/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/021104.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, November 4, 2002, Vol. 6, No. 218 Headlines 37POINT9: Lawsuit Filed Against Hydrogiene Corp. is Dismissed ACOUSTISEAL: Has Until January 2 to Make Lease-Related Decisions AMERICAN FINANCIAL: S&P Affirms BB+ Preferred Share Rating ANC RENTAL: Expanding Scope of Ernst & Young & Young's Retention ARMSTRONG HOLDINGS: Begins Reconciling 3,800+ Proofs of Claim ASPEN GROUP: Brings-In Robert Calentine as Interim CEO AUDIBLE INC: Balance Sheet Insolvency Widens to $11MM at Sept 30 BCE INC: Closes CDN$2-Billion Public Debt Offering BELL CANADA: Disposing of Remaining Assets -- Canbras and Axtel BORDEN CHEMICALS: Wants Lease Decision Time Extended to April 24 BUDGET GROUP: Court OKs Young Conaway as Local Delaware Counsel CALPINE: Receives $22MM from Nevada Power for Past-Due Payments CEDARA SOFTWARE: Will Publish First Quarter Results on Nov. 22 CLUBCORP INC: S&P Keeping Watch on B+ Corporate Credit Rating CORVUS INVESTMENTS: Fitch Keeping Watch on Low B-Rated Classes ENRON CORP: Saeger, et. al. Gets OK to Hire Manatt as Counsel ENRON CORP: Employee Committee Encouraged by Fastow's Indictment EOTT ENERGY: U.S. Trustee Appoints Unsecured Creditors Committee EUROSTAR I CDO: Fitch Cuts Class A-3 & B Note Ratings to B+/CC EXTENDED STAY: Amends Bank Credit Facility to Ensure Flexibility FINET.COM INC: Fails to Maintain Nasdaq Listing Requirements GENTEK INC: Seeks Approval to Hire Ordinary Course Professionals GLOBAL CROSSING: Urges Court to Approve Settlement with Fusion GOODYEAR TIRE: Underperformance Prompts S&P to Cut Rating to BB+ GWIN INC: Moore Stephens Expresses Going Concern Doubt HEALTHTRAC INC: Requires Additional Cash to Continue Operations HIGHLANDS INSURANCE: Files for Chapter 11 Reorganization in Del. HIGHLANDS INSURANCE: Case Summary & Largest Unsecured Creditors HORSEHEAD: Signs-Up McKinney & Stringer as Environmental Counsel INDIGO BOOKS: Working Capital Deficit Tops $22 Mill. at Sept. 28 INFINITE GROUP: Clarifies Issues re DARPA Contract Termination INPRIMIS INC: Changes Company Name to Ener1, Inc. INT'L THUNDERBIRD: TSX Halts Trading for Listing Noncompliance KAISER ALUMINUM: Seeks Approval of Release with Terrence Hayes LAIDLAW INC: Wants to Keep Exclusivity Until February 28, 2003 LORAL SPACE: S&P Drops Corporate Credit Rating to SD from CC MARK NUTRITIONALS: Committee Hires Kingman as Bankruptcy Counsel METAWAVE COMMS: Has Until April 24 to Meet Nasdaq Requirements MIIX GROUP: Nine-Month Net Loss Balloons to $50 Million MITEC TELECOM: Brings-In Rajiv Pancholy as New President and CEO MORTON CUSTOM: Files for Chapter 11 Reorganization in Wilmington MORTON HOLDINGS: Case Summary & Largest Unsecured Creditors NATIONSRENT INC: Brings-In UBS Warburg as Financial Advisor NAVISTAR INT'L: S&P Keeping Watch on BB Corporate Credit Ratings NDCHEALTH CORP: S&P Ratchets Corp. Credit Rating Down a Notch NETIA HOLDINGS: Asks Nasdaq Panel to Review Delisting Decision NETIA HOLDINGS: Will Not Make Interest Payments on Certain Notes NETZEE INC: September 30, 2002 Equity Deficit Tops $10 Million NEWFOUNDLAND CAPITAL: Reports Improved Performance in Q3 2002 NORSKE SKOG: Reports $20MM Net Loss on $392MM Sales in Q3 2002 NQL: ViewCast Unit Acquires Assets of Delta Computec Subsidiary OHIO CASULATY: S&P Changes Outlook on BB Rating to Negative OM GROUP: Low Liquidity Spurs S&P to Lower Credit Rating to BB- OWENS-BROCKWAY: S&P Rates Proposed $300M Sr. Secured Notes at BB PACIFIC GAS: Wants to Pay $1.3M for SEC Filing & Printer Fees PERLE SYSTEMS: Net Capital Deficiency Widens to $3 Million PHOTOCHANNEL: Raising $750K with Proposed LP Unit Financing POPE & TALBOT: Harmac Pulp Mill Resumes Operations After Outage REVLON CONSUMER: S&P Puts B-/CCC- Credit Ratings on Watch Neg. ROYAL CARIBBEAN: S&P Affirms BB+ Rating on Two Related Deals SATX INC: Court Approves First Amended Disclosure Statement S-C NEWCO: S&P Junks Corp. Credit Ratings over Market Pressures SLI INC: Committee Signs-Up KPMG LLP as Financial Advisor SMARTDISK CORP: Posts Better Financial Results for Third Quarter STANDARD MEMS: US Trustee Appoints 3-Member Creditors Committee TEXAS PETROCHEMICALS: Pursuing Options to Refinance Secured Debt THOMAS GROUP: Sept. 30 Balance Sheet Upside-Down by $1.7 Million UNIFAB INT'L: Shareholders' Meeting to Convene on Dec. 13, 2002 UNION ACCEPTANCE: Files for Chapter 11 Reorganization in Indiana UNIROYAL TECHNOLOGY: Fails to Win Nod to Hire White & Case LLP US AIRWAYS: Wants Court Okay to Assume & Ratify Charge Card Pact USI HOLDINGS: S&P Affirms B+ Rating & Removes it from Watch U.S. STEEL: Will Pay Q3 Common Stock Dividend on Dec. 10, 2002 VERITAS DGC: S&P Rates $275-Million Senior Secured Notes at BB+ VINTAGE CAPITAL: Fitch Slashes Class C Note Rating to Junk Level V-ONE CORP: Net Capital Deficiency Tops $629K at September 30 WINSTAR: Trustee Seeks Approval of $1.5M Settlement with Savvis WORKGROUP TECHNOLOGY: Nasdaq Delists Shares Effective October 31 W.R. GRACE: Court Stretches Lease Decision Time to April 1, 2003 W.R. GRACE: Sealed Air Turns to Third Cir. to Get Lawsuit Tossed * BOND PRICING: For the week of November 4 - November 8, 2002 ********* 37POINT9: Lawsuit Filed Against Hydrogiene Corp. is Dismissed ------------------------------------------------------------- A Synergie Holdings Ltd. Inc., (PinkSheets:SYHO) company spokesperson announced dismissal of a lawsuit brought against Hydrogiene, its officers and directors, and others not related to the company, by 37Point9 in a frivolous attempt to justify its loss of a license held with Magna IV Ltd., to produce and sell the Hydrogiene series of Ultimate Bidets and Surface Shield anti-microbiological disinfectant, according to Synergie Holdings Ltd. Inc. Termination of the license was brought about by 37Point9's financial insolvency and inability to conform to terms of license agreement to produce and market the products within a reasonable period of time, according to Synergie Holdings Ltd. Inc. The spokesperson said the attempt by 37Point9's president, Douglas Brown, and 37Points' majority stockholder, Bruce Barren, to discredit Hydrogiene and its Chairman and CEO Charles Kallmann was an egregious, unfounded attempt to derail Hydrogiene's resurgence from its two year dormancy, caused by a former, now-ousted board of directors, according to Synergie Holdings Ltd. Inc. The spokesperson added Synergie Holdings Ltd. Inc., and its other subsidiaries, of which Hydrogiene Corp., is one, is now well on its way to productivity and sales of its Theraclense- Ultimate Bidets and derivatives with assembly operations to start at initial facility in Henderson, Nev. An agreement with a national sales organization will be announced shortly; this organization to represent Hydrogiene to the mass merchant retail market, as well as hotel/leisure and medical/hospital markets. ACOUSTISEAL: Has Until January 2 to Make Lease-Related Decisions ---------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Western District of Missouri, Acoustiseal, Inc., obtained an extension of its lease decision period. The Court gives the Debtor until January 2, 2003, to determine whether to assume, assume and assign, or reject its unexpired nonresidential real property leases. Acoustiseal, Inc., filed for chapter 11 protection on September 4, 2002. Cynthia Dillard Parres, Esq., and Mark G. Stingley, Esq., at Bryan, Cave LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated assets of $10-$50 million and estimated debts of over $50 million. AMERICAN FINANCIAL: S&P Affirms BB+ Preferred Share Rating ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its triple-'B' counterparty credit and senior debt, triple-'B'-minus subordinated debt, and double-'B'-plus preferred stock ratings on American Financial Group Inc. In addition, Standard & Poor's affirmed its single-'A' counterparty credit and financial strength ratings on the members of the Great American Insurance Co. pool and the Republic Indemnity Co., pool, which primarily consist of AFG's specialty lines division, and constitute the property/casualty (P/C) subsidiaries expected to remain as part of AFG's insurance operations following the group's intended sale of its personal lines division through an initial public offering. At the same time, Standard & Poor's said it lowered its ratings on Great American Financial Resources Inc., AFG's majority-owned life insurance holding company, as well as the ratings on GAFRI's core life insurance subsidiaries. The outlook on AFG and GAFRI is negative. Standard & Poor's also took several other actions on GAFRI's noncore life insurance subsidiaries. Standard & Poor's also affirmed its single-'A' counterparty credit and financial strength ratings on personal lines writers Atlanta Casualty Co., Infinity Insurance Co., Leader Insurance Co., Windsor Insurance Co., and related insurance subsidiaries, following AFG's announcement of its intention to contribute these subsidiaries to a newly formed insurance holding company, Infinity Property and Casualty Corp., to execute its planned IPO. Standard & Poor's also assigned its triple-'B' counterparty credit rating to Infinity. The outlook on Infinity is negative. The negative outlook on AFG and GAFRI reflects lower than historical consolidated capital adequacy at the operating companies (including P/C and life operating companies) at midyear 2002 as well as a relative decline in the quality of capital given a moderate amount of intangible assets in the group's statutory capital. AFG's consolidated operating performance has improved through the first six months of 2002. A sustained track record of improved earnings and a gradual improvement in capital adequacy will be necessary for a revision of the outlook to stable. The negative outlook on Infinity and its related entities reflects uncertainty in AFG's ability to successfully execute its intended IPO. Standard & Poor's expects that if the IPO is successful and executed under the current terms, at the point it is completed the outlook on the Infinity group should change to stable. ANC RENTAL: Expanding Scope of Ernst & Young & Young's Retention ---------------------------------------------------------------- ANC Rental Corporation and its debtor-affiliates sought and obtained the U.S. Bankruptcy Court for the District of Delaware's authority to supplement the Debtors' retention of Ernst & Young. Specifically, the Debtors expect Ernst & Young to provide: A. various tax services to Debtors, including tax review, calculation and analysis relating to the Debtors' bankruptcy restructuring and post-bankruptcy operations, and B. business license compliance services, including analyzing the business license requirements for the Debtors, to conduct a review of the Debtors compliance with business license requirements and to prepare business licenses for the Debtors. Aside from reimbursement of actual and necessary expenses, Ernst & Young will be paid based on the hourly rates of its professionals rendering tax services and business licenses services: Partners $525 Principals 525 Senior Managers 425 Managers 315 - 330 Seniors 225 - 240 Staff 160 - 175 Paraprofessional 85 - 100 (ANC Rental Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) ARMSTRONG HOLDINGS: Begins Reconciling 3,800+ Proofs of Claim ------------------------------------------------------------- Armstrong Holdings, Inc., and its debtor-affiliates, ask Judge Newsome to disallow and expunge 46 more disputed claims, without prejudice to their right to object to these proofs of claim on any other grounds whatsoever to the extent that any of the proofs of claim survive expungement under this Objection. Rebecca Booth, Esq., at Richards Layton & Finger PA, in Wilmington, Delaware, remind the Court that the Debtors listed 182,584 claims in their Schedules. The general bar date for filing proofs of claim in these cases expired on August 31, 2001. By separate Order, Judge Newsome set March 20, 2002, as the bar date asbestos-related property damage claims. To date, Ms. Booth reports that 3,835 proofs of claim, many of which were duplicates or amendments, have been filed with the Debtors' claims agent, Trumbull. In addition, approximately 722 proofs of claim were received after the Bar Date, for a total of 4,557 proofs of claim related to asbestos property damage. Group A: Amended and Superseded Claims The proofs of claim in Group A are those claims that were amended and, therefore, superseded by a subsequent proof of claim filed by or on behalf of the same claimant. The Debtors should not be required to pay twice on the same obligation. Moreover, elimination of redundant claims will enable the Debtors to maintain a claims registry that more accurately reflects claims that have been asserted against the Debtors. Therefore, the Debtors object to each proof of claim in this group and ask the Court to disallow and expunge the amended or superseded claims. The proofs of claim in Group A are: Claimant Surviving Claim -------- --------------- Carlino Arcadia Associates LP $572,348.15 Philadelphia, PA Corpus Christi Gasket & Fastener 23,250,000.00 Corpus Christi, TX Brad Dusenka Unliquidated Houston, TX Rene Laurel Unliquidated Houston, TX Commonwealth of Massachusetts Dept. of Revenue 327,515.56 Boston, MA MewEnergy Midwest LLC 248,245.49 Chicago, IL Steven Tancredi Unliquidated Houston, TX Toyota Motor Credit Corporation 72,960.34 Torrence, CA University of Delaware 247,800.00 Newark, DE Wagman-Carlino JV 28,937.41 Philadelphia, PA Groups B and C: Duplicate Claims The Debtors assert that the proofs of claim in these two groups are duplicative of other proofs of claim filed by or on behalf of the same claimants. With respect to the proofs of claim in Group B, Ms. Booth notes, "[I]t appears that the claimant erroneously filed the same proof of claim against the same Debtor more than once." With respect to the proofs of claim in Group C, Ms. Booth observes, it appears that these claims were filed by Noteholders or Bondholders of AWI, and are duplicates of proofs of claim property filed by an indenture trustee, or scheduled by the Debtors on the indenture trustee's behalf, on account of the claims arising from these notes and bonds. The claims of the indenture trustee are for the full amount due and owing on the note or bond. Under the Trust Agreement governing these notes or bonds, the indenture trustee has the right to assert all claims on behalf of its respective noteholder or bondholder. Indeed, Ms. Booth says, for each series of notes outstanding: (1) the appropriate indenture trustee has already filed a proof of claim; or (2) AWI has scheduled the indenture trustee's claim in its Schedules as non-contingent and undisputed, in each case for the total principal amount outstanding, plus accrued interest, on each such series of notes or bonds as of the Petition Date. Thus, Ms. Booth concludes, any claims asserted by or on behalf of individual noteholders or bondholders are duplicative of the master claim filed by the appropriate indenture trustee or scheduled by AWI. The proofs of claim in Group C are those claims filed by individual noteholders or bondholders that also are included in one or more of the indenture trustee proofs of claim. Therefore, the Debtors ask the Court to disallow the duplicate claims and expunged them from the claims registry of these cases. The proofs of claim in Group B are: Claimant Claim Amount -------- ------------ Carey Canada, Inc. Unliquidated Philadelphia, PA Carroll College Unliquidated Mt. Pleasant, SC Celotex Corporation Unliquidated Philadelphia, PA GMI Insultation 1,940.00 Lebanon, PA Keysor-Century Corporation 409,869.05 Saugus, GA Commonwealth of Massachusetts Dept. of Revenue 326,857.09 Boston, MA Modern Handling Equipment Co. 37,630.97 Bristol, PA Rutgers University Unliquidated Piscataway, NJ Stanford University Unliquidated San Francisco, CA The Asbestos Settlement Trust (Celotex) Unliquidated Philadelphia, PA Thomas Moore College Unliquidated Covington, KY Town of Hooksett Unliquidated Hampton, SC Union County Board of Education Unliquidated Hampton, SC USM Corp. Bailey Div. Unliquidated Seabrook, NY The proofs of claim in Group C are: Claimant Surviving Claim -------- --------------- Lois A. Berry and William V. Berry $279.39 Annville, PA Anthony & Patricia Lang 5,000.00 St. John, MD Curtis R. Rasmussen 6,877.40 Group D: Holdings Interests AWI is an indirect, wholly owned subsidiary of Armstrong Holdings, Inc., a publicly traded company, which is not a debtor in these cases. The claims in Group D represent equity interests in Holdings and not claims against any of the Debtors. Holdings is not a debtor in these Chapter 11 cases, and equity interests in Holdings may not be asserted as claims against any of the Debtors. Accordingly, the Debtors object to the allowance of Mildred Bogienski's unliquidated Holdings Interest and ask the Court to disallow and expunge Ms. Bogienski's Holdings Interest. Group E: Late Claims The claims in Group E were filed after the Bar Date, or other deadline to file proofs of claim as authorized by the Bankruptcy Code or prior Court Order. Section 502(b)(9) of the Bankruptcy Code provides that a proof of claim will not be allowed if not timely filed. Because the claims in this Group were not timely filed, the Debtors object to these claims and ask the Court to disallow and expunge these claims: Claimant Date Filed Asserted Amount -------- ---------- --------------- American Inks & Coatings Corp. 09/04/2001 Unliquidated Blue Bell, PA Asbestos Claims Management Corp. 12/12/2001 Unliquidated Dallas, Texas Bonezzi Switzer Murphy & Polito 10/05/2001 3,954.65 Cleveland, OH Canadian National Railway Co. 06/10/2002 58,610.00 Toronto, Canada Ecredit.Com 09/10/2001 10,600.00 Dedham, MA Franchise Tax Board 08/08/2002 3,027,272.49 Sacramento, CA Modern Handling Equipment Corp. 05/06/2002 37,630.97 Bristol, PA NGC Settlement Trust 12/12/2001 Unliquidated Dallas, TX The Asbestos Settlement Trust 03/01/2002 Unliquidated Philadelphia, PA Group F: No Documentation Ms. Booth describes the proofs of claim in Group F as those filed without the supporting documentation required. These proofs of claim, therefore, do not constitute valid, prima facie claims because they have no supporting documentation. Ms. Booth reminds Judge Newsome that, for a proof of claim to be legally sufficient, it must: (a) be in writing; (b) make a demand upon the debtor's estate; (c) express an intent to hold the debtor liable for the debt; (d) be properly filed; and (e) be based on facts that would allow, as a matter of equity, the document to be accepted as a proof of claim. Rule 3001(b) of the Federal Rules of Bankruptcy Procedure further requires that the proof of claim be signed by the creditor or the creditor's authorized agent. If a proof of claim fails to comply with each of these requirements, it is not entitled to prima facie validity. Ms. Booth asserts that the proofs of claim in Group F contain no documentation from which Judge Newsome could reasonably rely to accept the proof of claim as evidence that each of these respective claimants has a valid claim. Furthermore, nothing in the Debtors' books and records evidences or supports a valid claim against the Debtors in the amounts asserted by any of the holders of the proofs of claim in this Group. Therefore, the Debtors object to each of these proofs of claim and ask the Court to disallow and expunge these claims: Claimant Asserted Amount -------- --------------- Acorn Glen Quality Assisted Living Unliquidated Princeton, NJ Canadian National Railway Company 58,610.00 Toronto, Canada Minnie Etheridge 20,000.00 Catherine, AL The Hartford Unliquidated Hartford, CN H L Yoh Company LLC 35,155.74 Lancaster, PA KTK Corporation Unliquidated Princeton, New Jersey Unipak LLC 10,213.32 Louisville, KY Viacom Inc. Unliquidated Pittsburgh, PA Zurich American Insurance Company Unliquidated Baltimore, MD (Armstrong Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Armstrong Holdings Inc.'s 9.000% bonds due 2004 (ACK04USR1) are trading between 58.5 and 60. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ACK04USR1for real-time bond pricing. ASPEN GROUP: Brings-In Robert Calentine as Interim CEO ------------------------------------------------------ Aspen Group Resources Corporation, (OTC Bulletin Board: ASPGF; Toronto: ASR), 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. For additional information on Aspen Group Resources Corporation visit http://www.asgrc.com AUDIBLE INC: Balance Sheet Insolvency Widens to $11MM at Sept 30 ---------------------------------------------------------------- Audible, Inc. (NASDAQ: ADBL), the leading provider of downloadable spoken word audio that informs and entertains anywhere and any time with audio editions of books, newspapers, magazines, radio programs and original shows, announced results for the quarter ended September 30, 2002. Highlights include: -- Growth to over 182,000 customers, an increase of 79% year over year. -- Audible.com(R) and Apple integrated the iPod and iTunes with Audible's Internet audio service. -- The Audible Internet audio service has been integrated into Palm's new Tungsten T handheld and will also be offered to users of future Palm handhelds. -- The new MSN 8 gives users free trial offers for Audible's downloadable audiobooks. -- Audible.com demonstrated downloads of spoken audio to Windows powered Smartphone. -- Audible.com and Cox High Speed Internet entered into a comarketing partnership. -- Audible.com and Toshiba Cable Modems entered into a comarketing partnership. -- Audible.com and Mac Publishing entered into a wide- ranging distribution and programming partnership. -- Audible.com named one of the "Best of Today's Web" by PC World magazine. -- Kenwood's Music Keg, powered by PhatNoise, will ship compatible with Audible's Internet audio service. -- Deloitte and Touche named Audible one of New Jersey's fastest growing technology companies in their "Fast 50" program, noting the company's 5,879% growth record over the past five years. At September 30, 2002, Audible recorded a total shareholders' equity deficit of about $11 million. "In an environment where significant economic growth is a challenge to many companies, Audible has once again exceeded its consumer content growth goals," observed Donald Katz, chairman and CEO, Audible, Inc. "This performance comes in advance of the positive effect of many of the important co-marketing and service bundling relationships the company has struck with leading partners in the broadband, CD-burning, audio device, and retail sectors. "Perhaps most importantly, our core consumer is no longer drawn from the ranks of early adopters," continued Katz. "The environmental acceptance of concepts such as downloading audio files and burning your own CDs is proving to be a tremendous catalyst as we move closer to profitability. With increased awareness of our audio service, we believe broad customer acceptance of the Audible audio service will emanate from the ranks of any and all consumers who want to make better use of their time." Consumer content revenue increased 24% in the third quarter over the prior quarter to $3,002,039. Net loss per share for the third quarter was $0.16. Net cash used during the quarter was $3.1 million. Audible's cash and cash equivalents totaled $3.7 million on September 30, 2002. In related news, Audible, Inc., announced that it has received a Nasdaq Staff Determination letter on October 29, 2002 indicating that the company has failed to comply with Marketplace Rule 4310(C)(8)(D) which required that Audible regain, by October 28, 2002, a minimum bid price for its common stock of $1.00 and with Marketplace Rule 4310(C)(2)(A) which requires that Audible meet the initial inclusion requirements of the Nasdaq SmallCap Market. Specifically, Rule 4310(C)(2)(A) requires that Audible have (i) stockholder's equity of $5 million; (ii) market value of listed securities of $50 million; (iii) $750,000 net income from continuing operations in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. Accordingly, the company's securities are subject to de- listing from the Nasdaq Small Cap Market. Audible will be requesting a hearing before the Nasdaq Listing Qualifications Panel to review the Staff Determination. The request for a hearing will defer the de-listing of Audible's common stock pending a decision by the panel. There can be no assurance that the panel will grant the company's request for continued listing. If the company's common stock is de-listed from the Nasdaq Small Cap Market, the company expects that its common stock would trade on NASD's OTC Bulletin Board. Management sees no negative impact of the potential of moving to OTC on operations or the achievement of growth and profitability. Audible(R) -- http://www.audible.com-- is the Internet's largest, most diverse provider of premium spoken audio services for content download or playback on personal computers or AudibleReady(TM) PC-based mobile devices. Audible has more than 34,000 hours of audio programs and 125 content partners that include leading audiobook publishers, broadcasters, entertainers, magazine and newspaper publishers and business information providers. Audible.com is Amazon.com's -- http://www.amazon.com-- exclusive provider of spoken word products for downloading or streaming via the Web. Additionally, the Company is strategically aligned with Random House, Inc., to pioneer the first-ever imprint to produce spoken word content specifically suited for digital distribution, Random House Audible. Among the Company's key business partners are Apple Corp., Card Access Inc., Casio Inc., Compaq Computer Corporation, Handspring, Hewlett-Packard Company, Microsoft Corporation, Royal Philips Electronics, RealNetworks, Inc., SONICblue Incorporated's Rio Audio Group, Sony Electronics, Texas Instruments and VoiceAge Corp. BCE INC: Closes CDN$2-Billion Public Debt Offering -------------------------------------------------- BCE Inc., (TSX, NYSE: BCE) closed a public offering of $300 million 6.20% Series A Notes, $1,050 million 6.75% Series B Notes, and $650 million 7.35% Series C Notes, further to its prospectus supplement dated October 25, 2002 to its August 1, 2002 shelf prospectus filing. Total gross proceeds were $2 billion. 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. BELL CANADA: Disposing of Remaining Assets -- Canbras and Axtel --------------------------------------------------------------- As a result of the adoption on July 17, 2002 of the Plan of Arrangement, and the completion of the sale of Bell Canada International Inc.'s (Nasdaq:BCICF) (TSX:BI) interest in Telecom Americas Ltd., on July 24, 2002, BCI's consolidated statements of earnings and cash flows for the third quarter of 2002 reflect only the activities of BCI as a holding company. Axtel S.A de C.V., and Canbras Communications Corp., are recorded under Investments on the balance sheet at the lower of carrying value and estimated net realizable value and their operating results are not reflected on BCI's consolidated statements of earnings. Third Quarter Results Cash on hand during the third quarter increased by $99.6 million reflecting the cash proceeds received to date from the sale of BCI's interest in Telecom Americas of $300.8 million, offset by the repayment of BCI's bank facility in the amount of $174.1 million and corporate interest and overhead expenses. BCI's balance sheet as at September 30, 2002 includes cash of $153.5 million. Current assets also include a note receivable, at an estimated net realizable value of $269.6 million, representing the remaining proceeds to be received on March 1, 2003 from the payment of the balance due under the America Movil S.A. de C.V. note. BCI's interests in Axtel and Canbras are recorded on the balance sheet at $96.6 million. Total liabilities include BCI's 11% senior unsecured notes due September 2004 in the amount of $160 million and accrued liabilities of $29.0 million. Net earnings for the third quarter were $2.2 million, or $0.06 per share, reflecting foreign exchange gains on the America Movil Note received as partial payment for BCI's interest in Telecom Americas, partially offset by corporate overhead and interest expenses and a loss from the early monetization on September 26, 2002 of US$50 million of the America Movil Note. Cash outlays from October 1, 2002 to March 1, 2003 are estimated at approximately $15 million to $20 million including accounts payable, accrued liabilities, net interest and overhead costs. On March 1, 2003, BCI expects to receive the balance of US$170 million due under the America Movil Note. For the last 10 months of 2003, BCI estimates cash outlays (including accounts payable, accrued liabilities, net interest and overhead costs) at approximately $35 million. The foregoing estimates exclude any amounts that may be required to settle contingent liabilities such as law suits, the Vesper guarantees and the Comcel voice over IP claim. Update on Assets Held for Disposition Pursuant to the court approved Plan of Arrangement, BCI is actively seeking to dispose of its remaining assets, Canbras and Axtel. The following is a summary of the third quarter financial and operational results of both companies. -- Canbras' revenues reached $14.8 million in the quarter, up $1.2 million over the third quarter of 2001 driven primarily by cable and internet access subscriber growth partially offset by a devaluation of 20% in the Brazilian real compared to the Canadian dollar. EBITDA was $3.7 million, up $3.2 million over the same quarter last year, primarily due to a reduction in operating expenses driven by the devaluation in the Brazilian real and higher revenues. Debt at the end of the period was $35 million. As existing cash and cash generated from operations are not expected to be sufficient to meet current liabilities over the next 12 months, Canbras is pursing refinancing alternatives as well as new sources of financing. There can be no assurance that such refinancing alternatives or any new financing can be arranged on acceptable terms or at all. -- Axtel's revenues were $95.8 million for the quarter, an increase of $1.9 million over the third quarter of 2001 driven by higher revenue per subscriber. EBITDA reached $26.9 million, up $16.6 million over the same quarter last year due primarily to reduced general and administrative expenses. Debt at the end of the period was $839 million. Axtel is pursing refinancing alternatives as well as new sources of financing. For example, Axtel is currently in discussions with its major supplier with respect to the terms of its supply and financing contracts. There can be no assurance that such refinancing or any new financing can be arranged on acceptable terms or at all. Plan of Arrangement Update -- The court-appointed monitor Ernst & Young Inc., is in discussions with BCI and BCI's stakeholders in order to formulate a recommendation to the court on the process of identifying and determining claims against BCI. A final recommendation is expected to be approved before year-end 2002. BCI is operating under a court supervised Plan of Arrangement, pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its stakeholders and dissolving the company. BCI is listed on the Toronto Stock Exchange under the symbol BI and on the NASDAQ National Market under the symbol BCICF. Visit its Web site at http://www.bci.ca BORDEN CHEMICALS: Wants Lease Decision Time Extended to April 24 ---------------------------------------------------------------- For the fifth time, Borden Chemicals and Plastics Operating Limited Partnership and its debtor-affiliates, ask the U.S. Bankruptcy Court for the District of Delaware to extend their lease decision period. The Debtors tell the Court that they need until April 24, 2003 to decide whether to assume, assume and assign, or reject all unexpired nonresidential real property leases. In connection with the conduct of its business, BCP may be a party to various unexpired nonresidential real property leases. The Debtors have indicated that they have been considering various strategic alternatives, including sales of substantially all of its assets. Consequently, the Debtors obtained Court's approval for the sale of its PVC and VCM/E Plants located at its now-idled Geismar Facility. The Debtors point out that potential purchasers of BCP's remaining assets may be interested in having the Debtors assume some or all unexpired leases associated with remaining assets and assign them to the purchasers. With respect to the sale of the Debtors' remaining assets, the Debtors and potential purchasers require additional time to coordinate their separate and cooperative analyses of these issues and negotiate a mutually acceptable strategy. Although the Debtors and their professionals have worked diligently and continuously toward finalizing various possible transactions, the process described in the Bidding Procedures will extend beyond the current deadline. Borden Chemicals and Plastics Operating Limited Partnership, producer PVC resins, filed for chapter 11 protection on April 3, 2001. Michael Lastowski, Esq., at Duane, Morris, & Hecksher represents the Debtors in their restructuring efforts. BUDGET GROUP: Court OKs Young Conaway as Local Delaware Counsel --------------------------------------------------------------- Budget Group Inc., sought and obtained approval from the U.S. Bankruptcy Court for the District of Delaware to employ Young Conaway Stargatt & Taylor LLP as local Delaware counsel to perform legal services that will be necessary during these Chapter 11 cases. The Debtors will compensate Young Conaway on an hourly basis, and reimburse the firm for actual, necessary expenses and other charges incurred. The principal attorneys and paralegals presently designated to represent the Debtors and their current standard hourly rates include: Robert S. Brady - $400 Edward J. Kosmowski - $280 Edmon L. Morton - $280 Joseph A. Malfitano - $260 Matthew B. Lunn - $220 Thomas Hartzell (paralegal) - $135 As legal counsel, Young Conaway will: A. provide legal advice with respect to the powers and duties as debtors in possession in the continued operation of their businesses and management of their properties; B. prepare and pursue confirmation of a plan of reorganization and approval of a disclosure statement; C. prepare, on behalf of the Debtors, necessary applications, motions, answers, orders, reports and other legal papers; D. appear in Court and protect the Debtors' interests before the Court; and E. perform all other legal services for the Debtors, which may be necessary and proper in these proceedings. Robert S. Brady, a partner at Young Conaway, tells the Court that the Firm received a $148,220 retainer in connection with planning and preparation of initial documents for filing the Debtors' Chapter 11 cases. A portion of this amount has been applied to prepetition fees and expenses, including the Chapter 11 filing fees. Young Conaway will hold the balance as security for postpetition fees and expenses. (Budget Group Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Borden Chemical & Plastics' 9.500% bonds due 2005 (BCPU05USR1) are trading between 0.5 and 2. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BCPU05USR1 for real-time bond pricing. CALPINE: Receives $22MM from Nevada Power for Past-Due Payments --------------------------------------------------------------- Calpine Corporation (NYSE: CPN) has received approximately $22 million from Las Vegas-based Nevada Power Company for all outstanding payables owed to Calpine for power deliveries Calpine made to Nevada Power during the period of May 1, 2002 through September 15, 2002. Calpine provides power and other ancillary services to Nevada Power through a variety of short- term contracts. In April 2002, Nevada Power requested that its power suppliers extend payment terms to help overcome the utility's short-term liquidity problems. Subsequently, Nevada Power withheld a significant portion of the power payments owed to Calpine for power deliveries during the period from May 1, 2002 through September 15, 2002. Although Nevada Power was no longer meeting its full payment obligations, Calpine continued to deliver much needed electricity to Nevada Power customers during the hot summer months, when power demand is at its highest. Curt Hildebrand, Calpine vice president, stated, "Calpine recognizes that with a vital product like electricity, customers require a reliable energy provider. Calpine continues to demonstrate our long-term commitment to the Nevada power market by continuing to provide a dependable source of electricity to Nevada Power customers." Based in San Jose, Calif., Calpine Corporation is an independent power company that is dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired power generation. It generates and markets power through plants it develops, owns and operates in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine also is the world's largest producer of renewable geothermal energy, and it owns approximately 1.0 trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its Web site at http://www.calpine.com * * * As reported in the April 3, 2002 issue of the Troubled Company Reporter, Standard & Poor's lowered its corporate credit rating on Calpine Corp., to double-'B' from double-'B'-plus. The outlook is stable. At the same time, Standard & Poor's lowered its rating on Calpine's senior unsecured debt to single-'B'-plus from double-'B'-plus, two notches below the corporate credit rating; its rating on the "SLOBS" (Tiverton/Rumford and Southpoint/Broad River/Rockgen) to double-'B' from double-'B'- plus; and its rating on the convertible preferred stock to single-'B' from single-'B'-plus. DebtTraders reports that Calpine Corp.'s 10.500% bonds due 2006 (CPN06USR2) are trading between 37 and 39. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN06USR2for real-time bond pricing. CEDARA SOFTWARE: Will Publish First Quarter Results on Nov. 22 -------------------------------------------------------------- Cedara Software Corp., (TSX:CDE/NASDAQ:CDSW) a leading provider of medical imaging software, will release the financial results for its first quarter after close of market on Friday, November 22, 2002. The Company will hold a conference call on Monday, November 25, 2002 at 11:00 a.m. EST to discuss first quarter performance and to provide an update by Cedara's recently appointed CEO, Abe Schwartz. Conference Call Details The conference call can be accessed via audio webcast by visiting http://www.cedara.com/investors/index.htmlor by going to http://www.cedara.comand clicking on "Investors". Participants in the conference call are asked to dial 416-695-5806 or 1-800-273-9672, five to ten minutes prior to the November 25, 2002, 11:00 a.m. start of the teleconference to participate in the call. Please note the revised conference call time of 11:00 a.m. and not 4:00 p.m. This conference call will be recorded and will be available on instant replay at the end of the call, until midnight December 20, 2002. To listen to the replay, please dial 416-695-5800 or 1-800-408-3053, and enter pass code 1300056. Cedara Software Corp. Annual Meeting Cedara Software Corp., also announced it will convene its annual meeting of shareholders on Tuesday November 26, 2002 at 3:00 p.m. EST at the Sheraton Centre Hotel, Essex Ballroom, 123 Queen Street West, Toronto, Ontario. The doors will open at 2:30 p.m. for product demonstrations and refreshments. Cedara Software Corp., is a leading provider of medical imaging software serving healthcare solution providers world-wide and is positioned to deliver sustainable software value to its Original Equipment Manufacturer and Value Added Reseller partners. Cedara's software enables healthcare devices and information technology to perform medical imaging, image distribution, diagnostic review and therapy guidance. As of March 31, 2002, Cedara posted a working capital deficit of about $4.7 million and a shareholders' equity deficit of $10 million. CLUBCORP INC: S&P Keeping Watch on B+ Corporate Credit Rating ------------------------------------------------------------- Standard & Poor's Ratings Services has placed its single-'B'- plus corporate credit rating on ClubCorp Inc., on CreditWatch with negative implications, based on the company's weaker-than- expected third quarter operating performance, its modest covenant cushion, and limited liquidity. Dallas, Texas-based ClubCorp is the largest owner and operator of golf and business clubs and destination golf resorts in the world. The company operates 119 country clubs, golf clubs and public golf facilities, three destination golf resorts and 77 business and sports clubs located in 30 states and five countries. As of September 3, 2002, ClubCorp had $674.2 million of debt outstanding. "The CreditWatch listing reflects uncertainty regarding ClubCorp's level of earnings and its ability to deliver expected operating performance amid a soft economy," said Standard & Poor's credit analyst Andy Liu. Liquidity for the company is tight. ClubCorp has some borrowing availability remaining on its revolving credit facility, and the access to capital market is limited. The company's performance has been adversely affected by the soft economy and negative travel trends. Memberships and golf rounds at its business/sports clubs and golf facilities declined, and the travel slump pressured occupancy rates at its resort properties. Operating performance is expected to remain weak for the medium term until the economy strengthens. On the other hand, the company has made significant progress in divesting under-performing and non-core properties. In resolving the CreditWatch, Standard & Poor's will assess ClubCorp's near-term operating outlook, including cost reduction efforts; refinancing plans regarding its bank loans; and any non-core asset divestitures that the company may undertake. CORVUS INVESTMENTS: Fitch Keeping Watch on Low B-Rated Classes -------------------------------------------------------------- Fitch Ratings has placed the following classes of notes issued by Corvus Investments Ltd., and Taunton CDO Ltd., on Rating Watch Negative: Corvus Investments Ltd. -- $200,000,000 class A-2 fixed-rate notes due 2030 'AAA'; -- $65,000,000 class B floating-rate notes due 2030 'AA'; -- $60,000,000 class C floating-rate notes due 2030 'A'; -- $40,000,000 class D floating-rate notes due 2030 'BBB'; -- $25,000,000 class E floating-rate notes due 2030 'BB'; -- $10,000,000 class F fixed-rate notes due 2030 'B'. Taunton CDO Ltd. -- $26,000,000 class B floating-rate notes due 2031 'AA'; -- $24,000,000 class C floating-rate notes due 2031 'A'; -- $16,000,000 class D floating-rate notes due 2031 'BBB'; -- $10,000,000 class E floating-rate notes due 2031 'BB'; -- $4,000,000 class F fixed-rate notes due 2031 'B'. Continued deterioration in the credit quality of their reference pools, coupled with a number of reference obligations that have become subjects of credit events as well as the potential for physical delivery of reference obligations that are currently deferring interest (PIKing) to the trusts, have increased the credit risk of both transactions to a point where their risk may no longer be consistent with their ratings. The physical delivery of PIKing reference obligations would reduce the notional amount of the credit default swaps, thus reducing current incoming cash flows. As of Sept. 30, 2002, Corvus Investments Ltd. had a Weighted Average Rating Factor (WARF) of 37.05 versus a trigger of 32. Taunton CDO Ltd. had a WARF of 37.93 versus a trigger of 32. Reference obligations that were subjects of credit events represented 3.5% and 8.25% of the total reference pool of Corvus Investments Ltd. and Taunton CDO Ltd., respectively. Both transactions were failing their E and F OC tests, with Taunton CDO Ltd. also failing its D OC test. Fitch is currently reviewing these transactions in detail. Appropriate action will ensue upon completion of its analysis. Both Corvus Investments Ltd., and Taunton 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 could become cash flow CDOs. As of Sept. 30, 2002, both Corvus Investments Ltd. and Taunton CDO Ltd. did not hold any physical assets in their portfolios. Both transactions' reference pools primarily consisted of RMBS, CDO, and CMBS securities. ENRON CORP: Saeger, et. al. Gets OK to Hire Manatt as Counsel ------------------------------------------------------------- The law firm of Manatt, Phelps & Phillips LLP was previously retained -- at Enron Corporation and its debtor-affiliates' expense -- to represent Rex Rogers. Four other Enron employees: -- Elizabeth Saeger, -- John Lavorato, -- Jeffrey Hodge, and -- Mark Taylor. are being asked by the government agencies to give testimony or information as witnesses about the Debtors. Judge Arthur Gonzalez of the U.S. Bankruptcy Court for the Southern District of New York permits Manatt, Phelps & Phillips to, at the Debtors' expense, serve as counsel to the four employees, nunc pro tunc to March 29, 2002. As the four employees' representative, Manatt and its clients will enter into retainer agreements as required by the District of Columbia Court of Appeals' rules of ethics. Either party have the right to terminate the relationship in accordance to the terms of the agreements. Manatt's current regular hourly rates for its professionals who will handle the case are: Michael Rauh $475 Lindsey W. Cooper, Jr. 230 Manatt will seek payment from the Debtors of legal fees and disbursement of reasonable out-of-pocket expenses in its representation of the employees with respect to the investigation, consistent with the Fee Orders. (Enron Bankruptcy News, Issue No. 46; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Employee Committee Encouraged by Fastow's Indictment ---------------------------------------------------------------- The following is the statement of Richard D. Rathvon, co-chair of the Enron Employment Related Issues Committee, regarding the federal indictment brought Thursday against former Enron CFO Andrew Fastow, thus: "The Employee Committee is encouraged that the authorities are taking aggressive action against those who mismanaged Enron into bankruptcy. The indictment against Mr. Fastow, the previous freezing of his assets, the plea of former Fastow aide Michael Kopper, all represent additional steps down the path to justice for former Enron employees hurt by the bankruptcy. "Current and former Enron employees can be reassured by the indictment against Mr. Fastow that justice is moving forward. And they can be reassured that the Employee Committee continues to pursue justice and fairness down additional paths that will hopefully lead to the recovery of an additional $80 million for severed employees who opted-in to the settlement agreement approved by the bankruptcy court in August. "Under terms of the Severance Settlement Agreement reached with Enron and approved by the Bankruptcy Court in August, the Committee will do all within its scope to recover the $80 million or more we believe to have been wrongfully distributed or received. Under terms of the Settlement Agreement, the Employee Committee will redistribute recovered bonus money to severed employees who opted-in to the settlement." Employees interested in more details of the Settlement agreement and the pursuit of retention bonuses should visit http://www.employeecommittee.com The Employee Committee is an official committee appointed by the United States Trustee charged with representing the collective interests of all current, former and retired employees of Enron in Enron's bankruptcy case. The Employee Committee serves as a strong advocate for the interests of former and current Enron employees during the bankruptcy process. Members of the committee were selected by the trustee and the make-up of the committee was designed to reflect the broad diversity of Enron's current and former workforce. The Committee is working to provide employees with timely, accurate information on the status of the bankruptcy case. EOTT ENERGY: U.S. Trustee Appoints Unsecured Creditors Committee ---------------------------------------------------------------- Pursuant to Sections 1102(a) and 1102(b)(1) of the Bankruptcy Code, United States Trustee for Region 7 Richard W. Simmons names four eligible creditors of EOTT Energy Partners, L.P., and its debtor-affiliates, to the Official Committee of Unsecured Creditors: 1. John Robert Chambers, Chairman Lehman Energy Fund 600 Travis, Ste 7330 Houston, Texas 77002 E-mail: rchamber@lehman.com 2. Timothy S. Collins Northwestern Mutual Life Insurance Co. 720 E. Wisconsin Ave. Milwaukee, Wisconsin 53202 E-mail: timothycollins@northwesternmutual.com 3. Keith Chan The Dreyfus Corporation 200 Park Ave. New York, New York 10166 E-mail: chan.kc@dreyfus.com 4. Derek Schrier Farallon Capital Management, LLC One Maratime Plaza, Ste, 1325 San Francisco, California 94111 E-mail: Dschrier@FarallonCapital.com (EOTT Energy Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTRaders that Eott Energy Partners/Fin.'s 11.000% bonds due 2009 (EOT09USR1) are trading between 57 and 59. See http://www.debttraders.com/price.cfm?dt_sec_ticker=EOT09USR1for real-time bond pricing. EUROSTAR I CDO: Fitch Cuts Class A-3 & B Note Ratings to B+/CC -------------------------------------------------------------- Fitch Ratings, the international rating agency, has taken the following actions on Eurostar I CDO Notes, a collateralized debt obligation backed predominantly by high yield bonds. Securities downgraded and removed from Rating Watch Negative are: -- Class A-3 notes to 'B+' from 'A-'; -- Class B notes to 'CC' from 'CCC'. The following securities have been affirmed and removed from Rating Watch Negative: -- Class A-1 and A-2: 'AAA'; -- Class C 'CC'. Fitch's downgrades reflect the deterioration in credit quality of the portfolio: the portfolio contains nine defaulted assets with a total par value of EUR40.5 million and seven 'CCC' or below rated assets with a total par value of EUR33.89m. The weighted average Fitch rating of the current portfolio is B+ (excluding defaulted assets). The downgrade of class B is also due to the fact that class B is currently deferring interest, thus increasing its principal balance. Due to the failure of the overcollateralisation tests, interest proceeds have been diverted from class B and C notes to pay down EUR13.19m of the class A-1 and A-2 notes. This mechanism has improved the credit quality of the class A-1 and A-2 notes and allowed Fitch to affirm their ratings. Interest proceeds will continue being diverted until such time that the coverage tests are back into compliance. In June 2000, Stichting EuroStar I CDO, a Dutch foundation, issued EUR306.31m of various classes of fixed- and floating-rate notes and invested the proceeds in a portfolio of sub-investment grade debt securities. EXTENDED STAY: Amends Bank Credit Facility to Ensure Flexibility ---------------------------------------------------------------- Extended Stay America, Inc. (NYSE:ESA), a leading provider of extended stay lodging, has amended its $900 million bank credit facility to provide flexibility to accelerate the pace of development of new hotels as market conditions warrant. The amendment modifies certain definitions and increases the total leverage covenant from 4.50 to 5.00 for the period from April 1, 2003, to March 31, 2004, and from 4.50 to 4.75 for the period from April 1, 2004, to June 30, 2004. The leverage covenant returns to the previously scheduled level of 4.50 beginning July 1, 2004. The amendment retains the existing pricing grid which provides for increases to the interest rate on outstanding loans under the credit facility by 0.25% if total leverage is greater than or equal to 4.25 or by 0.75% if total leverage is greater than or equal to 4.75. George D. Johnson, Jr., CEO, commented, "With the projected decline in the rate of supply of new hotel rooms for the next few years, we strongly believe that now is the time to prudently accelerate our pace of development and thereby further increase our industry-leading market share by having additional hotels in operation as the economy recovers." Extended Stay America currently owns and operates 452 hotels under the Extended StayAmerica, StudioPLUS, and Crossland brands. The Company currently has 16 hotels under construction. The Company plans to increase the number of sites upon which it will commence construction during the fourth quarter from 9 to 16 sites, which would increase the total number of construction starts for 2002 from 24 to 31 sites with total development costs of approximately $250 million. Depending on a number of factors including improvements in the overall U.S. economy, improvements in demand for lodging products in the overall lodging industry, and improvements in demand for the Company's extended stay lodging, the Company plans to commence construction on 31 sites in 2003 with total development costs of approximately $270 million and has identified 10 additional sites with total development costs of approximately $86 million for which construction could commence in 2003. The Company will continue to seek the necessary approvals and permits for additional sites and may seek to increase the number of construction starts in the future. At June 30, 2002, Extended Stay America's balance sheets show that its total current liabilities exceeded its total current assets by about $31 million. FINET.COM INC: Fails to Maintain Nasdaq Listing Requirements ------------------------------------------------------------ FiNet.com, Inc., (Nasdaq:FNCM), and its wholly owned subsidiaries, have received a Nasdaq determination letter dated October 23, 2002. The Company also announced its consolidated third quarter financial results for the three-month period ended September 30, 2002. Nasdaq Determination Letter The Nasdaq determination letter notifies the Company that it has failed to comply with either the minimum $2,000,000 net tangible assets or the minimum $2,500,000 stockholders' equity requirements for continued listing as set forth in Marketplace rule 4310(c)(2)(B). The letter states that as a result of its failure to maintain the minimum requirements, the Company's securities will be delisted from The Nasdaq SmallCap Market at the opening of business on October 31, 2002. Once delisted, the Company expects that its stock will trade on the Nasdaq-operated Over-the-Counter Bulletin Board. There can be no assurance that there will be a market maker for the Company's securities or that an active market will develop. Third Quarter Financial Results Revenues for the three-month period ended September 30, 2002 decreased 40%, or $1.2 million, to $1.8 million compared to the three-month period ended June 30, 2002. Revenues remained constant compared to the three-month period ended September 30, 2001. The decrease in revenues is primarily attributable to a substantial decrease in loan settlements during the three-month period ended September 30, 2002. The business-to-business segment decreased loan production by 17%, to $43.8 million, compared to $52.9 million for the three- month period ended June 30, 2002. The business-to-business segment's relative contribution to total loan production remained the same compared to the three-month period ended June 30, 2002. Loan settlements for the three-month period ended September 30, 2002 decreased to $39.0 million, a decrease of 39%, compared to $64.1 million for the three-month period ended June 30, 2002. Gross margin for the three-month period ended September, 2002 decreased to negative $0.2 million from $1.0 million from the prior three month period ended June 30, 2002, and decreased 133%, or $0.8 million, compared to the three-month period ended September 30, 2001. The decrease in gross margin is attributable to a 39% decrease in loan settlements. Loss from operations for the three-month period ended September 30, 2002 increased by 180%, or $1.8 million, to $2.8 million compared to $1.0 million for the three-month period ended June 30, 2002 and increased by 27%, or $0.6 million compared to the three-month period ended September 30, 2001. Other Financial Highlights Net loss available to common stockholders for the three-month period ended September 30, 2002 increased 167%, or $2.5 million, to $4.0 million compared to the three-month period ended June 30, 2002, and increased 82%, or $1.8 million, from $2.2 million compared to the three-month period ended September 30, 2001. Net loss also included a write-off amount of $0.9 million representing the remaining equity balance of FiNet's Equity- Method Investee. FiNet's senior management along with its Board of Directors made a determination that a decline in fair value of its investment occurred and it is other-than-temporary. Net loss per share for the three-month period ended September 30, 2002 was $0.42 per share, compared to a net loss of $0.18 per share in the three-month period ended June 30, 2002 and compared to a net loss of $0.23 per share in the three month period ended September 30, 2001. The total cash position of the Company as of September 30, 2002 was $2.3 million, of which $1.0 million was immediately available and $1.3 million was restricted. At September 30, 2002, FiNet.com's balance sheets show a total shareholders' equity deficit of about $2.4 million. FiNet.com, Inc., is a financial services holding company. Monument Mortgage, Inc., a wholly owned subsidiary conducts diversified mortgage banking and brokering operations and is a provider of both traditional and online mortgage services to a diversified customer base consisting of mortgage lenders, mortgage brokers, real estate agents and consumers. Monument Mortgage offers its services to mortgage broker businesses through http://www.monument.comand to real estate broker businesses and to consumers through http://www.homewardsolutions.comand http://www.finet.com GENTEK INC: Seeks Approval to Hire Ordinary Course Professionals ---------------------------------------------------------------- GenTek Inc., and its debtor-affiliates want to continue the employment and retention of various attorneys, accountants and other professionals in matters arising in the ordinary course of their businesses and unrelated to these Chapter 11 cases, while they operate as debtors-in-possession under the Bankruptcy Code. Consistent with the dimensions of these cases and the geographic diversity of the Debtors' businesses, the Debtors will employ the Ordinary Course Professionals on terms substantially similar to those in effect before the Petition Date. Mark S. Chehi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, explains that the continued employment of these ordinary course professionals will enable the Debtors to continue normal business activities that are essential to their stabilization and reorganization efforts. On the contrary, Mr. Chehi notes that the administration of the Debtors' estates would be severely hindered if the Debtors were required to: (a) submit to the Court an application, affidavit and proposed retention order for each Ordinary Course Professional; (b) wait until an order is approved before any Ordinary Course Professional continues to render services; and (c) withhold payment of the normal fees and expenses of the Ordinary Course Professionals until they comply with the compensation and reimbursement procedures applicable to professionals retain to do Chapter 11-related tasks. Under these conditions, Mr. Chehi points out that there is a significant risk that some Ordinary Course Professionals would be unwilling to provide services, and that others would suspend services pending a specific order authorizing the services. Since many of the matters are active on a day-to-day basis, any delay or need to replace professionals could have significant adverse consequences. Moreover, requiring the Ordinary Course Professionals to file retention pleadings and participate in the payment approval process along with the Chapter 11 Professionals would unnecessarily burden the Clerk's Office, the Court and the Office of the United States Trustee, while adding significantly to the administrative costs of these cases without any corresponding benefit to the Debtors' estates. Nevertheless, recognizing the importance of providing information regarding Ordinary Course Professionals to the Court and the United States Trustee, the Debtors propose these retention procedures: -- Each Ordinary Course Professional will be required to file with the Court a declaration of proposed professional and disclosure statement within 30 days after the Court approves this Motion. The Ordinary Course Professional will serve the disclosure to: * the U.S. Trustee; * the counsel for any official committees to be appointed; * the counsel to the Debtors' secured lenders; and * the counsel for the Debtors; -- After serving the required Declaration, the U.S. Trustee, the Committee and the Lenders will have 20 days to object to the retention of an Ordinary Course Professional; -- Any objection must be filed with the Court on or before the Objection Deadline and served to: * the Ordinary Course Professional; * the U.S. Trustee; * the counsel to the Committee; * counsel to the Lenders; and * the counsel to the Debtors; -- If any objection cannot be resolved and withdrawn within 20 days after the service, the matter will be scheduled for hearing before the Court; and -- If no objection is received by the Objection Deadline, or if an objection is withdrawn, the Debtors will be authorized to retain the Ordinary Course Professional as a final matter without further order of the Court. The Debtors also seek the Court's consent to retain additional Ordinary Course Professionals, as future circumstances require, without the need to file individual retention applications or provide further hearing or notice to any party. In hiring new Ordinary Course Professionals, the Debtors suggest to the Court these procedures: -- The Debtors will only file a supplement to the current list of Ordinary Course Professionals with the Court and serve a copy of the Supplement to: * the U.S. Trustee; * the counsel for the Committee; and * the counsel to the Lenders. -- As with the Ordinary Course Professionals, each Additional Ordinary Course Professional will be required to file and serve a Declaration within 30 days after the filing of the Supplement; -- The U.S Trustee, the Committee and the Lenders then would be given 20 days after service of each required Declaration to object to the retention of the Additional Ordinary Course Professional in question; and -- If no objection is submitted, or the objection is withdrawn, the Debtors would be authorized to retain the Additional Ordinary Course Professional as a final matter without further order. In consideration for an Ordinary Course Professional's services, the Debtors will implement these guidelines for payment of fees and expenses of an Ordinary Course Professional: -- The Debtors will pay, without formal application to the Court by any Ordinary Course Professional, fees and expenses not exceeding a total of $30,000 per month, for each Ordinary Course Professional. The Debtors also propose that aggregate monthly payments to all Ordinary Course Professionals be limited to $300,000, unless additional payments are authorized by the Court; -- If a Professional's fee exceed an average of $30,000 per month, any payments to a particular Ordinary Course Professional would become subject to court approval; -- However, any contingent fee amounts received by the Ordinary Course Professionals from recoveries realized on the Debtors' behalf, are exempted from the monthly limitations. The limitations would apply only to direct disbursements by the Debtors; -- The monthly allowance for fees and expenses of Ordinary Course Professionals be applied on an average "rolling" basis. If any professional's fees and expenses: (a) are in any month less than $30,000, the remainder of the monthly allowance will be made available for payment to that professional during subsequent months, in addition to the monthly allowance amount; and (b) exceed $30,000 -- plus any unused amounts from prior months -- in any month, the Debtors will pay no more than $30,000 -- plus any unused amounts from prior months. The Debtors will roll the average into following months, when it can be paid if the fees and expenses in those months are less than the allowance amount; and -- The Debtors believe that there are certain Ordinary Course Professionals that may be allowed to a monthly cap in excess of the $30,000 standard. In this case, the Debtors will seek the agreement of the U.S. Trustee, the Committee and the Lenders to a higher cap, not exceeding $75,000, for any Ordinary Course Professional who will exceed $30,000. (a) If the Debtors are able to obtain their agreement to a higher cap, the agreement would be evidenced by the filing of a notice of increased cap amount; and (b) In the absence of an agreement, the $30,000 cap will be enforced. The Debtors intend to file a payment summary statement with the Court every 120 days and to serve the statement to the U.S. Trustee, the Committee's and the Lenders' respective counsels. The summary statement will include this information for each Ordinary Course Professional: (i) the name of the Ordinary Course Professional; (ii) the aggregate amounts paid as compensation for services rendered and reimbursement of expenses incurred by that Ordinary Course Professional during the statement period; and (iii) a general description of the services rendered by that Ordinary Course Professional. Mr. Chehi assures the Court that, although certain of the Ordinary Course Professionals may hold unsecured claims against the Debtors, these Ordinary Course Professionals have no interest materially adverse to the Debtors, their estates, creditors or shareholders. (GenTek Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Urges Court to Approve Settlement with Fusion -------------------------------------------------------------- Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York, recounts that in November 2000, Global Crossing Ltd., and its debtor-affiliates, entered into an agreement with Financial Fusion Inc. to develop and license certain software. The Software was designed to support a comprehensive program to facilitate the exchange of information, particularly buy and sell orders relating to stock purchases and other securities, between broker/traders and accountants at financial institutions. The Service would act as a critical link between front office and back office transaction, payment and settlement systems for financial institutions. During the course of the Software's development, it became apparent that both the Debtors and Fusion neither had the resources nor the expertise to bring the Service to market. As a result, the Debtors and Fusion sought a business partner whose professional relationships with financial institutions could be leveraged to implement the Service. They identified the Society of Worldwide Interbank Financial Telecommunications SCRL -- SWIFT -- as an ideal business partner for bringing the Service to the market. Swift has strong relationships with many financial institutions and is in the business of implementing software and services to facilitate the management and operation of financial institutions. On November 28, 2001, Mr. Basta informs the Court that the Debtors, Fusion and Swift entered into a strategic cooperation agreement whereby the Service could be implemented and brought to market. The Agreement provided that the Debtors' rights in the Software would be modified to grant Swift rights to use the Software to develop and operate the Service. Additionally, under the Agreement, the Debtors were required to: -- provide Swift on-site resources to perform system and network administration for Swift's data center in Culpepper, Virginia; -- transfer title to the Hosting Assets to Swift; and -- reimburse Swift up to $100,000 for hosting the Service. Under the Agreement, Swift and Fusion agreed to pay the Debtors $2,000,000, payable on December 31, 2002, with an additional $3,000,000 to be paid out as a percentage of future revenues generated by the Service. To date, the Debtors have incurred $790,000 in costs in its efforts to develop the Service and fulfill its obligations under the Agreement. In order perform its outstanding obligations under the Agreement, the Debtors anticipate that it would incur at least an additional $800,000 in expenses through the end of 2002. The Debtors does not believe that it is in its best interests to continue to develop and operate the Service or to perform its other obligations under the Agreement. As a result of the Debtors' Chapter 11 cases, Mr. Basta reminds the Court that the Debtors have revised their business plan to concentrate on providing core network services and connectivity for customers between the top 200 cities in the world. Under their current business plan, the Debtors are neither pursuing plans under which they would install, monitor and maintain telecommunications equipment at individual customer locations, nor are they involved in the development of software for the financial industry or any other customer group. As a result of this change in business strategy and the concomitant downsizing in the Debtors' employee base, Mr. Basta relates that the Debtors do not currently employ the personnel with the requisite expertise or have the resources that are required to develop and support the Service. To complete the installation of the Hosting Assets at the Virginia Site and implement and market the Service, the Debtors would have to hire new employees with the necessary skills. Hiring these personnel and deploying additional resources would place an unduly large burden -- in terms of operating and capital expenditures -- on the Debtors in light of their current business strategy. Accordingly, the Parties have agreed to terminate the Debtors' involvement in the Agreement and to relieve the Debtors of any further obligations under the Agreement, as set forth in a settlement agreement dated August 27, 2002. The salient terms of the Settlement Agreement are: -- On or before January 15, 2003, Swift will pay to the Debtors $950,000; -- All the Debtors' obligations to Fusion and Swift under the Agreement, and all obligations of Swift and Fusion to the Debtors under the Agreement, will terminate and will be deemed to be fully and finally satisfied and of no further force and effect; -- Certain obligations contained in the Agreement will remain in full force and effect. Any transfer of intellectual property from the Debtors to Swift that has taken place prior to the Settlement Agreement, including transfer of rights to the Software, will be unaffected by the termination of the Agreement; -- As soon as the Settlement is approved, the Debtors will no longer be a party to the Agreement; -- The Debtors and Fusion agree that Swift's right to use the Software will remain valid and in force, and neither party will seek to further amend this consent in any way that will limit Swift's or Fusion's rights under Agreement; -- Each of Fusion and Swift on the one hand, and the Debtors on the other hand, release and discharge the other from, and irrevocably and unconditionally waive, any and all claims, causes of actions, actions, suits, debts, dues, sums of money, accounting reckonings, bonds, bills, specialties, controversies, agreements, promises, various trespasses, damages, judgments, extent executions and demands whatsoever which the releasing party could have asserted against the released party arising under the Agreement, subject only to the rights expressly granted to the respective Parties under the Settlement Agreement; and -- The Debtors affirm that all right, title and interest in the Hosting Assets at the Virginia Site passed to Swift effective July 18, 2002, free and clear of any liens. The Hosting Assets constitute certain assets provided and installed by the Debtors at the Virginia Site for the Service pursuant to its obligations under the Agreement. The purpose of this affirmation in the Settlement Agreement is to record the fact that the Debtors have complied with its obligations and acknowledge that from the Transfer Date forward, all responsibility for and risk in the Hosting Assets passed to Swift. The Debtors ask the Court to approve the Settlement Agreement with Swift and Fusion, pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure. Mr. Basta contends that the Settlement Agreement is fair and equitable, falls well within the range of reasonableness, and enables the parties to avoid the costs of litigation to resolve outstanding issues arising from the Debtors' performance under the Agreement. Termination of the Agreement enables the Debtors to cover costs, earn a profit, and be relieved of an obligation to develop and market a product in a field that is not part of their current business plan. Under the Settlement Agreement, Mr. Basta points out that the Debtors will recoup the $790,000 in costs already expended, and earn a $160,000 profit for its efforts under the Agreement. The Debtors estimate they would need to spend at least an additional $800,000 to complete their obligations under the Agreement. (Global Crossing Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Global Crossing Holdings Ltd.'s 9.625% bonds due 2008 (GBLX08USR1) are trading between 1.625 and 1.875. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1 GOODYEAR TIRE: Underperformance Prompts S&P to Cut Rating to BB+ ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its double-'B'-plus corporate credit rating on Goodyear Tire & Rubber Co., on CreditWatch with negative implications due to concern over Goodyear's financial performance relative to expectations and the likely need to dedicate substantial near-term cash flow to address its underfunded pension benefit obligation. Akron, Ohio-based Goodyear is the world's largest tire manufacturer, supplying products to both the replacement and original equipment markets. The company's total debt, unadjusted for operating leases or trade receivables securitization, totaled $3.6 billion at September 30, 2002, including $687 million of debt due within one year. "The CreditWatch listing follows the announcement of third- quarter 2002 results showing EBIT underperformance, relative to Standard & Poor's expectations, due largely to disappointing results in the North American tire segment," said Standard & Poor's credit analyst Nancy C. Messer. Although the company's other six operating segments reported improved operating income for the third quarter year-over-year, the North American tire segment accounts for 50% of Goodyear's sales, 30% of income, and over 40% of assets. Standard & Poor's is concerned about the adequacy of the company's ongoing restructuring actions to improve revenues and margins in the North American segment over the near term. In addition, the company indicated that its underfunded benefit obligation is estimated to total $2 billion at year-end 2002, compared with $1 billion at December 31, 2001, due to the decline in market valuation of the plan assets. Goodyear has reported disappointing financial results in recent years for a number of reasons, including competitive pricing conditions; product shortages; mix shifts; and depressed demand in key markets. Increased debt levels resulting from the 1999 alliance with Sumitomo Rubber Industries Ltd. made Goodyear especially vulnerable to profit pressures. Standard & Poor's is concerned that credit protection measures may not improve in the near term to a level commensurate with the ratings, specifically lease- adjusted debt to capital near 50% and funds from operations to debt in the 25%-30% range. Standard & Poor's expects to resolve the CreditWatch listing after meeting with management and completing further analysis of the company's operational, product mix, and pricing strategies; end-market demand; and pension obligation funding strategy. Standard & Poor's will review the company's prospective covenant compliance. Goodyear had cash balances of $595 million at Sept. 30, 2002, but cash contributions for pension funding requirements that could be in excess of the company's free cash flow, an accounts receivable securitization program that requires the company to maintain a 'BB' corporate credit rating, and significant near-term debt. GWIN INC: Moore Stephens Expresses Going Concern Doubt ------------------------------------------------------ Gwin Inc. provides sports handicapping analysis and advice to sports bettors worldwide through its wholly-owned subsidiary, Global SportsEDGE, Inc. Global SportsEDGE provides professional handicapping advice on professional football games played by the National Football League, professional basketball games played by the National Basketball Association, college football and basketball games played by Division I of the National Collegiate Athletic Association, and professional major-league baseball. Over the next year, the Company plans to expand its operations to cover sporting events in Europe and Asia, and to expand handicapping services to include soccer, cricket and rugby. The Company's business is highly seasonal and the seven months ended July 31, 2002 exclude virtually all of the college and professional football season. This has historically been the period in which a substantial part of annual revenues are generated. Comparisons to twelve month periods ending in December on a "pro-rata" basis may not be effective. Gwin's net loss decreased from $6,162,866 for the year ended December 31, 2000 to $5,527,352 for the year ended December 31, 2001. The net loss used in earnings per share calculation in 2001 was further increased by an imputed non-cash dividend on the Series C Preferred Shares of $1,092,000 to $6,619,352. This imputed dividend was a result of a 50% upward adjustment in the conversion rate attached to those Preferred Shares after issuance. The net loss for the seven months ended July 31, 2002 was $2,075,443. The Company's working capital deficit as of July 31, 2002, was $3,013,361. Of that amount, approximately $396,000 represents revenues from sales which will not be recognized until after July 31, 2002. Since July 31, 2002, Gwin has raised approximately $750,000 from its existing security holders. On October 11, 2002, the firm of Moore, Stephens, P.C., independent auditors for Gwin Inc. said of the Company: "[T]he Company has suffered a loss from operations, has a working capital deficiency and accumulated deficit that raise substantial doubt about its ability to continue as a going concern." HEALTHTRAC INC: Requires Additional Cash to Continue Operations --------------------------------------------------------------- HealthTrac Inc.'s financial statements have been prepared on the going concern basis, which assumes the realization of assets and the settlement of liabilities in the normal course of business. The application of the going concern concept is dependent on the Company's ability to generate future profitable operations and receive continued financial support from its shareholders and from external financing. The Company incurred a loss from operations of $2,121,903 for the six months ended August 31, 2002 and has an accumulated deficit of $119,195,227 at August 31, 2002. For the six months ended August 31, 2002, the Company used $387,360 in cash to fund operations, and at August 31, 2002, the Company has a working capital deficiency of $2,450,638. Management projects that the Company will require additional cash and working capital to fund planned operations and capital asset additions for fiscal 2003 of approximately $600,000 (unaudited). Although management is of the opinion that sufficient cash will be obtained from operations and external financing to meet the Company's liabilities and commitments as they become due in fiscal 2003, there can be no assurance that funds from external financings will be available when required on an economical basis to the Company. The ability of the Company to continue as a going concern and realize the carrying value of its assets is dependent on the Company's ability to increase its revenues by increasing its customer base and reducing its operating costs so that the Company achieves profitable operations. To date, subsequent to August 31, 2002 the Company has raised no funding through external common share private placements. If the Company is unable to obtain sufficient funds for operations, it will be required to reduce operations or liquidate assets. HIGHLANDS INSURANCE: Files for Chapter 11 Reorganization in Del. ---------------------------------------------------------------- Highlands Insurance Group, Inc., (OTC Bulletin Board: HIGP) announced that the Company and five of its non-insurance company subsidiaries have commenced Chapter 11 bankruptcy proceedings in the United States Bankruptcy Court for the District of Delaware. The Company and its debtor subsidiaries will be debtors in possession and have filed a joint plan for the reorganization of their debts. The joint plan will not become effective until it is approved by the bankruptcy court. Under the plan as proposed, the assets of the debtors will be transferred to a liquidating trust for the benefit of the debtors' secured and unsecured creditors and the holders of the Company's Series One Preferred Stock in accordance with the terms of a liquidating trust agreement. The Company's common stock will be cancelled with no consideration being paid. The Company is a property and casualty insurance holding company. In December of 2001, because of continuing financial losses, the Company adopted a plan to run-off its insurance business and cause its insurance company subsidiaries to cease issuing new or renewal policies, except as otherwise required by law. Regulatory actions taken by various of the State Departments of Insurance prohibit the Company's insurance company subsidiaries from making any dividend or tax sharing payments to the Company, and have thereby eliminated the Company's only significant sources of revenue. The bankruptcy filings arose as a result of the foregoing and the Company's substantial debt servicing requirements. HIGHLANDS INSURANCE: Case Summary & Largest Unsecured Creditors --------------------------------------------------------------- Lead Debtor: Highlands Insurance Group, Inc. 1000 Lenox Drive Lawrenceville, New Jersey 08648-0426 Bankruptcy Case No.: 02-13196 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Highlands Holding Company, Inc. 02-13197 Northwestern National Holding Company, Inc. 02-13198 American Reliance, Inc. 02-13199 aka Vik Brothers Insurance, Inc. Highlands Claims and Safety Services, Inc. 02-13200 Highlands Services Corporation 02-13201 Type of Business: Insurance Holding Company Chapter 11 Petition Date: October 31, 2002 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtors' Counsel: Richard W. Riley, Esq. Duane Morris LLP 1100 North Market Street Suite 1200 Wilmington, DE 19801 Tel: 302-657-4900 Fax : 302-657-4901 Total Assets: $1,643,969,000 Total Debts: $1,820,612,000 A. Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ JP Morgan Chase Morgan, 100% of the Common $47,710,117 270 Park Avenue Stock of (1) Highlands 20th Floor Holding Co., Inc., (2) (35.9M Sec.) New York, NY 10017 American Reliance, Inc.; (3) Highlands Claims and Safety Services, Inc. Insurance Partners, LP Holder of Convertible $40,177,946 Brad Cooper Subordinated Debenture 54 Thompson Street of the Debtor New York, NY 10012 Fax: 212-985-2411 Insurance Partners, LP Holder of Convertible $22,143,527 Insurance Partners Subordinated Debenture Offshore (Bermuda) of the Debtor Cedar House 41 Cedar Avenue, P.O. Box HM 1179 Hamilton, HM EX, Bermuda Fax: 441-292-8656 Richard M. Haverland Holder of Convertible $2,199,452 521 Pretty Brook Road Subordinated Debentures Princeton, NJ 08540 of the Debtor Fax: 561-231-6371 Comptroller of State of Corp. Franchise Tax $1,247,201 Texas P.O. Box 13528 Austin, TX 78744-3528 Fax: 512-463-4617 Computer Science Corp. Trade Debt $580,000 Michael E. Nemeth 9500 Arboretum Boulevard Austin, TX 78759 MCLP I Limited Partnership Holder of Convertible $527,868 c/o Bob Samuelson Subordinated Debentures 2 Canal Park of the Debtor Cambridge, MA 02141 JLT Re Solutions, Inc. Settlement Agreement $265,000 c/o Klett Rooney Lieber & Schorling 650 Broad Street, 8th Floor Newark, NJ 07102 Charles J. Bachand Holder of Convertible $208,947 Subordinated Debentures Of the Debtor W. Dale Montgomery Holder of Convertible $203,449 Subordinated Debentures of the Debtor Michael A. Weberpal Holder of Convertible $184,000 Subordinated Debentures of the Debtor John W. Cowley Employee & Retention $166,250 Agreement Alleged Amount JP Morgan Securities Inc. Financial Advisory $150,000 Services Kenneth D. Javor Holder of Convertible $109,972 Subordinated Debentures Of the Debtor First International Financial Advisory $103,527 Securities Services Robert C. Resch Holder of Convertible $71,482 Subordinated Debentures of the Debtor Highlands Insurance Co. Intercompany Payable $63,938 Robert M. Stephano Holder of Convertible $54,986 Subordinated Debentures of the Debtor Alliance of American Assessment for $50,000 Insurers membership services Mark W. Phillips Holder of Convertible $40,000 Subordinated Debentures of the Debtor B. American Reliance's 2 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ JP Morgan Chase Bank, as 100% of the $47,710,117 Agent Outstanding Common 270 Park Avenue Stock of Northwestern 20th Floor National Holding New York, NY 10017 Company, Inc. State of New Jersey 1995 and 1998 Corp. $1,586,278 Div. of Taxation business taxes Conferences & Appeals Branch Quakerbridge Road, Bldg. 5 3rd Floor Mercerville, NJ 06618 C. Claims & Safety's 2 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ JP Morgan Chase Bank, as 100% of the $47,710,117 Agent Outstanding Common 270 Park Avenue Stock of Northwestern ($8.4M Sec.) 20th Floor National Casualty New York, NY 10017 Company, Inc. and Pacific Insurance Company Highlands Insurance Co. Miscellaneous $386 Intercompany Payables D. Highland Holdings' 2 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ JP Morgan Chase Bank, as 100% of the $47,710,117 Agent Outstanding Common 270 Park Avenue Stock of Highlands ($26.5M Sec.) 20th Floor Insurance Company New York, NY 10017 Highlands Insurance Co. Intercompany Payables $394 E. Highland Services' 3 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Northwestern National Miscellaneous $31,311 Casualty Company Intercompany Payables Highlands Insurance Intercompany Account $6,003 Group, Inc. Pacific Automobile Miscellaneous $2,003 Insurance Company Intercompany Payables HORSEHEAD: Signs-Up McKinney & Stringer as Environmental Counsel ---------------------------------------------------------------- Horsehead Industries, Inc., and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the Southern District of New York to employ McKinney & Stringer, PC, as their Special Environmental Counsel, nunc pro tunc to August 19, 2002. McKinney & Stringer will perform any legal services on any environmental-related matters in these Chapter 11 cases, including protecting the Debtors' interests in the case of Horsehead Industries, Inc., d/b/a Zinc Corporation of America, vs. Tetra Tech, Inc., and Atkins Benham, Inc., f/k/a Roberts/Schorick & Associates. The principal attorneys presently designated to represent the Debtors and their current standard hourly rates are: David A. Cheek $295 per hour Mark D. Coldiron $300 per hour John P. Falcone $190 per hour 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. INDIGO BOOKS: Working Capital Deficit Tops $22 Mill. at Sept. 28 ---------------------------------------------------------------- Indigo Books & Music Inc. (TSX: IDG), Canada's largest book retailer, reported strong sales results for the second consecutive quarter due to significant inventory and merchandising improvements. Both superstores and traditional format stores showed strong comparable sales growth in the second quarter continuing the first quarter sales trends. Comparative stores sales at Chapters and Indigo superstores, including The World's Biggest Bookstore, increased 6.2% while comparative store sales at Coles increased 5.0% during the quarter. Year to date, comparable store sales are 7.0% and 4.8% at superstores and mall stores respectively. At September 28, 2002, the Company's balance sheets show that its total current liabilities exceeded its total current assets by about $22 million. "I am extremely pleased to see the trend we started in the first quarter is continuing," said Heather Reisman, CEO of Indigo. "Our strategy of careful product selection, improved merchandising, working closely with publishers and other suppliers, as well as the tremendous efforts of our store teams, have clearly put us on the right track going into the all- important holiday season." Total consolidated revenues for the second quarter ended September 28, 2002 grew 9.8% or $15.3 million to $171.2 million from $155.9 million in the second quarter last year. The increase was due in part to the operation of 12 additional superstores for the full quarter, offset by sales decreases from closing nine mall stores. Second quarter sales at Chapters and Indigo superstores, including The World's Biggest Bookstore, grew 13.2% to $118.2 million compared to sales of $104.5 million in the same period last year. Total mall store revenues declined to $36.4 million in the second quarter, a decrease of $1.0 million or 2.7% in comparison to $37.4 million in the second quarter last year, due to the closure of nine stores. The total number of superstores at September 28, 2002 was 89 as compared to 92 superstores at the end of the second quarter last year. The total number of mall stores at the end of the quarter was 181, compared to 190 last year. The store closures are part of the Company's ongoing initiative to streamline the real estate portfolio and close under-performing locations. Consolidated earnings before interest, taxes, restructuring charges, amortization and non-controlling interest in the second quarter was $2.3 million compared to $1.0 million in the second quarter last year, representing an increase in operating earnings of $1.3 million. The increase is due to improved performance across all areas of the business stemming from higher sales and lower operating costs. The consolidated net loss for the second quarter was $7.6 million as compared to a net loss of $31.3 million in the same period last year, an improvement of $23.7 million. The consolidated net loss in the second quarter last year included restructuring and other charges of $21.2 million due to store closures and acquisition of all shares of Indigo Books & Music, Inc. Excluding restructuring and other charges, the consolidated net loss improved $2.5 million over the prior year. Indigo is a Canadian company and the largest book retailer in Canada, operating bookstores in all provinces under the names Indigo Books Music & more, Chapters, The World's Biggest Bookstore and Coles. Indigo operates http://www.chapters.indigo.caan online retailer of books, gifts, videos, and DVDs. Indigo is a publicly traded company listed on the Toronto Stock Exchange under the stock symbol IDG. To learn more about Indigo, please visit the About Our Company section of http://www.chapters.indigo.ca INFINITE GROUP: Clarifies Issues re DARPA Contract Termination -------------------------------------------------------------- Infinite Group (NASDAQ:IMCI) provided the following further clarifications regarding the previously announced termination of its primary contract with the Defense Advanced Research Projects Agency (DARPA), Contract # MDA972-02-C-0013. What happened to the DARPA contract? "On October 30th, 2002, Infinite received a Notice of Termination of Contract #MDA972-02-C-0013. The Contract was terminated for the Government's convenience under the clause entitled Termination, Federal Acquisition Regulation (FAR) 52.249.6." Why was the DARPA contract terminated? "The Government has the right to terminate a contract for 'default' or 'convenience.' In this case, the Government's contract with Infinite Photonics, a subsidiary of Infinite Group, was terminated for the Government's convenience. Termination for convenience is the right of the Government to terminate or cancel performance of work under a contract, in whole or in part, if the contracting officer determines that termination is in the Government's interest. This right is contained in most Government contracts. Alternatively, Termination for default typically will occur in situations where the Government determines that the Contractor has failed to perform within the specified terms of the contract. To reiterate, the Contract was terminated for the Government's convenience." How far had Infinite Photonics progressed in the execution of the contract? "The contract was executed approximately ten months ago in February 2002. The original term of the contract was 24 months with an approximate total value of $12 million. As of June 30th, the Company had billed the Government approximately $2 million for its Research and Development efforts under the Contract. Incremental billings occurred during the quarter ended September 30, 2002. Financial results for the third quarter will be reported in the very near future." What happens next? "We will work very closely with the Government on the settlement process. For contracts terminated for the convenience of the Government, the settlement process may occur by negotiated agreement, by determination of the Terminating Contracting Officer, or by costing out those efforts associated with the Termination. The Company is entitled under the Contract to payment for all work allowable under the Contract that has occurred as of the termination date and all costs allowable under the Contract's settlement provisions." What does the termination mean to Infinite Group? "We are currently assessing both the short and long-term impact of the termination. Although the Company has had regular contact with DARPA throughout the term of the Contract, the receipt of a Notice of Termination for Convenience was unexpected at this time. We do remain committed to developing our laser diode technologies for commercial and military applications, and have confidence that our technologies have strong commercial potential across multiple markets. We intend to vigorously explore all means to continue these efforts." * * * As reported in Troubled Company Reporter's August 7, 2002 edition, the Company during 2001 continued to experience operating losses, due primarily to losses in the discontinued Plastics Group attributed to falling demand for injection molds, and to the start-up costs for the Photonics Group. These losses resulted in reductions in cash flow and a negative working capital position. Infinite is currently focused on its two primary lines of business and is are actively pursuing additional capital through the equity line of credit agreement, private equity sources, strategic alliances, venture capital and investment banking sources. At December 31, 2001, Infinite had a working capital deficit of approximately $1.7 million, ($1.3 million after eliminating the assets and liabilities of its discontinued operations). The working capital deficit was primarily caused by recurring losses at the former Plastics Group resulting in slow payments to the Company's vendors. A going concern qualification was included in the opinion issued by Infinite's auditors on its 2000 financial statements as a result of one of the Company's primary lenders not having issued its waiver for certain loan covenant violations that existed at December 31, 2000 at the Laser Fare subsidiary. The loan covenants are measured annually at December 31. The loan covenant violations which existed at December 31, 2000 related to failure to meet certain levels of working capital, debt to tangible net worth ratio and exceeding capital expenditure limits. Due to the acquisition of LENS equipment in a non- monetary transaction and acquisition of stent equipment, the Company exceeded the capital expenditure limitations to support the growth of its Laser Group. Subsequent to the issuance of the financial statements and the repayment of a certain portion of the related debt, the bank issued a waiver letter for the violations. At December 31, 2001, the Company was in violation of certain covenants related to its failure to meet certain levels of debt to tangible net worth ratio and exceeding the capital expenditure limits. It had completed acquisition of the LENS equipment in a non-monetary transaction in 2001, which also caused the Company to exceed capital limitation requirements. The covenant violations were waived by the bank prior to the issuance of the financial statements. INPRIMIS INC: Changes Company Name to Ener1, Inc. ------------------------------------------------- On October 23, 2002, Inprimis, Inc.'s Articles of Incorporation were amended to change its name to Ener1, Inc. The new trading symbol for the Company's common stock is "ENEI". In addition, the Company's Articles of Incorporation were further amended to increase its authorized common stock to 500,000,000 shares. The action was approved by a consent of the Company's Board of Directors and by a consent of the Company's majority shareholders. As a result of such amendment 4,010,000 shares of the Company's Class A Preferred Stock were converted, according to their terms, into an aggregate of 200,500,000 shares of common stock. Based upon conversion of the preferred stock, the Company currently has outstanding 309,447,020 shares of common stock. * * * As reported late last year, Datawave (CDNX:DTV.V, OTCBB:DWVSF) decided not to proceed closing the Plan of Arrangement with Inprimis as announced on October 12, 2001. DataWave informed Inprimis that it may reconsider its decision if Inprimis is able to demonstrate that the Plan of Arrangement would be in the best interest of DataWave shareholders. In October 2001, Inprimis' securities were delisted from Nasdaq and thus, is now currently trading on Over-The-Counter Bulletin Board. Also, on March 5, 2002, Inprimis, Inc., appointed Kaufman, Rossin & Co., as the independent accounting firm to audit Inprimis' financial statements for the year ended December 31, 2001 replacing Deloitte & Touche LLP, which resigned as Inprimis' independent accounting firm on January 23, 2002. INT'L THUNDERBIRD: TSX Halts Trading for Listing Noncompliance -------------------------------------------------------------- International Thunderbird Gaming Corporation (TSX: INB) announces the following update: The Company previously announced that its common shares were suspended from trading by the TSX as of the close of the market on Friday, November 1, 2002, for failure to meet the continued listing requirements of TSX. The Company will have one year to seek resumption of trading on the TSX by applying for reinstatement. The Company will be required to meet all of the TSX's listing requirements for original listing in order to be considered for reinstatement of trading privileges. The TSX will automatically de-list the Company's shares if such reinstatement has not been approved by October 31, 2003. On October 9, 2002, the Company applied for a new listing with the TSX Venture Exchange, and that exchange has not made its decision on whether the Company's shares will be listed for trading. The Company's common shares are referenced on the "pink sheets" in the U.S. -- http://www.pinksheets.com-- but have not actively been traded through that medium. The "pink sheets" as well as the OTC Bulletin Board Service are quotation mediums in the U.S. In order for shareholders to utilize the "pink sheets" for trading, the Company must comply with certain requirements of the Securities and Exchange Commission rule 15c2-11 and the filing information requirements of NASD Rule 6740. The Company is meeting with various "market makers" in the U.S. that could offer shareholders the opportunity to trade shares on the OTC Bulletin Board Service and on the "Pink Sheets." The Company will issue a press release once it has complied with the aforementioned rules and/or the TSX Venture Exchange makes its decision on the Company's listing. International Thunderbird Gaming Corporation is an owner and manager of international gaming facilities. Additional information about the Company is available on its World Wide Web site at http://www.thunderbirdgaming.com As reported in Troubled Company Reporter's September 27, 2002 edition, International Thunderbird Gaming Corporation said that its "going concern" challenges may be overcome in part if the Company's major creditors were willing to enter into "work-outs" with the company. The Company is no longer in default with respect to the Prime Receivables and MRG loans. Prime has agreed to a payment plan on the $730,000 balance whereby the Company will begin payments of $10,000 per month for 73 months. No interest will be charged on the $730,000 current balance unless the Company collects on one or more of its receivables, including the lawsuit filed by the Company against the Spotlight 29 tribe. KAISER ALUMINUM: Seeks Approval of Release with Terrence Hayes -------------------------------------------------------------- Kaiser Aluminum Corporation recently initiated talks with Terrence Hayes as well as their re-insurers led by AXA Corporate Solutions (U.K.) Ltd. for the consensual resolution of the Hayes' dispute. According to Patrick M. Leathem, Esq., at Richards, Layton & Finger, the resolution of the Hayes issues will pave the way for the substantial reduction of the Debtors' ongoing attorneys' fees and expenses incurred in connection with the Louisiana State Court Proceeding. More importantly, a settlement with Mr. Hayes will allow the Debtors to obtain from Mr. Hayes the excess of $2,400,000 in funds he is holding. Although the Debtors will receive the funds from Mr. Hayes, Mr. Leathem notes that the funds will still be held pending resolution of the claims of the Debtors' liability insurance carriers. Additionally, the settlement will eliminate the risk that Mr. Hayes may prevail on his claims against the Debtors. Consequently, the Debtors entered into a settlement agreement with Mr. Hayes and AXA, pursuant to which, the Debtors will be relieved of their obligation under the revenue and joint prosecution agreement with Mr. Hayes to prosecute claims against the remaining Third Party Defendants. The Release further provides that: A. Payment of Funds and Dismissal of Haves' Claims -- $2,419,700 will be transferred by wire from a client trust to a client trust account of Heller Ehrman White & McAuliffe, LLP, counsel for the Debtors; -- Mr. Hayes will release the Debtors and AXA from any claims arising from the litigation or the settlement of the litigation arising from the Gramercy Explosion. This includes the release of any claims for breach of any of the agreements between Mr. Hayes and the Debtors; and -- Upon Court approval of the Release by a final, non- appealable order, Mr. Hayes will dismiss, with prejudice, his appeal of the Court's ruling on the motion for relief from stay. The parties agree that Hayes reserves and does not release his rights against Thomas and Betts and Schweitzer. B. Relation to other Settlements -- Mr. Hayes will consent to the Debtors' assignment to AXA of their right, title, interest and obligation in and of the revenue and cost sharing provisions and cooperation provisions with respect to his previous agreements with the Debtors; and -- The Debtors acknowledge that they have no interest in and are not owed any further repayments or obligations from Mr. Hayes for any reason. C. Mutual Releases -- Mr. Hayes will agree that the Debtors do not owe him any money or any other obligation for any cooperation, defense or other costs under their previous agreements. Mr. Hayes will also agree that the Debtors will not owe any continuing or future obligation to cooperate or pay for defense or other costs under the previous agreements; -- The parties will acknowledge that the Debtors' only continuing obligation to Mr. Hayes under the previous agreements is their responsibility to make periodic payments. These payments are funded via a third-party annuity purchased long before the Petition Date; and -- The only claims Mr. Hayes retains arising from the Gramercy Explosion against the Debtors are claims that may arise should the Debtors fail to meet their obligations for the periodic payments or fail to meet their obligations under the Release. Thus, the Debtors ask Judge Fitzgerald to approve the Release. (Kaiser Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) LAIDLAW INC: Wants to Keep Exclusivity Until February 28, 2003 -------------------------------------------------------------- Laidlaw Inc., has filed a motion with the United States Bankruptcy Court for the Western District of New York in Buffalo, New York, to extend the period during which Laidlaw has the exclusive right to file a plan of reorganization and to solicit acceptances thereof through February 28, 2003. A related filing will be made with the Ontario Superior Court of Justice in Toronto, Ontario. As previously announced, Laidlaw has reached agreements to settle various issues with, among others, certain constituencies of Safety-Kleen Corp., and certain parties to the federal securities class action litigation, In re Laidlaw Bondholders Litigation. Laidlaw is working to resolve the remaining outstanding issues, including certain claims asserted in the bankruptcy proceeding by the Pension Benefit Guaranty Corporation. The Company expects to commence the solicitation of votes for its plan of reorganization as soon as practicable after the resolution of these pension funding issues. "We are pleased with the progress that we have made to date with our banks and bondholders," said Stephen F. Cooper, Laidlaw's vice chairman and chief restructuring officer. "We will now focus on resolving our remaining outstanding issues and intend to emerge from bankruptcy as soon as practicable." Copies of various filings and other documents related to the Company's reorganization may be obtained from the courts in Buffalo and Toronto and also are available in the reorganization section of the Company's Web site at http://www.laidlaw.com LORAL SPACE: S&P Drops Corporate Credit Rating to SD from CC ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on satellite leasing and manufacturing company Loral Space & Communications Ltd., to 'SD' from double-'C'. An 'SD' rating denotes a selective default. The ratings on Loral's series C and series D preferred stocks were lowered to 'D' from single-'C'. These actions follow completion of the company's exchange offer on a portion of the preferred issues for $13.7 million cash and 45.8 million shares of common stock. The exchange represented a 93% discount off the preferred stock liquidation preference. Standard & Poor's viewed the exchange as coercive and tantamount to a default on the original terms of the preferred issues. Standard & Poor's also removed the ratings from CreditWatch, where they were placed with negative implications on Sept. 19, 2002 in response to the subpar exchange offer. At that time, the corporate credit rating was lowered to double-'C' in anticipation of a selective default by the company upon completion of the exchange offer. Subsequent to the selective default, Standard & Poor's raised its corporate credit rating on Loral to triple-'C'-plus and assigned its double-'C' rating to the preferred stock not tendered in the exchange. The liquidation preference of the remaining series C and series D preferred shares are $187.3 million and $36.7 million, respectively. The triple-'C'-minus senior unsecured debt rating on Loral and the triple-'C'-plus senior unsecured debt rating on wholly owned subsidiary Loral Orion Inc. were affirmed. The outlook is negative. "Loral modestly improved its balance sheet and increased its cash flow generating potential by completing the exchange offer. However, the company's liquidity remains strained," said Standard & Poor's credit analyst Eric Geil. "Based on earlier company guidance, Loral expects to have roughly $100 million in cash and borrowing availability at year-end 2002, after accounting for cash used in the exchange offer, down from $180.7 million at June 30, 2002. We are concerned that Loral could exhaust its remaining liquidity in 2003, given the potential for continued satellite leasing and manufacturing industry weakness. The company operates in a competitive environment and still faces financially much stronger rivals." Standard & Poor's also said that persistent industry weakness could continue to exert downward pressure on the ratings. Absent stronger demand to boost cash flow, or management steps to stabilize falling liquidity, the ratings could be lowered. DebtTraders reports that Loral Space & Communications Ltd.'s 9.500% bonds due 2006 (LOR06USR1) are trading between 64 and 68. See http://www.debttraders.com/price.cfm?dt_sec_ticker=LOR06USR1 for real-time bond pricing. MARK NUTRITIONALS: Committee Hires Kingman as Bankruptcy Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Creditors of Mark Nutritionals, Inc., asks for authority from the U.S. Bankruptcy Court for the Western District of Texas to employ the Law Offices of William B. Kingman (Kingman, P.C.) to serve as its counsel. Kingman, P.C.'s employment includes: a) investigating the acts, conduct, assets, liabilities and financial condition of the Debtor, the operation of the Debtor's business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a Plan of Reorganization; b) participating in preparation of the Plan; c) requesting the appointment of a trustee or examiner, if necessary; d) counseling the Creditors' Committee in matters relating to the administration of this Bankruptcy Estate; e) representing the Creditors' Committee in negotiations with the Debtor, Debtor's Counsel, secured and priority creditors and their respective counsel; f) preparing and filing pleadings relating to the administration of the Bankruptcy Estate and the potential reorganization of the Debtor and related disclosures; g) making court appearances on behalf of the Creditors' Committee; h) analyzing schedules and pleadings filed by the Debtor and other parties in interest; i) analyzing, negotiating and litigating claims brought in the forms of objections or as adversary proceedings; and j) representing the Creditors' Committee in all other relevant matters relating to the administration of this case in order to maximize the interests of the creditors in this case. The Creditors' Committee tells the Court that the hourly fee for services rendered by the Firm is $215, and $60 for paralegals and employees. Mark Nutritionals, Inc., filed for chapter 11 protection on September 17, 2002. William H. Oliver, Esq., at Pipkin, Oliver & Bradley, LLP represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors it listed estimated debts of over $10 million. METAWAVE COMMS: Has Until April 24 to Meet Nasdaq Requirements -------------------------------------------------------------- Metawave(R) Communications Corp. (Nasdaq:MTWV), the leading worldwide provider of smart antenna solutions for wireless voice and data networks, has been granted an additional 180-day grace period, or until April 24, 2003, to regain compliance with the $1.00 per share minimum bid price requirement of the Nasdaq SmallCap Market. During this extension period, Metawave will maintain its listing on the Nasdaq SmallCap Market and will continue to trade under the ticker symbol "MTWV." Metawave(R) Communications Corp., is the leading worldwide provider of smart antenna solutions for wireless voice and data networks. The company's smart antenna offerings provide wireless operators, tower owners and infrastructure manufacturers with cost-effective solutions that maximize capacity and performance, improve quality and increase efficiency of CDMA, GSM and next generation wireless networks. Metawave's smart antenna solutions have been deployed in 14 of the top 20 markets in the US and five of the nine regions in Mexico. Founded in 1995, the company is headquartered in Redmond, Washington, with offices in California and Texas. For more information, call 888/METAWAVE or visit the company's Web site at http://www.metawave.com * * * Going Concern Consideration At December 31, 2001, Metawave's independent auditors' report, as prepared by Arthur Andersen LLP and dated April 3, 2002, which appears in its 2001 Form 10-K, includes the following explanatory paragraph: "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 20 to the financial statements, uncertainties regarding asserted and potential unasserted claims exist that raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 20. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern." As a result of this opinion, the Company said it may experience an adverse impact on future sales if customers choose not to purchase our products due to concerns about our ongoing viability. In addition, suppliers may refuse to provide product components or insist upon unacceptable payment terms. Further, the Company may have increased difficulty raising capital due to this opinion. MIIX GROUP: Nine-Month Net Loss Balloons to $50 Million ------------------------------------------------------- The MIIX Group, Inc., (NYSE:MHU) a provider of management and consulting services to the medical professional liability insurance industry, announced net operating income for the third quarter ended September 30, 2002, of $1.5 million compared to net operating income for the third quarter ended September 30, 2001 of $4.2 million. Net income for the third quarter ended September 30, 2002 was $0.9 million, compared to net income of $2.5 million for the quarter ended September 30, 2001. MIIX Insurance Company ceased writing insurance and voluntarily entered into run-off on September 1, 2002. For the nine months ended September 30, 2002, the Company incurred a net operating loss of $43.8 million compared with net operating income of $13.2 million during the nine months ended September 30, 2001. There was a net loss for the nine months ended September 30, 2002 of $50.6 million compared to net income of $10.8 million for the nine months ended September 30, 2001. Patricia Costante, Chairman and CEO, observed: "While the income for the third quarter was modest, we are very pleased to report significant progress in the Company's transformation from an insurer underwriting risks to a company providing management and consulting services. We have two primary objectives in achieving this transformation. The first objective is to manage the run- off operations prudently and efficiently to protect shareholder value and existing insureds. Our second objective is to continue to build our insurance management services and related consulting businesses. Run-off insurance operations progressed well in the third quarter. Loss and loss adjustment expense reserves were adjusted as the result of an internal study. Loss severity trends continued to move adversely, particularly in Pennsylvania, resulting in reserve increases, but there were also other reserve adjustments and the overall effect for the quarter, net of reinsurance, was a charge of about $3.7 million. Reserves for losses and legal costs associated with future anticipated claims not yet presented increased as a component of total reserves from 59.4% at June 30, 2002 to 60.3% at September 30, 2002. Investment results were impacted by continuing weakness in high yield debt securities and the Company wrote down investment values on certain securities by approximately $5.7 million. Otherwise, however, the investment portfolio was reasonably strong, with about $12 million of unrealized gains at September 30, 2002 and more than 93% of the portfolio rated at BBB or above. Underwriting expenses dropped as the result of reduced operations and the aggressive downsizing actions taken in the first quarter of this year. Overall, MIIX Insurance Company statutory surplus grew from $64.1 million at the beginning of the quarter to $71.2 million at September 30, 2002. The Company's insurance operations remain in voluntary run-off in all states in which they were operating. There continues to be a substantial risk, however, that the Company's insurance operations may become subject to mandatory control in New Jersey and/or Virginia as a result of several factors, including without limitation the severity trends and continued potential for losses in the Company's investment portfolio due to deterioration in the market for corporate securities. Further information about the run-off operations is contained in the supplementary data to be filed with the Form 10-Q in this and future quarters. The supplementary data provides detail about loss reserves, the investment portfolio, reinsurance recoverables and associated collateral, other balance sheet accounts, and operating expenses relating to run-off operations. The Company's insurance management services and consulting operations progressed in the third quarter. As previously reported, the Company provides ongoing management services to MIIX Advantage Insurance Company of New Jersey. The Company has agreed to sell to MIIX Advantage Insurance Company of New Jersey the renewal rights associated with its New Jersey physician book of business, certain intellectual property and ongoing management services. The contracts with MIIX Advantage provide an ongoing base of service revenues to the Company. The Company is currently seeking to grow its related consulting business by providing similar services to self-funded entities and other healthcare provider owned insurers. As the Company reported in a prior press release, the New York Stock Exchange notified the Company that the Company's stock price and market capitalization were below New York Stock Exchange listing thresholds and requested the Company to provide a business plan demonstrating compliance with continued listing standards. The Company subsequently submitted a plan, which the New York Stock Exchange has reviewed and accepted as demonstrating compliance with continued listing standards. The Company will continue to be listed on the Exchange but will remain subject to oversight by the Exchange for a period of time expected to be 18 months. Any future adverse development affecting the Company's plan may result in delisting. The third quarter was a very significant period of transition for the Company. The effects of the Company's run-off business plan are beginning to be seen as cancellation requests are moving premium and liabilities off the books and the claim count inventory declined in the third quarter. Case closures outpaced new reports. While future results, particularly with respect to loss reserves, cannot be predicted with great confidence at this time due to rapidly changing conditions, the Company is striving to protect the potential values we believe exist in MIIX Insurance Company and its subsidiary insurance companies. In addition, the Company is engaged in attempting to generate future revenues through service and consulting arrangements with insurers and healthcare providers." Third Quarter 2002 Performance Results Total Premiums Written: Total premiums written in the third quarter of 2002 amounted to negative $2.3 million, a decrease of $73.3 million compared to the third quarter of 2001. The negative total premiums written resulted from extensive cancellation activity associated with the Company's decision to place MIIX Insurance Company and its subsidiary insurance company into voluntary solvent run-off earlier this year. The negative total premiums written were composed of net cancellations of $0.6 million in Texas, $0.6 million in New Jersey, $0.5 million in Maryland, $0.3 million in Arizona and $0.3 million in all other states. Net Premiums Earned: Net premiums earned for the third quarter of 2002 decreased by $25.8 million compared to third quarter 2001. The decrease is the net result of reduced direct and assumed premiums earned of $24.4 million and an increase in ceded premiums earned of $1.4 million. The decrease in gross premiums earned occurred primarily as the result of ceased insurance operations and cancellation activity in the second and third quarters of 2002. The increase in ceded premiums earned primarily followed from the decline in gross premiums earned, and included additional ceded premiums of $4.5 million related to the Company's aggregate reinsurance contracts associated with loss and loss adjustment expense reserve adjustments made this quarter. Net Investment Income: Net investment income decreased $6.2 million for the third quarter of 2002 compared to 2001. The decrease in net investment income reflects the impact of declining market yields coupled with a decline in the invested asset base, as well as an increase in average short-term investments held during the third quarter of 2002. Realized Investment Losses: Net realized losses on investments were $0.6 million in the third quarter of 2002, compared to net realized losses of $2.2 million in the third quarter of 2001. Included in realized losses in the third quarter of 2002 were $5.7 million of write-downs, including $2.6 million associated with United Airlines debt and most of the balance associated with continued poor performance from collateralized bond and loan obligation securities. Other Revenue/Expenses: Net other income and expenses decreased $0.3 million for the third quarter of 2002 compared to 2001. Other revenue and expenses for the third quarter of 2002 include the Company's premium financing program associated with run-off operations as well as revenues and expenses related to the Company's management services and related contracts with MIIX Advantage Insurance Company of New Jersey, which commenced insurance operations on September 1, 2002. The net decrease consists of a decrease of $0.6 million related to third quarter 2001 net other income of Hamilton National Leasing, the Company's former subsidiary sold in the second quarter of 2002, and an increase of $0.3 million in net revenues and expenses of other non-insurance operations. Net revenues and expenses for other non-insurance operations in third quarter 2002 includes $0.1 million associated with management services and renewal rights provided to MIIX Advantage Insurance Company of New Jersey. Loss and Loss Adjustment Expenses: Loss and loss adjustment expenses were $21.2 million for the third quarter of 2002, compared to $47.1 million in the third quarter of 2001, a decrease of $25.9 million. Loss and loss adjustment expenses for the third quarter of 2002 included net adjustments to increase direct and assumed loss and allocated loss adjustment expense reserves by $30.7 million and to decrease unallocated loss adjustment expense reserves by $24.1 million. Ceded loss and ALAE reserves were increased by $11.2 million. The adjustments followed from an internal study conducted by the Company. Direct and assumed adjustments to loss and ALAE reserves included a net increase in Pennsylvania hospital reserves of $23.5 million, a net decrease in Pennsylvania physician reserves of $9.5 million, a net decrease in New Jersey physician reserves of $0.8 million, and a net increase in reserves held on all other business written outside of New Jersey and Pennsylvania, primarily Texas and Ohio, of $17.5 million. The net adjustment primarily reflects continued adverse severity trends, particularly with respect to Pennsylvania hospital claims but also apparent elsewhere, somewhat offset by better than expected activity in the 2002 accident year. The net adjustment to ULAE reserves primarily reflects the greater level of claims activity associated with claims made business written in recent years. Claims made business generally has a shorter development tail than occurrence policies, and the duration of anticipated future claim handling activity, and therefore claim activity costs per dollar of indemnity payment, has diminished. Funds Held Charges: Funds held charges relate to the Company's ceded reinsurance program. Funds held charges increased by $2.7 million in the third quarter of 2002 compared to the third quarter of 2001. The funds held charges for third quarter 2002 include an additional amount of $3.9 million associated with the adjustments to ceded loss and loss adjustment reserves made in the quarter. Funds held charges for the third quarter of 2001 included $1.4 million of additional charges relating to adjustments to ceded loss and loss adjustment expense reserves in that quarter. Underwriting Expenses: Underwriting expenses decreased by $5.1 million in the third quarter of 2002 compared to the third quarter of 2001. The net decrease in the quarter is principally due to the effects of discontinued insurance operations, with reduced commissions and a reduction in compensation and benefits resulting from downsizing actions taken in the first quarter of 2002. In addition, underwriting expenses in the third quarter of 2001 included $0.4 million in one-time severance charges. Provision for Income Taxes: The Company had no federal tax expense in the third quarter of 2002 due to its significant loss carryforward position. For the nine months ended September 30, 2002, the Company recognized a net operating loss carryback benefit related to tax years 1997 and 1996, resulting from a tax law change passed in the first quarter of 2002. Subsequent Event: In October 2002, a further downsizing of Company staff occurred in accordance with the detailed restructuring plan developed in the first quarter. With this action, 19 employees, or 14% of the prior workforce, were released. No further charge beyond the restructuring charge recorded in the first quarter is anticipated as a result of this action. Book Value and Share Information As of September 30, 2002, book value was $7.57 per share based on 13,382,173 outstanding shares. Excluding unrealized gains and losses, book value was $6.64 per share on the same share base. Weighted average shares outstanding were 13,479,760 and 13,605,579 for the quarters ended September 30, 2002 and 2001, respectively. Headquartered in Lawrenceville, New Jersey, The MIIX Group -- http://www.miix.com-- provides management and claims administrative services to the medical professional liability insurance industry, and a range of consulting products to physician and healthcare providers. The MIIX Group of Companies currently protects existing physician, medical professional, and institutional insureds through its long-term commitment to run- off insurance operations. * * * As reported in the Company's Form 10-Q filed on August 14, 2002, with the Securities and Exchange Commission, the Company has been subjected to a number of adverse developments during fiscal 2002 as a result of unexpected and unprecedented increases in loss severity during fiscal 2001. These increases required the Company to record an increase in its net loss reserves of approximately $29.5 million; in consequence, the Company was also required to take a valuation allowance against a deferred tax asset approximately of $9.5 million during 2002. As a result of these adjustments, the Company has, among other things: -- Closed its operations in Dallas and Indianapolis; -- Implemented a workforce reduction program; -- Ceased writing insurance in the states of Virginia, Texas, Ohio, Pennsylvania and other states; -- Submitted a risk-based capital plan to the New Jersey Department of Insurance and Banking; -- Placed its New Jersey insurance operations into voluntary solvent runoff; -- Engaged investment bankers to seek offers for any or all of the Company's assets and properties; -- Withdrawn from the A.M. Best Rating System; -- Announced that it will cease writing new insurance business in the State of New Jersey effective September 1, 2002; -- Been advised by the New York Stock Exchange that it no longer satisfies two of the applicable listing criteria and that its common stock may be delisted; -- Received a "going concern qualification" from the Company's independent accountants in its report accompanying the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. The Company anticipates that its subsidiary, MIIX Insurance Company, will cease doing business as an operating insurance company on September 1, 2002. Thereafter, the Company's business will consist principally of managing the runoff of existing claims and managing the operations of a newly formed New Jersey insurance company, MIIX Advantage Insurance Company of New Jersey. Thus, the Company does not anticipate near term significant revenues from continuing operations. Because the subsidiary, MIIX Insurance Company, will no longer be writing insurance policies after August 31, 2002, our revenues and expenses will decline significantly, and our historical financial statements cannot be relied upon as indicative of future performance. MITEC TELECOM: Brings-In Rajiv Pancholy as New President and CEO ---------------------------------------------------------------- Mitec Telecom Inc. (TSX: MTM), a leading designer and manufacturer of wireless network products for the telecommunications industry, named Rajiv Pancholy as the Company's new President and Chief Executive Officer, effective October 30, 2002. Mr. Pancholy replaces Myer Bentob, who stepped down from the post on September 12, 2002. "A number of momentous corporate initiatives and developments have come together over the past few days, and Mr. Pancholy's appointment is the capstone," said Myer Bentob, Chairman of Mitec's Board of Directors. "We are absolutely delighted that Mr. Pancholy will be heading up the Mitec team and I feel confident that his broad-based expertise in the wireless telecommunications industry will enable us to weather these turbulent times and spur us on to the next level of growth and success." Mr. Pancholy is a telecommunications industry veteran who brings to Mitec a rich experience base, having worked for both a wireless service provider and a network equipment provider. Most recently, he was President and Chief Operating Officer of Microcell Connexions, where he presided over Microcell becoming the first Canadian carrier to launch advanced 2.5G data services. Prior to joining Microcell in 1999, he held various senior management positions at Nortel, where he managed the development of new products as well as alliances with key carrier customers. His last position at Nortel was Vice President & General Manager in the Enterprise Networks group. Currently, Mr. Pancholy is on the investment committee of a major financial institution in Canada and acts as a venture advisor to several venture capital institutions in the United States and Canada. "I am truly delighted to be joining the Mitec team," Mr. Pancholy said. "While we face certain challenges at the present time, I am confident that these can be fully dealt with and we can realize the goal of making Mitec a vibrant, growth-oriented global company. This is a company blessed with depth in technology and the trust and loyalty of its customers. I look forward to building the future on these strengths." 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. MORTON CUSTOM: Files for Chapter 11 Reorganization in Wilmington ---------------------------------------------------------------- Morton Custom Plastics, LLC, a leading supplier of highly engineered injection molded plastic components to original equipment manufacturers, announced that it has reached a definitive agreement with Wilbert, Inc., for the sale of all of MCP, LLC's assets. Wilbert, based in Chicago, Illinois, is a privately held holding company operating TPi, the largest thermoformer of highly engineered plastic components in the U.S. with facilities located in Florida, Iowa, Minnesota, Ohio, North Carolina and Tennessee serving industrial original equipment manufacturers. MCP, LLC is a Limited Liability Corporation managed by Morton Industrial Group, Inc. (OTCBB: MGRP). Haskell G. Knight, who assumed the positions of President and Chief Operating Officer of Morton Custom Plastics, LLC to effect the restructuring of MCP, LLC, said: "We are very excited about the new opportunity with the Wilbert organization. Their financial strength will make MCP, LLC a much stronger company and help it to realize its full potential as a plastics leader in both thermoforming and injection molding. Our company has been affected by the economic downturn of 2001, including the fallout from the September 11th attacks and the continued sluggish economy in 2002. While our injection molding business is experiencing growth, the thermoforming business continues to struggle. The prospective partnership with Wilbert, a leading thermoformer, provides MCP, LLC and our customers, vendors and employees a clear path for great success going forward." Mr. Knight added that the company "has taken aggressive actions to manage operations during the past two difficult years, including the necessary steps to consolidate operations, reduce costs and maximize synergies within the company's core businesses. As a result, we've demonstrated that the MCP, LLC entities form a compelling platform upon which to grow and expand, with the right financial support." To facilitate the sale of Morton Custom Plastics, LLC, the subsidiary has voluntarily filed a petition for relief under Chapter 11 in the U.S. Bankruptcy Court in the District of Delaware in Wilmington. The sale of Morton Custom Plastics, LLC's assets located in Lebanon, Kentucky; St. Matthews, South Carolina; and Harrisburg and Concord, North Carolina will be done pursuant to Section 363. As part of the agreement and subject to Court approval, the company has obtained commitments for up to $2.5 million in debtor-in-possession financing from its existing lender, GE Capital, to fund working capital and other needs until the sale closes later this year or early next year. Mr. Knight said that MCP, LLC entered Chapter 11 protection with the understanding that the company's financial reorganization will be completed on an accelerated timetable, targeting the year-end. "During the reorganization, MCP, LLC will continue to operate in the normal course of business, maintaining our strong customer relationships with reliable, timely service and quality products." The MCP, LLC transaction is subject to approval of the Court, the Boards of Directors of Wilbert, Inc. and Morton Industrial Group, Inc. and the completion of the 20-day auction process for qualified bidders required under Section 363. Morton Industrial Group, Inc.'s metal fabrication business, Morton Metalcraft Co., and its remaining plastics facility in West Des Moines, Iowa are not affected by the filing or this sale transaction as they are financed independently from Morton Custom Plastics, LLC. Wilbert, Inc., based in Chicago, Illinois, is a privately held holding company for Wilbert Funeral Services, the largest source of burial vaults and funeral service supplies in North America and TPi - Thermoform Plastics, Inc., Trienda Corporation, and Synergy World, Inc., three companies that form the largest heavy gauge thermoforming operation in North America. With headquarters in Harrisburg, North Carolina, Morton Custom Plastics, LLC employs approximately 645 personnel at its manufacturing facilities in Harrisburg and Concord, North Carolina; St. Matthews, South Carolina; and Lebanon, Kentucky. MCP, LLC manufactures injection molded parts and performs pre- and post-molding services for use by a wide range of customers, including those in the high tech, motorized recreational equipment, agricultural machinery and equipment, medical equipment and supplies, office furniture and appliance industries. The company also provides thermoforming services to the marine motor, automotive and commercial equipment industries. MORTON HOLDINGS: Case Summary & Largest Unsecured Creditors ----------------------------------------------------------- Lead Debtor: Morton Holdings, LLC 1021 W. Birchwood Morton, Illinois 61550 Bankruptcy Case No.: 02-13224 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- Morton Custom Plastics, LLC 02-13226 Morton Lebanon Kentucky IBRB, LLC 02-13227 Chapter 11 Petition Date: November 1, 2002 Court: District of Delaware (Delaware) Judge: Peter J. Walsh Debtors' Counsel: Jeremy W. Ryan, Esq. Norman L. Pernick, Esq. Saul Ewing LLP 222 Delaware Avenue Wilmington, Delaware 19899 302-421-6805 Estimated Assets: Estimated Debts: Holdings, LLC $0 to $50,000 $10 to $50 Mill. Custom Plastics, LLC $10 to $50 Mill. $10 to $50 Mill. Lebanon Kentucky IBRB, LLC $10 to $50 Mill. $10 to $50 Mill. A. Custom Plastics' 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ General Electric Capital Bank loan $31,700,000 Corporation (25,000,000 sec.) 335 Madison Ave., 12th Fl New York, NY 10017 c/o Hydee Feldstein, Esq. Paul, Hastings, Janofsky & Walker LLP 515 S. Flower Street, 25th Fl Los Angeles, CA 90071 213-683-6249 Victory Lane Productions, Litigation 7,800,000 LLC c/o Michael J. Brown, Esq. 625 Lakeland East Drive, Suite A Flowood, MS 39232 601-936-7070 Worthington Ind. Inc., Litigation 7,800,000 and W.I. Products Inc. f/k/a Worthington Custom Plastics c/o Michael G. Long, Esq., Vorys, Sater, Seymour and Pease LLP 52 E. Gray St. P.O. Box 1008 Columbus, OH 43216-1008 614-464-6400 G.E. Polymerland Trade debt $788,459 9930 Kincey Avenue Huntersville, NC 28078 800-752-7842 Aristech Acrylics Note $557,892 Kim Zink 7350 Empire Dr. Florence, KY 41042 800-354-9858 Delta Mold Inc. Trade debt $515,913 9415 Stockport Place Charlotte, NC 28273 704-588-6600 Midsouth Customer/Vendor offset $409,000 P.O. Box 400 Annville, KY 40402 606-364-5142 Kleerdex Note $403,655 100 Gaither Drive Suite B Mount Laurel, NJ 08054 856-866-1700 x202 Ashland Chemical Co. Trade debt $303,164 4450 Northwest Expressway Doraville, GA 30340 614-790-4524 Ferguson Supply & Box Mfg. Trade debt $298,469 2500 Cindy Lane Charlotte, NC 28269 704-597-0310 LNP Engineering Plastics Trade debt $209,382 Bayer Corporation Trade debt $196,508 Angell Mfg. Company Trade debt $164,334 Carolina Custom Finishing Trade debt $132,173 Erickson's, Inc. Trade debt $151,266 GE Operation Services Trade debt $162,664 General Polymers Trade debt $138,965 Georgia Gulf Trade debt $194,763 MSI Mold Builders Trade debt - Tooling $178,613 Wrobel Engineering Co. Trade debt $270,920 154 Bodwell St. Avon, MA 02322 508-586-8338 B. Lebanon Kentucky's Largest Unsecured Creditor: Entity Nature Of Claim Claim Amount ------ --------------- ------------ General Electric Capital Bank Loan $31,700,000 Corporation (25,000,000 sec.) 335 Madison Ave., 12th Fl New York, Ny 10017 C/O Hydee Feldstein, Esq. Paul, Hastings, Janofsky & Walker LLP 515 S. Flower Street, 25th Fl Los Angeles, CA 90071 213-683-6249 NATIONSRENT INC: Brings-In UBS Warburg as Financial Advisor ----------------------------------------------------------- NationsRent Inc., sought and obtained the Court's approval to employ UBS Warburg LLC as financial advisors in its Chapter 11 cases. UBS Warburg will assist the Debtors in: (a) identifying and evaluating potential third parties to a potential transaction as defined in the Engagement Letter; (b) contacting and meeting with potential Transaction Parties; (c) preparing a memorandum that describes the Debtors and their business operations for distribution to Transaction Parties; (d) evaluate the financial aspects of a Transaction; (e) advising the Debtors as to the structure and form of a proposed Transaction; (f) developing a general negotiating strategy with a potential Transaction Party and participating in these negotiations; (g) in any proceeding relating to regulatory approvals required for a Transaction; and (h) assisting with other matters that fall within UBS Warburg's expertise as may be mutually agreed upon by both parties. In consideration for its services, the Debtors proposed to pay UBS Warburg: -- an initial fee of $175,000, payable promptly upon entry of an order approving the Motion; provided that this will be offset against the Transaction Fee; and -- a Transaction Fee payable at the closing of the Transaction, equal to the greater of: (1) $1,000,000; or (2) 1% of the Transaction Value. The Transactions must be consummated during the term UBS Warburg's engagement or within 12 months thereafter unless UBS Warburg chooses to terminate its engagement; A Transaction includes: (a) any merger, consolidation, reorganization or other business combination under which the business of the Debtors is combined with that of the Transaction Party; or (b) the sale, transfer or other disposition of 50% or more of the capital stock or assets of the Debtors by way of tender or exchange offer, option, negotiated purchase, leveraged buyout, minority investment or partnership, joint or collaborative venture or otherwise; This does not include a reorganization or recapitalization of the Debtors wherein the Debtors' creditors and other parties in interest surrender their debt and equity claims against the Debtors in exchange for new debt or equity claims as reorganized without a material new investment by any third party, creditor or other party in interest. The Debtors will also reimburse UBS Warburg for reasonable out- of-pocket expenses not to exceed $15,000 without the Debtors' prior written approval. The Debtors will indemnify, hold harmless, and defend UBS Warburg and its affiliates, directors, agents, employees or principals under certain circumstances. In particular, Mr. DeFranceschi says, these Parties will be indemnified by the Debtors for any losses, claims, damages, liabilities and expenses relating to or arising out of matters contemplated by UBS Warburg's engagement. This includes any legal proceeding in connection with matters relating to or referred to in the parties' Engagement Letter or arising out of issues in which UBS becomes involved in any capacity.(NationsRent Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) NAVISTAR INT'L: S&P Keeping Watch on BB Corporate Credit Ratings ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its double-'B' corporate credit ratings on Navistar International Corp., and its subsidiary Navistar Financial Corp., a leading North American producer of heavy- and medium-duty trucks, on CreditWatch with negative implications. The CreditWatch listing is the result of Standard & Poor's concerns that the loss or postponement of the Ford Motor Co. V6 diesel engine business, combined with heavy cash outlays associated with the recently announced $456 million restructuring charge and continued challenging end market conditions, could pressure the credit profile and cash flow. Additionally, the company has approximately $200 million in manufacturing debt maturities it needs to refinance in the next 12 months, which heightens financial risk. In the past Navistar has tried to diversify to help reduce its exposure to the cyclical swings in the truck market, as evidenced by its role as a leading supplier of mid-range diesel engines to Ford. However, Navistar announced that Ford no longer considers the V6 diesel engine program viable and commencement of Navistar's production is very uncertain. The company has indicated that this decision by Ford does not affect Navistar's supply of V8 engines to Ford. Accordingly, Navistar is taking a $120 million to $130 million after-tax charge associated with assets directly related to the V6 program. "The longer-term impact of this event on Navistar's engine strategy is unclear, as the V6 program had been viewed as a significant factor in its engine growth strategy," said Standard & Poor's credit analyst Eric Ballantine. Elements of the $456 million restructuring charge include costs associated with the closing of the Chatham, Ont., heavy-duty truck facility, and the ceasing of operations at its body plant located in Springfield, Ohio; asset write-downs related to the company's V6 diesel engine program with Ford; and costs related to exiting the Brazilian domestic truck market. Cash outlays associated with this charge are significant and come at a time when cash generation is weak as a result of soft market conditions. Navistar continues to experience very challenging end market conditions. The company's key end markets, heavy-duty and medium-duty trucks, are expected to continue to experience very weak demand over the near term, reflecting the reluctance by trucking customers to place orders for new trucks during the current soft economic conditions in the U.S. Standard & Poor's will meet with Navistar's management to assess its long-term engine strategy, its ability to cope with present business conditions, its plans to refinance near-term debt maturities, and the impact of the proposed restructuring charge on the company's cash flow and liquidity. NDCHEALTH CORP: S&P Ratchets Corp. Credit Rating Down a Notch ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on NDCHealth Corp., to 'BB-' from 'BB'. The downgrade reflects weakened debt protection measures and the expectation of a more leveraged financial profile for the Atlanta, Georgia- based provider of transaction-processing products to the health- care industry. At the same time, Standard & Poor's assigned its 'BB-' rating to the company's planned $200 million secured bank facility, which would replace the company's existing $150 million unsecured facility due 2003. The bank facility consists of a $125 million term loan due 2008 and a $75 million revolving credit facility due 2007. Standard & Poor's also assigned its 'B' rating to NDCHealth's planned $175 million senior subordinated notes due 2012. Proceeds from the notes and the term loan, totaling $300 million, would be used to redeem $144 million in outstanding convertible notes due November 2003, to repay $91 million of the company's existing revolving credit facility, and to bolster cash balances. The new $75 million revolving credit facility would be unused and available. Total debt after refinancing is expected to be about $325 million. The outlook is stable. By May 2003, NDCHealth is expected to acquire the remaining interest in TechRx Inc. (unrated), a provider of software that automates the prescription-fulfillment process. The price, expected to be $100 million-$200 million, can be paid in cash or equity, or a combination of both at the company's option. "Despite expectations for acquisition-based and internal sales growth, profitability gains could be muted and capital spending could increase over the near term, while the company integrates new products, challenging free cash flow," said Standard & Poor's credit analyst Emile Courtney. The stable outlook assumes NDCHealth successfully integrates TechRx and improves cash flow over the near term. NETIA HOLDINGS: Asks Nasdaq Panel to Review Delisting Decision -------------------------------------------------------------- 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 on October 29, 2002 it submitted a request to the Nasdaq Listing and Hearing Review Council to review the earlier decision of the Nasdaq Listing Qualifications Panel to delist Netia's American Depositary Shares from The Nasdaq Stock National Market, effective as of the opening of the business on October 15, 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. NETIA HOLDINGS: Will Not Make Interest Payments on Certain Notes ---------------------------------------------------------------- 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, in accordance with the terms of the restructuring agreement entered into earlier this year with its noteholders, Netia Holdings B.V., one of Netia's Dutch finance subsidiaries, will not make the following interest payments due on November 1, 2002 on certain notes: (i) US$10,250,000 on the 10-1/4% Dollar Notes due 2007 issued by BV I, (ii) US$10,887,000.50 on the 11-1/4% Discount Dollar Notes due 2007 issued by BV I and (iii) EUR 5,822,801.57 on the 11% Discount DM Notes due 2007 issued by BV I. In addition, these interest payments are not being made by the Company in accordance with the Dutch Court's grant on July 12, 2002 of provisional payment suspensions on the repayment of all obligations of BV I and Netia's other two Dutch finance subsidiaries. NETZEE INC: September 30, 2002 Equity Deficit Tops $10 Million -------------------------------------------------------------- Netzee, Inc. (OTCBB: NETZ), a provider of integrated Internet banking products and services and Internet commerce solutions, it achieved its fourth consecutive quarter of positive pro forma EBITDA (earnings before interest, taxes, depreciation and amortization) and generated positive pro forma cash earnings. For the quarter ended September 30, 2002, EBITDA totaled $1.3 million and cash earnings totaled $375,000 compared to an EBITDA loss of $205,000 and a cash loss of $1.1 million for the quarter ended September 30, 2001. For the quarter ended June 30, 2002, EBITDA was $892,000 and cash loss was $27,000. Pro forma EBITDA and pro forma cash loss numbers for the quarter ended June 30, 2002 include the impact of approximately $250,000 in severance payments to our former Chief Financial Officer. Excluding these costs, Netzee would have reported second quarter EBITDA of $1.1 million and cash earnings of $223,000. In its September 30, 2002 balance sheets, Netzee recorded a total shareholders' equity deficit of about $10 million, and a working capital deficiency of about $24 million. Netzee's recent achievements include: -- Migrated over 75 financial institutions to the Netzee Internet Banking version 4.0 platform. -- Released the beta version of Premier Internet Banking version 6.0 to four credit union customers. Version 6.0 features a consolidated transaction server which creates a seamless upgrade path to new product releases. -- Increased the end user acceptance rate of bill payment, due largely to the consumer account direct bill payment option. Revenues for the quarter ended September 30, 2002 totaled $4.5 million, compared with $4.4 million in the quarter ended June 30, 2002 and $6.2 million in the quarter ended September 30, 2001. The decline in revenue as compared to the prior year is due largely to the previously disclosed disposition of non-core businesses, including the sale of our Digital Visions business in November 2001, as well as the anticipated customer attrition during 2001 and 2002 of certain non-core business we acquired from John H. Harland Company in November 2000. Netzee ended the third quarter of 2002 with 543 financial institution customers contracted for its Internet banking products and 512 installed. There were over 900,000 end users of Netzee's core Internet banking products at September 30, 2002. Third quarter 2002 gross profit and gross margin were $3.0 million and 66 percent, respectively, compared with $2.9 million and 47 percent in the year-ago period, and $2.8 million and 63 percent in the second quarter of 2002. Gross margin improved from the year-ago period due to the dispositions and attrition of the lower-margin, non-core businesses noted above. Net loss for the third quarter of 2002 totaled $2.8 million, compared with $22.1 million in the third quarter of 2001 and $5.7 million in the second quarter of 2002. For the nine months ended September 30, 2002, EBITDA totaled $2.7 million and cash earnings totaled $29,000. This compares to EBITDA loss of $3.7 million and cash loss of $6.3 million for the nine months ended September 30, 2001. Pro forma EBITDA and pro forma cash loss numbers for the nine months ended September 30, 2002 include the impact of a $750,000 settlement of a lawsuit and approximately $250,000 in severance payments to our former Chief Financial Officer. Excluding these costs, Netzee would have reported year-to-date EBITDA of $3.7 million and cash earnings of $1.0 million. Net loss, excluding the impact of change in accounting principle, for the nine months ended September 30, 2002 totaled $14.8 million as compared to $52.4 million for the nine months ended September 30, 2001. Year to date revenues in 2002 totaled $13.7 million as compared to $20.1 million during the same period in 2001. The Company was notified by a significant customer of the completion of their conversion to another Internet banking system as of September 30, 