/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/021030.mbx T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, October 30, 2002, Vol. 6, No. 215 Headlines ADELPHIA COMMS: 10 Utilities Ask Court to Vacate Injunction AES CORPORATION: Exchange Offer for Senior Notes Expires Today AIR CANADA: September 30 Balance Sheet Upside Down by $1.5 Bill. AKORN INC: Sets Annual Shareholders' Meeting for Dec. 19, 2002 ALLMERICA FIN'L: S&P Lowers Counterparty Credit Rating to BB- ALLMERICA FINANCIAL: Third Quarter Net Loss Tops $315 Million AMERICAN ENTERPRISE: Plan Confirmation Hearing Set for Nov. 20 AMES DEPARTMENT: Gets Okay to Continue Compensation Procedures ANC RENTAL: Consolidating Operations at George Bush Airport ANGEION CORP: Minnesota Court Confirms Joint Reorganization Plan ANTHONY & SYLVAN: Working Capital Deficit Tops $1.2M at Sept. 30 ASBESTOS CLAIMS: All Proofs of Claim Due Tomorrow ASPEN GROUP RESOURCES: Defaults on Bank Loan Facility BALDWINS INDUSTRIAL: Panel Hires McClain & Leppert as Counsel BCE INC: Plans to Raise C$2B in Public Debt to Fund Bell Buyback BETHLEHEM STEEL: Court OKs Sale of Bethlehem Center to Majestic BRIGHTPOINT INC: Closes Sale of Certain Mexican Operating Assets BURNHAM PACIFIC: Trustees to Make Liquidating Distribution Today CLICKS & FLICKS: Gets Nod to Hire Finkel Goldstein as Counsel COMM 2000-C1: Fitch Affirms Low-B and Junk Ratings on 7 Notes COMVERSE: S&P Cuts Corp. Credit & Sr. Unsec. Ratings Cut to BB- CONTOUR ENERGY: Gets OK to Tap Energy Spectrum as Fin'l Advisors COVANTA ENERGY: Wants Lease Decision Period Extended to March 27 CYBEX INT'L: Will Hold Third Quarter Conference Call Tomorrow DOBSON COMMS: Will Report Third Quarter Results on Nov. 14, 2002 EB2B COMMERCE: Winding Down Training & Client Educ'l Services ENRON CORP: Wins Nod to Hire Blackstone as Financial Advisors EOTT ENERGY: Taps Andrews & Kurth as Special Litigation Counsel GENTEK INC: Brings-In Skadden Arps to Prosecute Chapter 11 Cases GLOBAL CROSSING: NY Court Approves Amended Disclosure Statement GLOBAL CROSSING: Carries Over 2BB Minutes on VoIP Platform in Q3 GRANT PRIDECO: S&P Keeping Watch on Low-B Credit & Note Ratings HELLER FINANCIAL: Fitch Affirms Low-B Ratings on Fives Classes HORIZON NATURAL: Agrees to Restructure Pittston Coal Transaction HORSEHEAD: FTI Consulting Serves as Committee's Fin'l Advisors HUNTSMAN POLYMERS: Eliminates $763MM Debt Claims after Workout HYDROMET ENVIRONMENTAL: Defaults on Two Convertible Debentures HYPERDYNAMICS: Independent Auditors Express Going Concern Doubt IFCO SYS: S&P Withdraws Junk-Rated Bank Loan over Restructuring KELLOGG COMPANY: Working Capital Deficit Tops $981MM at Sept. 28 KENTUCKY ELECTRIC: Will Defer $1.5MM Payment on 7.66% Sr. Notes KMART CORP: Seeks Okay to Assume Samuel Aaron Consignment Pact LEGATO SYSTEMS: Red Ink Continues to Flow in Third Quarter 2002 LIONBRIDGE TECHNOLOGIES: Working Capital Deficit Widens to $4MM LTV CORP: Varco Pruden Selling Miller Interests to Fitex S.A. M. A. GEDNEY: Case Summary & 20 Largest Unsecured Creditors MINNETHAN LAND: Case Summary & 3 Largest Unsecured Creditors MIRANT: Resolves Issues re Electricity Generation in Philippines MITEC: Will Streamline Activities to Generate Cash & Cut Costs MORTGAGE CAPITAL: Fitch Rates Five Note Classes at Low-B Level NERVA/SAVANNAH: Fitch Keeping Watch on Three Low-B-Rated Notes NETIA HOLDINGS: Dutch Units' Creditors Approve Composition Plans NPF XII/NPF VI: Fitch Withdraws Ratings Over Operations Concerns NU-LIFE CORP: Commences Restructuring Proceeding in Canada OAKWOOD MORTGAGE: S&P Maintains B- Ratings on Sub. B-2 Classes OCTEL CORP: Working Capital Deficit Tops $14.8 Mill. at Sept. 30 OGLEBAY NORTON: Reports Improved Third Quarter 2002 Results PANTRY INC: Chilton Investment Discloses 12.4% Equity Stake PERLE SYSTEMS: May 31 Balance Sheet Upside-Down by $2.25 Million PETROMINERALS CORP: Considering Reorganization Under Chapter 11 PHILIPS INTERNATIONAL: Double Play Discloses 6.7% Equity Stake READER'S DIGEST: Q1 2003 Results In Line with Revised Guidance RELIANCE GROUP: Insurance Commissioner Sells Shopping Center RELIANCE INSURANCE: Court Fixes Dec. 31, 2003 Claims Bar Date SAFETY-KLEEN CORP: Wants to Expand Experio Solutions' Engagement SAIRGROUP FINANCE: SDNY Court Fixes Nov. 22 as Claims Bar Date SENTRY TECHNOLOGY: Hires Balfour Capital to Raise Fresh Capital SERVICE MERCHANDISE: Has Until Jan. 31 to Remove Pending Actions SMTC CORP: 3rd Quarter Results Consistent with Company Estimates SORRENTO NETWORKS: Board Approves 1-For-20 Reverse Stock Split SUPERIOR TELECOM: S&P Ups Rating to CCC After Debt Restructuring TIME WARNER TELECOM: Banks Relax Covenants Under Credit Facility TRANSCARE: US Trustee Appoints Official Creditors' Committee TROPICAL SPORTSWEAR: S&P Ratchets Low-B Ratings Up a Notch UNIFY CORP: Appoints Pete DiCorti as Chief Financial Officer US AIRWAYS: HSBC Seek Stay Relief to Exercise Contractual Rights VENCOR: Wants Hearing on Hyperbaric Pact to Continue on Nov. 21 WESTAR AUTO: Bank One Forecloses on Security Interests in Certs. WORLDCOM: Wins Approval to Implement Proposed Setoff Procedures WORLDCOM: 80% of Q3 Defaults Results from Company's Bankruptcy * Shoylekov Named Special Counsel to Cadwalader's London Office * Meetings, Conferences and Seminars ********* ADELPHIA COMMS: 10 Utilities Ask Court to Vacate Injunction ----------------------------------------------------------- Allegheny Power, American Electric Power, Baltimore Gas & Electric Company, Duke Power, Georgia Power Company, National Fuel Gas Distribution Corporation, New York State Electric and Gas Corporation, Niagara Mohawk Power Corporation, Southern California Edison Company and Virginia Electric and Power Company, ask the Court overseeing the chapter 11 cases involving the Adelphia Communications Debtors to vacate the Utility Order entered by this Court on July 17, 2002. Robert T. Barnard, Esq., at Thompson & Hine LLP, in New York, tells the Court that the Debtors failed to serve the Utilities with the Utility Motion. Under fundamental principles of due process, the Court should not have granted the Utility Motion without proof that the Debtors actually served the Utility Motion on the parties against whom the relief was sought. The only pleading that the Debtors sent to some of the Utilities was a Notice of the Utility Motion, which was not served on the Utilities in accordance with Rule 7004 of the Federal Rules of Bankruptcy Procedure. Accordingly, the Utilities were denied any meaningful opportunity to contest the relief sought in the Utility Motion. Therefore, the Court should vacate the Utility Order as to the Utilities and permit them to be heard on the issues raised in the Utility Motion and this Motion. Mr. Barnard contends that the relief provided in the Utility Order differs from the relief requested in the Utility Motion and in the proposed order submitted with the Utility Motion. Specifically, the Postpetition Default Provision contained in the Utility Order was not sought in the Utility Motion or the proposed order. Through the Postpetition Default Provision in the Utility Order, the Debtors appear to have obtained injunctive and equitable relief, which forbids the Utilities from discontinuing postpetition service to the Debtors without further Court order. Furthermore, the Court should vacate the Utility Order because the Debtors have not set forth any legal or factual support for the extraordinary injunctive relief they improperly obtained in the Utility Order. Presumably the legal basis for the injunctive relief that is contained in the Utility Order is Section 366 of the Bankruptcy Code. However, Section 366 of the Bankruptcy Code does not authorize the imposition of injunctive relief. Mr. Barnard notes that the Utility Motion does not contain any facts as to why the Debtors need to obtain an injunction to preclude the Utilities from exercising their state law rights to terminate service for a postpetition payment default. In fact, since the Debtors claim that they will timely pay their postpetition invoices, it is unclear why they would need the injunctive relief they slipped into the Utility Order. In addition, the Court should vacate the injunctive relief in the Utility Order because it actually deprives the Utilities of their rights under applicable federal and state law. Under applicable federal and state law, the Utilities, in accordance with their state law tariffs and regulations, are entitled to terminate service to the Debtors for nonpayment of postpetition bills without the need to obtain Court approval. Mr. Barnard argues that there is no need for the injunctive relief because the normal billing cycles of the Utilities, which are governed by applicable tariffs, regulations and state laws, provide the Debtors with more than sufficient protections. Under the Utilities' state-mandated billing cycles, the Debtors must be severely delinquent in the payment of their bills and be sent a written warning notice before service would be disconnected for non-payment of postpetition bills. In contrast, the injunctive relief imposes a severe hardship on the Utilities. Under the Utilities' state-mandated billing cycles, the Utilities could provide the Debtors with 2 to 2-1/2 months of unpaid service before the Utilities could begin to terminate service to the Debtors for nonpayment of postpetition bills. The injunctive relief in the Utility Order requires the Utilities to incur these losses before they are permitted to move the Court for the "right" to terminate service to the Debtors for nonpayment of postpetition bills. In light of the Debtors' uncertain financial condition and the fact that several of the Utilities have over 1,000 accounts with the Debtors, requiring the Utilities to request a hearing each time there is a default on one of accounts after already having suffered a two-month loss on the account imposes an undue hardship on the Utilities and an unreasonable risk of nonpayment. According to Mr. Barnard, nobody knows the Debtors' true financial condition, not even the Debtors, as evidenced by their qualifications to their schedules in these bankruptcy cases. The Debtors have not filed any financial statements since the third quarter of 2001. Moreover, as a result of a series of revelations made by the Debtors since March this year regarding mismanagement and previously undisclosed and unauthorized financial transactions, the Debtors' financial statements for the last three years are considered to be wholly unreliable and will be restated by the Debtors. Even the Debtors' new accountants anticipate that it will take several months to untangle the Debtors' financial books and records and provide any reliable financial data regarding the Debtors. Accordingly, nothing is currently truly known regarding the Debtors' finances, and it is therefore unknown whether the DIP financing the Debtors have obtained is adequate to sustain their operating needs for even a short period of time. With this lack of information, all parties, including the Debtors themselves, are operating in the dark with respect to the true state of the Debtors' financial condition. Accordingly, unless the Utilities are granted the deposits they are requesting, they will be subjected to an unreasonable risk of nonpayment from the Debtors for postpetition services. Mr. Barnard points out that even the Debtors' counsel is concerned about the Debtors' ability to pay their bills and those of other professionals employed by the Debtors and official committees, as they have obtained a $15,000,000 carve- out in the DIP Order to ensure payment of those postpetition bills. If the Debtors' counsel, who has access to inside information of the Debtors, believes it is necessary to secure their postpetition fees and those of other professionals, then it is clear that the Utilities, which do not possess this information, should be entitled to security for providing the Debtors with essential postpetition services. This is not a situation in which the Debtors and the Utilities owe reciprocal obligations to one another. Rather, unlike the facts that were present in In re Adelphia Business Solutions, Inc., and In re Global Crossing, Ltd., none of the Utilities owe debts to any of the Debtors. Thus, the relationship between the Debtors and the Utilities is strictly one way, with the Debtors owing obligations to several of the Utilities not only for utility service, but also for other dealings, including rentals under pole attachment agreements wherein the Debtors lease space on poles and other structures owned by the Utilities. Rather than provide expedited procedures for termination on a postpetition default, the Utility Order provides that the Utilities must seek Court approval even after complying with the normal, lengthy state-mandated default procedures. Furthermore, the Utility Order does not even attempt to impose any additional safeguards, despite the fact that virtually no reliable information currently exists regarding the Debtors' financial condition. As a result of this lack of information, Mr. Barnard insists that the other "safeguards" employed in the ABIZ case would not be sufficient to provide the Utilities with adequate assurance of payment in this case. Additional financial reporting requirements would not be of any use because the Debtors are not currently in a position to provide any accurate financial reports and, according to their accountants, will not be in that position for at least several months. The opportunity to revisit the issue of adequate assurance in the event of an adverse material change in the Debtors' liquidity also would be meaningless because it is unclear when the Debtors will have access to reliable financial statements and other data to provide any valid measures or comparisons of the Debtors' liquidity. Thus, the Utilities cannot be provided adequate assurance of payment absent payment of deposits or advance payments. Under the Utilities' billing cycles the Debtors could receive 2 to 2-1/2 months of unpaid service before their service could be terminated for a post-petition payment default. Therefore, based on the Debtors' anticipated utility consumption in this case, the minimum period of time the Debtors could receive service from the Utilities before termination of service for non-payment of bills ranges from 2 to 2-1/2 months. Accordingly, the Utilities contend that the two-month security deposits requested are reasonable. Debtors Object Following entry of the Utility Order, the Debtors believe they have reached resolution with nearly all of their utility service providers regarding the terms of postpetition service. Paul V. Shalhoub, Esq., at Willkie Farr & Gallagher, in New York, notes that despite numerous hours of discussions and correspondence with counsel, the objecting utilities have refused to agree to any of the proposals made by the Debtors and instead have insisted on going forward with a hearing before this Court to reargue the Utility Order, and revisit this Court's approach to adequate assurance issues generally. Notwithstanding the existence of the Debtors' as yet unutilized DIP financing facility, the objecting utilities would require the Debtors to provide significant postpetition deposits. "Equally egregious is the objecting utilities' request to impose hair trigger post-default termination provisions, which would give them the ability to shut off service to the Debtors upon the occurrence of any minor payment default," Mr. Shalhoub says. Rather than ensuring that the Debtors continue to receive postpetition service and that they receive timely postpetition payments, Mr. Shalhoub observes that the objecting utilities seem to be more interested in frustrating the Debtors' efforts to conduct business as usual. In addition to demanding excessive deposits, some of the objecting utilities have refused to accept payments by check or money order. The objecting utilities have removed the Debtors from summary billing programs, which consolidates thousands of accounts with each utility company to a single statement. This action has generated thousands of monthly invoices per utility company and has made it even more difficult for the Debtors to comply with their obligation to pay for postpetition service in a timely fashion. Mr. Shalhoub asserts that the Utilities' request should be denied in their entirety. The objecting utilities should be directed to comply with this Court's Utility Order and be prohibited from imposing billing procedures on the Debtors that effectively penalize them on account of their status as Chapter 11 debtors. (Adelphia Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1), DebtTraders says, are trading at 33.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1 for real-time bond pricing. AES CORPORATION: Exchange Offer for Senior Notes Expires Today -------------------------------------------------------------- The AES Corporation (NYSE: AES) has extended from 5:00 p.m., New York City time, on October 25, 2002, until 5:00 p.m., New York City time, on October 30, 2002, the deadline by which holders of its outstanding $300,000,000 8.75% Senior Notes due 2002 and $200,000,000 7.375% Remarketable and Redeemable Securities due 2013, which are puttable in 2003, must tender in order to be eligible to receive the early tender bonus payment. Holders that tender on or prior to 5:00 p.m., New York City time, on October 30, 2002, and do not withdraw such securities will, if the exchange offer is consummated, be entitled to an early tender bonus payment in the amount of $15 for each $1,000 principal amount of 2002 Notes tendered and $5 for each $1,000 principal amount of ROARs tendered. Consummation of the exchange offer is subject to a number of significant conditions. The offering of the new senior secured notes in the exchange offer is being made only to "qualified institutional buyers" and "persons other than a U.S. person" located outside the United States, as such terms are defined in accordance with Rule 144A and Regulation S of the Securities Act of 1933, as amended. The new senior secured notes will not be registered under the Securities Act of 1933, or any state securities laws. Therefore, the new senior secured notes may not be offered or sold in the United States absent an exemption from the registration requirements of the Securities Act of 1933 and any applicable state securities laws. This announcement is neither an offer to sell nor a solicitation of an offer to buy the new notes. * * * As reported in Troubled Company Reporter's Monday Edition, Standard & Poor's lowered its corporate credit rating on AES to 'B+' from 'BB-', reflecting lower-than-expected operating cash flow and slower-than-expected progress on asset sales, resulting in AES needing to refinance rather than pay off maturing obligations. Apparently, banks are uncomfortable with the idea of some creditors being paid while they wait. The 'B+' rating is in line with Standard & Poor's expected cash flow compared with AES' debt burden. AES' corporate credit rating is on CreditWatch with negative implications because the rating could fall precipitously if AES were unable to execute this transaction. Standard & Poor's preliminary 'BB' rating on the bank loan and exchange notes is two notches above the corporate credit rating. This reflects Standard & Poor's high degree of confidence that the collateral package provides enough value for lenders to realize 100% recovery in a likely default or stress scenario. This rating assumes that a bankruptcy court would give priority to the secured creditors in a bankruptcy. The preliminary rating would become final when the transaction closes and Standard & Poor's receives final documentation. AES Corporation's 10.25% bonds due 2006 (AES06USR1) are trading at 34 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AES06USR1for real-time bond pricing. AIR CANADA: September 30 Balance Sheet Upside Down by $1.5 Bill. ---------------------------------------------------------------- For the quarter ended September 30, 2002, Air Canada reported net income of $125 million a $1.03 billion improvement from the restated third quarter of 2001. Operating income was $168 million, up $226 million from 2001. Income before foreign exchange on long-term monetary items and before income taxes was $205 million, an increase of $374 million from the prior year. Year over year comparisons of both financial and operational performance are affected by the adverse impact of the September 11, 2001 terrorist attacks. As well, the Corporation recorded a number of non-recurring or other significant items in the third quarter of 2001 and 2002. Please refer to the Adjusted Third Quarter Results section below and to Attachments One and Two for further information on the non-recurring or significant items. "Air Canada's third quarter results are particularly encouraging in the context of the crisis facing the North American airline industry today. Our performance clearly demonstrates that our focus on disciplined capacity management and cost control in tandem with our market segmentation strategy is producing positive results. Air Canada achieved the highest profit among all carriers in the Americas this quarter," said Robert Milton, President and Chief Executive Officer. "Our operating income performance year over year has improved even when we factor out the impact of September 11th on Air Canada. For the third consecutive quarter our unit costs, asset and employee productivity are improved on a year over year basis. In what is generally recognized as the worst revenue environment in the industry's history, we generated positive cash flow and achieved significantly improved operating results - in part due to our highly effective yield and capacity management strategy. "Mainline domestic passenger revenues showed marked improvement as evidenced by a seven per cent revenue increase and a five per cent increase in domestic yield per RPM year over year, including Tango. Our international markets also performed robustly in the quarter, posting overall a 17 per cent revenue improvement. Two of our major international markets - the Atlantic and the Pacific - posted impressive double digit revenue improvements on single digit ASM increases. "Our market segmentation strategy is effectively allowing us to offer customers in various market sectors the level of service they are willing to pay for. Tango, our separately branded service that offers price-conscious consumers a no-frills medium and long-haul alternative, has continued to perform well during the quarter, posting an 81.4 per cent average load factor, while our other mainline operations also posted an improved load factor for the second consecutive quarter. Tango's flexibility allows us to adjust to shifts in both seasonal and consumer demand and therefore we have redeployed some of its domestic flying for the winter and introduced new Tango transborder leisure flights to Florida and Las Vegas. "The successful launch of ZIP, our wholly-owned subsidiary offering low fares and high value on short-haul flights initially in Western Canada, will allow us to participate more actively and profitably in the growing discount market. ZIP replaces Air Canada mainline flying, allowing us to reduce costs in a marketplace where consumers are increasingly cost conscious. After a highly successful launch and encouraging results to date, we plan to increase ZIP's operations gradually throughout next year until it reaches a complement of 20 aircraft. "Looking forward to the remainder of the year and into early 2003, we expect to achieve further improvements as a result of disciplined capacity management, further cost reductions and increased productivity. Additional efficiencies will be realized as we continue to simplify our fleet and pursue initiatives that enhance customer service while contributing positively to our bottom line. "Significant challenges lie ahead however, given the fragile state of the economy and the uncertainty of world events. Fuel prices are once again close to historically high levels just as we move into the seasonally weaker quarters. The revenue environment in the regional and U.S. transborder markets remains weak with no indication of improvement in the foreseeable future. Furthermore, it is becoming increasingly clear that escalating surcharges and fees imposed on the Canadian airline consumer by government and government created monopolies over and above the cost of airfare are significantly affecting demand in short-haul and other markets. Year to date, Jazz has experienced an almost 30 per cent fall off in traffic and these surcharges and fees are a contributing factor in this fall off. Very simply, many consumers are now choosing to drive rather than fly. "On an ongoing basis, we will monitor our liquidity requirements and, as appropriate, will continue to access various financing alternatives including sale and leasebacks, asset sales and other transactions. Furthermore, we will take advantage of opportunities to reduce debt load and de-leverage the airline, including the purchase of debt. "With the diligent efforts of our employees to enhance customer service and improve operational efficiencies and with the ongoing support of our customers, we will continue to build on our accomplishments and remain well positioned to meet the challenges that lie ahead," he concluded. 2002 Initiatives: Air Canada's third quarter 2002 results reflect a number of important initiatives: - ONGOING CAPACITY MANAGEMENT during the quarter resulted in a year over year decrease of 11 per cent in Mainline capacity from the US transborder short haul market, and an increase of two per cent capacity in growing sun and leisure markets. Given the anomalies of Q3, 2001 as a point of comparison due to irregular operations resulting from the events of September 11, a more relevant capacity comparison of Q3, 2002 against Q3, 2000 shows a 21 per cent decrease in Mainline capacity from the US transborder short haul market and a three per cent increase in capacity to growing leisure and sun markets. - AIR CANADA'S SEAT RECONFIGURATION PROGRAM added approximately two per cent more capacity in Q3, 2002 at little additional cost while maintaining industry leading seating pitch standards. This program, begun in 2001, has added economy class seating on Airbus A320, A319, Boeing 767 and 737 aircraft and reduced business class seating on Airbus A320, A319 and Boeing 737 aircraft in response to a decrease in business travel demand. - AIR CANADA'S FLEET MODERNIZATION PROGRAM has, since June 30, 2001, permanently retired or parked over 45 of the airline's oldest Boeing 737 aircraft and the entire F-28 and DC-9 fleets. At the same time, Air Canada's modern, highly efficient Airbus fleet has been expanded, saving on fuel, maintenance and training costs. The airline took delivery of three Airbus A321s, one A319, one A320 and one Boeing 767-300 aircraft in the quarter under short and long term operating leases. Five Canadair Jets were delivered in the quarter to Air Canada Jazz under operating leases. The above programs together with disciplined capacity planning and the completion of the airline's employee reduction program produced the following year over year results for the third quarter: - SIGNIFICANT COST SAVINGS AND A TWO PERCENTAGE POINT SYSTEM LOAD FACTOR INCREASE by carrying more passenger traffic while operating six per cent fewer aircraft flying hours. - A NINE PER CENT INCREASE IN MAINLINE EMPLOYEE PRODUCTIVITY, as measured by available seat miles per employee, on a mainline capacity increase of two per cent. Additionally, Air Canada announced in the quarter a number of Initiatives as part of its strategy to transform the airline and redefine its business model in order to respond more effectively to the evolving industry environment, while highlighting the value of the Corporation's assets: - THE LAUNCH OF ZIP, the airline's wholly-owned independently operated low fare carrier, on September 22. ZIP offers up to 15 daily non-stop return flights on short-haul routes in Western Canada with connections to and from Air Canada's extensive network. ZIP operates with a start-up fleet of six Boeing 737-200 aircraft, with plans to eventually expand to 20 aircraft. - NEW EXECUTIVE FIRST SERVICE ON INTERNATIONAL ROUTES featuring refined in-flight service, quality Canadian products and contemporary design to create a complete, innovative travel experience that sets new standards for Air Canada's international customers. The new service is currently offered on flights to Europe, and will be expanded to include flights to Asia, Australia and South America. Premium service within Canada and the United States is undergoing a similar re-design planned to be launched in 2003. - THE ANNOUNCEMENT OF NEW TANGO SERVICE TO FLORIDA - THE FIRST SCHEDULED NO FRILLS, LOW FARE US TRANSBORDER SERVICE, with new seasonal daily non-stop service between: Montr�al (Dorval)- Fort Lauderdale; Montr�al (Dorval)-Orlando; both Qu�bec City and Ottawa and Fort Lauderdale; and daily service between Toronto and Las Vegas. - THE CONFIRMATION OF A $101.7 MILLION FIVE YEAR CONTRACT for the maintenance and repair of Canada's Department of National Defence (DND) fleet of Airbus A310 aircraft, including five one-year options for contract extension which, if exercised, would bring the total contract term to ten years with potential revenue to Air Canada Technical Services of $250 million. Air Canada created Air Canada Technical Services with the mandate to grow its aircraft maintenance repair and overhaul (MRO) business and improve efficiencies through increased scale. Operating Results Consolidated passenger revenues were up $128 million or 6 per cent on a 1 per cent increase to ASM capacity compared to the 2001 quarter. Passenger revenues at the Mainline carrier increased 8 per cent from the third quarter of 2001. Consolidated passenger traffic grew 4 per cent and system load factor at 76.7 per cent improved 2.0 percentage points. Passenger yield per revenue passenger mile (RPM) increased 2 per cent. As a result, passenger revenue per available seat mile (RASM) for the quarter was up 5 per cent (Mainline system RASM was up 6 per cent) from the third quarter of 2001. Third quarter consolidated domestic passenger revenues were up $22 million or 2 per cent with no change to ASM capacity. Domestic passenger traffic was also unchanged while yield per RPM improved 3 per cent. Domestic RASM increased 3 per cent from the third quarter of 2001. Domestic passenger revenues at Mainline, including Tango, increased $50 million or 7 per cent on a 3 per cent increase in ASM capacity over the prior year. Mainline RASM rose 4 per cent due to a 5 per cent increase in domestic yield per RPM over the 2001 quarter. Domestic revenues at Air Canada Jazz declined $28 million or 15 per cent due in part to capacity reductions and continuing traffic weakness in short haul markets. US transborder passenger revenues were $25 million or 5 per cent below the prior year on a 4 per cent reduction to ASM capacity. US transborder RASM declined 1 per cent (a decline of 2 per cent for the Mainline carrier) due to continuing business traffic weakness especially on short-haul routes, greater fare discounting and a relatively greater proportion of longer haul flying to Florida and Hawaii which have lower yields and RASM. Other international passenger revenues grew $131 million or 17 per cent on a 4 per cent increase to ASM capacity. Load factor on these routes improved 3.2 percentage points and RASM grew by 12 per cent. Atlantic revenues rose 20 per cent with an ASM capacity increase of 5 per cent. Pacific revenues grew by 14 per cent on a 3 per cent increase to ASM capacity. South Pacific, Caribbean, Mexico and South America revenues were up 5 per cent due mainly to greater flying on South Pacific and Mexico routes. Cargo revenues were $18 million or 13 per cent above 2001 levels. Other revenues increased $13 million or 5 per cent mainly as a result of greater third party maintenance revenues from Technical Services. For the quarter, total operating revenues increased $159 million or 6 per cent from the prior year. Operating Expenses Operating expenses declined $67 million or 3 per cent from the third quarter of 2001 on a 1 per cent increase to ASM capacity. This was due mainly to favorable fuel expense as well as cost reductions in most areas including commission expense, depreciation, aircraft maintenance materials and food, beverages and supplies. These reductions were partially offset by increased aircraft rent expense, higher airport and navigation fees and other expenses including insurance costs. Salary and wage expense was unchanged from last year. Full-time equivalent employees were reduced by approximately 2,600 personnel or 6 per cent compared to the third quarter of 2001. Cost savings from the staff reductions were offset by higher average salaries due to contractual union wage uplifts and the effect of having relatively fewer more junior employees at lower pay scales. Fuel expense declined $63 million or 15 per cent mainly due to lower fuel prices and favorable fuel hedging results. The remainder was due to lower flying hours and fuel volumes, including the use of more efficient aircraft. Commission expense decreased $31 million or 25 per cent largely as a result of the elimination of North American base commission. Aircraft rent expense rose $29 million or 12 per cent. Of this amount, $15 million was due principally to new deliveries of leased aircraft, net of retirements and aircraft provisions taken in 2001, and $14 million was due to sale/leaseback transactions completed on existing fleet during the prior year to increase liquidity. Depreciation expense was down $18 million due largely to 2001 sale and leaseback transactions and the retirement of owned aircraft. The Other expense category increased $22 million or 4 per cent mainly as a result of significantly higher insurance costs. In the 2002 quarter, Air Canada achieved a significant improvement in asset and employee productivity. Mainline ASM capacity increased 2 per cent with a 4 per cent reduction in flying hours. This was due to a higher proportion of flying by larger aircraft as well as increased seating on many aircraft types. With Mainline-related employees down 6 per cent, employee productivity, as measured by ASMs per FTE employee, improved 9 per cent. Fuel productivity, as measured by ASMs per liter of fuel consumed, improved 4 per cent due to the increased use of newer and more fuel efficient aircraft and increased seating on many aircraft types. Unit cost, as measured by operating expense per ASM, was down 4 per cent (2 per cent, excluding fuel) from the prior year for the Mainline-related operations. Operating expense, net of cargo and other non-ASM revenues per ASM, declined 6 per cent (4 per cent, excluding fuel). Non-Operating Expense Non-operating income, excluding foreign exchange on long-term monetary assets and liabilities, amounted to $37 million in the quarter. The Corporation recorded, in other non-operating income, gains of $100 million from the purchase of Air Canada debt including $92 million from the purchase of Japanese Yen perpetual debt. Net interest expense at $58 million decreased $14 million mainly as a result of lower interest rates and the favorable effect of a swap agreement. One-time non-operating losses from asset sales and leaseback amounted to $12 million in 2002 as compared to net losses from aircraft writedowns and asset sales of $121 million in the 2001 quarter. In the 2001 quarter, the Corporation recorded, in other non-operating income, expected proceeds of $105 million relating to its Government of Canada assistance claim covering losses due to the closure of Canada's airspace following the September 11, 2001 terrorist attacks. In the first quarter of 2002, $37 million of this claim was reversed as the Government disallowed a portion of the original claim. Foreign Exchange on Long-Term Monetary Items In January 2002, Air Canada adopted accounting standard amendments related to foreign exchange as prescribed by the Canadian Institute of Chartered Accountants standard No. 1650 - Foreign Currency Translation. As expected, the new accounting standard has increased the volatility of earnings in periods of significant fluctuation in foreign currency exchange rates relative to the Canadian dollar. Under the New standard, Air Canada recorded, in current income for the 2002 quarter, $86 million of foreign exchange losses on long-term monetary assets and liabilities (January to September, 2002 - $46 million loss). These foreign exchange losses resulted mainly from the effect of foreign exchange rate changes on long-term debt denominated in foreign currencies, net of hedging. A loss of $253 million was recorded in the 2001 quarter following the CICA 1650 restatement. This and other foreign exchange related adjustments increased 2001 pre-tax losses by $262 million ($262 million after tax). Previously under GAAP, foreign exchange gains or losses on long-term monetary assets and liabilities were deferred and amortized to income over the life of the corresponding asset or liability. Adjusted Third Quarter Results In the third quarter of 2001 and 2002, the Corporation recorded a number of non-recurring or other significant items including a major income tax valuation allowance, gains/losses on asset sales and purchase of debt and an estimated government assistance claim. Removing 2002 and 2001 non-recurring or other significant items described in Attachment One, the adjusted (a) income before foreign exchange on long term monetary items and income taxes would have been $117 million, a $278 million improvement from the $161 million adjusted loss in the 2001 quarter. (a) Air Canada's adjusted earnings/losses or non-GAAP earnings/losses are earnings/losses which have been adjusted for the non-recurring or other significant items described in Attachments One and Two. In order to allow the reader to view financial results on a normalized basis, non-recurring or other significant items which are not reflective of the underlying financial performance of the Corporation from ongoing operations have been removed from reported earnings/losses. For the third quarter of 2002, these items are gains/losses on the sale of assets and the purchase of debt. For January to September 2002, these items are gains/losses on the sale of assets and the purchase of debt and a charge relating to the government assistance claim recorded in 2001. For the third quarter of 2001, these items are aircraft retirement provisions and expected government assistance relating to the September 11, 2001 terrorist attacks, gains/losses on the sale of assets and the purchase of debt and a major tax valuation allowance. For January to September 2001, these items are aircraft retirement provisions and expected government assistance relating to the September 11, 2001 terrorist attacks, gains/losses on the sale of assets and the purchase of debt and a major tax valuation allowance. Adjusted earnings/losses are not a recognized measure for financial statement presentation under Canadian generally accepted accounting principles (GAAP). Non-GAAP earnings measures (such as adjusted earnings/losses) do not have any standardized meaning and are therefore not likely to be comparable to similar measures presented by other issuers. Readers should consider the adjusted earnings/losses measures in the context of Air Canada's GAAP results. Attachment One provides a reconciliation between GAAP results and the adjusted earnings/losses for third quarter results and Attachment Two provides a reconciliation for January to September results. Cash Flow Cash flows from operations amounted to $89 million, a $107 million improvement from the 2001 quarter. Improved operating results were the main reason for the cash flow improvement. Changes in advance ticket sales resulted in a $120 million greater cash usage compared to the third quarter of 2001. Changes in accounts payable and accrued liabilities used $140 million less cash than in 2001. With the integration of Canadian Airlines completed, special payments related to integration, separation programs and restructuring totaled $6 million in the 2002 quarter as compared to over $100 million recorded in the 2001 quarter. Use of cash for aircraft lease payments in excess of rent expense declined $49 million due to the timing of cash lease payments versus accounting rent expense. The Other cash category recorded a decline of $89 million mainly relating to the non-cash gain on debt purchases. On a year-to-date basis, cash flows from operations increased $794 million as a result of improved operating results, reduced integration-related payments and lower use of cash for aircraft lease payments in excess of rent expense. In the third quarter of 2002, repayments of long-term debt mounted to $364 million. Proceeds from the sale and leaseback of assets were $143 million from the sale and leaseback of two CRJ aircraft and spare engines. Additions to property and equipment totaled $32 million, mostly for aircraft-related expenditures, net of $20 million of recovered progress payments. Air Canada took delivery of three Airbus A321s, one A319, one A320 and one Boeing 767-300 aircraft in the quarter, under both short and long-term operating leases. One of the newly delivered Airbus A321 aircraft will commence scheduled operations in the fourth quarter. As well, five Canadair Jets were delivered to Air Canada Jazz, under operating leases. One leased Boeing 737-200 aircraft was returned to the lessor in the quarter. The Corporation closely monitors its liquidity requirements and is assessing various financing transactions and initiatives with the objective of ensuring its future liquidity needs are addressed. These activities could include additional sale and leaseback transactions, asset sales or other financing transactions. As at September 30, 2002, the Corporation's cash and cash equivalents amounted to $717 million and committed financing amounted to $180 million. Tax Effective July 2001, Air Canada ceased to record income tax recoveries on losses from operations at the Mainline carrier. Consequently, third quarter 2001 and 2002 results for the Mainline carrier are recorded on the same basis. However, because tax recoveries at the Mainline carrier were recorded in the first six months of 2001, year-to-date after tax results from operations are not reflected on the same basis as in the first half of 2001. Please refer to Note 1 to the Consolidated Financial Statements for more information. Year-to-Date Results For the nine months ended September 30, 2002, the Corporation recorded an operating income of $70 million, a $493 million improvement from 2001. Loss before foreign exchange on long-term monetary items and income taxes was $25 million, a $566 million improvement from the prior year. Net loss for 2002 was $64 million or $0.54 per share with an income tax recovery of $7 million as compared to a restated loss of $1,038 million or $8.64 per share with an income tax provision of $340 million in 2001. Removing non-recurring or other significant items as described in Attachment Two, the first nine months of 2002 would have produced a non-GAAP loss before foreign exchange on long-term monetary items and income taxes of $83 million, an improvement of $591 million from the similarly adjusted loss of $674 million in 2001. As of September 30, 2002, Air Canada's balance sheet shows a total shareholders' equity deficit of about $1.5 billion while total working capital deficit tops $778 million. AKORN INC: Sets Annual Shareholders' Meeting for Dec. 19, 2002 -------------------------------------------------------------- The Annual Meeting of shareholders of Akorn, Inc., will be held at 10:00 a.m., local time, on December 19, 2002 in the Read Room of The Northern Trust Bank, 265 East Deerpath, Lake Forest, Illinois 60045 for the following purposes: 1. To elect four directors to the Board of Directors. 