/raid1/www/Hosts/bankrupt/TCR_Public/021001.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, October 1, 2002, Vol. 6, No. 194
Headlines
AAMES FINANCIAL: Reports Improved Fiscal 2002 Financial Results
ADELPHIA BUSINESS: Continues Inquiry into Deals with Rigases
ADELPHIA COMMS: Circle Acquisition Balks at PwC's Engagement
AGWAY INC: Files for Chapter 11 Reorganization in Utica, NY
ALLMERICA FINANCIAL: Will Consider Strategic Options for Unit
ALLMERICA FINANCIAL: S&P Cuts Counterparty Credit Rating to BB
ALLMERICA: Fitch Cuts Sr. Debt & Comm'l Paper Ratings to BB+/B
ALLMERICA FIN'L: A.M. Best Lowers Fin'l Strength & Debt Ratings
AMERICAN TRANS: Wins Conditional OK for $148.5MM Loan Guarantee
AMERICREDIT: S&P Views $500MM Equity Issuance As Positive Dev't
AMERICREDIT: Fitch Affirms BB Sr. Unsec. Rating over Equity Sale
AMKOR TECHNOLOGY: Bank Group Extends Fin'l Covenants to Year-End
ANC RENTAL: Brings-In Dickstein as Counsel for Insurance Matters
AUSPEX SYSTEMS INC: Commences Trading on Nasdaq SmallCap Market
BANGOR & AROOSTOOK: Auction Sale Scheduled for October 8, 2002
BETHLEHEM STEEL: Court Appoints Retired Employees' Committee
BUDGET GROUP: Court Okays Payment of $15MM Cendant Break-Up Fee
CENTRAL EUROPEAN: Appoints Bruce Maggin to Board of Directors
CENTURY/ML CABLE: Files for Chapter 11 Reorganization in SDNY
CENTURY/ML CABLE: Case Summary & 20 Largest Unsecured Creditors
CLUBCORP INC: S&P Rates Corporate Credit Rating at B+
COMMUNICATION DYNAMICS: Receives Approval of First-Day Motions
COMMUNICATION DYNAMICS: Look for Schedules & Statements by Nov 7
CONTINUCARE: June 30 Working Capital Deficit Narrows to $7.6MM
COVANTA ENERGY: Committee Wants Cash Collateral to Fund Probe
DELTA AIR LINES: Foresees September Quarter Net Loss of $350MM
DIGEX INC: Nasdaq Approves Listing Transfer to SmallCap Market
ECLIPSE ENTERTAINMENT: Auditors Issue Going Concern Opinion
ENRON CORP: Manatt Wants to Represent Elizabeth Saeger, et al
EXIDE TECHNOLOGIES: Move to Appoint Equity Committee Draws Fire
FLAG TELECOM: Receives Green-Light to Hire Deloitte as Auditors
FLOWSERVE CORP: Plans to Repay Up to $90M of Debt in 3rd Quarter
FLOWSERVE CORP: Explains Compliance Status Under Loan Covenants
GENCORP INC: Names William Hvidsten Environmental Legal Counsel
GEORGIA-PACIFIC: S&P Ratchets Credit Rating Down a Notch to BB+
GEORGIA-PACIFIC CORP: Board Appoints Lee M. Thomas as President
GLENOIT CORP: Successfully Emerges from Chapter 11 Bankruptcy
GLOBAL CROSSING: Asks Court to Okay Energy Settlement Agreement
GOLF AMERICA: Taps DJM Asset Mgt. to Market 33 Store Locations
GRANDETEL TECHNOLOGIES: Balance Sheet Insolvency Tops C$38 Mill.
GREEN FUSION: Seeking New Financing to Pay Existing Liabilities
GROUP TELECOM: Will Defer Publishing Fiscal Q3 Financial Results
HIGHWOOD RESOURCES: Gets Further Extension of Forbearance Pact
IMMTECH INT'L: Raises $1.8M from Preferred Share & Warrant Issue
INNOVATIVE GAMING: Fails to Comply with Nasdaq Listing Criteria
INTEGRATED SYSTEMS: Case Summary & 20 Largest Unsec. Creditors
JUNIPER GENERATION: Rating Unaffected by El Paso's Watch Status
KAISER ALUMINUM: Safety Nat'l Wants Arbitration Rights Enforced
KMART CORP: Seeks Approval to Pay Compromised Reclamation Claims
KNOLOGY BROADBAND: Wants Disclosure Hearing Set for October 21
LAIDLAW INC: Judge Kaplan Approves Amended Disclosure Statement
MESABA HOLDINGS: ALPA Opposes Formation of Big Sky Airlines
MICRON: S&P Revises Outlook to Neg. over Industry Price Pressure
NATIONSRENT INC: Asks Court to OK Proposed Mediation Procedures
NATUROL HOLDINGS: Modifies Terms of License Agreement with MGA
NII HOLDINGS: Final Confirmation Hearing Rescheduled for Oct. 22
NORTHWESTERN: Fitch Junks Ratings on Two Certificates Classes
OWENS CORNING: Asks Court to Permit Funds Transfer to OC Anshan
PACIFIC GAS: Sempra May Purchase Section of North Baja Pipeline
PENNZOIL-QUAKER: FTC Clears Asset Acquisition by Shell Oil Co.
PENNZOIL-QUAKER: Expects to Close Transaction with Shell Today
PEREGRINE SYSTEMS: Wants to Hire Heller Ehrman as Corp. Counsel
PETROLEUM GEO: Proposed Restructuring Spurs S&P to Keep Watch
PHARMACEUTICAL FORMULATIONS: Posts Improved FY 2002 Performance
POLAROID CORP: Committee Wants to Retain Wind Down Associates
PURCHASEPRO.COM: Gordon & Silver Serving as Chapter 11 Counsel
RELIANCE GROUP: Pres. & CEO Paul Zeller Staying Until March 31
SEVEN SEAS: Signs-Up CIBC World Markets for Financial Advice
SLI INC: Turns to FTI Consulting, Inc. for Financial Advice
TELEGLOBE COMMS: Court Okays Settlement Agreement with Broadwing
TELESPECTRUM: Sets-Up Business Plan to Challenge Auditors' Doubt
TII NETWORK: Fourth Quarter Net Loss Balloons to $4.5 Million
TOWN SPORTS: Refinancing Issues Spur S&P to Keep Ratings Watch
TRICO MARINE: Completes Exchange Offer for 8-7/8% Senior Notes
US AIRWAYS: Wins Approval to Appoint Joint Fee Review Committee
VISION METALS: Selling Specialty Tube Div. to Michigan Seamless
WARNACO GROUP: Secures Okay to Expand BDO Seidman's Engagement
WHEELING-PITTSBURGH: Plan Exclusivity Extended to October 28
WORLDCOM INC: Proposes Uniform Pentagon Auction Procedures
WYNDHAM INT'L: Falls Below NYSE Continued Listing Standards
XO COMMS: Intends to Enter into Master Agreement with Level 3
*********
AAMES FINANCIAL: Reports Improved Fiscal 2002 Financial Results
---------------------------------------------------------------
Aames Financial Corporation (OTCBB: AMSF), a leader in subprime
home equity lending, reported net income of $4.5 million for the
year ended June 30, 2002, compared to a net loss of $30.5
million during the year ended June 30, 2001. Results of
operations during the year ended June 30, 2002 and 2001 included
residual interest write-downs of $27.0 million and $33.6
million, respectively. After the convertible preferred stock
dividend accrual of $13.8 million and $13.9 million for the
years ended June 30, 2002 and 2001, respectively, the net loss
to common shareholders was $9.2 million and $44.4 million,
respectively.
A. Jay Meyerson, Aames' Chief Executive Officer, stated, "I am
pleased by the improved results from the Company's core
operations, including continued growth in our loan production,
increased earnings from gain on sale, improved credit quality
and continued management of operating expenses." Meyerson
continued, "Despite these results, the Company experienced
write-downs to its residual interests during the fiscal year,
which negatively impacted the Company's earnings and net worth."
Results for the three months ended June 30, 2002
The Company reported net income of $186,000 for the three months
ended June 30, 2002, compared to a net loss of $988,000 during
the same quarter a year ago. During the three months ended June
30, 2002 and 2001, the net loss to common shareholders was
$607,000 and $3.2 million, respectively.
Summary of Financial Results
for the Year Ended June 30, 2002
Total revenues
During the year ended June 30, 2002 total revenue was $220.1
million, up $31.4 million from $188.7 million of total revenue
reported a year ago. Total revenue during the year ended June
30, 2002 includes $27.0 million of previously announced write-
downs to the Company's residual interests. The write-downs
resulted from the changes made by the Company to its credit loss
assumptions used in valuing its residual interests in light of
the Company's assessment of higher than expected credit loss and
delinquency experience of certain loans in the Company's
securitized trusts.
Excluding the residual interest write-downs of $27.0 million and
$33.6 million during the years ended June 30, 2002 and 2001,
respectively, total revenue during the year ended June 30, 2002
was $247.1 million, an increase of $24.8 million, or 11.2% from
total revenue of $222.3 million during the year ended June 30,
2001.
The increase in total revenues was primarily attributable to a
$22.1 million increase in gain on sale of loans during the year
ended June 30, 2002 to $95.5 million over the $73.4 million in
gain on sale of loans reported during the year ended June 30,
2001. The increase in gain on sale is attributable to the
increase during the year ended June 30, 2002 in the total amount
of loans sold of $861.1 million, or 36.9%, to $3.2 billion over
the $2.3 billion of total loans sold during the year ended June
30, 2001. The increase in total revenues also resulted from a
$8.6 million increase in origination fees to $56.0 million from
$47.4 million a year ago resulting from the $870.9 million
increase in loan production during the year ended June 30, 2002
over production levels a year earlier. Partially offsetting the
increases in gain on sale and origination fees were declines in
interest income and loan servicing of $3.3 million and $2.5
million to $83.2 million and $12.5 million, respectively, from
the $86.5 million and $15.0 million, respectively, reported
during the year ended June 30, 2001. The decrease in interest
income was due primarily to the decline in discount accretion
earned on lower average residual interest balances during the
year ended June 30, 2002 compared to the year ended June 30,
2001. To a lesser extent, the decline in interest income was due
to the declines in the rates of interest earned on the Company's
loans held for sale in light of the current mortgage interest
rate environment despite having higher average balances of loans
held for sale during fiscal 2002. The decline in loan servicing
revenue during the year ended June 30, 2002 was driven by the
decrease in the Company's portfolio of mortgage loans in
securitization trusts serviced in-house during fiscal 2002 from
a year ago.
The Company reported total revenue of $54.8 million during the
three months ended June 30, 2002 compared to total revenue of
$53.1 million during the same quarter a year ago.
Total expenses
Total expenses during the year ended June 30, 2002 declined $4.9
million, or 2.3%, to $212.5 million from $217.4 million of total
expenses reported during the year ended June 30, 2001. The
decrease in total expenses was attributable to declines of $10.0
million and $13.5 million in general and administrative and
interest expense, respectively, from levels reported during the
year ended June 30, 2001. General and administrative expenses
declined during the year ended June 30, 2002 from a year ago due
primarily to decreases in occupancy, communications, legal and
professional expenses. Interest expense declined during the year
ended June 30, 2002 from the year ended June 30, 2001 due to
lower interest costs on the Company's revolving warehouse and
repurchase facilities despite increased average borrowings under
the facilities during fiscal 2002 when compared to such rates
and average borrowings outstanding during fiscal 2001. Partially
offsetting these declines were increases in personnel expense
and production expense of $16.4 million and $2.3 million,
respectively, during the year ended June 30, 2002 over levels
reported during the year ended June 30, 2001. The increases in
personnel expense during the year ended June 30, 2002 from a
year ago was due primarily to increased compensation expenses
incurred as a consequence of the acquisition of the Company's
second National Loan Center, coupled with incentive compensation
relative to the increase in the Company's total loan production
and, to a lesser extent, increases in medical and other benefit
costs during fiscal 2002 over those incurred a year ago. The
increase in production expense during the year ended June 30,
2002 over a year ago is attributable to the increase during
fiscal 2002 in the Company's total loan production from loan
origination levels reported a year ago.
Total expenses during the three months ended June 30, 2002 were
$53.9 million compared to $51.7 million during the comparable
three month period during 2001.
Total Loan Production
During the year ended June 30, 2002, the Company's total
mortgage loan production increased $870.9 million, or 36.7%, to
$3.2 billion over the $2.3 billion of mortgage loans originated
during the year ended June 30, 2001. The increase in the
Company's loan origination volumes during the year ended June
30, 2002 over those reported during the year ended June 30, 2001
were due, in part, to a generally more favorable interest rate
environment in place during 2002 which has contributed to
increased financing activities in markets where the Company
operates.
Retail Production
The Company's total retail loan production was $1.6 billion, up
$429.3 million, or 36.4%, over $1.2 billion of total retail loan
production reported during the year ended June 30, 2001. Loan
origination through the Company's traditional retail branch
network increased $175.5 million or 15.9% to $1.3 billion, over
$1.1 billion a year ago. Mortgage loan production through the
National Loan Centers increased $253.8 million to $329.7 million
during the year ended June 30, 2002 over $75.9 million a year
ago.
Broker Production
The Company's total broker loan production during the year ended
June 30, 2002 was $1.6 billion, an increase of $441.6 million,
or 37.1%, over the $1.2 billion during the year ended June 30,
2001. Of the total broker loan production during the year ended
June 30, 2002, mortgage loan origination volume through the
Company's traditional regional broker office network was $1.5
billion, up $374.5 million, or 33.0% from the $1.1 billion of
mortgage loans produced through the traditional broker network
during the year ended June 30, 2001. Broker loan production
originated through telemarketing and the Internet was $122.4
million during the year ended June 30, 2002 compared to $55.3
million a year ago.
Loan Dispositions and Loan Servicing
During the year ended June 30, 2002, the Company sold and
securitized a total of $3.2 billion of mortgage loans which
includes loans pooled and sold in securitizations of $0.6
billion and whole loan sales for cash of $2.6 billion. In
comparison, during the year ended June 30, 2001 the Company
securitized and sold of an aggregate of $2.3 billion of mortgage
loans comprised of loans pooled and sold in securitizations of
$1.2 million and $1.1 billion of whole loan sales for cash.
"As the result of higher valuations, the Company chose to sell
most of its mortgage loans in whole loan sales, and completed
only two securitizations during the fiscal year ended June 30,
2001," said Ronald J. Nicolas, Jr., Aames' Chief Financial
Officer. Nicolas explained that, "The Company closely monitors
market prices for its loan products and modifies its loan
disposition strategy to capture these higher values."
As a means to maximize profitability and cash flows during the
year ended June 30, 2002, the Company sold all of the residual
interests created in its securitizations for $16.4 million in
cash to an affiliate. In addition, the Company sold for cash all
of the servicing rights in its securitizations to unaffiliated
loan servicing companies. All of the Company's whole loan sales
were done on a servicing released basis.
At June 30, 2002 and 2001, the Company's total servicing
portfolio was $2.3 billion and $2.7 billion, respectively, of
which $2.2 billion and $2.5 billion, respectively, or 94.6% and
93.2%, respectively, was serviced in-house. The Company's
portfolio of mortgage loans in securitization trusts serviced
in-house declined to $1.2 billion at June 30, 2002 from $1.8
billion at June 30, 2001. In-house servicing at June 30, 2002
and 2001 also includes $991.0 million and $722.0 million of
loans serviced on an interim basis. Loans serviced on an interim
basis includes loans sold where servicing has not yet been
transferred and loans held for sale. The decline in the
Company's portfolio of mortgage loans in securitization trusts
serviced in-house at June 30, 2002 from a year ago is due to
normal amortization and prepayments, and the disposition of all
loans during the year ended June 30, 2002 on a servicing
released basis.
Release of Web-Based Automated Underwriting Engine
for the Company's Wholesale Division
The Company successfully released a comprehensive web-based
automated underwriting engine at http://www.aamesdirect.comfor
wholesale subprime mortgage transactions. This new engine
expands the web-based service for mortgage brokers to include
all of the Company's loan products. Brokers utilizing the engine
are able to receive timely automated approvals specifically for
their loan requests, which approvals include conditions, fees
and pricing.
Neil J. Notkin, Executive Vice President, Wholesale Sales and
Marketing explained that, "With the automated underwriting
engine, brokers can now enjoy a sophisticated online decision
that until recently was only available for their prime credit
customers."
Aames Financial Corporation is a leading home equity lender, and
at June 30, 2002 operated 98 retail Aames Home Loan branches,
four wholesale loan centers and two National Loan Centers
throughout the United States.
For more information please contact Mr. Nicolas in the Company's
Investor Relations Department at (323) 210-5311 or at
info@aamesfinancial.com via email. Additional information may
also be obtained by visiting http://www.aames.netthe Company's
Web site.
* * *
As reported in Troubled Company Reporter's June 19, 2002
edition, Moody's Investors Service took several rating actions
on Aames Financial Corporation. The investors service lowered
the company's Senior Debt Rating to Caa3 from Caa2. It also
affirmed its Ca rating on Aames' Subordinated Debenture. Rating
outlook stays at negative.
The company's liquidity and financial flexibility remain
constrained. It appears that Aames may have difficulty obtaining
the necessary resources to pay for its approximately $150
million unsecured senior debt maturing on November 15, 2003. It
also has short-term warehouse facilities with financial
covenants maturing before October 2003 and which critically
needed to be renewed to maintain its limited financial
flexibility.
ADELPHIA BUSINESS: Continues Inquiry into Deals with Rigases
------------------------------------------------------------
On June 14, 2002, Adelphia Business Solutions, Inc., received an
unsolicited letter from Deloitte & Touche LLP, its former
independent accountants, notifying the Company that the client-
auditor relationship between the Company and Deloitte had
"ceased." The Company's understanding was that Deloitte resigned
as its independent public accountant effective as of June 14,
2002.
In response to the Company's query as to the circumstances
surrounding this letter, Deloitte declined to provide further
clarification other than to note that on June 9, 2002, Adelphia
Communications Corporation dismissed Deloitte as its independent
public accountant. Prior to January 11, 2002, the Company was a
majority-owned subsidiary of Adelphia. Adelphia sent an email to
Deloitte in regard to certain disclosures in a Form 8-K report
filed with the SEC.
According to the July 15 Deloitte Response, on May 14, 2002,
Deloitte suspended its audit of the financial statements of
Adelphia and, upon suspending its audit of the financial
statements of Adelphia, Deloitte also ceased its audit of the
financial statements of the Company. As of the June 14, 2002,
the date on which the Company received the aforementioned
resignation letter from Deloitte, Deloitte had not completed its
audit nor had it issued its report with respect to the Company's
financial statements for the year ended December 31, 2001.
Accordingly, the Company has not yet completed its financial
statements or filed its Annual Report on Form 10-K for the year
ended December 31, 2001, nor has the Company filed its Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2002 and
June 30, 2002. Neither the Board of Directors of the Company nor
the Audit Committee of the Board of Directors of the Company
took any action with respect to Deloitte's decision to resign as
the Company's independent public accountant.
The Company has not yet determined who it intends to appoint as
its independent public accountant on a going forward basis. In
addition, when the appointment is made, the Company will
authorize Deloitte to respond fully to the inquiries of the
successor independent public accountant and will place no
limitations on any such inquiries.
The Company believes that the following reportable events within
the meaning of Rule 304(a)(1)(v) have occurred:
Prior to its resignation as the Company's independent public
accountant, Deloitte informed the Vice President, Finance of the
Company and the Chairman of the Audit Committee of the Company
that Deloitte needed to resolve certain matters with respect to
its audit of Adelphia's consolidated financial statements for
the year ended December 31, 2001 before it could determine what
impact, if any, such audit of Adelphia might have on Deloitte's
audit of the Company's consolidated financial statements for the
same period. Upon its resignation as the Company's independent
public accountant, Deloitte informed the Vice President, Finance
of the Company that, because of its dismissal as Adelphia's
independent public accountant, it would be unable to make this
determination and, therefore, would be unable to complete its
audit of the Company's consolidated financial statements for the
year ended December 31, 2001.
In the July 15 Deloitte Response, Deloitte states, in part:
"During 2002 and continuing through the date of our
resignation, certain matters came to our attention in connection
with our audits of Adelphia and its subsidiaries and
co-borrowing groups that led us to believe that the scope of our
audits of Adelphia and its subsidiaries, including the Company,
and co-borrowing groups may need to be significantly expanded.
In addition, we determined that these matters, if further
investigated, may (i) materially impact the fairness or
reliability of our previously issued audit reports or the
underlying financial statements; or the financial statements to
be issued for the year ended December 31, 2001, or (ii) cause us
to be unwilling to rely on management's representations or be
associated with the financial statements of Adelphia or those of
its subsidiaries, including the Company, or co-borrowing groups.
In a letter addressed to the Securities and Exchange Commission
dated June 27, 2002, responding to Adelphia's Current Report on
8-K filed with the SEC on June 14, 2002, we set forth our views
in response to the Adelphia 8-K. The Deloitte Letter discussed
specific reportable events pertaining to Adelphia that either
required an expansion of the scope of our audit of Adelphia and
its subsidiaries and co-borrowing groups, or raised questions
about our willingness to rely on the representations of
management. The reportable events were followed by a description
of certain other events that occurred during the period May 1,
2002 through the date of our dismissal. Our views, as set forth
in the Deloitte Letter are included as an appendix to this
letter. As stated above, the Company was a majority owned
subsidiary of Adelphia up to January 11, 2002, and although the
matters discussed in the appendix to this letter did not appear
to have a direct effect on the consolidated financial statements
of the Company, the matters raised questions about our
willingness to rely on the representations of management of
Adelphia, including certain of its officers and directors, who
were also officers and directors of the Company through June 4,
2002.
"The matters described in the Deloitte Letter were
discussed with officers and directors of Adelphia at various
times, including those officers and directors who were also
officers and directors of the Company through June 4, 2002.
Those matters specific to the Company were also discussed with
the Chairman of the Audit Committee of the Company and the Vice
President, Finance of the Company as summarized below. . . ."
Deloitte has not identified, by name, the officers and directors
of Adelphia "who were also officers and directors of the Company
through June 4, 2002", but the Company presumes it is referring
to members of the Rigas family. Neither Deloitte (except as
disclosed in the July 15 Deloitte Response) nor any member of
the Rigas family has provided the Company with information about
such discussions. John, James, Michael and Timothy Rigas
resigned as directors of the Company and ceased to hold any
offices with the Company on July 22, 2002; Peter Venetis
resigned as a director of the Company on July 26, 2002.
The Audit Committee of the Company has requested that the
Company's outside counsel conduct an independent investigation
with respect to related party transactions and agreements
between the Company, Adelphia or the Rigas family and to
determine whether the Company or any of its officers or
directors have engaged in conduct in violation of applicable
law. The investigation is in process.
ADELPHIA COMMS: Circle Acquisition Balks at PwC's Engagement
------------------------------------------------------------
Jay L. Silverberg, Esq., at Silverberg Stonehill & Goldsmith
P.C., in New York, tells the Court that Adelphia Communications'
Application to retain PWC epitomizes the lack of business ethics
that has led to a loss of confidence in the accounting
profession in the United States. PWC has a clear and
significant conflict of interest that was not disclosed in the
Application. PWC represented Circle Acquisitions Inc. in a
matter adverse to the estate and would still be representing
Circle in that matter but for the fact that PWC apparently found
the proposed retention by the Debtors to be more lucrative. PWC
is aware of the conflict. PWC has acknowledged the conflict, and
upon information and belief, on at least one occasion broached
the possibility of doing something about it. Notwithstanding
the foregoing, PWC apparently has decided to gamble that this
Court would condone its chicanery.
As of the Petition Date, Mr. Silverberg relates that PWC
represented Circle in connection with an arbitration pending
against Debtor Starpoint Limited Partnership, with respect to a
claim of Circle against the Debtor that in all likelihood will
exceed $25,000,000. Furthermore, even if the court were to
entertain the retention, it is clearly contrary to the well-
established rule, laws and practice in this district to permit a
professional to be retained in a nunc pro tunc retention
relating back 3 months as PWC attempts to do in this instance.
Finally, it is clear from the Application itself and the
disclosed conflicts therein, other than the conflict with
Circle, that PWC should not be retained as the accountants for
this bankruptcy estate. (Adelphia Bankruptcy News, Issue No. 18;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
AGWAY INC: Files for Chapter 11 Reorganization in Utica, NY
-----------------------------------------------------------
Agway Inc., announced that the Company and certain of its
subsidiaries filed today, October 1, 2002, voluntary petitions
for reorganization under Chapter 11 of the U.S. Bankruptcy Code
in order to keep all of its businesses running normally and
without interruption while the Company gains the time needed to
reorganize its financial obligations and strengthen its balance
sheet. The petitions for Agway Inc., and certain of its
subsidiaries will include the following business units: Agway
Feed and Nutrition, Agway Agronomy, Seedway, Feed Commodities
International, Country Best Produce, CPG Nutrients, Agway CPG
Technologies and Agway General Agency. These petitions were
filed with the United States Bankruptcy Court for the Northern
District of New York in Utica, New York.
Agway Inc., intends to develop a longer-term strategic plan of
reorganization that will serve as a framework for Agway's
emergence from the Chapter 11 process as a financially healthy,
more competitive enterprise.
Four wholly owned Agway Inc., subsidiaries will not be included
in the Chapter 11 filings: Agway Energy Products LLC, Agway
Energy Services, Inc., Agway Energy Services-PA, Inc. and
Telmark LLC. In addition, Telmark debenture holders will not be
subject to the Chapter 11 filings. And, Agway dealer stores
will not be included in the filings, because they are separately
owned and are not affiliated with Agway Inc., in any way.
The bankruptcy law prohibits companies from paying pre-Chapter
11 claims, including most indebtedness, without obtaining the
approval of the Court. Agway Inc., intends to ask the Bankruptcy
Court for immediate approval to continue paying its employees'
wages and salaries and to continue medical and other benefit
programs.
The Company plans to continue its efforts to sell Telmark,
Agronomy and Seedway as previously announced and does not have
plans for other significant reductions in workforce or plant
closings as a result of the Chapter 11 filing.
As in all Chapter 11 cases, after the commencement of such
cases, any obligations that Agway and its filed subsidiaries
incur to its employees, vendors and other trade partners will be
honored and satisfied in the normal course of business without
need to obtain Court approval. The Company also intends to ask
the Court for approval to continue its "prepay" program with
farmers who purchase the Company's animal feed and agronomy
supplies and to allow the Company to pay for purchases subject
to the Perishable Agricultural Commodities Act.
In conjunction with the filing, Agway Inc., has obtained
commitments for $125 million in secured debtor-in-possession
financing from a group of institutions led by GE Commercial
Finance. This facility, which is subject to the approval of the
Court, is designed to provide adequate liquidity for all of
Agway's operating units to continue normal operations in a
business-as-usual manner throughout the Chapter 11 process.
The Company said the filing was due to insufficient cash flow
and Agway Inc.'s burden of debt. While some of its businesses
are doing well, Agway Inc., as a whole has not been generating
the cash it needs to support the level of debt the Company is
carrying, and that debt has taken on increased significance
because of losses during the past three fiscal years. Market
conditions, especially in the agriculture sector, continue to be
challenging. The financial markets and general economy have also
presented difficult environments for asset and business sales
underway.
Normal Operations to Continue with Business as Usual
Agway expects that each of its operations will continue to
conduct business as usual going forward with no interruption in
production, distribution or other normal activities. There
should be no supply chain disruption with vendors of the
operating businesses, because merchandise and services purchased
on or after the filing date will be paid for in full.
In addition, Agway is committed to delivering in full and on
time all products and services to its customers. Customers
should see no changes in the quality or the availability of
Agway products and services. And, future orders for products
will be serviced as they always have been. Agway and all of its
subsidiaries continue to be committed to, and fully in support
of, all sales plans and programs currently in operation. All
Agway facilities are open for business.
The Best and Most Realistic Option for the Company
Agway Chief Executive Officer Donald P. Cardarelli said, "The
Board of Directors believes that reorganization under Chapter 11
is by far the best and most realistic option available to Agway,
its employees, customers, vendors and other trade partners,
because it allows us to keep our businesses running normally
while providing the Company with the time and the breathing room
to develop a comprehensive plan to reorganize our financial
obligations and reduce our debt.
"Through reorganization," Mr. Cardarelli continued, "we can
safeguard the value of our businesses and assets, preserve jobs
for our employees, and ultimately emerge from Chapter 11 as a
stronger and healthier company. One of our primary objectives
as we work our way through the Chapter 11 process will be to
preserve the maximum value possible for Agway's securities
holders, other creditors and our employees."
Mr. Cardarelli added, "Although we cannot predict exactly how
long it may take for Agway to emerge from Chapter 11, our goal
is to move through the process as quickly as possible. We
believe that the recent restructuring initiatives we have
undertaken to reduce Agway Inc.'s debt load, including the sales
of several of our businesses, will facilitate the Company's
reorganization process."
"A Foundation of Solid Core Operations, Dedicated
Employees, Strong Brands and Loyal Member and Customer Bases"
Mr. Cardarelli said: "Several of Agway's businesses are
fundamentally sound. We have a good foundation to build on,
with solid core operations, dedicated and talented employees,
very strong brands and loyal member and customer bases."
Mr. Cardarelli noted that the Company's energy businesses, which
are not included in the Chapter 11 filing, continue to perform
very well. Agway Energy Products is historically profitable and
financially sound. One of the largest heating oil and propane
marketers in the U.S., Agway Energy Products reported pre-tax
earnings of $10.5 million for this past fiscal year despite one
of the warmest winters on record. Agway Energy Products also
has substantially grown its heating and air conditioning sales,
installation and service business over the past several years,
and now markets natural gas and electricity to customers in
several utility areas through Agway Energy Services, Inc., and
Agway Energy Services-PA, Inc.
In its dairy feed business, Agway is the market leader in the
Northeast. Agway Feed & Nutrition has more than 500 dedicated
employees who provide farmers with quality products, excellent
service and superior technical expertise. In its fresh produce
business, Country Best Produce is a leading provider of
potatoes, onions and other fresh produce to large chain store
customers in the Eastern United States. Through an integrated
network of fresh produce operations, Country Best is uniquely
positioned to meet the needs of major grocers and foodservice
customers.
A number of restructuring efforts undertaken to improve
operations and reduce the Company's debt have been successful.
These efforts include exiting the retail services business;
selling or closing over 60 feed and agronomy locations; and the
recently completed sales of Agway Insurance Company, Agway
Sunflower and Apex Bag Company.
Agway announced last week that the Company has signed a
definitive agreement to sell its Agronomy and Seedway
operations. In addition, Agway is continuing efforts to sell
its lease financing subsidiary Telmark. Telmark reported that
its net income grew over seventeen percent to $14.3 million for
the year ended June 30, 2002, while revenues of $90.2 million
were up by $4.0 million, compared to the prior year.
Reorganizing under Chapter 11 is anticipated to enable Agway
Inc., to complete its current restructuring initiatives.
Also, the Company reported a net loss of $98.2 million for the
year ended June 30, 2002, which includes a net loss of $85.4
million directly related to the sale of discontinued operations.
The Company had previously reported net losses of $8.9 million
in fiscal 2001 and $9.4 million in fiscal 2000. Sales and
revenues for fiscal 2002 were $899.9 million, a 21 percent
decline from the prior year primarily the result of lower sales
of heating oil and propane, due to mild winter weather
conditions in the Northeast, lower petroleum commodity prices,
and restructuring activities undertaken last year in the
Company's Feed and Country Products businesses.
Mr. Cardarelli pointed out that the clear majority of the
Company's net loss posted for 2002 was due to the sale of
discontinued operations associated with Agway Inc.'s
restructuring efforts and were not directly related to the
Company's on-going business operations.
Mr. Cardarelli concluded: "Our objective moving forward is to
position each of our businesses to realize the best value and
opportunity for both our creditors and our employees. This will
require continued operations improvements, further
simplification of our infrastructure, and an objective
assessment of the capital and ownership structures best suited
to take our continuing operations to their full potential. We
have businesses with superior market positions and effective
employee teams that must be given the resources and environment
to grow."
Background on Chapter 11
Chapter 11 of the U.S. Bankruptcy Code allows a company to
continue to operate its business and manage its assets in the
ordinary course of business while it formulates a reorganization
plan to restructure its financial obligations. Congress enacted
Chapter 11 to provide companies with the "breathing room" to
accomplish these objectives and avoid the negative effects of
liquidation proceedings. Chapter 11 enables a business to
preserve its going concern's value and its operations, as well
as to continue to provide its employees with jobs, and to
satisfy creditor claims based upon the value of the reorganized
company.
