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/raid1/www/Hosts/bankrupt/TCR_Public/030123.mbx T R O U B L E D C O M P A N Y R E P O R T E R Thursday, January 23, 2003, Vol. 7, No. 16 Headlines ADELPHIA COMMS: Deploys BigBand's Digital Video Soln. in 4 Sites ALTERRA HEALTHCARE: Files for Chapter 11 Reorganization in Del. ALTERRA HEALTHCARE: Files for Chapter 11 Reorganization in Del. AMCAST INDUSTRIAL: First Quarter Net Loss Tops $53,728K AMR CORP.: Balance Sheet Approaches the Zone of Insolvency ARGOSY GAMING: Names Joy Berry Sr. Vice President of Development ASIA GLOBAL CROSSING: Implements Interim Compensation Procedures ASPECT COMMS: Shareholders Approve Vista Private Placement ASPECT COMMS: Completes $50MM Private Preferred Equity Placement AVAYA INC: Fixes Jan. 27 Expiration Date for Exchange Offer AVAYA INC: Reports Declining Revenues Q1 2003 & Continued Losses BREAKAWAY SOLUTIONS: Taps Christensen Miller as Special Counsel CALPINE CORP: Enters Into 16-Year, 80-MW Contract with LIPA CALPINE: Selling Additional Units in Canadian Power Income Fund CARAUSTAR INDUSTRIES: Q4 & FY 2002 Webcast Set For February 4 CARIBBEAN PETROLEUM: Gets Until March 13 to Decide on Leases CASUAL MALE: Gets Further Exclusivity Extension through May 19 CASUALTY RECIPROCAL: S&P Revises Financial Strength Rating to R CENTRAL GARDEN: Ratings on Watch Pos. After Planned Refinancing CMS ENERGY: Will Provide Business and Financial Update Tomorrow COLUMBUS MCKINNON: Publishes Fiscal 2003 Third Quarter Results COMDISCO: SIP Participants Join Attack on Bank One's Claim CONSECO INC: US Trustee Appoints CFC Creditors Committee Members CONSECO INC: Will File Plan & Disclosure Statement by Month-End CONTINENTAL AIR: Enters Into Alliance with Delta & Northwest CORAM HEALTHCARE: Trustee Has Until June 30 to Decide on Leases DEVINE ENTERTAINMENT: Renegotiating Convertible Debt EL PASO ENERGY: Declares Fourth Quarter 2002 Cash Distribution ENCOMPASS: Obtains Lease Decision Period Extension to April 21 ENRON: New York Court Grants Okay to Redeem Class B Preferreds EXIDE TECHNOLOGIES: Enters Ford Warranty Reduction Program EXODUS COMMS: Infomart Urges Court to Compel Surrender of Lease FAO INC: Secures Nod to Employ Richards Layton as Co-Counsel FAO INC: Receives Delisting Notice from the Nasdaq FOUNTAIN PHARMACEUTICALS: Jeff Wasson Discloses 7% Equity Stake GENESIS HEALTH: Names Robert H. Fish as Permanent Chairman & CEO GENUITY INC: Seeking Approval of Small Asset Sale Procedures GLOBAL CROSSING: Assumes Telecom Services Agreement with IDT INTEGRATED HEALTH: Court Okays Global Settlement Pact with Omega GROUP MANAGEMENT: Names Barry Corker as Newest Board Member KB HOME: Fitch Rates $250 Mill. Senior Subordinated Notes at BB- KMART CORP: Details Terms of New $2 Billion Exit Facility LEVEL 3 COMMS: Expect Fourth Quarter 2002 Results on February 4 LISANTI FOODS: Sills Cummis Retained as Bankruptcy Attorneys MIDLAND STEEL: Securing Nod to Obtain $11 Million DIP Financing MIDWAY AIRLINES: Wants Until April 30 to Propose a Plan MOBILE KNOWEDGE: Negotiates with Creditors to Cure Defaults MOORE CORP: S&P Places BB+ Corp. Credit Rating on Watch Positive NATIONAL CENTURY: Demands Enforcement of Stay in Cal. Litigation NATIONAL LAMPOON: Christopher Williams Reports 6.8% Equity Stake NATIONSRENT INC: Proposes Special Solicitation Procedures NORTHWEST AIRLINES: S&P Lowers Class A & B NWA Trust 1 Ratings NORTHWEST AIRLINES: FY 2002 Net Loss Widens To $798 Million OWENS CORNING: Chapter 11 Reorganization Plan Overview OWENS CORNING: Alcoa Buying Atlanta Vinyl Production Facility PAC-WEST: Appoints Robert Morrison as VP and General Counsel PEREGRINE SYSTEMS: Files Chapter 11 Plan & Disclosure Statement PERRY JUDD: S&P Withdraws B+ Credit Rating at Company's Request POLAROID CORP: Solicitation Period Extended Until March 20, 2003 POPI GROUP: Designated Inactive Issuer after Unit's Bankruptcy PREMCOR INC: Posts $129.6 Million Net Loss For Year 2002 QWEST COMMS: U.S. State Department Awards $360 Million Contract READER'S DIGEST: Schedules Q2 2003 Conference Call Today SANLUIS: Fitch Assigns B-/CCC+ Ratings After Debt Restructuring SANMINA-SCI CORPORATION: Releases First Quarter Results SEVEN SEAS: Section 341(a) Meeting to Convene on February 11 SYSTECH: Arranging $1.73MM DIP Financing from Current Lenders TECHNEST HOLDINGS: Michael Sheppard Resigns as Officer/Director UNITED AIRLINES: Asks Court to Establish Claims Bar Date US AIRWAYS: Chuck Jones Asks Court to Name Shareholder Committee VISHAY: Sees $130-$150MM Pre-Tax Charge for Tantalum Products WACHOVIA BANK: S&P Assigns Prelim Ratings to Ser. 2003-C3 Notes WORLDCOM INC.: Expands Private IP Network-based VPN Service * DebtTraders' Real-Time Bond Pricing ********* ADELPHIA COMMS: Deploys BigBand's Digital Video Soln. in 4 Sites ---------------------------------------------------------------- BigBand Networks, Inc., a leading provider of broadband multimedia routing systems for broadcast television and advanced services, announced that Adelphia Communications Corporation (OTC: ADELQ), the fifth largest U.S. cable operator, has deployed BigBand Networks' Broadband Multimedia-Service-Router (BMR) for digital broadcast services at four headend system locations in California, Colorado and Pennsylvania. Adelphia is using BigBand Grooming on the BMR to cost effectively gain control over programming line-ups and efficiently utilize network bandwidth and associated resources. The relationship signifies BigBand Networks' continuing success in the North American cable market, with six of the top ten operators as customers. "We have selected BigBand Networks because the BMR platform lets us expand the digital broadcast programming we provide to our subscribers as an alternative to expensive plant upgrades," said Dan Liberatore, vice president of engineering of Adelphia. "The platform also promises to extend its cost effectiveness and plant efficiency benefits to additional services such as HDTV, digital ad insertion and VOD." BigBand Grooming achieves a new approach to digital broadcasting within a networked, multi-service environment. By bringing together graphical user interface (GUI) software, high port density, and integrated switching from any input to any output, cable operators gain significantly better control over programming, and its consumption of network bandwidth. The BigBand BMR's high performance media processing further enhances bandwidth efficiency through selective application of BigBand Networks' RateShaping video bit rate adaptation to some or all programs on an as-needed basis. High input capacity on the BMR chassis enhances operator flexibility in creating line-ups from many satellite-based, off-air and local digitally encoded programming sources. "Working with the BigBand BMR allows Adelphia to profitably maximize digital offerings and to more effectively compete with alternative programming carriers," said Jamie Howard, chief operating officer of BigBand Networks. "BigBand Networks looks forward to ongoing work with operators like Adelphia, further expanding content and services over cable with solutions such as BigBand Switched Broadcast and BigBand VOD Edge." BigBand Grooming leverages the BigBand BMR's platform advantages in intensive media processing, integrated switching, high port density, reliable architecture, and ease-of-use. The modular NativeMediaT operating system inside the BMR cost effectively provides operators with incremental scaling of capacity, and seamless addition of new functionality such as BigBand VOD Edge, BigBand Switched Broadcast, BigBand HDTV, BigBand Ad Splicing Gateway, and BigBand Transport Gateway. About BigBand Networks BigBand Networks, Inc. designs, manufactures, sells and supports Broadband Multimedia-Service Routers (BMR). The BMR is a new class of router built on the company's NativeMedia technology that uniquely routes and processes video, audio and data in their native formats. The field-upgradeable architecture combines advanced hardware and software technologies, for high performance media processing and switching, with agility to optimize for each service supported. This enables network operators to cost-effectively expand revenue-generating offerings of broadcast-quality content and advanced, interactive services. Services supported by the BMR include digital broadcast television, HDTV, transport of high quality video, ad insertion, VOD and iTV. The company's customers include Comcast, Time Warner Cable, Cox Communications, Adelphia Communications, Mediacom Communications and Rogers Cable. BigBand Networks is based in Redwood City, CA. For more information on BigBand Networks, visit http://www.bigbandnet.com About Adelphia Communications Corporation Adelphia Communications Corporation, with headquarters in Coudersport, Pennsylvania, is the fifth-largest cable television company in the country. It serves 3,500 communities in 32 states and Puerto Rico. It offers analog and digital cable services, high-speed Internet access (Adelphia Power Link), and other advanced services. More information about Adelphia Communications can be accessed on the Internet at http://www.adelphia.com ALTERRA HEALTHCARE: Files for Chapter 11 Reorganization in Del. --------------------------------------------------------------- Alterra Healthcare Corporation (AMEX:ALI), a national provider of assisted living residences, announced that, in order to facilitate and complete its on-going restructuring initiatives, the Company filed a voluntary petition with the U.S. Bankruptcy Court for the District of Delaware to reorganize under Chapter 11 of the U.S. Bankruptcy Code. In announcing Wednesday's Chapter 11 filing, Company management emphasized that the filing would not affect the normal operation of its assisted living residences. None of the Company's subsidiaries or affiliates are included in the Chapter 11 filing. In conjunction with the filing, the Company has secured a $15 million debtor-in-possession financing commitment, subject to Bankruptcy Court approval, from affiliates of certain principal holders of the Company's pay-in-kind securities issued in the summer of 2000. The Company expects that the DIP financing, together with the Company's cash flow from existing operations, will provide adequate liquidity to meet all future obligations to residents, employees and vendors and also to fund the costs of the bankruptcy proceedings. In addition, while there is no commitment or binding obligation at this time, the Company is in discussions with the DIP lenders and others regarding a possible equity or equity-linked investment in the Company upon the confirmation of the Company's plan of reorganization. "We believe the Chapter 11 filing is the appropriate and necessary next step to conclude the reorganization initiatives we began in 2001," said Patrick Kennedy, Chief Executive Officer and President. "The focus of our restructuring efforts to date has been portfolio rationalization and the restructuring of our senior financing obligations with secured lenders and lessors. During this time, the Company has disposed of over 100 non- strategic or under-performing residences and has restructured its commitments with many of its senior financing sources, while continuing to strengthen its internal operations. We appreciate the participation and support we have received from our senior financing sources. The Chapter 11 process will now permit us to restructure our junior capital structure, which includes unsecured obligations and claims, convertible subordinated debentures and common stock. The Company is in discussions to obtain an Exit Equity Financing commitment and expects to file its plan of reorganization during the first quarter of 2003. The confirmation of our Plan of Reorganization will enable the Company to conclude its restructuring process and to emerge with a sound capital structure." Mark Ohlendorf, Senior Vice President and Chief Financial Officer, added, "The Company has filed motions with the Bankruptcy Court seeking approval to continuing paying its critical vendors in the normal course. As such, we expect no disruption in the operation of the Company's residences and expect to continue to provide a high level of care and services to our over 14,000 residents." Mr. Ohlendorf stated further, "Our Plan of Reorganization will benefit from the existence of many restructuring agreements that have been pre-negotiated with a number of parties, including certain of our lenders and lessors, since the commencement of our restructuring activities." In addition, the Company announced that in recent months Timothy J. Buchanan, Natalie K. Townsend and Jerry L. Tubergen have resigned from the Company's Board of Directors, and Gene Burleson has been elected Chairman of the Board of Directors. Alterra offers supportive and selected healthcare services to our nation's frail elderly and is the nation's largest operator of freestanding Alzheimer's/memory care residences. Alterra currently operates in 24 states. ALTERRA HEALTHCARE: Case Summary & 30 Largest Unsec. Creditors -------------------------------------------------------------- Debtor: Alterra Healthcare Corporation 10000 Innovation Drive Milwaukee, WI 53226 dba Sterling House Corporation Bankruptcy Case No.: 03-10254 Type of Business: Alterra Healthcare Corporation is one of the nation's largest and most experienced healthcare providers operating assisted living residences. The Company offers supportive and selected healthcare services to the nation's largest operator frail elderly and is the nation's largest operator of freestanding Alzheimer/memory care residences, currently operating in 24 states. Chapter 11 Petition Date: January 22, 2003 Court: District of Delaware Judge: Mary F. Walrath Debtor's Counsel: James L. Patton, Esq. Edmon L. Morton, Esq. Joseph A. Malfitano, Esq. Robert S. Brady, Esq. Young, Conaway, Stargatt & Taylor LLP The Brandywine Bldg. 1000 West Street, 17th Floor P.O. Box 391 Wilmington, DE 19899 Tel: 302 571-6600 Fax : 302-571-1253 Total Assets: $735,788,000 Total Debts: $1,173,346,000 Debtor's 30 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ The Bank of New York, as Trustee for: Series A Trustee 9.75% Debentures $44,571,875 101 Barclay Street, 8th Fl. Series B Debentures $143,911,048 New York, NY 10286 Series C Debentures $52,221,962 John Gulliano, VP Tel: 212-815-5441 Fax: 212-815-5707 HSBC Bank USA Trustee for: As Trustee 5.25% Sub. Debentures $112,044,000 452 Fifth Avenue 7.0% Sub. Debentures $40,355,000 New York, NY 10018 Russ Paladino, VP Tel: 212-525-1324 Fax: 212-525-1366 State Street Bank & Trust Trustee for 6.75% Sub. $34,850,000 Co., as Trustee Debentures Due 2006 Lafayette Corp. Ctr. Two Ave., de Lafayette Boston, MA 02111-1724 Robert Buyzier Manor Care, Inc. Promissory Note dated $5,000,000 R. Jeffrey Bixler 12/31/01 333 North Summit St. Toledo, OH 43604 Tel: 419-252-5770 Fax: 419-252-5599 US Bank Letters of Credit $3,505,485 Dale Welke, VP Special Assets Group 777 E. Wisconsin Avenue Milwaukee, WI 53021 Tel: 414-765-6561 Fax: 414-765-4332 Elderly Living IX, LP Promissory Notes $2,349,348 Pete Russell 107 S. Osprey Avenue Suite 200 Sarasota, FL 34236 Tel: 941-953-3557 Fax: 941-953-4306 Arbor Investments Property Senior & Junior $2,349,348 Trust UAD 5/16/97 Promissory Notes 1400 N. Woodward Ave., #130 Bloomfield Hills, MI 48304 Attn: Eugene Applebaum, Trustee Ed Goldberg Family Trust Senior & Junior $538,914 Ed Goldberg, Manager Promissory Notes 1621 Franklin Hills Drive Bloomfield Hills, MI 48302 Darrell Group, LLC Senior & Junior $278,510 Bruce E. Thai, Manager Promissory Notes 300 Ferndale Birmingham, MI 48009 Tel: 248-644-8095 Joel H. Shapiro Senior & Junior $278,510 1421 Lochridge Promissory Notes Bloomfield Hills, MI 48302 Tel: 248-333-3161 Keith Promeroy Revocable Senior & Junior $269,457 Trust Promissory Notes Keith Pomeroy, Trustee 74 East Long Lake Road Bloomfield Hills, MI 48304 Tel: 248-723-2100 Irwin and Judith Elson Senior and Junior $244,961 JTWROS Promissory Notes Harley K. Kopke Senior and Junior $244,961 Promissory Notes Alice Berlin Revocable Senior and Junior $244,961 Trust Promissory Notes US Foodservice Trade Vendor $234,263 Harold Brode Revocable Senior and Junior $200,515 Trust Promissory Notes Irving Nusbaum Trust Senior and Junior $146,976 Promissory Notes Joseph C. and Susan A. Senior and Junior $146,976 Roebuck, JTWROS Promissory Notes Mark H. Hutton Trust Senior and Junior $122,480 Promissory Notes Miles E. Brasch Senior and Junior $122,480 Promissory Notes Seymour Brode Trust Senior and Junior $122,480 Promissory Notes Emanuel Ravet Revocable Senior and Junior $122,480 Trust Promissory Notes GFC Profit Sharing Plan Senior and Junior $122,480 & Trust Promissory Notes Louis Gordon Trust Senior and Junior $122,480 Promissory Notes Stephen Grand Property Senior and Junior $122,480 Trust Promissory Notes Robert A. Herdorza Senior and Junior $122,480 Promissory Notes Wayne Jones Senior and Junior $122,480 Promissory Notes Daniel Stewart Trust Senior and Junior $122,480 Promissory Notes Michael Maddin Revocable Senior and Junior $122,480 Living Trust Promissory Notes New Wellington Group, LLC Senior and Junior $122,480 Promissory Notes H. Barry Levine Revocable Senior and Junior $199,942 Promissory Notes Medline Industries Trade Vendor $99,051 AMCAST INDUSTRIAL: First Quarter Net Loss Tops $53,728K ------------------------------------------------------- Amcast Industrial Corporation is a leading manufacturer of technology-intensive metal products. Its two business segments are Flow Control Products, a leading supplier of copper and brass fittings for the industrial, commercial, and residential construction markets, and Engineered Components, a leading supplier of aluminum wheels and aluminum components for automotive original equipment manufacturers in North America as well as a leading supplier of light-alloy wheels for automotive original equipment manufacturers and aftermarket applications in Europe. In the first quarter of fiscal 2003, consolidated net sales increased $20,576,000 or 15.2%, compared with the first quarter of fiscal 2002. This increase was due to growth in aluminum components and global wheel sales. Sales volume increased from new product introductions, existing products, and conquest sales. A stronger euro also increased sales at Speedline, the Company's Italian operation. A decline in the volume of Flow Control Products partly offset sales growth in Engineered Components. The Company's pricing partially reduced sales for the quarter as unfavorable pricing continued in the Flow Control Products segment due to competitive market conditions, and lower aluminum costs were passed-through to global wheel and aluminum components customers. There was a positive product mix experienced by the Company's U.S. operations. For the first quarter of fiscal 2003, a $802,000 decrease in gross profit compared with the first quarter of fiscal 2002 was caused by a decline in the gross profit of Flow Control Products and Speedline. This decrease more than offset the increased gross profit experienced by U.S. wheel and aluminum components due to higher production volumes and manufacturing improvements. The Amcast Production System, a more efficient manufacturing approach being implemented at the Company's U.S. manufacturing facilities, had a positive impact on gross profit by improving productivity and reducing manufacturing costs. APS should continue to be a positive factor on gross profit as more of the Company's workforce becomes certified. In the Flow Control Product segment, reduced volume and lower pricing in a highly competitive market were the primary reasons for the decrease in gross profit. Speedline continues to experience operating difficulties which are negatively affecting gross profit. Net Loss for the first fiscal quarter of 2003 was $53,728,000, as compared to the net loss of $5,523,000 for the comparable fiscal quarter of 2002. The Company's cash balance at December 1, 2002 was $12,566,000; plus an additional $7,067,000 of restricted cash existed for payment of principal and interest on the Company's debt that is required under its debt agreements. Cash provided by operations was $4,728,000 in the first quarter of fiscal 2003 compared with cash provided by operations of $7,278,000 in the first quarter of fiscal 2002. Excluding the impact of restricted cash, cash flow from operations was $10,728,000 for an increase of $3,450,000 over the first quarter of fiscal 2002. The non-cash benefits of depreciation, amortization, the cumulative effect of the accounting change, and other non-cash charges were offset by the net loss recorded in the first quarter of fiscal 2003. A decrease in working capital demonstrated the Company's continuing focus on working capital management. Investing activities, primarily capital spending, used net cash of $3,252,000 in the first quarter of fiscal 2003 compared with $8,148,000 used in the first quarter of the prior year. This decrease reflects management controls placed on capital spending as the Company focuses on cost reduction and improving production efficiencies. In the first quarter, capital spending as a percent of depreciation was 43.3% in fiscal 2003 versus 83.6% in fiscal 2002. At December 1, 2002, the Company had $3,887,000 of commitments for additional capital expenditures, primarily for the Engineered Components segment. Financing activities used $6,184,000 of cash in the first quarter of fiscal 2003, compared with $5,855,000 of cash used in the first quarter of fiscal 2002. During the quarter, the Company made debt payments of $2,558,000 for the bank debt and senior notes and $383,000 in payments related to the Company's insurance premium financing. The bank debt and senior notes payment was three months ahead of the debt covenant requirements. CTC made net debt payments of $950, and Speedline made net debt payments of $2,293,000. Total debt was 83.6% of total capital at December 1, 2002 and 68.5% at August 31, 2002. The bank group and senior note holder debt are classified as current debt because the bank credit facilities mature in September 2003, and the senior notes mature in November 2003. The Company cannot borrow additional funds from its bank credit facilities or the senior note holders. These lenders have security interests in the assets of the Company and its U.S. subsidiaries. The Company's LIFO credit agreement provides for a maximum of $15,000,000 based on the Company meeting certain conditions. The Company has borrowed the entire $15,000,000 in compliance with its lending agreement, of which $1,442,000 is due in February 2003, $3,500,000 is due in August 2003, and the remaining balance is due in September 2003. The bank credit facilities, the senior notes, and the LIFO credit agreement contain certain financial covenants regarding quarterly earnings before interest, taxes, depreciation, and amortization, fixed cost coverage, capital expenditures, and debt repayments that it must maintain as part of its debt agreements. These debt covenants are: Consolidated EBITDA - The Company must maintain a consolidated EBITDA of not less than $25,900,000 for the four fiscal quarter period ending December 1, 2002, $27,000,000 for the four fiscal quarter period ending March 2, 2003, $29,300,000 for the four fiscal quarter period ending June 1, 2003, and $36,100,000 for the four fiscal quarter period ending August 31, 2003. Domestic EBITDA - The Company must maintain a domestic EBITDA, defined as EBITDA of all North American units excluding CTC, of not less than $28,200,000 for the four fiscal quarter period ending December 1, 2002, $29,800,000 for the four fiscal quarter period ending March 2, 2003, $30,200,000 for the four fiscal quarter period ending June 1, 2003, and $34,400,000 for the four fiscal quarter period ending August 31, 2003. Fixed Cost Coverage - The Company must maintain a fixed charge coverage ratio, defined as the ratio of Domestic EBITDA for such period to Domestic Fixed Charges for such period, to be not less than 0.48 to 1.00 for the fiscal quarter ended December 1, 2002, 0.55 to 1.00 for the fiscal quarter ended March 2, 2003, 0.76 to 1.00 for the fiscal quarter ended June 1, 2003, and 0.86 to 1.00 for the fiscal quarter ended August 31, 2003. * * * As reported in Troubled Company Reporter's July 19, 2002, edition, Amcast Industrial Corporation (NYSE:AIZ) successfully negotiated a restructuring of its credit facilities with its bank-lending group and senior note holders. As restructured, the bank credit facilities have been continued through September 14, 2003, and a required $12.5 million prepayment under the senior notes has been deferred until maturity in November 2003. After restructuring, long-term debt at the end of the fiscal third quarter was $160.4 million. This reduced short-term debt to $25.4 million, or 13.7% of total obligations. AMR CORP.: Balance Sheet Approaches the Zone of Insolvency ---------------------------------------------------------- In the wake of a $3.5 billion loss for 2002, shareholder equity on AMR Corporation's balance sheet tumbled to roughly $800 million at Dec. 31, 2002. The world's largest carrier's debts at Sept. 30, 2002, stood at $29 billion. American's 95.8% debt- to-equity ratio shows a higher degree of financial strain than United Airlines' balance sheet did in the months preceding its chapter 11 filing. USAir's balance sheet was upsidedown, with liabilities exceeding assets, for many months before it filed a chapter 11 petition. Southwest Airlines' balance sheet, by contrast, shows a 1:1 debt-to-equity ratio. As AMR's balance sheet approaches the zone of insolvency, Reuters reports that AMR's hired Marcia Goldstein, Esq., and Martin Beinenstock, Esq., at Weil, Gotshal & Manges for legal advice. Harvey Miller at Greenhill & Co., Reuters reports, has also been retained to advise American. Weil Gotshal's served as counsel to AMR for years; Alan B. Miller, Esq., Thomas A. Roberts, Esq., and Shai Y. Waisman, Esq.; in the Firm's New York office and Mary R. Korby, Esq., in the Firm's Dallas office represented American when it acquired Trans World Airlines in 2001. In a conference call yesterday afternoon, Jeffrey C. Campbell, AMR's CFO, declined to confirm or deny the COmpany's retention of Ms. Goldstein or Messrs. Beinenstock and Miller, saying that, as one would predict, a multinational corporation consults with a long list of lawyers and bankers for a multitude of reasons. Attempting to Renegotiate Loan Covenants While announcing fourth-quarter and year-end financial results yesterday, American said it will seek to renegotiate specific loan covenants under its $834 million credit facility that expires December 15, 2005. That credit agreement, data obtained from http://www.LoanDataSource.comshows, was revised in the fourth quarter of 2001, to require that American have at least $1.5 billion of liquidity (defined as the sum of cash, short- term investments, and 50% of the net book value of unencumbered aircraft) at June 30, 2003. American reports that unrestricted cash balances at Dec. 31, 2002, stood at approximately $2 billion, and cash continues to burn at a rapid pace. 2002 Loss Tops $3.5 Billion "Consistent with expectations," AMR Corporation, the parent company of American Airlines, Inc., yesterday reported a fourth quarter net loss of $529 million. This compares with last year's fourth quarter net loss of $734 million before special items, and $798 million after special items. For full year 2002, AMR reported a net loss of $2.0 billion before special items, and $3.5 billion after special items. For 2001, the Company reported a net loss of $1.4 billion before special items, and $1.8 billion after special items. "Clearly, results such as the ones we reported today are unsustainable," said Don Carty, AMR's chairman and chief executive officer. "While there are many factors that impacted our results during 2002, including a sluggish economy, high fuel prices, lingering concerns over terrorism and the possibility of a war in the Middle East, the core issue for our Company remains a cost structure that is out of step with the revenue environment facing domestic airlines. As we've been discussing with our employees, we believe that a permanent shift has occurred in the airline revenue environment which will require us to reduce our annual costs by at least four billion dollars." Carty continued, "The people of American have made tremendous strides to reduce our operating costs by de-peaking our Chicago and Dallas/Ft. Worth hubs, simplifying our fleet, automating customer ticketing and check-in functions, as well as a host of other programs designed to reduce our long-term structural costs. These incredibly significant efforts have resulted in a permanent annual savings of two billion dollars. Nonetheless, we still have a very big challenge in front of us to achieve our four billion cost-reduction target." While American continues to modify its operations to be more competitive with low-fare carriers, Carty acknowledged that the future of the Company cannot be assured until ways are found to lower significantly its labor and other costs. Carty noted that American started talks with all of its labor unions in October and that those discussions continue with both the unions and their respective financial advisors. Carty stressed that, to put the Company on a sustainable footing and for its continued survival, American must move quickly to reduce its labor costs significantly in conjunction with its broader cost-reduction program. Citing the tremendous challenges that the people of American have overcome during its 75-year history, Carty remains optimistic that solutions can be found to the problems confronting American. However, he acknowledges that, "It remains a treacherous time for our Company." As the Company faces its challenges, Carty said, it draws strength from its operational performance and the quality of its customer service. He noted that American's on-time dependability and the percentage of flights completed each day are at or near the top of the industry. At the same time, customer satisfaction ratings are among the best in years as employees on the ground and in the air continue to focus on the needs of passengers and shippers. "Our people remain our greatest asset," Carty said. Lastly, the Company will record a significant minimum pension liability at year end, driving an approximate $1.1 billion charge to equity. This minimum pension liability will reflect the amount that the Company's pension plans' accumulated benefit obligation at Dec. 31, 2002 exceeded the plans' assets at that date. ARGOSY GAMING: Names Joy Berry Sr. Vice President of Development ---------------------------------------------------------------- Argosy Gaming Company (NYSE: AGY) announced the appointment of Joy Berry as Senior Vice President of Development, a newly created position. Ms. Berry will report directly to Richard J. Glasier, Argosy's President, who was recently elected to succeed Jim Perry as Chief Executive Officer, effective May 2, 2003. "Joy Berry will draw on her development experience to shape our strategy, and will play a pivotal role as it grows and evolves," Mr. Glasier stated. "In particular, her broad and diverse knowledge of and success in the gaming and hospitality business will be instrumental to Argosy as we capitalize on development opportunities in 2003 and beyond." Ms. Berry joins Argosy from Marriott International, where she was Regional Vice President of Development responsible for hotel development in the western region of the United States and Canada. Over the past five years, her efforts led to the addition of approximately 175 new hotels. As President of Bonanza Realty, Inc., from 1991-1996, Ms. Berry headed up the effort that led to the acquisition of the Evansville, Indiana casino license for Aztar Corporation. Her responsibilities included identifying the markets, land acquisition, and coordinating the local and state selection process, as well as the design and construction planning. Prior to Bonanza, Ms. Berry served as Vice President of Real Estate and Development at Ramada International Hotels & Resorts, Inc. Mr. Glasier concluded, "Argosy has a well-earned reputation for operational excellence and sound investment of capital. These provide a solid foundation for an increasing strategic focus on development activities and Joy is a terrific addition to the Argosy senior management team." Argosy Gaming Company is a leading owner and operator of riverboat casinos and related entertainment and hotel facilities in the Midwestern and southern United States. Argosy owns and operates the Alton Belle Casino in Alton, Illinois, serving the St. Louis metropolitan market; the Argosy Casino- Riverside in Missouri, serving the greater Kansas City metropolitan market; the Argosy Casino-Baton Rouge in Louisiana; the Belle of Sioux City in Iowa; the Argosy Casino-Lawrenceburg in Indiana, serving the Cincinnati and Dayton metropolitan markets; and the Empress Casino Joliet in Illinois serving the greater Chicagoland market. As of September 30, 2002, the company posted total current assets of $76,718,000 against total current liabilities of $133,378,000 ASIA GLOBAL CROSSING: Implements Interim Compensation Procedures ---------------------------------------------------------------- Asia Global Crossing Ltd., and its debtor-affiliates sought and obtained a Court order establishing an orderly, regular process for allowance and payment of compensation and reimbursement for attorneys and other professionals whose services are authorized by this Court pursuant to Sections 327 or 1103 of the Bankruptcy Code and who will be required to file applications for allowance of compensation and reimbursement of expenses pursuant to Sections 330 and 331 of the Bankruptcy Code. In addition, the AGX Debtors also sought and obtained a Court order establishing a procedure for reimbursement of reasonable out-of-pocket expenses incurred by members of any statutory committees appointed in these cases. Specifically, the payment of compensation and reimbursement of expenses of professionals will be structured as: A. On or before the 20th day of each month following the month for which compensation is sought, each professional seeking compensation will serve a monthly statement, by hand or overnight delivery, on: -- the Debtors, 11150 Santa Monica Blvd., Suite 400, Los Angeles, California 90025 (Attn: Charles F. Carroll, Esq.); -- Kasowitz, Benson, Torres & Friedman LLP, 1633 Broadway, New York, New York 10019 (Attn: Richard F. Casher, Esq.); -- attorneys for the Ad Hoc Committee, Bingham McCutchen LLP, One State Street, Hartford, Connecticut 06103 (Attn: Evan D. Flaschen, Esq.); -- attorneys for any statutory committees appointed in these cases; and -- the Office of the United States Trustee for the Southern District of New York, 33 Whitehall Street, 21st Floor, New York, New York 10004 (Attn: Lauren Landsbaum, Esq.); B. The Monthly Statement need not be filed with the Court and a courtesy