2. To consider and vote upon the adoption of the Akorn, Inc., 2002 Stock Option Plan for Directors. 3. To consider and vote upon approval of certain of the conversion features of the subordinated debt issued by the Company to a trust controlled by the Company's Chairman and Chief Executive Officer. 4. To transact such other business as may properly come before the Meeting and any adjournments thereof. The Board of Directors has fixed the close of business on November 8, 2002 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting and all adjournments thereof. Akorn, Inc., manufactures and markets sterile specialty pharmaceuticals, and markets and distributes an extensive line of pharmaceuticals and ophthalmic surgical supplies and related products. As reported in Troubled Company Reporter on September 26, 2002, Akorn, Inc., entered into an Agreement with its senior lender, The Northern Trust Company, under which the Bank had agreed to forebear from taking action with respect to Akorn's current default in the payment of principal and interest under its existing Credit Agreement with the Bank and, subject to the terms of the Agreement, would continue to forebear from exercising its remedies under the Credit Agreement until January 3, 2003. The Bank had notified the Company on September 16, 2002 of the payment default, and of its decision to pursue its legal remedies if an agreement on forbearance could not be reached prior to September 23, 2002. ALLMERICA FIN'L: S&P Lowers Counterparty Credit Rating to BB- ------------------------------------------------------------- Standard & Poor's Ratings Services removed from CreditWatch its counterparty credit rating on Allmerica Financial Corp., and lowered it to double-'B'-minus from double-'B' following discussions with AFC's management regarding capitalization and liquidity at the consolidated insurance company and holding company levels. Standard & Poor's also said that it removed from CreditWatch and lowered its various ratings on AFC's operating companies. The outlook on all these companies is negative. "At the consolidated life insurance company operations, statutory capitalization is expected to have declined in the third quarter of 2002 because of the negative impact of equity market volatility on statutory earnings," explained Standard & Poor's credit analyst Kevin G. Maher. "Statutory earnings are depressed because of increased reserve strengthening for guaranteed minimum death benefit reserves and lower fee income from reduced assets under management." AFC indicated in its second-quarter 10Q filing that for each 1% decline in the S&P 500 index, the expected increase in required statutory GMDB reserves is about $6 million-$8 million, which would imply a range of about $102 million-$136 million following the drop of about 17% in the S&P 500 in the third quarter of 2002. These declines in capital position follow drops in 2001 and in the second quarter of 2002. Subsequent to a capital contribution from First Allmerica Financial Life Insurance Co., to Allmerica Financial Life Insurance & Annuity Co., the primary ariable annuity writer, risk-adjusted capitalization is well below the triple-'B'-minus range. Standard & Poor's remains concerned that further weakness in the equity markets could significantly strain the life companies' already weakened statutory capitalization. Standard & Poor's believes AFC's management is committed to maintaining capitalization at sufficient levels to satisfy Delaware and Massachusetts insurance regulators. To facilitate capital management, AFC has initiated expense reductions by ceasing new underwriting of proprietary life and annuity products and reducing its workforce, which supported the variable business. In addition, variable annuity surrender activity has increased recently, resulting in statutory capital relief through increased revenues from surrender charges and release of GMDB reserves. AFC has also been repurchasing outstanding guaranteed investment contracts backed by funding agreements, resulting in addition statutory capital. The rating action at the holding company reflects the potential capital strain related to life insurance operations and the balance sheet effect on the increased acceleration of the amortization of deferred acquisition costs at the life insurance operations. Because of increased surrenders at the life operations and equity market effects, AFC is expected to recognize sizeable non-cash DAC write-off as of the third quarter of 2002. As for ongoing cash obligations, the property/casualty companies have historically contributed about 10% of statutory surplus for use at the holding company to service debt (the 2002 pretax interest expense is about $40.6 million). Standard & Poor's has reviewed cash flow assumptions and projections with AFC management and believes that the holding company will be able to support demands for cash obligations through the remainder of 2002. Although on a stand-alone basis the property/casualty operations appear to benefit from improved market conditions, good operating performance, and increased rates, the challenge facing AFC is an overall concern. It is Standard & Poor's expectation, however, that there will be no further contributions from the property/casualty companies in the form of an extraordinary dividend in the remainder of 2002. The outlook continues to reflect the uncertainty surrounding the effects of equity market volatility on the group's capitalization. ALLMERICA FINANCIAL: Third Quarter Net Loss Tops $315 Million ------------------------------------------------------------- Allmerica Financial Corporation (NYSE: AFC) reported a net operating loss for the third quarter of $315.0 million, compared to net operating income of $34.4 million in 2001. For the nine months ended September 30, 2002, the Company reported a net operating loss of $297.3 million, as compared to net operating income of $130.5 million for the same period in 2001. The Company also reported that it has reached an agreement with the Massachusetts Division of Insurance whereby it will indefinitely maintain the Risk Based Capital ratio of its lead life insurance company, First Allmerica Financial Life Insurance Company, at a minimum of 100 percent, so long as FAFLIC does not write new business. This agreement replaces an earlier commitment that FAFLIC maintain a 225 percent RBC ratio which would have expired in 2005. The Company reported a net loss of $313.4 million in the third quarter of 2002, compared to net income of $31.2 million in 2001. The third quarter 2002 net loss included net realized after tax investment losses of $0.7 million and a contingency payment received from the sale of the defined contribution business, net of tax, of $2.3 million. For the comparable period in 2001, net income included net realized investment losses of $2.8 million related primarily to impairments on certain fixed income securities and a loss of $0.4 million on derivatives. For the nine months ended September 30, 2002, the Company reported a net loss of $321.0 million as compared to net income of $67.6 million for the same period in 2001. Strong results in the Company's property and casualty operations were more than offset by significant charges related to the Company's decision to cease the manufacture and sale of proprietary variable annuity and variable life insurance products, as well as the impact of the continued decline in the equity market through September 30, 2002. These charges include $487.5 million related to a write-off of deferred policy acquisition costs, $106.7 million related to guaranteed minimum death benefit reserves partially offset by a related decrease in deferred acquisition cost amortization of $67.6 million, and $29.8 million related to the write-off of certain capitalized hardware and software development costs in the Allmerica Financial Services business unit. Net operating loss and income excludes certain items which management believes are not indicative of overall operating trends, including net realized investment gains and losses and certain other items, net of taxes. The net operating loss in the third quarter of 2002 includes the aforementioned adjustments to deferred policy acquisition costs, guaranteed minimum death benefit reserves, and capitalized technology costs. "The combined effects of the equity market's decline in the third quarter, the decision by the major rating agencies to reduce the insurance financial strength ratings of our life insurance companies, and the accounting for our related decision to cease sales of proprietary life insurance and annuity products, led to a significant reported GAAP loss in Allmerica Financial Services," said Edward J. Parry, III, President of the Company's Asset Accumulation business. "The actions we are taking, however, are having a positive effect on our statutory capital position and related risk based capital ratios and, of course, these writedowns have no impact on the ability of our life insurance units to meet obligations to our policyholders," said Parry. "Moreover, we are very pleased with the new agreement we have reached with the Massachusetts Division of Insurance regarding the reduction in required maintenance of statutory capital levels in our lead life insurance company." Robert P. Restrepo, President of Allmerica's property and casualty operations added, "Risk Management, our property and casualty business, produced strong earnings for the third consecutive comparative quarter. These results reflect lower losses, primarily in our commercial lines, higher earned premiums, and lower catastrophe losses during the quarter." Segment Results Allmerica Financial operates in two primary businesses: Risk Management and Asset Accumulation. Risk Management markets property and casualty insurance products on a regional basis through The Hanover Insurance Company and Citizens Insurance Company of America and Asset Accumulation markets insurance and retirement savings products and services to individual and institutional clients through Allmerica Financial Services, and investment management services to institutions, pension funds, and other organizations through Allmerica Asset Management, Inc. Risk Management Risk Management pre-tax operating earnings were $58.5 million, compared to $6.8 million for the third quarter of 2001. Earnings increased in the quarter due to continued improvement in loss ratios. This improvement resulted from the agency management strategies, re-underwriting actions and rate increases that have been put into place over the past two years, as well as lower pre- tax catastrophe losses and favorable development on prior accident year loss reserves. Property and Casualty highlights: -- Net premiums written were $596.8 million in the third quarter compared to $586.7 million in the third quarter of 2001. -- Net premiums earned for the third quarter were $568.3 million compared to $552.5 million in 2001. -- The statutory loss ratio was 62.7 percent in the third quarter of 2002 compared to 73.6 percent in the same period in 2001. -- In the third quarter of 2002, pre-tax catastrophe losses were $4.0 million versus $15.6 million in the third quarter of 2001. -- The statutory expense ratio was 28.8 percent in the third quarter compared to 26.4 percent for the third quarter of last year. Asset Accumulation The reported third quarter pre-tax operating loss for the Asset Accumulation business was $534.5 million versus pre-tax operating income of $40.5 million in 2001. Allmerica Financial Services reported a pre-tax operating loss of $540.2 million in the third quarter of 2002 compared to pre- tax operating income of $34.4 million in the third quarter of 2001 due to the aforementioned adjustments. Effective at the end of the third quarter of 2002, new sales of life and annuity products issued by Allmerica Financial Services were essentially terminated. Allmerica Asset Management's pre-tax operating income was $5.7 million in the quarter compared to $6.1 million in the same period of the prior year. Corporate Corporate segment net expenses were $17.5 million in the third quarter of 2002, compared to $15.7 million in the comparable period in 2001. Investment Results Net investment income was $152.8 million for the third quarter of 2002, compared to $169.6 million in the same period in 2001. $12.7 million of this decrease was principally related to lower average spread-based assets in the guaranteed investment contract business. In addition, net investment income decreased due to lower portfolio yields driven by an increased emphasis on higher credit quality bonds, and lower prevailing interest rates. Third quarter pre-tax net realized investment losses were $7.8 million, compared to $4.9 million of pre-tax net realized investment losses in the third quarter of 2001. In the current period, pre-tax net realized investment losses of $48.8 million related primarily to impairments on certain fixed income securities. These losses were largely offset by gains of $40.2 million from sales of other fixed income securities. Net realized investment losses in the third quarter of 2001 related primarily to impairments on certain fixed income securities and losses from derivative instruments, largely offset by gains from sales of other fixed income securities. Income Taxes The $181.7 million tax benefit during the quarter was primarily the result of the significant loss recognized by Allmerica Financial Services. Balance Sheet Shareholders' equity was $2.1 billion at September 30, 2002, compared to $2.4 billion at December 31, 2001. Excluding accumulated other comprehensive income, book value was $39.47 per share at the close of the third quarter, compared to $45.44 per share at December 31, 2001. Total assets were $27.5 billion at September 30, 2002, compared to $30.3 billion at year-end 2001. Separate account assets were $12.2 billion at September 30, 2002, versus $14.8 billion at December 31, 2001. The decline in "total" and "separate account" assets was principally the result of the decline in the equity markets through September 30, 2002. Statutory Capital of Life Insurance Subsidiaries The Company estimates that each of its life insurance subsidiaries, First Allmerica Financial Life Insurance Company and Allmerica Financial Life Insurance and Annuity Company, have Risk Based Capital ratios that are in excess of the National Association of Insurance Commissioner's 100 percent Company Action Level. The Company Action Level is the first level at which regulatory involvement is specified based upon the level of capital. Regulated insurance companies with RBC ratios which fall below the Company Action Level are required to prepare and submit an RBC Plan which is acceptable to the insurance commissioner of the state of domicile. The Company expects that FAFLIC's RBC ratio at September 30, 2002 will be approximately 145 percent of the Company Action Level, and that AFLIAC's will be approximately 130 percent of the Company Action Level. AFLIAC's estimated ratio includes a capital contribution of $171 million that FAFLIC made in October, and is accrued in its September 30, 2002 statutory filing. The Company also reported that it has reached an agreement with the Massachusetts Division of Insurance whereby it will indefinitely maintain the RBC ratio of its lead life insurance company, First Allmerica Financial Life Insurance Company, at a minimum of 100 percent, so long as FAFLIC does not write new business. This agreement replaces an earlier commitment that FAFLIC maintain a 225 percent RBC ratio which was due to expire in 2005. Rating Actions Recently, the Company's ratings were downgraded by A.M. Best, Moody's, Standard & Poor's and Fitch. The financial strength ratings of its life insurance companies as well as its holding company debt ratings are now below investment grade. In addition, A.M. Best, Moody's and Standard & Poor's reduced the ratings of the Company's property & casualty companies to "B++", "Baa3" and "BBB+", respectively. The ratings actions and the decision to cease selling proprietary life and annuity products will cause surrender rates in the Company's life insurance and annuity business to increase; however, the Company believes that its life insurance subsidiaries have sufficient assets, liquidity and cash flow to satisfy policyholder obligations. The decrease in the property & casualty ratings, in particular the A.M. Best rating, could negatively impact earnings and growth in this business. Other Items The Company has decided to suspend payment of its annual common stock dividend. Allmerica Financial Corporation's Third Quarter Statistical Supplement is also available at http://www.allmerica.com AMERICAN ENTERPRISE: Plan Confirmation Hearing Set for Nov. 20 -------------------------------------------------------------- American Enterprise.Com, Corporation (OTCBB:AMER) announced that its previously signed Letter of Intent to acquire 100% of the outstanding stock of HealthCentrics, Inc., after AMER emerges from Chapter 11 reorganization, is proceeding as planned. All terms and conditions are the same, including HealthCentrics' shareholders receiving one share of AMER for each share of HealthCentrics. AMER's plan to complete its reorganization this month has been conditionally approved by the court. The court has set the date of November 20, 2002 for final approval, subject to hearing and ruling on any third party objections that may be filed. The Plan of Reorganization contemplates that AMER will emerge from reorganization with no significant debt. Further, the existing publicly traded stock will not be compromised. Accordingly, there will be no reverse split or cancellation of the existing AMER stock. The acquisition of HealthCentrics by AMER is subject to the parties concluding a definitive agreement and approval by the Bankruptcy Court. HealthCentrics is a healthcare Application Service Provider that markets HealthCentrics 3.0, a web-native and browser-based practice management application to third-party billing companies, practice management organizations, payers, hospitals, and physician organizations. For additional information please visit the Web site at http://www.HealthCentrics.com AMES DEPARTMENT: Gets Okay to Continue Compensation Procedures -------------------------------------------------------------- Martin J. Bienenstock, Esq., at Weil, Gotshal & Manges LLP, in New York, tells Judge Gerber that Delaware Ribbon, Wings Manufacturing and I. Shalom's objections simply overlooked the basis on which the professionals were induced to render services from the outset of Ames Department Stores, Inc.'s Chapter 11 cases. In contrast to the postpetition trade creditors who hold unsecured administrative claims, Mr. Bienenstock explains that professionals have a "superpriority" status by virtue of the $5,000,000 Carve-out. Unlike postpetition trade creditors, Mr. Bienenstock explains that these professionals have had their fees paid at 80% to 90% of amounts billed to the Debtors. Postpetition trade creditors, on the other hand, have, until recently, been paid 100% on their invoices billed to the Debtors. In fact, as a class of creditors, the postpetition trade creditors are paid more than 95% of their invoices billed since the Petition Date. * * * After considering the merits of the case, Judge Gerber authorizes the Debtors to implement the Compensation Procedures and pay the professionals employed in these Chapter 11 cases. The Debtors are authorized and directed to compensate the professionals, other than the ordinary course professionals, for the services rendered and the reimbursement of actual and necessary expenses incurred on a monthly basis. The Debtors are to pay: 50% of the Fees and 100% of the Expenses for July 2002; 60% of the Fees and 100% of the Expenses for August 2002; and 74% of the Fees and 100% of the Expenses accrued for September 2002 and each month thereafter, until further order of this Court. (AMES Bankruptcy News, Issue No. 27; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANC RENTAL: Consolidating Operations at George Bush Airport ----------------------------------------------------------- To save over $4,720,000 per year in fixed facility costs and other operational cost savings, ANC Rental Corporation and its debtor-affiliates seek the Court's authority to: -- reject the Alamo Concession Agreement, the Future Alamo Concession Agreement, the Alamo Facilities Lease, the Alamo Members Agreement, the Alamo MOU and the Alamo Operating Agreement, and -- assume and assign to ANC Rental Corp. the National Concession Agreement, the Future National Concession Agreement, the National Lease, the National Facilities Agreement, the National Members Agreement, the National MOU and the National Operating Agreement. The Debtors and the City of Houston are parties to these agreements that relate to the operation of the Alamo and National brand names at George Bush Intercontinental Airport in Houston, Texas. Bonnie Glantz Fatell, Esq., at Blank Rome Comisky & McCauley LLP, in Wilmington, Delaware, tells Judge Walrath that all rental car companies operating at the Houston Intercontinental Airport must be party to the Members Agreement, the Operating Agreement and the Memorandum of Understanding to use the consolidated rental car facility at the airport and to participate in the bus service. Ms. Fatell informs the Court that a consolidated rental car facility is currently being constructed at the Airport, which is anticipated to be ready for occupancy in March 2003. The Members Agreement, dated April 12, 2000, was entered into by National and Alamo with eight other rental car companies at the Houston Intercontinental Airport. Under the Members Agreement, the car rental companies, through IAH RACS LLC, oversee the financing, design and construction of the consolidated facility, purchase certain buses and operate a portion of the consolidated facility at the Houston Intercontinental Airport. The MOU, meanwhile, is for the initial allocation of spaces within the consolidated car rental facility. The Operating Agreement sets forth the obligations of each car rental company to IAH RACS LLC. Pursuant to the Facilities Agreement, Ms. Fatell explains that each rental car company was allocated proceeds from bonds issued by the City to fund the costs of designing, constructing and equipping their maintenance-storage facilities and exclusive space within the consolidated facility based on the total estimated costs. Alamo was allocated $2,400,000 to be used for its space at the consolidated facility and has spent $161,470 to date in connection with design-related costs. The remaining $2,200,000 allocation to Alamo will automatically be eliminated once the Alamo Agreements are rejected. Ms. Fatell tells the Court that IAH RACS LLC was notified of the Debtors' intention to reject the Alamo agreements two months ago. The Debtors and the other car rental companies have met to discuss the reallocation of the space and funds previously allocated to Alamo. The discussions are currently ongoing. (ANC Rental Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANGEION CORP: Minnesota Court Confirms Joint Reorganization Plan ---------------------------------------------------------------- Angeion Corporation (Nasdaq: ANGQC) announced that the United States Bankruptcy Court for the District of Minnesota, Third Division, has confirmed the Company's Joint Modified Plan of Reorganization, dated September 4, 2002, to take effect October 25, 2002. Under the terms of the Plan, the holders of the Company's 7-1/2% Senior Convertible Notes, due April 2003, agreed to convert the debt to equity. The Note holders and other holders of certain unsecured claims will receive a pro rata share of 95% of replacement common shares to be issued pursuant to the Plan. On October 25, 2002 the conversion took place and all outstanding notes have been cancelled. The transaction was implemented as a voluntary Chapter 11 Bankruptcy for the purpose of enabling the Company to retain unimpaired utilization of a net operating loss carryforward of over $125 million. Holders of the Company's old common stock will receive a pro rata share of 5% of the replacement common stock. Each will receive one share and one warrant to purchase an additional share of replacement common stock for every 20 shares of the old common that was owned prior to the effective date. Shareholders will receive cash in lieu of any fractional shares. Letters of transmittal to facilitate the replacement of the old shares are being mailed commencing October 28, 2002. Until replacement is complete, the Company expects the replacement shares will trade on a "when issued" basis on the Nasdaq Small Cap Market under the symbol ANGNV. After, it is expected that the replacement shares will trade under the Company's traditional symbol ANGN. Following the replacement of the old shares there will be 3,594,627 shares outstanding. Angeion's President and Chief Executive Officer, Richard Jahnke, stated, "We are delighted to have this behind us. We emerge with no corporate debt, shareholders' equity of approximately $20 million and over $4 million of cash and marketable securities on our balance sheet. "We are also excited about our prospects going forward," Jahnke continued. "Our Medical Graphics business is a leading manufacturer and marketer of non- invasive cardio-respiratory diagnostic systems and related software. These systems are designed for the management and improvement of cardio- respiratory health, as well as for hospital and physician office metabolic and nutrition assessments. And, we are especially encouraged by the market response to the introduction of our New Leafr health and fitness products, many of which are derived from Medical Graphics' core technologies. These products include our recently introduced Weight Loss Training program that is being marketed through health and fitness clubs." Jahnke also noted that Medical Graphics was not involved in Angeion's Bankruptcy. Founded in 1986, Angeion Corporation -- http://www.angeion- ir.com -- acquired Medical Graphics -- http://www.medgraphics.com-- in December 1999. Medical Graphics develops, manufactures and markets non-invasive cardio- respiratory diagnostic systems and related software for the management and improvement of cardio- respiratory health. The Company has also introduced a line of health and fitness products, many of which are derived from Medical Graphics' core technologies. These products, marketed under the New Leaf Health and Fitness Brand -- http://www.newleaf-online.com-- help consumers effectively manage their weight and improve their fitness. They are marketed to the consumer primarily through health and fitness clubs and cardiac rehabilitation centers. ANTHONY & SYLVAN: Working Capital Deficit Tops $1.2M at Sept. 30 ---------------------------------------------------------------- Anthony & Sylvan Pools Corporation (Nasdaq: SWIM) announced results for its third quarter ended September 30, 2002. Net sales were $50,626,000, a decrease of 11.4% from the third quarter 2001 sales of $57,118,000. Net income for the third quarter was $177,000 compared with $1,681,000 for the same period last year. On a per share basis, adjusted for a 10% stock dividend distributed in May 2002, diluted earnings per share of $0.03 compares with $0.32 per share recorded in the third quarter ended September 30, 2001. For the nine months ended September 30, 2002, revenues of $142,291,000 compared with $151,892,000 last year, a 6.3% decrease. Net income for the nine months was $310,000 compared with $2,689,000 in the prior year. Diluted earnings per share for the nine-month period of $0.06 compared with $0.51 per share reported last year. Included in the results for the third quarter and nine months is a $1,170,000 pre-tax restructuring charge for the previously announced decision to close its swimming pool installation divisions in the Orlando and Southeastern Florida markets. In addition, those divisions had combined operating losses of $800,000 and $500,000 for the third quarter ended September 30, 2002 and 2001, respectively, and operating losses of $2,600,000 and $1,500,000 for the nine months ended September 30, 2002 and 2001, respectively. At September 30, 2002, the Company's balance sheets shows a working capital deficit of about $1.2 million. Commenting on the results, Stuart D. Neidus, Anthony & Sylvan's Chairman and Chief Executive Officer, said, "The wind-down of the closings of our Orlando and Southeastern Florida swimming pool installation divisions is going well and should be, for the most part, completed before the end of the year. At that time, we will account for those operations as discontinued. Our continuing businesses, while still experiencing the effect of consumer restraint and price sensitivity, saw third quarter bookings of sales contracts increase over last year." Mr. Neidus commented on the outlook for the remainder of the year by stating, "For the fourth quarter, our results will be affected by the wind- down of operations in the two Florida divisions that are closing. Once the wind-down is completed, we can fully redirect our financial and intellectual assets to markets and growth strategies that can yield levels of return consistent with our long-term goal of increasing shareholder value." He also noted that the Company continues to maintain a strong balance sheet, with over $30 million in equity and no debt at September 30, 2002. Mr. Neidus also announced that the Company's Board of Directors has declared a 10 percent stock dividend payable on November 29, 2002 to shareholders of record on November 15, 2002. Commenting on the dividend action, Mr. Neidus said, "Our Board again has indicated its confidence in the long-term potential for Anthony & Sylvan. This stock dividend is another step toward increasing the liquidity of our stock." Anthony & Sylvan -- http://www.anthonysylvan.com-- operates in the leisure industry, offering in-ground, concrete residential swimming pools, spas and related products to its customers. The Company serves its customers through a network of over 40 sales design centers in 23 geographic markets in 16 states. It also sells pool-related consumables, replacement parts, equipment and supplies through retail service centers. ASBESTOS CLAIMS: All Proofs of Claim Due Tomorrow ------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Texas fixes October 31, 2002, as the Bar Date for creditors of Asbestos Claims Management Corporation to file their proofs of claim or be forever barred from asserting that claim. Proofs of claim are deemed timely-filed if they are received on or before 4:00 p.m. of the Bar Date by: Asbestos Claims Management Corporation c/o Trumbull Services LLC 4 Griffin Road North, Windsor CT 06095 The Debtors identified five kinds of claims that are exempted to the Bar Dates: a) Claims already been properly filed with this Court; b) Claims not listed in the Schedules as "disputed," "contingent," or "unliquidated"; c) Administrative expense of the Debtor's chapter 11 case; d) Claims previously allowed by order of this Court; and e) Asbestos-related bodily injury claim, including claims based on the rejection or alleged breach of a written settlement agreement with respect to such asbestos-related bodily injury claim. The Government Claims Bar Date is February 17, 2003. Asbestos Claims Management Corporation filed for chapter 11 protection on August 19, 2002 at the U.S. Bankruptcy Court for the Northern District of Texas. Michael A. Rosenthal, Esq., and Janet M. Weiss, Esq., at Gibson, Dunn & Crutcher represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors it listed debts and assets of over $100 million. ASPEN GROUP RESOURCES: Defaults on Bank Loan Facility ----------------------------------------------------- Aspen Group Resources Corporation, (OTCBB: ASPGF; Toronto: ASR) has appointed Robert Calentine to the position of interim Chief Executive Officer. Mr. Calentine has been on the Board of Directors of Aspen since May, 2002, and was former CEO and founder of Custom Steel Inc., a leading supplier of custom fabricated steel products. Aspen also announced that it has appointed Ron Mercer as Vice- President of Operations. Mr. Mercer has been with Aspen since 1999 in various capacities. Aspen has received the resignation of Jack Wheeler as a director and officer of Aspen. Mr. Wheeler has served Aspen in various capacities as Chairman, President, CEO and a director since September of 1999. The Board of Directors of Aspen thank Mr. Wheeler for his years of service and wish him success in his future endeavors. Aspen also announced that it has received a notice of default from its bank with regard to its loan facility. Management of Aspen is actively pursuing resolutions with its bank to rectify the events of default and put the loan back in good standing as soon as possible. BALDWINS INDUSTRIAL: Panel Hires McClain & Leppert as Counsel ------------------------------------------------------------- The Official Committee of Unsecured Creditors asks for authority from the U.S. Bankruptcy Court for the Southern District of Texas to hire McClain & Leppert, PC, as its Counsel in connection to the chapter 11 cases involving Baldwins Industrial Services, Inc., and its debtor-affiliates. The Committee relates to the Court that during its meeting, members voted to tap the legal services of McClain & Leppert as counsel for the Committee with David P. McClain, Esq., as the attorney in charge of the representation. The Committee anticipates McClain & Leppert will: a) give the Committee legal advice with respect to its powers and duties under the Bankruptcy Code in connection with this case; b) prepare on behalf of the Committee all necessary applications, answers, claims, proceedings, orders, reports and other legal instruments necessary or advisable to represent the interests of the unsecured creditors of Baldwins Industrial; c) initiate and prosecute any litigation to which the Committee may be a party; d) assist the Committee in its investigation of the acts, conduct, assets, liabilities, and financial condition of Baldwins Industrial, the operation of Baldwin Industrial's business, and the desirability of the continuation of such business, and any other matter relevant to the case or to the formulation of a plan of reorganization; e) assist the Committee in requesting the appointment of a trustee or examiner should such action become necessary; f) negotiate with the secured creditors and Baldwins Industrial on behalf of the Committee; g) review all claims and documentation of collateral or security held against Baldwins Industrial or its assets; h) institute objections to proofs of claim asserted against Baldwins Industrial's estate, and to prosecute all contested objection to proofs of claim asserted against the estate; i) analyze, institute and prosecute actions regarding recovery of property of Baldwins Industrial's estate; j) assist, advise and represent the Committee in analyzing the capital structure of Baldwins Industrial, investigating the extend and validity of liens, cash collateral stipulations or contested matters; k) assist, advise and represent the Committee in any manner relevant to preserving and protecting Baldwins Industrial's estate; l) investigate and prosecute preferences, fraudulent transfers and other actions arising under Baldwins Industrial's bankruptcy avoiding powers, to the extent the Committee is so empowered; m) appear in Court and to protect the interests of the Committee before the Court; n) assist the Committee in administrative matters; and o) perform such other legal services as may be required and in the interest of the unsecured creditors of Baldwins Industrial's estate, including preparation of a plan of reorganization and disclosure statement. McClain & Leppert's bankruptcy-related work will be performed by David P. McClain, Esq., and Mike Leppert, Esq., at $300 per hour. The rates for other professionals are: Associates $150 - $185 per hour Legal Assistants $ 60 per hour Baldwins, one of the largest crane rental companies