Agway, Inc., is an agricultural cooperative owned by 69,000
Northeast farmer-members. The Cooperative is headquartered in
DeWitt, NY. Visit Agway at http://www.agway.com
ALLMERICA FINANCIAL: Will Consider Strategic Options for Unit
-------------------------------------------------------------
Allmerica Financial Corporation (NYSE: AFC) announced plans to
consider strategic alternatives with regard to its Allmerica
Financial Services business unit, which includes the company's
life insurance and annuity operations. This action was prompted
by the continued sharp decline and volatility in the equity
markets, and resultant impact of these factors on this business.
The company noted that as of the close of business yesterday,
the S&P 500 index was off 44% from its peak in March 2000. The
company also noted that year-to-date, the index has declined
over 25%, and since the end of the second quarter, has declined
14%. The decline in the equity markets results in, among other
things, increased Guaranteed Minimum Death Benefit expenses,
lower fee income, higher deferred acquisition cost amortization
and higher statutory capital reserve requirements. The reduction
in statutory profits associated with these items also
exacerbates the strain on statutory capital associated with
continued sales of variable annuities.
Among the strategic alternatives the company is considering is
capital raising in some form, including, but not limited to,
raising external capital, making use of reinsurance of certain
lines of business, and potentially selling certain appreciated
lines of business in its life insurance companies. It is
contemplated that the company will significantly reduce sales of
proprietary variable annuities and life insurance products,
primarily in its Select and Partner channels. Allmerica also
plans to reduce its operating expenses. The company noted that
the actions announced today do not involve the holding company,
Allmerica's property & casualty operations, or its third-party
asset management business, all of which remain well positioned.
"The prolonged downturn in the equity markets, which represents
arguably the worst bear market since the Depression, has placed
a strain on the statutory capital base of our life insurance and
annuity business," said John F. O'Brien, Allmerica's President
and Chief Executive Officer. "The uncertain economic outlook and
the potential for further uncertainty in the equity markets
makes these actions the prudent response to these difficult
conditions in order to manage the risk and maximize the value of
our enterprise for all of our stakeholders. As we implement
these changes to our life and annuity operations, Allmerica will
become a smaller asset accumulation operation, focused primarily
on management of the existing in-force assets in our products as
well as continuing to increase the distribution of third-party
asset accumulation products through our Advisor channel. We will
also remain committed to pursuing the excellent opportunities
for continued profitable growth in our property & casualty
insurance business, which is experiencing increased earnings
this year."
The company expects to provide further details on the strategic
actions being considered and implemented when it announces its
third quarter results, currently expected to be October 28,
2002.
Allmerica Financial Corporation is the holding company for a
diversified group of insurance and financial services companies
headquartered in Worcester, Massachusetts.
* * *
As reported in Troubled Company Reporter's August 7, 2002
edition, Standard & Poor's Ratings Services lowered its ratings
on two synthetic transactions related to Allmerica Financial
Corp., to double-'B'-plus from triple-'B' and removed them from
CreditWatch negative.
The rating actions followed the lowering of Allmerica Financial
Corp.'s preferred stock rating on August 1, 2002.
Ratings Lowered and Removed From Creditwatch
PreferredPLUS Trust Series ALL-1
$48 million trust certificates series ALL-1
Rating
Class To From
A BB+ BBB/Watch Neg
B BB+ BBB/Watch Neg
CorTs Trust For AFC Capital Trust I
$36 million Allmerica corporate-backed trust
securities (CorTs) certificates series 2001-19
Rating
Class To From
A BB+ BBB/Watch Neg
ALLMERICA FINANCIAL: S&P Cuts Counterparty Credit Rating to BB
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its counterparty
credit rating on Allmerica Financial Corp., to double-'B' from
triple-'B' and placed it on CreditWatch with negative
implications following AFC's announcement that its life company
operations are expected to report declines in statutory surplus
in the third quarter because of increased guaranteed minimum
death benefit reserves, lower fee income, and higher acquisition
costs.
Standard & Poor's also said that it lowered and placed on
CreditWatch negative its ratings on various AFC operating
companies.
"The third-quarter statutory surplus declines follow previous
drops in 2001 and in the first half of 2002," explained Standard
& Poor's credit analyst Kevin G. Maher. Earlier this year,
Standard & Poor's reviewed AFC's life and annuity operating
results for the first half of 2002 and lowered the ratings on
the life companies and the holding company by two notches on
Aug. 1, 2002. Risk-adjusted capitalization on a consolidated
basis is expected to drop from the high double-'A' range at
year-end 2000 into the triple-'B' range because of these strains
to statutory risk-adjusted capital.
Friday's rating action also reflects concerns with ongoing
management strategy. Despite deterioration in risk-adjusted
capital at the life companies through 2001 and the first half of
2002, additional support from available funds at the
property/casualty operations, the holding company, or external
capital raising has been somewhat limited. Plans for strategic
alternatives--which could include selling certain appreciated
lines of business and significantly reducing sales of
proprietary variable annuity and life products--could impair the
company's ability to improve the life operations' statutory
capital position in the near term. Coverage and leverage levels
are within tolerances for the ratings.
In addition to potential ongoing problems with the company's
bond portfolio, the company remains vulnerable to continued
equity-market declines. The company has been heavily focused on
variable products. In 2001 and to date in 2002, its fee income
has been significantly reduced because of the decline in asset
values underlying these products.
Standard & Poor's believes AFC has sufficient cash at the
holding-company level to support interest payments on debt
obligations through 2003. First Allmerica Financial Life
Insurance Co. has about $1.85 billion of funding agreement-
backed notes and certificates outstanding, which are non-
putable, though non-payments or regulatory action could trigger
these agreements coming due immediately.
ALLMERICA: Fitch Cuts Sr. Debt & Comm'l Paper Ratings to BB+/B
--------------------------------------------------------------
Fitch Ratings has lowered the insurer financial strength ratings
of First Allmerica Financial Life Insurance Co., and Allmerica
Financial Life Insurance and Annuity Co., to 'BBB-' from 'A'. In
addition, Fitch has lowered its rating on Allmerica Global
Funding LLC's $2 billion global debt program rating to 'BBB-'
from 'A'.
Fitch has also lowered Allmerica Financial Corporation's senior
debt rating to 'BB+' from 'BBB' and its rating on AFC's
commercial paper program to 'B' from 'F2'. In addition, Fitch
has placed the ratings of FAFLIC, AFLIAC, AGF, and AFC on Rating
Watch Negative.
Fitch's rating actions follow Friday's announcement by AFC that
it is considering executing strategic options to fund capital
requirements associated with its variable annuity operation.
Raising external capital, reinsuring various lines of business,
and selling certain lines of business are included among these
strategic options. Fitch's rating actions reflects what it
considers to be significant execution risks associated with the
broad strategic options being considered by AFC. While AFC
continues to deploy a moderate amount of financial leverage,
Fitch believes current capital market conditions could make
raising external capital difficult.
Further, Fitch believes that current conditions in the life
insurance and annuity industry may make it difficult for AFC to
reinsure or sell lines of business on favorable terms. Fitch
believes that the prolonged equity market downturn has
significantly reduced variable annuity writer's attractiveness
in the near term, while simultaneously increasing the number of
variable annuity writers that are seeking some form of capital
relief.
Fitch notes that in addition to the strategic options outlined
by AFC, the company has access to a $150 million committed bank
credit facility that it could use to provide temporary capital
to its life and annuity operation.
Historically, Fitch considered the credit profiles of AFC's
property/casualty subsidiaries and FAFLIC and AFLIAC to be
loosely linked. More recently Fitch has attributed some support
from AFC's property/casualty subsidiaries to FAFLIC and AFLIAC.
Fitch now believes that FAFLIC's and AFLIAC's credit profiles
have deteriorated significantly relative to the
property/casualty subsidiaries' credit profile. As a result,
Fitch no longer refers support from the property/casualty
subsidiaries to FAFLIC and AFLIAC.
Downgrade Ratings Rating Watch
First Allmerica Financial Life Insurance Co.
-- Insurer financial strength 'BBB-' Negative.
Allmerica Financial Life & Annuity Co.
-- Insurer financial strength 'BBB-' Negative.
Allmerica Global Funding LLC $2 billion global note program
-- Long-term issuer rating 'BBB-' Negative.
Allmerica Financial Corp.
-- Long-term issuer 'BB+' Negative;
-- Senior debt rating 'BB+' Negative;
-- Commercial paper rating 'B'.
Allmerica Financing Trust
-- Capital securities rating 'BB-' Negative.
ALLMERICA FIN'L: A.M. Best Lowers Fin'l Strength & Debt Ratings
---------------------------------------------------------------
A.M. Best Co., has downgraded the financial strength ratings
from A- (Excellent) to B+ (Very Good) of Allmerica Financial
Corporation's (Worcester, MA) [NYSE: AFC] life/annuity insurance
companies and lowered the financial strength ratings from A
(Excellent) to A- (Excellent) of the company's property/casualty
operating subsidiaries. In addition, AFC's senior debt ratings
were downgraded from "bbb+" to "bbb-," the capital securities
rating was downgraded from "bbb" to "bb," while the commercial
paper rating was lowered from AMB-2 to AMB-3.
All of AFC's financial strength and debt ratings were placed
under review with negative implications.
The rating actions reflect the uncertainty surrounding the
direction of Allmerica's life and annuity businesses, as
management is exploring a number of strategic alternatives
including, but not limited to, raising external capital and
reinsuring or divesting lines or blocks of business. A.M. Best
believes that AFC's capital raising options are restricted, and
the ability to effect strategic options is limited. These
businesses have experienced continuing declines in statutory
capitalization since year-end 2000 as a result of weakened
operating and investment results. A.M. Best also believes that
the life group's concentrated market profile, which is primarily
focused in variable products, has exposed the company to adverse
affects of the equity markets' downturn over this time. Reduced
operating earnings due to lower asset-based fees and increased
reserves related to guaranteed minimum death benefits--which
increase during declining financial markets--have been recorded.
In addition, during second quarter 2002, Allmerica recorded a
$142 million pre-tax deferred acquisition costs write-off, which
was the main contributor to AFC's second quarter 2002 GAAP loss;
further write-offs are expected in the third quarter. Further,
A.M. Best believes that additional DAC write-offs may occur if
unfavorable equity market conditions continue. Net income has
also been impacted by credit market deterioration, which has
caused realized losses and impairments on investments.
Risk-adjusted capitalization at the life companies has been
significantly weakened by these factors. Following a
considerable decline in statutory surplus in 2001, surplus
levels remained relatively flat through the second quarter of
2002 after additional capital contributions were received from
its property/casualty affiliates, which offset realized losses
recorded during the quarter. However, A.M. Best believes that
the current market environment will make it difficult for
Allmerica's life operations to rebuild their capital position to
historical levels and also believes that the potential for
further capital contributions from either the parent holding
company or the property/casualty affiliates is minimal at best.
AFC's financial leverage--excluding funding agreements--is
moderate, with a debt plus trust preferred to capital ratio of
17.3% at the end of June 2002. The holding company currently
maintains sufficient liquidity to cover its fixed obligations
and shareholder dividends. AFC has been able to satisfy its cash
needs from its profitable property/casualty subsidiaries;
however, these subsidiaries are now faced with the need to
provide cash to the holding company as well as to support
surplus levels of the life companies. While the
property/casualty group's operating performance has improved
significantly relative to 2001--absent adverse loss reserve
development--A.M. Best is concerned that AFC's dividend
requirements of the group may potentially result in
capitalization falling short relative to that supporting its
current rating. Allmerica's property/casualty operations are
overshadowed by the uncertainty in life operations, and a
conflict between maintaining adequate capital in the life
operating companies, property/casualty companies and holding
company cash needs will continue to exist for the near term.
The ratings will remain under review with negative implications
pending the release and A.M. Best's review of third quarter 2002
results and the results of management's strategic decisions.
A.M. Best Co., established in 1899, is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit A.M. Best's Web site at
http://www.ambest.com
AMERICAN TRANS: Wins Conditional OK for $148.5MM Loan Guarantee
---------------------------------------------------------------
ATA Holdings Corp. (Nasdaq:ATAH), parent company of ATA
(American Trans Air, Inc.) reported that the airline received
conditional approval for a $148.5 million federal loan guarantee
from the Air Transportation Stabilization Board.]
"The proceeds of this loan will provide ATA with the necessary
liquidity to help weather the industry's downturn," said George
Mikelsons, ATA Chairman and CEO. "Now we can continue to execute
the tough but achievable business plan that we agreed to with
the ATSB: further reducing our costs, completing our fleet
modernization and growing our scheduled service product. We are
gratified that the ATSB agrees with us regarding the viability
of our business model and the potential for future success.
Additionally, we are especially pleased that the process our
government put in place to assist the airline industry through
this difficult period has been so capably administered by the
ATSB."
ATA expects to meet the ATSB's conditions and fund the loan in
the fourth quarter of 2002.
Now celebrating its 30th year of operation, ATA is the nation's
10th largest passenger carrier based on revenue passenger miles.
ATA operates significant scheduled service from Chicago-Midway
and Indianapolis to more than 40 business and vacation
destinations. To learn more about the company, visit the Web
site at http://www.ata.com
AMERICREDIT: S&P Views $500MM Equity Issuance As Positive Dev't
---------------------------------------------------------------
AmeriCredit Corp.'s (BB-/Stable/--) announced completion of a
$500 million equity issuance is viewed by Standard & Poor's as a
positive development. The net proceeds from the common stock
offering will be used to provide a greater portion of the up-
front credit enhancement required on future securitizations, and
could increase to as high as 12%. By making a larger up-front
deposit on a transaction, the company would shorten the time
until it would begin receiving cash from the deals. By slowing
its current $2.4 billion rate of originations growth per
quarter, AmeriCredit will be able to preserve cash and enhance
its liquidity position.
However, Standard & Poor's continues to remain concerned about
potential deterioration in asset quality metrics in this weak
economic environment. Should the company experience further
asset quality deterioration over and above its expected
delinquency and annualized net losses in the 5.0%-5.4% range,
ratings would likely be negatively affected.
While raising $500 million in equity enhances the firm's
liquidity position in the short term, Standard & Poor's will
continue to monitor liquidity closely.
AMERICREDIT: Fitch Affirms BB Sr. Unsec. Rating over Equity Sale
----------------------------------------------------------------
Fitch Ratings affirmed the 'BB' rating for AmeriCredit Corp.'s
senior unsecured debt and removed the Rating Watch Negative
following their announcement of the completion of an equity
offering in the amount of $502 million. The Rating Outlook is
Stable. Approximately $375 million of debt is affected by this
action.
Fitch's rating action reflects the success ACF achieved through
its just completed equity offering totaling $502 million. This
offering enhances liquidity for ACF to complete new
securitization transactions, and endure any withholding of cash
from previously issued securitization transactions. Fitch
expects that cash raised through the equity offering will be
used to increase the amount of initial cash in securitization
transactions, which should ultimately lead to an earlier release
of any residual cash flows back to ACF. Friday's affirmation and
Stable Rating Outlook also reflects ACF's commitment to grow
receivables at a moderate rate, thus enhancing overall
capitalization.
Fitch's rating also reflects ACF's performance to date,
sophisticated risk management capabilities, and leading market
position in subprime automobile finance. Rating concerns center
on ACF's historical excessive growth rate that was well above
internal capital formation, dependence on secured markets for
long-term financing, and declining asset quality trends. Fitch
anticipates that positive rating momentum could be achieved
through improved operating performance going forward,
particularly with respect to ACF's asset quality trends. Also,
Fitch will be closely monitoring ACF's receivables growth rate
so that it remains below internal capital formation, as has been
committed by management.
Based in Fort Worth, TX, ACF has become the largest independent
subprime automobile finance company in North America. As of June
30, 2002, ACF maintained $14.8 billion in managed automobile
finance receivables.
AMKOR TECHNOLOGY: Bank Group Extends Fin'l Covenants to Year-End
----------------------------------------------------------------
Amkor Technology (Nasdaq:AMKR) said that the lenders under its
Secured Bank Credit Facility have agreed to extend the existing
financial covenant framework through December 31, 2003. The Bank
Credit Facility encompasses a $97 million term loan and an
unused $100 million revolving credit facility. The term loan
will maintain its scheduled amortization of approximately $12
million per quarter beginning in December 2003 through December
2005. The $100 million revolving credit facility will remain in
place. The Bank Credit Facility will revert to its original
covenants in January 2004.
Amkor said the amendment does not require any prepayment of
principal on the term loan and does not change the interest
rates.
Amkor Technology, Inc., is the world's largest provider of
contract semiconductor assembly and test services. The company
offers semiconductor companies and electronics OEMs a complete
set of microelectronic design and manufacturing services. More
information on Amkor is available from the company's SEC filings
and on Amkor's Web site at http://www.amkor.com
DebtTraders reports that Amkor Technology Inc.'s 10.50% bonds
due 2009 (AMKR09USR1) are trading at 40 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=AMKR09USR1
for real-time bond pricing.
ANC RENTAL: Brings-In Dickstein as Counsel for Insurance Matters
----------------------------------------------------------------
ANC Rental Corporation and its debtor-affiliates seek the
Court's authority to employ the law firm of Dickstein Shapiro
Morin & Oshinsky LLP as their special counsel for insurance
coverage matters, nunc pro tunc to June 17, 2002.
Elio Battista, Jr., Esq., at Blank Rome Comisky & McCauley LLP,
in Wilmington, Delaware, explains that the Debtors want to
retain Dickstein for advice on insurance coverage matters
related to the consequences of the September 11, 2001 bombings.
The Debtors expect Dickstein to:
A. Investigate and analyze the Debtors' potentially available
insurance assets,
B. Render advice to the Debtors concerning their pursuit of
potentially available insurance assets,
C. Review and analyze insurance-related applications,
orders, operating reports, schedules and other materials
filed and to be filed by the Debtors or other interested
parties,
D. Represent the Debtors at hearings to be held before this
Court on insurance coverage matters,
E. Assist in litigation concerning insurance coverage,
F. Assist generally with respect to insurance coverage matters
during this proceeding and in the formulation of the
Reorganization Plan by providing services that are in the
Debtors' best interests, and
G. Perform all other appropriate legal services related to
its representation of the Debtors.
According to Mr. Battista, Dickstein has significant experience
in insurance coverage litigation of the nature and character
that the Debtors require. Many of the cases represented by
Dickstein include the recovery of insurance assets by companies
that are in bankruptcy. Dickstein, in addition, is currently
engaged as counsel in six September 11-related insurance
coverage cases.
The Debtors had sought to retain Dickstein as an ordinary course
professional but now seek to retain Dickstein for a specialized
engagement. Dickstein is to be paid based upon the hourly rates
of its professionals assigned to the Debtors' cases. The
current rates of Dickstein's professionals are:
Partners $345 - 550
Associates 180 - 295
Para-professionals 90 - 150
In addition, Dickstein will be reimbursed for out-of-pocket
expenses including long distance telephone calls, facsimiles,
photocopies, postage and package delivery charges, messengers,
court fees, transcript fees, mileage and travel expenses and
computer-assisted legal research.
Jerold Oshinsky, Esq., a partner at Dickstein, informs the Court
that Dickstein searched its client database for the past five
years to determine whether it had any relationships with the
parties-in-interest the Debtors' cases.
Mr. Oshinsky reports that Dickstein has rendered or continues to
render services to these entities in matters unrelated to the
Debtors' cases: DirecTV, AT&T and AT&T Wireless, Arthur
Anderson, ING Borings, Barton Protective Services Inc., Capital
Bank, JP Morgan Chase, Wachovia Bank, Congress Financial, First
Union Commercial Corporation, First Union National Bank, First
Union Commercial Corporation and First Union Securities,
Corporate Express Inc., Deutsche Bank Alex Brown, National
Discount Broker Group, Donaldson Lufkin & Jenrette, Diamond
Triumph Auto Glass, DuPont Pharmaceuticals, Dupont Flooring
Systems, Dupont Flooring Systems, Eller Media Company, Robertson
Stephens, Goodyear Tire, Hewlett Packard, Greenwich Capital
Markets, Citizens Bank N.A., and Natwest Finance, Inc., Royal
Bank of Scotland, Lorillard Tobacco, Continental Casualty
Company, Lucent Technologies, Oracle Corporation, Textron, Wells
Fargo Card Services Inc., and Wells Fargo Bank Minnesota.
However, Mr. Oshinsky assures the Court that Dickstein is a
disinterested person as that term is defined in the Bankruptcy
Code. (ANC Rental Bankruptcy News, Issue No. 20; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
AUSPEX SYSTEMS INC: Commences Trading on Nasdaq SmallCap Market
---------------------------------------------------------------
Auspex Systems, Inc. (Nasdaq: ASPX), a leader in the Network
Attached Storage market, reported that NASDAQ approved its
application to have its Common Stock traded on the NASDAQ
SmallCap Market. This transfer was effective at the opening of
business yesterday, September 30, 2002. The Company's Common
Stock will continue to trade under the symbol ASPX.
The Company was previously notified that it did not comply with
the requirements for continued listing on the NASDAQ National
Market System. "We decided to apply voluntarily for trading on
the SmallCap Market which allows us to maintain our focus on
near term business objectives. We believe the transfer to the
SmallCap Market is in the best interests of our shareholders as
it will better protect the trading continuity of the stock as we
pursue these business objectives," said Peter R. Simpson, Chief
Financial Officer.
Auspex is the Network Attached Storage server choice of Fortune
1000 customers in the semiconductor, software development, oil
and gas exploration, automotive, aerospace, communications,
publishing, entertainment, animation, and financial services
industries. Its products are designed for storage applications
requiring secure NT and UNIX data sharing from a single data
image, server consolidation or continuous network data
availability. The Company excels in enterprise-level [multi-
terabyte] NAS solutions and services. Visit the company's Web
site at http://www.auspex.com
BANGOR & AROOSTOOK: Auction Sale Scheduled for October 8, 2002
--------------------------------------------------------------
James E. Howard, the Chapter 11 Trustee for the estates of
Bangor & Aroostook Railroad Company and its debtor-affiliates,
entered into an Asset Purchase Agreement to sell substantially
all of the Debtors' assets, free and clear of liens and
encumbrances and together with the right to assume and assign
certain executory contracts, to Montreal, Maine & Atlantic
Railway, LLC. Consideration for the sale is approximately $50
million plus certain contingent future payments. The sale is
subject to any higher and better offers that the Trustee may
select and the U.S. Bankruptcy Court for the District of Maine
will approve.
Under a set of uniform Bidding Procedures, an Auction will be
conducted as part of the hearing on the Trustee's Sale Motion on
October 8, 2002 at 2 p.m. Competing Bids, in accordance with
the Bidding Procedures, must be received no later than today,
October 1, 2002.
Union Tank Car Company, Ebenezer Railcar Services, Inc. and Helm
Financial Corporation filed an involuntary Chapter 11 petition
against Bangor & Aroostook Railroad Company and its debtor-
affiliates on August 15, 2001. Roger A. Clement, Jr., Esq. and
Andrew R. Sarapas, Esq. at Verrill & Dana represent the Debtors
in its restructuring efforts.
BETHLEHEM STEEL: Court Appoints Retired Employees' Committee
------------------------------------------------------------
The Retired Employees' Benefits Coalition, Inc. -- REBCO --
complains to the U.S. Bankruptcy Court for the Southern District
of New York that, by proposing a retired employees committee,
Bethlehem Steel Corporation and its debtor-affiliates are
improperly seeking to control the appointees and influence the
vote of each.
A. Dennis Terrell, Esq., in New York, reminds the Court that a
Section 1114 committee serves the entire body of retirees which
it represents. Thus, the Debtors cannot and should not be
allowed to dictate which members should be appointed and which
committee members can vote. The committee should be
representative of the entire retiree body and its membership
should reflect the number of constituents it represents.
Instead of the Debtors' proposed appointees, the Retired
Employees insist on their candidates:
(1) James Van Vliet, a retiree who receives Retiree Benefits
pursuant to the Comprehensive Medical Program of Bethlehem
Steel Corp. -- CMP -- and the President of the Committee,
should be appointed to the Retirees' Committee as a voting
member;
(2) All members of the Retirees' Committee, including Charles F.
Collins, a CMP Retiree, should be full members of the
Retirees' Committee; and
(3) Labor organizations should be declared the authorized
representatives of persons receiving Retiree Benefits
covered by their Collective Bargaining Agreements.
UMWA Doesn't Like It Either
The United Mine Workers of America and the UMWA 1992 Benefit
Plan and its trustees contend that the appointment of a retirees
committee according to the Debtors' proposal attempts to deprive
the UMWA retirees of the continued representation of their union
with respect to their retiree benefits. This is to the extent
that the Debtors' motion seeks the appointment of a committee to
negotiate modifications in statutory benefits mandated by the
Coal Industry Retiree Health Benefits Act of 1992.
The UMWA 1992 Benefit Plan was established in 1992 to provide
coverage to those retirees -- consisting of miners -- who are
not eligible for benefits from the UMWA 1950 Benefit Trust or
the 1974 Benefit Trust. These miners retired before September
30, 1994 and met the applicable age and service requirements for
benefits from the UMWA 1950 or 1974 Benefit Trusts as of
February 1, 1993. Additionally, the members of the 1992 Plan
should have been covered under individual employer plans but
their employers fail to provide the coverage.
Kent Y. Hirozawa, Esq., at Gladstein, Reif & Meginniss, LLP, in
New York, explains that appointing a different representative is
not appropriate. The Debtors' assertion that a conflict of
interest between the union's representation of the retirees and
its representation of active employees is unfounded since no
conflict exists with respect to UMWA retirees. The Debtors have
had no active UMWA employees since 1997.
The UMWA believes the vast majority of the 4,100 UMWA retirees
and dependents indicated by the Debtors in their motion are
retirees receiving benefits pursuant to the Coal Industry
Retiree Benefits Act of 1992. Those benefits are statutory
obligations mandated by law and are not subject to modification
under Section 1114 of the Bankruptcy Code. Therefore, Mr.
Hirozawa asserts that the appointment of a representative for
the purpose of negotiating modifications under Section 1114 for
Coal Act retirees is not appropriate.
In addition, Mr. Hirozawa further states that, even with respect
to the minority of UMWA retirees subject to Section 1114, the
nature of the obligation owed by the Debtors to the UMWA
retirees is completely different from the obligations owed to
the non-union retirees, which arise under benefit plans created
by the Debtors. Their interests in this matter may be
substantially different.
Mr. Hirozawa also points out that the retiree benefits of the
UMWA retirees are not similar to those of the non-union
retirees, and the interests of the UMWA retirees cannot be
fairly represented by the proposed committee. The UMWA benefit
plans and benefits are also substantially different from those
of other retirees of the Debtors who are represented by
different labor organizations including the United Steelworkers
of America and the United Transportation Union.
"Modifications proposed by the Debtors to a single Retirees
Committee would likely impact different groups of retirees to
significantly greater degrees," Mr. Hirozawa says.
Debtors Respond
To quell the complaints from the major retiree groups, the
Debtors file a supplemental pleading on:
1. The UMWA and the 1992 Plan Objection
The Debtors agree that the UMWA will be the authorized
Representative of the UMWA Retirees who receive Retiree
Benefits covered by Collective Bargaining Agreements between
certain of the Debtors and the UMWA. The UMWA also will
represent UMWA Retirees in the negotiations, which will be
conducted separate and apart from the negotiations with the
Retirees' Committee. The outcome of the Debtors'
negotiations with the Retirees' Committee will not bind the
UMWA and the negotiations with the UMWA will not bind the
Retirees' Committee.
2. The REBCO Objection
The Debtors and REBCO have resolved the REBCO Objection. The
Debtors have no objection to REBCO's requests that James Van
Vliet, individually, be appointed to the Retirees' Committee
and that Charles F. Collins serve as a full member of the
Retirees Committee. The Debtors propose that the Retirees'
Committee should determine its own voting procedures, and
therefore, take no position with regard to the voting rights
of any members of the Retirees' Committee. Additionally, the
Debtors reserve their right to assert their unilateral
ability to modify or terminate the CMP outside of the Section
1114 process.
3. The USWA Concerns
The Debtors and the United Steelworkers of America have
resolved the concerns raised. The Debtors agree that the
USWA will represent the USWA Retirees in negotiations, which
will be conducted separate and apart from the negotiations
with the Retirees' Committee. The outcome of the Debtors'
negotiations with the Retirees' Committee will not bind the
USWA and the negotiations with the USWA will not bind the
Retirees' Committee.
* * *
After due deliberation, the Court appoints these persons to the
Retired Employees Committee:
Designee Retiree Group Retirement Date
-------- ------------- ---------------
Lewis F. Sensenbach BPHP January 1, 1983
2 Doe Court
Phoenix, MD 21131
(410) 527-0881
James Van Vliet CMP May 1, 1988
1940 Stonesthrow Road
Bethlehem, PA 18015
(610) 868-6132
Ralph D. Case Shipyard September 1, 1997
1822 Jackson Road
Baltimore, MD 21222
(410) 282-1739
Charles F. Collins CMP July 1, 2000
2915 Oakland Road
Bethlehem, PA 18017
(610) 868-1840
The Court further rules that:
(a) The United Transportation Union may appoint a Railroad
Retiree who receives Retiree Benefits covered by a
Collective Bargaining Agreement with United Transportation
to the Retirees' Committee by filing a notice of the
appointment with the Court and serving the Appointment
Notice upon the Debtors' attorneys and each of the Service
Parties;
(b) If no party-in-interest files with this Court an objection
to an Appointment Notice Parties before September 26, 2002,
the United Transportation appointee will be named to the
Retirees' Committee;
(c) The Retirees' Committee established will be the sole
authorized representative of the Section 1114 Retirees other
than the USWA Retirees and the UMWA Retirees;
(d) The United Steelworkers of America will be the authorized
representative of the USWA Retirees, as agreed-upon by the
parties; and
(e) The United Mine Workers of America will be the authorized
representative of the UMWA Retirees who receive Retiree
Benefits covered by Collective Bargaining Agreements between
the Debtors and the UMWA, as agreed-upon by the parties.
(Bethlehem Bankruptcy News, Issue No. 22; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
Bethlehem Steel Corporation's 10.375% bonds due 2003 (BS03USR1)
are trading at 7 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for
real-time bond pricing.
BUDGET GROUP: Court Okays Payment of $15MM Cendant Break-Up Fee
---------------------------------------------------------------
JPMorgan Chase Bank and Wilmington Trust Company assert that
Budget Group Inc., and its debtor-affiliates failed to
demonstrate that the proposed $15,000,000 break-up fee is
"actually necessary to preserve the value of the estate." Thus,
the Break-Up Fee should be disallowed.
Tobey M. Daluz, Esq., at Reed Smith LLP, in Wilmington,
Delaware, points out that the Third Circuit Court of Appeals in
Calpine Corp. v. O'Brien Environmental Energy Inc., states that
break-up fees must be actually necessary to preserve the value
of the estate and that the former business judgment rule is not
to be applied. In an attempt to meet the Third Circuit's
standards, the Debtors argued first that the break-up fee was
the only basis on which Cendant would execute the Sale
Agreement. The Sale Agreement, in turn, was the only agreement
available to the Debtors, which satisfied the condition
contained in the Secondary DIP Order, requiring the Debtors to
execute a Sale Agreement by August 22, 2002. The Debtors' logic
sees the break-up fee as a so-called necessary evil. However,
since the covenant in the Secondary DIP Order has now been met,
the Secondary DIP Order does not render the break-up necessary.
Mr. Daluz rebuts the Debtors' assertion that the break-up fee is
justifiable given the magnitude of the transaction. The assumed
liabilities should not be considered as part of the purchase
price because they are value neutral. This is because the
assumed liabilities derive primarily from Debtors' fleet
financing and related credit enhancements. For every dollar of
liability, there is a corresponding new vehicle in the Debtors'
fleet, which will be returned or sold for its full book value.
It is the Debtors' operations, and not Cendant, which will
continue to fund this fleet debt in the ordinary course. Thus,
the break-up fee is actually 10% of the purchase price.
According to Mr. Daluz, JPMorgan and Wilmington have yet to
locate a single case where a break-up fee of greater than 5.9%
of the purchase price was approved. The courts have recognized
the inherent danger in large break-up fees:
"A breakup fee may discourage an auction process and
preclude further bidding when the fee is so large as
to make competitive bids too expensive." (See Revlon
Inc. v. MacAndrews & Forbes Holdings, Inc.)
Should the Court approve the break-up fee, JPMorgan and
Wilmington insist that the amount should be reduced to the
actual expenses Cendant incurred in preparing its bid.
