proceeds from the sale will allow us to significantly reduce our senior debt and eliminate the overadvance, and will facilitate a refinancing of the secured lenders. While the operational and financial restructuring initiatives were important to execute the turnaround, we continue to work diligently to complete the audit of our financial statements and become current with our SEC filings. We recognize our responsibility to shareholders and the investment community, and anticipate filing our FY02 Form 10-K (including restated FY01 financial statements) and FY03 Form 10- Q prior to the AMEX de-listing appeals hearing, which is currently scheduled for October 22." Measurement Specialties is a designer and manufacturer of sensors, and sensor-based consumer products. Measurement Specialties produces a wide variety of sensors that use advanced technologies to measure precise ranges of physical characteristics, including pressure, motion, force, displacement, angle, flow, and distance. Measurement Specialties uses multiple advanced technologies, including piezoresistive, application specific integrated circuits, micro- electromechanical systems, piezopolymers, and strain gages to allow their sensors to operate precisely and cost effectively. * * * As reported in Troubled Company Reporter's July 10, 2002 edition, Measurement Specialties, Inc., successfully negotiated and executed an extended forbearance agreement with its lenders. This agreement provides that the lenders will forbear, until November 1, 2002, from exercising the rights and remedies available to them as a result of the Company's defaults under its credit agreement. The agreement is the critically important first step in the Company's broader restructuring plan announced June 19th. In a display of support for the proposed restructuring plan, the lenders have also agreed to extend additional credit under the Company's revolving credit facility as well as allow the Company to apply the proceeds from the sale/liquidation of certain Company assets against amounts outstanding under the revolving credit facility (rather than against amounts outstanding under the term loan as otherwise required by the credit agreement). As a condition to the agreement and the lenders' continued forbearance, the Company has agreed to pledge in favor of the lenders certain unencumbered assets, and must take certain actions and comply with strict financial covenants during the forbearance period. MENTERGY: Files for Court Protection from Creditors in Israel ------------------------------------------------------------- Mentergy(TM) Ltd. (Nasdaq:MNTE), has filed a request with an Israeli court seeking protection from creditors and appointment of a trustee for the company for a period of three months in order to prepare a recovery plan and an arrangement with creditors. The filing relates only to creditors of Mentergy Ltd. (an Israeli company), and does not apply to any of Mentergy's subsidiaries. Mentergy expects the recovery plan to include a sale of its U.S. operations to local management, and is currently in negotiations for such sale. In addition, Mentergy is considering transferring its TrainNet activities to its subsidiary, Gilat Satcom Systems. There can be no assurance that the recovery plan or any component of the plan will be successful. METROCALL INC: Court Confirms Plan & Stage Set to Emerge in Oct. ---------------------------------------------------------------- Metrocall, Inc., (OTC Bulletin Board: MCLLQ) one of the nation's largest narrowband wireless data and messaging companies, announced that its Plan of Reorganization was confirmed by the United States Bankruptcy Court and expects to emerge from the restructuring process in early October when the plan becomes effective. Vincent D. Kelly, Metrocall's Chief Operating and Chief Financial Officer, commented , "We are pleased our plan has been confirmed by the court and was supported by an overwhelming majority of all voting classes. We look forward to emerging as a newly reorganized company in early October. This successful restructuring represents the collective efforts of Metrocall, our creditors, our employees and valued customers." Throughout its restructuring proceedings, which commenced June 3, 2002, Metrocall's wireless data networks and customer support services continued to operate seamlessly. "We continue to exceed the service revenues, operating cash flow and subscriber targets provided for in our restructuring business plan," Mr. Kelly noted. Metrocall's reorganization which was completed without any debtor-in-possession financing will result in substantial debt elimination and de-leveraging. Metrocall will continue to focus on its traditional subscriber base, emphasizing business development and retention of small business, government, healthcare and corporate customers. As previously announced and in accordance with the pre- negotiated plan, Metrocall's $133 million of existing senior secured debt will be exchanged for (i) a $60 million secured term note to be issued by the reorganized operating entity, (ii) a $20 million paid-in-kind note to be issued by the reorganized holding company, (iii) preferred stock to be issued from the reorganized holding company with a $53 million liquidation preference and (iv) 42% of the new common stock of the reorganized holding company (subject to dilution of up to 7% for options provided to employees under a new stock option plan to be implemented after the effective date of the plan). Metrocall's general unsecured creditors' claims, totaling approximately $751 million, including the holders of its unsecured public notes, will be exchanged for a pro rata share of (i) preferred stock of the reorganized holding company with a $5 million liquidation preference and (ii) 58% of the new common stock to be issued (also subject to dilution of up to 7% for the aforementioned stock option plan to be implemented). Pursuant to the plan, ninety-five percent of the total voting rights shall be with the preferred stock until such stock is fully redeemed. Metrocall's plan also provides that general unsecured creditors of its wholly owned subsidiaries will receive payment of 100% of the principal amount of their allowed claims upon effectiveness of the plan. The current equity holders of the Company will receive no distributions under the plan and their stock, options and warrants will be canceled when the plan becomes effective. Metrocall, Inc., headquartered in Alexandria, Virginia, is one of the largest narrowband wireless data and messaging companies in the United States, providing both products and services to over four million business and individual subscribers. Metrocall was founded in 1965 and currently employs approximately 2,000 people nationwide. The company currently offers two-way interactive messaging, wireless e-mail and Internet connectivity, cellular and digital PCS phones, as well as one- way messaging services. Metrocall operates on multiple nationwide, regional and local networks. Also, Metrocall offers integrated resource management systems and communications solutions for business and campus environments. For more information on Metrocall please visit its Web site and on-line store at http://www.Metrocall.comor call 800-800-2337. MILITARY RESALE: Cash Levels Insufficient to Fund Operations ------------------------------------------------------------ The total revenue of Military Resale Group Inc., for the three months ended June 30, 2002 of $1,721,912 reflected an increase of $557,030, or approximately 47.8%, compared to total revenue of $1,164,882 for the three months ended June 30, 2001. Revenues are derived in either one of two ways: in the majority of instances, the Company purchases products from manufacturers and suppliers for resale to the commissaries it services. In such cases, it resells the manufacturer's or supplier's products to the commissaries at generally the same prices it pays for such products, which prices generally are negotiated between the manufacturer or supplier and the Defense Commissary Agency. Revenue is recognized as the gross sales amount received by Military Resale from such sales, which includes (i) the purchase price paid by the commissary plus (ii) a negotiated storage and delivery fee paid by the manufacturer or supplier. In the remaining instances, Military Resale acts as an agent for the manufacturer or supplier of the products it sells, and earns a commission paid by the manufacturer or supplier, generally in an amount equal to a percentage of the manufacturer's or supplier's gross sales amount. In such cases, revenue is recognized as the commission received on the gross sales amount. Resale revenue for the three months ended June 30, 2002 of $1,657,440 reflected an increase of $609,049, or approximately 58.1%, compared to resale revenue of $1,048,393 for the three months ended June 30, 2001. For the three months ended June 30, 2002, approximately 75.6% of gross profit was derived from sales involving resale revenue compared to 30.6% for the three months ended June 30, 2001. These increases were attributable primarily to the addition of the new products the Company began supplying to commissaries during the fourth quarter of fiscal 2001, including Slimfast, L'eggs, Bush Beans and Rayovac Batteries, and during the first quarter of fiscal 2002, including a line of feminine hygiene products and a line of infant feeding products supplied by Playtex Products, Inc., which the Company sells on a resale basis, as well as the implementation of its long-term strategy to increase its ratio of sales of products it sells on a resale basis, rather than a commission basis, due to the payment discounts it often receives from the manufacturers and suppliers of the goods it purchases for resale. Commission revenue for the three months ended June 30, 2002 of $64,472 reflected a decrease of $52,017, or approximately 44.7%, compared to commission revenue of $116,489 for the three months ended June 30, 2001. For the three months ended June 30, 2002, approximately 24.4% of gross profit was derived from sales involving commission revenue compared to approximately 69.4% for the three months ended June 30, 2001. These decreases were attributable primarily to the implementation of gthe Company's long-term strategy to increase its ratio of sales of products so ld on a resale basis, rather than a commission basis. It cannot be certain as to whether or not these trends will continue; however, in the long term it is seeking to increase the ratio of its sales of products sold on a resale basis, rather than a commission basis, because it believes it can increase profitability on such sales by taking advantage of payment discounts frequently offered by the manufacturers and suppliers of such products. To do so, the Company intends to continue to seek to add new products that it can offer to commissaries on a resale basis from its existing manufacturers and suppliers and from others with whom it does not currently have a working relationship. The Company incurred a net loss of $456,650 for the three months ended June 30, 2002 as compared to a net loss of $36,819 for the three months ended June 30, 2001. And although revenues increased for the six month period ended June 30, 2002, as compared to the same period of 2001, the Company, primarily as a result of increased expenses and cost of goods sold, incurred a net loss of $645,590 for the six months ended June 30, 2002 as compared to a net loss of $134,241 for the six months ended June 30, 2001. Military Resale's current cash levels, together with the cash flows it generates from operating activities, are not sufficient to enable it to execute its business strategy. As a result, the Company intends to seek additional capital through the sale of up to 5,000,000 shares of its common stock. In December 2001, it filed with the Securities and Exchange Commission a registration statement relating to such shares. Such registration statement has not yet been declared effective, and there can be no assurance that the Securities and Exchange Commission will declare such registration statement effective in the near future, if at all. In the interim, the Company intends to fund operations based on its cash position and the near term cash flow generated from operations, as well as additional borrowings. In the event it sells only a nominal number of shares (i.e. 500,000 shares) in its proposed offering, it believes that the net proceeds of such sale, together with anticipated revenues from sales of its products, will satisfy its capital requirements for at least the next 12 months. However, the Company would require additional capital to realize its strategic plan to expand distribution capabilities and product offerings. These conditions raise substantial doubt about Military Resale Group's ability to continue as a going concern. Assuming that the Company receives a nominal amount of proceeds from its proposed offering of common stock, it expects capital expenditures to be approximately $200,000 during the next twelve months, primarily for the acquisition of an inventory control system. It is expected that its principal uses of cash will be to provide working capital, to finance capital expenditures, to repay indebtedness and for other general corporate purposes, including sales and marketing and new business development. The amount of spending for any particular purpose is dependent upon the total cash available to it and the success of its offering of common stock. At June 30, 2002, the Company had liquid assets of $529,076, consisting of cash and accounts receivable derived from operations, and other current assets of $336,367, consisting primarily of inventory of products for sale and/or distribution. Long term assets of $166,690 consisted primarily of warehouse equipment used in operations. Current liabilities of $1,528,116 at June 30, 2002 consisted of approximately $1,108,770 of accounts payable and $339,755 for the current portion of capitalized leases and notes payable, of which approximately $210,000 was payable to its officers or its other affiliates. The Company's working capital deficit was $662,673 as of June 30, 2002. MTS SYSTEMS: Fails to Comply with Nasdaq Listing Requirements ------------------------------------------------------------- MTS Systems Corporation (Nasdaq: MTSCE) received a NASDAQ notice on September 24, 2002 indicating that the company is currently not in compliance with NASDAQ listing rules requiring companies to obtain reviews of internal financial information by their independent auditors prior to filing Form 10-Q reports with the Securities and Exchange Commission. On August 16, 2002, coincident with filing its third quarter Form 10-Q, MTS disclosed that its current auditors KPMG LLP had not completed reviewing the company's results for the three- month and nine-month periods ended June 30, 2002. KPMG had previously replaced Arthur Andersen LLP as the company's auditor effective May 31, 2002. Consequently, the NASDAQ has issued a staff determination that the company is subject to delisting as set forth in Marketplace Rule 4310(C)(14). This delisting is subject to the results of a hearing before the NASDAQ Hearings Department, which the company has requested. No date has been set for the hearing. Simultaneously, NASDAQ changed the company's trading symbol to MTSCE. This symbol will remain in effect until the matter is resolved. MTS fully expects that NASDAQ will grant its request to continue listing following this hearing. The company previously reported that KPMG had requested additional analysis on the timing of a number of adjustments made during the first nine months of the year. These adjustments were related to changes in accounting estimates and corrections of bookkeeping errors. On a net basis, these past adjustments had a negative impact on the company's reported net income in all of the first three quarters of fiscal 2002. The company and KPMG have, to-date, not been able to make a complete and accurate assessment of changes, if any, in the timing of recording these adjustments. It may still be determined that the third quarter fiscal year 2002 report and previously filed periodic reports for fiscal 2002 and 2001 require revision. "The review is taking a little longer than we expected," said Sidney W. Emery, Jr., chairman and CEO. "MTS and KPMG are working together to ensure we do a complete and thorough assessment. As before, I remain confident that the results will have no material impact on the financial health of the company." MTS Systems Corporation is a global supplier of integrated simulation solutions that help customers accelerate and improve their design, development and manufacturing processes. MTS supplies products for determining the mechanical behavior of materials, products and structures -- including computer-based testing and simulation