copy need not be delivered to chambers since professionals are still required to serve and file interim and final applications for approval of fees and expenses in accordance with the relevant provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and the Local Bankruptcy Rules for the Southern District of New York; C. Each Monthly Statement must contain a list of the individuals and their titles (e.g., attorney, accountant, or paralegal) who provided services during the statement period, their billing rates, the aggregate hours spent by each individual, a reasonably detailed breakdown of the disbursements incurred, and contemporaneously maintained time entries for each individual in increments of 1/10 of an hour; D. Each person receiving a statement will have at least 15 days after its receipt to review it, and, in the event that he or she has an objection to the compensation or reimbursement sought in a particular statement, he or she will, by no later than the 35th day following the month for which compensation is sought, serve on the professional whose statement is objected to, and the other designated persons, a written "Notice Of Objection To Fee Statement," setting forth the nature of the objection and the amount of fees or expenses at issue; E. At the expiration of the 35-day period, the Debtors will promptly pay 80% of the fees and 100% of the expenses identified in each Monthly Statement to which no objection has been served; F. If the Debtors receive an objection to a particular Monthly Statement, they will withhold payment of that portion of the Monthly Statement to which the objection is directed and promptly pay the remainder of the fees and disbursements. G. Similarly, if the parties to an objection are able to resolve their dispute following the service of a Notice of Objection To Fee Statement and if the party whose Monthly Statement was objected to serves on all of the parties a statement indicating that the objection is withdrawn and describing in detail the terms of the resolution, then the Debtors will promptly pay that portion of the Monthly Statement, which is no longer subject to an objection; H. All objections that are not resolved by the parties will be preserved and presented to the Court at the next interim or final fee application hearing to be heard by the Court; I. The service of an objection will not prejudice the objecting party's right to object to any fee application made to the Court in accordance with the Bankruptcy Code on any ground whether raised in the objection or not. Furthermore, the decision by any party not to object to a Monthly Statement will not be a waiver of any kind or prejudice that party's right to object to any fee application subsequently made to the Court in accordance with the Bankruptcy Code; J. Every 120 days, but not more than every 150 days, each of the professionals will serve and file with the Court an application for interim or final Court approval and allowance of the compensation and reimbursement of expenses requested; K. Any professional who fails to file an application seeking approval of compensation and expenses previously paid under this Motion when due will: -- be ineligible to receive further monthly payments of fees or reimbursement of expenses as provided until further order of the Court, and -- may be required to disgorge any fees paid since retention or the last fee application, whichever is later; L. The pendency of an application or a Court order that payment of compensation or reimbursement of expenses was improper as to a particular statement will not disqualify a professional from the future payment of compensation or reimbursement of expenses, unless otherwise ordered by the Court; M. Neither the payment of, nor the failure to pay, in whole or in part, monthly compensation and reimbursement will have any effect on this Court's interim or final allowance of compensation and reimbursement of expenses of any professionals; and N. The attorney for any statutory committee may, in accordance with the procedure for monthly compensation and reimbursement of professionals, collect and submit statements of expenses, with supporting vouchers, from members of the committee he or she represents; provided, however, that these reimbursement requests comply with this Court's Administrative Orders dated June 24, 1991 and April 21, 1995. David M. Friedman, Esq., at Kasowitz Benson Torres & Friedman LLP, in New York, relates that the procedures will enable the Debtors to closely monitor the costs of administration, forecast level cash flows, and implement efficient cash management procedures. Moreover, these procedures will also allow the Court and the key parties-in-interest, including the United States Trustee for the Southern District of New York, to insure the reasonableness and necessity of the compensation and reimbursement sought pursuant to these procedures. (Global Crossing Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Asia Global Crossing's 13.375% bonds due 2010 (AGCXUS10R1) are trading at 11 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AGCXUS10R1 for real-time bond pricing. ASPECT COMMS: Shareholders Approve Vista Private Placement ---------------------------------------------------------- Aspect Communications Corporation (Nasdaq: ASPT), the leading provider of enterprise customer contact solutions, announced that Aspect shareholders voted, by a substantial margin, to approve the proposed private placement transaction with Vista Equity Fund II, LP at a Special Meeting of Shareholders. Actual results will be released in the normal course of Aspect's public filings. Beatriz Infante, chairman, president and chief executive officer of Aspect, said, "We are extremely pleased with the strong support from Aspect's shareholders, who clearly agree that strengthening the Company's balance sheet through the Vista transaction was an essential part of management's four-part plan to return the company to profitability and increase shareholder value. The placement allows us to significantly reduce Aspect's outstanding debt, assure customers of our financial strength and increase the cash available for the Company's next phase of growth. We thank our shareholders for their strong support and valuable input into this process." As previously announced, on Nov. 14, 2002, the Board of Directors of Aspect approved entering into a private placement agreement with Vista to sell $50 million in Series B convertible preferred stock. This transaction facilitates the redemption in cash of Aspect's $123 million of outstanding convertible debentures, as of Sept. 30, 2002. It also allows the Company to maintain an appropriate cash balance and gives Aspect the financial flexibility to pursue growth and new market opportunities. About Aspect Communications Aspect Communications Corporation is the leading provider of business communications solutions that help companies improve customer satisfaction, reduce operating costs, gather market intelligence and increase revenue. Aspect is a trusted mission- critical partner with over two-thirds of the Fortune 50, daily managing more than 3 million customer sales and service professionals worldwide. Aspect is the only company that provides the mission-critical software platform, development environment and applications that seamlessly integrate voice- over-IP, traditional telephony, e-mail, voicemail, Web, fax and wireless business communications, while guaranteeing investment protection in a company's front-office, back-office, Internet and telephony infrastructures. Aspect's leadership in business communications solutions is based on more than 17 years of experience and over 8,000 implementations deployed worldwide. The company is headquartered in San Jose, Calif., with offices around the world and an extensive global network of systems integrators, independent software vendors and distribution partners. For more information, visit Aspect's Web site at http://www.aspect.comor call 877-621-3692. * * * As previously reported, Standard & Poor's Ratings Services said that its ratings on Aspect Communication Corp. remain on CreditWatch with negative implications where they were placed on October 25, 2002. Standard & Poor's said it will affirm Aspect's corporate credit rating at 'B' and its subordinated debt ratings at 'CCC+' following the completion of the sale of $50 million of preferred convertible stock to a private investor. Completion of the sale, subject to SEC and shareholder approval, is expected before the end of the March 31, 2003, quarter. At that point, Standard & Poor's expects to remove the ratings from CreditWatch, and the outlook will be negative. ASPECT COMMS: Completes $50MM Private Preferred Equity Placement ---------------------------------------------------------------- Aspect Communications Corporation (Nasdaq: ASPT), the leading provider of enterprise customer contact solutions, announced that it has completed its private placement agreement with Vista Equity Fund II, L.P. to sell $50 million in Series B convertible preferred stock. The Company's shareholders approved the proposed private placement transaction with Vista Equity Fund II, L.P. Each share of the Series B convertible preferred stock will be convertible into common stock at a conversion price of $2.25, or approximately 22,200,000 shares of common stock, subject to anti-dilution protection and certain adjustments. Vista Equity Partners is a San Francisco-based private equity firm, which provides capital to both private and public technology-enabled companies. Vista invests in dynamic, successful companies with management teams that have a long-term perspective and are committed to maintaining leadership in their markets. Vista has more than $1.25 billion in committed capital. The Company intends the net proceeds from this financing to provide general working capital as well as provide additional capital to repurchase outstanding convertible subordinated debentures issued by the Company on Aug. 10, 1998. About Aspect Communications Aspect Communications Corporation is the leading provider of business communications solutions that help companies improve customer satisfaction, reduce operating costs, gather market intelligence and increase revenue. Aspect is a trusted mission- critical partner with over two-thirds of the Fortune 50, daily managing more than 3 million customer sales and service professionals worldwide. Aspect is the only company that provides the mission-critical software platform, development environment and applications that seamlessly integrate voice- over-IP, traditional telephony, e-mail, voicemail, Web, fax and wireless business communications, while guaranteeing investment protection in a company's front-office, back-office, Internet and telephony infrastructures. Aspect's leadership in business communications solutions is based on more than 17 years of experience and over 8,000 implementations deployed worldwide. The company is headquartered in San Jose, Calif., with offices around the world and an extensive global network of systems integrators, independent software vendors and distribution partners. For more information, visit Aspect's Web site at http://www.aspect.comor call 877-621-3692. AVAYA INC: Fixes Jan. 27 Expiration Date for Exchange Offer ----------------------------------------------------------- Avaya Inc., a leading global provider of communications networks and services to businesses, confirmed that the exchange offer for its Liquid Yield Option (TM) Notes due 2021 would expire, as previously scheduled, at 12:00 p.m. midnight, EST, on January 27, 2003, unless extended. Avaya and Warburg Pincus Equity Partners, L.P. have agreed that Avaya's announcement concerning its first fiscal quarter 2003 earnings will not result in an extension of the exchange offer. Avaya also confirmed that, based on the January 27 expiration date, the number of shares of Avaya common stock delivered to holders of LYONs accepted in the exchange offer for the mixed consideration will be based on the volume-weighted average trading price of a share of Avaya common stock on the New York Stock Exchange on Jan. 16, 17, 21, 22 and 23. Morgan Stanley & Co. Incorporated is acting as dealer manager for the exchange offer. Georgeson Shareholder Communications, Inc. is the information agent, and The Bank of New York is the exchange agent. Copies of the offer documents may be obtained at no charge from the information agent at 866-295-4337 or 212-440- 9800 or from the SEC's website at http://www.sec.gov. Additional information concerning the terms of the exchange offer, including all questions relating to the mechanics of the offer, may be obtained by contacting the information agent at 866-295-4337 or Morgan Stanley at 212-761-5409 (collect). A registration statement relating to the Avaya common stock being offered has been filed with the SEC but has not yet become effective. Such securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This news release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Avaya common stock in any state in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. The exchange offer may only be made pursuant to the offer to exchange/prospectus, dated December 23, 2002, (as amended on Jan. 13 and 22, 2003), and the accompanying letter of transmittal. Avaya Inc. designs, builds and manages communications networks for more than 1 million businesses worldwide, including 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol (IP) telephony systems and communications software applications and services. Driving the convergence of voice and data communications with business applications -- and distinguished by comprehensive worldwide services -- Avaya helps customers leverage existing and new networks to achieve superior business results. For more information visit the Avaya website: http://www.avaya.com Avaya Inc.'s 11.125% bonds due 2009 (AV09USR1), DebtTraders says, are trading at 95 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AV09USR1for real-time bond pricing. AVAYA INC: Reports Declining Revenues Q1 2003 & Continued Losses ---------------------------------------------------------------- Avaya Inc., a leading global provider of communications networks to businesses, said revenues from ongoing operations in the first fiscal quarter of 2003 were $1.067 billion compared to revenues in the fourth fiscal quarter of 2002 of $1.152 billion, a decline of 7.4 percent. Compared to first fiscal quarter 2002 revenues of $1.306 billion, the revenue decline was 18.3 percent. The company said it had a net loss from ongoing operations of $33.4 million in the first fiscal quarter of 2003. This is an improvement from the fourth fiscal quarter of 2002, when the company had a net loss from ongoing operations of $72.8 million. The net loss from ongoing operations in the first fiscal quarter of 2003 compares to a net loss of $16.2 million in the first fiscal quarter of 2002. Avaya said a sequential improvement in gross margin percentage, as well as lower spending for selling, general and administrative expenses in the first fiscal quarter of 2003 as a result of the company's restructuring initiatives, contributed to a smaller sequential loss per diluted share. The company's cash balance increased by $54 million sequentially from the fourth fiscal quarter to $651 million at the end of the first fiscal quarter of 2003 due primarily to continued improvements in the management of accounts receivable. "Avaya's long-term goal remains profitable revenue growth," said Don Peterson, chairman and CEO, Avaya. "We intend to accomplish this by helping our customers provide superior service to their customers with communications- driven solutions and services. Since the last quarter, we've taken steps toward this goal, most notably, an intensive effort to build awareness of Avaya in key markets. A cornerstone of this effort is a new advertising campaign launched this month in the United States. Early customer response has been positive. "Through our restructuring initiatives we continue to demonstrate our ability to manage expenses. And the discipline we've instilled in operations, particularly in accounts receivable management, contributed to our increased cash balance this quarter." Review Of Quarter And Business Update Avaya said the sequential decline in revenues in the quarter was offset by improved gross margin percentage and lower expenses. These improvements allowed the company to narrow its operating loss from ongoing operations to $14.3 million from $15.8 million sequentially from the fourth fiscal quarter of 2002. Revenues from outside the United States rose slightly and represented 27 percent of total revenues for the quarter. The company's IP Office system, targeted to the important small and medium business market and first introduced outside the United States, continues to be well-positioned in the marketplace. The company noted it is making gains in market share despite a challenging marketplace and customers are showing their interest in spending for IP and IP-enabled networks. According to the latest information from InfoTech (third calendar quarter 2002), Avaya is the number one vendor in the U.S. enterprise telephony market, which includes IP-PBX, IP-enabled PBX, PBX and key/hybrid systems as measured by total port shipments. Avaya's 27 percent share of the overall U.S. enterprise telephony market is a full six percentage points more than its next competitor. Synergy Research, in its latest report on Worldwide Local Area network telephony and IP-enabled/Converged Systems (November 2002) ranks Avaya number two globally with 22 percent market share as measured by total ports shipped. Reported Results For First Fiscal Quarter, Including Charges Including $4.2 million of one-time expenses associated with its fourth fiscal quarter 2002 restructuring initiative, Avaya reported a net loss of $37.6 million or a loss of 10 cents per diluted share, in the first fiscal quarter of 2003. This compares to a net loss of $19.5 million or a loss of nine cents per diluted share in the first fiscal quarter of 2002, which included $3.3 million in one-time expenses (net of tax) primarily associated with outsourcing certain of the company's manufacturing operations. Breakeven Outlook Avaya previously stated it intended to achieve a cost structure by the third fiscal quarter of 2003 that would allow it to break even if the revenue level were $1.075 billion. The company believes that through the positive impact of its restructuring program and planned actions to reduce information technology (IT) expenses, by the third fiscal quarter it will be able to reduce the revenue level required to break even to about the revenue level achieved in the first fiscal quarter of 2003. The company would expect to take a modest charge in the second fiscal quarter in connection with the planned actions to reduce IT expenses. Pension Payments The company estimated the funded status of its pension plans as of Jan. 1, 2003, in accordance with Employee Retirement Income Security Act rules, to determine the required cash contribution to its pension plans in fiscal 2004. As a result of this review, Avaya confirms its previously forecasted required cash contributions of approximately $53 million in fiscal 2004. The required cash payment Avaya will make to its pension plans in fiscal 2003 remains at the previously released amount of $45 million. About Avaya Avaya Inc. designs, builds and manages communications networks for more than 1 million businesses worldwide, including 90 percent of the FORTUNE 500(R). Focused on businesses large to small, Avaya is a world leader in secure and reliable Internet Protocol (IP) telephony systems and communications software applications and services. BREAKAWAY SOLUTIONS: Taps Christensen Miller as Special Counsel --------------------------------------------------------------- Breakaway Solutions, Inc., asks for authority from the U.S. Bankruptcy Court for the District of Delaware to employ Christensen, Miller, Fink, Jacobs, Weils and Shapiro LLP as its Special Counsel. The Debtor tells the Court that it desires to bring-in Christensen Miller in connection with the adversary proceeding instituted by the Debtor in the Bankruptcy Court against Pacificare Behavorial Health of California, Inc. The Pacificare Litigation involves the collection of an account receivable in the amount of $358,465 for services performed by the Debtor. The Debtor seeks to retain Christensen Miller as its special counsel since venue of the Pacificare Litigation was transferred by Court Order to the United States Bankruptcy Court for the Central District of California and the offices of Christensen are located near the vicinity of the transferred action. Consequently, the Debtor believes its costs in pursing the Pacificare Litigation will be reduced by having a local law firm represents its interests in the Pacificare Litigation given its changed venue. The Debtor asserts that the legal services and functions performed by Christensen Miller will not be duplicative of the services provided by any other counsel to the Debtor. The Debtor will pay Christensen its customary hourly rates for services rendered: Attorneys $165 to $525 per hour Paralegal $110 to $150 per hour This engagement will be led by Peter C. Sheridan, Esq., whose current hourly rate is $425. Breakaway Solutions, Inc., which provides collaborative business solutions to its clients, filed for Chapter 11 bankruptcy protection on September 5, 2001. Gary M. Schildhorn, Esq., and Leon R. Barson, Esq., at Adelman Lavine Gold and Levin and Neil B. Glassman, Esq., and Steven M. Yoder, Esq., at The Bayard Firm represent the Debtor in its restructuring efforts. When the company filed for protection from its creditors, it listed $45,319,579 in assets and $25,877,720 in debt. CALPINE CORP: Enters Into 16-Year, 80-MW Contract with LIPA ----------------------------------------------------------- Independent power producer Calpine Corporation (NYSE: CPN) and the Long Island Power Authority (LIPA) announced that they will enter into a 16-year power purchase and sale agreement related to an 80-megawatt expansion of Calpine's existing cogeneration facility located on the campus of the State University of New York at Stony Brook. The new capacity will help the University meet its growing local energy needs with a reliable and cost- effective long-term power supply, with any additional power not used by the campus supplied under the agreement to LIPA. According to Calpine Vice President Paul Barnett, "This upgrade will allow us to improve the efficiency and operation of our existing plant while expanding our ability to be part of a cost- effective and environmentally responsible energy future for Long Island. We are pleased to have an opportunity to follow last summer's successful expansion of our Bethpage plant with a new project that will provide direct benefits to Stony Brook and to electricity customers throughout Long Island. This plant will be one of the cleanest and most efficient long-term energy resources on Long Island and represents a tremendous opportunity for the University, LIPA and its customers." "This project is a win-win situation. It will provide the campus with a reliable and cost-effective power supply well into the future and will help alleviate the current power shortage on Long Island," added Stony Brook President Shirley Strum Kenny. "This is an excellent project," said LIPA Chairman Richard M. Kessel. "Calpine's enhanced facility will help Stony Brook meet its growing need for electricity in the future, and it will help LIPA meet the area's growing need for electricity now. This is a win-win situation for everyone." Pending final state and other approvals, the 80-megawatt project will be constructed in two phases. First, a 45-megawatt LM6000 turbine will be installed for commercial operation as a peaking unit beginning August 1, 2003 to help meet LIPA's critical power demand this summer. After the summer season, Calpine plans to adapt the unit to run in a highly efficient combined-cycle mode with the addition of a 35-megawatt steam turbine generator for commercial operation as a baseload generating unit beginning in the summer of 2004. Calpine's existing 45-megawatt Stony Brook Cogeneration Center began commercial operation in 1995, as a cost-effective solution to the University's local energy needs. The proposed expansion will help meet the growing demand on the campus as well as provide significant additional energy cost savings to the University. Power from the plant that is not needed by the campus will be used as a much-needed incremental addition to LIPA's growing electric power needs, especially in the eastern portion of Long Island. Moreover, building the facility in a combined-cycle configuration will result in one of the most energy-efficient and environmentally responsible electric generation facilities on Long Island and will represent an operational and environmental improvement of the existing plant. Established in 1957, Stony Brook University is one of the leading public research institutions in the nation. Its renowned graduate and undergraduate programs include the humanities, arts and sciences, and engineering and applied sciences. Internationally known faculty members teach courses in more than 100 programs to 22,000 students. Stony Brook's Health Sciences Center trains undergraduate and graduate students for careers in healthcare and Stony Brook University Hospital is the tertiary care facility for Suffolk County's 1.7 million residents. Last year, Stony Brook University expanded into New York City with a new state-of-the-art Manhattan facility. Stony Brook University is a NCAA Division I school and a member of the invitation-only organization of top research universities, the Association of American Universities (AAU). LIPA is a not-for-profit municipal electric utility that serves approximately 1.1 million customers in Nassau and Suffolk counties and the Rockaways Peninsula of Queens. LIPA does not own any electric generation assets on Long Island and does not provide natural gas service. Based in San Jose, Calif., Calpine Corporation is a leading independent power company that is dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired power generation. It generates and markets power through plants it develops, owns, leases and operates in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and it owns approximately one trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its website at http://www.calpine.com. As reported in Troubled Company Reporter's December 11, 2002 edition, Calpine Corp.'s senior unsecured debt rating was downgraded to 'B+' from 'BB' by Fitch Ratings. In addition, CPN's outstanding convertible trust preferred securities and High TIDES are lowered to 'B-' from 'B'. The Rating Outlook is Stable. Approximately $9.3 billion of securities are affected. The rating action follows a review of CPN's recently reported financial results and Fitch's revised view of power market prices across various U.S. regional markets. The downgrades reflect CPN's high debt leverage and the expectation that leverage and credit measures will remain under pressure due to continued weakness in the U.S. wholesale power market. In addition, the revised rating levels reflect a lower assessment of the residual value of assets available to unsecured creditors after giving affect to the senior secured liens for the benefit of banks participating in CPN's $2 billion secured credit facilities and lenders under CPN's $3.5 billion non-recourse secured construction financings. Security currently pledged to banks include a first priority interest in CPN's U.S. natural gas reserves as well as equity interests in various subsidiaries holding CPN's generating facilities. DebtTraders reports that Calpine Corp.'s 10.500% bonds due 2006 (CPN06USR2) are trading at 53 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN06USR2for real-time bond pricing. CALPINE: Selling Additional Units in Canadian Power Income Fund --------------------------------------------------------------- Calpine Corporation (NYSE: CPN), a leading North American power producer, and Calpine Power Income Fund (TSX: CF.UN) announced a secondary offering of Warranted Units of the Calpine Power Income Fund. Calpine plans to sell approximately 17 million Warranted Units, each consisting of one Trust Unit owned by Calpine combined with one-half of one Trust Unit Purchase Warrant issued by the Fund to purchase additional Trust Units of the Fund acquired from Calpine. One full Trust Unit Purchase Warrant will enable the holder to further acquire one Trust Unit of the Fund on or before December 30, 2003 at the offering price. The offering is expected to price by the close of business Wednesday, January 22, 2003 at approximately Cdn $9.00 per Warranted Unit to yield approximately 10.4% at that expected offering price. The offering is expected to close on or about February 13, 2003. Gross proceeds of the offering to Calpine are expected to be approximately Cdn $153 million prior to the exercise of the Trust Unit Purchase Warrants. If the Warrants are fully exercised, Calpine's gross proceeds of the offering will be approximately Cdn $230 million. The sale of Calpine's Trust Units will not impact Calpine's 30% subordinated interest in the operating assets of the Fund. Today the Fund is also announcing its financial results for 2002 (representing the period from its initial public offering on August 29, 2002 to December 31, 2002). The 2002 financial results have resulted in excess distributable cash of Cdn $0.9 million that has permitted the declaration of a special distribution of Cdn $0.0165 per Trust Unit to be paid on February 20, 2003 to Unitholders of record on January 31, 2003. Calpine Power Income Fund is an unincorporated open-ended trust that invests in electrical power generation assets. The Fund indirectly owns interests in two power generating facilities in British Columbia and Alberta and has a loan interest in a third power generating facility in Ontario. The Fund is managed by Calpine Canada Power Ltd., which is headquartered in Calgary, Alberta. The Trust Units of the Calpine Power Income Fund are listed on the Toronto Stock Exchange under the symbol CF.UN, and the Trust Units have the second-highest Canadian stability rating of 'SR-2' with a stable outlook from Standard & Poor's. The Trust Unit Purchase Warrants will trade separately from the Trust Units. For more information about the Fund, please visit its website at http://www.calpinepif.com A preliminary prospectus relating to these securities has been filed with securities commissions or similar authorities in certain provinces and territories of Canada but has not yet become final for the purpose of a distribution to the public. The offering will be jointly led by Scotia Capital Inc. and CIBC World Markets Inc. on behalf of a syndicate of underwriters. The securities offered have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. This news release shall not constitute an offer to sell or a solicitation to buy these securities in any state of the United States or province or territory of Canada. Based in San Jose, California, Calpine Corporation is an independent power company that is dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired and geothermal power generation. It generates power through plants it owns, operates, leases and develops in 23 states in the United States, three provinces in Canada and in the United Kingdom. Calpine also owns approximately 1.0 trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its Web site at http://www.calpine.com. CARAUSTAR INDUSTRIES: Q4 & FY 2002 Webcast Set For February 4 ------------------------------------------------------------- Caraustar Industries, Inc. (Nasdaq: CSAR) announces the following Webcast: What: Caraustar Industries, Inc. Fourth Quarter & Full-Year 2002 Results When: Tuesday, February 4, 2003, 11 a.m. Eastern Where: http://www.caraustar.comand click on the "Our Financials" page or http://www.firstcallevents.com/service/ajwz372877301gf12.html How: Live over the Internet - simply log on to the web at one of the addresses above If you are unable to participate during the live webcast, the call will be archived on the Website http://www.caraustar.com. To access the Website replay, go to the "Our Financials" page. Caraustar,to which Standard & Poor's assigns a BB Corporate Credit Rating, is one of the largest and most cost-effective manufacturers and converters of recycled paperboard and recycled packaging products in the United States. The company has developed its leadership position in the industry through diversification and integration from raw materials to finished products. Caraustar serves the four principal recycled paperboard product markets: tubes, cores and cans; folding carton and custom packaging; gypsum wallboard facing paper; and miscellaneous "other specialty" and converted products. CARIBBEAN PETROLEUM: Gets Until March 13 to Decide on Leases ------------------------------------------------------------ By order of the U.S. Bankruptcy Court for the District of Delaware, Caribbean Petroleum LP and its debtor-affiliates obtained an extension of their lease decision period. The Court gives the Debtors until March 13, 2003, to decide whether to assume, assume and assign or reject their unexpired nonresidential real property leases. Caribbean Petroleum LP and its debtor-affiliates, distributor petroleum products, filed for chapter 11 bankruptcy protection on December 17, 2001. Michael Lastowski, Esq., William Kevin Harrington, Esq., at Duane, Morris & Heckscher LLP represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed over $100 million in assets and over $50 million in debts. CASUAL MALE: Gets Further Exclusivity Extension through May 19 -------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the Southern District of New York, Casual Male Corp., and its debtor-affiliates obtained an extension of their exclusive periods. The Court gives the Debtors, until May 19, 2003, the exclusive right to file their plan of liquidation and until July 14, 2003 to solicit acceptances of that Plan from creditors. Casual Male Corp. with its debtor-affiliates filed for chapter 11 protection on May 18, 2001. Adam C. Rogoff, Esq., at Cadwalader, Wickersham & Taft represents the Debtors as they wind-down their assets. When the Company filed for protection from its creditors, it listed $299,341,332 in total assets and $244,127,198 in total debts. The Debtors anticipate that the Estates may have in excess of $70 million to be distributed to creditors under a chapter 11 plan. CASUALTY RECIPROCAL: S&P Revises Financial Strength Rating to R --------------------------------------------------------------- Standard & Poor's Ratings Services revised its financial strength rating on Casualty Reciprocal Exchange and Equity Mutual Insurance Co. to 'R' from 'CCCpi' after a county court judge placed the two Kansas City-based insurers into receivership. The ruling makes Missouri Department of Insurance Director Scott B. Lakin the rehabilitator for CRE. The two companies participate in an interaffiliate pool in which CRE has an 80% share and EMI has the remaining 20% Headquartered in Kansas City, Missouri, the pool writes mainly workers' compensation and auto liability insurance, with an additional specialization in reinsurance. More than one half of the pool's business lies within its major states of California, New Jersey, Texas, Florida, and Pennsylvania. All tangible assets and renewal rights for existing insurance policies are being sold to Meadowbrook Group. Management of CRE, which is a member of the Dodson Group of Kansas City, agreed to the rehabilitation. An insurer rated 'R' is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision, the regulators may have the power to favor one class of obligations over others or pay some obligations and not others. The rating does not apply to insurers subject only to nonfinancial actions such as market conduct violations. CENTRAL GARDEN: Ratings on Watch Pos. After Planned Refinancing --------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on Central Garden & Pet Co. on CreditWatch with positive implications. The CreditWatch listing reflects the company's intention to refinance a significant portion of its existing indebtedness as well as the company's improved financial profile and credit measures. The positive implications of the CreditWatch listing incorporate Standard & Poor's expectation that it will raise Central Garden & Pet's corporate credit and senior secured bank loan rating to 'BB' upon the closing of the refinancing transaction. If completed as described, the note offering will extend Central Garden & Pet's debt maturities. In addition, Standard & Poor's assigned its 'B+' rating to Central Garden & Pet Co.'s proposed $150 million subordinated notes, due 2013 and offered under Rule 144A with registration rights. The rating on the proposed subordinated notes is not on CreditWatch. It is based on preliminary documentation and subject to review once final documentation is received. Net proceeds from the offering will be used to redeem the company's $115 million 6% subordinated convertible notes due 2003 and about $15 million in term loans at Central Garden & Pet's All- Glass Aquarium subsidiary. Central Garden & Pet may also use any remaining proceeds to repay some or all amounts outstanding under its Pennington $95 million revolving credit facility. In connection with the debt offering, the company intends to increase the size of its revolving credit facility, which expires July 2004, to $175 million, and intends to eliminate the Pennington revolving credit facility expiring September 2003. Because it will be withdrawn upon completion of the transaction, the rating on the company's existing convertible notes is not on CreditWatch, and the company's outlook upon completion would be stable. Central Garden had about $210 million in debt outstanding as of Sept. 28, 2002. "The ratings on Central Garden & Pet Co. reflect the strong competition in the company's business segments, significant seasonality in the lawn and garden business, and customer concentration," said Standard & Poor's credit analyst Jean C. Stout. "These risks are somewhat mitigated by the company's broad product portfolio and moderate financial profile." Lafayette, California-based Central Garden & Pet manufactures and distributes a wide assortment of branded lawn and garden and pet supply products. The company maintains good market positions within certain product lines. However, intense competition in the lawn, garden, and pet products business segments includes The Scotts Co. and The Hartz Mountain Corp., which have strong brand name recognition. This competition is a rating concern because customer choice is based not only on price but on perceived value and quality. CMS ENERGY: Will Provide Business and Financial Update Tomorrow --------------------------------------------------------------- CMS Energy (NYSE: CMS) announced plans to provide a business and financial update to investors, analysts and others at 8:00 a.m. EST on Friday, Jan. 24, 2003. Those interested may participate in an Internet webcast by going to the CMS Energy home page, http://www.cmsenergy.com, and selecting "Business and Financial Update Webcast, Jan. 24, 2003, 8 a.m." A replay of the webcast will be available for 30 days. CMS Energy Corporation is an integrated energy company, which has as its primary business operations an electric and natural gas utility, natural gas pipeline systems, and independent power generation. For more information on CMS Energy, please visit our web site at: http://www.cmsenergy.com/ As previously reported, ratings for CMS Energy by Fitch are: Senior unsecured debt 'B+'; Preferred stock/trust preferred securities 'CCC+'. Outlook is negative. DebtTraders reports that CMS Energy Corp.'s 9.875% bonds due 2007 (CMS07USR1) are trading between 89 and 91. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CMS07USR1for real-time bond pricing. COLUMBUS MCKINNON: Publishes Fiscal 2003 Third Quarter Results -------------------------------------------------------------- Columbus McKinnon Corporation (Nasdaq: CMCO), announced its financial results for the fiscal 2003 third quarter, which ended on December 29, 2002. Prior period results have been restated to reflect the classification of the Company's subsidiary, Automatic Systems, Inc. (ASI) as discontinued operations. The sale of the ASI assets, which comprised the principal business in the Company's former Solutions -- Automotive segment, was announced on May 13, 2002 and reported in the fiscal 2002 financial statements. Columbus McKinnon's fiscal 2003 third quarter consolidated net sales from continuing operations were $107.4 million, compared with $113.9 million a year ago, a decrease of 5.7%. Its net loss for the third quarter of fiscal 2003 was $2.5 million, or $0.17 per diluted share, compared with a net loss of $0.1 million, or $0.01 per diluted share, in the fiscal 2002 third quarter. Net sales from continuing operations for the first nine months of fiscal 2003 were $334.5 million, compared with $365.6 million in the same period last year, a decrease of 8.5%. The net loss for the first nine months of fiscal 2003 was $6.0 million, or $0.41 per diluted share, compared with a net loss of $6.1 million, or $0.42 per diluted share, for the first nine months of fiscal 2002. The third quarter of fiscal 2003 was impacted by a restructuring charge of $0.8 million, realized and unrealized losses in the investment portfolio of the Company's captive insurance subsidiary of $2.7 million, and the early write-off of deferred finance charges associated with the Company's former senior credit facility of $1.4 million. The third quarter of fiscal 2002 reflected the loss from discontinued operations of $1.3 million and goodwill amortization of $2.7 million. The nine months of fiscal 2003 reflected a restructuring charge of $0.8 million, the early write-off of deferred finance charges of $1.4 million, and the cumulative effect of accounting change of $8.0 million. The nine months of fiscal 2002 reflected a restructuring charge of $9.6 million, the loss from discontinued operations of $4.8 million, and amortization of goodwill of $8.0 million. "We continue to contend with lower than normal market demand for industrial products and that is reflected in our sales volumes and financial results for the quarter," said Timothy T. Tevens, President and Chief Executive Officer. "In addition, the third quarter is typically our lowest volume quarter. Based upon historical sales patterns and December order activity, we expect improvement in the fourth quarter. Despite lower volumes, we are maintaining market share in key product lines and margins have held up fairly well due to our productivity and cost control initiatives. Given the prolonged weakness in industrial markets, we are taking further actions to reduce costs and to accelerate debt reduction, which include additional facility rationalizations, personnel reductions, and evaluation of the possible sale of some operations." Tevens continued, "During the third quarter, we announced the consolidation of our chainmaking manufacturing operations, which is reflected in this quarter's restructuring charge, expected to result in $2.1 million in annual pretax cost savings. We have recently decided to close our Reform, Alabama Durbin-Durco plant, our smallest forge group operation, and are consolidating its manufacturing and warehouse operations into our plants in Lexington and Chattanooga, Tennessee, which should result in annual pretax savings of $0.5 million." Columbus McKinnon refinanced its senior credit facility during the fiscal 2003 third quarter and reached new credit agreements with its lenders maturing on or after March 31, 2007; the refinancing was announced on November 27, 2002. At the end of its fiscal 2003 third quarter, the Company was in compliance with all debt covenants related to its new credit agreements, and its total long-term debt was $334.6 million, compared with $348.1 million a year earlier and $322.9 million at the end of the fiscal 2003 second quarter. "The refinancing of our credit facility, which was due to mature in March 2003, increases our financial flexibility and gives us the time needed to complete our strategic initiatives. These initiatives, which include facility rationalizations and Lean manufacturing activities companywide, will enable us to make further reductions in our cost structure and to accelerate debt repayment," Tevens said. "We expect to complete these initiatives over the next few years and, combined with the new products we are developing to facilitate our expansion into new international markets, we believe that we have in place a sound strategy to maintain our strong competitive position, reduce debt, and improve our financial performance as industrial market conditions recover." Columbus McKinnon is a leading worldwide designer and manufacturer of material handling products, systems and services, which efficiently and ergonomically move, lift, position or secure material. Key products include hoists, cranes, chain and forged attachments. The Company is focused on commercial and industrial applications that require the safety and quality provided by its superior design and engineering know-how. Comprehensive information on Columbus McKinnon is available on its web site at http://www.cmworks.com As previously reported, Standard & Poor's lowered its corporate credit rating on Columbus McKinnon Corp., to single-'B' from single- 'B'-plus following the company's announcement that it had withdrawn its registration statement for a follow-on public equity offering. Proceeds from the offering were expected to be used to reduce debt, which would have modestly improved the company's aggressive financial profile. At the same time, Standard & Poor's removed the rating from CreditWatch. The rating action affects about $325 million in outstanding debt securities. The outlook is stable. COMDISCO: SIP Participants Join Attack on Bank One's Claim ---------------------------------------------------------- Fifty-two SIP Participants seek the Court's authority to intervene in proceedings relating to the Comdisco, Inc. and its debtor-affiliates' objection to the Proof of Claim No. 1723 filed by Bank One. If granted intervenors status in the Bank One claim proceeding, the SIP Participants further ask Judge Black's permission to file a petition for declaratory relief. John B. Alsterda, Esq., at Davis, Mannix & McGrath, in Chicago, Illinois, recounts that Bank One filed a proof of claim based on the Facility and Guaranty Agreement signed by Comdisco. After which, most, but not all of the SIP Participants filed their individual proofs of claim, asserting claims against Comdisco for its conduct in connection with the development, presentation, offering and execution of the SIP Agreement. All of the 52 SIP Participants, Mr. Alsterda relates, have claims against Bank One and the other SIP Lenders for the same conduct including violations of the Illinois Consumer Fraud Act, the California, Illinois, and Federal Securities Law, as well as margin regulations promulgated under the Securities Exchange Acts of 1933 and 1934. The Shared Investment Incentive Plan is a financial product developed and presented by Bank One in 1997 that could be offered to certain senior level employees of Comdisco. It had an overall purpose of increasing key manager stock ownership in Comdisco. Under the SIP, Bank One would act as the "arranger" and provide a "credit facility" to finance the entire purchase of Comdisco's shares by the participants in the SIP. Approximately 106 Comdisco managers of the 147 senior level employees elected to participate in the SIP by financing 100% of the purchase price of the margin shares of Comdisco. Each Plan participant executed a full-recourse unsecured promissory note to Bank one. This group purchased 6,320,000 shares of Comdisco common stock for $109,020,000, at the then market value of $17.25 per share. Mr. Alsterda reports that the 52 SIP Participants account for approximately $43,000,000 or 40% of the aggregate purchase price financed through the SIP loan made and arranged by Bank One. In their First Omnibus Objection, the Debtors objected to both the Claim filed by Bank One and many of the SIP Participants' SIP-related claims. The Debtors assert that they have no liability to the SIP Lenders. In their Second Omnibus Objection, the Debtors objected to claims of Bank One again and the remainder of the SIP Participants' SIP-related claims. The Debtors filed a more specific objection to Bank One's claim. Since then, Comdisco and Bank One have attempted to resolve Bank One's claims consensually, but have yet to reach a resolution. On November 27, 2002, the Court entered an Order authorizing Modification to SIP Relief, which provides that, as a condition to accepting SIP Relief, a SIP participant must release all claims which are in any way related to Comdisco or the SIP. However, Mr. Alsterda notes, this order states that the release will not apply to any SIP Lender. Mr. Alsterda points out that the SIP Participants' request in this motion is consistent with the Order that no claims are asserted against Comdisco. Rather, intervention is requested in support of the Debtors' objection to the claim of Bank One. Bank One claims that it advanced the principal sum of $109,020,000 to the SIP participants as of February 10, 1998 and subsequently assigned to each of the defined lenders a ratable portion of the rights under the Facility Agreement and Notes. The 52 SIP Participants have asserted that their SIP obligations are void under the Federal Margin Regulations under the Federal Securities Laws, Section 78cc(b) of the Trade and Commerce Code and Section 7 of the Securities Exchange Act of 1934, authorizing the Federal Reserve Board to limit the amount of credit that investors may receive to finance their stock purchases. Furthermore, under Section 29(b) of the Securities Exchange Act, any contract that is made in violation of the Securities Act or any Rule or Regulation is considered void. If the underlying Notes are void, Mr. Alsterda argues, then the guaranty between Comdisco and Bank One is in violation of the Act, and is void as well. On the other hand, Section 1109(b) of the Bankruptcy Code states that, "a party-in-interest . . . may raise and may appear and be heard on any issue in a case under this chapter." Mr. Alsterda maintains that the 52 SIP Participants have a direct and compelling interest in the outcome of this Claim proceeding. A ruling determining whether the SIP Notes and Guaranty are legally enforceable, and the resultant obligations of the parties, will dictate precisely how much each of the 52 SIP Participants may be called upon to pay by Bank One or Comdisco. Possible outcomes range from zero liability -- if SIP is declared void, to complete liability -- if the SIP is fully upheld. With so much at stake for the SIP Participants, Mr. Alsterda emphasizes, a better case for intervention cannot be conceived. Moreover, the parties presently before the Court do not adequately protect the interests of the 52 SIP Participants. For one, Mr. Alsterda notes, Bank One obviously seeks to have the SIP Notes enforced in full and is directly diverse to the SIP Participants. On the other hand, because Comdisco is the party that sold the SIP stock and collected the proceeds, its motivations are materially different from that of the SIP Participants who borrowed the funds to acquire the stock. In addition, the 52 SIP Participants believe they should have an independent voice in the proceedings due to the greater relative financial impact the outcome will have on them as individuals. Rule 2018(a) of the Federal Rules of Bankruptcy Procedure stating that, "in a case under the Code, after hearing on notice as the court directs and for cause shown, the court may permit any interested entity to intervene generally or with respect to any specified matter" is another ground for the Court to allow intervention. Mr. Alsterda insists that the 52 SIP Participants are an interested entity who, individually and collectively, have an enormous stake in the outcome in this matter, and that they can show "good cause" to intervene for the reason that interest will not be adequately protected by the parties now before the Court. Furthermore, Mr. Alsterda says, there will be no delay caused if the 52 SIP Participants are allowed to intervene. To date, Comdisco has filed only a skeletal specific objection, no discovery has been propounded and no dispositive motions have been filed. Far from causing any prejudice, beneficial economies for the parties and courts will result from having all interested parties before one court in a single proceeding, and the prospect of inconsistent rulings on SIP by different courts can also be eliminated. In the alternative, the 52 SIP Participants believe that Bankruptcy Rule 7024(a) allows them to intervene because: (a) they claim an interest relating to the SIP transaction that is the Bank One's claim and Comdisco's objection; and (b) they are so situated that the disposition of the action may as a practical matter impair their ability to protect that interest. Mr. Alsterda argues that the ability of the 52 SIP Participants to fully preserve and present all of their defenses, to enforcement of the SIP Notes and Guaranty will be impaired to the extent that the bankruptcy court makes an adverse ruling which might later be binding on them through the doctrine of collateral estoppel. Under Bankruptcy Rule 7024(b), the Court also has discretion to permit an applicant to intervene where the claim or defense asserted and the main action have a question of law or fact in common and the intervention will not unduly delay the adjudication of the rights of the original parties. The securities law defenses that would be asserted by the intervening 52 SIP Participants have common questions of both law and fact with Bank One's claim and Comdisco' objection. (Comdisco Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO INC: US Trustee Appoints CFC Creditors Committee Members ---------------------------------------------------------------- Unsecured creditors of Conseco Financing Corporation and Conseco Finance Servicing Corporation have their own official committee, separate from the creditors of the Holding Company Debtors. United States Trustee for Region 11, Ira Bodenstein, appoints these seven creditors to the Official Committee of Unsecured Creditors in the CFC Debtors cases: 1. U.S. Bank National Association 180 East Fifth Street St. Paul, MN 55101 Attn: Jeffrey J. Kerr 2. Millennium Partners, LLC 666 Fifth Avenue, 8th Floor New York, NY 10103 Attn: Philip Schockling 3. Prudential Insurance Company Two Gateway Center, 7th Floor Newark, NJ 07102-5096 Attn: Michael J. Bozzo 4. Commonwealth Advisors, Inc. 247 Florida Street Baton Rouge, LA 70801 Attn: Walter Morales 5. Deutsche Asset Management 280 Park Avenue, 4 East, NYC03-0425 New York, NY 10017 Attn: James Grady 6. Jefferson Pilot Financial Insurance Company P.O. Box 21008 Greensboro, NC 27420 Attn: Richard A. Kapanka 7. Morgan Keegan 1100 Ridgeway Loop Road, Suite 510 Memphis, TN 38120 Attn: Jim Kelsoe (Conseco Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO INC: Will File Plan & Disclosure Statement by Month-End --------------------------------------------------------------- Conseco, Inc. (OTCBB:CNCEQ) announced that it is in the final stages of drafting a Plan of Reorganization and Disclosure Statement for its holding companies, which will be filed with the United States Bankruptcy Court by January 31, 2003. As announced last month, Conseco has reached an agreement in principle with a committee of its bondholders and a committee of its bank lenders to significantly deleverage the holding companies. The Plan and Disclosure Statement to be filed later this month reflect the consensual agreement with these principal constituents to recapitalize the holding companies. "We are pleased with the progress that has been made on the Plan, and look forward to this next critical step in the reorganization" commented William Shea, CEO of Conseco. According to Shea, "Management has been focused on completing the Plan and Disclosure Statement since the agreement in principle was reached. The Company has received significant input from its Official Committee of Unsecured Creditors, which also agrees with the Company's decision to file the Plan and Disclosure Statement this month." CONTINENTAL AIR: Enters Into Alliance with Delta & Northwest ------------------------------------------------------------ Continental Airlines (NYSE: CAL), Delta Air Lines (NYSE: DAL) and Northwest Airlines (Nasdaq: NWAC) issued the following response to the U.S. Department of Transportation's (DOT) notice last Friday proposing to impose certain conditions on the implementation of the carriers' marketing agreement: "We have decided to move forward with implementation of our marketing agreement at the earliest possible date. As planned, the three airlines will soon offer reciprocal frequent flyer and airport lounge benefits to consumers, and will begin codesharing as soon as practicable. "In recent days, we reached agreement with the U.S. Department of Justice on conditions related to our marketing agreement, and we were prepared to accept most of the additional conditions that DOT sought to impose on us. However, some of DOT's conditions are unacceptable, and we will not agree to them. "A similar marketing agreement between Continental and Northwest has lowered prices, increased service levels and brought as much as $1.5 billion of annual benefits to consumers since it started in 1998. The marketing agreement among Continental, Delta and Northwest will bring similar consumer benefits, including: -- Seamless service to thousands of new markets -- Frequent flyer reciprocity, so customers can earn their favorite frequent flyer miles whether they fly Continental, Delta or Northwest -- Access to each carrier's private airport lounges -- Increased frequency of flights, and better time of day coverage for travelers -- Broader availability of low-priced seat inventory "Our marketing agreement preserves competition among Continental, Delta and Northwest, since each carrier will continue to independently price, schedule and make all other competitive determinations. The U.S. Department of Justice, the government agency with the principal responsibility and expertise in enforcement of U.S. competition laws, last Friday approved our marketing agreement, subject to conditions agreed to by the carriers with the Justice Department, stating, 'This alliance agreement, as conditioned, has the potential to lower fares and improve service for passengers in many markets throughout the country.' The Justice Department concluded that no other conditions were necessary to protect competition or to realize the consumer benefits of the carriers' marketing agreement. According to the Justice Department's statement: 'The alliance can benefit consumers by offering codeshare service to new cities, increasing frequencies or improving connections to cities already served by the carriers, and by permitting frequent flyers to earn and redeem their miles on any participating carrier. Corporations can also benefit from joint bids for contracts from alliance airlines where the airline partners offer complementary rather than competing service.' "Moreover, the DOT recently permitted a virtually identical marketing arrangement between United Air Lines, the world's second largest airline, and US Airways to proceed without any conditions imposed by the DOT. "While the three airlines were prepared to accept most of DOT's proposed conditions, there are several conditions that are not acceptable. In particular: -- Confiscation of 'underutilized' gates -- the DOT's proposed requirement that the airlines surrender gates at their hub airports that do not satisfy an arbitrary 'utilization' test created by DOT is unacceptable because it is completely unrelated to the marketing agreement, labels normal gate utilization as 'under- utilized,' will put at risk the core assets on which the airlines depend to operate their hub-and-spoke networks, raises complex questions about airport financing arrangements, and jeopardizes the ability of the airlines to continue to serve the full scope of communities they now serve. -- Limitations on the scope of codesharing -- while the airlines are willing to adhere to numeric limitations on the scope of codesharing during the first year phase-in of service, the potentially permanent limitation contemplated by the DOT is unacceptable as it would severely restrict the availability of codeshare benefits to millions of passengers and arbitrarily deprive the airlines of the much-needed economic benefit of the marketing agreement. -- Limitations on joint contracts -- the proposed restrictions on joint contracts with corporate customers is unacceptable, as it will arbitrarily and severely deprive corporate customers and travel agents of the advantages of the airlines' expanded codeshare services. It would also arbitrarily and unfairly leave the airlines unable to compete effectively for corporate customer and travel agency business. "These proposed DOT conditions would undermine the value of the marketing agreement to consumers, and, therefore, to the participating airlines. "Although the carriers will not agree to certain of the conditions that DOT seeks to impose, Continental, Delta and Northwest have committed nonetheless to: -- Release to local airport authorities a total of 13 gates at four of the carriers' hub airports that become surplus as a result of the carriers relocating their gates in order to make connections between the carriers more convenient for travelers, and offer to release in the future any gates at their hub airports or at Boston that become surplus as a result of similar airport gate relocations related to the marketing agreement -- Restrict for a one-year period the total number of new domestic, Canadian and Caribbean codeshare flights between Northwest and Delta and between Continental and Delta to 650 flights per two carrier codeshare (for a total of 2,600 flights), and specify that at least 391 of each marketing carrier's new codeshare flights (a total of 1,564 flights) must be to or from underserved or small airports, with a provision to notify the DOT if the carriers desire in the future to increase the number of those new codeshare flights -- Restrict three-carrier joint bids for corporate or travel agency contracts to those companies that request them; prohibit joint bids to companies headquartered or with a principal place of business in a carrier's hub city or other cities for domestic service originating from that city if the combined market share of the three carriers exceeds 50 percent at that city, and restrict the content of joint bids unless otherwise requested by the company or in a good faith response to a competitive bid. "None of these additional commitments was required by the Department of Justice when it approved the carriers' marketing agreement last Friday, nor were similar conditions imposed by DOT when it approved a virtually identical agreement between United Air Lines and US Airways. None of these additional commitments is necessary to preserve competition as part of the carriers' marketing agreement, which is designed to maintain the competitive independence of each of Continental, Delta and Northwest. Nonetheless, each carrier has made these commitments during the pendency of any enforcement proceeding brought by DOT. "Now that DOT's regulatory review period has terminated, Continental, Delta and Northwest intend to move forward with implementation of their alliance (subject to the commitments outlined above). "Our marketing agreement fully complies with applicable law. Should DOT bring an enforcement action regarding the marketing agreement, the carriers intend to defend their marketing agreement vigorously while continuing to implement it, in order to protect the pro-competitive, pro-consumer benefits identified by the Justice Department, and to prevent the DOT from placing Continental, Delta and Northwest at a competitive disadvantage during a time of unprecedented crisis in the airline industry." CORAM HEALTHCARE: Trustee Has Until June 30 to Decide on Leases --------------------------------------------------------------- By order of the U.S. Bankruptcy Court for the District of Delaware, Arlin M. Adams, the Chapter 11 Trustee for Coram Healthcare Corp., and Coram, Inc., obtained an extension of time to decide whether to assume, assume and assign, or reject the Debtors' unexpired nonresidential real property leases. Judge Walrath gives the Trustee until June 30, 2003, to make those decisions. Coram Healthcare, a provider of home infusion-therapy services filed for Chapter 11 bankruptcy protection on August 8, 2000. Kenneth E. Aaron, Esq., at Weir & Partners LLP and Barry E. Bressler, Esq., at Schnader Harrison Segal & Lewis LLP represent the U.S. Trustee in these proceedings. DEVINE ENTERTAINMENT: Renegotiating Convertible Debt ---------------------------------------------------- Devine Entertainment Corporation (TSX:DVN) announced that the Company has reached an agreement with the majority of its outstanding debenture holders to postpone certain principal payments. In aggregate, CDN $1,385,800 principal amount of the Series 1 and 2 Subordinate Convertible Debentures are currently issued and outstanding. As of December 31, 2002 the Company was in default on the Series 2 Debentures. The Company previously reported that because of conditions in the capital markets that made it difficult for the Company to raise equity investment, its working capital continues to be limited. With the support of its debt holders, the Company had previously postponed certain interest payments. David Devine, President and CEO stated, "The Company is looking forward to beginning new film productions in the first quarter of 2003 and to raising additional working capital shortly thereafter. Terms for the debenture will be finalized at this time. Given that a majority of the debenture holders also participated in the previously disclosed financing to restructure the Company's Royal Bank debt in 2002, the Company is pleased with the continued support of the debenture holders." Five-time Emmy Award-winning Devine Entertainment Corporation is a developer and producer of high-quality children's and family films designed for worldwide television and cable markets and international home video markets. The Company's interactive history website, www.devinetime.com, was a YAHOO! Canada "Pick of the Week" and won first prize in the Entertainment category at the Atlantic Digital Media Festival. EL PASO ENERGY: Declares Fourth Quarter 2002 Cash Distribution -------------------------------------------------------------- El Paso Energy Partners, L.P. (NYSE: EPN) announced its fourth quarter 2002 cash distribution of $0.675 per Common Unit. The distribution is payable on February 14, 2003 to unitholders of record at the close of business on January 31, 2003. This distribution covers the period from October 1, 2002 through December 31, 2002 and represents an 8-percent increase over that of the fourth quarter of 2001. El Paso Energy Partners, L.P. is one of the largest publicly traded master limited partnerships with interests in a diversified set of midstream assets, including onshore and offshore natural gas and oil pipelines; offshore production platforms; natural gas storage and processing facilities, and natural gas liquids fractionation, transportation, storage and terminal assets. Visit El Paso Energy Partners on the Web at http://www.elpasopartners.com As reported in Troubled Company Reporter's December 5, 2002 edition, Standard & Poor's placed its 'BB+' corporate credit rating on oil and natural gas services company El Paso Energy Partners L.P., on CreditWatch with negative implications based on the recent downgrade of its general partner, El Paso Corp. (BB/Watch Neg/--). Houston, Texas-based EPN has about $1.8 billion in outstanding debt. "The CreditWatch listing for EPN reflects the greater uncertainties surrounding the credit profile of its general partner. El Paso's involvement as the general partner with a 42% stake in EPN influences the partnership's credit profile in several ways and effectively tethers the ratings of the two entities," said Standard & Poor's credit analyst Todd Shipman. ENCOMPASS: Obtains Lease Decision Period Extension to April 21 -------------------------------------------------------------- Pursuant to Section 365(d)(4) of the Bankruptcy Code, a debtor must decide whether to assume, assume and assign, or reject its unexpired non-residential real property leases within 60 days after the Petition Date. The statute, however, provides that the Court may extend the 60-day period, upon the debtor's request, for cause. Lydia T. Protopapas, Esq., at Weil, Gotshal & Manges LLP, in Houston, Texas, explains that Encompass Services Corporation and its debtor-affiliates have not yet reviewed all their leases and have not determined which of the leases they will assume or reject. The Debtors are still in the process of reviewing their businesses and assets and are conducting assets sales to dispose of some assets to obtain significant beneficial tax refunds. Both processes, Ms. Protopapas notes, are potentially impeded if the Debtors are required to divert manpower from the asset sale process to ensure that the leases are all reviewed and analyzed before January 21, 2003. At the Debtors' request, Judge Greendyke moved the deadline to assume or reject unexpired non-residential real property leases for an additional 90 days, through and including April 21, 2003. The 90-day extension is without prejudice to the Debtors' right to seek further extension. With the 90-day extension, Ms. Protopapas believes that the Debtors will timely perform their undisputed postpetition obligations under the unexpired leases in the same manner as they have performed the obligations before the Petition Date. (Encompass Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: New York Court Grants Okay to Redeem Class B Preferreds -------------------------------------------------------------- Enron Corp. is the sole shareholder of Enron North America Corp., which is the holder of: (a) all of the common stock of Enron Canada Corp.; and (b) all of the Class A Preferred Stock of Enron Canada Power Corp. ECC, on the other hand, is the holder of: (a) all of the common stock of ECPC; and (b) all of the Class B Preferred Stock of ECPC. ECPC holds all of ECC's Class A Preferred Stock. Enron holds 1,039,504,347 shares of ECC's Class B Preferred Stock having a stated par value of $1. By its terms, the ECC Class B Preferred is redeemable by ECC at its stated par value per share, plus any dividends declared and unpaid or accrued and unpaid. ECC wants to redeem certain shares of its Class B Preferred Stock held by Enron now. ECC is currently in the process of winding down its business operations. It is anticipated that ECC will have sufficient assets to pay all of its creditors in full and to pay a portion of its obligations pursuant to the ECC Class B Preferred in connection with the wind down process. Melanie Gray, Esq., at Weil, Gotshal & Manges LLP, in New York, assures the Court that the Redemption will not negatively impact ECC's ability to make the payments. Ms. Gray recounts that from September through November 2001, ECC and ECPC loaned $190,000,000 to Enron. The Loan was structured as: (a) ECC transferred $160,000,000 cash to Enron Development Funding, Ltd. -- a Cayman Islands corporation and an indirect wholly owned Enron subsidiary -- in return for an EDF promissory note payable to ECC for the amount, plus interest; and (b) ECPC transferred $30,000,000 cash to EDF, in return for an EDF promissory note payable to ECPC for the same amount, plus interest. EDF then forwarded the Loan to Enron by applying the proceeds to an existing EDF promissory note payable to Enron equal to $578,000,000. Ms. Gray notes that Section 15(2) of the Income Tax Act of Canada, as amended, provides that any loan made by a Canadian corporation to its U.S. parent that is not satisfied before the end of the following tax year is deemed to be a dividend and therefore, subject to withholding tax at the rate of 5% per annum. At the time of the granting of the Loan, Enron intended to satisfy it. However, Enron was facing an uncertain financial condition and could not be certain that it would satisfy the Loan before the December 31, 2002 deadline. Rather than risk adverse consequences pursuant to the Tax Act, Enron, through its agent, ECC, paid the Withholding Tax in December 2001. According to Ms. Gray, the Redemption would permit Enron to satisfy the Loan, as originally intended, and avoid any adverse consequences pursuant to the Tax Act. In addition, Enron's satisfaction of the Loan would permit ECC to request a refund of the Withholding Tax. ECC's receipt of the Refund would increase its value, benefiting Enron's creditors by increasing the amount payable by ECC to Enron as the holder of additional shares of ECC Preferred Stock. Thus, Enron seeks the Court's authority to effectuate the Redemption in satisfaction of the Loan pursuant to the terms in the Assignment Agreement, the Debt Assumption Agreement and the Acknowledgment Agreement. The Transaction provides that: (i) ECPC will assign the ECPC Note to ECC in consideration for an ECC promissory note payable to ECPC amounting to $30,000,000, plus interest, thus consolidating EDF's obligations pursuant to the ECC Note and the ECPC Note -- the EDF Obligations -- with ECC; (ii) EDF will assign the EDF Obligations to Enron, ECC will release EDF from the EDF Obligations, and Enron will assume the EDF Obligations in consideration for an EDF promissory note payable to Enron for $190,000,000, plus interest; and (iii) ECC will redeem 190,000,000 shares of the ECC Class B Preferred held by Enron in full and complete satisfaction of the Satisfaction Note. Ms. Gray contends that the assumption of the EDF Obligations pursuant to Section 105 of the Bankruptcy Code and the sale of the Property pursuant to Section 363 is warranted because it permits: (a) Enron to effectuate the Transaction, and thereby avoid adverse consequences pursuant to the Tax Act; and (b) ECC to request the Refund, to the benefit of creditors of Enron's estate during distribution. Moreover, Ms. Gray informs the Court that Enron is not aware of any lien existing against the Redeemed Shares. Accordingly, the Court should declare the sale to be free and clear of all liens, claims, encumbrances, setoff, recoupment, netting and deduction. * * * Accordingly, the Court approves the Debtors' request in all respects. (Enron Bankruptcy News, Issue No. 54; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE TECHNOLOGIES: Enters Ford Warranty Reduction Program ---------------------------------------------------------- Exide Technologies (OTC Bulletin Board: EXDTQ) -- http://www.exide.com-- a global leader in stored electrical energy solutions, has entered into a new warranty reduction program (WRP) with its original equipment customer, Ford Motor Company. Ford, which celebrates its 100th anniversary in 2003, developed the WRP as a sliding scale incentive to reward all of its suppliers who help reduce warranty expenses. Exide is an original equipment supplier of automotive starting batteries for the Crown Victoria, Econoline, Explorer, F-Series, Grand Marquis, Mountaineer, Ranger, Sable and Taurus car models. The Exide Technologies WRP is designed to reward model-year over model-year improvements in warranty performance on original equipment batteries it supplies to Ford. "The WRP aligns the common objectives of Exide Technologies and Ford to provide best-in-class customer satisfaction. And both of our companies have equity in reducing warranty claims," said Craig H. Muhlhauser, Chairman and CEO of Exide Technologies. "The program also will continue to improve quality, reduce costs and allow Exide to be swifter to market with products and services that will support Ford in addressing its customer concerns." About Exide Technologies Exide Technologies, with operations in 89 countries and fiscal 2002 net sales of approximately $2.4 billion, is one of the world's largest producers and recyclers of lead-acid batteries. The company's three global business groups - transportation, motive power and network power -- provide a comprehensive range of stored electrical energy products and services for industrial and transportation applications. Transportation markets include original-equipment and aftermarket automotive, heavy-duty truck, agricultural and marine applications, and new technologies for hybrid vehicles and 42-volt automotive applications. Industrial markets include network power applications such as telecommunications systems, fuel-cell load leveling, electric utilities, railroads, photovoltaic (solar-power related) and uninterruptible power supply (UPS), and motive-power applications including lift trucks, mining and other commercial vehicles. EXODUS COMMS: Infomart Urges Court to Compel Surrender of Lease --------------------------------------------------------------- Margaret Manning, Esq., at Buchanan Ingersoll Professional Corporation, in Wilmington, Delaware, informs the U.S. Bankruptcy Court for the District of Delaware that in a lease dated December 28, 1999 between Infomart, as landlord, and GlobalCenter Inc., as tenant, GlobalCenter leased the Property for a term of 15 years. Pursuant to the Lease, the term "Premises" is defined as, "the entire eighth, ninth and tenth floors of the Building. . ." The term "Building" is defined as, "the building, fixtures, equipment and other improvements and appurtenances now located or hereafter erected, located or placed upon the [Property]." On April 30, 2000, GlobalCenter and Infomart executed the First Amendment of the Lease. Pursuant to the terms of the First Amendment, the "Additional Premises" is defined as "[t]he 1st Floor Space, the 2nd Floor Space, 3rd Floor Space and (subject to Section 9(c)) the 6th Floor Space. . ." Furthermore, the First Amendment provides that the "Additional Premises shall be incorporated into the Existing Premises, and as so incorporated shall constitute the Premises for all purposes of the Lease. . . ." The salient provisions of the lease are: A. Global Center is responsible for the payment of all Rent, including the Fixed Rent and Additional Rent; B. After the expiration or other termination of this Lease, Tenant will quit and surrender to Landlord the Premises, vacant, broom-clean, in good order and condition, ordinary wear and tear damage for which Tenant is not responsible under the terms of this Lease expected, and Tenant will remove all of its Property and the Designated alterations from the Premises; and C. The Tenant may remove its Property and any alterations made by or on the Tenant's behalf at any time, provided that the Tenant will repair and restore in a good workman-like manner any damage to the Premises and the building caused by removal. Pursuant to the explicit terms of an Agreement and Plan of Merger dated September 28, 2000, Exodus Communications, Inc., and its debtor-affiliates assumed GlobalCenter's obligations due to Infomart under the Lease Documents. Ms. Manning relates that pursuant to a Designation of Rights Agreement dated October 3, 2001, by and between the Debtors and Global Crossing Ltd., the Debtors transferred the right to direct the disposition of certain of the Debtors' leasehold interests, including the Lease Documents, in exchange for Global Crossing's undertaking to pay carrying costs associated with the applicable properties. On December 13, 2001, this Court entered an Order, approving the Designation Agreement, which transferred the Debtors' rights to designate certain leases. More specifically, the Designation Agreement "relates to the transfer of rights by the Debtors to Global Crossing to direct the disposition of certain leasehold interests held by the Debtors." The salient provisions of the Designation Agreement are: A. The Debtors have determined that it is in the best interests of their estates to assume and assign the Leases to mitigate any claims that may be asserted against their estates as a result of their rejection of the Leases; and B. After a Rejection Direction, the Debtors will promptly File a motion or serve a notice in accordance with the Court-approved rejection procedures, but in no event greater than three business days following a Rejection Direction, seeking to reject the Lease. However, on January 28, 2002, only one month after execution of the Designation Agreement, Ms. Manning reports that Global Crossing and its various affiliates filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. Global Crossing subsequently informed the Debtors that it did not intend to perform its rights and obligations under the Designation Agreement. Nevertheless, at no time have the Debtors filed an application or sought entry of a Court order authorizing the rejection of the Lease. In addition, at no time has Global Crossing issued a Rejection Direction to the Debtors. Accordingly, no application has ever been filed and no order has ever been entered by this or any Court authorizing the Debtors to reject the Lease. By Order dated November 15, 2001, Ms. Manning reminds the Court that it granted the Debtors' application to establish certain procedures for the periodic sales of certain miscellaneous assets valued at less than $1,000,000. By and through the Miscellaneous Asset Sale Motion, the Debtors sought to sell certain assets, which are substantially comprised of the electrical and computerized security systems for the Property. Infomart believed that, pursuant to the terms of the Lease Documents, it held title to the electrical and computerized security system. The Debtors' attempt to sell these properties and retain the proceeds of the sale deprived Infomart of the full benefit of the Lease and its Assets. Accordingly, Infomart objected to the Debtors' proposed sale of the Assets. In response to Infomart's Asset Sale Objection, the Debtors excluded the Assets from the sales set forth in the Miscellaneous Asset Sale Motion, pending resolution of the ownership of the Assets. On February 6, 2002, a hearing was held before the Court with respect to the Debtors' proposed sale of the Assets, at which time the Debtors' counsel advised the Court that: -- the parties had conditionally resolved the Asset Sale Objection; -- agreed to the rejection of the Lease; and -- that they were hopeful and confident they would be able to have a full resolution of the controversy. Ms. Manning relates that notwithstanding Debtors' counsel's statements, the controversy between the parties was not resolved, and no order memorializing a resolution of the Asset Sale Objection or the alleged Lease rejection was ever sought by the Debtors or entered by the Court. Ms. Manning points out that pursuant to the Plan and the Confirmation Order, all the Debtors' executory contracts and unexpired leases are deemed rejected as of the Effective Date, except for certain specifically identified unexpired leases and executory contracts, which do not include the Lease with Infomart. Moreover, pursuant to the Confirmation Order, any creditors seeking payment on account of administrative expense claims must file a request on or before 30 days after the Confirmation Date. Accordingly, inasmuch as the Debtors failed to comply with the Designation Rights Order and did not specifically seek to reject the Lease until it filed the Plan, the Lease was not deemed rejected until the Effective Date. According to Ms. Manning, with the parties unable to agree as to the date that the Lease had been rejected and unable to resolve their dispute as to title to the Assets, on June 14, 2002, Infomart commenced an adversary proceeding against the Debtors, seeking a declaratory judgment that Infomart holds title to the Assets, including the security system for the Property, all of which are located at the Property. On August 1, 2002, the Debtors filed an Answer in the Adversary Proceeding disputing Infomart's interest in the Assets, and asserting paramount title to it. Nevertheless, the Assets remain at the Property. After extensive litigation and discovery, on December 16, 2002, Infomart agreed to relinquish any further claim it has to the Assets. By correspondence of the same date, Infomart confirmed to the Debtors that it relinquished all further claims to the Assets and advised the Debtors that it had 30 days to remove the Assets from the Property and to submit a plan for restoring and repairing the Property after the removal of the Assets. Ms. Manning informs the Court that despite receiving the December 16, 2002 correspondence and having a representative visit the Property on December 19, 2002, the Debtors still have not indicated to Infomart whether it intends to remove the Assets from the Property and submit a plan for the restoration and repair of the Property. Thus, Infomart is compelled to file this motion. Although the parties continue to dispute the effective date of the rejection of the Lease, the parties agree that the Debtors rejected the Lease for the Property. Accordingly, by operation of Section 365(d)(4) of the Bankruptcy Code, after the rejection date, the Debtors had an obligation to immediately surrender the Property to Infomart. The Debtors, however, continues to store the Assets at the Property and, thus, has failed to comply with their statutory obligations. Accordingly, Infomart asks the Court to compel the Debtors to surrender the Property and remove the Assets by the Surrender Date. Ms. Manning believes that the cost of removing the Assets from the Property and storing the Assets may be of greater expense to the estate than the value of the Assets themselves. Accordingly, in the event that the Debtors do not remove the Assets by the Surrender Date, Infomart asks that the Court to find that the Debtors' refusal to remove the Assets is prima facie evidence that: -- there is no equity in the Assets; -- the removal and disposal of the Assets is and would be burdensome to the estate; and -- the Assets are of inconsequential value and benefit to the estate. In sum, Infomart asks the Court to compel the Debtors to abandon any Assets to Infomart that are not removed from the Property prior to the Surrender Date. In addition, Infomart asks the Court to compel the Debtors to repair and restore the Property with respect to any and all damage caused as a result of the Debtors' removal of the Assets from the Property pursuant to the Lease and applicable law. In the alternative, Infomart asks the Court to allow its administrative expense claim for the restoration and repair of the Property arising from the Debtors' removal of the Assets from the Property, and direct the Debtors to immediately pay the administrative expense claim. Courts have recognized that, where removal and restoration clauses are contained in the lease, it would be inequitable to permit a debtor to avoid its obligations and have held that the debtor must restore the premises to a condition, which complies with the clauses in the lease. (Exodus Bankruptcy News, Issue No. 29; Bankruptcy Creditors' Service, Inc., 609/392-0900) FAO INC: Secures Nod to Employ Richards Layton as Co-Counsel ------------------------------------------------------------ FAO, Inc., and its debtor-affiliates sought and obtained authority from the U.S. Bankruptcy Court for the District of Delaware to employ and retain Richards, Layton & Finger, PA in Wilmington, Delaware, as its Co-Counsel in the toy retailer's chapter 11 proceedings. The Debtors are also seeking court nod to bring-in Levene, Neale, Bender, Rankin & Brill, LLP as co-counsel. The Debtors submit that it is essential for them to employ both firms. Levene Neale will lead the restructuring engagement and Delaware counsel is required for the Debtors to appear before the Bankruptcy Court. The Debtors assure the Court that the two firms have discussed a division of responsibilities regarding representation of the Debtors and will make every effort to avoid or minimize duplication of services. Richards Layton has rendered legal services and advice to the Debtors with respect to the preparation of these cases. During the course of this representation, Richards Layton has acquired knowledge of the Debtors' business, financial affairs and capital structure. As Co-Counsel, Richards Layton will: (a) advise the Debtors of their rights, powers and duties as debtors and debtors in possession; (b) take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on the Debtors' behalf, the defense of any actions commenced against the Debtors, the negotiation of disputes in which the Debtors are involved, and the preparation of objections to claims filed against the Debtors' estates; (c) prepare on behalf of the Debtors all necessary motions, applications, answers, orders, reports and papers in connection with the administration of the Debtors' estates; and (d) perform all other necessary legal services in connection with the Debtors' chapter 11 cases. The principal professionals and paraprofessionals designated to represent the Debtors and their current standard hourly rates are: Mark D. Collins $425 per hour John H. Knight $310 per hour Rebecca L. Booth $200 per hour Kimberly D. Newmarch $165 per hour Diana M. Poole $125 per hour Amanda R. Kernish $115 per hour FAO, Inc., 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. The Company filed for Chapter 11 protection on January 13, 2003. Rebecca L. Booth, Esq., Mark D. Collins, Esq., and Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A. and David W. Levene, Esq., and Anne E. Wells, Esq., at Levene, Neale, Bender, Rankin & Brill represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $257,400,000 in total assets and $238,374,000 in total debts. FAO INC: Receives Delisting Notice from the Nasdaq -------------------------------------------------- FAO, Inc. (Nasdaq: FAOOQ), a leader in children's specialty retailing, announced that it had received a Nasdaq Staff Determination on January 14, 2003, indicating that, as a result of its recent bankruptcy filing, the Company fails to comply with the requirements for continued listing set forth in Marketplace Rules 4300 and 4450(f), and that its securities are, therefore, subject to delisting from the Nasdaq National Market. The Company has requested a hearing before a Nasdaq Listing Qualifications Panel to review the Staff Determination. There can be no assurance the Panel will grant the Company's request for continued listing. About FAO, Inc. 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/ FOUNTAIN PHARMACEUTICALS: Jeff Wasson Discloses 7% Equity Stake --------------------------------------------------------------- As of the close of business on January 7, 2003, Jeff Wasson was the beneficial owner of 868,000 shares of common stock of Fountain Pharmaceuticals, Inc. As of January 7, 2003, these shares represented 7% of the sum of the 12,400,309 total shares of common stock outstanding as reported by the Company. Mr. Wasson is a private investor. He holds sole voting and dispositive rights over the 868,000 shares held. On November 21, 2002, the Company completed the acquisition of all of the issued and outstanding shares of SiriCOMM, Inc., a Missouri corporation. Mr. Wasson loaned SiriCOMM, Inc. (Missouri) an aggregate of $500,000 in two installments of $250,000 each on November 16, 2001 and April 5, 2002 respectively. In connection with these loans, Mr. Wasson was issued two convertible notes each in the principal amount of $250,000. Upon conversion, these notes are convertible into an aggregate of 7% of the combined entity's common stock. Accordingly, on January 7, 2003, Mr. Wasson converted his notes into 868,000 shares of the Company's common stock, which represents 7.0% of the company's issued and outstanding shares of common stock. Mr. Wasson made the initial loans out of his personal funds. The shares of common stock deemed to be beneficially owned by Mr. Wasson were acquired for, and are being held for, investment purposes. * * * As previously reported in the Oct. 17, 2002, issue of the Troubled Company Reporter, Fountain Pharmaceuticals, which had relied largely on loans from chairman James Schuchert, Jr., ran out of time and money. Before suspending operations and transferring its assets instead of facing foreclosure, it primarily developed "cosmeceuticals" based on its proprietary drug-delivery technology -- man-made microscopic spheres carry pharmaceuticals that are released when applied to the skin. The technology was used in sunscreens, lotions, and moisturizers under the Celazome and LyphaZone brands. Since Fountain Pharmaceuticals no longer has assets except the Company's public shell, it no longer has the ability to generate revenue; therefore, the Company is not in the position to continue as a going concern. The Company's Board of Directors is currently pursuing candidates with potential business interest with which to merge. The Company has reached an agreement to acquire all of the issued and outstanding shares of SiriCOMM, Inc. GENESIS HEALTH: Names Robert H. Fish as Permanent Chairman & CEO ---------------------------------------------------------------- Genesis Health Ventures, Inc. named Robert H. Fish as permanent Chairman of the Board and Chief Executive Officer. Fish, 52, who had been serving as interim CEO since May 28, is a 25-year veteran of the healthcare industry. "During our extensive 6-month CEO search, we unanimously concluded that Bob is the right person to lead the company through this period of strategic restructuring," said Joseph A. LaNasa, III, a member of the Genesis Board's search committee. "I am pleased to accept the permanent assignment as Genesis' CEO and about continuing to lead a dynamic company through a period of significant operational and strategic initiatives. Over the next 60 days, the Board's evaluation of strategic business alternatives will conclude and a number of very exciting initiatives will begin," said Fish. Before joining Genesis, Fish was a Partner of Sonoma-Seacrest, LLC, a California-based healthcare consulting firm. He had also served as President and Chief Executive Officer of St. Joseph Health System/Sonoma County and Chief Executive Officer of ValleyCare Health System in California. Fish holds a Bachelor of Arts degree from Whittier College and a Master's in Public Health with a concentration in Hospital Administration from the University of California at Berkeley. Fish has a special interest in Gerontology and has studied extensively at the Ethel Percy Andrus School of Gerontology at the University of Southern California at Los Angeles. Genesis Health Ventures (Nasdaq: GHVI) provides healthcare services to America's elders through a network of NeighborCare pharmacies and Genesis ElderCare skilled nursing and assisted living facilities. Other Genesis healthcare services include rehabilitation and respiratory therapy, hospitality services, group purchasing, and diagnostics. Visit http://www.ghv.com On Oct. 3, 2002, Standard & Poor's Ratings Services affirmed its corporate credit rating and assigned its 'B+' rating to a proposed $200 million senior unsecured term loan B, due 2007. GENUITY INC: Seeking Approval of Small Asset Sale Procedures ------------------------------------------------------------ According to William F. McCarthy, Esq., at Ropes & Gray, in Boston, Massachusetts, in connection with the operation of their businesses, the Debtors maintain various assets, including personal property. Some of this property won't be necessary for the continued operation and reorganization of their businesses. Consequently, Genuity Inc., together with its debtor-affiliates anticipate that over the course of these bankruptcy cases, they will want, and attempt, to sell those assets that are, or become, unproductive, unnecessary and burdensome to their estates. The Debtors believe that the assets they will seek to sell primarily constitute non-core assets that, in most cases, have relatively de minimis value when compared with the Debtors' total asset base. These assets include security equipment, phone systems, fire protections systems, UPS (Uninterrupted Power Supply), conference room set-ups, network equipment and facilities equipment including HVAC, DC power plants, generators, communications servers and routers, cable and cable racking, as well as internal IT equipment and office related materials including printers, laptops, PCs, modems, copiers, flooring, chairs, cubicles and private office set-ups that are either unused or have become obsolete. Despite the de minimis value of the assets, Mr. McCarthy is concerned that the sales of some of these assets may constitute transactions that are outside of the ordinary course of the Debtors' businesses that would normally require individual Court approval pursuant to Section 363(b)(1) of the Bankruptcy Code. However, Debtors believe that having to obtain Court approval for each individual proposed sale of De Minimis Assets would be administratively burdensome to the Court and expensive for the Debtors' estates. This is not only true in light of the small value of the De Minimis Assets, but also because the window of opportunity to sell assets like the De Minimis Assets is often quite small. In fact, in some cases, the costs and delays associated with seeking individual Court approval of a proposed sale of a De Minimis Assets could eliminate, or substantially reduce, the economic benefit of the sale. In addition, to the extent the Debtors wish to sell De Minimis Assets to facilitate the rejection of certain real estate leases, the delays associated with seeking individual Court approval of a sale would result in increasing the amount of the Debtors' administrative rent expenses. To alleviate the burden and cost of having to obtain individual Court approval each time the Debtors seek to sell certain De Minimis Assets, and to facilitate the rejection of real estate leases, the Debtors seek entry of an order approving the sale procedures. The Debtors believe that the Sale Procedures strike a proper balance between, on the one hand, enabling the Debtors to maximize the value of the De Minimis Assets to the estates and minimize their administrative rent obligations, and, on the other, the necessity of providing parties-in-interest with notice and an opportunity to object to a proposed sale out of the ordinary course of business. The Debtors propose to implement the Sale Procedures on these terms: A. the Debtors will only be authorized to sell assets that the Debtors could otherwise sell without violating the Asset Purchase Agreement with 360 Networks; B. the Debtors will be permitted to sell De Minimis Assets where the sale price for a specified De Minimis Asset or groups of related De Minimis Assets is $1,500,000 or less. If the sale price for a specified De Minimis Asset or groups of related De Minimis Assets is $350,000 or less, the Debtors will be authorized to sell the property in the ordinary course of business pursuant to Section 363(c) of the Bankruptcy Code without further notice or further order of the Court. These De Minimis Sales will be deemed final and fully authorized by the Court, and will be free and clear of all Liens to the fullest extent permitted by Section 363(f) of the Bankruptcy Code. C. if a proposed sale price for a specified De Minimis Asset or groups of related De Minimis Assets is in excess of $350,000, but no more than $1,500,000, the Debtors will be permitted to consummate a sale under these procedures in lieu of a separate notice and hearing for each sale: -- the Debtors will give notice via e-mail, facsimile, or overnight delivery service of each proposed sale to: a. counsel for the Creditors' Committee, b. the United States Trustee's Office, c. counsel to the administrative agent for the Debtors' prepetition credit facility, and d. any and all parties known to the Debtors as holding or asserting an interest in the De Minimis Assets subject to sale; -- the notice will specify: a. the De Minimis Assets to be sold; b. the identity of the proposed purchaser; c. the relationship, if any, that the proposed purchaser has with the Debtors; d. the identities of any parties holding liens on or other interests in the assets; e. the current estimated value of the assets to be sold; and f. instructions consistent with the procedures to assert objections to, or requests for time to evaluate, the proposed sale; -- the Notice Parties will have 5 business days from the date on which the Sale Notice is sent to object to, or request additional time to evaluate, the proposed sale. All objections or requests should be in writing and delivered to: Genuity Inc. 225 Presidential Way, Woburn, MA 01801 Attn: Ira H. Parker and Debtors' counsel, Ropes & Gray One International Place, Boston, MA 02110 Attn: Don S. DeAmicis If no written objection or request for additional time is received by Genuity and Ropes & Gray within the 5- day period, the Debtors will be authorized to consummate the proposed sale and to take actions as are reasonable or necessary to close the sale and obtain sale proceeds; -- if any Notice Party timely provides a written request to Genuity Inc. and Ropes & Gray for additional time to evaluate the proposed sale, the Notice Party will have an additional 10 calendar days to object to the proposed sale. The Debtors may consummate a proposed sale of De Minimis Assets, after objection, if the objecting party consents or withdraws its objection, and with the consent of any Notice Party to any change of the terms of the proposed sale that are materially adverse to the Notice Party; -- if any Notice Party submits a written objection to the proposed sale so that the objection is received by Genuity Inc. and Ropes & Gray on or before the 5th business day after the Sale Notice is sent, the Debtors and the objecting Notice Party will use good faith efforts to resolve the objection. If the Debtors and the objecting Notice Party are unable to achieve a resolution, the Debtors will not proceed with the proposed sale without Court approval, after notice and a hearing; D. nothing will prevent the Debtors, in their sole discretion, from seeking the Court's approval at any time of any proposed sale of assets after notice and a hearing; E. the Sales Procedures will not apply to sales of assets to an "insider," as defined in Section 101(31) of the Bankruptcy Code. Any sale will continue to require Court approval after notice and a hearing as set forth in Section 363(b) of the Bankruptcy Code; F. any Lien on any De Minimis Assets sold without further court order will be deemed to attach to an amount of cash or cash equivalents held by the Debtors equal to the net proceeds of the sale; and G. if the proposed sale price is greater than $1,500,000, the Debtors will be required to file a motion with the Court requesting approval of the sale pursuant to Section 363 of the Bankruptcy Code. The Debtors further request authority to execute and deliver all instruments and documents, and take other actions as may be necessary or appropriate to implement and effectuate the Sale Procedures as approved by this Court. The Debtors also request that the Court approve any and all sales of De Minimis Assets in accordance with the terms of the Sales Procedures free and clear of all Liens. The Debtors further request that the Court find and hold that all purchasers of the De Minimis Assets or interests in the De Minimis Assets, who purchase these Assets in accordance with the Sale Procedures set forth, are entitled to the protections afforded by Section 363(m) of the Bankruptcy Code. The outlined Sale Procedures will minimize administrative costs in these cases, including administrative rent obligations, facilitate the expeditious liquidation of miscellaneous non-core assets, and preserve the rights of the interested parties to object. Mr. McCarthy believes that having to obtain Court approval of each individual proposed sale or would result in increased costs incurred by the drafting, serving and filing of pleadings, as well as time incurred by attorneys for appearing at Court hearings. In addition, having to obtain Court approval would further delay the Debtors' ability to vacate and reject certain leases of real property in which certain De Minimis Assets are located, thereby causing the Debtors to incur administrative rent obligations and associated expenses, including utility charges and common area maintenance charges. Moreover, the Debtors may often face tight time constraints imposed by proposed purchasers in connection with closing a proposed sale. The Sale Procedures set forth will enable the Debtors to quickly respond to the needs of the purchasers, while preserving the rights of parties-in-interest to review and object to the proposed sale. Mr. McCarthy insists that the Debtors have a sound business purpose for selling the De Minimis Assets and for establishing procedures to permit the Debtors to accomplish these sales in the most efficient, cost-effective manner possible. The Sale Procedures set forth with respect to De Minimis Assets with a sale price between $350,000 and $1,500,000 will enable the Debtors to quickly respond to the needs of the purchasers, while preserving the rights of parties-in-interest to review and object to the proposed sale. Accordingly, the Debtors believe that the Sale Procedures satisfy the requirements of Section 363(f) of the Bankruptcy Code. If a holder of a Lien receives the requisite notice and fails to object within the prescribed time period, the holder will be deemed to have consented to the proposed sale and the property may then be sold free and clear of the holder's Liens. With respect to sale of De Minimis Assets with a value less than $350,000, which, pursuant to the Sale Procedures, will be authorized without notice and further Court approval, the Debtors submit that they are unaware of any Liens against the De Minimis Assets and request the Court to authorize that the sales of these De Minimis Assets pursuant to the Sale Procedures set forth in this motion also be free and clear of any Liens, with any Liens to be, at the Debtors' discretion, either: -- satisfied from the proceeds of the sale; or -- transferred and attached to the net sale proceeds. Mr. McCarthy points out that these estates have substantial free cash, and no substantial secured claims against them. Providing holders of Liens on De Minimis Assets with a floating lien on the free cash of the relevant Debtor will defer consideration of all lien issues until a more appropriate time -- objections to claims and plan confirmation -- while permitting these estates to quickly and efficiently liquidate their assets for the benefit of all creditors. (Genuity Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Assumes Telecom Services Agreement with IDT ------------------------------------------------------------ Global Crossing Ltd., and its debtor-affiliates sought and obtained the Court's authority to assume a certain telecommunications services agreement with IDT Corporation. Paul M. Basta, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that Global Crossing Bandwidth, Inc., one of the GX Debtors, provides telecommunications services to IDT Corporation pursuant to a certain Telecommunications Services Agreement, dated September 29, 1998. In addition, the GX Debtors purchase certain telecommunications services from IDT. On the Petition Date, the GX Debtors and IDT held claims against each other, based on their existing contractual relationships. On May 16, 2002, the Court approved a stipulation that resolved all claims. The Stipulation also provides that IDT will pay $6,100,000 to GC Bandwidth on the date the Court approves the assumption of the Capacity Contract. Pursuant to the Capacity Contract, Mr. Basta explains that GC Bandwidth agreed to provide certain dedicated circuit capacity on the Network for the transportation of IDT's telecommunications traffic. Specifically, IDT agreed to purchase from GC Bandwidth 23,859,360 channel miles of circuit capacity along the Network between certain cities within the United States, with the right to freely substitute a designated city pair with another city pair along the Network. The significant terms of the Capacity Contract are: -- IDT agreed to pay $1.35 per DS-O channel mile along the Network for the entire 20-year term of the Capacity Contract as a nonrecurring charge amounting to $32,210,136; -- IDT agreed to pay GC Bandwidth 15% of the Total Nonrecurring Charge after execution of the Capacity Contract, with the balance to be paid pro rata based on the number of channel miles per circuit order; -- IDT was required to either order all 23,859,360 channel miles within the first 18 months of the Capacity Agreement or pay the entire balance of the Total Nonrecurring Charge at the end of the first 18 months; and -- In addition to the Total Nonrecurring Charge, IDT agreed to pay GC Bandwidth $.0035 per channel mile a month for maintenance of the Network. Beyond the Total Nonrecurring Charge and the Maintenance Charge, IDT had the right to purchase additional capacity beyond the 23,859,360 of original channel miles, with costs varying for additional capacity depending on the grade of fiber purchased. In essence, GC Bandwidth has agreed to provide telecommunications capacity to IDT on the Network in exchange for significant upfront payments and ongoing maintenance charges. Mr. Basta admits that most of the Debtors' contracts with customers are being assumed or rejected in a procedure that is tied to the effective date of the Plan. The Debtors have determined, however, that the assumption of the Capacity Contract at this time will provide significant benefit to their estates. Most notably, the Purchase Agreement with the Investors on which the Plan is based includes certain cash and working capital tests that are measured on December 31, 2002. The assumption of the Capacity Contract at this time will trigger IDT's obligation under the Stipulation to pay $6,100,000 and will assist the Debtors in meeting those targets. Moreover, Mr. Basta believes that the assumption of the Capacity Contract at this time will further an important business relationship with IDT. Finally, the Debtors believe that there will be no cure costs involved in the assumption of the Capacity Contract. All prepetition claims between the parties have been finally resolved pursuant to the Stipulation. The Debtors also believe that assumption of the Capacity Contract will bring value to the Debtors' estates and that the future provision of Network-related services to IDT is consistent with the Debtors' business plan. (Global Crossing Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) INTEGRATED HEALTH: Court Okays Global Settlement Pact with Omega ---------------------------------------------------------------- Integrated Health Services, Inc., and its debtor-affiliates sought and obtained a Court order approving a "global" settlement with Omega Healthcare Investors, Inc., pursuant to the Term Sheet executed between the parties on November 26, 2002. The Term Sheet generally provides for the release and discharge of any and all claims other than the Crystal Springs Claim or contingent Ballard Payment in exchange for the transfer to Omega or its designee of substantially all of the Debtors' real property and improvements and certain related personal property serving as collateral for Omega's mortgage loans to each Debtor, pursuant to a deed in lieu of foreclosure, and the transfer of operations to Omega or its designee of the nursing home facility and certain related personal property owned by the Debtors pursuant to a certain Operations Transfer Agreement. Each Operations Transfer Agreement will address the disposition of the Medicare provider reimbursement agreement and Medicare provider number and the Medicaid provider reimbursement agreement and Medicaid provider number related to the Facility. Robert S. Brady, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, informs the Court that prior to the Petition Date, certain of the Debtors and Omega executed three commercial mortgage notes, secured by three separate and distinct mortgages covering three separate groups of skilled nursing facilities held by Omega totaling $54,410,000. These mortgages consist of two "blanket" mortgages and a separate mortgage in favor of and held by Omega securing indebtedness in the original principal amounts of $12,000,000, $37,500,000 and $4,910,000. The $12,000,000 Note is secured by a lien on the Bonterra Nursing Center and Parkview Manor Nursing properties. The $37,500,000 Note is secured by a lien on IHS properties at Brandon, IHS at Central Park Village, IHS of Dallas at Treemont, IHS of Florida at West Palm Beach, IHS of Lakeland at Oakbridge, IHS of Sarasota at Beneva and The Vintage Properties. Finally, the Crystal Springs Nursing and Rehabilitation Center secures the $4,910,000 Note. In connection with each Mortgage, Omega asserts first priority, perfected mortgage liens on the Properties that serve as collateral. Mr. Brady explains that the settlement provides for the transfer of the Properties to Omega in recognition of the fact that, by virtue of the Omega Liens, Omega allegedly possesses the rights and interests of a mortgagee, and, subject to applicable law, would be entitled to foreclose on the Omega Liens and receive the proceeds of any disposition of the Properties, provided that these proceeds are applied to reduce Omega's mortgage claims against the Debtors. Based on its review of copies of the recorded Mortgages and certain title information, the Debtors believe that the Omega Liens are properly perfected. Following negotiations among the Debtors and Omega, on June 30, 2000, Mr. Brady reminds the Court that it entered a Stipulation and Order among the Debtors and Omega authorizing the grant of "adequate protection" to Omega pursuant to Sections 361 and 363 of the Bankruptcy Code. The Stipulation provided for the Debtors to make monthly "adequate protection" payments of non- default rate interest to Omega with respect to the Mortgages, renewable automatically for successive six-month periods unless terminated by the Debtors or Omega in accordance with its terms. The Stipulation also provided for the reservation of all of the parties' rights with respect to valuation matters and to the final allocation of the "adequate protection" payments to these claims of Omega, which might ultimately be allowed. To date, since the entry of the order approving the Stipulation, the Debtors have paid $15,692,798 in non-default rate interest payments to Omega. According to Mr. Brady, the settlement provides for Omega to release all Claims against the Debtors' estates comprised of alleged secured claims amounting to $50,500,000, other than its $4,500,000 general unsecured claim arising from the Crystal Springs Mortgage. Moreover, Omega has asserted that the Debtors are obligated to compensate Omega, as a postpetition administrative expense of the Debtors' estates, for any postpetition diminution in value of the Mortgaged Properties. In addition, Omega asserts $1,500,000 lease rejection damage claims arising from a lease for the Ballard Convalescent Center, a 142-bed skilled nursing facility located in Seattle, Washington, and $1,100,000 in postpetition administrative expense claims with respect to the Debtors' alleged obligation to pay for and make certain repairs and improvements to the Ballard Facility. Omega has asserted that the Debtors are obligated under the terms of the Ballard Lease to install a new HVAC system at the Ballard Facility at a total cost exceeding $1,000,000. Omega alleges that under the terms of the Ballard Lease, the Debtors have an obligation to return the premises to Omega in operating condition, and the premises allegedly have licensure survey deficiencies resulting from the failure of the HVAC system. Accordingly, Omega argues that this sum would constitute a postpetition administrative expense of the Debtors' estates. Mr. Brady recounts that this Court previously has authorized the Debtors to abandon the Crystal Springs Property to Omega pursuant to its Order dated March 7, 2002. Omega argues, however, that it is entitled to an administrative expense claim due to the postpetition diminution in value of the Crystal Springs Property arising from the closing of the facility without Omega's consent. The Debtors contest all of these Claims and assertions but believe that in light of the compromise in the Term Sheet, it would be imprudent to suffer the time, delay and undue expense of litigating them. Thus, the Debtors have negotiated an acceptable compromise for inclusion in the "global" settlement. Mr. Brady explains that the Debtors want to discontinue operations at all of the Facilities because the professional and general liability related to these Facilities has caused the Debtors' operations to suffer reduced profitability in the context of their overall business plan. Moreover, the Debtors believe that their existing interested or prospective acquirers will not seek to own of operate any of the Facilities. Accordingly, returning the Facilities to Omega in a manner that satisfies its claims in full represents a prudent exercise of the Debtors' business judgment. The Debtors and Omega have engaged in extensive arm's-length, good faith negotiations, which have resulted in the agreement in principle to effectuate the settlement set forth in the Term Sheet. The salient terms and provisions of the settlement are: A. Cash Payments: As part of the settlement, the Debtors would continue to pay Omega $452,000 per month through February 2003, after which date the Monthly Payments and any and all other payments by the Debtors with respect to the Claims or the Properties would cease, even if the Properties or Facilities are transferred in connection with a "stand-alone" reorganization of the Debtors. In addition to paying the Monthly Payments, the Debtors have agreed to make a $650,000 payment to Omega, in full and complete release, discharge and satisfaction of any and all claims of Omega related to the Ballard Facility; provided, however, that the Ballard Payment is contingent on and will be due and payable only if all of the Properties and Facilities are transferred on or prior to March 1, 2003. If these transfers are not completed by March 1, 2003, the Ballard Claim will be deemed released, discharged and satisfied in full; B. Property Transfers: The Debtors and Omega also have agreed to execute a Deed in Lieu to effect the transfer of Property. Salient provisions of the Deed in Lieu are: -- Title: The Debtors will transfer to Omega the Property in "as is" condition, subject to existing liens and encumbrances pursuant to the Deed in Lieu. This transfer will be without representation, warranty or recourse to the Debtors, except as specifically provided in the Deed in Lieu. Omega will accept title subject to the rights of the patients and clients of the Facility being operated on the Property; -- Liens: The Property will be transferred to Omega subject to the Permitted Encumbrances. Omega will bear any and all costs and expenses associated with the transfer of title to the Properties; -- Closing: Omega will provide the Debtors with at least 10 business days' prior written notice of its intent to transfer a particular Property and its related Facility and indicate the desired closing date. The parties will close these transfers as soon as is reasonably practicable, in accordance with the Term Sheet, applicable law, the Transaction Documents and the order granting this Motion, and will endeavor to cause the Closing Date of the Property transfers to be on the first day of the month following the date on which Omega provides notice to the Debtors of its intention to transfer a particular Property, but in any event no later than March 1, 2003; and -- Real Estate Broker: Neither the Debtors nor Omega has utilized the services of any real estate or other broker in connection with these transactions; and C. Operations Transfers: The Debtors and Omega also have agreed to execute an Operations Transfer Agreement to transfer the operations of each of the Facilities. The Operations Transfer Agreement governs the disposition of the operations at each Facility and certain personal property of each applicable Debtor relating to the operation of its Facility. The Operations Transfer Agreements also govern: -- the transfer of the Debtors' personal property located at the Facility to the New Operator, including, inventory, resident lists and records, furniture, fixtures, equipment and supplies; -- the transfer of resident trust funds; -- the employment of the Debtors' employees by the Omega Transferee; -- prorations of utility charges, real and personal property taxes, and any other items of revenue or expense attributable to the Facility; and -- access to records. The Operations Transfer Agreement provides that the Debtors and New Operator will be entitled to payments of accounts receivable, which provides in general that accounts receivable that relate to the period prior to the effective date of the transfer will inure to the benefit of the Debtors, and accounts receivable that relate to the period after the transfer will inure to the benefit of the New Operator, and contains a mechanism for the allocation of collections arising from accounts receivable. The Operations Transfer Agreements also govern the assumption by the New Operator of certain contracts related to the Facility's operations, and the Medicare Provider Agreement and the applicable Medicaid Provider Agreement. The New Operator may seek or decline to assume any of the Debtors' rights in the Medicare Provider Agreement or the Medicaid Provider Agreement related to a particular Facility. Each New Operator will acknowledge and agree under the Operations Transfer Agreement that it is assuming all risks arising out of the New Operator's failure to obtain a new Medicare Provider Agreement or a new Medicaid Provider Agreement with respect to the Facility. The New Operator has also agreed that it will not discharge, or take any action to discharge any Medicare or Medicaid beneficiaries who are residents or patients of the Facility immediately prior to the effective date of the transfer by reason of the New Operator's inability to bill Medicare or Medicaid with respect to the residents or patients, and to indemnify the Debtors from and against all damages, claims, losses, penalties, liabilities, actions, fines, costs and expenses incurred by the Debtors which arise out of the New Operator's failure to accept assignment of the Medicare Provider Agreement or Medicaid Provider Agreement, including any claims arising from the discharge from the Facility of any Medicare or Medicaid patient of the Facility immediately prior to the time that the New Operator ceases to hold a Medicare Provider Agreement or Medicaid Provider Agreement. The Debtors will bear the cost of certain adjustments under the Operations Transfer Agreements, including the cost to cure any "overpayments" arising prior to the transfer of the Facilities with respect to the Medicare program. At present, the Debtors estimate of that the total "cure" amount due is $452,675 with respect to all of the Facilities. Mr. Brady relates that the Term Sheet obligates Omega to identify a bona fide Omega Transferee for each Property and New Operator for each Facility on or prior to February 16, 2003. If Omega fails to do so, the Debtors will be permitted immediately to commence closing the Facilities without any liability to Omega. Moreover, if the transfer of any Facility has not occurred on or prior to March 1, 2003, then the Debtors will be permitted to close the Facility without liability to Omega. Subject to the preceding caveats, until the Debtors cease to be a licensed operator with respect to a particular Facility, the Debtors will cooperate with Omega to effectuate a transfer of Property to an Omega Transferee. As set forth in the Term Sheet, the Debtors' substantial compliance with the terms and provisions will constitute substantial compliance with the Term Sheet for the purposes of their obtaining the releases of any and all Claims of Omega, so that in the event that Omega fails to identify an Omega Transferee or close the transfer of a Property or Facility, then the Claims of Omega nonetheless will be deemed released, discharged and satisfied in full. The Debtors submit that the value to be received from the transfers of the Property to an Omega Transferee and Facilities to a New Operator derives from the fact that, at present, the Properties are subject to and heavily burdened by Omega's Mortgages. The Debtors have determined that the value of each Property is substantially less than the principal amount of the applicable Mortgage to which it is subject. Mr. Brady believes that an arm's-length sale to a third party would not result in the realization of sales proceeds that would meet the debt evidenced by the Notes secured by the Mortgages. In consummating these transfers, the Debtors' estates and creditors will be relieved from Omega's $54,400,000 secured claims arising from the Mortgages, and the Debtors will not have to pay any general unsecured deficiency claim with respect to any Facility other than Crystal Springs. They will also be relieved of any postpetition administrative expense liability arising from the postpetition diminution in value of the Facilities or any obligation to pay for and make repairs or improvements to the Ballard Facility, and of the time and expense of litigating Omega's Claims. The Debtors believe that the settlement is more favorable to their estates and creditors than any reapplication of their monthly payments because these payments, even if reallocated to a reduction of principal, would not relieve the estates from the burden of satisfying the balance of Omega's secured claims in addition to its alleged administrative expense claims and allocation of the estates' resources for any deficiency claims. The Debtors contend that the Transfers will yield the highest value and benefit for the Property, and therefore are most advantageous to their estate and creditors. Mr. Brady points out that the settlement embodied by the Transaction Documents includes the release of $54,400,000 in secured and unsecured Claims arising from the Mortgages, in return for the Debtors' making three additional Monthly Payments of $452,000 to Omega, and paying the $650,000 Ballard Payment. Therefore, in exchange for the $2,00,000 payment plus the $4,500,000 general unsecured claim related to the Crystal Springs Facility, the Debtors' estates will be relieved of the obligation to satisfy Omega's $54,400,000 Mortgage Claims, the alleged $1,400,000 lease rejection damages claim and asserted $l,100,000 in postpetition administrative expense claim related to the Ballard Lease, and any "diminution in value" administrative claims, remaining Claims of Omega related to the Ballard Lease or Crystal Springs Property. Moreover, the Debtors believe that if the Property is auctioned, any bids would, in all likelihood be substantially less than the principal amount of the Omega's Mortgage Claims. Therefore, conducting a public auction would be a waste of the Debtors' time and financial resources, and would jeopardize the settlement and the Debtors' ability to reorganize, to the detriment of their estates and creditors.(Integrated Health Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 609/392-0900) GROUP MANAGEMENT: Names Barry Corker as Newest Board Member ----------------------------------------------------------- Group Management has appointed Barry Corker to fulfill a vacancy on its Board of Directors. Barry Corker is a graduate of Georgia State University where he attained a Bachelor of Business Administration degree with an emphasis in Finance. He spent 10 years with Delta Airlines, Inc., serving in various customer service and marketing-related functions that included vendor negotiations, budget analysis, customer reliability studies and community affairs projects. Barry then left Delta Airlines in August of 1994 and began his career as a Financial Consultant with Merrill Lynch, Inc., where he served 5 and one- half years and graduated with honors from the coveted Professional Development Program (PDP) that is recognized in the financial industry as one of the most prestigious training avenues for Investment Advisors. In July of 1999 he left Merrill Lynch and opened an Independent office with Raymond James Financial Services where he served as Branch Manager and Financial Advisor to many high net-worth clients. After working 1 and one-half years under the Branch Manager arrangement, he then formed The Corker Capital Group, LLC and partnered with TD Waterhouse Institutional to provide extensive financial and investment advisory services along with research analysis for his existing clientele and community. Barry is actively involved with many noted organizations within the Atlanta area. He serves tirelessly as Vice-President of the Georgia State University Alumni Association. He is a member of the Board of Advisors for the Jesse Draper Boys & Girls Club and is a member of the Atlanta Business League. He is also a board representative with the African American Health Foundation. Barry Corker is a NASD General Securities Principal (Series 24 license), holds a Series 7, Series 63 and Series 65 Registered Investment Advisor (RIA) licenses. Barry is a recognized and dynamic public speaker in which he holds various seminars and workshops involving estate planning, tax reduction strategies and investment analysis procedures for business owners and non- profit organizations. Group Management Corp. is fortunate to have an individual with the experience necessary to operate a financial subsidiary. * * * As previously reported, Group Management Corp (OTCBB:GPMT) disclosed that holders of a $1.1 million convertible note filed a complaint in United States District Court for the Southern District of New York against, the Company and Elorian Landers, the Company's Chief Executive Officer. In their complaint, the note holders allege, among other things, fraud in connection with the sale of the notes and breach of contract on the notes. The note holders are seeking monetary damages in excess of $1.1 million and certain injunctive relief in connection with the registration of the common stock underlying the notes, conversion of the notes into Company common stock and transfer of Company common stock pledged as collateral in connection with a related financing transaction surrounding the notes. The note holders had previously declared the Company in default on the notes and demanded payment thereon. KB HOME: Fitch Rates $250 Mill. Senior Subordinated Notes at BB- ---------------------------------------------------------------- Fitch Ratings has assigned a 'BB-' rating to KB Home's (NYSE: KBH) $250 million, 7.75% senior subordinated notes due February 1, 2010. The 'BB+' senior unsecured debt rating is affirmed. The Rating Outlook is Stable. Proceeds from the new debt issue would replace the $125 million principle amount of 9 5/8% senior subordinated notes due 2006. There is a call premium of 3.2125% (approximately $4 million) for the 9 5/8% notes. The balance of the proceeds will be used for other corporate purposes. The new issue has a lower rate and extends the maturity by roughly three years. For the fiscal year ending November 30, 2003, Fitch expects leverage (excluding financial services) to remain comfortably within KB Home's stated debt to capital target of 45-55%. The long-term ratings for KB Home are based on the company's geographic diversity, primary focus on the entry-level homebuyer, solid operating performance, conservative building practices and effective utilization of return on invested capital criteria as a key element of its operating model. Risk factors include the inherent cyclical nature of the homebuilding industry. The company has expanded EBITDA margins over the past several years on steady price increases, volume improvements and reductions in SG&A expenses. Also, KB Home has produced record levels of home closings, orders and backlog as the housing cycle extended its upward momentum. KB Home realizes a significant portion of its revenue from California, a region that has proved volatile in past cycles. But the company has reduced this exposure as it has implemented its growth strategy and currently sources 23% of its deliveries from California, compared with 69% in fiscal 1995. Over recent years KB Home shifted toward a presale strategy, producing a higher backlog/delivery ratio and reducing the risk of excess inventory and debt accumulation in the event of a slowdown in new orders. The strategy has also served to enhance margins. The company maintains a 4 year supply of lots (based on deliveries projected for 2003), 50% of which are owned and the balance controlled through options. Inventory turnover has been consistently at or above 1.8 times (x) during the past six years. Balance sheet liquidity has continued to improve as a result of efforts to reduce long-dated inventories, quicken inventory turns and improve returns on capital. Progress in these areas has allowed the company to accelerate deliveries without excessively burdening the balance sheet. KMART CORP: Details Terms of New $2 Billion Exit Facility --------------------------------------------------------- An integral aspect of Kmart Corporation and its debtor- affiliates' strategy to emerge from Chapter 11 is a new, exit financing facility designed to fund certain payments under their restructuring plan and to provide working capital to the reorganized enterprise. To this end, J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom LLP, reports that the Debtors have obtained a commitment letter from General Electric Capital Corporation, Fleet Retail Finance, Inc., and Bank of America, N.A. -- the Initial Lenders -- for up to $2,000,000,000 of exit financing. The Exit Facility will replace the Debtors' existing DIP financing facility, assist Reorganized Kmart in meeting its ongoing working capital needs, and provide financing for seasonal increases in inventory. In securing the Financing Commitment Letter, Mr. Ivester informs the Court that the Debtors, with the assistance of their investment banker and financial advisor, Miller, Buckfire, Lewis & Co., LLC, approached several major financial institutions and solicited commitments for a $2,000,000,000 exit financing facility on the terms acceptable to them and their creditor constituencies. The Debtors obtained proposals from a number of institutions, and devoted considerable time negotiating with the proponents about the various proposed lending terms. After considering the various alternatives, the Debtors determined to proceed with the Financing Commitment Letter proposed by GE Capital, Fleet, and Bank of America. The Debtors are convinced that this proposal provides the best exit financing terms available, consistent with their anticipated working capital and other needs as they emerge from Chapter 11. The Exit Facility The Financing Commitment Letter offers $2,000,000,000 in exit financing facility to Kmart Corporation as Borrower. The amount includes: * a letter of credit sub-facility of up to $800,000,000; and * a swingline facility in an amount to be determined. The Debtors may opt for a lesser amount before the Closing Date. A portion of the Exit Facility not to exceed $200,000,000 may take the form of a synthetic term loan facility using credit- linked deposits. The Initial Lenders commit: GE Capital $750,000,000 Fleet $750,000,000 Bank of America $500,000,000 GE Capital acts as administrative agent for the Exit Lender Syndicate and Fleet Retail Finance and Bank of America act as co-syndication agents. GE Capital and Fleet Retail Finance also serve as co-collateral agents. GECC Capital Markets Group, Inc.; Fleet Securities Inc.; and Bank of America Securities LLC are the co-lead arrangers and co-book runners. The Commitment Letter also proposes these terms and conditions: Term: 36 months Availability: The lesser of: -- $2,000,000,000; and -- the sum of: (a) the lesser of: (i) 65% of the Debtors' eligible inventory valued at the lower of cost -- FIFO -- or market; or (ii) 80% of the appraised net going out of business value of the Debtors' eligible inventory; and (b) the lesser of: (i) 50% of the Debtors' eligible in- transit inventory covered by letters of credit valued at the lower of cost (FIFO) or market; or (ii) 60% of the appraised net going out of business value of the Debtors' eligible in-transit inventory covered by letters of credit under the Letter Of Credit Sub-facility. Use of Proceeds: Loans made at the Closing would be used to repay certain postpetition secured indebtedness on the effective date, to otherwise enable the Debtors to consummate the reorganization plan on the effective date and to fund certain fees and expenses associated with the financing. Loans made after the Closing Date would be used for the Debtors' working capital and other general corporate purposes, including permitted capital expenditures. Interest: For all loans, at the Debtors' option, either: -- absent an event of default, 1, 2, 3 or 6- month reserve-adjusted LIBOR plus the applicable margin; or -- floating at the index rate -- higher of prime or 50 basis points over Fed Funds -- plus the applicable margin. The applicable margins will be per annum rates: * Applicable Revolver Index Margin 2.50% * Applicable Revolver LIBOR Margin 3.50% * Applicable L/C Margin 3.50% Fees: The Debtors will pay these fees to GE Capital in connection with the financing documentation: -- Unused facility fee equal to 0.50% per annum on the average unused daily balance of the revolver, payable monthly in arrears; and -- Letter of credit fee equal to the Applicable L/C Margin on the face amount of the letters of credit, plus a 0.25% fronting fee, payable monthly in arrears, plus any reasonable costs and expenses GE Capital incurred in arranging for the issuance or guaranty of the letters of credit not issued by an Initial Lender plus any charges assessed by the issuing bank. Default Rates: Default interest and letter of credit fee at 2% above the rate otherwise applicable will accrue during the continuance of: -- any payment or bankruptcy event of default; or -- any other event of default if the GE Capital or the requisite Lenders have given the Debtors written notice during the continuance of the event of default that the default rates will apply. Upon acceptance of the Financing Commitment Letter, Mr. Ivester maintains that the Co-Arrangers will initiate discussions with potential lenders relating to the syndication of the financing. "The Initial Lenders, through the Co-Arrangers, intend to syndicate the financing to allow them to sell down the financing to their desired hold positions," Mr. Ivester says. Accordingly, the Lenders want the Debtors to agree to a syndication timetable that allows for the primary syndication of the financing before the Closing Date. Each of the Initial Lender's commitments is expressly subject to the Debtors' compliance with the terms of a financing commitment letter and a syndication letter. A free full-text copy of the Commitment Letter is available at: http://www.sec.gov/Archives/edgar/data/56824/000095017203000156/0000950172-0 3-000156.txt Financial Covenants The Lenders intend that the definitive financing documentation will require, among other things, compliance with three financial covenants: A. a $100,000,000 Minimum Excess Availability will be installed at all times; B. maximum Capital Expenditure; and C. a minimum EBITDA covenant at levels to be determined based on an annual cushion of $150,000,000 off of EBITDA set forth in the Business Plan for the most recently reported 12 month period. However, until the 1st anniversary of the Closing Date, the minimum EBITDA will build up to a rolling 12 month period with an EBITDA cushion not to exceed $15,000,000 per month so long as the aggregate annual EBITDA cushion will not exceed $150,000,000 for the applicable fiscal period. The Lenders propose that the EBITDA covenant will be triggered in the event that the minimum Excess Availability is less than $400,000,000 from each January through July and $250,000,000 from each August through December during the Term of the Financing. Once implemented, the Lenders also want the Debtors' compliance with the minimum EBITDA covenant tested on a monthly basis. In the event that the minimum EBITDA covenant is triggered, Lenders indicate that the Debtors would be allowed to avoid further minimum EBITDA testing to the extent that the Debtors: (i) are in compliance with the then applicable minimum EBITDA covenant; (ii) maintain an average Excess Availability above the then applicable Minimum Covenant Trigger for five consecutive business days; and (iii) continue to maintain the Excess Availability above the then applicable Minimum Covenant Trigger level. To the extent the minimum Excess Availability is less than the then applicable Minimum Covenant Trigger at any time after the date of the second EBITDA Covenant Release, a minimum EBITDA covenant for the most recently reported 12 month period will be instituted and remain in place for the term of the Financing, with compliance to be tested on a monthly basis. Securing Repayment of the Exit Facility To secure all of the Debtors' obligations under the Exit Facility, GE Capital, as the Administrative Agent for itself and for the ratable benefit of all Lenders, will receive a fully perfected first priority security interest in: (1) all inventory of any kind wherever located other than the inventory consigned to the Debtors; (2) all documents of title for any Inventory; (3) all claims and causes of action in any way relating to any of the Inventory; (4) all bank accounts into which any proceeds of Inventory are deposited; (5) all books and records relating to the Inventory; (6) all general intangibles other than the intellectual property, except to the extent of software which is necessary or advisable, in GE Capital's opinion, to monitor, sell or otherwise deal with the Collateral in any way related to any of the Inventory; (7) customer scripts, including, without limitation, customer prescription lists relating to the pharmaceutical inventory, to the extent not prohibited by applicable law; (8) accounts receivable constituting credit card receivables; and (9) all substitutions, replacements, accessions, products or proceeds including, without limitation, the insurance proceeds and proceeds constituting accounts receivable of any of the Collateral. Consequently, the Debtors seek the Court's authority to enter into a commitment letter with the Initial Lenders. The Debtors also seek permission to accept and perform their obligations under: (a) the Financing Commitment Letter; (b) a confidential letter agreement with GE Capital regarding the payment of certain fees in connection with the exit facility; and (c) a confidential letter with the Initial Lenders relating to syndication of the financing contemplated by the Financing Commitment Letter. (Kmart Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) LEVEL 3 COMMS: Expect Fourth Quarter 2002 Results on February 4 --------------------------------------------------------------- Level 3 Communications, Inc. (Nasdaq: LVLT) will release fourth quarter results on Tuesday, February 4, 2003, and will host a conference call at 11 a.m. Eastern time. The fourth quarter conference call will be broadcast live on Level 3's website at http://www.Level3.com. If you are unable to join the call via the web, you may access the call at 612- 326-1003. You may also email questions to Investor.Relations@Level3.com The call will be archived and available on our website at http://www.Level3.com,or you may access an audio replay until 8 p.m. Eastern time on February 7, 2003 by dialing 320-365-3844 - access code 670293. For additional information please call 720- 888-2502. Level 3 Communications' September 30, 2002 balance sheet shows a total shareholders' equity deficit of about $254 million, as compared to a deficit of about $65 million, recorded at December 31, 2001. LISANTI FOODS: Sills Cummis Retained as Bankruptcy Attorneys ------------------------------------------------------------ Lisanti Foods, Inc., and its debtor-affiliates sought and obtained approval from the U.S. Bankruptcy Court for the District of New Jersey to retain and employ Sills Cummis Haden Tischman Epstein & Gross as their Chapter 11 attorneys. The Debtors selected Sills Cummis as their attorneys because the firm has extensive experience and knowledge in the field of debtors' and creditors' rights and because they believe that such firm is well qualified to represent them as the debtors in these cases. Sills Cummis will be required to: a. Take all necessary action to protect and preserve the estates of the Debtors, including the prosecution of actions on the Debtors' behalf, the defense of certain actions commenced against the Debtors, negotiations concerning litigation in which the Debtors are involved, and analyzing and objecting to, where necessary, claims filed against the estates; b. Prepare on behalf of the Debtors, as debtors in possession, all necessary motions, applications, answers, orders, reports, and papers in connection with the administration of the estates herein; c. Negotiate and prepare on behalf of the Debtors a plan of reorganization and all related documents; and d. Perform all other necessary legal services in connection with these Chapter 11 cases. The Debtors disclose that Sills Cummis does not hold or represent any interest adverse to the estates and is a disinterested person, as that term is defined in the Bankruptcy Code. The professionals who will be primarily designated in these cases and their current hourly rates are: Jack M. Zackin $475 per hour Andrew H. Sherman $425 per hour Ivan J. Kaplan $275 per hour Boris I. Mankovetskiy $175 per hour Lisanti Foods, Inc., leading suppliers of products to restaurants and pizza parlors, files for chapter 11 protection on November 20, 2002 in the U.S. Bankruptcy Court for the District of New Jersey. Boris I. Mankovetskiy, Esq., Gail B. Cooperman, Esq., and Jack M. Zackin, Esq., at Sills Cummis Radin Tischman Epstein & Gross, P.A., represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $30 million in assets and $33 million in debts. MIDLAND STEEL: Securing Nod to Obtain $11 Million DIP Financing --------------------------------------------------------------- Midland Steel Products Holding Company and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware to approve a postpetition financing arrangement to provide continued working capital financing to fund post-bankruptcy operations. The Debtors also ask the Court for authority to provide the Lenders with adequate protection of their liens securing repayment of those borrowings. The Debtors present the Court with a debtor in possession financing facility from GMAC Business Credit LLC and a request to grant GMAC first priority liens and security interests in all postpetition accounts receivable and inventory. The Debtors also want the Court to provide adequate protection to Bank of America, National Association's interests in the prepetition collateral by collecting all amounts paid on prepetition accounts and by paying to Bank of America 80% of the prepetition inventory consumed by the Debtors. In essence, the Debtors explain, by purchasing the prepetition inventory from Bank of America, the Debtors will have sufficient raw material, work in process and finished goods to continue to operate and ship products to customers. To pay for that purchase, and to pay operating costs immediately postpetition, the Debtors will borrow up to $5,000,000 from GMAC. Additionally, the Debtors entered into an Accommodation Agreement and Access and Security Agreement with General Motors Corporation and International Truck and Engine Corporation. The Debtors want the Court to approve these Designated Customers' Agreements as postpetition contracts, enforceable according to their terms. Should the Debtors fail to meet their obligations to timely deliver Component Parts to the Customers, the Customers will experience an imminent interruption in Customers' assembly operations, and as a result the Customers and sub-suppliers will suffer significant damages and may have claims against the Debtors for such damages. To ensure the continued uninterrupted supply of Components Parts, the Customers have requested that the Debtors continue to supply the Component Parts, without interruption, during the period of DIP Financing. To facilitate the DIP Financing, Customers have been asked to provide certain extraordinary accommodations to GMAC in the form of Inventory Purchase/Setoff Limitation Agreement and Guaranties. Absent the extraordinary accommodations, GMAC will not provide for the necessary financing to continue the Debtors' operations. The Accommodation Agreement represents the definitive agreement among Debtors and the Customers related to the continued operation of Debtors for the purpose of the production of Component Parts during the DIP Financing. The Access Agreement represents the definitive agreement between the Debtors and Customers regarding the Customers' rights to access and use certain of Debtors' assets to produce Component Parts at the Debtors' facilities. As of the Petition Date, the Debtors owe Bank of America $16,700,000. The DIP Financing is essential to enable the Debtors to meet their postpetition obligations and continue in operation. Without the DIP Financing, the Debtors would be forced to cease their operations, and the Debtors, their estates and their creditors would be irreparably harmed. Accordingly, the Debtors require the Interim DIP Financing to ensure that the Debtors are able to meet all of their postpetition obligations. Additionally, the Debtors need to demonstrate to their customers, trade vendors and other creditors that they are a viable enterprise and will have sufficient funds to operate in the ordinary course on a postpetition basis. Prior to the Filing Date, the Debtors sought additional financing from both new and existing lenders. No potential lender was willing to provide the Debtors with necessary financing but GMAC. GMAC is willing to provide the Debtors up to $11,000,000 of postpetition credit to finance the Debtors' operations. Midland Steel Products Holding Company provides frames for the medium duty line at General Motors. The Debtors filed for chapter 11 bankruptcy protection on January 13, 2003. Laura Davis Jones, Esq., Rachel Lowy Werkheiser, Esq., Paula A. Galbraith, Esq., at Pachulski Stang Ziehl Young & Jones and Shawn M. Riley, Esq., Susanne E. Dickerson, Esq., at McDonald, Hopkins, Burke & Haber Co., LPA represent the Debtors in their restructuring efforts. MIDWAY AIRLINES: Wants Until April 30 to Propose a Plan ------------------------------------------------------- Midway Airlines has asked a bankruptcy court judge to extend the deadline for filing its reorganization plan by 90 days, the Herald-Sun reported. In October, Judge A. Thomas Small ordered the Morrisville airline to file the plan by January 30 detailing how it will return to business, or face possible liquidation. In the months since, Midway solidified its regional jet agreement with US Airways and returned to the air on Jan. 1 as a commuter affiliate for the airline. And in a document filed on Jan. 21, in the U.S. Bankruptcy Court in Raleigh, North Carolina, Midway said it "will be in a much better position to propose a meaningful plan when it has the results of several months of operation." The airline asked that the deadline be pushed back to April 30, reported the newspaper. (ABI World, Jan. 21) MOBILE KNOWEDGE: Negotiates with Creditors to Cure Defaults ----------------------------------------------------------- Mobile Knowledge Inc. (TSX: MKN), a leading provider of commercial GPS and computer dispatch solutions for the taxi, limousine, and transit markets, announced that as a result of delays in completing certain transactions in December 2002, Mobile Knowledge has experienced a reduction in its working capital that has resulted in a default of certain of its financial covenants under its March 2002 secured convertible debentures. Mobile Knowledge is currently negotiating with representatives of the secured debenture holders to cure and/or waive these defaults and will advise further as appropriate. In the interim, the company is taking steps to manage its resources. About Mobile Knowledge Mobile Knowledge uses GPS and wireless communications technology to deliver advanced mobile data solutions for commercial taxi, limousine and transit applications. Building on global customer relationships and over 20 years of experience in the taxi dispatch market, Mobile Knowledge offers a highly flexible product set to help businesses manage and protect valuable mobile assets, improve productivity, and generate new revenue streams. Through comprehensive system design, implementation, training, and support services, Mobile Knowledge ensures seamless integration and maximum return on investment for its customers. The common shares of Mobile Knowledge trade on the Toronto Stock Exchange under the symbol "MKN". For more information about Mobile Knowledge, visit http://www.mobile- knowledge.com MOORE CORP: S&P Places BB+ Corp. Credit Rating on Watch Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on printing company Moore Corp. Ltd. and its subsidiaries on CreditWatch with positive implication, including the 'BB+' long- term corporate credit rating. At the same time, the ratings on Wallace Computer Services Inc., including the 'BBB' long-term corporate credit rating, were placed on CreditWatch with negative implications. The CreditWatch placements follow the announcement that Mississauga, Ont.-based Moore and Lisle, Illinois-based Wallace have signed a definitive merger agreement to create the third-largest printing firm in North America. "The merger will result in a stronger business risk profile than Moore's for the combined entity, Moore Wallace, and a solid pro forma financial profile, in spite of increased leverage, offset by integration risks," said Standard & Poor's credit analyst Barbara Komjathy. The negative CreditWatch placement on Wallace reflects the expectation that following the completion of the transaction, the long-term debt ratings on the combined entity will be rated lower than the current long-term ratings on Wallace. Concurrent with the closing of the merger, the ratings on Wallace's debt will be lowered to reflect Moore Wallace's combined risk profile. The aggregate consideration of about US$1.3 billion consists of about US$470 million of Moore equity, US$210 million of debt assumed from Wallace, and US$606 million of cash, financed from cash on hand and incremental debt. Moore Wallace's pro forma 2002 revenues and EBITDA are estimated at US$3.6 billion and about US$420 million, respectively, close to double those of either party on a stand-alone basis. Pro forma total debt is estimated at US$1 billion (unadjusted for operating leases), as of September 30, 2002. Initial synergies are expected at US$50 million and free cash flows are estimated between US$250 million to US$300 million in the first year of consolidated operations, implying potential material debt reduction in the medium term. Nevertheless, Standard & Poor's is concerned about the integration risk associated with this material acquisition. Standard & Poor's will meet Moore's management in the near term to determine Moore Wallace's combined credit risk profile. In addition, the CreditWatch resolution for both Moore and Wallace is dependent on the transaction being completed substantially as proposed. NATIONAL CENTURY: Demands Enforcement of Stay in Cal. Litigation ---------------------------------------------------------------- Joseph E. Witalec, Esq., at Jones, Day, Reavis & Pogue, in Columbus, Ohio, recounts that Debtor NPF Capital entered into a "Litigation Control and Security Agreement and Assignment of Litigation Proceeds" with Allegiant Physicians Services, Inc. and National Pain Institute, Inc. on February 17, 2000. Pursuant to the Litigation Agreement, NPF Capital agreed to lend Allegiant $500,000 and, as security for repayment, Allegiant and NPI granted NPF Capital a security interest in their right, title and interest in all claims asserted against all defendants in the "NPI Medical Group, et al. v. State Compensation Insurance Fund" in the Superior Court of the State of California, County of Los Angeles, including all proceeds thereof. NPF Capital is also granted full and complete control over the California Litigation, including selection of counsel, determination of litigation strategy, determination of whether to negotiate, offer, accept or reject any settlement, and the determination of whether to continue to pursue or to abandon the litigation. Moreover, the Litigation Agreement provided an allocation formula for any and all proceeds in excess of the $500,000 loan and litigation expenses, wherein NPF Capital was to receive a significant portion of any remaining proceeds of the California Litigation, in addition to reimbursement for the fees and expenses it advanced. Mr. Witalec contends that by virtue of the Litigation Agreement, the proceeds of the California Litigation are assets of the NCFE Debtors' estate. The possible recovery could exceed $200,000,000. On the other hand, NPF Capital has ongoing obligations under the Litigation Agreement, which could affect an asset of the Debtors' estate. Hence, the Litigation Agreement is an executory contract under Section 365 of the Bankruptcy Code. Mr. Witalec reports that the California Litigation is set for trial in the Supreme Court of the State of California on March 17, 2003. At NPF's instructions, the Plaintiffs request a three-month stay of the California Litigation to allow the Debtors to determine whether to assume or reject the Litigation Agreement. To prepare for the California Litigation, Mr. Witalec explains, the Estate will be forced to immediately expend significant sums for legal fees and expenses related to expert discovery. "Failure to adequately prepare for trial could result in the total loss of a significant asset of the estate," Mr. Witalec says. However, Mr. Witalec notes, it is impossible at this early stage of the Debtors' bankruptcy proceeding to determine whether the estate will be benefited if they continue to perform their obligations to pursue the California Litigation. Thus, the Debtors ask the Court to temporarily stay all activity in the California Litigation for a period of 90 days with the understanding that within that time period, they will make a determination as to whether they will assume, reject or otherwise terminate their obligations under the Litigation Agreement. Mr. Witalec concedes that the Debtors seek an unusual, but necessary and appropriate remedy from the Court, which is a limited stay of a lawsuit pending in the California state court that the Debtors have been funding and are contractually entitled to the proceeds of any recovery, but to which the Debtors are not a party. Mr. Witalec points out that the issue is simply one of timing. The California Litigation is set for trial in just three months. However, neither the parties to the California Litigation nor NPF Capital could have prepared for the Debtors' bankruptcy filing. The Debtors believe that the defendants in the litigation are attempting to turn NPF Capital's financial difficulties to their advantage by refusing to agree to any extension of the trial date or otherwise allowing NPF Capital time to regroup. These third party actions threaten to substantially interfere with the Debtors' efforts to reorganize, and could result in the abandonment of a significant asset of the estate. (National Century Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL LAMPOON: Christopher Williams Reports 6.8% Equity Stake ---------------------------------------------------------------- Christopher R. Williams beneficially owns 100,000 shares of the common stock of National Lampoon, Inc. with shared voting and dispositive powers over the stock. The amount of stock held represents 6.8% of the outstanding common stock of National Lampoon. Mr. Williams holding is based upon his right to acquire 100,000 shares of common stock upon the exercise of warrants. * * * It was previously reported that since the completion of the Reorganization Transactions, Company operations have been characterized by ongoing capital shortages caused by expenditures in initiating several new business ventures. The Company is also actively seeking private sources of financing, establishing bank lines and obtaining additional equity from third party sources. There is no assurance that such financing will be available on commercially acceptable terms, if at all. Natinal Lampoon is not certain if its existing capital resources are sufficient to fund its activities for the next six to twelve months. Unless revenues from new business activities significantly increase during that period, the Company will need to raise additional capital to continue to fund its planned operations or, in the alternative, significantly reduce or even eliminate certain operations. There can be no assurance that it will be able to raise such capital on reasonable terms, or at all. As of December 15, 2002, the Company had cash on hand of $21,849, and no significant receivables. This amount is not sufficient to fund current operations, which is estimated to be approximately $480,000 per month. National Lampoon anticipates that any shortfall will be covered by the additional exercise of the Series B Warrants held by the NLAG Group or other investments by NLAG. If NLAG declines to make additional investments, or should National Lampoon be unable to secure additional financing, it could be forced to immediately curtail much, if not all, of its current plans. The Company's financial statements for the fiscal year ended July 31, 2002 contain an explanatory paragraph as to its ability to continue as a "going concern". This qualification may impact its ability to obtain future financing. NATIONSRENT INC: Proposes Special Solicitation Procedures --------------------------------------------------------- NationsRent Inc., and its debtor-affiliates currently lack the information necessary to solicit the votes of the holders of Old Senior Subordinated Notes. The Debtors do not have any information regarding the identities of the Noteholders or their holdings. In addition, the Indenture Trustee filed a single proof of claim on behalf of all of the Noteholders with respect to their Old Senior Subordinated Note Claims. The Indenture Trustee's records identify only the registered holders and it does not have direct access to any information regarding the beneficial owners that hold their Old Senior Subordinated Notes in "street name" through brokers, banks or other agents. As a result of these unique circumstances, the Debtors ask Judge Walsh to implement these special procedures for the distribution of the Solicitation Packages and tabulation of votes with respect to the Noteholders' Old Senior Subordinated Note Claims: 1. The Debtors will mail the Solicitation Package by first class mail, postage prepaid, to: (i) each holder of record of the Old Senior Subordinated Notes as of the Record Date that hold the notes in their own name -- rather than in street name as a Master Ballot Agent for Beneficial Owners; and (ii) each Master Ballot Agent for distribution to Beneficial Owners as of the Record Date; 2. To facilitate the transmittal of the Solicitation Packages to the Individual Record Holders and Beneficial Owners of Old Senior Subordinated Notes, the Debtors will require the Indenture Trustee to provide the Record Holder Register, Master Ballot Agent Register and the accompanying mailing labels within three business days after the Record Date; 3. The Debtors or their agent will send each Individual Record Holder a Solicitation Package containing a Form A Individual Ballot. The Form A Individual Ballot must be completed and returned to Logan & Company before the Voting Deadline; 4. Upon receipt of the Master Ballot Agent Register, Logan will: (i) contact each Master Ballot Agent to determine the number of Solicitation Packages the Master Ballot Agent needs for distribution to the applicable Beneficial Owners for whom the Master Ballot Agent performs services; and (ii) deliver to each Master Ballot Agent a Master Ballot and the requisite number of Solicitation Packages with Form B Individual Ballots; 5. Master Ballot Agents will distribute the Solicitation Packages they receive as promptly as possible to the Beneficial Owners. To obtain the votes of the Beneficial Owners, the Master Ballot Agents will include as part of each Solicitation Package sent to a Beneficial Owner a Form B Individual Ballot and a return envelope provided by and addressed to the Master Ballot Agent. The Beneficial Owners then must return the Form B Individual Ballots to the Master Ballot Agent. Upon receipt of the completed Form B Individual Ballots from the Beneficial Owners, the Master Ballot Agent will summarize the votes of its Beneficial Owners. The Master Ballot Agent must return the Master Ballot to Logan so as to be received before the Voting Deadline; 6. The Debtors will serve a copy of the order approving the Solicitation Procedures to: (i) the Indenture Trustee; (ii) each known entity that is serving as a Master Ballot Agent; and (iii) ADP Proxy Services, which is an intermediary that processes voting materials for many brokerage firms and banks. Upon written request, the Debtors will reimburse these entities or their agents in accordance with customary procedures for their reasonable, actual and necessary out-of-pocket expenses incurred in performing their required tasks. No other fees, commissions or other remuneration will be payable to any Master Ballot Agent - - or their agents or intermediaries -- in connection with the distribution of the Solicitation Packages to the Beneficial Owners or the completion of Master Ballots; 7. With respect to the tabulation of Ballots cast by the Individual Record Holders and Beneficial Owners of Old Senior Subordinated Notes, these procedures will apply: -- All Master Ballot Agents will be required to retain the Form B Individual Ballots cast by their Beneficial Owners for inspection for a period of one year after the Voting Deadline; -- Logan will compare (i) the votes cast by the Individual Record Holders and Beneficial Owners to (ii) the Record Holder Register and the Master Ballot Agent Register: (a) The votes submitted by an Individual Record Holder on a Form A Individual Ballot will not be counted in excess of the record position in the Old Senior Subordinated Notes for that particular Individual Record Holder, as identified on the Record Holder Register; (b) The votes submitted by a Master Ballot Agent on a Master Ballot will not be counted in excess of the aggregate position in the Old Senior Subordinated Notes of the Beneficial Owners for whom the Master Ballot Agent provides services, as identified in the Master Ballot Agent Register; and (c) The submission of a Form A Individual Ballot or a Master Ballot reflecting an aggregate amount of voting claims that exceeds the record position as identified on the Record Holder Register or the aggregate position identified on the Master Ballot Agent Register, will be referred to as an "overvote"; -- To the extent that a Form A Individual Ballot submitted by an Individual Record Holder contains an overvote or otherwise conflicts with the Record Holder Register, Logan will tabulate the Individual Record Holder's vote to accept or reject the Plan based on the information contained in the Record Holder Register; -- To the extent that a Master Ballot contains an overvote or votes that otherwise conflict with the Master Ballot Agent Register, Logan will attempt to resolve the overvote or conflicting vote before the Voting Deadline; -- If the overvote or conflicting vote on a Master Ballot is not reconciled before the Voting Deadline, Logan will: (a) calculate the percentage of the total stated amount of the Master Ballot voted by each Beneficial Owner; (b) multiply such the for each Beneficial Owner by the amount of aggregate holdings for the applicable Master Ballot Agent identified on the Master Ballot Agent Register; and (c) will tabulate the plan votes based on the result of this calculation. The Debtors reserve the right to challenge the appropriateness of this calculation in any given case by seeking a determination of the Court within three business days after Logan certifies the final voting results; -- A single Master Ballot Agent may complete and deliver to Logan multiple Master Ballots summarizing the votes of the Beneficial Owners of Old Senior Subordinated Notes. The votes reflected on multiple Master Ballots will be counted -- except to the extent that they are duplicative of other Master Ballots. If two or more Master Ballots are inconsistent, the latest dated Master Ballot received before the Voting Deadline will supersede and revoke any prior Master Ballot; and -- The tabulation of votes by the Individual Record Holders and Beneficial Holders is further subject to Tabulation Rules the Debtors seek to implement. (NationsRent Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) NORTHWEST AIRLINES: S&P Lowers Class A & B NWA Trust 1 Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Northwest Airlines Corp.'s NWA Trust No. 1, Class A, to 'BB' from 'BBB-' and on the Class B to 'B+' from 'BB'. The BB- /Negative/-- corporate credit ratings of Northwest Airlines Corp. and its Northwest Airlines Inc. subsidiary are affirmed. The rating actions reflected substantial deterioration in collateral coverage for NWA Trust No. 1, the first enhanced equipment trust certificate, which is secured by six B747-200 and four B757-200 aircraft. Northwest Airlines Corp.'s $488 million fourth quarter 2002 net loss, reported today, included $366 million of pretax charges to write down B747-200 and DC10- 30 aircraft whose retirement is being accelerated. Eagan, Minnesota-based Northwest has rated debt of about $7.6 billion. It posted a fourth-quarter net loss, $178 million before special charges, which was less than the net loss of $256 million the prior year, in line with expectations, and somewhat better than average among results anticipated from large U.S. airlines. Still, the continuing significant losses, without a clear path to profitability, indicate, according to management, a permanent change in the airline industry's revenue environment. "Ratings could be lowered if U.S. military action against Iraq and/or further substantial terrorist attacks significantly affect revenues and earnings, or if the company is not able to reduce costs further in response to the weak airline industry environment," said Standard & Poor's credit analyst Philip Baggaley. The company indicated that it will approach its labor unions, and possibly other parties, such as suppliers, about ways to lower costs and remain competitive. Northwest also took a $1 billion aftertax charge to equity due to pension underfunding. The charge is not recorded as an expense on the balance sheet. Separately, Northwest Airlines Inc., Delta Air Lines Inc. (BB/Negative/--), and Continental Airlines Inc. (B+/Negative/--) announced that they would proceed with their proposed code share and marketing alliance, with minor revisions sought by the U.S. Department of Justice but not incorporating much more far- reaching changes sought by the U.S. Department of Transportation. The Transportation Department, accordingly, could seek to challenge the alliance through a department administrative law hearing and, potentially, thereafter in federal court. NORTHWEST AIRLINES: FY 2002 Net Loss Widens To $798 Million ----------------------------------------------------------- Northwest Airlines Corporation (Nasdaq: NWAC), the parent of Northwest Airlines, reported a fourth quarter net loss of $488 million or $5.68 per common share. This compares to a fourth quarter 2001 net loss of $216 million or $2.55 per common share. Excluding unusual items, Northwest reported a fourth quarter 2002 net loss of $178 million or $2.08 per common share, compared to a fourth quarter 2001 net loss of $256 million or $3.02 per common share. These results were in- line with consensus estimates of a $2.14 loss per share. Fourth quarter 2002 results included $464 million in unusual pre-tax charges, principally attributable to the accelerated retirement of certain Boeing 747-200 and DC10-30 aircraft, costs associated with the closure of several facilities, and a partial write-down of the receivable related to the grant under the Airline Stabilization Act. In addition, the fourth quarter tax rate reflected a provision of $15 million for tax credits that are expected to expire unused. "Although Northwest Airlines outperformed most of its network carrier competitors in 2002 across relevant financial measures, our absolute performance was disappointing. While the impact of a slow economy remains a serious issue for the entire industry, the industry's revenue environment has permanently changed and we must, and will, operate our airline accordingly," said Richard Anderson, chief executive officer. Anderson continued, "While Northwest has been aggressively managing its costs since early 2001, we must work even harder with our employees, suppliers, and other partners to bring our costs in line with expected revenues. We must be able to compete more effectively with airlines that are dramatically reducing their operating costs through bankruptcy, as well as the rapidly growing low cost airlines." Looking ahead, Anderson added, "There are several uncertainties including a possible conflict in Iraq, further fuel price increases, and a soft global economy that make it difficult to forecast when the airline will report a quarterly profit. However, our management team is convinced that working together with our employees, labor leaders and suppliers, Northwest will make the adjustments necessary to be competitive in a permanently changed environment." For the full year, Northwest reported a net loss of $798 million, inclusive of unusual items, or $9.32 per common share, which compares to a full year 2001 reported net loss of $423 million, or $5.03 per common share. Excluding unusual items, the net loss for the full year 2002 of $488 million represented a modest improvement versus last year's $536 million net loss. While not impacting its income statement, Northwest also recorded a $1.0 billion after-tax reduction to stockholders' equity to reflect the funding status of its pension plans at year-end. Operating Results Fourth quarter 2002 operating revenues of $2.3 billion were up 17.8%, while operating expenses, excluding unusual items, increased 9.4% as compared to the fourth quarter of last year. This resulted in a 7.6% fourth quarter 2002 negative operating margin, which was 8.3 points better than the same measure from a year ago. For the quarter, Northwest continued to report the highest load factors among its peer group of major airlines with a system load factor of 74.4%, up 4.9 points on a 9.2% increase in capacity year-over-year. Northwest ended the full year 2002 with a system load factor of 77.1%, which was 5.5 points better than the collective average of the other major airlines. Northwest's fourth quarter system unit passenger revenue (RASM) improved 7.5% from the same period last year, as the airline continued to outperform the domestic industry average in absolute RASM with both higher yields and load factors. Fourth quarter operating cost per seat mile (CASM), excluding fuel and unusual items, decreased 2.6% year-over-year, benefiting from previously implemented and ongoing cost reduction programs. In late 2002, Northwest deferred the delivery of 13 new Airbus aircraft, previously scheduled for delivery in 2003 through 2005, by an average of more than 2 years per aircraft. In recent weeks, Northwest completed its fifth round of cost reductions since early 2001, which included ideas from more than 4,000 employees for cost reduction and revenue enhancements. The permanent benefit from all rounds of cost cutting now total more than $1.2 billion. Northwest had $2.2 billion in total cash at quarter-end, including $100 million in restricted cash. Other Activity In December, Northwest completed the expansion of its e-service center check-in kiosks at nearly 100 new locations. The convenient airport check-in tools are now at 143 locations, making Northwest the airline with service kiosks at more airports than any other airline in the world. In November, Northwest became the first airline to launch a self-service check-in option to most of its e-ticket eligible destinations in Asia and Europe. Doug Steenland, president, said, "With our commitment to making the travel experience more efficient, we are pleased that more than one million customers took advantage of Northwest's Internet and e-service center check-in options during both November and December." During 2002, independent parties and publications, reflecting the choices of business and leisure travelers from throughout the world, recognized Northwest's efforts to make travel more convenient through its world-class hub airport facilities, customer service technology, and growing global network. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for second place among large domestic airports in overall customer satisfaction. Business travelers who subscribe to the OAG print and electronic flight guides rated nwa.com as the best airline Web site. Readers of TTG Asia and TTG China named Northwest "Best North American airline." Northwest Airlines Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and more than 1,500 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents. OWENS CORNING: Chapter 11 Reorganization Plan Overview ------------------------------------------------------ Following confirmation and consummation of the Plan, the Reorganized Owens Corning Debtors will continue to exist as separate corporate entities in accordance with the laws of their states of incorporation and pursuant to their certificates or articles of incorporation and bylaws in effect prior to the Effective Date, except to the extent these certificates or articles of incorporation and bylaws are amended pursuant to the Plan. On the Effective Date of the Plan: -- debt will be cancelled and extinguished; and -- the obligations of the Debtors, CFSB as agent for the Bank Holders and the Prepetition Indenture Trustees under the Debt Agreements will be discharged. Each of the Prepetition Bond Indentures will continue in effect solely for the purposes of: -- allowing the Prepetition Indenture Trustee to make distributions to holders of Allowed Class 5 Claims pursuant to the Plan; and -- permitting the Prepetition Indenture Trustee to maintain any rights or liens it may have for fees, costs and expenses under its indenture or other agreement, but this will not result in any expense or liability to any Reorganized Debtor other than as expressly provided for in the Plan. No Reorganized Debtor will have any obligations to any Prepetition Indenture Trustee, agent or service for any fees, costs or expenses, except as expressly provided in the Plan. On the Effective Date and immediately following the completion of distributions to holders of Claims in Class 5, the Prepetition Indenture Trustees will be released from all duties, without any further action on the part of the Debtors or Reorganized Debtors. As of the Effective Date, all of the Owens Corning Equity Interests outstanding at the Effective Date will be cancelled, extinguished and retired, and no consideration will be paid or delivered. Holders of the Owens Corning Interests will not be required to surrender their certificates or other instruments evidencing ownership of these Interests. Restructuring Transactions Subject to approval of the Board of Directors of Reorganized Owens Corning and the holders of New OC Common Stock as may be required under the Amended and Restated Certificate of Incorporation of Reorganized Owens Corning, the Amended and Restated By-Laws of Reorganized Owens Corning and applicable non-bankruptcy law, on or after the Effective Date, any Reorganized Debtor may enter into Restructuring Transactions and may take any actions as may be necessary or appropriate to effect Restructuring Transactions, as may be determined by the Reorganized Debtor to be necessary or appropriate. The actions to effect the Restructuring Transactions may include: -- the execution and delivery of appropriate agreements or other documents of merger, consolidation, restructuring, disposition, liquidation or dissolution containing terms that are consistent with the terms and that satisfy the requirements of applicable law and any other terms to which the entities may agree; -- the execution and delivery of appropriate instruments of transfer, assignment, assumption or delegation of any asset, property, right, liability, duty or obligation on terms consistent with the terms and having any other terms to which the applicable entities may agree; -- the filing of appropriate certificates or articles of merger, consolidation or dissolution pursuant to applicable law; and -- all other actions, which the applicable entities may determine to be necessary or appropriate, including making filings or recordings that may be required by applicable law in connection with these transactions. The Restructuring Transactions may include one or more mergers, consolidations, restructures, dispositions, liquidations or dissolutions, as may be determined by the Reorganized Debtors to be necessary or appropriate to result in substantially all of the assets, properties, rights, liabilities, duties and obligations of all or certain of the Reorganized Debtors vesting in one or more surviving, resulting or acquiring corporations. In each case in which the surviving, resulting or acquiring corporation in any transaction is a successor to a Reorganized Debtor, the surviving, resulting or acquiring corporation will perform the obligations of the applicable Reorganized Debtor pursuant to the Plan to pay or otherwise satisfy the Allowed Claims against the Reorganized Debtor, except as provided in any contract, instrument or other agreement or document effecting a disposition to the surviving, resulting or acquiring corporation, which may provide that another Reorganized Debtor will perform these obligations. On or prior to, or as soon as practicable after, the Effective Date, the Reorganized Debtors may take any steps as may be necessary or appropriate to effectuate Restructuring Transactions. Litigation Trust On the Effective Date, the Reorganized Debtors will transfer and assign to the Litigation Trust, all their right, title and interest in and to the Litigation Trust Assets. The Litigation Trustee for the Litigation Trust will be designated by the Plan Proponents and approved by the Bankruptcy Court. On or prior to the date of the Disclosure Statement Hearing, the Plan Proponents will file with the Bankruptcy Court a notice designating the person they have selected as Litigation Trustee and seeking approval of the designation at the Confirmation Hearing. Once approved by the Bankruptcy Court, the Litigation Trustee will have and perform all of the duties, responsibilities, rights and obligations. On the Effective Date, the Debtors will irrevocably transfer the Litigation Trust Assets to the Litigation Trust, for and on behalf of the beneficiaries of the Litigation Trust. After the transfer, the Debtors, the Disbursing Agent and the Reorganized Debtors will have no further interests or rights or obligations other than the right of the Reorganized Debtors to recover the Litigation Trust Reimbursement Obligation. The Debtors will deliver the Litigation Trust Initial Deposit to the Litigation Trustee on the Effective Date. The Litigation Trustee will use the Litigation Trust Initial Deposit consistent with the purpose of the Litigation Trust and subject to the terms and conditions of the Plan and the Litigation Trust Agreement. The Litigation Trustee will make distributions of Litigation Trust Recoveries in accordance with the Litigation Trust Agreement. The Litigation Trust Agreement will provide for distributions to be made as soon as practicable after receipt of Litigation Trust Recoveries: -- to pay the Litigation Trust Expenses; -- to repay the Litigation Trust Reimbursement Obligation until the Litigation Trust Reimbursement Obligation is paid in full; and -- to holders of Allowed Claims in each of Classes 4, 5, and 6 and the Asbestos Personal Injury Trust for distribution in accordance with Section 3.3(e) of the Plan. A free copy of the Debtors' Reorganization Plan is available at: http://bankrupt.com/misc/6756_chapter (Owens Corning Bankruptcy News, Issue No. 44; Bankruptcy Creditors' Service, Inc., 609/392-0900) OWENS CORNING: Alcoa Buying Atlanta Vinyl Production Facility ------------------------------------------------------------- Alcoa Home Exteriors, Inc., a wholly owned subsidiary of Alcoa, Inc., has reached an agreement to acquire Owens Corning's vinyl production facility in Atlanta, Georgia. The acquisition will help Alcoa Home Exteriors continue its growth as the leading partner in the home exteriors marketplace. Terms of the deal, which is expected to be completed by April 2003, were not disclosed. "The addition of this facility along with the increased capacity it will bring to our overall production system will help support our future organic growth initiatives," said Gary Acinapura, president of Alcoa Home Exteriors, Inc. "Following on the heels of the acquisition of Richwood Building Products in November, the move will allow us to take service levels to new heights as we continue to provide our customers with the products they want, when they want them and in the quantities they need." The Atlanta facility, which currently employs approximately 120 people, was scheduled for closure by Owens Corning. Alcoa Home Exteriors intends to employ most of the current workforce as it is integrated into its vinyl siding production operations. Because Owens Corning has filed for Chapter 11 bankruptcy protection, the transaction will be subject to approval by the presiding bankruptcy court. Headquartered in Pittsburgh, PA, Alcoa Home Exteriors, Inc., a wholly owned subsidiary of Alcoa, is a leading U.S. manufacturer of vinyl and aluminum products for the remodeling and new construction markets, featuring both the Masticr premium brand siding and the Alcoa Classic Living Siding. Alcoa Home Exteriors offers 41 years of experience in manufacturing and marketing a broad selection of exterior building products, including vinyl siding, soffit, shutters, decorative accessories and aluminum gutters, soffit, fascia and trim. Alcoa Home Exteriors operates manufacturing and warehousing facilities in Ohio, Virginia, South Carolina, Kentucky and Texas. For more information, visit http://www.alcoahomes.com,or call (800) 962-6973. PAC-WEST: Appoints Robert Morrison as VP and General Counsel ------------------------------------------------------------ Pac-West Telecomm, Inc. (Nasdaq: PACW), a provider of integrated communications services to service providers and business customers in the western U.S., announced the appointment of Robert C. Morrison as Vice President and General Counsel. Prior to his appointment, Morrison served as a Director and Corporate Secretary on the company's Board of Directors. Wally Griffin, Pac-West's Chairman and CEO, said, "We are delighted to have someone with Bob's professional background and experience join our team. He has worked closely with Pac-West for over 20 years as our outside legal counsel and has served on our board since 2001. His active involvement and leadership in his profession, in the community, and in higher education are a great fit with Pac-West's culture." As Pac-West's Vice President and General Counsel, Morrison will be responsible for corporate governance, record keeping, documentation and legal administration of contractual relationships, and managing the company's relationships with outside law firms. He will continue to serve as Corporate Secretary for Pac-West's Board of Directors. Morrison said, "I am very excited about joining the Pac-West team. As a former member of one of their outside law firms, I have had the pleasure of working with Pac-West since they were founded in 1980. I have watched the company grow from a small privately held company to a publicly traded corporation operating in five states. They have continued to grow and outlast most of their competition because of their commitment to serving customers better than anyone else in the industry. I am looking forward to working with such a focused and driven organization." Prior to joining Pac-West, Morrison was an attorney with Neumiller and Beardslee, P.C. in Stockton, California from 1972 to 2002. He served as Managing Director from 1983-1990. He holds a bachelor's degree in rhetoric and a juris doctor from the University of California, Davis, and an MBA in business and taxation from Golden Gate University. In July of 2002, he completed a term on the Board of Regents of the University of California. Morrison is a past president of the Greater Stockton Chamber of Commerce, the San Joaquin County Economic Development Association and the alumni association for UC Davis. He currently serves on the Board of Directors and Executive Committee of the Lassen Volcanic National Park Foundation. About Pac-West Telecomm, Inc. Founded in 1980, Pac-West Telecomm, Inc. supplies Internet access services to Internet and other types of service providers, and integrated voice and data communications services to small and medium-sized businesses. The company estimates that its network carries over 20% of the Internet traffic in California. Pac-West currently has operations in California, Nevada, Washington, Arizona, and Oregon. For more information, please visit the company's web site at http://www.pacwest.com. * * * As reported in Troubled Company Reporter's November 20, 2002 edition, Standard & Poor's lowered its corporate credit rating on competitive local exchange carrier Pac-West Telecomm Inc., to 'CC' from 'CCC-'. The senior unsecured debt rating on the company remains at 'C'. The ratings were removed from CreditWatch with negative implications. The outlook is negative. At the end of September 2002, Stockton, California-based Pac-West had total debt of more than $106 million. PEREGRINE SYSTEMS: Files Chapter 11 Plan & Disclosure Statement --------------------------------------------------------------- Peregrine Systems, Inc. (OTC: PRGNQ) filed its Plan of Reorganization and Disclosure Statement on Jan. 20 with the U.S. Bankruptcy Court for the District of Delaware in Wilmington. The Plan offers a blueprint for restructuring the company, including reinstatement of bondholder claims, full repayment of most unsecured debt under extended terms, preservation of value for shareholders, and a proposed resolution of shareholder class action claims. "Our filing of the Plan and Disclosure Statement reflects significant progress in our Chapter 11 proceeding," said Gary Greenfield, Peregrine's CEO. "The Plan is a fair and reasonable restructuring proposal, and we believe it sets the stage for Peregrine's successful reorganization. It will allow us to maximize the value of assets and distributions to creditors, minimize our expenses and provide sufficient time to pay our debts. We have proposed repaying our bondholder debt in full, as well as most other unsecured creditors, while also preserving a substantial amount of shareholder equity. "We value the support that we have continued to receive from our customers, partners, employees, vendors and others, who have allowed us to use this process to lay the foundation for our future success," he added. "Completing our reorganization under this Plan will allow Peregrine to move forward as a viable and independent software business." The Plan also calls for appointing a new, five-member board of directors for the reorganized company. It would consist of four independent directors, as well as the company's CEO. Additional oversight is prescribed to assure independence of individuals nominated. Peregrine intends to ask the court for approval to retain an outside search firm to identify and present nominees for these board positions for appointment by the time the company emerges from Chapter 11. The Plan and Disclosure Statement were filed in bankruptcy court within the 120-day period in which Peregrine has the exclusive right to file a Plan. The Official Committee of Unsecured Creditors does not support the Plan at this time and may not elect to do so. The Disclosure Statement requires bankruptcy court approval, and the company hopes that a hearing to consider it could be as soon as February 25. If the court approves the Disclosure Statement, it will be sent to creditors and equity interests, to the extent that their claims or interests are impaired under the Plan, and the company will commence solicitation of votes for confirmation of the Plan by certain classes of creditors and equity interests. The company hopes that a hearing to consider the Plan's confirmation could be as soon as April 2003. Plan of Reorganization The Plan proposed by Peregrine would allow the company to continue to operate the business and give it sufficient time to pay off debts. Some elements of the Plan are subject to a vote by certain creditors and shareholders, and the Plan in its entirety is subject to confirmation by the court. Key elements of the Plan include: -- The Secured Purchaser Banks that financed certain Peregrine accounts receivables will receive 100 percent of their allowed claims over four years without interest and retain their security interests. In addition, certain accounts receivables will be repurchased under terms of the Forbearance Agreement entered into with the banks in August 2002. -- The Plan calls for full reinstatement of the $270 million in Convertible Subordinated Notes issued in the year 2000 under original terms at 5 1/2 percent with the principle due in 2007. -- Holders of existing common stock, or common stock options or warrants or other rights, would retain those interests, which would represent at least 90 percent of the common stock of the reorganized Peregrine. -- Up to 10 percent of the common stock of the reorganized company would be available to settle shareholder lawsuits. -- Small claims would be categorized as a class of Convenience Claims. These claims would include creditors owed $1,000 or less, or claims voluntarily reduced to that level. If these claims exceeded $500,000 in total, they would be paid over a period of four years. -- Peregrine would repay all General Expense Claims in full in equal annual installments over four years. This category includes trade debt, real property lease rejection claims and other creditors. Payments are currently estimated not to exceed $63 million. -- The Plan proposes that Peregrine pay Motive Communications a sum of $4 million on the date of the Plan's approval and an additional $5 million over a 48-month period. On the effective date of the Plan, Peregrine will return 1.7 million shares of Motive stock to Motive, and Motive will return one million shares of Peregrine stock to Peregrine. The filing also included a detailed "liquidation analysis" -- a required element of the Disclosure Statement -- which concludes that Peregrine's creditors and the overall value of the company's estate would be better served if the company completes a successful restructuring and remains an on-going enterprise. Going forward Under the direction of new management, Peregrine in recent months has gone through an exacting process to refocus the company's strategy and software products in its core strength -- service and asset management -- which helps customers run their businesses more productively. The company has divested of non- core products, completed the $355 million sale of its Remedy business unit to BMC Software under a court-approved auction, and fully repaid $54 million in debtor-in-possession financing. "With this reorganization, Peregrine will be positioned as a software industry leader capable of meeting its financial obligations, supporting its customers, and developing and innovating great software," said Greenfield. In addition, the company detailed a number of important corrective actions and initiatives directed at ensuring compliance with stringent legal and accounting standards. Peregrine's board has adopted a comprehensive Corporate Compliance Policy, which establishes strict standards of compliance to all laws and accounting standards on a global basis. To implement the policy with a compliance program, the board has established two new positions, reporting to the audit committee: the corporate compliance officer, a senior-level officer position, and an internal auditor, whose role will be to assist in compliance activities related to the company's financial and operating condition, including quarterly reports to the board's audit committee. The company also will file information under seal with the Delaware court today to advise the court of its progress in a restatement of its financial results for fiscal years 2000, 2001, and the first three quarters of 2002, and the audit by PricewaterhouseCoopers of results for fiscal years 2000, 2001 and 2002. Peregrine filed a voluntary Chapter 11 petition on Sept. 22, 2002 after accounting irregularities came to light, making it necessary to restate financial results for 11 quarters. About Peregrine Systems, Inc. Founded in 1981, Peregrine Systems develops and sells application software to help large global organizations manage and protect their technology resources. With a heritage of innovation and market leadership in consolidated asset, service and change management software, the company's flagship offerings include ServiceCenter and AssetCenter, complemented by its Employee Self Service, Automation and Integration product lines. Headquartered in San Diego, Calif., Peregrine's solutions facilitate the automation of business processes, resulting in increased productivity, reduced costs and accelerated return on investment for its more than 3,500 customers worldwide. More information about Peregrine is available at http://www.peregrine.com PERRY JUDD: S&P Withdraws B+ Credit Rating at Company's Request --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B+' corporate credit rating for Perry Judd's Holdings Inc. at the company's request. At the same time, all other ratings were withdrawn. POLAROID CORP: Solicitation Period Extended Until March 20, 2003 ---------------------------------------------------------------- According to Gregg M. Galardi, Esq. at Skadden, Arps, Slate, Meagher & Flom LLP, in Wilmington, Delaware, Polaroid Corporation, and its debtor-affiliates faced steadily declining revenues since the Petition Date. Thus, as part of their reorganization efforts, the Debtors put into place numerous cost-saving measures and liquidated certain assets to continue operating while determining how best to restructure their business -- a sale of substantially all of their assets. With the sale of the assets to OEP, the Plan filed in April was predicated on the consummation of the Sale, post-sale liquidation of the Debtors' remaining asserts and the distribution of the proceeds from the sale and the other assets in the Debtors' estates to the Debtors' creditor constituencies. Mr. Galardi notes that the Sale has been consummated and the Debtors have begun to liquidate their estates and distribute the proceeds from the Sale to the Debtors' creditor constituencies. However, the Asset Purchase Agreement the Court approved differs from the terms of the APA filed with the Sale Motion. Specifically, the APA approved pursuant to the Sale Order provides for the distribution of 35% of the equity in the New Polaroid Corporation to the Debtors' unsecured creditors and for the payment of the Debtors' prepetition Lenders and certain administrative expenses of the Debtors' estates. In addition, the Debtors have resolved their prior disputes with the Unsecured Creditors' Committee with respect to the Sale and the Exclusive Order. The Debtors and the Committee have co- exclusivity to allow them equal input in drafting and filing an amended Plan that accurately reflects the details of the APA approved pursuant to the Exclusivity Order and provides for an equitable distribution of the assets of the Debtors' estates to the Debtors' creditor constituencies. Given their substantial efforts since the Petition Date, the Debtors and the Committee believe that they should be given additional time to negotiate the final terms of the Plan without the distraction of competing plans filed by other parties-in- interest. Accordingly, the Debtors and the Committee sought and obtained a Court order: (a) extending the Exclusive Periods to January 20, 2003 to file a Plan and March 20, 2003 to solicit acceptances of that Plan; and (b) prohibiting any party, other than the Debtors or the Committee, from filing a competing plan or soliciting acceptances of any competing plan during the extended Exclusive Periods. In convincing the Court to grant the Debtors' request, Mr. Galardi cited these factors that warrant the extension of the exclusive periods pursuant to Section 1121(d) of the Bankruptcy Code: A. The Debtors and the Committee have made significant progress in resolving many of the issues facing the Debtors' estates, including disputes between the Debtors and the Retiree Committee and potential disputes between the Committee and the Debtors' Prepetition Lenders; B. An extension of the Solicitation Period will give the Debtors and the Committee a reasonable opportunity to negotiate a consensual amended Plan and ultimately confirm a Plan without prejudicing any party-in-interest; and C. The Debtors' cases are large and complex and uncertain, substantial issues remain unresolved. (Polaroid Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) POPI GROUP: Designated Inactive Issuer after Unit's Bankruptcy -------------------------------------------------------------- POPi Group Inc. (TSX-V: POP) announced, as a result of the assignment into bankruptcy of POPi Childrenswear Enterprises Inc., that it has been designated by the TSX Venture Exchange as an inactive issuer. Effective Wednesday, January 22, 2003 POPi will commence trading as an inactive issuer and has been designated a Tier 2 Issuer. Childrenswear, a wholly-owned subsidiary of POPi was assigned into bankruptcy under the Bankruptcy and Insolvency Act (Canada) on November on January 6, 2003. POPi has outstanding indebtedness of approximately $400,000 payable to various creditors in the ordinary course of business. It is the intention of POPi to satisfy this indebtedness through negotiations with the creditors and the sale of assets where possible. Upon the satisfaction of such indebtedness POPi intends to seek alternative businesses for acquisition in order to meet the listing criteria of the TSX Venture Exchange. PREMCOR INC: Posts $129.6 Million Net Loss For Year 2002 -------------------------------------------------------- Premcor Inc. (NYSE: PCO) reported net earnings of $34.7 million, or $.60 per share, in the fourth quarter of 2002 and a net loss of $129.6 million, or $2.65 per share, for the full year ended December 31, 2002. These results compare to a net loss of $44.5 million, or $1.40 per share, in the fourth quarter of 2001 and net earnings of $142.6 million, or $4.13 per share, for the full year ended December 31, 2001. Excluding the effect of special items, the fourth quarter 2002 net earnings of $34.7 million, or $.60 per share, compares to a net loss of $35.0 million, equal to $1.10 per share for the fourth quarter of 2001. Excluding the effect of special items for the full year results, the net loss for the year ended December 31, 2002 was $10.5 million, or $.22 per share, compared to net earnings of $237.5 million, or $6.88 per share, for the year ended December 31, 2001. Special items are discussed below. The company's customary quarterly conference call concerning the quarter's results will not be held due to its pending equity offering. Thomas D. O'Malley, Premcor's Chairman and Chief Executive Officer, said, "During the fourth quarter, the company succeeded in producing good results despite reduced throughputs due to hurricanes Isidore and Lili as well as scheduled turnaround maintenance. Premcor's turnaround activity in 2003 will be minimal, including that associated with the Memphis refinery, which we expect to acquire during the first quarter of 2003." O'Malley continued, "The fourth quarter represents the first quarter of operations where a significant portion of our restructuring cost savings are reflected, and where the expenses associated with the operation of the Hartford refinery have for the most part been eliminated. Also during the quarter, the company completed the formation of its management team when Michael D. Gayda joined as general counsel." For the fourth quarter of 2001, special items included an after- tax charge of $9.5 million, equal to $.30 per share, related to reserves established in connection with previously discontinued retail operations. There were no special items in the fourth quarter of 2002. For the twelve months of 2002, pre-tax special items of $192.4 million included restructuring charges totaling $172.9 million and a $19.5 million charge related to the early retirement of long-term debt. Restructuring charges included $137.4 million related to the closure of the Hartford refinery, $27.4 million primarily for severance and other charges related to the restructuring of the company's Port Arthur, Texas and Lima, Ohio refineries and the St. Louis general and administrative operations, $2.5 million related to the PRG and Sabine restructuring, $1.4 million for idled equipment, and $4.2 million related to the write-off of the Clark Retail Enterprises minority interest. The after-tax effect of these special items for the twelve months of 2002 was $119.1 million, or $2.43 per share. Pre-tax special items for the twelve months of 2001 included restructuring charges of $176.2 million related to the closure of the Blue Island, Illinois refinery and the decommissioning of two coker units at Port Arthur, and an $8.7 million gain associated with debt repurchases. The after-tax effect of these items, along with an $18 million after-tax charge relating to discontinued operations, partially offset by a $30 million income tax benefit, was $94.9 million, or $2.75 per share. 