Debtors: Break-Up Fee Necessary
According to Edward J. Kosmowski, Esq., at Young Conaway
Stargatt & Taylor LLP, in Wilmington, Delaware, the suggestion
that the proposed break-up fee is "illegal" under the O'Brien
standard is preposterous. In the Debtors' sale transaction, the
break-up fee provides at least three separate benefits to the
Debtors, each of which independently supports an award under the
O'Brien standard.
Mr. Kosmowski relates that the break-up fee affords the Debtors
an opportunity to conduct a final market test of the purchase
consideration without the risk of losing the committed purchase
price. The Debtors will demonstrate at the hearing that neither
the Cherokee nor Cendant would have executed the Asset Purchase
Agreement unless Cherokee, as the buyer, was rightfully afforded
a stalking horse bid protection.
Mr. Kosmowski asserts that Cendant has expended an enormous
amount of time and resources conducting due diligence and
negotiating a comprehensive Asset Purchase Agreement with the
Debtors over a period of several months. The Asset Purchase
Agreement and supporting schedules and attachments exceed 4,000
pages. The Debtors have been advised that Cendant incurred more
than $10,000,000 in fees and expenses in conducting due
diligence and negotiating the transaction with the Debtors and
the committees. Cendant continues to incur fees and expenses
working towards closing of the Asset Purchase Agreement.
The assertion that the break-up fee is no longer necessary
because the Secondary DIP Facility has already been approved
conveniently overlooks the fact that the Buyer can terminate the
transaction if it is not afforded the break-up fee protection.
* * *
Finding that the payment of the break-up fee is an actual and
necessary cost and expense to induce a bid for the Debtors'
assets, Judge Walrath approves the payment of the break-up fee
to Cendant in the event a competing bidder tops its offer.
(Budget Group Bankruptcy News, Issue No. 8; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CENTRAL EUROPEAN: Appoints Bruce Maggin to Board of Directors
-------------------------------------------------------------
Central European Media Enterprises Ltd., (OTC Bulletin Board:
CETVF) today announced the appointment of Bruce Maggin to its
Board as a non-executive independent director and to its fully
independent audit committee. The appointment brings the number
of independent directors to four and the total number of
directors to eight.
"Bruce brings a wealth of media industry, legal and financial
experience to CME's board," said Ronald Lauder CME's Non-
executive Chairman. "In addition to the board, Bruce will add
considerable skills to CME's independent audit committee. I am
delighted he accepted our invitation to join us and look forward
to working with him."
Mr. Maggin is currently a Principal of The H.A.M. Media Group,
an international investment and advisory firm specializing in
the entertainment and communications industries. He is also CEO
of atTV Media, a joint venture between Gemstar-TV Guide, Thomson
Multimedia and NBC. atTV Media is responsible for the sale and
distribution of interactive advertising and other services on
Gemstar's GUIDE Plus+ electronic program guides.
Formerly, Mr. Maggin headed the ABC Multimedia Group, one of the
five divisions of ABC, Inc. In this role he was responsible for
centralizing and expanding ABC's activities in the digital
world. In addition, Mr. Maggin spearheaded ABC's technology
investments and was responsible for the company's home video
distribution business and its new media sales organization. He
had previously been head of the Development/Operations unit of
Capital Cities/ABC Video Enterprises where he oversaw all of the
company's start-up and venture business activities.
Mr. Maggin originally joined ABC in 1970 as part of the
company's corporate planning department. After a brief stint as
a merger and acquisition consultant for a major Wall Street bank
he became Vice President of Ziff Corporation, the parent company
of Ziff-Davis Publishing and Broadcasting. He returned to ABC
in 1982.
Mr. Maggin has been a member of the Board of Directors of
several companies including cable networks, Lifetime and ESPN.
He currently serves on the Board of Directors of Phillips-Van
Heusen Corporation and MindArrow Sytstems, Inc. A member of the
New York State Bar he received a BA degree from Lafayette
College and JD and MBA degrees from Cornell University.
Central European Media Enterprises Ltd. (CME) is a TV
broadcasting company with leading stations located in Romania,
Slovenia, Slovakia and Ukraine. CME is traded on the Over the
Counter Bulletin Board under the ticker symbol "CETVF.OB."
* * *
As reported in Troubled Company Reporter's Sept. 5 edition,
Andersen's reports on the Company's consolidated financial
statements for the year 2001 was modified on a going concern
basis since in its cash flow projections the Company was relying
on cash flows that were outside the Company management's direct
control.
CENTURY/ML CABLE: Files for Chapter 11 Reorganization in SDNY
-------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELQ) announced that
Century/ML Cable Venture -- a holder of the cable franchise in
Levittown, Puerto Rico and a New York joint venture between
Century Communications Corp., a wholly-owned indirect subsidiary
of Adelphia, and ML Media Partners, L.P. -- has filed a
voluntary petition for relief under Chapter 11 of the United
States Bankruptcy Code. The petition was filed in the U.S.
Bankruptcy Court for the Southern District of New York.
Company Committed to Continuing Operations
with No Interruptions in Service
Century/ML Cable Venture remains committed to continue providing
cable entertainment and services to its 15,000 customers in the
communities of Toa Baja, Toa Alta and Catano. CMLCV expects
that all post-petition obligations to local franchise
authorities, vendors, employees and others will be satisfied in
the normal course of business.
The joint venture, Adelphia and Century Communications, which
holds a 50% interest in and manages the joint venture, are
currently involved in litigation with the other venture partner,
ML Media Partners.
"After carefully considering all of our options, we concluded
that Chapter 11 protection would protect our creditors and allow
for an orderly resolution of the litigation related issues
facing the joint venture while enabling us to continue to
provide quality service to our 15,000 customers," said Century
Communications Vice President and Treasurer Chris Dunstan, who
also serves as Executive Vice President and Chief Financial
Officer of Adelphia. "The business is fundamentally sound and
substantially current on its obligations to its vendors, and we
expect to emerge from the proceedings fully able to maintain
operations going forward."
CMLCV Employees to Continue
to Receive Wages and Benefits
All of CMLCV's 18 current employees will continue to receive
their wages, as well as health and welfare benefits, subject to
Bankruptcy Court approval. The Company also has the resources to
carry on day-to-day operations and will pay local franchise
authorities and its vendors for post-petition obligations in the
normal course of business.
Operations of Other Adelphia Systems
in Puerto Rico Remain Unaffected
The subsidiary of CMLCV, Century-ML Cable Corporation, will not
be affected by CMLCV's Chapter 11 filing. Cable services to
Century-ML Cable Corporation's 130,000 customers in San Juan,
Bayamon, Carolina, Guayanabo and Trujillo Alto will not be
impacted by today's filing.
Chapter 11 of the United States Bankruptcy Code allows a company
to continue operating its business and managing its assets in
the ordinary course of business. Congress enacted Chapter 11 to
encourage and enable a debtor business to continue to operate as
a going concern, to preserve jobs and to maximize the recovery
of all its stakeholders.
Adelphia is represented in its Chapter 11 cases by Willkie Farr
& Gallagher.
Adelphia Communications Corporation, with headquarters in
Coudersport, Pennsylvania, is the sixth-largest cable television
company in the country. It serves 3,500 communities in 32 states
and Puerto Rico. It offers analog and digital cable services,
high-speed Internet access (Adelphia Power Link), and other
advanced services.
CENTURY/ML CABLE: Case Summary & 20 Largest Unsecured Creditors
---------------------------------------------------------------
Debtor: Century/ML Cable Venture
Sabana Seca Avenue
At the Corner of Dr. Villalobos Street
Toa Baja, PR 00949
Bankruptcy Case No.: 02-14838
Type of Business: The Debtor is an affiliate of Adelphia
Communications Corp.
Chapter 11 Petition Date: September 30, 2002
Court: Southern District of New York (Manhattan)
Judge: Robert E. Gerber
Debtors' Counsel: Myron Trepper, Esq.
Marc Abrams, Esq.
Shelley C. Chapman, Esq.
Paul V. Shalhoub, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
(212) 728-8000
Estimated Assets: More than $100 Million
Estimated Debts: More than $100 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
ML Media Partners, LP Put right for $275,000,000
444 Madison Avenue redemption of 50%
Suite 703 equity interest
New York, NY 10022
Attn: Elizabeth McNey Yates
Tel: (212) 980-7110
Counsel: Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attn: Bertram Abrams, Esq.
Tele: (212) 969-2900
Century Communications Management fees $8,507,147
Corporation
One North Main
Coudersport, PA 16915
Tel: (814) 274-9830
Adelphia Communications Programming charges, $3,332,590
Corporation capital expenditure
One North Main charges, miscellaneous
Coudersport, PA 16915
Tel: (814) 274-9830
Cable Services Group, Inc. Billing Vendor $17,000
Yabucoa Cable Const., Inc. Sub-contractor for $17,000
House Drops
JS Construction Sub-contractor for $12,500
Construction
Autoridad De Power Utility & $8,500
Energia Electrica Power Supplies
Silver Communications Sub-contractor for $8,000
House Drops
Your Security Security Services $7,300
Comm Scope, Inc. Trunk and Drop Cable $6,100
Jal & Asoc., Inc. Construction and $2,800
Drop Material
Credit Protection Agency Collections $2,400
Triple S $1,800
RGS Contractor Contractor Services $1,300
Preferred Health Health Plan Services $1,200
Puerto Rico Telephone Co. Telephone Utility $1,200
and Pole Rental
Action Service Cleaning Service $1,100
Centennial de Puerto Rico Land Lines $1,100
Alas Technical Products $1,000
Angray Comm Group Communication Services $1,000
CLUBCORP INC: S&P Rates Corporate Credit Rating at B+
-----------------------------------------------------
Standard & Poor's Rating Services assigned its single-'B'-plus
corporate credit rating to golf club and resort company ClubCorp
Inc. The outlook is negative.
Standard & Poor's said that at the same time it assigned its
single-'B'-plus bank loan rating to ClubCorp's $325 million
revolving credit facility due 2004 and its single-'B' rating to
the company's proposed $225 million senior unsecured notes due
2010.
Dallas, Texas-based ClubCorp is the largest owner and operator
of golf and business clubs and destination golf resorts in the
world. The company operates 120 country clubs, golf clubs and
public golf facilities, three destination golf resorts and 77
business and sports clubs located in 30 states and five
countries.
Standard & Poor's noted that the bank loan rating is the same
level as the corporate credit rating. The facility consists of a
$325 million revolving credit facility due 2004, $100 million
term loan A due 2004, and $200 million term loan B due 2007.
Standard & Poor's simulated default scenario assumed that the
revolving credit facility was fully-drawn and that both cash
flow and resale multiples were at distressed levels. Said
Standard & Poor's credit analyst Andy Liu, "Because the facility
is secured, lenders can expect to recover more than a typical
unsecured creditor in the event of a default or bankruptcy."
Based on Standard & Poor's simulated default scenario, it is not
clear that a distressed enterprise value would be sufficient to
cover the entire fully-drawn loan facility." Proceeds from the
senior unsecured notes will be used to pay down the revolving
credit facility and term loans.
Standard & Poor's said that its ratings on ClubCorp reflect the
company's diverse portfolio of golf related properties and
business/sports clubs and relatively stable cash flow base from
membership dues and fees. Offsetting factors include aggressive
financial profile, significant debt maturities, relatively
little covenant cushion even under amended terms, and weak
demand for upscale resorts and business/sports clubs. The
ratings also incorporate Standard & Poor's expectation that
operating performance at company's country clubs and resorts
will stabilize soon.
COMMUNICATION DYNAMICS: Receives Approval of First-Day Motions
--------------------------------------------------------------
Communication Dynamics, Inc., parent company of TVC
Communications, received Bankruptcy Court approval to, among
other things, use interim cash collateral to operate its
businesses during its voluntary restructuring under Chapter 11,
which commenced on Sept. 23, 2002. The Company also has
received operational relief to ensure business as usual during
the restructuring. This relief allows the Company to:
-- Pay pre-petition and post-petition employee wages,
salaries and benefits
-- Pay certain shipping and related obligations
-- Continue maintenance of existing bank accounts and
existing cash management systems
-- Continue existing warranty programs
"We are very pleased that the Court has granted this important
relief, which will benefit employees, customers and vendors. The
approval of our first-day motions helps to ensure that we will
continue operating smoothly while we undergo our restructuring,"
said Robert Ackerman, CDI President and Chief Executive Officer.
"The liquidity resulting from the Court's approval of our use of
interim cash collateral will be more than adequate to pay for
goods and services going forward."
The Company also filed a motion, which is pending Court
approval, to implement a "546(g)* program." A 546(g)* program
allows a company operating in Chapter 11 to return certain goods
shipped before the bankruptcy filing and reduce pre-petition
outstanding balances in exchange for post-petition trade credit.
Additionally, TVC Communications reported that it received a
very positive response from customers and vendors. Many major
customers pledged to continue buying products and vendors have
agreed to return to shipping on 30-day terms.
A second interim cash-collateral hearing is scheduled for Oct.
15, 2002 and a final hearing is scheduled for Oct. 31, 2002.
CDI announced that on Sept. 23, 2002 it began the process of
restructuring its debt and operations by filing for relief under
Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court
for the District of Delaware in Wilmington. The case number is
#02-12753 and the case has been assigned to the Honorable Mary
F. Walrath.
Communication Dynamics, Inc., is the parent company of TVC
Communications. TVC provides the products and services that
have helped build the communications infrastructure in the
United States, Canada, South America and Europe. Founded in
1952, TVC is backed by close working relationships with top
manufacturers and a deep understanding of the technology behind
the products it sells. TVC has proven itself to be a valued
partner to both the broadband cable and telecommunications
industries.
For further information please contact Brenda Adrian, +1-310-
788-2850, or Dana Coleman, +1-212-573-6100, both of Sitrick And
Company, for Communication Dynamics, Inc.
COMMUNICATION DYNAMICS: Look for Schedules & Statements by Nov 7
----------------------------------------------------------------
By order of the U.S. Bankruptcy Court for the District of
Delaware, Communication Dynamics, Inc., and its debtor-
affiliates sought and obtained additional time to file their
Schedules of Assets and Liabilities and Statements of Financial
Affairs. The Court gives the Debtors until November 7, 2002 to
complete their schedules, lists of executory contracts and
unexpired leases and statements of financial affairs and
otherwise comply with 11 U.S.C. Sec. 521(1).
Communication Dynamics, Inc., together with its Debtor and non-
Debtor affiliates, is one of the largest multinational suppliers
of infrastructure equipment to the broadband communications
industry. The Debtors filed for chapter 11 protection on
September 23, 2002. Jeffrey M. Schlerf, Esq., at The Bayard
Firm represents the Debtors in their restructuring efforts.
When the Company filed for protection from its creditors, it
listed more than $100 million both in estimated assets and
debts.
CONTINUCARE: June 30 Working Capital Deficit Narrows to $7.6MM
--------------------------------------------------------------
Continucare Corporation (AMEX:CNU), a provider of outpatient
healthcare and home health services through managed care,
Medicare direct and fee for service arrangements, in the Florida
market, reported a net loss for Fiscal 2002 of $3,646,388
compared with a net loss of $137,902 in Fiscal 2001. Included in
Fiscal 2001's results was a gain on extinguishment of debt of
approximately $3.5 million and a contractual revision of
previously recorded medical claims of approximately $4.6
million.
Income from operations for Fiscal 2002 was $332,328 compared
with income from operations of $1,461,247 for Fiscal 2001 after
recording the gain on extinguishment of debt of approximately
$3.5 million in Fiscal 2001. Total revenue in Fiscal 2002
decreased 6.1% to approximately $105.7 million from
approximately $112.6 million in Fiscal 2001.
Total revenue for the three months ended June 30, 2002 was
approximately $27.5 million compared to approximately $23.5
million for the three months ended June 30, 2001. Net income for
the three months ended June 30, 2002 was $932,328 compared with
net income of approximately $3,219,838 for the three months
ended June 30, 2001. Net income in the fourth quarter of Fiscal
2001 included a gain on extinguishment of debt of approximately
$3.5 million.
At June 30, 2002, the Company's balance sheet shows that its
total current liabilities exceeds its total current assets by
approximately $7.6 million.
Spencer Angel, President and CEO of Continucare, commented: "We
face many uncertainties concerning Medicare reimbursement and
potential changes in benefit packages of local HMOs. During
Fiscal 2002 we continued to experience aggressive increases in
many of our core expense categories. However, despite the
challenges under which we operate, we were able to reduce our
medical services expense as a percentage of our total revenue to
87.1% in Fiscal 2002 from 88.6% in Fiscal 2001. In Fiscal 2003
we intend to continue providing quality medical care in a cost
effective manner."
Continucare Corporation, headquartered in Miami, Florida, is a
holding company with subsidiaries engaged in the business of
providing outpatient physician care and home healthcare
services.
COVANTA ENERGY: Committee Wants Cash Collateral to Fund Probe
-------------------------------------------------------------
Pursuant to Section 363(c) of the Bankruptcy Code and Rule
4001(b) of the Federal Rules of Bankruptcy Procedure, the
Official Committee of Unsecured Creditors, in the chapter 11
cases involving Covanta Energy Corporation and its debtor-
affiliates, seeks the Court's authority to use the Cash
Collateral to investigate and prosecute the adversary
proceedings the Committee filed on behalf of the Debtors with
respect to the existence of the 9-1/4 Debenture Holders' alleged
lien on the Debtors' assets. Moreover, the Committee also seeks
Court approval to lift the $125,000 cap now in place on the
Committee's costs of investigating the Action and similar
claims.
Michael J. Canning, Esq., at Arnold & Porter, in New York,
relates that the Committee commenced an adversary proceeding
against Wells Fargo Bank Minnesota, National Association, as
trustee on behalf of the holders of certain debentures. The
Action seeks a declaratory judgment that an alleged lien of
certain debenture holders securing a debt owing to the Debenture
Holders of $105,000,000 does not, in fact, exist. If the
Committee prevails in the Action, a significant portion of the
Debtors' prepetition secured claims will be eliminated --
enhancing the prospects for plan confirmation and the ultimate
recovery to unsecured creditors.
Thus, Mr. Canning contends, the relief requested is warranted,
because:
(a) under Section 363(o)(2) of the Bankruptcy Code, the
Debenture Holders have the burden of demonstrating that
they have a valid interest in property entitled to
adequate protections -- and they cannot meet that burden;
(b) even if the Debenture Holders were theoretically
positioned to receive adequate protection, there would be
no legal basis for them to claim it here, since their
alleged collateral has increased in value since Petition
Date;
(c) the Debenture Holders already agreed to a package of
"adequate protection" consideration, which they would
still receive if the Motion is granted, and which they
deemed adequate when the cash forecast for these Debtors
was far more negative than has turned out to be the case;
and
(d) the equities of the case support the motion, including
the fact that the Debtors will be paying the Debenture
Holders' legal fees to defend the Action; basic fairness
demands that the Committee be afforded the same treatment.
Simply put, Mr. Manning asserts, the Committee only asks for
funding to finish what is it has started. Otherwise, the
Committee's investigation and $125,000 would have wasted.
Furthermore, any objection the Debenture Holders would raise in
this motion is only to "thwart a challenge to the validity of
their purported lien."
As the Debenture Holders have adequate protection, "it would be
a Kafkaesque absurdity to deny the Committee -- which is the
statutory guardian of the unsecured creditors' interests -- the
funds to challenge the Debenture Holders' alleged lien, but, at
the same time, to grant the Debenture Holders funds through
their informal committee to defend the alleged lien, based on
the theory that the lien is valid," Mr. Manning says.
Mr. Manning reports that since the investigation began, the
Committee has reached its $125,000 cap. Accordingly, to
complete the investigation, the Committee asks Judge Blackshear
to increase the expense cap to $250,000. Mr. Manning asserts
that this is a reasonable estimate of the fees that the
Committee would incur to investigate the validity of the liens
of the bank lending group as well as the Debenture Holders.
Debtors Respond
The Debtors do not object to the motion to the extent that it
will not prejudice the other parties-in-interest. Thus, the
Debtors ask the Court:
(a) that any order in relation to the Motion should make it
clear that the relief granted does not result in a
default under the DIP Agreement;
(b) to impose, without further Court order, a limit on the
professional fees and expenses each of the Committee and
the Debenture Holders may incur in connection with the
Adversary Proceeding. In particular, the Debtors request
that each of the parties be limited to a total of
$250,000 in professional fees and expenses from Petition
Date in respect to pursuing the Adversary Proceeding. To
the extent that the parties believe further funds are
necessary to pursue the Adversary Proceeding, the Debtors
ask the Court to require all parties to appear again
before the Court to discuss the status of the matter, to
explain the need for further funding, and to provide an
estimate of the duration of the Adversary Proceeding;
(c) that there be frequent and substantive conference in the
Adversary Proceeding, so that the Court is able to
monitor the progress of the Adversary Proceeding and can
determine whether the ongoing expenditure of professional
fees and expenses is justified;
(d) to require the parties to the Adversary Proceeding to
dispense with any issue or group of issues that can be
easily resolved by means of one or more dispositive
motions as early as possible in the process, so that the
Adversary Proceeding can be streamlined and costs
reduced; and
(e) to make it clear in any order granting relief sought in
the Motion that, to the extent the Committee is
successful in the Adversary Proceeding, there will be a
mechanism for the repayment of the professional fees of
the informal committee and the indenture trustee.
Indenture Trustee Objects
On the other hand, Wells Fargo Bank Minnesota, National
Association, as Successor Indenture Trustee, asks the Court to
deny the Committee's motion in its entirety.
Chris Lenhart, Esq., at Dorsey & Whitney LLP, in New York,
argues that that the motion is a collateral attack on the Cash
Collateral Order, which is a final order. "The Committee is not
free to seek a modification of the Cash Collateral Order to
better suit its goals," Mr. Lenhart says. Moreover, Rule 60 of
the Federal Rules of Civil Procedures provides that a party may
only be relieved from a final judgment, order or proceeding
under special circumstances, including:
(1) mistake, inadvertence, surprise or excusable neglect;
(2) newly discovered evidence which by due diligence could
not have been discovered in the time to remove for a new
trial;
(3) fraud, misrepresentation, or other misconduct of an
adverse party;
(4) the judgment is void;
(5) the judgment has been satisfied, released or discharged,
or a prior judgment upon which it is based has been
reversed or otherwise vacated, or it is no longer
equitable that the judgment should have a prospective
application; or
(6) any other reason justifying relief from the operation of
the judgment.
However, Mr. Lenhart contends, the Committee has not
demonstrated that it has met any of the criteria established in
Rule 60 to justify the modification of the Cash Collateral
Order.
In addition, Mr. Lenhart asserts that the Committee lacks
standing to request use of the Cash Collateral prospectively.
Nothing in Section 363 of the Bankruptcy Code purports to give
the Committee the right to prospectively request the use of cash
collateral. Mr. Lenhart adds that although an attack on the
Trustee's and the Debenture Holders' position may have been
possible under Section 363(o) of the Bankruptcy Code, there is
no legal basis for the Committee to request payment from the
Debtors or the cash collateral of the Trustee to prospectively
fund an objection to the Trustee Liens.
Mr. Lenhart suggests that the Committee should request the
payment of its litigation costs under Section 503(b)(3). To the
extent that the Committee believes it has a meritorious claim
that will bring substantial value to the estate, it may seek
reimbursement and expenses of its action under this section.
(Covanta Bankruptcy News, Issue No. 14; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DELTA AIR LINES: Foresees September Quarter Net Loss of $350MM
--------------------------------------------------------------
Delta Air Lines (NYSE: DAL) has filed a Form 8-K with the United
States Securities and Exchange Commission.
The Form 8-K includes a letter to certain analysts and investors
which briefly discusses Delta's expected financial performance
for the September 2002 quarter. A copy of the letter is
provided below. For a complete copy of the 8-K filing, see:
http://www.delta.com/inside/investors/index.jsp
September 27, 2002
Dear Investors and Analysts,
Over the past several weeks, there has been continued media
focus regarding the challenges facing the airline industry.
Clearly, the industry is experiencing an unprecedented
financial crisis. The current First Call consensus estimate for
total U.S. airline losses in 2002 is approaching $7.0 billion.
As you know, Delta is facing the same challenges as the rest
of the industry. While we have made significant cost reductions
and we remain committed to aggressive cost control and liquidity
management, the revenue and demand environment remains weak. We
currently do not anticipate any near-term improvements in
revenue.
In our June quarter 2002 Form 10-Q, we stated that Delta did
not expect the financial results of the third quarter 2002 to be
substantially different from that of the second quarter.
However, we now believe that our performance for the September
2002 quarter will be weaker than we had anticipated, driven
primarily by the month of September. As a result, we believe
that total revenues for the September 2002 quarter will be
approximately flat versus the September 2001 quarter.
We continue to work hard to manage through these times in a
responsible manner. For both the September and December 2002
quarters, we have hedged 50% of our anticipated aircraft fuel
requirements at 66 cents per gallon. We estimate our all-in
fuel price for the September 2002 quarter to be 71 cents
per gallon. Furthermore, our capacity for both the September
and the December 2002 quarters remains disciplined. September
quarter capacity will be down year-over-year between 2.5-3.0%.
We expect December quarter capacity to be up 2.0-2.5% from the
previous year.
We continue to strategically evaluate all items that will
contribute to Delta's ability to recover. Maintaining our
flexibility remains key. We expect to record unusual pretax
charges totaling approximately $200 million during the September
2002 quarter. Our unusual items will include a charge for the
further write-down of certain aircraft, a charge related to the
temporary carrying costs of grounded aircraft and surplus pilots
and a gain related to compensation from the Air Transportation
Safety and System Stabilization Act.
Based on the above information, we expect our net loss for
the September 2002 quarter to be in the range of $350 million,
including unusual items. Excluding unusual items, we expect our
net loss to be in the range of $225 million.
During our earnings call on October 15th, we will continue
to discuss the initiatives we are undertaking to move forward
during these difficult times. Should you have any questions in
the meantime, please do not hesitate to contact us.
Regards,
Gail Grimmett
Managing Director - Investor Relations
Delta Air Lines
DIGEX INC: Nasdaq Approves Listing Transfer to SmallCap Market
--------------------------------------------------------------
Digex, Incorporated (Nasdaq: DIGX), announced that its request
to transfer from The Nasdaq National Market to The Nasdaq
SmallCap Market had been approved and took effect Monday
September 30, 2002. Digex's common stock will continue trading
under its current symbol: DIGX.
The transfer to the Nasdaq SmallCap Market extends the grace
period to achieve the minimum USD$1.00 bid price requirement to
December 4, 2002. The company may also be eligible for an
additional 180 calendar day grace period provided that it meets
the initial listing criteria, other than the minimum US$1.00 bid
price, as of December 4, 2002 for the SmallCap Market under
MarketPlace Rule 4310(c)(2)(A). Frequently asked questions and
answers about listing with Nasdaq are available on Nasdaq's Web
site: http://www.nasdaq.com/about/LegalComplianceFAQs.stm
Digex is a leading provider of managed Web and application
hosting services. Digex customers, from mainstream enterprise
corporations to Internet-based businesses, leverage Digex's
services to deploy secure, scaleable, high performance e-
Enablement, Commerce and Enterprise IT business solutions.
Additional information on Digex is available at
http://www.digex.com
ECLIPSE ENTERTAINMENT: Auditors Issue Going Concern Opinion
-----------------------------------------------------------
Eclipse Entertainment Group incurred a net loss of approximately
$481,000 for the six months ended June 30, 2002. The Company's
current liabilities exceed its current assets by approximately
$3,566,000 as of June 30, 2002. These factors create
substantial doubt about the Company's ability to continue as a
going concern. The Company's management has developed a plan of
marketing and selling its films to generate future revenues.
The Company will also seek additional sources of capital through
the issuance of debt and equity financing, but there can be no
assurance that the Company will be successful in accomplishing
its objectives.
The overall strategic plan for Eclipse is to generate sufficient
profits from the distribution of medium budget feature films to
finance future films, to develop its domestic video label,
record label and motion picture studio. These films will be
produced and/or acquired by Eclipse for worldwide distribution.
Simultaneous with the operation of these facilities Eclipse will
expand its Eclipse distribution arm to penetrate the entire
entertainment industry. Eclipse plans to create its own sales
and marketing department in 2002, which will lessen and
eventually eliminate the reliance upon Westar. Eclipse intends
to aggressively pursue strategic partnerships or output deals
with one or more of the US Studios and to begin discussions with
a major German film fund to secure funding for future film
projects. It is the intention of management to expand
operations with the present staff until such time when
sufficient cash flow allows for the addition of quality
entertainment industry personnel.
For the period from the Company's inception through the period
of its most recent financial statements reported to the SEC,
there have been no revenues. Operating activities have been
related primarily to establishing the management and operating
infrastructure, as well as the production of the movie, Ancient
Warriors. The Company created the ability to acquire and license
worldwide or sell distribution rights to independently produced
feature films. The Company can obtain rights to motion pictures
at various stages of completion (either completed, in production
or in development) and licenses distribution rights (including
video, pay television, free television, satellite and other
ancillary rights) of motion pictures to various sub-distributors
in the United States and in foreign markets.
Eclipse has a limited operating history. It must establish and
maintain distribution on current rights to motion pictures,
implement and successfully execute its business and marketing
strategy, provide superior distribution of motion pictures,
anticipate and respond to competitive developments, and attract
and retain qualified personnel. There is no assurance that the
Company will be successful in addressing these needs.
The Company's current assets exceed its current liabilities by a
total of $3,566,000 as of June 30th, 2002. As of June 30th,
2002 the Company had an accumulated deficit of $2,293,000. This
raises substantial doubt about the Company's ability to continue
as a going concern.
ENRON CORP: Manatt Wants to Represent Elizabeth Saeger, et al
-------------------------------------------------------------
The law firm of Manatt, Phelps & Phillips LLP was previously
retained -- at Enron Corporation's expense -- to represent Rex
Rogers. Four other Enron employees:
-- Elizabeth Saeger,
-- John Lavorato,
-- Jeffrey Hodge, and
-- Mark Taylor.
are being asked by the government agencies to give testimony or
information as witnesses about the Debtors.
By this Application, Michael Rauh, Esq., at Manatt, Phelps &
Phillips, in Washington, D.C., asks Judge Gonzalez for
permission, at the Debtors' expense, to serve as counsel to the
four employees, nunc pro tunc to March 29, 2002.
In preparation of their testimony, the employees may seek the
legal representation of Swidler Berlin Shereff Friedman -- the
Debtors' Special Employees Counsel. However, Swidler
recommended that the four employees retain another counsel due
to potential or actual conflict of interest.
As the four employees' representative, Manatt and its clients
will enter into retainer agreements as required by the District
of Columbia Court of Appeals' rules of ethics. Either party
have the right to terminate the relationship in accordance to
the terms of the agreements.
Mr. Rauh informs the Court that Manatt will seek payment from
the Debtors of legal fees and disbursement of reasonable out-of-
pocket expenses in its representation of the employees with
respect tot the investigation, consistent with the Fee Orders.
Manatt's current regular hourly rates for its professionals who
will handle the case are:
Michael Rauh $475
Lindsey W. Cooper, Jr. 230
In the Swidler Retention Order, Mr. Rauh notes, Manatt must file
a separate application to the Court for each client it will
represent. For efficiency purposes, Manatt asks the Court that
it be allowed to file a "Notice of Representation" with an
attached affidavit of the Employee attesting to facts that
satisfy the requirements of the Swidler Order. Upon filing of
the Notice and supporting affidavit, Manatt's representation
will be deemed Court-approved as long as it is consistent with
the terms and grounds for relief set in Roger's Application.
Mr. Rauh asserts that this proposed procedure will not affect
any Party's rights to object to Manatt's retention under the
Swidler Order. (Enron Bankruptcy News, Issue No. 43; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
EXIDE TECHNOLOGIES: Move to Appoint Equity Committee Draws Fire
---------------------------------------------------------------
David B. Stratton, Esq., at Pepper Hamilton LLP, in Wilmington,
Delaware, representing Official Committee of Unsecured Creditors
of Exide Technologies and its debtor-affiliates, points out that
the State of Wisconsin Investment Board is a huge public
investment fund with tens of billions of dollars in assets under
management and owns almost a fifth of the total common stock in
this case. It cannot credibly be suggested that Wisconsin
Investment Board is incapable of protecting its own interests as
a shareholder without the intervention of an official committee.
Moreover, given its formidable financial resources and its huge
equity stake in the Debtors, Wisconsin Investment Board has an
economic incentive to protect its equity interest if it truly
believes that there is value to protect. In the unlikely event
that Wisconsin Investment Board is correct and the actions of
its professionals ultimately benefit the estate, it can assert a
substantial contribution claim to recover its professional fees.