systems, modeling and testing software, and consulting services -- as well as products for automating manufacturing processes. MTS had 2,200 employees and revenue of $397 million for the fiscal year ended September 2001. Additional information on MTS can be found on the worldwide web at http://www.mts.com NATIONAL STEEL: Ziegler Wants to Recoup Assets from Nat'l Pellet ---------------------------------------------------------------- Ziegler Inc., wants the automatic stay lifted so it can repossess a truck it sold to National Steel Pellet Company. Additionally, Ziegler asks that the Court direct National Pellet to make adequate protection payments on certain mining property because the value of its collateral is declining. Ziegler sold a Caterpillar Model 793C truck for $1,780,304 but, to date, National Pellet has yet to make payments for the truck. According to John S. Delnero, Esq., at Bell, Boyd & Lloyd LLC, in Chicago, Illinois, on September 14, 2001, National Pellet sent Ziegler a purchase order for the truck. The Purchase Order incorporated a quotation Ziegler gave earlier. The quotation, which Ziegler provided on May 22, 2001, states that, "it is intended and understood that title and ownership of said equipment is and shall remain vested in the Sellers, notwithstanding delivery or possession, until the entire price is paid by cash in full." On January 2, 2002, continues Mr. Delnero, National Pellet started to receive components of the Truck. Shortly thereafter, the assembly of the Truck began and was largely completed by January 30, 2002 except for a seat, which as National Pellet reported to Ziegler, did not conform to its order. On February 14, 2002, the correct seat was delivered and installed and the Truck, as ordered, was now completely delivered. After the Truck was completely installed, Ziegler sent National Steel an invoice. Later, Ziegler filed a U.C.C. financing statement in Delaware to secure Ziegler's reservation of title. Since the invoice was sent, Ziegler has continued to provide goods and services related to the Truck. These goods and services are provided pursuant to the Truck sale contract with no extra charge to National Pellet. For example, on March 4, 2002, a steering tie and ring in the Truck was replaced. And, Ziegler has provided and continues to provide personnel on National Pellet's site to help service the Truck. Based on the allegations mentioned, Mr. Delnero contends that Ziegler -- as a secured creditor with a purchase money security interest in the Truck -- is entitled to adequate protection to cover depreciation of the Truck. Mr. Delnero asserts that Ziegler should be paid $98.92 per hour of use, as this type of Truck depreciates at this rate. The Truck was worth $1,700,000 on March 6, 2002 and $1,350,000 on August 9, 2002. According to Mr. Delnero, an hourly meter on the Truck can measure the amount of use. Meanwhile, Ziegler also seeks adequate protection of its interests on a mining property, which National Pellet has been using. Ziegler asserts a miners' lien on the property under Minnesota law. Mr. Delnero explains that National Pellet has continued to mine a real property covered by the lien and the liened real estate is depreciating as it is mined; the minerals are extracted the property loses value. Ziegler does not know the value of the real estate or its rate of depreciation. Given that, Mr. Delnero believes Ziegler is entitled to relief from the stay to foreclose upon the land referred to the Miners' Lien. Ziegler has given notice under Section 546 of the Bankruptcy Code that it intends to enforce its rights and foreclose on the property secured by the Minnesota Miners' Lien under Minn. Stat. Section 514.17. Debtors Reply Although the Debtors do not deny allegations that they have bought the Caterpillar truck from Ziegler Inc. and the existence of a miners' lien, the Debtors argue certain points made in Ziegler's motion. The Debtors remind Ziegler that the services it provides are just customary and are not exclusive of the Caterpillar Truck alone. Ziegler serviced National Pellet's entire fleet. The Debtors also challenge the validity of the miner's lien. The Debtors also are unaware of the allegations that the truck or the liened real estate is depreciating in value. Consequently, the Debtors contend that the motion should be denied. (National Steel Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) NEPTUNE SOCIETY: KPMG LLP Articulates Going Concern Doubts ---------------------------------------------------------- The Neptune Society Inc., is a provider of pure cremation services in North America. As of April 1, 2002, it operated 19 locations serving California, Colorado, Florida, Illinois, Iowa, Oregon, New York, and Washington. Its strategy is to grow by: o initiating start-up operations; o selectively acquiring small, family-owned cremation service providers strategically located across North America ; o operating all locations under one nationally branded name, "The Neptune Society" (where permitted); o avoiding direct competition with corporate consolidators by concentrating solely on cremation services and cremation products; and o improving revenue and profitability of newly acquired operations by consolidating administrative and management functions within its organization. The Company believes that implementing these initiatives are critical to achieving profitability and are its most important challenges in competing effectively in the death care industry. In May 2001, Neptune changed its inventory procedures and sales contracts to conform to its revised revenue recognition policy. Under its revised revenue recognition policy, the Company recognizes certain pre-need merchandise revenues from the sale of pre-need contracts prior to the performance of the related cremation service. Cremation service and merchandise revenues were $11,775,000 for the year ended December 31, 2001 compared to $6,188,000 for the same period in 2000. Revenues increased $4,195,000, or 90%, due to the recognition of pre-need merchandise revenue, increased at-need revenues and travel assurance product offering. During the four month period beginning June 1, 2001 and ending September 30, 2001, the Company recognized pre-need merchandise revenues of $1,804,000. Effective October 1, 2001, it changed inventory management policy and no longer recognized revenue on the sale of pre-need merchandise. The introduction of its worldwide travel plan, which was introduced company-wide during the first quarter of 2001, contributed $1,905,000 to the increase in revenues. During the year ended December 31, 2001 and 2000, merchandise sales of $5,097,000 and $4,326,000, respectively, were deferred as Neptune did not meet its revenue recognition criteria. Although such revenues were deferred, pre-need cremation arrangement sales contract volume increased 18% over the same period in 2000. During the year ended December 31, 2001, the Company recognized previously deferred pre-need merchandise revenues and costs of approximately $34,000 and $14,000, respectively, related to the fiscal year 2000 cumulative effect of change in accounting principle adjustment. The Company believes that revenues were also lower during the year ended December 31, 2001 as it suspended marketing activities in Riverside, Imperial, San Bernardino and San Diego Counties pending resolution resulting from litigation for trademark infringement resulting from its use of the "Neptune Society" name in those counties. It suspended sales in these areas, and estimates that the litigation caused revenues to decline by approximately $350,000, or 3%, during the year ended December 31, 2001. In October, 2001, the Company entered into a settlement agreement to resolve the litigation. Under the terms of the settlement agreement, Neptune is permitted to market pre-need arrangement contracts under the name "Trident Society." The Company believes the settlement will not have a material financial impact on operations; however, it cannot predict when, or if, revenues related to the affected areas will return to historical levels. Loss before cumulative effect of a change in accounting principle was $10,151,000 and $8,435,000, for the year ended December 31, 2001 and 2000, respectively. Net loss was $10,151,000 and $8,839,000 for the year ended December 31, 2001 and 2000, respectively. At June 30, 2002, Neptune had current assets of $3,321,000, which was comprised of $887,000 in cash, $2,218,000 in accounts receivable and $216,000 in prepaid expenses and other current assets. It had total current liabilities of $3,720,000, comprised mainly of $1,389,000 in accounts payable, $1,424,000 in accrued liabilities, and $907,000 in the current portion of long-term debt. It had long-term debt of $2,069,000, convertible debentures with a carrying value of $5,827,000 and other long- term liabilities of $996,000. It also had deferred pre-need revenue of $15,642,000. Neptune had a working capital deficit of $400,000 at June 30, 2002. The Company has also guaranteed the payment of a $1,500,000 debt, due July 31, 2002 (extended to November 1, 2002), assumed by the purchaser of its Portland, Oregon crematory operations. Management had a net working capital deficit of approximately $400,000 as of June 30, 2002. The Company carries outstanding debt, including convertible debt, requiring annual cash interest payments of approximately $1.1 million, payable in monthly installments for the year ending December 31, 2002. There is no guarantee that any convertible debt will be converted; therefore the maximum amount of interest payments have been projected. The Company anticipates capital expenditures to amount to approximately $200,000 for the year ending December 31, 2002. These expenditures include office furniture and office and computer equipment. Neptune is obligated under certain office rental, facility rental, storage rental equipment rental, temporary housing rental and automotive rental agreements. Future lease payments from 2003 through 2005 amount to $1.0 million. The Company states that it may have to raise additional capital to meet its obligations under the portions of long-term debt due after 2002 and intends to raise the capital required to fund its financing needs by issuance of debt and equity. There can be no assurance financing will be available or accessible on reasonable terms. Neptune estimates its total operating and capital budgets for the fiscal year ended December 31, 2002 to be approximately $21 million. There is no assurance that actual expenditures for the fiscal year ending December 31, 2002 will not exceed the estimated operating budgets. Actual expenditures will depend on a number of factors, some of which are beyond Company control including, among other things, timing of regulatory approval of its projects, the availability of financing on acceptable terms, reliability of the assumptions of management in estimating cost and timing, the death and cremation rates in the geographical locations that are served, consumer acceptance of the pre need plans, changes in governmental regulation as they relate to Neptune's business, certain economic and political factors, the time expended by consultants and professionals and fees associated with applications related to obtaining and maintaining licenses for its locations and the professional fees associated with its reporting obligations under the Securities Exchange Act of 1934. If the actual expenditures for such costs exceed the estimated costs or if events occur that require additional expenditures, the Company will be required to raise additional financing or to defer certain expenditures to meet other obligations. If the Company cannot raise adequate financing to fund its plan of operation, it may be required to suspend its growth strategy; consolidate its operations through reductions in staffing, marketing and sales, promotion and hours of operation; terminate its operations in unprofitable or difficult to service markets; sell assets or operations in some of the markets it services and/or suspend its operations in certain markets. The failure to meet certain expenditures may cause Neptune to default on material obligations and such default may have a material adverse effect on its business and results of operations. Neptune expects operating cash flows, before debt servicing and expansion expenditures, to be adequate to finance basic operations. It anticipates that it will finance long-term debt, additional acquisitions, if any, and growth, in part, by issuing equity and/or debt securities. KPMG LLP, in its Auditors Report for the year ended December 31, 2000, issued a statement concerning substantial doubt regarding the ability of the Company to continue as a going concern. NORTEL NETWORKS: Revises Q3 2002 Outlook & Plans Reverse Split -------------------------------------------------------------- Nortel Networks Corporation (NYSE:NT)(TSX:NT.) expects revenues from continuing operations in the third quarter of 2002 to be lower than second quarter 2002 revenues from continuing operations by approximately 15%. This compares to its previously stated guidance of expected sequentially lower revenues in the third quarter of 2002 of "up to approximately 10%." Further deterioration in spending by service providers, generally in the United States and for wireless networks in Asia, has resulted in the revised outlook. Despite the current revenue outlook, the Company continues to expect that the impact of its ongoing restructuring will result in a lower cost structure in the third quarter of 2002. Factoring the uncertainty about the timing of a meaningful recovery in the telecom market into its quarterly review procedures regarding the potential realization of the income tax assets on its balance sheet, the Company at this time anticipates recognizing significantly lower than expected income taxes against its loss for the third quarter. As a result, the Company expects a marginally larger pro forma net loss from continuing operations per share in the third quarter of 2002 compared to the second quarter of 2002. Frank Dunn, president and chief executive officer, Nortel Networks reiterated, "Despite the continued challenging market environment, our top priority remains to return to profitability by the end of June of 2003. We are progressing well in our restructuring plan, and we will continue to monitor the market and the spending environment and take additional actions, as appropriate, to achieve our profitability goals." In addition, the Company continues to assess its overall liquidity needs and expects to enter into discussions with its banks regarding its existing credit facilities (all of which are currently undrawn). The Company also announced that it plans to present a proposal to its shareholders for a consolidation of its outstanding common shares (also known as a "reverse stock split") at its annual meeting planned for spring 2003. The consolidation ratio will be set by the Company's Board of Directors in early 2003 at a level which would be expected at that time to result in an initial post-consolidation common share price in the range of US$10 to US$20, assuming receipt of shareholder and regulatory approvals. As of the close of trading today, the 30-day average closing share price for the Company's common shares has fallen below the minimum continued listing requirements of the New York Stock Exchange. The planned share consolidation proposal is intended to satisfy such continued listing requirements. Nortel Networks is an industry leader and innovator focused on transforming how the world communicates and exchanges information. The Company is supplying its service provider and enterprise customers with communications technology and infrastructure to enable value-added IP data, voice and multimedia services spanning Metro and Enterprise Networks, Wireless Networks and Optical Networks. As a global Company, Nortel Networks does business in more than 150 countries. More information about Nortel Networks can be found on the Web at http://www.nortelnetworks.com * * * As reported in Troubled Company Reporter's Wednesday Edition, Standard & Poor's lowered its rating on Nortel Networks Lease Pass-Through Trust to single-'B' from double-'B'-minus. The outlook remains negative. The rating on Nortel Networks Lease Pass-Through Trust is dependent on the corporate credit rating of Nortel Networks Ltd., which was lowered to single-'B' from double-'B'-minus on September 18, 2002. The pass-through trust certificates reflect security interests in five single-tenant, office/research and development buildings leased to Nortel. Nortel guarantees the payment and performance of all obligations of the tenant under the leases. NORTHWEST AIRLINES: Blaylock Initiates Coverage with Hold Rating ---------------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of Northwest Airlines, Inc., (Nasdaq: NWAC) with "hold" rating. Mr. Neidl delayed initiating coverage of the airline until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. In his equity reports, Mr. Neidl noted that Northwest Airlines should rebound once the economy recovers. The airline has enough liquidity to carry it through to next year. Reasons for Mr. Neidl's "hold" recommendation include: -- NWAC -- Northwest's publicly traded debt is trading at deeply discounted levels, which is attractive, as the airline is not in danger of defaulting. EBITDA is expected to turn positive in 2002 to $271 million, and EPS for 2002 of negative $4.21 is expected to turn positive to $0.97 in 2003. Mr. Neidl also cites the reasons why he is not optimistic on the industry in the short-term: -- The disappointing pace of economic recovery during the summer, and no clear direction yet as to when the full recovery will come -- General stock market weakness and continuing large institutional sellers -- The slowdown in the industry recovery as reflected in the continuing weak traffic and yield numbers -- Continuing high oil prices at around $30 barrel -- The threat of conflict in the Middle East and its possible effect on travel and oil prices -- Additional costs and inconvenience on the traveling public of beefed-up security procedures continue to affect operations -- A certain segment of the traveling public's continuing fear of flying due to terrorism -- The threat of a major industry player, UAL Corp., going bankrupt, and its possible effect on the rest of the industry -- The continuing uncertainty and increased costs of insurance -- The normally slow fall seasonal weakness of airline travel and stock prices will also probably have a continuing negative effect on stock prices. Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P., has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P. is a member of the National Association of Securities Dealers, CRD number 35669. Northwest Airlines Inc.'s 9.875% bonds due 2007 (NWAC07USR2) are trading at 45 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NWAC07USR2 for real-time bond pricing. OMEGA HEALTHCARE: S&P Affirms B Corporate Credit Rating ------------------------------------------------------- Standard & Poor's Ratings Services affirmed its single-'B' corporate credit rating on Omega Healthcare Investors Inc. At the same time, ratings on the company's $100 million 6.95% senior unsecured notes due 2007 and $107.5 million preferred stock are affirmed. The outlook is revised to positive from stable. The outlook revision reflects ongoing improvements to this health care REIT's business, its increased debt coverage measures, and improved financial flexibility following its rights offering and private placement. Maryland-based Omega invests in and provides financing to the long-term care industry. The company owns or holds mortgages on 233 skilled nursing and, to less of an extent, assisted living facilities with approximately 24,400 beds located in 28 states and operated by 36 independent health care operating companies. Similar to other health care REITs focused on skilled-nursing facilities, the company's operator base faced significant challenges during the past few years (in part, as a result of the implementation of the Prospective Payment System) that led to operator bankruptcies, and lease/mortgage restructurings. Omega's management team has done a commendable job of renegotiating and restructuring lease/mortgage agreements with troubled operators. As a result, the vast majority of the company's primary operators (representing about 75% of investments) are currently meeting their obligations, albeit at reduced rates, and achieving approximately 1.2 times EBITDAR coverage after a 4% management fee. The company has also made good strides recapitalizing its balance sheet. It has used proceeds from asset sales and suspended dividends to reduce debt, refinanced some existing debt to lower overall debt costs, and completed a $50 million rights offering in February 2002 that enabled it to meet its maturing debt obligations and achieve extensions on its secured bank line agreements. Further, book value leverage of about 40% at June 30, 2002 is down materially from roughly 55% in 1999, although the favorable debt reduction has been offset by the higher proportion of variable-rate short-term, bank debt that now dominates the capital structure. Nonetheless, coverage measures have benefited, as debt service coverage reached 2.4x for the six months ended June 30, 2002, which is up dramatically from just 1.3x for fiscal year 2001. Notably, Omega's fixed- charge coverage continues to mirror its debt service coverage since the company has suspended preferred dividend payments ($35 million of cumulative to date) since February 2001. Common dividends (which had been running at roughly $55 million annually two years ago) will likely be reinstated sometime in early 2003, but at a materially lower level. Financial flexibility, while improved, does remain constrained as the majority of assets are encumbered by mortgages, and bank line availability is modest, with about $207 million outstanding at the end of the second quarter under the combined $225 million lines, both of which appear to be currently well-collateralized. OUTLOOK: POSITIVE The company has worked through several tenant bankruptcies and lease/mortgage negotiations while successfully meeting its maturing debt obligations. Further, Omega's operating cash flow continues to improve and when combined with proceeds from asset sales, should provide the company with sufficient cash to meet the $40 million cumulative preferred dividends in early 2003, subject to Omega's board approval. Once the cumulative preferred dividends are paid and future preferred dividends are reinstated, Standard & Poor's will raise the preferred rating from its current 'D' default status to triple-'C'-plus and consider raising the corporate rating and senior unsecured rating a single-notch to single-'B'-plus and single-'B'-minus, respectively. OWENS CORNING: Jackson & Hancock Want to Recover Settlements ------------------------------------------------------------ Like Owens Corning, Fibreboard was a long-time producer and seller of products containing asbestos. Beginning in the 1960s, substantial numbers of product liability claims were being filed against manufacturers of asbestos-containing products, including Fibreboard and Owens. In the 1980s and 1990s, Fiberboard engaged in substantial litigation and negotiations regarding the scope and extent of its insurance coverage in connection with the asbestos claims. By the end of 1996, Fibreboard and its insurers entered into an irrevocable agreement under which the insurers undertook to establish a $18,000,000,000 trust to pay present and future asbestos claims against Fibreboard, in exchange for which the insurers would have no further liability to Fiberboard or to asbestos claimants. Using funds provided by the Bank Group, Owens Corning acquired Fiberboard in 1997, including its contractual entitlement and its trust by Fiberboard's insurers for $660,000,000. By this motion, Jackson National Life Insurance Company and John Hancock Life Insurance Company, as members of a sub-committee of the Official Committee of Unsecured Creditors, seek the Court's authority to commence these three avoidance actions in behalf of the Debtors: -- An action for the purpose of avoiding and setting aside as a fraudulent conveyance the May 1997 acquisition by Owens Corning of the capital stock of Fibreboard, the assumption and repayment by Owens Corning of Fiberboard's debt and Fiberboard's transfer of assets to Owens Corning; -- An action for the purpose of avoiding and setting aside as a fraudulent conveyance the claims which the Bank Group has asserted against certain of the Debtors and their non-Debtor affiliates arising out of inter-corporate guarantees and security interests in support of the $ 1,500,000,000 of prepetition loans and advances made by the Bank Group to one or more of the Debtors, or alternatively to equitably subordinate the claims to other claims against the Debtors; and -- An action to avoid as fraudulent transfers dividend paid to the Debtors' shareholders between 1996 and 2000 and to recover the dividends for the Debtors' estates. Francis A. Monaco, Esq., at Walsh Monzack and Monaco PA, in Wilmington, Delaware, tells the Court that Jackson and John Hancock have reason to believe that Fiberboard and the Debtors were already insolvent at the time of the acquisition. If their suspicions are true, Mr. Monaco says, the Debtors could not have received reasonably equivalent value for the acquisition and, thus, the acquisition was a fraudulent transfer. A number of inter-corporate guarantees and stock pledges were made for the benefit of the Bank Group in connection with the documentation of the credit facility. Mr. Monaco relates that Jackson and John Hancock also suspect that the Debtors and their non-Debtors were: * insolvent at the time the documentation was entered into, * were rendered insolvent by the acquisition transaction, or * subsequently, were rendered insolvent by the conveyance and operation of the stock pledges and inter-corporate guarantees in question. In any event, Mr. Monaco says, the Debtors and their affiliates did not receive reasonably equivalent value. The guarantees and stock pledges in question must be avoided and set aside, or in the alternative, equitably subordinated. The Debtors paid $61,000,000 in dividend from 1996 to 2000. Mr. Monaco insists that the dividend payments qualify as transfers under the Uniform Transfer Act in effect in Delaware, Owens Corning's state of incorporation and Ohio, Owens Corning's principal state of business. Since the Debtors were already insolvent at the time of the transfers, they received no value for the payment of the dividends. Thus, the funds paid out should be returned to the Debtors as fraudulent transfers. Debtors Respond Norman L. Pernick, Esq., at Saul Ewing LLP, in Wilmington, Delaware, tells the Court there is no reason to grant the sub- committee's motion as far as the avoidance action on the Bank Group's guarantees are concerned because the Debtors will be proceeding with the action on October 4, 2002. The Debtors, however, have determined not to assert either the Fibreboard Action or the action on the dividends due to concerns about the merits of the actions and the recoveries that may actually be realized. But should the Court grant the sub- committee's motion, Mr. Pernick explains that the Debtors will not object so long as the sub-committee will not proceed with the action on the Bank Group's guarantees. (Owens Corning Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Wants to Defray $5.6MM Additional Misc. Plan Costs --------------------------------------------------------------- Pacific Gas and Electric Company seeks the Court's authority to incur additional miscellaneous expenses of $5,602,810 for projects in connection with Plan Implementation. A. GTrans Business Processes 1. Credit Evaluations (Cost Estimate -- $40,000) PG&E purchases electricity from QF customers pursuant to Qualifying Facilities agreements. Conversely, PG&E provides QF customers with gas and electric transmission services. PG&E currently may offset payments to the QF customers with amounts due from the QF customers. The ability to offset payments is a consideration in determining the creditworthiness of these QF customers. Upon separation from PG&E, GTrans will provide gas transmission services to the QF customers but will not buy electricity from them. Therefore, GTrans will not be able to evaluate creditworthiness based on offset payments but will have to incur expenses to perform credit evaluations for 80 customers who hold Qualifying Facilities agreements with PG&E. PG&E has selected a management consulting and engineering firm, ESS Consulting, to perform the credit evaluations. 2. Virtual Metering (Cost Estimate -- $140,000) After the Plan Effective Date, GTrans will be a gas transmission business and PG&E will be one of its customers for gas deliveries. In order to bill PG&E for gas deliveries, GTrans will need to measure the quantity of gas delivered to PG&E. Currently, over 5,000 interconnection points between what will be the GTrans gas transmission system and the PG&E gas distribution system are not metered. In view of the large number of interconnection points, it is not economically feasible to install meters. Therefore, instead of meters, PG&E intends to measure the gas deliveries by a "virtual metering" methodology, which has been proposed pursuant to the Metered Quantity Determination Agreement. As part of PG&E's applications filed on November 30, 2001 with the Federal Energy Regulatory Commission to approve the transactions contemplated by the Plan, PG&E filed the proposed MQDA and requested FERC's approval for its virtual metering methodology. In order to create virtual metering, a new database on gas delivery information will need to be developed. PG&E has selected two applications developers from Blackstone Technology Group to design, develop and implement the new database, working with PG&E business and systems analysts. Blackstone Technology Group is a consulting firm specializing in utility application solutions. B. Reorganized PG&E Business Processes To establish important PG&E business processes that need to be developed as a result of the separation contemplated by the Plan, PG&E needs: 1. Software Licenses And Related Expenses (Cost Estimate -- $9,200) Currently, PG&E Corporation provides certain services to PG&E utilizing software products that are licensed by PG&E Corporation. As a result of the separation under the Plan, PG&E must purchase and install several software products so that it will be able to perform the functions internally. PG&E will need to purchase software: a. to track employee contributions to PG&E's political action committee; b. to manage PG&E's pension and pension benefits funds; c. to train PG&E employees over the Internet on business ethics and compliance with legal and regulatory requirements; d. to track risk management and insurance requirements; and e. for tax return preparation and tax solutions. 2. Stock Option Management (Cost Estimate -- $25,000) PG&E Corporation currently administers a stock option plan for PG&E employees who hold options to purchase PG&E Corporation stock. Pursuant to the Plan, employees who hold options to purchase PG&E Corporation stock will also be granted options to purchase PG&E stock, which will be publicly traded after the Plan Effective Date. Therefore, PG&E will require a new PG&E stock option plan. PG&E has selected Salomon Smith Barney, a member of Citigroup (Salomon), to develop a system for administering the new stock option plan. C. New Entity Business Processes PG&E has identified several projects related to the business operations of all of the New Entities, which must be completed by or in advance of the Plan Effective Date. For these operations, PG&E will need certain software and related services: 1. Human Resources Software (Cost Estimate -- $75,810) a. "Heidi/Assistant" -- for Random Drug Testing in order to comply with Department of Transportation regulations for certain classes of employees; PG&E intends to purchase a software license for the New Entities from Compliance Information Systems for $6,590, which includes the software and support for 2,500 tests per year; b. "Great AAP" -- to create and manage affirmative action plans to comply with state and federal regulations; PG&E intends to purchase the software license from Berkshire Associates, Inc. for $2,995, which includes the Great AAP Master Edition Single License and one year of technical support; c. "Training Server" -- to manage training; PG&E intends to purchase this software license from THINQ Learning Solutions Inc. for $20,000 and to pay THINQ $40,000 for the installation, configuration and testing; d. "Scan Tools" -- for Employee Testing from NCS Pearson for $1,725 and the EEI Scanner Software from the Edison Electric Institute for $4,500. PG&E intends to obtain the necessary software licenses and to transfer the licenses to the New Entities upon the Plan Effective Date. If the Plan is not confirmed, PG&E anticipates that it will be able to use all of the software tools, which represent current (and therefore upgraded) versions of software already in use by PG&E. 2. Banking & Money Management (Cost Estimate -- $195,800) a. Cash Management Software and Related Services PG&E currently licenses Resource IQ software, which it uses to manage its daily cash position and to record banking transactions to the general ledger accounting system. Therefore, for the New Entities, PG&E intends to purchase a similar license from Sunguard Treasury Systems, a banking software specialist, at a cost of $110,950. Software consultants from Sunguard will assist with the installation, configuration and implementation of Resource IQ at an additional cost of $32,000. In addition, PG&E will purchase a license for Mellon Bank's Telecash software for the New Entities at a cost of $350. This software is used to approve wire transfers of money to and from Mellon Bank initiated through the Resource IQ software system. b. Banking Relationship Software and Related Services PG&E currently uses Banking Relationship Manager software to analyze banking fees and services. For the New Entities, PG&E contemplates purchasing a license for Banking Relationship Manager software from The Weiland Financial Group, a financial services consulting firm, at a cost of $20,500. Weiland will also provide one or more consultants who will assist PG&E in separating the data currently stored in the Banking Relationship Manager software used by PG&E. The cost for the consultants' services will be $2,000. c. Project Management PG&E has selected Boil and Company, Inc., a cash management consulting firm, to provide project management services in connection with the implementation of the banking and money management processes for the New Entities at a cost of $30,000. 