2002, significantly ahead of their schedule. Revenue for the third quarter and year-to-date period attributable to this customer was approximately $255,000 and $922,000, respectively. As previously disclosed, another significant customer is expected to complete their conversion during the fourth quarter of 2002. Revenue for the third quarter and year-to-date period attributable to this customer was approximately $510,000 and $1,448,000, respectively. As of September 30, 2002, Netzee had approximately $5.7 million in cash on hand and cash available under its line of credit. Netzee provides financial institutions with a suite of Internet- based products and services, including full-service Internet banking, bill payment, cash management, Internet commerce services, custom web design and hosting, branded portal design, targeted marketing and implementation and marketing services. Netzee was formed in 1999 as a subsidiary of InterCept, Inc., and as the successor to a company founded in 1996. Netzee became a public company in November 1999. The company's stock is quoted through the OTC Bulletin Board under the symbol NETZ. Further information about Netzee is available at http://www.netzee.com NEWFOUNDLAND CAPITAL: Reports Improved Performance in Q3 2002 ------------------------------------------------------------- Newfoundland Capital Corporation Limited announces its unaudited financial results for the third quarter of 2002. The third quarter of 2002 marked the beginning of Newfoundland Capital Corporation Limited as a pure Broadcasting Company. The Company divested of its Publishing and Printing Division on July 25, 2002 to a newly incorporated company, Optipress Inc., (TSX-OPP) which completed its Initial Public Offering on that date. The transaction was effective June 30, 2002. This reportable segment has been accounted for as discontinued operations from the beginning of the third quarter of 2002, therefore the amounts shown below relate only to continuing operations with the exception of net income. Net income for the third quarter of 2002 was $4.3 million, a significant improvement over the prior year's net loss of $5.0 million. Excluding the gain on sale of the Publishing and Printing Division in the current period and the restructuring charges in 2001, net income from continuing operations would be $1.1 million compared to last year's $0.2 million. The after tax gain on disposal of the Publishing and Printing Division was $3.3 million. This is net of a deferred pre-tax gain of $3.5 million. Revenue from continuing operations increased by 22% to $13.3 million in the quarter. Cash flow was $2.3 million as compared to $2.1 million in 2001. The third quarter saw Radio improve operating earnings by 43% to $3.2 million from last year's $2.3 million. Operating cash flow rose 25% to $3.7 million from $2.9 million last year. Year-to-date, net income was $6.6 million as compared to a loss of $4.8 million a year ago. After adjusting for the gain from Publishing and Printing and restructuring charges, net income from continuing operations would be $2.8 million well ahead of 2001 results which would have been at breakeven. On revenue from continuing operations of $35.4 million, cash flow was $6.1 million, a 37% improvement over the $4.4 million posted last year. Radio operating earnings were $8.6 million, 50% better than last year's $5.7 million. Radio cash flow was $9.6 million, well ahead of the $7.6 million achieved in 2001. Newfoundland Capital Corporation Limited (TSX - NCC.A, NCC.B) is a public company based in Dartmouth, Nova Scotia. The Company owns and operates 42 radio stations representing a total of 57 licenses across Canada with a significant presence in Alberta and Atlantic Canada. Newfoundland Capital's September 30, 2002 balance sheets show a working capital deficit of about $9 million. NORSKE SKOG: Reports $20MM Net Loss on $392MM Sales in Q3 2002 -------------------------------------------------------------- Continuing weak economic conditions contributed to a third quarter net loss for Norske Skog Canada Limited of $20.1 million on sales of $392.6 million. Earnings before interest, tax, depreciation, amortization and before other non-operating income and expenses (EBITDA) were $42.4 million. The net results include an after-tax foreign exchange loss of $4.7 million from the translation of U.S. dollar denominated debt. For the same period a year ago, the company recorded net earnings of $18.8 million on sales of $322.1 million and EBITDA of $45.0 million. These earnings reflect an income tax recovery of $22.8 million from reduced provincial corporate income tax rates. They also include an after-tax foreign exchange loss of $9.0 million from the translation of U.S. dollar denominated debt. The current quarter's results compare favorably with the previous quarter, when the company's net loss was $24.4 million on sales of $359.8 million and EBITDA of $6.0 million. This net loss includes an after-tax foreign exchange gain of $13.2 million from the translation of U.S. dollar denominated debt, a release of future income taxes of $9.7 million and an after-tax write-off of deferred financing costs of $10.3 million for repaid term and operating credit facilities. The company said its improved third quarter operating performance primarily reflected higher specialty paper sales volumes, a stronger U.S. dollar, and improved pulp and paper production costs. Newsprint prices in North America increased from their trough levels in the second quarter. The North American US$50 per tonne price increase announced August 1 partially took effect during the third quarter. Pricing for specialty grades appear to have stabilized after some slippage early in the quarter. The company also reports it exceeded its upgraded $100.0 million synergy target in the quarter well ahead of the accelerated timeline. As of September 30, 2002, NorskeCanada had captured $110.0 million in synergies on an annualized run-rate basis (assuming full capacity), of which $104.0 million related to EBITDA (the original target was $60 million by August 31, 2003). Adjusting for actual operating rates from curtailment, results for the third quarter include EBITDA-improving synergies of approximately $24.0 million, or $94.0 million annually. In August, the company's paper operations returned to full capacity following significant market downtime in the early part of the year. Operating rates were largely boosted from the stronger seasonal demand for the company's specialty papers; newsprint volumes remained unchanged quarter over quarter. While the company will continue to run full well into the fourth quarter, it will not rule out further curtailment later in the year or early in 2003 if markets deteriorate. "Our approach is to be highly disciplined in matching production with our order book," said president and CEO Russell Horner. "If market conditions worsen, we will need to adjust our run rate accordingly." A major achievement in the quarter was the successful negotiation of new five-year collective agreements with the company's two unions - the Communications, Energy and Paperworkers Union of Canada and the Pulp, Paper and Woodworkers of Canada. The terms of the settlement, reached 10 months before the existing agreements expire, provide a competitive wage increase and ensure operational stability at all of the company's operations for the next five years. Horner said the constructive conclusion of negotiations is another outcome of the company's intensive program to dramatically improve operational performance. "While markets have been at their historic worst, our employees have been at their historic best," commented Horner. "Costs are down, synergies are up, and our machine efficiency is better than ever. "However, we will continue to raise the performance bar. Although we have exceeded our synergy goal, we will continue to look for opportunities both in synergy capture and in operational excellence." For the nine months ended September 30, 2002, Norske Skog Canada Limited recorded a net loss of $86.0 million on sales of $1,076.7 million and EBITDA of $46.3 million. This compares to net earnings of $56.5 million on sales of $975.9 million and EBITDA of $156.8 million for the same period in 2001. The net loss for the current period included an after-tax write-off of deferred financing costs of $10.3 million, an after-tax foreign exchange gain of $8.7 million, and a release of future income taxes of $9.7 million. (The results for the third quarter and nine months ended September 30, 2001 exclude the earnings of Pacifica, acquired on August 27, 2001, and the impact of changes in the company's capital structure during the last year, and include the earnings from the former Mackenzie pulp operations up to its sale on June 15, 2001. Further related information is available in the attached management's discussion and analysis.) Management's Discussion and Analysis The following management's discussion and analysis should be read in conjunction with the unaudited interim consolidated financial statements for the three and nine-month periods ended September 30, 2002 and 2001 and the three-month period ended June 30, 2002. The consolidated statements of earnings and retained earnings and cash flows for the nine-month period ended September 30, 2001 include the results of our former Mackenzie pulp operations prior to its sale on June 15, 2001. The consolidated statements of earnings and retained earnings and cash flows for the three-month and nine-month periods ended September 30, 2001 exclude the earnings of Pacifica Papers Inc. prior to acquisition on August 27, 2001, the full impact on earnings of the change in the Company's capital structure arising from the Acquisition and the payment of a special distribution to shareholders in August 2001, and the impact of the Company's equity offering of $217.7 million in May 2002. These events affect comparisons with historical results. Pulp and paper producers continued to experience challenging market conditions during the third quarter of 2002. A stuttering U.S. economic recovery and flagging consumer confidence, due in part to the recent stock market downturn and rising unemployment rates, dispelled any hopes of a significant upturn in consumer demand outside the normal fall seasonal increase. On the pricing front, a US$50 per tonne price increase for North American newsprint customers partially took effect during the quarter. Prices for specialty paper grades appear to have stabilized after some further slippage early in the current quarter. Pulp prices, after several price hikes earlier this year, started to come under downward pressure towards the end of the current quarter, due to a combination of higher industry operating rates and softer demand. Containerboard pricing remained firm during the quarter. Despite the difficult climate, we recorded an improved financial performance for the third quarter of 2002, generating EBITDA of $42.4 million. We also achieved our upgraded Acquisition synergy target of $100 million, well ahead of the accelerated timeline. Moreover, as of September 30, 2002, we had captured a further $10 million of synergies, taking our total synergies, on an annualized run-rate basis, to $110 million. Results of Operations For the three months ended September 30, 2002, we incurred a net loss of $20.1 million on sales of $392.6 million. Earnings before interest, taxes, depreciation, amortization and before other non-operating income and expenses were $42.4 million. Our net loss included an after-tax foreign exchange loss of $4.7 million arising from the translation of U.S. dollar denominated debt. This compares to the second quarter of 2002 when we recorded a net loss of $24.4 million and EBITDA of $6.0 million on sales of $359.8 million. Included in the net loss for the preceding quarter was an after-tax foreign exchange gain of $13.2 million arising from the translation of U.S. dollar denominated debt, an after-tax write-off of deferred financing costs of $10.3 million associated with repaid term and operating credit facilities, and a release of future income taxes of $9.7 million. For the quarter ended September 30, 2001, we reported net earnings of $18.8 million and EBITDA of $45.0 million on sales of $322.1 million. Earnings for the third quarter of 2001 reflected an income tax recovery of $22.8 million following a reduction in provincial corporate income tax rates and an after- tax foreign exchange loss of $9.0 million arising from the translation of U.S. dollar denominated debt. For the nine months ended September 30, 2002, our net loss was $86.0 million on sales of $1,076.7 million, compared to net earnings of $56.5 million on sales of $975.9 million for the comparative period in 2001. Our net loss for the current period included an after-tax write-off of deferred financing costs of $10.3 million, an after-tax foreign exchange gain of $8.7 million arising from the translation of U.S. dollar denominated debt, and a release of future income taxes of $9.7 million. Net earnings for the first nine months of 2001 included an after-tax loss of $19.0 million on the sale of Mackenzie, an after-tax foreign exchange loss of $9.0 million arising from the translation of U.S. dollar denominated debt, and income tax recoveries totaling $33.3 million which resulted from the reduction in provincial corporate income tax rates, and the amortization of deferred credits upon utilization of acquired tax losses. EBITDA for the first nine months of 2002 was $46.3 million, compared to $156.8 million, for the same period in 2001. Three Months ended September 30, 2002 compared to Three Months ended September 30, 2001 Consolidated Total EBITDA for the three months ended September 30, 2002 was $42.4 million on total sales of $392.6 million, compared to EBITDA of $6.0 million on sales of $359.8 million for the previous quarter ended June 30, 2002. Our stronger financial performance primarily reflected higher specialty paper sales volumes, a stronger U.S. dollar and improved pulp and paper production costs. Specialties Our specialties paper business generated EBITDA of $25.2 million on sales of $195.1 million for the current quarter, compared to EBITDA of $14.3 million on sales of $170.9 million for the quarter ended June 30, 2002. In the third quarter of 2002, sales volumes were 223,100 tonnes, up 27,400 tonnes, or 14.0%, from the previous quarter, due primarily to seasonally higher demand, which accounted for our improved operating rates in the current quarter. The average sales revenue for the third quarter remained at similar levels to the previous quarter, at $874 per tonne. The positive impact of a stronger U.S. dollar was balanced by lower prices for our LWC and uncoated groundwood specialty papers, and higher freight costs. The average cost of sales for the current quarter was $729 per tonne, an improvement of $34 per tonne, or 4.5%, from the previous quarter. Our improved cost performance was due primarily to higher production volumes, synergy- driven cost savings resulting from the elimination of 60 positions at Port Alberni, and lower maintenance spending. These cost savings were partially offset by costs associated with scheduled annual power boiler maintenance shutdowns at our Crofton and Elk Falls paper operations in the current quarter and higher de-inked pulp (DIP) consumption. Newsprint Our newsprint paper business recorded EBITDA of $0.9 million on sales of $117.1 million for the current quarter, compared to EBITDA of $(8.2) million on sales of $112.0 million for the quarter ended June 30, 2002. Third quarter newsprint sales volumes remained largely unchanged from the previous quarter, at 201,600 tonnes. The average sales revenue for the third quarter of 2002 was $581 per tonne, an increase of $17 per tonne, or 3.0%, from the preceding quarter. The partial implementation of a US$50 per tonne price increase for North American markets during the current quarter, as well as the stronger U.S. dollar, more than offset a decline in period-over-period average transaction prices in offshore markets. The average cost of sales for the current quarter was $551 per tonne, an improvement of $30 per tonne, or 5.2%, from the previous quarter. This was mostly attributable to further synergies, lower maintenance costs, seasonally lower energy costs and reduced DIP consumption. These cost reductions were partially offset by scheduled power boiler shutdown costs at Crofton and Elk Falls. Pulp and Containerboard EBITDA from pulp and containerboard operations for the third quarter of 2002 was $16.3 million on sales of $80.4 million, compared to EBITDA of $(0.1) million on sales of $76.9 million for the quarter ended June 30, 2002. Pulp and containerboard sales volumes for the current quarter were 126,600 tonnes, a decrease of 11,200 tonnes, or 8.1%, from the previous quarter. This was largely due to increased internal use of kraft pulp as our paper production facilities returned to full capacity. The average pulp and containerboard sales revenue for the current quarter was $635 per tonne, an increase of $77 per tonne, or 13.8%, from the previous quarter, reflecting stronger prices in the third quarter and favourable foreign exchange movements. The average cost of sales for pulp and containerboard for the third quarter was $479 per tonne, an improvement of $55 per tonne, or 10.3%, over the preceding quarter. The scheduled kraftmill maintenance shutdown at Elk Falls in the second quarter, improved energy consumption and seasonally lower energy costs in the third quarter were the primary factors accounting for the reduction in costs. Three Months ended September 30, 2002 compared to Three Months ended September 30, 2001 Consolidated Total EBITDA for the three months ended September 30, 2002 was $42.4 million on total sales of $392.6 million, compared to EBITDA of $45.0 million on sales of $322.1 million for the comparative period in 2001. The positive impact on EBITDA of synergies, higher sales volumes and a higher-value product mix arising from the Acquisition, together with lower production costs and improved pulp and containerboard prices, was offset primarily by significantly weaker newsprint and specialty paper prices. Specialties EBITDA from our specialties paper business was $25.2 million on sales of $195.1 million for the third quarter of 2002, compared to $26.8 million on sales of $119.4 million for the same quarter last year. Sales volumes for the third quarter of 2002 were 223,100 tonnes, up 108,500 tonnes, or 94.7%, compared to the same period in 2001, primarily as a result of the Acquisition. The average sales revenue for the third quarter of 2002 was $874 per tonne, a decrease of $168 per tonne, or 16.1%, compared to the corresponding quarter of 2001. Price erosion over the last year, particularly LWC and uncoated groundwood specialty papers, outweighed the positive impact of a higher-value grade mix arising from the Acquisition, and to a lesser extent, a stronger U.S. dollar. The average cost of sales for the third quarter of 2002 was $729 per tonne, an improvement of $37 per tonne, or 4.8%, from the comparative period in 2001. The capture of various fibre, furnish, energy, and other synergies realized in the current quarter, together with lower wood fibre and natural gas prices, were the primary factors accounting for the significant reduction in costs. These cost reductions were partly offset by costs associated with our higher-value grade mix arising from the Acquisition. Newsprint Our newsprint paper business recorded EBITDA of $0.9 million on sales of $117.1 million, compared to $15.0 million on sales of $117.5 million for the quarter ended September 30, 2001. Sales volumes for the third quarter of 2002 were 201,600 tonnes, which represented an increase of 52,200 tonnes, or 34.9%, compared to the same period in 2001. The increase was largely due to additional newsprint capacity arising from the Acquisition, which more than offset higher curtailment taken in the third quarter of 2001. For the third quarter of 2002, the average sales revenue was $581 per tonne, a decrease of $206 per tonne, or 26.2%, compared to the same period in 2001. The decrease substantially reflects a sharp drop off in consumer demand over the last year as a result of the ailing U.S. economy. The average cost of sales for the current quarter was $551 per tonne, an improvement of $92 per tonne, or 14.3%, compared to the same quarter a year earlier. This primarily reflected the capture of various synergies as well as favourable movements in fibre and energy prices. Pulp and Containerboard EBITDA from pulp and containerboard was $16.3 million on sales of $80.4 million for the current quarter of 2002, compared to EBITDA of $3.2 million on sales of $85.2 million for the same period in 2001. Pulp and containerboard sales volumes for the third quarter of 2002 were 126,600 tonnes, a decrease of 28,000 tonnes, or 18.1%, from the comparable period in 2001. Additional internal pulp requirements in the current quarter following the closure of the Powell River kraft pulp mill in late 2001 more than offset the impact of 35,000 tonnes curtailment in the third quarter of 2001. The average pulp and containerboard sales revenue for the third quarter of 2002 was $635 per tonne, an increase of $84 per tonne, or 15.2%, from the same quarter in 2001. The positive variance was primarily due to improved transaction prices for both pulp and containerboard products and favourable foreign exchange movements. The average pulp and containerboard cost of sales for the third quarter was $479 per tonne, an improvement of $21 per tonne, or 4.2%, over the same quarter in 2001. Lower unit fixed costs resulting from higher operating rates and lower fibre costs more than offset the impact of improving net realizable values on inventory volumes and values in the third quarter of 2001. Nine Months ended September 30, 2002 compared to Nine Months ended September 30, 2001 Consolidated Total EBITDA for the nine months ended September 30, 2002 was $46.3 million on total sales of $1,076.7 million, compared to EBITDA of $156.8 million on sales of $975.9 million for the comparative period in 2001. Improvements to EBITDA resulting primarily from Acquisition-related synergies, higher sales volumes and a higher-value product mix, lower production costs and stronger pulp and containerboard prices were more than offset by a sharp deterioration in paper prices as well as additional curtailment in 2002. Specialties Our specialties paper business generated EBITDA of $65.8 million on sales of $536.4 million for the first nine months of 2002, compared to EBITDA of $57.9 million on sales of $258.3 million for the nine months ended September 30, 2001. For the first nine months of 2002, sales volumes were 600,300 tonnes, up 350,900 tonnes, or 140.7%, from the same period last year, due primarily to increased production capacity across all product lines as a result of the Acquisition. The average sales revenue for the nine months ended September 30, 2002 was $893 per tonne, a decrease of $143 per tonne, or 13.8%, from the same period last year. Falling prices across all product lines, as a result of prolonged weak consumer demand, more than offset the positive contribution made by the increased proportion of higher-value grades following the Acquisition. The average cost of sales for the first nine months of 2002 was $748 per tonne, a decrease of $5 per tonne, or 0.7%, from the same period in 2001. Synergy-driven production cost improvements as well as lower prices for fibre and natural gas more than offset additional costs associated with our higher- value sales mix arising from the Acquisition, lower operating rates and higher DIP consumption in the current period. Newsprint Our newsprint paper business recorded EBITDA of $(19.6) million on sales of $320.1 million for the nine months ended September 30, 2002, compared to EBITDA of $74.3 million on sales of $371.9 million for the nine months ended September 30, 2001. Sales volumes in the first nine months of the year were 550,700 tonnes, an increase of 113,600 tonnes, or 26.0%, compared to the same period in 2001. Increased capacity following the Acquisition was partly offset by higher curtailment in 2002 versus 2001. The average sales revenue for the nine months ended September 30, 2002 was $581 per tonne, a decrease of $270 per tonne, or 31.7%, from the same period in 2001. The depressed market conditions led to a sharp fall in transaction prices from the last quarter of 2001 through the first half of 2002. The average cost of sales for the first nine months ended September 30, 2002 was $589 per tonne, an improvement of $42 per tonne, or 6.8%, from the corresponding period in 2001. Savings arising from synergies, combined with lower fibre and energy costs and less DIP consumption, more than offset the impact of higher curtailment through the first nine months of 2002. Pulp and Containerboard EBITDA from pulp and containerboard operations in the first nine months of 2002 was $0.1 million, on sales of $220.2 million, compared to EBITDA of $24.6 million on sales of $345.7 million for the nine months ended September 30, 2001. Pulp and containerboard sales volumes for the first nine months of 2002 were 375,300 tonnes. This represented a decrease of 165,400 tonnes, or 30.6%. This was primarily due to the reduction in available capacity in the first nine months of 2001, following the June 2001 sale of Mackenzie and the shutdown of the Powell River pulp mill, which required the diversion of market pulp for internal consumption at Powell River and Port Alberni. Lower curtailment in the nine months of 2002, compared to the same period in 2001, partly offset this decrease. The average pulp and containerboard sales revenue for the nine months ended September 30, 2002 was $587 per tonne, a decrease of $52 per tonne, or 8.1%, from the same period last year. The impact of reduced prices across all products for 2002 was partly offset by a greater proportion of higher-value containerboard in our 2002 sales mix following the sale of Mackenzie. The average cost of sales for pulp and containerboard for the first nine months of 2002 was $559 per tonne, down $11 per tonne, or 1.9%, over the same period last year. The additional costs associated with our higher-value pulp and containerboard sales mix, following the disposal of Mackenzie and the shutdown of the Powell River kraft pulp mill, were more than offset by lower fixed unit and fibre costs. Cash Provided by Operations Cash flow provided (used) by operating activities, after changes in non- cash working capital, for the quarter ended September 30, 2002 was $(47.1) million, compared to $60.2 million for the third quarter of 2001 and $(5.6) million for the previous quarter ended June 30, 2002. Compared to the previous quarter of 2002, improved cash flow from operations ($48.5 million) was more than offset by additional working capital requirements ($90.0 million) resulting primarily from higher sales volumes, the seasonal build-up of specialty paper inventories, and property taxes paid during the period. Cash flow provided (used) by operating activities, after changes in non-cash working capital, for the nine months ended September 30, 2002, was $(59.2) million, compared to $215.3 million for the same period in 2001, primarily due to the weaker market conditions. Investing and Financing Activities We continued to keep a tight control on our capital expenditures in the third quarter of 2002. Capital spending for the current quarter was $13.6 million, compared to $21.5 million for the same quarter in 2001, and $17.5 million for the second quarter of 2002. Capital spending for the first nine months of 2002 was $40.5 million, significantly lower than $62.1 million for the comparable period in 2001. In July 2002, we replaced our revolving operating loan with a new $350 million revolving operating loan. As of September 30, 2002, the unused operating credit facility available to the Company was $192 million. In July 2002, Powell River Energy Inc., refinanced its debt from an issue of $75.0 million of First Mortgage Bonds due July 2009, of which our proportionate share is $37.6 million. As part of the refinancing, NorskeCanada and the other shareholder of PREI each advanced $7.5 million to PREI. As at September 30, 2002 the Company was in compliance with the covenants under both its credit facilities and bond indentures. However, the Company's Consolidated Fixed Charge Ratio is below the 2.0:1 threshold of the bond indentures. While this does not constitute non-compliance or default, the indentures place some restrictions on the Company while its Consolidated Fixed Charge Ratio remains below this threshold. The restrictions prohibit the payment of dividends and limit the amount of additional debt that can be incurred outside of the existing credit facilities. Update on Synergies As previously mentioned, we achieved our upgraded Acquisition synergy target of $100 million during the third quarter of 2002. On an annualized run- rate basis, assuming operations are at full capacity, we have now captured synergies totalling $110 million, of which $104 million relates to EBITDA. Based on actual operating rates (i.e. adjusted for the negative impact of curtailment), the results for the current quarter reflect EBITDA-improving synergies of approximately $24 million ($94 million per year). We continue to look for opportunities to capture any remaining synergies from the Pacifica acquisition. In the third quarter of 2002, the Company exceeded synergy targets set out in an incentive plan developed in September 2001 when the Company merged with Pacifica. Payments authorized under this plan include the granting of 2.1 million share options. Other Developments In September 2002, we reached tentative settlements with the Communications, Energy and Paperworkers Union of Canada and the Pulp, Paper and Woodworkers of Canada, on new five-year collective agreements, ten months before the existing agreements expire. These two unions represent substantially all of the members at the Company's four operations. The terms of the settlement provide a competitive wage increase and ensure operational stability for the next five years. Outlook Given the current market conditions, we anticipate newsprint and specialty paper prices will remain essentially flat for the balance of 2002. Containerboard prices are expected to show a modest improvement over the same period; however, pulp prices appear to be heading down in the short term as a result of the current imbalance of global supply and demand. Looking further ahead to 2003, the outlook is somewhat unclear. It is anticipated that the combination of increased disposable income, following recent tax rate reductions in the U.S., and low interest rates, will act as a stimulus to generate a sustainable upturn in economic activity as the year progresses. We expect groundwood paper prices to improve steadily as the U.S. economy strengthens. As we have indicated in previous quarters, we will continue to position ourselves conservatively in the event that the awaited recoveries in paper, pulp and containerboard markets take longer than anticipated. * * * As previously reported, Moody's Investors Service took several rating actions on Norske Skog Canada. Rating Actions: Assigned Norske Skog Canada Finance Limited Proposed $C300 million Revolving credit facility; Ba1 Downgraded Norske Skog Canada Finance Limited Existing Bank Debt; to Ba1 from Baa3 Norske Skog Canada Limited Senior Implied Rating; to Ba2 from Ba1 Confirmed Norske Skog Canada Limited Global Senior Unsecured Notes; Ba2 Guaranteed Global Bonds (formerly Paper Papers Inc.); Ba2 Issuer Rating; Ba2 The ratings slide reflects the weak near term outlook for the company's core business of newsprint, pulp and coated papers, and low expected cash flow until the end of 2002. The ratings also reflect the company's narrow product focus in a commodity industry with volatile pricing; its moderate size in relation to its competitors; and its lack of geographic diversification. NQL: ViewCast Unit Acquires Assets of Delta Computec Subsidiary --------------------------------------------------------------- NQL, Inc.'s wholly-owned subsidiary, Delta Computec Inc., disposed of substantially all of Delta's assets, including operating assets, vendor and customer contracts, property and customer lists on October 11, 2002 pursuant to the terms of an Asset Purchase Agreement between NQL, Delta and ViewCast.com, Inc. The United States Bankruptcy Court for the District of New Jersey in NQL's bankruptcy case previously authorized NQL to cause Delta to sell its assets to ViewCast. NQL has previously reported the signing of the Asset Purchase Agreement in a prior report which was filed with the SEC on July 3, 2002. At the closing, the Delta assets were transferred or assigned to, and certain of Delta's liabilities were assumed by, a subsidiary of ViewCast. In consideration for the acquisition of the Delta assets and the assumption of Delta's liabilities, an aggregate of $500,000 was paid in cash at the October 11, 2002 closing. In addition, subject to adjustment as set forth in the Asset Purchase Agreement, an additional $250,000 is payable six months after the closing and a final $250,000 is payable twelve months after closing. The ViewCast subsidiary also agreed to assume Delta liabilities in the approximate aggregate amount of $2,562,000. ViewCast has guaranteed the obligations of the ViewCast subsidiary. By the Asset Purchase Agreement, ViewCast also agreed to issue to Delta up to 150,000 shares of ViewCast's Class D Preferred Stock, of which 95,500 shares were issued at the closing. Subject to adjustment as set forth in the Asset Purchase Agreement, the remaining 54,500 shares are issuable in the future. For the purposes of the acquisition, the Asset Purchase Agreement valued the 150,000 shares of ViewCast Class D Preferred Stock at $10.00 per share, or $1,500,000. The 150,000 shares of the Class D Preferred Stock are convertible into 1,000,000 common shares of ViewCast at $1.50 per share. The ViewCast common stock to be issued upon conversion is subject to a Registration Rights Agreement whereby ViewCast has agreed to register that ViewCast common stock in certain circumstances. The shares of common stock of ViewCast are traded on the OTC Bulletin Board under the symbol VCST. The Class D Preferred Stock is also required to be redeemed at the stated value of $1,500,000, at the option of the holders of that stock, at any time after the second anniversary of the closing. ViewCast also has the right to redeem the 150,000 shares of Class D Preferred Stock at the stated value of $1,500,000 at any time from and after the third anniversary date of the closing, or prior to the third anniversary date of the closing if the ViewCast common stock has traded at $3.75 per share for a period of ten consecutive trading days. The principle followed in determining the amount of consideration paid for the Delta assets was an arms-length negotiation between NQL, Delta and ViewCast. There was no prior material relationship between ViewCast and either NQL or Delta or any of their affiliates, directors or officers or any associates of any such director or officer. Following the closing, the former president of Delta became an employee of, and President of, the ViewCast subsidiary. OHIO CASULATY: S&P Changes Outlook on BB Rating to Negative ----------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on Ohio Casualty Corp., which has a double-'B' counterparty credit rating, and related operating companies to negative from stable following Ohio Casualty's recent announcement of its third quarter 2002 earnings, in which the group posted a net loss of $69.9 million. The main factors driving this loss were pretax reserve charges of $62.2 million for construction-defect claims as well as a pretax impairment write-down of its agent intangible asset of $54 million. As a result, Ohio Casualty's operating results fell substantially below Standard & Poor's expectations for the first nine months of the year, with the group posting a $30 million net loss and 114.6% statutory combined ratio for the period. In addition, the group's operating capital adequacy is expected to fall below Standard & Poor's initial expectation of 125%-135% at year-end 2002 given the fall in the group's statutory surplus as of Sept. 30, 2002. "Over the last two years, Ohio Casualty has undergone significant restructuring to address its poor operating performance," said Standard & Poor's credit analyst Laline Carvalho. "Although Standard & Poor's believes the group's strategic focus has improved significantly since the entrance of a new management team in early 2001, Standard & Poor's believes over the medium-term, the group will remain challenged by its high expense structure, lingering (though decreasing) exposure to the New Jersey personal lines market, and the potential for further adverse reserve development." Ohio Casualty's financial flexibility has also declined, with the group's stock price trading significantly below its book value following its third-quarter announcement. Partially offsetting these factors are Ohio Casualty's good regional business position, improved investment strategy, and improving accident year loss ratios, as the group continues not to renew unprofitable business and agents. OM GROUP: Low Liquidity Spurs S&P to Lower Credit Rating to BB- --------------------------------------------------------------- Standard & Poor's Ratings Services has lowered its corporate credit rating on metal-based specialty chemical and refined metal products producer OM Group Inc., to double-'B'-minus from double-'B' based on liquidity concerns and challenging market conditions. Standard & Poor's said that it has also placed its ratings on the company on CreditWatch with negative implications. Cleveland, Ohio-based OM Group has about $1.2 billion of debt outstanding. "The downgrade is the result of the company's liquidity coming under stress because of probable financial covenant violations, unexpected dismal earnings