If it is not correct, Wisconsin Investment Board, and not the
Debtors' unsecured creditors, will have gambled on those
expenditures. In the meantime, Mr. Stratton explains, it in the
interests of the Creditor's Committee to ensure that the value
of these estates is maximized. The Committee's activities
toward that end will protect, for distribution in accordance
with the priorities of the Bankruptcy Code, whatever value that
equity holders believe may exist without the need for these
estates to incur additional administrative expenses. The
request for a separate, special interest equity committee should
therefore be denied.
According to Mr. Stratton, it is inevitable in a reorganization
case of this size and complexity that the costs of
administration will be substantial even without the appointment
of an equity committee. Mr. Stratton insists that the
appointment of a second official committee would result in
unnecessary administrative expenses in a case that by necessity
already has substantial legitimate expenses. These costs are a
luxury that the creditors of these estates can ill afford. This
factor therefore weighs decidedly against the appointment of an
equity committee.
Once approved, Mr. Stratton believes that a second committee
undoubtedly will devote substantial time gathering from the
Debtors information to enable that committee to formulate
positions in the case, duplicating efforts already made to bring
the Committee up to speed, to keep the Committee informed, and
to vet creditor concerns. However, unlike the Committee, which
represents a constituency with a significant economic interest,
an equity committee would be duplicating the Committee's efforts
on behalf of an out-of-the-money constituency. This duplication
can only serve to hinder and delay the Debtors' reorganization
efforts. When the Debtors' operational restructuring has
proceeded to the point that plan negotiations can reasonably be
expected to proceed, the need to negotiate with a court-
sanctioned official equity committee, representing an out-of-
the-money constituency, can only serve to add unnecessary
burden, expense and complication.
In these cases, various factors indicate that the Debtors are
hopelessly insolvent. Mr. Stratton notes that the Debtors'
Chapter 11 petitions list the net-book value of assets at
$2,100,000,000 and the net-book liabilities at $2,500,000,000.
Furthermore, the Debtors' annual 10-K, which was filed with the
Securities and Exchange Commission on August 19, 2002, shows
that the Debtors have a negative net worth of $555,742,000 and
sustained income losses of $303,586,000 for the fiscal year
ending March 31, 2002. Finally, while not determinative of the
valuation of the Debtors' assets and operations, the Debtors'
unsecured 10% Senior Notes are currently trading at only 15% of
their face value. The Debtors' apparent hopeless insolvency
weighs strongly against the appointment of an equity committee.
Mr. Stratton contends that virtually all of the functions that
an equity committee might otherwise perform in this case have
already been undertaken by the Committee who, at this time, is
in a better position to fulfill the statutory duties set forth
in Section 1103(c) of the Bankruptcy Code without burdening the
estate with substantial additional administrative costs. The
Committee serves as an appropriate and adequate overseer of the
Debtors' activities to ensure that the value of the Debtors'
assets and operations are maximized. While the Committee does
not and will not serve the function of negotiating plan
treatment for out-of-the-money equity holders, that function
would in any event be inconsistent with the absolute priorities
of the Bankruptcy Code in these cases, where the Debtors appear
to be hopelessly insolvent.
(2) Debtors
Christopher J. Lhulier, Esq., at Pachulski Stang Ziehl Young &
Jones P.C., in Wilmington, Delaware, reports that under the
facts of these Chapter 11 Cases, it is incontrovertible that the
Debtors appear to be insolvent because:
-- According to book value, as of the Petition Date, the
Debtors' had a negative equity of more than $450,000,000.
Equity has only moved further and further out of the money,
on a book value basis, as these Chapter 11 Cases have
proceeded. Shareholders equity had a value of negative
$555,742,000 as of March 31, 2002, and negative $604,282,000
as of June 30, 2002. In clear contrast to Wisconsin
Investment Board's unsubstantiated claims of hidden value,
the Debtors' publicly filed financial statements indicate
that equity was significantly out of the money as of the
Petition Date, and is even further out of the money today;
and
-- The market valuation of the Debtors' public debt clearly
reflects the market's opinion that the Debtors are insolvent.
The Debtors' public debt is currently selling at a very steep
discount, meaning that, in keeping with the absolute priority
rule, the market strongly believes that there will be no
recovery for equity. As of September 9, 2002, the Debtors'
10% senior notes, due 2005, were trading at 13.75 cents on
the dollar, and Exide Technologies' 2.9% senior subordinated
convertible notes, due 2005, were trading at less than one
cent on the dollar. Given the fact that the Debtors and the
market fully expect that unsecured creditors will not collect
in full, there is no escaping the conclusion that, in keeping
with the absolute priority rule, the Debtors appear to be
insolvent.
Mr. Lhulier tells the Court that Wisconsin Investment Board has
failed to present any evidence to contradict the conclusion that
the Debtors are insolvent. In its Motion, Wisconsin Investment
Board relies on nothing more than speculation and conjecture,
baldly claiming that the Debtors' assets are worth
"substantially more than book value." Wisconsin Investment
Board fails, however, to substantiate its claim with any
evidence as to valuation. The Debtors, on the other hand, are
on the record having valued their debts at more than
$600,000,000 greater than the total value of their assets.
Wholly independent of the Debtors' judgment, Mr. Lhulier points
out that the market has indicated its strong belief that debt
holders will not see a full recovery. By merely arguing the
possibility that the Debtors are solvent, Wisconsin Investment
Board has not met its evidentiary burden. Instead, the
Wisconsin Investment Board must show the substantial likelihood
of a meaningful recovery, and must further demonstrate why they
are unable to represent their interests in the bankruptcy case
without an official committee.
According to Mr. Lhulier, there is no basis to conclude that
equity holders are unable to represent their interests without
an official committee. These factors compel this conclusion:
-- The Debtors' current officers and directors collectively hold
a significant equity stake in the Debtors, aggregating almost
10% of the outstanding shares on a fully-exercised basis. In
this regard, the interests of the Board of Directors and
senior management are undeniably aligned with non-insider
shareholders, and are just as interested in maintaining value
as would be any other public investor. The fact that the
Debtors' officers and directors owe fiduciary duties to
creditors as well as equity holders does not change this
analysis. Wisconsin Investment Board fails to provide any
reason as to why the Debtors' current officers and directors
are not fully capable of representing the interests of their
fellow equity holders; and
-- Wisconsin Investment Board has not demonstrated that it needs
an equity committee in order to be adequately represented.
Wisconsin Investment Board, holding, by their estimation,
almost 20% of the common stock of the Debtors, is fully
capable of being a meaningful participant in these Chapter 11
Cases without the creation of an official equity committee.
Other equity holders have the exact same rights and
opportunities. Given Wisconsin Investment Board 's ability
to adequately represent itself, it is impossible to argue
that an official committee is necessary to insure adequate
representation.
While the Debtors recognize and appreciate the right of
Wisconsin Investment Board and other equity holders to
participate in these Chapter 11 Cases, the Debtors believe that
the appointment of an official equity committee is not warranted
on the facts of this case.
(3) Credit Suisse First Boston
According to Mark D. Collins, Esq., at Richards Layton & Finger
P.A., in Wilmington, Delaware, Wisconsin Investment Board is
attempting to have its battles funded by these hopelessly
insolvent estates. Granting the Motion would effectively
require all creditors who are in the money to pay equity's costs
of litigation thereby resulting in a commensurate reduction in
creditors' recoveries. Imposing these litigation costs on
creditors will only embolden equity holders to take extreme
litigation positions in an effort to increase whatever nuisance
value they can assert. "It is grossly unfair to creditors, who
will suffer substantial losses in any event, to bear these
additional and unnecessary burdens," Mr. Collins says. (Exide
Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
Exide Technologies' 10% bonds due 2005 (EXDT05FRR1), DebtTraders
reports, are trading at 15 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=EXDT05FRR1
for real-time bond pricing.
FLAG TELECOM: Receives Green-Light to Hire Deloitte as Auditors
---------------------------------------------------------------
FLAG Telecom Holdings Limited and its debtor-affiliates obtained
authority from the Court to employ Deloitte & Touche UK as
internal auditor in connection with the confirmation of their
Chapter 11 Plan of Reorganization.
The Debtors expect Deloitte to:
a. Report on the application of certain accounting principles
and practices in connection with confirmation of the
Debtors' chapter 11 plan of reorganization;
b. Assist Debtors' legal counsel, to the extent necessary,
with the analysis and revision of the Debtors' plan of
reorganization;
c. Attend meetings and assist in discussions related to the
Debtors' plan of reorganization with the creditors'
committee, the U.S. Trustee, and other interested parties,
to the extent requested by the Debtors;
d. Consult with the Debtors' management on other business
matters relating to its chapter 11 reorganization efforts;
and
e. Assist with such other matters as the Debtors' management
or legal counsel and D&T UK may agree from time-to-time.
The customary hourly rates charged by Deloitte are:
Actual Illustrative
Rates US $ Equivalent
------ ---------------
Partners/Principals GBP 435 - 605 $679 - 944
Managers/Directors GBP 195 - 500 $304 - 780
Assistant Managers/
Senior Associates/
Associates GBP 85 - 280 $133 - 437
(Flag Telecom Bankruptcy News, Issue No. 16; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
FLOWSERVE CORP: Plans to Repay Up to $90M of Debt in 3rd Quarter
----------------------------------------------------------------
Citing market-related factors, Flowserve Corp., (NYSE:FLS)
lowered its 2002 earnings estimates to 30 to 32 cents for the
third quarter and $1.45 to $1.55 for the full year, excluding
special items, which relate to the May 2002 acquisition of the
Invensys Flow Control Division. The company's previous guidance
had been 38 to 43 cents for the third quarter and $1.70 to $1.90
for the full year, on the same basis.
These market-related factors include unanticipated further
deterioration of typically higher margin book-and-ship, or quick
turnaround, business, particularly in the chemical, power, and
general industrial sectors, and an unfavorable mix of lower
margin project business.
"While I am disappointed to reduce our earnings estimates, I am
pleased to report that we plan to repay about $85 to 90 million
of debt, which includes an optional repayment of about $70
million, at the end of the third quarter," said Flowserve
Chairman, President and Chief Executive Officer C. Scott Greer.
"Our debt paydown projections continue to look very good for
future periods. Our current focus is squarely on cash flow and
debt reduction. We are working on improving our working capital
efficiency and controlling capital expenditures, in order to
increase cash flow and improve our financial leverage.
"In some of our end-markets, particularly upstream petroleum and
water, bookings have held up," Greer added. "Additionally, I
remain optimistic about the company's prospects for 2003 and
beyond. We are continuing to make important progress in
strengthening the company's balance sheet and operational
processes. That said, we are not comfortable at this point
projecting more than marginal earnings improvement in 2003,
unless markets start to improve. And, we believe they will."
The company plans to release its third quarter 2002 financial
results on Oct. 22, 2002.
Separately, the company upped its annual synergy savings
estimates from the IFC acquisition to $15 to 20 million, from
$10 to 15 million, as the integration continues to progress
smoothly and additional synergy savings opportunities are being
identified. Total IFC restructuring costs and related
integration expenses are expected to be about three-times the
estimated annual savings.
Flowserve Corp., is one of the world's leading providers of
industrial flow management services. Operating in 34 countries,
the company produces engineered and industrial pumps for the
process industries, precision mechanical seals, automated and
manual quarter-turn valves, control valves and valve actuators,
and provides a range of related flow management services.
* * *
As reported in the March 28, 2002 edition of Troubled Company
Reporter, Standard & Poor's affirmed Flowserve's BB- rating due
to the company's higher financial risks.
FLOWSERVE CORP: Explains Compliance Status Under Loan Covenants
---------------------------------------------------------------
During a conference call discussing its news release issued
Friday, the company furnished additional explanatory information
concerning its compliance with its bank loan covenants and is
filing a Form 8-K with the SEC confirming this information.
While key elements of this information were already in the
public domain, the company is filing the attached financial
details to enable investors to better understand the company's
compliance status under the bank covenants.
The company also reiterated it is in compliance with all of its
bank covenants.
In addition, the company further clarified that its optional
debt prepayment of $70 million that was discussed in an earlier
announcement will be applied in chronological order to
installments of principal scheduled to be paid in the next 12
months and then pro rata against the remaining scheduled
installments of principal payments. In effect, the company will
have no mandatory principal payment due in the fourth quarter of
2002 nor in the first half of 2003. The company said, however,
that it expects to make additional optional prepayments in 2003
over and above what is required.
Flowserve Corp., is one of the world's leading providers of
industrial flow management services. Operating in 34 countries,
the company produces engineered and industrial pumps for the
process industries, precision mechanical seals, automated and
manual quarter-turn valves, control valves and valve actuators,
and provides a range of related flow management services.
* * *
As reported in the March 28, 2002 edition of Troubled Company
Reporter, Standard & Poor's affirmed Flowserve's BB- rating due
to the company's higher financial risks.
GENCORP INC: Names William Hvidsten Environmental Legal Counsel
---------------------------------------------------------------
GenCorp Inc., (NYSE: GY) announced that William E. Hvidsten has
assumed the position of senior counsel, Environmental for the
Company. Mr. Hvidsten is responsible for counsel related to
environmental litigation, remediation, regulatory compliance,
and real estate transactions. He will report to Gregory Kellam
Scott, the Company's senior vice president and general counsel.
"Bill is a highly respected attorney who brings recognized
expertise in the areas of environmental litigation, water and
air quality compliance, and significant business real estate
transactions," said Mr. Scott. "He will provide essential
expertise related to federal and California law in these areas,
as well as assisting the Company with its environmental
remediation activities."
For the past 10 years, Mr. Hvidsten was a shareholder with the
firm Somach, Simmons & Dunn. He has held numerous positions on
the Executive Committee of the Sacramento County Bar Association
Environmental Section, including chairman, and served on the
Sacramento Environmental Commission and the Board of Editors of
the California Environmental Law & Regulation Reporter. Mr.
Hvidsten received his Juris Doctorate from the George Washington
University in 1984 and is a member of the State Bar of
California.
GenCorp is a global, technology-based manufacturer with leading
positions in automotive, aerospace, defense, and pharmaceutical
fine chemicals industries. For more information, visit the
Company's Web site at http://www.gencorp.com
* * *
As reported in Troubled Company Reporter's July 11, 2002
edition, Standard & Poor's assigned its preliminary double-'B'
and single-'B'-plus ratings to senior unsecured and subordinated
debt securities, respectively, filed under GenCorp Inc.'s $300
million SEC Rule 415 shelf registration.
At the same time, Standard & Poor's affirmed its existing
ratings on GenCorp, including the double-'B' corporate credit
rating. The outlook is stable.
GEORGIA-PACIFIC: S&P Ratchets Credit Rating Down a Notch to BB+
---------------------------------------------------------------
Standard & Poor's Rating Services lowered all of its ratings on
Georgia-Pacific Corp., by one notch to speculative grade as the
forest products giant continues to struggle to meet debt
reduction targets.
Standard & Poor's said that it lowered its long-term corporate
credit rating on the company to double-'B'-plus from triple-'B'-
minus and lowered its short-term corporate credit rating to 'B'
from 'A-3'. All ratings were removed from CreditWatch where they
were placed with negative implications on September 12, 2002.
The current outlook is negative.
"The ratings were lowered because Georgia-Pacific is unlikely to
be able to meet the debt reduction targets on the timetable it
established when it acquired tissue maker Fort James Corp. two
years ago", said Standard & Poor's credit analyst Cynthia
Werneth. "The company has reduced debt by nearly $4 billion, but
further significant near-term debt reduction will be difficult
because of continued weak market conditions for some of Georgia-
Pacific's products and the delay the company is experiencing in
raising equity in connection its planned separation into two
public companies".
Atlanta, Georgia-based Georgia-Pacific is a major diversified
forest products company with about $12 billion in debt. Standard
& Poor's said that its ratings reflect the company's leading
market shares, competitive cost position, and good cash flow
generating ability, offset by vulnerability to industry cycles
and credit measures that are weak even for the lowered ratings.
The double-'B'-plus rating incorporates Standard & Poor's
expectations that Georgia-Pacific will complete the planned $850
million sale of its Unisource paper distribution subsidiary and
use proceeds to reduce debt. The company is also expected to
maintain adequate liquidity and repay or refinance its
significant near-term debt maturities.
GEORGIA-PACIFIC CORP: Board Appoints Lee M. Thomas as President
---------------------------------------------------------------
Georgia-Pacific Corp.'s (NYSE: GP) board of directors named Lee
M. Thomas the company's president, effective immediately.
In this role, Thomas will report to A.D. "Pete" Correll,
chairman and chief executive officer, and will add
responsibility for several key support staff groups in addition
to his role as head of the company's building products
manufacturing and distribution business.
"The appointment of Lee Thomas to this position recognizes his
extraordinary contributions to this company over the years,"
Correll said. "In this role, Lee will have expanded
responsibilities for continuing the momentum achieved by our
building products business and staff functions in preparing for
the separation of Georgia-Pacific. Time and again, Lee has
excelled at establishing clear strategic direction for the
groups under his responsibility and effectively achieving
results."
Thomas, 58, in March was named president -- building products
with executive management responsibility for Georgia-Pacific's
building products manufacturing and distribution business and
its Unisource paper distribution business.
In his new role, Thomas' responsibilities also will include the
staff functions of human resources, information technology,
environmental affairs, government affairs and other corporate
services. Reporting to Thomas will be Patricia A. Barnard,
executive vice president -- human resources; James E. Bostic,
Jr., executive vice president -- environmental, government
affairs and communications; Charles F. Williams, vice president
-- information resources and chief information officer; Thomas
E. Single, vice president -- strategic sourcing and procurement;
and Sheila Weidman, vice president -- corporate communications
and marketing. In addition, James E. Moylan Jr., executive
vice president and chief financial officer -- building products
and distribution; Ronald L. Paul, executive vice president --
wood products and distribution; John F. Rasor, executive vice
president -- wood procurement, gypsum and industrial wood
products; Charles C. Tufano, president -- Unisource; and Mario
Concha, president -- chemical, will continue reporting to
Thomas.
The management team for Georgia-Pacific's consumer products and
packaging business group, including Michael C. Burandt,
president -- North American consumer products; John F. Lundgren,
president -- European consumer products; David J. Paterson,
executive vice president -- pulp and paperboard; and George W.
Wurtz, president -- paper and bleached board, will continue
reporting to Correll, as will Danny W. Huff, executive vice
president -- finance and chief financial officer, and James F.
Kelley, executive vice president and general counsel.
Prior to assuming the leadership role for the company's building
products business, Thomas served as executive vice president --
consumer products, concurrent with Georgia-Pacific's acquisition
of Fort James Corp. At that time, he assumed responsibility for
preparing and executing plans for integrating Fort James into
Georgia-Pacific and achieving the operating synergies expected
from the combination.
Thomas joined Georgia-Pacific in 1993 as senior vice president
-- environmental and government affairs. He became senior vice
president -- paper in 1995, and was later promoted to executive
vice president -- paper and chemicals in 1997, with
responsibility for the company's tissue, communication papers
and chemicals businesses and, subsequently, the Unisource
business. Prior to joining Georgia-Pacific, Thomas was chairman
and chief executive officer of the Law Companies Environmental
Group Inc.
Headquartered at Atlanta, Georgia-Pacific is one of the world's
leading manufacturers and distributors of tissue, packaging,
paper, building products, pulp and related chemicals. With
annual sales of more than $25 billion, the company employs
approximately 71,000 people at 600 locations in North America
and Europe. Its familiar consumer tissue brands include Quilted
Northern(R), Angel Soft(R), Brawny(R), Sparkle(R), Soft 'n
Gentle(R), Mardi Gras(R), So-Dri(R), Green Forest(R) and Vanity
Fair(R), as well as the Dixie(R) brand of disposable cups,
plates and cutlery. Georgia-Pacific's building products
distribution segment has long been among the nation's leading
wholesale suppliers of building products to lumber and building
materials dealers and large do-it-yourself warehouse retailers.
In addition, Georgia-Pacific's Unisource Worldwide subsidiary is
one of the largest distributors of packaging systems, printing
and imaging papers and maintenance supplies in North America.
For more information, visit http://www.gp.com
* * *
As reported in Troubled Company Reporter's Sept. 18, 2002
edition, Fitch lowered the senior unsecured long-term debt
ratings of Georgia-Pacific to 'BB+' from 'BBB-', the company's
unsecured short-term ratings to B from 'F3', and assigned the
ratings a Negative Rating Outlook.
The Negative Rating Outlook reflects concern regarding the
refinancing of near-term obligations which were to have been
repaid in the course of the separation.
DebtTraders reports that Georgia-Pacific's 8.25% bonds due 2023
(GP23USR1) are trading at 86.959 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GP23USR1for
real-time bond pricing.
GLENOIT CORP: Successfully Emerges from Chapter 11 Bankruptcy
-------------------------------------------------------------
Glenoit Corp., a New York-based home furnishings manufacturer,
Friday emerged from Chapter 11 bankruptcy, ending a two-year
saga that originally saw Glenoit file for a prepackaged
bankruptcy plan in 2000.
Since that time, under guidance from its financial advisor, Carl
Marks Consulting Group LLC, the Company sold two of its
divisions and has reorganized around its remaining divisions,
Ex-Cell and Consumer Products.
Woolard Harris and Mark Claster, partners of New York-based Carl
Marks, led the effort to sell the divisions and reorganize the
Company. Carl Marks had been hired in accordance with the
company's debtor-in-possession financing agreement in early
2001.
"Glenoit was a case of a rollup that never rolled up. We helped
eliminate the multiple 'back offices' that were prohibiting the
company from operating as a unified, profitable business," said
Harris. "In turn, that kept Glenoit from using its DIP loan,
which certainly made the lenders happier."
Under the Chapter 11 reorganization, the secured lenders will
receive approximately 87 cents on the dollar. Going forward,
Glenoit will be run by new CEO Barry Leonard, who was recruited
by Carl Marks during the reorganization.
Carl Marks Consulting Group is a full-service advisory firm,
dedicated to helping businesses effectively manage change and
strengthen their organizations for long-term success. It is
consistently ranked among the "Outstanding Turnaround Firms" by
Turnarounds & Workouts magazine. The firm is an affiliate of
Carl Marks & Co., a leading merchant bank founded in 1925 in New
York as a foreign exchange dealer. Since 1960, Carl Marks & Co.
has held equity positions in more than 300 companies and
currently has more than $1 billion of assets under management.
For more information, please visit the company's Web site at
http://www.carlmarks.com
GLOBAL CROSSING: Asks Court to Okay Energy Settlement Agreement
---------------------------------------------------------------
Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York,
recounts that in 1998 and 1999, Worldport Communications entered
into various agreements with certain Global Crossing entities to
purchase cable capacity on the Debtors' Network. On January 14,
2000, Energis NV entered into a certain novation agreement with
Worldport and the Debtors, whereby Energis assumed Worldport's
capacity purchase obligations under the Contracts. Upon
executing the Novation, Energis is liable under the Contracts to
the Debtors for $3,500,000 for capacity purchased, and has
committed to spend $36,000,000 on future capacity purchases.
Energis asserts that the Future Purchases provisions of the
Contracts are not enforceable because there is no consideration
underlying the obligations for Future Purchases. The Debtors
deny these assertions and maintains that the Future Purchases
provisions are enforceable.
Irrespective of the enforceability of the Future Purchases
provisions of the Contracts, Mr. Basta informs the Court that
Energis is a company in dire financial straits that is incapable
of performing its payment obligations with respect to the Future
Purchases. Energis is a wholly owned subsidiary of Energis plc,
an international telecommunications company organized under the
laws of the United Kingdom. On July 16, 2002, trading of
Energis plc shares on the London Stock Exchange was suspended
and Joint Administrators were appointed for Energis plc.
The Debtors and Energis have agreed to a settlement of matters
related to the Contracts. The salient terms of their August 15,
2002 Settlement Agreement are:
-- Energis will pay $1,500,000 to Atlantic Crossing Ltd., on
behalf of itself and each of the Debtors;
-- Energis will make 3 payments to Atlantic Crossing, on behalf
itself and each of the GX Entities, of $333,333.33 on or
before each of these dates:
a. December 31, 2002;
b. March 31, 2003; and
c. May 30, 2003.
-- On the Effective Date, the Debtors will discharge and cancel
the $3,555,632 of accounts receivable currently outstanding
from Energis. All other obligations relating to the
purchase, operation, administration or maintenance of any
cable or fiber will be discharged and cancelled.
-- On the Effective Date, the Debtors will release and discharge
Energis and its subsidiaries from any and all liability under
any correspondence or course of dealing in connection with
the Contracts, including any remaining purchase commitments.
-- On the Effective Date, all rights of Energis under the
Contracts to Circuits will be of no further force or effect
and all right to title and any other interest in the Circuits
will vest with and be the exclusive property of the Debtors.
-- On the Effective Date, Energis and the Debtors will terminate
and settle, release, remise and forever discharge each other,
their successors, affiliates, agents and assigns, all former,
present and future directors, officers incorporators,
stockholders, subsidiaries and partners and all other
persons, firms or corporations liable or who might be claimed
to be liable from any and all costs, liabilities,
obligations, claims, demands, damages, actions, etc., whether
present or contingent, known or unknown, now existing or
which may in the future exist, based upon the Contracts.
In connection with its reorganization, Energis plc has
identified a potential purchaser, Management Company Het
Berghuis BV. The sale of Energis is conditioned upon Court
approval of the Settlement Agreement. In addition, the parties
entered into a loan facility whereby Management Company agreed
to lend Energis $1,000,000. Under the Facility, Management
Company is fully secured by all of Energis' assets.
Mr. Basta contends that non-approval of the Settlement Agreement
is an event of default under the Facility requiring all funds
owing under the Facility to be immediately payable. If the
Settlement Agreement is not approved, the sale of Energis will
not occur and the Facility will be terminated, leading to the
insolvency and liquidation of Energis. In that event, the
Debtors will be left with a claim against Energis, the value of
which, while uncertain, will likely be less than the payments to
the Debtors under the Settlement Agreement.
Thus, the Debtors ask the Court to approve the Settlement
Agreement and authorize the rejection of the Contracts.
Mr. Basta insists that the Settlement Agreement is fair and
equitable, falls well within the range of reasonableness,
enables the parties to avoid the costs of litigation and avoids
difficulties associated with collection. Absent authorization
to enter into the Settlement Agreement, the Debtors and Energis
would require judicial intervention to resolve their dispute
regarding whether the Debtors are entitled to funds owing under
the Future Purchases obligations. The undertaking of a risky
litigation would be an unnecessary drain on the resources of the
Debtors' estates and would divert the attention of its
management and legal personnel from the current efforts to
maximize the value of the estates.
The Debtors have entered into the Settlement Agreement because,
among other reasons, they do not believe that Energis has the
ability to honor the Future Purchases obligations pursuant to
the Contracts. By entering into the Settlement Agreement with
Energis and rejecting the Contracts, Mr. Basta points out that
the Debtors will have an opportunity to re-market the Network
Capacity and Circuits subject to the Contracts to other
consumers in the industry, thereby generating revenue greater
than the amount likely to be recovered from Energis if the
Debtors sought to enforce the Contracts. (Global Crossing
Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
Global Crossing Holdings Ltd.'s 9.625% bonds due 2008
(GBLX08USR1) are trading at 1.5 cents-on-the-dollar, DebtTraders
reports. For real-time bond pricing, see
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1
for real-time bond pricing.
GOLF AMERICA: Taps DJM Asset Mgt. to Market 33 Store Locations
--------------------------------------------------------------
DJM Asset Management, LLC, a division of Gordon Brothers Group,
LLC, has been retained as real estate advisor to dispose of
leases in the Golf America Stores Chapter 11 bankruptcy case.
DJM will market 33 top mall locations in 17 states.
"The locations that we are marketing include properties of
between 1,200 s.f. to 5,900 s.f. in prime mall locations,
including Roosevelt Field Mall in Garden City, NY, Garden State
Plaza in Paramus, NJ and King of Prussia Mall in King of
Prussia, PA," said Andy Graiser, Principal of DJM. "Bids are due
on or before November 8, 2002. We welcome any and all
inquiries."
The leases available include properties in Alabama, Colorado,
Florida, Georgia, Louisiana, Maryland, Michigan, New Jersey, New
York, North Carolina, Ohio, Oklahoma, Pennsylvania, South
Carolina, Tennessee, Texas and Virginia. To obtain information
on specific Golf America Store locations contact Jim Avallone,
Tom Laczay or Andy Graiser at 631-752-1100. Store photos,
demographics, store plans and site plans can be viewed on DJM's
Web site at http://www.djmasset.com
Based in Melville, New York, DJM Asset Management, LLC, a Gordon
Brothers Group company, assists retailers nationwide with the
disposition of unwanted locations, leasehold evaluations and
lease mitigation. During 2001, over 28 retailers retained DJM
to dispose of 2200 locations and over 50 million square feet of
retail space. Its most recent clients have included Kmart,
Harcourt General, Scotty's, Pep Boys, Odd Job, Bally Shoes and
FAO Schwarz.
GRANDETEL TECHNOLOGIES: Balance Sheet Insolvency Tops C$38 Mill.
----------------------------------------------------------------
GrandeTel Technologies Inc., (OTCBB:GTTIF) released its
financial results for the six months ending July 31, 2002.
For the six months period, the Company had reported a net loss
of C$1.4 million, compared with a net loss of C$2.7 million for
the same period a year ago.
Sales revenue decreased by C$0.1 million from C$0.8 million of
the same period a year ago. The decrease in revenue was due to
reduction in billing rates as the telecommunication industry in
China is preparing to open up as now China has entered the World
Trade Organization. The Company is operating in three major
cities in China, namely Shanghai, Guangzhou and Qingdao. The
overall gross profit margin for the period was dropped as the
Company used the transmission facilities of major carriers in
China for IP mode transmission.
Operating, selling and administrative expenses decreased by
C$0.3 million from last year's total of C$1.1 million to this
year's total of C$0.8 million. The major reductions are about
C$0.1 million in depreciation and amortization expenses, C$0.1
million in salaries and wages and C$0.1 million in other general
and administrative expenses. Other expense of last year of C$0.2
million were Hong Kong corporate services and overheads which
was eliminated with the closing of the Hong Kong operation
during last year. During the period a portion of the Shanghai
property was rented out and received a small rental income.
In February 2002, Nakamichi Corporation, a company listed in
Japan and in which the Company holds 8,450,000 shares
(approximately 8% of total shares issued by Nakamichi), applied
to Tokyo District Court for Civil Restructuring Proceeding, this
is similar to a U.S. Chapter 11 Bankruptcy Protection filing.
The Company has made provision for its C$26.4 million investment
in Nakamichi in the year ended January 31, 2002. On August 7,
2002, the creditors of Nakamichi approved the Restructuring
Plan. Under such plan, the existing shareholders of Nakamichi
will not get any recovery.
In late November 2000, the Company announced the acceptance of
put option exercisable by Class A shareholders pursuant to the
settlement of a major class action lawsuit in New York in 1999.
The put period commenced from December 1, 2000 and ended March
30, 2001. The acceptance or put price was US fifty (50) cents
per share. As the Company did not have the financial resources,
in accordance with the terms of the settlement agreement, The
Grande Holdings Limited, a major shareholder holding about 28%
of the Common Shares of the Company at that time, honored the
Put. The settlement agreement provided that, in the event that
Grande was required to honor any such Put, it should be entitled
to the reimbursement from the Company the costs of honoring such
Put. There were 11,098,574 Class A shares outstanding. The total
numbers of Class A shares tendered and accepted were 7,060,606
shares. After acceptance of the Class A shares Put and the
conversion of all class A shares into common shares in
accordance with the terms of the settlement, Grande hold about
42% of the issued and outstanding shares of the Company. Grande
has notified the Company in June 2002 of its intention to ask
the Company for reimbursement of the costs of honoring such Put.
Accordingly, the Company has provided the cost of honoring the
Put of about $5.65 million in the year ended January 31, 2002
results.
The Company has renewed its bank loan with Hong Kong Bank of
Canada in December 2001. When Nakamichi Corporation filed for
Civil Restructuring Proceeding in February 2002, Hong Kong Bank
of Canada has asked Grande, and Grande has agreed, to provide
other listed shares in addition to the Company's Nakamichi
shares as securities for the loan. The loan was then renewed for
a period of 5 years from February 1, 2002. The loan is repayable
in quarterly payments of US$250,000 each plus a US$ 2 million
balloon payment in February 2007.
At July 31, 2002, the Company's balance sheet shows a working
capital deficit of about $30 million and a total shareholders'
equity deficit of about $38 million.
During the period, under loan agreements with The Alpha Capital
Group Limited, a subsidiary of Grande, the Company was provided
loans totaling C$66 million. The loans are repayable on demand
and carry interest at the Hong Kong prime lending rate plus 2%.
Decrease in accounts receivable was mainly attributable to the
provision of C$1.9 million for receivable from the Chinese
joint-venture partners of Guangzhou Enhanced Communication Co.
Ltd., a joint venture in which the Company has a 65% interest,
at the end of last fiscal year-end. The provision was made on
the basis that the telecommunication business was not expected
to have a strong turn around in the near future.
The 8% senior convertible debentures with face value of
US$5,757,000 (C$9,136,000) are unsecured and are maturing on
July 31, 2003. It is classified as a current liability starting
this quarter-end.
Although two defendants have entered into agreement to settle
the California lawsuit with the plaintiffs in late 2001. Other
defendants, including the Company, have been negotiating but
have not yet reached an agreement to settle with the plaintiffs.
The Company is still facing difficult time ahead as it still has
liquidity problem. The audited financial statements for the year
ended January 31, 2002 were prepared on a going concern
assumption and depends on the outcome of the following events:
-- The Company's long distance fax and voice service
operations will be turned around and achieve break-even in the
coming year.
-- The remaining lawsuit in California will be settled so
that the Company will be able to raise additional financing to
strengthen its financial position and to take on new projects.
-- The Company will implement a restructuring to reduce
its debts, such as a debt to equity conversion program.
-- The Company will continue to receive financial support
from Grande.
GrandeTel is a Canadian company with headquarter in Hong Kong.
The Company holds interests in joint ventures that offer long
distance discount fax and voice services in China.
GREEN FUSION: Seeking New Financing to Pay Existing Liabilities
---------------------------------------------------------------
Green Fusion Corporation was incorporated on March 5, 1998 in
the state of Nevada and is listed on the OTC Bulletin Board
under the GRFU symbol. Effective May 1, 2002, the Company
acquired all of the issued and outstanding shares of House of
Brussels Holdings Ltd., which owns and operates Brussels
Chocolates Ltd. Brussels Chocolates is a manufacturer and
wholesaler of premium Belgium-styled chocolates. On May 10,
2002 the Company also acquired all of the issued and outstanding
shares of GFC Ventures Corp., a company that had been supplying
management services to Green Fusion and had facilitated the
purchase of Brussels Chocolates by Green Fusion.
House of Brussels Holdings Ltd., owns and operates House of
Brussels Chocolates, an established manufacturer of gourmet
quality chocolate products in Vancouver, British Columbia,
Canada. House of Brussels Chocolates is a premier manufacturer
and distributor of gourmet, high-quality Belgian chocolates
through it's licensed retail outlets and through a wholesale
network in Canada, the United States and overseas. Since 1983,
House of Brussels Chocolates has been an established chocolate
manufacturer and retailer in the Vancouver, British Columbia
metropolitan region and its name has become synonymous with
high quality gourmet Belgian chocolates at an affordable cost.
House of Brussels Chocolates offers a full line of gourmet
quality, Belgian chocolates, utilizing high grade chocolate and
quality ingredients. Brussels Chocolate's signature product is
its "hedgehog" chocolate - a molded chocolate design that blends
aesthetics with taste for a strong customer appeal. The
"hedgehog" is a traditional Belgian symbol of good luck, and the
House of Brussels Chocolates manufactures its "hedgehog"
chocolates in eighteen different flavors, including almond dark
chocolate, macadamia milk chocolate and hazelnut white
chocolate. House of Brussels Chocolates also offers fine
quality chocolate bars in over 10 distinct flavors, as well as
an assortment of truffles in flavors including maple creams.
Brussels Chocolate's ice wine truffles are made with Canadian
ice wine and have become increasingly popular.
House of Brussels Chocolates manufactures all of its chocolate
products in-house at a high-quality 30,000 square foot
manufacturing facility in Vancouver, British Columbia. This
facility is currently operating at approximately 20% capacity,
and will provide ample production capabilities for a planned
ramp up in sales and operations throughout Canada and the United
States.
Acquisition of GFC Ventures Corp.
Green Fusion completed the acquisition of GFC Ventures Corp.,on
May 10, 2002 pursuant to an agreement originally dated June 26,
2001. GFC Ventures originally signed the original letter of
intent for the acquisition of House of Brussels Chocolates in
June 2001 and has been engaged in the management of the business
of House of Brussels Chocolates since that date. Green Fusion
issued an aggregate of 13,684,700 shares of its common stock in
consideration of the acquisition of all of the outstanding
shares of GFC Ventures.
Green Fusion has a working capital deficiency and is not paying
its debts in a timely manner. It is actively seeking new
financing to fund future operations and to pay existing
liabilities. There is no assurance that the Company will be
successful. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.
The Company's revenues were $357,787 for the three months ended
July 31, 2002, compared to revenues of $427,467 for the three
months ended July 31, 2001. All revenues for both periods were
attributable to the business operations of House of Brussels
Chocolates. The decrease in revenues in the amount of $69,680
is attributable mainly to the closure of some of the Company's
retail stores during the fiscal year ended April 30, 2002 and
the sale of four of its retail stores during the three months
ended July 31, 2002. Green Fusion has entered into additional
wholesale contracts during the current fiscal year but will not
realize revenues from these contracts until later in the year
when these contracts are fulfilled, at which time the Company
anticipates that its revenues should increase. Revenues
included $65,000 of licensing fees associated with the sale of
four retail stores in July 2002 and the entering into of license
arrangements with the purchaser for the operation of these
stores. The license fees were one-time license fees. The
purchaser has agreed under the terms of the licensing
arrangement to purchase product from the Company on a wholesale
basis but will not pay ongoing license fees.
Cost of sales decreased to $227,978 for the three months ended
July 31, 2002, compared to costs of sales of $250,040 for the
three months ended July 31, 2001. The gross profit margin
declined to 36% for the three months ended July 31, 2002,
compared to 42% for the three months ended July 31, 2001. The
decrease to gross profit margin was attributable to period-end,
non-recurring adjustments. When these adjustments are
eliminated, gross profit for the three months ended July 31,
2002 was actually higher than for the three months ended July
31, 2001. This increase was attributable to the elimination of
low margin contracts and the careful attention to costs. Costs
of sales include rent for the Vancouver, British Columbia
manufacturing facility in the amount of $20,000 per month.
Operating expenses increased to $469,417 for the three months
ended July 31, 2002, compared to operating expenses of $431,752
for the three months ended July 31, 2001, representing an
increase of $37,665. Operating expenses exclusive of
amortisation costs were $451,465 for the three months ended July
31, 2002, compared to $415,628 for the three months ended July
31, 2001.
General and administrative expenses increased to $182,213 for
the three months ended July 31, 2002, compared to general and
administrative expenses of $67,535 for the three months ended
July 31, 2001, representing an increase of $114,678. This
increase in general and administrative expenses is primarily
attributable to a one-time charge to accrue salaries and fees in
the amount of $140,000, which amount included an amount of
$70,000 payable to Company president, Mr. L. Evan Baergen, in
consideration of the provision of his services from January 1,
2002 to July 31, 2002.
Selling expenses decreased to $269,252 for the three months
ended July 31, 2002, compared to selling expenses of $348,093
for the three months ended July 31, 2001, representing a
decrease of $78,841. The reduction to selling expenses was in
part due to the result of rationalization of selling costs,
including reduction of salaries paid to sales employees,
reduction to advertising efforts and the elimination of certain
consultants and brokers. Selling expenses also included
expenditures related to rental costs for the sales office in
Toronto and retail outlets in Vancouver. These expenses
totalled $82,633 for the three months ended July 31, 2002,
representing 18% of the total operating costs, compared to
$133,360 for the three months July 31, 2001, representing 32% of
total operating expenses.
With the elimination of retail stores, Green Fusion anticipates
that total selling costs will continue to decrease compared to
the same period in the previous year.
Amortisation costs totalled $42,584 for the three months ended
July 31, 2002 compared to $33,544 for the three months ended
July 31, 2001. Of this amount, $24,632 was included in cost of
sales for the three months ended July 31, 2002, compared to
$17,420 for the three months ended July 31, 2001, and the
remainder in selling, general and administrative costs.
Loss for the three months ended July 31, 2002 increased to
$339,608 from $254,325 for the three months ended July 31, 2001,
representing an increase of 85,283. The increased loss reflects
reduced revenues and increased general and administrative
expenses, as discussed above.
The Company had cash in the amount of $1,787 as of July 31,
2002, compared to cash in the amount of $8,444 as of April 30,
2002. The working capital deficit decreased to $376,933 as of
July 31, 2002, compared to a working capital deficit of $562,115
as of April 30, 2002.
Accounts receivable increased to $301,899 as of July 31, 2002,
compared to $186,244 as of April 30, 2002. Of this increase,
approximately $120,000 is attributable to amounts owing on
account of the sale of four of the Company retail stores in July
2002 and includes amounts payable in respect of inventory,
prepaid expenses and other fees payable by the purchaser. The
balance of accounts receivable are primarily the result of sales
to wholesale customers and are net of any doubtful accounts.
Accounts payable increased to 857,197 as of July 31, 2002,
compared to $630,076 as of April 30, 2002. The increase in
accounts payable is primarily attributable to the Company's
inability to pay for accounts payable from cash reserves.
Included in this amount as of July 31, 2002 is an amount payable
to Mr. L. Evan Baergen, President, in respect of accrued but
unpaid management fees.
Green Fusion incurred an increase to bank indebtedness in the
amount of $76,872 during the three months ended July 31, 2002.
This bank indebtedness represents a bank overdraft that was
incurred to cover shortfalls in cash resources. There are no
stated terms of repayment and the Company is paying interest at
the rate set from time to time by the bank. The overdraft
remains outstanding as of September 23, 2002.
GROUP TELECOM: Will Defer Publishing Fiscal Q3 Financial Results
----------------------------------------------------------------
GT Group Telecom (TSX: GTG.B, GTG.A) will defer the issuance of
its fiscal third quarter 2002 financial results and the related
management's discussion and analysis. This announcement revises
GT Group Telecom's prior statement that it would release this
information prior to September 30, 2002.
As previously announced, GT Group Telecom has delayed the
preparation and filing of its consolidated financial statements
for the nine months ended June 30, 2002 as a result of being
under Companies' Creditors Arrangement Act protection. On June
26, 2002, GT Group Telecom Inc. was granted protection for an
initial period of 30 days, and on July 25, 2002, obtained an
extension of protection to September 10, 2002. On September 10th
the CCAA protection was extended to September 19th, 2002.
Subsequently, the September 19th protection was further extended
to September 25th, at which time, its CCAA protection was
extended to November 4th, 2002.
The company continues to develop a plan of restructuring and has
sought and obtained approval for a merger and acquisition
process that will be led jointly by its Special Committee and
the Canadian court-appointed Monitor PricewaterhouseCoopers.
Until this process is completed, GT Group Telecom is unable to
complete the applicable financial statements and related
documents.
Due to the late filing of its financial results, GT Group
Telecom's securities may be subject to a cease trade order
affecting certain members of management and other insiders. If
GT Group Telecom fails to file its financial statements by
October 31, 2002, a cease trade order may be issued affecting
all of its securities.
GT Group Telecom continues to comply with the Alternate
Information Guidelines set out in Ontario Securities Commission
Policy 57-603, which include issuing a default status report
every two weeks.
Monthly reports, filed by PricewaterhouseCoopers, the Canadian
court- appointed Monitor, can be found under the heading
"Monitor's Reports" when visiting the PricewaterhouseCoopers
information link, on the Group Telecom website at www.gt.ca.
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.
HIGHWOOD RESOURCES: Gets Further Extension of Forbearance Pact
--------------------------------------------------------------
Highwood (OTCBB:HIWDF)(TSX:HWD) announces that its principal
lender has agreed to an amendment of the forbearance agreement
dated October 3, 2001, as amended March 28, 2002 with respect to
the repayment of the debt due to the lender. The amendment
provides an extension of the time for repayment of all
indebtedness owing to the lender from September 30, 2002 to
December 31, 2002. The amendment requires Highwood to engage a
monitor to report to the lender on business operations.
The repayment extension is expected to provide Highwood
sufficient time to complete the plan of arrangement announced
August 30, 2002. Completion of the arrangement is subject to
regulatory, shareholder and court approvals.
ICON Capital: Fitch Hatchets Ratings of 3 Certificates Classes
--------------------------------------------------------------
Fitch Ratings has downgraded the following ICON Capital
transactions.
ICON Equipment Lease Grantor Trust 1998-A:
-- Class A certificates are downgraded to 'C' from 'B';
-- Class B certificates are downgraded to 'C' from 'CCC';
-- Class C certificates are downgraded to 'D' from 'C'.
The rating on the class C certificates is also withdrawn. The
Class A and Class B certificates are removed from Rating Watch
Negative.
ICON Receivables 1997-A, LLC:
-- The Class A-3 notes are removed from Rating Watch Negative.
These rating actions are the result of adverse collateral
performance and further deterioration of asset quality outside
of Fitch's original expectations. Losses from defaulted leases
have significantly reduced the remaining credit enhancement
available for each class of securities. Delinquencies continue
to be high. See Fitch press releases dated Sept. 15, 2000, Oct.
3, 2000, and June 22, 2001 for previous rating actions taken by
Fitch on these transactions.
Fitch will continue to closely monitor these transactions and
may take additional rating action in the event of further
deterioration.
IMMTECH INT'L: Raises $1.8M from Preferred Share & Warrant Issue
----------------------------------------------------------------
On September 25, 2002, Immtech International, Inc., issued an
aggregate of 75,725 shares of its Series B Convertible Preferred
Stock and 189,312 related warrants in private placements to
certain accredited and non-United States investors in reliance
on Regulation D and Regulation S, respectively, under the
Securities Act of 1933, as amended. The gross proceeds of the
offering are $1,878,010. The Series B Preferred Stock is subject
to the terms and conditions of the Certificate of Designation.
The Warrants are subject to the terms and conditions of the Form
of Stock Purchase Warrant.
The securities were sold pursuant to exemptions from
registration under the Securities Act and have not been
registered under the Securities Act. They may not be offered,
sold, pledged or otherwise transferred by the purchasers in the
absence of registration or an applicable exemption. Pursuant to
the terms of the Certificate of Designation, the Company has
agreed to prepare and file with the Securities and Exchange
Commission a registration statement on Form S-3 covering the
resale of the shares of the Company's common stock issuable
pursuant to the terms of the Series B Preferred Stock and
related Warrants.
Immtech International, Inc., is a pharmaceutical company focused
on the development and commercialization of drugs to treat
infectious diseases that include fungal infections, Malaria,
tuberculosis, Hepatitis C, pneumonia, diarrhea and African
sleeping sickness, and cancer. The Company holds worldwide
patents, licenses and rights to license worldwide patents,
patent applications and technologies from third parties that are
integral to the Company's business.
Since its formation in October 1984, the Company has engaged in
research and development programs, expanding its network of
scientists and scientific advisors, negotiating and consummating
technology licensing agreements, and advancing the technology
platform toward commercialization. The Company uses the
expertise and resources of strategic partners and contracted
parties in a number of areas, including: (i) laboratory
research, (ii) pre-clinical and human clinical trials and (iii)
the manufacture of pharmaceutical products. The Company has
licensing and exclusive commercialization rights to a dicationic
anti-infective pharmaceutical platform and is developing drugs
intended for commercial use based on that platform. These
dication pharmaceuticals work by blocking life-sustaining
enzymes from binding to the key sites in the "minor groove" of
an organism's deoxyribonucleic acid, thereby killing the
infectious organisms that cause fungal, parasitic, bacterial and
viral diseases. The minor groove or key site on an organism's
DNA is an area where enzymes interact with the DNA as part of
their normal life cycle. The Company does not have any
commercially available products nor does it expect to have any
commercially available products for sale until after March 31,
2003, if at all.
As reported in Troubled Company Reporter's August 21, 2002
edition, the Company has a shortage of unrestricted working
capital and has had recurring losses from operations and
negative cash flows from operations since inception. These
factors, among others, raise substantial doubt about its ability
to continue as a going concern. The ability to continue to
operate will ultimately depend upon raising additional funds,
attaining profitability and operating at a profit on a
consistent basis, which will not occur for some time or may
never occur.
INNOVATIVE GAMING: Fails to Comply with Nasdaq Listing Criteria
---------------------------------------------------------------
Innovative Gaming Corporation of America (Nasdaq: IGCAD) was
recently notified by Nasdaq that its recent private placement of
Convertible Notes failed to comply with Nasdaq's shareholder
approval rules as set forth in Nasdaq Marketplace Rules
4350(i)(1)(D)(ii) and 4350(i)(1)(B). These rules require prior
shareholder approval of any private placement involving the sale
or issuance of common stock, or securities convertible into
common stock, equal to more than 20% of the outstanding common
stock at a price less than market value of the stock.
The Company has a hearing with Nasdaq on September 27, 2002, to
discuss this deficiency and the two previously announced
deficiencies relating to failure to maintain minimum bid price
and independent directors and audit committee deficiencies. The
Company recently announced that it has filed a preliminary proxy
statement with the SEC relating to a Special Meeting of
Shareholders in connection with the Convertible Note private
placement.
Furthermore, the Company had earlier announced its appointment
to the Board of two additional independent directors, bringing
the total number of independent directors and audit committee
members to three. Finally, the Company's stock has closed over
$1.00 per share for the past 12 days since effecting the 10 for
1 reverse stock split.
Nevertheless, there can be no assurance that the Nasdaq Hearing
Panel will grant the Company's request for continued listing.
Innovative Gaming Corporation of America, through its wholly
owned operating subsidiary, Innovative Gaming, Inc., develops,
manufactures and distributes fast playing, high-entertainment
gaming machines. The Company distributes its products both
directly to the gaming market and through licensed distributors.
INTEGRATED SYSTEMS: Case Summary & 20 Largest Unsec. Creditors
--------------------------------------------------------------
Lead Debtor: Integrated Systems and Power, Inc.
88 Tenth Avenue
6th Floor
New York, NY 10011
Bankruptcy Case No.: 02-14733
Debtor affiliates filing separate chapter 11 petitions:
Entity Case No.
------ --------
Simplex of New York City, LLC 02-14734
Chapter 11 Petition Date: September 26, 2002
Court: Southern District of New York (Manhattan)
Judge: Allan L. Gropper
Debtors' Counsel: Kevin J. Nash, Esq.
Finkel Goldstein Berzow Rosenbloom Nash
26 Broadway
Suite 711
New York, NY 10004
(212) 344-2929
Fax : (212) 422-6836
Total Assets: $4,589,417
Total Debts: $5,402,311
Debtor's 20 Largest Unsecured Creditors:
Entity Nature of Claim Claim Amount
------ --------------- ------------
Frank D'Alessio Trade Debt $1,008,333
242 Bay 10 St.
Brooklyn, NY 11228-3908
c/o Peter L. Jacobs &
Associates, P.C.
50 East 42nd Street,
17th Floor
New York, NY 10017
Alta Health & Life Trade Debt $178,924
Webb Electric Company Trade Debt $84,000
Broadway Premium Funding Trade Debt $45,817
Corp.
GE Capital CPLC Trade Debt $25,000
Safe Fire Detection, Inc. Trade Debt $22,703
Notifier/Nesco Trade Debt $18,744
Sieratzki, Ceccarelli Trade Debt $13,208
& Weprin LLP
Strand Electric Co., Inc. Trade Debt $10,695
Intern'l Systems of Trade Debt $10,000
America
Dell Computer Trade Debt $7,000
Dynamic Fire, Inc. Trade Debt $6,000
Just in Time Electronics Trade Debt $5,339
ADT Security Trade Debt $4,700
Michael J. Greene Trade Debt $2,835
Montana Datacom Trade Debt $2,809
Ecker, Loeher, Ecker & Trade Debt $2,773
Ecker, LLP
A.D.I. Trade Debt $2,630
Nex Watch Trade Debt $2,310
Insight Trade Debt $2,167
JUNIPER GENERATION: Rating Unaffected by El Paso's Watch Status
---------------------------------------------------------------
Standard & Poor's Ratings Services said that the recent
placement of El Paso Corp., (BBB+) on CreditWatch negative will
not have an effect on the rating of Juniper Generation LLC
(B+/Stable/--) at this time because El Paso's rating is still
six notches above that of Juniper's.
Juniper is also structured as a special-purpose entity that is
bankruptcy remote from El Paso. El Paso Corp., is the indirect
owner of Juniper and the operator and provider of fuel services
to most of its facilities.
KAISER ALUMINUM: Safety Nat'l Wants Arbitration Rights Enforced
---------------------------------------------------------------
Safety National Casualty Corporation wants to enforce its
arbitration rights under an insurance policy with Kaiser
Aluminum & Chemical Corporation as a means of resolving any
coverage disputes that Safety National has with the Debtors and
Certain Underwriters at Lloyd's London. To do this, Safety
National asks the Court to lift the automatic stay so the
arbitration could proceed in another forum.
According to Brian A. Sullivan, Esq., at Werb & Sullivan, in
Wilmington, Delaware, the arbitration should be allowed to
proceed because the Debtors have not and cannot show that
enforcement of the Safety National arbitration clause "would
conflict in any way with the purpose or provisions of the
Bankruptcy Code," this dispute should be referred to
arbitration. Mr. Sullivan also points out that Safety National
is not a creditor and is not making a claim against the Debtors'
estate. The insurance coverage dispute too does not arise out of
the bankruptcy; it is completely independent of and existed
before the Debtors' bankruptcy filing.
Mr. Sullivan recounts that it was the Debtors who initiated, and
continued to prosecute, the insurance coverage litigation in the
California action. The Debtors themselves chose to litigate the
coverage issues in a forum other than this Bankruptcy Court.
Given that, Mr. Sullivan claims arbitrating the issues of Safety
National's insurance policy coverage, in a forum other than this
Court, is entirely consistent with the Debtors' own intentions.
To repel Safety National's arbitration proposition, Mr. Sullivan
asserts that the Debtors must either:
-- concede that they are not seeking insurance coverage from
Safety National; or
-- show that the text or purposes of the Bankruptcy Code would
be violated so significantly by enforcing an arbitration
clause in the particular factual circumstances of the case
before the Court.
Mr. Sullivan tells the Court that hardship will weigh heavily on
Safety National if the arbitration does not take place. Safety
National will be forced to litigate coverage issues in the
California action, with hundreds of other insurers, in direct
contradiction to the benefits to which it is contractually
entitled under the arbitration clause in the policy. That
result would eviscerate the arbitration clause from Safety
National's policy.
No Grounds for Arbitration
The Debtors and the Official Committee of Unsecured Creditors
want the motion denied.
Despite its contentions to the contrary, Paul N. Heath, Esq., at
Richards, Layton & Finger, in Wilmington, Delaware, points out
that Safety National is not defending claims asserted against it
by the Debtors. The Debtors have never instituted an action
against Safety National and are not at this time pursuing any
claims against it. As Safety National concedes, Safety National
is a party in the California Action only because London sued
Safety National for contribution.
"That the Debtors served certain routine discovery requests on
Safety National, which Safety National characterizes as the
Debtors 'taking advantage of Safety National's status as a
third-party defendant,' does not change this fact," Mr. Heath
says.
Rather than defending the Debtors' claims, Mr. Heath observes
that Safety National is seeking to initiate a preemptive strike
against claims it believes the Debtors may pursue against it in
the future. Safety National wants to initiate a new proceeding
in which it would seek a determination that the Debtors are not
entitled to insurance coverage for asbestos claims under the
Safety National policy, thus impairing a potential asset
available to the Debtors to address their asbestos liabilities.
In addition, even if this Court applies the factors for
considering whether cause exists to "continue" litigation, none
of those factors supports relief from stay either. Mr. Heath
maintains that Safety National overlooked two key facts when it
claimed that the Debtors would not be adversely affected with
the arbitration:
(1) The arbitration that Safety National seeks would not proceed
in the California action or even in California, as implied
by Safety National. Instead, pursuant to the arbitration
provision Safety National seeks to apply, the arbitration
must proceed in St. Louis, Missouri unless the parties
otherwise agree; and
(2) Although the Debtors have chosen to litigate insurance
coverage issues with certain carriers as Safety National
asserts, the Debtors have chosen to litigate any issues with
Safety National.
Mr. Heath further contends that the Debtors would be greatly
prejudiced if the stay were lifted and they were required to
arbitrate an issue they do not need or desire to address at this
time. This substantial prejudice would be further exacerbated
if the California Action were also stayed pending the completion
of the arbitration as Safety National requests. As recognized
by the California court in its remarks at the August 16, 2002
hearing, the insurance policies represent an asset of the
Debtors' estate. It is also in the Debtors' interest to obtain
an expeditious determination of their rights under the policies
at issue in that action.
Mr. Heath also believes there is no hardship on Safety
National's part because, in the first place, Safety National has
not been sued by the Debtors in the California action -- it has
been sued by London, which is not bound by any provision in the
Safety National policy. In addition to that, the arbitration
provision is not even operative at the present time. Assuming
that the arbitration provision were enforceable, Mr. Heath says
the language would mean only that, before the Debtors can sue
Safety National with respect to any dispute arising under the
policy, they must first proceed to arbitration. Then again,
since the Debtors are not seeking to sue Safety National at this
time, however, there is no basis under the policy to compel
arbitration.
If this Court nonetheless decides to lift the automatic stay,
Mr. Heath insists that it should permit the California court to
decide the various state law issues regarding the enforceability
and applicability of the arbitration provision currently pending
in the California Action. The California court should decide
how to proceed with the coverage litigation between the other
parties in view of the arbitration demand. (Kaiser Bankruptcy
News, Issue No. 15; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
DebtTraders says that Kaiser Aluminum & Chemicals' 12.75% bonds
due 2003 (KLU03USR1) are trading at 17 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KLU03USR1for
real-time bond pricing.
KMART CORP: Seeks Approval to Pay Compromised Reclamation Claims
----------------------------------------------------------------
Kmart Corporation and its 37 debtor-affiliates seek the Court's
authority to pay compromised reclamation claims. The Debtors
want to pay those reclamation claimants who voluntarily
participate in a freshly unveiled Reclamation Payment Program.
To date, the Debtors have resolved 516 claims of the 2,500
reclamation demands that total $112,000,000. Individual
resolved reclamation claims range in size from $0 to $7,900,000.
J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom,
in Chicago, Illinois, informs the Court that the Debtors will
pay eligible claimants 75% of their Allowed Reclamation Claim in
full satisfaction of their Claim. An Eligible Claimant is one
who has received a fully executed settlement agreement with the
Debtors with respect to a reclamation claim. Accordingly, all
Eligible Claimants may participate in the Reclamation Payment
Program.
In order to participate in the Reclamation Payment Program,
Eligible Claimants must send a written request to participate
to:
Alice Buckley
Re: Reclamation Payment
Legal Department
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084-3163
The Reclamation Payments will be made on the later of:
-- November 30, 2002; or
-- 30 days after an Eligible Claimant elects in writing to
receive payment pursuant to the Reclamation Payment
Program.
Significantly, by accepting the payment under the Reclamation
Payment Program, an Eligible Claimant agrees, without the
necessity of executing a separate agreement, to these terms and
conditions:
(a) The payment of 75% of the Eligible Claimant's Allowed
Reclamation Claim constitutes a waiver, release,
discharge, and satisfaction of any and all rights and
claims that the Eligible Claimant has ever had, or will or
may have, against the Debtors arising from, or in
connection with, the goods constituting the basis for the
Allowed Reclamation Claim, and of any other reclamation
rights for the same goods that the Eligible Claimant has
asserted against the Debtors;
(b) Within 18 months from the date of the Reclamation Payment,
the Eligible Claimant, unless it is a factor, will
continue:
(i) supplying goods to the Debtors on customary trade
terms that the Eligible Claimant provided goods to
the Debtors before the Petition Date; and
(ii) providing other favorable trade practices and
programs that are at least as favorable to the
Debtors as those in effect before Chapter 11
Petition;
(c) In the case of a factor, within 18 months from the date of
the Reclamation Payment, the Eligible Claimant will
continue to factor clients supplying goods and services to
the Debtors on the same or better customary factor terms
before the Petition Date;
(d) The Debtors do not in any way waive any claims they may
have against the Eligible Claimant relating to
preferential or fraudulent transfers, or other potential
claims, counterclaims or offsets with respect to the
Eligible Claimant. Rather, the Debtors expressly reserve
their rights to pursue those claims, and any and all other
claims they may seek to advance against the Eligible
Claimant in the future other than those arising
specifically in connection with the Allowed Reclamation
Claim; and
(e) The Debtors may assert a Reserved Defense, pursuant to the
Reclamation Procedures approved by the Court, against the
Eligible Claimant. If a Reserved Defense is adjudicated
in the Debtors' favor:
(i) the Eligible Claimant will immediately repay to the
Debtors the Reclamation Payment in proportion to the
amount of the Allowed Reclamation Claim disallowed;
or
(ii) in the discretion of the Debtors, the Eligible
Claimant will apply the amount as directed by the
Debtors.
The Eligible Claimant must continue to comply with the
terms and conditions set forth unless its Allowed
Reclamation Claim is disallowed in its entirety.
In the event the Debtors believe that an Eligible Claimant who
participates in this Payment Program is in default of the Terms,
the Debtors may send written notice of the default to the
Eligible Claimant. Upon receipt of the default notice, the
Eligible Claimant will either:
(1) refund the Reclamation Payment to the Debtors in full; or
(2) show cause as to why it is not in default of the Terms al
the next regularly scheduled omnibus hearing.
If the Eligible Claimant does not show cause, it will be
required to refund the Reclamation Payment.
Mr. Ivester contends that the Reclamation Payment Program will
provide benefit to the Debtors and their estates in several
ways. According to Mr. Ivester, the Reclamation Payment Program
will enhance both Kmart's relations with its vendors and the
vendors' confidence in Kmart's financial position. By offering
this program, vendors will be able to liquidate their
reclamation claims at a significant percentage of their total
claim. Furthermore, because participation in the Reclamation
Payment Program is voluntary, it provides vendors with an
additional financing option as they enter the holiday shopping
season. Moreover, Kmart's commitment to make payments in the
fourth quarter for as much as $84,000,000 yields vendor
confidence in Kmart's financial stability.
"Enhancing vendor relations and building vendor confidence are
especially important as Kmart enters the holiday shopping
season," Mr. Ivester tells Judge Sonderby.
Mr. Ivester further points out that, since the Allowed
Reclamation Claims are administrative claims, they will be paid
in full upon Kmart's emergence from bankruptcy. But by allowing
the Debtors to satisfy Allowed Reclamation Claims at a 25%
discount, the Debtors will accrue a substantial financial
benefit of as much as $28,000,000.
Of equal significance, the Reclamation Payment Program provides
substantial trade term benefits. Mr. Ivester notes that each
participant in the Reclamation Payment Program must agree to
provide Customary Trade Terms or Customary Factor Terms for 18
months from the date of the Reclamation Payment. Because of
this, Kmart will further heighten the stability of its supply of
merchandise. This benefit will be of particular value in the
coming holiday season and in Kmart's overall reorganization.
(Kmart Bankruptcy News, Issue No. 34; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
DebtTraders reports that Kmart Corp.'s 9.0% bonds due 2003
(KM03USR6) are trading at 17 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for
real-time bond pricing.
KNOLOGY BROADBAND: Wants Disclosure Hearing Set for October 21
--------------------------------------------------------------
Knology Broadband, Inc., and its debtor-affiliates ask the U.S.
Bankruptcy Court for the Northern District of Georgia to:
a) schedule a Disclosure Statement Hearing and a hearing on
confirmation of the Plan and allowance of the claims of the
holders of the Notes on or about October 21, 2002;
b) require that any objections to approval of the Disclosure
Statement, the Debtor's solicitation procedures, and/or
confirmation of the Plan be filed with the Court and served
on:
1) counsel for the Plan co-proponent, Knology, Inc.
-- Ronald E. Barab at Smith, Gambrell & Russell, LLP and
-- Christopher Strickland at Alston & Bird, LLP; and
2) the United States Trustee
not later than October 16, 2002 at 5:00 p.m., Eastern
Daylight Savings Time;
d) requiring that any holder of a claim other than an Impaired
Claim or a Rejection Claim must file their proofs of claim
and no later than October 23, 2002, at 5:00 p.m., Eastern
Daylight Savings Time;
e) direct that objections to allowance of the Noteholders'
claims be filed with the Court and served on
The Bank of New York, as Trustee
101 Barclay Street
New York, New York 10286
no later than October 16, 2002.
The Debtor seeks a prompt hearing on approval of the Disclosure
Statement, solicitation procedures and a hearing on confirmation
of the Plan. The Debtor believes that the continuation of stable
relations with its customers, trade creditors, and other
suppliers is critical to its ability to successfully conduct its
business operations. If the Debtor's reorganization under the
Bankruptcy Code is prolonged, the Debtor believes that
relationships with such constituencies as well as with holders
of the Notes, and Wachovia will be adversely affected and, as a
result, business operations will be damaged.
Furthermore, the Debtor believes that any delay could greatly
affect its ability to generate cash from operations and make it
more difficult to make timely payments to its creditors. Each of
the Debtor's creditors will, therefore, be adversely affected by
such delay. The Debtor also believes that any adverse impact
upon its business will diminish the value of its equity and will
adversely affect present holders of its equity interests.
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.
LAIDLAW INC: Judge Kaplan Approves Amended Disclosure Statement
---------------------------------------------------------------
After hearing oral arguments from lawyers for the Laidlaw Inc.
Debtors, and the remaining Objectors, Judge Kaplan finds that
Debtors' Disclosure Statement filed in support of its Plan
contains adequate information pursuant to Section 1125 of the
Bankruptcy Code. Objections not resolved or withdrawn were
overruled. Accordingly, the Court approved the Laidlaw Debtors'
disclosure statement on September 24, 2002.
Judge Kaplan finds that the document -- as it will be amended by
the Debtors to satisfy additional information requests proposed
by the Objectors -- contains the right amount of the kind of
information necessary to permit creditors to make informed
decisions when voting to accept or reject the plan.
The Debtors will prepare a final Disclosure Statement, bundle it
with copies of the Plan and deliver it to creditors with
customized ballots. The Debtors are targeting a mass mailing
within by the end of the first week of October.
Based on that schedule, Judge Kaplan directs that any objections
to confirmation of the amended plan will be due on November 8,
2002.
Judge Kaplan will convene a hearing to consider the confirmation
of the amended plan on November 19, 2002. (Laidlaw Bankruptcy
News, Issue No. 24; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
MESABA HOLDINGS: ALPA Opposes Formation of Big Sky Airlines
-----------------------------------------------------------
Leaders of the Air Line Pilots Association contacted Mesaba
management Friday to voice their displeasure at the company's
intention to use the purchase of Big Sky Airlines as negotiating
leverage during contract negotiations. Mesaba Airlines flies as
a Northwest Airlink.
"The company promised this pilot group that Mesaba pilots would
be used to grow the airline. Instead, our pilots are being laid
off while management uses profits from our pilots' hard work to
purchase a new carrier," said Captain Tom Wychor, chairman of
Mesaba Airlines ALPA unit. "This is clearly designed to hurt
our current negotiations and is devastating employee morale."
The union leadership tried to set up a meeting with Mesaba
management to discuss this issue, but the company has refused to
meet.
Mesaba pilots have been in contract negotiations for sixteen
months, and the pilot union leadership sees this latest purchase
as management's way of giving the pilot group a choice -- an
inadequate contract or no jobs.
"This is another horrible example of a company punishing its
employees and forgetting that it was the employees who
sacrificed and made the company profitable," said Captain Duane
Woerth, ALPA President. "Taking jobs away from the Mesaba pilots
after they agreed on a concessionary contract in '96 to help
Mesaba become profitable is just plain wrong."
Woerth went on to say, "This is a very dangerous trend in our
industry and ALPA will use all appropriate means, including
financial, legal, communications and other resources to end this
whipsawing tactic."
Captain Wakefield Gordon, chairman of Pinnacle Airlines ALPA
unit, another Northwest Airlink, said, "The Pinnacle pilots have
been down this road and our management, like the Big Sky
management, enticed us to enter a long term contract in exchange
for growth. Now we are saddled with mediocre wages, parsimonious
retirement and antiquated work rules. Northwest already has two
first-class feeders, so the only possible reason for this
transaction is to play one carrier against another."
The union leaders believe Mesaba CEO Paul Foley may use Big Sky
to divert work from Mesaba as a form of leverage during contract
negotiations. The Mesaba pilots have been working under a
concessionary contract since 1996 and have been in negotiations
for a new contract since June of 2001.
"This is a classic case of whipsawing one pilot group against
another. Using another pilot group as leverage is not only an
attack on Mesaba pilots, but also on the piloting profession,"
said Captain Mark McClain, chairman of Northwest Airlines ALPA
unit. "Northwest pilots support Mesaba pilots and will help
resist attempts at whipsawing pilot groups in the Northwest
family."
The purchase of Big Sky is reminiscent of the Air Tran spinoff
in '93. In a similar situation, the company decided to expand by
creating a separate company with profits earned by Mesaba.
Management then used its resources on the growth of Air Tran and
neglected Mesaba Aviation. It was not until the pilots took a
concessionary agreement in '96, that Mesaba began substantial
and sustained growth and profitability.
Founded in 1931, ALPA is the world's oldest and largest pilot
union, representing more than 66,000 pilots at 43 airlines in
the U.S. and Canada, including 950 Mesaba Airlines pilots. Visit
the ALPA Web site at http://www.alpa.org
MICRON: S&P Revises Outlook to Neg. over Industry Price Pressure
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its double-'B'-minus
corporate credit rating on Micron Technology Inc., and revised
its outlook to negative from stable, following Micron's
announcement that pricing pressures in the semiconductor memory
industry have accelerated.
Boise, Idaho-based Micron is the second-largest supplier of
"dynamic memory" chips in the world, with about a 21% share.
Micron had about $454 million of debt outstanding at Aug. 31,
2002.
Micron reported a net loss of $587 million for the August 2002
quarter, including a $174 million inventory revaluation,
compared to a $24 million net loss in the May 2002 period.
Revenues in the quarter were $748 million, only 32% of the
cyclical peak of $2.3 billion set in August 2000.
Industry-wide, unit demand growth is estimated to be about 40%-
50% in 2002, well below the historical 70%-100% range, while
industry revenues this year could well decline from the 2001
level. Unit growth is likely to be subpar through much of 2003,
and the industry is likely to remain oversupplied over at least
the intermediate term.
"While substantial earnings volatility continues to be
anticipated in Micron's current rating, sustained subpar
operating performance or significantly depressed liquidity could
still lead to lower ratings," said Standard & Poor's credit
analyst Bruce Hyman.
Micron is expected to retain its strong position in the industry
through the course of the challenging business cycle.
NATIONSRENT INC: Asks Court to OK Proposed Mediation Procedures
---------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates seek to establish
mediation procedures to assist them in the resolution of various
adversary proceedings and other matters relating to the
characterization of agreements entered into between the Debtors
and various defendants in the adversary proceedings.
According to Jeffrey L. Moyer, Esq., at Richards, Layton &
Finger, P.A., in Wilmington, Delaware, the mediation proceedings
will tackle these primary issues:
1) Whether the economic realities of the agreement at issue,
including the value of the equipment, return costs,
replacement costs and the need for an available inventory of
rental equipment compel the Debtors to purchase the
equipment;
2) Whether the defendants in the adversary proceeding are
entitled to an administrative priority claim for any
postpetition scheduled payments that the Debtors did not make
during the 60-day grace period provided by Section
365(d)(10);
3) Whether and to what extent a defendant in the adversary
proceeding is entitled to a claim with respect to any
equipment sold, lost, stolen or damaged prior to the Petition
Date; and
4) Whether any of the defendants in the adversary proceedings
have a first priority perfected security interest in the
equipment to the extent the agreement is deemed a financing
agreement and not a true lease.
In view of that, the Debtors believe that mediation will be
beneficial in resolving the issues encompassed by the adversary
proceedings. The Mediation Procedures will be subject to these
terms:
A. Inclusion of Proceedings in the Mediation Procedures
A proceeding may be included in the Mediation Procedures if
it relates to the characterization of a lease/financing
agreement for equipment used by NationsRent to rent to its
customers. A Proceeding will be classified as a Mediation
Proceeding, and therefore be subject to the Mediation
Procedures, upon the filing and service of a "Notice of
Designation" on a defendant to an Adversary Proceeding by the
Debtors.
Upon approval of the Mediation Procedures:
-- the Debtors will designate certain Proceedings for
resolution through the Mediation Procedures by serving
upon defendants in those Proceedings a Notice of
Designation indicating that the applicable Proceeding has
been submitted to the Mediation Procedures Designation;
and
-- The Debtors will send a copy of the Notice of Designation
to the mediator appointed by the Court, notifying the
Mediator of the pending mediation and of the need for the
scheduling of a mediation conference between the parties.
There are currently 26 adversary proceedings that the Debtors
anticipate will be subject to the Mediation Procedures. The
Debtors, however, reserve their rights to include further
proceedings filed on, or arising at, a later date in the
Mediation Procedures.
B. Reservation of Right to Withdraw Proceeding from the
Mediation Procedures
The Debtors will have the right, in their sole discretion, to
withdraw from the Mediation Procedures any Proceeding that
has been submitted.
C. Objection to Inclusion in the Mediation Procedures
Each defendant who is identified on the Preliminary Mediation
Defendants List who fails to file an objection to this Motion
or whose objection is overruled by the Court will be subject
to the Mediation Procedures upon receipt of service of the
Notice of Designation on that Defendant, without further
opportunity to object to the Mediation Procedures in this
Court.
D. Non-Included Defendants
A Defendant not identified on the Preliminary Mediation
Proceedings List that the Debtors serve with:
-- a copy of the Mediation Order;
-- a copy of the Mediation Procedures term sheet attached to
the Mediation Order; and
-- a Notice of Designation
will have 20 days from receipt of service to file an
objection with the Court to the inclusion in the Mediation
Procedures of any of its Proceedings identified in the Notice
of Designation.
If the Non-Included Defendant:
(a) fails to file with the Court an objection to its
inclusion in the Mediation Procedures within this 20-
day time period, the Non-Included Defendant will be
subject to the Mediation Procedures without further
order of the Court; and
(b) timely files an objection to its inclusion in the
Mediation Procedures, the Debtors will have 20 days
from the date the objection was filed to respond to the
objection and to request for a hearing before the Court
regarding inclusion of the applicable Proceeding in the
Mediation Procedures.
E. The Mediation Conference
The Mediator, in consultation with the parties, will set the
date of the mediation conference to be held in-person in
Wilmington, Delaware, unless the Mediator directs otherwise
or the parties mutually agree to another location. The
Mediator will schedule the initial Mediation Conference no
later than 30 days after the Proceeding becomes subject to
the Mediation Procedures. The Mediator may schedule one or
more Mediation Conferences subsequent to the Mediation
Conference if the Mediator believes that doing so would
further the likelihood of resolution.
F. Submission Materials
Not less than seven calendar days before the Mediation
Conference, each party will submit directly to the Mediator a
confidential written statement of no more than five pages,
exclusive of exhibits, setting forth the parties' respective
positions on the Mediation Proceedings. The Mediator may, at
any time, request that the parties submit additional
materials. The Submissions and all other materials provided
to the Mediator will not be filed with the Court and the
Court will not have access to them.
G. Persons Required to Attend
-- The applicable Defendant and the Defendant's attorney; and
-- A representative of the Debtors who has full authority to
negotiate and settle the matter on behalf of the Debtors.
H. Failure to Attend
Willful failure to attend any Mediation Conference in
accordance with the Mediation Procedures may be punishable as
contempt and the non-appearing party will be liable for the
costs and expenses, including attorneys' fees, incurred by
the appearing party. A person required to attend the
Mediation Conference is excused from appearing if all parties
and the Mediator agree in advance of the Mediation Conference
that the person need not attend.
I. Mediation Fees, Costs and Expenses
The fees and administrative costs of the mediation will be
shared equally by the Debtors and the Defendant, unless
otherwise ordered by the Mediator.
J. Mediation Procedures and the Local Rules
The Mediation Procedures are mainly based on Rule 9019-3 of
the Local Rules of Bankruptcy Practice and Procedure of the
Delaware Bankruptcy Court. Notwithstanding the Local Rules,
the Mediator will determine the methods, procedures and
timing of the mediation, in consultation with the Court, if
necessary. In the event of any conflict between the Local
Rules and the Mediation Procedures, the Mediation Procedures
will govern.
K. Confidentiality of Mediation Materials and Communications
Confidential materials and communications are not subject to
disclosure in any judicial or administrative proceeding.
These include:
-- All memoranda, work product and other materials contained
in the case files of the Mediator; and
-- Any communication made in or in connection with the
mediation that relates to a controversy being mediated,
whether made to the Mediator or to a party, or to any
person if made at the Mediation Conference.
L. Protection of Information Disclosed at Mediation
The Mediator and the participants in mediation are prohibited
from divulging, outside of the mediation, any oral or written
information disclosed by the parties or by witnesses in the
course of the mediation. No person may rely on or introduce
as evidence in any arbitral, judicial or other proceeding
evidence pertaining to any aspect of the mediation effort,
including but not limited to:
-- views expressed or suggestions made by a party with
respect to a possible settlement of the dispute;
-- the fact that another party had or had not indicated
willingness to accept a proposal for settlement made by
the Mediator;
-- proposals made or views expressed by the Mediator;
-- statements or admissions made by a party in the course of
mediation; and
-- documents prepared for the purpose of, in the course of or
pursuant to the mediation.
In addition, Rule 408 of the Federal Rules of Evidence, and
any applicable federal or state statute, rule, common law or
judicial precedent relating to the privileged nature of
settlement discussions, mediation or other alternative
dispute resolution procedures will apply. Information
otherwise discoverable or admissible in evidence, however,
does not become exempt from discovery, or inadmissible in
evidence, merely by being used by a party in the mediation.
M. Preservation of Privileges
The disclosure by a party of privileged information to the
Mediator does not waive or otherwise adversely affect the
privileged nature of the information.
N. Preparation of Orders
The Debtors will have the authority to compromise and settle
Mediation Proceedings without further Court order in
accordance with the Settlement Procedures approved by the
Court.
For all settlements falling outside the parameters of the
Settlement Procedures Order, the Debtors will submit fully
executed stipulations and orders to the Court with respect to
all settlements reached under the Mediation Procedures.
O. Final Disposition of Proceedings
Proceedings not resolved through the Mediation Procedures
will be resolved by the Court or another appropriate court or
forum.
P. Injunction
During the period that a Mediation Proceeding is subject to
the Mediation Procedures, the Debtors and the Defendant on
which the notice has been served will be enjoined from, among
other things, commencing or continuing any action or
proceeding in any manner or any place to resolve a Mediation
Proceeding other than through the Mediation Procedures.
However, all parties to the Adversary Proceedings may
continue to take discovery during the Mediation Proceeding.
This injunction will commence:
-- with respect to the Proceedings held by Defendants
identified on the Preliminary Mediation Proceedings List,
on the date that the applicable Notice of Designation is
filed and served;
-- with respect to Non-Included Proceedings:
(a) if no objection to inclusion in the Mediation
Procedures is timely filed, upon the expiration of the
20-day objection period; or
(b) if an objection to inclusion in the Mediation
Procedures is filed, upon the entry of an order of the
Court overruling the objection.
The Mediation Injunction will expire with respect to a
Mediation Proceeding only when the Mediation Procedures have
been completed with respect to that Proceeding. In addition,
Mediation Proceedings will remain subject to the automatic
stay after expiration of the Mediation Injunction through the
date of confirmation of a plan or plans of reorganization in
the applicable Debtors' Chapter 11 cases, unless the stay is
or has been earlier terminated by an order of the Court.
(NationsRent Bankruptcy News, Issue No. 19; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NationsRent Inc.'s 10.375% bonds due 2008 (NRNT08USR1),
DebtTraders reports, are trading at a penny on the dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NRNT08USR1
for real-time bond pricing.
NATUROL HOLDINGS: Modifies Terms of License Agreement with MGA
--------------------------------------------------------------
Naturol Holdings Ltd., (OTC:BB-NTUH) announces that on September
18, 2002, Naturol's board of directors approved a proposal by
MGA Holdings Limited whereby an exclusive License Agreement,
which was executed between Naturol's wholly owned subsidiary
Naturol Inc., and MGA was modified to a non- exclusive License
Agreement.
Naturol, Inc., a wholly owned subsidiary of Naturol, entered
into an Agreement with MGA on the 20th day of August, 2001
granting Naturol the exclusive North American rights under
certain patents held by MGA in a process for the extraction of
oils from natural plants and other materials. Under the terms of
the Agreement, Naturol was obligated to fund and advance the
commercial development of the technology, which included the
annual payment of a $360,000 license fee payable quarterly, in
addition to royalty payments. As part of the consideration for
the license agreement, Willow Holdings Inc., an affiliate of
MGA, received 9,331,321 shares of restricted common stock of
Naturol as partial consideration for the grant of the exclusive
license.
On August 28, 2002, MGA notified Naturol that as a result of the
inability of Naturol to make any substantial payment of the
license fee or to fund and advance the commercial development of
the technology, MGA considered Naturol in default in its
obligations under the terms of the Agreement. In an effort to
avoid a dispute over the potential termination of the Agreement,
Naturol and MGA agreed to the following changes in their
relationship:
1. MGA waived all payment obligations by Naturol under the
Agreement.
2. MGA and Naturol executed a new, revised non-exclusive
license agreement, which agreement superceded all terms and
conditions of the original Agreement.
3. Naturol has the option of converting the amended non-
exclusive license agreement to an exclusive license agreement.
4. Willow, agreed to return to Naturol, 9,331,321 shares of
common stock of Naturol issued to Willow.
5. MGA and Naturol agreed that MGA or its assigns will
assume operational control of Naturol's interest in its
subsidiary, Naturol Canada Limited, which is 49% owned by
Naturol and 51% owned by Isaac Moss and held in trust for
Naturol. Naturol will be provided access to all technological
developments relating to the technology as referenced in the
amended license agreement, which technology is being further
developed at the Prince Edward Island Food Technology Centre in
Canada. MGA will assume and indemnify Naturol of all outstanding
financial obligations incurred by Naturol or Naturol Canada
Limited in reference to the activities of Naturol Canada
Limited, including but not limited to the obligations to the
National Research Council of Canada Industrial Research
Assistance Program Contribution to Firms Agreement.
Additionally, MGA will continue to pay all future financial
obligations of Naturol Canada Limited relating to obligations of
Naturol Canada Limited to National Research Council of Canada
Industrial Research Assistance Program Contribution to Firms
Agreement.
6. MGA assumed all financial obligations relating to patent
and licensing issues, including past obligations by Naturol to
the firm of Koppel & Jacobs, patent counsel. MGA will provide
Naturol with access to all the benefits of the patents,
copyrights, and other intellectual property rights, which are
derived from or in relation to the technology referenced in the
amended non-exclusive license Agreement.
Concurrent with the actions taken above, Paul McClory,
beneficial owner of Willow, President, CEO and a director of the
Company, immediately resigned as an officer and director of the
Company.
NII HOLDINGS: Final Confirmation Hearing Rescheduled for Oct. 22
----------------------------------------------------------------
NII Holdings, Inc., previously known as Nextel International,
announced that the final confirmation hearing in its bankruptcy
proceedings before the U.S. Bankruptcy Court in Wilmington,
Del., which was originally scheduled for September 27, has been
postponed and has been rescheduled for October 22 at 12:30.
NII Holdings, Inc., formerly known as Nextel International, is a
substantially wholly owned subsidiary of Nextel Communications
(Nasdaq:NXTL). NII has operations in Mexico, Brazil, Peru,
Argentina, Chile and the Philippines. NII offers a fully
integrated wireless communications tool with digital cellular,
text/numeric paging, wireless Internet access and Nextel Direct
Connect(R), a digital two-way radio feature. Visit the Web site
at http://www.nextelinternational.com
NORTHWESTERN: Fitch Junks Ratings on Two Certificates Classes
-------------------------------------------------------------
Fitch Ratings downgraded the ratings of two classes issued by
Northwestern Investment Management Company CBO I Fund, Ltd. The
deal is a collateralized bond obligation backed predominantly by
high yield bonds.
Securities downgraded and removed from Rating Watch Negative:
-- Class B-1 fixed-rate notes to 'CC' from 'BBB-';
-- Class B-2 floating-rate notes to 'CC' from 'BBB-'.
Northwestern Investment Management Company CBO I Fund, Ltd.'s
collateral, as shown in the trustee report dated August 26,
2001, includes $17.08 million (5.0%) defaulted assets. The deal
currently contains another 17.3% assets rated 'CCC+' or below.
The class A overcollateralization test is failing at 105.91%
with a trigger of 115% and the class B overcollateralization
test is failing at 97.37% with a trigger of 109.25%.
In reaching its rating actions, Fitch reviewed the results of
its cash flow model runs after running several different stress
scenarios. Also, Fitch had conversations with Mason Street
Advisors, the portfolio manager, regarding the portfolio.
Fitch will continue to monitor this transaction.
OWENS CORNING: Asks Court to Permit Funds Transfer to OC Anshan
---------------------------------------------------------------
Rebecca E. Street, Esq., at Saul Ewing LLP, in Wilmington,
Delaware, informs the Court that Owens Corning has been
developing a market in China for its products since 1995. Owens
Corning has determined that the market for vinyl products in
China is growing at a rate that would permit Owens Corning
(Anshan) Fiberglass Co., Ltd., to profit.
OC Anshan is an indirect wholly owned non-debtor subsidiary of
Owens Corning through Owens Corning (China) Investments Company
Ltd., which is an indirect wholly owned non-debtor subsidiary of
Owens Corning through Owens Corning Cayman (China) Holdings, a
direct wholly owned non-debtor subsidiary of OC.
OC Anshan is located in north China, where 50% of the market for
vinyl products in China is located and close to Korea, where
there is also a growing market for vinyl products. OC Anshan
operates its insulation business out of a manufacturing
facility, which can easily accommodate an additional line of
business. OC Anshan has recently entered into an Equipment
Sales Agreement to purchase equipment used to manufacture vinyl
products.
OC Anshan is currently leasing its manufacturing facility from
Bank of China and Anshan Glass Works, an enterprise owned by the
Chinese government, pursuant to a lease set to expire in July
2004. During the term of the lease, OC Anshan has an option to
purchase the facility for $5,400,000. Bank of China has offered
to sell the manufacturing facility to OC Anshan for $3,000,000
if OC Anshan will purchase the facility now instead of at the
end of the term of the lease.
By this motion, the Debtors seek the Court's authority transfer
$4,000,000 funds from OC Investments to OC Anshan.
OC Anshan currently has a $3,430,000 accounts payable to OC
Investments, with OC Investments having a corresponding accounts
receivable from OC Anshan. The accounts receivable was
generated this year when the billing structure of the non-debtor
Chinese entities was realigned and centralized in OC
Investments.
Ms. Street relates that although OC Anshan and OC Investments
are non-Debtors, their actions are governed by the Order
granting the Debtors' cash management system. The transfer of
funds is specifically prohibited by the Order.
According to Ms. Street, the capital contribution is supported
by sound business reasons. The capital contribution permits OC
Anshan to borrow funds in order to take advantage of a greatly
reduced price for a manufacturing facility with the latest
technology in the Northeast region of China. OC Anshan is
strategically located in China where the demands for insulation
products and vinyl products are growing and will continue to
grow as that portion of China continues to develop.
Importantly, OC Anshan will become the first vinyl manufacturer
in China and is the only producer of fiberglass insulation
products in Northeast China within a 500-mile radius.
Additionally, the labor market in China can easily accommodate
the labor-intensive operation of the vinyl manufacturing
equipment. Finally, if OC Anshan exports vinyl products to
Korea and other Asian markets, the Chinese government provides
rebates to a Chinese company that exports products manufactured
in China. (Owens Corning Bankruptcy News, Issue No. 38;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PACIFIC GAS: Sempra May Purchase Section of North Baja Pipeline
---------------------------------------------------------------
Sempra may exercise its option to buy the 80-mile natural-gas
pipeline owned by PG&E Corp, according to Sempra Chief Executive
Officer Stephen Baum during a Merrill Lynch & Co., conference in
New York, according to a report from Bloomberg News.
The pipeline runs from Ehrenberg, Arizona, about 150 miles west
of Phoenix, through California to the Mexican border, where it
connects to a 135-mile pipeline owned by Sempra.
Mr. Baum notes that the section of the North Baja Pipeline owned
by PG&E's power-generation unit, National Energy Group, would be
a natural acquisition for Sempra. The North Baja Pipeline,
which began operating on Sept. 1, will supply gas to several
power plants, including Sempra's 600-megawatt Termoelectrica de
Mexicali plant, which is scheduled to begin operating in June
2003.
The pipeline cost $230 million to build, Daniel Taub at
Bloomberg reports. Spokespersons for PG&E and Sempra declined
Mr. Taub's request for comment about the value of PG&E's portion
of the pipeline. (Pacific Gas Bankruptcy News, Issue No. 45;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PENNZOIL-QUAKER: FTC Clears Asset Acquisition by Shell Oil Co.
--------------------------------------------------------------
Pennzoil-Quaker State Company (NYSE: PZL) confirmed that the
U.S. Federal Trade Commission has cleared its acquisition by
Shell Oil Company, a wholly-owned member of the Royal
Dutch/Shell Group of Companies (NYSE: RD). Shell Oil Company
and Pennzoil-Quaker State Company have entered into a consent
order with the FTC that resolves the agency's concerns regarding
the US group II base oil marketplace. The Company expects the
transaction to be completed on October 1, 2002. Following the
closing, Pennzoil-Quaker State Company shareholders will receive
$22 in cash per share.
* * *
As reported in the April 1, 2002 edition of Troubled Company
Reporter, Standard & Poor's placed its double-'B'-plus senior
secured and senior unsecured ratings for Pennzoil-Quaker State
Co., on CreditWatch with positive implications. PQS' double-'B'-
plus corporate credit rating, which is also on CreditWatch
positive, would be withdrawn upon completion of the transaction.
The rating actions followed the announcement that Shell had
entered into a definitive agreement to acquire PQS in a
transaction valued at about $2.9 billion, which includes the
assumption of about $1.1 billion in debt.
PENNZOIL-QUAKER: Expects to Close Transaction with Shell Today
--------------------------------------------------------------
Shell Oil Company, a wholly-owned member of the Royal
Dutch/Shell Group of Companies (NYSE: RD), has received U.S.
Federal Trade Commission clearance for the proposed acquisition
of Pennzoil-Quaker State Company (NYSE: PZL). Shell Oil Company
and Pennzoil-Quaker State have entered into a consent order
with the FTC that resolves the agency's concerns regarding the
US group II base oil marketplace. The transaction is expected
to be completed today, October 1.
"I am pleased that the FTC has concluded its review and we can
complete the acquisition of Pennzoil-Quaker State Company. The
acquisition of the leading passenger car motor-oil manufacturer
in the United States will make Shell a leader in both the U.S.
and global lubricants markets and further strengthen our
business," said Rob Routs, President and Chief Executive Officer
of Shell Oil Products U.S.
Under the terms of the order with the FTC, Shell Oil Company has
agreed that it will divest itself of Pennzoil-Quaker State
Company's 50 percent ownership interest in Excel Paralubes, a
base oil processing facility that is a joint venture between
Conoco Inc. and Pennzoil-Quaker State Company, and place it
immediately in a trust. The facility is capable of producing
about 21,000 barrels per day of group II base oil, the primary
base stock in motor oil, and is located adjacent to the Conoco
refinery near Lake Charles, Louisiana.
"Even after the divestiture Shell Oil will have access to base
oil from its wholly-owned and joint venture facilities in Port
Arthur, TX, Martinez, CA and Deer Park, TX in addition to
numerous base oil plants outside the US," said David Pirret,
Vice President Lubricants, Shell Oil Products US. "Overall, the
acquisition is a great strategic fit."
Plans to integrate the two lubricants organizations are
progressing rapidly, with top levels of management already
named.
Shell Oil Company is an affiliate of the Royal Dutch/Shell Group
of Companies. For more information, please visit
http://www.shell.com Shell Oil Products US is a leader in the
marketing of fuels, lubricants, coolants, services and solutions
to consumer and business-to-business customers in automotive,
commercial and industrial sectors. Shell Oil Products US also
operates refineries and a pipeline and terminal system, and has
a network of nearly 9,000 branded gasoline stations in the
Western United States. Shell Oil Company is a 50 percent owner
of Motiva Enterprises LLC, along with Saudi Refining, Inc.,
which refines and markets branded products through 13,000
stations in the eastern and southern United States.
PEREGRINE SYSTEMS: Wants to Hire Heller Ehrman as Corp. Counsel
---------------------------------------------------------------
Peregrine Systems, Inc., and its debtor-affiliates want to
employ and retain Heller, Ehrman, White & McAuliffe as Special
Corporate and Transactional Counsel.
In preparing for its representation, Heller Ehrman has become
familiar with the Debtors' business and affairs and many of the
potential business related issues that may arise in the context
of these cases.
The principal attorneys and paralegals designated to represent
the Debtors and their current standard hourly rates are:
Sarah A. O'Dowd $580 per hour
Robert C. Alexander $550 per hour
James C. Olson $525 per hour
Peter J. Benvenutti $510 per hour
Alan Jacobs $495 per hour
Joseph M. Lesko $395 per hour
Juan E. Zuniga $380 per hour
Matthew M. Gosling $350 per hour
Lawrence J. McSwiggan $350 per hour
Melissa K. Black $245 per hour
The professional services that Heller Ehrman will render to the
Debtors include:
a) providing advice in connection with corporate law
matters, merger and acquisition transactions, asset
acquisition and dispositions, corporate governance
matters, SEC reporting and compliance, stock listings,
and commercial law and intellectual property matters,
and other related corporate matters;
b) preparing various transaction documents, board and
committee presentations, SEC reporting and registration
documents, various corporate and commercial contracts
and intellectual property applications, registrations
and licensing documents and various other corporate
agreements, documents and instruments;
c) assisting bankruptcy counsel in preparation and filing
of various court papers, documents and related materials
in connection with the chapter 11 cases of Debtors; and
d) performing all other corporate, securities law,
intellectual property and commercial law services for
the Debtors that may be necessary and proper in these
proceedings.
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.
PETROLEUM GEO: Proposed Restructuring Spurs S&P to Keep Watch
-------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on oil
services company Petroleum Geo-Services ASA on CreditWatch with
developing implications, which implies that the ratings may be
raised, altered, or affirmed based on future events. PGO has
approximately 2.8 billion of debt and preferred stock
obligations outstanding.
The CreditWatch listing is as follows: The scheduling of an
extraordinary meeting for September 27, 2002, during which Umoe
AS, a Norwegian investment company that now owns more than 10%
of PGO, will nominate a new Board of Directors and propose an
authorization to increase the share capital of the company. The
revelation that Compagnie Generale de Geophysique now holds a
7.5% stake in PGO and will back Umoe's plan. Standard & Poor's
does not believe at this time that CGG intends to acquire PGO,
but CGG does appear to desire closer interaction with PGO's
seismic operations. If a transaction involving PGO's seismic
operations were to occur, Standard & Poor's would reevaluate
PGO's ratings. Standard & Poor's ongoing concerns about the
company's liquidity and debt-refinancing challenges and
uncertainty as to how Umoe will address them. While a change in
corporate management could result in an improvement in PGO's
viability, Standard & Poor's also is concerned about the current
financial condition of PGO given the strains of operating as a
distressed enterprise.
PGO is a large participant in the seismic services and floating
production, storage, and offloading vessel industries. PGO's
credit quality has deteriorated in recent years as a result of
the severe downturn in the seismic industry, and poor
investments that have saddled the company with a heavy debt
burden.
During the past year, concerns about the company's ability to
refinance or repay approximately $1 billion of debt that is
maturing in 2003 have resulted in the termination of the
company's merger with another competitor, and greatly reduced
the company's ability to access capital markets.
The CreditWatch listing will be resolved when events warrant.
* * *
As reported in the August 2, 2002 edition of the Troubled
Company Reporter, Fitch Ratings downgraded Petroleum Geo-
Services ASA senior unsecured debt rating to 'B' from 'BBB-' and
downgraded PGO's trust preferred securities to 'B-' from 'BB+'.
The Rating Outlook has been changed to Negative from Stable.
PHARMACEUTICAL FORMULATIONS: Posts Improved FY 2002 Performance
---------------------------------------------------------------
Pharmaceutical Formulations, Inc., announced that it had net
sales of $52.5 million for fiscal year 2002 compared with net
sales of $49.2 million for the prior fiscal year. The Company
incurred a net loss of $6.9 million for fiscal 2002 compared to
a net loss of $14.6 million for fiscal 2001. For the quarter
ended June 29, 2002, PFI had net sales of $13.7 million compared
with net sales of $12.2 million in the prior year quarter. The
Company incurred a net loss of $655,000 in the current quarter
compared with a net loss of $5.9 million in the prior year
quarter, which included $3.2 million of year-end adjustments for
inventory valuations, bad debts and other potential liabilities.