3. Electronic Data Interchange (Cost Estimate -- $90,000) GE Global Exchange Services currently provides an Electronic Data Interchange program for PG&E's purchasing and accounts payable functions. The EDI program allows PG&E to communicate electronically with its vendors and exchange purchase orders, purchase order changes and invoices electronically. It also permits PG&E to pay vendors via Electronic Funds Transfer. PG&E has selected GE Global Exchange Services to provide a similar EDI program for the New Entities. 4. Procurement Management (Cost Estimate -- $270,000) It is estimated that the New Entities collectively will spend $200,000,000 per year on materials (including supplies and equipment) and $300,000,000 per year on services (including consulting services and technical assistance). In order for the New Entities to be prepared to commence business operations by the Effective Date, PG&E intends to implement certain procurement processes in advance of the Effective Date. Significant portions of this project will be handled by PG&E, including, for example, the configuration of the new Materials Management System to be utilized by the New Entities. However, PG&E will require the assistance of consultants in connection with this project and also anticipates incurring certain printing costs. a. Project Management Russell Harris of Source California Energy Services will provide project management services. PG&E estimates that the cost for these services will be $135,000. Stan Miyamoto of Stan Miyamoto Consulting will provide project management support as well as oversee the coordination of this project with the related materials distribution center project. PG&E estimates that the cost for Mr. Miyamoto's services will be $25,000. b. Consultants with Procurement Expertise Three outside consultants will be needed to provide expertise and recommendations in the areas of warehouse management, paperless procurement and e-commerce technology. PG&E has not yet selected the consultants but estimates a total cost of $75,000 for these services, based on its past experience with similar consultants and preliminary discussions to date with potential consultants. c. Printing of Materials PG&E estimates that it will incur $35,000 for printing of training manuals, policies and procedures manuals, and other materials related to procurement procedures for use by the New Entities. 5. Accounting Processes And Procedures (Cost Estimate -- $1,500,000) Currently, PG&E's principal accounting system is provided through a client server application developed by SAP America, Inc. PG&E also uses more than 80 other software applications that support information recorded in the SAP accounting system and perform other accounting functions. By the Plan Effective Date, the New Entities will require accounting systems and applications that are fully implemented and operational in order to maintain their books and records. PG&E has selected PricewaterhouseCoopers, a global accounting and financial services firm, to assist with the development of accounting processes and procedures for the New Entities. PG&E estimates that the accounting process and procedures work to be performed by PwC (and related work to be performed by PG&E) will take six months. This project is designed to provide only the basic accounting requirements for the New Entities and PG&E. PG&E estimates that the total cost for PwC's services will be $1,500,000. D. General Implementation Expenses 1. Transactional Agreements And Schedules (Cost Estimate -- $257,000) Implementation of the Plan will require the creation of up to 100 separate agreements, most of which will have several schedules. Some of the schedules are expected to take up thousands of pages and will be maintained on computer discs rather than in paper format. PG&E has selected ZIA Information Analysis Group, Inc. to provide data management support for this project. 2. Permit And Franchise Application Fees (Cost Estimate -- $3,000,000) Pursuant to the Permits Motion, PG&E obtained authority to hire various consultants to assist it with the process of obtaining the necessary permits and franchises for the New Entities. PG&E subsequently obtained authority to incur additional expenses related to the permit transfer process. Since the previous motions were approved, PG&E and its consultants have contacted many of the applicable government entities to begin the lengthy process of arranging for the Permits and Franchises to be in place in advance of the Plan Effective Date. In some cases, applications have been submitted. Some government entities are requesting that PG&E submit application fees and/or cost recovery fees. In addition, upon issuance of Franchises, PG&E may be required to post a surety or performance bond to secure performance. PG&E anticipates that it will have bonding capacity and will therefore only need to pay bond premiums. At this time, PG&E does not know the exact amount of the Application Fees or bond premiums that will be owed, but PG&E estimates that it could be $3,000,000. PG&E seeks approval for the various implementation expenses as a use of estate property that is outside of the ordinary course of business under Bankruptcy Code Section 363(b)(1). (Pacific Gas Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Plan Confirmation Hearings to Begin on November 18 --------------------------------------------------------------- The U.S. Bankruptcy Court ruled that the confirmation hearings in Pacific Gas and Electric Company's Chapter 11 case will begin on November 18, 2002. "We are pleased PG&E's reorganization plan continues to move forward in a timely manner and that the Bankruptcy Court did not agree with the California Public Utilities Commission's request for a significant delay," said Roger J. Peters, Pacific Gas and Electric Company's senior vice president and general counsel. As previously determined by the Bankruptcy Court, it will hear each confirmation case separately, beginning with the plan submitted by the CPUC and then moving to PG&E's reorganization plan immediately afterwards. At the beginning of Wednesday's hearing, the CPUC requested the confirmation hearing be postponed, in light of Monday's Ninth Circuit Court of Appeals decision that threw into question the CPUC's settlement with Southern California Edison Company. The CPUC's legal counsel indicated that the decision raised questions about the confirmability of its plan. The CPUC later indicated it was ready to proceed with its plan in November. Recent events confirm PG&E's strong belief that it has developed the only practical solution that allows the utility to emerge from Chapter 11 as a financially healthy, investment-grade company, pays creditors in full with interest and gives the State of California a clearly defined path to exit the power buying business. PG&E's plan achieves these objectives without asking the Bankruptcy Court to raise rates or customers for a bailout. PENN MUTUAL: Fitch Ups Ratings on Series 1996-PML P-T Certs. ------------------------------------------------------------ Fitch Ratings upgrades Penn Mutual Life Insurance Company's commercial mortgage pass-through certificates, series 1996-PML, $11.7 million class E to 'AAA' from 'AA', $23.4 million class F to 'AAA' from 'AA-' and principal only class P to 'AAA' from 'BBB'. Fitch also upgrades the following classes: $19.5 million class G to 'AA' from 'BBB+', $23.4 million class H to 'A' from 'BBB-', $15.6 million class J to 'BBB' from 'BB', $23.4 million class K to 'BB+' from 'B+', $15.6 million class L to 'BB-' from 'B' and $11.7 million class M to 'B' from 'CCC'. In addition, Fitch affirms the $24.4 million class B, notional class X-1 and X-2, $31.3 million class C and $35.1 million class D at 'AAA'. Fitch does not rate the $12.9 million class N. The ratings upgrades and affirmations follow Fitch's annual review of the transaction, which closed in August 1996. The upgrades are primarily due to increased subordination levels caused by the reduction in certificate balance combined with stable operating performance. As of the September 2002 distribution, the deal has paid off 68.5% since issuance to $245.9 million from $781.6 million at issuance. In addition, 78.6% of the loans in the pool are out of the prepayment lockout period and approximately half of the loans have an interest rate at or above 9.0%. Given the current interest rate environment, Fitch expects the deal to continue to experience significant paydown. Midland Loan Services, the master servicer, collected year-end 2001 financials for 95.0% of the pool. Loans that reported financials at year-end 2000, YE 2001, and at issuance represented 84.7% of the pool. These loans had a weighted average debt service coverage ratio of 1.72 times for YE 2001 compared to 1.71x in YE 2000 and 1.35x at issuance. This pool benefits from loan seasoning. The weighted average seasoning is 10.8 years. Another strength of the deal is the staggered maturity concentration. The highest amount of loan maturites occur in 2004 representing only 12.06% of the pool Currently there are five loans, representing 8.2% of the pool, on the master servicer's watchlist. Three of the five loans are on the watchlist due to upcoming maturities. All of these loans have demonstrated a stable operating performance. The remaining two loans are on the watchlist because of occupancy problems. Both of these loans remain current. The first loan is a retail property located in Gurnee, IL. The anchor tenant, Piggly Wiggly, vacated the property in September of 2001. There are no prospective tenants at this time and the borrower is currently marketing the property for sale. The other loan is an office property located in Deerfield, IL. The property has a history of occupancy problems. The YE 2001 occupancy was 44.2% which is an increase from 30.0% in YE 2000. The servicer indicated that the borrower was asking below market rents and that the property was in good condition with no significant deferred maintenance. In addition to these loans on the watchlist, there is one loan that in foreclosure representing 1.4% of the outstanding loan balance. The property is a single tenant office building located in Georgetown, MA. The loan originally transferred to special servicing because the tenant, Salomon, vacated the building. Subsequently, the borrower filed bankruptcy on February 26, 2002 which has delayed the foreclosure process. Currently the building is 100% occupied by High Tech Hose, a London based firm. There are currently no other delinquent loans in the transaction. Fitch believes that the increased subordination levels caused by the reduction of the certificate balance, the stable operating performance of the loans, and the low amount of delinquent loans warrant the upgrades for this transaction. Fitch will continue to monitor this transaction, as surveillance is ongoing. PENN TRAFFIC: Ups Promo Spending to Combat Market Competition ------------------------------------------------------------- Penn Traffic, headquartered in Syracuse, New York, plans to invest on additional promotional spending in wake of expected 28 competitive openings, including nine supercenters, F&D Reports' Monday edition said. The Company is on track with its capital expenditure program for the current fiscal year and expects to invest approximately $60.0 million in its store base and infrastructure. Included in these expenditures are five new store openings and 12 major store remodels. This comes on top of the $170.0 million Penn Traffic spent over the past three years to remodel, enlarge or replace 94 of its 216 supermarkets, representing 50% of its square footage. * * * As previously reported, Penn Traffic obtained a waiver of a default under its $205 million secured revolving credit and term loan agreement funded -- according to data obtained from http://www.LoanDataSource.com-- by Fleet Capital Corporation, GMAC Business Credit, LLC, AmSouth Bank, Bank of America National Trust and Savings Association, Heller Financial, Inc., LaSalle Business Credit, Inc., Citizens Business Credit Company, The CIT Group/Business Credit, Inc., IBJ Whitehall Business Credit Corporation, Foothill Capital Corporation, TransAmerica Business Credit Corporation, Sovereign Bank And The Provident Bank. The lending consortium agrees to forbear until October 31, 2002, and continue providing working capital financing to Penn Traffic, Dairy Dell, Inc., Big M Supermarkets Inc. and Penny Curtiss Baking Company Inc. PENNEXX FOODS: Plans Equity Infusion to Dodge Potential Default --------------------------------------------------------------- Pennexx Foods, Inc. (OTC Bulletin Board: PNNX), a leading provider of case-ready meat to retail supermarkets in the Northeast, announced that the costs of vacating its former plant in Pottstown, Pennsylvania and of opening its new plant in Philadelphia will contribute to a loss in the quarter annual period ending September 30, 2002. Michael D. Queen, President of the Company said, "Because of the magnitude of the move, we estimate that the Company's net loss for July 2002 approximated $1.2 million, and that the net loss for August 2002 approximated $0.3 million. Additional expenses related to the relocation, including installation and training costs, will also weigh on the results of operation for September and October, and possibly, later into the fall." The Company's July results included a non-cash write-off of approximately $200,000 in improvements at the Pottstown plant, and an estimated loss of contribution of between $500,000 and $600,000 due to the temporary subcontracting of pork production to Smithfield Foods, Inc., during the move. The Company's accounting policy is to expense all moving related expenses. This policy has increased the size of the losses as compared to the amounts which would have been reported if certain of such costs had been capitalized. The Company's Board of Directors is considering the raising of additional equity to improve its balance sheet through an additional equity contribution from Smithfield Foods, Inc. or other third parties. Such an equity infusion would not only improve the Company's liquidity which has deteriorated due to the losses, but would also provide some additional protection against a potential default under the Company's Credit Agreement (with Smithfield Foods, Inc.), which requires the Company to maintain positive shareholders' equity. (The Company estimates that shareholders' equity at August 31, 2002 was $ 250,000.) Of course, there is no assurance that such equity will be available on terms acceptable to the Company. Mr. Queen reported that the Philadelphia facility's conversion to new automated, state-of-the-art equipment would be completed within the next 90 days. "From that point forward," said Mr. Queen, "we expect Company efficiencies to increase substantially and return the Company to profitability." Established in 1999, Pennexx Foods, Inc., is a leading provider of case-ready meat to retail supermarkets in the northeastern U.S. The company currently provides case-ready meat within a 300-mile radius of its plant to customers in the Northeast in order to assure delivery of product with an extended shelf life. The company cuts, packages, processes and delivers case-ready beef, pork, lamb and veal in compliance with the United States Department of Agriculture regulations. Pennexx customers include many significant supermarket retailers. In June 2001, Smithfield Foods, Inc., (NYSE: SFD) acquired 50% of the common stock of Pennexx Foods, Inc. Smithfield Foods has delivered a 26 percent average annual compounded rate of return to investors since 1975. With annualized sales of $8 billion, Smithfield Foods is the leading processor and marketer of fresh pork and processed meats in the United States, as well as the largest producer of hogs. For more information, please visit http://www.smithfieldfoods.com PEREGRINE SYSTEMS: Look for Schedules & Statements around Nov. 5 ---------------------------------------------------------------- Peregrine Systems, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for more time to prepare and file their Schedules of Assets and Liabilities and Statements of Financial Affairs. The Debtors report that they have over 15,000 potential creditors. The conduct and operation of their businesses require the Debtors to maintain voluminous books and records and a complex accounting system. Due to the number of creditors, the complexity of their businesses and the diversity of their operation and assets, the Company needs more time to comply with the disclosure obligations imposed under 11 U.S.C. Sec. 521(1) and Rule 1007 of the Federal Rules of Bankruptcy Procedure. The Debtors tell the Court that they need until November 5, 2002 to complete their schedules and statements and file that mountain of paper with the Court. Peregrine Systems, Inc., the leading global provider of Infrastructure Management software, filed for chapter 11 protection on September 22, 2002. Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young & Jones represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $100 million. PEREGRINE SYSTEMS: Receives Court Approval of First Day Motions --------------------------------------------------------------- Peregrine Systems, Inc., (OTC: PRGNQ) has received U.S. Bankruptcy Court approval of $60 million of interim debtor-in- possession financing for immediate use by the company to fund ongoing operations during its voluntary Chapter 11 reorganization under the U.S. Bankruptcy Code. Among other actions, the court also has approved payment of pre-petition and post-petition employee wages, healthcare insurance and other employee benefits. The $60 million of interim DIP financing is part of the $110 million commitment from BMC Software, Inc. (NYSE: BMC). The final hearing regarding approval of the DIP financing has been set for Oct. 15, 2002. BMC Software also agreed to acquire all of the assets of Peregrine's Remedy(R) business unit for $350 million and to assume substantially all of its liabilities. 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. At hearings conducted on Peregrine's "first day motions," the court also approved employee pay, reimbursable expenses, the company's severance program and insurance benefits, including medical, dental, workers compensation insurance and vision care, during its voluntary Chapter 11 reorganization. In addition, the company was authorized to continue, in the ordinary course of business, all of its customer-related practices and programs. Gary Greenfield, Peregrine CEO, said he was "extremely pleased with the Bankruptcy Court's approval of its 'first-day' motions and interim DIP financing. We appreciate the court's prompt action on these first-day orders, especially those authorizing the continuation of employee wages and healthcare benefits as well as our customer programs." In addition, Greenfield said that the interim DIP financing will be used for post-petition trade and vendor obligations, among other things. Peregrine filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on Sept. 22, 2002 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 Remedy 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. POLAROID CORP: Wants More Time to Remove Prepetition Actions ------------------------------------------------------------ According to Eric M. Davis, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, Polaroid Corporation and its debtor-affiliates require additional time to determine which of the State Court Actions they will remove to the Delaware Bankruptcy Court for continued litigation and resolution. The Debtors are parties to over 50 different judicial and administrative proceedings currently pending in various courts or administrative agencies throughout the country. The Actions involve a wide variety of claims -- environmental, commercial, employment-related, product liability, trademark and patent litigation -- some of which are extremely complex. Accordingly, the Debtors ask the Court to further extend the deadline to remove prepetition actions to the later of: (a) January 31, 2003; or (b) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. Pursuant to Rule 9006(b) of the Federal Rules of Bankruptcy Procedure, Mr. Davis asserts that the extension should be granted since: (a) it will afford the Debtors with sufficient opportunity to make fully-informed decisions on the possible removal of Actions; (b) it will protect the Debtors' valuable right economically to adjudicate lawsuits pursuant to Section 1452 of the Judiciary Procedures Code if the circumstances warrant removal; (c) the Debtors have made significant achievements to date in their Chapter 11 cases; (d) the Debtors' adversaries will not be prejudiced by the extension as they may not prosecute the Actions absent relief from the automatic stay; and (e) this Motion will not prevent any party to a proceeding that the Debtors seek to remove from pursuing a remand pursuant to Section 1452(b) of the Bankruptcy Code. The Court will convene a hearing to consider the Debtors' request on November 12, 2002. By application of Del.Bankr.LR 9006-2, the deadline by which the Debtors must make decisions about lease dispositions is automatically extended through the conclusion of that hearing. (Polaroid Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Polaroid Corporation's 11.50% bonds due 2006 (PRDC06USR1) are trading at 5.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=PRDC06USR1 for real-time bond pricing. PREVIO INC: Files Cert. of Dissolution with Delaware State Sec. --------------------------------------------------------------- Previo, Inc., (Nasdaq: PRVO) filed a certificate of dissolution with the office of the Secretary of State of the state of Delaware in accordance with the plan of dissolution previously approved by the stockholders on September 17, 2002. As a result, Previo's stock transfer books were closed as of the end of trading Wednesday (Sept. 23, 2002), and it has ceased the issuance and recording of the transfer of shares of its common stock. Also effective Wednesday, Previo has voluntarily delisted from the Nasdaq National Market. The record date for purposes of determining stockholders that will be eligible to participate in any distributions made by Previo is September 25, 2002. As also previously announced, on September 17, 2002, Previo obtained approval by its stockholders for the sale of substantially all of its non-cash assets to Altiris, Inc. for consideration totaling $1,000,000 cash. On September 24, 2002 Previo and Altiris, Inc., formally completed this transaction. PURCHASEPRO.COM: Case Summary & 20 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Purchasepro.Com, Inc. 3391 Buffalo Drive, Suite 9 Las Vegas, Nevada 89129 dba Purchase Pro, Inc. Bankruptcy Case No.: 02-20472 Type of Business: Purchasepro.com offers strategic sourcing and procurement software solutions. Chapter 11 Petition Date: September 12, 2002 Court: District of Nevada (Las Vegas) Judge: Robert C. Jones Debtor's Counsel: Gregory E. Garman, Esq. Gorcion & Silver, Ltd. 3960 Howard Hughes Parkway, 9th Floor Las Vegas, Nevada 89109 (702) 796-5555 Total Assets: $41,943,000 Total Debts: $20,058,000 Debtor's 20 Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Chayenne Investments, Inc. $4,643,277 3291 N. Buffalo Drive Suite 1 Las Vegas, Nevada 89129 Compaq Computer Corporation $868,892 PO Box 281858 Atlanta, GA 30384-1858 Advanstar Communications, Inc. $868,892 PO Box 64584 Saint Paul, MN 55154-0564 Computer Associates $472,000 Dept. 0730 PO Box 120001 Dallas, TX 75312-0730 Arrow Electronics $200,000 Alta Vista Company $175,000 ADP Investor Shareholder Services $149,627 Communication Services Aces International $123,696 Wilson Sonini Goodrich & Prof. Services Rendered $110,271 Rosati Directcolor Invoice $72,520 Exodus Communications, Inc. $63,667 Grant Thornton LLP Prof. Services Rendered $62,807 MGM Mirage $42,000 Sklar, Warren, Conway $33,922 GATX Technology ECR Portfolio $33,142 Ogata, Setsuko Services $31,500 Morris Pickering & Sanner Prof. Services Rendered $29,149 Brobeck Hale & Dorr $29,026 Ernst & Young LLP Prof. Services Rendered $29,015 Pondell/Wilkinson MS&L Prof. Services Rendered $27,136 REUNION INDUSTRIES: Closes Sale of Kingway Division for $32 Mil. ---------------------------------------------------------------- Reunion Industries, Inc., (Amex - RUN) has completed the sale of its Kingway Material Handling Division for $32 million in cash and notes. Anticipated use of the cash proceeds from the sale is to reduce bank debt. Future proceeds from the notes are contingent upon Kingway's future operating results. Kingway designs, manufactures and installs high quality, integrated material handling systems for distribution centers for mass merchandisers and grocery retailers. Reunion President Kimball Bradley stated in his comments, "This is an important step towards meeting the challenges we faced during the last 18 months and going forward. We can now focus on improving our operations and rebuilding customer and vendor relationships. Among the benefits of this divestiture is that it alleviates our dependence on large capital projects and eliminates progress billings, which historically have been a tremendous strain on our liquidity. We're now better positioned to complete our previously announced restructuring plan and rebuild our continuing businesses." Reunion manufactures and markets a broad range of metal and plastic products and parts, including seamless steel pressure vessels, fluid power cylinders, leaf springs, high volume precision plastics products and thermoset compounds and provides engineered plastics services. Reunion Industries is headquartered at 11 Stanwix Street, Suite 1400, Pittsburgh, PA, 15222. Reunion's June 30, 2002 balance sheet shows a working capital deficit of about $63 million, and a total shareholders' equity deficit of about $25.6 million. SAGENT: Nasdaq Approves Listing Transfer to SmallCap Market ----------------------------------------------------------- Sagent (Nasdaq:SGNT), a leading provider of enterprise business intelligence solutions, announced Nasdaq Stock Market approval of its application to list its common stock on the Nasdaq SmallCap Market, effective at market opening on Sept. 26, 2002. The company's ticker symbol remains the same, "SGNT". Sagent also announced its decision against pursuing a 1-for-10 reverse stock split, as disclosed on July 30, 2002, at this time. "We believe that these decisions are in the best interests of our stockholders and our own profitability targets," said Steve Springsteel, Sagent chief operating officer and chief financial officer. "When we reported second-quarter 2002 results on July 30, we reiterated our plans for EBITDA break-even at year-end 2002. Voluntarily transferring our listing from the Nasdaq National Market to the Nasdaq SmallCap Market will enable us to keep these plans on track by avoiding the expense of a special stockholders' meeting to approve the proposed reverse stock split. Moreover, as an alternative to potential delisting and relegation to the over-the-counter bulletin board, the move will maintain Sagent's presence on Nasdaq and stockholders' access to all current trading information and price quotations." Sagent plans to report its third-quarter 2002 results after the close of market on Oct. 22, 2002. Sagent provides a complete software platform for business intelligence, enabling companies to reduce operational costs, increase profitability and improve customer relationships. Sagent employs a unique business intelligence life-cycle process that facilitates the rapid development of custom analytic solutions and helps bridge the gap between business users and information technology. Through its technology, services and business expertise, Sagent simplifies business intelligence for more than 1,500 customers worldwide. Sagent customers include: AT&T, Boeing Employees Credit Union, BP Amoco, Carrefour, Citibank, GPU Energy, Guinness UDV, Heineken, Kawasaki, Kemper National Insurance, La Poste, Novartis, NTT-DoCoMo, Sara Lee, Siemens, and Singapore Telecom. Sagent technology is also embedded in multiple partner solutions that address the needs of specific vertical and functional application areas; key ISV partners include Advent Software, Hyperion Solutions and HAHT Commerce. Sagent technology has been adopted by leading regional and global systems integrators, such as Cap Gemini Ernst & Young, Satyam and Unisys, to address customer needs within their business intelligence practices. In addition, Sagent has built alliances with numerous technology vendors to cooperatively market solutions; alliance partners include Microsoft, Business Objects and Sun Microsystems. Sagent is headquartered in Mountain View, Calif. For more information about Sagent, please visit http://www.sagent.com SERVICE MERCH.: Asks Court to Lift Claim Trading Restrictions ------------------------------------------------------------- Service Merchandise Company, Inc., and its debtor-affiliates seek to terminate the notice and hearing procedures for trading in claims against the Debtors established by the Court's April 6, 2000 order. Beth A. Dunning, Esq., at Bass, Berry & Sims PLC, at Nashville, Tennessee, relates that the Claims Trading Procedures Order was established to preserve the Debtors' ability to use their consolidated net operating loss carryovers, to offset future income. It enabled the Debtors to monitor claims trading activity and seek appropriate relief if the trading were to jeopardize the Debtors' ability to utilize their net operating loss carryovers. Pursuant to the Procedures Order, the Debtors have been and continue to receive notifications from certain creditors as they acquire claims against the Debtors. Because the Debtors will be filing a plan of liquidation to provide for the distribution of the proceeds of their assets to creditors, the Debtors will not be able to utilize their net operating loss carryovers. Accordingly, the notification and hearing procedures for trading claim against the Debtors are no longer necessary. (Service Merchandise Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders says that Service Merchandise's 9.0% bonds due 2004 (SVCD04USR1), an issue in default, are trading at 7 cents-on- the-dollar. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=SVCD04USR1 SLI INC: Wins Nod to Pay Critical Vendors' Prepetition Claims ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave its stamp of approval to SLI, Inc., and its debtor-affiliates to pay critical trade vendors' prepetition claims. In return for receiving payment of these claims, the critical vendors will be required to extend normalized trade credit terms to the Debtors for the duration of these cases. The Debtors intend to pay an aggregate amount of no more than $8,117,000 to the Critical Vendors. The Debtors are among the world's leading manufacturers of lighting products. The raw and processed materials, parts, goods and services to be provided by the Critical Vendors during these cases are utilized in the Debtors' manufacturing and related operations as well as their import and sale of finished lamp and other lighting products. Such materials, parts, goods and services are an integral part of the products that the Debtors, in turn, manufacture and sell to their customers. Absent payment of the Critical Vendor claims in the ordinary course of business, the Debtors believe that their business will be severely damaged, perhaps beyond repair. The Debtors' Critical Vendors fall into six broad categories: 1) Quality Control Vendors Vendors whose products have been extensively tested by the Debtors for quality control purposes and who are able to consistently produce Critical Products that meet or exceed the Debtors' exacting production standards; 2) Capacity Vendors Vendors who are the sole vendors able to supply the Debtors with adequate amounts of a Critical Product; 3) Sole Source Vendors Vendors who are the sole sources of supply for a Critical Product; 4) Customer Directed Vendors Vendors who manufacture, assemble and/or deliver a product based on the customer's stated specifications and requirements; 5) Key Small Vendors Vendors who are also Sole Source or Quality Control Vendors and for whom the Debtors constitute a primary or substantial customer, such that non-payment of prepetition amounts may jeopardize such vendor's ability to continue to provide Critical Products to the Debtors; and 6) Operational Services Vendors Vendors who provide critical operational services to the Debtors. Additionally, the Debtors have historically sought to maximize the value of SLI by, among others, minimizing total global delivery costs and strategically availing themselves of tax and regulatory benefits. To achieve these goals, and to ensure availability of satisfactory amounts of certain Critical Products, the Debtors purchase many Critical Products from their subsidiaries and affiliates in foreign countries. The Foreign Affiliates are managed independently from the Debtors, and deal with the Debtors on an arms' length basis. The Debtors cannot compel the Foreign Affiliates to continue to provide Critical Products to the Debtors if they decline to do so voluntarily. Transactions with Critical Affiliated Vendors account for approximately 40% of the Debtors' total revenues in their general lighting business and approximately 200 of total revenues in their miniature lighting business. If the Debtors fail to keep current on their obligations to their Critical Affiliated Vendors, the Debtors' sales will drop precipitously and their reorganization efforts will be seriously jeopardized. SLI, Inc., and its affiliates operate in multi-business segments as a vertically integrated manufacturer and supplier of lighting systems, which includes lamps, fixtures and ballasts. The Company filed for chapter 11 protection on September 9, 2002 in the U.S. Bankruptcy Court for the District of Delaware. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $830,684,000 in total assets and $721,199,000 in total debts. SUNRISE TECHNOLOGIES: Files for Chapter 7 Liquidation in Calif. --------------------------------------------------------------- Sunrise Technologies International, Inc., (OTC:SNRS) has filed a Chapter 7 bankruptcy. The official bankruptcy filing was made in the Northern District of California - Oakland Division. Dale Bowerman, Chairman of the Board of Sunrise Technologies International, Inc., said, "We, along with several large shareholders, have tried to reorganize the company in order to preserve its value and to make this technology available to the physicians and their patients. At the same time we have been trying to enhance the technology. We have been unable to raise enough money to pay our commitments to our creditors. One secured creditor decided to foreclose on all company assets and conduct an auction to sell these assets. We felt that it was in the best interests of all our creditors that the company ask the bankruptcy court to assist in this liquidation procedure. It is with deepest regret that we make this Chapter 7 filing." Mr. Bowerman added, "We also would like to thank all of those who were involved in the last nine months in the efforts to save the company. I hope and expect that Sunrise's technology will find its way into the ownership of a company that will continue to service our customers and to continue enhancing the LTK procedure." Sunrise Technologies International, Inc., is a refractive surgery company based in Menlo Park, California, that has developed holmium YAG laser-based systems that utilize a patented process for shrinking collagen developed by Dr. Bruce Sand (the "Sand Process") for correcting ophthalmic refractive conditions. SYNTHONICS TECHNOLOGIES: Committee Wants to File a Better Plan -------------------------------------------------------------- The Official Creditors' Committee appointed in Synthonics Technologies, Inc.'s on-going chapter 11 case pending before the U.S. Bankruptcy Court for the Central District of California says it has a better plan for the Debtor than the one on the table. The Creditors Committee has come up with a Plan and Disclosure Statement that is "much more relevant to . . . creditors . . . and will be far more advantageous to the creditors," Earle Hagen, Esq., in Encino, California, says. The Committee Mr. Hagen's representing wants the hearing scheduled to consider the Debtors' Disclosure Statement adjourned for 30-45 days, "so that everybody will [have] time to evaluate th[e] Disclosure Statement and Plan proposed by the Creditors Committee." As reported in the Troubled Company Reporter on March 8, 2001, the Company proposed a plan premised on retiring and canceling all old debt and equity securities and issuing new securities under a distribution scheme allocating: * 60% of the new securities for 3D as reorganization equity, * 20% for creditors holding allowed claims and electing to participate in the equity distribution rather than receive deferred payment of debt, * 15% for the existing interest holders, and * 5% held in reserve for future use by the reorganized company management. Synthonics Technologies, Inc., develops and licenses advanced three-dimensional replication software tools used in computer- assisted design, virtual reality and medical animation applications. The Company filed for chapter 11 protection on October 23, 2000. TRICORD SYSTEMS: Receives Formal Notice of Patent Acceptance ------------------------------------------------------------ Tricord Systems, Inc. (Nasdaq:TRCDQ) -- developer of the revolutionary Illumina clustering software and Lunar Flare clustered server appliances -- today announced it has received formal notification from the U.S. Patent Office that an additional patent has been allowed on Tricord's unique clustering technology. The patent, entitled "Self-Healing Computer System Storage" concerns Tricord's proprietary technique for dynamically rerouting data access requests from a failed memory controller to a backup memory controller. "We're pleased to add this to the growing number of patents for our unique Illumina software," said Keith Thorndyke, president and CEO of Tricord. "This patented technology allows us to deliver the availability and ease-of-use of a SAN with a much lower price point." The Notification of Allowance was dated August 7, 2002. The Company expects that the U.S. Patent Office will issue this patent within 60 days. Tricord Systems, Inc., designs, develops and markets clustered server appliances and software for content-hungry applications. The core of Tricord's revolutionary new technology is its patented Illumina software that aggregates multiple appliances into a cluster, managed as a single resource. Radically easy to deploy, manage and grow, Tricord's products allow users to add capacity to a cluster with minimal administration. Appliances are literally plug-and-play, offering seamless growth and continuous access to content with no downtime. The technology is designed for applications including general file serving, virtual workplace solutions, digital imaging and security. Tricord is based in Minneapolis, Minnesota. On August 2, 2002, Tricord filed a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Minnesota. For more information regarding Tricord, visit http://www.tricord.com TRICORD SYSTEMS: Obtains Formal Notice of Patent Issuance --------------------------------------------------------- Tricord Systems, Inc. (Nasdaq:TRCDQ) -- developer of the revolutionary Illumina clustering software and Lunar Flare clustered server appliances -- has received the Notice of Issuance of U.S. Patent 6,427,212 from the U.S. Patent Office. The patent, entitled "Data Fault Tolerance Software Apparatus and Method," concerns Tricord's proprietary technique for file distribution across a large-scale data processing system, which protects against data loss when one or more storage devices fail. The patent describes how each distributed file object may have an associated fault tolerance that, combined together, provides RAID-level data protection on a file-by-file basis. "We're very pleased that our unique technology has received this patent, among others, which further solidifies Tricord's leadership in the field of high availability, distributed file systems," said Keith Thorndyke, president and CEO of Tricord. "Our Illumina software has received two patents and has one pending patent for its unique SAN-like high availability. Our advanced technology allows us to offer the software at a much lower price point than traditional SAN systems." Tricord Systems, Inc., designs, develops and markets clustered server appliances and software for content-hungry applications. The core of Tricord's revolutionary new technology is its patented Illumina software that aggregates multiple appliances into a cluster, managed as a single resource. Radically easy to deploy, manage and grow, Tricord's products allow users to add capacity to a cluster with minimal administration. Appliances are literally plug-and-play, offering seamless growth and continuous access to content with no downtime. The technology is designed for applications including general file serving, virtual workplace solutions, digital imaging and security. Tricord is based in Minneapolis, Minnesota. On August 2, 2002, Tricord filed a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court for the District of Minnesota. For more information regarding Tricord, visit http://www.tricord.com UNITED AIRLINES: AFL-CIO Issues Comment on Union Coalition Plan --------------------------------------------------------------- Association of Flight Attendants, AFL- CIO, United Airlines Master Executive Council President Greg Davidowitch issued this statement following his meeting with the leaders of the other unions representing workers at United and the airline's CEO Glenn Tilton: "Being a part of the solution that assists United in surviving its near-term financial crisis is central to our goal of ensuring that the Flight Attendants' long-term interests are represented. "By bringing in a new CEO, Glenn Tilton, United now has the leadership with the vision, plan and commitment needed to turn our airline around. With this leadership in place, AFA and the other Unions at United have developed an alternative framework for a recovery program that will provide United with $5 billion in total labor cost savings over the next five years -- including significant savings from management. Now United can successfully amend its application for a loan guarantee from the Air Transportation Stabilization Board, get access to near-term financing, avoid bankruptcy, and rebuild." The United Union Coalition includes representatives from AFA, Airline Pilot's Association; the International Association of Machinists and Aerospace Workers, Districts 141 and 141-M; the Professional Airline Flight Control Association; and the Transport Workers Union of America. More than 50,000 Flight Attendants, including the 26,000 Flight Attendants at United, join together to form AFA, the world's largest Flight Attendant union. Visit its Web site at http://www.unitedafa.org UNITED AIRLINES: Blaylock Initiates Coverage with Sell Rating ------------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of United Airlines' parent UAL Corporation (NYSE: UAL) with "sell" rating. Mr. Neidl delayed initiating coverage of the airline until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. Mr. Neidl's reasons for his "sell" recommendations for UAL include: -- UAL -- There is a high probability that the airline will file for Chapter 11 this fall. If it does so, the stock, including ESOP stock, may lose all value. Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P. has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P. is a member of the National Association of Securities Dealers, CRD number 35669. US AIRWAYS: Conditionally Seeks Okay to Reject Union Agreements --------------------------------------------------------------- John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, relates that any restructuring will require a reduction in labor costs. US Airways has been working closely with its unions for several months to voluntarily modify labor agreements. US Airways has already made significant progress in this effort. In June 2002, US Airways began bargaining in earnest with its five unions. At the commencement of these bargaining sessions, US Airways provided each union with a written term sheet that outlined specific proposals by the Company for modifications to the existing collective bargaining agreements that would achieve the cost reduction target. The chart shows the average annual cost savings, calculated over a six and a half-year period from July 1, 2002 through December 31, 2008, produced by the Company's Initial Prepetition Proposals to each union: Valuation of Initial Prepetition Proposals Union Average Annual Cost Savings (millions) -------------------------------------------- ALPA (Pilots) $546.9 IAM (Mechanical and Related) 178.3 AFA (Flight Attendants) 89.2 CWA (Passenger Service Employees) 82.7 IAM (Fleet Service) 77.1 TWU (Dispatchers) 5.9 TWU (Flight Crew Training Instructors) 5.4 TWU (Simulator Engineers) 1.4 IAM (Maintenance Training Specialists) 0.9 ------ TOTAL $987.8 All of the organized employees of US Airways are represented by one of 5 unions: * ALPA represents approximately 4,430 US Airways pilots; * AFA represents approximately 7,625 flight attendants; * IAM represents approximately 6,631 mechanical and related employees, approximately 5,360 fleet service employees, and approximately 48 maintenance training specialists; * CWA represents approximately 6,700 passenger service employees; and * TWU represents approximately 160 dispatchers, approximately 46 simulator engineers, and approximately 113 flight crew training instructors. At the time US Airways began its restructuring effort, all of these groups were subject to collective bargaining agreements. Thus, the labor cost reductions needed under the restructuring plan could be achieved only by modifying existing collective bargaining agreements. Mr. Butler warns that there is no assurance US Airways will achieve its goal of full voluntary participation with the IAM and CWA. Because of the urgency of the Company's financial condition, the Debtors cannot delay exercising their legal rights. In the event that mutually agreeable cost-reduction agreements cannot be reached with each union, the Debtors seek the Court's authority to reject the collective bargaining agreements. US Airways have already executed cost-reduction agreements with two of its largest organized employee groups. Shortly before the Petition Date, US Airways' pilots and flight attendants overwhelmingly ratified restructuring agreements that will produce an aggregate of $552,000,000 in average annual cost reductions through calendar year 2008. These agreements also provide the pilots and flight attendants with financial participation in the anticipated financial recovery of US Airways through equity or profit-sharing plans. On August 21, 2002, the dispatchers and flight simulator engineers, who are represented by the Transport Workers Union, ratified restructuring agreements. A third group represented by TWU -- flight crew training instructors -- ratified a restructuring agreement on August 23, 2002. These three restructuring agreements will produce an aggregate of $11,000,000 in annual labor cost savings through 2008, and provide financial participation for TWU-represented employees through equity or profit-sharing plans. Mr. Butler relates that of IAM members, only the fleet service employees have executed a tentative agreement. The mechanical and related employees rejected the cost-reduction agreement. The three IAM proposals would deliver an aggregate of $219,000,000 in average annual labor cost savings for IAM- represented employees through 2008. Based on ratifications by ALPA, AFA and TWU, US Airways is hopeful that the three IAM employee groups will ratify agreements, but the outcome cannot be predicted with certainty. If the IAM-represented employee groups ratify the prepetition cost-reduction agreements, this application will be withdrawn for the relevant bargaining units. The remaining union at US Airways, the CWA, represents the Company's approximately 6,700 passenger service employees. From May 2002 until it filed its chapter 11 reorganization cases on August 11, 2002, US Airways met with CWA 16 times in an effort to obtain a prepetition cost-reduction agreement. US Airways also provided CWA with the voluminous financial and operational data that was provided to the other unions -- data that demonstrated to the genuine and urgent need for labor cost reductions by all US Airways employees. Unlike the other unions at US Airways, which agreed either to enter into prepetition cost-reduction agreements or to submit US Airways' final cost-reduction proposal to its membership for a vote, CWA has declined to do either. To meet the Company's goal of spreading the required financial sacrifices fairly among all US Airways employees and to achieve the total amount of labor cost reductions needed to carry out its business plan and obtain DIP financing, US Airways must obtain modifications to the current CWA collective bargaining agreement that will produce approximately $70,000,000 in average annual savings through 2008. US Airways delivered to CWA representatives a formal proposal for modifications of the CWA collective bargaining agreement pursuant to Section 1113 of the Bankruptcy Code. While US Airways will attempt to reach a voluntary agreement with CWA, Debtors will ask the Court to authorize rejection of the CWA labor agreement, if necessary. The modifications to the IAM and CWA agreements as proposed under Section 1113 are necessary to accomplishing four key goals of Debtors' reorganization: 1) completion of the Restructuring Plan and Long-Term Viability; 2) fair and Equitable Treatment of All Employees; 3) accessing the ATSB Loan Guarantee; and 4) accessing DIP Financing. Although US Airways and CWA have been engaged in negotiations since May 2002, US Airways has been unable to obtain CWA's agreement to the modifications the Company believes are necessary to successfully restructure. CWA has also declined the Company's request to put US Airways' last prepetition proposal to an employee ratification vote, as the IAM has done. In the judgment of US Airways management, obtaining CWA-related average annual savings of $70,000,000 a year for six and a half years -- that is, 85% of the $82,700,000 in annual cost reductions under the Company's Initial Prepetition Proposal -- is a necessary component of the plan to successfully restructure the Company. In addition, that level of reductions is necessary for CWA employees to shoulder their fair share of the burden of restructuring. If management were to settle with CWA for less than the 85% contributed by other employees or if this Court were to deny US Airways' Section 1113 application for rejection of CWA agreement, it would have a destabilizing effect on labor relations at US Airways. "It would send a message to the unions that they can advantage their position by not concluding an agreement in a timely manner," Mr. Butler says. Furthermore, the business plan upon which the Company's ATSB application is based assumes that CWA will participate in labor cost reductions. The DIP Facility also requires voluntary modifications or court-ordered rejection of each collective bargaining agreement, including that of CWA. Achieving all key elements of the restructuring plan, including labor agreements with all groups and gaining access to the ATSB loan guarantee, is necessary to access the DIP financing. Without the liquidity provided by the DIP Facility or replacement financing, US Airways may not have sufficient liquidity to restructure. The likelihood of liquidation would therefore be much higher. By this application, the Debtors conditionally seek the Court's authority to reject each collective bargaining agreement for a bargaining unit that has not delivered a signed, ratified agreement for voluntary modifications. Achieving modifications, whether voluntary or through Court-approved rejection, is a vital component of the Debtors' reorganization plans. Section 1113(c) of the Bankruptcy Code authorizes the Court to approve rejection of a collective bargaining agreement where the debtor demonstrates compliance with this checklist: 1) The debtor made a proposal to modify the collective bargaining agreement; 2) The proposal was based upon the most complete and reliable information available at the time of the proposal; 3) The proposed modifications are necessary to permit reorganization of the debtor; 4) The modifications assure that all creditors, the debtor, and all other affected parties are treated fairly and equitably; 5) The debtor provided to the union relevant information as is necessary to evaluate the proposal; 6) The debtor met at reasonable times with the union between the time of the proposal and the time of the hearing on the proposal; 7) The debtor conferred with the union in good faith at these meetings; 8) The union refused to accept the debtor's proposal without good cause; and 9) The balance of equities clearly favors rejection of the agreement. Mr. Butler reports that CWA has now reached a tentative agreement with US Airways on consensual modifications to the collective bargaining agreements with the passenger service employees. That tentative agreement remains subject to a ratification vote by the union membership. In addition, IAM has agreed to re-submit a US Air proposal for modifications for a ratification vote by the mechanical and related employees. Although the parties to this Motion hope and expect that the modifications will be ratified, there can be no certainty of that occurring. Accordingly, the parties have agreed to continue the hearing on the Application for a period of time sufficient to complete the ratification process and to prepare for a hearing if: (a) CWA's membership fails to ratify the tentative agreement, and/or (b) IAM's mechanical and related employees fail to approve US Air's final prepetition proposal. (US Airways Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Blaylock Commences Coverage with SELL Rating -------------------------------------------------------- Blaylock & Partners' airlines and transportation analyst Ray Neidl has initiated coverage of US Airways, Inc. (NYSE: U-NL) with "sell" rating. Mr. Neidl delayed initiating coverage of the airline until he had a better sense of when a recovery will occur, which he believes will not be until 2Q03 at the earliest. Mr. Neidl's reasons for his "sell" recommendations for US Airways include: -- U-NL -- As in previous bankruptcy filings where common shareholders lost all value for their shares, restructuring under Chapter 11 may make US Airways' common shares valueless. Blaylock's ratings system consists of "buy," "hold" and "sell" recommendations. Investment banking stocks have a "not rated" designation. Institutional investors interested in receiving more information should contact Mr. Neidl at 212/715-6627 -- rneidl@blaylocklp.com Journalists interested in receiving copies of the research reports should contact Dao Tran at dtran@starkmanassociates.com Based in New York, Blaylock & Partners, L.P., has been ranked by Black Enterprise magazine as the number one minority-owned investment banking firm for 1999 and 2000. The firm has co- managed four of the largest most recent IPOs - Travelers Property Casualty Corp., Prudential Financial, Inc., Kraft Foods Inc., and Agere Systems Inc. Blaylock & Partners is a member of the NASD and SIPC. Blaylock & Partners, L.P., is a member of the National Association of Securities Dealers, CRD number 35669. US Airways Inc.'s 10.375% bonds due 2013 (U13USR2) are trading at 10 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR2for real-time bond pricing. VALEO ELECTRICAL: Court Clears Emergence from Ch. 11 Bankruptcy --------------------------------------------------------------- Valeo Electrical Systems Inc., was cleared to emerge from the protection of Chapter 11 of the U.S. Bankruptcy Code, as the U.S. Bankruptcy Court today confirmed the company's Plan of Reorganization. Pursuant to orders signed by the Honorable Stuart M. Bernstein, VESI's Plan of Reorganization is expected to become effective on October 7, 2002, and payments to creditors holding allowed claims will commence shortly thereafter. Under the terms of the Plan, which was endorsed by the Official Committee of Unsecured Creditors in VESI's Chapter 11 case, unsecured creditors will receive 95 percent of their allowed claims against the company. On August 21, the Court had approved the Disclosure Statement relating to VESI's Chapter 11 case, and authorized the company to solicit acceptances from its creditors. The Plan received overwhelming approval from VESI's creditors, as more than 90 percent of those voting filed acceptances by the September 19, 2002 ballot deadline. Commenting on the confirmation of the Plan, VESI executive vice president and general manager of the Rochester site, Walter Kneuer said, "This is an important day for VESI, the culmination of a long process that reached this successful conclusion thanks to the support of key stakeholders - especially our employees and suppliers. Looking ahead, the real significance of emerging from Chapter 11 is that VESI now has a new and solid framework for competing in the future, and for continuing to serve our customers as a part of Rochester's manufacturing base." VESI filed for Chapter 11 on December 14, 2001 to protect its operations in the face of a difficult competitive situation. VESI's parent company Valeo has agreed to fund the terms of the Plan by contributing $226 million ($190 million on the Effective Date and the balance in 2003) to recapitalize VESI. VESI manufactures automotive wiper systems, motors and other components in North America for sale to car and truck manufacturers, component suppliers and other customers. VESI's manufacturing operations are primarily located in a facility in Rochester. It is a subsidiary of Valeo, an independent industrial Group fully focused on the design, production and sale of components, integrated systems and modules for cars and trucks. Valeo ranks among the world's top automotive suppliers. Detailed information about the VESI Chapter 11 filing can be found at http://www.valeoelectricalsystems.com VIVENDI UNIVERSAL: Six Board of Directors Members Leave Seats ------------------------------------------------------------- Vivendi Universal (Paris Bourse: EX FP; NYSE: V) announced that its Board of Directors met Wednesday, September 25, 2002. It noted the resignation of six of its members: Mrs. Esther Koplowitz, Mr. Richard Brown, Mr. Eric Licoys, Mr. Samuel Minzberg, Mr. Simon Murray and Mr. Serge Tchuruk. On the proposal of the Chairman, Mr. Jean-Rene Fourtou, the Board elected Mr. Fernando Falco y Fernandez de Cordoba as a non-executive director. The Board of Directors is thus reduced to a more streamlined 12 members. Mr. Jean-Rene Fourtou asked the Human Resources Committee to propose a complete reorganization of the various Board Committees at the next Board Meeting with a view to finalizing them and, if necessary, bringing them into line with the new European and U.S. standards that are currently in development, as well as the Bouton report on corporate governance in France. Following the meeting, Mr. Jean-Rene Fourtou, Chairman and CEO of Vivendi Universal, declared: "The Board has noted with satisfaction the decisive progress made during the past three months. We are leaving the crisis behind us. The main sources of loss have been reduced, sold or halted, or are about to be. The reduction of the company's debt has started through a major asset disposal plan that will be carried through with determination with the target of achieving at least 12 billion euros over 18 months. Vivendi Universal Publishing future disposal is part of this plan. "The Board has approved the decision to enhance the value of the company's entertainment businesses and develop them. It is a market in which Vivendi Universal is already among the world leaders. To meet that challenge, our objective is to create a true partnership, on both sides of the Atlantic, with the senior executives and talented employees that are the key to these businesses. The partnership will be based on financial agreements and management methods." Jean-Rene Fourtou went on to add: "With regard to Cegetel, the Board was pleased with the company's excellent results, and we are continuing to study every possible solution that would be favorable to our shareholders and compatible with our primary financial objectives. It must be understood that we do not have the capacity to take back majority control of Vivendi Environnement. We, therefore, must make optimum use of our interest in Vivendi Environnement, and examine, in close collaboration with its management, how the relationship between Vivendi Universal and Vivendi Environnement should develop. The Vivendi Universal Chairman concluded: "The employees have experienced moments of great anxiety during the past year. I want to thank each of them, on behalf of the company, for the significant work they have accomplished and to acknowledge their professionalism." 1. We are leaving the crisis behind us. In a very unfavorable economic climate, marked by the Enron and Worldcom scandals, the downgrading of Vivendi Universal's status by the rating agencies and the banks' sudden loss of confidence in the company's future, brought the financial crisis to a height in early July. The cash crunch came when the company had an untenable level of debt given the available cash flow (35 billion euros at June 30, 2002, of which 19 billion euros for Media and Communication), with repayment terms that were too tight and could not be rescheduled. The situation was resolved in two phases. - On July 10, 2002, Vivendi Universal obtained a short-term credit line of 1 billion euros from a group of seven international banks. This facility pushed back the risk of immediate default, and gave the company time to negotiate refinancing so that it could meet its needs over a longer term. - On September 18, 2002, the banks agreed a 3 billion euro medium-term credit line, replacing the 1 billion euro facility obtained in July. This loan takes the form of three tranches, each one secured, with repayment dates spread over the period from November 2003 to December 2004 at the latest. It will give the company a breathing space pending receipt of revenue from the disposal of assets. The risk associated with the company's cash position is therefore in the process of being eliminated, especially since negotiations on extending the repayment date of the Vivendi Universal Entertainment credit line (1.6 billion euros) from November 2002 to November 2003 are at a very advanced stage. 2. The main sources of loss have been reduced, sold or halted, or are about to be The main sources of loss have been clearly identified. They have been reduced, sold or halted, or are about to be: Canal+ Italy, Poland, Benelux and Scandinavia are going to leave Vivendi Universal's landscape. Vizzavi has been sold (excluding Vizzavi France, which is now wholly owned). Scoot and Divento are in the process of being closed. The other Internet assets will be sold or integrated with the businesses to which they report. In addition, measures have been taken to reduce Paris and New York headquarters costs, as well as communication and sponsorship expenditure. 3. The company is progressing in its debt reducing program through a significant asset disposal plan that will be carried through with determination Within the next 18 months, Vivendi Universal is expected to sell off assets worth 12 billion euros, of which divestments of at least 5 billion euros will be completed within nine months. This plan will return the company to a financial situation that should earn it BBB/Baa2 status from the rating agencies. The main assets in the disposals plan, subject to consultation with employee representatives and labor unions, include: - Canal+ activities outside France (Italy, Poland, Benelux, Scandinavia) and Canal+ Technologies; - The interest in the "new Canal+ above 49%"; - Telecoms activities outside France (Poland, Hungary, Kenya, etc.); - Internet activities; - Press (Comareg, Express-Expansion) and publishing (VU Publishing); - Minority interests; - Miscellaneous assets (property, distribution, airplanes, energy production, etc.); - Monetization of a minority stake of VU Games With the exception of VUP, these are primarily non-core businesses, which should have been sold off anyway due to the difficulties involved in managing such a complex and disparate range of activities. Several disposals, for a total amount of around 1.1 billion euros, have already been finalized. In addition, Vivendi Universal confirms having received acquisition proposals for Vivendi Universal Publishing (VUP) in its entirety. These proposals are currently being studied, in the best interest of the shareholders of Vivendi Universal, Vivendi Universal Publishing and VUP employees. Vivendi Universal specifically asked all potential acquirers to include in their proposals commitments regarding the preservation of VUP's French cultural heritage. These commitments will be made public. 4. The entertainment businesses will be enhanced and developed Vivendi Universal's aim is to streamline its consolidation scope. The new Vivendi Universal is an entertainment company focused on the creation of consumer content, and with two important minority interests, Cegetel and Vivendi Environnement. Vivendi Universal is among the world's leading media and communication companies and is number one in Europe. Entertainment (music, film, TV, parks and games) is its core business. The company has excellent assets, strong prospects for growth in these activities, high quality management teams and creative talents, and outstanding brands (Universal and Canal+). These will contribute to the enhancement of the media and communication activities with the primary goal of creating maximum value for all of its shareholders. With regard to Cegetel, against the new backdrop created by the expiry of the standstill clauses in the shareholder agreements, Vivendi Universal is studying every possible solution that will favor value creation, in accordance with terms that are compatible with our priority financial objectives. With regard to Vivendi Environnement, as Vivendi Universal cannot take back majority control, the aim is to optimize our stake and to examine, with Vivendi Environnement management, how relationship between Vivendi Universal and Vivendi Environnement should develop. 