performance, and the likelihood for a continuation of a weak economy well into 2003", said Standard & Poor's credit analyst Wesley E. Chinn. The company has $170 million of availability under its credit agreement, but there is the potential for noncompliance with debt covenants at Dec. 31, 2002, because of expected further deterioration of operating results in the fourth quarter. Moreover, the price of cobalt is expected to remain low through 2003, reflecting the tough market environment and the lack of any foreseeable improvement in the demand for super alloys. Standard & Poor's said that the CreditWatch listing reflects considerable uncertainties regarding the company's near-to intermediate-term liquidity and the strength of its cash flow generation and business activity. Standard & Poor's said it will resolve the CreditWatch listing following the outcome of the company's discussions with its banks to amend its credit agreement and after meeting with OM's management. OWENS-BROCKWAY: S&P Rates Proposed $300M Sr. Secured Notes at BB ---------------------------------------------------------------- Standard & Poor's Ratings Services has assigned its double-'B' rating to Owens-Brockway Glass Container Inc.'s proposed $300 million senior secured notes due 2012. Owens-Brockway is wholly owned subsidiary of Toledo, Ohio-based Owens-Illinois Inc. Total debt outstanding was about $5.4 billion as at Sept. 30, 2002. Standard & Poor's said that it has affirmed all of its ratings, including its double-'B' corporate credit rating, on Owens- Illinois Inc. and its related entities. The outlook remains negative. Proceeds of the proposed note offering will be used to repay a portion of the outstanding bank debt. "The affirmation incorporates expectations that the company's asbestos liability will remain manageable and that management's efforts to improve cash flow protection measures will be realized in the near to intermediate term", said Standard & Poor's credit analyst Paul Vastola. Standard & Poor's said that its ratings on Owens-Illinois Inc. and its related entities reflect the company's aggressive financial profile and meaningful concerns regarding its asbestos liability, offset by an above-average business position and strong EBITDA generation. Owens-Illinois is the largest manufacturer of glass containers in North America, South America, Australia, and New Zealand, and the second largest in Europe. In addition, the company is a leading plastics packaging manufacturer. PACIFIC GAS: Wants to Pay $1.3M for SEC Filing & Printer Fees ------------------------------------------------------------- The Chapter 11 Plan proposed by Pacific Gas and Electric Company provides for the creation of three new companies, ETrans LLC, Gtrans LLC and Electric Generation LLC. According to Janet A. Nexon, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin, P.C., in San Francisco California, PG&E will split its operations according to its four historical lines of business and functions: (a) The Reorganized Debtor will continue to operate the retail gas and electric distribution business; (b) ETrans LLC will operate the electric transmission business; (c) GTrans LLC will operate the gas transmission business; and (d) Electric Generation LLC will operate the electric generation business. A significant component of the Plan involves the issuance of various types of debt securities by: -- the New Entities as part of the distributions to be made to holders of Allowed Claims; and -- PG&E and the New Entities as a means of raising the cash to pay Allowed Claims and otherwise implement the Plan. To this end, Ms. Nexon relates that the Debtor has utilized its underwriters in connection with the securities offerings. The underwriters helped prepare the registration statements and related prospectuses that PG&E and the New Entities will file with the Securities and Exchange Commission for the offerings of New Money Notes to the public and the potential resale of Long- Term Notes by the holders of Allowed Claims to the public. However, as conditions precedent to the effectiveness of the Plan: (i) the registration statements for the New Money Notes and the Long-Term Notes must be declared effective by the SEC; and (ii) PG&E must have consummated the sale of its New Money Notes and the New Money Notes of each of the New Entities will have been priced and their trade dates will have occurred. Additionally, once the registration statements are filed, there may be a lengthy SEC review process for the securities offerings before the registration statements are declared effective. Ms. Nexon maintains that, at the time the registration statements are filed, PG&E will be required to pay filing fees to the SEC. PG&E estimates that the total filing fees will be $500,000, based on a total principal amount of $5,360,000,000 in debt to be offered. The current SEC filing fee is $92 for each $1,000,000 of debt offered. The Debtor anticipates it will need a professional printer to prepare and file the registration statements in the electronic filing format. The printer's costs for these services depend on: * the size of the filings; * the number of amendments required by the SEC staff; and * the number of individual revisions made in preparing the filings and amendments. As a result, the printer fees are difficult to estimate in advance. PG&E, however, calculates that the printer's costs for these services will not exceed $800,000 before the confirmation of the Plan. After confirmation, additional amendments may also be expected. By this motion, PG&E seeks the Court's authority to pay for the SEC filing fees and printer fees. Ms. Nexon tells Judge Montali that the Debtors need to pay for these fees "in order to file the registration statements with the SEC and to proceed with the process of obtaining SEC clearance for the debt securities offerings that are necessary to implement the Plan." Besides, Ms. Nexon says,, PG&E is solvent and has sufficient cash to pay these expenses without causing any detriment to its creditors. (Pacific Gas Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) PERLE SYSTEMS: Net Capital Deficiency Widens to $3 Million ---------------------------------------------------------- Perle Systems Limited (OTCBB:PERL)(TSE:PL), a leading provider of networking products for Internet Protocol and e-business access, reported unaudited financial results for the first quarter fiscal 2003 ended August 31, 2002. At August 31, 2002, Perle Systems' balance sheets show a total shareholders' equity deficit of about $3 million, up from about $2 million as recorded at May 31, 2002. Financial Highlights Based on US GAAP, the Company's revenue for the first quarter of fiscal 2003 totaled US$5.3 million, compared to revenue of US$7.7 million for the first quarter of fiscal 2002. This reduction in sales was due to poor economic conditions in our largest European markets, including the United Kingdom, France and Germany, combined with the traditional European summer slowdown. In North America, we reorganized our entire distribution channel to lay the groundwork for sales growth in the coming quarters. This reorganization had the result of inhibiting sales during the quarter. Sales in the Asia-Pacific region, especially China, were maintained. In addition to these factors, we experienced some production backlogs, which prevented meeting all of the demand during the quarter. We anticipate clearing this backlog during the second quarter. Disciplined cost controls and stable gross margins offset the lower sales revenue to some extent and the cash loss or net operating loss for the quarter was approximately US$478,000 compared to a net cash loss or operating loss of approximately US$172,000 in the same period last year. Cash loss per share was US$0.05 for the quarter compared to a cash loss per share of US$0.02 in the same period last year. Net cash loss or net operating loss and cash loss per share figures exclude acquisition-related amortization, depreciation of capital assets and intangibles and one time costs. There were no one-time costs in the first quarter of this year or last year. Chief Executive Officer's comments: "Our goal in fiscal 2003 is to continue to deliver operating profitability and sales growth." "During the first quarter we continued with research and development programs to concentrate on our higher growth product lines with the intention of bringing leading technology at value prices to the market", stated Joe Perle, President and Chief Executive Officer. "Our marketing campaigns have taken a more aggressive approach and we have restructured our distribution channel, in particular in North America, to better service our VAR's and in so doing, to help drive demand for our products. We are already seeing some of the benefits in the second quarter and I remain confident of the long term outlook for Perle." Chief Financial Officer's comments: "Having restored the Company to operating profitability in fiscal 2002, we are taking steps to further strengthen the Company in fiscal 2003. We continue to focus on the fundamentals of building sales, improving margins and operating efficiencies while containing costs," stated Derrick Barnett, Vice President, Finance and Chief Financial Officer. "We are particularly encouraged by the terms of the new credit agreement with our bankers, which we recently announced and believe that this will provide Perle with the working capital needed to continue on its path to attain full profitability and further growth." 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 PHOTOCHANNEL: Raising $750K with Proposed LP Unit Financing ----------------------------------------------------------- PhotoChannel Networks Inc., reports that the PhotoChannel Limited Partnership intends to sell up to 750 additional Limited Partnership Units for proceeds of up to $750,000. Each investor will enter into an agreement with PhotoChannel, pursuant to which PhotoChannel has the right to acquire, provided that certain market capitalization and working capital tests are met, all of the investors' LP Units, at any time after March 1, 2003 and, provided that certain market capitalization and working capital tests are met, on or before June 30, 2004, in exchange for 10,000 units of PhotoChannel per LP Unit, each unit of PhotoChannel being comprised of one common share and one common share purchase warrant, each of which, and the shares underlying the warrants, will be subject to a four month hold period from the date of issuance of the units. Each common share purchase warrant so issued will entitle the holder to purchase one common share of PhotoChannel at a price of $0.10, at any time on or before June 30, 2004. PhotoChannel will seek the approval of the TSX Venture Exchange for the Option Agreements to be entered into with new or existing limited partners of PhotoChannel LP. The terms of the new Option Agreement(s) will be identical terms to those entered into with the existing limited partners. PhotoChannel also reports that upon opening of the TSX Venture Exchange on October 29, 2002, certain insiders and friendly shareholders sold 2,962,100 shares for gross proceeds of $207,347. The sellers were Peter Scarth for 1,442,100 common shares and Quantus Capital Corp., for 1,520,000 common shares. The net proceeds from the sale will be loaned to the Company, as a bridge financing. Founded in 1995, PhotoChannel is a leading digital imaging technology provider for a wide variety of businesses including photofinishing retailers, professional/commercial photo processing labs, image content owners and targeted portal services. PhotoChannel has created and manages the PhotoChannel Network environment whose focus is delivering digital image orders from capture to fulfillment under the control of the originating PhotoChannel Network partner. For more information visit http://www.photochannel.com Formed in 2002, with the exclusive licensing rights to the PhotoChannel Network for Canadian distribution. Investors, to date, in the PhotoChannel Limited Partnership are TELUS Corporation, Discovery Capital Corporation and Peter Scarth. PhotoChannel filed for Chapter 7 Liquidation on November 1, 2001, in the U.S. Bankruptcy Court for the District of Connecticut in Bridgeport. POPE & TALBOT: Harmac Pulp Mill Resumes Operations After Outage --------------------------------------------------------------- Pope & Talbot (NYSE: POP) announced that its Harmac pulp mill in Nanaimo, British Columbia resumed full operation after one of its recovery boilers was shut down for repairs. The boiler shut down caused the mill to lose approximately 8,000 metric tons of production, and is estimated to result in a $1.0 - $1.5 million reduction in operating income for the fourth quarter of 2002. All repairs have been successfully and safely completed and the mill is back in full operation. Pope & Talbot is dedicated to the pulp and wood products businesses. The Company is based in Portland, Oregon and traded on the New York and Pacific stock exchanges under the symbol POP. Pope & Talbot was founded in 1849 and produces market pulp and softwood lumber at mills in the U.S. and Canada. Markets for the Company's products include the U.S., Europe, Canada, South America, Japan and the other Pacific Rim countries. For more information on Pope & Talbot, Inc., please check the Web site: http://www.poptal.com * * * As reported in the July 18, 2002 edition of Troubled Company Reporter, Standard & Poor's assigned its double-'B' rating to pulp and lumber producer Pope & Talbot Inc.'s $50 million senior unsecured notes due 2013. Standard & Poor's also affirmed its existing ratings on the company, including its double-'B' corporate credit rating. The outlook remains stable. Debt outstanding at the company at March 31, 2002, totaled $230 million. REVLON CONSUMER: S&P Puts B-/CCC- Credit Ratings on Watch Neg. -------------------------------------------------------------- Standard & Poor's Ratings Services placed its single-'B'-minus corporate credit rating on Revlon Consumer Products Corp. and its triple-'C'-minus corporate credit rating on REV Holdings Inc., on CreditWatch with negative implications. Revlon is a New York-based manufacturer and marketer of cosmetics, skin care, fragrance, and personal care products. REV Holdings conducts business exclusively through its indirect subsidiary, Revlon, which had $1.74 billion in debt at September 30, 2002. Debt held directly at REV Holdings totaled $80.5 million. "The CreditWatch placement reflects Revlon's reduced liquidity position, which has continued to weaken because of negative operating cash flow. Furthermore, Revlon has announced it may not be in compliance with its bank financial covenant of minimum EBITDA of $210 million for the quarter ending December 31, 2002, due to the company's weaker-than-expected operating performance and anticipated soft 2002 holiday selling season," stated Standard & Poor's credit analyst Lori Harris. Standard & Poor's remains very concerned that Revlon's liquidity position may be severely stressed over the near term given the pace at which the company's cash balances are depleting and credit facility availability is reducing. Revlon's financial flexibility has declined substantially in 2002; availability under the $132.1 million revolving credit facility declined to $32 million at September 30, 2002, from $104 million at December 31, 2001. Furthermore, cash balances have dropped to $59 million at September 30, 2002, from $103 million at December 31, 2001. Standard & Poor's will meet with Revlon management to review 2002 earnings and cash flow expectations, discussions with senior lenders, operating strategies, and prospects for recovery in 2003. ROYAL CARIBBEAN: S&P Affirms BB+ Rating on Two Related Deals ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its double-'B'-plus ratings on class A-1 of two synthetic transactions linked to Royal Caribbean Cruises Ltd., and removed them from CreditWatch with positive implications. The rating actions follow the affirmation of Royal Caribbean Ltd.'s corporate credit and senior unsecured debt ratings on Oct. 25, 2002. Both synthetic issues are swap-independent synthetic transactions that are weak-linked to the underlying collateral, Royal Caribbean Cruises Ltd.'s debt. The rating actions reflect the credit quality of the underlying securities issued by Royal Caribbean Cruises Ltd. A copy of the Royal Caribbean Cruises Ltd.-related press release, dated October 25, 2002, can be found on RatingsDirect, Standard & Poor's Web-based credit analysis system. Ratings Affirmed And Removed From Creditwatch Positive Corporate Backed Trust Certificates Series 2001-27 Trust $38.028 million corporate-backed certs Rating Class To From A-1 BB+ BB+/Watch Pos Corporate Backed Trust Certificates Royal Caribbean Debenture- Backed Series 2001-30 $21.293 million debenture-backed certs Rating Class To From A-1 BB+ BB+/Watch Pos SATX INC: Court Approves First Amended Disclosure Statement ----------------------------------------------------------- On March 22, 2002, SATX, Inc., (OTCBB:SATX) filed a chapter 11 petition for relief under the United States Bankruptcy Code. On October 28, 2002 the Bankruptcy Court signed an order approving SATX's First Amended Disclosure Statement. The hearing date for approval of SATX's Plan of Reorganization was set for November 25, 2002. The deadline for submitting objections to the Plan is November 18, 2002. The deadline for all ballots to be timely submitted is November 18, 2002. The ballots must be received no later than the close of business November 18, 2002 at the following address. Jesse Blanco, P.O. Box 680875 San Antonio, Texas 78268. If, and only if, the First Amended Plan of Reorganization as proposed by SATX is approved, SATX proposes to enter into the following transactions. Intelligent Medicine, Inc. SATX proposes to purchase 100% of all the outstanding and issued capital stock of Intelligent Medicine, Inc. IMED is a Houston, Texas based company dedicated to becoming the world's leading provider of Medical Informatics Services. Since their original principals founded the Company in 1993, they have firmly believed that Telemedicine is dependent upon systems integration of hardware, software, devices, and communications networking. IMED's solution is a Telemedicine Service offering combining hardware, software, communications, and management. They deliver turnkey systems and networks combined with their clients' ability to offer clinical diagnosis and treatment through their existing professional service networks. Their systems are an efficiently integrated healthcare suite of robust, proprietary, open architecture, networked systems combined with a complete line of video teleconferencing, still image, voice, data, and digitized medical peripheral devices. This enables their clients to leverage their service facilities to deliver live and/or virtual caregiver to patient, or caregiver-to-caregiver, medical consultations and/or treatment at the point-of-need or in a store and forward environment. IMED, in partnership with First Genesis, has established relationships with the US Army for medical informatics. The First Genesis software, Global Application Framework, GAF, is currently in process for evaluation as a standard for all military medical informatics. GAF is an architecture that enhances the critical needs of security, transaction processing and data throughput. If the evaluations prove successful, IMED will move quickly to implement this networking software across all applications areas. IMED has recently been involved in the discussions for the development of a USA Bio-Terrorist Health Alert Network. IMED was invited to represent industry on a panel including the DOD, CDC, NLM, Dept. of Commerce, VA and ATA. IMED has recognized expertise in networks and will position GAF as the solution for this Health Alert Network. IMED's marketing focus is in Military Applications, Prison Healthcare and Telemedicine Networking. IMED has become recognized for its leadership and this gives IMED a first mover advantage in these application areas. It has established relationships with the leading TeleHealth research facility for a constant flow of innovative technologies. In addition, they have assisted their clients in implementing telemedicine solutions by partnering with hardware, software, and network providers thereby creating unique designs that are the result of the integration of these technologies. IMED is managed by an experienced group of professionals. Their senior management team brings many years of complementary medical practice, software, technology, and project experience to bear in designing and implementing telemedicine client solutions. They consistently bring together software engineering staff with internal and external medical professionals and high- quality systems integrators to continue to develop and produce systems and further product integration enhancements for their clients applications. IMED services encompass designing, implementing, and managing telemedicine and healthcare technology networked solutions. They assess their client's particular tele-healthcare system needs, design and install the required telemedical information systems and network solution, provide systems training, and manage the clients' system-wide solution. Their implementation team complete with medical specialists, telemedically experienced clinical personnel information systems analysts, software and hardware engineers, and telecommunications experts work together with the client to completely provide a turnkey telemedicine service to the client's satisfaction. IMED has designed and produced the first mobile telemedicine clinic. This mobile telemedicine unit comes in an array of sizes and capabilities suited to their clients' particular mobile needs. The mobile telemedicine unit is capable of the following: -- Complete Telemedicine over T-1, FT-1, ISDN, Frame Relay, IP addressing, Satellite -- Complete ECG, EKG, Vital Signs including pulse rate, blood pressure, SpO2 and digital stethoscope -- Ultrasound system with full range of attachments. -- Communicates through direct connect to services, or through RF, Cellular and or Satellite communication protocolsComes complete with Wheel chair lift, 2 roof (interior) mounted pan, tilt, zoom cameras with 12 x zoom, On-board generator supplies power or external weather proofed connections for AC, and communication links available on the exterior of the vehicle. The following is a list of top management of the Company, including each manager's resume and area of responsibility or oversight. -- Dr. R. J. Bono - Chairman and CEO. Dr. Bono's experience includes a 29 year private Dental Practice and entrepreneurial activities resulting in the successful establishment of investment groups for 18 start-up companies. During the course of spearheading efforts toward development of capital, business organization, corporate planning and new market analysis he has gained a wealth of business knowledge. In particular, he has over ten years of experience in telecommunications. -- Joe Chirco - President. An accomplished systems, sales, and business management professional with over twenty five years experience generating revenues and profits in the highly competitive telecommunications and telemedicine industry. Mr. Chirco is recognized as a leader in delivering innovative telemedicine solutions. In two years the IMED has progressed from a "member of the pack" to a recognized leader in the telemedicine market. His experience includes start-up and turnaround situations, international market development, major account management and new business development. Mr. Chirco graduated in 1968 with a BSEE from Rutgers College of Engineering, in 1972 with an MS Degree in Management Sciences and Operations Research from Stevens Institute of Technology and in 1979 a MBA Degree in Executive Sales Management from Columbia University. -- Dr. Paul K. Keller, Ph. D. - Vice President of R&D/Engineering. Dr. Keller is a recognized creative scientist. He has completed specialized training and graduated from the following: Chemistry, University of Oklahoma; Nuclear Energy, LSU; Environmental Law, University of Washington; Nuclear Physics, MIT; Certified Telemedicine System Integrator for NEC, V-Tel and CLI. Dr. Keller has been an educator in the fields of physics, chemistry, nuclear science, and engineering. He was the Director of Special Projects for the United States Atomic Energy Commission and a technology advisor to Presidents Carter and Reagan. He currently also serves as President of Paul Keller and Executive Assistant to the Governor of Louisiana for State technology programs. Dr. Keller developed the State Telecommunication and Telemedicine plan. The board of directors consists of Dr. R. J. Bono, Chairman, Joe Chirco, President and Director, Paul Keller, Vice President and Director, Maurice Stone Vice President and Director, Wyntress Ware, Director, Theodis Ware, Director, Dr. David DiLoretto, Director, Eddie Austin, Legal Counsel and Director, and Dr. Darshan Wadhwa, Chief Financial Officer and Director. First Genesis, Inc. SATX proposes to purchase 100% of all the outstanding and issued capital stock of First Genesis, Inc., 100% of all the outstanding and issued capital stock of First Genesis Professional Services, Inc., a Texas wholly owned subsidiary which has a licensing agreement with another company called ATRADE Investment Technologies, Inc. First Genesis, Inc., is a Texas corporation that has authorized and issued 1000 shares of common stock with a one-dollar par value. The members of the board of directors are Ron Watty, Pascal Watty, Harold Woolfolk and Maurice Stone. For the past four years the company has been involved in the Information Technology Consulting business primarily in the Energy and Financial Industry. The company has developed an intellectual property called Global Application Framework, or GAFr, which is a technology used in the health "Informatics" industry for managing patients' medical records. The health Informatics business has developed into First Genesis' primary business focus. First Genesis, Inc., is a holding company with one wholly owned subsidiary named First Genesis Professional Services, Inc., a Texas corporation. First Genesis Professional Services, Inc., holds a license resale agreement from ATRADE Investment Technologies, Inc., for technical analysis software called Gr8Alert. It is a trading application for technical analysis of the stock market. First Genesis Professional Services, Inc. owns the intellectual property known as GAF(R) or Global Application Framework that is used by First Genesis, Inc., in the health Informatics business. The following is a list of top management of the Company, including each manager's resume and area of responsibility or oversight: -- Ronald Watty, President / CEO. Ronald S. Watty brings over 15 years of entrepreneurial and creative experience in information technology, consulting, sales, business development, product management, and product development. He has extensive experience in operations management, product and service marketing, and new market development. Mr. Watty's background allows him to have a clear vision for the emerging technology industry, which will lead and direct the goals and objectives of FIRST GENESIS. Mr. Watty earned his B.S. in Computer Engineering from the University of Houston and certifications in Finance, Marketing, and Data Management. He joined American Express as a Sr. software developer in 1989. There he designed and developed a travel management system (i.e., TripPower, CardPower, and PurchasePower) for American Express corporate clients. This system helps manage corporate travel managers who were handling up 20M in travel volume. In 1994, Mr. Watty join Virtual Shopping as Product Development Manager. He design and developed one of the first Video Conferencing call management system and received training in Project Management, Product Management, and Marketing and Sales. In 1995, Mr. Watty formed his own company, First Genesis Medical Group, where he managed and developed new markets for rehabilitation services for the Home Health Care and Rehabilitation Industry. The company was later changed into First Genesis, Inc. and spun out its technology group First Genesis Professional Services, Inc. As President of the corporation, Mr. Watty perform consulting services on several major projects for Berger & Co. as a Sr. Consultant. In addition, Mr. Watty designed, developed, and managed data warehousing products (TotalVision) for the financial market for Bisys, Inc. -- Pascal Watty, VP Operations. Mr. Watty is one of the founders of the Company and is responsible for the direction of the day-to-day operations of the Company. Mr. Watty received his baccalaureate degree in Political Science from The University of Texas at Austin in 1993. He has extensive experience in business, including over 5 years in sales and marketing, product development, and senior management. As Vice President, Mr. Watty is First Genesis' accountable executive for the administration of all policies and procedures relating to full-time, part- time, and contractor labor. This responsibility includes developing and implementing a Continuous Quality Improvement program to ensure continued organizational quality. Today, he also acts as a principal in First Genesis Holdings, LLC, an investment holding company. The members of the First Genesis Professional Services, Inc. board of directors are Ron Watty, Pascal Watty, Harold Woolfolk and Maurice Stone. Iceberg Oil and Gas, Inc. SATX proposes to form a wholly owned Delaware subsidiary, Iceberg Oil and Gas, Inc. The Company will purchase certain oil and natural gas platforms with existing proved reserves. The Company will target acquisitions from owners that are currently in a distressed situation. The Company, where possible, will acquire developed properties, aggressively manage and exploit all properties, and use technological expertise to develop reserves. The President will be Garry McHenry and the Secretary & Treasurer will be Celso B. Suarez, Jr. High Yield Financial, Inc. SATX proposes to form a wholly owned Delaware subsidiary, High Yield Financial, Inc. The Company will be in the business of purchasing high yield, low grade defunct credit risks of mortgages, more commonly known as "non performing bond pools." The Company will buy the bond pools at an average approximate price of between 33 to 65 cents on the dollar, but at times may pay prices from lower than 33 cents and/or higher than 65 cents, depending on the pool that is purchased. The Company intends to buy the pools, repackage the performing bonds and sell them. The Company will take the non-performing bonds and sell the assets that were used to securitize each bond. The President will be Garry McHenry, and the Secretary & Treasurer will be Celso B. Suarez, Jr. Effective as of October 6, 2002, SATX, Inc., as a result of the recent merger of several of the Partners of Grassi & Co., CPA's P.C., into Marcum & Kliegman, LLP, dismissed Grassi & Co., CPA's P.C., and engaged Marcum & Kliegman, LLP as its independent accountant. The decision to change accountants was approved by the Board of Directors of the Company. S-C NEWCO: S&P Junks Corp. Credit Ratings over Market Pressures --------------------------------------------------------------- Standard & Poor's Rating Services lowered its corporate credit ratings on co-borrowers S-C Newco LLC and P-G Newco LLC to triple-'C'-plus from single-'B'-minus. In addition, senior secured bank loan ratings on the companies were lowered to single-'B'-minus from single-'B'-plus. The ratings remain on CreditWatch with negative implications, where they were placed July 22, 2002. The rating actions reflect the adverse impact that recent aviation industry pressures have had on collateral values and cash flow streams. The bank facility is secured by a first- priority interest in the assets of the borrowers and their subsidiaries, which consists of a portfolio of medium-size widebody freighter aircraft. The facility is jointly and severally guaranteed by S-C Aircraft Holdings LLC and P-G Aircraft Holdings LLC, which own 100% of S-C Newco and P-G Newco. S-C Aircraft Holdings is owned by George Soros investment interests, the Winston Fund, and the Quantum Fund; P-G Aircraft Holdings is owned by George Soros investment interests and the Winston Fund. S-C Newco and P-G Newco are aircraft lessors, based in New York, New York. "The downgrades reflect the adverse impact that the aviation downturn has had on lease revenues and collateral values," said Standard & Poor's credit analyst Lisa Jenkins. "Ratings remain on CreditWatch due to concerns over near term liquidity and covenant compliance," the analyst added. The companies are currently negotiating with lenders to amend the existing credit facility. S-C Newco and P-G Newco took on significant debt to acquire a modest-size, specialized portfolio of medium-capacity Airbus A300B4-200 widebody aircraft and convert them to freighters. To meet their debt service requirements, the companies rely on leasing revenues and proceeds from the sale of aircraft. Equity infusions from the companies' owners are the only other material source of liquidity for the companies`. Ratings were initially assigned based on a loan to value of around 50%. As a result of industry pressures over the past year, the value of the collateral has declined and asset protection levels have deteriorated even though a significant amount of principal has been amortized over the past two years. Industry pressures have also had an adverse impact on lease payment streams and have made it more difficult to complete required aircraft sales. Standard & Poor's expects industry conditions to remain challenging over at least the near term. The one notch rating differential on the credit facility, though less than the previous two notch rating differential, still reflects Standard & Poor's belief that there is a strong likelihood of full recovery of principal in the event of a default or bankruptcy. However, all ratings could be lowered if it appears that liquidity will remain constrained for an extended period or if the companies are unsuccessful in renegotiating the terms of the credit facility to provide more room to weather the industry downturn. Standard & Poor's will continue to monitor the companies' near-term operating outlook and access to bank funding and will take further rating actions as appropriate. SLI INC: Committee Signs-Up KPMG LLP as Financial Advisor --------------------------------------------------------- The Official Committee of Unsecured Creditors appointed to the chapter 11 cases SLI, Inc., and its debtor-affiliates, asks permission from the U.S. Bankruptcy Court for the District of Delaware to hire KPMG LLP as its financial advisor. The Committee anticipates that KPMG may render: a) assistance in the review of reports or filings as required by the Bankruptcy Court or the Office of the United States Trustee, including the schedules of assets and liabilities, statement of financial affairs, and monthly operating reports; b) review of the Debtors' financial information, including analyses of cash receipts and disbursements, financial statement items and proposed transactions for which Bankruptcy Court approval is sought; c) review and analysis of the reporting regarding cash collateral and any debtor-in-possession financing arrangements and budgets; d) evaluation of potential employee retention and severance plans; e) assistance with identifying and implementing potential cost containment opportunities; f) assistance with identifying and implementing asset redeployment opportunities; g) analysis of assumption and rejection issues regarding executory contracts and leases; h) review and analysis of the Debtors' proposed business plans and the business and financial condition of the Debtor generally; i) assistance in evaluating reorganization strategy and alternatives available to the creditors; j) review and critique of the Debtor's financial projections and assumptions; k) preparation of enterprise, asset and liquidation valuations; l) assistance in preparing documents necessary for confirmation; m) advice and assistance to the Committee in negotiations and meetings with the Debtor and the bank lenders; n) advice and assistance on the tax consequences of proposed plans of reorganization; o) assistance with the claims resolution procedures, including analyses of creditors' claims by type and entity and maintenance of a claims database; p) litigation consulting services and expert witness testimony regarding confirmation issues, avoidance actions or other matters; and q) other function s as requested by the Committee or its counsel to assist the Committee in this Chapter 11 case. The customary hourly rates for financial advisory services to be rendered by KPMG LLP are: Partners $540 - $600 per hour Managing Directors/Directors $450 - $510 per hour Senior Directors/Directors $360 - $420 per hour Senior/Staff Consultants $270 - $330 per hour Paraprofessionals $120 per hour SLI, Inc., and its affiliates operate in multi-business segments as a vertically integrated manufacturer and supplier of lighting systems, which includes lamps, fixtures and ballasts. The Company filed for chapter 11 protection on September 9, 2002 in the U.S. Bankruptcy Court for the District of Delaware. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $830,684,000 in total assets and $721,199,000 in total debts. SMARTDISK CORP: Posts Better Financial Results for Third Quarter ---------------------------------------------------------------- SmartDisk Corporation (Nasdaq:SMDK), a company that develops and markets products that enable people to capture, organize, use and preserve digital content in easy and enjoyable ways, released its financial results for the quarter and nine months ended September 30, 2002. Third Quarter Results For the quarter ended September 30, 2002 the Company's net loss was $0.67 million, compared to a net loss of $51.26 million for the corresponding quarter in 2001. The Company reported revenue of $10.36 million for the quarter ended September 30, 2002, compared to revenue of $17.32 million for the corresponding quarter in 2001. First Nine Months Results For the nine-month period to September 30, 2002 the Company's net loss was $15.74 million, compared to a net loss of $67.83 million for the corresponding period in 2001. The Company reported revenue of $31.07 million for the nine- month period to September 30, 2002, compared to revenue of $55.26 million for the corresponding period in 2001. Recent Highlights "During the past quarter and throughout 2002, we have successfully expanded our product line with exciting new digital lifestyle products. In addition, we have significantly broadened our distribution network of world-class retailers and distributors. As a result, our revenue increased 8% from the prior quarter, despite global market weakness. At the same time, given the challenging and prolonged economic environment that has persisted, we have continued to aggressively reduce operating expenses and lower unit costs of our products," said Michael S. Battaglia, President and CEO. Specifically, SmartDisk has recently: - Introduced a unique Digital Camera Accessory Pack at Wal- Mart retail stores nationwide. - Commenced shipping SmartScan film and slide scanners to retailers and distributors. - Launched a new line of high-capacity, portable external hard drives. - Extended its distribution network nationally and in Europe. SmartDisk is a leading developer, manufacturer and marketer of a range of advanced consumer electronic products and exciting software solutions that are enabling the digital age and simplifying the digital lifestyle. The company's innovative products help users transfer, store, manage and share digital music, video, pictures and data. Headquartered in the U.S., with operations in Europe and Asia, SmartDisk sells and supports its products worldwide. For more information, go to http://www.smartdisk.com * * * SmartDisk, in its Form 10-Q filed on August 14, 2002, reported: "Cash and cash equivalents decreased to $4.409 million at June 30, 2002 from $14.517 million at December 31, 2001. Cash and cash equivalents have decreased over each of the last several quarters. The Company has minimal financial resources and cash flow from operating activities continues to be insufficient to meet operating needs and other payment obligations. "The decrease in cash and cash equivalents of $10.108 million reflected (i) net cash used in operating activities of $8.423 million, (ii) net cash used in investing and financing activities of $1.900 million and (iii) the positive effect of exchange rate fluctuation on cash of $0.215 million. "Net cash used in operating activities was $8.423 million for the six months ended June 30, 2002 compared to $1.757 million for the six months ended June 30, 2001. "Net cash used in operating activities of $8.423 million in the six months ended June 30, 2002 was comprised of (i) the net cash loss, or net loss adjusted for non-cash charges and credits, of $2.243 million and (ii) investment in working capital of $6.180 million. The investment in working capital was predominantly comprised of (i) increased accounts receivable of $2.089 million, resulting from sales in the latter part of the reporting period, (ii) increased inventory of $2.518 million, resulting from the reduction in sales activity of certain personal storage and software products and the purchases of initial stock levels of Universal Readers and USB versions of Firelite hard disk drives, (iii) increases in prepaid expenses and other current assets of $0.740 million, (iv) decreases in accounts payable of $0.337 million and (v) decreases in other accrued liabilities of $0.459 million. "Net cash used in investing activities was $1.839 million for the six months ended June 30, 2002 compared to net cash provided by investing activities of $0.199 million for the six months ended March 31, 2001. "The Company believes that its cash and cash equivalents and working capital may not be sufficient to meet its operating requirements through the end of fiscal 2002. The Company's operating losses and working capital requirements continue to adversely affect cash flow. In the event of a continued decrease in revenue generation and cash flow from accounts receivable is reduced further or interrupted by slow collections, the Company will likely be unable to meet its operating requirements through the end of fiscal 2002. These liquidity problems raise substantial doubt about whether the Company can continue as a going concern without raising additional capital. Such additional capital, if required, may not be available to the Company or may be available on terms which may be unacceptable to the Company." STANDARD MEMS: US Trustee Appoints 3-Member Creditors Committee --------------------------------------------------------------- Donald F. Walton, the United States Trustee appoints a three- member Official Committee of Unsecured Creditors in the chapter 11 case of Standard MEMS. The appointees are: 1. MEMC Electronic Materials, Inc. Attn: Larry J. Rock 501 Pearl Drive, P.O. Box 8 St. Peters, Missouri, 63376 Phone: (636) 474-5675, Fax: (636) 474-5154; 2. Rite Track Equipment Services, Inc. Attn: Thomas Hayden 8655 Rite Track Way, West Chester, OH, 45069 Phone: (513) 881-7820, Fax: (513) 881-7828; and 3. Surface Technology Systems Attn: Andrew Duncan McQuarrie 611 Veterans Blvd., Suite 107 Redwood City, CA Phone: (650) 569-3655, Fax: (650) 569-3663. Standard MEMS, Inc., a fully integrated micro electro mechanical systems company providing product design, MEMS semiconductor fabrication, end product packaging and system integration to the general marketplace, filed for chapter 11 protection on September 16, 2002 at the U.S. Bankruptcy Court for the District of Delaware. Mark E. Felger, Esq., at Cozen O'Connor represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of over $10 million. TEXAS PETROCHEMICALS: Pursuing Options to Refinance Secured Debt ---------------------------------------------------------------- Texas Petrochemicals LP, whose corporate credit rating has been affirmed by Standard & Poor's at BB, announced a net loss of $4.2 million on $157.1 million in sales revenue in the first quarter ended September 30, 2002, compared to a net loss of $9.3 million on $154.9 million in sales revenue for the corresponding quarter in the prior year. Earnings before interest, taxes, depreciation and amortization for the first quarter were $6.2 million compared to a loss of $0.8 million for the corresponding quarter in the prior year. The current quarter EBITDA was substantially below the normal historical level for TPC's first quarter. The prior year comparable quarter included a negative impact of approximately $13 million from non-recurring events related to the fire and flood in the summer of 2001. The decline in the current quarter performance compared to historical levels is due primarily to lower production volumes of MTBE and lower unit margins on MTBE sales during the quarter. MTBE production volume during the quarter was reduced by two operational outages. In July 2002 one of TPC's two dehydro units was shut down for unplanned maintenance for three weeks, and in September 2002 the other dehydro unit was shut down for three weeks for planned maintenance and catalyst change. These two operating outages limited MTBE production to less than 40 percent of normal operating rates during the quarter. MTBE variable margin contribution increased over $6 million compared to the prior year comparable quarter. Prior year performance was materially impacted by lower production and higher costs associated with operational issues. Partly offsetting the improvement compared to the prior year, MTBE unit margins were negatively impacted by a significant increase in raw material costs compared to the prior year, particularly the price of methanol. Butadiene variable margin contribution increased 56 percent in the current quarter compared to the prior year quarter due to higher sales prices and slightly higher sales volumes. The majority of the increase in contribution was due to higher butadiene sales prices, which increased three cents per pound during the current quarter. Sales volumes increased over seven percent in the current quarter as compared to the prior year quarter. While butadiene demand continues to remain relatively stable, sales prices have increased due to a global shortage of available raw material. Crude butadiene is produced as a by- product to the ethylene manufacturing process. Ethylene plants have been operating at rates lower than historical levels and with lighter feedstocks, which produce less crude butadiene by- product. The shortage in available crude butadiene has limited TPC's ability to take advantage of additional butadiene production capacity announced last year. TPC's butadiene production capacity was increased from 900 million pounds per year to 1.2 billion pounds per year. In response to the shortage of feedstock supply, TPC began operations of its on-purpose butadiene plant during the quarter. This operating plant has the capability of producing between 5-10 million pounds per month of additional butadiene without the need to acquire crude butadiene. Specialty products variable margin contribution increased seven percent during the current quarter compared to the prior year quarter. Sales volume was 99 percent of the prior year as a decline in sales of our traditional specialty products was largely offset by growth of the polyisobutylene business. Increased variable margin contribution from polyisobutylene sales contributed to the majority of the increase in the specialty products business profitability. TPC has been pursuing several options to refinance its existing secured debt under the Bank Credit Agreement. The Revolving Credit Facility under the Agreement is currently set to expire on December 31, 2002. As of September 30, 2002 TPC had $21.5 million outstanding on the Revolver and $34.3 million in outstanding term loans. TPC has obtained waivers of the Total Debt to EBITDA ratio covenant in order to stay in compliance with the Agreement. On September 26, 2002 TPC obtained a one- month waiver that allowed borrowings of up to $33 million under the Revolver through October 31, 2002. On October 30, 2002 TPC obtained a second waiver which granted another one-month extension that allows borrowing of up to $26 million under the Revolver through November 29, 2002. The Company is in negotiations to replace the existing Agreement with a new revolving credit facility and a new term loan. Based on preliminary negotiations, TPC believes this financing will include a revolving credit facility of up to $60 million and a term loan of at least $25 million and anticipates closing will occur in November. TPC is a producer of quality C4 chemical products widely used as chemical building blocks for synthetic rubber, nylon carpets, adhesives, catalysts and additives used in high-performance polymers. TPC also manufactures fuel products used in the formulation of cleaner burning gasoline. The company has manufacturing facilities in the industrial corridor adjacent to the Houston Ship Channel and operates product terminals in Baytown, TX and Lake Charles, Louisiana. TPC is a Responsible Care(R) company dedicated to supporting the continuing effort to improve the industry's responsible management of chemicals. For more information about TPC products and services visit the company online at http://www.txpetrochem.com THOMAS GROUP: Sept. 30 Balance Sheet Upside-Down by $1.7 Million ---------------------------------------------------------------- Thomas Group, Inc., (OTCBB:TGIS) announced that third quarter 2002 results from core business operations continued to show substantial improvements. Throughout the third quarter both revenue and profit performance improved, and for the first time in over one year, the Company showed a profit from core operations in September. Core earnings excludes expenses related to the Company's re-financing activities and restructuring charges. Overall core operating results for the third quarter of 2002 also improved compared to the second quarter of 2002. In the third quarter of 2002 there was an overall core net loss of $0.6 million, compared to a net loss from core business operations of $1.3 million in the second quarter of 2002. This marks the third consecutive quarter the Company has improved core operating results. The following table shows the Company's improvements in core operations. Consolidated operations of the Company had a net loss in the third quarter of 2002 of $1.8 million on revenue before reimbursements of $6.8 million. These results compare favorably to the second quarter of 2002 net loss of $2.3 million on revenue before reimbursements of $8.0 million. At September 30, 2002, the Company's balance sheets show a working capital deficit of about $3 million, and a total shareholders' equity deficit of about $1.7 million. Improving Financial Performance: It is significant that the Company was able to improve core business bottom line results by $0.7 million and consolidated operations by $0.5 million, when comparing the third quarter of 2002 with the second quarter of 2002, despite revenue decreasing $1.2 million during this period. This result reflects the Company's successful efforts to attain nearly 100% utilization of its professional workforce, as well as improved control of its selling, general and administrative costs, which decreased by $0.8 million when comparing the third quarter of 2002 with the second quarter of 2002. Commenting on the Company's third quarter 2002 performance, John Hamann, Thomas Group's President and CEO said, "Q3 was very encouraging on a number of dimensions. First, our cost control actions continued to deliver results. Second, the difficult actions we needed to take in Europe and Asia were completed, allowing a basis for future profitability in both regions. Finally, and most importantly, we saw business conditions and our financial performance improve throughout the quarter." Restructuring Charge: Included in the operating results for the third quarter of 2002 is $0.8 million of non-cash restructuring charges related to write-down costs expected from the closure and liquidation of the Company's German subsidiary. Quarterly cost savings from this action are expected to be approximately $0.7 million per quarter. No other charges related to the German subsidiary are anticipated. Business Development: During the third quarter of 2002, the Company continued to win new business in North America and Asia. These contract wins confirm the success the Company has had in winning business in its selected target markets, despite the tight market for consulting services. In North America, the Company continued to expand its relationship with the United States military by reaching agreement with the United States Navy's Submarine Forces to improve the efficiency of the Torpedo Enterprise Process. This program will be a one-year initial program with multi-year follow-on potential. Also, the Company began a new program in September with the United States Army's Aviation and Missile Command to conduct an analysis of the Helicopter Training Fleet. This program is an initial four-month program with potential for a multi-year follow-on program. The Company also began an assessment of the US Navy's Surface fleet refurbishment process. In Asia the Company reached agreement with a major product distribution company, JDH Philippines, a member of the Li and Fung Group of Companies, to evaluate distribution operations and to deliver increased marketing effectiveness and faster customer service. In addition, agreement was reached with a major garment manufacturer, MAST Lanka and the Phoenix Group of Companies to focus process improvements on order fulfillment, supply chain, sales and merchandising, as well as change management. Commenting on the recent business wins and the future potential of business under development, John Hamann said, "Thomas Group won $4.1million of important new programs in the third quarter, in Asia and North America, in commercial as well as military sectors. Many of these new programs were assessments, which are expected to turn in to multi-year, multi-million dollar agreements in Q4. These conversions, if completed as expected, will provide significantly improved revenue stability for the Company over the next two to three years. We are very pleased by the two new programs in Asia. These programs were won in a significantly shorter cycle time than is typical for Thomas Group. We believe this reflects many positive factors, including a better marketing and selling process, the positive guidance of new Thomas Group leadership in Asia, and market acceptance of Thomas Group's new Rapid Deployment Methodology. We continue to believe that Asia is an area of significant potential for Thomas Group, and we believe we will continue to win more business there in the near-term." Backlog: As of September 30, 2002, the Company had backlog of $28.3 million compared to backlog of $26.5 million at June 30, 2002. The increase in backlog reflects the contract wins in North America and Asia quarter-over-quarter. Financing Activities: As previously reported the Company reached agreements on September 20, 2002 and October 17, 2002 to receive, in the aggregate, $2.0 million in subordinated convertible promissory notes from the Company's Chairman of the Board and one of the Company's stockholders. These agreements bring the total amount of debt or convertible debt raised by the Company to $3.5 million since March of 2002. Founded in 1978, Thomas Group, Inc., is an international, publicly traded professional services firm (OTCBB:TGIS). Thomas Group focuses on improving enterprise wide operations, competitiveness, and financial performance of major corporate clients through proprietary methodology known as Process Value Management(TM), process improvement, and by strategically aligning operations and technology to improve bottom line results. Recognized as a leading specialist in operations consulting, Thomas Group creates and implements customized improvement strategies for sustained performance improvement. Thomas Group, known as The Results Company(SM), has offices in Dallas, Detroit, Zug, Singapore and Hong Kong. For additional information on Thomas Group, Inc., please visit the Company on the World Wide Web at http://www.thomasgroup.com UNIFAB INT'L: Shareholders' Meeting to Convene on Dec. 13, 2002 --------------------------------------------------------------- The annual meeting of shareholders of UNIFAB International, Inc., will be held December 13, 2002, at 10:00 A.M., Central Time, at 5007 Port Road, New Iberia, Louisiana. The purposes of the meeting are to consider and vote upon the following proposals and to transact such other business as may properly come before the annual meeting: 1. To amend the Articles of Incorporation to declassify the Board of Directors and require the annual election of all directors, and to adopt certain related amendments to the Articles of Incorporation; 2. To elect eight directors to serve until the 2003 annual meeting or until their respective successors are duly elected and qualified, in the event Proposal One is approved at the annual meeting; 3. Alternatively, to elect two Class II directors to serve until the 2005 annual meeting or until their respective successors are duly elected and qualified, in the event Proposal One is not approved at the annual meeting; 4. To ratify the appointment of _______________ as independent auditors to audit UNIFAB's financial statements for 2002; 5. To amend the Articles of Incorporation to increase the number of authorized shares of Company common stock to 150,000,000; 6. To amend the Articles of Incorporation to effect a one-for-five reverse stock split pursuant to which every five shares of common stock would be converted into one share of common stock; and 7. To amend the Company's long-term incentive plan. Holders of record as of the close of business on November 11, 2002 are eligible to attend and vote at the meeting. * * * As previously reported, Ernst & Young LLP, the accounting firm that has been the independent auditor of UNIFAB International, Inc., since its initial public offering in 1997, resigned from its engagement with the Company, effective August 15, 2002. E&Y notified the Company of its resignation on August 13, 2002. In its report on the Company's audited financial statements for the year ended December 31, 2001, E&Y modified its audit opinion by noting that there was substantial doubt about the Company's ability to continue as a going concern through the 2002 fiscal year. This modification was the only qualification or modification expressed by E&Y in their audit opinions during its five-year engagement as the Company's independent auditor. UNION ACCEPTANCE: Files for Chapter 11 Reorganization in Indiana ---------------------------------------------------------------- Union Acceptance Corporation (Nasdaq:UACA) has filed a petition for reorganization under Chapter 11 of the Bankruptcy Code to facilitate a financial restructuring. The objective of the reorganization proceeding is to protect the enterprise and restructure obligations so that the Company will be able to continue as a going concern. Management believes that assets and future cash flows will be sufficient to pay all obligations, but has determined that the special remedies available through a bankruptcy proceeding are necessary to achieve that objective and maintain operations. The proceeding is in the U. S. Bankruptcy Court for the Southern District of Indiana, Indianapolis Division. "We obviously regret that this measure has become necessary. We have been working to acquire additional long-term capital and to supplement our receivable acquisition funding. While our lenders have been working with us to meet our needs it has become apparent that supplemental arrangements will not be in place in time for us to continue as we have. We are suspending receivable acquisitions for the time being until new funding arrangements can be put in place," said Lee Ervin, president and chief executive officer. "We currently expect debtor-in-possession financing to be implemented in the next few days to permit us to continue receivable acquisitions. Our objective is to protect our enterprise, to position ourselves to fund all of our obligations, to preserve value for our shareholders, and to rebuild for the future." Post-petition financing, which is subject to bankruptcy court approval, will be necessary for the company to continue to fund receivable acquisitions and the company is seeking approval by the Court to continue to fund payroll, pay key vendors and take other measures to maintain operations. "We believe the Chapter 11 process will enable us to address our liquidity issues with minimal disruption of operations," said Ervin. UAC's current surety provider has not indicated a willingness to support future term securitizations in the present environment. Accordingly, management is exploring other arrangements for disposition of the held for sale portfolio. The Chapter 11 proceeding does not include UAC's warehouse funding and securitization subsidiaries. Discussion of Quarterly Results The Company also reported a third quarter net loss of $35.5 million. This compares with a loss of $23.8 million for the same period last year and a loss of $3.3 million in the second quarter of 2002. The net loss for the nine months ended September 30, 2002 was $45.7 million compared with a net loss of $26.4 million on a fully diluted basis, in the comparable year- ago nine-month period. Results for the quarter ended September 30 in both 2002 and 2001 include charges for the revaluation of retained interest in securitized assets. In the third quarter 2002, the charge was $29.7 million after-tax and $27.9 million after-tax in the year- ago quarter. Excluding the charges in both quarters, comparable net loss would have totaled $5.8 million in the most recent quarter and earnings of $4.1 million for the year-ago quarter. "The third quarter was important on a number of strategic fronts," said Ervin. "UAC continued to focus on disciplined pricing to achieve its 1.50% return on managed assets target for new receivable acquisitions, total dollars in delinquency are down 25% since December 2001, and we had been able to regain momentum in receivable acquisitions. Despite the many improvements that have occurred in our operations, the recessionary trends in the economy continue to negatively impact our earnings and challenged our financing relationships. Improved collection techniques have, however, greatly improved our effectiveness in this important aspect of our business. These efforts will continue, despite our reorganization filing, and our expense reduction plans will be accelerated." "We believe the adjustment of credit loss assumptions we took during the most recent quarter reflects our best estimate of the impact that an extended recession will have on our retained interest in securitized assets," continued Ervin. "While the adjustment and its negative effect on short-term earnings were disappointing, we believe it is in the best long-term interest of the company to be proactive with these issues, and this action will provide shareholders with the most accurate financial picture possible. These results are presented based on the assumption that we will continue to service our securitized portfolio." "Lastly, I believe we have a management team capable of rebuilding Union Acceptance. The risk adjusted spreads on recent new business cause us to believe the intense price competition that has so long been a problem for this industry has changed in a very positive way. We believe the primary driver of this change has been the capital markets' insistence on stronger capital ratios and investors' demand for higher returns. Our goal is to be positioned to meet the market's expectations when we emerge from Chapter 11 in the very near future." Receivable Acquisitions The quarterly volume of receivable acquisitions increased to $223.3 million, up 16% from the prior quarter and 24% from the December 2001 quarter, but down 14% from $258.4 million from the year-ago quarter. The average monthly FICO score was 703 during 2002; approximately 66% of accounts originated have a credit score of 675 or better, and less than one % of the accounts have a FICO score below 625. The average servicing portfolio was $2.6 billion for the September 30, 2002 quarter, down from $3.2 billion for the comparable year-ago quarter. Receivables held for sale increased to $488.0 million at September 30, 2002 compared with $38.3 million at September 30, 2001. Revenues As previously mentioned, UAC recorded a charge in the third quarter of 2002 of $29.7 million after-tax for the revaluation of the retained interest in its securitized assets. The majority of the revaluation is related to higher credit losses indicated by recent portfolio performance and an estimate of the impact of continued sluggish economic conditions, and to a lesser extent, an adjustment of the discount rates used in the valuation of the retained interest. The weighted average discount rate increased to 12.03% for the quarter ended September 30, 2002, up from 9.67% in the previous quarter, reflecting current market conditions. The net interest margin after provision for estimated credit losses of $7.9 million for the quarter was negatively impacted by a higher provision, but still up from $4.6 million in the prior quarter and $6.1 million in the year-ago quarter. Before the provision, the net interest margin was $10.1 million, compared with $5.7 million in the prior quarter and $6.7 million for the same three-month period last year. The increase in the net interest margin, combined with servicing fee income of $5.8 million and other fee income of $2.5 million, offset the $10.8 million loss for the quarter on the interest rate derivatives on held for sale receivables. Operating Expenses and Efficiency Expenses for the third quarter 2002 were $12.8 million, or 1.93% of the servicing portfolio, compared with $13.3 million, or 1.68%, in the year-ago quarter. Operating expenses for the past three quarters have been at lower levels than the $13.6 million for the quarter ended December 2001, although expenses as a percentage of the servicing portfolio have not experienced a corresponding decline because of the reduced servicing portfolio. Operating expenses do not include the expenses related to the company's Circle City Car Company automobile dealership, which was classified as a discontinued operation in the third quarter and sold in October. Delinquency and Credit Loss In the third quarter, the company continued to experience increases in delinquency and credit losses, resulting primarily from the continued effects of the ongoing recession, continuing trends in bankruptcy filings and lower automobile auction values. Delinquency was 4.22% at September 30, 2002, compared with 3.79% in the prior quarter and 3.73% a year ago. Total dollars delinquent for the quarter were $110.0 million, up $7.2 million from the prior quarter, but down from $116.6 million in the same period a year ago and down from $146.0 million at December 2001. UAC typically experiences higher delinquencies in the fourth quarter as a result of normal seasonal trends. Annualized net credit losses totaled 4.50% for the quarter ended September 30, 2002, compared with 4.08% in the second quarter and 3.67% in the quarter ended September 30, 2001. The company's allowance for estimated credit losses on securitized receivables was 6.66% at September 30, 2002 compared with 5.26% in the second quarter and 5.87% in the same period a year ago. Compared with the prior quarter, gross credit losses in the third quarter remained at a comparable level. The increase in net credit losses is primarily the result of lower recoveries on repossessed vehicles sold at auction, which can be attributed largely to lower prices for used vehicles created by the 0% financing and rebates offered by new vehicle manufacturers. Liquidity At September 30, 2002, $445.5 million of warehouse capacity was utilized out of a total capacity of $550 million, and an additional $22.1 million was available to borrow based on the outstanding principal balance of eligible receivables. The company maintained cash on hand of $14.5 million at September 30, 2002. At present there is no additional funding available under the company's warehouse facilities. The company will be dependent on debtor-in-possession financing to continue funding receivable acquisitions, as described above. Earnings Before the Impact of Derivative Instruments In the normal course of business, the value of the company's assets held for sale changes as interest rates change. To mitigate the economic impact of changing interest rates, the company uses interest rate derivatives to hedge the held for sale assets. According to generally accepted accounting principles, UAC is required to mark these instruments to market and recognize corresponding gains and losses in the income statement during the period in which the changes in the market values occur. At the time of the securitization of the underlying assets, the interest rate derivative contracts are settled, and any resulting gains or losses are included on the income statement with the corresponding gains or losses on the receivables sold. Pro Forma Portfolio-Based Financial Statements Following are pro forma portfolio-based statements of operations, which account for securitization transactions as secured financings rather than sales of receivables. In its consolidated financial statements prepared in accordance with GAAP, the company records a gain for the sale of receivables in securitization transactions primarily representing the discounted estimated future servicing cash flows to be received by the company related to the receivables sold. Future servicing cash flows are the projected cash flows resulting from the difference between the weighted average coupon rate of the receivables sold and the weighted average note rate paid to investors in the securitized trusts, less an allowance for estimated credit losses, the company's contractual servicing fee of 1.00% and ongoing trust and credit enhancement fees. The pro forma portfolio-based statements of earnings set forth below (following the presentation of the company's historical selected financial data), present the company's operating results under the assumption that securitization transactions are secured financings and no gain on sale, retained interest income, or servicing fee income is recognized. Instead, interest income, fee income, interest expense and other costs related to the asset-backed securities are recognized over the life of the securitized receivables. There is no provision or allowance for credit losses. Credit losses are recorded as incurred. The pro forma portfolio-based statements of operations and related data do not present the company's operating results in accordance with GAAP. The pro forma portfolio-based data is presented solely for illustrative purposes to assist readers in their understanding of the company's business and its financial performance. Such data is not intended to be an indication of any future results of operations of the company and such data does not provide all information that would be provided with financial statements prepared in accordance with GAAP if the company had accounted for its securitizations as secured financings. UAC is an independent, indirect provider of automobile financing and servicing. The company's primary business is purchasing and servicing prime automobile retail installment sales contracts. These contracts are originated by dealerships affiliated with major domestic and foreign manufacturers, nationally recognized rental car outlets and used car superstores. UAC focuses on acquiring receivables related to late model used and, to a lesser extent, new automobiles purchased by customers who exhibit favorable credit profiles. Union Acceptance Corporation commenced business in 1986 and currently acquires receivables from more than 5,900 manufacturer-franchised dealerships in 39 states. By using state-of-the-art technology in a highly centralized underwriting and servicing environment, Union Acceptance Corporation enjoys one of the lowest cost operating structures in the independent prime automobile finance industry. UNIROYAL TECHNOLOGY: Fails to Win Nod to Hire White & Case LLP -------------------------------------------------------------- The Honorable Peter J. Walsh denied Uniroyal Technology Corporation's application to employ White & Case LLP as their attorneys. The application was opposed by the United States Trustee and, based upon the evidence presented at the hearing, the Court denied the Debtors' application for employment. The Debtors' Consolidated List of Equity Security Holders lists Emcore Corporation as an Equity Security Holder. The Parties' Counsel advised the Office of the United States Trustee that Emcore or its Chairperson are collectively the holders of approximately 20% of the Debtor's equity. Both parties indicate that there is a likelihood that various issues between them may be disputed. Accordingly, White & Case is not a "disinterested person" as that phrase is defined in the Bankruptcy Code, the Court found. The evidence shows that White & Case acts regularly as counsel for Emcore, a major creditor and equity security holder of Uniroyal. Emcore has been a regular client of White & Case for five years and will presumably remain so. Uniroyal Technology Corporation and its subsidiaries are engaged in the development, manufacture and sale of a broad range of materials employing compound semiconductor technologies, plastic vinyl coated fabrics and specialty chemicals used in the production of consumer, commercial and industrial products. The Company filed for chapter 11 protection on August 25, 2002 Eric Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at The Bayard Firm represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $85,842,000 in assets and $68,676,000 in debts. US AIRWAYS: Wants Court Okay to Assume & Ratify Charge Card Pact ---------------------------------------------------------------- US Airways Group Inc., is a party to a Charge Card Processing and Security Agreement with National Processing Company and National Bank of Kentucky. The Debtors seek the Court's authority to assume and ratify the Charge Card Contract. John Wm. Butler, Jr., Esq., at Skadden, Arps, Slate, Meagher & Flom, assures Judge Mitchell that other than the continuation of ordinary course payments, there are no immediate costs associated with the assumption and ratification of the Agreement. Additionally, Mr. Butler relates, NPC and NCK have agreed to extend the term of the Agreement for a minimum of three months beyond the current termination date of December 31, 2002. Mr. Butler explains that the assumption of the Agreement will enhance the Debtors' liquidity position and avoid disruption to the most significant tender choice for payment by the Debtors' customers. Given the benefits and NPC and NCK's agreement to extend their processing obligations pending the Debtors' reorganization efforts, Mr. Butler asserts that the relief is in the best interests of the estates. Mr. Butler reminds the Court that, in previous credit card- related motions, the Debtors have outlined the extent that charge cards are important to their operations. Pursuant to this Credit Card Agreement, the Debtors accept both VISA and Mastercard. Approximately 47% of the Debtors' credit card sales are paid for with VISA and Mastercard cards. The Debtors are obligated to submit to NPC sales records evidencing all purchases that have been made within a certain period of time. NCK pays the Debtors for all sales evidenced by the VISA and Mastercard sales records, less fees and charges. Prior to the Petition Date, NPC notified the Debtors that it intended to exercise its right to terminate the Charge Card Agreement on its expiration date of December 31, 2002. The Debtors attempted to negotiate with NPC for an extension of the Agreement's terms. A review, led the Debtors, concluded that assuming the Agreement was in the best interests of the estate because reaching a new agreement with an alternate processor would be extremely difficult except in connection with an emergence from Chapter 11. Mr. Butler reports that the Debtors and NPC were able to successfully negotiate an amendment to the Agreement. NPC will extend its term by three months. The Debtors agree to allow NPC to increase the reserve against future refunds to VISA and Mastercard cardholders from approximately 10% of exposure to 35%. The Debtors also agreed to provide NPC with other protections: (a) The reserve will be $125,000,000, including at least $60,000,000 already held by NPC; (b) NPC agrees to use reasonable efforts to transfer the existing processing function to a new processor on expiration of the Agreement; (c) The term is extended through March 31, 2003. If a reorganization plan is confirmed by then and there is a contract with a new processor, then the date is extended until April 15, 2003. If the plan is consummated by April 15, then the date is further extended until May 15, 2003; (d) The Debtors will provide similar reports to NPC as provided to postpetition lenders under the DIP Agreement; (e) NPC has a one-time right to request additional collateral if the Debtors fail to meet certain financial performance covenants; (f) NPC may terminate the Agreement if: 1) the Chapter 11 case is dismissed or converted; 2) failure to achieve minimum liquidity levels; 3) cancellation of a percentage of flight departures; (g) If these defaults occur, NPC and NCK agree to process transactions for an additional 45 days; (h) The Agreement provides for the complete return of collateral over a period of 270 days following the Agreement's termination. (US Airways Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTRaders reports that US Airways Inc.'s 9.820% bonds due 2013 (U13USR1) are trading between 10 and 20. See http://www.debttraders.com/price.cfm?dt_sec_ticker=U13USR1for real-time bond pricing. USI HOLDINGS: S&P Affirms B+ Rating & Removes it from Watch ----------------------------------------------------------- Standard & Poor's Ratings Services removed from CreditWatch and affirmed its single-'B'-plus ratings on USI Holdings Corp., after the company successfully completed its IPO, selling 9 million shares for total gross proceeds of $90 million. Standard & Poor's also said that the outlook on USI is positive. "The net proceeds of about $78.4 million will be used to pay down debt, substantially reducing total-debt-to capital to 45.3% from the pre-IPO level of 68.5%," explained Standard & Poor's credit analyst Donovan Fraser. The offering had been repeatedly delayed and ultimately reduced in size from initial price targets. However, the decreased leverage, pro forma equity in excess of $160 million, and the first quarter of positive net income in the company's history in the second quarter of 2002 place the company on a surer footing than its pre-IPO capitalization and operating levels. Through June 30, 2002, the company has a year-to-date pretax loss from continuing operations of $10.3 million, consisting of a first-quarter pretax loss of $13.2 million and second-quarter pretax income of $2.9 million. Standard & Poor's believes that the company should be better positioned to continue to further penetrate its target niche market of businesses with 20-999 employees and grow both organically and through measured acquisitions. Standard & Poor's also considers the company's strategy of focusing on growing the specialized benefits segment to be a prudent strategy of earnings diversification given the cyclicality of the property/casualty sector. U.S. STEEL: Will Pay Q3 Common Stock Dividend on Dec. 10, 2002 -------------------------------------------------------------- United States Steel Corporation announced that the Board of Directors declared a dividend of 5 cents per share on U. S. Steel (NYSE: X) Common Stock. The dividend is payable December 10, 2002, to stockholders of record at the close of business November 20, 2002. For more information on U. S. Steel, visit its Web site at http://www.ussteel.com * * * As reported in the August 12, 2002 edition of the Troubled Company Reporter, Fitch Ratings affirmed the senior unsecured long-term ratings of U.S. Steel at 'BB' and assigned a 'BB+' rating to the company's senior secured revolver. The Rating Outlook is Stable. VERITAS DGC: S&P Rates $275-Million Senior Secured Notes at BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its double-'B'-plus rating to Veritas DGC Inc.'s proposed $275 million senior secured credit facility. Houston, Texas-based Veritas provides seismic services to the petroleum industry and has about $200 million of outstanding debt pro forma for the proposed financing transaction. The outlook is stable. "The $275 million senior secured credit facility consists of a $200 million term loan maturing in 2007 and a $75 million revolving facility maturing in 2005," noted Standard & Poor's credit analyst Daniel Volpi. The proceeds from the proposed term loan will be used to retire the company's $130 million outstanding 9-3/4% senior unsecured notes due in 2003 and to repay all amounts outstanding on its current secured bank line. The proposed $75 million revolving secured credit facility will replace the existing bank facility and will be undrawn at closing. The ratings on Veritas reflect its participation in the highly competitive, cyclical, capital-intensive seismic services segment of the petroleum industry, and moderate financial leverage. Over the past few years, the seismic services industry has been plagued by excess capacity. A shift toward multiclient services has increased the industry's capital requirements, essentially forcing seismic operators to shoulder a greater degree of financial risk. Veritas compensates for its participation in a difficult industry by maintaining moderate financial leverage, with total debt-to-total capital expected to remain around 25% and total debt to EBITDA likely to remain below 1.0 times (x). While the company historically has outspent its operating cash flow due to hefty investment in its multiclient library, management has publicly stated that it is targeting free operating cash flow in 2003. EBITDA interest coverage is expected to remain above 10.0x in the near-to-medium-term, or about 4.0x adjusting EBITDA for multiclient expenditures. Although the book value of Veritas' assets is high relative to the loan amount, Standard & Poor's has rated the proposed $275 million senior secured credit facility at the same level as its corporate credit rating. Standard & Poor's believes that the nature of the secured assets (i.e., high specificity, above- average obsolescence risk), the small pool of likely buyers, and historical liquidation values of oilfield services assets precludes an enhancement above the corporate credit rating. In addition, the lack of a debt cushion (i.e., no debt ranked below the secured facilities) further reduces the likelihood of an enhanced recovery. VINTAGE CAPITAL: Fitch Slashes Class C Note Rating to Junk Level ---------------------------------------------------------------- Fitch Ratings has downgraded Vintage Capital SA's floating-rate notes as follows -- Class B to 'BBB-' from 'A+'; -- Class C to 'CCC' from 'BBB-'. The classes A1 and A2 are affirmed at 'AAA'. In February 2001, Vintage Capital SA, a special purpose vehicle with limited liability incorporated under the laws of Luxembourg, acquired a bond portfolio originated by Banca Monte dei Paschi di Siena and CDS portfolio originated by Bank of America. At closing these acquisitions were financed by issuing EUR$198 million floating-rate notes and a EUR$162 million senior swap. The bond portfolio contains asset-backed securities, corporate, financial institution and sovereign debt. The combined weighted average Fitch factor for both portfolios has decreased from 'BBB+' to 'BBB-' due to the downgrade of some of the underlying ABS and corporate assets. Fitch has reviewed the performance of the portfolio in detail. To date there have been no defaults in the bond portfolio, though there are three ABS assets rated below 'CCC+', one of which carries a default rating. The notional of these assets comprise 5.5% of the portfolio. There have been no credits events in the reference portfolio though it does contain Lucent Technologies (rated 'CCC+' by Fitch), TXU Europe (rated 'C') and British Energy (rated 'B-'). The transaction has a semi-annual payment date in June and December. The transaction has a final maturity date in December 2010. V-ONE CORP: Net Capital Deficiency Tops $629K at September 30 ------------------------------------------------------------- V-ONE Corporation (OTCBB:VONE) reported revenue of $1.2 million for the third quarter and $2.9 million for the first nine months of fiscal 2002. Revenue for the comparable three and nine month periods that ended September 30, 2001, was $1.1 million and $2.8 million, respectively. The loss attributable to holders of common stock for the third quarter of 2002 was $1.3 million, compared with a loss attributable to holders of common stock of $2.4 million based on the weighted average number of common shares outstanding of 26.0 million and 22.9 million, respectively, for the third quarter of 2002 and 2001. The loss attributable to holders of common stock for the first nine months of 2002 was $5.0 million, compared with a net loss of $8.9 million based on the weighted average number of common shares outstanding of 24.8 million and 22.4 million, respectively, for the first nine months of 2002 and 2001. During the quarter ended September 30, 2002, V-ONE Corporation solidified significant elements of the Company's long- term strategy and market positioning. Important strategic initiatives in financing, product development programs enabling expansion of existing customer networks and new market penetration programs for V-ONE's satellite products were successfully completed. In V-ONE's September 30, 2002 balance sheets, the Company recorded a working capital deficit of about $1 million, and a total shareholders' equity deficit of close to $630 million. In July, the Company closed on approximately $1.2 million in a private placement of 8% Secured Convertible Notes with warrants. The Company's ability to raise additional capital at this time has been hampered by poor market conditions and delays in funding of national security programs. The amount raised was not sufficient to capitalize the Company at a level necessary to maintain its listing on the Nasdaq Small Cap Market and effective October 18, 2002 the Company's securities began trading on the Nasdaq OTC Bulletin Board. This action does not impact the Company's day-to-day operations as V-ONE continues to focus its resources on building the Company by providing superior security products and technology solutions to existing government and commercial customers. "We believe that the strategy and plan implemented last year is providing the foundations to increase shareholder value in the long term and we are staying closely focused on achieving operational results" said Margaret Grayson, CEO of V-ONE Corporation. Cost reduction measures implemented during 2002 and expansion of our existing customer programs have provided cash flow from operations that extends the Company's ability to continue operating beyond October 31, 2002. At September 30, 2002, the Company's cash position was $163,000 and $915,000 at October 30, 2002. The Company's ability to continue operating beyond October 31, 2002 will be substantially dependent upon timely receipt of orders underlying requirements from its government customers that can provide sustaining revenue if these programs are implemented as planned. V-ONE product development announcements include: -- V-ONE Announces High Performance VPN Solution for VSAT & Satellite Date Networks; Application Layer VPN Technology Overcomes IPSec Performance Problems -- Mentat and V-ONE Partner to Provide High Performance Satellite Security Solutions -- V-ONE Corporation Announces Availability of Mac OS X VPN Client Software; Security Solution Meets Needs of Mac Users including Mac OS 10.2 -- V-ONE's SmartGuard VPN Appliance Awarded ICSA Firewall Certification V-ONE customer relationship announcements include: -- V-ONE expands security for FBI's LEO Information Sharing Network -- V-ONE Secures Backbone for LEO/RISS Super Information Sharing Network -- V-ONE secures information sharing for National White Collar Crime Center -- V-ONE CEO Named to President's National Infrastructure Advisory Council; Council to Advise President on Security of Critical Information Systems Infrastructures "The Company continues to perform in a manner that is meeting customer expectations. With operating costs under tight control and government and commercial customers now expanding their use of V-ONE's security products, we remain focused on meeting the challenges of continued slowness in the funding and implementation schedules of some of the Company's programs," added Margaret Grayson. Providing enterprise-level network security protection since 1993, V-ONE Corporation's flagship product is SmartGate(R), a client/server Virtual Private Network technology. Fortune 1000 corporations, health care organizations and sensitive government agencies worldwide use SmartGate for their integrated authentication, encryption and access control. With its patented client deployment and management capabilities, SmartGate is a compelling solution for remote access intranets and secure extranets for electronic business between trading partners, for both conventional and wireless networks. V-ONE is headquartered in Germantown, MD. Product and network security information, white papers and the company's latest news releases may be accessed via http://www.v-one.com WINSTAR: Trustee Seeks Approval of $1.5M Settlement with Savvis --------------------------------------------------------------- Prior to the conversion of Winstar Communications, Inc., and its debtor-affiliates' cases from Chapter 11 to Chapter 7, the Debtors and SAVVIS Communications Corporation were parties to a series of commercial agreements pursuant to which each party bought and sold goods and services from one another. A Master Agreement was entered into on June 30, 2000, whereby SAVVIS was obligated to purchase telecommunications equipment from the Debtors. The aggregate sales price for the equipment under the Master Agreement was $29,435,000. The Debtors allege that SAVVIS only paid a portion of the purchase price, leaving a considerable net balance owed to the Debtors. In addition to the Master Agreement, the Debtors and SAVVIS also entered into a professional services agreement pursuant to which SAVVIS was obligated to pay Winstar $10,000,000 for professional services. The Debtors again allege that SAVVIS only paid a portion of its obligation. SAVVIS was also obligated to pay the Debtors' installation fees in connection with the installation of telecommunications equipment. A portion of the fees is still outstanding. Sheldon K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel LLP, in Wilmington, Delaware, relates that Chapter 7 Trustee Christine Shubert has been negotiating with SAVVIS' counsel to settle the disputes. After extensive negotiations, the Chapter 7 Trustee and SAVVIS have agreed to resolve their disputes, embodied in a settlement agreement. The settlement agreement provides, in pertinent part, that: A. The Chapter 7 Trustee agrees to accept $1,500,000 as the Settlement Amount in consideration for the amounts owed to the Debtors' estates under the SAVVIS Agreements and in exchange to release any and all claims of whatsoever nature the estates have or may have against SAVVIS; B. SAVVIS agrees to pay the Settlement Amount to the Chapter 7 Trustee; and C. SAVVIS is in possession of 106 radio units previously delivered to it in connection with the agreements. Pursuant to this settlement agreement, the Debtors will relinquish to SAVVIS any right, title or interest it has or may have with respect to the radio units. Absent the agreement, the Chapter 7 Trustee would be forced to proceed with arbitration that would unnecessarily burden the Debtors' estates. Based on the high cost of the potential arbitration in relation to the value of the settlement amount, the settlement agreement represents a fair and reasonable consensual resolution of the issues and is in the best interests of all creditors. Mr. Rennie assures the Court that the settlement agreement is a product of a significant arm's-length bargaining among the parties. (Winstar Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Winstar Communications' 12.500% bonds due 2008 (WCII08USR1) are trading between 0.125 and 0.250 . See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCII08USR1 for real-time bond pricing. WORKGROUP TECHNOLOGY: Nasdaq Delists Shares Effective October 31 ---------------------------------------------------------------- Workgroup Technology Corporation (NASDAQ: WKGP), a leading provider of Web-enabled, extended enterprise collaborative product data management software solutions, announced that the Nasdaq Listing Qualifications Panel had rejected the Company's request for continued listing on The Nasdaq SmallCap Market, and that the Panel determined to delist the Company's securities from The Nasdaq Stock Market effective with the open of business on October 31, 2002. The Panel further informed the Company that the Company's securities may be immediately eligible to trade on the OTC Bulletin Board. WTC develops, markets and supports WTC ProductCenter(TM), a web- enabled, extended enterprise collaborative Product Data Management solution that provides document management, design integration, configuration control, change management, and enterprise integration for optimizing product development. Based in Burlington, Massachusetts, the Company differentiates itself on the basis of its controlled and secure accessibility, enterprise integration, and quick adaptability of its software. Thousands of users at mid-sized and global companies are in production and benefit from WTC products, including ABB Flexible Automation; Baker Oil Tools; Eaton Corporation; General Electric Company; Goodrich Turbine Fuel Technologies; Honeywell; Millipore Corporation; Siemens Energy & Automation, Inc.; U.S. Army; and Whirlpool Corporation. The Company's Web site is located at http://www.workgroup.com * * * The Company has generated continued losses from operations which has reduced its cash balances. At September 30, 2002, the Company had cash and cash equivalent balances totaling $2,301,000 and working capital of $552,000, each of which represent significantly lower liquidity than in the prior year. The Company intends to continue to take appropriate action to manage its expenses commensurate with the level of sales expected. Among other things, these actions may include a restructuring of its operations. Management believes that cash and cash equivalent balances at September 30, 2002 are sufficient, combined with management's intent and ability to reduce expenditures, to meet its operating and capital expenditure requirements and maintain positive liquidity at least through March 31, 2003. At September 30, 2002, Workgroup's balance sheets show that the Company's total shareholders' equity has dwindled to about $715,000 from about $1.7 million recorded at March 31, 2002. W.R. GRACE: Court Stretches Lease Decision Time to April 1, 2003 ---------------------------------------------------------------- W.R. Grace & Co., and its debtor-affiliates sought and obtained Judge Fitzgerald's approval to extend the deadline to decide whether to assume, assume and assign, or reject unexpired non- residential real property leases until April 1, 2003. The Debtors made it clear the request is without prejudice to the Company's right to request a further extension of the deadline, and without prejudice to any lessor's right to request to shorten the lease decision period on a particular lease. The Debtors reminded Judge Fitzgerald that they are parties to several hundred unexpired leases that fall into two major categories: (a) real property leases for offices and plants throughout the United States and Puerto Rico; and (b) leases where the Debtors are lessees of commercial real estate, often retail stores, restaurants, and other similar facilities most of which have been sub-leased to other tenants. These leases are important assets of the estate, such that the decision to assume or reject is central to any plan of reorganization. Furthermore, these cases are large and complex, and involve many leases. Since the first extension order was entered, the Debtors' management and professionals have been consumed with the operation of the Debtors' businesses and the resolution of a number of complex business decisions. Furthermore, the Debtors have focused on defining the mounting asbestos-related litigation liabilities that they contend precipitated these Chapter 11 cases. Resolution of these issues will involve significant litigation that will take time. The Debtors have not yet intelligently appraised each lease's value to its plan, and until the asbestos issues are resolved, little progress can be made toward developing a viable plan of reorganization. The Debtors assured Judge Fitzgerald that they are current in all of their postpetition rent payments and other contractual obligations with respect to the unexpired leases. The Debtors intend to continue to timely pay all rent obligations on leases until they are either rejected or assumed, and will continue to timely perform their contractual obligations with respect to the assumed leases. As a result, the Debtors' continued occupation of the relevant real property (whether directly or as sublessees) will not prejudice the lessors of the real property or cause the lessors to incur damages that cannot be recompensed under the Bankruptcy Code.(W.R. Grace Bankruptcy News, Issue Nos. 29 & 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) W.R. GRACE: Sealed Air Turns to Third Cir. to Get Lawsuit Tossed ---------------------------------------------------------------- Sealed Air Corporation (NYSE:SEE) has asked the U.S. Court of Appeals for the Third Circuit to hear its appeal of trial court orders refusing to apply the Third Circuit's ruling in the unrelated Cybergenics case and denying Sealed Air's motion to dismiss the fraudulent transfer case against the Company. The trial court overseeing Grace's bankruptcy had ordered the case to proceed with all the parties as originally configured, that is, with the claims asserted against Sealed Air by creditors committees in the W. R. Grace bankruptcy proceeding. The trial court had earlier postponed the original September 30 trial date in order to review how the case should proceed in light of the Third Circuit ruling in the Cybergenics case. The Third Circuit had held in that case that a creditor or creditors committee may not assert a fraudulent transfer claim in a bankruptcy proceeding and that only a debtor-in-possession or an appointed trustee may bring such an action. The 1998 transaction that combined Sealed Air with the Cryovac packaging business of W. R. Grace was designed to create a world-leading packaging company. Sealed Air believes that Grace was solvent at the time of the transaction even if claims arising after 1998 are taken into account. The Company remains confident in the integrity of the deal. Sealed Air Corporation is a leading global manufacturer of a wide range of food, protective and specialty packaging materials and systems, including such widely recognized brands as Bubble- Wrap(R) air cellular cushioning, Jiffy(R) protective mailers and Cryovac(R) food packaging products. For more information about Sealed Air Corporation, please visit the Company's Web site at http://www.sealedair.com * BOND PRICING: For the week of November 4 - November 8, 2002 ------------------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- AES Corporation 4.500% 08/15/05 21 AES Corporation 9.375% 09/15/10 41 AES Corporation 9.500% 06/01/09 43 Adaptec Inc. 3.000% 03/05/07 70 Adelphia Communications 3.250% 05/01/21 7 Adelphia Communications 6.000% 02/15/06 7 Adelphia Communications 9.875% 03/01/05 35 Adelphia Communications 9.875% 03/01/07 33 Adelphia Communications 10.875% 10/01/10 33 Advanced Energy 5.000% 09/01/06 68 Advanced Micro Devices Inc. 4.750% 02/01/22 47 Advanstar Communications 12.000% 02/15/11 66 Aether Systems 6.000% 03/22/05 72 Agere Systems 6.500% 12/15/09 53 Akamai Technologies 5.500% 07/01/07 31 Alternative Living Services (Alterra) 5.250% 12/15/02 3 Alkermes Inc. 3.750% 02/15/07 47 Alexion Pharmaceuticals Inc. 5.750% 03/15/07 62 Amazon.com Inc. 4.750% 02/01/09 71 American Tower Corp. 6.250% 10/15/09 43 American Tower Corp. 9.375% 02/01/09 52 American & Foreign Power 5.000% 03/01/30 55 Americredit Corp. 9.875% 04/15/06 75 Amkor Technology Inc. 5.000% 03/15/07 26 Amkor Technology Inc. 9.250% 05/01/06 70 Amkor Technology Inc. 9.250% 02/15/08 66 Amkor Technology Inc. 10.500% 05/01/09 47 AnnTaylor Stores 0.550% 06/18/19 62 ANR Pipeline 9.625% 11/01/21 72 Arco Chemical Company 9.800% 02/01/20 73 Armstrong World Industries 9.750% 04/15/08 42 AMR Corporation 9.000% 09/15/16 74 AMR Corporation 9.750% 08/15/21 75 AMR Corporation 9.800% 10/01/21 75 Asarco Inc. 8.500% 05/01/25 35 Aspen Technology 5.250% 06/15/05 37 Atlas Air Inc. 9.250% 04/15/08 51 AT&T Corp. 6.500% 03/15/29 75 AT&T Wireless 8.750% 03/01/31 71 Aurora Foods 9.875% 02/15/07 61 Avaya Inc. 11.125% 04/01/09 61 Axcelis Technologies 4.250% 01/15/07 62 Best Buy Co. Inc. 0.684% 06?27/21 66 Bethlehem Steel 8.450% 03/01/05 14 Borden Inc. 7.875% 02/15/23 56 Borden Inc. 8.375% 04/15/16 61 Borden Inc. 9.250% 06/15/19 65 Borden Inc. 9.200% 03/15/21 62 Boston Celtics 6.000% 06/30/38 65 Brocade Communication Systems 2.000% 01/01/07 66 Brooks Automatic 4.750% 06/01/08 71 Browning-Ferris Industries Inc. 7.400% 09/15/35 73 Budget Group Inc. 9.125% 04/01/06 17 Burlington Northern 3.200% 01/01/45 50 Burlington Northern 3.800% 01/01/20 71 CSC Holdings Inc. 7.625% 07/15/18 73 Calpine Corp. 4.000% 12/26/06 41 Calpine Corp. 4.000% 12/26/06 41 Calpine Corp. 8.500% 02/15/11 38 Capital One Financial 7.125% 08/01/08 68 Case Credit 6.750% 10/21/07 74 Case Corp. 7.250% 01/15/16 69 Cell Therapeutic 5.750% 06/15/08 42 Centennial Cell 10.750% 12/15/08 57 Century Communications 8.875% 01/15/07 34 Champion Enterprises 7.625% 05/15/09 31 Charter Communications, Inc. 4.750% 06/01/06 29 Charter Communications, Inc. 5.750% 10/15/05 33 Charter Communications Holdings 8.250% 04/01/07 54 Charter Communications Holdings 8.625% 04/01/09 53 Charter Communications Holdings 9.625% 11/15/09 53 Charter Communications Holdings 10.000% 04/01/09 54 Charter Communications Holdings 10.000% 05/15/11 52 Charter Communications Holdings 10.250% 01/15/10 54 Charter Communications Holdings 10.750% 10/01/09 55 Charter Communications Holdings 11.125% 01/15/11 54 Ciena Corporation 3.750% 02/01/08 59 Cincinnati Bell Telephone (Broadwing) 6.300% 12/01/28 71 Cincinnati Bell Inc. (Broadwing) 7.250% 06/15/23 70 CIT Group Holdings 5.875% 10/15/08 74 CNET Inc. 5.000% 03/01/06 55 Coastal Corp. 6.375% 02/01/09 74 Coastal Corp. 6.500% 05/15/06 69 Coastal Corp. 6.500% 06/01/08 73 Coastal Corp. 6.950% 06/01/28 45 Coastal Corp. 7.420% 02/15/37 55 Coastal Corp. 7.500% 08/15/06 73 Coastal Corp. 7.750% 10/15/35 53 Coeur D'Alene 6.375% 01/31/05 73 Coeur D'Alene 7.250% 10/31/05 70 Cogentrix Energy 8.750% 10/15/08 73 Comcast Corp. 2.000% 10/15/29 18 Comforce Operating 12.000% 12/01/07 57 Commscope Inc. 4.000% 12/15/06 74 Computer Associates 5.000% 03/15/07 72 Computer Network 3.000% 02/15/07 64 Conexant Systems 4.000% 02/01/07 26 Conexant Systems 4.250% 05/01/06 34 Conseco Inc. 8.750% 02/09/04 7 Conseco Inc. 10.750% 06/15/09 23 Continental Airlines 4.500% 02/01/07 31 Corning Inc. 3.500% 11/01/08 51 Corning Inc. 6.300% 03/01/09 62 Corning Inc. 6.750% 09/15/13 51 Corning Inc. 6.850% 03/01/29 42 Corning Inc. 7.000% 03/15/07 73 Corning Inc. 8.875% 08/15/21 54 Corning Glass 7.000% 03/15/07 73 Corning Glass 8.875% 03/15/16 58 Cox Communications Inc. 3.000% 03/14/30 35 Cox Communications Inc. 0.348% 02/23/21 70 Cox Communications Inc. 0.348% 02/23/21 70 Cox Communications Inc. 0.426% 04/19/20 42 Cox Communications Inc. 7.750% 11/15/29 25 Critical Path 5.750% 04/01/05 63 Critical Path 5.750% 04/01/05 63 Crown Castle International 9.000% 05/15/11 65 Crown Castle International 9.375% 08/01/11 65 Crown Castle International 9.500% 08/01/11 66 Crown Castle International 10.750% 08/01/11 70 Crown Cork & Seal 8.375% 01/15/05 68 Cubist Pharmacy 5.500% 11/01/08 42 Cummins Engine 5.650% 03/01/98 58 Cypress Semiconductor 4.000% 02/01/05 73 Dana Corp. 7.000% 03/01/29 66 Dana Corp. 7.000% 03/15/28 66 Delhaize America 9.000% 04/15/31 72 Dillard Department Store 7.000% 12/01/28 70 Dobson Communications Corp. 10.875% 07/01/10 70 Dobson/Sygnet 12.250% 12/15/08 74 Documentum Inc. 4.500% 04/01/07 74 Dresser Industries 7.600% 08/15/96 60 DVI Inc. 9.875% 02/01/04 73 Dynegy Holdings Inc. 6.875% 04/01/11 41 EOTT Energy Partner 11.000% 10/01/09 67 Echostar Communications 4.875% 01/01/07 74 Echostar Communications 5.750% 05/15/08 73 Edison Mission 7.330% 09/15/08 71 El Paso Corp. 7.000% 05/15/11 58 El Paso Corp. 7.750% 01/15/32 57 El Paso Natural Gas 7.500% 11/15/26 56 El Paso Natural Gas 8.625% 01/15/22 65 Emulex Corp. 1.750% 02/01/07 72 Enron Corp. 9.875% 06/15/03 16 Enzon Inc. 4.500% 07/01/08 68 Equistar Chemicals 7.550% 02/15/26 63 E*Trade Group 6.000% 02/01/07 62 E*Trade Group 6.750% 05/15/08 71 Extreme Networks 3.500% 12/01/06 75 FEI Company 5.500% 08/15/08 71 Finisar Corp. 5.250% 10/15/08 55 Finova Group 7.500% 11/15/09 30 Fleming Companies Inc. 5.250% 03/15/09 35 Fleming Companies Inc. 10.625% 07/31/07 47 Food Lion Inc. 8.050% 04/15/27 64 Ford Motor Co. 6.500% 08/01/18 72 Ford Motor Co. 6.625% 02/15/28 66 Ford Motor Co. 7.125% 11/15/25 72 Ford Motor Co. 7.500% 08/01/26 75 Fort James Corp. 7.750% 11/15/23 68 Foster Wheeler 6.750% 11/15/05 58 GCI Inc. 9.750% 08/01/07 60 General Physics 6.000% 06/30/04 51 Geo Specialty 10.125% 08/01/08 71 Georgia-Pacific 7.375% 12/01/25 65 Georgia-Pacific 7.750% 11/15/29 74 Georgia-Pacific 8.125% 06/15/23 71 Georgia-Pacific 8.250% 03/01/23 73 Globespan Inc. 5.250% 05/15/06 74 Goodyear Tire 7.000% 03/15/28 63 Gulf Mobile Ohio 5.000% 12/01/56 63 Hanover Compress 4.750% 03/15/08 68 Hasbro Inc. 6.600% 07/15/28 74 Health Management Associates Inc. 0.250% 08/16/20 72 Health Management Associates Inc. 0.250% 08/16/20 72 HealthSouth Corp. 7.000% 06/15/08 61 HealthSouth Corp. 8.375% 10/01/11 64 HealthSouth Corp. 8.500% 02/01/08 74 HealthSouth Corp. 10.750% 10/01/08 67 Hertz Corp. 7.000% 01/15/28 66 Human Genome 3.750% 03/15/07 65 Human Genome 5.000% 02/01/07 73 Huntsman Polymer 11.750% 12/01/04 67 I2 Technologies 5.250% 12/15/06 57 ICN Pharmaceuticals Inc. 6.500% 07/15/08 62 IMC Global Inc. 7.300% 01/15/28 70 IMC Global Inc. 7.375% 08/01/18 73 Ikon Office 6.750% 12/01/25 67 Ikon Office 7.300% 11/01/27 72 Imcera Group 7.000% 12/15/13 67 Imclone Systems 5.500% 03/01/05 57 Inhale Therapeutic Systems Inc. 3.500% 10/17/07 42 Inland Steel Co. 7.900% 01/15/07 57 International Rectifier 4.250% 07/15/07 75 Interpublic Group 1.870% 06/01/06 71 JL French Auto 11.500% 06/01/09 54 Juniper Networks 4.750% 03/15/07 68 Kaiser Aluminum & Chemicals Corp. 9.875% 02/15/49 62 Kmart Corporation 8.125% 12/01/06 16 Kmart Corporation 8.250% 01/01/22 22 Kmart Corporation 8.375% 07/01/22 22 Kmart Corporation 9.375% 02/01/06 16 Kulicke & Soffa Industries Inc. 5.250% 08/15/06 42 LSI Logic 4.000% 11/01/06 75 LSP Energy LP 8.160% 07/15/25 74 LTX Corporation 4.250% 08/15/06 60 Lehman Brothers Holding 8.000% 11/13/03 63 Level 3 Communications 6.000% 09/15/09 30 Level 3 Communications 6.000% 03/15/09 33 Level 3 Communications 9.125% 05/01/08 54 Liberty Media 3.500% 01/15/31 62 Liberty Media 3.500% 01/15/31 62 Liberty Media 3.750% 02/15/30 47 Liberty Media 4.000% 11/15/29 50 LSI Logic 4.000% 11/01/06 72 LSI Logic 4.000% 11/01/06 72 Lucent Technologies 5.500% 11/15/08 70 Lucent Technologies 6.450% 03/15/29 32 Lucent Technologies 6.500% 01/15/28 46 Lucent Technologies 7.250% 07/15/06 41 Magellan Health 9.000% 02/15/08 18 Mail-Well I Corp. 8.750% 12/15/08 47 Mail-Well I Corp. 9.625% 03/15/12 66 Mastec Inc. 7.750% 02/01/08 72 MCI Communications Corp. 7.500% 08/20/04 29 MCI Communications Corp. 7.750% 03/15/24 30 Medarex Inc. 4.500% 07/01/06 57 Mediacom Communications 5.250% 07/01/06 61 Mediacom LLC 7.875% 02/15/11 66 Mediacom LLC 8.500% 04/15/08 75 Mediacom LLC 9.500% 01/15/13 75 Metris Companies 10.000% 11/01/04 75 Metris Companies 10.125% 07/15/06 75 Mikohn Gaming 11.875% 08/15/08 63 Mirant Corp. 5.750% 07/15/07 30 Mirant Americas 7.200% 10/01/08 47 Mirant Americas 7.625% 05/01/06 63 Mirant Americas 8.300% 05/01/11 42 Mirant Americas 8.500% 10/01/21 35 Mirant Americas 9.125% 05/01/31 59 Mission Energy 13.500% 07/15/08 43 Missouri Pacific Railroad 4.750% 01/01/20 71 Missouri Pacific Railroad 4.750% 01/01/30 68 Missouri Pacific Railroad 5.000% 01/01/45 54 Motorola Inc. 5.220% 10/01/21 53 Motorola Inc. 6.500% 11/15/28 74 MSX International 11.375% 01/15/08 63 NTL (Delaware) 5.750% 12/15/09 14 NTL Communications Corp 6.750% 05/15/08 16 National Vision 12.000% 03/30/09 60 Natural Microsystems 5.000% 10/15/05 58 Navistar Financial 4.750% 04/01/09 69 Nextel Communications 5.250% 01/15/10 68 Nextel Communications 6.000% 06/01/11 71 Nextel Partners 11.000% 03/15/10 67 NGC Corp. 7.625% 10/15/26 54 Noram Energy 6.000% 03/15/12 68 Northern Pacific Railway 3.000% 01/01/47 50 Northern Pacific Railway 3.000% 01/01/47 50 Nvidia Corp. 4.750% 10/15/07 75 ON Semiconductor 12.000% 05/15/08 73 ONI Systems Corporation 5.000% 10/15/05 74 OSI Pharmaceuticals 4.000% 02/01/09 63 Owens-Illinois Inc. 7.800% 05/15/18 68 PG&E National Energy 10.375% 05/16/11 36 Panamsat Corp. 6.875% 01/15/28 71 Paxson Communications 10.750% 07/15/08 75 Pegasus Satellite 12.375% 08/01/06 49 Photronics Inc. 4.750% 12/15/06 68 PMC-Sierra Inc. 3.750% 08/15/06 65 Polaroid Corp. 11.500% 02/15/06 5 Primedia Inc. 7.625% 04/01/08 65 Primedia Inc. 8.875% 05/15/11 73 Providian Financial 3.250% 08/15/05 64 PSEG Energy Holdings 8.500% 06/15/11 71 Public Service Electric & Gas 5.000% 07/01/37 72 Photronics Inc. 4.750% 12/15/06 72 Quanta Services 4.000% 07/01/07 49 Qwest Capital Funding 7.000% 08/03/09 44 Qwest Capital Funding 7.250% 02/15/11 44 Qwest Capital Funding 7.625% 08/03/21 47 Qwest Capital Funding 7.750% 08/15/06 62 Qwest Capital Funding 7.900% 08/15/10 44 Qwest Communications Int'l 7.250% 11/01/06 48 RF Micro Devices 3.750% 08/15/05 74 RF Micro Devices 3.750% 08/15/05 74 Redback Networks 5.000% 04/01/07 32 Rite Aid Corp. 4.750% 12/01/06 67 Rite Aid Corp. 7.125% 01/15/07 65 Rite Aid Corp. 7.125% 01/15/07 69 Rockwell Int'l 5.200% 01/15/98 72 Royster-Clark 10.250% 04/01/09 67 Rural Cellular 9.625% 05/15/08 49 Ryder System Inc. 5.000% 02/25/21 73 SBA Communications 10.250% 02/01/09 41 SCI Systems Inc. 3.000% 03/15/07 57 Saks Inc. 7.375% 02/15/19 72 Sepracor Inc. 5.000% 02/15/07 50 Sepracor Inc. 7.000% 12/15/05 62 Service Corp. Int'l 6.750% 06/22/08 74 Silicon Graphics 5.250% 09/01/04 54 Simula Inc. 8.000% 05/01/04 73 Skechers USA, Inc. 4.500% 04/15/07 65 Solutia Inc. 7.375% 10/15/27 69 Sonat Inc. 6.625% 02/01/08 61 Sonat Inc. 6.750% 10/01/07 63 Sonat Inc. 7.625% 07/15/11 53 Sonic Automotive 5.250% 05/07/09 74 Sotheby's Holdings 6.875% 02/01/09 73 Sprint Capital Corp. 6.000% 01/15/07 74 Sprint Capital Corp. 6.875% 11/15/28 60 Sprint Capital Corp. 6.900% 05/01/19 63 Sprint Capital Corp. 8.375% 03/15/28 66 Sprint Capital Corp. 8.750% 03/15/32 72 TCI Communications Inc. 7.125% 02/15/28 74 TECO Energy Inc. 7.000% 05/01/12 73 Tenneco Inc. 10.000% 03/15/08 74 Tenneco Inc. 11.625% 10/15/09 73 Tennessee Gas PL 7.000% 10/15/28 52 Tennessee Gas PL 7.500% 04/01/17 60 Tennessee Gas PL 7.625% 04/01/37 56 Teradyne Inc. 3.750% 10/15/06 72 Tesoro Pete Corp. 9.000% 07/01/08 52 Tesoro Pete Corp. 9.625% 11/01/08 53 TIG Holdings Inc. 8.125% 04/15/05 74 Time Warner Inc. 6.625% 05/15/29 74 Transwitch Corp. 4.500% 09/12/05 59 Trenwick Capital I 8.820% 02/01/37 72 Tribune Company 2.000% 05/15/29 68 Triton PCS Inc. 8.750% 11/15/11 67 Triton PCS Inc. 9.375% 02/01/11 63 Trump Atlantic 11.250% 05/01/06 74 Turner Broadcasting 8.375% 07/01/13 74 TXU Corp. 6.375% 06/15/06 75 US Airways Passenger 6.820% 01/30/14 68 US Airways Passenger 9.010% 01/20/19 49 US Airways Inc. 7.960% 01/20/18 72 Ugly Duckling 11.000% 04/15/07 60 United Air Lines 10.670% 05/01/04 20 United Air Lines 11.210% 05/01/14 28 Universal Health Services 0.426% 06/23/20 71 US Timberlands 9.625% 11/15/07 54 US West Capital Funding 6.250% 07/15/05 63 US West Capital Funding 6.375% 07/15/08 45 US West Capital Funding 6.875% 07/15/28 67 US West Communications 7.250% 10/15/35 66 US West Communications 7.500% 06/15/23 71 Utilicorp United 7.625% 11/15/09 69 Utilicorp United 7.950% 02/01/11 71 Utilicorp United 8.000% 03/01/23 57 Utilicorp United 8.270% 11/15/21 59 Veeco Instrument 4.125% 12/21/08 66 Vertex Pharmaceuticals 5.000% 09/19/07 73 Vesta Insurance Group 8.750% 07/15/25 74 Viropharma Inc. 6.000% 03/01/07 35 Vitesse Semiconductor 4.000% 03/15/05 72 Weirton Steel 10.750% 06/01/05 66 Westpoint Stevens 7.875% 06/15/08 27 Williams Companies 6.625% 11/15/04 65 Williams Companies 7.125% 09/01/11 73 Williams Companies 7.875% 09/01/21 65 Williams Holding (Delaware) 6.250% 02/01/06 70 Williams Holding (Delaware) 6.500% 12/01/08 56 Wind River System 3.750% 12/15/06 69 Witco Corp. 6.875% 02/01/26 68 Witco Corp. 7.750% 04/01/23 75 Worldcom Inc. 6.400% 08/15/05 12 XM Satellite Radio 7.750% 03/01/06 34 Xerox Corp. 0.570% 04/21/18 56 Xerox Credit 7.200% 08/05/12 57 ********* 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. 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