At June 29, 2002, the Company's working capital was a positive
$373,000 compared to a deficiency of $17.8 million at the prior
year-end.
While the softness in the general economy has persisted, the
Company has successfully continued to rebuild and expand its
customer base, and the sales growth, which began during the
second half of fiscal 2001, has continued throughout fiscal
2002. Net sales in each quarter of fiscal 2002 exceeded the
net sales of the comparable prior year quarter. During the
year, sales to brand name pharmaceutical companies rose to 12%
of total sales compared to 6% in the prior year, as we expanded
our contract manufacturing activities to additional products.
At the same time, the Company has seen the significant benefit
of ongoing efforts at cost reduction and operating efficiencies,
especially lower sales discounts and allowances and a decline in
raw material prices. In addition, in the fourth quarter, PFI
established a new relationship with a major national retailer to
whom shipments began in July 2002.
On December 21, 2001, ICC Industries Inc., converted $15 million
of loans due from PFI into 44,117,647 common shares, to increase
its ownership to 85.6% of the outstanding common shares.
Therefore, the Company is included in the consolidated tax
return of ICC as of that date. As a result, PFI has recorded a
tax benefit of $1,360,000 for the fiscal year ended June 29,
2002 and $574,000 for the quarter ended June 29, 2002. The
Company has also incurred a reduction in interest costs as a
result of the decrease in its debt.
In September 2002, PFI agreed in principle to sell its ownership
interest in Healthcare Industries to its partner, APG Inc., for
an aggregate of $1,050,000. Under the terms of the Redemption
Agreement, PFI received an initial payment of $325,000. The
remaining payments will be received in semi-annual installments
beginning December 31, 2002 and ending December 31, 2004, unless
accelerated by APG. In addition, PFI will receive semi-annual
payments of its share of Healthcare Industries' profits as long
as PFI has an ownership interest. The primary product marketed
by this joint venture was a line of anti-fungal aerosols. Our
investment in Healthcare Industries was $545,000.
As previously announced, in June 2002, holders of $2,081,000 in
principal amount of our 8% and 8.25% convertible subordinated
debentures agreed to extend the payment terms on those bonds to
June 15, 2003, at the current interest rate of 8% or 8.25%. In
exchange, they received a one-time up-front fee of $50 per
$1,000 of bond principal held by them. The privilege to
convert the bonds into our common stock was adjusted from $48.00
per share to $.34 on the 8% debentures and from $.39 per share
to $.34 on the 8.25% debentures. The remaining principal balance
of $3,526,000 was repaid to the bond holders in cash. In
addition, on June 10, 2002, PFI repaid $400,000 of bonds due the
New Jersey Economic Development Authority. Each of these
transactions was financed by loans received from ICC.
The Company has made a rights offering to its stockholders to
enable its stockholders, other than ICC, to be able to purchase
additional shares of its common stock at the same price as was
used to effectuate conversions of debt and preferred stock by
ICC, and to raise additional capital. Each holder of PFI common
stock at the close of business on May 7, 2002, other than ICC,
and each employee of PFI who was holder of an option to purchase
common stock, has received 2.8 subscription rights for each
share of common stock or stock option they held. Rights holders
are entitled to purchase one share of common stock for each
right held at a price of $.34 per share. An aggregate of
34,467,741 shares of common stock will be sold if all rights are
exercised. The offering is currently scheduled to expire on
October 23, 2002.
ICC has demonstrated its continued confidence in the Company's
management and business plan by providing loans to increase the
Company's working capital.
ICC, the holder of approximately 74.5 million shares
(approximately 87%) of the common stock of PFI, is a major
international manufacturer and marketer of chemical, plastic and
pharmaceutical products with 2001 sales in excess of $1.6
billion.
Pharmaceutical Formulations' June 29, 2002 balance sheet shows a
total shareholders' equity deficit of about $18 million.
POLAROID CORP: Committee Wants to Retain Wind Down Associates
-------------------------------------------------------------
In accordance to the Asset Sale Order, the Official Committee of
Unsecured Creditors, in the chapter 11 cases involving Polaroid
Corporation and its debtor-affiliates, is primarily responsible
for the reconciliation and allowance of general unsecured
claims, provided that it consults, in good faith, with the
Debtors and OEP. In addition, the Committee was granted the
right to appoint a plan administrator that will, inter alia:
(a) complete the claims resolution process begun by the
Committee; and
(b) wind down the Debtors' estates.
Accordingly, in anticipation of the filing of the Amended Joint
Plan of Reorganization, the Committee seeks the Court's
authority to retain Wind Down Associates LLC as Chapter 11 wind
down agent and future plan administrator, nunc pro tunc to
August 7, 2002.
Brendan Linehan Shannon, Esq., at Young Conaway Stargatt &
Taylor LLP, in Wilmington, Delaware, relates that Wind Down
provides dissolved business management services and is a wholly
owned subsidiary of Bridge Associates LLP. Bridge is known to
provide turnaround and crisis management services. Wind-down
specializes in claims resolution and in-court and out-of-court
wind downs and liquidations. Wind Down has a professional
clerical staff, which has the capacity and the experience to
reconcile claims against the Debtors and to manage the objection
process in a timely and efficient manner. Moreover, Wind Down
has served as liquidation consultants to a diverse group of
debtors like Agribiotech Inc., Spinnaker Coatings, Inacom Corp.,
Transcom and Anchor Glass Container.
With the $5,000,000,000 total claims filed against the Debtors,
Mr. Shannon explains, the Committee requires the services of an
experienced professional to assist and advise it with respect to
the claims resolution process. The Committee chose Wind Down
against three other candidates because it believes that Wind
Down has the expertise to undertake the claims resolution
process and continue it through post-confirmation. The
Committee also believes that Wind Down can undertake all the
other duties of a plan administrator in the most cost-effective
manner.
If retained, Wind Down will provide these services:
1. As wind down agent:
(a) evaluate data availability and begin the process of
reviewing and extracting data necessary to reconcile
proofs of claim. Organize and set-up a claims
reconciliation process designed to effectively reconcile,
among other things, over-stated and inappropriate
secured, priority and administrative expense claims;
(b) reconcile, if necessary and as appropriate, secured,
priority, administrative expenses and unsecured claims;
(c) review case to date activity to familiarize Wind Down
with remaining assets, claims activity, issues and
disputes in the case;
(d) evaluate potential avoidance actions and fraudulent
conveyances retained by the estate and not previously
released;
(e) assist the Debtors with the consummation of the Plan,
including necessary filings with the Internal Revenue
Services and other federal, foreign, state and local
authorities as required;
(f) establish a cash management program for the Debtors;
(g) begin the planning process for dissolution of the
Debtors, including, fact gathering and coordinating of
the preparation of any outstanding and final tax returns;
(h) review, establish, negotiate and procure insurance to
satisfy the requirements of the Debtors;
(i) review all cash distributions by the Debtors in excess of
$15,000 and, to the extent Wind Down objects to the
disbursement, provide written notice of the objection to
the Debtors and their legal counsel; and
(j) perform other tasks reasonable requested by the
Committee.
2. As Plan Administrator:
(a) take actions as required or allowed pursuant to the
Plan, and complete the liquidation of the Debtors'
remaining assets after the confirmation of the Plan;
(b) reconcile, if necessary and as appropriate, claims
pursuant to the Plan;
(c) receive, conserve and manage the estate's assets, and
sell or otherwise dispose of the assets for a price and
upon the terms and conditions as it deems most beneficial
to the estate, seek approval of the Bankruptcy Court, if
necessary or appropriate, and execute deeds, bills of
sale, assignments and other instruments in connection
therewith;
(d) protect, perfect and defend the title to any assets of
the estate and enforce any bonds, mortgages or other
obligations or liens owned by the estate;
(e) prosecute or settle litigation claims and, in connection
therewith, participate in or initiate any proceeding
before the Bankruptcy Court or any other court of
appropriate jurisdiction and participate as a party or
otherwise in any administrative, arbitration or other
non-judicial proceeding on behalf of the estate and
pursue actions to settlement or judgment, provided,
however, that the Plan Administrator will seek the
approval of the Bankruptcy Court and the Committee or,
from and after the effective date of the Plan, the Plan
Committee before entering, on the final basis, into any
settlement of a litigation claim in excess of $100,000.
In connection with any compromise or settlement, the Plan
Administrator will further consult, in good faith, with
OEP and the Agent with respect to the compromise or
settlement in accordance with the terms of the Sale Order
and the procedures set forth in the Plan;
(f) file tax returns as may be required by federal, foreign,
state or local taxing authorities;
(g) calculate and oversee distributions to the holders of
claims entitled to distributions in accordance with the
terms of the Plan and the Sale Order;
(h) make arrangements as the Plan Administrator believes are
in the best interest of the estate with regard to the
retention of records and the provision of office space
and staff needed to effect the terms of the engagement;
(i) obtain and pay for liabilities and casualty insurance as
the Plan Administrator will reasonably deem necessary
for the protection of the estate, Wind Down and the Plan
Administrator;
(j) consult with or engage attorneys, accountants, appraisers
or other parties deemed by the Plan Administrator to have
qualifications necessary to assist him in the proper
administration of the estate;
(k) seek approval, where required or appropriate, from the
Bankruptcy Court, and the Committee or, from and after
the effective date of the Plan, the Plan Committee and
to the extent required by the Sale Order, from OEP and
the Agent, for actions taken or to be taken in
furtherance of the execution of the terms set forth in
the Plan or the Engagement Letter;
(l) testify as required in connection with any litigation
involving the assets of the Debtors or any motion before
the Bankruptcy Court;
(m) administer the Debtors' estate until the liquidation or
abandonment of the Debtors' assets remaining at the
effective date is complete and to render a final
accounting which will be presented to the Bankruptcy
Court and the Plan Committee for approval and for the
discharge of the Plan Administrator, upon notice to the
United States Trustee and the Plan Committee and other
parties-in-interest as the Bankruptcy Court may direct;
and
(n) perform other tasks reasonably requested by the Committee
or, from and after the effective date of the Plan, the
Plan Committee.
Mr. Shannon informs Judge Walsh that Mark S. Stickel, a managing
director at Wind Down, will be the principal responsible for the
overall engagement during the pre-confirmation period, as
Chapter 11 wind down agent and will act as the Plan
Administrator upon the consummation of the Plan. Other
professionals and staff of Wind Down will assist him during both
periods as their particular expertise may become relevant to
these assignments.
In return, the Committee proposes to compensate Wind Down these
fees and expenses:
(a) The services performed by Mr. Stickel for the benefit of
the Debtors will be billed by Wind Down at $300 per hour;
(b) The compensation payable to Wind Down with respect to any
other professional will be based on the hours charge,
which range from $90 to $300 per hour. Monthly fees
under the Engagement Letter will not exceed $60,000 for
the first two months of the engagement, $40,000 for the
next eight months and $25,000 for each month thereafter
until the termination of the engagement; provided,
however, that to the extent the parties agree to a change
in scope for the engagement, the monthly fee limitations
will be reviewed and, upon approval of the Bankruptcy
Court or with the prior written consent of the Committee,
OEP and the Agent, increased or decreased,
correspondingly to reflect the changes. To the extent
that the fees do not exceed the fee limitations, the
unused portion of the amount for a particular month may
be carried forward and applied in subsequent periods;
(c) Wind Down staff will be reimbursed for all reasonable
and documented out-of-pocket expenses incurred in
connection with the engagement, including but not limited
to: delivery and postage costs, photocopying expenses,
telephone and facsimile charges and travel expenses;
(d) Wind Down will be paid certain success fees, namely:
(i) a success fee paid by the Debtors equal to 5% of
the amount, if any, by which the Estate Costs are
less than $27,000,000;
(ii) a specific success fee paid by the Debtors equal to
$40,00 if 100% if the face amount of all claims
filed against the Debtors and 95% of the face
amount of all other Claims filed against the
Debtors are resolved by final and non-appealable
court order on or before April 30, 2003; and
(iii) pursuant to the Asset Sale Agreement between the
Debtors and OEP, in the event the Estate Costs are
less than $27,000,000, Wind Down will be entitled
to receive an additional success fee -- Level One
Success Fee -- equal to $440,000. The Level One
Success Fee will be paid to Wind Down by the
Debtors to the extent that the Debtors have cash
funds available for the payments thereof; provided,
however, that the Debtors will not be required to
sell or liquidate the Capital Stock in order to
make cash funds available for any Level One Success
Fee payment. To the extent that the Debtors do not
have cash funds available for the payment, the
remaining unpaid balance of the Level One Success
Fee will be paid on these terms:
-- OEP will pay Wind Down 65.91% of the Unpaid
Balance; and
-- the Agent will pay Wind Down 34.09% of the
Unpaid Balance;
(iv) in the event OEP is obligated to pay any Estate
Costs out of the First Basket, Wind Down will be
entitled to receive an additional success fee --
Level Two Success Fee -- equal to 3% of the
remaining unpaid balance of the First Basket plus
$240,000. The Level Two Success Fee will be paid
as:
-- OEP will pay Wind Down the First Basket Fee,
plus $90,000; and
-- the Agent will pay Wind Down $150,000;
(v) in the event the Agent is required to pay any
Estate Costs out of the Second Basket, but OEP is
not obligated to pay any Estate Costs out of the
Third Basket, Wind Down will be entitled to
receive an additional success fee 00 Level Three
Success Fee -- equal to 3% of the remaining unpaid
balance of the Second Basket plus $90,000, to be
paid as:
-- the Agent will pay Wind Down the Second Basket
Fee; and
-- OEP will pay Wind Down $90,000;
(vi) in the event OEP is obligated to pay any Estate
Costs out of the Third Basket but after payment
there remains an unpaid balance in the Third
Basket, Wind Down will be entitled to receive an
additional success fee -- Level Four Success Fee --
equal to 3% of the remaining unpaid balance. OEP
will pay the Level Four Success Fee to Wind Down;
and
(e) Wind Down will be entitled to draw payment for the fees
and expenses from available cash on a monthly basis and
will be subject to any outstanding orders or local rules
of the Bankruptcy Court governing the payment of
professionals in these cases. Each payment will be
based on a corresponding monthly invoice that will set
forth in reasonable detail the fees and expenses. Copies
of the invoice will be promptly provided to the Debtors,
OEP and the Agent and in the case of invoices provided
prior to the effective date of the Plan to the Committee,
and in the case of invoices provided on or after the
effective date of the Plan, to the Plan Committee.
Wind Down intends to apply to the Court for allowances of
compensation and reimbursement of expenses in accordance with
the applicable provisions of the Bankruptcy Code, the Bankruptcy
Rules, the local rules of the United States Bankruptcy Court for
the District of Delaware and the orders of this Court for all
services performed and incurred until the confirmation of the
Plan.
Mr. Stickel assures the Court that Wind Down does not represent
any other entity having an adverse interest in connection with
the matters for which it is to be retained in these cases within
the meaning to Rule 2014 of the Bankruptcy Rules, except:
(a) Michael L. Newsom, who performs environmental consulting
and other consulting services for Wind Down, performs
environmental consulting services for BOC Gases, which is
a creditor in these Chapter 11 cases. The consulting
services is wholly unrelated to the Debtors' cases; and
(b) Wind Down has been involved in and may in the future be
involved in matters and transactions with certain other
financial institutions, attorneys or accounting firms
that may be creditors or parties-in-interest in these
Chapter 11 cases. However, Wind Down's interactions
with these financial institutions were not and will not
be related to the Debtors' cases. (Polaroid Bankruptcy
News, Issue No. 24; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
PURCHASEPRO.COM: Gordon & Silver Serving as Chapter 11 Counsel
--------------------------------------------------------------
The U.S. Bankruptcy Court for the District of Nevada gave its
stamp of approval to PurchasePro.com, Inc., to employ Gordon &
Silver, Ltd., as its reorganization counsel.
The Debtor needs Gordon & Silver to:
i) prepare schedules, statements, applications and reports
for which the services of an attorney are necessary;
ii) advise the Debtor of its rights and obligations and its
performance of its duties during the administration of
these cases;
iii) assist the Debtor in formulating a plan of
reorganization and disclosure statement and obtaining
approval and confirmation;
iv) represent the Debtors in all proceedings before this
Court or other courts with jurisdiction over these
cases; and
v) represent the Debtor in a proposed sale of substantially
all of its assets.
Gordon & Silver's will bill the Debtor at its current hourly
rates ranging from:
Paraprofessionals $100 - $110 per hour
Law Clerks $115 per hour
Associates $120 - $275 per hour
Shareholders $290 - $425 per hour
PurchasePro.com, which offers strategic sourcing and procurement
software solutions, filed for chapter 11 protection on September
12, 2002. Gregory E. Garman, Esq. at Gordon & Silver, Ltd.,
represents the Debtors in their restructuring efforts. The
Debtor's Chapter 11 Plan and Disclosure Statement is due on
January 9, 2003. When the Company filed for protection from its
creditors, it listed $41,943,000 in total assets and $20,058,000
in total debts.
RELIANCE GROUP: Pres. & CEO Paul Zeller Staying Until March 31
--------------------------------------------------------------
M. Diane Koken, Insurance Commissioner of the Commonwealth of
Pennsylvania, in her official capacity as Liquidator of Reliance
Insurance Company, argued to the U.S. Bankruptcy Court for the
Southern District of New York that Paul Zeller's continued
employment is unnecessary.
Ann B. Laupheimer, Esq., at Blank, Rome, Comisky & McCauley,
reminds Judge Gonzalez that Reliance Group Holdings, Inc., and
the Liquidator are litigating over $95,000,000 that RGH
"improperly" took from RIC. The funds are held by RGH in a
constructive trust for the benefit of RIC.
The Debtors list RIC as an unsecured creditor, owed
$300,000,000. Accordingly, RIC has a significant interest in the
expenditure of the Debtors' limited funds and the proper
management of the Debtors in bankruptcy.
The Debtors seek to continue the employment of Mr. Zeller as the
President and Chief Executive Officer through March 31, 2003 at
an annual salary of $480,000 with an additional retention bonus
of $50,000 due on October 1, 2002. Mr. Zeller, the former
Deputy General Counsel of RGH and Vice President of RIC, also
received a $100,000 "retention bonus" upon execution of his
employment agreement.
Ms. Laupheimer recounts that on June 24, 2002, the Liquidator
commenced a civil action against former directors and officers
of the Debtors, including Mr. Zeller, for breach of fiduciary
duty, professional negligence, aiding and abetting, voidable
preferences, and violations of the Pennsylvania Insurance
Holding Company Act, 40 P.S. Section 991.1412.
The Debtors characterize Mr. Zeller's employment as absolutely
necessary to their continued business and in the best interest
of their estates and creditors. In support of the Motion for
continued employment, the Debtors assert that, "due to his
extensive experience at RGH and RFS and his supervision of the
Debtors' restructuring efforts since the commencement of these
cases, Mr. Zeller has detailed knowledge of and familiarity with
the Debtors' affairs, which have enabled him to effectively
manage the Debtors' estates and contribute to reduce the
Debtors' outside counsel fees."
But Ms. Laupheimer notes that the Motion provides no explanation
for these characterizations. It does not explain how a defunct
holding company, whose only operating unit is insolvent and has
been seized by the Insurance Department of the Commonwealth of
Pennsylvania needs a "CEO" to the tune of a half million dollars
per year, Ms. Laupheimer says. Nor does it explain the
"reduction" in counsel fees, which are the only significant
expense of the defunct company, Ms. Laupheimer adds.
Ms. Laupheimer argues that the characterization of Mr. Zeller as
"effective" in his management of the Debtors is unsupported at
best. The Debtors are not conducting ongoing business and their
principal operating subsidiary, RIC, is in a liquidation
proceeding under the direct control and supervision of the
Liquidator.
Furthermore, the Motion lacks any factual basis to assess the
services that Mr. Zeller has rendered to date or will render in
the future to justify the exorbitant salary proposed or the
amount of time he has devoted or will devote to the Debtors'
affairs.
Moreover, Ms. Laupheimer says, the Motion neither addresses the
level of Mr. Zeller's expertise nor articulates why his
expertise would provide value to the Debtors' estates. It lacks
any discussion of whether the proposed salary is competitive for
similar positions of responsibility. The Debtors do not point
to a single material accomplishment achieved during Mr. Zeller's
initial tenure, aside from the purported "oversight" of outside
counsel since his retention in October 2001. Meanwhile, since
the commencement of these cases, the estates' professionals have
accrued over $7,000,000 in fees and expenses.
Because Mr. Zeller is presently a defendant in a pending D&O
Action commenced by the Liquidator, his engagement as the
Debtors' CEO will permit him the opportunity to continue to act
for the benefit of himself as well as his co-defendants in that
litigation and to the potential detriment of the Debtors and
their creditors including RIC, to whom Debtors concededly owe
almost $300,000,000.
If the Court grants the Motion, the Liquidator expressly
reserves the right to seek disgorgement of Mr. Zeller's
compensation (including bonuses) if and when payment of the
compensation would deplete the Fund.
* * *
Despite the RIC Liquidator's objection, Judge Gonzalez grants
the Debtors' motion to extend Mr. Zeller's employment until
March 31, 2002, and under the terms of an Amended Employment
Agreement, provide Mr. Zeller with:
1) a $50,000 retention bonus payable on October 1, 2002. Mr.
Zeller will return the bonus if he resigns without good
reason or is terminated for cause prior to March 31, 2003.
RGH reserves the right to recover the bonus in court if Mr.
Zeller fails to return it; and
2) two weeks vacation for the period from October 1, 2002
through March 31, 2003. (Reliance Bankruptcy News, Issue
No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900)
SEVEN SEAS: Signs-Up CIBC World Markets for Financial Advice
------------------------------------------------------------
Seven Seas Petroleum Inc., (Amex: SEV) has engaged CIBC World
Markets Corp., to provide financial advice in connection with a
possible sale of its interest in the Guaduas Oil Field, its
production facilities, and the forty-mile Guaduas-La Dorada
pipeline which connects the field to Colombia's existing
pipeline infrastructure.
Seven Seas Petroleum Inc., is an independent oil and gas
exploration and production company operating in Colombia, South
America.
Seven Seas Petroleum's June 30, 2002 balance sheets show a total
shareholders' equity deficit of $66,000.
SLI INC: Turns to FTI Consulting, Inc. for Financial Advice
-----------------------------------------------------------
SLI, Inc., along with its debtor-affiliates, asks for authority
from the U.S. Bankruptcy Court for the District of Delaware to
bring-in FTI Consulting, Inc., as their financial advisors.
The Debtors tell the Court that FTI Consulting has a wealth of
experience in providing financial advisory services in
restructurings and reorganizations and enjoys an excellent
reputation for services it has rendered in large and complex
chapter 11 cases.
The Debtors relate that PricewaterhouseCoopers LLP used to
provide services to the Debtors and on August 2002, FTI
Consulting purchased the Business Recovery Services practice and
related assets and receivable of PwC. Accordingly, the Debtors
wish to retain FTI Consulting to preserve the institutional
knowledge gained by the Business Recovery Services in PwC's
engagement.
FTI Consulting will provide:
a) assistance to the Debtors in the preparation of financial
relates disclosures required by the Court, including the
Schedules and Assets and Liabilities, the Statement of
Financial Affairs and Monthly Operating Reports;
b) assistance to the Debtors with information and analyses
required pursuant to the Debtors' Debtor-In-Possession
financing including preparation for hearings regarding the
use of cash collateral and DIP Financing;
c) assistance with the identification and implementation of
short-term cash management procedures;
d) advisory assistance in connection with the development and
implementation of key employee retention and other critical
employee benefit programs;
e) assistance and advice to the Debtors with respect to the
identification of core business assets and the disposition
of assets and liquidation of unprofitable operations;
f) assistance with the identification of executory contracts
and leases and performance of cost/benefit evaluations with
respect to the affirmation of rejection of each;
g) assistance regarding the valuation of the present level of
operations and identification of areas of potential cost
savings, including overhead and operating expense reduction
and efficiency improvements;
h) assistance in the preparation of financial information for
distribution to creditors and others including cash flow
projections and budgets, cash receipts and disbursement
analysis, analysis of various asset and liability accounts
and analysis of proposed transactions for which Court
approval is sought;
i) attendance at meetings and assistance in discussions with
potential investors, banks and other secured lenders, the
Creditors' Committee appointed in this chapter 11 case, the
U.S. Trustee, other parties in interest and professionals
hired by the same, as requested;
j) analysis of creditor claims by type, entity and individual
claims, including assistance with development of database
to track such claims;
k) assistance in the preparation of information and analysis
necessary for the confirmation of a Plan of Reorganization
in this chapter 11 case;
l) assistance in the evaluation and analysis of avoidance
actions, including fraudulent conveyances and preferential
transfers;
m) litigation advisory services with respect to accounting and
tax matters, along with expert witness testimony on case
relates issues as required by the Debtors; and
n) other general business consulting or assistance as
the Debtors' management or counsel may deem necessary that
are consistent with the role of a financial advisor and not
duplicative of services provided by other professionals in
this proceeding.
FTI Consulting's customary hourly rates range from:
Senior Managing Director $525 - $595 per hour
Directors/Managing Directors $370 - $525 per hour
Associates/Consultants $185 - $345 per hour
Administration/Paraprofessionals $ 75 - $140 per hour
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.
TELEGLOBE COMMS: Court Okays Settlement Agreement with Broadwing
----------------------------------------------------------------
Broadwing Inc., (NYSE:BRW) announced that the US bankruptcy
court and Canadian Monitor overseeing the reorganization of
Teleglobe have approved a settlement agreement releasing
Broadwing from its obligations to Teleglobe.
Under the settlement agreement:
-- Broadwing is immediately released from its obligation
to provide service to Teleglobe. Teleglobe terminates 52 (10
gigabit) long-term capacity circuits as well as all additional
purchase obligations with Broadwing.
-- Broadwing terminates its obligation to purchase
international services from Teleglobe.
-- Both parties are released from any outstanding claims
against the other party.
-- Residual services both parties are providing each other
remain in place and will be paid on a monthly basis by each.
-- Broadwing paid $4.25 million to Teleglobe.
As a result of this settlement agreement, Broadwing expects to
recognize a $41.2 million non-recurring, non-cash benefit in
revenue for the third quarter of 2002.
Customers of Broadwing's international services remain
unaffected by this termination. The company continues to offer a
full suite of international voice, data, and IP products and
services through several global service partners.
Broadwing Inc., (NYSE:BRW) is an integrated communications
company comprised of Broadwing Communications and Cincinnati
Bell. Broadwing Communications leads the industry as the world's
first intelligent, all-optical, switched network provider and
offers businesses nationwide a competitive advantage by
providing data, voice and Internet solutions that are flexible,
reliable and innovative on its 18,500-mile optical network and
its award-winning IP backbone. Cincinnati Bell is one of the
nation's most respected and best performing local exchange and
wireless providers with a legacy of unparalleled customer
service excellence and financial strength. The company was
recently ranked number one in customer satisfaction by J.D.
Power and Associates for local residential telephone service and
residential long distance among mainstream users for the second
year in a row. Cincinnati Bell provides a wide range of
telecommunications products and services to residential and
business customers in Ohio, Kentucky and Indiana. Broadwing Inc.
is headquartered in Cincinnati, Ohio. For more information,
visit http://www.broadwing.com
TELESPECTRUM: Sets-Up Business Plan to Challenge Auditors' Doubt
----------------------------------------------------------------
On April 29, 2002, TeleSpectrum Worldwide, Inc., entered into an
agreement with its bank lenders that resulted in a
recapitalization of its balance sheet and a reduction of its
debt. As a result of the recapitalization, the amounts due under
its existing credit facilities totaling approximately $162.2
million at the time of recapitalization, which consisted of
outstanding debt, accrued interest and fees, were converted into
(a) a three-year term facility of $25 million (face amount)
under an amended and restated credit agreement, (b) $40 million
(stated value) of the Company's Series A Preferred Stock, and
(c) shares of the Company's Series B Convertible Preferred Stock
which will convert into common stock representing 95% of the
Company's common outstanding after such conversion. The three
year term facility is secured by, among other things, the
Company's assets and outstanding trade receivables, bears
interest at a base rate as defined in the agreement plus 400
basis points, and matures in May 2005. Under the terms of the
Agreement, the Company is required to meet certain financial
covenants, including a fixed charge coverage ratio and Earnings
Before Interest Taxes, Depreciation, and Amortization (EBITDA)
targets. The Series A Preferred Stock has a 10% annual dividend
rate, which accrues and is payable either in cash or in
additional shares of Series A Preferred Stock. Approximately
18,903 shares of the Series B Convertible Preferred Stock was
converted into 155,435,035 shares of the Company's common stock
immediately after the closing of the recapitalization, and the
remainder will convert into shares of common stock as soon as
the Company amends its Certificate of Incorporation to increase
the authorized number of shares of common stock. Such amendment
requires approval of the Company's shareholders.
In addition to entering into the amended credit agreement and
completing the recapitalization with its bank lenders on April
29, 2002, other debt balances outstanding to unsecured creditors
were restructured from $15.2 million to approximately $0.7
million, with cash payments of $1.6 million. Certain commercial
liabilities, primarily accounts payable, which had a carrying
value of $3.0 million were also settled through cash payments of
$1.0 million and notes payable of $0.3 million. Additional
settlements were reached on certain real estate lease
obligations that will result in a reduction of $4.9 million of
future lease commitments through cash payments of $0.5 million
and notes payable of $0.4 million. As part of the debt
restructuring, the Company divested itself of its ownership
interest in eSatisfy.com. The Company recorded a gain on the
above for approximately $11.2 million.
As a result of these transactions, TeleSpectrum recorded a gain
on the extinguishment of debt and restructuring of the above
obligations for approximately $141.7 million.
During May 2002, J. Peter Pierce announced his resignation from
the Company's Board of Directors and as Chief Executive Officer
of the Company and Christopher Williams also announced his
resignation from the Company's Board of Directors and as Chief
Operating Officer. In addition, during May 2002 Joe Nezi,
Executive Vice President of Sales announced his resignation from
the Company and was later replaced by William Pieper. In early
June, Price Brannon, Executive Vice President, Technology
Services, resigned from the Company and was subsequently
replaced by James Wallace as Senior Vice President of
Information Technology.
As a result of the recapitalization, the Company's Board of
Directors is now comprised of four individuals. They are: Kevin
Flannery (Chairman of the Board), Brad Scher, Gene Davis, and
Charles Sweet.
As a result of the resignations of Peter Pierce and Chris
Williams, an Operating Committee was created to run the day-to-
day operations of the Company. This Committee is comprised of
five individuals of the Company's management. They are: Kurt
Dinkelacker - Executive Vice President and Chief Financial
Officer, Susan Parker - Executive Vice President of Customer
Service, Glenn Smith - Executive Vice President of Call Center
Operations, William Pieper - Executive Vice President of Sales,
and James Wallace - Senior Vice President of Information
Technology. The Committee assists with developing and
implementing the strategic and tactical goals of the Company.
At June 30, 2002, the Company had a stockholders' deficit of
$18.2 million, and reported net income of approximately $128.9
million during the first six months of 2002. The amended
agreement requires compliance with stipulated covenants,
including EBITDA, fixed charge, and capital expenditures, which
was based on the Company's updated business plan for 2002.
During the second quarter of 2002, the Company failed to meet
the financial covenant terms of the Amended and Restated Credit
Agreement dated April 29, 2002. The Company obtained a limited
waiver from the bank group for the non-compliance with EBITDA
and fixed charge coverage covenant for the second quarter. The
Company also obtained an amendment from the bank group to modify
future quarterly covenants. Management believes based on the
revised forecast levels that these covenants are attainable.
Management believes that the restructuring of its bank debt and
other liabilities that occurred on April 29, 2002, together with
existing working capital and projected results for 2002, should
enable the Company to generate sufficient cash flow to meet its
operating cash needs, fund required capital expenditures, and
satisfy its debt service and other financing requirements. As a
result of continuing customer losses and a declining revenue
base, the Company implemented a significant cost reduction plan
in January 2002. This plan included the reduction of corporate
overhead and the closure of five additional contact centers. As
of June 30, 2002, the Company estimates that it will save over
$15 million in connection with this plan for 2002. On an
annualized basis, this plan will reduce fixed expenses by
approximately $19 million. Subsequent to the January plan, the
Company instituted additional cost reductions in March to
include the reduction of additional corporate overhead and the
closure of one additional contact center. The Company estimates
these savings will total $1.5 million in 2002 and $2.5 million
annually thereafter. The impact of these reductions was first
realized in June 2002.