5. First-half 2002 financial statements The Board of Directors approved the reviewed financial statements for the first half of 2002. These financial statements will replace the interim results published on August 14, 2002. The full statements will be published in the usual way and made available on www.vivendiuniversal.com in the Shareholders section, as well as on the Investor Relations Website at http://finance.vivendiuniversal.comThey will also be available on request from the Shareholder Information Department. 6. The PwC assignment The PwC assignment consisted of delivering some information to the new general management about some specific aspects, but it was not an audit of Vivendi Universal's accounts. To date, this assignment has not revealed any malfunction of a nature to bring the sincerity of the written financial information provided by Vivendi Universal into question. On the contrary, it has revealed the complexity of that information and has led to the identification of ways and means of improving and coordinating the procedures used by the various business units and the holding company, in particular in terms of cash, Vivendi Universal commitments, and basic accounting structures and processes. The Board noted senior management's decision to take full account of these recommendations and adopt the measures necessary for implementing them as quickly as possible. WORLDCOM INC: Asks Court to Clear Pentagon Purchase Agreement ------------------------------------------------------------- Marcia L. Goldstein, Esq., at Weil Gotshal & Manges LLP, in New York, relates that after the execution of the contract for the sale of Pentagon City, TST/Pentagon City LLC and Worldcom Inc., and its debtor-affiliates continued an open dialogue regarding the property. In connection with the dialogue and following the Purchaser's due diligence investigation as contemplated by the contract, the parties agreed to amend and restate the July 11, 2002 contract. On August 28, 2002, the parties executed the Amended and Restated Sale and Purchase Contract. The Agreement provides for the sale of: -- Pentagon City, including all legal rights related thereto, -- certain furniture, fixtures and equipment related to the use and operation of Pentagon City, and -- all intangible property, if any, pertaining to Pentagon City or the FF&E, including the assignment to Purchaser of certain related contracts. Ms. Goldstein adds that TST/Pentagon City LLC also will have the option to assume certain service contracts. The Agreement further contemplates the execution of two lease agreements between TST/Pentagon City LLC and the Debtors for an equipment site lease at 701 South 12th Street and a post-closing occupancy agreement for portions of 701 South 12th Street and 601 South 12th Street. The principal terms of the Agreement are: -- Purchase Price: $101,425,000 -- Deposit: $2,000,000, to be applied toward the Purchase Price at closing. -- Closing Date: The closing will occur as soon as practicable after Court approval but not later than 11 days after entry of the Sale Order. -- Assets To Be Sold: a. Real Property consisting of Pentagon City, all mineral, oil and gas rights, water rights, sewer right, and other utility rights associated therewith, all appurtenances, easements, licenses, privileges and other property interests belonging or appurtenant therewith, and all right, title and interest in any roads, streets and ways serving Pentagon City; b. Tangible Personal Property, consisting of the furniture, fixtures and equipment; and c. Intangible Personal Property, consisting of all intangible personal property related to the Real Property or the Tangible Personal Property. The Debtors agree to assign, to the extent assignable, its interest in all Service Contracts related to the property, including management contracts, transferable utility contracts, service contracts, equipment leases, and maintenance contracts, to the Purchaser to the extent that the Purchaser elects to assume the Service Contracts. The Debtors will cancel, with respect to the Assets to be sold, all terminable Service Contracts that the Purchaser elects not to assume. -- Leases: The Purchaser and the Debtors will enter into an equipment site lease and a temporary post-closing occupancy agreement with the Debtors. -- Warranty: The Assets are being sold "as is" without any representations and warranties whatsoever other than as specified in the Agreement. -- Closing Conditions: Closing is subject to Bankruptcy Court approval and other customary conditions. -- Auction Procedures: The Agreement provides that the Debtors will file and diligently prosecute a motion seeking entry of an order of the Bankruptcy Court approving certain bidding protections for the Purchaser including a break-up fee of 3% of the Purchase Price, setting a deadline for the submission of competing offers, setting an initial minimum overbid requirement of the Purchase Price plus the Break-Up Fee plus $1,000,000, fixing bidding increments of not less than $500,000, and other customary bid protections. The order of the Bankruptcy Court approving the auction procedures must be entered not later than October 3, 2002. An order approving the sale must be entered no later than November 14, 2002. If the Debtors do not obtain the requisite orders prior to the stated deadlines, the Purchaser may terminate the Agreement pursuant to its terms. -- Equipment Site Lease: The Purchaser will lease to the Debtors 4,300 net rentable square feet on the second floor of 701 South 12th Street, together with a generator area, at an annual base rent of $86,000, or $20 per rentable square foot, for a term of 2 years, with six 3-year renewal options, on terms and conditions specified in the Equipment Site Lease. -- Post-Closing Occupancy Agreement: The Debtors will continue to occupy certain floors of Pentagon City for varying periods of time pursuant to a transition schedule through December 31, 2002. The Debtors will pay the Purchaser rent for the premises it occupies during the transition period at $20 per rentable square foot on terms and conditions set forth in the Post-Closing Occupancy Agreement. (Worldcom Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392- 0900) WORLDCOM: ATLANTIC-ACM Says Bankruptcy Will Benefit IDT & Vartec ---------------------------------------------------------------- ATLANTIC-ACM's ninth annual study of the long distance industry reveals the shrinkage of the U.S. long distance switched revenue market from $55 billion in 2001 to $39 billion in 2007. Dramatic shifts in market share are expected during these years with burgeoning LD entrants predicted to seize much of the retail switched voice market. These carriers, which passed $1B in LD revenue by 2001, include Verizon, Qwest, Global Crossing, Vartec and IDT. As a group, they will see their retail switched voice revenues grow at a compounded annual growth rate of 18.1% from $5.7 billion in 2001 to $15.6 billion in 2007. The Regional Bell Operating Companies are expected to triple their 2001 long distance market share by 2007. Their share of 6.3% in 2001 will jump to 22.8% in 2007. RBOCs are also expected to increase their private and data market share 2.5 fold from 2001 to 2007. "This large market share growth will be a result of extensive marketing efforts by the RBOCs," explains Dr. Judy Reed Smith, CEO of ATLANTIC-ACM. "The recent bankruptcy filing by WorldCom will benefit emerging companies, with IDT and Vartec, in particular, well-poised to seize a considerable percentage of WorldCom's retail residential share," proclaims Taher Bouzayen, Vice President at ATLANTIC- ACM. U.S. Long Distance Services Market: Sizing & Share Analysis 2002-2007 is a 232-page report available now for $4,950.00(US). The report provides a quantitative analysis of the overall size and composition of the current U.S. long distance services market, projecting its growth and opportunities for both long distance players and their competitors. For more information contact ATLANTIC-ACM at One Beacon Street, 34th Floor, Boston, MA 02108, Tel +1(617) 720-3700, Fax +1 (617) 720-1077, e-mail atlantic@atlantic-acm.com or visit its Web site at http://www.atlantic-acm.com ATLANTIC-ACM is a telecommunications strategy consulting and customized research firm. ATLANTIC-ACM assists clients in evaluating telecommunications opportunities for successful investment, market entry, and long-term planning. 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. ZIFF DAVIS: Commences Exchange Offer for Series E Preferreds ------------------------------------------------------------ Ziff Davis Media Inc., is offering to exchange up to 28,526.40 Shares of outstanding Series E Redeemable Preferred Stock of Ziff Davis Holdings Inc., for a like number of Shares of new Series E-1 Preferred Stock of Ziff Davis Holdings Inc., and $90,333,600 of outstanding Senior Subordinated Compounding Notes due 2009, of Ziff Davis Media Inc., for a like amount of new Senior Subordinated Compounding Notes due 2009, Series B of Ziff Davis Media Inc. The terms of the series E-1 preferred stock to be issued in the exchange offer are substantially identical to the outstanding series E redeemable preferred stock, except that the transfer restrictions and registration rights relating to the series E redeemable preferred stock will not apply to the series E-1 preferred stock. The terms of the exchange notes to be issued in the exchange offer are substantially identical to the existing notes, except that the transfer restrictions and registration rights relating to the existing notes will not apply to the exchange notes. The Company believes that, subject to certain exceptions, the exchange notes and the series E-1 preferred stock each may be offered for resale, resold and otherwise transferred by the purchaser without compliance with the registration and prospectus delivery provisions of the Securities Act. The Company also believes that the exchange of series E-1 preferred stock and the exchange of notes will not be taxable events for U.S. Federal income tax purposes. The exchange offer is subject to customary conditions, including the condition that the exchange offer will not violate applicable law or any applicable interpretation of the Staff of the SEC. The expiration date of the offer has not yet been stipulated. Ziff Davis will not receive any cash proceeds from the exchange offer. Each broker-dealer that receives exchange notes or series E-1 preferred stock for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such exchange notes or series E-1 preferred stock. The Letter of Transmittal states that by so acknowledging and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. Neither the Securities and Exchange Commission nor any state securities commission has approved the notes or preferred stock to be distributed in the exchange offer. Ziff Davis Media Inc., is a special interest media company focused on the technology and game markets. In the United States, the company publishes 9 industry leading business and consumer publications: PC Magazine, eWEEK, Baseline, CIO Insight, Electronic Gaming Monthly, Xbox Nation, Official U.S. PlayStation Magazine, Computer Gaming World and GameNow. There are 45 foreign editions of Ziff Davis Media's publications distributed in 76 countries worldwide. In addition to producing companion sites for all of its magazines, the company develops tech enthusiast sites such as ExtremeTech.com. Ziff Davis Media provides custom publishing and end-to-end marketing solutions through its Integrated Media Group, industry analyses through Ziff Davis Market Experts and produces seminars and webcasts. For more information, visit http://www.ziffdavis.com As reported in Troubled Company Reporter's August 14, 2002 edition, Ziff Davis Media completed its exchange offer with its bondholders and is now planning to finish the related documentation and distribute proceeds for its financial restructuring plan within the next several days. As of August 9, 2002, holders of 95.1% of the aggregate face amount of its $250.0 million of 12.0% Senior Subordinated Notes due 2010 formally accepted the terms of its out-of-court financial restructuring plan. In addition, the Company also announced that it has reached agreement with holders of 100.0% of the outstanding loans under its Senior Credit Facility regarding an amended and restated credit agreement. As a result of the out-of-court restructuring, the Company will reduce its outstanding debt by approximately $147.4 million and its cash debt service requirements over the next several years by over $30.0 million annually. * BOOK REVIEW: The Phoenix Effect: Nine Revitalizing Strategies No Business Can Do Without ---------------------------------------------------------------- Authors: Carter Pate and Harlann Platt Publisher: John Wiley & Sons, Inc. Softcover: 244 Pages List Price: $27.95 Review by Gail Owens Hoelscher Buy a copy for yourself and one for a colleague on-line at http://amazon.com/exec/obidos/ASIN/0471062626/internetbankrupt Think of all the managers of faltering companies who dream of watching those companies rise from the ashes all around them! With a record number of companies failing in 2001, and another record-setting year expected for 2002, there are a lot of ashes from which to rise these days. Carter Pate and Harlan Platt highly value strong leadership able to sharpen a company's focus and show the way to the future. They believe that all too often, appropriate actions required to improve organizations are overlooked because upper management either isn't aware of the seriousness of the issues they face or they don't know where to turn for accurate information to best address their concerns. In the Phoenix Effect, the authors present their ideas to "confront, comprehend, and conquer a company's ills, big and small." These ideas are grouped into nine steps: (i) Find out whether the company needs a tune-up, a turnaround, or crisis management. Locate the source of "the pain." (ii) Analyze the true scope of the company's operations. Decide whether to stay in the same businesses, withdraw from existing businesses, or enter new ones. (iii) Hold the company to its mission statement. If it strives to be "the most environmentally friendly." Figure out how. (iv) Manage scale. Should the company grow, stay the same size, or shrink? (v) Determine debt obligations and work toward debt relief. (vi) Get the most from the company's assets. Eliminate superfluous assets and evaluate underused assets. (vii) Get the most from the company's employees. Increase output and lower workforce costs. (viii) Get the most from the company's products. Turn out products that are developed and marketed to fill actual, current customer needs. (ix) Produce the product. Search for alternate ways to create the product: owning or leasing facilities, outsourcing, etc. The authors believe that "how you're doing is where you're going." They assert that the "one fundamental source of life in companies, as in people,.is the capacity for self-renewal, the ability to excite your team for game after game. to go for broke season after season." This ability can come from "(g)enetics, charisma, sheer luck, stock options - all crucial, yes, but the best renewal insurance is a leader who always knows exactly how his or her company is doing." There are a lot of books written on this topic. Pate and Platt successfully bridge the gap between overgeneralization and too detail. They are equally adept at advising on how to go about determining a business's scope and arguing for Monday rather than Friday for implementing layoffs. They don't dwell on sappy motivational techniques. They don't condescend to the reader or depend too much on folksy vernacular and clich,. Their message is clear: your company's phoenix, too, can rise from its ashes. * Carter Pate is a well known turnaround expert at PricewaterhouseCoopers with more than 20 years experience providing strategic consulting and implementation strategies. * Harlan Platt is a professor of finance at Northeastern University and author of the book Principles of Corporate Renewal. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2002. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed.