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/raid1/www/Hosts/bankrupt/TCR_Public/030114.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, January 14, 2003, Vol. 7, No. 9 Headlines ADELPHIA COMMS: Court Approves Decision Strategies' Engagement AGRO PACIFIC: Unit Inks Pact to Merge with Agstar Power Inc. ALLMERICA FINANCIAL: Fitch Revises Rating Watch to Positive AMERCO: Enters into Standstill Agreement with Bank of Montreal AMERICAN PAD: Wants Schedule Filing Deadline Extended to Feb. 3 AMERICAN PAD: Cerberus Partners Gets to Keep its $100,000 AMTRADE INTERNATIONAL: Fitch Withdraws Various D Ratings ANC RENTAL: Has Until April 7 to Make Lease-Related Decisions AOL LATIN: America Online & Cisneros Convert Preferred Shares ARMSTRONG: Wants More Time to Move Lawsuits to Delaware Courts AVADO BRANDS: S&P Ups Credit Rating to SD after Interest Payment BAUSCH & LOMB: Will Publish Fourth Quarter Results on January 30 BAY VIEW: Sells 2 Factoring Business as Part of Liquidation Plan BAYOU STEEL: Red Ink Continues to Flow in Fourth Quarter BUDGET GROUP: Court Approves Verwaltung Master Agreement BURLINGTON: US Trustee Balks at Ivins Philips' Engagement CITGO PETROLEUM: Fitch Lowers Senior Unsec. Debt Rating to BB- COEUR D'ALENES: Executes 1,000-to-1 Reverse Stock Split COMMANDER AIRCRAFT: Hires Chung & Press as Bankruptcy Counsel CONSECO INC: Wants to Continue Payment of Employee Obligations COVANTA: Inks Stipulation Allowing Setoff with Fairfax, Virginia DENNY'S CORP: Reports Same-Store Sales & Guest Count Declines DIAMETRICS MEDICAL: Fails to Meet Nasdaq Listing Requirements DIVERSIFIED CORPORATE: Sells All Mountain Ltd. Shares to Hosmers DIVERSIFIED CORP.: Closes Greenfield Credit Facility Arrangement DLJ MORTGAGE: S&P Further Cuts P-T Certs. Ratings to CCC-/D DORSET/TULLAS CDO: Fitch Cuts Ratings on Various Note Classes EFA SOFTWARE: Has Until Feb. 27 to File Canadian BIA Proposal EMERGING VISION: Horizon Investors Discloses 21% Equity Stake ENCOMPASS SERVICES: Receives Court Injunction Against Utilities ENRON CORP: Brings-In FTI Consulting to Render Financial Advice EOTT: U.S. Trustee Balks at Appointing Environmental Committee EXIDE: Equity Committee Taps Potter Anderson as Local Counsel FAO INC: Files for Chapter 11 Reorganization in Wilmington, DE FAO INC: Chapter 11 Case Summary & Largest Unsecured Creditors FEDERAL-MOGUL: Committees Ask Court to End Exclusive Periods FORD MOTOR COMPANY: Says On Target to Achieve Bottom-Line Goal FREESTAR: vFinance, et al., File Involuntary Chapter 7 Petition GENTEK INC: Court Approves Lazard Freres as Financial Advisor GF FUNDING: Fitch Plucks CCC Class E Note Rating from Watch Neg. GREAT NORTHERN: Case Summary & 20 Largest Unsecured Creditors HECTOR FUNDING: Fitch Junks Class A Floating-Rate Notes Ratings HUGHES ELECTRONICS: Will Host Q4 Earnings Conf. Call Tomorrow IFCO SYSTEMS: Restructures 10.625% Senior Subordinated Notes INFINITE GROUP: Fails to Comply with Nasdaq Listing Guidelines INSILCO TECH: Turns to FTI Consulting for Bankruptcy Advice INSURANCE CO. OF THE WEST: S&P Downgrades Ratings to BBpi IT GROUP: Bags Approval to Hire Kroll Zolfo as Consultants KAISER ALUMINUM: Court Okays Third DIP Financing Amendment KMART CORP: Court to Hear on J.W. Mitchell's Complaint on Jan 28 KULICKE & SOFFA: Appoints Barry Waite to Board of Directors LAIDLAW INC: Expects to Emerge from Chapter 11 by March 31 LINGTEC CONSTRUCTORS: Case Summary & 8 Largest Unsec. Creditors LUCENT TECH.: StockPickReport Gives 'Outperform' Stock Rating MATTRESS DISCOUNTERS: Plan Confirmation Hearing Set for March 3 MICRON TECH.: StockPickReport Gives "Outperform' Stock Rating MIRANT CORP: Outlines Key Elements of Company's Strategic Plan MOTOROLA INC: Will Publish Fourth Quarter Results on January 21 NATIONAL CENTURY: Wants OK to Tap Ruscilli as Real Estate Broker NATIONAL STEEL: Wants to Sell Metals USA Claims for $1.5 Million NETIA HOLDINGS: S&P Withdraws Units' D Sr. Unsecured Debt Rating NTL EUROPE: Emerges from Chapter 11 Bankruptcy Reorganization NTL INC: Successfully Emerges from Chapter 11 Proceedings OVERHILL FARMS: Posts Lower Earnings for Year Ended September 29 OWENS CORNING: Wins Approval of Staubach Management Agreement PACIFIC GAS: Pushing for Approval of DWR Operating Agreement PENN TREATY: S&P Junks $45 Million Subordinated Debt Rating PG&E CORP: Files Second Round of Comments on NOPR with FERC PREMCOR INC: Will Publish Fourth Quarter Results on January 21 PRIME FINANCE: Fitch Removes B Class B-2 Notes Rating from Watch STRUCTURED ASSET: Fitch Takes Rating Action on Various Bonds TANDYCRAFTS INC: Expects to File Proposed Chapter 11 Plan Soon TENFOLD CORP: Responds to Warning on Outsourcing Security Risks TEREX CORP: Forms & Introduces Financial Services Subsidiary TIGER TELEMATICS: Executes OEM Agreement with Branson Ltd. TURBOCHEF TECHNOLOGIES: Falls Below Nasdaq Listing Standards TYCO INT'L: Will Publish First Quarter Results on January 22 UNION ACCEPTANCE: Reaches Interim Settlement with MBIA Insurance UNITED AIRLINES: Receives Court Approval of Wage Concession UNITED AIRLINES: Obtains Stay Relief to Pursue $100MM Tax Refund US AIRWAYS: Passenger Service Workers Ratify Labor Cost Pact US AIRWAYS: Flight Attendants Ratify Additional Contract Cuts VIZACOM INC: Achieves Key 2002-2003 Restructuring Plan Goals WESTAR ENERGY: Inks Pact with ONEOK to Sell Some Preferreds WHEELING-PITTSBURGH: Steel Deal Good for Byrd Bill Application WHEELING-PITTSBURGH: Plan's Claim Classification and Treatment WORLDCOM INC: Seeks Go-Signal to Reject 530 Telecom Circuits W.R. GRACE: Taps Woodcock Washburn for Indiana Patent Suit * Large Companies with Insolvent Balance Sheets ********* ADELPHIA COMMS: Court Approves Decision Strategies' Engagement -------------------------------------------------------------- Adelphia Communications and its debtor-affiliates obtained the Court's authority to employ Decision Strategies LLC to assist them in searching for, identifying and analyzing assets that are property of its estates or that may be subject to valid claims, including assets nominally held by the Managed Rigas Entities that they may seek to recover for the benefit of its estates. By letter agreement dated June 12, 2002, the ACOM Debtors engaged Decision Strategies as investigations and asset recovery specialists. The professionals who primarily will be rendering services in these cases and their hourly rates are: Bart M. Schwartz $375 Joseph Jaffe 350 David Denton 300 Frank Rudewicz 290 Jonathon Newcomb 205 Michael Moore 175 Elizabeth Papaslis 120 John Keeney 205 Decision Strategies is an international firm that provides global business intelligence, litigation and financial investigation, risk management and security services to the public and private sectors. Decision Strategies specializes in all aspects of background and due diligence inquiries, crisis management, executive protection, forensic auditing, digital investigation and litigation intelligence gathering. Decision Strategies has substantial experience in providing the kinds of services sought to be rendered in these Chapter 11 cases. Moreover, principal officers and managing directors of Decision Strategies are all former executive level federal prosecutors, corporation attorneys, law enforcement agents and forensic auditors with strong backgrounds in financial investigations and the prosecution of civil, criminal and administrative matters. Decision Strategies will render to the Debtors will principally involve searching for and identifying assets that are property of the Debtors' estate or that may be subject to valid claims by the Debtors. These asset searches will vary in scope and will require a multitude of investigative techniques. For example, Decision Strategies will be called on to search for assets through online commercial database searches, web access searches, proprietary database searches and manual searches for records. This process will involve searching public records, including property records, mortgage records, judgment indices and federal, state and local court records. In addition, Decision Strategies will assist the Debtors with certain investigative matters in connection with both pending and prospective litigation. (Adelphia Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1) are trading at about 43 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1 for real-time bond pricing. AGRO PACIFIC: Unit Inks Pact to Merge with Agstar Power Inc. ------------------------------------------------------------ Agro Pacific Industries Ltd., entered into an amalgamation agreement dated January 8, 2003, whereby 4033981 Canada Inc., a wholly-owned subsidiary of Agro Pacific, will merge with Agstar Power Incorporated by way of a three-cornered amalgamation. The surviving company following the Amalgamation will be a wholly- owned subsidiary of Agro Pacific. Once the Amalgamation is completed, Agro Pacific plans to de list from the Toronto Stock Exchange and obtain a listing on the TSX Venture Exchange. Prior to the Amalgamation, Agro Pacific will seek conditional listing approval from the TSX Venture in respect of all of the currently outstanding Common shares of Agro Pacific and the Common shares to be issued pursuant to the Amalgamation. Pursuant to the terms of the Amalgamation Agreement, each issued and outstanding common share of Agstar will be exchanged for one Class "A" Common share of Agro Pacific. Agstar currently has 419,953,233 shares issued and outstanding. In addition, as part of Agro Pacific's restructuring under the Companies' Creditors Arrangement Act, Agro Pacific's current unsecured creditors will receive 21,139,630 freely tradeable Class "A" Common shares of Agro Pacific upon the completion of the Amalgamation. There are currently 7,687,138 Class "A" Common shares of Agro Pacific issued and outstanding. Once the Amalgamation is completed, there will be a total of 448,780,001 Class "A" Common shares of Agro Pacific issued and outstanding. Pursuant to the Amalgamation Agreement, the issued and outstanding share capital of Agro Pacific will be consolidated on a 10:1 basis, or other terms acceptable to the TSX Venture, following the Amalgamation. Agstar was incorporated to develop large scale greenhouse operations in Leamington, Ontario. On July 31, 2002, Agstar of New Mexico Inc., a wholly owned subsidiary of Agstar incorporated in the State of New Mexico, acquired two separate and complete 22 acre greenhouses in the town of Grants and near the town of Estancia in New Mexico. These greenhouses were dormant at the time of purchase. Agstar New Mexico commenced operations immediately and started shipping produce in October 2002. In November 2002, Agstar completed its acquisition of all of the issued and outstanding shares of 1037161 Ontario Limited, Southpoint Produce (1997) Limited, Veg Gro Inc., Sun Gro Farms Inc., and Veg Gro Sales Inc. The completion of the acquisition of the Veg Gro Companies and the New Mexico greenhouse assets provides Agstar with a geographically diversified greenhouse business which has access year round to produce and which has integrated marketing, packing and transportation operations. Both the Agstar New Mexico and the Veg Gro Companies greenhouses are operational facilities and producing tomatoes. As a result of these acquisitions, Agstar has over $44 million in greenhouse assets. The Veg Gro Companies had over $4.9 million in EBITDA for the 9 months ending September 30th and is similar in size to the operations in New Mexico. Agstar has future plans to develop, pursuant to a joint venture or otherwise, a proposed power generation plant which when developed could provide the greenhouses with heat and electricity, with the aim of reducing the greenhouses' operating costs and making them less vulnerable to energy price fluctuations. Excess power generated by the plant could then be sold on the open market. Ontario deregulated its electricity market in May 2002. The Amalgamation is part of Agro Pacific's restructuring pursuant to the CCAA and is the culmination of efforts to refinance Agro Pacific and enhance shareholder value. The Amalgamation has been approved by the board of directors of both Agro Pacific and Agstar. The Amalgamation will not be completed unless Agro Pacific has obtained conditional listing approval from the TSX Venture in respect of all of the currently outstanding Common shares of Agro Pacific and the Common shares to be issued pursuant to the Amalgamation. ALLMERICA FINANCIAL: Fitch Revises Rating Watch to Positive ----------------------------------------------------------- Fitch Ratings revised its Rating Watch on the insurer financial strength ratings of First Allmerica Financial Life Insurance Co., Allmerica Financial Life Insurance and Annuity Co., and Allmerica Global Funding LLC's $2 billion global debt program rating to Positive from Negative. Fitch has also revised its Rating Watch on Allmerica Financial Corporation's senior debt rating and Allmerica Financing Trust's capital securities to Positive from Negative. Fitch's actions reflect the significant increase in statutory capitalization for AFC's life operations as a result of the execution of several fourth quarter transactions, including the definitive agreement to sell its interest in a $650 million block of universal life insurance to John Hancock Life Insurance Company, the retirement of $551 million in funding agreement liabilities below face value through open market purchase/ tender offer and the implementation of a new guaranteed minimum death benefit mortality reinsurance program. Fitch also believes that uncertainty regarding regulatory action has been reduced due to an improvement in AFLIAC's risked based capital at year-end 2002 to an estimated 235% from 133% at the end of the third quarter coupled with AFC's fourth quarter 2002 agreement with the Massachusetts Commissioner of Insurance to maintain AFLIAC's RBC ratio at a minimum of 100%. This replaced an original commitment to maintain FAFLIC's RBC at 225%. Other recently announced changes include the reorganization of the ownership of AFC's subsidiary life companies, AFLIAC and FAFLIC. Fitch believes the advantages of the new structure include a more efficient regulatory process with a single regulator with the re-domestication of AFLIAC to Massachusetts and reduced statutory surplus volatility for FAFLIC and AFLIAC. Fitch plans to resolve its Rating Watch after a review of fourth quarter results and discussions with management concerning capital management plans and cash flow development for AFC and operating results at its property casualty operations. Entity/Issue Type/Action/Rating/Rating Watch First Allmerica Financial Life Insurance Co. --Insurer financial strength Rating Watch - 'BB-'/Rating Watch - Positive Allmerica Financial Life & Annuity Co. --Insurer financial strength 'BB-'/ Rating Watch Positive. Allmerica Global Funding LLC $2 billion global note program --Long-term issuer rating 'BB-'/ Rating Watch Positive. Allmerica Financial Corp. --Long-term issuer 'BB'/ Rating Watch Positive; --Senior debt rating 'BB'/ Rating Watch Positive; --Commercial paper rating 'B'. Allmerica Financing Trust --Capital securities rating 'B+'/ Rating Watch Positive. AMERCO: Enters into Standstill Agreement with Bank of Montreal -------------------------------------------------------------- AMERCO (Nasdaq: UHAL), the parent company for U-Haul International, Inc., entered into a standstill agreement with The Bank of Montreal with respect to an approximate $149 million lease obligation. This agreement allows the Company to pursue its debt-restructuring plan. Under the terms of this standstill, the Company will continue to make all required payments under the lease facility and provide timely information concerning the progress of its debt restructuring. "[Fri]day's announcement is another key step in efforts to restructure AMERCO's debt." commented Holly Etlin, principal of Crossroads, LLC., AMERCO's restructuring firm. "Given the complex nature of these negotiations, it is important to note that we are on track with our previously established timeline of March 31, 2003, the Company's fiscal year end. The primary focus of AMERCO's financial recovery is debt restructuring through refinancing and debt reduction plans," said Etlin. "This is a very positive development for AMERCO. This agreement, along with other forbearance agreements, demonstrates lender confidence in the Company's operations and in our ability to work closely with our creditors," stated Joe Shoen, AMERCO Chairman of the Board. "We intend to emerge from this restructuring as a stronger, more financially sound Company that will continue to deliver improved performance." On January 8, the Company announced that, as part of its debt- restructuring process, it reached agreements with Bank of America and Citibank to restructure approximately $26.5 million in obligations that were in default. Constructive work continues towards obtaining a standstill agreement with holders of the $100 million in BBATS that matured on October 15, 2002. AMERCO is the parent company of U-Haul International, Inc., Republic Western Insurance Company, Oxford Life Insurance Company and Amerco Real Estate Company. U-Haul is the largest do-it-yourself moving and storage operator in North America. For more information about AMERCO, visit www.uhaul.com AMERICAN PAD: Wants Schedule Filing Deadline Extended to Feb. 3 --------------------------------------------------------------- American Pad & Paper LLC asks the U.S. Bankruptcy Court for the Eastern District of Texas to extend the time period within which it must file its schedules of assets and liabilities, statements of financial affairs, list of equity security holders and lists of executory contracts and unexpired leases required under 11 U.S.C. Sec. 521(1). The Debtor tell the Court that it needs until February 3, 2003, to deliver these documents to the Clerk. The Debtor tells the Court that due to the complexity and size of its business, some of the Debtor's key personnel didn't have the time immediately after the Petition Date to compile the information and date required for the Schedules. If they had spent their time doing that they would have been precluded from addressing crucial ongoing business operations of the Debtor as a debtor in possession. The Debtor believes that an additional extension of time to file its Schedules will provide sufficient time for it to prepare and file coherent and complete Schedules. American Pad & Paper, LLC, manufacturer and distributor of writing pads, filing supplies, retail envelopes and specialty papers, filed for chapter 11 petition on December 20, 2002 in the U.S. Bankruptcy Court for the Eastern District of Texas. Deirdre B. Ruckman, Esq., at Gardere & Wynne, L.L.P., represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated assets of over $10 million and estimated debts of over $50 million. AMERICAN PAD: Cerberus Partners Gets to Keep its $100,000 --------------------------------------------------------- Steven G. Singer, the Chapter 7 Trustee overseeing the liquidation and winding-up of American Pad & Paper Company, et al.'s estates before the U.S. Bankruptcy Court for the District of Delaware sued Cerberus Partners, L.P., to recover $100,000. Mr. Singer alleged in his suit that Cerberus received a $100,000 payment from American Pad within the 90-day period prior to its January 10, 2000, bankruptcy filing, the payment was on account of antecedent dent, and American Pad's estate received no new value after it made that payment. In short, the payment was a classic preference recoverable by the estate under 11 U.S.C. Sec. 547, Robert W. Pedigo, Esq., Mr. Singer's attorney at Cooch and Taylor in Wilmington argued to Judge Walsh. Mr. Singer sent Cerberus a letter on October 1, 2002, asking for a $100,000 check. Cerberus didn't cut the check. In response, Mr. Singer's lawyer commenced an Adversary Proceeding, No. 02-06813-PJW, on November 21, 2002, to recover the funds, demanding that the $100,000 be turned over to the Debtors' estates pursuant to 11 U.S.C. Sec. 550. Without explanation, Mr. Pedigo delivered a Notice to the Bankruptcy Court on January 7, 2003, indicating that Mr. Singer has withdrawn his complaint against Cerberus and the Adversary Proceeding is dismissed with prejudice. AMTRADE INTERNATIONAL: Fitch Withdraws Various D Ratings -------------------------------------------------------- Fitch Ratings withdrew all ratings on Amtrade International Bank, which was closed on September 30, 2002 by the Georgia Department of Banking. Amtrade had been in self-liquidation and at the time of closure had $10 million of deposits. The FDIC is completing the liquidation process as receiver. Ratings Withdrawn: -- Long-Term Deposit Rating 'D'; -- Short-Term Deposit Rating 'D'; -- Long-Term Issuer Rating 'D'; -- Short-Term Issuer Rating 'D'; -- Individual Rating 'E'; -- Support Rating '5'. ANC RENTAL: Has Until April 7 to Make Lease-Related Decisions ------------------------------------------------------------- ANC Rental Corporation and its debtor-affiliates sought and obtained an order from the U.S. Bankruptcy Court for the District of Delaware giving them until April 7, 2003, to decide whether they want to assume, assume and assign or reject unexpired non-residential real property leases. (ANC Rental Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) AOL LATIN: America Online & Cisneros Convert Preferred Shares ------------------------------------------------------------- America Online Latin America, Inc. (Nasdaq:AOLAC), one of the leading interactive services providers in Latin America, announced that America Online, Inc., and the Cisneros Group of Companies converted 32,328,736 and 28,508,177 shares, respectively, of preferred stock to class A common stock. The stock conversion occurred on January 10, 2003. AOL Latin America noted that as a result of this conversion there are now 127,906,978 shares of class A common stock outstanding. This conversion was effected to support the Company's efforts to maintain its listing on the NASDAQ SmallCap Market. AOL Latin America further noted that the stock conversion did not change the aggregate number of outstanding shares for all classes of stock; however, the number of shares of class A common stock increased by the same amount that the shares of preferred stock decreased. The Company believes that the conversion benefits class A common stock holders as it includes the forfeiture of dividends, liquidation preferences, and other preferential rights associated with the converted preferred stock by the Cisneros Group of Companies and America Online, Inc. There can be no assurance that this stock conversion will result in AOL Latin America's continued listing on the NASDAQ SmallCap Market beyond January 13, 2003. In the event that the Company is no longer able to continue trading on the NASDAQ SmallCap Market, the Company expects that its class A common stock would trade on the Over-the-Counter Bulletin Board (OTCBB). The OTCBB is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information for more than 3,600 equity securities. America Online Latin America, Inc., (Nasdaq:AOLAC) is the exclusive provider of AOL-branded services in Latin America and has become one of the leading Internet and interactive services providers in the region. AOL Latin America launched its first service, America Online Brazil, in November 1999, and began as a joint venture of America Online, Inc., a wholly owned subsidiary of AOL Time Warner Inc. (NYSE:AOL), and the Cisneros Group of Companies. Banco Itau, a leading Brazilian bank, is also a minority stockholder of AOL Latin America. The Company combines the technology, brand name, infrastructure and relationships of America Online, the world's leader in branded interactive services, with the relationships, regional experience and extensive media assets of the Cisneros Group of Companies, one of the leading media groups in the Americas. The Company currently operates services in Brazil, Mexico and Argentina and serves members of the AOL-branded service in Puerto Rico. It also operates a regional portal accessible at http://www.aola.com America Online's 35 million members worldwide can access content and offerings from AOL Latin America through the International Channels on their local AOL services. ARMSTRONG: Wants More Time to Move Lawsuits to Delaware Courts -------------------------------------------------------------- Armstrong World Industries, Inc., Nitram Liquidators, Inc., and Desseaux Corporation of North America ask the Court to further extend the deadline to file notices to remove prepetition litigative and administrative matters through and including the later of: (i) July 31, 2003, or (ii) 30 days after entry of an order terminating the automatic stay with respect to any particular action sought to be removed. Stephen Karotkin, Esq., and Debra A. Dandeneau, Esq., at Weil Gotshal & Manges, in New York, and Mark D. Collins, Esq., and Rebecca L. Booth, Esq., at Richards Layton & Finger, in Wilmington, Delaware, remind Judge Newsome that the Debtors are parties to numerous judicial and administrative proceedings currently pending in various courts or administrative agencies throughout the country. Due to the number of proceedings involved, and the wide variety of claims these proceedings present, the Debtors need more time to determine which, if any, of the proceedings should be removed and, if appropriate, transferred to this district. The extension would protect the Debtors' valuable right to economically adjudicate lawsuits if the circumstances warrant removal. It will not prejudice the Debtors' adversaries because they may not prosecute the actions and proceedings pending relief from the stay. Furthermore, the Debtors assure the Court that the extension will not prejudice a party to a proceeding that the Debtors seek to remove because the party may seek remand of any removed action or proceeding. Unless their request is granted, the Debtors will be forced to address the pending prepetition claims and proceedings in a piecemeal fashion to the detriment of their creditors. (Armstrong Bankruptcy News, Issue No. 34; Bankruptcy Creditors' Service, Inc., 609/392-0900) Armstrong Holdings Inc.'s 9.0% bonds due 2004 (ACKH04USR1) are trading at about 58 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ACKH04USR1 for real-time bond pricing. AVADO BRANDS: S&P Ups Credit Rating to SD after Interest Payment ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its corporate credit rating to 'SD' (selective default) from 'D' on casual dining restaurant operator Avado Brands Inc., and raised its senior unsecured debt rating on the company to 'CC' from 'D'. At the same time, Standard & Poor's affirmed its 'D' rating on Avado Brands' subordinated notes. The rating actions are the result of the company's payment of interest to holders of its 9.75% senior unsecured notes. The interest payment was originally due on Dec. 1, 2002. Avado has not remitted its December 15, 2002 interest payment on its subordinated notes. "Avado's financial flexibility continues to be limited. On December 27, 2002, the company executed an amendment to its $75 million credit facility whereby its lenders agreed to forbear from exercising their remedies with respect to existing events of default until May 31, 2003. The amendment also revised certain financial covenants and requires the company to reduce its obligations under the facility to zero by May 25, 2003," said Standard & Poor's credit analyst Diane Shand. At September 29, 2002, Avado had $36 million of cash borrowings and $15 million of letters of credit outstanding under the credit facility. During the third quarter of 2002, the company fell out of compliance with certain EBITDA requirements contained in its credit facility and master equipment lease. Avado needs to obtain sources of capital to meet its cash needs and debt obligations. The company only had $309,000 of cash and cash equivalents on the balance sheet as of Sept. 29, 2002. BAUSCH & LOMB: Will Publish Fourth Quarter Results on January 30 ---------------------------------------------------------------- Bausch & Lomb (NYSE:BOL) will report its 2002 fourth-quarter earnings results on Thursday, January 30, 2003. On that day, the Company will issue a news release via Business Wire by 8:00 a.m. Eastern time. The news release also will be posted on the Company's Web site at http://www.Bausch.com Also on January 30, the Company will hold a conference call at 10:00 a.m. (ET) to discuss the results. Members of the news media may "listen only" to the conference call. The conference call can be accessed on January 30 in three ways: -- By telephone -- call 913/981-5507 between 9:50 a.m. and 10:00 a.m.; -- By Internet -- log on to http://www.vcall.com; -- By Internet -- log on to the Investor Relations page of the Company's Web site http://www.bausch.com The conference call will be available by telephone rebroadcast beginning at 1:30 p.m. (ET) on January 30, 2003, through midnight, Monday, February 3, 2003. The call-in number to listen to the replay is 719/457-0820; the confirmation code is 383448. Bausch & Lomb Incorporated is the preeminent global technology- based healthcare company for the eye, dedicated to helping consumers see, look and feel better through innovative technology and design. Its core businesses include soft and rigid gas permeable contact lenses, lens care products, ophthalmic surgical and pharmaceutical products. The Company is advantaged with some of the most respected brands in the world starting with its name, Bausch & Lomb(R), and including SofLens(TM), PureVision(TM), Boston(R), ReNu(R), Storz(R) and Technolas(TM). Founded in 1853 in Rochester, N.Y., where it continues to have its headquarters, the Company has annual revenues of approximately $1.7 billion and employs approximately 12,000 people in more than 50 countries. Bausch & Lomb products are available in more than 100 countries around the world. More information about the Company can be found on Bausch & Lomb's Web site at http://www.bausch.com * * * As reported in Troubled Company Reporter's November 20, 2002 edition, Bausch & Lomb completed a public offering of $150 million five-year senior notes with a coupon rate of 6.95 percent. The company's effective cost of the offering was approximately 8.65 percent, which included the cost of the treasury rate hedge instrument entered into in May 2002. The notes were rated BBB- by Standard & Poor's Rating Services and Ba1 by Moody's Investors Service. The offering represents the first offering under the company's $500 million Shelf Registration filed with the Securities and Exchange Commission in June 2002. BAY VIEW: Sells 2 Factoring Business as Part of Liquidation Plan ---------------------------------------------------------------- Bay View Capital Corporation (NYSE: BVC) sold two factoring businesses with approximately $23 million in factoring receivables. The sale of the Dallas-based Goodman Factors was made to a group of investors led by the factoring company's current management team. The sale of the Bay View Business Manager division was made to a group of investors led by former management of the San Mateo-based factoring company. Under the Company's liquidation basis of accounting, these units were recorded at their estimated realizable value at September 30, 2002. These transactions resulted in no gain or loss for the Company in the fourth quarter. These sales are important steps towards completing the Company's plan of liquidation and stockholder liquidity. "We are pleased to have sold these units to the current and former management of the Bay View factoring businesses. These groups of professionals have been running the factoring units since inception and are largely responsible for their successes," said Charles Cooper, Bay View Capital Corporation CEO. Bay View Capital Corporation is a commercial bank holding company headquartered in San Mateo, California and is listed on the NYSE: BVC. For more information, visit http://www.bayviewcapital.com As previously reported in Troubled Company Reporter, Standard & Poor's raised its ratings on Bay View Capital Corp., including its counterparty credit rating to 'BB-/B' from 'CCC-/C', and related entities, and removed all but the preferred stock rating of Bay View Capital Trust I from CreditWatch Positive where they were placed on July 24, 2002. The outlook is stable. This action was in response to the successful completion of the sale of the branch network and most of the deposit base to U.S. Bancorp's lead bank, U.S. Bank N.A. ('A1'). These transactions are part of the company's plan to liquidate. The company has received approval and filed notice to redeem its outstanding debt. It has also received approval to bring its preferred stock dividends out of arrears. When this is done the rating on this instrument will be moved to 'B-'. BAYOU STEEL: Red Ink Continues to Flow in Fourth Quarter -------------------------------------------------------- Bayou Steel Corporation (AMEX:BYX) reported a loss of $7.8 million for the fourth quarter of fiscal 2002 and a loss of $40.7 for the year ended September 30, 2002. The annual loss included two non-cash charges totaling $14.3 million for write downs of a deferred tax asset and the carrying value of its Tennessee facility. The quarterly and annual results compare with a loss of $7.5 million and $34.1 million in the prior year comparable periods. The annual results are reflective of a year that, in the second fiscal quarter, produced one of the lowest selling prices ever experienced by the Company. "This year has brought extreme challenges to the organization," said Jerry Pitts, President and Chief Operating Officer. "Although falling shipments over the last several years stabilized, the erosion of selling prices and operating margins continued well into the year until we received modest relief in the second half," Pitts continued. The selling price for the Company's finished product reached a floor in its second fiscal quarter before gaining $21 per ton over the remainder of its fiscal year. Excluding the two non-cash write downs, the loss would have been $26.4 million for the year compared to a $34.1 million loss in the prior year improving over 20%. Pitts expanded, "This improvement, almost entirely driven by reductions in operating cost, is substantial; however, we have not reached our goal of achieving cash breakeven from our operations." Offsetting even further improvement made by the Company was a reduction in the metal margin which is the difference between the price of the raw material scrap and finished goods selling prices. This spread decreased $60 per ton or approximately $30 million since the Company reported earnings in fiscal 1998. Given the continued losses and the Company's sensitivity to liquidity issues that naturally arise with sustained losses, the Company did not make a scheduled interest payment under its first mortgage notes in December. Pitts stated, "The Company decided not to make this payment to preserve liquidity under our line of credit and to ensure sufficient funding for on-going operations." The Company has retained financial advisors and has commenced discussions with a committee representing the holders of over 75% of the aggregate principal amount outstanding under the notes. The Company is also discussing with its senior lender options available under its line of credit facility. Pitts added, "We are seeking every equitable solution to the problems the Company now faces and are seeking financing options suitable to allow us to accomplish our business plan. We believe that the execution of our plan will bring positive cash flow." "Shipments declined in the usual slow months of October through December. The new year, however, should bring increased shipments overall as a result of modest improvements in the underlying demand, and, more importantly, as a result of operational enhancements which we believe will be well received by our customers. Additionally, pricing in our first fiscal quarter has been consistent with the improved pricing experienced at the end of fiscal 2002. Bayou appreciates the strong support of our customers, suppliers, and, most of all, our employees in dealing with the challenges of the past. Their continued support will help us achieve our short term goal of achieving cash breakeven," Pitts concluded. Bayou Steel Corporation manufacturers light structural and merchant bar products in LaPlace, Louisiana and Harriman, Tennessee. The Company also operates three stocking locations along the inland waterway system near Pittsburgh, Chicago, and Tulsa. BUDGET GROUP: Court Approves Verwaltung Master Agreement -------------------------------------------------------- Budget Group Inc., and its debtor-affiliates obtained the Court's nod allowing Budget Rent A Car International Inc., to enter into the Master Franchise Agreement, dated July 3, 2002, with Verwaltung Dovenhof Leasing and NL Nordleas AG. The agreement will ensure the continuation of the Debtors' operations in Germany. Pursuant to the Master Franchise Agreement, Budget International agreed to transfer the exclusive right to use and market the Budget trademarks in Germany for a period of 10 years, subject to Verwaltung's right to three successive five-year renewal terms under certain conditions. Verwaltung, in exchange, would remit a stream of royalty payments. There is no initial franchise fee. In consideration of the obligations that it will assume, Verwaltung's royalty fees are staggered for the first two years: -- 1.9% of revenue for 2003, -- 2.5% of revenue for 2004, and -- 3.5% of revenue thereafter. The Master Franchise Agreement also obligates Verwaltung to build the German operations and make minimum marketing investments. Verwaltung is also obliged to make a capital investment as much as $500,000 necessary to interface its travel agent reservations systems with the Budget reservations systems. Verwaltung is further obligated to assume the entire infrastructure and liabilities of the Debtors' German operations including employees, contracts, operating and headquarters facilities. Nordleas, pending the closing of the Master Franchise Agreement, has guaranteed vehicle financing for Budget's operations in Germany. The Debtors do not have a choice but to execute the Master Franchise Agreement. Budget International can no longer support the Debtors' operations in Germany. It has maintained its German rental fleet during these Chapter 11 cases only through Nordleas' Guarantee, and its absence would precipitate cash operating losses of $200,000 per month. The liquidation of the Debtors' German operations is not a viable alternative since Germany is the Debtors' largest outbound market in Europe. In addition, given the integrated character of Europe, the loss of Germany would significantly diminish the interest of any acquirer of Budget International's operations. (Budget Group Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) Budget Group Inc.'s 9.125% bonds due 2006 (BD06USR1) are trading at about 23 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BD06USR1for real-time bond pricing. BURLINGTON: US Trustee Balks at Ivins Philips' Engagement --------------------------------------------------------- Donald F. Walton, the Acting U.S. Trustee for Region 3, asks the Court to deny Burlington Industries, Inc., and its debtor- affiliates' request to employ Ivins, Philips & Barker as Special Tax and Employee Benefits Counsel. Julie L. Compton, Esq., in Wilmington, Delaware, notes that IP&B had previously provided legal services to the Debtors pursuant to the Ordinary Course Professionals Order dated December 12, 2001. However, for the four-month period from April 1, 2002 through July 31, 2002, IP&B's fees for services rendered were $215,492, in excess of the fee cap set in the OCP Order. According to the Application, the Debtors inadvertently paid the excess fees, but have withheld any further payments to IP&B until the Court approves the firm's employment. Mr. Walton objects to the Debtors' request for approval of IP&B's employment nunc pro tunc to the Petition Date because it is both unwarranted and unnecessary. The Debtors have not given any reason compelling nunc pro tunc approval to the Petition Date. Moreover, Ms. Compton notes that even after realizing that IP&B had exceeded the fee cap for the period from April 1, 2002 through July 31, 2002, the Debtors still waited almost five months to file the Application. Ms. Compton points out that no justification has been given for the delay. Ms. Compton argues that if the Court approves IP&B's employment nunc pro tunc to the Petition Date under the circumstances, it would render the limitations and requirements of the OCP Order meaningless, especially where the OCP Order itself is a "relaxing" of the strict requirement of Sections 327(a) and 327(e) of the Bankruptcy Code, intended to ease the burden in larger cases where the Debtors employ numerous professionals to assist them. (Burlington Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) CITGO PETROLEUM: Fitch Lowers Senior Unsec. Debt Rating to BB- -------------------------------------------------------------- Fitch Ratings downgraded the senior unsecured debt rating of CITGO Petroleum Corporation to 'BB-' from 'BBB-'. Fitch has also lowered the rating on the senior notes of PDV America, Inc., to 'B-' from 'BB+'. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A., the state-owned oil company of Venezuela. CITGO and PDV America remain on Rating Watch Negative. The downgrades reflect Fitch's heightened concerns with the financial flexibility of both CITGO and PDV America due to the general strike in Venezuela, which has severely disrupted the country's oil exports. Earlier today, Fitch downgraded the long- term foreign currency rating of Venezuela and PDVSA to 'CCC+' from 'B' and the short-term foreign currency (Venezuelan bolivar) rating of Venezuela to 'C' from 'B'. As a result of the strike, CITGO has been forced to find alternate sources for much of the crude supplied by PDVSA. CITGO typically purchases approximately 50% of its crude needs from PDVSA under long-term contracts. CITGO has been successful acquiring alternate crudes and other feedstocks to maintain refinery operations. However, spot market terms have increased working capital requirements and given the lowered credit ratings of CITGO related entities, additional working capital requirements are possible. Near term obligations as well as a rating trigger in the company's trade accounts receivable program could significantly reduce CITGO's liquidity. Unless CITGO achieves a waiver, Fitch's downgrade will result in termination of the accounts receivable program. In mid-December, CITGO entered into a new $520 million credit facility, split into a $260 million three- year facility and a $260 million 364-day revolver. Concerns over the situation in Venezuela, however, have limited CITGO's ability to enter the capital markets for a planned bond issuance in the fourth quarter of 2002. The CITGO downgrade and the more severe downgrade to the senior notes of PDV America are also based on the deteriorating creditworthiness of PDVSA and Venezuela. The $500 million of senior notes mature in August 2003 and are supported by Mirror Notes issued by PDVSA and held by PDV America. The senior notes and Mirror Notes have identical terms and conditions such that the interest income PDV America receives from PDVSA on the mirror notes pays the interest on the senior notes. In an absence of a return to normal oil operations, Fitch has significant concerns with the ultimate parent's ability and willingness to pay the maturity of the notes. In 1998 and 2000, dividends from CITGO were ultimately used to pay the $250 million tranches that matured in each of those years. Given CITGO's current financial situation, CITGO is not expected to pay any dividends to PDVSA to support PDV America's senior notes. The situation in Venezuela remains highly volatile. Although Fitch expects CITGO to maintain operations, further deterioration in CITGO's financial position or the ultimate shareholders credit quality could result in additional downgrades. CITGO is one of the largest independent crude oil refiners in the United States with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company also owns approximately 41% interest in LYONDELL-CITGO Refining L.P., a limited liability company that owns and operates a 265,000-barrel per day crude oil refinery in Houston, Texas. CITGO markets refined products through approximately 13,400 independently owned and operated retail sites. COEUR D'ALENES: Executes 1,000-to-1 Reverse Stock Split ------------------------------------------------------- Effective Nov. 27, 2002, The Coeur d'Alenes Company (OTCBB:CDAL), Cusip #192 117 109, conducted a 1,000 to 1 reverse split on its Common Stock. All shareholders owning fewer than 1,000 shares on Nov. 27, 2002, will be cashed out. These shares have been cancelled and can no longer be traded or transferred. Immediately following the reverse split, the Company conducted a forward split of 1,000 to 1, eliminating the need to reissue certificates for those shareholders holding 1,000 or more shares. * * * As previously reported, Coeur d'Alene Mines Corporation dismissed Arthur Andersen LLP as the Company's independent accounting firm. Arthur Andersen LLP had served in that capacity since October 1999. The Company's determination reflected the fact that on June 15, 2002, the Securities and Exchange Commission announced that Arthur Andersen LLP had informed the Commission that it will cease practicing before the Commission by August 31, 2002. Arthur Andersen's report dated February 15, 2002, stated that the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, had been prepared assuming that the Company will continue as a going concern. COMMANDER AIRCRAFT: Hires Chung & Press as Bankruptcy Counsel ------------------------------------------------------------- Commander Aircraft Company asks for permission from the U.S. Bankruptcy Court for the District of Delaware to hire and employ the law firm of Chung & Press, P.C., as bankruptcy counsel. In order to enable the Debtor to perform its duties as debtor- in-possession and to effect the proper and expeditious administration of this case, Chung & Press will be required to: a) assist and advise the Debtor relative to the administration of this proceeding; b) represent the Debtor before the Bankruptcy Court and advising the Debtor on all pending litigations, hearings, motions, and of the decisions of the Bankruptcy Court; c) review and analyze all applications, orders, and motions filed with the Bankruptcy Court by third parties in this proceeding and advising the Debtor thereon; d) attend all hearings conducted pursuant to section 341(a) of the Bankruptcy Code and representing the Debtor at all examinations; e) communicate with creditors and all other parties in interest; f) assist the Debtor in preparing all necessary applications, motions, orders, supporting positions taken by the Debtor, and preparing witnesses and review documents in this regard; g) confer with all other professionals, including any accountants and consultants retained by the Debtor and by any other party in interest; h) assist the Debtor in its negotiations with creditors or third parties concerning the terms of any proposed plan of reorganization; i) prepare, draft and prosecute the plan of reorganization and disclosure statement; and j) assist the Debtor in performing such other services as may be in the interest of the Debtor and performing all other legal services required by the Debtor. The normal hourly rate charged by the firm are: Daniel M. Press $250 per hour Juan Chardiet $225 per hour Russell B. Adams III $200 per hour Commander Aircraft Company, wholly-owned subsidiary of publicly- traded Aviation General, Incorporated, filed for chapter 11 petition on December 27, 2002. David Lee Finger, Esq., at David L. Finger, P.A., represents the Debtor in its restructuring efforts. CONSECO INC: Wants to Continue Payment of Employee Obligations -------------------------------------------------------------- Conseco Inc., and the Conseco Finance Debtors ask the Court for permission to reimburse Conseco Services for prepetition employee services. Conseco Services provides use of its employees to the Holding Company Debtors. Conseco Services allocates the costs among its affiliates. As a result, the Holding Company Debtors have only 5 employees who have employment contracts. Conseco Services pays these executives and is reimbursed by the Holding Company Debtors. Conseco Services has about 6,458 employees that also provides services to non-debtor subsidiaries. On average, Conseco Services pays about $17,558,891 per month on account of non-debtor employees. The Service Agreements provide for monthly invoicing of the expenses that Conseco Services pays on the Holding Company Debtors' behalf, plus a 10% service fee. In practice, the Holding Company Debtors and the non-debtor subsidiaries advance the cash needed to pay the month's expenses to Conseco Services. To bridge the gap between estimated and actual expenses, Conseco Services submits quarterly invoices to affiliates for the unpaid charges that the affiliate incurred in the previous quarter and the affiliate must pay this amount. Further, the Holding Company Debtors request that they be authorized to make payments to the CFC Debtors' Employees, in the event that the CFC Debtors are unable to make these payments and that the Holding Company Debtors be accorded a priority claim for any amounts advanced for CFC Debtor Employee Obligations. Conseco Services and the CFC Debtors sponsor and maintain tax- qualified defined contribution 401(k) savings plans, which provide eligible employees the opportunity to make pre-tax salary deferral contributions. The Holding Company pays Conseco Services approximately $14,000 per month for 401(k) provision. Historically, Conseco Services matched 50% of the first 6% of an employee's pre-tax contribution, made in common stock. Because Conseco's common stock value has significantly decreased, Conseco Services switched to cash-based match. Approximately $3,200,000 will be contributed to the plan on account of employee service for the first 3 quarters of 2002. Additionally, the Holding Company and the CFC Debtors seek permission to continue paying health and welfare benefit plans which include medical and health, life insurance, death, dental, vision and disability. Vacation and sick leave pay also should be payable by the Holding Company and the CFC Debtors. (Conseco Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Conseco Inc.'s 10.50% bonds due 2004 (CNC04USR2) are trading at about 37 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC04USR2for real-time bond pricing. COVANTA: Inks Stipulation Allowing Setoff with Fairfax, Virginia ---------------------------------------------------------------- Covanta Fairfax and Fairfax County, Virginia are parties to a Service Agreement regarding the operation of a waste-to-energy facility in Fairfax County, Virginia. Pursuant to the Service Agreement, Covanta Fairfax owes the County an undisputed amount of $338,952 relating to ash hauling, tipping floor assistance, supplemental waste disposal, supplemental waste miscellaneous revenue and spot market disposal, which obligations were incurred prior to the Petition Date. In addition, Covanta Fairfax owes the County an undisputed amount of $485,993 relating to ash disposal charges incurred Prepetition, which amount Covanta Fairfax has authority to pay to the County pursuant to a September 18, 2002 Court Order. On the other hand, the County owes the undisputed amount of $1,395,649 to Covanta Fairfax for gross receipts tax incurred prior to the Petition Date from October 27, 1992 through March 31, 2002. Moreover, the County owes the undisputed amount of $122,771 to Covanta Fairfax for additional prepetition waste service fees. In a Court-approved Stipulation, the Parties agree to offset the undisputed prepetition amounts they owe to each other, specifically: 1. After set-off, the amount owed to Covanta Fairfax by the County is $1,179,468; 2. The County Obligation and the Covanta Fairfax Obligation will each be paid substantially contemporaneously at a mutually agreed time; and 3. The payment by the County of the County Obligation is without prejudice to any rights that the County may have in the Debtors' Chapter 11 cases or under the United States Bankruptcy Code. (Covanta Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) DENNY'S CORP: Reports Same-Store Sales & Guest Count Declines ------------------------------------------------------------- Denny's Corporation (OTCBB: DNYY) reported same-store sales for its company-owned Denny's restaurants during the five-week period, quarter and year ended December 25, 2002, compared with the same periods in fiscal year 2001. Five Weeks 13 Weeks 52 Weeks Sales: Dec. 2002 4Q-2002 2002 ------ ---------- -------- -------- Same-Store Sales 0.3% (2.1%) (1.0%) Guest Check Average 3.9% 3.5% 1.8% Guest Counts (3.5%) (5.4%) (2.8%) Restaurant Counts: 12/25/02 12/26/01 ------------------ -------- -------- Company-owned 566 621 Franchised 1,095 1,114 Licensed 15 14 -------- -------- 1,676 1,749 Denny's is America's largest full-service family restaurant chain, operating directly and through franchisees approximately 1,700 Denny's restaurants in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico. For further information on the Company, including news releases, links to SEC filings and other financial information, please visit the Denny's Web site at http://www.dennys.com As reported in Troubled Company Reporter's December 30, 2002 edition, Standard & Poor's assigned its 'BB-' senior secured bank loan rating to family dining restaurant operator Denny's Corp.'s $125 million senior secured revolving credit facility. The new facility will be used to refinance the existing credit facility. At the same time, Standard & Poor's raised its corporate credit rating on the company to 'B' from 'B-'. The outlook is stable. Spartanburg, South Carolina-based Denny's had total debt of $606 million as of September 25, 2002. DIAMETRICS MEDICAL: Fails to Meet Nasdaq Listing Requirements ------------------------------------------------------------- Diametrics Medical, Inc., (Nasdaq:DMED) received a Nasdaq Staff Determination on January 9, 2003, indicating that the Company fails to comply with the minimum stockholders' equity requirement for continued listing set forth in Marketplace Rule 4450(a)(3), and that its securities are, therefore, subject to delisting from The Nasdaq National Market. The Company will request a hearing before a Nasdaq Listing Qualifications Panel to review the delisting decision. The request for a hearing will stay the delisting of the Company's securities, pending the Panel's decision. There can be no assurance the Panel will grant the Company's request for continued listing. If the Company is unsuccessful in its appeal, it currently intends to apply for listing of its securities on The Nasdaq SmallCap Market. Diametrics Medical is a leader in critical care technology. The company is dedicated to creating solutions that improve the quality of healthcare delivery through products and services that provide immediate, accurate and cost-effective time critical blood and tissue diagnostic information. Primary products include the IRMA(R)SL point-of-care blood analysis system; the Trendcare(R) continuous blood gas monitoring system, including Paratrend(R) and Neotrend(R) for use with adult, pediatric and neonatal patients; the Neurotrend(R) cerebral tissue monitoring system; and the Integrated Data Management System (idms(TM)). Additional information is available at the company's Web site at http://www.diametrics.com * * * Liquidity and Capital Resources In its SEC Form 10-Q filed on November 14, 2002, the Company reported: "At September 30, 2002, the Company had working capital of $1,847,979, a decrease of $10,028,477 from the working capital reported at December 31, 2001. The decrease is impacted primarily by the reclassification of $7.3 million of Convertible Senior Secured Fixed Rate Notes due August 4, 2003 from long- term to current liabilities, the year-to-date net loss before depreciation and amortization and other noncash charges of approximately $2,093,494 and purchases of property and equipment of approximately $589,944. "[T]he Company's total cash and marketable securities balance decreased by approximately $4.8 million and $550,000 during the nine months ended September 30, 2002 and 2001, respectively. Inventory availability at the end of the second quarter 2002 and the $2.7 million payment from Philips in lieu of minimum product purchase requirements in the third quarter allowed a reduction in inventory purchases for third and fourth quarter production requirements, resulting in the generation of positive cash flows for the three months ended September 30, 2002. The impact on cash of lower required inventory purchases is expected to continue into the fourth quarter, and consequently, the rate of net cash usage during the fourth quarter is expected to be minimal. The Company is monitoring its cash position carefully and is evaluating its future operating cash requirements in the context of its strategy, business objectives and expected business performance. As part of this, the Company is currently reviewing various options for raising additional capital, including the use of asset-based credit and the issuance of debt or equity securities. Additionally, the full principal balance of the Company's $7.3 million Convertible Senior Secured Fixed Rate Notes becomes due August 4, 2003, unless the note holders elect prior to that date to convert the notes into shares of the Company's Common Stock at a conversion price of $8.40 per share. The Company is currently discussing with the note holders a potential extension of the notes under modified terms. If the note holders do not elect to extend the due date or exercise the conversion option, the Company plans to refinance the notes with debt or equity to the extent cash flows from operations or partnering activities are not sufficient to retire the notes. There is no assurance that the Company will be able to refinance the notes or be able to refinance under favorable terms. The Company's long-term capital requirements will depend upon numerous factors, including the impact of changes in distribution relationships and methods on sales, the rate of market acceptance of the Company's products, the level of resources devoted to expanding the Company's business and manufacturing capabilities, and the level of research and development activities. While there can be no assurance that adequate funds will be available when needed or on acceptable terms, management believes that the Company will be able to raise adequate funding to meet its operational requirements. If the Company is unable to refinance or extend the due date for its notes, raise an adequate level of additional capital or generate sufficient cash flows from operations, the Company's ability to execute its business plan will be significantly impaired." DIVERSIFIED CORPORATE: Sells All Mountain Ltd. Shares to Hosmers ---------------------------------------------------------------- On December 24, 2002, Diversified Corporate Resources, Inc., a Texas corporation, and MAGIC Northeast, Inc. a Delaware corporation, completed the sale of all of the issued and outstanding shares of capital stock of Mountain, Ltd., a Maine corporation, pursuant to the certain Agreement dated December 20, 2002, between the Company, Seller, Joseph H. Hosmer, and Sandra Hosmer. The effective date of this transaction was the close of business on December 20, 2002. Seller is a subsidiary of the Company, and prior to the closing of this transaction, Mountain was a subsidiary of the Company. Pursuant to the terms of the Sale Agreement, the transaction involved the following: (a) $572,000.00 was paid to the Company in cash on December 24, 2002, (b) $78,000.00 is payable by the Buyers to the Company at such time as J. Hosmer is paid $78,000.00 owed to him by J. Michael Moore, the Chairman of the Board and Chief executive Officer of the Company, (c) the Buyers waived the obligation of the Company and Seller to pay any portion of the purchase price not already paid by the Company in connection with the Company's purchase of Mountain from the Buyers in August, 1999; such unpaid amount was approximately $2.1 million, (d) the Company retained all of the cash and accounts receivable of Mountain which existed as of the close of business on December 20, 2002, (e) the Company retained the obligation for all of the liabilities of Mountain which existed as of the close of business on December 20, 2002, (f) the Buyers sold 77,000 shares of common stock of the Company to DCRI for $7,700.00 paid in cash to the Buyers on December 24, 2002, (g) J. Hosmer waived the right to all unpaid compensation and bonuses payable to him by the Company in connection with the two employment agreements previously entered into with J. Hosmer, (h) both such employment agreements were terminated, (i) J. Hosmer resigned as an officer and director of the Company and all of the subsidiaries of the Company, and (j) until at least March 31, 2003, Mountain will continue to provide contract placement services to one client of a subsidiary of the Company pursuant to a fee sharing arrangement between the Company and Mountain. Prior to the closing of this transaction, J. Hosmer had been President of the Company and a member of the Board of Directors of DCRI. Mountain is based in Yarmouth, Maine, and is engaged in the contract placement business with emphasis on the telecommunications industry. Diversified Corporate's September 30, 2002 balance sheet shows a working capital deficit of about $3.6 million. * * * Going Concern Uncertainty In its SEC Form 10-Q dated November 14, 2002, the Company reported: "As of September 30, 2002, we were not in compliance with the amended financial covenant under our three-year revolving line of credit agreement with General Electric Capital Corporation. "The Company failed to make the required acquisition agreement payments of approximately $1,178,000 and $884,000 (to the former owners of Mountain, LTD., which were due on October 1, 2001 and October 1, 2002, respectively, and we failed to make the payment of approximately $867,000 to the former owners of Texcel, Inc. which was due on October 8, 2001. Effective as of October, 2001, we entered into forbearance agreements with the former owners of both Mountain and Texcel that involved (among other things) the extension of the debt payment dates under both obligations, and our commitment to pay interest on the amount owed to the holders of both the Mountain and Texcel debt. We were able to make partial debt payments to the former owners of Texcel, but in September, 2002, we failed to pay the installment payments then owed to the former owners of both Mountain and Texcel, and the entire amount payable to these individuals is now due and payable. As of September 30, 2002, we owed approximately $2,062,000 to the former owners of Mountain, and approximately $747,000, to the former owners of Texcel. We are unable to pay any of such amounts at this time, and our ability to cure such defaults in connection with these debt obligations is contingent upon the outcome of our efforts to refinance the GE facility. We are currently in negotiations with respect to these debt obligations. "These factors, among others, indicate that the Company may be unable to continue as a going concern. "We are continuing to evaluate various financing and restructuring strategies to maximize shareholder value and to provide assistance to us in pursuing alternative financing options in connection with our capital requirements and acquisition debt obligations. We can provide no assurance that we will be successful in implementing the changes necessary to accomplish these objectives, or if we are successful, that the changes will improve our cash flow and liquidity." DIVERSIFIED CORP.: Closes Greenfield Credit Facility Arrangement ---------------------------------------------------------------- On December 24, 2002, Diversified Corporate Resources, Inc., finalized a credit facility pursuant to a Loan and Security Agreement with Greenfield Commercial Credit, L.L.C. In connection with this secured lending transaction, the Company now has a one-year line of credit with Greenfield in the initial amount of $4.0 million; this amount reduces to $3.5 million in 45 days from the date of this transaction. All of the assets of the Company and its subsidiaries are pledged to secure this debt obligation, and most of these subsidiaries have guaranteed the repayment of the Company's debt obligation to Greenfield. This line of credit was funded by Greenfield on December 24, 2002, with the initial funding amount totaling approximately $4.0 million. The proceeds of this funding were primarily used to repay in full the secured debt obligation of the Company to General Electric Capital Corporation. In connection with this loan transaction, Greenfield required that J. Michael Moore, the Chairman and Chief Executive Officer of the Company, execute a Validity Guaranty. The JMM Guaranty basically obligates Moore to repay the Greenfield loan in the event and to the extent that the Company engages in any inappropriate activities related to the Greenfield financing. As the result of Moore executing the JMM Guaranty, the Board of Directors of the Company has previously indicated that it is their intent to indemnify Moore, and to consider providing Moore with a second lien on the same assets pledged to secure the Greenfield loan. At this time, no action has been taken by the Board of Directors of DCRI to effectuate this second lien arrangement. In addition, another condition to the closing of the Greenfield loan transaction was the execution of a Subordination Agreement by certain unsecured debt holders of the Company. With respect to holders who did not execute such a document, the Company is precluded from making any interest or debt payments to such holders without first obtaining the written consent of Greenfield. With respect to those debt holders who did execute such a document, the Company is precluded form making principal payments to them unless and to the extent that the Company has available borrowing capacity in excess of a minimum of $1,000,000. The holders of the debt payable to the former owners of the business now operated by Datatek Group Corporation, a subsidiary of the Company which was acquired in March, 2000, did execute the required document. Although a debt payment of $170,625 was owed to the Datatek debt holders on January 1, 2003, the Company did not have sufficient liquidity to make such payment. Under the terms of the Greenfield loan documentation, the Company is not in default to the holders of the Datatek debt because the minimum liquidity requirements of the Greenfield loan documentation precluded such payment. The Company was not successful in securing the execution of a Subordination Agreement by the former owners of the business now operated by Texcel Services, Inc., a subsidiary of the Company which was acquired in October, 1998. Since the Company is in default with respect to the amount of $746,800 (exclusive of accrued interest) owed to the former owners of the Texcel business, there is no certainty as to what action, if any, that these debt holders will take in an effort to collect the amount owed to them. Diversified Corporate's September 30, 2002 balance sheet shows a working capital deficit of about $3.6 million. DLJ MORTGAGE: S&P Further Cuts P-T Certs. Ratings to CCC-/D ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of DLJ Mortgage Acceptance Corp.'s commercial mortgage pass-through certificates series 1997-CF2. The lowered ratings reflect the appraisal reductions and special servicing fees taken to date and the resultant interest shortfalls that are occurring in two rated classes. The rated classes affected are B-4 and B-5. The rating on the B-5 class is lowered to 'D' from 'CCC-', as interest shortfalls are expected to continue, without any near term recovery expected. The B-4 class, at this time, does not appear to be permanently impaired; its rating is lowered to 'CCC-' from 'CCC+'. Total delinquencies account for 12.10% of total principal balance. Two delinquent loans are responsible for the appraisal reductions taken and include one large hotel group and a retail property. The hotel loan group, which represents 7.5% of the pool's principal balance, is 90 days delinquent, and is secured by five cross-collateralized and cross-defaulted lodging properties. Four of the properties are located in the Orlando, Fla. market that serves Disney World, and the fifth is in San Antonio, Texas. The servicer, Orix Capital Markets LLC, took an appraisal reduction amount of $11.66 million in April 2002. The properties are in very competitive markets and have been affected by the slowdown in business and leisure travel. Another Orlando property, the Mercado Mediterranean Village (2.80% of the pool's principal balance), is 90 days delinquent. This 116,327-square-foot retail center, also located near Disney World, is being affected by the decline in tourism. It has a $16.8 million principal balance and represents 2.7% of the pool's principal balance. An appraisal reduction amount of $2.66 million was taken. There is currently $78.5 million, or 13.3%, of the pool's principal balance on the servicer's watchlist. The two delinquent loans mentioned account for 10.3% of this amount. The remaining balance is attributable to nine other loans, none of which has a significant balance. Ratings Lowered DLJ Mortgage Acceptance Corp. Commercial mortgage pass-thru certs series 1997-CF2 Rating Class To From Credit Support (%) B-4 CCC- CCC+ 3.4 B-5 D CCC- 2.8 DORSET/TULLAS CDO: Fitch Cuts Ratings on Various Note Classes ------------------------------------------------------------- Fitch Ratings downgraded the following classes of notes issued by Dorset CDO Ltd. and Tullas CDO Ltd.: Dorset CDO Ltd. --$317,327,920 class A notes downgrade to 'B' from 'AA'; --$10,000,000 class B notes downgrade to 'CC' from 'BBB'; --$12,000,000 class C notes downgrade to 'C' from 'B-'; --$10,000,000 class D notes downgrade to 'C' from 'CC'. Tullas CDO Ltd. --$314,586,389 class A notes downgrade to 'BBB+' from 'AAA'; --$6,000,000 class B notes downgrade to 'BBB-' from 'AA'; --$8,000,000 class C notes downgrade to 'CCC' from 'BBB'; --$14,000,000 class D notes downgrade to 'C' from 'CCC-'; --$8,000,000 class E notes downgrade to 'C' from 'CC'. The above referenced securities have been downgraded as a result of credit deterioration, higher than expected default rates, and lower recovery expectations. Dorset has experienced $63,000,000 (16.49%) defaults to date and contains another $24,000,000 (6.28%) rated 'CCC+' or below. As a result of failing overcollateralization tests, Dorset CDO Ltd.'s B, C, D, and E notes have deferred all interest payments to date. Tullas has experienced $39,000,000 (10.21%) defaults to date and contains another $24,000,000 (6.28%) rated 'CCC+' or below. As a result of failing overcollateralization tests, Tullas CDO Ltd.'s C, D, E, and F notes have deferred all interest payments to date. The class A notes of Dorset CDO Ltd. are currently receiving their coupon, however, the uncertainty of the timing and extent of loss may lead to an impairment of the principal amount as well as future rating actions. The transaction has exposure to underperforming sectors such as manufactured housing, aircraft securitizations and collateralized debt obligations. As such, this transaction has exposure to distressed credits that were material in Fitch's analysis. Fitch will continue to monitor this transaction and take additional action if warranted. EFA SOFTWARE: Has Until Feb. 27 to File Canadian BIA Proposal ------------------------------------------------------------- Basis100 (TSX:BAS), a business services provider to the financial services industry, said its wholly owned subsidiaries, EFA International Inc. and EFA Software Services Ltd., have received an extension to the deadline to file a formal proposal under the Bankruptcy and Insolvency Act of Canada. The revised deadline is February 27, 2003. The previously disclosed acquisition of certain assets of the EFA Group by Computershare Ltd., is unaffected by this filing extension. Basis100 Inc., is a business services provider to the financial services industry, which enables companies to build, distribute, buy and sell products and services in more efficient and innovative ways. Basis100's lines of business include: Lending Solutions for consumer credit, mortgage origination and processing; Data Warehousing and Analytics Solutions for automated property valuations, property data-warehousing, data products and analytics support; and Capital Markets Solutions for fixed income trading. For more information about Basis100, visit http://www.Basis100.com EMERGING VISION: Horizon Investors Discloses 21% Equity Stake ------------------------------------------------------------- Horizons Investors Corporation of Albany, New York, beneficially owns 6,301,075 shares of the common stock of Emerging Vision, Inc., representing 21% of the outstanding common stock of the Company. Horizons hold sole voting and dispositive powers over the stock held. The Corporation purchased 574,000 shares in past 60 days at average price of $.04. Emerging Vision (formerly Sterling Vision) owns about 30 optical outlets and franchises about 200 others under the Sterling Optical, Sight for Sore Eyes, and other names in 26 states, the US Virgin Islands, and Ontario, Canada. Emerging Vision scrapped its plans to sell its retail chain operations and establish itself as an Internet portal supply chain serving businesses within the optical industry. It's refocused on its optical businesses once again to create brand awareness. To that end, it has sold its outpatient ambulatory surgery center in New York, a part of its wholly owned subsidiary, Insight Laser Centers (laser vision correction centers), which it is planning to sell. * * * Liquidity As of September 30, 2002 (exclusive of net liabilities of discontinued operations), Emerging Vision Inc., had negative working capital of $4,681,000 and cash on hand of $601,000. During the nine months ended September 30, 2002, the Company used approximately $1,856,000 of cash in its operating activities. This usage was in line with management's plans and was mainly a result of approximately $680,000 of costs related to the Company's store closure plan, a net decrease of $593,000 in accounts payable and accrued liabilities that existed as of December 31, 2001, and $271,000 related to the prepayment of certain other business expenses, offset, in part, by a net decrease of $346,000 in franchise and other receivables. Management anticipates that it will continue to incur significant costs in order to continue to close certain of its non-profitable Company-owned stores, all in its effort to eliminate future cash flow losses currently generated by such stores. Based on its current financial position, the Company may not have sufficient liquidity available to continue in operation for the next 12 months. However, the Company plans to continue to attempt to improve its cash flows during the remainder of 2002, and into 2003, by improving store profitability through increased monitoring of store-by-store operations, closing non- profitable Company-owned stores, implementing reductions of administrative overhead expenses where necessary and feasible, actively supporting development programs for franchisees, and adding new franchised stores to the system. Management believes that with the successful execution of the aforementioned plans to attempt to improve cash flows, its existing cash, the collection of outstanding receivables, the availability under its existing credit facility, and the successful completion of its shareholder rights offering, there will be sufficient liquidity available for the Company to continue in operation for the next 12 months. However, there can be no assurance that the Company will be able to successfully execute the aforementioned plans, or that it will be successful in completing its rights offering. ENCOMPASS SERVICES: Receives Court Injunction Against Utilities --------------------------------------------------------------- After due deliberation, Judge Greendyke directs all utility companies not to alter, refuse or discontinue their service to, or discriminate against, Encompass Services Corporation and its debtor-affiliates. In turn, Judge Greendyke directs the Debtors to pay, on a timely basis, all undisputed invoices with respect to the postpetition utility services that may be provided. Judge Greendyke clarifies that the Order is without prejudice to the rights of any Utility Company to request in writing by pleading filed with the Court assurances in the form of deposits or other security and that the burden of proof will remain unaffected by the approved provisions. In the event a utility company timely requests additional assurance that the Debtors believe are unreasonable, the Debtors may file a motion for determination of adequate assurance of payment. Judge Greendyke rules that any utility company requesting additional adequate assurance of payment will be prohibited from discontinuing, altering or refusing service to the Debtors and will be deemed to have adequate assurance unless and until the Court enters a final order to the contrary. Meanwhile, any utility company that does not formally request additional assurance will be prohibited from discontinuing, altering or refusing service to the Debtors and will be deemed to have adequate assurance under Section 366 of the Bankruptcy Code. (Encompass Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: Brings-In FTI Consulting to Render Financial Advice --------------------------------------------------------------- Brian S. Rosen, Esq., at Weil, Gotshal & Manges LLP, in New York, reminds the Court that Enron Corporation and its debtor- affiliates have employed PricewaterhouseCoopers to provide, among other services, financial restructuring support services through its professionals within PwC's Business Recovery Services practice, a product line which specializes in providing these services to parties in distressed corporate situations. These services included assisting the Debtors with the preparation of financial disclosures the Court required, cash management and reporting, identification and analysis of certain reclamation and creditor claims, evaluation, analysis, procedures and other services as necessary for the purposes of the wind-down and liquidation of the trading books of the various Debtor entities, and other services as required by the Debtors. On July 24, 2002, FTI Consulting, Inc., and its wholly owned entities publicly announced that they had entered into a definitive agreement to purchase the BRS Practice and related assets and receivables. Mr. Rosen relates that the transaction was consummated on August 30, 2002, and the consideration paid to PwC included, among other things, cash and equity interests in FTI. As a result of the Closing, J. Robert Medlin, the primary PwC partner providing the BRS Services to the Debtors, as well as substantially all of the other members of the Enron BRS Practice engagement team, became FTI employees. Consequently, PwC will no longer provide the BRS Services to the Debtors, but will continue to provide the non-BRS Services. "To the extent that PwC supplemented the BRS Services to the Debtors with financial advisory services provided by professionals in other practice areas, like tax and accounting, PwC will continue to provide the non-BRS Services to the Debtors and the services remain unaffected by this Application," Mr. Rosen explains. By this application, the Debtors seek the Court's authority to employ FTI pursuant to Section 327(a) of the Bankruptcy Code, nunc pro tunc to August 31, 2002, to serve as its financial advisors and continue to provide the BRS Services previously provided to the Debtors by PwC. Mr. Rosen emphasizes that the scope, terms and conditions of FTI's proposed retention and employment are identical to those set forth in the Original PwC Application and approved in the PwC Retention Order. Mr. Rosen notes that the BRS Practice has become intimately familiar with the Debtors' businesses and affairs and the many financial and other issues that may arise in the context of these Chapter 11 cases. A consequence of the Closing is that the BRS professionals with this knowledge and familiarity are now employed by FTI. The Debtors believe FTI is both well qualified and uniquely positioned to continue to provide financial restructuring support to the Debtors in an efficient and effective manner. "To lose these professionals would impact the Debtors' ability to administer expeditiously these Chapter 11 cases," Mr. Rosen says. The Debtors propose to pay FTI the customary hourly BRS Practice rates that were in place at the time of the Closing, subject to periodic adjustments and to reimburse FTI according to its customary reimbursement policies. FTI's regular hourly rates are: Partners $525 - 595 Managers/Directors 370 - 525 Associates/Senior Associates 185 - 345 Administration/Paraprofessionals 85 - 150 FTI intends to apply to the Court for allowances of compensation for financial advisory services in accordance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, corresponding local rules, orders of this Court and guidelines established by the United States Trustee and the Fee Committee appointed in these Chapter 11 cases. As successor to the BRS Practice, FTI will be responsible for filing appropriate fee applications regarding previously unbilled services provided by PwC prior to the Closing Date, and will be entitled to all payments to be made by the Debtors after the Closing Date for any outstanding receivables related to pre- Closing Date services. Furthermore, FTI assumes the responsibility for filing a single final fee application for pre-Closing Date PwC services and post-Closing Date FTI services at the conclusion of these proceedings. Since the Closing Date, FTI's access to confidential information obtained by the BRS Practice in connection with its services to the Debtors has been limited: (a) the former BRS Practice personnel working on the engagement for the Debtors have been prohibited from disclosing any confidential information relating to this case to any pre-Closing Date FTI personnel; and (b) no pre-Closing Date FTI personnel have been assigned to perform financial advisory services for the Debtors. J. Robert Medlin, FTI Consulting Inc. Senior Managing Director, informs Judge Gonzalez that the firm has conducted a review of its professional connections to these Chapter 11 cases. Mr. Medlin believes that FTI: (i) has no connection with the Debtors, their creditors or other parties-in-interest in these cases; (ii) does not hold any interest adverse to the Debtors' estates; and (iii) is a "disinterested person" as defined within Section 101(14) of the Bankruptcy Code. However, Mr. Medlin discloses that FTI has performed or is currently performing these engagements for the Debtors or their affiliates: (1) In December 1998, FTI was retained by Enron to provide database management services and evidence storage in connection with litigation concerning the explosion of a building in San Juan, Puerto Rico. FTI terminated its data management services upon the filing of these Chapter 11 proceedings. It has continued to store physical evidence for a nominal monthly fee, which is paid by a non-Debtor affiliate of Enron. FTI is currently owed approximately $1,100 in unpaid fees incurred in connection with this engagement. If the Application is granted, FTI agrees to waive any claim that it may have against the Debtors relating to these unpaid fees. The court presiding over the litigation has recently given FTI permission to dispose of the evidence that it has been storing. Once that disposal is completed, FTI's services on the engagement are expected to cease; and (2) In December 2001, the Committee of the Enron Corporation Savings Plan and the Enron Corporation Employee Stock Owners engaged FTI to provide the Plan with financial advice related to the Plan's ownership of Enron stock and the value of that stock. FTI's work was limited to viewing publicly available financial information, and it ultimately did not provide any financial advice to the Plan. On February 13, 2002, the Plan's Committee directed FTI to cease its work for the Plan. FTI is currently owed approximately $45,000 in unpaid fees incurred in connection with this engagement. If the Application is granted, FTI agrees to waive any claim that it may have against the Debtors relating to these unpaid fees. If the Application is granted, FTI agrees to waive any and all claims that it may have against the Debtors relating to fees for prepetition services. Prior to the Closing Date, FTI performed certain services for creditors relating to these Chapter 11 proceedings. In January 2002, FTI was engaged by JPMorgan Chase and Citibank, N.A. to provide financial advisory services with respect to their Debtor-in-Possession financing arrangements with Enron. FTI's services were substantially completed by March 2002, FTI resigned from the engagement in July 2002, and all fees incurred in connection with the engagement have been paid. No FTI professional who has worked on this engagement will have any role in the performance of any services in connection with FTI's role as financial advisors to the Debtors, and FTI has taken steps, including the implementation of an ethical wall, to ensure the separation of the professionals working on and information obtained in connection with each engagement. FTI has provided and likely will continue to provide services unrelated to the Debtors' cases for various entities. FTI's assistance to these parties has been related to providing various financial restructuring, litigation support and/or engineering and scientific investigation consulting services. (Enron Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3) are trading at about 14 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. EOTT: U.S. Trustee Balks at Appointing Environmental Committee -------------------------------------------------------------- The United States Trustee for Region 5, Richard W. Simmons, objects to the creation of a Committee of Unsecured Environmental Claimants, in the chapter 11 cases involving EOTT Energy Partners, L.P., and debtor-affiliates, and asserts that: (a) he did not abuse his discretion in deciding not to appoint a separate committee of unsecured environmental claimants -- the Second Committee; (b) there is no need for a Second Committee as the TransAmerican Plan of Reorganization contemplates, or will provide, an efficient and cost-effective process to achieve the stated purpose of the proposed Second Committee according to the testimony of EOTT in open court; (c) the Court should exercise its discretion to deny the motion because the Movants have not and cannot show that the delay and expense associated with an additional committee will yield benefits offsetting the depletion of estate assets and delay in completion of this case. In fact, the delay and expense of a Second Committee are more likely to cause harm to the estate than provide any benefit; (d) he has already considered and denied this same request from the Movants' attorney; (e) the motion is untimely because the Debtors have filed their Disclosure Statement and Plan of Reorganization. The Disclosure Statement was approved after a hearing during which all of the Movants' arguments were heard for the formation of a Second Committee. The Plan is set for confirmation on January 30, 2003; and (f) the motion is an unjustified attempt to shift the burden of the Movants' professional fees onto the estate. Barbara C. Jue, Esq., in Corpus Christi, Texas, relates that on November 22, 2001, the U.S. Trustee may have represented in open Court that a Second Committee would be formed. However, after the hearing, the U.S. Trustee consulted with the attorney for the Official Committee of Unsecured Creditors and the Debtors' counsel prior to making a decision to form a Second Committee. After lengthy discussion, consideration and consultation, the U.S. Trustee decided that it would be in the Debtors and creditors' best interest to have only one committee. The Creditors' Committee convinced the U.S. Trustee that additional members from the Movants' group would be welcome to join them to fairly represent the Movants' members. The U.S. Trustee accordingly extended the invitation to the Movants to join the existing Creditors' Committee in open Court and privately. However, the Movants declined the invitation to join the existing creditors' committee. The existing Committee's counsel consulted with the Movants to convince them of the fair representation they would have on the Committee. Section 1102 of the Bankruptcy Code, Ms. Jue notes, directs and authorizes the U.S. Trustee to appoint an official unsecured creditor committee and provides the U.S. Trustee with discretion to appoint additional committees. This Court has the power to review the U.S. Trustee's actions taken pursuant to this same section of the Code to decide whether or not the U.S. Trustee abused his discretion in his decision not to appoint a Second Committee. Ms. Jue contends that the U.S. Trustee exercised his discretion not to appoint a Second Committee. The existing Committee is representative of the interests of all unsecured claimants, including the Movants whether or not they "per se" have a representative on the Committee. The U.S. Trustee reviewed the list of the 20 largest unsecured creditors -- the bondholders and banks. To diversify the list, the U.S. Trustee contacted at least seven trade creditors to join the committee but all declined to serve. Northwestern Mutual Life Insurance Company contacted the U.S. Trustee to be permitted to join the Committee. Hence, Northwestern was added to the Committee even though the addition would result in an even number of members on the Committee. "Mr. Simmons was seeking diverse representation on the Committee and weighed that factor against the possibility of a voting deadlock within the Committee," Ms. Jue explains. The U.S. Trustee continued to encourage trade creditor participation hoping to balance the Committee with another representative but to no avail. "Mr. Simmons was not aware of any other creditors representing a diverse group whose representative could round out the Committee," Ms. Jue informs the Court. Consequently, the U.S. Trustee advised the Committee members of their duties to conform to Section 1103(c) of the Bankruptcy Code. The members were told that their obligation was to represent creditor interests as a whole and as members of the Committee, which they had fiduciary obligations. Furthermore, Ms. Jue points out that an important factor militating against appointing a separate committee is the cost factor. The Debtors' business is stable, but dependent on a speedy recovery from bankruptcy. According to the Debtors, it is essential to conclude the case as expeditiously as possible to retain its present customer base and expand on it. The formation of a Second Committee will only serve to delay the case. Thus, the U.S. Trustee asks the Court to deny the Movants' Motion. Official Committee of Unsecured Creditors The Committee understands the urgency and fragility of the Debtors' position. At the same time, the Committee understands the need to protect the interests of general unsecured creditors. The Committee has worked to balance these interests through the negotiation and formulation of the plan and disclosure statement. Through the Committee's efforts, the Disclosure Statement and the Plan were amended to provide a better treatment for general unsecured creditors. Yet, Sharon M. Beausoleil-Mayer, Esq., at Fulbright & Jaworski LLP, in Houston, Texas, notes, the Movants make a series of general allegations that the Committee is not acting for the best interests of all general unsecured creditors. The Movants alleged that the Committee has not adequately represented the different types of general unsecured creditors, especially the Movants. In the first allegation, the Movants make a statement that the majority of the Committee participated in the negotiation of the Enron Settlement but it did not provide for environmental claims. Beyond this statement, Ms. Mayer points out, the Movants have not provided any details to show how the Enron Settlement harms the general unsecured creditors as a whole or harms the Movants specifically. "The Committee recognizes that the Debtors need to divorce themselves from Enron and move forward as their own companies -- a benefit to all general unsecured creditors, including the Movants," Ms. Mayer tells Judge Schmidt. In the second allegation, the Movants point out that the Committee did not file a formal objection to the disclosure statement. Though the Committee did not file a formal written objection with the Court, Ms. Mayer reports that the Committee has voiced its objections directly to the Debtors, working nonstop in its analysis of these documents, continuously negotiating with the Debtors on the adequacy of information included in the Disclosure Statement. The Committee made, and the Debtors incorporated, language changes to improve the clarity of various sections and provide additional information. Overall, the Committee demanded more detailed information be included in the final form of the Disclosure Statement for the benefit of all general unsecured creditors. The third allegation focuses on the Debtors' ability to object to claims, which will prevent the votes of certain claimholders from being counted in the ballot tabulation for the plan vote. The Movants point out that since they have unliquidated claims, the Debtors may file objections to these claims, preventing them from voting on the Plan. Ms. Mayer emphasizes that the Debtors always have the power to object to all claims, including any general unsecured claims. Thus, this situation is not unique to the Movants. In addition, Section 502 of the Bankruptcy Code allows a Bankruptcy Court to estimate claims for voting purposes. In the Movants' fourth allegation, they attempt to show that their interests are adverse to the interests of the creditors serving on the Committee, which is securing future payment and equity ownership. In addition, the Movants want the Debtors to fulfill their obligations and make payments now. Ms. Mayer notes that the individual members of the Committee, like the Movants, would prefer that the Debtors pay all general unsecured creditors immediately. However, Ms. Mayer tells the Court, the Committee has been advised by financial experts that the Debtors can reasonably be expected to deliver to the general unsecured creditors only $104,000,000 in notes and 11,947,820 new LLC units to be shared pro rata for general unsecured claims in Class 5. The Committee has balanced the interests of the general unsecured claims and the Debtors' survival. "The principal role of a committee is to participate in the negotiation and formation of the Plan and Disclosure Statement," Ms. Mayer says. In these cases, this Committee has fulfilled that role in numerous ways. The burden is on the Movants to show how the Committee has failed to adequately represent their Claims. Ms. Mayer contends that the Movants had only made very general statements but failed to explain how the Committee has not provided a tangible benefit to the general unsecured creditors. "The Movants cannot give the Court detailed examples of where the Committee has failed in its fiduciary duties to the general unsecured creditors, including the Movants, because the Committee has fulfilled its fiduciary duties," Ms. Mayer insists. Moreover, as the Court may recall, the Movants declined the U.S. Trustee's offer to become a member of the Committee when they expressed their desire to be represented. These cases are set for confirmation. Ms. Mayer argues that to delay the cases and appoint another committee serves only to frustrate the process and to endanger the compromises reached by the parties who have stayed involved in the process. Accordingly, the Committee asks the Court to deny the Movants' motion in its entirety. (EOTT Energy Bankruptcy News, Issue No. 8; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE: Equity Committee Taps Potter Anderson as Local Counsel ------------------------------------------------------------- The Official Committee of Equity Security Holders of Exide Technologies and debtor-affiliates sought and obtained the Court's authority to retain Potter Anderson & Corroon LLP as its local counsel. Equity Committee Chairman Keith Johnson relates that the Committee voted to employ the law firm of Potter Anderson & Corroon LLP as its local counsel in this matter under a general retainer. It is the Committee's intent and commitment that Potter Anderson's functions will not be duplicative of the services performed by Reinhart Boerner Van Deuren S.C., but rather will ensure the most economic and effective means for the Equity Committee to be represented in these proceedings. The Equity Committee notes that the firm's members have considerable experience in bankruptcy matters. As local counsel, Potter Anderson will: -- attend hearings pertaining to the case, as necessary; -- review all applications and motions filed in connection with the case; -- communication with the Committee's lead counsel, as necessary; -- perform all other services for the Committee that are necessary for local counsel to perform in this case. Potter Anderson will calculate fees using its standard hourly rates, which are subject to normal adjustments from time to time. The professionals primarily responsible for the representation of the Equity Committee and their corresponding hourly rates are: Laurie Selber Silverstein $425 William A. Hazeltine 300 Ronald S. Gellert 225 Barbara J. Micun (paralegal) 125 Beth Muspratt (clerk) 50 C. Sue Atkins (clerk) 50 Nancy A. Baxter 50 The current hourly rates of Potter Anderson's partners and associates range from $160 to $525. Potter Anderson Partner Laura Selber Silverstein assures the Court that the firm has not represented the Debtors or any party-in-interest in any matter adverse to the Equity Committee. In addition, Potter Anderson does not hold or represent any interest adverse to the Equity Committee and is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. However, Ms. Silverstein admits that the Firm currently represents or in the past has represented these entities in unrelated matters: R2 Top Hat Ltd., Salomon Bros. Holdings Co. Inc., Textron Financial Corp., Toronto Dominion Bank, Edison Mission Power, Lucent Technologies, Bank of Louisiana, Firstar, Kmart Corp., Toyota Motor Corp., Union Pacific Railroad, Parts Plus, IBM Credit Corp., Bank of New York, State of Wisconsin Investment Board, Allstate Life Insurance, Bank of Montreal, Bank One NA, GE Capital CFE Inc., Salomon Smith Barney/Citibank, Reed Smith Shaw & McClay, Morrison & Foerster LLP, McKinsey & Co., Bankers Trust, Gelco Corp., General Electric Capital Corp., Heller Financial, Senstar Finance Co., Associates Leasing Inc., Enron Corp., CitiCorp, Dresdner Kleinwort Wasserstein, UBS AG, AIM, Mellon Bank, Credit Suisse First Boston, Wells Fargo, Wal- Mart Stores Inc., DaimlerChrysler AG, Qwest Communications, Citibank N.A., Chase Manhattan Bank USA N.A., Arch Chemical Inc., Bank of Scotland, Bear Stearns Investment Product, First Union National Bank, Fleet National Bank, Lehman Bros., Bank of America, Mercedez Benz, and Morgan Stanley. (Exide Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) FAO INC: Files for Chapter 11 Reorganization in Wilmington, DE -------------------------------------------------------------- FAO, Inc. (Nasdaq: FAOO), a leader in children's specialty retailing, filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the District of Delaware in Wilmington. The Company said that the filing will allow it to continue business operations without interruption while it obtains necessary approval of its financial restructuring plan. In conjunction with the filing, the Company said that it has reached an agreement with its existing bank lenders to use cash collateral which, upon Court approval, will enable FAO Inc., to fund post-petition trade and employee obligations, as well as the Company's ongoing operating needs while it begins the restructuring process. The Company stated that it intends to immediately meet with its major creditor constituencies and file a formal plan of reorganization with the bankruptcy court very soon. As part of this plan, the Company will engage an investment banker to assist it in raising equity capital within its current public company structure. "Having already made significant strides in our restructuring efforts through the decision to close 75 - 80 stores, we are now able to turn our focus toward ensuring our long-term financial health," said Jerry R. Welch, President and Chief Executive Officer. The Company stated that employees and customers should not see any difference in operations at its ongoing stores as a result of the filing. Daily operations will continue, stores will remain open, and transactions which occur in the normal course of business will go on as before. Policies regarding returns, exchanges, special orders, credit purchases and gift certificates will remain unchanged. "The Company has been in contact with many of its suppliers, and they have indicated that they will continue to support FAO, Inc., during the reorganization period. Our access to cash collateral provides adequate financial resources to purchase the goods and services we need while we begin the restructuring process," said Mr. Welch. "Due to the highly seasonal nature of toy retailing and the need to make inventory commitments and other preparations for the upcoming 2003 holiday selling season, we have established a fast-track timetable for the Chapter 11 process. We are encouraged by the support demonstrated by our various creditor constituencies going into this process and expect to emerge a stronger, well-capitalized company by the second quarter of this year. A timely successful conclusion to this process will allow the Company to position itself to take full advantage of this year's upcoming holiday selling season," Mr. Welch concluded. FAO, Inc., (formerly The Right Start, Inc.) owns a family of high quality, developmental, educational and care brands for infants, toddlers and children and is a leader in children's specialty retailing. FAO, Inc., owns and operates the renowned children's toy retailer FAO Schwarz; The Right Start, the leading specialty retailer of developmental, educational and care products for infants and toddlers; and Zany Brainy, the leading retailer of development toys and educational products for kids. FAO, Inc., assumed its current form in January 2002. The Right Start brand originated in 1985 through the creation of the Right Start Catalog. In September 2001, the Company purchased assets of Zany Brainy, Inc., which began business in 1991. In January 2002 the Company purchased the FAO Schwarz brand, which originated 141 years ago in 1862. For additional information on FAO, Inc., or its family of brands, visit the Company on line at http://www.irconnect.com/faoo/ FAO INC: Chapter 11 Case Summary & Largest Unsecured Creditors -------------------------------------------------------------- Lead Debtor: FAO, Inc. 2520 Renaissance Boulevard King of Prussia, PA 19406 fka The Right Start, Inc. Bankruptcy Case No.: 03-10119 Debtor affiliates filing separate chapter 11 petitions: Entity Case No. ------ -------- FAO Schwarz, Inc. 03-10120 ZB Company, Inc. 03-10121 Targoff-RS, LLC 03-10122 The Right Start, Inc. 03-10123 Type of Business: The debtor, along with its wholly-owned subsidiaries, is a specialty retailer of high-quality, developmental, educational and care products for infants and children and high quality toys, games, books and multimedia products for kids through age 12. Chapter 11 Petition Date: January 13, 2003 Court: District of Delaware Judge: Peter J. Walsh Debtors' Counsel: Rebecca L. Booth, Esq. Mark D. Collins, Esq. Daniel J. DeFranceschi, Esq. Richards, Layton & Finger, P.A. One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 Tel: 302-651-7700 -and- David W. Levene, Esq. Anne E. Wells, Esq. Levene, Neale, Bender, Rankin & Brill 1801 Avenue of the Stars, Suite 1120 Los Angeles, California 90067-5805 Tel: 310-229-1234 Total Assets: $257,400,000 Total Debts: $238,374,000 A. FAO Inc.'s 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Mattel Toys Trade Debt $1,140,073 Jill Wilson 333 Continental Blvd. El Segundo, CA 90245-5012 Tel: 310-252-4869 Fax: 310-252-2860 Lego Systems Trade Debt $1,128,720 Attn: Legal Dept. 555 Taylor Road PO Box 1600 Enfield, CT 6082 Tel: 860-749-2291 Fax: 860-749-0650 Applause Trade Debt $886,652 Legal dept. 6041 Variel Avenue Woodland Hills, CA 91367 Tel: 800-777-6990 Fax: 818-595-3008 Alexander Dolls Trade Debt $703,928 Legal Dept. 613 West 131st Street New York, NY 10027 Tel: 212-283-5900 Fax: 212-283-4263 Learning Curve Toys Trade Debt $676,141 Steve O'Dell 800 Veterans Parkway Bolingbrook, IL 60440 Tel: 630-633-3151 Fax: 312-981-7600 Plastwood Trade Debt $669,963 Legal dept. 2130 Adams Avenue San Leandro, CA 94577 Tel: 800-647-9989 Fax: 510-577-7816 New Roads Service Provider $655,738 Legal Dept. 3342 Melrose Avenue Roanoke, VA 24017 Tel: 540-345-7640 Fax: 732-248-1968 Gund, Inc. Trade Debt $648,658 PO Box 852 Edison, NJ 8818 Tel: 732-248-1500 Fax: 732-248-1968 Manhattan Toy Company Trade Debt $516,224 430 First Avenue North Suite 500 Minneapolis, MN 55401 Tel: 800-541-1345 Fax: 612-341-4457 Flying Colors Trade Debt 4513,662 22619 Pacific Coast Highway Suite 250 Malibu, CA 90074-6442 Tel: 310-455-6321 Fax: 310-455-6395 ARC One Stop Inc. Trade Debt $450,799 4250 Coral Ridge Drive Coral Springs, FL 33065 Tel: 800-356-2049 Fax: 954-255-4825 The Learning Company Trade Debt $443,295 Alan Rubin 60 Lambert Avenue Sparta, NJ 07871-1128 Tel: 973-726-9308 Fax: 973-726-9367 Lights, Camera & Trade Debt $425,188 Interaction PO Box 590 Westport, CT 06881 Tel: 800-284-3948 Fax: 888-441-8883 K'nex Industries, Inc. Trade Debt $414,672 2990 Bergey Road PO Box 700 Hatfield, PA 19940-5100 Tel: 215-997-7722 Fax: 215-996-4224 Britax Child Safety, Inc. Trade Debt $402,530 13501 South Ridge Drive Charlotte, NC 28273 Tel: 704-409-1700 Fax: 704-409-1710 TY, Inc. Trade Debt $393,311 280 Chestnut Street Westmont, IL 60559 Tel: 888-569-7272 Fax: 630-920-1980 Steiff North America Inc. Trade Debt $375,927 425 Paramount Drive Raynham, MA 02767 Tel: 508-828-2377 Fax: 508-828-4477 Hit Entertainment/Lyrick Trade Debt $375,459 830 S. Greenville Avenue Allen, TX 75002-3320 Tel: 800-418-2371 Fax: 972-390-6001 Infogames, Inc. Trade Debt $368,625 147 5th Avenue, 8th Floor New York, NY 10016 Tel: 212-726-6500 Fax: 212-252-8603 International Playthings Trade Debt $351,286 75 D Lackawanna Avenue Parsippany, NJ 07054 B. FAO Schwarz's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ RR Donnelley Receivables Service Provider $748,966 Mary Reilly PO Box 13654 Newark, NJ 07188 Tel: 717-293-3545 Fax: 717-293-3910 Midland Paper Service Provider $547,986 Richard Fay 135 S. LaSalle Street Dept. 1140 Chicago, IL 60674-1140 Tel: 800-253-7477 Fax: 847-777-2551 Sanrio Inc. Trade Debt $423,540 570 Eccles Avenue So. San Francisco, CA 94080 Tel: 650-952-2880 Fax: 650-872-2513 ICS Service Provider $235,332 Color By Pergament Trade Debt $179,481 Catalog Marketing Serv. Trade Debt $165,026 Classic Packaging & Paper Trade Debt $154,517 Co. Sony Entertainment Robot Trade Debt $138,520 Alschuler Grossman Stein Litigation Counsel $127,472 & Kahan LLP Larry Jennings Trade Debt $105,991 Mokrynski & Assoc. Inc. Trade Debt $97,054 Kone Inc. Service Provider $89,244 Servco Industries Service Provider $85,769 Abacus Corporation Service Provider $77,299 Radica USA Ltd. Trade Debt $70,764 Nassau Candy Trade Debt $62,530 A Wish Come True Trade Debt $55,884 Drop Ship Express Freight Carrier $47,612 Baker & Taylor Books Trade Debt $43,504 Tim Dalal Studio Service Provider $40,836 C. ZB's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Print Media Alliance, Inc. Trade Debt $1,744,681 PO Box 99686 Pittsburgh, PA 15233 Tel: 412-322-1099 Fax: 412-322-3680 Coyle Reproductions Trade Debt $998,837 14949 Firestone Blvd. LaMirada, CA 90638 Tel: 714-690-8200 Fax: 714-690-8217 Zany Brainy, Inc. Contractual $770,272 2520 Renaissance Blvd. Indemnification/ King of Prussia, PA 19406 Reimbursement Tel: 610-278-7800 Obligation Fax: 610-278-7813 Quad/Graphics (GA) Service Provider $697,975 Cindi Jungwirth 952 Badger Road PO Box 2718 Lorima, WI 53048-2718 Tel: 920-269-4700 Fax: 414-566-4655 Midland Paper Trade Debt $547,986 Richard Fay 135 S. LaSalle Street Dept. 1140 Chicago, IL 60674-1140 Tel: 800-253-7477 Fax: 847-777-2551 AEC One Stop Inc. Trade Debt $450,799 4250 Coral Ridge Drive Coral Springs, FL 33065 Tel: 800-356-2049 Fax: 954-255-4825 Sanrio, Inc. Trade Debt $423,540 570 Eccles Avenue So. San Francisco, CA 94080 Tel: 650-952-2880 Fax: 650-872-2513 Valley Media Trade Debt $346,051 PO Box 2057 1280 Santa Anita Ct. Woodland Hills, CA 95776-2057 Tel: 800-456-9660 Fax: 530-406-5205 Northeast Graphics, Inc. Trade Debt $224,534 GA Communications, Inc. Trade Debt $219,397 MBS/Multimode Trade Debt $189,926 Alschuler Grossman Stein Service Provider $127,472 & Kahan, LLP (Litigation Counsel) Carousel Center Co. LP Trade Debt $100,767 Interart Trade Debt $99,372 RR Donnelley Receivables Service Provider $98,983 Inc. Amtech Lighting Services Service Provider $66,736 Baker & Taylor Video Trade Debt $54,075 Staples Business Advantage Trade Debt $51,570 Belz Park Place, LP Lease Obligation $50,830 ADT Security Services Service Provider $50,253 FEDERAL-MOGUL: Committees Ask Court to End Exclusive Periods ------------------------------------------------------------ The Official Committee of Unsecured Creditors and the Official Committee of Asbestos Claimants Committee urge the Court to terminate the Federal-Mogul Debtors' exclusive right to file a reorganization plan and let the Debtors' creditors propose a plan to carve-up the value of Federal-Mogul's estates. The Committees want the Debtors' Exclusive Periods terminated because: (i) the Debtors and the Committees have reached an impasse in negotiations; (ii) continuation of the Exclusive Periods serves no purpose but to impermissibly entrench Debtors' management; and (iii) the Committees are prepared to promptly file their own plan and disclosure statement. Currently, through March 3, 2003, only the Debtors have the right to file a reorganization plan. Charlene D. Davis, Esq., at The Bayard Firm, in Wilmington, Delaware, reports that the Creditors' Committee and the Asbestos Committee reached an agreement in principle about the terms of a proposed reorganization plan for Federal-Mogul in March 2002 -- just five months into these cases. The Committees presented their proposed plan to the Debtors in April 2002. Since that time, the Committees have engaged in negotiations with the Debtors in the hope of reaching a consensual plan. That hasn't happened. The Committees' Plan Proposal The crux of the proposed plan is that noteholders and asbestos claimants will convert their billions of dollars of claims against the Debtors into equity in the reorganized debtors -- a classic chapter 11 deleveraging of the balance sheet. Specifically, 49.9% of the common stock will be distributed to the holders of allowed noteholder claims and 50.1% will be distributed to a trust established pursuant to Section 524(g) of the Bankruptcy Code for the benefit of personal injury asbestos claimants and to shield the reorganized company from future asbestos-related liability. The trust would also receive certain proceeds of insurance policies available to cover asbestos liabilities, and would assume liability for all personal injury asbestos claims against the Debtors. The proposed plan further provides that: (a) the Debtors' secured bank debt, if valid and fully secured, will receive new secured notes in the full amount of its indebtedness on commercially reasonable terms; (b) trade creditors receive a distribution in cash or debt securities in an amount generally equal to the value of the distribution to noteholders; and (c) the prepetition equity interests in Federal-Mogul Corporation will be canceled. The Committees believe that the proposed plan is in the best interests of these estates. The proposed plan materially deleverages the Debtor's balance sheet by eliminating $2,500,000,000 of noteholder debt, a portion of the trade debt, and all of the Debtors' asbestos liabilities. Their plan also enables the Debtors to promptly exit these costly bankruptcy proceedings by this summer -- less than 20 months after the commencement of these cases, a relatively short period of time for large asbestos cases. Where the Parties Disagree All along, however, the Committees and the Debtors have disagreed on key parts of the plan, including: 1. the scope of releases to be given to insiders; 2. the treatment of current Federal-Mogul shareholders; 3. the treatment of the prepetition bank debt; and 4. the Reorganized Debtors' debt capacity. According to Ms. Davis, the primary disagreement that prevents the filing of a consensual plan relates to the debt capacity of the Reorganized Debtors. "The Debtors contend that they do not have sufficient debt capacity to pass through the prepetition bank debt in full, if necessary, as contemplated by the proposed plan and hence that the proposed plan is not feasible," Ms. Davis says. On numerous occasions, the Debtors have also insisted that some of the common stock of the Reorganized Debtors go to the banks on account of any deficiency claim held by the banks, which would violate the crux of the agreement among the commercial and asbestos constituencies -- that is, the 50.1%/49.9% split). "The Committees disagree with the Debtors as to the feasibility of the proposed plan," Ms. Davis tells Judge Newsome. "The Committees also question the sincerity of the Debtors' position." The Committees fear that the Debtors' position on the Reorganized Debtors' debt capacity is not in good faith, but instead is a calculated maneuver to either entrench the management, avoid a shift in board control to noteholders and asbestos claimants, and maintain leverage in seeking releases or other benefits for insiders. Ms. Davis points out that all of the stakeholders in these cases and their respective financial advisors believe that the Reorganized Debtors will have sufficient debt capacity to carry the secured bank debt, if necessary. The banks also believe that there is adequate debt capacity to pass the prepetition bank debt through in full. "It is only management, which has no financial stake in these cases, that believes that the Reorganized Debtors will not have sufficient debt capacity to pass through the secured debt if necessary," Ms. Davis reports. Notwithstanding numerous meetings and discussions regarding the Reorganized Debtors' debt capacity and other issues, Ms. Davis maintains that the Committees and the Debtors have been at an impasse on this issue since April 2002 -- almost nine months -- and thus unable to reach a consensual plan. Ms. Davis directs Judge Newsome's attention to In re Crescent Beach Inn, Inc., 22 B.R. 155, 160-161 (Bankr. D. Me. 1982), where that debtor's original 120-day exclusivity period was shortened due to acrimony between the debtor and its creditors. The Crescent Beach Court stated: "It appears that the major obstacle in the path to a successful reorganization in this case is the principal parties' acrimonious relations. They continue their bitter feuding not only at their own expense, but at the expense of all creditors of the debtor. Shortening the debtor's exclusive period for filing a plan will permit any party in interest, including parties with perhaps a more objective view of the debtor's circumstances, to file a plan." In In re United Press Int'l., Inc., 60 B.R. 265, 271 n. 12 (Bankr. D.D.C. 1986), the Court also permitted entities "that have the most at stake in [a] case and have shown themselves to be responsible parties" to file a plan during the exclusive period. The United Press Court found that: "[the] prospect that continued conflict between management and stockholder would lead to a stalemate in which no plan at all could feasibly be filed in the name of the Debtor." Both Committees represent the overwhelming majority of stakeholders in these cases. The Creditors' Committee represents over $2,500,000,000 of bond and trade debt. The Asbestos Committee and Eric Green, the Future Asbestos Claimants Representative, represent present and future asbestos claimants asserting claims exceeding $2,500,000,000. "These cases have been pending for nearly fifteen months. The costs of administration, most particularly professional fees, have run into the multi-millions of dollars. Remaining in bankruptcy proceedings does not help the Debtors businesses," Ms. Davis reminds the Court. Ms. Davis says the Committees are prepared to file their plan. The Committee's motion will be heard by the Bankruptcy Court on January 29, 2003. Federal-Mogul says that it "continues to be actively engaged in discussions with all stakeholders in its reorganization proceedings in its efforts to achieve a consensual plan of reorganization." (Federal-Mogul Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) Federal-Mogul Corp.'s 8.80% bonds due 2007 (FMO07USR1) are trading at about 18 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=FMO07USR1 for real-time bond pricing. FORD MOTOR COMPANY: Says On Target to Achieve Bottom-Line Goal -------------------------------------------------------------- Twelve months into its five-year Revitalization Plan, Ford Motor Company (NYSE: F) is on target to achieve its bottom-line goal: a $7 billion annual pre-tax profit by mid-decade. The company provided a Revitalization Plan update and released its 2003 financial milestones in Dearborn during a meeting with securities analysts. "We made a great deal of progress in 2002 toward a long-term Revitalization Plan that we fully believe is the right strategy for getting the company back on track," said Chairman and CEO Bill Ford. "This is our Centennial year, and while we certainly will be celebrating our past, we will be focused on the future. Meeting our 2003 financial goals will be the first step." The 2003 milestones are: Planning Assumptions Milestone -------------------- --------- * Industry Volume - U.S. 16.5 million units - Europe 17.0 million units * Net Pricing - U.S. Zero - Europe 1% Physicals Milestone * Quality Improve in all regions * Market Share Improve in all regions * Automotive Cost Performance Improve by at least $500 million (at constant volume and mix) * Capital Spending $8 billion Financial Results Milestone Automotive * Income Before Taxes Breakeven * Operating Cash Flow (#) Breakeven Ford Credit Improve cash contribution to Parent Maintain managed leverage in low end of 13-14 to 1 range (##) (#) Consistent with operating cash flow calculation in MD&A of our Third Quarter 2002 10-Q (before tax refunds) (##) Consistent with definition contained in MD&A of Ford Credit's 2001 10-K. Assuming achievement of these milestones, the company expects to have fully diluted earnings per share of 70 cents in 2003. "These milestones demonstrate that Ford intends to deliver another year of strong and measurable results that support the plan we outlined one year ago," said Vice Chairman and Chief Financial Officer Allan Gilmour. Gilmour also provided an update on the company's pension funding status. For 2003, the pension fund long-term annual return assumption has been reduced to 8.75 percent from 9.5 percent for the U.S., Canada and Britain, and, in the U.S., the discount rate has been reduced to 6.75 percent at year-end 2002 from 7.25 percent at year-end 2001. On January 6, 2003, Ford contributed $500 million of cash to its U.S. pension fund and intends to make another $500 million contribution in the first half of the year, depending on the determination of the tax treatment of the additional contribution. The additional contribution was originally scheduled for 2004. Ford Motor Company, headquartered in Dearborn, Michigan, is the world's second-largest automaker, with approximately 335,000 employees in 200 markets on six continents. Its automotive brands include Aston Martin, Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. Its automotive-related services include Ford Credit, Quality Care and Hertz. Ford Motor Company will officially observe its 100th anniversary on June 16, 2003. Ford Motor Company's 6.625% bonds due 2028 are currently trading at about 74 cents-on-the-dollar. FREESTAR: vFinance, et al., File Involuntary Chapter 7 Petition --------------------------------------------------------------- FreeStar Technologies, Inc. (OTCBB:FSTI), a company providing one of the world's first live, operational debit and ATM solutions with PIN-authenticated payment solution on the Internet, PaySafeNow, and a leading Northern European Processing subsidiary, Rahaxi Processing Oy, has been notified that a Chapter 7 Involuntary Bankruptcy Petition has been filed against the Company. Paul Egan, President and Chief Executive Officer of FreeStar, stated: "There is clearly a connection between this petition, filed in the Southern District of New York [Thurs]day afternoon by Larry Ivan Glick on behalf of vFinance, Inc., David Stefansky, Richard Rosenblum, Marc Siegel, Boat Basin Investors LLC, and Papell Holdings Ltd., and the short selling activities of vFinance and affiliates during the month of December 2002. We dismiss the petition as a frivolous and transparent attempt to mitigate the financial losses of the aforementioned individuals' illicit short selling activities. FreeStar Technologies is solvent and will therefore defend the petition vigorously." Continuing, Egan added: "This is a bad faith filing, pure and simple; vFinance has possession of collateral underpinning their claim, thereby rendering the debt secure. We will continue to resist Messrs. Stefansky, Rosenblum and Siegel's increasingly desperate attempts to circumvent Rule 144 provisions. FreeStar Technologies has funding commitments exceeding the claims in question and will seek substantial punitive and consequential damages pursuant to the Bankruptcy Code." With Corporate headquarters in Santo Domingo, Dominican Republic, and offices in Dublin, Ireland, and Helsinki, Finland, FreeStar Technologies is focused on exploiting a first-to-market advantage for enabling ATM and debit card transactions on the Internet. FreeStar Technologies' Enhanced Transactional Secure Software is a proprietary software package that empowers consumers to consummate secure e-commerce transactions on the Internet using credit, debit, ATM (with PIN) or smart cards. It sends an authorization number to the e-commerce merchant, rather than the consumer's credit card information, to provide a maximum level of security. FreeStar entered into an agreement to acquire leading Northern European processing, Rahaxi Processing Oy, in September 2002. For more information, please visit the Company's Web sites at http://www.freestartech.com http://www.rahaxi.comand http://www.epaylatina.com GENTEK INC: Court Approves Lazard Freres as Financial Advisor ------------------------------------------------------------- Judge Walrath permits GenTek Inc., and its debtor-affiliates to employ Lazard Freres & Co. LLC in accordance with the terms of the engagement letter. However, Judge Walrath makes it clear that Lazard's fees will be subject to the review for reasonableness. Judge Walrath also emphasizes that only the U.S. Trustee will have the right to object to the Debtors' indemnification of Lazard, if during these cases, the U.S. Court of Appeals for the Third Circuit issues a ruling with respect to the appeal from the decisions of the U.S. District Court for the District of Delaware with respect to the indemnification right in In re United Artists Theatre Co. et. al. The U.S. Trustee must file its objection, if any, within 60 days after the date the Court of Appeals issues its ruling. * * * The Debtors expect Lazard to: (i) review and analyze their businesses, operations and financial projections; (ii) evaluate their potential debt capacity in light of its projected cash flows; (iii) assist in the determination of an appropriate capital structure; (iv) determine a range of values on a going concern basis; (v) advise them on tactics and strategies for negotiating with the stakeholders; (vi) render financial advice and participate in meetings or negotiations with the stakeholders and rating agencies or other appropriate parties in connection with any restructuring, modification or refinancing of the Debtors' existing obligations; (vii) advise them on the timing, nature, and terms of new securities, other consideration or other inducements to be offered pursuant to a "Restructuring"; (viii) advise and assist them in evaluating potential capital markets transactions of public or private debt or equity offerings, evaluating and contacting potential sources of capital as they may designate, and assist in negotiating that transaction; (ix) assist them in preparing documentation within Lazard's area of expertise in connection with a Restructuring of the existing obligations; (x) assist them in identifying and evaluating candidates for a potential merger or the sale of all or a portion of their assets, equity, or other interests, advise them in connection with negotiations and aid in the consummation of a Business Combination; (xi) advise and attend meetings of the Debtors' Board of Directors; and (xii) provide them with other general restructuring advice. As compensation, Lazard will charge the Debtors: -- A $200,000 monthly fee, payable on the 19th day of the month and on the same day of each month after that until the earlier of the consummation of the Restructuring or the termination of Lazard's engagement. All monthly fees, except those in respect of the first five months of the engagement, will be credited against any restructuring or Business Combination fees; -- A fee equal to $6,000,000 payable upon the consummation of a Restructuring; -- A Business Combination fee: (a) If, whether in connection with the consummation of a Restructuring or otherwise, the Debtors consummate a Business Combination incorporating all or substantially all of their assets or the majority of the equity interests of the Debtors, Lazard will be paid a fee based on the aggregate consideration of the transaction. The total fee is calculated by multiplying the Aggregate Consideration by the applicable fee percentage. Lazard's Fee Schedule Aggregate Consideration Involved in Transaction Amount Percent of (Millions) (Thousands) Transaction ---------- ----------- ----------- $2,000 up $9,000 up 0.450% 1,000 6,000 0.600 900 5,625 0.625 800 5,200 0.650 700 4,900 0.700 600 4,500 0.750 500 4,000 0.800 400 3,600 0.900 300 3,000 1.000 200 2,400 1.200 100 1,500 1.500 50 1,000 2.000 or less or lower Aggregate Consideration means: (i) the total amount of cash and the fair market value on the date of payment of all of the property paid or payable, including amounts paid into escrow in connection with the Business Combination or any related transaction; plus (ii) the principal amount of all indebtedness far borrowed money of the Company and any subsidiary or, in case of the sale of assets, all indebtedness for borrowed money as set forth in the most recent consolidated balance sheet assumed by the third party. In the event that Lazard is entitled to receive both the Restructuring Transaction Fee and a Business Combination Fee, the lower of the two fees will be fully credited against the higher of the two fees; (b) In the event that the Debtors consummate any Business Combination relating to certain of the Debtors' business lines, divisions or operating groups, the Debtors will pay Lazard a Business Combination Fee in cash based on the Aggregate Consideration of the transaction. The Combination Fee in this case, however, must not less than $500,000. Any fee payable will be fully credited against any Restructuring Fees or Business Combination Fees associated with the sale of substantially all of the Debtors' assets; and (c) Any Business Combination Fee payable will be paid upon closing of the applicable Business Combination. More than one fee may be payable; and -- Lazard's total fee, however, will not, in any event be greater than $7,000,000. In addition to any fees that may be payable to Lazard and, regardless of whether any transaction or Restructuring occurs, the Debtors will promptly reimburse Lazard for all: (a) reasonable out-of-pocket expenses; and (b) other reasonable fees and expenses, including expenses of outside counsel, if any. (GenTek Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) GF FUNDING: Fitch Plucks CCC Class E Note Rating from Watch Neg. ---------------------------------------------------------------- Fitch Ratings completed a review of a series of equipment lease transactions whose ratings have been on Rating Watch Negative. Based on the review, it was determined that the tranches below are performing in line with their current ratings. As a result, Fitch removes the following securities from Rating Watch Negative: GF Funding Corp, VIII --Class D notes 'BBB-'; --Class E notes 'CCC'. GREAT NORTHERN: Case Summary & 20 Largest Unsecured Creditors ------------------------------------------------------------- Debtor: Great Northern Paper, Inc. Millinocket Mill One Katahdin Avenue Millinocket, Maine 04462-1398 Bankruptcy Case No.: 03-10048 Type of Business: Paper Mills Chapter 11 Petition Date: January 9, 2003 Court: District of Maine (Bangor) Judge: Louis H. Kornreich Debtors' Counsel: Alex M. Rodolakis, Esq. Harold B. Murphy, Esq. Hanify & King, P.C. One Beacon Street 21st Floor Boston, MA 02108 Tel: (617) 423-0400 Fax : (617) 556-8985 -and- David W. Bertoni, Esq. Martin I. Eisenstein, Esq. Brann & Isaacson 184 Main Street PO Box 3070 Lewiston, ME 04243 Tel: 786-3566 Estimated Assets: More than $100 Million Estimated Debts: More than $100 Million Debtor's 20 Largest Unsecured Creditors: Entity Claim Amount ------ ------------ Metso Paper Company $3,738,000 2900 Courtyard Drive Norcross, GA 30071 Tel: 770-246-7232 Specialty Minerals $3,385,000 PO Box 951446 Dallas, TX 75228 Tel: 212-878-1857 Ondeo Nalco $1,472,000 PO Box 640863 Pittsburgh, PA 15219 Tel: 630-305-1650 Norfolk Southern $1,207,620 735 W. 7th Street #300 Cincinnatti, OH 45203 Tel: 404-529-2129 FCR Recycling $756,000 PO Box 10501 Albany, NY 12203 BPR Benivel $684,000 Jacques Bedard 4655 Wilfrid Hamel Quebec, Canada Tel: 418-871-8151 General Electric Power $555,000 PO Box 281962 Atlanta, GA 30306 Attn: Ingrid Mills General Electric Canada PO Box 145457 Cincinnatti, OH 45271 Tel: 905-858-6482 Bangor and Aristook Railroad $553,000 Dick Rushmore 15 Iron Road Hermon, ME 04401 Tel: 207-848-4222 Richard Carrier Trucking Int'l. $511,000 Richard Carrier PO Box 718 Industrial Park Skowhegan, ME 04976 Tel: 207-474-6293 H.C. Haynes $510,000 Herb Haynes PO Box 96 Winn., ME 04495 Tel: 207-736-3412 H.E. Sargent $407,000 Brent Hartley 101 Bennoch Road PO Box 435 Stillwater, ME 04489 Tel: 207-827-4435 Weavexx $378,000 Jack Prevost Dept. 10543 Palatine, IL 60074 Tel: 919-556-2074 Central Maine Transport $375,000 Roly PO Box 753 Bangor, ME 04401 Tel: 207-942-2220 Voith Dryer $342,000 PO Box 751307 Charlotte, NC 28217 Tel: 800-551-8399 W.T. Gardner $336,000 Bill Gardner PO Box 189 Lincoln, ME 04457 Tel: 207-794-2303 Albany Mount Vemon $325,000 Angela Blount PO Box 75158 Charlotte, NC 28217 Tel: 864-527-1653 Sonoco Products $318,000 George Goudelock PO Box 91218 Chicago, IL 60607 Tel: 843-383-7459 Nationwide Magazine & Book Recycling Division $295,000 PO Box 170427 Irving, TX 75062 Tel: 800-777-9088 Asten Johnson $396,000 Dave McCann PO Box 751985 Charlotte, NC 28217 Tel: 843-202-6306 PSP Wood Recovery $242,000 HECTOR FUNDING: Fitch Junks Class A Floating-Rate Notes Ratings --------------------------------------------------------------- Fitch Ratings downgraded the following classes of notes issued by Hector Funding Ltd., and Hector Funding II Ltd., both partially funded synthetic collateralized debt obligations: Hector Funding Ltd. series 1 --$50,000,000 class A floating-rate notes to 'CC' from 'AA'. Hector Funding II Ltd. series 1 --EUR50,000,000 class A floating-rate notes to 'CC' from 'AA'. Both classes have also been removed from Rating Watch Negative. The downgrades reflect the highly levered nature of the transactions and can be directly attributed to the deterioration in the credit quality of their respective reference pools. Both transactions have exposure to recently downgraded credits that were material in Fitch's analysis. In the case of Hector Funding Ltd., these credits include, but are not limited to, senior class(es) of Corvus Investments Ltd., Dorset CDO Ltd., Nerva Ltd., Savannah II CDO Ltd., Taunton CDO Ltd., and Tullas CDO Ltd.. Hector Funding II Ltd.'s recently downgraded reference obligations include, but are not limited to, senior class(es) of Corvus Investments Ltd., Dorset CDO Ltd., MARV I Ltd., MARV II Ltd., Savannah II CDO Ltd., Taunton CDO Ltd., and Tullas CDO Ltd.. The class A notes of both Hector Funding Ltd. and Hector Funding II Ltd. represent the first loss position of their respective reference portfolios. Therefore, the probability of default on the class A notes of both Hector Funding Ltd. and Hector Funding II Ltd. is equivalent to the probability of default for any one of the credits in their respective reference pools. This probability is equal to the sum of the probability of default for each of the credits in their respective reference pools, less the joint probability of default (the correlation of the credits in their respective reference pools). HUGHES ELECTRONICS: Will Host Q4 Earnings Conf. Call Tomorrow ------------------------------------------------------------- Hughes Electronics Corporation will host an Internet webcast and analyst conference call with the release of its fourth-quarter 2002 financial results and 2003 guidance on Wednesday, January 15. When: 11 a.m. PT/ 2 p.m. ET Wednesday, Jan. 15, 2003 Dial-in: (913) 981-5517 Confirmation code: 797276 Webcast: http://www.hughes.com Host: Michael Gaines, HUGHES corporate vice president and chief financial officer. Please call in 7 to 12 minutes prior to start time. Please access the web site at least 15 minutes prior to start time in order to download and install any necessary software. A replay of this conference call will be available via telephone from 4 p.m. PT Wednesday, January 15, through 9:59 p.m. PT Sunday, January 19. Telephone: (719) 457-0820 Confirmation Code: 797276 The webcast will be archived for one quarter starting at 4 p.m. PT Wednesday, January 15, at http://www.hughes.com/ir/guidance/recent_pres.xml HUGHES, a world-leading provider of digital television entertainment, broadband services, satellite-based private business networks, and global video and data broadcasting, is a unit of General Motors Corporation. The earnings of HUGHES are used to calculate the earnings attributable to the General Motors Class H common stock (NYSE: GMH). As reported in Troubled Company Reporter's December 13, 2002 edition, Standard & Poor's revised its CreditWatch implications for its 'B+' corporate credit ratings on Hughes Electronics Corp., and 81%-owned subsidiary PanAmSat Corp., to developing from negative, following Hughes' and EchoStar Communications Corp.'s termination of their merger deal. As part of a negotiated resolution, EchoStar will pay Hughes a $600 million cash breakup fee, but will not be purchasing Hughes' PanAmSat stake as originally agreed. IFCO SYSTEMS: Restructures 10.625% Senior Subordinated Notes ------------------------------------------------------------ IFCO Systems N.V., announced that the restructuring of its EUR 200 million 10.625% Senior Subordinated Notes due 2010 became effective on Dec. 31, 2002. On Dec. 31, 2002, the Company issued an aggregate of 39,090,599 new ordinary shares, each ordinary share having a nominal value of EUR 0.10, to holders of approximately 97.85% of the Company's Notes by means of a private subscription for new equity. As previously announced, the Company signed a restructuring agreement on Sept. 18, 2002 with holders of over 97% of the aggregate principal amount of the Notes. The ordinary shares issued to the participating Noteholders on Dec. 31, 2002 were admitted to the Official List of the Frankfurt Stock Exchange effective as of Jan. 10, 2003, increasing the total number of ordinary shares of the Company listed on the Frankfurt Stock Exchange to 43,483,718 ordinary shares. Pursuant to the terms of the Restructuring Agreement, the Noteholders participating in the private subscription surrendered their Notes to the Company in exchange for the newly issued ordinary shares, and the surrendered Notes were cancelled effective Dec. 31, 2002. The exchange of approximately 97.85% of the Company's Notes on Dec. 31, 2002 for ordinary shares in the private subscription results in a reduction of the Company's total debt, including accrued interest, by US$ 219.1 million (from US$ 341.7 million to US$ 122.6 million, as of Sept. 30, 2002) and a reduction of the Company's interest expenses by approximately EUR 20.8 million per year. This also results in an increase of the Company's equity as of Sept. 30, 2002 by US$ 219.1 million (from US$ (26.2) million to US$ 192.9 million). Additionally, effective as of Dec. 31, 2002, the Company entered into the Third Amended and Restated Credit Agreement (the "Restructured Senior Credit Facility") with its senior lenders. The Company has various post-closing obligations regarding collateral and other ancillary matters in connection with the Restructured Senior Credit Facility which it must complete by Feb. 15, 2003. * * * As reported in Troubled Company Reporter's October 30, 2002 edition, Standard & Poor's withdrew its double-'C' bank loan rating on IFCO Systems N.V.'s $178 million secured bank credit facility, as the company is currently in the process of restructuring the facility, which will likely result in impairment to current holders of the facility. At the same time Standard & Poor's withdrew its corporate credit and subordinated debt ratings on the company, which had been lowered to 'D' on March 15, 2002, after IFCO failed to make its interest payment on its 10.625% senior subordinated notes due 2010. INFINITE GROUP: Fails to Comply with Nasdaq Listing Guidelines -------------------------------------------------------------- Infinite Group, Inc., (NASDAQ: IMCI) received a Nasdaq Staff Determination on January 8, 2003 indicating that the Company has failed to comply with the requirement to hold an annual meeting of shareholders and to solicit proxies, a requirement for continued listing set forth in Marketplace Rules 4350(e) and 4350(g). Accordingly the Staff has determined to delist the Company's common stock from the Nasdaq Stock Market effective January 16, 2003. The Company intends to appeal the Nasdaq Staff Determination pursuant to the procedures set forth in the Nasdaq Marketplace Rule 4800 Series. The Company's hearing request will stay the delisting of the Company's Common Stock pending the hearing and the Panel's decision. There can be no assurance that the Panel will grant the Company's request for continued listing. Infinite Group's September 30, 2002 balance sheet shows that total current liabilities eclipsed total current assets by about $2 million. INSILCO TECH: Turns to FTI Consulting for Bankruptcy Advice ----------------------------------------------------------- Insilco Technologies, Inc., and its debtor-affiliates want to hire FTI Consulting, Inc., as their Bankruptcy Advisors in the company's on-going chapter 11 cases. The Debtors tell the U.S. Bankruptcy Court for the District of Delaware that they need FTI to provide: a) assistance in the preparation of financial related disclosures required by the Court, including the Schedules of Assets and Liabilities, the Statement of Financial Affairs and Monthly Operating Reports; b) assistance in the preparation of financial information for distribution to creditors and other, including cash flow projections and budgets, cash receipts and disbursement analysis, analysis of various asset and liability accounts, and analysis of proposed transaction for which Court approval is sought; c) attendance at meeting and assistance in discussions with potential investors, banks and other secured lenders, the Creditors' Committee appointed in these chapter 11 cases, the United States Trustee for the District of Delaware, other parties in interest and professionals hired by the same, as requested; d) analysis of creditor claims by type, entity and individual claim, including assistance with development of a database to track such claims; e) assistance in the evaluation and analysis of avoidance actions, including fraudulent conveyances and preferential transfers; and f) render such other general business consulting or such other assistance as the Debtors' management or counsel may deem necessary that are consistent with the role of a bankruptcy advisor and not duplicative of services provided by other professionals in these proceedings. The customary hourly rates charged by FTI personnel anticipated to be assigned to this case are: Senior Managing Director $550 to $595 Directors/Managing Directors $370 to $525 Associates/Consultants $174 to $325 Administration/Paraprofessionals $ 85 to $140 Insilco Technologies, Inc., a leading global manufacturer and developer of highly specialized electronic interconnection components and systems, serving the telecommunications, computer networking, electronics, automotive and medical markets, filed for chapter 11 petition on December 16, 2002. Pauline K. Morgan, Esq., Sharon M. Zieg, Esq., Maureen D. Luke, Esq., at Young, Conaway, Stargatt & Taylor and Constance A. Fratianni, Esq., Scott C. Shelley, Esq., at Shearman & Sterling, represent the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $144,263,000 in total assets and $611,329,000 in total debts. INSURANCE CO. OF THE WEST: S&P Downgrades Ratings to BBpi --------------------------------------------------------- Standard & Poor's Ratings Services lowered to 'BBpi' from 'BBBpi' its counterparty credit and financial strength ratings on Insurance Co. of the West (83.5%) and its qualifying inter- affiliated pool members, The Explorer Insurance Co. (15.0%) and Independence Casualty & Surety Co. (1.5%). "The rating action is based on a decline in capitalization and surplus and poor operating performance following several years of adverse reserve development," explained credit analyst Alan Koerber. Headquartered in San Diego, California, the company writes mainly workers' compensation and private passenger auto. Business in the company's major states of operations -- California, Texas, Colorado, and Nevada -- constitutes more than 75% of its total revenue and its products are distributed primarily through independent agents. Western Insurance Holdings, Inc., owns Insurance Co. of the West which in turn directly owns The Explorer Insurance Co., and Independence Casualty & Surety Co. ICW group is licensed in 42 states and is a large insurance group with 2001 surplus of $162.0 million. IT GROUP: Bags Approval to Hire Kroll Zolfo as Consultants ---------------------------------------------------------- The IT Group, Inc., and its debtor-affiliates sought and obtained the Court's authority to employ Kroll Zolfo Cooper LLC as their bankruptcy consultants and special financial advisors, nunc pro tunc to September 6, 2002. Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, tells Judge Walrath that the Debtors' original financial advisors are now a first-tier subsidiary of Kroll Inc., a publicly traded Delaware Corporation. On September 5, 2002, the members of Zolfo Cooper transferred all their membership interests in the firm to Kroll. On the same date, 100% of the issued and outstanding shares in Zolfo Cooper's affiliates -- Zolfo Cooper Advisors, Inc.; Zolfo Cooper Management Advisors, Inc. and Zolfo Cooper Services, Inc. -- were transferred to Zolfo Cooper Holdings, Inc. In turn, 100% of Zolfo Cooper Holdings' common stock was transferred to Kroll. Mr. Galardi further relates that, since November 8, 2002, Zolfo Cooper has used the name Kroll Zolfo Cooper LLC. But in the interim, Zolfo Cooper was authorized to do business under the alternate name of Kroll Zolfo Cooper since September 6, 2002. Notwithstanding the acquisition, Mr. Galardi says, Kroll Zolfo Cooper will continue to provide the services previously provided by Zolfo Cooper. The firm will also follow the same compensation arrangements previously agreed by the Debtors and Zolfo Cooper. Salvatore LoBiondo, Jr., of Kroll Zolfo Cooper, assures Judge Walrath that his firm: (a) has no connection with the Debtors, their creditors or other parties-in-interest in these cases; (b) does not hold any interest adverse to the Debtors' estates; and (c) is a "disinterested person" as defined within Section 101(14) of the Bankruptcy Code. Kroll Acquires Zolfo Cooper On September 5, 2002, Kroll, Inc., acquired all of the equity interests of Zolfo Cooper, LLC and Zolfo Cooper Holdings, Inc. and their subsidiaries. The combined firm will be known as Kroll Zolfo Cooper. Together with Kroll's pre-existing corporate restructuring business in the U.K. and Canada, Zolfo Cooper forms Kroll's Corporate Advisory and Restructuring Group. Zolfo Cooper has been involved, on an annual basis, in the restructuring and refinancing of billions of dollars worth of debt through both out-of-court and in-court proceedings. While Zolfo Cooper has experience in representing all the various stakeholders involved in a reorganization process, the vast majority of its engagements have involved representing the debtor. To a lesser extent, Zolfo Cooper also has represented institutional creditors or equity stakeholders. Some of Zolfo Cooper's more notable engagements include Enron (Steve Cooper's there today), Federated Department Stores, Sunbeam, Laidlaw, Washington Group International, Polaroid, Morrison Knudsen, Pegasus Gold, NationsRent, and ICG Communications. In combination with Kroll's pre-existing U.K. and Canadian based restructuring group, Zolfo Cooper allows Kroll to offer a single cross-border solution for large-scale, complex, transatlantic bankruptcies and restructurings. In a regulatory filing, Kroll discloses that it paid $100,000,000 in cash and, on January 15, 2003, will issue 2,900,000 shares of its common stock to the former owners of Zolfo Cooper. In addition, Kroll will issue to them, as contingent consideration, 625,000 additional shares of common stock per year if Zolfo Cooper achieves operating profit levels exceeding: Target Annual Period Operating Profit ------------- ---------------- January 1, 2003 to December 31, 2003 $30,000,000 January 1, 2004 to December 31, 2004 $31,000,000 January 1, 2005 to December 31, 2005 $32,000,000 January 1, 2006 to December 31, 2006 $33,000,000 To the extent Zolfo Cooper's operating profit exceeds the target operating profit level for a particular year, 50% of the excess, up to $5,000,000, may be credited to the following year's operating profit to determine if a contingent consideration payment should be made for that year. Alternatively, to the extent Zolfo Cooper's operating profit exceeds the target operating profit for a particular year, 100% of the excess may be credited to the previous year's operating profit to determine if a contingent payment should have been made for that previous year. All of the contingent consideration is payable in full if Kroll undergoes a change of control or if the employment of any one of the three former principal owners of Zolfo Cooper is terminated without "cause" or for "good reason" (as these terms are defined in their employment agreements). The three former principal owners of Zolfo Cooper -- Stephen Cooper, Michael France and Leonard LoBiondo -- also agreed, in connection with the sale of their business, to a non-compete, subject to certain conditions. Kroll also granted options to purchase 600,000 shares of common stock under existing stock option plans to the professional staff of Zolfo Cooper. These options were granted at an exercise price equal to the closing price of Kroll common stock on September 5, 2002 (just over $18 per share), and will vest over four years: 10% on the first anniversary of the Closing Date; 20% on the second anniversary; 30% on the third anniversary; and 40% on the fourth anniversary. In connection with the acquisition, the three former principal owners and other senior professionals of Zolfo Cooper entered into employment agreements to serve as executives of Kroll Zolfo Cooper following the acquisition. The employment agreements expire on December 31, 2006 and include customary non-compete and non-solicitation provisions that remain in effect during the terms of the employment agreements and for one year thereafter or two years thereafter in the case of the three former principal owners, unless the employee is terminated without "cause" or for "good reason", subject to certain conditions. Kroll also agreed to pay an entity controlled by the three former principal owners of Zolfo Cooper $2,000,000 per year until December 31, 2006 for their business use of an airplane owned by that entity. To the extent the airplane is used in connection with a client engagement, Kroll may be reimbursed by the client. Kroll's disclosure documents give the first public peek into Zolfo's finances and internal operations: * Zolfo Cooper performed services for more than 50 clients in 1999, more than 90 clients in 2000, more than 80 clients in 2001; * in 1999, 2000 and 2001, 44.2%, 28.2% and 24.1%, of Zolfo Cooper's consolidated revenue was derived from five clients; * in one instance during the period from 1999 through 2001, a single client accounted for more than 10% of Zolfo Cooper's consolidated revenues for the applicable year; * for the year ending December 31, 2001, Zolfo generated $59,240,896 in revenues and showed $33,697,605 in net income; * for the six months ending June 30, 2001, Zolfo generated $31,794,249 in revenue and earned $19,453,594 in net income; and * Zolfo's auditors detected a high concentration of credit risk in the course of the 2001 audit -- Zolfo had $9,256,000 in cash on deposit at commercial banks in excess of FDIC insured amounts. (IT Group Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) KAISER ALUMINUM: Court Okays Third DIP Financing Amendment ---------------------------------------------------------- After reviewing the merits of the case, Judge Fitzgerald authorizes Kaiser Aluminum Corporation and its debtor-affiliates to enter into the Third Amendment and perform their obligations under the Third Amendment and the Postpetition Credit Agreement. The Debtors are also permitted to pay the related amendment fees to the Lenders. * * * Pursuant to the Third Amendment to the Postpetition Credit Agreement, the parties decided to modify the definition of the term "Adjusted Net Earnings from Operations," which is the basis for computing EBITDA. The "Adjusted Net Earnings from Operations" will now exclude certain charges in addition to those already listed in the Postpetition Credit Agreement. The additional exclusions involve these charges: (a) Mead Charges The Debtors could incur certain non-cash charges in connection with the possible indefinite curtailment of operations or shutdown of Mead, Washington facility. The charges include: (i) a non-cash impairment charge of up to $145,000,000 associated with the fixed assets of that facility; (ii) accounting charges for future retiree medical, pension, and other benefits of up to $65,000,000. This represents the amounts that would be paid over an extended period of time -- primarily after the expiration of the term of the Postpetition Credit Agreement; and (iii) other accounting charges -- i.e., inventory writedowns, salaried work force restructuring, etc. -- that are non-cash or have limited cash impacts during the term of the Postpetition Credit Agreement of up to $20,000,000; provided: * the aggregate amount of the charges that may be excluded will not exceed $230,000,000; and * the aggregate amount of cash charges allocated by the Debtors in good faith to the Mead Charges will not exceed $10,000,000. (b) Non-Cash LIFO Inventory Valuation Charges The Debtors recorded a $1,600,000 LIFO charge to the EBITDA in the quarter ending June 30, 2002, primarily resulting from the exit of the lid and tab stock and brazing sheet product lines at the Trentwood facility. The Debtors also recorded additional non-cash inventory charges totaling $3,000,000 in the quarter ended September 30, 2002, as a result of inventory reductions. Additional inventory reductions could occur in the future as a result of ongoing efforts to improve asset efficiency and other initiatives. But while those inventory reductions would generate positive cash flow, they would also trigger additional LIFO charges. Under the Third Amendment, up to $20,000,000 in Non-Cash LIFO Inventory charges will be excluded. (c) Permitted Asset Disposition of Kaiser Center Assets The Debtors are planning to sell their interests in the Kaiser Center -- a leased office building complex located in Oakland, California. The likely proceeds from this transaction may be less than the carrying value of related assets, possibly resulting in a non-cash charge similar to depreciation. Given that, any resulting non- cash charges not exceeding $25,000,000 would be excluded. (d) Settlement Charges Related to the Kaiser Retirement Plan and Other Restructuring Charges During the first six months of 2002, the Debtors recorded $12,000,000 in non-cash charges for additional pension expenses because lump-sum payments from the assets of the Debtors' salaried employee pension plan exceeded a stipulated level provided for by GAAP. But to the extent that additional retirements occur and lump-sum payment options are exercised under the salaried employees pension plan, the resulting additional non-cash charges to earnings would not be determined until year-end 2002. The Debtors also will continue to incur restructuring charges under the GAAP for other early retirement costs as they continue their efforts to reduce their cost structure. In order to account for all of these charges, the exclusion of these charges from the EBITDA will be increased from from $10,000,000 to $30,000,000. EBITDA Covenant Based on a revised forecast, the Third Amendment will reduce the minimum EBITDA requirements under the Postpetition Credit Agreement to more appropriately reflect the Debtors' possible financial results based on the Debtors' assumptions of key market factors at the time of the Third Amendment: -- The Debtors covenant with the DIP Lenders to maintain, on a consolidated basis, minimum EBITDA (defined as Adjusted Net Earnings from Operations plus interest plus taxes plus $30,000,000) of: Minimum Testing Period EBITDA -------------- ------- Petition Date to 06/30/02 ($45,000,000) Petition Date to 09/30/02 (48,000,000) Petition Date to 12/31/02 (82,000,000) 4 Fiscal Quarters ending 03/31/03 (98,000,000) 4 Fiscal Quarters ending 06/30/03 (86,000,000) 4 Fiscal Quarters ending 09/30/03 (45,000,000) 4 Fiscal Quarters ending 12/31/03 10,000,000 -- If at any time during any month for a period of 3 consecutive Business Days: (i) the Revolving Credit Outstanding exceeds $100,000,000; or (ii) the Revolving Commitment Availability is less than $75,000,000, EBITDA testing will occur on a monthly basis and, to avoid triggering a default, the consolidated EBITDA on the last day of each period must be no less than: Minimum Testing Period EBITDA -------------- ------- Petition Date to 06/30/02 ($45,000,000) Petition Date to 07/31/02 (48,000,000) Petition Date to 08/30/02 (48,000,000) Petition Date to 09/30/02 (48,000,000) Petition Date to 10/31/02 (82,000,000) Petition Date to 11/30/02 (82,000,000) Petition Date to 12/31/02 (82,000,000) Petition Date to 01/31/03 (98,000,000) Petition Date to 02/28/03 (98,000,000) 12 months ending 03/31/03 (98,000,000) 12 months ending 04/30/03 (94,000,000) 12 months ending 05/31/03 (90,000,000) 12 months ending 06/30/03 (86,000,000) 12 months ending 07/31/03 (72,000,000) 12 months ending 08/31/03 (58,000,000) 12 months ending 09/30/03 (45,000,000) 12 months ending 10/31/03 (27,000,000) 12 months ending 11/30/03 (9,000,000) 12 months ending 12/31/03 10,000,000 12 months ending 01/31/04 10,000,000 12 months ending 02/28/04 10,000,000 Other Modifications Other modifications to the Postpetition Credit Agreement are: (1) Amendments to allow the possible sale of certain of the Debtors' non-core or non-operating assets, including the Kaiser Center Assets, the fabricated products plant in Oxnard, California, and certain property used in connection with the Debtors' primary aluminum smelter in Tacoma, Washington. A portion of the proceeds from the sale of these non-core assets will: (i) be applied to the outstanding indebtedness, if any, owed under the Postpetition Credit Agreement,; (ii) reduce the "PPE Subcomponent" of the Borrowing Base on a permanent basis by 50% of the Net Disposition Proceeds in: * the case of the Kaiser Center Assets; * excess of $20,000,000 in the case of the smelter assets located in Tacoma, Washington; and * excess of $10,000,000 in the case of the fabricated products plant located in Oxnard, California; (2) An increase in the basket for other permitted Asset Dispositions in the fiscal year 2002 from $25,000,000 to $30,000,000; (3) An expansion of the definition of the term "Eligible Account" to include in the Borrowing Base the accounts of certain other credit-worthy account debtors; (4) The requirements for the Letters of Credit will be modified to provide that, to the extent any Letters of Credit are outstanding on the final maturity date of the Postpetition Credit Agreement -- or any earlier date on which the commitments are terminated -- the Debtors will, on or before that date: (i) pay to the Agent in cash for the deposit in the L/C Collateral Account an amount equal to the aggregate Letter of Credit Outstanding; or (ii) provide to the Agent one or more letters of credit from an issuer satisfactory to the Agent in an aggregate amount equal to the Letter of Credit Outstanding; (5) A stipulation to provide that the decision issued in May 2002 against Kaiser by an Administrative Law Judge in respect of certain allegations of unfair labor practices will not be deemed to have a Materially Adverse Effect on the Debtors. That decision will not cause the Debtors to default on the Postpetition Credit Agreement as long as: (i) the decision is subject to appeal -- where it currently is; and (ii) the Debtors will not pay any amounts with respect to the decision during the term of the Postpetition Credit Agreement; The decision issued by the Administrative Law Judge relates to a lockout that took place at certain of the Debtors' plants in September 2000; (6) The Lenders will allow the Debtors to: (i) incur contingent liabilities in connection with the proposed draw down of existing debenture financing and the entry into a new series of debenture financing by Queensland Alumina Limited, an Australian affiliate of Debtors Kaiser Aluminum & Chemical Corporation and Kaiser Alumina Australia Corporation; and (ii) make cash investments in QAL, so long as the aggregate amount of the contingent liabilities and cash investments incurred or made in the 2002 and 2003 fiscal years does not exceed $87,000,000; and (7) The Third Amendment include technical modifications and corrections to: (i) certain Exhibits and Schedules attached to the Postpetition Credit Agreement, including the addition of a new Exhibit describing the Kaiser Center Assets to be sold; (ii) the Disclosure Schedule attached to the Postpetition Credit Agreement; and (iii) the Security Agreement. The proposed Third Amendment to the DIP Credit Agreement identifies other members of the present lending consortium: * General Electric Capital Corporation, as Documentation Agent; * Foothill Capital Corporation, as Co-Syndication Agent; * The CIT Group/Business Credit, Inc., as Co-Syndication Agent; * Merrill Lynch Business Financial Services Inc.; * PNC Bank, N.A.; * GMAC Business Credit, LLC; and * The Provident Bank (Kaiser Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART CORP: Court to Hear on J.W. Mitchell's Complaint on Jan 28 ---------------------------------------------------------------- In August 2001, J.W. Mitchell Investment and Kmart Corporation and its debtor-affiliates entered into a J.W. Mitchell Investment Standard Industrial/Commercial Single-Tenant Lease- Net for the lease of a parcel of real property located at 3100 Milliken Avenue in Mira Loma, California and a 759,260-square foot tilt-up building on the property. Pursuant to the agreement, the Debtors leased both real property and building for a period of 15 years. Subsequently, Mitchell Investments assigned its right, title and interest in the property and the building to J.W. Mitchell Company. The Debtors continued to occupy the premises as of the Petition Date. However, the Debtors defaulted under the terms of the Lease. Whitman Brisky, Esq., at Lindenbaum, Coffman, Kurlander, Brisky & Grippo, Ltd., in Chicago, Illinois, reports that the Debtors have failed to pay $150,000 in charges due under the Lease, including property taxes, management fees, and other costs. The Debtors were also obligated to timely pay for all work performed on the premises at their direction, and to maintain the premises free and clear of all liens and encumbrances. However, before the Petition Date, the Debtors breached this covenant by failing to pay a tenant improvement work done by Interlake Material Handling. As a consequence, Interlake recorded a mechanic's lien against the premises, and filed a collection action against J.W. Mitchell before the California Superior Court, seeking over $700,000 in damages. Mr. Brisky also alleges that, since the Petition Date, the Debtors also failed and refused to pay $55,160 in postpetition management fees and legal fees that accrued under the Lease. Mr. Brisky contends that the postpetition fees are due and payable pursuant to Section 365(d)(3) of the Bankruptcy Code. After the Petition Date, the Debtors asked J.W. Mitchell to consent to certain renovations on the premises. The Debtors intend to: 1. pave the south portion of the property, which would cost $500,000; 2. remove all of the existing lighting fixtures in the premises, which have a value of $1,000,000; and 3. replace the removed fixtures with lighting fixtures worth $400,000. Under the Lease, the Debtors are prohibited from performing either the Paving Work or the Lighting Work without J.W. Mitchell's prior written consent. In an August 1, 2002 Letter, J.W. Mitchell explained to the Debtors that the request imposed significant risks because: (a) J.W. Mitchell is already defending itself against the Interlake Action. If the Debtors commence the Paving and Lighting Work and again default on their obligations to pay the work, J.W. Mitchell could be subjected to two additional mechanics' lien actions; and (b) The Debtors are proposing to remove the valuable fixtures and replace them with lighting fixtures worth less than their value. Although the Debtors would be obligated to restore this fixture to its original condition at the end of the term of the Lease, pursuant to the restoration covenant under the Lease, this obligation has no legal effect until the Debtors assume the Lease. Therefore, to allow the Debtors to remove $500,000 of value from the premises without the assurance of future restoration would impose substantial additional risks on J.W. Mitchell. Nonetheless, J.W. Mitchell will consent to the Paving and Lighting Work on the condition that the Debtors: (i) assume the Lease; (ii) obtain the issuance of a $1,000,000 letter of credit in J.W. Mitchell's favor to secure the payment of the claims of contractors; and (iii) cure all postpetition obligations due under the Lease. But the Debtors failed and refused to comply with the conditions. Yet, the Debtors began to move forward with the Paving Work by depositing tons of unsuitable fill on the property. The Debtors also authorized contractors to enter the property and initiate the Paving Work. Mr. Brisky notes that the area where the unauthorized Paving Work is proceeding is subject to an easement in favor of Southern California Edison. Hence, any grading within the area subject to the easement is further subject to a grading agreement between J.W. Mitchell and SCE. Mr. Brisky tells the Court that the Grading Agreement imposes a number of restrictions and conditions on any grading within the easement area, and in particular prohibits the use of fill material having a diameter in excess of six inches. The fill that the Debtors use is larger than what is authorized in the Grading Agreement. Mr. Brisky asserts that the Debtors' unauthorized initiation of the Grading Work and the use of unauthorized fill materials in this project is causing, and will continue to cause, damage and harm to J.W. Mitchell. The Debtors' act imposes potential liability for the contractor work on J.W. Mitchell and generates liability under the terms of the Grading Agreement. The work also imposes remediation liability on J.W. Mitchell under the Grading Agreement. Accordingly, J.W. Mitchell asks Judge Sonderby to: -- issue a permanent injunction barring the Debtors from moving forward with the Paving Work and the Lighting Work without J.W. Mitchell's consent or further Court order; -- direct the Debtors to restore the property to the condition that it was in before the initiation of the Paving Work; -- declare that the Debtors may not proceed with the Paving Work or the Lighting Work without J.W. Mitchell's consent; -- declare that the conditions to granting the work consent set forth in the August 1, 2002 Letter and J.W. Mitchell's refusal to consent are reasonable; -- declare that the Postpetition Obligations are due and payable and must be timely paid; and -- award it administrative priority damage claim. Pending a final determination from the Court regarding the complaint, J.W. Mitchell also asks Judge Sonderby to issue a temporary restraining order against the Debtors, barring and restraining them from proceeding with the Paving Work and directing them to remove all the fill materials placed on the property. * * * After hearing the oral arguments from both parties, Judge Sonderby denies J.W. Mitchell's request for a temporary restraining order and preliminary injunction against the Debtors. A hearing on the complaint is scheduled on January 28, 2003 at 0:00 a.m. (Kmart Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.00% bonds due 2003 (KM03USR6) are trading at about 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. KULICKE & SOFFA: Appoints Barry Waite to Board of Directors ----------------------------------------------------------- Kulicke & Soffa Industries, Inc., (Nasdaq:KLIC) said that semiconductor industry veteran, Barry Waite is joining its Board of Directors, and will be nominated for election by the shareholders at the company's Annual Meeting on February 11, 2003. Mr. Waite brings executive level leadership experience to Kulicke and Soffa as the retired Chief Executive Officer of Chartered Semiconductor. Chartered is one of the top three silicon foundries in the world, operating five wafer fabs at its Singapore headquarters with a sixth wafer fab being developed as a 300 mm facility. "Barry will add a unique vantage point to the K&S executive team as he brings his semiconductor wafer fab experience from Chartered as well as his multi-faceted roles at Motorola. His background at these companies as a customer of semiconductor production equipment is clearly relevant for our strategic planning and positioning of K&S," said Scott Kulicke, chairman and chief executive officer of Kulicke and Soffa. "I am pleased to make this announcement, since Barry will be a welcome addition to our board." Prior to joining Chartered Semiconductor, Mr. Waite had been with Motorola's Semiconductor Products Sector, from 1982 to 1998, most recently as Senior Vice President and General Manager- Europe, Middle East, and Africa. Mr. Waite started his semiconductor career at Texas Instruments from 1970 to 1982. From 1980 to 1982, he was the General Manager- Digital Circuit Business. He holds a bachelor of arts degree from Sheffield University. Kulicke & Soffa is the world's leading supplier of semiconductor assembly and test interconnect equipment, materials and technology. Assembly solutions combine wire bonding equipment with bonding wire and capillaries. Test interconnect solutions include standard and vertical probe cards; ATE interface assemblies and ATE boards for wafer testing; and test sockets and contactors for all types of packages. Kulicke & Soffa's Web site address is http://www.kns.com Kulicke & Soffa's 5.25% bonds due 2006 are currently trading at about 59 cents-on-the-dollar. LAIDLAW INC: Expects to Emerge from Chapter 11 by March 31 ---------------------------------------------------------- Laidlaw Inc., released its audited results for the year ended August 31, 2002. The operating results contained in these statements are unchanged from the unaudited results previously announced on December 19, 2002. Consolidated Revenue Consolidated revenue from the Company's Contract Bus Services, Greyhound and Healthcare Services for the year ended August 31, 2002 was $4.43 billion, a marginal growth on the $4.42 billion reported in 2001. Earnings The Company reported a net loss for the year ended August 31, 2002 of $124.4 million or $0.38 per share after a goodwill impairment charge of $194.7 million (2001 - $1,105.1 million). This compares to a net loss of $598.9 million or $1.84 per share in 2001. Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) and before goodwill impairment charges were $421.0 million for the year ended August 31, 2002 compared with $383.4 million for fiscal 2001. As previously disclosed on December 19, 2002, the Company filed a Second Amended Joint Plan of Reorganization with the United States Bankruptcy Court on September 24, 2002. The projected consolidated statements of operations contained in the plan anticipated EBITDA of $500 million for fiscal 2002. However, a subsequent review of the actuarial cost projections for current- year and maturing prior-year accident claims indicated a negative trend in settlement amounts. Accordingly, the Company increased its reserve estimates, primarily relating to prior year incidents, resulting in an additional charge to earnings of $60 million. "In addition to this increased provision, a number of other smaller items came to light in the course of conducting the year-end review of our operations" said Kevin Benson, President and Chief Executive Officer. "We felt it was prudent to provide for these losses and we believe that these will not be repeated in subsequent years". There was no income from discontinued operations in fiscal 2002 as the Company's healthcare operations were reinstated as continuing operations in fiscal 2001. In addition the Company's investment in Safety-Kleen Corp., which had filed voluntarily petitions for Chapter 11 relief in the United States Bankruptcy Court for the District of Delaware on June 9, 2000, was abandoned abandoned in fiscal 2002 and has now been shown as a discontinued operation. The company expects to shortly file a Third Amended Joint Plan of Reorganization. The amended filing will include projected consolidated statements of operations reflecting our latest EBITDA estimates for 2003 of approximately $500 million before restructuring charges, and contemplates the effective date of the reorganization to be March 31, 2003. "In prior years, the Company has prepared its financial statements according to Canadian GAAP and included a note reconciling differences to US GAAP requirements," said Benson. "However, our commitment to apply for a listing on the New York Stock Exchange in connection with our emergence from chapter 11 necessitates the preparation of full US GAAP financial statements as at August 31, 2002. This has complicated and delayed the finalization of the statements, particularly in light of the many reporting requirement changes underway under US GAAP. I am pleased to have the statements completed and anticipate completing our reorganization process by the end of March this year. In particular, I look forward to being able to focus our energies on the real opportunities of growing our revenue and earnings." Resolution of PBGC Issues The Company has been in discussion with the Pension Benefit Guaranty Corporation, a United States government corporation that administers the mandatory termination insurance program for defined benefit pension plans under the Employee Retirement Income Security Act. These discussions centred on the claims asserted by the PBGC against the Company in the U.S. bankruptcy proceedings regarding funding of the Greyhound U.S. Plans. As previously announced, the Company and the PBGC have orally agreed to resolve the claims of the PBGC, subject to negotiation and execution of a definitive agreement. The terms of this agreement, in essence, provide for the Company to contribute an aggregate amount of $150 million to such Greyhound U.S. Plans, in excess of minimum contributions. This amount will be contributed as follows: - $50 million in cash on exit from bankruptcy protection; - $50 million in cash in June 2004; - $50 million from the sale of Laidlaw Stock placed in trust upon exit from bankruptcy and sold over the period to December 30, 2004. Laidlaw Inc., is a holding company for North America's largest providers of school and intercity bus transportation, public transit, patient transportation and emergency management services. Laidlaw Inc.'s August 31, 2002 balance sheet shows a total shareholders' equity deficit of about $1.1 billion. LINGTEC CONSTRUCTORS: Case Summary & 8 Largest Unsec. Creditors --------------------------------------------------------------- Debtor: LINGTEC Constructors L.P. 1400 Smith Street Houston, Texas 77002 Bankruptcy Case No.: 03-10106 Type of Business: The Debtor's business is the construction of the Dabhol Power Plant and LNG Facility in Dabhol, India. Lingtec is an affiliate of Enron Corp. Chapter 11 Petition Date: January 9, 2003 Court: Southern District of New York (Manhattan) Judge: Arthur J. Gonzalez Debtors' Counsel: Brian S. Rosen, Esq. Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, New York 10153 212-310-8602 Fax: 212-310-8007 - and - Melanie Gray, Esq. Weil, Gotshal & Manges LLP 700 Louisiana, Suite 1600 Houston, Texas 77002 Telephone: (713) 546-5000 Total Assets: $112,453,1771 Total Debts: $129,403,4162 Debtor's 8 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Besix-Kier Dabhol S.A. Trade Debt $11,909,940 1080 BLVD louis Mettewis 74-76 Bruxelles, Belgique (P) 32 (0) 2 412631 (F) 32 (0) 2 4126376 Skanska Cementation Trade Debt $6,300,909 International Limited Site Office Dabhol LNG Terminal Phase II Taluka; Guhagar Dist. Ratnagiri 415 703 PricewaterhouseCoopers Trade Debt $126,813 Services Pvt. Ltd. Great Lakes Dredge & Dock Trade Debt $80,961 Company Site Management Services Trade Debt $46,837 Intl. Inc. Chase Manhattan Letter Trade Debt $38,520 of Credit Department DMJM+HARRIS, Inc. Trade Debt $18,568 SolidState Controls, Inc. Trade Debt $4,134 LUCENT TECH.: StockPickReport Gives 'Outperform' Stock Rating ------------------------------------------------------------- StockPickReport.Com (IARD#119079 - http://www.stockpickreport.com/?src=bw) makes this stock evaluation for the short term: Lucent Technologies (NYSE:LU) - Outperform http://www.stockpickreport.com/?src=lu What This Rating Means: StockPickReport.Com ranks stocks with a proprietary unbiased system of technical analysis. These ratings do not indicate a "long term" view of any company listed. These are ratings that reflect our opinion of a stock's PRICE movement versus the SP 500 over the short term. These ratings may change based on daily market conditions. StockPickReport.Com is a stock research firm. Its daily commentary has regular, worldwide distribution. They are Registered Investment Advisors. Lucent Technologies' 7.70% bonds due 2010 (LU10USR1) are trading at about 32 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=LU10USR1for real-time bond pricing. MATTRESS DISCOUNTERS: Plan Confirmation Hearing Set for March 3 --------------------------------------------------------------- Mattress Discounters Corporation announced that the United States Bankruptcy Court for the District of Maryland had approved the Company's Disclosure Statement relating to its First Amended Joint Plan of Reorganization, keeping the Company's "fast-track" voluntary Chapter 11 reorganization on schedule. A hearing to confirm the Plan of Reorganization has been scheduled for March 3, 2003, and, if confirmed, will put in motion a timeline for one of the nation's largest specialty mattress retailers to emerge from Chapter 11 protection as early as March 2003, only five months after the initial filing. The Official Committee of Unsecured Creditors is a co-proponent of the Plan of Reorganization and, along with the Company, will be soliciting the remaining creditors to support the Plan. Under a Settlement Agreement that was approved by the Bankruptcy Court in November 2002, unsecured creditors holding in excess of 60% of the estimated unsecured claims have agreed to vote in favor of the Plan. In addition, the Company's prepetition secured lenders have also agreed to vote in favor of the Plan. "We have returned to our most profitable roots in the North East and Mid- Atlantic states and, after exiting our loss-making and least profitable markets elsewhere in the country and reducing our corporate costs, we are on- track to emerge from Chapter 11 in March. Our efforts will ensure that we emerge from Chapter 11 protection as a very efficient specialty retailer with an appropriate capital structure," said Steve Newton, Mattress Discounters' president and chief executive officer. "The support of our associates and customers, along with the help of our creditors and our lenders, lessors and vendors, has allowed us to use the Chapter 11 process to lay the groundwork for our future success." The Company will be sending the Disclosure Statement, Plan of Reorganization, ballots and other voting materials to all creditors within the week. "As the pioneer of the specialty sleep shop and in our 25th anniversary year, we are delighted to commence 2003 with such a positive step towards our emergence," said Newton. "This puts us in a superb position to take advantage of our strengths and to manage our growth carefully over the coming year." Mattress Discounters is headquartered in Upper Marlboro, Maryland, employing 540 people. With 25 years in business and more than 100 company- owned stores, they are one of the largest and most experienced specialty mattress retailers in the USA. MICRON TECH.: StockPickReport Gives "Outperform' Stock Rating ------------------------------------------------------------- StockPickReport.Com (IARD#119079 - http://www.stockpickreport.com/?src=bw) makes this stock evaluation for the short term: Micron Technology Inc (NYSE:MU) - Outperform http://www.stockpickreport.com/?src=mu What This Rating Means: StockPickReport.Com ranks stocks with a proprietary unbiased system of technical analysis. These ratings do not indicate a "long term" view of any company listed. These are ratings that reflect our opinion of a stock's PRICE movement versus the SP 500 over the short term. These ratings may change based on daily market conditions. StockPickReport.Com is a stock research firm. Its daily commentary has regular, worldwide distribution. They are Registered Investment Advisors. As reported in Troubled Company Reporter's December 20, 2002 edition, Standard & Poor's lowered its corporate credit rating on Micron Technology Inc., to 'B+' from 'BB-'. The action reflects profitability pressures in the semiconductor memory industry and expectations that market conditions are likely to remain challenging over the intermediate term. Micron, based in Boise, Idaho, had about $601 million of debt and capitalized leases at November 30, 2002. The outlook is stable. In the highly volatile semiconductor memory market, Micron is the second-largest supplier of "dynamic random access memory" chips in the world and has conservative financial policies. Micron is expected to retain its strong position in the industry through the course of the business cycle. MIRANT CORP: Outlines Key Elements of Company's Strategic Plan -------------------------------------------------------------- In an analysts' conference call held Friday, the executive management of Mirant (NYSE: MIR) discussed key elements of its strategic plan that it believes will enable Mirant to manage through the current downturn in the wholesale power industry and strengthen the company's long-term viability. "Mirant intends to remain a leader in the markets it serves and increase value for its many stakeholders," said Marce Fuller, president and chief executive officer, Mirant. "As such, our strategic plan focuses on two priorities. First, maximize opportunity in well-functioning, regional markets where we have a critical mass of assets, people and customers. Second, continue to enhance our liquidity position." Maximizing North American and International Market Opportunity Mirant will focus on markets with the following characteristics: sizeable Mirant presence, proper market structure, fair rules for all participants, regulatory and public support, a favorable power supply/demand outlook and sufficient market liquidity. U.S. regional markets best matching these criteria are the Northeast where Mirant owns 3,100 megawatts, the Mid-Atlantic (over 5,000 megawatts) and the Midwest (1,400 megawatts) -- a market that is becoming more closely tied to the Mid-Atlantic. In these areas, Mirant's presence is substantial and its facilities are located near major metropolitan centers with growing power needs. Mirant's perspectives on other North American markets: * Mirant continues to see opportunity in the Western region (3,000 megawatts) and anticipates adding 650 megawatts in Nevada and Oregon during 2003. While the company also forecasts a growing need for power in Northern California, it plans to restrict capital commitments in the state until a more rational market structure develops. * Mirant intends to reduce its presence in the Southeast and Texas markets over time. * Canada remains important to Mirant since it provides natural gas for the company's Western and Mid-Western asset base; however, the company will scale back its current level of involvement in that market. Internationally, Mirant has exited, or plans to exit, Germany, the U.K., Italy, Norway, Korea, Australia, China, Guam and Brazil. The company intends to continue operations in the Philippines, where it owns 2,400 megawatts, and the Caribbean (1,100 megawatts). The company's stable franchises in these locations provide approximately $200 million in net income on a combined annual basis. Additionally, strong regulatory and customer support for Mirant's participation in these markets provides important stability. In the fourth quarter 2002, Mirant expects to record an after- tax gain of approximately $75 million from its previously announced sale of Shajiao C in China, before taking into account an after-tax loss of approximately $35 million from the termination of interest rate swaps related to Mirant's Asia holding company debt. As previously disclosed, Mirant repaid $254 million in debt at its Asia holding company through proceeds from the Shajiao C sale. This action also removed a dividend block from its Philippine businesses. Mirant reports that on December 30, 2002, it sold its economic interest in CEMIG (Brazil) for a nominal amount. This sale will result in a fourth- quarter write-off of previously disclosed, deferred currency losses of approximately $84 million after tax. Enhancing Liquidity Mirant achieved year-end liquidity of $1.4 billion and notes that nearly all of this amount is in cash. The company is targeting the following measures to enhance its liquidity position: * Selling Non-Strategic Assets -- Anticipates additional sales of at least $300 million in 2003. -- Announced or sold $2 billion in net proceeds from asset sales in 2002 after repayment of $800 million in debt. * Reducing Capital Expenditures -- Lowering 2003 capital expenditures to $570 million, which includes approximately $270 million in turbine cancellation costs and approximately $20 million in capitalized interest. -- Capital expenditures were approximately $1.8 billion in 2002 and $1.8 billion in 2001. * Lowering Collateral -- Targeting a 50 percent reduction in gas volumes by the end of 2003; gas volumes are currently 13 billion cubic feet per day. -- In reaching this target, collateral for trading and marketing should be reduced to $400 million to $500 million by year-end, a reduction of approximately $300 million to $400 million from current levels. -- Removed $700 million in potential ratings triggers during 2002. * Cutting Operating Costs -- Moving aggressively to eliminate an additional $125 million in annualized operating costs. Combined with a reduction in annualized costs of $150 million in 2002, the company expects to realize a total annualized cost reduction of $275 million by the end of 2003. -- Restructured and reduced the company's global workforce in 2002, eliminating 800 positions and reducing levels of management. "It's obvious that we still face many challenges. But we continue to make excellent progress toward achieving the priorities of our strategic plan," said Fuller. "I remain convinced that our ongoing efforts will enable Mirant to thrive in the future." The company intends to provide a more comprehensive financial outlook in its fourth quarter earnings release in late February. Analysts' Conference Call Replay A recording of Friday's analysts' conference call is available for replay until Jan. 24, at http://www.mirant.com To listen to the call, you will need: * RealPlayer, available at http://www.real.com or * Windows Real Media, available at http://www.windows.com Mirant Corp.'s 5.75% bonds due 2007 are currently trading at about 43 cents-on-the-dollar. MOTOROLA INC: Will Publish Fourth Quarter Results on January 21 --------------------------------------------------------------- Motorola, Inc., (NYSE: MOT) plans to release its fourth-quarter and full-year results at approximately 4:30 p.m. Central Time on Tuesday, January 21, 2003. The full text of the press release will be available on Motorola's Web site at: http://www.motorola.com/mediacenter On January 22nd, Motorola plans to hold its conference call with financial analysts. The conference call is scheduled to begin at 7:00 a.m. Central Time. A live Webcast of the conference call and subsequent replays (approximately two hours after the completion of the call) will be also available on Motorola's Investor Relations Web site at: http://www.motorola.com/investors Members of the media are again invited to listen to the live conference. Questions, however, will be taken only from members of the investment community. Motorola, Inc., (NYSE: MOT) is a global leader in providing integrated communications and embedded electronic solutions. Sales in 2001 were $30 billion. For more information, please visit: http://www.motorola.com Motorola Inc.'s 5.220% bonds due 2097 are currently trading at about 65 cents-on-the-dollar. NATIONAL CENTURY: Wants OK to Tap Ruscilli as Real Estate Broker ---------------------------------------------------------------- Charles M. Oellermann, Esq., at Jones, Day, Reavis & Pogue, in Columbus, Ohio, relates that a portion of the office complex owned by Debtor Memorial Drive Office Complex, in Dublin, Ohio, is being used as the Debtors' headquarters. With National Century Financial Enterprises, Inc., and its debtor-affiliates' consolidation and downsizing of operations, they no longer have a need for a substantial portion of the existing space at their headquarters. Accordingly, the Debtors wish to sell this surplus space in connection with their consolidating operations. In light of the planned sale, the Debtors seek the Court's authority to employ Ruscilli Real Estate Services, Inc. as real estate brokers to sell MDOC's interest in certain of the office complex buildings in Ohio, pursuant to Section 327 of the Bankruptcy Code, nunc pro tunc to December 10, 2002. Mr. Oellermann informs Judge Calhoun that the Debtors and Ruscilli entered into an engagement letter with respect to the sale of the Memorial Drive Properties as of December 10, 2002 wherein Ruscilli would be retained to sell six buildings in the office complex, including: -- Building #2 (6035 Memorial Drive), -- Building #3 (6051 Memorial Drive), -- Building #4 (6075 Memorial Drive), -- Building #6 (6015 Memorial Drive), -- Building #8 (6179-3189 Memorial Drive), and -- Building #9 (6135 Memorial Drive and 3155 Memorial Drive). Mr. Oellermann contends that Ruscilli is well qualified to assist the Debtors with the sale of the Memorial Drive Properties. Ruscilli is one of Ohio's largest full service third party commercial brokerage firms. Ruscilli has successfully leased and sold millions of square feet of industrial, retail and office space in central Ohio. In addition, Ruscilli's client base includes many office users, so Ruscilli is intimately familiar with properties like the Memorial Drive Properties, their value and likely purchasers. Mr. Oellermann adds that Ruscilli has extensive familiarity with the office real estate market in the northwest Columbus metropolitan area and thus has the necessary expertise to assist the Debtors in marketing the properties for sale. Ruscilli will assist the Debtors in all aspects of the marketing and sale of the Memorial Drive Properties. Ruscilli has already added the Memorial Drive Properties to its website's list of properties for sale and has been actively negotiating with potential purchasers. In fact, due to Ruscilli's efforts, Mr. Oellermann relates, there are parties already are in contract to purchase four of the Memorial Drive Properties. Pursuant to the Engagement Letter, Ruscilli will have the exclusive right to sell the properties through December 31, 2003. Under the Engagement Letter, Mr. Oellermann tells the Court, Ruscilli will receive a 6% commission of the sale price of any of the Memorial Drive Properties in cash at closing, with the exceptions that: (a) Should RJ Boll Realty acting as buyer enter into a purchase contract and close on any of the properties within 30 days after the effective date of Ruscilli's engagement, Ruscilli will receive a 3% real estate commission, in cash at closing, and (b) Should Meeder Financial, Purcell & Scoot or Dr. Fanning, which are all current tenants of the Memorial Drive Properties, enter into a purchase contract and close on one or more of the properties within 90 days after the effective date of Ruscilli's engagement, Ruscilli will earn a 4% commission. According to Timothy D. Kelton, President of Ruscilli Real Estate Services, Ruscilli has no connection with the Debtors, their creditors, the U.S. Trustee or any other party with an actual interest in these Chapter 11 cases or their attorneys, except: (a) Ruscilli has in the past listed and sold property for Huntington National Bank, one of the lenders under the Debtors' prepetition credit facility and is the financial institution where the Debtors maintain many of the bank accounts in their cash management system. Ruscilli currently does not list any property for Huntington National Bank; (b) Ruscilli currently lists warehouse space in Grive City, Ohio for Metropolitan Life Insurance Company, one of the Debtors' noteholders; (c) Ruscilli has in the past listed and sold property for Provident Bank, one of the lenders under the Debtors' prepetition credit facility. Ruscilli currently does not list any property for Provident Bank; (d) An affiliate of Ruscilli, Ruscilli Construction Company, employs Deloitte & Touche LLP, which audited the Debtors' financials prior to the Petition Date, to audit its financial books. In the past, Ruscilli also has utilized Deloitte & Touche LLP for certain accounting services; (e) Ruscilli has in the past used Bricker & Eckler LLP, which has been retained as special litigation counsel for the Debtors in these cases, for various legal services; (f) Ruscilli previously has retained Squire Sanders & Dempsey LLP, which represents Bank One, N.A. in its role as indenture trustee for the notes issued by NPF XII, for various legal services; (g) Ruscilli represented Hand-in-Hand, a Dublin-based pediatric group, as a buyer representative in an unsuccessful search for office space. Ruscilli terminated the representation of Hand-in-Hand on February 18, 2002. Hand-in-Hand has signed a contract with MDOC for one of the Memorial Drive Properties. Another real estate firm represents Hand-in Hand in that transaction; and (h) Meeder Financial, which is looking for office space in the Dublin are and is a lessee of space in one of the Memorial Drive Properties, has retained Ruscilli to list a property that it owns. Ruscilli will not represent Meeder Financial in any matter relating to the Debtors or these Chapter 11 cases. Because the Debtors are a large enterprise, Ruscilli is unable to ascertain that every client representation has been disclosed. Thus, Ruscilli will file a supplemental disclosure with the Court if they discover any additional information. Accordingly, the Debtors believe that Ruscilli is a "disinterested person" as defined by Section 101(14) and Section 327(e). Pursuant to Section 328(a) of the Bankruptcy Code, the Debtors also ask the Court to approve the payment of commissions and expenses. The Fee Structure appropriately reflects the nature of services to be provided by Ruscilli and the fee structures typically utilized by Ruscilli and other real estate brokers. The Debtors believe that the Fee Structure is fair and reasonable. Mr. Oellermann adds that all of Ruscilli's fees and expenses will be subject to Court approval upon proper application by Ruscilli in accordance with Sections 330 and 331 of the Bankruptcy Code and Rule 2016 of the Federal Rules of Bankruptcy Procedure. Moreover, the Debtors further propose that any commissions be paid to Ruscilli at the time of closing of the applicable transaction provided that commissions in all cases will be subject to the Court's approval. (National Century Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392- 0900) NATIONAL STEEL: Wants to Sell Metals USA Claims for $1.5 Million ---------------------------------------------------------------- National Steel Corporation and its debtor-affiliates notify the Court that they intend to sell all of their right, title and interest in and to certain trade claims totaling $5,410,000 against Metals USA Inc. to Citadel Equity Fund Ltd. The Debtors will sell the trade claims for $1,568,900 in cash. George T. Plumb, Esq., at Piper Marbury Rudnick & Wolfe, in Chicago, Illinois, relates that Metals USA is currently in the process of emerging from its own bankruptcy proceeding. Pursuant to its Amended Plan of Reorganization, Metals USA has agreed to issue to each holder of an allowed general unsecured claim its pro rata share of 20,000,000 shares of its new common stock. Metals USA's Plan was confirmed by the United States Bankruptcy Court in the Southern District of Texas, Houston Division on October 18, 2002. Metals USA and the Debtors have entered into a Stipulation and Agreed Order setting the amount of their allowed unsecured claim at $5,410,000, eliminating the need for the Debtors to go through a claims dispute process. Metals USA also has waived a claim exceeding $170,000, which it holds against the Debtors, but has reserved its right to assert other claims against them. Mr. Plumb asserts that selling the Metals USA claim to Citadel will provide an immediate and significant benefit to the Debtors' estates because: (a) although the Metals USA's Plan and related Disclosure Statement indicates that the Shares represent a 52.6% estimated recovery for the general unsecured claims holders, the market for the Shares may be volatile; (b) no assurance can be given as to the market price that will prevail following the issuance of the Shares or that a market for the Shares will develop at any time; and (c) Metals USA's assets will serve as collateral for its post- reorganization credit facility and Metals USA will emerge from bankruptcy leveraged with debt service obligations. If the Debtors do not receive any written objection to the proposed sale, Mr. Plum notes that the Debtors will be authorized to consummate the sale and to take actions necessary to close the transaction and obtain the sale proceeds without further Court approval. (National Steel Bankruptcy News, Issue No. 20; Bankruptcy Creditors' Service, Inc., 609/392-0900) NETIA HOLDINGS: S&P Withdraws Units' D Sr. Unsecured Debt Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'D' long-term corporate credit rating on Poland-based telecommunications operator Netia Holdings S.A. At the same time, Standard & Poor's withdrew its 'D' senior unsecured debt ratings on Netia's guaranteed subsidiaries. The long-term rating on Netia was lowered to 'D' on December 18, 2001, following failure by the company to pay the interest on its 13.125% senior dollar notes due 2009 and on its 13.5% senior euro notes due 2009. Netia has undergone a financial restructuring, which included the cancellation of its outstanding bonds and the issue of shares to the company's bondholders in accordance with the agreed terms of Netia's restructuring. In addition, Netia Holdings B.V., Netia's Dutch subsidiary, issued ?49.5 million ($52.0 million) of its 10% senior secured notes due 2008 in exchange for the existing notes of Netia Holdings B.V. and Netia Holdings II B.V., in accordance with the agreed terms of the restructuring and the composition plans for each of Netia's Dutch subsidiaries. Netia Holdings SA's 13.50% bonds due 2009 (NETH09NLN2) are trading at about 17 cents-on-the-dollar, DebtTraders says. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NETH09NLN2 for real-time bond pricing. NTL EUROPE: Emerges from Chapter 11 Bankruptcy Reorganization ------------------------------------------------------------- NTL Europe, Inc., has emerged from Chapter 11 bankruptcy reorganization following the implementation of the Second Amended Joint Reorganization Plan of NTL Incorporated and Certain Subsidiaries, dated July 15, 2002, as subsequently modified, which became effective Friday, January 10, 2003. As previously announced, the Plan was confirmed by order of the United States Bankruptcy Court for the Southern District of New York on September 5, 2002. Old NTL and its debtor subsidiaries filed for bankruptcy reorganization on May 8, 2002. Pursuant to the Plan, Old NTL was reorganized into two separate companies, which are the corporations previously named "NTL Incorporated" and "NTL Communications Corp." NTL Incorporated was renamed "NTL Europe, Inc.," and is the holding company for substantially all of NTL's businesses and investments in continental Europe as well as other minority investments and interests. NTL Communications Corp., was renamed "NTL Incorporated" and is the holding company for substantially all of Old NTL's businesses and operations in the United Kingdom and Ireland. For a more complete description of the business, investments and operations of NTL Europe, Inc., as well as significant risks relating to an investment in the Company and its securities, please refer to the Company's current report on Form 8-K filed today with the Securities and Exchange Commission. In addition, on the Effective Date and pursuant to the Plan, all previously outstanding public debt, equity securities, warrants and stock options of Old NTL Inc., were cancelled and the Company issued 20,000,000 shares of common stock, par value $0.01 per share, together with associated preferred stock purchase rights, and approximately 7,364,000 shares of 10% Fixed Coupon Redeemable Preferred Stock, Series A, par value $0.01 per share (with a $50.00 liquidation preference per share) (the "Preferred Stock"). Pursuant to the Confirmation Order, $25 million of Preferred Stock was redeemed by the Company Friday with such redemption for procedural purposes being treated as a distribution under the Plan. Immediately after such redemption, approximately $343 million of liquidation preference of Preferred Stock remains outstanding, which is equal to approximately 6,864,000 shares of Preferred Stock. For a more complete description of the Company's securities, please refer to the Form 8-A/A filed with the Securities and Exchange Commission. For further information, please visit the Company's Web site at http://www.ntleurope.com NTL INC: Successfully Emerges from Chapter 11 Proceedings --------------------------------------------------------- NTL Incorporated (formerly NTL Communications Corp.) announced that its financial recapitalization plan has been successfully completed and the Company has emerged from Chapter 11 proceedings in the United States. The company formerly known as NTL Incorporated and its subsidiaries have been reorganized into two separate companies: NTL Incorporated, formerly known as NTL Communications Corp., comprising Old NTL's UK and Ireland businesses, and NTL Europe, Inc., formerly known as NTL Incorporated, comprising Old NTL's assets in continental Europe as well as other minority investments and interests. The Company's common stock (CUSIP 62940M104) and Series A warrants (CUSIP 62940M138) will trade on NASDAQ commencing Monday, January 13, 2003 under the symbols of NTLI and NTLIW, respectively. Shares of common stock of Old NTL, which previously traded under the symbol NTLDQ, have been cancelled. Under the recapitalization plan, approved by the creditors of Old NTL and confirmed by the U.S. Bankruptcy Court for the Southern District of New York, approximately $10.9 billion in debt has been converted into equity in the two reorganized companies. Consummation of the recapitalization plan was subject to a number of conditions, all of which have now been met. In connection with the Company's emergence from Chapter 11, the Company and certain of its subsidiaries issued $558.24 million aggregate principal face amount of 19% Senior Secured Notes due 2010. Initial purchasers of the notes also purchased 500,000 shares of Common Stock on the Effective Date. The gross proceeds from the notes and such shares totaled $500 million. The Company's lending banks in the UK have agreed to the issuance of the Notes as well as to certain amendments to the existing banking facilities. The $630 million DIP facility has been repaid in full. On the Effective Date, all specified previously outstanding public debt and equity securities of the Company were cancelled and the Company issued (a) 50,500,969 shares of its common stock, par value $0.01 per share, and (b) eight year warrants to purchase 8,750,496 shares (subject to adjustment) of its common stock at an exercise price of $309.88 per share (subject to adjustment). As previously announced, the number of shares and warrants issued was reduced from the amounts originally cited in the Plan. "[Fri]day's announcement marks a new beginning for the Company and is a tribute to the tremendous cooperation of our creditors and their confidence in NTL," said Barclay Knapp, chief executive officer of the Company. "Working with our creditors, we have successfully completed our recapitalization and have significantly reduced our debt." "Operationally, despite being in US Chapter 11 and a challenging business environment, NTL has made steady progress during 2002, improving our products and services, reducing our churn rate and generating three consecutive quarters of positive operating cash flow. Our strategy going forward is to focus on delivering profitable growth and returning to service excellence." Summary of the Recapitalization Plan: Pursuant to the recapitalization plan, Old NTL's bondholders received, in the aggregate, 100% of the initial equity of the Company and approximately 86.5% of the initial equity of NTL Europe Inc. NTL (Delaware) Inc.'s former bondholders had the opportunity to reinvest all or a portion of NTL (Delaware), Inc. cash to which they were otherwise entitled under the recapitalization plan in additional shares of common stock of NTL Incorporated. Preferred and common stockholders of Old NTL, including France Telecom, received a package of equity rights priced at a $10.5 billion enterprise value and Series A warrants entitling them to purchase new shares of common stock of the Company at the consummation of the plan (in the case of the equity rights) and for the duration of the eight-year warrants, at prescribed prices. Only a limited number of stockholders and bondholders exercised these rights. - Holders of Diamond Cable Communications Limited notes received their pro rata share of 6,817,934 shares of NTL Incorporated Common Stock; - Holders of the former NTL Communications Corp's senior notes received their pro rata share of (i) 41,376,048 shares of NTL Incorporated Common Stock, (ii) 74,425 shares of NTL Europe, Inc. Preferred Stock (assuming a $50.00 liquidation preference per share), (iii) 0.725% of the Delaware Cash Amount (as defined in the Plan), (iv) 5.012% of the NTL Cash Amount (as defined in the Plan), and (v) the entitlement to the value of 331,222 shares of NTL Europe, Inc. Common Stock pursuant to the terms of the recapitalization plan; - Holders of the former NTL Communications Corp.'s subordinated notes received their pro rata share of (i) 823,129 shares of NTL Incorporated Common Stock, (ii) 6,615 shares of NTL Europe, Inc., Common Stock, (iii) 1,492 shares of NTL Europe, Inc. Preferred Stock (assuming a $50.00 liquidation preference per share), (iv) 0.014% of the Delaware Cash Amount, and (v) 0.100% of the NTL Cash Amount; - Holders of NTL (Delaware), Inc. subordinated notes (other than France Telecom), received their pro rata share of (i) 665,314 shares of NTL Incorporated Common Stock, (ii) 10,692,532 shares of NTL Europe, Inc., Common Stock, (iii) 5,879,240 shares of NTL Europe, Inc. Preferred Stock (assuming a $50.00 liquidation preference per share), and (iv) 85.540% of the Delaware Cash Amount; - Holders of the former NTL Incorporated's subordinated notes (other than France Telecom) received their pro rata share of (i) 317,576 shares of NTL Incorporated Common Stock, (ii) 6,270,159 shares of NTL Europe Inc., Common Stock, (iii) 1,408,861 shares of NTL Europe, Inc. Preferred Stock (assuming a $50.00 liquidation preference per share), (iv) 13.720% of the Delaware Cash Amount, and (v) 94.887% of the NTL Cash Amount; - Holders of the former NTL Incorporated's old senior preferred stock received their pro rata share of (i) 749,119 NTL Incorporated Series A Warrants, (ii) 642,102 shares of NTL Europe, Inc. Common Stock; - France Telecom received (i) 100% of the former NTL Incorporated's interest in Suez Lyonnaise Telecom, (ii) 6,040,347 NTL Incorporated Series A Warrants, and (iii) 376,910 shares of NTL Europe, Inc. Common Stock; - Holders of the former NTL Incorporated's common stock (excluding France Telecom) will receive their pro rata share of (i) 1,960,536 NTL Incorporated Series A Warrants, and (iii) 1,680,459 shares of NTL Europe, Inc. Common Stock; and - Holders of the former NTL Incorporated's warrants and options were not entitled to, and did not, receive or retain any property or interest on account of such old warrants and old options. For more information on NTL Europe Inc. (formerly known as NTL Incorporated), please refer to their Form 8-K filed with the SEC or to their Web site at http://www.ntleurope.com OVERHILL FARMS: Posts Lower Earnings for Year Ended September 29 ---------------------------------------------------------------- Overhill Farms, Inc., was formed in 1995 as a Nevada corporation. In May 1995, the Company acquired all of the operating assets of IBM Foods, Inc., for a cash payment of $31.3 million, plus the assumption of certain liabilities. While its business is nationwide, its headquarters are located in Vernon, California, and it has facilities throughout Southern California. During August 2000, the Company purchased the operating assets and trademarks of the Chicago Brothers food operations from a subsidiary of Schwan's Sales Enterprises, Inc., for total consideration of $4.2 million, consisting of cash of $3.3 million and a note payable to the seller for $900,000. The Company was a 99% owned subsidiary of TreeCon Resources, Inc., formerly known as Overhill Corporation, until the completion of its spin-off in October 2002. In the spin-off, TreeCon Resources distributed all of the outstanding shares of Overhill Farms' common stock that it owned to the holders of record of TreeCon Resources common stock as of the close of business on September 30, 2002. Overhill Farms, Inc., is a value-added manufacturer of quality frozen food products including entrees, plated meals, meal components, soups, sauces, poultry, meat and fish specialties. It is positioned as a provider of custom prepared foods to a number of prominent customers such as Albertson's, Jenny Craig Products, Carl's Jr., Jack in the Box, Panda Restaurant Group, Schwan's and King's Hawaiian/Pinnacle Foods as well as most domestic airlines, including American Airlines, United Airlines and Delta Airlines. For the fiscal year ended September 29, 2002, the Company's net revenues decreased $24,039,000 (14.8%) to $138,119,000 as compared to $162,158,000 for the fiscal year ended September 30, 2001. This revenue decrease is substantially the result of a decrease in airline sales during the period. In 2002, sales to airline customers were approximately $35.0 million, or 25.3% of total net sales as compared to sales of $54.7 million, or 33.8% of total net sales in 2001. The tragic events of September 11, 2001 have significantly impacted Overhill Farms' sales to airline-related customers. Though the long-term effect of these events on the airline industry, airline revenues, and on Overhill Farms business in particular, cannot be accurately determined at this time, the Company is estimating that in the near term, sales to airline customers will experience little to no growth from 2002 levels. In cost saving measures the Company has begun to consolidate certain of its home office, manufacturing and warehousing, product development, and marketing and quality control facilities into a single location. Though it is currently in the process of implementing various stages of this plan, management believes that when the plan is fully implemented, the Company should expect to achieve significant operating efficiencies as well as a reduction of its dependence on outside cold storage facilities. However, in the near term, the Company showed only net income for the fiscal year ended September 29, 2002 of $1,030,000 as compared to $2,242,000 for the fiscal year ended September 30, 2001. As of June 30, 2002, the Company was in violation of certain financial covenants with respect to its financing arrangements with the Bank and its senior subordinated creditor. As of September 11, 2002, it had received a waiver of these violations from the Bank and an amendment to its financial covenants with its senior subordinated creditor, effective as of June 30, 2002. Additionally, the Company entered into further amendments to its financing arrangements with both creditors, whereby, among other things, future financial covenant requirements were modified to levels more consistent with the the Company's current and future expected results of operations. As of September 29, 2002, Overhill Farms was in compliance with all of its amended financial covenants. Management believes, based upon historical performance, current results of operations for the fiscal year ended September 29, 2002 and forecasted performance for all of fiscal 2003, that it is probable that Overhill Farms will be in compliance with all of its revised financial and other covenant requirements. Accordingly, the Company has classified its outstanding senior secured debt, which matures in November 2003, and its senior subordinated debt, which matures in November 2004, as long-term, except for contractually current maturities. In the future, the failure to achieve certain revenue, expense and profitability forecasts could result in a violation of the Company's amended financial covenants under its financing arrangements, which could have a material adverse effect on its financial condition, results of operations or cash flows. OWENS CORNING: Wins Approval of Staubach Management Agreement ------------------------------------------------------------- Owens Corning and its debtor-affiliates obtained Court approval of the execution of a two-year real estate portfolio management services agreement with Great Lakes Corporate Real Estate Partners LLC, doing business as The Staubach Company, Great Lakes Region, and Staubach Global Services Inc. The Court further approves the indemnification provisions in the Staubach Agreement under these terms: A. The Debtors are authorized to indemnify, and will indemnify, Staubach in accordance with the Staubach Agreement for any claim arising from, related to or in connection with the services provided for in the Staubach Agreement, provided, however, that indemnification is approved by the Court; B. Notwithstanding any provisions of the Staubach Agreement to the contrary, the Debtors will have no obligation to indemnify Staubach or provide contribution or reimbursement to Staubach for any claim or expense that is either: -- judicially determined to have resulted primarily from the willful misconduct, gross negligence, bad faith or self-dealing of Staubach, or -- settled prior to a judicial determination as to Staubach's willful misconduct, gross negligence, bad faith or self-dealing, but determined by the Court, after notice and hearing to be a claim or expense for which Staubach should not receive indemnity, contribution, or reimbursement; C. If, before the earlier of the entry of an order confirming a Chapter 11 plan in these cases, and the entry of an order closing these Chapter 11 cases, Staubach believes that it is entitled to the payment of any amounts by the Debtors on account of the Debtors' indemnification, contribution and reimbursement obligations under the Staubach Agreement, including the advancement of defense costs, Staubach must file an application in this Court, and the Debtors may not pay any amount to Staubach before the entry of a Court order approving the payment. This statement is intended only to specify the period of time during which the Court will have jurisdiction over any request for indemnification, contribution or reimbursement by Staubach and not a provision limiting the duration of the Debtors' obligation to indemnify Staubach; and D. Notwithstanding any provisions of the Staubach Agreement to the contrary, in the event that Staubach is required to contribute to any losses, claims, damages, liability or expenses, any limitation of the contribution in the Staubach Agreement will not apply; and E. The United States Trustee will have the right to object to the indemnification provisions approved if, during the Debtors' cases, the United States Court of Appeals for the Third Circuit issues a ruling in the appeal from the decision of the United States District Court for the District of Delaware with respect to indemnification right; provided that the United States Trustee will be required to file any objection within 60 days after the date the United States Court of Appeals for the Third Circuit issues the ruling. * * * The Debtors have determined that it is desirable to obtain outside support for the servicing, administration and management of the portfolio. There are two types of services that Staubach will render to the Debtors -- Administration and Transaction Services. The Administration Services A. Scope of Services: Staubach will appoint a real estate administrator who will perform a variety of ministerial tasks for the daily upkeep and operation of the Debtors' portfolio. The administrator is expected to: -- create files and manage the Portfolio within a standard organized filing system; -- create and maintain a database of the Portfolio; -- process real estate documents including lease renewals and insurance certificates; -- coordinate accounts payable through the Debtors' accounting department; -- coordinate accounts receivable for the Debtors' subleases; -- perform desktop audits; -- validate expenses; and -- assist in the generation of periodic real estate reports; B. Fees and Compensation: The Debtors will pay Staubach an initial start-up fee equal to $15,000, on account of license fees for the real estate administration software to be provided to the Debtors under the terms of the Agreement, as well as other start-up and transition costs. The Debtors will also pay Staubach a one-time fee of $300 per record for the cost of lease abstraction and data input activities. Separate from the start-up fees, the Debtors will pay Staubach a $6,000 Administration Service Fee per month, which may be adjusted upward or downward as leased or owned properties are added to or deleted from the Portfolio. Staubach, in addition, will be entitled to a percentage, 25% or another agreed amount, of any cash recovery the Debtors realize as a result of Staubach's administration of the portfolio, including recoveries on account of improperly billed and paid rent. Staubach may be entitled to certain reimbursements of out-of-pocket expenses associated with start-up activities and other ongoing administration services. The Transaction Services A. Scope of Services: Staubach will assist the Debtors in the management of the portfolio, by providing certain Transaction Services. Among other things, Staubach will: -- verify the Debtors' business needs for a real estate related project and ensuring its integration with the Debtors' overall business strategy; -- provide market research reports and analysis tailored to the Debtors' requirements; -- arrange for site visits and presentations to the Debtors, if necessary; -- consult with the Debtors on the development and preparation of a Request for Proposal form for each of the standard project types in which the Debtors are typically involved; -- evaluate proposals; -- conduct due diligence in connection with solicitation of appropriate alternative properties; -- document leases and assist in coordination of documentation process; -- process and execute documents; and -- provide standard real estate brokerage services; B. Fees and Compensation: The Debtors will pay Staubach a monthly Account Support Fee as reimbursement for Staubach's actual costs associated with non-brokerage-fee- bearing activities in support of the management of the Debtors' portfolio, including certain employment costs and business expenses. These expenses will be paid on the basis of the actual costs incurred by Staubach for activities and are expected to be lower than, and not in excess of, the cost incurred internally by the Debtors prior to the implementation of the Agreement. Staubach will also be entitled to commissions for: -- new leases the Debtors enter into with the support and service of Staubach, -- renewal or expansion of certain other leases, and -- properties acquired or disposed of by the Debtors; C. Revenue Rebate: This provision requires Staubach to credit the Debtors a portion of the commissions it receives from third parties. Each month, Staubach will be required to credit the Debtors against its monthly invoice for the Administration Services Fee and the Account Support Fee in an amount equal to one-half of the transaction fees Staubach received in the preceding month. Credit balances, if any, are carried forward and applied to subsequent months. At the end of a calendar year, any unapplied credit balances are adjusted pursuant to a prescribed formula and the remaining balance is either paid to the Debtors or applied to subsequent monthly invoices, at the Debtors' option. The agreement specifically provides that: "On a calendar year basis, any unapplied credit balance will be adjusted so that the total credits received by [the Debtors] for the calendar year do not exceed the annual gross billings for the Administration Services Fee and Account Support Fee (net of any Cost Recovery/Fees) for the calendar year plus Twenty Percent (20%) of any Transaction Fees in excess of two (2) times such gross billings for the Administration Services Fee and Account Support Fee (net of any Cost Recovery/Fees) for such calendar year." The Debtors anticipate that the Fees under the agreement will be $300,000 over the year, subject to reduction on account of the rebate program. (Owens Corning Bankruptcy News, Issue No. 43; Bankruptcy Creditors' Service, Inc., 609/392-0900) PACIFIC GAS: Pushing for Approval of DWR Operating Agreement ------------------------------------------------------------ On December 19, 2002, the California Public Utilities Commission issued Decision 02-12-069 adopting an "operating order" that requires all investor-owned utilities to provide contract administration services to the California Department of Water Resources, effective January 1, 2003. The CPUC issued the Operating Order after concluding that the utilities had not succeeded in reaching an agreement with DWR. However, the CPUC specifically left open the door for the utilities to enter into an operating agreement superseding the Operating Order, if an agreement can be mutually agreed upon. The CPUC stated in its Order: "We understand that DWR believes that there is a realistic possibility that such an Operating Agreement can be worked out with the utilities through continued negotiations and we continue to support these efforts. The utilities may continue to negotiate with DWR to attempt to reach consensus on a mutually acceptable Operating Agreement. If such an agreement is reached, the utilities should submit the agreement to the Commission for approval and request termination of the Operating Order. Assuming that the agreement is substantially similar to the Operating order we adopt today, we anticipate that it could be approved on an expedited basis, after the necessary public review and comment." Julie B. Landau, Esq., at Howard, Rice, Nemerovski, Canady, Falk & Rabkin, PC, informs the Court that Pacific Gas and Electric Company and DWR have finalized the terms of an operating agreement on December 19, 2002 following months of negotiations, and executed the Operating Agreement on December 20, 2002. The Operating Agreement ensures that the necessary legal structure is in place among the entities to allow PG&E to assume the contract administration functions as contemplated by CPUC's Decision 02-09-053 -- the Allocation Decision. On December 20, 2002, PG&E filed with the CPUC an "Expedited Motion To Terminate Operating Order And Approve Operating Agreement". In the Expedited Motion, PG&E requested that the CPUC approve the Operating Agreement on an expedited basis so that contract administration services can be performed under a mutually acceptable agreement between DWR and PG&E by January 1, 2003. PG&E, together with another utility, the San Diego Gas and Electric Company, also filed a joint motion to stay the Operating Order as to them. PG&E and San Diego committed that they would perform contract administration services under their Operating Agreements on January 1, 2003, on an interim basis, pending the CPUC's action on the Operating Agreements. In light of the importance of a smooth and orderly transfer of contract administration functions from DWR at the start of the new year, PG&E sought and obtained Judge Montali's permission to begin performing under the Operating Agreement. "Under the CPUC's Allocation Decision, PG&E will be performing the day-to-day scheduling, dispatch and administrative functions for the DWR Contracts allocated to its portfolio, beginning January 1, 2003. Therefore, it is necessary for PG&E and DWR to have an operating agreement in place setting forth the terms and conditions applicable to the administration of the allocated DWR Contracts," Ms. Landau explains. The CPUC took no action on PG&E's requests to make the Operating Agreement effective at its final meeting of the year on December 30, 2002. On December 30, 2002, PG&E filed an application for rehearing of the Operating Order decision with the CPUC. On January 1, 2003, after having reserved all rights associated with challenges to the Operating Order, PG&E commenced providing contract administration, scheduling and dispatch services to the DWR under the CPUC's Operating Order. The CPUC's Allocation Decision allocated DWR's contracts with third party suppliers among the IOU's customers for operational and administrative purposes only. The DWR Contracts involve a large number of bilateral power contracts between DWR and the third party power suppliers to obtain power for the purposes of supplying the PG&E's and the IOU's retail customers. Although the Operating Order and the Operating Agreement have fundamentally the same objectives, the operating agreement, among other things: (1) provides an adequate contractual basis for establishing a limited agency relationship between PG&E and DWR; (2) limits PG&E's contractual liability to DWR to $5,000,000 per year plus 10% of damages in excess of $5,000,000 with a limit of $50,000,000 over the term of the agreement. DWR also releases PG&E from any liability for the damages in excess of the limitations on certain liabilities except for liability resulting from PG&E's gross negligence or willful misconduct; and (3) clarifies that DWR is not in the business of reviewing PG&E's least-cost dispatch, other than to verify compliance with the supplier contracts. Pursuant to the Operating Agreement, PG&E will take on contract administration functions under the allocated DWR Contracts assigned to its electric portfolio, acting as DWR's limited agent. In particular: -- PG&E will schedule and dispatch the DWR resources in its electric portfolio so as to best ensure least cost dispatch of the entire portfolio; -- PG&E will provide billing and settlement services to DWR, although all payments for electricity received under the allocated DWR Contracts will be made by DWR directly to its counter parties under the electric supply contracts; -- PG&E will, acting as DWR's limited agent and on its own behalf, sell surplus power for the portfolio and allocate the revenues from the sales on a pro-rata basis as directed by the CPUC; -- PG&E will also purchase natural gas do DWR's behalf, acting as its limited agent, for provision to suppliers under the allocated DWR Contracts; -- DWR will continue to hold all legal and financial responsibility under the allocated DWR Contracts. DWR will also remain financially responsible for the costs of the gas purchases; and -- The Operating Agreement does not constitute an assignment of the allocated DWR Contracts to PG&E in any respect. The Operating Agreement also addresses the division of responsibility among the CPUC, DWR and PG&E in relation to the management of the allocated DWR Contracts: (i) PG&E is to perform the functions under the Operating Agreement in a commercially reasonable manner, exercising good utility practice in a fashion reasonably designed to serve the overall best interests of its and DWR's retail electric customers; (ii) If PG&E requests, DWR will provide evidence in the CPUC proceedings describing its own and PG&E's performance under the Operating Agreement; (iii) DWR acknowledges the CPUC's exclusive authority over whether PG&E has managed allocated power available under the DWR Contracts in a just and reasonable manner; and (iv) PG&E acknowledges DWR's separate and independent right to evaluate and enforce its commercial performance under the Operating Agreement. PG&E will incur additional costs associated with the services to be provided to DWR under the Operating Agreement, Ms. Landau says. PG&E estimates these costs to be $2,500,000 to $5,000,000 per year. But at its sole election, PG&E will recover these costs, either through DWR's direct reimbursement or, if authorized by the CPUC, in its retail rates. (Pacific Gas Bankruptcy News, Issue No. 51; Bankruptcy Creditors' Service, Inc., 609/392-0900) PENN TREATY: S&P Junks $45 Million Subordinated Debt Rating ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'CC' subordinated debt rating to Penn Treaty American Corp.'s ('CCC-'/Stable) $45 million, 6.25% convertible subordinated notes, which are due Oct. 15, 2008. "The notes are offered as part of a rights offering to holders as of Nov. 25, 2002, of the company's common stock, its existing convertible subordinated notes due 2008, and its existing convertible subordinated notes due 2003," explained Standard & Poor's credit analyst Neal Freedman. Upon subscription of at least $20 million for the notes, the notes will have identical terms to the existing 'CC' rated notes due in 2008, except that the company will lower the conversion price of both the new notes and the existing 2008 notes to $2.50 per share from $4.50 per share. PG&E CORP: Files Second Round of Comments on NOPR with FERC ----------------------------------------------------------- PG&E Corporation (NYSE: PCG) filed its second round of comments with the Federal Energy Regulatory Commission, supporting the Commission's Notice of Proposed Rulemaking on Standard Market Design. In its filing, PG&E Corp., stated that the Commission's efforts to amend its market design regulations would remedy undue discrimination in the provision of interstate transmission services, and facilitate development of well-functioning electric wholesale energy markets in all regions across the nation, which will ultimately benefit consumers. PG&E Corp. supports the Commission's SMD efforts, including: -- Using Congestion Revenue Rights, a system of financial rights for customers to protect against congestion costs; PG&E Corp., recommends there be a variety of CRR products available in the market. -- Measures needed to plan and develop the transmission infrastructure essential to support competitive power markets. -- A market design for the Western Interconnection that reduces transaction inefficiencies. -- A long-term resource adequacy requirement; PG&E Corp. recommends regional flexibility in the determination of the aggregate reliability margin. -- The Commission's preference for a regional transmission planning process. "PG&E Corp., supports the Commission's objective to implement structural changes to market design necessary to improve the functioning of the nation's wholesale power markets and transmission grid. [Our] comments are intended to share past experiences, provide reactions to the alternatives proposed in the NOPR, and identify areas of concern -- all with the goal of assisting the Commission in its efforts to craft standardized terms and conditions of transmission service and power market operations that will benefit consumers and promote investments in infrastructure." PREMCOR INC: Will Publish Fourth Quarter Results on January 21 -------------------------------------------------------------- Premcor Inc., (NYSE: PCO) will report its operating results for the fourth quarter and year ended December 31, 2002 on January 21, 2003. The company recently announced that it has filed a registration statement pursuant to the Securities Act of 1933 relating to its proposed sale of up to $287.5 million of its common stock. Accordingly, the company will not hold its customary quarterly conference call. Morgan Stanley & Co., Incorporated will be the sole book-running managing underwriter for the offering. When available, a copy of the preliminary prospectus for the offering may be obtained from the offices of Morgan Stanley, 1585 Broadway, New York, NY 10036. Premcor Inc., is one of the largest independent petroleum refiners and marketers of unbranded transportation fuels and heating oil in the United States. * * * As reported in Troubled Company Reporter's December 4, 2002 edition, Fitch Ratings affirmed the ratings of Premcor USA, Premcor Refining Group and Port Arthur Finance Corp. in the low- B ranges. Fitch says the Rating Outlook for the debt of PUSA, PRG and PAFC remains Positive. PRIME FINANCE: Fitch Removes B Class B-2 Notes Rating from Watch ---------------------------------------------------------------- Fitch Ratings completed a review of a series of equipment lease transactions whose ratings have been on Rating Watch Negative. Based on the review, it was determined that the tranches listed below are performing in line with their current ratings. As a result, Fitch removes the following securities from Rating Watch Negative: Prime Finance Corporation, 1995-A --Class A-1 notes 'AA'; --Class A-2 notes 'A'; --Class A-3 notes 'BBB'; --Class B-1 notes 'BBB-'; --Class B-2 notes 'B'. STRUCTURED ASSET: Fitch Takes Rating Action on Various Bonds ------------------------------------------------------------ Fitch takes rating action on the following Structured Asset Securities Corporation's mortgage pass-through certificates: SASCO 1996-4: --Class B3 downgraded to 'BB' from 'BBB'; --Class B4 downgraded to 'D' from 'CCC'. SASCO 2000-3, Group 1: --Class 1B5 downgraded to 'CCC' from 'B'. SASCO 2000-3, Group 2: --Class 2B4 rated 'BB' is placed on Rating Watch Negative; --Class 2B5 downgraded to 'C' from 'B'. SASCO 2001-2: --Class B4, rated 'BB', is placed on Rating Watch Negative; --Class B5 downgraded to 'C' from 'B'. SASCO 2001-5: --Class B5 downgraded to 'CCC' from 'B'. SASCO 2001-9: --Class B4, rated 'BB', is placed on Rating Watch Negative; --Class B5 downgraded to 'C' from 'B'. The action is the result of a review of the level of losses incurred to date as well as Fitch's future loss expectations on the current severely delinquent loans in the pipeline relative to the applicable credit support levels as of the Dec. 25, 2002 distribution. TANDYCRAFTS INC: Expects to File Proposed Chapter 11 Plan Soon -------------------------------------------------------------- On December 31, 2002, Tandycrafts, Inc., together with its wholly owned subsidiaries Tandyarts, Inc., and TAC Holdings, Inc., consummated the sale of substantially all of their assets (together with the assumption of certain liabilities), under section 363 of the Bankruptcy Code, to an affiliate of Newcastle Partners, LP, a Dallas based investment fund. The purchase price for the assets, which was approved in mid-December by the Delaware Bankruptcy Court administering Tandycrafts' chapter 11 cases, was $22,650,000 (plus certain assumed liabilities). Approximately $20,400,000 was paid to satisfy obligations of certain pre-petition secured creditors of Tandycrafts. With the completion of the sale, Tandycrafts expects to file shortly with the Bankruptcy Court a chapter 11 plan of liquidation that will distribute the remaining sale proceeds (after appropriate holdbacks for ongoing costs of administering the chapter 11 cases) and any other remaining estate assets to creditors in accordance with the requirements of the Bankruptcy Code. It is expected that there will be no distributions to the Company's common stockholders under such plan and that all of Tandycrafts' common stock will be cancelled. Mark Schwartz, a director of Tandycrafts, Inc., is the managing partner of Newcastle Partners, L.P. TENFOLD CORP: Responds to Warning on Outsourcing Security Risks --------------------------------------------------------------- TenFold Corporation (OTC Bulletin Board: TENF), provider of the Universal Application(TM) platform for building and implementing enterprise applications with a total shareholders' equity deficit of about $30 million (as of June 30, 2002), weighed in on the New York Times January 6th story "Experts See Vulnerability as Outsiders Code Software" on vulnerabilities of applications development outsourcing. "White House infrastructure protection board Vice Chairman Howard Schmidt has correctly stated that applications development outsourcing is part of a broader discussion on overall security issues," said Dr. Nancy Harvey, president and CEO of Tenfold. "He's right that applications security is compromised by outsourcing applications development beyond company walls -- whether to India, Pakistan, or just down the road. The euphoria over hoped-for IT savings may be shattered by the harsh reality of compromised intellectual property or insidious and hard-to-spot malicious programming." "What's the difference between a terrorist and a well- intentioned programmer just making a mistake that opens a system to malicious intruders?" said Adam Joseph, President of Washington, D.C.-based TruSecure and former founder and president of AiB, a software reliability tools company acquired by Platinum Technology. "The applications development outsourcing discussion ignores the broader issue that traditional applications development involves so many lines of code written by so many programmers that it is impossible to code those applications to be secure." "In practice, it is impossible to protect conventional application programs from malicious programmers, because no one can find a time-bomb in 20-million lines of code. A terrorist, business subversive, or error-prone programmer could easily corrupt most programs with little risk of detection whether working at home or abroad," said Jeffrey L. Walker, TenFold's founder and CTO. "We expect that businesses planning new mission-critical applications will protect against these security risks by demanding an applications development strategy that mitigates the risk of applications subversion. There is no other responsible path. "When we founded TenFold ten years ago we couldn't imagine the intense interest around applications security arising today," added Mr. Walker. "We set out to invent a technology that would isolate applications content from infrastructure software. It turns out that isolating applications content reduces 20-million lines of code to a few thousand easily-auditable, business- descriptions of applications design. We took this approach to meet the challenge of building and maintaining complex applications faster and cheaper. Today we see the extraordinary value of having made those applications more secure. With TenFold's technology our customers' applications meet the security imperative. "In other words," continued Walker, "outsourcing applications development can be safer if outsourcers use an applications development technology that companies can audit. And, frankly, in-house development will only be safe too, if companies can productively audit applications development results." TenFold (OTC Bulletin Board: TENF) licenses its patented technology for applications development, the Universal Application(TM), to organizations that face the daunting task of replacing obsolete applications or building complex applications systems. Unlike traditional approaches, where business and technology requirements create difficult IT bottlenecks, the Universal Application lets a small, business team design, build, deploy, maintain, and upgrade new or replacement applications with extraordinary speed and limited demand on scarce IT resources. For more information, visit http://www.10fold.com TEREX CORP: Forms & Introduces Financial Services Subsidiary ------------------------------------------------------------ Terex Corporation (NYSE: TEX) announced the formation of Terex Financial Services. This financial services unit will offer Terex customers a complete line of financial products and services to assist in the acquisition of Terex equipment. In North America, Terex Financial Services will work with a dedicated team from GE Vendor Financial Services, a leading financial services and solutions provider. Commenting on the announcement, Ronald M. DeFeo, Terex's Chairman and Chief Executive Officer, said, "Terex Financial Services represents an important advance in Terex's ability to provide a full range of products and services to our customers, and also to level the competitive playing field. The formation of Terex Financial Services in coordination with a strong business partner will enable us to offer financial products, services and cost-effective financing solutions to our customers to meet their business needs. Further, it will allow us to participate in the financing of our products in North America with minimal expense and without adding any additional debt to Terex's balance sheet." Joseph F. Apuzzo, President of Terex Financial Services, went on to add, "The combination of Terex's customer knowledge and breadth of products and GE Vendor Financial Services' operating efficiency and expertise in financial services will provide a powerful presence in the marketplace. Terex Financial Services will allow us to better service our customers' needs and continue to build on Terex's mission to improve customer productivity and return on invested capital." Terex Corporation is a diversified global manufacturer based in Westport, Connecticut, with pro forma 2001 annual revenues of $3.4 billion. Terex is involved in a broad range of construction, infrastructure, recycling and mining-related capital equipment under the brand names of Advance, American, Amida, Atlas, Bartell, Bendini, Benford, Bid-Well, B.L. Pegson, Canica, Cedarapids, Cifali, CMI, Coleman Engineering, Comedil, CPV, Demag, Fermec, Finlay, Franna, Fuchs, Genie, Grayhound, Hi- Ranger, Italmacchine, Jaques, Johnson-Ross, Koehring, Lectra Haul, Load King, Lorain, Marklift, Matbro, Morrison, Muller, O&K, Payhauler, Peiner, Powerscreen, PPM, Re-Tech, RO, Royer, Schaeff, Simplicity, Square Shooter, Telelect, Terex, and Unit Rig. More information on Terex can be found at http://www.terex.com GE Vendor Financial Services is a global leader in developing and providing financial solutions and services to equipment manufacturers, distributors, dealers and their end users. With nearly $25 billion in served assets worldwide, Vendor Financial Services helps its customers drive new revenues and strengthen their existing business by providing superior service, a commitment to quality and the application of the latest e- commerce technology. Vendor Financial Services serves approximately 1,400 manufacturers & distributors, 16,000 dealers, and currently has over 500,000 accounts in 33 countries. * * * As reported in Troubled Company Reporter's Sept. 18, 2002 edition, Standard & Poor's assigned its double-'B'-minus secured bank loan rating to Terex Corp.'s proposed $210 million new term loan C maturing in December 2009. Proceeds from this loan and about $60 million in Terex common stock will be used to finance the acquisition of Genie Holdings Inc., for $270 million. In addition, the double-'B'-minus corporate credit rating was affirmed on Westport, Connecticut-based Terex, a manufacturer of construction and mining equipment. Total rated debt is $1.6 billion. The outlook is stable. The bank loan is rated the same as the corporate credit rating. The total senior secured credit facility of $885 million is comprised of a revolving credit facility of $300 million, a term loan B of $375 million, and the new term loan C of $210 million. The facility is secured by substantially all of the company's assets. Under Standard & Poor's simulated default scenario, the company's cash flows were stressed and the resulting enterprise value would not be sufficient to cover the entire bank loan in the event of a default. However, there is reasonable confidence of meaningful recovery of principal, despite potential loss exposure. TIGER TELEMATICS: Executes OEM Agreement with Branson Ltd. ---------------------------------------------------------- Tiger Telematics, Inc. (OTC Bulletin Board: TIGR) -- http://www.tigertelematics.com-- headquartered in Jacksonville, Fl. and with offices in London, UK, said it has executed an OEM Agreement with Branson Ltd. -- http://www.bransonworldplc.com-- to supply the Tiger Telematics products in the Branson product line that includes motorbikes, scooters and ATV bikes. Branson Ltd., based in the UK, has signed a multi-year agreement with Tiger Telematics that provides for the installation of the Tiger product, TT1015, in every model manufactured by Branson. The units will supply an advanced telematics system for the Branson bikes. "Employing the Tigers Telematics technology will allow Branson to upgrade valuable features on the Branson vehicles. The Tiger devise will also permit our customers to obtain affordable insurance for the vehicles. This will enable us to sell more units, creating a competitive advantage for Branson," says Michael Garrard-Locke, founder and Managing Director of Branson, Ltd. "Tiger proved that their system could fulfill our requirements at a very attractive cost model making Tiger Telematics the logical choice for Branson. We intend to increase our sale of motorbikes in the next few years and the Tiger product will be on all of our units." "Along with our recently launched Tiger childtracker product -- http://www.tigerchildtracker.com-- Tiger Telematics has once again delivered a true to life business application that will create value for our customers and shareholders. Our proprietary product is perfect for Branson. This is our first venture into OEM supplier relationships and it is a logical extension of our development. The Tiger device will provide significant customer benefit at a great value. The tiger product will be sold as a part of the completed vehicle and the wireless carrier will operate on a pay as you go basis for monthly usage by the customers," indicates Michael Carrender, Tiger's Chief Executive Officer. Branson Ltd., is a manufacturer of a range of motorbikes, scooters and ATV bikes that it has introduced to the World Market. The Branson product has been designed for the European market using Japanese technology and built in China under strict quality controls. Sold through distributors, Branson is rapidly expanding across Europe and other regions. Tiger Telematics, Inc., is a designer, developer and marketer of mobile telematic systems and services that combine global positioning and voice recognition technology to locate and track vehicles and people down to street level in countries throughout the world. The systems are designed to operate on GSM, which is the standard operating system for wireless carriers in the UK and in Continental Europe, and are currently being marketed to GSM current and potential subscribers, primarily by the company's London-based subsidiaries. At September 30, 2002, Tiger Telematics' balance sheet shows a working capital deficit of about $700,000 and a total shareholders' equity deficit of about $2.6 million. TURBOCHEF TECHNOLOGIES: Falls Below Nasdaq Listing Standards ------------------------------------------------------------ TurboChef Technologies, Inc., (Nasdaq: TRBO) recently received a letter from the staff of Nasdaq indicating that it is not in compliance with the stockholders' equity requirements for continued listing of its common stock on the Nasdaq SmallCap Market. The Company is seeking to obtain the financing necessary to regain compliance and has requested a hearing before a Nasdaq Listing Qualification Panel to review the staff determination. The Company has engaged an investment bank to assist in obtaining financing or other transactions to satisfy the stockholders' equity requirement, although there can be no assurance that any such financing or other transaction will be consummated. The Company will also address at the hearing, the failure of its common stock to maintain the required bid price of $1 per share. There can be no assurances that the panel will grant the Company's request for continued listing of its common stock on the Nasdaq SmallCap Market. TurboChef is the world's leader in rapid cook solutions. The TurboChef oven provides a solution, which delivers a variety of cooked food products. The proprietary rapid cook system, which requires no ventilation, employs a combination of high speed forced air and microwave energy to "cook to order" menu items with restaurant quality at speeds 7-10 times faster than conventional methods of cooking. TurboChef markets to both traditional establishments such as quick service and conventional restaurants and non-traditional foodservice locations such as petrol station convenience stores, cinemas, C- stores, sports arenas and stadiums and airport concessions. * * * Liquidity TurboChef's capital requirements in connection with its product and technology development and marketing efforts have been and will continue to be significant. Additional capital will be required to fund current operations. Since its inception, the Company has not generated significant revenue from operations and has been substantially dependent on loans and capital contributions from its principal stockholders and proceeds from the sale of its securities. Furthermore, the Company will continue to be dependent on outside sources of financing for the foreseeable future to fund its working capital needs. The Company anticipates that it will need to raise this additional capital as early as the fourth quarter of 2002, but no later than the end of the first quarter of 2003. No assurances can be made that the Company will generate the necessary sales from its rapid cook ovens or from the proceeds from the sales of its securities or other financing sources to generate the necessary working capital. As a result of these conditions, the independent certified public accountant's report on the Company's financial statements for the year ended December 31, 2001 contains an explanatory paragraph regarding the Company's ability to continue as a going concern. The Company has, and will continue to hold inventory, due to its long manufacturing cycle. As of September 30, 2002, the Company held $1,444,000 of finished goods inventory (ovens), $76,000 of demonstration inventory (ovens used for customer demonstrations, tests and pilot programs) and $1,113,000 of parts inventory (used for manufacturing and service). The Company may offer demonstration inventory free of charge or at reduced prices to certain potentially large customers, who wish to test and evaluate an oven prior to purchase. Should sales fail to materialize, or materialize at slower rates than currently anticipated by the Company, additional working capital will be required to cover the carrying costs of component parts and purchase completed ovens. No assurances can be made that the Company will generate the necessary sales of its ovens or from the proceeds from the sales of its securities or other financing sources to generate the necessary working capital. In February 2002, the Company and Whitbread Group PLC entered into an agreement to terminate an extended warranty originally purchased by Whitbread, from the Company, in September 1999. Under the new agreement, TurboChef is required to pay Whitbread o460,000 (approximately $670,000) plus Value Added Tax over a 24 month period, beginning in March 2002. In return, Whitbread has released TurboChef from its obligation to continue its warranty on 260 older model ovens. On signing the agreement, TurboChef made an initial payment to Whitbread of o50,000 (approximately $72,000) plus VAT and thereafter has agreed to pay o15,000 (approximately $22,000) plus VAT a month for the next 24 months, with a final payment of o50,000 plus VAT due the final month. The Company did not make the required payments for the months of September, October and November 2002 on a timely basis. Although, the Company believes it is now current in its obligations under this agreement, there can be no assurance that Whitbread will not allege a breach of contract and seek a legal remedy under the law due to Company's failure to make the required payments on a timely basis. In March 2002, the Company agreed to purchase from the Shandong Xiaoya Group approximately $14 million of C-3 ovens over a seventeen month period. In addition, in connection with the manufacturing agreement the Company will be required to use working capital to purchase certain component parts that will be supplied to Xiaoya for use in the ovens. Although the Company entered into the agreement with Xiaoya in anticipation that its sales of C-3 ovens will increase from current levels, there can be no such assurance that any sales will materialize. Through the end of October 2002, the Company has been purchasing at a rate of approximately 51% ($2.4 million of ovens as compared to $4.7 million of ovens) of what was required under the terms of the agreement. The slower rate of oven purchases is a result of sales by the Company materializing at a lower rate than anticipated. The Company does not currently have a significant number of purchase orders or firm commitments from customers to purchase its C-3 ovens in 2003. It is the Company's belief that the reduced levels of oven purchases by the Company are currently acceptable to Xiaoya. However, there can be no assurance that Xiaoya will not take action against the Company for failure to make the required oven purchases. Such action could include, among others, a decision by Xiaoya to cease production of C-3 ovens. Currently, Xiaoya is the Company's sole supplier of C-3 ovens. In the first quarter of 2002, the Company expanded its direct sales and marketing efforts. As a result of slower than anticipated sales of ovens the Company has taken actions to reduce the level of fixed overhead. In the second quarter of 2002, the Company closed its United Kingdom office and reduced its sales personnel. Subsequently, the Company recorded a charge to earnings associated with the closing of this office and reduction in staff. During the third quarter of 2002, the Company made the decision to close its New York office upon the expiration of the current lease and consolidate all activities into the Company's Dallas office. Subsequently, the Company recorded a charge to earnings associated with the closing of this office and reduction in staff. These changes will result in monthly cost savings which may be offset in part by the Company's increased use of outsourced support services and possible new employees. The Company does not currently anticipate any significant increases in lease payments or any other long-term fixed obligations from current levels during the remainder of fiscal 2002. In July 2002, the Company issued a promissory note in the amount of $1,000,000 to Grand Cheer Company LTD, a principal stockholder of the Company, which is secured by 350 C-3 ovens. The Company was to pay approximately $2,800 per oven within five days of receipt of cash from the sale of the ovens. Approximately 150 ovens were sold and cash was received but no payment was made to Grand Cheer. The note was due on October 15, 2002. The note also provided that if the Company did not repay the note in full by October 15th, 2002, all remaining unvested warrants (666,667 warrants) previously granted to Grand Cheer would immediately vest. The Company incurred a non-cash finance charge of $200,000 which was payable upon the maturity of the note as a result of a reduction in the exercise price from $1.20 to $1.00 for 1,000,000 warrants previously issued to Grand Cheer upon its purchase of the Company's Series B Convertible Preferred Stock. The $200,000 finance charge was recorded as interest expense during the third quarter of 2002. The Company is currently in default of this promissory note and is negotiating the restructuring of the loan, which is currently due and payable. The Company believes that it will be able to restructure the terms of this loan, however, there are no assurances that this will occur or that the terms of the restructured loan will be beneficial to the Company. Failure to restructure the loan would have a material adverse effect on the Company, which could include, among other things, repossession by Grand Cheer of the unsold ovens, which were pledged as collateral for the loan. The Company anticipates the need currently to obtain additional sources of funding in order to continue its ongoing operations. However, no assurances can be made that the Company will actually obtain the necessary funding to finance its operations. A failure to obtain additional funding would have significant adverse effects on the Company. All of the above factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. TYCO INT'L: Will Publish First Quarter Results on January 22 ------------------------------------------------------------ Tyco International Ltd., (NYSE: TYC, LSE: TYI, BSX: TYC) will be reporting its first quarter results before the market opens on Wednesday, January 22, 2003. The Company will hold a conference call for investors at 8:30 am EST. The call can be accessed in three ways: -- At the following Web site: http://investors.tycoint.com/medialist.cfm A replay of the call will be available through Tuesday, January 28, 2003 at the same Web site. -- By telephone dial-in with the capability to participate in the question and answer portion of the call. The telephone dial-in number for the participants in the United States is: (888) 428-4479. The telephone dial-in number for the participants in International locations is: (651) 291-0344. Due to capacity limitations on the part of its teleconference service provider, the number of lines available is limited. If these lines have reached their limit, investors will need to call the "listen-only" number provided below. -- By telephone dial-in to participate in a "listen-only" mode. The telephone dial-in number for the participants in the United States is: (866) 254-5937. The telephone dial-in number for the participants in International locations is: (612) 326-0025. The participants' code for all callers is: 670434. Investors who do not intend to ask questions should dial this number directly. The replay is scheduled to be available at 1:45 PM on January 22, 2003 until 11:59 PM on January 28, 2003. The dial- in numbers for the replay are as follows: Domestic (U.S.) (800) 475-6701. International: (320) 365-3844. The replay access code for all callers is: 670435. Tyco International Ltd., is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services; and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in disposable medical products, plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. Tyco International Group's 6.25% bonds due 2003 (TYC03USR1) are trading slightly below-par at about 99 cents-on-the-dollar, DebtTraders reports. For real-time bond pricing, see http://www.debttraders.com/price.cfm?dt_sec_ticker=TYC03USR1 UNION ACCEPTANCE: Reaches Interim Settlement with MBIA Insurance ---------------------------------------------------------------- Union Acceptance Corporation (OTC Bulletin Board:UACAQ) reached an interim settlement with MBIA Insurance Corporation in respect to its adversary proceeding against MBIA in connection with UAC's pending Chapter 11 Bankruptcy proceeding. The interim agreement was approved by the U.S. Bankruptcy Court in an agreed order on January 7, 2003. Under the interim agreement, UAC has dismissed its proceeding against MBIA without prejudice. In addition, MBIA and UAC have agreed that UAC will continue as servicer of UAC's MBIA-wrapped securitization and warehouse portfolios at least through March 31, 2003. MBIA would be permitted to terminate this standstill period on seven days notice if UAC's cash availability were to fall below $1.5 million. Both parties have reserved all rights following termination of the standstill period. MBIA currently wraps all 18 of UAC's outstanding securitizations and its Bank of America warehouse portfolio of approximately $300 million in receivables. UAC sold approximately $200 million of receivables held under its warehouse facility with Wachovia Securities on December 18, 2002 and has indicated its intention to pursue a sale of the Bank of America warehouse as well. "We are pleased with our discussions with MBIA," said Lee Ervin, president and chief executive officer of Union Acceptance Corporation. "Our dialogue continues with MBIA, and we are hopeful that all open issues can be amicably resolved." "With the completion of the sale of our Wachovia-warehoused portfolio last month, our cash position has improved," Ervin continued. "Our cash reserves should remain well above the minimum we have stipulated with MBIA and should be sufficient for our working capital needs as we work through the reorganization process." UAC also announced that its employee retention plan was approved by the Bankruptcy Court on January 8, 2003. The plan provides certain financial assurances to encourage current employees to remain with the company through the reorganization process. "We are pleased that we were able to work with our creditors to provide this important safeguard for our valuable employees," commented John M. Eggemeyer, chairman of Union Acceptance Corporation. Union Acceptance Corporation is a specialized financial services company headquartered in Indianapolis, Indiana. The company's primary business is the servicing of automobile retail installment sales contracts representing primarily late model used, and to an extent, new automobiles purchased by customers who exhibit favorable credit profiles. Union Acceptance Corporation commenced business in 1986 and became an independent public corporation in 1995. By using state-of-the art technology in a highly centralized servicing environment, Union Acceptance enjoys one of the lowest cost servicing structures in the independent prime automobile finance industry. UNITED AIRLINES: Receives Court Approval of Wage Concession ----------------------------------------------------------- UAL Corp. (NYSE: UAL), the parent company of United Airlines, received a ruling from the bankruptcy court that will allow the company to implement interim wage reductions of approximately $70 million a month beginning January 2003 for all of its union groups. Friday's ruling will keep the company on track to meet debtor-in-possession financing covenants and will provide more time for collaborative discussions between the company and its unions regarding the long-term transformation necessary to emerge successfully from Chapter 11. As previously announced, United's pilots, flight attendants, dispatchers and meteorologists ratified wage reduction proposals earlier this week that will now go into effect. The court's order imposes wage reductions on the company's employees represented by the International Association of Machinists, which did not agree to the wage reduction proposals. The wage reductions will remain in effect until the earlier of a final agreement on modifications to the collective bargaining agreements or May 1, 2003, subject to further proceedings before Judge Wedoff. "Now that we have received court approval to take the immediate steps necessary to stabilize our cost structure, we can devote our attention to working with our unions on the longer-term imperatives currently facing the company. From the outset of this process, it has been United's objective to make the necessary changes in a collaborative way. We thank our unions and employees for making the immediate sacrifices necessary for us to be able to continue discussions on the long-term changes needed to re-shape United into a strong and vibrant competitor," said Glenn F. Tilton, chairman, president and chief executive officer. The wages of United's management and salaried employees were reduced effective Dec. 16, 2002, and additional cost-saving measures will be implemented later this month. Court approval is not required for reductions affecting these employees. United Airlines operates more than 1,700 flights a day on a route network that spans the globe. News releases and other information about United Airlines can be found at the company's Web site at http://www.united.com United Airlines' 9.00% bonds due 2003 (UAL03USR1), DebtTraders reports, are trading at about 8 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL03USR1for real-time bond pricing. UNITED AIRLINES: Obtains Stay Relief to Pursue $100MM Tax Refund ---------------------------------------------------------------- UAL Corporation and its debtor-affiliates ask the Court to lift the automatic stay to pursue two separate proceedings currently pending before the United States Tax Court. On November 23, 1998, the Debtors filed a petition in the Tax Court seeking a determination that they made tax overpayments in certain years. The case is entitled UAL Corp. v. Commissioner, U.S. Tax Court Docket No. 18573-98. On July 13, 2001, the Tax Court issued an opinion in the Debtors' favor -- holding that the Debtors were entitled to be reimbursed for the overpayments. On December 6, 2002, the Debtors filed with the Tax Court a settlement stipulation, including calculations for the overpayments. The Tax Court has not yet entered a decision. On December 12, 1999, the Debtors filed a second petition in the Tax Court, also claiming tax overpayments in previous years. The case is captioned UAL Corp. v. Commissioner, U.S. Tax Court Docket No. 15931-99. The Internal Revenue Service conceded defeat and the parties filed another stipulation agreeing that $54,700,000 was due to the Debtors in this second proceeding. The Stipulation promulgated that the repayments be assessed and immediately paid to the Debtors. The decision was entered by the Tax Court on December 9, 2002, without knowledge of these Chapter 11 proceedings. James H.M. Sprayregen, Esq., at Kirkland & Ellis, points out that the Debtors' Chapter 11 proceedings began after the Tax Court had entered the First Stipulation and after the Second Stipulation had been filed, but prior to the Tax Court's entry of a decision on the Second Matter. The Tax Court contends that Section 362(a)(8) of the Bankruptcy Code prohibits it from entering a decision in Tax Case I and that the Tax Court's entry of a decision in Tax Case II violated the automatic stay. The Debtors and the IRS have been asked by the clerk's office at the Tax Court to prepare a joint motion to vacate the Decision. The Decision in Tax Case II should result in a tax refund, including interest, of approximately $100,000,000. The Debtors incorporated this sum into their business plan and intended to use it during the upcoming weeks to help fund operations. Given its size, the refund will be valuable to the Debtors' estates. The Debtors want the Court to modify the automatic stay so they and the IRS can proceed and the Tax Court can enter all necessary orders so the IRS may pay the Debtors its refund. * * * After due deliberation, Judge Wedoff permits UAL to collect the overpayment refund. (United Airlines Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Passenger Service Workers Ratify Labor Cost Pact ------------------------------------------------------------ The Communications Workers of America, which represents US Airways' passenger service workers, ratified a new agreement in support of the company's cost-cutting efforts. The vote was 1938-1933 in favor of the agreement. "[Fri]day's vote by our CWA employees to make additional sacrifices to help US Airways achieve profitability is an extremely critical part of our reorganization plan. Each and every one of them faced an extremely difficult choice and I personally thank them for their resolve in ratifying this agreement," said US Airways President and Chief Executive Officer David Siegel. US AIRWAYS: Flight Attendants Ratify Additional Contract Cuts ------------------------------------------------------------- The Association of Flight Attendants, representing US Airways' cabin-crew employees, ratified an agreement to further cut costs in support of the company's efforts to restructure and emerge from Chapter 11 in March 2003. The agreement was ratified by a 2,704 to 2,157 vote. "Our flight attendants have shown great judgment in ratifying this cost- cutting agreement. Their support of our restructuring brings us that much closer to emergence from Chapter 11," said US Airways President and Chief Executive Officer David Siegel. "I am grateful to each and every US Airways flight attendant for their past and continuing contributions." * * * US Airways flight attendants, represented by the Association of Flight Attendants, AFL-CIO, ratified a package of more contract concessions in the face of management threats to shut down and liquidate the airline. Because of the threat of liquidation and possible loss of all US Airways employees' jobs, a majority of the AFA US Airways Master Executive Council voted to recommend that flight attendants vote "FOR" the contract changes. Sixty-four percent of eligible flight attendants voted, with 55 percent voting "FOR" the new cuts. "We've given wage, benefit and work rule cuts. We're paying significantly more for our health care, bringing home less in our paychecks and now with these latest cuts we must spend more time away from home just to earn the reduced pay we agreed to after the initial round of cuts in August 2002," said AFA US Airways MEC President Perry Hayes. "We've done more than our fair share to keep this airline running. "Dr. Bronner and his management team said these cuts are what they need to succeed," Hayes said. "It's time for management to deliver." More than 50,000 flight attendants at 26 airlines, including 7,000 at US Airways, join together to form AFA, the world's largest flight attendant union. Visit http://www.afausairways.org US Airways Inc.'s 9.625% bonds due 2003 (U03USR1), DebtTraders reports, are trading at about 10 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=U03USR1for real-time bond pricing. VIZACOM INC: Achieves Key 2002-2003 Restructuring Plan Goals ------------------------------------------------------------ Vizacom Inc. (OTCBB:VIZY.OB), a provider of comprehensive information technology product and service solutions, achieved several corporate objectives relating to its 2002-2003 restructuring initiative. These objectives include utilizing $400,000 from a recently completed sale of its Harvard trademark to decrease its bank debt, raising approximately $600,000 in private financing, closing on a $2.5 million credit line with a commercial finance company, and settling a lawsuit with its largest creditor. In addition, the Company's PWR subsidiary restructured debts aggregating approximately $300,000 for longer-term payouts and discounted settlements. The Company's Board of Directors has appointed a new Board Chairman, Douglas Greenwood, and a new board director, Mark Barbera, both principals of the Company's Investment Banking firm. Commenting on the restructuring, Alan W. Schoenbart, the Company's Chief Financial Officer stated: "We have been and will continue to be focused on improving our balance sheet fundamentals and executing on an integrated financing plan that will strengthen the Company and provide the capital to implement our business plan. Our success to date represents significant steps towards that goal." PWR Completes Key Projects in Wireless Networking and Forms Strategic Alliances In the fourth quarter of 2002, The Company's PWR Systems subsidiary completed several wireless network installations. The Company began to move into the market for corporate wireless solutions in the second half of 2002. It has continued to expand its WiFi network on Fire Island, New York, to enhance its wireless service offerings. PWR also formed two strategic alliances that it expects will enhance its competitiveness and provide additional revenue generating opportunities particularly in the market for business wireless services. The alliances are with: -- American VoD, a next generation provider of video-on- demand solutions and other specialized interactive services for new media, entertainment and corporate markets. Under terms of the alliance, PWR will provide procurement and integration services to VoD, enabling VoD to install larger, more sophisticated broadband-based video content delivery and management solutions for its customers. In October 2002, PWR recorded revenues on its first contract with VoD. Kenneth T. Chin, Chairman of American VoD, stated: "We are pleased that this alliance with PWR Systems allows us to focus on creating solutions for our customers and deploying them in a more efficient manner." -- Pocket Solutions, Inc., the manufacturer of the "CoverUP" screen cover for PDA's to provide logistical and order processing services. In December 2002 Vizacom placed its Vizy Interactive NY subsidiary (a/k/a Renaissance Multimedia Inc.), whose operations were discontinued in November 2001, into Chapter 7 bankruptcy. Vizacom Inc., with a total shareholders' equity deficit of about $4.5 million at September 30, 2002, is a provider of comprehensive information technology product and service solutions. Vizacom develops and provides to leading global and domestic companies a range of solutions, including: multimedia products; systems and network development and integration; state-of-the-art managed and co-location services; and data security solutions. Vizacom attracts top, established companies as clients, including: Verizon Communications, WPP Group, and Viacom. Visit http://www.vizacom.com American VoD is a next generation provider of video-on-demand solutions and other specialized interactive services. Its multi- talented team has over sixty years of combined technical and creative experience in the digital interactive services field and can offer its customers a wide spectrum of convergent digital media products guaranteed to meet their satisfaction. American VoD is one of the first companies to provide a complete working solution for IP technology and broadband-based video content delivery and management services for new media, entertainment and corporate markets using proprietary and non- proprietary tools. American VoD has the expertise to provide end-to-end video-on-demand (VoD) solutions to the broadband network service market, including Integrated Communications Providers ("ICP's") and other businesses that require or utilize digital video application services. American VoD is well positioned to be the leader in providing superior, turnkey digital media solutions and content management services to this marketplace. WESTAR ENERGY: Inks Pact with ONEOK to Sell Some Preferreds ----------------------------------------------------------- ONEOK, Inc., (NYSE: OKE) entered into an agreement with Westar Energy, Inc., (NYSE: WR) and its wholly owned subsidiary, Westar Industries, Inc., to repurchase a portion of the shares of ONEOK's Series A Convertible Preferred Stock held by Westar at the prevailing market price, less certain costs and to exchange Westar's remaining shares of Series A Convertible Preferred Stock for new shares of ONEOK's Series D Convertible Preferred Stock. The repurchase and related transactions are subject to approval by the Kansas Corporation Commission and other conditions, including the receipt by ONEOK of proceeds from future equity or other financing transactions. David Kyle, ONEOK's chairman, president and chief executive officer, said, "This agreement removes the uncertainty regarding Westar's ownership position in ONEOK. It represents the positive efforts on the part of the new leadership team at Westar and in particular their President and Chief Executive Officer, Jim Haines. Together we have crafted an agreement that we believe addresses our needs and theirs. We believe that this transaction will ultimately have the effect of increasing our market capitalization and eliminating the use of an accounting pronouncement (EITF Topic No. D-95) that has impacted our earnings calculation resulting in a lower reported earnings per share. "This action, along with our recent acquisition of the Texas Gas Service Company, the third largest gas distribution company in Texas, and the divestitures of some of our natural gas midstream assets and reserves allows us to move with greater confidence into 2003." ONEOK has agreed to file a shelf registration statement, following completion of the repurchase and the exchange, to register for resale all the Series D Convertible Preferred shares held by Westar and 4.7 million shares of ONEOK common currently held by Westar. The timing of sales of the Westar stock will be governed by a new Registration Rights Agreement entered into between ONEOK and Westar. The Series D Convertible Preferred Stock will have substantially the same terms as the Series A Convertible Preferred Stock, except that: -- The Series D Convertible Preferred Stock will have a fixed quarterly cash dividend of 23.125 cents per share, as declared by ONEOK's board of directors; -- The Series D Convertible Preferred Stock will be redeemable by ONEOK at any time after August 1, 2006, (subject to possible extension for 90 days) in the event that the closing price of ONEOK Common Stock exceeds $25 for 30 consecutive trading days; the per share redemption price will be $20; -- Each share of Series D Convertible Preferred Stock will be convertible into one share of ONEOK common stock, subject to adjustment for stock splits, stock dividends, reverse stock splits or any transaction with comparable effects; and -- Westar Industries may not convert any shares of Series D Convertible Preferred Stock held by it unless the annual per share dividend for the ONEOK common stock for the previous year is greater than 92.5 cents per share and such conversion would not subject ONEOK to the Public Utility Holding Company Act of 1935. ONEOK and Westar Energy have also agreed to amend the terms of their existing Shareholder Agreement and Registration Rights Agreement. The new agreements will not be effective until the repurchase and the exchange are completed. Under the new agreements: -- Westar will be prohibited from acquiring any additional securities of ONEOK. -- Westar may make private sales of shares as long as each sale involves less than five percent of ONEOK's outstanding common shares (assuming conversion of the Series D Preferred Stock to be sold) and is made to an owner of less than five percent of ONEOK's outstanding common shares. Westar may make public sales in any broad underwritten offering under the shelf registration statement. -- Westar will have the right to designate one ONEOK board member. -- Westar will not be obligated to sell into stock repurchases by ONEOK. -- The new Shareholder Agreement will terminate if Westar's, or any affiliate's beneficial ownership falls below 10 percent of ONEOK's outstanding common shares (assuming conversion of the Series D Convertible Preferred into ONEOK common). -- The top-up rights, dilutive issuance rights and buy/sell option provided for in the previous Shareholder Agreement are eliminated in the new agreement ONEOK, Inc., is a diversified energy company involved primarily in oil and gas production, natural gas processing, gathering, storage and transmission in the mid-continent areas of the United States. The company's energy marketing and trading operations provide service to customers in 28 states. The company is the largest natural gas distributor in Kansas and Oklahoma and the third largest in Texas, operating as Kansas Gas Service, Oklahoma Natural Gas and Texas Gas Service, serving 1.9 million customers. ONEOK is a Fortune 500 company. Westar Energy's March 31, 2002, balance sheet shows a working capital deficit topping $1 billion. WHEELING-PITTSBURGH: Steel Deal Good for Byrd Bill Application -------------------------------------------------------------- Wheeling-Pittsburgh Steel President and CEO James G. Bradley said that the steel industry is being transformed into a healthier, more competitive industry following the announcements earlier this week that International Steel Group and United States Steel have made separate bids to obtain the assets of Bethlehem Steel Corporation and National Steel Corporation, respectively. Bradley said that based on media reports, the agreement between ISG and the United Steelworkers of America will help the domestic steel industry, including Wheeling-Pittsburgh Steel, better compete in global steel markets. The agreement between ISG and the USWA must still be ratified by ISG's union- represented employees. "The USWA has shown that it is committed to a healthy domestic steel industry that can compete on a global basis," Bradley said. "What is occurring between the union and ISG will also benefit Wheeling-Pittsburgh Steel in its application for an Emergency Steel Loan Guarantee. "Wheeling-Pittsburgh Steel is an ideal candidate for a Byrd Bill loan guarantee," Bradley said. "We have a plan to invest in technology that significantly reduces our costs of steel production that we use for our metal processing businesses, while improving our ability to react to changing market conditions. The states of West Virginia and Ohio have already shown their confidence in our application by participating in the loan guarantee. If it is ratified, the labor agreement with ISG sets a pattern that can only improve our cost structure and manufacturing flexibility." The company's plan to emerge from bankruptcy calls for it to replace an aging blast furnace with a state-of-the-art electric arc furnace, to install automatic roll changers at its 80" hot strip mill and to make improvements at its finishing mills. "We believe that while consolidation is inevitable and will help strengthen the steel industry, there also will be room for smaller companies that have viable niche strategies," Bradley said. "Our plan calls for a focus on new, less capital- intensive technology, on continued quality and productivity improvements and on growth in our metal processing businesses. "This plan, when coupled with a competitive labor cost component, will help ensure that when we emerge from bankruptcy protection we will be on sound footing. My goal for Wheeling- Pittsburgh Steel is not to merely emerge from bankruptcy, but for this company to be a viable, competitive company for the long haul," Bradley said. WHEELING-PITTSBURGH: Plan's Claim Classification and Treatment -------------------------------------------------------------- Wheeling-Pittsburgh Steel Corp., and its debtor-affiliates estimate that administrative claims will aggregate approximately $160,000,000 as of December 31, 2002, excluding amounts payable under the DIP Facility and other postpetition secured claims. Under the Debtors' Plan, each holder of an Administrative Claim that is allowed will be paid in cash, in full, on the later of: (a) the Effective Date of the Plan; and (b) the date the Administrative Claim becomes Allowed. Requests for payment, unless previously filed, must be filed and served on the Reorganized Debtors under procedures to be specified. If a holder is required to serve a written request and does not do so timely, the Debtors explain that the Administrative Claim will be deemed discharged as of the Effective Date of the Plan. Professionals filing a Fee Claim for services rendered to the Debtors prior to the Effective Date, with the exception of ordinary course professionals, must file and serve an application for final allowance of the Fee Claim no later than 60 days after the Effective Date. No requests for payment need be made by the DIP Lenders and other postpetition secured claims. However, the holder of a given Administrative Claim may be treated on less favorable terms, and Administrative Claims representing liabilities incurred by the Debtors in the ordinary course of their business during these cases will be paid by the Reorganized Debtors in accordance with the terms and provisions of the particular transactions and related agreements. Class Payment ----- ------- N/A - Admin Paid in full, in cash Claim 1 - Priority The Debtors will pay the full amount of the Allowed Claim on the later of the Effective Date or the date the Claim is allowed; or upon other less favorable terms as may be agreed. 2 - Misc. On the Effective Date, at the Debtors' Secured option: a) the Debtors will cure any default for which cure is required by the Bankruptcy Code; b) the Plan does not alter any rights of the claimholder; or c) payment upon other less favorable terms as may be agreed. 3 - IRB On the Effective Date, at the Debtors' Secured option: a) the Debtors will cure any default for which cure is required by the Bankruptcy Code; b) the Plan does not alter any rights of the claimholder; or c) payment upon other less favorable terms as may be agreed. The Debtors caution that the "treatment of IRB Claims is still being analyzed". 4 - Secured On the Effective Date, a pro rata share of Noteholder $15,000,000 in cash. In addition, on and after the Effective Date, additional distributions from any Unclaimed Property or distributions allocated to claims later disallowed. 5 - Unsecured On the Effective Date: WPC Claims a) a pro rata share of $25,000,000 in cash, and b) a pro rata share of the New Secured Notes. In addition, on and after the Effective Date, additional distributions from any Unclaimed Property or distributions allocated to claims later disallowed. 6 - Noteholder On the Effective Date, from Reorganized WPC a Guaranty pro rata share of an unspecified number of shares of New Common Stock constituting 40% of the New Common Stock. The right to later participate in any Unclaimed Property or distributions allocated to claims later disallowed. 7 - Unsecured On the Effective Date, a pro rata share of an WPSC unspecified number of shares of New Common Claims Stock. The right to later participate in any Unclaimed Property or Distributions allocated to claims later disallowed. 8 - Convenience All Claims that would otherwise be classified in Classes 5, 6 or 7, which were filed or scheduled for, or were reduced prior to the Confirmation Date to an amount not yet specified or less. Each person holding an Allowed Claim in Class 8 will be paid the full amount of the Allowed Claim in cash on the later of: (a) the Effective Date, or (b) the date on which the Claim becomes allowed. 9 - Intercompany Before the Effective Date, all WPC Claims against its directly or indirectly owned subsidiaries will be contributed by WPC, directly or indirectly, to the capital of the subsidiary; same with WPSC and its subsidiaries. Therefore, on the Effective Date, all other Class 9 Claims then outstanding will be deemed expunged and extinguished. 10 - Penalties No distribution. On the Effective Date, all Class 10 Claims then outstanding will be deemed expunged and extinguished. 11 - Old Equity The Claims of Holders of Old Subsidiary in Common Stock will be fully reinstated. Subsidiaries 12 - Old Equity A pro rata share of $10,000 and all Class 12 in WPC Interests then outstanding will be extinguished. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM INC: Seeks Go-Signal to Reject 530 Telecom Circuits ------------------------------------------------------------ Lori R. Fife, Esq., at Weil Gotshal & Manges LLP, in New York, relates that Worldcom Inc., and its debtor-affiliates purchase certain telecommunications services pursuant to tariffs filed by incumbent and competitive local exchange carriers in accordance with the Telecommunications Act of 1996. Tariffs are schedules of rates, terms and conditions, by which LECs agree to provide services to their customers. Tariff services are purchased by submitting a contract known as an access service orders to the LEC. Since the Petition Date, Ms. Fife tells the Court that the Debtors have reviewed the operating capacity of its network. This network rationalization process is an ongoing component of the Debtors' long-range business plan. The Debtors determined that it does not require the capacity relating to 530 circuits purchased through the service orders purchased under tariffs. The circuits and associated service orders are with Ameritech, Bell South, Pacific Bell, Qwest, Southwestern Bell, and Verizon. In determining to reject the service orders, the Debtors considered network capacity, costs, overlap and other inefficiencies, as well as their ability to move traffic to alternative circuits in a more cost-effective manner. Accordingly, the Debtors seek the Court's authority to reject the service orders associated with the 530 circuits. Ms. Fife relates that the Debtors currently have no traffic on the circuits purchased under the service orders, in which they incur $496,102 in monthly charges. Thus, the circuits provided under the service orders are unnecessary and costly to the Debtors' estates. By rejecting the service orders, the Debtors will save $5,953,224 in administrative expenses per annum or $8,928,000 for the remainder of the term of the service orders for capacity that they do not need or use. (Worldcom Bankruptcy News, Issue No. 17; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders says that Worldcom Inc.'s 7.25% bonds due 2008 (WCOE08USR2) are trading at about 25 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE08USR2 for real-time bond pricing. W.R. GRACE: Taps Woodcock Washburn for Indiana Patent Suit ---------------------------------------------------------- The W.R. Grace Debtors ask Judge Fitzgerald to authorize their employment of Woodcock Washburn LLP as special litigation counsel to intervene in a case styled David B. Bartholic and Intercat, Inc. v. Nol-Tec Systems, Inc., pending in the United States District Court for the Northern District of Indiana. The Debtors want to intervene in the Intercat patent infringement suit in order to protect a significant part of their business. The Intercat suit commenced on October 18, 2002. Intercat alleges that Nol-Tec is inducing infringement, or contributing to the infringement, of U.S. Patent No. 5,389,236 issued February 14, 1995. Intercat is seeking damages for willful infringement, as well as preliminary and permanent injunctive relief. No alleged direct infringer is identified in Intercat's complaint, and none of the Debtors are currently parties to the Intercat suit. However, the Intercat suit may directly affect Grace's business. The Debtors are the leading suppliers of fluid cracking catalysts and additives to petroleum refiners around the world. In 2001, the Debtors' revenues for sales of catalysts were in excess of $600 million, or 36% of the Debtors' consolidated, worldwide revenues for 2001. Since 1997, Nol-Tec has been the Debtors' most important supplier of catalyst loading equipment in the United States. Nol-Tec catalyst loaders are used by oil refiners to introduce fluid cracking catalyst additives into so- called "FCC Units" which are physically located at the petroleum company's refinery. Crude petroleum is chemically cracked in those FCC units during the process of refining the petroleum into gasoline for use in motor vehicles. The FCC Additives are introduced into FCC units in order to reduce nitrous oxide and sulfur dioxide emissions in motor vehicle exhausts which would otherwise be released into the atmosphere. Nol-Tec sells catalyst loaders to the Debtors, and the Debtors either sell or lease the loaders to refiners. The Patent which Intercat alleges has been infringed in the Intercat suit contains claims, among other matters, for a method of controlling the addition of a catalyst into an FCC unit in order to maintain a given concentration of the catalyst in the FCC unit and thereby produce a desired performance from the FCC unit. In its Complaint against Nol-Tec in the Intercat suit, Intercat alleges that, by selling catalyst loaders to refiners, Nol-Tec is inducing refiners to infringe the methods claimed in the Patent, or is contributing to such infringement by the refiners. Although Debtors are not directly mentioned in the Complaint, Nol-Tec sells the Debtors loaders of the kind charged in the Complaint with infringement, which the Debtors supply to refiners as part of the Debtors' FCC catalyst and additives business. In addition to damages for alleged willful infringement by Nol-Tec, the plaintiffs are seeking a preliminary and a permanent injunction which would prohibit the sale of catalyst loaders to the Debtors and other companies which, in turn, lease or sell such loaders to refiners. The Debtors are in the process of investigating the factual bases for the Plaintiffs' infringement action. Based upon its review to date, the Debtors have no information which would indicate either that the Patent is being directly infringed by a refiner or that Nol-Tec is inducing infringement or is contributing to infringement by any refiner. A party cannot be liable for inducing or contributing to infringement in the absence of direct infringement by a third party. The Debtors are concerned, however, that Nol-Tec may not have sufficient strategic interest in catalyst loader production to incur the costs of defending the Indiana infringement action. If the action were pursued through trial and appeal, the litigation could cost in excess of one million dollars to defend. The Debtors are concerned that Nol-Tec could attempt to settle Intercat's action by either agreeing not to sell loaders to the Debtors, or by agreeing not to contest Intercat's motion for an injunction against the sale of catalyst loaders to the Debtors and other third parties. Even if Nol-Tec is willing to incur defense costs, the issuance of a preliminary or permanent injunction against Nol-Tec by the Indiana court could cut off the supply of these catalyst loaders to the Debtors. In addition, even if an injunction were not granted, refiners may nonetheless refuse to accept any catalyst loaders from the Debtors without extensive indemnifications by the Debtors against future infringement claims by Bartholic and Intercat. The Debtors further believe that it is reasonably likely that any settlement of the Indiana action by Nol-Tec would put Intercat into a position by which it could offer inducements to refiners to purchase catalysts or FCC Additives from Intercat by offering Intercat catalyst loaders at greatly reduced cost to the refiner and/or a free license under the Patent if the refiner purchasers the Intercat catalyst or additive. Accordingly, even though a refiner might otherwise wish to purchase catalysts or FCC Additives from the Debtors, Intercat could charge a price for a license under the Patent that was prohibitively expensive to the refiner. The Debtors view this threat as a serious one which may lead to the loss of revenues from the sale of FCC Additives to refiners. If Nol-Tec does settle Intercat's action, neither the issue of which refiners, if any, might be directly infringing the Patent, nor the issue of which Nol-Tec catalyst loaders, if any, sold or leased by the Debtors might constitute indirect infringement of the Patent, would be resolved. This would result in a great deal of uncertainty in the marketplace. Although the Debtors could locate a different supplier for different loaders, prospective customers for FCC Additives may refuse to accept any catalyst loaders from the Debtors without extensive indemnification commitments from the Debtors. Alternatively, a refiner may choose simply to buy FCC Additives from Intercat to avoid any controversy regarding catalyst loaders. Similar considerations would apply to existing refinery customers for the Debtors' FCC Additives. The Debtors view this threat as a serious one which could lead to the loss of revenues from the sale of FCC Additives to refiners. As a consequence, the Debtors believe it is in their best interest and the best interests of their estates to retain Woodcock to intervene on the Debtors' behalf in the Intercat suit in order to protect against the strategic threat posed by that suit. The Debtors estimate that he attorneys' fees to be incurred by Woodcock to represent the Debtors if intervention is permitted are likely to be in excess of $1,000,000, depending on whether the case goes to trial. Compensation The Debtors propose to compensate Woodcock on an hourly basis at its customary rates for services rendered. The primary partners, associates and paralegals of Woodcock who will be handling this matter, and their current standard hourly rates are: Attorney/Paralegal Hourly Rate ------------------ ----------- Gary H. Levin $435 David R. Bailey $360 Frank T. Carroll $250 Karen M. Whitney $190 Cathy Branka $145 These hourly rates are subject to periodic adjustments to reflect economic and other conditions. Other attorneys or paralegals may from time to time serve the Debtors in the matter for which Woodcock's retention is sought. Gary H. Levin avers that Woodcock does not represent or hold any interest adverse to the Debtor in the matters on which the firm is to be retained, and is a disinterested party. However, Mr. Levin discloses relationships with the Debtors in the last ten years: (a) Defense of a patent infringement filed against W. R. Grace & Co. by DuPont Company for alleged infringement of a patent directed to a method of making photopolymerizable sheet materials used for production of printing plates; (b) A patent infringement action against Intercat, Inc. related to Intercat's infringement of a patent directed to a catalytic additive used in fluid catalytic cracking processes (Mr. Levin adds that the subject matter of this past infringement action is related to the action for which this application is made); (c) A patent infringement action against ZapatA Industries originating as a declaratory judgment action by ZapatA for infringement of a patent directed to sealing compositions containing oxygen scavenging materials for use in beer bottling; (d) Numerous matters relating to analysis and rendering of opinions of third-party patents where such patents have had the possibility of affecting the Debtors' actual or proposed operations, and analysis of possible infringement of the Debtors' patents or misappropriation of the Debtors' trade secrets. Several such analyses are currently being conducted on behalf of the Debtors. None of these analyses involves or has involved parties-in-interest in the Debtors' chapter 11 cases. Mr. Levin advises that, while Woodcock was paid prior to the Petition Date for its services, the firm has no pre-petition claim for services or expenses. Further, none of the fees paid to Woodcock represents payments for legal services in connection with the preparation or filing of these chapter 11 cases. However, Woodcock has represented Sealed Air Corporation, a member of the Unsecured Creditors' Committee, in a patent infringement action, and has provided opinions on patent matters to Sealed Air in areas. The firm currently represents Sealed Air in the prosecution of several patent applications before the United States Patent and Trademark Office. None of these matters was or is adverse to the Debtors or their affiliates, and none was or is related to or involves or has involved a party-in-interest in the Debtors' chapter 11 cases. (W.R. Grace Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Shareholders Total Working Equity Assets Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------------ ------- -------- Actuant Corp ATU (44) 294 18 Advisory Board ABCO (16) 48 (20) Air Canada AC (938) 8,901 (634) Alaris Medical AMI (47) 573 129 Alliance Resource ARLP (47) 291 (2) Amazon.com AMZN (1,440) 1,637 286 American Standard ASD (90) 4,831 208 Amylin Pharm Inc. AMLN (3) 63 47 Anteon Int'l. Corp. ANT (3) 307 27 Arbitron Inc. ARB (169) 127 17 Avon Products AVP (46) 3,193 428 Campbell Soup Co. CPB (114) 5,721 (1,479) Caremark Rx, Inc. CMX (772) 874 (31) Chippac Inc. CHPC (23) 431 (18) Choice Hotels CHH (64) 321 (28) Dun & Brad DNB (20) 1,431 (82) Echostar Comm DISH (778) 6,520 2,024 Expressjet Holdings XJT (214) 430 52 Gamestop Corp. GME (4) 607 31 Gartner Inc IT (5) 824 18 Graftech International GTI (307) 797 112 Hollywood Casino HWD (92) 553 89 Hollywood Entertainment HLYW (113) 718 (271) Imclone Systems IMCL (5) 474 295 Inveresk Research Group IRGI (7) 302 (115) Journal Register JRC (36) 711 (26) Kos Pharmaceuticals KOSP (58) 83 27 Level 3 Comm Inc. LVLT (65) 9,316 642 Ligand Pharm LGND (58) 117 22 Medical Staffing MRN (33) 162 55 Mega Blocks Inc. MB (37) 106 56 Moody's Corp. MCO (304) 505 12 MTC Technologies MTCT 0 26 10 Petco Animal PETC (86) 473 68 Playtex Products PYX (44) 1,105 108 Proquest Co. PQE (45) 628 (140) RH Donnelley RHD (111) 296 0 Saul Centers Inc. BFS (24) 346 N.A. Sepracor Inc. SEPR (314) 1,093 727 Solutia Inc. SOI (113) 3,408 (495) United Defense I UDI (166) 912 (55) Valassis Comm. VCI (66) 363 10 Ventas Inc. VTR (91) 942 N.A. Weight Watchers WTW (87) 483 (24) Western Wireless WWCA (274) 2,370 (105) ********* 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. 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For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. 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