in the Southwestern United States, filed for chapter 11 protection on August 26, 2002. Jack M. Partain, Jr., Esq., at Fulbright & Jaworksi represents the Debtors in their restructuring efforts. When the Company filed for chapter 11 protection it listed assets of not more than 10 million and estimated debts at not more than 50 million. BCE INC: Plans to Raise C$2B in Public Debt to Fund Bell Buyback ---------------------------------------------------------------- BCE Inc., (TSX, NYSE: BCE) announced that further to its August 1st, 2002 shelf prospectus filing, it will file a prospectus supplement with all Canadian provincial securities regulatory authorities for the public offering of Cdn $2 billion of BCE debt securities in three series. BCE will offer Series A, Series B, and Series C Notes: - The $300 million 6.20% Series A Notes will be dated October 30, 2002, mature on October 30, 2006 and will be issued at a price of 99.937% of par. - The $1,050 million 6.75% Series B Notes will be dated October 30, 2002, mature on October 30, 2007 and will be issued at a price of 99.829% of par. - The $650 million 7.35% Series C Notes will be dated October 30, 2002, mature on October 30, 2009 and will be issued at a price of 99.747% of par. The net proceeds resulting from this public debt offering will be used to pay part of the acquisition price of SBC Communications Inc.'s indirect minority interest in Bell Canada. The closing of the offering is scheduled to occur on October 30, 2002, and is subject to certain conditions set forth in the underwriting agreement. The debt securities are offered for sale to the public by a syndicate of underwriters led by TD Securities Inc. as lead manager and book-runner and Merrill Lynch Canada Inc. as co-lead manager. The underwriting syndicate also includes BMO Nesbitt Burns Inc., CIBC World Markets Inc., RBC Capital Markets, Scotia Capital Inc., Banc of America Securities, National Bank Financial Inc., Casgrain & Company Ltd., and Societe Generale. BCE is Canada's largest communications company. It has 24 million customer connections through the wireline, wireless, data/Internet and satellite services it provides, largely under the Bell brand. BCE leverages those connections with extensive content creation capabilities through Bell Globemedia which features some of the strongest brands in the industry - CTV, Canada's leading private broadcaster, The Globe and Mail, the leading Canadian daily national newspaper and Sympatico.ca, a leading Canadian Internet portal. As well, BCE has extensive e- commerce capabilities provided under the BCE Emergis brand. BCE shares are listed in Canada, the United States and Europe. BETHLEHEM STEEL: Court OKs Sale of Bethlehem Center to Majestic --------------------------------------------------------------- Steven E. Ostrow, Esq., at White and Williams LLP, in Philadelphia, Pennsylvania, informs the Court that Grubb & Ellis is a licensed real estate broker in Pennsylvania. Through its brokerage services and diligent efforts as dual agent for Bethlehem Steel Corporation, its debtor-affiliates, and Majestic, Grubb & Ellis procured Majestic as the ready, willing and able buyer for the Assets. Grubb & Ellis agreed to be paid a commission upon the closing of the sale. But since the commission is not payable until closing, the commission is not "earned" unless and until the actual sale of the Assets occurs under Pennsylvania law. Therefore, Grubb & Ellis' claim for a commission arises postpetition at settlement. The Debtors and Majestic are jointly obligated to pay Grubb & Ellis its standard commission on vacant property equal to 10% of the Purchase Price or at least $1,298,999, upon the closing of the Agreement. Instead, the Debtors and Majestic have sought to preclude Grubb & Ellis from recovering its commission. Under the Sale Motion, both the Debtors and Majestic seek: (a) to arbitrarily limit Grubb & Ellis' commission to an amount not more than $360,000; (b) an injunction permanently enjoining and precluding all parties and entities asserting any claims against the Acquired Assets and the Debtors, including Grubb & Ellis, from asserting any claims, or taking any legal action, against the Assets and Majestic; and (c) to restrict any and all claims and litigation arising out of the Sale Motion or the Agreement or any dispute relating to the exclusive jurisdiction of the Bankruptcy Court. In addition to its claim against Majestic, Grubb & Ellis asserts an administrative expense claim for the Commission, which will accrue or be earned and due and payable under Pennsylvania law upon the closing of the sale of the Acquired Assets. Majestic Disputes Grubb & Ellis' Claim Majestic Realty Co. asserts that Grubb & Ellis' objection premature. According to Michael D. Sirota, Esq., at Cole, Schotz, Meisel, Forman & Leonard PA, in New York, Grubb & Ellis itself concedes that any commission or fee to which it may be entitled is not payable until the Settlement Date. Thus, since the settlement date of the transactions contemplated by the Agreement may not occur for years, if at all, there exist no legitimate reason to adjudicate the Objection now or to modify the proposed form of the Sale Order. Mr. Sirota also argues that Grubb & Ellis' contention that it is entitled to a commission with respect to the sale of the Assets has no factual or legal support. Contrary to Grubb & Ellis' misinterpretation of the Agreement, neither the Agreement nor the Parties acknowledge that Grubb & Ellis was the "procuring broker" for the sale of the Acquired Assets. In fact, Mr. Sirota relates, the Agreement only recognizes that Grubb & Ellis was a broker that the Parties dealt with in connection with the Agreement. More damaging to Grubb & Ellis' claim is that neither of the parties ever signed a written agreement with Grubb & Ellis. Mr. Sirota informs the Court that the 1998 revised provisions of the Real Estate Licensing and Registration Act unequivocally demonstrate that the Pennsylvania legislature now requires broker agreements to be in writing or, at least, include a written memorandum stating the agreement's terms as a condition precedent to a broker receiving any compensation from a real estate transaction. Thus, since a written brokerage agreement with the Parties or an oral listing agreement with a written memorandum stating the terms does not exist, Grubb & Ellis is not entitled to any brokerage fee or commission. Debtors Respond George A. Davis, Esq., Weil, Gotshal & Manges LLP, at New York, argues that Grubb & Ellis' request is not a proper objection to the Sale Motion because nothing in the Sale Motion or the proposed sale order limits in any way Grubb & Ellis' right to assert any claims against the Debtors or Majestic for a brokerage fee. Any request for payment of a brokerage fee should be made by separate motion to the Court on proper notice to the Debtors and parties-in-interest. In addition, Mr. Davis notes that Grubb & Ellis has not been retained as a professional in the Debtors' Chapter 11 cases. All of the activities Grubb & Ellis allege gives rise to a right to payment of a brokerage commission occurred prepetition. Hence, any brokerage commission claim is a prepetition unsecured claim, which will be addressed in a confirmed plan of reorganization for the Debtors. Mr. Davis clarifies that the injunction provision merely complements the "free and clear" component of the sale order and prevents claimants from asserting the claims they hold against the Debtors against Majestic. Therefore, any direct claims Grubb & Ellis holds against Majestic are unaffected by the injunction provision of the sale order. The choice of forum provision of the Agreement is binding only on the Debtors and Majestic and does not limit in any way the rights of other parties-in-interest. Mr. Davis tells Judge Lifland that Grubb & Ellis misinterpreted the Agreement. The Debtors and Majestic do not seek to arbitrarily limit Grubb & Ellis' brokerage fee to not more than $360,000, as it suggests. Because Grubb & Ellis' claim is disputed, the intent of that provision is to limit the Debtors' liability vis a vis Majestic pursuant to the Agreement to $360,000 in the event the Debtors or Majestic are found to be liable to Grubb & Ellis for a brokerage fee. * * * After weighing the arguments presented, Judge Lifland authorizes the Debtors to sell Bethlehem Center to Majestic in accordance with the terms of the parties' sale agreement. The Court overrules Grubb & Ellis' Objection. Judge Lifland, however, emphasizes that, nothing in the Agreement, the Sale Motion or this Order will bar, impair or preclude any rights, claims or liens, if any, of Grubb & Ellis in any court of competent jurisdiction against Majestic or the Debtors for a broker's commission or finder's fee arising out of or relating to the sale of the Assets. The Court makes it clear that: -- the title to the Assets will pass to Majestic at the Settlement Date free and clear of the Commission Claims; and -- effective on the settlement date of the transactions contemplated by the Agreement, Grubb & Ellis is permanently enjoined and precluded from asserting or filing the Commission Claims against the Assets themselves. * * * To recall, the Bethlehem Center is located in the City of Bethlehem and Lower Saucon Township in Northampton County, Pennsylvania. The Center is comprised of 1,600 acres upon which Bethlehem operated a steel plant that was shut down in several phases from 1995 through 1998. As a result of the closure of the steel plant, the land on which the vacant plant is located has only been used by some of Bethlehem's non-debtor railroad subsidiaries but has not been used by the Debtors since 1998. Since that time, Bethlehem Steel Corporation and its debtor-affiliates have been engaged in redeveloping and marketing the property for sale as a light industrial/commerce park development. The salient terms of the Purchase and Sale Agreement are: Assets: (a) 452 acres of the Bethlehem Commerce Center (b) 18 acres owned by the CENTEC Roll Corporation The Debtors do not currently own the CENTEC Property. However, the Debtors and CENTEC Corp. are currently discussing the terms and conditions under which CENTEC Corp. would sell the CENTEC Property to the Debtors. Accordingly, if acquired by the Debtors, the CENTEC Property would be sold to Majestic or the successful bidder, if any, for the same consideration the Debtors were required to pay to acquire the CENTEC Property; (c) 19 acres known as "Waylite Tract No. 1" Majestic has an obligation to acquire Waylite Tract No. 1 if Majestic acquires the Bethlehem Center; (d) 64 acres known as "Waylite Tract No. 2" If Majestic acquires the Bethlehem Center, Majestic will have an option to acquire Waylite Tract No. 2, which option must be exercised by June 30, 2004; The Waylite tracts and adjoining property of Bethlehem are currently encumbered by the Waylite Lease, which expires in June 2006. The Waylite lease is not readily assignable to Majestic. As a result, the parties agree that the sale of the Waylite Tracts will close after the expiration of the Waylite Lease. Price: $12,989,999, which will be allocated as follows: -- $9,407,477 for the Property; -- $790,000 for the CENTEC Property; -- $639,252 for Waylite Tract No. 1; -- $2,153,270 for Waylite Tract No. 2; and -- $5,800,000 in escrow upon Notice of Termination at settlement of a certain intermodal Lease. Deposit: $500,000 50% of the Deposit becomes non-refundable 180 days after the Court enters an Order approving the sale. Due Diligence: (a) Majestic has 365 days from the date the Sale Order is entered to conduct due diligence, including tests, investigations, and studies. (b) Majestic has the right to extend the Due Diligence Period for two separate periods of three months each by notice to Bethlehem accompanied by the payment of $200,000 for each extension. (c) The Extension Payments are non-refundable, except as provided in the Agreement, and are not to be applied to reduce the purchase price. Environ- mental Matters: (a) Within nine months after the Sale Order is entered, Bethlehem is to address certain environmental issues. (b) After the Sale Order is entered, Majestic will initiate and diligently proceed to address the issues and complete assessments of soil contamination at the Property consistent with the requirements to obtain: -- a release of liability from the Pennsylvania Department of Environmental Protection under Pennsylvania's brownfields law; and -- approval from the United States Environmental Protection Agency that the applicable corrective action requirements of the Resource Conservation and Recovery Act have been met. (c) Subsequent to the completion of the soil assessments, Majestic will develop a remediation plan for approval by the DEP and the EPA; (e) Bethlehem will perform, at its expense, environmental assessments of the groundwater at the Property, Waylite Tract No. 1, the CENTEC Property -- if acquired by Bethlehem -- and Waylite Tract No. 2 -- if the option is exercised; Notices of Violation: If Bethlehem receives a notice of violation relating to the Property prior to settlement, Bethlehem must correct such violation, provided that the cost to affect a cure or compliance shall not exceed in the aggregate $3,000,000. Right to Terminate: Majestic has the right to seek specific performance from the Debtors or terminate the Agreement. In the event of a termination, Majestic receives the Deposit, other necessary reimbursements, if any, and $500,000 as liquidated damages. (Bethlehem Bankruptcy News, Issue No. 24; Bankruptcy Creditors' Service, Inc., 609/392-0900) Bethlehem Steel Corp.'s 10.375% bonds due 2003 (BS03USR1), DebtTraders reports, are trading at 7 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for real-time bond pricing. BRIGHTPOINT INC: Closes Sale of Certain Mexican Operating Assets ---------------------------------------------------------------- Brightpoint, Inc. (NASDAQ:CELL), whose corporate credit is currently rated by Standard & Poor's at B, said that it and certain of its subsidiaries have completed the sale of certain operating assets of Brightpoint de Mexico, S.A. de C.V., and their respective ownership interests in Servicios Brightpoint de Mexico, S.A. de C.V., to Soluciones Inteligentes para el Mercado Movil, S.A. de C.V., an entity which is wholly-owned and controlled by Brightstar de Mexico S.A. de C.V. Pursuant to the transaction, Brightpoint received cash consideration totaling approximately US$1.7 million and a short- term promissory note from SIMM totaling approximately US$1.1 million that matures in December 2002. The repayment of the promissory note is guaranteed by Brightstar. The Company expects to record a loss in the range of US$4.5 million to US$5.0 million relating to the sale of these operating assets (including approximately US$3.4 million from a non-cash write- off of cumulative foreign currency translation losses) during the fourth quarter of 2002. Additionally, Brightpoint plans to initiate the liquidation of the remaining assets and liabilities of its Mexican operations during the fourth quarter of 2002. The losses and the results of operations of Brightpoint Mexico will be classified as a part of discontinued operations in Brightpoint, Inc.'s consolidated statement of operations beginning in the fourth quarter of 2002. Brightpoint is one of the world's largest distributors of mobile phones. Brightpoint supports the global wireless telecommunications and data industry, providing quickly deployed, flexible and cost effective third party solutions. Brightpoint's innovative services include distribution, channel management, fulfillment, eBusiness solutions and other outsourced services that integrate seamlessly with its customers. Additional information about Brightpoint can be found on its Web site at http://www.brightpoint.com Founded in 1997, Brightstar Corporation is a solution provider and value-added distribution and manufacturing services company. The company provides customers in the wireless industry with inventory management, logistics, fulfillment, Internet-based solutions, customized packaging and after-sales support. Brightstar ranks sixth on the Hispanic Business 500 and number one on its technology list. Its customer base includes over 100 network operators and nearly 6,000 distributors, agents, resellers and retailers around the world. Brightstar is one of Motorola's strategic partners in Latin America and the U.S. and an authorized distributor for all leading wireless equipment manufacturers. Brightstar operates 18 facilities in 14 countries worldwide. Its headquarters is based in Miami, FL, with operations in Argentina, Bolivia, Brazil, Colombia, Chile, the Dominican Republic, El Salvador, Guatemala, Mexico, Paraguay, Peru, the United States and Puerto Rico, Uruguay and Venezuela. During the year ended December 31, 2001, Brightstar's consolidated revenues were $631 million. For more details, visit http://www.brightstarcorp.com BURNHAM PACIFIC: Trustees to Make Liquidating Distribution Today ---------------------------------------------------------------- The trustees of the Burnham Pacific Properties Liquidating Trust have determined to make a liquidating distribution in the amount of $0.50 per unit to the registered unitholders of the Trust. This distribution is scheduled to be paid today, October 30, 2002. A letter from the trustees of the Trust to the registered unitholders regarding the distribution and related matters will accompany the payment of the distribution. Other recent events include: -- On June 28, 2002, the Trust closed on the sale of Central Shopping Center, located in Ventura, California, for approximately $3,000,000. -- On August 14, 2002, the Trust closed on the sale of the Palms to Pines shopping center, located in Palm Desert, California, for approximately $3,200,000. A lawsuit originally filed in April 2002 by certain individuals and their investment companies that owned the Lake Arrowhead Village property immediately before an affiliate of Burnham Pacific Properties, Inc. acquired the property was settled and dismissed for a settlement value of approximately $850,000, which amount was fully reserved for in the most recently filed financial statements of Burnham Pacific Properties, Inc. CLICKS & FLICKS: Gets Nod to Hire Finkel Goldstein as Counsel ------------------------------------------------------------- Clicks & Flicks, Inc., sought and obtained approval from the U.S. Bankruptcy Court for the Southern District of New York to employ and retain Finkel Goldstein Berzow Rosenblomm & Nash LLP as its attorneys in its chapter 11 case. As bankruptcy counsel to the Debtor, Finkel Goldstein is expected to: a) provide the Debtor with necessary legal advice in connection with the operation and rehabilitation of its business during the Chapter 11 proceeding; b) represent the Debtor in all court proceedings and proceedings before the United State Trustee; c) prepare on behalf of the Debtor all necessary petitions, orders, applications, motions, reports and other legal papers and plan documents; d) examine into any liens, transfers, and claims and bring necessary adversary proceedings or objections in connection with this case; and e) perform all other necessary legal services for the Debtor. Mr. Cliff Strome, President of Clicks and & Flicks tells the Court that Finkel Goldstein is disinterested and qualified to serve as bankruptcy counsel. Kevin J. Nash, Esq., at Finkel Goldstein Berzow Rosenbloom Nash represents Clicks & Flicks, Inc., in its restructuring efforts. The hourly rates of Finkel Goldstein' professionals who represent the Debtor, however, is not disclosed. When the Company filed for protection from its creditors, it listed an estimated debts and assets of $1 million to $10 million each. COMM 2000-C1: Fitch Affirms Low-B and Junk Ratings on 7 Notes ------------------------------------------------------------- COMM 2000-C1 commercial mortgage pass-through certificates, series 2000-C1 are affirmed by Fitch Ratings as follows: $130.5 million class A-1, $542.9 million class A-2 and interest-only class X at 'AAA'; $38.2 million class B at 'AA'; $39.3 million class C at 'A'; $13.5 million class D at 'A-'; $25.8 million class E at 'BBB'; $11.2 million class F at 'BBB-'; $26.9 million class G at 'BB+'; $6.7 million class H at 'BB'; $6.7 million class J at 'BB-'; $10.1 million class K at 'B+'; $7.9 million class L at 'B'; $6.7 million class M at 'B-'; and $4.5 million class N at 'CCC'. Fitch does not rate the $9 million class O certificates. The affirmations follow Fitch's annual review of the transaction, which closed in September 2000. The rating affirmations reflect the conduit loan performance, the investment grade credit assessments of two loans (14.7%) and the minimal reduction of the pool collateral balance since closing. As of the October 2002 distribution date, the pool's aggregate certificate balance has been reduced by approximately 2%, to $879.9 million from $897.9 million at closing. ORIX Real Estate Capital Markets, LLC, the master servicer, collected year-end 2001 financials for 80% of the outstanding pool balance. The 2001 weighted average debt service coverage ratio for these loans is 1.61 times versus 1.57x at YE 2000 and 1.52x at issuance. Three loans representing 4.8% of the overall pool balance are currently in special servicing. The largest loan in special servicing represents 3.5% of the overall pool balance and is collateralized by the Radisson Hotel in Miami, FL. Though the loan is only 30 days delinquent, operations at the property continue to decline with a current occupancy at 60%. According to GMAC, the special servicer, this loan is expected to be paid in full in November. The next largest loan in special servicing is secured by a retail property in Norco, CA and is currently REO after the sole tenant, Home Base, vacated. Aside from the loans in special servicing, nine loans representing 4.5% of the pool balance have YE 2001 DSCRs below 1.00x. Fitch reviewed the performance and underlying collateral of the Crowne Plaza (10%) and the Crystal Park (4.7%) loans, which both have investment grade credit assessments. The DSCR for each of these loans is calculated using borrower financials less required reserves and debt service payments based on the original balance and Fitch stressed refinance constant. The Crowne Plaza loan is the largest loan in the pool. The loan is secured by a 46 story, 770-room hotel located in Times Square area of midtown Manhattan. The trailing twelve month June 30, 2002 DSCR is 1.49x, compared to 1.42x at YE 2001 and 1.73x at underwriting. The hotel's occupancy and average daily rate as of June 2002 were 79% and $181, respectively. The Property Market Metric score for hotels in this area is '5'. The Crystal Park loan (4.7% of the pool) is secured by an 11- story office building in Arlington, Virginia. Approximately 74% of net rentable area is occupied by the U.S. government, with the Patent and Trademark office occupying 59% of the NRA. The YE 2001 DSCR is 2.01x compared to 1.95x at underwriting. The PMM score for office properties in Arlington is '1', which is the highest score possible. Fitch applied various hypothetical stress scenarios taking into consideration the specially serviced loans and the other loans with DSCRs below 1.00x. Even under these stress scenarios, subordination levels remain sufficient to affirm the ratings. Fitch will continue to monitor this transaction, as surveillance is ongoing. COMVERSE: S&P Cuts Corp. Credit & Sr. Unsec. Ratings Cut to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured debt ratings on telecommunications software provider Comverse Technology Inc., to double-'B'-minus from double-'B.' At the same time, Standard & Poor's removed the ratings from CreditWatch, where they had been placed on September 11, 2002. The action reflected deteriorating profitability, particularly in Comverse's network services business segment, precipitated by the sharp slowdown in wireline and wireless telecommunications carrier capital spending. The outlook is negative on Woodbury, N.Y.-based Comverse, a leading supplier of software-driven voicemail and related messaging systems to telecommunications carriers. It had $434 million of debt outstanding as of July 31, 2002. "Failure to restore profitability could result in further lowering of the rating," said Standard & Poor's credit analyst Joshua G. Davis. Comverse has been hurt by cutbacks in spending on enhanced services, such as voicemail, which represent about 57% of total revenues. The cutbacks have come from telecommunications carriers, especially wireless operators, which account for more than half of Comverse's revenues have been the source of the cutbacks. Comverse has had five consecutive quarters of revenues declines. Profitability has likewise deteriorated. CONTOUR ENERGY: Gets OK to Tap Energy Spectrum as Fin'l Advisors ---------------------------------------------------------------- Contour Energy Co., and its debtor-affiliates sought and obtained permission from the U.S. Bankruptcy Court for the Southern District of Texas to hire Energy Spectrum Advisors Inc., as their Financial Advisors in their chapter 11 cases. Energy Spectrum will: a) advise and assist the Debtors in developing, identifying and evaluating potential transactions involving asset dispositions, arranging senior and subordinated debt financing, and merger partners; b) provide expert testimony, as needed, in connection with hearings relating to matters for which Energy Spectrum has advised the Debtors, including any hearing on the confirmation of a plan; and c) provide other financial advisory and related investment banking services in this chapter 11 case as reasonably requested by the Debtors. Energy Spectrum will serve as the Debtors' financial advisors in exchange for: a) a cash retainer of $100,000; b) a success fee equal to 0.75% of the Aggregate Consideration associated with a Transaction. Transaction may include: 1) the conversion of existing debt into equity of Contour; 2) the placement of equity from new investors into Contour; 3) the sale or merger of Contour to or with a third party; 4) the sale of all or portions of Contour's assets; 5) the refinancing of existing debt. c) a cash retainer of $50,000 for each two possible six months extensions of the Engagement Agreement beyond July 30, 2002; and d) the reimbursement for all the reasonable and necessary expenses incurred. Energy Spectrum's engagement will expire on January 31, 2003. This retention is led by James P. Benson, a Partner and Managing Director of Energy Spectrum. Contour Energy Co., a company engaged in the exploration, development acquisition and production of oil and natural gas primarily in south and north Louisiana, the Gulf of Mexico and South Texas, filed for chapter 11 protection on July 15, 2002. John F. Higgins, IV, Esq. and Porter & Hedges, LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $153,634,032 in assets and $272,097,004 in debts. COVANTA ENERGY: Wants Lease Decision Period Extended to March 27 ---------------------------------------------------------------- Covanta Energy Corporation and its debtor-affiliates currently have until November 27, 2002 to decide whether to assume or reject their 411 unexpired non-residential real property leases. James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, in New York, explains that the Debtors' decision whether to assume or reject most, if not all, of the remaining Unexpired Leases will depend in large part on the nature of the Debtors' Plan. Since the Debtors are asking for an extension of time to file a plan, an extension of time to decide on the Unexpired Leases is only reasonable. Accordingly, pursuant to Section 365(d)(4) of the Bankruptcy Code, the Debtors ask the Court to extend the period to assume or reject the Unexpired Leases to March 27, 2003, without prejudice to their right to seek further extension, after notice and a hearing, and the right of any counter-party to an Unexpired Lease to request that the period be shortened. Mr. Bromley tells Judge Blackshear that of the remaining Unexpired Leases, 386 of them relates to leases of surface and mineral rights in California -- Heber Leases -- that enable the Debtors to produce geothermal fluid from the ground and use it to generate electricity. Another 24 Unexpired Leases relate to power generation facilities or the land on which those facilities are located. The remaining leases are for leases of office space. The Debtors reserve the right to identify more Unexpired Leases to be covered by the extension. Mr. Bromley clarifies that there may be a case that an identified lease may not actually be a true lease but is included in the list out of an abundance of caution. Since the First Extension Motion, Mr. Bromley reports, two leases have been rejected pursuant to a Court order. The Debtors have also recently commenced discussion with the counter-parties to the Heber Leases in an effort to resolve a significant dispute concerning the payment amounts owed under the leases. Mr. Bromley asserts that the extension sought should be granted because: (a) in compliance with Section 365(d)(3) of the Bankruptcy Code, the Debtors fully intend to remain current with respect to all outstanding postpetition obligations under the Unexpired Leases as they come due; (b) the negative effects of an extension on the counter- parties to the Unexpired Leases are minimal; (c) any counter-party to the Unexpired Lease may request that the Court fix an earlier date by which the Debtors must assume or reject the Lease, with the Debtors retaining the burden of persuasion for any motion so filed; (d) the Unexpired Leases are critical assets that are integral to the Debtors' reorganization as they cannot successfully operate their power generation, water and wastewater facilities without the continued use of the property underlying the Unexpired Leases; (e) in order to make an informed decision regarding whether to assume or reject each of the Unexpired Leases in the context of the Plan, the Debtors will require substantial time to adequately assess the potential value of each lease within the marketplace as well as within the Debtors' own operations; (f) the Debtors have made substantial progress in the administration of these complicated cases and have resolved a multitude of operational issues that have arisen since the Petition Date requiring their full and immediate attention, making it virtually impossible for the Debtors to devote the resources necessary to complete their analysis of the Unexpired Leases in the context of a Plan to date; and (g) premature rejection of the leases would harm the Debtors' estates by resulting in the loss of one or more leases of real property that may be essential to the Debtors' reorganization. Likewise, premature assumption of real property leases would harm the estates by resulting in the Debtors being required to cure prepetition claims and the elevation of landlord claims to administrative expense status before an informed decision can be made and a reorganization ensured. (Covanta Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) CYBEX INT'L: Will Hold Third Quarter Conference Call Tomorrow ------------------------------------------------------------- Cybex International, Inc. (AMEX: CYB), a leading exercise equipment manufacturer, will discuss its third quarter financial results in a conference call tomorrow, October 31 at 10:00 a.m. EST. Those who wish to participate in the conference call may telephone (888) 335-6674 approximately 15 minutes before the 10:00 a.m. EST starting time. A digital replay of the call will be available by telephone for 24 hours following completion of the live call, at (877) 519-4471 toll free in the United States or (973) 341-3080 for international callers, PIN #3571307. Cybex International, Inc., is a leading manufacturer of premium exercise equipment for consumer and commercial use. Cybex and the Cybex Institute, a training and research facility, are dedicated to improving exercise performance based on an understanding of the diverse goals and needs of individuals of varying physical capabilities. Cybex designs and engineers each of its products and programs to reflect the natural movement of the human body, allowing for variation in training and assisting each unique user - from the professional athlete to the rehabilitation patient - to improve their daily human performance. For more information on Cybex and its product line, please visit the Company's Web site at http://www.eCybex.com Cybex International's June 29, 2002, balance sheets show a working capital deficit of about $9 million. In addition, the Company's total shareholders' equity has further sunk to about $870,000 at the same date, from about $23 million recorded at December 31, 2001. DOBSON COMMS: Will Report Third Quarter Results on Nov. 14, 2002 ---------------------------------------------------------------- Dobson Communications Corporation (Nasdaq:DCEL) reported that net subscriber additions for the third quarter ended September 30, 2002 were approximately 14,300, compared with approximately 26,600 net subscribers for the same period last year. These totals do not include net subscriber additions for American Cellular Corporation, which is jointly owned by Dobson and AT&T Wireless. Dobson's postpaid customer churn was 2.0 percent for the third quarter of 2002, compared with churn of 1.9 percent for the same period last year. Gross subscriber additions (postpaid) were approximately 58,800 for the third quarter, equal to gross subscriber additions for the same period last year. American Cellular's total net subscriber additions were approximately 15,200 for the third quarter ended September 30, 2002, compared with approximately 25,500 for the same period last year. American's postpaid customer churn was 2.0 percent for the third quarter of 2002, compared with churn of 1.8 percent for the same period last year. Gross subscriber additions (postpaid) were approximately 49,900 for the third quarter, compared with 54,300 gross subscriber additions for the same period last year. Both postpaid and prepaid subscribers are included in net subscriber additions. Gross subscriber additions and churn are reported on a postpaid basis only. The totals above give effect to and thus exclude the results of the five properties that were sold to Verizon Wireless (NYSE:VZ) by Dobson Communications and American Cellular during the first quarter ended March 31, 2002. Conference call Dobson plans to report its full third quarter 2002 results after the close of regular market trading on Thursday, November 14, 2002. The Company plans to conduct a conference call to discuss the results the following day, Friday, November 15, beginning at 9 a.m. ET (8 a.m. CT). The call will also be broadcast on the Internet. Those interested may access the call by dialing: Conference call (800) 665-0430 Pass code 338308 The call may also be accessed via the Internet through the Investor Relations page of Dobson's web site at http://www.dobson.net. A replay of the call will be available later in the day via Dobson's web site or by phone. Replay (888) 203-1112 Pass code 338308 As part of the conference call, the Company expects to discuss its operating outlook and other strategic issues. Dobson Communications is a leading provider of wireless phone services to rural markets in the United States. Headquartered in Oklahoma City, the Company owns or manages wireless operations in 17 states. For additional information on the Company and its operations, please visit its Web site at http://www.dobson.net. At June 30, 2002, Dobson Communication's balance sheet shows a total shareholders' equity deficit of about $389 million. EB2B COMMERCE: Winding Down Training & Client Educ'l Services ------------------------------------------------------------- As a result of continuing operating losses during 2001 and 2002, eB2B Commerce, Inc., determined to discontinue its training and client educational services business as of September 30, 2002. This business, which entails the provision of authorized technical training education services and training seminars to corporate computer professionals, has been treated as a separate reportable segment and was not part of the Company's core transaction processing business. The Company does not have a buyer for this business and management is currently winding down its operations. For the year ended December 31, 2001, the training and client educational services business segment contributed revenues of approximately $2.5 million and an EDITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) loss of $15,000. For the six months ended June 30, 2002, revenues and EBITDA for this business segment were $724,000 and a loss of $333,000, respectively. The net liabilities of this discontinued operation will be recorded at their net realizable value under the caption "Net liabilities of discontinued operation" in the September 30, 2002 balance sheet when the Company files its Form 10-Q for the three months ended September 30, 2002. * * * As previously reported, eB2B Commerce dismissed Deloitte & Touche LLP as independent auditors for the Company. The opinion issued by Deloitte & Touche LLP with the Company's financial statements for the year ended December 31, 2001 included a reference to substantial doubt that exists regarding the Company's ability to continue as a going concern. Effective August 6, 2002, the Company engaged Miller Ellin Company LLP to serve as the Company's independent auditors. ENRON CORP: Wins Nod to Hire Blackstone as Financial Advisors ------------------------------------------------------------- Enron Corporation, and its debtor-affiliates obtained permission from the U.S. Bankruptcy Court for the Southern District of New York to employ The Blackstone Group, L.P., as their financial advisors. Specifically, The Blackstone will: (a) Assist in the evaluation of the Debtors' businesses and prospects; (b) Assist in the development of the Debtors' long-term business plan; (c) Assist in the development of financial data and presentations to the Debtors' Boards of Directors, various creditors, any official committees formed in a Chapter 11 proceeding, and other third parties; (d) Analyze the Debtors' financial liquidity and evaluate alternatives to improve such liquidity; (e) Analyze various restructuring scenarios and the potential impact of these scenarios on the value of the Debtors and the recoveries of those stakeholders impacted by the Restructuring; (f) Provide strategic advice with regard to restructuring or refinancing the Debtors' Obligations; (g) Evaluate the Debtors' debt capacity and alternative capital structures; (h) Participate in negotiations among the Debtors and their creditors, suppliers, lessors and other interested parties with respect to any of the transactions contemplated in the Blackstone Agreement; (i) Value securities offered by the Debtors in connection with a restructuring; (j) Advise the Debtors and negotiate with lenders with respect to potential waivers or amendments of various credit facilities; (k) Assist in the arranging of Financings (including a DIP Financing), including identifying potential sources of capital, assisting in the due diligence process, and negotiating the terms of any proposed Financing, as requested; (l) Assist the Debtors in evaluating and executing both a Trading Transaction and a Merger Transaction, including identifying potential buyers or parties in interest, assisting in the due diligence process, and negotiating the terms of any proposed Trading Transaction or Merger Transaction, as requested; (m) Provide testimony in any Chapter 11 case concerning any of the subjects encompassed by Blackstone's financial advisory services, if appropriate and as required; (n) Assist and advise the Debtors concerning the terms, conditions and impact of any transaction proposed by Blackstone; and (o) Provide such other advisory services as are customarily provided in connection with the analysis and negotiation of any transactions. For its services in these chapter 11 cases (incorporating defined terms included in a yet-to-be-made-public Engagement Letter dated November 24, 2001), Enron agrees to pay Blackstone: (a) a $350,000 Monthly Advisory Fee; (b) 1.0% of the aggregate value of the Consideration paid on consummation of any Trading Transaction, subject to a $10,000,000 floor and subject to a $35,000,000 cap; (c) a $35,000,000 transaction fee on consummation of any Merger Transaction; (d) 1.0% of the aggregate consideration paid on consummation of any divestiture of specific assets or subsidiaries; (e) 0.5% of the total facility size of any Debt Financing arranged by Blackstone -- excluding the $1.5 billion DIP Facility being arranged by JPMorgan Chase and Citicorp; (f) 3.0% of the gross proceeds to Enron from any new Equity Financing Transaction; and (g) 0.25% of the face amount of all restructured obligations under a plan of reorganization, subject to a $35,000,000 cap. (Enron Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Enron Corp.'s 9.125% bonds due 2003 (ENRN03USR1) are trading at 12 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR1 for real-time bond pricing. EOTT ENERGY: Taps Andrews & Kurth as Special Litigation Counsel --------------------------------------------------------------- EOTT Energy Partners, L.P., and its debtor-affiliates seek the Court's authority to retain Andrews & Kurth, LLP as Special Litigation Counsel to represent the Debtors' interests in the John H. Roam Litigation involving Pipeline. The Litigation includes allegations relating to spills and releases from pipelines in West Texas and New Mexico. The Jerry W. Holmes litigation has been consolidated with this Litigation. Dana R. Gibbs, President and CEO of EOTT Energy Corp., tells the Court that Pipeline has asserted in the Litigation an overarching cross-claim against Texas-New Mexico Pipeline Company. Andrews & Kurth was initially retained prepetition to represent the Debtors in the Litigation and the Debtors seek to continue to utilize Andrews & Kurth's services. Ms. Gibbs informs Judge Schmidt that Andrews & Kurth also represents the Debtors with respect to the reclamation claims in the Owens Corning bankruptcy case and the Debtors seek to continue to utilize Andrews & Kurth's services to pursue the Reclamation Claims. With Judge Schmidt's approval of Andrews & Kurth's retention, in accordance with Section 330(a) of the Bankruptcy Code, compensation will be payable to Andrews & Kurth on an hourly basis, plus reimbursement of actual, necessary expenses incurred by Andrews & Kurth. The hourly rates of Andrews & Kurth professionals are: Paul Bohannon $450 Carrick Brooke-Davidson 280 Allison Comment 225 Sara Galley 165 Wade Jensen 160 Letha Walker 85 Carl Eatmon 40 Sandy Stewart 40 Ms. Gibbs reports that the Debtors have paid to Andrews & Kurth a $12,000 retainer, which is held in Andrews & Kurth's trust account. In addition, Andrews & Kurth was paid $577,080 for pre-bankruptcy services and expenses in connection with the Debtors' Litigation and the Reclamation Claim. Paul Bohannon, Esq., a partner with Andrews & Kurth LLP, discloses that: (a) prior to Enron's bankruptcy, Andrews & Kurth served as outside counsel for various matters and continues to provide legal service to Enron in its bankruptcy proceeding in New York. Andrews & Kurth has not undertaken any Enron bankruptcy representations against the Debtors; (b) In 1995, Andrews & Kurth represented the underwriters in connection with the Debtors' initial public offering of stock and perform Blue Sky matters in connection the same; (c) In 1999, Andrews & Kurth represented the Debtors in connection with it credit facility associated with its initial public offering of stock; (d) Andrews & Kurth presently represents the Debtors on other litigation that may be subjected to the bankruptcy stay, to wit: -- Jimmie B. Cooper, et al. v. EOTT in the U.S. District Court of New Mexico; and -- Lankford v. EOTT in the County Court at Law of Midland County, Texas; (e) Andrews & Kurth presently represents the Debtors on claims that may evolve into litigation or that have been resolved subject to possible continuing actions, to wit: -- McCasland Claim (New Mexico), -- Jimmie T. Cooper Claim (New Mexico), -- Red Byrd Claim (New Mexico), -- D.K. Boyd Claim (New Mexico), -- Durham-Rogers cleanup (New Mexico), -- Oil Conservation Division regulatory matters (New Mexico), -- Darr Angell cleanup matters (New Mexico), -- Winnie Kennann cleanup matters (New Mexico), -- Jan Anthony cleanup matters (New Mexico), -- Railroad Commission of Texas regulatory matters (Texas), -- Ft. Stockton cleanup matters (Texas), -- Diamond Y Springs cleanup matter (Texas), and -- Osborne environmental matters (Texas); (f) Andrews & Kurth is representing AIG Insurance in its surrogated claim, with the knowledge and consent of the Debtors, in the Kniffen matter; and (g) Andrews & Kurth performed ERISA pension work for the Debtors. Andrews & Kurth believes that none of these matters would constitute a conflict of interest in its representation of the Debtors in the Litigation and Reclamation Claims. (EOTT Energy Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENTEK INC: Brings-In Skadden Arps to Prosecute Chapter 11 Cases ---------------------------------------------------------------- GenTek Inc., and its debtor-affiliates need bankruptcy lawyers to prosecute their Chapter 11 cases. Matthew R. Friel, GenTek Inc., Chief Financial Officer, tells Judge Walrath that the Debtors chose Skadden, Arps, Slate, Meagher & Flom LLP, because of the firm's extensive experience with, and knowledge of, the Debtors and their businesses. Skadden, Arps also has wide experience and knowledge in debtors' and creditors' rights and business reorganizations under Chapter 11 of the Bankruptcy Code. The Debtors believe that Skadden, Arps' representation is critical to the success of their reorganization. Skadden, Arps is expected to: (a) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their businesses and properties; (b) attend meetings and negotiate with representatives of creditors and other parties-in-interest and advising and consulting on the conduct of the cases, including all of the legal and administrative requirements of operating in Chapter 11; (c) take all necessary actions to protect and preserve the Debtors' estates, including the prosecution of actions on their behalf, the defense of any actions commenced against those estates, negotiations concerning all litigation in which the Debtors may be involved and objections to claims filed against the estates; (d) prepare, on the Debtors' behalf, all motions, applications, answers, orders, reports and papers necessary to the administration of the estates; (e) negotiate and prepare, on the Debtors' behalf, plan or plans of reorganization, disclosure statements and all related agreements and documents and taking any necessary action on behalf of the Debtors to obtain confirmation of those plans; (f) advise the Debtors in connection with any sale of assets; (g) appear before this Court, any appellate courts, and the United States Trustee, and protecting the interests of the Debtors' estates before these courts and the United States Trustee; and (h) perform all other necessary legal services and provide all other necessary legal advice to the Debtors in connection with these Chapter 11 cases. In consideration for the firm's professional services, the Debtors propose to pay Skadden, Arps in accordance with the firm's standard hourly rates. According to Mr. Friel, Skadden, Arps' bundled rate structure will apply to these cases. This means that Skadden, Arps will not be seeking to be separately compensated for certain staff, clerical and resource charges. Presently, the hourly rates under the bundled rate structure range from: Bundled Rate Professionals ------------ ------------- $495 - 725 partners 240 - 485 counsel & associates 80 - 195 legal assistants & support staff The Debtors will also reimburse Skadden, Arps for actual necessary expenses incurred in connection with their services in these cases. The Debtors and Skadden, Arps also agreed to implement a retainer program pursuant to which the Debtors paid $1,500,000 as initial retainer for the services rendered or to be rendered by the firm. As of the Petition Date, based on prepetition fees and costs that have been identified and accounted for, Skadden, Arps had $1,370,341 remaining in the Retainer. Those remaining funds will be applied by Skadden, Arps to pay prepetition fees and costs that are subsequently identified and accounted for. Mr. Friel relates that within the one-year period preceding the Petition Date, Skadden, Arps billed the Debtors $3,980,084 in aggregate prepetition services. Of that amount, $2,419,302 is attributable to prepetition fees and $89,002 to prepetition expenses that have been identified and accounted for. During the same period, the Debtors paid Skadden, Arps $4,008,304 including payment of the Initial Retainer amount. This also covered the $28,220 Chapter 11 filing fees. Accordingly, the $1,370,341 balance is the amount of the remaining, unapplied Retainer funds. Within the one-year period preceding the Petition Date, Skadden, Arps' books and records show that the Firm received, in April and July 2002, two payments totaling $12,919 in connection with legal services rendered prior to October 11, 2002. According to Mr. Friel, Skadden, Arps is waiving any claims that the firm might have in respect of those amounts. Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, assures the Court that the firm does not represent or hold any interest adverse to the Debtors, their estates, creditors, equity security holders, or affiliates, and is a "disinterested person" within the meaning of 11 U.S.C. Sec. 101(14). Mr. Chehi adds that neither Skadden, Arps nor any attorney at the firm: -- holds or represents an interest adverse to the Debtors' estates; -- is or was a creditor, an equity security holder or an insider of the Debtors, except that Skadden, Arps previously has rendered legal services to the Debtors for which it has been compensated; -- is or was an investment banker for any outstanding security of the Debtors; -- is or was, within three years before the Petition Date, an investment banker for a security of the Debtors, or an attorney for an investment banker in connection with the offer, sale or issuance of any security of the Debtors; -- is or was, within two years before the Petition Date, a director, officer or employee of the Debtors or of an investment banker of the Debtors; and -- has any connection with: (a) any United States District Judge or United States Bankruptcy Judge for the District of Delaware; or (b) the United States Trustee for the District of Delaware or to any known employee in the office. (GenTek Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: NY Court Approves Amended Disclosure Statement --------------------------------------------------------------- To the extent unresolved, the U.S. Bankruptcy Court for the Southern District of New York overrules all objections to Global Crossing Ltd.'s Disclosure Statement. Judge Gerber finds that the Amended Disclosure Statement contains enough information for creditors to decide whether to vote to support the Plan or vote to reject it. (Global Crossing Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Carries Over 2BB Minutes on VoIP Platform in Q3 ---------------------------------------------------------------- Global Crossing announced that the number of minutes carried over its seamless, global Voice over Internet Protocol platform -- one of the world's largest -- grew to more than 2.3 billion minutes during the third quarter of 2002, a 255% increase over the first quarter. The growth in traffic from new and existing customers across the Americas and in Europe is testament to Global Crossing's reliable, cost-effective voice services over its global backbone. "Global Crossing's VoIP platform allows us to bring the simplicity and elegance of IP solutions to our clients over a wide geographic area," said Juan Carlos Canto, CFO of LD Telecom, which delivers enhanced communications solutions to small and medium enterprises in shared tenant environments in Latin America. Canto continued, "We're very pleased with the service and continue to grow our customer base at a healthy rate as we bring intelligence to voice networks in underserved markets." Voice traffic is routed over Global Crossing's worldwide fiber optic network using either packet-based VoIP or conventional Time Division Multiplexing technology. Both platforms are fully interoperable. By managing a VoIP platform over its own network, Global Crossing delivers a cost-effective, reliable solution unaffected by public Internet delays and congestion. This premier VoIP network also provides users with quality comparable to that of the traditional Time Division Multiplexing infrastructure. The VoIP platform's multi-layered architecture makes it an ideal choice for IP-based applications, built to satisfy current and future communications needs. "Our IP network, connecting over 200 cities in 27 countries, is truly an exceptional asset, and we continue to reap its benefits, as do our customers," said John Legere, CEO of Global Crossing. "We are migrating increasing amounts of our growing voice traffic onto our VoIP platform, and customers are experiencing the quality they expect in their voice services with the added efficiencies of an all-IP environment. Our global network is able to address the connectivity needs of customers today while providing solutions that match their future requirements." Global Crossing's suite of voice products gives carrier and enterprise customers access to switched and dedicated origination and termination, both nationally and internationally, as well as long-distance and toll-free services, with enhanced routing capabilities over Global Crossing's secure fiber optic network. Global Crossing's comprehensive, end-to-end network management system monitors traffic 24 x 7 for unsurpassed reliability. Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. Global Crossing operates throughout the Americas and Europe, and provides services in Asia through its subsidiary, Asia Global Crossing. On January 28, 2002, Global Crossing and certain of its affiliates (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda. On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. On April 23, 2002, Global Crossing commenced a Chapter 11 case in the Bankruptcy Court for its affiliate, GT UK, Ltd. On August 4, 2002, Global Crossing commenced a Chapter 11 case in the United States Bankruptcy Court for the Southern District of New York for its affiliate, SAC Peru Ltd. On August 30, 2002, Global Crossing commenced Chapter 11 cases in the Bankruptcy Court for an additional 23 of its affiliates (as specified in the July Monthly Operating Report filed with the Bankruptcy Court) in order to coordinate the restructuring of those companies with its restructuring. Global Crossing has also filed coordinated insolvency proceedings in the Bermuda Court for those affiliates that are incorporated in Bermuda. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced in Bankruptcy Court on January 28, 2002. Global Crossing's Plan of Reorganization, which it filed with the Bankruptcy Court on September 16, 2002, does not include a capital structure in which existing common or preferred equity would retain any value. Please visit http://www.globalcrossing.comor http://www.asiaglobalcrossing.comfor more information about Global Crossing and Asia Global Crossing. Global Crossing Holdings' 9.625% bonds due 2008 (GBLX08USR1), DebtTraders reports, are trading at 1.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1 for real-time bond pricing. GRANT PRIDECO: S&P Keeping Watch on Low-B Credit & Note Ratings --------------------------------------------------------------- Standard & Poor's Ratings Services placed its corporate credit and senior unsecured note ratings on oilfield services company Grant Prideco Inc., (BB/Watch Neg/--) on CreditWatch with negative implications following the company's announced acquisition of Reed-Hycalog from Schlumberger Ltd., for $350 million. The acquisition, which is expected to close by year- end, will be funded with about $255 million in cash, $5 million of assumed liabilities and $90 million of Grant Prideco common stock, which will be issued to Schlumberger, in accordance with the terms of the transaction. Houston, Texas-based Grant Prideco had approximately $220 million of debt as of June 30, 2002. The CreditWatch listing for Grant Prideco reflects the potential for lower ratings given the significantly increased pro forma leverage to complete the acquisition of Reed-Hycalog, a manufacturer and marketer of drill bit technology and products, and the company's ability to generate appropriate financial measures with the current ratings. "Although the acquisition diversifies the company's product lines and lowers the volatility of Grant Prideco's cash flow, Standard & Poor's may downgrade the company's ratings because the transaction materially increases Grant Prideco's debt burden during challenging drilling market conditions," said Standard & Poor's credit analyst Brian Janiak. The acquisition of Reed-Hycalog should improve Grant Prideco's business risk profile by adding a business with profitability throughout the drilling cycle, in contrast to the company's current businesses that rank among the most volatile in the oilfield services sector. The broader product platform and relatively more stable cash flow generation ultimately could improve Grant Prideco's credit quality by improving the consistency of its cash flow. In addition, longer term, Grant Prideco's cash flow could increase on a secular basis as it plans to grow the drill bit business and should realize synergies in technology, manufacturing and sales throughout the company. Nevertheless, the acquisition will be funded though an aggressive use of debt. Grant Prideco effectively is adding Reed-Hycalog at a 5.0 times debt to EBITDA transaction multiple, which will stretch the company's near term credit protection measures. Standard & Poor's will resolve the CreditWatch listing after meeting with management to review the recent acquisition and discuss the company's future strategic, operating, and financial plans. HELLER FINANCIAL: Fitch Affirms Low-B Ratings on Fives Classes -------------------------------------------------------------- Heller Financial Commercial Mortgage Asset Corp.'s mortgage pass-through certificates, series 1999 PH-1, $151.4 million class A-1, $535.6 million class A-2, and interest-only class X are affirmed at 'AAA' by Fitch. In addition, the $22.7 million class B is affirmed at 'AAA', the $20.2 million class C at 'AA', the $53.0 million class D at 'A', the $12.6 million class E at 'A-', the $37.9 million class F at 'BBB', the $17.7 million class G at 'BBB-', the $35.3 million class H at 'BB+', and the $20.2 million class J at 'BB'. The $7.6 million class K is affirmed at 'BB-', the $15.1 million class L at 'B', and the $7.6 million class M at 'B-'. The $18.8 million class N is not rated by Fitch. The rating affirmations follow Fitch's review of the transaction, which closed in May 1999. The rating affirmations reflect the consistent loan performance, investment grade credit assessments of two loans (9.30% of the pool) and minimal reduction of the pool collateral balance since closing. As of the October 2002 distribution date, the pool's aggregate certificate balance has decreased by 5.3% since closing, to $955.7 million from $1.0 billion. The certificates are collateralized by 187 fixed-rate mortgage loans, consisting primarily of retail (31% by balance), multifamily (25%), and office (23%) properties, with concentrations in Texas (13%), New Jersey (10%), and California (10%). Wachovia Securities, the master servicer, provided year-end 2001 borrower operating statements for 94% of the pool's outstanding balance. The weighted average debt service coverage ratio for YE 2001 increased to 1.47 times from 1.39x at closing. Ten loans (3.14%) reported YE 2001 DSCRs below 1.00x. There are currently no delinquent loans and only one loan (0.31%) in special servicing. Since Fitch's previous review, the Trust incurred approximately $1.4 million in losses due to the disposition of two assets (one hotel and one office). Fitch reviewed the performance and underlying collateral of the South Plains Mall (6.58%) and the Station Plaza Office Complex (2.72%) loans, which both have investment grade credit assessments. The DSCR for each of these loans is calculated using borrower financials less required reserves and debt service payments based on the original balance and Fitch stressed refinance constant. The South Plains Mall, located in Lubbock, Texas, consists of 1.1 million sq. ft., of which 1.0 million sq. ft. is collateral for the loan. Total mall occupancy is 98% as of 6/30/02, which is flat to the 98% occupancy at closing. The anchors at the mall, JC Penney, Dillard's, Dillard's Home, Mervyn's, Beall's, and Sears, have reported YE 2001 sales per sq. ft. that are generally consistent with the historical performance at the property. The trailing-twelve-month 6/30/02 DSCR is 1.87x, up from 1.70x at TTM 6/30/01 and 1.47x at closing. The Station Plaza Office Complex consists of three office buildings (320,477 sf) located in Trenton, New Jersey. Property occupancy is at 100%, which is flat to closing. The largest tenant is the State of New Jersey, rated 'AA' by Fitch, which leases 87% of the buildings under a lease expiring in 2017. The loan will fully amortize by August 2013. The TTM 6/30/02 DSCR is 1.28x, compared to 1.32x at TTM 6/30/01 and 1.36x at closing. Fitch will continue to monitor this transaction, as surveillance is ongoing. HORIZON NATURAL: Agrees to Restructure Pittston Coal Transaction ---------------------------------------------------------------- The Pittston Company (NYSE: PZB) and Horizon Natural Resources Company have agreed preliminarily, in the face of delays due to closing conditions not being satisfied, to restructure their previously announced transaction. Subsidiaries of Horizon will acquire certain coal mining assets of subsidiaries of Pittston in West Virginia (including all active mining operations in West Virginia) and an option to acquire certain additional properties (including certain coal reserves in Kanawha and Fayette Counties, West Virginia). Consummation of the transaction is subject to completion of negotiation of definitive agreements, the receipt of various consents and other typical closing conditions. Pittston remains confident of completing the process of exiting the coal business this year. The Pittston Company is a diversified company with interests in security services through Brink's, Incorporated and Brink's Home Security, Inc., global freight transportation and supply chain management services through BAX Global, Inc. and mining and minerals exploration through Pittston Coal Company and Pittston Mineral Ventures. Press releases are available on the World Wide Web at http://www.pittston.comor by calling toll free (877) 275-7488. As reported in Troubled Company Reporter's October 21, 2002 edition, Horizon Natural Resources retained Robert M. Miller of Financo, Inc., as its financial advisor to review strategic options. Horizon Natural Resources Company (formerly known as AEI Resources Holding, Inc.) conducts mining operations in five states with a total of 42 mines, including 27 surface mines and 15 underground mines: -- Central Appalachian operations includes all of the company's mining operations in southern West Virginia and Kentucky, currently totaling 36 surface and underground mines, which produced approximately 12.2 million tons of coal (65 percent of total production) during the first six months of 2002. -- Western operations includes mining in Colorado, Illinois and Indiana, currently totaling six surface and underground mines, which produced approximately 6.6 million tons (35 percent of total production) during the first six months of 2002. * * * As reported in Troubled Company Reporter's September 30, edition, Horizon Natural Resources initiated discussions with holders of its credit facility and will contact senior secured debt holders, so as to avoid being in violation of one or more of its debt covenants. HORSEHEAD: FTI Consulting Serves as Committee's Fin'l Advisors -------------------------------------------------------------- The Official Committee of Unsecured Creditors of Horsehead Industries Inc., obtained Court's authority to engage the FTI Consulting, Inc., as its financial advisors, effective as of September 3, 2002. FTI will provide consulting and advisory services to the Committee and its legal advisor as appropriate and feasible in order to advise the Committee in the course of these chapter 11 cases, including: -- Assistance to the Committee in the review of financial related disclosures required by the Court, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; -- Assistance to the Committee with information and analyses required pursuant to the Debtors' Debtor-In-Possession financing, if any, including, preparation for hearings regarding the use of cash collateral and DIP financing; -- Assistance with a review of the Debtors' short-term cash management procedures; -- Assistance with a review of the Debtors' key employee retention and other critical employee benefit programs, if any; -- Assistance and advice to the Committee with respect to the Debtors' identification of core business assets and the disposition of assets or liquidation of unprofitable operations; -- Assistance with a review of the Debtors' performance of cost/benefit evaluations with respect to the affirmation or rejection of various executory contracts and leases; -- Assistance regarding the valuation of the present level of operations and identification of areas of potential cost savings, including overhead and operating expense reductions and efficiency improvements; -- Assistance in the review of financial information distributed by the Debtors to creditors and others, including, but not limited to, 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; -- Attendance at meetings and assistance in discussions with the Debtors, potential investors, banks and other secured lenders in this chapter 11 case, the U.S. Trustee, other parties in interest and professionals hired by the same, as requested; -- Assistance in the review and/or preparation of information and analysis necessary for the confirmation of a Plan of Reorganization in this chapter 11 case; -- Assistance in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; -- Assistance with sale efforts and transactions related to the debtors assets; -- Litigation advisory services with respect to accounting and tax matters, along with expert witness testimony on case related issues as required by the Committee; and -- Render other general business consulting or other assistance as the Committee or its counsel may deem necessary. The customary hourly rates charged by FTI personnel anticipated to be assigned to this case are: Senior Managing Directors $525-595 Directors / Managing Directors $370-525 Associates / Senior Associates $185-345 Administration / Paraprofessionals $ 85-140 Horsehead Industries, Inc., d/b/a Zinc Corporation of America, the largest zinc producer filed for chapter 11 protection on August 19, 2002. Laurence May, Esq., at Angel & Frankel, PC represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $215,579,000 in assets and $231,152,000 in debts. HUNTSMAN POLYMERS: Eliminates $763MM Debt Claims after Workout -------------------------------------------------------------- On September 30, 2002, Huntsman Company LLC (formerly known as Huntsman Corporation) and Huntsman Polymers Corporation completed a debt for equity exchange. Huntsman Company obtained the required consent of all its bank lenders to complete the Restructuring on an out-of-court basis. The Restructuring involved the following: Equity Interest in Huntsman Holdings -- Members of the Huntsman family who owned equity interests in Huntsman Company and any of its subsidiaries, together with certain affiliated entities that owned such equity interests, contributed all their equity interests in Huntsman Company and its subsidiaries to a newly established holding company, in exchange for equity interests in Huntsman Holdings. Huntsman Holdings now indirectly owns all the stock of Huntsman Company and certain debt securities of Huntsman International Holdings. The Huntsman Family will continue to have operational and board control of Huntsman Company, Huntsman Polymers and Huntsman International Holdings. -- MatlinPatterson Global Opportunities Partners, L.P. (formerly known as CSFB Global Opportunities Partners, L.P.), and Consolidated Press Holdings Limited held, in the aggregate, $763 million principal and accrued interest of Huntsman Company's and Huntsman Polymers' bonds, which were ultimately exchanged for equity interests in Huntsman Holdings. Huntsman Company's and Huntsman Polymers' Bonds -- Approximately $59 million in principal amount of Huntsman Company's and approximately $37 million in principal amount of Huntsman Polymers' bonds not held by GOP and CPH were reinstated. The non-payment of interest defaults on these bonds were cured by paying approximately $4.7 million of interest that had accrued on Huntsman Polymers' bonds to be reinstated since December 2001 and approximately $5.4 million of interest that had accrued on Huntsman Company's bonds to be reinstated since January 2002. -- Pursuant to previously adopted amendments to the indentures governing the Huntsman Company and Huntsman Polymers bonds, which became effective upon completion of the Restructuring, most of the restrictive covenants in these indentures have been eliminated. Bank Credit Facilities Amendments -- Amendments to Huntsman Company's bank credit facilities were executed and are comprised of the following: * A term loan facility maturing in 2007 which is secured by a second lien on substantially all the assets of Huntsman Company and its domestic restricted subsidiaries; and * A $275 million priority revolving credit facility maturing in 2006. The revolving credit facility replaces Huntsman Company's existing $150 million supplemental accounts receivable facility, and is available for general corporate purposes. As a result of the restructuring, Huntsman Company has eliminated $763 million of consolidated debt claims and has reduced annual interest expense on such debt claims by approximately $63 million. These interest savings, together with in excess of $150 million in annual cost reductions over 2000 levels make a combined annual savings of in excess of $210 million for Huntsman Company. A subsidiary of the world's largest privately held chemical firm, Huntsman Corporation, Huntsman Polymers produces commodity and performance polymers. Its amorphous polymers are used in adhesives, sealants, and wire. The company also makes polyethylene and polypropylene, used in a wide variety of applications. In addition, it's a top maker of expandable polystyrene resins, produced as small beads and used in drinking cups, packaging, and insulation. Huntsman Polymers has reported growing losses since 1997, partly because of higher energy costs. On February 27, 2002, three creditors of Huntsman Polymers filed an involuntary Chapter 7 petition in the U.S. Bankruptcy Court for the District of Delaware. HYDROMET ENVIRONMENTAL: Defaults on Two Convertible Debentures -------------------------------------------------------------- Hydromet Environmental Recovery Ltd., (TSX Venture Exchange: YHM.A) is in default on $2,244,300 of convertible debentures issued in June 2001 and a further $1,260,000 of convertible debentures issued in March 2002. The Company has received a Notice of Foreclosure on the Newman, Illinois plant from the $2,244,300 debenture holders, and a demand for repayment in full from the $1,260,000 debenture holders. The Company also announces that a forbearance Agreement has been reached with two of the three debenture holders representing $1,510,000 of the $2,244,300 debenture total, and all of $1,260,000 debenture holders, whereby these debenture holders will not accelerate their legal actions against the Company prior to January 10, 2003, thereby granting the Company the necessary time to seek regulatory approval and shareholder approval for a change in the terms and conditions of the present debentures. If the shareholders of the Company and regulators approve the re-negotiated terms and conditions of the present debentures, then the debenture holders agree to accept these new terms and conditions for their debentures, thereby correcting the current default situation. The Company has agreed to pay a one-time fee of $220,000 for this Forbearance Agreement, with the fee being added to the present debenture total outstanding. The Board of Directors of the Company proposes to call an Extraordinary Shareholder Meeting as soon as possible, but in any event on or before January 10, 2003, to seek shareholders approval for: 1. A one for six share consolidation. 2. Approval of new conversion terms and exercise dates on the $3,504,300 of debentures currently in default. 3. Approval for the issuance of up to $995,000 in new convertible debentures. 4. Any other issues relating to the above matters. The Company also announces that it has received and accepted, subject to regulatory approval, and if required, shareholder approval, an Offer to Finance, for a minimum of $380,000 and a maximum of $995,000, for the purchase of convertible debentures. The proposed debentures would be convertible into units of Hydromet at $0.10 per unit on a post consolidation basis of 1:6. Each unit would be 1 Class A common share and 1 share purchase warrant. There would be a 10% finders fee payable, to an arms length party, on all new funding raised. The terms of the agreement for the old debentures would be for an extension of the conversion dates for an additional three year period at a conversion price of $0.20 per share with the warrants to be exercisable for a period of two years at $0.21 per share. The Company also announces that Carolyn Morgan, Charles Zimmerman and Charles De Rohan have resigned from the Board of Directors of the Company, to allow the Company the opportunity to add new Directors with expertise in dealing with the difficult challenges facing the Company at this time. The Company also announces that James E. Lalonde, presently in charge of Investor Relations for the Company, has been elected to the Board of Directors. HYPERDYNAMICS: Independent Auditors Express Going Concern Doubt --------------------------------------------------------------- Out of necessity resulting from a dramatic downturn in the IT services and related communications industries, and the design of a basic diversification strategy, HyperDynamics Corporation transitioned its focus this year. In the most general sense, it leveraged its resources while moving away from the troubled IT services market. It has diversified to a more clear-cut vertical focus in the arena of seismic data management within the oil and gas exploration industry. This shift of focus started with the acquisition of SCS Corporation in May of 2001. The result is the addition of growing and developing oil and gas industry based service revenues associated with seismic data management. The necessity to vertically focus and diversify began when the Company experienced serious problems in the transition regarding the time it took for its mission critical fiber to be installed at the new facility in 2001. HyperDynamics encountered unforeseen delays in moving into its new facility while the entire ITSP industry was encountering major difficulties. The need for vertical diversification away from general ITSP services was accented dramatically during the year with the literal downfall of so many once viable communications companies including such name brands as Worldcom, as one example. Revenues decreased to $355,628 for the year ended 2002, from $426,601 for 2001. The 16.7 % decrease was due to the transitioning from the ITSP services and refocusing and starting up new contracts in the area of the Company's current focus of seismic data management services. Revenues for general IT services were significantly reduced during the year because of difficulties related to the implementation of the ITSP business model. Additionally, new business contracts in the oil and gas industry were slow to begin. However, the Company expects to deepen its revenue base with the creation and marketing of the NuData (TM) Management System, which began in early fiscal 2003, and with seismic data transcription services. Cost of revenues decreased to $526,197 (148% of revenue) for the year ended 2002, from $919,538 (215% of revenue) for 2001. The reason for the significant decrease in cost of sales is related directly to the decrease in related revenues and the reason cost of revenues is more than revenues reflects management's decision to keep core operational infrastructure in place and personnel on staff during the downturn of the IT services business and ramp up of its seismic data management services in transition. The cost of revenues is beginning to decrease as a percentage of revenues compared to 2001 based on gradually increased service revenues with higher contribution margins in 2002. Selling, General and Administrative expenses increased to $2,832,667 (796% of revenue) for the year ended 2002, as compared to $2,339,178 (548% of revenue) for 2001. Consulting expenses increased to $1,474,432 in 2002 from $380,849 in 2001. This was primarily due to $1,392,500 in consulting expenses incurred for product development and sales and marketing for the Company's new tape transcription services that were not there last year. These expenses are not expected to continue at this level on an ongoing basis. Also, accounting expenses increased 120% to $58,480 in 2002 from $26,625 in 2001. The increase was primarily due to increasing complexities and requirements of the reporting and the hiring of a part-time in-house accounting consultant. Legal fees dropped 90.46% to $94,749 for 2002 compared to $994,053 for 2001. The decrease was due to the fact that last year the Company instigated a major lawsuit and this year those expenses have returned to a more normal level in 2002. Rent increased 55% to $286,701 for 2002 compared with $184,567 in 2001. The increase in rent was due primarily to the fact that the company moved into its new leased facility during 2001. Additionally, depreciation and amortization expense increased to $250,808 from $122,144 due two factors: HyperDynamics charged a full year of depreciation and amortization in 2002 for the leasehold improvements as opposed to 3 months in 2001 and it changed the estimated life for the leasehold improvements from ten years to five years. The Company's net loss was $3,005,271 for the year ended 2002, or $0.18 per share, compared to a net loss of $2,809,183, or $0.21 per share for 2001. The net loss available to shareholders was $3,180,866. This amount includes the deduction for preferred stock dividends. The Company says the negative results are due to the factors discussed above. At June 30, 2002 the Company's current ratio of current assets to current liabilities was .17. This compares to .20 for 2001. It remains management's priority to achieve cash flow from operations as quickly as possible. It is critical that HyperDynamics obtain additional working capital so that it can continue to meet current cash obligations while it continues to improve cash flow from operations. It is important to note however, that deeper analysis of the current ratio reveals several current obligations that while they reduce the current ratio, there is no requirement to use cash to satisfy the obligation. These items include Accrued salaries payable to officers, Deposits, Dividends Payable, and Dividends payable to related party. Adjusting these amounts not requiring cash would calculate an adjusted current ratio of .61. HyperDynamics has been operating with a cash deficit this entire last year. The Company has taken steps to minimize cash requirements including the officer's agreement to accept notes from the Company in lieu of cash payments for their salaries. The cash flow statements only show a 6.7% decrease in cash flow used by operations from 2001 to 2002 (-$881,272 and -$821,822 respectively). While this is a small improvement for the year as a whole, with cash conservation steps put in place by management and increasing contribution margins beginning in April 2002, the Company indicates that it is now making significant progress in reducing and ultimately eradicating negative cash flow from operations. For example, the monthly average of cash used by operations for fiscal year end 2002 was $68,490 per month. However, for the first nine months of the fiscal year the average cash used from operations on a monthly basis was $83,989 per month and for the last three months of the fiscal year the average cash used by operations was approximately $21,972 per month showing a significant positive trend. As a public company, the health of the Company's market is paramount to be able to raise critical working capital and bridge capital. During continued tough times such as this year, HyperDynamics only source for obtaining critical capital has been through its ability to place private investments with accredited investors, for restricted stock from several of its significant long-term shareholders and also from some exercises of warrants and options. This fiscal year $690,800 was raised as proceeds from sale of common stock. Without these funds paid in, the Company would have not been able to reasonably meet its current obligations this last fiscal year. Now, based on the progress of its most significant tape conversion contract implemented in April 2002, SCS Corporation, and other sales forecasted, HyperDynamics has made significant progress towards cash flowing from operations. Based on contracts in hand, being currently performed, and forecasted sales for significant projects associated with the NuDataTM Management System, HyperDynamics expects to improve cash flow operations for the second quarter of fiscal year end June 30, 2003. In order to bridge itself to a new level of operational success, management is planning to raise another $250,000. On September 12, 2002, the Company signed a stock subscription agreement to sell, on a best efforts basis, up to $250,000 of its restricted 144 common stock to IC Investments LTD at $.23 per share. As of October 10, 2002 it has raised $10,000 from this agreement. The Company could obtain additional capital upon the exercise of previously issued in the money outstanding warrants and options for common stock. Notwithstanding the above, the Company's independent auditors have issued the following statement in the Auditors Report dated September 13, 2002: "HyperDynamics has suffered recurring losses from operations which raises substantial doubt about its ability to continue as a going concern." IFCO SYS: S&P Withdraws Junk-Rated Bank Loan over Restructuring --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its double-'C' bank loan rating on IFCO Systems N.V.'s $178 million secured bank credit facility, as the company is currently in the process of restructuring the facility, which will likely result in impairment to current holders of the facility. At the same time Standard & Poor's withdrew its corporate credit and subordinated debt ratings on the company, which had been lowered to 'D' on March 15, 2002, after IFCO failed to make its interest payment on its 10.625% senior subordinated notes due 2010. KELLOGG COMPANY: Working Capital Deficit Tops $981MM at Sept. 28 ---------------------------------------------------------------- Kellogg Company (NYSE: K) said it generated accelerated sales and profit growth in its third quarter, resulting in net earnings that exceeded its previous guidance. Reported net earnings were $203.5 million, compared to last year's $150.3 million. The year-ago quarter's EPS included $0.03 of adverse impact from specific activities related to integrating Keebler Foods, as well as $0.08 of amortization. (The Company adopted SFAS No. 142 in 2002, eliminating most of its amortization on a prospective basis.) Excluding these items, EPS in the third quarter of 2001 was $0.48. At September 28, 2002, the Company's balance sheets show a working capital deficit of about $981 million. "The changes we made to our Company last year were expected to create accelerated growth in 2002, and this acceleration continued in the third quarter," said Carlos M. Gutierrez, Kellogg's chairman and chief executive officer. "Our 'Volume to Value' initiatives drove an acceleration in internal net sales growth, an expansion in gross profit margin, and increased reinvestment in brand-building. Meanwhile, our principle of 'managing for cash' continued to result in strong cash flow and enhanced financial flexibility. The net result was another quarter of quality earnings growth." On a comparable basis, the growth rates for net sales, operating profit, and EPS were 7%, 15%, and 2%, respectively. This basis adjusts year-ago sales and profit to exclude the impact of factors associated with the integration of Keebler, the amortization of intangible assets eliminated by SFAS No. 142, results attributable to the since-divested Bake-Line Products, and a difference in shipping days created by changing the interim reporting periods for all business units to uniform 13- week quarters. This basis adjusts year- ago EPS to exclude only the integration impact and the amortization eliminated by SFAS No. 142. On a reported basis, net sales were down 2%, primarily reflecting a fewer number of shipping days, while operating profit and EPS were up 20%, and 32%, respectively, in part because of integration costs in the year-earlier quarter and this year's SFAS 142 elimination of amortization. The comparable-basis net sales gain of 7% represents an acceleration of a strong trend that began in late 2001. Best of all, this growth was broad- based: U.S. retail cereal was up 6% on a comparable basis, U.S. retail snacks increased 5%, and the other U.S. businesses collectively posted an 11% gain. International grew over 6%, or 5% in local currencies. "Our sales growth featured continued strong contribution from mix and average pricing in virtually every business and market," said Mr. Gutierrez "This performance reflected improved execution of innovation and marketing, as well as the Company's focus on adding value for consumers, rather than discounting prices." During the quarter, gross profit margin was up nearly a full percentage point, excluding value-added promotions that are now included in cost of goods sold. Mr. Gutierrez commented, "A priority for us in 2002 has been to grow our gross profit margins to levels that allow us to reinvest more in brand- building. In the third quarter, this gross profit margin improvement was again driven by higher sales, an improved sales mix, and cost savings, and we again increased our advertising and promotion investment." Cash flow from operating activities less capital expenditures was $456 million in the quarter, which was well above the year- ago period's unusually strong $361 million. Through the first nine months of 2002, cash flow is up more than 33% year-over- year. This improvement has been driven by higher earnings, increased discipline in capital expenditure, and continuous reductions in working capital as a percentage of sales. Mr. Gutierrez said, "Debt reduction remains our priority for cash flow. However, we did begin to repurchase shares in the third quarter to offset the dilutive impact of exercised options. In addition, our cash flow and financial flexibility have improved enough that we are considering investing cash into our pension funds, to provide better security for our earnings and retirees going forward." The Company reiterated its EPS guidance of $1.73 for the full year 2002. Kellogg also indicated that in 2003, strong underlying business momentum, improved sales mix, and productivity initiatives should more than offset higher commodity costs and employee benefits expense. As a result, Kellogg expects to achieve its goals of low single-digit net sales growth, mid-single- digit operating profit growth, and high single-digit EPS growth in 2003, translating into net earnings of approximately $1.86 - 1.90 per share. "The goal of 2002 was to accelerate our growth, and we have clearly attained that acceleration, as evidenced by our strong third quarter results," concluded Mr. Gutierrez. "This performance is attributable to a better business model, enhanced capabilities, and improved execution. Therefore, we are confident that we can carry this momentum into 2003 and achieve our targeted growth, even despite cost challenges." With 2001 sales of about $8 billion, Kellogg Company is the world's leading producer of cereal and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles, meat alternatives, pie crusts, and ice cream cones. The company's brands include Kellogg's, Keebler, Pop-Tarts, Eggo, Cheez-It, Nutri-Grain, Rice Krispies, Murray, Austin, Morningstar Farms, Famous Amos, Carr's, Plantation, Ready Crust, and Kashi. Kellogg products are manufactured in 19 countries and marketed in more than 160 countries around the world. For more information, visit Kellogg's Web site at http://www.kelloggs.com KENTUCKY ELECTRIC: Will Defer $1.5MM Payment on 7.66% Sr. Notes --------------------------------------------------------------- Kentucky Electric Steel, Inc., (Nasdaq:KESI) has entered into an agreement with the holders of its 7.66% Senior Notes due November 1, 2005 to defer the $1.5 million principal payment due under the notes from November 1, 2002 to January 2, 2003. In addition, the Company agreed with the lenders under its $18 million revolving line of credit to increase the advance rates under the revolving credit agreement. The amendment to the revolving credit agreement provides that the borrowing base will be the sum of (a) 85% of the Company's net outstanding eligible accounts receivable and (b) the lesser of $14 million or the sum of 60% of the net security value of eligible scrap and raw materials inventory, 50% of the net security value of eligible billet inventory, and 70% of the net security value of eligible finished goods inventory. Each of the agreements announced today provides that on or before December 16, 2002, the Company must deliver a proposed agreement to the noteholders and to the lenders under the revolving credit facility regarding a restructuring of the Company's indebtedness or other transaction that would enable the Company to repay the notes and the revolver in full. Kentucky Electric Steel, Inc., is a publicly held company which operates a specialty steel mini-mill, manufacturing special quality steel bar flats for the leaf-spring suspension, cold drawn bar conversion, truck trailer support beam, and steel service center markets. Kentucky Electric Steel, Inc.'s common stock (symbol: KESI) is traded on the NASDAQ Small Cap Market. KMART CORP: Seeks Okay to Assume Samuel Aaron Consignment Pact -------------------------------------------------------------- Like M. Fabrikant, Mark A. McDermott, Esq., at Skadden, Arps, Slate, Meagher & Flom, tells the Court that Samuel Aaron International, Inc., also provides Kmart Corporation with moderately priced diamond and precious gem jewelry, like diamond rings, earrings, and necklaces, on a "perpetual" consignment relationship. "This works to the advantage of retailers, such as Kmart, because the consignment relationship affords a singularly unique form of financing, namely, the ability of the retailer to obtain goods without having to pay for them until after they have been sold to a customer," Mr. McDermott says. Under that relationship, Samuel Aaron grants the Debtors an initial, agreed-upon amount of consignment "credit." As of the Petition Date, Samuel Aaron has provided the Debtors $2,894,816 in consignment credit. Through this arrangement, the Debtors acquired $2,894,816 in consigned jewelry without having to pay for it until the Agreement is terminated. Also, the Debtors could always acquire from Samuel Aaron additional jewelry, but they must pay for amounts in excess of the credit in accordance with ordinary trade terms. Before the Petition Date, the Debtors had fully utilized the amount of the credit provided to them. In particular, Mr. McDermott recounts that the Debtors had obtained from Samuel Aaron consigned inventory of $2,894,816. It is estimated that a total of $1,089,041 of that inventory had already been sold prepetition, with an additional $1,805,775 of the inventory on hand. Being trade partners for more than a decade now, the Debtors and Samuel Aaron have agreed to amend the consignment agreement on October 1, 2002. Samuel Aaron has agreed to increase the Debtors' consignment credit amount by $1,450,000 from $2,894,816 to $4,347,000. This credit will persist until the consignment relationship is either altered or terminated. "Once the additional consignment credit amount is in place, Kmart will not owe Samuel Aaron any money until Kmart receives more than $4,347,000 of merchandise. As a result, Kmart can carry and earn revenues on $4,347,000 of merchandise without paying Samuel Aaron anything," Mr. McDermott emphasizes. The Agreement will continue until either of the parties elects to terminate the Agreement on 60 days notice. No party, however, may terminate the Agreement until after March 31, 2003. Samuel Aaron also may not terminate the Agreement during the Debtors' fiscal fourth quarter. In the event a party issues a notice of termination, according to Mr. McDermott, Samuel Aaron must continue to provide merchandise on consignment for the 60 days preceding the termination. After the termination, the Debtors will have 60 more days to continue to sell the Consigned Merchandise. In addition, within 30 days after the Closeout Period, the Debtors may elect to return some or all of the Consigned Merchandise for credit. If any amount remains due, then the Debtors will pay that amount. The Debtors also, at their sole discretion, may return Consigned Merchandise for credit throughout the term of the Agreement. Thus, the Debtors seek authority to assume the consignment agreement, as amended. Mr. McDermott contends that the parties' consignment agreement, as amended, puts the Debtors in a vantage position; assuming the agreement enhances the Debtors' ability to provide good quality, moderately-priced jewelry to their customer and, more importantly, to increase their sales. Mr. McDermott reiterates that the Debtors will receive another $1,450,000 in additional financing. The assumption of the agreement also cements a long- standing relationship with a key jewelry consignor. Mr. McDermott also reasserts that the Debtors will not have to "cure" any prepetition defaults, as a condition of the assumption. Hence, the Debtors are saved from immediately paying the $1,089,041 owed to Samuel Aaron on account of consigned jewelry sold but not paid for prepetition. (Kmart Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) Kmart Corp.'s 9.0% bonds due 2003 (KM03USR6), DebtTraders reports, are trading at 17 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. LEGATO SYSTEMS: Red Ink Continues to Flow in Third Quarter 2002 --------------------------------------------------------------- LEGATO Systems, Inc. (Nasdaq:LGTO), a worldwide leader in enterprise content and storage management software, announced financial results for its third quarter of 2002. Revenues for the third quarter of 2002 were $68.1 million as compared to $61.6 million for the second quarter of 2002 and $57.0 million for the third quarter of 2001. Net loss, excluding certain items, for the third quarter of 2002 was $5.1 million, as compared to a net loss of $7.6 million for the second quarter of 2002, and a net loss of $7.5 million for the third quarter of 2001. The excluded items consist of the amortization of intangibles (net of tax) in all periods, the establishment of a valuation allowance against deferred tax assets in the third quarter of 2002, the write-off of in-process research and development (net of tax) in the second quarter of 2002, and a reversal of restructuring charges (net of tax) in the third quarter of 2001. A reconciliation of net loss per generally accepted accounting principles to this pro forma net loss is included on the consolidated statements of operations attached. Net loss per GAAP for the third quarter of 2002 was $126.2 million, as compared to a net loss of $45.9 million for the second quarter of 2002, and as compared to a net loss of $13.0 million for the third quarter of 2001. During the third quarter of 2002, we took a charge to earnings of $119.2 million to provide a full valuation allowance against our net deferred tax assets. For the nine months ended September 30, 2002, the Company reported revenue of $185.3 million as compared to revenue of $180.6 million in 2001. Net loss, excluding certain items, was $18.5 million, as compared to a net loss of $12.4 million in 2001. The excluded items consist of the items listed above plus a litigation settlement charge (net of tax) in 2002 and a gain on sale of an equity investment (net of tax) in 2001. For the nine months ended September 30, 2002, net loss per GAAP was $218.8 million, as compared to a net loss of $33.6 million in 2001. At September 30, 2002, the Company's balance sheets show that its total current liabilities exceeded its total current assets by about $19 million. "LEGATO is tracking to deliver profitable growth as we close out the fourth quarter of 2002," said David B. Wright, chairman and CEO of LEGATO Systems, "The ongoing expansion of the LEGATO franchise through channel partners, global resellers and direct sales is proof positive that our customers are benefiting from the ROI their budget-constrained IT environments demand today. Our commitment to the archive, retrieval and recovery of vital content, applications, and information is why LEGATO continues to be a growing storage software leader." "Revenue growth and cost synergies were our focus for the third quarter, and our financial performance is a result of this focus," said Andy Brown, CFO of LEGATO Systems, "During the final quarter of 2002 we are forecasting revenue growth between 8 to10 percent. We are also expecting to be cash flow neutral to positive during the fourth quarter." LEGATO Systems, Inc., (Nasdaq:LGTO) delivers worldwide enterprise class software solutions and services that keep the world's business-critical information and applications available. With a direct sales force and through strategic partnerships and alliances, LEGATO delivers the advantage of business continuance through enterprise automation with information protection, application availability as well as content, message and storage management solutions. The company's corporate headquarters are located at 2350 West El Camino Real, Mountain View, CA 94040 650/210-7000, fax: 650/210-7032, Web site: http://www.LEGATO.com LIONBRIDGE TECHNOLOGIES: Working Capital Deficit Widens to $4MM --------------------------------------------------------------- Lionbridge Technologies, Inc., (Nasdaq: LIOX) announced financial results for the quarter ended September 30, 2002. Financial highlights for the quarter include: * Revenues of $33.9 million, an increase of 15% compared to revenue of $29.5 million for the second quarter of 2002 and an increase of more than 30% compared to revenue of $25.9 million for the third quarter of 2001. This also represents an increase over previously provided Company guidance. * Earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.8 million and a net loss of $246,000 on a GAAP basis. The Company also reported a net loss of $0.01 per share based on 31.7 million weighted average common shares outstanding. This compares to a net loss of $0.25 per share for the third quarter of 2001, based on 30.8 million weighted average common shares outstanding. * During the quarter, Lionbridge acquired eTesting Labs, a small subsidiary of Ziff Davis Media that provides a range of usability and performance testing services that complement the Company's VeriTest testing and certification offerings. * Excluding losses related to the eTesting Labs acquisition, the Company reported EBITDA of $2.1 million and positive net income of $234,000. Lionbridge's working capital deficit widens to about $4 million at September 30, 2002. "Our Q3 results demonstrate that Lionbridge has hit an inflection point of growth and profitability. Our strong year- on-year and quarter-on-quarter organic growth is coming from customers in both the technology and non- technology segments," said Rory Cowan, CEO, Lionbridge. "We are hitting the numbers we gave over a year ago and we are doing it the old-fashioned way - by reducing costs and increasing revenues. Our ability to deliver on these expectations shows the resilience of our business model and proves that Lionbridge has become the partner of choice for multilingual business process outsourcing." Lionbridge continued to grow revenue from its top customers. During the quarter, revenue from the Company's top ten customers grew 23% compared to the prior quarter. The Company's strong recurring revenue was complemented by several new contracts from leading global companies. "While the losses associated with the eTesting Labs acquisition were not in our plans or projections for the second half of this year, the acquisition presented an immediate, high-value opportunity for us to enhance our VeriTest business in growth areas such as usability and performance testing. As we have done with other small acquisitions, we expect to get eTesting Labs integrated into our core business quickly." Lionbridge also strengthened its fiscal 2002 revenue guidance by stating that it expects revenue in the upper range of the $115 - 120 million guidance it previously provided, with estimated $5-7 million of operating EBITDA. The Company also confirmed its plan for operating profitability, excluding losses related to the eTesting Labs acquisition, in the second half of 2002. The Company also stated that it has increased confidence in its 2003 revenue guidance of approximately $130 million, which would yield EBITDA in the $12 million range and GAAP net income of approximately $5 million. Lionbridge Technologies, Inc., provides solutions for worldwide deployment of technology and content to Global 2000 companies in the technology, life sciences and financial services industries. Lionbridge testing and compatibility services, globalization solutions, and multilingual content management technologies help clients reduce cost, speed time to market, and ensure the integrity of global brands. Based in Waltham, Mass., Lionbridge maintains facilities in Ireland, The Netherlands, France, Germany, China, South Korea, Japan, Brazil and the United States. To learn more, visit http://www.lionbridge.com LTV CORP: Varco Pruden Selling Miller Interests to Fitex S.A. ------------------------------------------------------------- Debtor Varco Pruden International, Inc., notifies the Court that it intends to sell and assign its interests in Miller Varco Pruden S.A., a corporation organized under the laws of Argentina, to Fitex S.A. (1) The property to be sold consists of: (a) all of VPI's equity and other attendant interests in MVP; specifically being; -- 3,640,000 Class B shares of MVP held by VPI; and -- all rights of any nature in relation to MVP that VPI may have, which rights may entitle VPI to receive any shares of MVP of any nature whatsoever, or to participate in any way in MVP's net worth, business or assets; and (b) an unsecured claim that VPI holds against MVP in the insolvency proceedings of MVP filed in the Civil and Commercial Court No, 19 of the City of La Plata, Province of Buenos Aires, Argentina, which has been accepted by the court in the MVP Insolvency Proceedings in the amount of US $954,266.51, including all accessories to the VPI Credit, as well as all rights stemming from the VPI Credit, including but not limited to any rights that VPI may have in the MVP Insolvency Proceedings. (2) VPI and Fitex have business relationships by virtue of the unsecured claim, and other past business relationships among the parties. (3) The cash purchase price for the Acquired Interests will be $2 in the aggregate ($1 as consideration for the Acquired Interests assigned by two agreements). (4) The parties holding liens or other interests or potential interests in the Acquired Interests, to the extent known by VPI, are The Chase Manhattan Bank and Abbey National Treasury Services plc. VPI believes that all these liens or interests can be extinguished, will be waived at the time of the sale, or are capable of monetary satisfaction. (5) In VPI's view, the proposed sale does not require the consent of its postpetition lenders. (LTV Bankruptcy News, Issue No. 38; Bankruptcy Creditors' Service, Inc., 609/392- 00900) M. A. GEDNEY: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: M. A. Gedney Company 2100 Stoughton Avenue Chaska, Minnesota 55318 Bankruptcy Case No.: 02-83631 Type of Business: Manufacturer and marketer of acidified food Products. Chapter 11 Petition Date: October 22, 2002 Court: District of Minnesota Judge: Nancy C. Dreher Debtor's Counsel: William I. Kampf, Esq. Kampf & Associates, P.A. 901 Foshay Tower 821 Marquette Avenue Minneapolis, MN 55402 Tel: 612-339-0522 Total Assets: $15,371,257 Total Debts: $28,954,441 Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Texana Pickle Producers $802,476 Frank Gonzales 504 S Pleasantview Drive Box 1013 Weslaco TX 78596 Tel: 956-968-5251 Marbran USA LC $565,400 Carlos Garza 200 S 10th St, Ste 1104 McAllen TX 78501 McAllen TX 78501 Tel: 956-630-2941 Brun Processed FDS $467,645 Guillermo Brun Colima Mexico 28970 Brun Processed FDS Colima Mexico 28970 The Revere Group $227,105 Plastican $189,380 Falkner Produce $166,314 PeopleSoft USA $132,483 Burns Philip Food Inc $99,865 Marketing Midwest $70,875 Advantage Sales & Marketing $66,440 James P. Smith & Co Inc. $65,355 C R England Inc. $61,886 Miller & Smith Foods $58,930 Donald F. Dahlke $58,914 Rea-D-Pak Foods Inc. $54,720 Myakka Brokers $53,006 Smyth Company Inc. $51,806 Masterson Personnel Inc. $48,999 Letica Corporation $48,445 Sunoliva Comercio Y Servicios $45,486 MINNETHAN LAND: Case Summary & 3 Largest Unsecured Creditors ------------------------------------------------------------ Debtor: Minnethan Land Investors Company c/o Donald Altman Louis Sternbach & Company 1333 Broadway Suite 516 New York, NY 10018 Tel: 212 695-6660 Bankruptcy Case No.: 02-15348 Chapter 11 Petition Date: October 28, 2002 Court: Southern District of New York (Manhattan) Judge: Robert D. Drain Debtor's Counsel: Scott R. Kipnis, Esq. Hofheimer Gartlir & Gross, LLP 530 5th Avenue 9th Floor New York, NY 10036 Tel: (212) 897-7898 Fax : (212) 897-4999 Estimated Assets: $10 to $50 Million Estimated Debts: $1 to $10 Million Debtor's 3 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Corona Meadow Realty Corp. $7,600,000 c/o Coby Housing Corp. c/o Hartman & Craven LLP Mark R. Kook, Esq. 460 Park Avenue New York, NY 10022 212-753-7500 STI Realty Corp. $2,000,000 c/o Coby Housing Corp. c/o Hartman & Craven LLP Mark R. Kook, Esq. 460 Park Avenue New York, NY 10022 212-753-7500 Anderson Kill & Olick, $250,000 P.C. Mark Weyman, Esq. 1251 Avenue of the Americas New York, NY 10020 212-278-1000 MIRANT: Resolves Issues re Electricity Generation in Philippines ---------------------------------------------------------------- Mirant (NYSE: MIR) has successfully resolved all outstanding issues related to Mirant's electricity generation in the Philippines through a bilateral agreement between the company, the Philippine Department of Energy and the Power Sector Assets and Liabilities Management Corporation (PSALM). The agreement upholds the sanctity of the existing power contracts between Mirant and the National Power Corporation, the state-run agency that purchases power for the Philippines. This agreement includes the following points: * Mirant will decrease by five percent the amount of power it will provide from its Pagbilao plant and sell to Napocor under the existing contract, a reduction of approximately $10 million in annual pre-tax revenue. As a result, Mirant will have more opportunity to sell additional power generated at Pagbilao to prospective industrial and commercial customers through its energy supply business. * The agreement clarified the number of days allowed for planned outages and unplanned outages related to Mirant's Pagbilao plant. This will reduce the potential for penalty payments to Napocor. * Regarding Mirant's Navotas I and II plants, Mirant will buy the facilities from Napocor for approximately $22 million and sell the output to prospective industrial and commercial customers through its energy supply business. Control of these plants had previously been planned to transfer to the government in 2003 and 2005, respectively. Napocor will pay Mirant approximately $10 million in 2002 to cover the balance of the capacity fees over the remaining contract life. "Mirant's existing contracts with Napocor are legally sound and will remain in effect," said Rick Kuester, senior vice president, international, Mirant. "The Philippine government asked that we work with them to resolve power price and reliability concerns. Under the voluntary agreement, Mirant's operational position in the Philippines is reaffirmed and strengthened, while future energy costs for the Philippines will be curtailed. Mirant looks forward to continuing its operations in the Philippines under this mutually beneficial agreement." This bilateral agreement will allow Mirant to sell additional power through its energy supply business, and to continue to provide private sector assistance in support of the Philippine government's Project Beacon, a program to provide complete electrification of all Philippine villages by 2006. Mirant entered the Philippines in 1997 and invested in the expedited development of new power generation. Filipino consumers and industry continue to benefit from the electricity that Mirant power plants generate. Mirant currently operates seven separate power plants in the Philippines with a combined generation of approximately 2,000 megawatts. Mirant is among the world's largest competitive energy developer and providers. Mirant owns or controls 22,184 MW of electricity generation capacity in the U.S., the Caribbean, Latin America, and Asia. Visit http://www.mirant.comto learn more about the Company. * * * As reported in Troubled Company Reporter's October 23, 2002 edition, Standard & Poor's lowered its corporate credit and senior unsecured ratings on energy merchant Mirant Corp., and its subsidiaries to 'BB' from 'BBB-', and its preferred stock rating to 'B' from 'BB'. The outlook is negative. Standard & Poor's assigned the same ratings to Mirant, Mirant Americas Generation Inc., Mirant Americas Energy Marketing L.P., and Mirant Mid-Atlantic LLC, given the lack of bankruptcy-remote structures between the entities and the intermingled cash flow operations. MITEC: Will Streamline Activities to Generate Cash & Cut Costs -------------------------------------------------------------- Maintaining its proactive approach in dealing with the current weak economy, Mitec Telecom Inc. (TSX: MTM), a leading designer and manufacturer of wireless network products for the telecommunications industry, announced further details of its extensive corporate wide plan to generate cash and slash operating costs. The announcement to reduce the global workforce by 150 positions was further to the one made on September 26, 2002 which itemized a number of initiatives including global staff reductions and the sale of certain Company real estate and non-core assets. Ken Allstaff, Interim President and Interim COO said Mitec is moving decisively and rapidly to position the organization to survive the current telecommunications turmoil. The staff reduction program will touch all aspects of the Company's global operations. With a view to reducing costs while increasing the effectiveness of technology development programs, engineering functions will be realigned to provide a more distributed capability throughout the organization. The three existing teams of engineers within the Suzhou, China, Dunstable, U.K. and the Montreal, Quebec facilities will continue to interface with major customers. The Company's three existing "Centers of Excellence" will remain in place, becoming an integral part of the customer localization strategy. These Centers include: Montreal for future integrated technology; Dunstable for filter advancement; and Tinton Falls, New Jersey for power amplifier development. "I am determined that a much higher proportion of our R&D costs will be spent on differentiating technology to set us apart from our peers in the years ahead. We have some very exciting technologies and products to offer to our customers," stated Mr. Allstaff. The Company is also embarking on a business diversification program to be centered in Montreal. "Given the serious challenges that the -Wireless business will continue to face the Company is also aggressively developing plans to expand its Defense and Satcom business segments as they promise growth and high margins. I am confident that having right sized our Wireless business we can concentrate on developing one of the largest and most successful high frequency technology companies in Canada." Mr. Allstaff said that the mobile communications market will remain flat for the foreseeable future. "The lack of spending has been much worse than the informed opinion of 18 months ago. As such, we are taking a very prudent approach to our Wireless business in order to be in a stronger position to offer our customers the most relevant and competitive technology when the market is rekindled as a result of 3G and 4G acceptance and infrastructure upgrading." Quantifying the impact of the changes, Mitec Executive Vice President, Finance and CFO, Keith Findlay, said that, excluding severance costs, the staff reductions and engineering realignment are expected to result in annualized pretax savings of approximately $6 million. The savings will take effect immediately. Mr. Findlay said that the realignment of engineering was dictated by current market conditions. "Simply put, our engineering costs were too high for current revenue streams. In this business we have to meet aggressive pricing targets and our margins were unable to support the level of R&D spending. "We are confident that the implementation of this program will allow us to generate positive EBITDA. The challenge facing us is this transitional phase. I am comfortable we are doing what is required to take us through to our next fiscal year," concluded Mr. Findlay. Mitec Telecom is a leading designer and manufacturer of products for the telecommunications industry. The Company sells its products worldwide to network providers for incorporation into high-performing wireless networks used in voice and data/Internet communications. Additionally, the Company provides value-added services from design to final assembly and maintains test facilities covering a range from DC to 60 GHz. Headquartered in Montreal, Canada, the Company also operates facilities in the United States, Sweden, United Kingdom, China and Thailand. Mitec Telecom Inc., is listed on the Toronto Stock Exchange under the symbol MTM. On-line information about Mitec is available at http://www.mitectelecom.com. In its recent financial statements filed with SEDAR, Mitec has experienced recent losses, negative cash flows and it has violated substantially all of its Canadian debt covenants. As such, the realization of assets and the discharge of liabilities are subject to significant uncertainty. The Company's continuation as a going concern is dependent upon, amongst other things; the injection of new capital by investors, the continuing support of the Corporation's lenders which is dependent on certain conditions including a capital injection by November 1, 2002, maintaining a satisfactory sales level, the continued viability of the Corporation's significant customers, a return to profitable operations and the ability to generate sufficient cash from operations, financing arrangements and new capital to meet its obligations as they become due. MORTGAGE CAPITAL: Fitch Rates Five Note Classes at Low-B Level -------------------------------------------------------------- Mortgage Capital Funding, Inc.'s mortgage pass-through certificates, series 1998-MC2 are affirmed by Fitch Ratings as follows: $123.3 million class A-1, $514.2 million class A-2, and interest-only class X at 'AAA'; $48 million class B at 'AA'; $58 million class C at 'A'; $60.6 million class D at 'BBB'; $37.9 million class E at 'BBB-'; $12.6 million class F at 'BB+'; $25.2 million class G at 'BB'; $7.6 million class H at 'BB-'; $15.1 million class J at 'B' and $7.6 million class K at 'B-'. Fitch does not rate the $11.1 million class L certificates. The affirmations follow Fitch's annual review of the transaction, which closed June 1998. As of the October 2002 distribution date, the aggregate collateral balance has decreased by 8.9% to $919.5 million from $1 billion at closing. ORIX, as master servicer, provided year- end 2001 operating statements for 97.7% of the pool balance. The YE 2001 weighted average debt service coverage ratio is 1.60 times compared to 1.59x as of YE 2000 and 1.54x at issuance. Fitch maintains an investment grade credit assessment on two loans, 375 Hudson Street (18.3% of the pool) and Wellpoint Office Complex (5.2%). The 375 Hudson Street loan is secured by a class A office building located in Manhattan. The rating of the loan is dependent upon the rating of the largest tenant in the building, Saatchi & Saatchi. The rating of Wellpoint Office Complex loan is also dependent upon the rating of the lease guarantor, Wellpoint Health Networks, which remains investment grade. The loan is secured by a 13-story office tower and three single story buildings. Fitch lowered its credit assessment of the Minneapolis City Center to below investment grade due to the decline in DSCR and the 9% additional vacancy that will occur when Target vacates 6 floors upon lease expiration at the end of 2002. Twenty loans (7.2%) are in special servicing, including six (3.2%) that are delinquent as follows: five 90+ days (2.9%) and one real estate owned (0.3%). A crossed pool of 11 loans was transferred to special servicing due to non-monetary default. These loans are expected to return to the master servicer. Loss estimates on the remaining loans in special servicing are expected to be fully absorbed by the unrated class L. Fitch will continue to monitor this transaction, as surveillance is ongoing. NERVA/SAVANNAH: Fitch Keeping Watch on Three Low-B-Rated Notes -------------------------------------------------------------- Fitch Ratings has placed the following classes of notes issued by Nerva Ltd. and Savannah II CDO Ltd. on Rating Watch Negative: Nerva Ltd. -- $513,573,683 class A floating-rate notes due 2014 'AAA'; -- $12,000,000 class B floating-rate notes due 2014 'AA'; -- $30,000,000 class C floating-rate notes due 2014 'BBB'; -- $12,000,000 class D floating-rate notes due 2014 'BB'. Savannah II CDO Ltd. -- $300,000,000 class A floating-rate notes due 2012 'AAA'; -- $18,450,000 class B floating-rate notes due 2012 'AA'; -- $22,500,000 class C floating-rate notes due 2012 'BBB'; -- $6,750,000 class D floating-rate notes due 2012 'BB'; -- $5,250,000 class E floating-rate notes due 2012 'B'. Continued deterioration in the credit quality of their reference pools, coupled with a significant amount of reference obligations that have become subjects of credit events, have increased the credit risk of both transactions to a point where their risk may no longer be consistent with their ratings. As of Sept. 30, 2002, Nerva Ltd. had a weighted average rating factor of 31.21 versus a trigger of 24. Savannah II had a WARF of 41.75 versus a trigger of 34. Reference obligations that were subjects of credit events represented 12.75% and 10.20% of the total reference pool of Nerva Ltd., and Savannah II CDO Ltd., respectively. Both transactions were failing all of their OC tests. Fitch is currently reviewing these transactions in detail. Appropriate action will ensue upon completion of its analysis. Both Nerva Ltd. and Savannah II CDO Ltd. are Collateralized Debt Obligations that may have characteristics of both synthetic and cash flow CDOs. At issuance, both transactions entered into separate credit default swaps with Barclays Bank PLC as the swap counterparty. In its capacity as such, Barclays has the option to settle each swap (in whole or in part), in which case the respective transactions would become cash flow CDOs. As of Sept. 30, 2002, both Nerva Ltd., and Savannah II CDO Ltd., did not hold any physical assets in their portfolios. Both transactions' reference pools primarily consisted of asset- backed securities and corporate debt, with Savannah II CDO Ltd. also containing emerging market corporate and sovereign debt. NETIA HOLDINGS: Dutch Units' Creditors Approve Composition Plans ---------------------------------------------------------------- Netia Holdings S.A. (WSE: NET), Poland's largest alternative provider of fixed-line telecommunications services (in terms of value of generated revenues), announced that at the creditors' meetings of its three Dutch finance subsidiaries held today in Amsterdam, the Netherlands, all creditors present cast their votes in favor of the composition plans of Netia Holdings B.V., Netia Holdings II B.V. and Netia Holdings III B.V., respectively. The hearing on approval of the composition plans will be held on November 6, 2002. Netia Holdings BV's 13.75% bonds due 2010 (NETH10NLN1) are trading at 16 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH10NLN1 for real-time bond pricing. NPF XII/NPF VI: Fitch Withdraws Ratings Over Operations Concerns ---------------------------------------------------------------- Fitch Ratings withdraws its ratings on the following securities within the NPF XII and NPF VI Healthcare Securitization Programs: NPF XII, Inc., Series 1999-1 -- Class A notes 'AA'; -- Class B notes 'A'; NPF XII, Inc., Series 1999-3 -- Class A notes 'AA'; -- Class B notes 'A'; NPF XII, Inc., Series 2000-2 -- Class A notes 'AA'; -- Class B notes 'A'; NPF XII, Inc., Series 2001-1 -- Class A notes 'AA'; -- Class B notes 'A'; NPF XII, Inc., Series 2001-2 -- Class A notes 'AA'; -- Class B notes 'A'; NPF VI, Inc., series 1998-2 -- Class A notes 'A'; -- Class B notes 'BBB'; NPF VI, Inc., series 1998-4 -- Class A notes 'A'; -- Class B notes 'BBB'; NPF VI, Inc., series 2001-1 -- Variable funding note 'BBB'. While Fitch lacks the information necessary to make definitive ratings changes, Fitch believes the ratings on the NPF XII Master Trust could be as low as 'B'/'CCC' given the reserve fund depletion as described in more detail below. With regards to the NPF VI Master Trust transactions, Fitch is not aware at this time of any credit enhancement deficiencies, but is concerned that NCFE is not operating in a manner consistent with a servicer of investment grade rated transactions regardless of the available credit enhancement. In addition, Fitch was notified earlier today by the trustee, JPMorgan Chase Bank, that the sole holder of the Series 2001-1 notes directed the trustee to declare a principal amortization event with respect to the Series 2001-1 notes. According to the most recent servicer report, NPF VI reserve levels are in compliance, however the ramifications related to this principal amortization are as of yet unknown. This withdrawal is the result of a series of events that culminated in Bank One, as trustee for the NPF XII master trust, declaring an Event of Default on October 25, 2002. The events that led to this declaration cause Fitch to question the reliability of the information provided by NCFE, and make it difficult or impossible for Fitch to accurately maintain the current ratings. In addition, other than the written notice of default from the trustee received on October 26, 2002, Fitch's calls to Bank One and to NCFE seeking to clarify and understand the situation have not been returned. As indicated in previous press releases, a primary consideration in Fitch's downgrade of the NPF XII and VI transactions on July 12, 2002 was the inconsistent communication between NCFE and Fitch. On October 26, 2002, Fitch was notified by the trustee that on October 25, 2002, an Event of Default was declared under the NPF XII, Inc., Master Indenture, Section 7.01 (j). Specific to subsection (j), a shortfall in the Equity Account Balance occurred as of the October payment date, and was not remedied within the necessary time frame. While the Event of Default notice was exclusive to NPF XII, ongoing concerns at both the program and servicer levels place both NCFE sponsored programs in jeopardy. According to the most recent servicer report for NPF XII, dated October 23, 2002 and received by Fitch earlier today, the actual level of cash reserves was 0.06% versus the specified level of 17.0%. This reserve shortfall results not only in the aforementioned Event of Default, but severely impairs the trust's ability to protect against losses and dilutions. It has been reported to Fitch by interested parties that NCFE directed the trustee to re-route certain funds intended for the NPF XII reserve accounts in order to fund the purchase of new receivables. The company's apparent willingness to disregard the documents and commit such a serious breach causes Fitch to question NCFE's viability. Finally, the cumulative impact of these actions makes it difficult for Fitch to rely on the accuracy of the information provided by NCFE. If a diversion of funds from the reserves did indeed occur and the depleted credit enhancement levels persist, Fitch expects that its ratings on the Class A and Class B notes of NPF XII would fall to the 'B' and 'CCC' category. Fitch originally placed the NPF XII and NPF VI Healthcare Programs on Rating Watch Negative on May 23, 2002. On July 12, 2002, Fitch downgraded all securities it rated under the NPF XII and NPF VI programs because of a decline in collateral performance, concentrations in excess of Fitch's comfort levels, NCFE's inability to raise additional debt and equity and NCFE's delays in providing Fitch with the information necessary to maintain its ratings. In the future, if Fitch is able to gather reliable information as to the performance of the trusts and the viability of NCFE's operations, it is possible that the ratings may be reinstated at the then appropriate levels. NU-LIFE CORP: Commences Restructuring Proceeding in Canada ---------------------------------------------------------- Nu-Life Corp., the supplier of Nu-Life Vitamins, announced that it and its subsidiary Nu-Life Nutrition Ltd., have each filed a restructuring application with their respective creditors and that it has entered into a conditional financial agreement with Vitaquest International, Inc., estimated to be worth more than $6.5 million. "Nu-Life suffered severe operational difficulties caused by its manufacturing facility shut down in 1998 and never recovered," said Mark Couper, Nu-Life's President and CEO. "We're seeking to re-engineer our business beginning with a hard look at all infrastructure and operating costs as well as a new strategic growth plan. We intend to re-establish a strong financial platform, so that we can quickly meet product demand and achieve sustainable and profitable sales growth." The Company's Board of Directors has appointed BDO Dunwoody Limited as licensed trustee of its and Nu-Life Nutrition Ltd.'s restructuring application, to be accomplished by way of proposals under the Bankruptcy and Insolvency Act. Management believes that this approach will create the most positive economic advantages for the Company and its subsidiary while respecting shareholders, creditors, suppliers and customers. All parties are likely to derive a greater benefit from the Company and its subsidiary continuing operations versus any recovery resulting from bankruptcy. As a part of the restructuring, the Company and its subsidiary will take all appropriate charges. De-listing from TSX Trading of Nu-Life's shares was suspended by the TSX on July 5, 2002, and the shares were subsequently de-listed as the Company no longer met the TSX's listing requirements,. The Company may re-list its shares on a Canadian stock exchange in the future, but there can be no assurance that it will be able to do so. "We have dedicated and talented employees, innovative products and a strong ability to provide added value and marketing know- how to leading retailers," said Couper. "We are reinforcing our commitment to independent health food retailers who have contributed significantly towards our premium brand positioning. As a result of our strategic plans, we have achieved distribution of our products in mainstream retail chains such as Shoppers Drug Mart, Pharma Plus, Pharmasave, Jean Coutu, Uniprix, Loblaws, Fortino's, Zehr's, Sobey's, Safeway, Save-on- Foods, A&P and Dominion". Vitaquest Financial Support Agreement Vitaquest has entered into a financial support agreement with the Company dated October 23, 2002, pursuant to which it has, subject to certain terms and conditions, agreed to support the Company's and the Subsidiary's proposals. Vitaquest, the Subsidiary's primary supplier, is a large privately held vitamin manufacturer, which sells through retail, direct response and electronic retail, primarily in the United States, and is also Nu-Life's principal manufacturer. Additionally, Vitaquest is a shareholder with 2,335,500 common shares, an approximate 8.5% interest. "With the Vitaquest financial support agreement, coupled with the support of our valued suppliers, we expect that our balance sheet and cash flow will be substantially enhanced, product availability assured and operating costs dramatically reduced, including our banking fees and interest charges, which alone will be reduced by over $500,000 per year," Couper said. Contingent upon the success of the proposal, Vitaquest has agreed to convert its unsecured Subsidiary debt into common shares of the Company at $0.02 per share and provide US $750,000 of inventory, on a secured basis, without interest, as well as term out the payments thereof over 15 equal monthly installments, starting January 1, 2003. Vitaquest has further agreed to enter into a manufacturing agreement, with appropriate performance parameters and industry standard terms, subject to Vitaquest's standard credit requirements and the success of of the two proposals. Vitaquest has also agreed, contingent upon the success of the two proposals, to reduce the interest rate under its existing secured convertible debentures to the minimal accepted IRS interest rate, with an offsetting marketing allowance, and to term out its secured debt position, previously acquired from Congress Financial, over 15 equal monthly installments, starting January 1, 2003, at the Canadian bank prime rate. Most of Vitaquest's commitments are subject to events of default by the Subsidiary or the Company. Vitaquest will retain its pre- emptive rights to acquire shares of the Company, but shall waive them in respect of shares issuable pursuant to the proposal. The Company has, among other things, agreed to seek to amend its by- laws to increase its maximum non-Canadian director representation. As Vitaquest is controlled by Mr. Keith Frankel, who is a director of the Company, the issuance of common shares of the Company to Vitaquest and other transactions with Vitaquest contemplated under the proposals of each of the Subsidiary and the Company could be viewed as one or more related party transactions. In addition, Ms. Sharon Leavy, another director of the Company, is related to Mr. Frankel. The Company's remaining director is Mr. Mark Couper. A material change report attaching the two proposals and the Vitaquest financial support agreement will be filed with Canadian securities regulators shortly. The successful completion of the proposals will be subject to the support of the creditors of the Company and the Subsidiary, as well as court approval. Meetings are currently scheduled for November 12, 2002. The effective date is expected to be October 24, 2002, subject to the receipt of applicable approvals. OAKWOOD MORTGAGE: S&P Maintains B- Ratings on Sub. B-2 Classes -------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on various Oakwood Mortgage Investors Inc.-related transactions issued between 1995 and 2001 on CreditWatch with negative implications. The ratings on the subordinate B-2 classes of series 1997-A, 1997-B, 1997-C, and 1998-B, which are dependent on Oakwood Homes Corp.'s rating as guarantor, are unaffected by this action and remain at single-'B'-minus. The ratings assigned to these B-2 classes were lowered on Nov. 2, 2000, following the lowering of Oakwood's long-term credit rating on Oct. 30, 2000. The CreditWatch placements reflect the worse-than-expected performance of the underlying pools of manufactured housing contracts. With pool factors ranging from 26% to 58%, the transactions originated between 1995 and 1998 display cumulative net loss rates that range between 6.68% and 10.63% of the respective original pool balances. Comparatively, Oakwood transactions issued during 1999 and 2001 display pool factors ranging between 68% and 98%, and display cumulative net loss rates ranging from 0.36% to 5.60%. In addition, repossession inventory, as a percentage of the current pool balance, is significant for all transactions ranging between 2.4% and 12.50%. Furthermore, the percentage of the collateral pool that consists of receivables that are 30 or more days delinquent is between 3% and 10% as of the September 2002 collection period for all transactions. Although the cumulative recovery rates on charged off collateral displayed by these transactions are relatively strong, recoveries in more recent months have dissipated substantially as a result of the greater percentage of repossessed manufactured housing units being liquidated by Oakwood through wholesale liquidation channels. In fact, during the past 18 months, wholesale liquidations comprised a progressively larger percentage of total monthly liquidations, while retail based liquidations have slowly diminished. Retail based liquidations previously comprised as much as 80% to 90% of Oakwood's total monthly liquidations, but have since dropped to the current level of 40% and are expected to decrease further. Due to a depressed repossession resale market, liquidation proceeds from wholesale liquidation channels have frequently been insufficient to cover Oakwood's liquidation expenses and outstanding servicer advances, resulting in net recoveries of diminutive amounts for the ABS transactions and, ultimately, higher net losses. Oakwood's retail based liquidations are currently yielding recoveries averaging 40%. The future liquidation of repossession inventory, which is substantial for many transactions as described above, combined with significantly reduced recovery rates is expected to further impact the remaining credit support negatively. In addition, Oakwood has recently announced that it intends to close approximately 40 of its retail sales centers and five of its factory-certified stores, leaving approximately 200 company-owned dealerships in addition to its repossession centers. Standard & Poor's will complete a detailed review of the credit performance of the aforementioned transactions relative to the remaining credit support in order to determine if any rating actions are necessary. Ratings Placed On Creditwatch With Negative Implications Oakwood Mortgage Investors Inc. Series 1995-A Class Rating To From A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA B-1 A-/Watch Neg A- Oakwood Mortgage Investors Inc. Series 1995-B Class Rating To From A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1996-A Class Rating To From A-3 AAA/Watch Neg AAA A-4 AA+/Watch Neg AA+ Oakwood Mortgage Investors Inc. Series 1996-B Class Rating To From A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA A-6 AA/Watch Neg AA Oakwood Mortgage Investors Inc. Series 1996-C Class Rating To From A-5 AAA/Watch Neg AAA A-6 AA+/Watch Neg AA+ Oakwood Mortgage Investors Inc. Series 1997-A Class Rating To From A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA A-6 AA/Watch Neg AA B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1997-B Class Rating To From A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA M-1 AA/Watch Neg AA B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1997-C Class Rating To From A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA A-6 AAA/Watch Neg AAA M-1 AA/Watch Neg AA B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1998-A Class Rating To From A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA M-1 AA/Watch Neg AA B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1998-B Class Rating To From A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB Oakwood Mortgage Investors Inc. Series 1998-D Class Rating To From A AAA/Watch Neg AAA A-1ARM AAA/Watch Neg AAA OMI Trust 1999-C Class Rating To From A-2 AAA/Watch Neg AAA M-1 AA-/Watch Neg AA- M-2 BBB+/Watch Neg BBB+ B-1 BB+/Watch Neg BB+ OMI Trust 1999-D Class Rating To From A-1 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 1999-E Class Rating To From A-1 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A OMI Trust 2000-A Class Rating To From A-2 AAA/Watch Neg AAA A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-5 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 2000-B Class Rating To From A-1 AAA/Watch Neg AAA M-1 AA/Watch Neg AA B-1 BBB/Watch Neg BBB OMI Trust 2000-C Class Rating To From A-1 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 2000-D Class Rating To From A-1 AAA/Watch Neg AAA A-2 AAA/Watch Neg AAA A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 2001-C Class Rating To From A-1 AAA/Watch Neg AAA A-2 AAA/Watch Neg AAA A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-IO AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 2001-D Class Rating To From A-1 AAA/Watch Neg AAA A-2 AAA/Watch Neg AAA A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-IO AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OMI Trust 2001-E Class Rating To From A-1 AAA/Watch Neg AAA A-2 AAA/Watch Neg AAA A-3 AAA/Watch Neg AAA A-4 AAA/Watch Neg AAA A-IO AAA/Watch Neg AAA M-1 AA/Watch Neg AA M-2 A/Watch Neg A B-1 BBB/Watch Neg BBB OCTEL CORP: Working Capital Deficit Tops $14.8 Mill. at Sept. 30 ---------------------------------------------------------------- Octel Corp., (NYSE: OTL) announced financial results for the third quarter ended September 30, 2002. Highlights - Quarter ended September 30, 2002 - Earnings per share at $1.44, up by 21% (adjusted for FAS 142) - TEL gross profit year to date improves from 49% to 54% - Restructuring charge of $3.1m in third quarter and comprehensive review of cost base initiated The Company has completed the transitional goodwill impairment tests as required under Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets". In accordance with the Statement, adopted by the Company effective January 1, 2002, the carrying value of goodwill is no longer amortized but instead evaluated for impairment annually. In connection with that review, the Company determined that the fair values of its reporting units exceeded their recorded values. Accordingly, the Company is not required to recognize an impairment loss at this time. Amortization of goodwill reduced 2001 third quarter net income by $11.6 million after tax, or $0.92 per share and $34.6 million after tax, or $2.76 per share, for the first nine months of 2001. All comparisons of operating and net income in this press release are made on a post FAS 142 basis. Net income for the third quarter of 2002 was $18.3 million, compared with $15.0 million in the third quarter of 2001 (adjusted for FAS 142). Net income for the nine months ended September 30, 2002 was $54.4 million, compared with $47.6 million for the nine months ended September 30, 2001 (adjusted for FAS 142). At September 30, 2002, the Company's balance sheets show a working capital deficit of about $14.8 million. Ongoing tetraethyl lead sales for the September quarter were $66 million, an increase of 12% over the third quarter of 2001. TEL sales for the nine months to September, 2002 were 7% below the corresponding period last year due to the continuing decline in the global market. Due to the closure of the German TEL plant and a combination of price increases and cost reduction at the UK plant, the TEL gross profit increased to $102 million or 54% of sales. Savings in SG&A and intangible amortization costs have resulted in TEL operating income increasing by $5m over 2001 (adjusted for FAS 142). Specialty Chemicals sales for the third quarter were $47 million, an increase of 2% over the third quarter of 2001. Specialty Chemicals operating income in the quarter at $3 million was $1 million less than in 2001, due to reduced gross margin, but it was $2 million higher than the disappointing second quarter of 2002. Cash generated from operating activities was $18 million for the third quarter and $84 million for the year to date, compared with $85 million for the nine months to September 2001. Dennis Kerrison, President and Chief Executive Officer of Octel Corp. commented: "The third quarter reflects the trend seen at the half-year. The Lead Alkyls business is performing well. Although TEL sales have declined 7% year on year, operating income is up 15% for the quarter and 5% year to date. We would expect to finish the year ahead of 2001 for TEL, although one Middle Eastern customer has exited the market about six months earlier than planned." "Specialty Chemicals results are clearly disappointing. The market softness signalled in the first two quarters continues, with customers attempting to economise on the use of performance fuel additives. Our objective of exploiting synergies from the specialties business is our highest priority. To accelerate the integration process and squeeze costs out of the system, we have decided to be proactive now in order to obtain meaningful benefits in 2003." "As part of this initiative, we have taken a restructuring charge of $3.1 million in the quarter. This relates mainly to costs for the chlorine plant closure at Ellesmere Port and redundancies across the organisation. Despite this charge we have met market expectations for the quarter." "Currently we are undertaking a broad and comprehensive review of our cost base and our infrastructure needs to accelerate our global growth programme. The first phase has identified a possible $8 million of further restructuring costs to be provided in the fourth quarter. We would expect to have this quantified by the time of our year-end results. We believe this corporate programme to be critical in terms of our ability to deliver long-term shareholder value." Octel Corp., a Delaware corporation, is a global chemical company specializing in high performance fuel additives and special and effect chemicals. The Company's strategy is to manage profitably and responsibly the decline in world demand for its major product - tetraethyl lead in gasoline - through stringent product stewardship, to expand its Petroleum Specialties and Performance Chemicals businesses organically through product innovation and focus on customer needs, and to seek synergistic growth opportunities through joint ventures, alliances, collaborative arrangements and acquisitions. OGLEBAY NORTON: Reports Improved Third Quarter 2002 Results ----------------------------------------------------------- Oglebay Norton Company (Nasdaq: OGLE) reported its results for the third quarter and nine months ending on September 30, 2002. Results for the quarter and nine months include: * Revenues for the quarter were $123.7 million compared to $120.1 million in the year earlier period. Revenues for the nine-month period were $298.6 million compared to $305.4 million in the prior-year nine-month period. * Operating income was $14.5 million compared to operating income of $10.5 million in the third quarter of 2001. For the 2002 nine-month period, operating income was $31.5 million compared to $23.4 million for the 2001 nine-month period. Adjusted third quarter 2001 operating income was $11.2 million excluding goodwill amortization of $0.7 million, while adjusted operating income for the 2001 nine-month period was $29.7 million excluding a special charge of $4.1 million and $2.2 million attributable to goodwill amortization. * Net income for the quarter was $2.0 million, compared to net income of $227,000 for the third quarter last year. Net income for the nine months was $74,000, compared to a net loss of $7.9 million for the same period last year. Adjusted third quarter 2001 net income was $0.14 per diluted share excluding goodwill amortization of $0.09 per diluted share, while adjusted net loss for the 2001 nine-month period was $0.01 per diluted share excluding special charges totaling $1.29 per diluted share and $0.27 per diluted share attributable to goodwill amortization. * Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $24.7 million compared to $21.1 million in the third quarter 2001. EBITDA for the nine-month period was $55.8 million compared to $54.5 million in the year-earlier nine months. Oglebay Norton Chairman and Chief Executive Officer John N. Lauer said, "Despite a tough economy, we were able to improve margins in each of our business segments. Revenue, EBITDA and operating income contributions from our Great Lakes Minerals and Global Stone segments all improved from the third quarter of 2001. Additionally, we were able to maintain the EBITDA and operating income contribution for our Performance Minerals segment on revenues that were 13% off last year's third quarter levels. "We continue to concentrate our efforts on executing our Great Lakes Minerals strategy, improving Global Stone's margins and maintaining our Performance Minerals segment's contributions. The successfully completed $75 million notes offering and the extension of our bank group credit facility provides us the financial flexibility to focus intently on continuing to improve our operations' profitability," Lauer added. The Great Lakes Minerals segment's revenues for the quarter increased to $58.5 million from $54.3 million in the third quarter 2001. The increase in revenue is primarily related to Michigan Limestone Operations selling a higher percentage of its products at a delivered price including freight. Total freight sales were up $2.3 million for the quarter compared to last year's third quarter, while cost of sales increased by a similar amount. Demand for the segment's limestone is expected to remain steady through the end of the season. Cost-control measures and the efficiencies derived from the pooling agreement with American Steamship Company helped improve the segment's operating margins to 14.5% for the quarter compared with 12.2% for the same period in 2001. On a year-to-date basis, operating margins improved for the segment to 13.9% from 10.8% last year. Operating income for the quarter increased to $8.5 million compared to $6.6 million for the same period in 2001. The Global Stone segment's revenues for the quarter were $43.1 million, up from $40.3 million in the 2001 third quarter. The increase in revenues is attributable to increased volume for fillers supplied to the roofing industry, increased sales to the lawn and garden market and increased volume to the steel industry. These gains were partially offset by weakened demand for fillers in the carpet and flooring markets, lower lime sales in the Oklahoma region and lower aggregate volume in Virginia. Demand for both lime and fillers is expected to remain flat in the fourth quarter. Operating margins improved to 10.4% for the quarter compared with 6.4% in last year's third quarter. For the nine-month period, operating margins were 10.8% compared to 8.6% through nine months in 2001. The margin improvements for the segment are primarily the result of cost-control measures initiated as part of the company's restructuring initiatives put in place late in the fourth quarter of 2001. Operating income for the quarter was $4.5 million compared to $2.6 million in last year's third quarter. The Performance Minerals segment's revenues for the quarter were $23.2 million compared to $26.7 million in the same period last year. The decline in revenues is primarily the result of reduced demand for fracturing sands caused by a decline in oilfield activity, reduced demand for sands in the building materials market, and the closure of three non-strategic abrasives plants. Restructuring-related cost reductions and productivity improvements helped improve operating margins to 17.1% for the quarter compared to 14.4% in the year-earlier period. Year-to- date operating margins were 16.5% compared to 14.4% for the 2001 nine-month period. Operating income for the quarter was $4.0 million compared to $3.9 million in last year's third quarter. Michael D. Lundin, Oglebay Norton's President and Chief Operating Officer said, "We have been focusing on the fundamentals of running our industrial minerals operations and those efforts were reflected in our improved results. However, we can still realize further improvements as we continue to move towards being one company with one vision of being the best. "Additionally, we have placed a renewed emphasis on our strategic sales and marketing initiatives. We have created a new sales structure to more aggressively develop the collective synergies of our formerly distinct operating units. Our goal is to capture more cross-selling opportunities, more effectively capitalize on market growth opportunities and develop new markets for our products," Lundin concluded. Oglebay Norton Company, a Cleveland, Ohio-based company, provides essential minerals and aggregates to a broad range of markets, from building materials and home improvement to the environmental, energy and metallurgical industries. Building on a 149-year heritage, our vision is to be the best company in the industrial minerals industry. The company's Web site is located at http://www.oglebaynorton.com * * * As reported in Troubled Company Reporter's August 8, 2002 edition, Standard & Poor's lowered its corporate credit and bank loan ratings on Oglebay Norton Co., to single-'B' from single- 'B'-plus due to difficult end-market conditions, the company's weak financial performance, and its limited free cash-flow generation, which will continue to result in high debt levels. The outlook is negative. The ratings reflect Oglebay's very high debt leverage, cyclical end markets, high capital spending requirements relative to operating cash flow, and refinancing risk. The ratings also reflect the company's diversified business segments and a focus on productivity and operational improvements. PANTRY INC: Chilton Investment Discloses 12.4% Equity Stake ----------------------------------------------------------- Chilton Investment Company, Inc. beneficially owns 2,235,100 shares of the common stock of The Pantry, Inc. Chilton has sole voting and dispositive powers over the 2,235,100 shares held. That amount represent 12.4% of the outstanding common stock of The Pantry. The Pantry's shelves are stuffed with convenience stores -- the company operates more than 1,300. About 85% of them are located in fast-growing cities and resort areas of the Carolinas and Florida. Through acquisitions The Pantry has also expanded into Georgia, Mississippi, Indiana, Virginia, Kentucky, Louisiana, and Tennessee. Its selection of store chain names include The Pantry, Big K, Zip Mart, Express Stop, Handy-Way, Lil' Champ, Smokers Express, ETNA, Sprint, Depot, and Wicker Mart. About 200 locations feature fast-food restaurants. The Pantry generates 60% of its sales from gasoline; tobacco, alcohol, and soft drinks are its biggest nonfuel sellers. As previously reported, Standard & Poor's lowered its corporate credit rating on The Pantry Inc., a leading convenience store operator in the Southeast, to single-'B'-plus from double-'B'- minus based on a decline in credit measures in the first quarter of fiscal 2002 and in the full fiscal year of 2001. Standard & Poor's also removed the ratings from CreditWatch, where they had been placed on Jan. 24, 2002. The outlook is stable. PERLE SYSTEMS: May 31 Balance Sheet Upside-Down by $2.25 Million ---------------------------------------------------------------- Perle Systems Limited (OTCBB:PERL) (TSE:PL), a leading provider of networking products for Internet Protocol and e-business access, reported audited financial results for the fiscal year ended May 31, 2002. Financial Highlights: On a US GAAP basis, the Company's revenue for the year ended May 31, 2002 totaled US$30.5 million. Cash earnings per share were US$0.08 for the year. Net cash earnings or operating profits for the year were US$759,000 reflecting the continuing improved productivity from the lower operating cost base of the business. The net loss for the year was US$5.3 million after the effect of the (non-cash) write down of US$2,945,000 of goodwill and intangibles. Revenue, cash earnings per share and net cash earnings or operating profits for the year ended May 31, 2001 were US$36.8 million, US$0.12 and US$748,400, respectively. The net loss for the year ended May 31, 2001 was US$2.5 million. Net cash earnings or operating profits and cash earnings per share exclude acquisition-related amortization, capital asset depreciation and restructuring costs. At May 31, 2002, the Company's balance sheets show a total shareholders' equity deficit of about US$2.25 million. President and Chief Executive Officer's Review: Joe Perle, President and Chief Executive Officer, stated, "Our costs are in line with revenues, and we delivered operating profits in this fiscal year. Subsequent to the year-end we initiated a strategy to increase demand for our products, by improving our channel program and expanding marketing activities as they relate to our VAR's. We also continued our sales push into the strong Chinese economy." "During the fiscal year we focused R&D activities on our high growth product lines. This resulted in releasing the P-series midsize router product line, and in several high-value product feature releases such as SSH security on the Perle CS9000 console server family." "Looking at the progress of these sales growth initiatives in the current year, I am confident in the opportunities for sales growth, despite the current market environment. I am therefore hopeful of increasing profitability from our new product releases, as well as Perle's increasing base of successful VAR channel partners." Chief Financial Officer's statement: "During the year we continued with our disciplined monitoring of operating costs and maintained the Company's expenditure levels in line with the current sales levels, allowing us to deliver operating profits," stated Derrick Barnett, Perle's Vice President, Finance and Chief Financial Officer. "We generated additional internal working capital by further decreasing inventory and accounts receivables. We took appropriate write downs in our goodwill and intangible assets, which in large part contributed to our net loss for the year." "Notwithstanding this return to operating profitability, the Company has experienced a substantial downturn in sales and operating earnings over the last three years, and had both working capital and shareholder's equity deficiencies for the year ended May 31, 2002. Should the slowdown in the technology sector continue, it may not be possible for the Company to meet its loan covenants and continue to operate as a going concern. Under these circumstances, the Company may seek to obtain waivers of its loan covenants and to secure additional financing. However there can be no assurance that the Company's lender will agree to any such waivers or that additional financing will be forthcoming." "Subsequent to the year end, on October 28, 2002, the Company entered into a letter of commitment and terms of agreement with its banker to revise its credit agreement, the terms of which will include a reduction of interest payments and deferral and extension of principal payments. As a result additional working capital will be introduced to the business and will significantly reduce any concerns about the Company's ability to continue as a going concern." "In addition, Perle agreed to issue to its banker warrants to acquire 2,400,000 of its common shares in addition to repricing 500,000 warrants previously issued to the bank. Perle is entitled to purchase up to 1,400,000 of these new warrants to acquire common shares of the Company at a nominal amount and on a pro rata basis, on early repayment of a portion of its credit facility at any time prior to May 31, 2006. Perle currently has approximately 9,600,000 common shares issued and outstanding." "Because of our improved operating efficiencies together with the new credit agreement, I remain confident regarding Perle's long-term growth and profitability strategy." Perle Systems is a leading developer, manufacturer and vendor of award-winning networking products. These products are used to connect remote users reliably and securely to central servers for a wide variety of e-business and general business applications. Perle specializes in Internet Protocol (IP) connectivity applications, with an increasing focus on mid-size IP routing solutions. Product lines include routers, remote access servers, serial/console servers, emulation adapters, multi-port serial cards, multi-modem cards, print servers and network controllers. Perle distinguishes itself by its ownership of extensive networking technology, depth of experience in major network connectivity environments and long-term channel relationships in major world markets. Perle Systems has offices and representative offices in 12 countries in North America, The United Kingdom, Europe and Asia and sells its products through distribution channels worldwide. Its stock is traded on the OTCBB (symbol PERL) and the Toronto Stock Exchange (symbol PL). For more information about Perle and its products, access the Company's Web site at http://www.perle.com PETROMINERALS CORP: Considering Reorganization Under Chapter 11 --------------------------------------------------------------- In prior filings Petrominerals Corporation (OTC Bulletin Board: PTRO) announced that an action was filed against the Company and a former employee, Daniel H. Silverman, in California, along with several other defendants by Sole Energy Company. The complaint alleges that the defendants, and each of them, interfered with Sole's contractual relationship, prospective economic advantage and fraud. The crux of this matter issued out of letter of intent negotiations between Sole and Nevadacor on the purchase of HBOC. Nevadacor terminated these negotiations with Sole in writing prior to Company's offer to purchase HBOC from Nevadacor. However, and notwithstanding the termination by Nevadacor, Sole joined Petrominerals Corporation as a Defendant. A motion for summary judgment in favor of Company was granted; then reversed and appealed. An amended complaint naming additional plaintiffs was set for trial over Company's objection and a jury verdict was entered after a lengthy trial against Company for a total of $19,257,416.29. Trial Counsel for Company expressed Company's position in the following words: "We believe that this outcome is outrageous. We plan the following: 1. We will object to the entry of any judgment until such time as the pending appeal is resolved. [In response to the company's objection, the trial judge recently ruled that he will not sign the proposed judgment until after he has had an opportunity to rule on post-trial motions.] 2. We will move for new trial and/or remittitur [reduction] of the amount of the judgments. 3. We will move for a [Judgment (for Defendant) Notwithstanding the Verdict] 4. We will appeal on a number of grounds, including, but not limited to: a. the plaintiffs lack standing having never been parties to the letter of intent and/or assigning away any such rights b. there is insufficient evidence of the existence of an agreement/prospective economic advantage c. there is no evidence of any wrongful acts by either of the defendants [meaning Petrominerals Corporation and Petrominerals employee, Daniel H. Silverman] d. the lost profits damages are based on speculation (as admitted by their expert) We are disappointed, but not swayed regarding the merits of the case. " The Board of Directors is actively considering all of its options including reorganization under Chapter 11 and has deferred the date for the Annual Shareholder Meeting until the Company's status is more certain. The Board also determined that the office of Company should be moved to San Clemente, California, to the address set forth hereinabove. PHILIPS INTERNATIONAL: Double Play Discloses 6.7% Equity Stake -------------------------------------------------------------- Double Play Partners Limited Partnership, a Massachusetts limited partnership, beneficially owns 489,100 shares of the common stock of Philips International Realty Corporation, representing 6.7% of the outstanding common stock of that Company. Double Play has sole power to vote, or direct the vote of, and to dispose of, or direct the disposition of, the entire amount of stock held. On October 10, 2000, the stockholders approved the plan of liquidation, which was then estimated to generate approximately $18.25 in the aggregate in cash for each share of common stock in two or more liquidating distributions. The fifth liquidating distribution declared by the Board of Directors brings the total payments to date to $ 15.75 per share. Prior distributions of $13.00, $1.00, $.75 and $.50 per share were paid on December 22, 2000, July 9, 2001, September 24, 2001 and November 19, 2001, respectively. The Company's three remaining shopping center properties are currently being offered for sale. As reported in Troubled Company Reporter's October 10, 2002 edition, Philips International's Board of Directors declared a fifth liquidating distribution of $0.50 per share which was payable on October 22, 2002, pursuant to the Company's plan of liquidation. READER'S DIGEST: Q1 2003 Results In Line with Revised Guidance -------------------------------------------------------------- The Reader's Digest Association, Inc., (NYSE: RDA, RDB) reported a loss of $0.05 per share for the first quarter of Fiscal 2003 ended September 30, 2002, in line with revised guidance. Revenues were $517 million, EBITDA was $18 million and operating profits were $2 million. This compares with revenues of $498 million, EBITDA of $11 million, operating profits of $3 million and a loss of $0.01 per share for the first quarter of Fiscal 2002. Free cash flow (cash flow before dividends, share repurchases and acquisitions) improved by $9 million. The first-quarter Fiscal 2003 results did not include $25 million in revenues and $16 million in operating profits from certain book-marketing programs at Reiman Publications that the company decided to recognize in the second quarter instead of the first. This resulted in a one-time shift of $0.10 per share from the first to the second quarter. Not including this shift, EPS would have been $0.05, at the top end of previous guidance. Due to the absence of such book-marketing profits, the first quarter of Fiscal 2003 EPS results were unfavorably affected by ($0.04) from Reiman, primarily relating to interest expense on the debt from the acquisition. In addition, EPS results improved by $0.02 in the quarter, principally due to settlement of a 6-year-old lawsuit on terms more favorable than earlier estimates. At September 30, 2002, Reader's Digest's working capital deficiency widens to about $138 million. "First quarter operating results were consistent with our overall expectations," said Thomas O. Ryder, Chairman and Chief Executive Officer. "The performance of our domestic business exceeded our expectations, led by significantly reduced losses and improved performance at U.S. BHE. These improvements were offset by reduced activity and a weaker-than-expected performance in our international operations." Consolidated revenues grew by 4 percent to $517 million, driven largely by the addition of Reiman, which contributed $68 million during the first quarter. Excluding Reiman, first-quarter revenues declined by 10 percent, reflecting a major restructuring at U.S. BHE in April, which resulted in the elimination of unprofitable businesses and cutbacks in mail quantity, and planned reductions in mail quantity in international markets. Other factors included: the elimination of unprofitable businesses -- Gifts.com, Inc., New Choices and Walking magazines -- that had contributed revenue in the Fiscal 2002 quarter; economic softness in most international markets; the effects of severe floods in Eastern Europe; and lower advertising and circulation revenues in U.S. Magazines. This was partially offset by double-digit revenue growth at Books Are Fun. Operating profits for the first quarter were $2 million, a decrease of $1 million versus the year-ago quarter. The decline reflects lower results in International Businesses due to decreased promotional activity, economic softness in all markets, investment spending on new customer-acquisition programs in all markets, as well as advertising and planned circulation declines in U.S. Magazines. Offsetting these declines were dramatically improved results at U.S. Books and Home Entertainment, which reduced operating losses by more than $10 million, as well as improved results at QSP and Books Are Fun. Reiman contributed $2 million in operating profit and $10 million in EBITDA in the quarter. "Our international results for the quarter reflect a planned reduction in mailing activity in Europe to address intensity issues in some markets. However, our results were also affected by external events, most notably the soft global economy," Ryder said. "To offset the impact of such events, we have stepped up re-engineering and cost-reduction activity in International Businesses. For the remainder of the year we expect International Businesses to equal or exceed results of the comparable Fiscal 2002 periods." Outlook The Company anticipates earnings in the range of $0.88 to $1.00 per share for the second quarter of Fiscal 2003. This range excludes the one-time costs related to the company's pending re- capitalization. This compares with EPS of $0.78 in the second quarter of Fiscal 2002. The company maintains its $1.20 to $1.30 EPS expectations for full-year Fiscal 2003. "We expect to see improvement in the second quarter," Ryder said. "Our optimism remains cautious, however, as the slowdown in the global economy has affected all of our businesses in the United States and abroad." Operating Segment Results North America Books and Home Entertainment For the Fiscal 2003 first quarter, North America BHE had operating profits of $3 million, up significantly from a loss of $11 million in the first quarter of Fiscal 2002. The improvement was mostly driven by dramatically reduced losses in U.S. operations of BHE, reflecting the elimination of unprofitable products, as well as overhead savings, lower promotion costs, and more efficient and profitable mailings. After a difficult 18 months, U.S. BHE continues to see improved predictability in its business. The improvement in operating profits also was driven by a strong performance by Books Are Fun, which had double-digit increases in both revenues and operating profits. Fiscal 2003 first quarter revenues for the NA BHE segment were $115 million, down from revenues of $141 million in Fiscal 2002. The decline largely reflects a planned reduction in sweepstakes- related marketing activity in U.S. BHE, offset slightly by the gains at BAF. International Businesses International Businesses, comprising BHE and magazines outside of North America, had revenues of $228 million and an operating loss of $2 million in the first quarter of Fiscal 2003, compared with revenues of $242 million and operating profit of $13 million in the year-ago quarter. Both revenues and profits were lower primarily due to a planned reduction in marketing activities in many European markets, business impacts of flooding in the Czech Republic, Hungary and Germany, and economic-related softness in Europe and Latin America. The planned reduction in marketing activity primarily affected the company's businesses in the United Kingdom and Poland, and, to a lesser extent, Germany and France as several single-sales activities were postponed to later in the year or eliminated. Response rates were lower in Germany, some markets in Eastern Europe, and Latin America, while advertising revenues were soft in many markets. The company expects performance to strengthen in the balance of the year as new customer-acquisition and cost- reduction initiatives gain momentum and mailings are sent that were postponed in the first quarter. Around the world, the company continued to invest in new marketing efforts, including telemarketing, newspaper and magazine inserts, and outside list acquisition, which contributed to lower operating profits in the quarter. U.S. Magazines The U.S. Magazines segment had revenues of $174 million, up 51 percent from $115 million in the first quarter of Fiscal 2002. The group had an operating loss of $1 million, versus a profit of $1 million in the year-ago period. Reiman contributed $68 million in revenue and $2 million in operating profits in the quarter. Excluding Reiman, revenues were off 9 percent and operating profits fell by $5 million, reflecting the elimination of New Choices and Walking magazines, advertising and circulation- related softness at U.S. Reader's Digest magazine, offset slightly by a modest improvement at QSP. QSP had an increase in revenues and reduced operating losses in the quarter. QSP historically loses money in the quarter as it ramps up for its seasonally strong second quarter. The company has three operating segments: * North America Books and Home Entertainment -- Select Editions, series and general books, music, video and Young Families products in the United States and Canada; Books Are Fun; Reader's Digest magazine in Canada; QSP Canada; and financial services marketing alliances and other strategic initiatives in the United States and Canada. * International Businesses -- Products sold in more than 60 countries outside the United States and Canada, including: Select Editions, series and general books, music, video and Young Families products; Reader's Digest magazine in numerous editions and languages, Special Interest magazines in the Czech Republic, a personal finance magazine in the United Kingdom; and financial services marketing partnerships and other strategic initiatives in more than 30 countries. * U.S. Magazines -- Reader's Digest magazine in the United States; Reiman Media Group, including magazines Taste of Home, Light & Tasty, Quick Cooking, Birds & Blooms, Country, Country Woman, Country Discoveries, Reminisce, Farm & Ranch Living, Your Family and Crafting Traditions, as well as books, cooking schools, country tours and other enterprises; QSP, Inc.; and The Family Handyman, American Woodworker, Reader's Digest Large Type Edition and Selecciones. RELIANCE GROUP: Insurance Commissioner Sells Shopping Center ------------------------------------------------------------ M. Diane Koken, Insurance Commissioner for the Commonwealth of Pennsylvania and the Liquidator of Reliance Insurance Company, has sold a shopping center owned by RIC. In an effort to raise cash, RIC initiated the sale process before the Commissioner assumed control of the estate. The Commissioner justified the sale to the Commonwealth Court on the grounds that the price provided fair value and would bring an immediate influx of cash into the estate, which was desperately needed at the time. The shopping center was located on 38.3 acres of land in Fort Worth, Texas. The Center was comprised of approximately 317,000 square feet of retail stores. RPI Ridgmar Town Square, Ltd. bought the shopping center for $11,200,000. The closing date of the sale occurred on September 28, 2001. (Reliance Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) RELIANCE INSURANCE: Court Fixes Dec. 31, 2003 Claims Bar Date ------------------------------------------------------------- Reliance Insurance Company was placed in Liquidation by Order of the Commonwealth Court of Pennsylvania on October 3, 2001, pursuant to the provisions of Article V of the Insurance Department Act of 1921. In order to Propose an appropriate distribution of assets, the types and amount of claims against Reliance must be determined. Therefore, all persons who may have a claim against Reliance Insurance, against the Liquidator, her agents or representatives, or in any way affecting or seeking to affect any of the assets of Reliance must file proofs of claim against the Debtor before 5:00 p.m. on December 31, 2003, or the claim may be denied. Proofs of claim must be filed even if the claim has been the subject of litigation. Proofs of claim must be addressed to: Proof of Claim Department, Statutory Liquidator of Reliance Insurance Company P.O. Box 13527 Philadelphia, Pennsylvania 19101-3527 SAFETY-KLEEN CORP: Wants to Expand Experio Solutions' Engagement ---------------------------------------------------------------- Safety-Kleen Corp., and its debtor-affiliates want to expand the scope of employment and retention of Experio Solutions Corporation as consulting advisors in connection with the Debtors' various process improvement initiatives nunc pro tunc to October 1, 2002. The Debtors earlier sought and obtained the Court's authority to employ KPMG Consulting Inc., Lucidity Consulting Group, LP, and Experio Solutions Corporation as Consulting Advisors to replace Arthur Andersen LLP in connection with the Debtors' process improvement initiatives nunc pro tunc to July 1, 2002. Under the terms of the Initial Retention Order, the Debtors retained Experio, KPMG and Lucidity to provide: (i) assistance in designing and administering a program management office through which the Initial Initiatives would be managed and administered, and (ii) experienced resources to perform and administer the individual Initial Initiatives. Specifically, Experio and the other consulting firms were initially engaged to address these finance and support services: (i) order entry and billing, (ii) collections and cash accounting, (iii) accounts receivable accounting, (iv) procurement-to-payment process, (v) payroll and benefits accounting, (vi) intercompany accounting, (vii) inventory and equipment-at-customers, and (viii) the account analysis and "close-the-books" processes. Experio's responsibilities consisted of: (i) recommending a design, and (ii) providing appropriate staffing for the PMO for the Process Improvement Initiatives. Towards that end, Experio has, through the PMO, tracked the progress of all process improvement initiatives and worked with the Debtors' senior management team to: (i) address the timely resolution of issues and the resource allocations necessary to meet project timelines, and (ii) develop the necessary training and implementation plans to address material control weaknesses. Experio and the other consulting firms have substantially completed the PII Services in connection with the Initial Initiatives. During the course of providing the PII Services, the Debtors and Experio have identified several new initiatives to improve various other financial processes. Several of the New Initiatives relate to the execution and implementation of the Initial Initiatives. Specifically, pursuant to an engagement letter between the Debtors and Experio, dated October 1, 2002, the scope of Experio's engagement is being expanded to address these finance and support initiatives: (i) cash acceleration, (ii) "Most Valuable Partner" processing (The Most Valuable Partner program provides favorable pricing and billing for customers who consolidate their environmental and waste management services with Safety-Kleen), (iii) automated customer action form development, (iv) billing standardization, (v) training assessment and coordination, (vi) inventory processes, and (vii) close-the-books. Additionally, Experio will provide PII Services in connection with any other initiatives identified by the Debtors during the course of Experio's engagement. Certain of the New Initiatives relate to the implementation of certain Initial Initiatives or are in response to certain issues identified in connection with the Initial Initiatives. For example, the "Inventory Processes" and "Close the Books" initiatives, both of which are New Initiatives, involve the post-implementation support of recommendations developed in connection with certain Initial Initiatives and adopted by the Debtors (i.e., the Inventory and Equipment-At-Customers and Account Analysis and "Close-the-Books" initiatives). Similarly, the Automated Customer Action Form Development and Billing Standardization initiatives have been identified to increase the efficiency and effectiveness of financial processes improved after implementation of certain recommendations developed in connection with certain Initial Initiatives, which addresses the weaknesses and deficiencies of certain financial processes (i.e., the Order Entry and Billing and Account Analysis and Collections and Cash Accounting initiatives). As previously disclosed in the Initial Application and Initial Affidavit, Experio hired certain Arthur Andersen professionals that previously provided the PII Services in connection with the Initial Initiatives. Due to the enlarged scope of Experio's retention, although these individuals primarily will be responsible for providing the PII Services in connection with the New Initiatives on behalf of Experio, Experio may use its other professionals who have not previously provided services to the Debtors. Experio intends to apply to the Court for the allowance of compensation and reimbursement of expenses in connection with providing the PII Services with respect to the New Initiatives consistent with the compensation structure set forth in the Engagement Letter. With certain exceptions, Experio will be compensated for its professional services and reimbursed for its expenses in the same manner disclosed in the Initial Application and Initial Affidavit. In connection with the implementation of the "Cash Acceleration" initiative, in addition to compensating Experio on an hourly basis for its services, the Debtors propose to compensate Experio based on the increase in collections on certain accounts receivable realized by the Debtors. The Cash Acceleration initiative focuses on improving the collection of aged accounts receivable. Based on historical information, the Debtors have estimated that approximately 15% of their accounts receivable outstanding between 90 and 365 days and 100% of their accounts receivable outstanding more than 365 days is un-collectible. Through the implementation of certain elements of the Cash Acceleration initiative, Experio expects that the Debtors should be able to increase the amount they collect on account of their Aged Accounts Receivable. To the extent the Debtors are successful in collecting more on their accounts receivable than they have been historically, Experio will be entitled to 30% of the increased collections realized by the Debtors. Pursuant to the Engagement Letter, Experio will be entitled to a $1,000,000 maximum Gainshare. It is the Debtors' understanding that Gainsharing arrangements are common arrangements with respect to the rendition of similar accounts receivable collection services. Experio has been providing PII Services in connection with the New Initiatives to the Debtors since October 1, 2002, and has accrued approximately $45,000 in fees and $12,500 in expenses since that time. Experio intends to seek compensation and reimbursement for these fees and expenses in the first fee application following Bankruptcy Court approval of the expanded scope of its retention. Except as disclosed, there are no proposed arrangements between the Debtors and Experio for compensation. Paul Dunn, Experio Vice-President, assures Judge Walsh that the firm and its principals and professional employees: (a) do not have any connection with the Debtors, their creditors, or any other party-in-interest, or their attorneys or accountants, (b) do not hold or represent an interest adverse to the estates, and (c) are "disinterested persons" under Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). (Safety-Kleen Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) SAIRGROUP FINANCE: SDNY Court Fixes Nov. 22 as Claims Bar Date -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York schedules November 22, 2002, as the deadline for all creditors of SAirGroup Finance (USA) Inc., wishing to assert a claim against the Debtor, to file their proofs of claim. Written proofs of claim must be received by: Clerk, United States Bankruptcy Court Southern District of New York Alexander Hamilton Custom House One Bowling Green New York, New York 10004 and Allen & Overy 1221 Avenue of the Americas New York, New York 10020 Attn: Hugh McDonald, Esq. to be deemed timely-filed on or before 5:00 p.m. on the Bar Date. Holders of claims who need not file their proofs of claim on the Bar Date are: a) Any person or entity whose claim has been paid in full by the Debtor; b) Any person or entity that has already properly filed a proof of claim against the Debtor with this Court; c) Any person or entity whose claim has already been allowed by Order of this Court; and d) Any entity whose claim against the Debtor is not listed as disputed, contingent or unliquidated in the schedules. Prior to the petition date, SairGroup Finance (USA), Inc., participated in and assisted with financing transactions on behalf of its parent and sole shareholder, SAirGroup. The Company filed for chapter 11 protection on September 3, 2002. David C.L. Frauman, Esq., at Allen & Overy represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $460,161,000 in assets and $582,888,000 in debts. SENTRY TECHNOLOGY: Hires Balfour Capital to Raise Fresh Capital --------------------------------------------------------------- Balfour Capital Advisors, LLC, a New York-based Financial Advisory firm which specializes in providing operational and financial restructuring to highly leveraged and distressed companies, has been engaged by Sentry Technology Corporation as Financial Consultant, to assist the Company in conducting an organized search and evaluation regarding a possible corporate transaction to gain access to greater resources and to exploit the Company's products and technological advances. Balfour will take the lead in attempting to raise up to $5,000,000 in financing to assist the Company in bringing existing vendor payables current and to achieve its longer-term goals. There can be no assurance that any such transaction will be concluded. Sentry's June 30, 2002, Balance Sheet shows $1.4 million in shareholder equity -- half what it was at Dec. 31, 2002, after two unprofitable quarters. Sentry's seen double-digit percentage sales declines in domestic revenues caused by "the post September 11 soft economic environment, resulting in a slowdown or delay in new retail store openings of some of our customers," according to the Company's latest quarterly report. "We are pleased that Balfour is supporting our efforts to grow Sentry," said Peter L. Murdoch, President and CEO of Sentry Technology Corporation. "New funding, in combination with our current [three-year $8-million] banking agreement with CIT Business Credit and the continuing support of existing vendors, will provide us with the interim financing necessary until a new long-term financial partner is found. Our Board of Directors engaged Balfour to examine the full range of available alternatives for Sentry. We believe that an additional outside investment is necessary to properly market the Company's new and existing product lines." Sentry Technology Corporation designs, manufactures, sells, installs and services a complete line of Radio Frequency (RF) and Electro-magnetic (EM) EAS and Closed Circuit Television (CCTV) surveillance systems. The CCTV product line features SentryVision(R), a proprietary, patented, traveling Surveillance System including our latest generation SmartTrack system. The Company's products are used by retailers to deter shoplifting and internal theft, and by industrial and institutional customers to protect assets and people. The recent partnership with Dialoc ID Holdings BV expands the Company's product offerings to include proximity Access Control and Radio Frequency Identification (RFID) solutions. Balfour Capital Advisors, LLC -- http://www.balfournyc.com-- provides advisory services to parties involved with highly leveraged companies and special situations. Balfour is able to provide unique capabilities, including financial and operational restructuring and flexible compensation structures that focus on success-fee formulas. The firm has seasoned professionals that specialize in turnaround and financial advisory services, crisis management, capital raising and investments, investment banking and M&A advice, fairness and valuation opinions, accounts receivables collections, and liquidations. This expertise spans across various sectors including telecom, media, technology, food service, aerospace, and general manufacturing. SERVICE MERCHANDISE: Has Until Jan. 31 to Remove Pending Actions ---------------------------------------------------------------- Service Merchandise Company, Inc., and its debtor-affiliates sought and obtained a Court order extending the removal period with respect to pending prepetition civil actions to: (a) January 31, 2003; or (b) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. According to Paul G. Jennings. Esq., at Bass, Berry & Sims PLC, in Nashville, Tennessee, the Debtors continue to be parties to numerous proceedings involving a wide variety of claims. These proceedings are currently pending in various courts. Mr. Jennings explains that additional time is required to determine which of the state court actions will be removed, and if appropriate, transfer to the Middle District of Tennessee. This extension sought, Mr. Jennings says, will provide the Debtors sufficient opportunity to make fully informed decisions concerning the possible removal of their actions, as well as to protect their valuable right to economically adjudicate lawsuits if circumstances warrant removal. Mr. Jennings assures the Court that the Debtors' adversaries will not be prejudiced by this extension since prosecution cannot take place without relief from the automatic stay. (Service Merchandise Bankruptcy News, Issue No. 40; Bankruptcy Creditors' Service, Inc., 609/392-0900) SMTC CORP: 3rd Quarter Results Consistent with Company Estimates ---------------------------------------------------------------- SMTC Corporation (Nasdaq: SMTX) (TSE: SMX), whose corporate credit and senior secured bank loan are rated by Standard & Poor's at B, reported third quarter revenue of $153 million, a 22% increase from the third quarter of 2001. The reported net loss on a GAAP basis for the third quarter of 2002 of $13.4 million, includes restructuring and other charges of $13.7 million. This compares to a net loss on a GAAP basis for the third quarter of 2001, including discontinued operations, restructuring and other charges and goodwill amortization of $39.4 million of $34.2 million. Adjusted net earnings for the third quarter of 2002 are $0.3 million. This compares to an adjusted net loss of $6.2 million for the third quarter of 2001. The financial results demonstrate a return to positive adjusted net earnings, a result of the Company's continued focus on cost controls, and improved liquidity management. Gross profit on a GAAP basis for the third quarter of 2002 was $1.7 million compared to a loss of $19.5 million for the same period in the prior year. Gross profit for the third quarter of 2002, excluding restructuring and other charges of $7.2 million, was $8.8 million or 5.8%, versus $0.3 million or 0.2%, excluding $19.8 million of restructuring and other charges, for the same period last year. The improvement in the gross margin is a result of lower manufacturing expenses. The operating loss on a GAAP basis for the third quarter of 2002 was $11.3 million compared to $46.4 million for the same period in the prior year. The operating income, excluding restructuring and other charges, for the third quarter 2002 was $2.4 million compared to an operating loss of $10.6 million for the same period last year. In response to the continuing weakness in our customers' business, the Company is taking further steps to realign its cost structure and plant capacity and announces third quarter restructuring charges of $13.7 million, and anticipates fourth quarter restructuring charges of between $11 million and $21 million, related to the cost of exiting equipment and facility leases, severance costs and inventory exposures. Effective January 1, 2002, the Company had unamortized goodwill of $55.6 million. In response to the implementation of new accounting standards, the Company completed its transitional goodwill impairment testing in the third quarter and concluded that a write-off of the entire amount was required as the cumulative change in accounting principle as at January 1, 2002. SMTC's President and C.E.O., Paul Walker commented, "I am pleased with the progress our team has made despite the ongoing weakness in technology end markets. We have continued to reduce our costs and improve our efficiency which has resulted in higher gross and operating margins, a return to profitability on an adjusted earnings basis, and positive cash flow from operations." The Company achieved a net cash cycle of 15 days for the third quarter of 2002, compared to 63 days for the same period in 2001 as it continues to drive working capital improvements. Days sales outstanding improved to 42 days at the end of the third quarter of 2002 from 65 days for the same period in 2001. Inventory turns improved to 12 times at the end of the third quarter of 2002, from 6 times for the same period in 2001. Days payables also improved to 58 days at the end of the third quarter from 67 days for the same period in 2001. Frank Burke, Chief Financial Officer of SMTC added, "The third quarter results are a continued demonstration of our commitment to restructuring our business and realigning our operations to the current and anticipated EMS environment. The Company's focus on working capital and expense management has achieved substantial benefits over the past twelve months with the Company now reporting three consecutive quarters of positive cash flow from operations. The Company has made some very difficult decisions during the previous year but we have been committed to aligning our expense structure with our sales levels to achieve profitability. The Company remains committed to its goals of effective working capital, manufacturing and SG&A expense management." Last year, at this time, the Company and its bank group agreed to enter into an amendment to the Company's credit facility that revised the covenants that apply for the year 2002 to correspond to the Company's business plan. The Company has maintained a positive working relationship with its lending syndicate and is currently in the process of negotiating an amendment to its credit facility to revise the covenants that apply for the period from January 1, 2003 through June 30, 2004 to correspond to the Company's current business plan. 2002 Outlook The Company expects lower revenues in the fourth quarter as we complete our previously announced disengagement with Dell and our overall cautious view with respect to the current environment. We expect the lower revenue to be offset by a reduction in our cost structure resulting in a breakeven run rate of between $110 million and $120 million. SMTC Corporation is a global provider of advanced electronic manufacturing services to the technology industry. The Company's electronics manufacturing and technology centers are located in Appleton, Wisconsin, Austin, Texas, Boston, Massachusetts, Charlotte, North Carolina, San Jose, California, Toronto, Canada, Donegal, Ireland and Chihuahua, Mexico. SMTC offers technology companies and electronics OEMs a full range of value- added services including product design, procurement, prototyping, printed circuit assembly, advanced cable and harness interconnect, high precision enclosures, system integration and test, comprehensive supply chain management, packaging, global distribution and after-sales support. SMTC supports the needs of a growing, diversified OEM customer base primarily within the networking, communications and computing markets. SMTC is a public company incorporated in Delaware with its shares traded on the Nasdaq National Market System under the symbol SMTX and on The Toronto Stock Exchange under the symbol SMX. Visit SMTC's Web site at http://www.smtc.comfor more information about the Company. SORRENTO NETWORKS: Board Approves 1-For-20 Reverse Stock Split -------------------------------------------------------------- Sorrento Networks Corp. (Nasdaq:FIBR), a leading provider of metro and regional optical networking solutions, announced that it its board of directors approved a 1-for-20 reverse stock split, effective Monday, Oct. 28, 2002. The move is aimed at bringing the company's stock price into compliance with Nasdaq listing requirements. The company also announced that Nasdaq Staff has approved the company's capital restructuring plan for bringing shareholders' equity into compliance with listing requirements. The plan calls for the restructuring of certain financings to equity securities. According to the Nasdaq Staff, "the Company provided a definitive plan evidencing its ability to achieve and sustain compliance with the Rule, and as such, Staff has determined to grant an extension of time." Pursuant to the extension, the company will be required to submit to the Nasdaq Staff, by Dec. 9, 2002, a definitive capital-restructuring plan, and to implement the plan by Jan. 8, 2003. "We are pleased that Nasdaq has granted us the time we need to complete our capital restructuring efforts," said Phil Arneson, Sorrento's chairman and CEO. "When completed, our restructuring efforts will provide the necessary strength to our balance sheet that can position the Company for continued growth and increased shareholder value," he added. Sorrento Networks, headquartered in San Diego, is a leading supplier of intelligent optical networking solutions for metro and regional applications worldwide. Sorrento Networks' products support a wide range of protocols and network traffic over linear, ring and mesh topologies. Sorrento Networks' existing customer base and market focus includes communications carriers in the telecommunications, cable TV and utilities markets. The storage area network market is addressed though alliances with SAN system integrators. Recent news releases and additional information about Sorrento Networks can be found at http://www.sorrentonet.com SUPERIOR TELECOM: S&P Ups Rating to CCC After Debt Restructuring ---------------------------------------------------------------- Standard & Poor's Rating Services raised its corporate credit and senior secured debt ratings on Superior Telecom Inc., to triple-'C' from 'SD', or selective default, following the company's successful completion of an announced debt restructuring. The current outlook is negative. Superior, based in East Rutherford, New Jersey, currently, has approximately $1.4 billion in debt outstanding. As a result of the restructuring, Superior has eliminated its term loan amortization requirements for the remainder of 2002 and for the first six months of 2003. In total, amortization payments will be reduced by more than $225 million through year- end 2003. The company negotiated noncash payment-in-kind interest on its $200 million subordinated notes in 2002 and is negotiating to have the PIK option extend into 2003. Standard & Poor's said that it expects that negotiations with the subordinated note holders will be successful. "The ratings reflect Superior's position as the largest U.S. producer of copper cables and wires, a very aggressive financial profile, an onerous debt maturity schedule, weak end-market demand, and tight liquidity", said Standard & Poor's credit analyst Paul Vastola. Superior's operations have been negatively affected by weak conditions in the telecommunications market, which are not expected to rebound until the latter half of 2003 at the earliest. Superior is highly dependent on capital expenditures from the regional Bell operating companies (RBOCs), all of which have cut back heavily on spending. Standard & Poor's noted that the ratings could be lowered if liquidity worsens or if the RBOCs continue to delay or further reduce capital expenditures, which could lead to further deterioration in Superior's operations. The ratings would also be lowered should there be further debt restructurings. TIME WARNER TELECOM: Banks Relax Covenants Under Credit Facility ---------------------------------------------------------------- Time Warner Telecom Inc. (Nasdaq: TWTC), whose corporate credit is rated by Standard & Poor's at B, has successfully negotiated an amendment to its bank credit facility. The Company, among other things, relaxed the consolidated leverage and interest coverage ratios and reduced the total availability by 20% to $800 million. In addition, the interest rate spread increased by 75 basis points on portions of the facility. In conjunction with the amendment, the Company intends to increase its net borrowings by $170 million, while retaining $380 million of undrawn funding. "Our solid operating history and credible business plan allowed us to gain additional covenant flexibility under our secured credit facility," said David Rayner, Time Warner Telecom's Senior Vice President and Chief Financial Officer. "Although we expected to meet future covenant requirements, we requested this amendment to provide additional flexibility to our operations and to remove any question as to the availability of our undrawn credit lines. By eliminating excess capacity, we are lowering our overall net interest expense related to this facility." Time Warner Telecom has been a leader in its sector, including its focus on return on investment, positive cash flow and liquidity. "While others in the industry are capital constrained or worse, our expected liquidity position allows us to continue to deploy infrastructure to serve our customers," said Rayner. "As our business plan is fully funded, we are not distracted by liquidity concerns. Our time is devoted to running the business and providing excellent service to our customers." A copy of the amendment will be filed on form 8-K with the SEC. Time Warner Telecom Inc., headquartered in Littleton, Colo., delivers "last-mile" broadband data, dedicated Internet access and voice services for businesses. Time Warner Telecom Inc., one of the country's premier competitive telecom carriers, delivers fast, powerful and flexible facilities-based metro and regional optical networks to large and medium customers. Please visit http://www.twtelecom.comfor more information. Time Warner Telecom Inc.'s 10.125% bonds due 2011 (TWTC11USN1) are trading at 31.5 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=TWTC11USN1 for real-time bond pricing. TRANSCARE: US Trustee Appoints Official Creditors' Committee ------------------------------------------------------------ Carolyn S. Schwatz, the United States Trustee for Region 2, names five of the largest unsecured creditors of TransCare Corporation and its debtor-affiliates, to serve on the Official Committee of Unsecured Creditors in connection with these chapter 11 cases. The five appointees are: 1) Hancock Mezzanine Partners, LP 800 Clarendon Street, T57 Boston, MA 02117 Attn: Stephen J. Blewitt Senior Managing Director Tel. No.: 617 527-9624 2) Albion Alliance Mezzanine Fund, LP c/o Albion Alliance LLC, General Partner 1345 Avenue of the Americas, 37th Floor New York, NY 10105 Attn: James C. Oendergast Charles Gonzales Tel. No.: 212 969-1549 Tel. No.: 312 596-7906 3) Gerard C. Schultz 810 Petem Road Kingsville, MD 21087 Fax No.: 410 391-9502 4) Anthony J. Brown 2805 Eagle Ct. Baldwin, MD 21013 Tel. No.: 410 978-1490 5) Petro, Inc. 48 Harbor Park Drive Port Washington, NY 11050 Attn: Gloria Fancyk Credit Analyst Tel. No.: 718 333-8830 TransCare, a privately held corporation, is one of the largest privately owned providers of ambulance and ambulette services in the United States, providing both emergency and non-emergency services, primarily on a fee-for-service basis. The Company filed for chapter 11 protection on September 9, 2002. Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher represents the Debtors in their restructuring efforts. When the Debtors sought protection from its creditors, it listed an estimated assets of $10 million to $50 million and debts of over $100 million. TROPICAL SPORTSWEAR: S&P Ratchets Low-B Ratings Up a Notch ---------------------------------------------------------- Standard & Poor's raised its long-term corporate credit rating on Tampa, Florida-based apparel manufacturer Tropical Sportswear International Corp., to double-'B'-minus from single-'B'-plus. At the same time, the subordinated debt rating was also raised to single-'B' from single-'B'-minus, and the bank loan rating was raised to double-'B' from single-'B'-plus. The company had about $110 million of total debt outstanding on June 29, 2002. The outlook is stable. "The upgrade reflects the company's improved financial profile resulting from a $64 million equity infusion, of which about $32 million was used to reduce outstanding debt," said Standard & Poor's credit analyst Susan Ding. "In addition, the company's financial performance and related credit measures have improved during the past several years, despite the difficult retail environment and the weak economy." The bank loan rating is one notch higher than the corporate credit rating. Significant downward adjustments were made to the values of accounts receivable and inventory (as well as to property, plant, and equipment), to reflect the stresses inherent in a default scenario. Standard & Poor's assessment of the value of the company's collateral package supports full recovery of the loan facility if a payment default were to occur. Furthermore, the security interest in substantially all the company's assets offers reasonable prospects for full recovery of principal. The ratings on Tropical Sportswear International reflect the company's narrow product portfolio, customer concentration, participation in the competitive apparel industry, and leveraged financial structure. Somewhat mitigating these factors is the low fashion risk associated with many of its products. Tropical Sportswear produces basic men's and women's casual and dress apparel under both private labels and the brand names that it owns. Men's casual and dress pants represent about 67% of the company's total apparel sales. During the past few years, sales have directly benefited from the trend toward casual wear in the U.S. Still, the apparel industry has been characterized by unpredictable volatility in demand that has affected even such basic core items as jeans and T-shirts. Moreover, Tropical Sportswear competes with Levi Strauss' Dockers brand, which has a larger and leading market position. UNIFY CORP: Appoints Pete DiCorti as Chief Financial Officer ------------------------------------------------------------ Unify Corporation (OTCBB:UNFY), a leading provider of business application platform solutions, announced that Pete DiCorti, has been appointed chief financial officer effective Nov. 1, 2002. He will succeed David Adams, the Company's current CFO, who is resigning effective Oct. 31, 2002. As Unify's vice president of finance and administration, and CFO, DiCorti will be responsible for accounting, financial planning and analysis, human resources, order processing, investor relations, and Securities and Exchange Commission reporting. DiCorti, 51, brings more than 25 years of national and international experience in corporate finance, accounting, tax, legal and human resources management, including 18 years working with high-tech software and hardware companies. Before joining Unify, DiCorti served as the business development officer for JMW Capital Partners where he consulted with executives on refinancing, restructuring, and mergers and acquisitions. Prior to that, DiCorti was the vice president and CFO of the Grass Valley Group, where he assisted in the planning and execution of a $31 million private placement and refinancing, and built and led a worldwide finance team. Additionally, DiCorti has held executive management CFO positions with Pacific Access, Alldata and Digital Research. DiCorti has a bachelor's degree in accounting from Santa Clara University. "We are extremely pleased to have someone of Pete's caliber join Unify's executive team," said Todd Wille, president and CEO of Unify. "Pete's extensive experience in developing financial systems and internal controls, raising capital, and working with securities analysts, investment bankers and venture capitalists will be invaluable as Unify continues to execute on its strategic plan." Wille added, "Dave was a valued member of the Unify team and was instrumental in resolving Unify's regulatory and legal issues. Unify thanks him for his integrity and hard work, and we wish him all the best." Unify Corporation is a leading provider of business application platform solutions that enable companies to deliver J2EE, Web, graphical and character-based applications productively and reliably. With more than 2,000 active customers in more than 45 countries, Unify has a well-established customer base of ISVs, solution integrators and corporate IT departments. Unify's customers include AT&T, Bear Stearns & Co, Biomeriuex, Boeing, Credit Lyonnais, Federal Express, Fuji Electric Co., Ltd, General Dynamics, Glaxo, Lexis/Nexis, Mitsubishi Denki Co., Ltd., Nortel Networks, Inc., Sescoi, Sherwood International Systems and Triple G Systems Group. Headquartered in Sacramento, Calif., Unify has offices in the UK and France in addition to a worldwide network of distributors. Further information is available at http://www.unify.com * * * In Unify's July 31, 2002 financial results on Form 10-Q filed with the Securities and Exchange Commission on September 13, 2002, the Company said that its condensed consolidated financial statements (for the quarter ended July 31, 2002) have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company recorded a net loss of $285,000 and has an accumulated deficit of $58,152,000. In addition, the Company has experienced a decline in annual revenues and decreases in cash and cash equivalents during the previous three fiscal years. These factors indicate that the Company may potentially be unable to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon its ability to sustain profitability and generate significant cash flows. During fiscal 2001 and 2002, management realigned the Company's operations, aggressively controlled costs, including a reduction in force, re-focused on selling existing products to the customer base and worked to resolve the lawsuits described in Part II, Item 1 of this report. During fiscal 2003, management plans to continue to sell existing products to the customer base, aggressively sell and market ACCELL/Web to existing customers, and launch and sell the Company's next generation product to existing and new customers. There is no assurance that management's plans will be successful or if successful, that they will result in the Company continuing as a going concern. US AIRWAYS: HSBC Seek Stay Relief to Exercise Contractual Rights ---------------------------------------------------------------- HSBC Bank USA, successor-in-interest to J.P. Morgan Trust Company, N.A., as Trustee for the holders of certain revenue bonds, seeks relief from the automatic stay imposed by Section 362(a) of the Bankruptcy Code. This will permit HSBC, as Trustee, to exercise all of its contractual and state law rights as a secured creditor of US Airways Group Inc., and its debtor- affiliates. Eric A. Schaffer, Esq., at Reed Smith, tells Judge Mitchell that more than two years ago, USAir applied to the Philadelphia Authority for Industrial Development for assistance in financing an economic development project consisting of the design, construction, improvement and/or furnishing of facilities at the Philadelphia International Airport. The Authority approved USAir's application. To finance the Project, the Authority approved the issuance and sale of $71,140,000 Special Facility Revenue Bonds, Series 2000. The bonds were sold pursuant to the terms of a Trust Indenture dated June 1, 2000 between the Authority and Chase Manhattan Trust Company, N.A., as Trustee. Mr. Schaffer explains that J.P. Morgan Trust Company became a successor to Chase through a merger consummated at the end of 2000. Pursuant to the terms of an Instrument Of Resignation, Appointment And Acceptance, dated September 30, 2002, HSBC succeeded the interests of J.P. Morgan and is presently the Trustee under the Indenture. The Loan Agreement expressly provided that the proceeds generated from the Bond Sale would be the source of funds for the Loan. Therefore, after the issuance and sale of the Bonds, the Authority entered into a Loan Agreement dated June 1, 2000 with USAir, as borrower, whereby the Authority loaned to USAir $71,140,000. The Indenture required that the Trustee establish a Construction Fund and a Debt Service Fund from the proceeds generated by the sale of the Bonds: a. Construction Fund -- Article III, Section 3.1 of the Indenture required the Trustee "to establish and maintain a Construction Fund . . . which shall be held separate and apart from all other funds and accounts established under this Indenture and from all other monies of the Trustee." It further requires the Trustee to "establish an account within the Construction Fund designated '2000 Account' for deposit of a portion of the 2000 Bond proceeds." Indenture, Section 3.1; and b. Debt Service Fund -- Article IV, Section 4.4 of the Indenture required the Trustee also to "establish a Debt Service Fund and shall make available to the Paying Agent the amount required to pay the interest on the Bonds when due and the principal of the Bonds as they mature upon surrender thereof." Indenture, Section 4.4. Pursuant to this section, the Trustee was required to "initially deposit in the Debt Service Fund from the proceeds of the 2000 Bonds an amount equal to the accrued interest on the 2000 Bonds received by the Authority as part of the purchase price of the 2000 Bonds and in a subaccount, the amount of proceeds of the 2000 Bonds to be used to pay capitalized interest on the 2000 Bonds. . ." Id. Pursuant to the Loan Agreement, USAir granted a security interest in the Construction Fund to the Indenture Trustee. Pursuant to the Granting Clauses of the Indenture and in order to secure the obligations under the Bonds, the Authority expressly assigned, transferred, set over, pledged and granted to the Trustee "a continuing lien on and security interest in all of the right, title and interest of the Authority in the Loan Agreement and the Pledged Authority Revenues." The Pledged Authority Revenues are defined to include: -- any payments received by the Authority from USAir pursuant to the Loan Agreement, -- any and all amounts payable to the Authority on account of the Loan Agreement, and -- all income and receipts or investments of the Funds established and maintained by the Trustee under the Indenture. Mr. Schaffer relates that the liens and security interests are made expressly applicable to the Debt Service Fund by Section 4.4 of the Indenture, which provides that "the monies in the Debt Service Fund shall be held by the Trustee in trust, deposited and secured or invested as provided in Article VI, and shall be subject to a lien and charge in favor of, and as security for the holders of Outstanding Bonds, until paid out..." In accordance with the Indenture, the Authority sold the Bonds to a variety of individuals and institutional investors, generating $71,400,000 in proceeds. Subsequently, the Trustee established the Funds. The Loan was deemed "fully advanced upon deposit of the net proceeds from the sale of the 2000 Bonds in the Construction Fund or Debt Service Fund." Mr. Schaffer tells the Court that as of the Petition Date, the Trustee held in the Funds $22,180,975.55, of which $21,641,111.05 is held in the Construction Fund and $539,864.50 is held in the Debt Service Fund. The cash contained in the Funds is part of the Authority Trust Estate, constitute Pledged Authority Revenues and is subject to the liens and security interests created by the Loan Agreement and the Indenture. Mr. Schaffer argues that the Indenture, by its terms and through the terms of the Loan Agreement, expressly provides that USAir has no right to use or direct payment of any monies in the Construction Fund absent a certification that no "Event of Default" exists. Pursuant to the Loan Agreement, a voluntary petition filing under Title 11 constitutes an Event of Default. Therefore, Mr. Schaffer asserts that USAir has no right to use or direct payment of any monies in the Construction Fund and the Trustee has no obligation to disburse monies from the Construction Fund pursuant to USAir's direction. Accordingly, Mr. Schaffer argues that the automatic stay should be lifted and terminated under the provisions of Section 362 (d)(2). Under these provisions, a secured creditor is entitled to relief from the stay if the debtor does not have any equity in the secured creditor's collateral and the collateral is not necessary to an effective reorganization. Mr. Schaffer points out that USAir has no equity in the funds. There is no question that the outstanding balance due under the Loan Agreement exceeds the aggregate value of the money on deposit in the Funds, $71,140,000 versus $22,000,000. Moreover, Mr. Schaffer contends that the funds are not necessary to an effective reorganization of USAir. In the absence of equity in the Funds, the burden of proof shifts to USAir to demonstrate that the Funds are necessary to an effective reorganization. 11 U.S.C. Sections 362(d)(2)(B), (g)(2). Mr. Schaffer does not believe that USAir can sustain its burden of proof. Mr. Schaffer adds that the automatic stay should be lifted and terminated for "cause" under Section 362(d)(1). Mr. Schaffer explains that USAir is prohibited from using the money contained in the Funds because: (i) it is unable to provide adequate protection to the Trustee, (ii) with respect to the Construction Fund, contractual provisions in the Indenture and the Loan Agreement expressly forbid their use, and (iii) with respect to the Construction Fund, disbursements would constitute a financial accommodation within the meaning of Section 365(c)(2) of the Code. Under these circumstances, so long as USAir remains a debtor under the Code, there is no scenario under which USAir would ever be entitled to use the monies contained in the Funds. As a result, cause exists to lift the automatic stay to permit the Trustee to exercise its contractual and state law rights against the Funds. (US Airways Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) VENCOR: Wants Hearing on Hyperbaric Pact to Continue on Nov. 21 --------------------------------------------------------------- To recall, Judge Walrath instructed Vencor, Inc., in September 2001 to designate a representative to work with Hyperbaric Management in acquiring additional third-party provider contracts for the hyperbaric program. Moreover, Judge Walrath scheduled a status conference for a review on the parties' efforts in obtaining additional third-party contracts. Consequently, a status hearing was held on March 21, 2002. The Debtors presented the testimony of Allison Newlon, who detailed the Debtors' efforts to acquire third-party provider agreements and market the hyperbaric program -- efforts above and beyond what was required of the Debtors under the Agreement. Hyperbaric Management, on the other hand, presented alleged evidence of their purported lost profits due to the Debtors' alleged breach of the Agreement. Judge Walrath allowed the Debtors an opportunity to investigate Hyperbaric Management's information and to respond to the alleged "cure" evidence presented at the Status Hearing. The Court is supposed to continue the hearing today, October 24, 2002. Michael G. Busenkell, Esq., at Morris, Nichols, Arsht & Tunnell, in Wilmington, Delaware, reports that the Debtors served a set of interrogatories and document requests on June 12, 2002 to Hyperbaric Management, who in turn, requested to be given an extension of time to respond to the requests. Hyperbaric Management filed its responses, which consisted mostly of non- specific objections that the discovery requests were overly broad, unduly burdensome and vague. Moreover, Hyperbaric Management identified two witnesses, in addition to the principal, that participated in the preparation of their cure claim analysis. Mr. Busenkell adds that after the receipt of Hyperbaric Management's responses, the Debtors advised Hyperbaric Management of its desire to depose the additional witnesses and attempted to coordinate a mutually convenient time. The Debtors also asked Hyperbaric Management's consent to an adjournment of the continued hearing on the Assumption Motion, the Objection and Hyperbaric Management's cure claim to facilitate an adequate opportunity to depose the witnesses. However, Mr. Busenkell tells Judge Walrath that, to date, the Debtors have not received any response from Hyperbaric Management regarding their request for an adjournment. Nevertheless, the Debtors ask the Court to adjourn the hearing to November 21, 2002 at 9:30 a.m. or other date and time as the Court determines to be appropriate. * * * Background As previously reported, HMS provides hyperbaric treatment and wound healing services to THCLV patients in a Wound Healing Center established at THCLV's medical facility in Las Vegas, Nevada. The Debtors originally obtained Court approval to reject the Contract because participation in it resulted in losses to THCLV. After HMS filed a rejection claim in excess of $9,000,000, the Debtors changed their mind. The amount of the rejection claim was much more than that expected and the Debtors were not successful in disputing it or obtaining a consensual resolution. After a revaluation of costs and benefits, the Debtors determined to assume the HMS Contract because the cost of performance under the contract could be less than the potential liability for damages due to the rejection of it. The Debtors' cost of performing under the HMS Contract has historically been $20,000 per month. Moreover, by assuming the contract, the Debtors would retain their ability to continue to obtain revenues from it. HMS objected to the Motion to Assume on the grounds that: (a) The Debtor defaulted on its obligations under the Contract by, inter alia, failing to obtain the third party payor contracts necessary to ensure payment for the hyperbaric and related services provided by HMS under the Contract, which resulted in very few patients being eligible for treatment and treated at the Las Vegas facility; and (b) The Debtor is obligated to pay HMS what it would have received from operation of the hyperbaric treatment center had the Debtor put in place the third party payor contracts that it could have obtained, from the outset of the Contract. At the conclusion of the hearing on the Assumption Motion on September 12, 2001, the Court instructed the Reorganized Debtors to designate a representative to work with HMS in acquiring additional third-party provider contracts for the hyperbaric program. The Court also ordered HMS to cooperate with the Debtors in this effort. At the status hearing on March 21, 2002 to review the parties' progress, the Reorganized Debtors detailed their efforts in acquiring third-party provider agreements and in marketing the hyperbaric program. The Reorganized Debtors had been able to obtain additional third party payor contracts and the hyperbaric program had experienced an increase in patient treatments in the several months preceding the hearing. The Reorganized Debtors point out that they had made efforts above and beyond what was required of them under the Agreement. HMS, on the other hand, contends that the result shows that the Debtors could have obtained these, and more, payor contracts than they actually had since the beginning of the relationship, and the Debtors' failure to do so was a default under the Contract. HMS argues that, if the additional payor contracts obtained in those several months had been in place from the beginning of the relationship, additional amounts would have been payable by the Debtors to HMS under the Contract due to the increased pool of patients eligible to be treated at the facility. HMS, therefore, asserts that it is entitled to a cure claim in an amount equal to purported lost profits due to this alleged breach. The Reorganized Debtors point out that the plain, unambiguous language of the Agreement merely required that the Debtors cooperate with HMS in marketing the hyperbaric program and obtaining third-party provider contracts but imposed no affirmative obligation of the Debtors to obtain third-party provider agreements. The Reorganized Debtors maintain that the additional contracts secured in those several months are the result of efforts made above and beyond what was required of them under the Agreement. Over the Reorganized Debtors' objection, HMS presented evidence of its purported lost profits. Recognizing that HMS' evidence was outside the scope of the Status Hearing, the Court allowed the Debtors an opportunity to investigate HMS' information and to respond to the alleged evidence for cure amount presented by HMS at the Status Hearing. At the close of the March 21, 2002 hearing, the Reorganized Debtors asked for an opportunity to take some discovery. The Court granted it and the Reorganized Debtors served their first set of interrogatories and document requests. The Reorganized Debtors subsequently served a second set of interrogatories and document requests on HMS. This was met with resistance. Within an allowed extended period of time, HMS filed its responses objecting to the discovery requests. HMS tells the Court that the discovery requests are overly broad, unduly burdensome and vague. (Vencor Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) WESTAR AUTO: Bank One Forecloses on Security Interests in Certs. ---------------------------------------------------------------- By virtue of default by Westar Auto Finance, L.L.C., a Washington limited liability company under a certain Amended and Restated Revolving Credit Agreement with Bank One, Columbus, N.A., dated as of July 22, 1997, Bank One will foreclose its security interest in, and sell at public auction as a single unit, together with other collaterals, the outstanding "Asset Specific Trust Interest Certificates" of the company. The sale shall be held at the King County Courthouse at 10:00 a.m. on November 20, 2002. The sale is subject to the payment of all expenses and fees of Bank One. Except as expressly set out with Bank One's ability to credit bid, all sales will be for cash only. Sale of the assets will be made in an "as is" and "where is", without warranty of any kind. Potential bidders are encouraged to perform such due diligence as they deem necessary, including but not limited to review of the underlying documentation. Bank One reserves the right to bid at the sale on its own behalf and to credit such bid some or all of its secured claims. WORLDCOM: Wins Approval to Implement Proposed Setoff Procedures --------------------------------------------------------------- Worldcom Inc., and its debtor-affiliates obtained the Court's approval of its proposed Prepetition Setoff Procedures and the Postpetition Setoff Procedures, which are established in good faith with the Utility Companies. The terms of the proposed Prepetition Setoff Procedures and the Postpetition Setoff Procedures with respect to setoffs by Utility Companies that are both creditors and debtors of WorldCom are: A. No Utility Company may file any motion with the Court seeking authorization to effectuate a prepetition setoff, and the Debtors will not seek to compel a Utility Company to pay prepetition amounts due to the Debtors that have been withheld based upon a good faith assertion that the amounts are subject to the right of setoff against the Debtors, without first complying with the following Prepetition Setoff Procedures; B. Any Utility Company seeking to accomplish a prepetition setoff should send written notice to the Debtors addressed to: Robert W. Rodrigues, Esq. WorldCom, Inc. 1133 Nineteenth Street, Washington, DC 20036 Phone: (202) 736-6865 Fax: (202) 736-6471 E-mail:robert.w.rodrigues@wcom.com with a copy to: Alfredo R. Perez, Esq. Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600, Houston, Texas 77002 Phone: (713) 546-5000 Fax: (713) 224-9511 E-mail:alfredo.perez@weil.com -and- Christopher Marcus, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue, New York, New York 10153 Phone: (212) 310-8000 Fax: (212) 310-8007 E-mail:christopher.marcus@weil.com C. If the Debtors seek to compel a Utility Company to make payment of prepetition amounts due that have been withheld on account of prepetition claims against the Debtors, they should send the Initial Notice to the applicable Utility Company, with a copy to any counsel that has filed a notice of appearance in these cases on behalf of the Utility Company; D. The Initial Notice should contain this information for each claim potentially subject to setoff: -- Identification of the legal entity on each side of the transaction; -- A concise statement of the prepetition amounts alleged to be owed to and from the Debtors; -- Identification of the specific contract or agreement pursuant to which the alleged prepetition amounts are owed, including any account number or other identifying information for the account in question; and -- Contact information for a person with settlement authority to resolve the matter; E. Not later than 20 business days after service of the Initial Notice, the counterparties should participate in a mandatory settlement conference, either in person or by telephone. The settlement conference should be attended by representatives of the Utility Company and the Debtors who have settlement authority to resolve the matter. The purpose of the settlement conference will be to determine if agreement can be reached on the amount of any prepetition setoff, or to determine whether additional information is required. If mutually agreed upon by the parties, the settlement conference may consist of a series of actual meetings or telephonic conferences. If an additional exchange of information is required, the counterparties should make good faith efforts to provide each other with the information as the other reasonably requests within 10 business days of the settlement conference, and should convene a follow-up conference within 20 business days of the initial conference; F. If the counterparties reach agreement with respect to any prepetition setoff, the Debtors should file with the Court a summary notice setting forth the essential terms of the agreement reached, including the amount of the setoff to be effected and the amount of the payment, if any, to be made to the Debtors. The Notice of Setoff should be served on: -- the United States Trustee; -- counsel for the statutory committee of unsecured creditors; -- counsel for the Debtors' postpetition lenders; and -- counsel for the applicable Utility Company. If no objection is received within 7 days of filing and service of the Notice of Setoff, the applicable Utility Company may effect the setoff without further order of the Court and should, within 3 business days, pay to the Debtors any net prepetition amounts due and owing to the Debtors after application of the setoff. If a timely objection is received, the Debtors will set the matter for hearing on a regularly-scheduled hearing date and serve notice of the hearing in accordance with the Court's order dated July 29, 2002, establishing notice procedures. If no response or objection to the Notice of Setoff is timely filed, the Notice of Setoff will have the effect of a final order of the Court approving a stipulated settlement of the setoff; G. If, after an initial settlement conference and, to the extent applicable, a follow-up conference, the Debtors and a Utility Company are unable to reach agreement with respect to a prepetition setoff, either counterparty may file a motion with the Court seeking appropriate relief; and H. Nothing herein will be deemed to grant any Utility Company the right to setoff any postpetition amounts owing to the Debtors against any prepetition amounts owed by the Debtors or to eliminate the requirement of mutuality in order to assert a right of setoff. (Worldcom Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM: 80% of Q3 Defaults Results from Company's Bankruptcy -------------------------------------------------------------- Ten high yield issuers defaulted on a combined $4.6 billion in bonds in September, bringing the volume of defaults in the third quarter to $33.2 billion. Nearly 80% of the third quarter tally resulted from WorldCom's bankruptcy filing in July. The number of issuers defaulting declined substantially in the third quarter to 28 from 53 in the second quarter but default volume remained high due almost entirely to WorldCom. This trend is expected to continue as long as the telecom sector continues to lead defaults. Excluding telecom, the number of defaulted issuers in the third quarter was the lowest quarterly level in nearly two years. The year to date default rate ended September at 14.3%, or 10.9% excluding fallen angel defaults. The trailing twelve month default rate ended September at 16.6%, 13% excluding fallen angel defaults. Year to date default volume hit $90.5 billion in September, exceeding full year 2001's $78.2 billion. Summary of Default Activity through September: -- In September, the year to date default rate reached 14.3% on default volume of $90.5 billion; -- A total of 136 issuers defaulted on 316 bond issues; -- The telecom and cable sectors continued to represent the biggest concentration of defaults at a combined $66.8 billion or 73.8% of the nine month volume. Excluding the two sectors, the default rate for the remainder of the high yield market was 5.2% through September; -- The weighted average recovery rate for the first nine months of the year (excluding fallen angel defaults) was 28% of par. To date, 2002 has produced a weighted average recovery rate nearly twice the level of 15% of par recorded in 2001. The biggest drain on the average recovery rate this year was telecom. The sector experienced an average recovery rate of 14% of par through September, up marginally from the 11.5% recovery rate of 2001; -- The top five industry default rates through September included: Telecommunications (38.5%), Insurance (35.8%), Cable (34.3%), Metals and Mining (19.3%) and Retail (11.8%). The high default rate for Insurance was due entirely to Conseco; -- Approximately $16.7 billion or 18.5% of default volume through September came from issuers domiciled outside of the U.S. Further, 80.1% of these defaults were concentrated in cable and telecom. In the first nine months of 2001, $8.7 billion or 14.5% of defaults came from non-U.S. issuers (Fitch includes defaults on yankee issues in its U.S. default index.). Overview of the Fitch U.S. High Yield Default Index Fitch's default index is based on the U.S., dollar denominated, non-convertible, speculative grade bond market (the rating equivalent of 'BB+' and below). Fitch includes rated and non- rated, public bonds and private placements with 144A registration rights. Defaults include missed coupon or principal payments, bankruptcy, or distressed exchanges. Default rates are calculated by dividing the volume of defaulted debt by the average principal volume outstanding for the period. Fitch's high yield default studies are available in the 'Credit Market Research' section on the Fitch Ratings Web site at http://www.fitchratings.com * Shoylekov Named Special Counsel to Cadwalader's London Office --------------------------------------------------------------- Cadwalader, Wickersham & Taft has bolstered its Project Finance Group by naming Richard Shoylekov, formerly General Counsel of AGIP, a major oil and gas company based in Milan, as Special Counsel in the London office. Mr. Shoylekov's experience includes a wide range of international upstream oil and gas projects, including exploration and production contracts, joint ventures, pipeline transportation and sales, and company and asset acquisitions. He has a proven track record in the UK and across Europe as well as in emerging markets including the former Soviet Union and Africa advising on investment projects as well as handling legal, transactional and negotiation issues. "We look forward to having Richard join Cadwalader's London office. His experience not only complements but also substantially enhances the capabilities of our highly sought after Projects Group," said Andrew Wilkinson, Managing Partner of Cadwalader's London office. "Richard is well known in the oil & gas and pipeline sectors," said Paul Biggs, Head of Cadwalader's European Project Finance practice in London and Europe. "Having worked on the client side for several years, his knowledge of what works in the industry will be valuable to all members of the group as we continue to develop and act on further major project instructions. His familiarity with projects in the former Soviet Union is also a great benefit to the group as we build this geographic specialization." "I look forward to collaborating with Paul Biggs, and the strong team of projects lawyers he has assembled, in particular Bill Rubin whose experience in Central and Eastern Europe complements my familiarity with projects in the former Soviet Union," said Mr. Shoylekov. Prior to serving as General Counsel for AGIP, Mr. Shoylekov held various titles with the company including Business Development and Legal Manager and Head of Legal and Company Secretary. In 1994 he was an Assistant Solicitor for Watson, Farley & Williams. From 1991 until 1994 he served as a Legal Advisor to British Gas Exploration and Production where he handled upstream oil and gas exploration and development matters. He began his career as a trainee at Freshfields, later serving as an Assistant Solicitor for the firm. Mr. Shoylekov speaks a number of languages including Italian, French and Russian. He received his B.A. from Downing College, Cambridge in 1987 and graduated form Guildford College of Law in 1988. He was admitted to practice English law in 1990. Cadwalader, Wickersham & Taft, established in 1792, is one of the world's leading international law firms, with offices in New York, Charlotte, Washington and London. Cadwalader serves a diverse client base, including many of the world's top financial institutions, undertaking business in more than 50 countries in six continents. The firm offers legal expertise in securitization, structured finance, mergers and acquisitions, corporate finance, real estate, environmental, insolvency, litigation, health care, global public affairs, banking, project finance, insurance and reinsurance, tax, and private client matters. More information about Cadwalader can be found at http://www.cadwalader.com * Meetings, Conferences and Seminars ------------------------------------ November 18-19, 2002 EUROLEGAL Insurance Exit Strategies Kingsway Hall, London Contact: +44 0 20 7878 6886 November 20, 2002 New York Institute of Credit Bankruptcy Contact: info@nyic.org; 212-629-8686; (fax)212-629-8787 November 20th 6:00-7:15pm New York Institute of Credit 4th Trustees Award Contact: info@nyic.org; 212-629-8686; (fax)212-629-8787 November 21-24, 2002 COMMERCIAL LAW LEAGUE OF AMERICA 82nd Annual New York Conference Sheraton Hotel, New York City, New York Contact: 312-781-2000 or clla@clla.org or http://www.clla.org/ December 2-3, 2002 RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP Distressed Investing 2002 The Plaza Hotel, New York City, New York Contact: 1-800-726-2524 or fax 903-592-5168 or ram@ballistic.com December 5-7, 2002 STETSON COLLEGE OF LAW Bankruptcy Law & Practice Seminar Sheraton Sand Key Resort Contact: cle@law.stetson.edu December 5-8, 2002 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference The Westin, La Paloma, Tucson, Arizona Contact: 1-703-739-0800 or http://www.abiworld.org February 22-25, 2003 NORTON INSTITUTES ON BANKRUPTCY LAW Litigation Institute I Marriott Hotel, Park City, Utah Contact: 1-770-535-7722 or http://www.nortoninstitutes.org March 6-7, 2003 ALI-ABA Corporate Mergers and Acquisitions San Francisco Contact: 1-800-CLE-NEWS or http://www.ali-aba.org March 27-30, 2003 NORTON INSTITUTES ON BANKRUPTCY LAW Litigation Institute II Flamingo Hilton, Las Vegas, Nevada Contact: 1-770-535-7722 or http://www.nortoninstitutes.org March 31 - April 01, 2003 RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP Healthcare Transactions: Successful Strategies for Mergers, Acquisitions, Divestitures and Restructurings The Fairmont Hotel Chicago Contact: 1-800-726-2524 or fax 903-592-5168 or ram@ballistic.com April 10-13, 2003 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting Grand Hyatt, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org May 1-3, 2003 ALI-ABA Chapter 11 Business Organizations New Orleans Contact: 1-800-CLE-NEWS or http://www.ali-aba.org May 8-10, 2003 ALI-ABA Fundamentals of Bankruptcy Law Seattle Contact: 1-800-CLE-NEWS or http://www.ali-aba.org June 19-20, 2003 RENAISSANCE AMERICAN MANAGEMENT, INC. & BEARD GROUP Corporate Reorganizations: Successful Strategies for Restructuring Troubled Companies The Fairmont Hotel Chicago Contact: 1-800-726-2524 or fax 903-592-5168 or ram@ballistic.com June 26-29, 2003 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains, Advanced Bankruptcy Law Jackson Lake Lodge, Jackson Hole, Wyoming Contact: 1-770-535-7722 or http://www.nortoninstitutes.org July 10-12, 2003 ALI-ABA Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy Eldorado Hotel, Santa Fe, New Mexico Contact: 1-800-CLE-NEWS or http://www.ali-aba.org December 3-7, 2003 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference La Quinta, La Quinta, California Contact: 1-703-739-0800 or http://www.abiworld.org April 15-18, 2004 AMERICAN BANKRUPTCY INSTITUTE Annual Spring Meeting J.W. Marriott, Washington, D.C. Contact: 1-703-739-0800 or http://www.abiworld.org December 2-4, 2004 AMERICAN BANKRUPTCY INSTITUTE Winter Leadership Conference Marriott's Camelback Inn, Scottsdale, AZ Contact: 1-703-739-0800 or http://www.abiworld.org The Meetings, Conferences and Seminars column appears in the Troubled Company Reporter each Wednesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2002. All rights reserved. ISSN: 1520-9474. 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