The Company does not have a line of credit or other short-term
borrowing facility available. In addition, covenants in its
amended credit agreement restrict the Company's ability to
pledge assets as collateral for other borrowings.
The Company's 2002 operating plan assumes a stabilization of the
Company's revenue base and an improvement in operating profit
margins from historical levels. The Company's ability to meet
its obligations in the ordinary course of business is dependent
upon successful implementation of its operating plan and
stabilization of its operations. Uncertainties exist with
respect to management's plans, because events and circumstances
frequently do not occur as expected, and those differences may
be material. These uncertainties raise substantial doubt about
its ability to continue as a going concern.
TII NETWORK: Fourth Quarter Net Loss Balloons to $4.5 Million
-------------------------------------------------------------
TII Network Technologies, Inc. (Nasdaq: TIII), a leading
provider of telecommunications network protection and management
products, announced its results of operations for the fiscal
2002 fourth quarter and year ended June 28, 2002.
Revenues for the fourth quarter of fiscal 2002 were $7.3
million, compared to $9.8 million in the year ago comparable
quarter. Revenues for fiscal year 2002 were $29.8 million
compared to $39.3 million during fiscal 2001. The decrease was
primarily due to the continuing telecommunications industry-wide
slowdown, cutbacks by telecommunications service providers in
their construction and maintenance budgets, actions taken by the
service providers to reduce inventory levels and a reduction in
the number of telephone access lines per subscriber being
deployed.
During this telecommunications industry-wide slowdown, the
Company has been restructuring and downsizing its operations to
reduce its cost structure to enable it to operate profitably at
lower sales levels and position itself for profitable growth
with the recovery of the market for its products. Despite
previous industry predictions of a turnaround, this slowdown
continued through the end of fiscal 2002. As a result, in the
fourth quarter of fiscal 2002, the Company took additional
actions to reduce costs and improve operating efficiencies.
Included in these actions were the further downsizing and
consolidation of operations, additional workforce reductions,
discontinuance of a product line and equipment and inventory
write-downs. Accordingly, the Company recorded charges in the
fourth quarter of fiscal 2002 of $4.1 million, consisting of
non-cash charges of $3.6 million that included $1.9 million for
the write-down of inventories determined to be excess or
obsolete and $1.7 million for the impairment of long-lived
assets, and severance and other operating charges of $0.5
million.
Gross profit for the fourth quarter of fiscal 2002 was $1.9
million (excluding the charge of $1.9 million for inventory
write-downs) or 25.9 percent of sales, compared to gross profit
of $2.4 million or 24.5 percent of sales in the year ago
quarter. Gross profit for fiscal 2002 was $7.2 million
(excluding the charges of $1.9 million for inventory write-
downs) or 24.2 percent of sales, compared to gross profit of
$9.2 million (excluding charges of $2.7 million for inventory
write-downs) or 23.3 percent of sales in the year ago period.
The improved gross profit margins during the periods are
principally due to the success of the Company's continuing cost
reduction efforts, including the 2001 operations re-alignment,
its outsourcing strategy and an increased level of sales of
technologically advanced, higher margin products.
The net loss for the fourth quarter of fiscal 2002 was $4.5
million, compared to a net loss of $723,000, in the year ago
quarter. The net loss for fiscal 2002 was $6.8 million, compared
to a net loss of $7.5 million in the year ago period. The net
loss for the 2002 fourth quarter and fiscal year includes the
charges of $4.1 million discussed above, and the net loss for
fiscal 2001 includes net aggregated re-alignment charges of $6.1
million. Excluding the effects of these charges, the fourth
quarter and fiscal year 2002, net losses would have been
$437,000 and $2.7 million, respectively. Excluding the effects
of the 2001 re-alignment charge, the fiscal year 2001 net loss
would have been $1.4 million.
Commenting on the results, Timothy J. Roach, President and CEO
stated: "Fiscal 2002 was a challenging year for the
telecommunications industry. The on-going industry-wide slowdown
continued to have a negative impact on our revenues and
earnings. During the year, we further streamlined our operations
and took a number of additional actions to reduce costs and
improve operating efficiencies, without sacrificing product
quality or customer service. We further re-engineered our Puerto
Rico operations with the objective of creating a quicker-
response, low-cost production facility. In addition, we
consolidated most of the remaining administrative and management
responsibilities into our New York headquarters. Also, we
continued to expand our highly successful outsourcing strategy.
As a result, despite expected lower revenues, we have positioned
our Company to return to profitability in the first quarter of
fiscal 2003.
"Although we received several industry awards for the Digital
Closet, due to a difficult economy and disappointing sales, we
have discontinued the Digital Closet product line. In order to
continue to pursue the home networking market, we will market a
residential gateway system, developed with a technology partner,
that will be distributed through the Company's traditional
telecommunications distribution channels and will not require us
to expend significant additional resources.
"While we expect the telecommunications industry slowdown to
continue to negatively impact sales through fiscal 2003, we
enter the new fiscal year with optimism as we believe we have
sized our Company to achieve and maintain profitability at lower
sales levels while positioning ourselves for profitable growth
with the recovery of the market for our products. We have
strengthened our balance sheet, reduced our already low debt by
$1.0 million, repurchased the $1.6 million of previously
outstanding convertible preferred shares at a discount, and at
the same time, closed the fiscal year with $868,000 of cash and
no outstanding borrowings under our revolving credit facility.
It should be noted that, by repurchasing the preferred shares we
have also eliminated potentially significant dilution to our
shareholders.
"Though we have been pursuing aggressive cost reduction
programs, we expect to introduce several new product lines
during fiscal 2003 as a result of our continued investment in
research and development. We will also continue to actively seek
new markets with our technologies. In addition, we will also
continue to watch costs in order to timely respond to the
unprecedented changes that have been occurring in our industry
sector."
TII is a proven technology leader specializing in providing the
telecommunications industry with innovative, network protection
and management products, including station protectors, network
interface devices, DSL protectors, filters and splitters and
power and data-line protectors, multi-service residential
gateway, as well as creative, custom design solutions to meet
customers' individual requirements.
* * *
As reported in Troubled Company Reporter's May 24, 2002 edition,
TII Network Technologies received a Nasdaq Staff Determination
Letter dated May 16, 2002 indicating that its common stock
failed to comply with Nasdaq's minimum bid price requirements
for continued listing on The Nasdaq National Market (NMS) as set
forth in Nasdaq's Marketplace Rule 4450(a)(5) and that the
Company's common stock is, therefore, subject to delisting from
the NMS.
TOWN SPORTS: Refinancing Issues Spur S&P to Keep Ratings Watch
--------------------------------------------------------------
Standard & Poor's Ratings Services placed its single-'B'-
corporate credit and senior debt ratings and single-'B'-plus
bank loan rating on Town Sports International Inc. on
CreditWatch with negative implications as a result of concerns
raised by the company's recently disclosed plans to refinance
some or all of its debt and preferred stock.
The New York City-based health club operator had total debt
outstanding of $161.7 million on June 30, 2002.
The company plans to refinance some or all of its debt and
preferred securities with new debt. "The rating action is based
on concerns that the company could potentially increase its debt
leverage by replacing preferred stock with debt," said Standard
& Poor's credit analyst Andy Liu.
Standard & Poor's said that its ratings on Town Sports could be
negatively affected by increased debt levels, worse than
expected financial performance at newer clubs, significant
discretionary cash flow deficit, expansion activity, and erosion
of liquidity. Standard & Poor's will meet with the management to
address its recapitalization plans and assess the impact on the
company's capital structure, liquidity and expansion plans in
resolving the CreditWatch listing.
TRICO MARINE: Completes Exchange Offer for 8-7/8% Senior Notes
--------------------------------------------------------------
Trico Marine Services, Inc., (Nasdaq: TMAR) announced that as of
5:00 p.m., New York City time on September 26, 2002, its offer
to exchange up to $250 million principal amount of its
registered 8-7/8% Senior Notes due 2012 for any and all
outstanding unregistered 8-7/8% Senior Notes due 2012 expired
and that all of its unregistered 8 7/8% Senior Notes due 2012
were tendered in the exchange offer and accepted.
Trico Marine provides a broad range of marine support services
to the oil and gas industry, primarily in the Gulf of Mexico,
the North Sea, Latin America, and West Africa. The services
provided by the Company's diversified fleet of vessels include
the marine transportation of drilling materials, supplies and
crews, and support for the construction, installation,
maintenance and removal of offshore facilities. Trico has
principal offices in Houma, Louisiana, and Houston, Texas.
* * *
As reported in Troubled Company Reporter's May 23, 2002 edition,
Standard & Poor's affirmed its single-'B'-plus corporate credit
rating on Trico Marine Services Inc. and at the same time,
assigned its single-'B' debt rating to the company's proposed
$250 million senior unsecured notes issue. Houma, Louisiana-
based Trico Marine provides offshore support services to the
petroleum industry and has approximately $300 million of
outstanding debt.
The ratings on Trico Marine reflect the company's participation
in the volatile offshore support segment of the petroleum
industry and aggressive financial leverage. Trico Marine
operates 85 offshore support vessels stationed in the Gulf of
Mexico, the North Sea, South America, and West Africa drilling
markets. Roughly half of the company's revenues are derived from
the Gulf of Mexico, a market that typically operates on short-
term contracts. The recent weakness of the Gulf of Mexico market
has been tempered by the company's exposure to the relatively
stable international markets. Cash flow stability is underpinned
by the contract position of the company's international fleet; a
high percentage of the company's 2002 projected revenue is under
contract.
US AIRWAYS: Wins Approval to Appoint Joint Fee Review Committee
---------------------------------------------------------------
In connection with the payment of compensation to professionals,
the Debtors obtained Court approval to establish a Joint Fee
Review Committee consisting of:
(a) a representative of the Office of the United States
Trustee for this District;
(b) Michelle V. Bryan, Executive Vice President, Corporate
Affairs and General Counsel of US Airways Group, Inc.;
(c) John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate,
Meagher & Flom, lead counsel of the Debtors;
(d) the chairperson of the Creditors' Committee; and
(e) Scott Hazen, Esq., at Otterbourg, Steindler, Houston &
Rosen, lead counsel selected by the Committee. (US
Airways Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
VISION METALS: Selling Specialty Tube Div. to Michigan Seamless
---------------------------------------------------------------
Michigan Seamless Acquisition LLC, a company formed by Russ
Maier, former Chairman & CEO of Republic Engineered Steels, Inc.
and Atlas Holdings FRM LLC has entered into a contract with
Vision Metals, Inc., to acquire the fixed assets and
intellectual property of its Michigan Specialty Tube Division
based in South Lyon, Michigan. The transaction is structured as
a Section 363 sale under the federal bankruptcy code. Its
financial terms were not disclosed.
Michigan Seamless Tube is a highly specialized manufacturer of
seamless mechanical and pressure tube for demanding industrial
applications. Seamless tubing produced by Michigan Seamless
Tube is available in carbon and alloy in a broad selection of
sizes and wall thickness. Prior to the bankruptcy of Vision,
Michigan Seamless Tube operated successfully and continuously
for 75 years from its 320,000 square foot manufacturing facility
in South Lyon, Michigan. Michigan Seamless Tube ceased
shipments in February 2002 as part of the bankruptcy process,
but has remained on "hot-idle" status since that time. Michigan
Seamless Tube intends to begin shipping product during December
2002.
Russ Maier, President of Michigan Seamless Tube, stated, "We are
excited about the prospects of restarting the operations of
Michigan Seamless Tube. Michigan Seamless Tube did not
contribute to the financial problems that caused Vision to file
for Chapter 11 protection. Michigan Seamless Tube was always a
profitable business that unfortunately became intertwined in the
financial issues of its parent." Mr. Maier continued, "We
expect to reenter the market with the same highly skilled
workforce that Michigan Seamless Tube possessed prior to
bankruptcy. However, we anticipate having a more attractive
cost structure because of the elimination of a substantial
number of liabilities as a result of the bankruptcy process and
a new, flexible collective bargaining agreement we have entered
into with the United Steelworkers of America."
Tim Fazio, managing partner of Atlas Holdings also commented,
"Michigan Seamless Tube is well-positioned to reenter the
seamless tube market and resume operations virtually
immediately. Michigan Seamless Tube will commence operations
with no bank debt, substantial cash balances and an experienced
management team. We are extremely confident that Michigan
Seamless Tube can provide our customers with high levels of
quality and service for many years to come."
Michigan Seamless Tube is taking orders for shipments in
December 2002.
Originally founded in 1927, Michigan Seamless Tube was recently
purchased by Michigan Seamless Acquisitions, LLC and continues
to remain loyal to its manufacturing plant in South Lyon,
Michigan. Seamless tubing produced by MST is ISO and QS
certified and is available in a broad selection of sizes and
wall thickness, both in carbon and alloy grades, to meet
ASTM/ASME, AMS, SAE and DIN specifications. A variety of heat
treatment and custom processes are available to meet the most
stringent customer requirements as well as welded DOM for
mechanical applications.
Michigan Seamless Tube is a portfolio company of Atlas Holdings.
Atlas Holdings is a private investment firm that brings together
its capital and industrial experience to acquire and to build
successful, long-term businesses. Over the past twenty years,
the principals of Atlas Holdings have undertaken more than 300
transactions and, in partnership with capable management teams,
have built more than 40 companies in a variety of industries,
including basic manufacturing, industrial distribution and
services, financial services and media. For more information
please refer to http://www.atlasholdingsllc.com
WARNACO GROUP: Secures Okay to Expand BDO Seidman's Engagement
--------------------------------------------------------------
The Warnaco Group, Inc., and its debtor-affiliates obtained the
Court's authority to further expand the scope of BDO Seidman's
employment to include certain analysis and examination of the
assumptions underlying the financial projections utilized in
formulating a plan of reorganization, nunc pro tunc to August 2,
2002.
The expanded scope of employment include:
(1) Receiving briefings from the corporate officers, group
presidents and divisional CFO's or other representatives
concerning historical and projected operating and
financial performance;
(2) Obtaining the most recent historical financial data for
each division;
(3) Obtaining the most recent prospective financial
statements for each division with all underlying
assumptions to the forecasts or projections;
(4) Working with divisional and corporate management to
understand the planning process and the documentation
used to form the bases for the plan numbers. This will
involve evaluating the assumptions used to consolidate
the divisional numbers into the corporate plan as well
as the assumptions used at the corporate level for items
like capital structure, interest rates, cash flow
requirements; and
(5) Comparing each divisional set of assumptions to the
historical data for the same division and for comparable
companies and industries in the marketplace. BDO will
utilize readily available data from recognized sources
and cite same. BDO's focus will be on the quality and
level of support for the operational factors
contributing to the plan EBITDAR an net income numbers,
specifically gross and net revenues, cost of goods sold,
gross and net profit margins, SM&A, depreciation and
amortization, interest, taxes and other items.
BDO will charge the Debtors for its Plan Assumption Analysis
Services on an hourly basis, in accordance with its ordinary and
customary rates for matters of this type in effect on the date
the services are rendered. BDO will also seek reimbursement of
all costs and expenses incurred in connection with these Chapter
11 cases. The current BDO rates are:
Partners $450 - 525
Senior Managers 295 - 385
Managers 215 - 300
Associates and staff 165 - 210
The fees for the additional services will be $365,000 plus
expenses. (Warnaco Bankruptcy News, Issue No. 33; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WHEELING-PITTSBURGH: Plan Exclusivity Extended to October 28
------------------------------------------------------------
On September 20, 2002, Judge Bodoh approved an Agreed Order
signed by:
-- Scott N. Opincar, Esq., at Calfee Halter & Griswold, on
behalf of Wheeling-Pittsburgh Steel Corp.,
-- Lee D. Powar, Esq. and Julie K. Zurn, Esq., on behalf
of the Official Noteholders' Committee, and
-- Marc E. Richards, Esq., and Edward J. LoBello, Esq., on
behalf of the Official Committee of Unsecured Trade
Creditors.
The parties agree to further extend the Debtors' exclusive
period to file a plan of reorganization until October 28, 2002,
and to a concomitant extension of the Debtors' exclusive period
to solicit acceptances of that plan until December 27, 2002.
(Wheeling-Pittsburgh Bankruptcy News, Issue No. 27; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
WORLDCOM INC: Proposes Uniform Pentagon Auction Procedures
----------------------------------------------------------
The sale of Pentagon City is still subject to higher and better
offers. Worldcom Inc., and its debtor-affiliates propose that
Competing Offers for the Pentagon City Assets be governed by
these procedures:
-- Any party wishing to conduct due diligence on the Assets
should, upon execution of a confidentiality agreement in form
and substance satisfactory to the Debtors, be granted access
to a diligence room at Pentagon City or at a location
otherwise designated by the Debtors. The Debtors will make
access to the Diligence Room available during normal business
hours to any potential purchaser for a period of 15 business
days, which will commence on or before the second business
day after entry of the Auction Procedures Order. Parties
interested in gaining access to the Diligence Room should
contact:
Alan Lieberman
Hilco Real Estate, LLC
5 Revere Drive, Suite 320, Northbrook, Illinois 60062
Telephone: (847) 504-2453
Facsimile: (847) 714-1289
-- To be considered, a Competing Offer for the Assets should be
delivered to:
A. WorldCom, Inc.
Corporate Real Estate
1133 19th Street NW, Room 432, Washington, D.C. 20036
Attn: Dept. 8435/003
B. Weil, Gotshal & Manges LLP, counsel to the Debtors,
767 Fifth Avenue, New York, New York 10153
Attn: Sharon Youdelman, Esq. and
Scott E. Cohen, Esq.,
C. Hilco Real Estate, LLC
5 Revere Drive, Suite 320, Northbrook, Illinois 60062
Attn: Alan Lieberman,
so as to be received not later than 12:30 p.m. EDT, on
October 21, 2002 and should include:
* A statement of the offeror's intent to bid at the Auction;
* Evidence satisfactory to the Debtors that the offeror has
delivered to the Debtors' designated escrow agent a good
faith deposit in the amount of $2,000,000 in accordance
with the terms of the Agreement;
* A purchase price that exceeds the Purchase Price contained
in the Agreement by at least $4,042,750;
* A written agreement executed by the offeror together with a
copy of the agreement marked to show changes from the
Agreement; and
* Evidence, acceptable to the Debtors, of the offeror's
ability:
a. to consummate the transaction by no later than 11 days
after the entry of an order approving the sale,
including without limitation, evidence satisfactory to
the Debtors of the financial wherewithal to pay the
purchase price and
b. to provide adequate assurance of the offeror's future
performance to counterparties under the Service
Contracts.
-- Competing Offers should be unconditional and not contingent
upon any event, including, without limitation, any due
diligence investigation, the receipt of financing or any
further approval, including, without limitation, from any
board of directors, shareholders or otherwise. All Competing
Offers will be irrevocable through the Closing Date.
-- Competing Offers will be considered at the Auction. The
Auction will be conducted by the Debtors or their
representatives and will commence on October 24, 2002 at 4:00
p.m. ET at the offices of the Debtors' counsel, Weil, Gotshal
& Manges LLP, 767 Fifth Avenue, New York, New York 10153.
Offerors may participate in the Auction telephonically.
-- At the Auction, all increases in bids should be made in
increments of no less $500,000.
-- All deposits will be retained by the Debtors and will be
returned at the Closing Date, except the Debtors will apply
the deposit of the winning bidder to the purchase price at
the Closing Date.
-- In the event a bidder submitting a Competing Offer is the
winning bidder following the conclusion of the Auction, and
the winning bidder fails to consummate the proposed
transaction by the Closing Date due to a breach by the
winning bidder, the bidder's deposit will be forfeited to the
Debtors but not as liquidated damages, the Debtors reserving
the right to pursue all remedies that may be available to
them. The Debtors may request authority to consummate the
proposed transaction with the next highest bidder at the
final price bid by the bidder at the Auction. If the next
bidder is unable to consummate the transaction at that price,
the Debtors may consummate the transaction with the next
highest bidder, and so forth. The Agreement will be deemed
in full force and effect through the Closing Date.
-- Following the conclusion of the Auction, the Debtors will
select the offer that they determine to be the highest and
best offer for the Assets and will file with the Court a
notice of the selection. The offer will be presented to the
Court for approval. No offer will be deemed accepted unless
and until it is approved by the Bankruptcy Court.
The Debtors contend that these Auction Procedures provide a fair
and reasonable means of ensuring that the Pentagon City Assets
are sold for the highest and best offer attainable. The
procedures afford potential purchasers a reasonable opportunity
to investigate the Assets and afford the Debtors enough time to
consider and evaluate Competing Offers submitted. Thus, the
Debtors assert, these Auction Procedures should be approved.
(Worldcom Bankruptcy News, Issue No. 8; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
WYNDHAM INT'L: Falls Below NYSE Continued Listing Standards
-----------------------------------------------------------
Wyndham International, Inc., (NYSE:WYN) received notification
from the New York Stock Exchange that the Company's share
trading price has fallen below the continued listing criteria
for an average closing price of a security of less than $1.00
over a consecutive 30 trading day period.
Wyndham International's management has met with NYSE
representatives and the NYSE's Listing and Compliance Committee
has agreed to continue the listing of the Company's common stock
through Nov. 15, 2002, subject to certain conditions. At that
time, The Exchange Committee will reevaluate the Company's
listing status.
Earlier this week, Wyndham announced it had entered into a
definitive agreement with Westbrook Hotel Partners IV, LLC to
sell 13 hotel properties for approximately $447 million,
furthering its strategy of becoming a proprietary-branded hotel
operating company. Wyndham remains in discussions with Westbrook
and other parties for the sale of additional non-strategic
assets of which the proceeds will be used to pay down debt.
Wyndham International, Inc., offers upscale and luxury hotel and
resort accommodations through proprietary lodging brands and a
management services division. Based in Dallas, Wyndham owns,
leases, manages and franchises hotels and resorts in the United
States, Canada, Mexico, the Caribbean and Europe. For more
information, visit http://www.wyndham.com
XO COMMS: Intends to Enter into Master Agreement with Level 3
-------------------------------------------------------------
XO Communications, Inc., its non-debtor subsidiary XO Intercity
Holdings No. 2, Level 3 LLC, and Level 3 Inc. are parties to
several prepetition agreements:
* a Cost Sharing and IRU Agreement, dated July 18, 1998,
between Level 3 LLC and XO Intercity, as amended;
* a National Master Communications Services Agreement, dated
April 16, 1999, between Level 3 LLC and the Debtor on
behalf of its operating subsidiaries and affiliates;
* a Master Wavelengths Agreement, dated April 25, 2001,
between Level 3 LLC and the Debtor, as amended; and
* a Workout Agreement, dated October 30, 2001, between Level
3 Inc., and the Debtor.
Prior to the Petition Date, the Debtor and Level 3 were in
discussions regarding possible modifications to the Agreements.
The Debtor and XO Intercity sought to reduce XO Intercity's
ongoing obligations for maintenance and relocation charges under
the IRU Agreement -- which aggregate $17,000,000 per year.
Level 3, on the other hand, wanted to retake possession of
certain fibers and a conduit previously transferred to XO
Intercity pursuant to the IRU Agreement.
The parties were not able to reach an agreement before XO filed
for bankruptcy on June 17, 2002.
On June 19, 2002, Level 3 sent XO Intercity two notices of
default with respect to the IRU Agreement asserting non-payment
of $8,773,741.90 in Recurring and other charges. XO Intercity
disputed it.
Nevertheless, the parties continued their discussions.
As a result, the Debtor and XO Intercity entered into a Master
Agreement with Level 3 on August 8, 2002. In brief terms, the
Master Agreement requires the Debtor and XO Intercity to make a
prepayment of the Recurring Charge and other consideration to
Level 3. At the same time, the Master Agreement provides for
amendments to the prepetition agreements, which will enable the
Debtor and XO Intercity to have uninterrupted access to Level
3's fibers granted under the IRU Agreement at reduced annual
payments. The amendments also provide the Debtor and XO
Intercity with other benefits. In particular, they resolve
issues raised by the Notice of Default.
Accordingly, the Debtor seeks the Court's authority, to
-- enter into the new Master Agreement with Level 3
Communications, Inc. and Level 3 Communications, LLC; and
-- assume the three related amended prepetition agreements:
the NMCSA, the Master Wavelengths Agreement, and the
Workout Agreement.
As the Debtor is not a party to the IRU Agreement and XO
Intercity is not a debtor-in-possession, the Debtor does not
seek the Court's authority to assume the IRU Agreement.
Salient Terms of the New Master Agreement
1. Payments by XO Intercity to Level 3
$12,661,000 Paid upon execution of the Master Agreement,
on account of the amounts due under the IRU
Agreement.
$4,339,000 to be paid ($1,580,000 on each of September 30,
2002 and October 30, 2002, and $1,179,000 on
November 30, 2002.
The two amounts add up to $17,000,000. If the transaction
contemplated by the Master Agreement closes, these payments
will constitute payment in full of the Recurring Charge and
certain other expenses due and payable as of August 5, 2002
through January 1, 2003 under the IRU Agreement and the
Amendment of Guaranty Agreement executed by the Debtor in
connection with the IRU Agreement on or about May 9, 2000.
2. Amendments of Various Agreements
At the closing of the transaction, the parties will execute
and deliver the Amendments amending the IRU Agreement and the
three Executory Contracts (contracts that the Debtor entered
into prepetition) -- the National Master Communications
Services Agreement, the Master Wavelengths Agreement, and the
Workout Agreement.
3. Termination
The Agreement may be terminated by either party if the Court
has not issued an order approving the Debtor's entry into the
Master Agreement by October 31, 2002, or if the transactions
have not closed on or prior to February 28, 2003.
In addition, the non-defaulting party may terminate the
agreement if the other party materially defaults, or if there
is a material misrepresentation, and the default is not cured
within three days following written notice of a payment
default and 30 days following written notice of other
breaches.
The Amended IRU Agreement
Pursuant to the IRU Agreement,
-- Level 3 LLC granted to XO Intercity an indefeasible right of
use with respect to certain fibers and an option to acquire
additional fibers. These fibers are an integral and
necessary component of the network operated by the Debtor's
subsidiaries.
-- XO Intercity agreed to pay to Level 3 LLC, among other
things:
a. amounts representing a contribution for the construction
of the fiber optic communications system, and
b. a Recurring Charge relating to XO Intercity's allocable
share of costs of maintenance of the network and certain
relocation costs. The annual cost of XO Intercity's
obligations for this Recurring Charge aggregates
$17,000,000.
Pursuant to the Guaranty, the Debtor guaranteed XO
Intercity's obligations under the IRU Agreement.
Amendment to the IRU Agreement provides for:
* a fixed Recurring Charge of $5,000,000 per year (regardless of
the actual maintenance and relocation expenses incurred by
Level 3) and the elimination of certain adjustments;
* the elimination of certain charges that XO Intercity is
required to pay to Level 3 LLC;
* XO Intercity's surrender of a conduit and certain fibers to
Level 3 LLC without refund by Level 3 LLC of any of the
contribution amounts previously paid by XO Intercity with
respect to the construction of the network;
* the grant of certain Tag-Along Rights to XO Intercity; and
* the grant of an option to XO Intercity, expiring on July 31,
2007, to acquire a 20-year IRU on one additional conduit.
The Amended NMCSA
Pursuant to the National Master Communications Services
Agreement, the Debtor or one of its non-debtor affiliates
provides to Level 3, on a non-exclusive basis, dedicated
"transport" services on the Debtor's network. The Debtor
provides connections from its points-of-presence to Level 3's
gateway facilities in various cities.
The NMSCA has a three-year term, and is renewed automatically
for successive one-year terms unless terminated by one of the
parties at least 60 days prior to the end of the one-year term.
Pursuant to the NMSCA, Level 3 pays to the Debtor recurring
charges and non-recurring charges based on the type of service
provided by the Debtor.
Amendment to the NMCSA includes:
* an extension of the term of the NMCSA through June 1, 2005;
* a requirement that Level 3 LLC pay all taxes relating to the
provision of services (other than income taxes on the Debtor's
net income);
* limiting services to Level 3 LLC to point-to-point private
line services; and
* a grant to Level 3 LLC of a $2.5 million credit that may be
applied to pay amounts owed by Level 3 LLC to the Debtor under
the NMSCA or any other amounts due to the Debtor or its
affiliates.
The Amended Master Wavelength Agreement
The Master Wavelengths Agreement is a five-year agreement that
grants the Debtor the right to obtain transparent, unprotected
virtual channels (or wavelengths) on the Level 3 network between
various "termination nodes" identified by the Debtor when it
places an order for a wavelength.
The Debtor submits non-binding capacity forecasts to Level 3 LLC
on a quarterly basis showing its anticipated need for capacity
during the following year. Upon the acceptance by Level 3 LLC
of any order by the Debtor for capacity upon any route, the
Debtor is granted an IRU of capacity in the route for the term
of the agreement.
Under the terms of the Master Wavelength Agreement, the Debtor
may terminate an IRU prior to the expiration of its individual
term. The Debtor receives a rebate credit for IRUs with an
initial term of more than five years that are terminated, and
the credit may be applied to purchase additional IRUs according
to applicable terms and conditions. Furthermore, the Debtor may
add or remove termination nodes at any time during the term of
the IRU in accordance with the terms and conditions contained in
the agreement. Level 3 LLC provides the Debtor with both
installation delay credits and service outage credits.
Amendment to the Master Wavelength Agreement includes:
* a clarification to the payment schedule for POM Charges
(Power, Operations and Maintenance charges);
* a reconciliation of POM Charges, as of May 1, 2002, owed by
the Debtor to Level 3 LLC and the setoff of this amount
against a certain amount owed by Level 3 LLC to the Debtor for
the purchase of certain transmission gear owned by the Debtor;
and
* a reconciliation of the amount owed by Level 3 LLC to the
Debtor on account of the transmission gear.
The Amended Work Out Agreement
Pursuant to the Workout Agreement:
-- The Debtor and Level 3 and certain affiliates agreed to
terminate a Trans-Atlantic Capacity Agreement;
-- The Debtor agreed to purchase Trans-Atlantic capacity through
a protected STM-4 circuit for a 15-month term;
-- The parties agreed to reduce the purchase price to be paid by
Level 3 to the Debtor, and thus the Debtor's credit, on
account of certain purchased equipment;
-- The Debtor agreed to purchase managed modem services from
Level 3 and to permit Level 3 to offset certain cancellation
charges assessed against Level 3 in an amount not to exceed
$750,000; and
-- Level 3 agreed to issue the Debtor an additional $6,000,000
in credits to be used equally towards the Debtor's purchases
of Level 3 managed modem services and wavelength services.
Amendment to the Workout Agreement includes:
* an increase in the unused $6,000,000 credit to $7,500,000,
which may be used by the Debtor in its sole discretion within
8 years to pay any invoices, including the Recurring Charge
under the IRU Agreement;
* a requirement that the Debtor purchase wavelength services in
the United States and Europe exclusively from Level 3 for a
five-year period upon competitive terms and prices, and if
Level 3 has sufficient capacity and the routed services that
The Debtor wants; and
* an acknowledgement of the Debtor's full payment of amounts due
and owing under certain agreements relating to the
construction of communication facilities in Boston,
Massachusetts.
The Debtor tells Judge Gonzalez that the benefits from entry
into the Master Agreement and assumption of the executory
contracts more than justify the payments required by the Master
Agreement and the other consideration furnished to Level 3 by
the Debtor and XO Intercity.
In particular, the Debtor points out that:
-- by amending the IRU Agreement, XO Intercity's annual payments
to Level 3 for Recurring Charges and certain other expenses
will be reduced from $17,000,000 to $5,000,000, and XO
Intercity will save $216,000,000 over the remaining term of
the IRU Agreement; and
-- XO and XO Intercity will have continued, uninterrupted access
to the fibers granted under the IRU Agreement, which are an
important component of the network operated by XO's
subsidiaries.
The Debtor reminds Judge Gonzalez that its business plan
contemplates the continued operations of XO Intercity, and
Amendment to the IRU Agreement will enhance the value of its
investment in XO Intercity.
Furthermore, the Debtor notes that the Amendment to the Workout
Agreement increases its credit under that agreement by
$1,500,000 and expands its ability to utilize the previously
granted $6,000,000 credit.
Although the Amendments to the NMCSA increases the credit in
favor of Level 3 and amendments to the Master Wavelength
Agreement reconciles balances and permits Level 3 to effectuate
a setoff, Debtor believes that these are necessary elements of
the overall agreement reached between Level 3, the Debtor and XO
Intercity. (XO Bankruptcy News, Issue No. 10; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
*********
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For copies of court documents filed in the District of Delaware,
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*********
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Copyright 2002. All rights reserved. ISSN: 1520-9474.
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