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. QWEST COMMS: U.S. State Department Awards $360 Million Contract --------------------------------------------------------------- Qwest Communications (NYSE: Q) announced that it was awarded a 10-year contract from the U.S. Department of State's Diplomatic Telecommunications Service Program Office (DTSPO). Under the contract, called the SPECTRUM contract, Qwest will have the opportunity to deliver a variety of network services to U.S. government agencies around the world. Qwest has the opportunity to receive up to $36 million per year -- or $360 million over the life of the contract. Qwest's subcontractor partners for this effort are COMSAT General (a division of Lockheed Martin) and Communication Technologies, Inc. (COMTek). The SPECTRUM program was created to deliver networked telecommunication services -- including high-speed video, data, ATM and IP services -- to U.S. Department of State embassies and consulates around the world. "The federal government is an important customer to Qwest and we look forward to helping DTSPO build a next-generation global infrastructure," said James F.X. Payne, senior vice president and general manager of Qwest's government services division. "Qwest, along with our teaming partners, has clearly proven itself as a leader in providing the skill set and level of service that federal government agencies expect from the private sector." Qwest provides network services to a wide range of federal government agencies, including the Department of Energy, NASA, the Department of Treasury, and the National Oceanic and Atmospheric Administration. About Qwest Qwest Communications International Inc. (NYSE: Q) is a leading provider of voice, video and data services to more than 25 million customers. The company's 53,000-plus employees are committed to the "Spirit of Service" and providing world-class services that exceed customers' expectations for quality, value and reliability. For more information, please visit the Qwest Web site at http://www.qwest.com READER'S DIGEST: Schedules Q2 2003 Conference Call Today -------------------------------------------------------- Readers Digest Association (NYSE: RDA) announces the following webcast: What: RDA Q2 2003 Financial Release Conference Call When: Thursday, January 23, 2003 @ 8:30 a.m. EST Where: http://www.firstcallevents.com/service/ajwz372616461gf12.html How: Live over the Internet -- Simply log on to the web at the address above. Contact: William Adler Director, Corporate Communications +1-914-244-7585 william.adler@readersdigest.com In addition to the live Webcast, you may access the call on an archived basis on the Web site, http://www.rd.com The Reader's Digest Association, Inc. is a global publisher and direct marketer of products that inform, enrich, entertain and inspire people of all ages and all cultures around the world. Global headquarters are located at Pleasantville, New York. At September 30, 2002, Reader's Digest's working capital deficiency widened to about $138 million. SANLUIS: Fitch Assigns B-/CCC+ Ratings After Debt Restructuring --------------------------------------------------------------- Fitch Ratings has assigned ratings of 'B-' to the senior secured debt obligations and 'CCC+' to the senior unsecured obligations of SANLUIS Corporacion, S.A. de C.V. (SANLUIS) as the debt restructuring has been formally completed. The senior secured rating of 'B-' applies to the estimated $265 million of bank loans that are held by SANLUIS' operating subsidiaries and are secured by assets, while the senior unsecured rating of 'CCC+' applies to the estimated $47.6 million of newly issued 8% senior notes due 2010 and $76.2 million of 7% mandatorily convertible debentures due 2011 that SANLUIS' debt holders have received in exchange for defaulted debt that they formerly held. These securities have been issued by SISA, a wholly owned subsidiary of SANLUIS that will indirectly own all of SANLUIS' operating companies, and are effectively in a subordinated position compared the bank loans. The Rating Outlook is Stable. The debt restructuring is positive for SANLUIS as it will result in the reduction of SANLUIS' debt burden by close to 25% and the lengthening of debt maturities. In addition, cash flow will improve as a portion of the company's debt will have interest that is paid-in-kind rather than paid in cash. The resulting improvements in its debt profile are expected to help SANLUIS normalize its ongoing operations and to focus on improving the profitability of its auto part business. Since defaulting on its debt obligations, SANLUIS has sought to preserve a minimum of liquidity necessary for its ongoing operations. This objective was made difficult by more restrictive credit terms from raw material suppliers and other vendors. Since then, credit terms have gradually improved and are expected to become more normal after the debt restructuring is completed. SANLUIS will continue to face a challenging operating environment for the auto parts industry. SANLUIS, which manufactures suspension and brake components primarily for export to original equipment manufacturers (OEMs) including Ford, DaimlerChrysler and General Motors, is exposed to the cyclicality of the United States auto industry, which remains in a downturn. SANLUIS' debt leverage will remain high after the debt restructuring, with EBITDA generation of $55.5 million over the twelve months ended September 30, 2002 to total pro forma debt above 8.0 times (x). EBITDA/interest during the first nine months of 2002 would have been slightly above 1.0x if SANLUIS was still making interest payments on its debt as originally scheduled. After the debt restructuring, EBITDA/interest is expected to improve closer to 1.5x due to the recent stabilization of profitability margins and the estimated reduction in debt from $568 million at September 30, 2002 to an estimated $427.3 million after the restructuring. The new debt profile will be comprised of $38.9 million at the SANLUIS holding company level, $123.8 million at the SISA level ($47.6 million in senior notes and $76.2 million in convertible debentures), $34 million at the brake group subsidiary level and $230.6 million at the suspension group subsidiary level. On a cash basis, EBITDA/interest will be closer to 2.0x since interest on the 7% mandatorily convertible debentures due 2011 will be paid-in-kind and capitalized rather than paid in cash. SANLUIS has completed the debt restructuring process that began in September 2001 after the company defaulted on its debt obligations. Consolidated debt at the time of the default was approximately $550 million, of which half were direct obligations of SANLUIS, and the remaining were the obligations of its operating subsidiaries. Direct obligations of SANLUIS, which were unsecured, were effectively in a subordinated position versus operating subsidiary debt, which was secured by receivables. In March 2002, SANLUIS reached an agreement in principle with the holders of its operating subsidiary debt. Under this agreement, the maturity of the operating subsidiary debt has been extended. In return, creditors received an increase in coupon rates in the latter years. In October 2002, SANLUIS launched a cash tender and debt exchange offering open to holders of the company's direct obligations, which totaled $291.3 million and included $200 million senior notes due 2008, $77.5 million euro commercial paper, and $13.8 million of other unsecured debt obligations. Holders were given the option to choose between a cash payment of $350 for each $1,000 in principal amount of debt tendered, or $384.15 in principal amount of newly issued 8% senior notes due 2010 plus $615.85 in principal amount of newly issued 7% convertible debentures due 2011. On December 16, 2002, SANLUIS announced that 87% of the debt holders consented to the cash tender and debt exchange offering. As a result, $128.6 million in defaulted debt and $36.4 million in unpaid and accrued interest have been retired with a cash payment of $45 million. In addition, $123.8 million of defaulted debt has been exchanged for $47.6 million of 8% senior notes due 2010 plus $76.2 million of 7% convertible debentures due 2011. SANMINA-SCI CORPORATION: Releases First Quarter Results ------------------------------------------------------- Sanmina-SCI Corporation (Nasdaq: SANM), a leading supplier of integrated design and electronics manufacturing solutions (EMS), reported financial results for its first quarter ended December 28, 2002. Results for the quarter ended December 29, 2001 are stated on a proforma basis to reflect the company's December 6, 2001 acquisition of SCI Systems, Inc for the full quarter. For the first quarter ended December 28, 2002, Sanmina-SCI reported revenues of $2.537 billion, compared to proforma (giving the effect to the combination of Sanmina and SCI) revenues of $2.406 billion for the first quarter ended December 29, 2001. Proforma net income for the first quarter this year was $1.380 million, or $0.01 diluted cash earnings per share. This compares to proforma net income of $7.302 million, or $0.03 diluted cash earnings per share for first quarter last year. Proforma financial results do not include merger and integration, restructuring and other infrequent or unusual charges. For the quarter ended December 28, 2002, Sanmina-SCI reported $1.6 billion in cash and short-term investments. Cash provided by operations this quarter was approximately $123 million. The company continues to improve cash cycle days and increase inventory turns. At December 28, 2002, cash cycle days were reduced to 41 days, and inventory turns increased to 9.0 turns. At quarter- end, the company had a current ratio of 2.4, working capital of $2.6 billion and shareholders' equity of $3.4 billion. During the quarter, the company repurchased at a discount approximately $151 million of its 41/4% Convertible Notes, Zero Coupon Convertible Subordinated Notes and 3% Convertible Notes (convertible debt). After taking into account interest accruals associated with the Zero Coupon Subordinated Notes, upon exercise of redemption rights by Zero Coupon Note holders, the debt reduction of the convertible debt was approximately $160 million. Since the beginning of September the company has reduced its shorter term bond debt coming due in 2004 and 2005 approximately $337 million, or approximately 27%. The balance sheet reflects the company's completion of $1.025 billion in financing, including an offering of $750 million in senior secured notes in a private placement to qualified investors and a $275 million senior secured credit facility. Company Expands Market Leadership in Target Markets Jure Sola, Chairman and Chief Executive Officer of Sanmina-SCI, said, "We continue to focus our resources on increasing our market leadership in our target markets. As a result of our commitment to advanced technology and manufacturing excellence, another of our quick-turn assembly and volume manufacturing facilities has been certified by the military. During the quarter, we also announced the acquisition of an Israeli manufacturer of high- end complex medical systems and other high-end industrial products, expanding our capabilities in the global medical technology industry. This facility enables us to deliver leading-edge CT and nuclear medicine systems to key OEM's globally. "In addition to the defense and medical markets, we are also capitalizing on growth opportunities within the computing sector. In early January, we announced an expanded strategic partnership with IBM. The agreement expands the range of manufacturing services Sanmina-SCI provides IBM in North America and Europe. Sanmina-SCI is now positioned to be the leading EMS provider in the global server manufacturing and distribution market." Commenting further, Sola said, "In addition to expanding our growth opportunities, which have diversified our revenues, we have also further rationalized our operations, realigning our operations to be market focused. We believe our market-focus strategy will increase our operating efficiencies and enable us to better serve our customers from the early stage of product development to volume production. The goal in everything we do is customer satisfaction. "Although the market continues to be challenging, we believe by emphasizing excellence in performance and by providing our customers innovative, cost-effective solutions and superb global supply management, Sanmina-SCI is solidifying its industry leadership." Company Outlook Sanmina-SCI projects second quarter fiscal 2003 revenue to be approximately $2.3 to $2.5 billion, and cash earnings per share to be between ($0.01) to $0.01 before merger, restructuring and other infrequent or unusual charges, and after adjustment for financing costs. About Sanmina-SCI Sanmina-SCI Corporation is a leading electronics contract manufacturer serving the fastest-growing segments of the $125 billion global electronics manufacturing services (EMS) market. Recognized as a technology leader, Sanmina-SCI provides end-to- end manufacturing solutions, delivering unsurpassed quality and support to large OEMs primarily in the communications, defense and aerospace, industrial and medical instrumentation, and computer technology and multimedia sectors of the market. Sanmina-SCI has facilities strategically located in key regions throughout the world. More information regarding the company is available at http://www.sanmina-sci.com. As reported in the Troubled Company Reporter's December 9, 2002 issue, Standard & Poor's Ratings Services lowered its corporate credit rating on Sanmina-SCI Corp to 'BB-' from 'BB' and its subordinated note ratings to 'B' from 'B+'. At the same time, Standard & Poor's assigned a 'BB' bank loan rating to the proposed $250 million senior secured credit facility due 2007, and a 'BB-' rating to the proposed $450 million of senior secured notes due 2009. The previous senior secured bank loan rating is withdrawn. The ratings outlook is stable. Total debt is $2.1 billion. The rating action is based on weak credit measures for the rating and the likelihood that profitability will remain depressed over the intermediate term, largely due to sluggish demand in major end markets. SEVEN SEAS: Section 341(a) Meeting to Convene on February 11 ------------------------------------------------------------ The United States Trustee will convene a meeting of Seven Seas Petroleum Inc.'s creditors on February 11, 2003 at 10:00 a.m. at 515 Rusk, Suite 3401 in Houston, Texas. This is the first meeting of creditors required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases. Proofs of claim are due on May 12, 2003. All creditors are invited, but not required, to attend. This Meeting of Creditors offers the one opportunity in a bankruptcy proceeding for creditors to question a responsible office of the Debtor under oath about the company's financial affairs and operations that would be of interest to the general body of creditors. Seven Seas Petroleum Inc., filed for chapter 11 protection on January 14, 2003 at the U.S. Bankruptcy Court for the Southern District of Texas. Tony M. Davis, Esq., at Baker Botts LLP represents the Debtor in its restructuring efforts. As of September 30, 2002, the Company listed $180,389,000 in total assets and $185,970,000 in total debts. SYSTECH: Arranging $1.73MM DIP Financing from Current Lenders ------------------------------------------------------------- Systech Retail Systems Corp, Inc. and it's Canadian affiliates, a retail store solutions provider in North America, announced that they were granted an Order applied for under Section 11 of the Companies' Creditors Arrangement Act. The order recognized as "foreign proceedings" the voluntary petitions filed by Systech Retail Systems (U.S.A.), Inc. and its United States and Canadian affiliates, which filing has accorded Systech protection under Chapter 11 of the United States Bankruptcy Code in the Eastern District of North Carolina - Raleigh Division effective January 13, 2003. Systech has arranged for a US$1.73 million (approximately C$2.66 million) debtor-in-possession (DIP) financing commitment from its existing, principal secured lenders; Integrated Partners Limited Partnership One and Park Avenue Equity Partners, L.P., that will enable it, subject to court approval, to continue business operations, including having funds available to meet future working capital needs and fulfill the obligations associated with its business, including the prompt payment of new vendor invoices. Systech began rationalization activities in early 2001 and accelerated those efforts in the second half of 2002 with the implementation of an informal financial and operational restructuring sponsored by its senior stakeholders. This initiative saw the closure of offices and consolidation of operations, rationalization of inventory and significant reductions in employees. This initiative received the support of the Company's major shareholders, secured lenders, most of its creditors and its major customers. However, agreement was not forthcoming from all of the necessary creditors, one of whom obtained a judgment that proved too disruptive to complete the informal reorganization effort. The Board, the senior stakeholders, the major shareholders and management have therefore determined that the only way the restructuring can be finally affected is under regulatory protection and are committed to the successful completion of this process as quickly as possible. Systech will use this process to take other opportunities to improve its operating performance and to realize significant cost savings. Systech plans for operational improvement include consolidating operations, leveraging existing relationships, increasing revenues through organic growth and implementing additional operational improvements. "We are optimistic about the successful reorganization of Systech now that the decision has been made to complete our financial restructuring within creditor protection proceedings. We are confident that Systech can now affect a more timely and effective reorganization and emerge a healthier, better capitalized enterprise that can continue to play a significant and leading role in the retail market segment" said Systech President & CEO Geoff Owen. The Chapter 11 and CCAA processes will preserve and drive additional agreements to convert debt to equity. It is intended to have no effect on customers or employees and we anticipate that it will have manageable impact on suppliers. This is consistent with the objectives first set when we started the informal restructuring process. "Our management team is enthusiastic about Systech's prospects and is committed to providing our customers with excellence in service and products. Financial uncertainty will be dramatically reduced by the provision of the DIP financing and the protection afforded by the filings," said Owen. He added, "There will be minimal change in our software development, solution delivery, field maintenance and customer support personnel. In short, we will be reinforcing our commitment to delighting our customers, enriching our suppliers, empowering our employees and rewarding our investors. Customers will be able to continue to purchase our products and services, with the knowledge that we will consistently provide the solution creativity and service excellence that have come to distinguish us in the retail POS marketplace." For the fiscal year ended January 31, 2002, Systech had consolidated annual revenue of approximately $95.6 million (Canadian). As of fiscal year ended January 31, 2002, the books and records of Systech reflected assets totaling approximately $57.7 million (Canadian) and liabilities of approximately $100.0 million (Canadian). Founded in 1986, Systech develops, integrates and supports retail store solutions and systems for large and medium North American supermarket, general merchandise and hospitality chains. Systech is the largest independent provider of retail store systems and field services in North America. Currently, Systech has approximately 420 employees and has business operations in the United States and Canada. Additional information about Systech is available at http://www.srspos.com TECHNEST HOLDINGS: Michael Sheppard Resigns as Officer/Director --------------------------------------------------------------- On December 5, 2002, Michael Sheppard resigned as an officer and director of Technest Holdings Inc. The Company states that the resignation was not because of a disagreement with the Company on any matter relating to the Company's operations, policies or practices. At September 30, 2002, Technest's working capital deficit tops $2 million. UNITED AIRLINES: Asks Court to Establish Claims Bar Date -------------------------------------------------------- United Airlines requests an order establishing various bar dates and approving the form and manner of notice. James H.M. Sprayregen, Esq., at Kirkland & Ellis, outlines the proposed terms for Judge Eugene R. Wedoff. The Debtors propose establishing the day that is 75 days after the Debtors file their Bankruptcy Schedules and Statements of Financial Affairs as the General Bar Date -- the deadline for all parties asserting a claim against any of the Debtors to a file proof of such Claim or Interest. With regards to rejection of an executory contract or unexpired lease, the Debtors propose to establish the later of the General Bar Date or 30 days after the effective date of any order authorizing the rejection of an executory contract or unexpired lease as the bar date by which a proof of claim relating to the Debtors' rejection of the contract or lease must be filed. Mr. Sprayregen says it is essential to ascertain the full extent of the claims asserted against the Debtors and their estates. To develop a viable plan of reorganization, the Debtors will require complete and accurate information on the nature, amount and status of all claims that will be asserted in these Chapter 11 Cases. Accordingly, the Debtors request that the Court fix a deadline for the filing of proofs of claim or interest against the Debtors' estates, for claims or interests that arose on or before the Petition Date. The requested General Bar Date should allow the Debtors to ascertain the number and amount of claims in various classes and finalize the terms of a plan of reorganization and disclosure statement prior to solicitation of votes. The Debtors propose that the Bar Date apply to all Persons or Entities holding Claims against or Interests in the Debtors (whether secured, priority or unsecured) that arose prior to the Petition Date, including the following: a) Any Person or Entity whose Claim or Interest is listed as "disputed," "contingent," or "unliquidated" that desires to participate in or share in any distribution in these Chapter 11 Cases; b) Any Person or Entity whose Claim or Interest is improperly classified or is listed in an incorrect amount in the Schedules and that desires to have its Claim allowed in a classification or amount other than set forth in the Schedules; and c) Any Person or Entity whose Claim or Interest against a Debtor is not listed in the applicable Debtors' Schedules. The Debtors anticipate that creditors may assert Claims in connection with a Debtor's rejection of executory contracts and unexpired leases pursuant to Section 365 of the Bankruptcy Code. The Debtors propose that, for any Claim relating to a Debtor's rejection of an executory contract or unexpired lease that is approved by an order of the Court, the bar date for filing any Claim shall be the Rejection Bar Date. Mr. Sprayregen explains that given the factual complexities of the case, the Debtors propose to provide actual written notice of the Bar Date to all known Parties holding Claims and Interests. The Debtors propose to give notice of the Bar Date by first class mail at least 60 days before the Bar Date. Creditors and potential creditors would receive more notice of the Bar Date than the 20 days required by Bankruptcy Rule 2002(a)(7). Creditors would have more than sufficient notice, time and opportunity to file their proofs of claim or interest. The Debtors propose that for any Proof of Claim Form to be validly and properly filed, a signed original of the completed Proof of Claim Form, with accompanying documentation, must be delivered to the Debtors' Claims and Noticing Agent at the address set forth on the Bar Date Notice so as to be received no later than 4:00 p.m., prevailing Central time, on the Bar Date. The Debtors propose that creditors be permitted to submit Proofs of Claim or Interest in person or by courier service, hand delivery or mail. Facsimile submissions will not be accepted. Proofs of Claim or Interest shall be deemed filed when actually received by the Debtors' Claims and Noticing Agent. If a creditor wishes to receive acknowledgment of receipt of a proof of claim or interest, the creditor must submit a copy of the proof of claim and a self-addressed, stamped envelope. The Debtors propose that all Persons and Entities asserting Claims against or Interests in more than one Debtor are required to file a separate proof of claim form with each Debtor. If Parties are permitted to assert Claims against or Interests in more than one Debtor in a single proof of claim form, the Claims and Noticing Agent may have difficulty maintaining separate Claim registers for each Debtor and all Debtors will be required to object to a proof of claim that may be applicable to only one. Likewise, Parties should be required to identify on each proof of claim form the particular Debtor against which their claim or Interest is asserted. This will greatly expedite the Debtors' review of proofs of claim and will not be unduly burdensome on claimants since they should know the identity of the Debtor against which they asserting a Claim or Interest. The Debtors propose to publish notice of the Bar Date once at least sixty 60 days before the Bar Date. The Debtors will publish the notice if a mixture of publications they're convinced will be most likely to reach an audience of creditors and interest holders that may hold unknown claims or interests: Domestic -------- USA Today Wall Street Journal New York Times Chicago Tribune International ------------- Australia The Australian Hong Kong South China Morning Post Japan Asahi Shinbun Argentina La Nacion United Kingdom The London Times Brazil Folha de Sao Paulo (Retail Rate) Worldwide --------- USA Today - Global Edition International Herald Tribune In addition, the Debtors propose that all Parties asserting Claims against or Interests be required to file Proofs of Claim in English and in U.S. dollars. If a Person or Entity does not specify the amount of its claim in U.S. dollars, the Debtors reserve the right to convert it to U.S. dollars using the applicable conversion rate as of the Petition Date, unless the Debtors deem another date to be more appropriate. (United Airlines Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service, Inc., 609/392-0900) US AIRWAYS: Chuck Jones Asks Court to Name Shareholder Committee ---------------------------------------------------------------- Chuck Jones claims to have had "numerous conversations with representatives of US Airways' Investor Relations and Corporate Offices." Mr. Jones is concerned about the Plan's treatment of equity. Mr. Jones alleges that he was "deceived" by Airways Group Inc. because their representatives repeatedly stated that there was no discussion of the equity being cancelled and he was repeatedly reminded that US Air management was among the largest shareholders. Based on these conversations, Mr. Jones says, he purchased the US Air common stock. To remedy this inequity, Mr. Jones proposes the establishment of a Shareholders' Committee. Mr. Jones calls the postpetition financing arrangement with RSA a "conspiracy." "This would allow the RSA virtually to takeover the entire airline by canceling existing stock, issuing and distributing new shares to itself, while spreading some crumbs to the puppet management of the airline and the unions as a bribe and payoff for their support of the RSA." Mr. Jones even goes so far as to say that the U.S. Trustee in this case was in "collusion with the DIP and Plan Sponsor," creating inherent conflicts of interest. Mr. Jones asserts that his and other shareholders' rights have been trampled on, they have no advocate in these proceedings, and ultimately, they stand to receive absolutely nothing under the proposed Plan. Thus, Mr. Jones insists, a committee of shareholders should be appointed. (US Airways Bankruptcy News, Issue No. 22; Bankruptcy Creditors' Service, Inc., 609/392-0900) VISHAY: Sees $130-$150MM Pre-Tax Charge for Tantalum Products ------------------------------------------------------------- Vishay Intertechnology, Inc. (NYSE: VSH) announced that its results for 2002 will reflect a write-down of its current inventory of tantalum powder and wire and an accrual for its commitments under contracts for the supply of tantalum by Cabot Corporation that are for prices in excess of market. The non- cash charge will be in the range of $130 million to $150 million before taxes. Vishay's action reflects weak product demand for tantalum that is below 1999 levels and increased tantalum production capacity, which together have resulted in substantial worldwide capacity under-utilization and severely depressed pricing for this commodity. In June 2002, Vishay agreed with Cabot to amend two agreements for the supply of tantalum powder and wire. The parties agreed to reduce volumes, and starting in 2003, prices of tantalum products under the agreements and to extend the longer-term agreement by one year through 2006. Vishay, a Fortune 1,000 Company listed on the NYSE, is one of the world's largest manufacturers of discrete semiconductors (diodes, rectifiers, transistors, optoelectronics, and selected ICs) and passive electronic components (resistors, capacitors, inductors, and transducers). The Company's components can be found in products manufactured in a very broad range of industries worldwide. Vishay is headquartered in Malvern, Pennsylvania, and has plants in sixteen countries employing over 25,000 people. Vishay can be found on the Internet at http://www.vishay.com. As reported in the Troubled Company Reporter's January 21, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured bank loan ratings on electronic components manufacturer Vishay Intertechnology to 'BB' from 'BB+' and its subordinated debt rating to 'B+' from 'BB-.' The ratings were removed from CreditWatch, where they had been placed on Nov. 11, 2002. The outlook is stable. WACHOVIA BANK: S&P Assigns Prelim Ratings to Ser. 2003-C3 Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Wachovia Bank Commercial Mortgage Trust's $937.3 million commercial mortgage pass-through certificates series 2003-C3. The preliminary ratings are based on information as of Jan. 21, 2003. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, the economics of the underlying loans, and the geographic and the property type diversity of the loans. Classes A-1, A-2, B, C, D, and E are currently being offered publicly. Standard & Poor's analysis determined that, on a weighted average basis, the pool has a debt service coverage ratio of 1.43x, a beginning loan-to-value ratio (LTV) of 94.7%, and an ending LTV of 80.0%. Unless otherwise indicated, all calculations in this report, including weighted averages, do not consider the B notes for Best Buy - Wichita Falls or Walgreens - Las Vegas. PRELIMINARY RATINGS ASSIGNED Wachovia Bank Commercial Mortgage Trust Series 2003-C3 Class Rating Amount ($) A-1 AAA 259,086,000 A-2 AAA 477,837,000 B AA 36,319,000 C AA- 12,888,000 D A 25,775,000 E A- 12,887,000 F BBB+ 10,544,000 G BBB 12,888,000 H BBB- 12,887,000 J BB+ 22,260,000 K BB 9,373,000 L BB- 7,029,000 M B+ 2,343,000 N B 7,030,000 O B- 4,686,000 P N.R. 23,432,149 IO-I (*) AAA (#) 937,264,149 IO-II (*) AAA (#) 890,430,000 (*) Interest only class. (#) Notional amount. WORLDCOM INC.: Expands Private IP Network-based VPN Service ----------------------------------------------------------- WorldCom (WCOEQ), the leading global business data and Internet communications provider, announced that its Private IP network- based VPN service is one of the first to deliver real-time traffic management and performance reporting capabilities globally. With WorldCom's Private IP Platinum service, companies can better manage and monitor their virtual private networks to optimize network and applications performance, streamline network management and control costs. "WorldCom continues to lead the industry delivering premier global VPN services and tools to enterprises," said Jim DeMerlis, WorldCom vice president of product management. "The advanced performance management tools we've built into Private IP Platinum provide the next level of assurance our customers require to confidently plan and implement their corporate network requirements worldwide." WorldCom's Private IP Platinum service is ideal for new and existing VPN customers wanting to extend their network visibility and analytical capabilities. Using a secure Web- based interface, customers can review and evaluate real-time and historic VPN metrics like latency, throughput, circuit usage, and packet loss in real-time, hourly, daily, weekly, monthly and annual performance reporting formats. With this level of detail, customers can shift network resources or optimize bandwidth to accommodate up-to-the minute business requirements. Additionally, enterprises can more simply validate their network performance against WorldCom's stringent, credit-bearing service level agreements, which are some of the most competitive in the industry. With Private IP Platinum's highly effective, proactive notification feature, customers can potentially avert or quickly resolve network performance issues globally. This advanced design significantly reduces troubleshooting by providing a comprehensive global look at all network systems including the physical network, operating environment, provisioning, alarm systems, and traffic routing mechanisms. "The Platinum option moves WorldCom's Private IP solution up the value stack for MPLS-based VPN users," said Steve Harris, research manager for IDC. "Providing direct, real-time access to VPN performance data worldwide, enables enterprises to take full advantage of their VPN's capabilities with tangibly enhanced levels of confidence and control. Whether you're a current MPLS-based VPN user seeking greater visibility into your network's operation to optimize its performance, or if considering migration to an IP networking solution, a monitoring and reporting service like Private IP Platinum is worth a look." Supported by Visual Networks' (Nasdaq: VNWK) industry-leading performance management technology, WorldCom's Private IP Platinum comes complete with customer premise equipment (CPE) and software, ongoing maintenance, service management support, access to WorldCom's Web-based reporting service and premier troubleshooting capabilities. The service is available immediately for a low monthly fee per circuit. "WorldCom is committed to using the principles of Total Quality Management in our operations and customer support," said DeMerlis. "We've built quality processes into our front and back-end service delivery in the form of feature-rich products supported by industry-leading service level guarantees backed by monetary credits, plus the tools customers need to monitor and measure the quality of service we deliver." With Private IP Platinum, customers gain access to online reporting through the WorldCom Customer Center (http://www.worldcom.com/us/wcc),the company's electronic customer relationship management Web portal. The Customer Center also provides a 24/7 venue for WorldCom VPN customers to order, provision, monitor, report, purchase and pay for their WorldCom services. WorldCom offers the most extensive suite of secure VPN and data networking services to meet every customer's need and management preference -- from traditional private line, frame relay and ATM networks to advanced VPN solutions -- all backed by the highest performance guarantees. Each runs over WorldCom's award-winning global IP and facilities-based data networks and is a part of the full continuum of integrated communication products and services WorldCom provides to enterprises of all sizes around the world. About WorldCom, Inc. WorldCom, Inc. (WCOEQ, MCWEQ) is a pre-eminent global communications provider for the digital generation, operating in more than 65 countries. With one of the most expansive, wholly- owned IP networks in the world, WorldCom provides innovative data and Internet services for businesses to communicate in today's market. In April 2002, WorldCom launched The Neighborhood built by MCI -- the industry's first truly any- distance, all-inclusive local and long-distance offering to consumers for one fixed monthly price. For more information, go to http://www.worldcom.com * DebtTraders' Real-Time Bond Pricing ------------------------------------- Issuer Coupon Maturity Bid - Ask Weekly change ------ ------ -------- --------- ------------- Federal-Mogul 7.5% due 2004 18 - 20 +2 Finova Group 7.5% due 2009 35 - 37 +1 Freeport-McMoran 7.5% due 2006 92 - 94 0 Global Crossing Hldgs9 .5% due 2009 3.5 - 4.5 +0.5 Globalstar 11.375% due 2004 6 - 7 -2.5 Lucent Technologies 6.45% due 2029 50.5 - 52.5 -0.5 Polaroid Corporation 6.75% due 2002 4.5 - 6.5 +1.5 Terra Industries 10.5% due 2005 90 - 92 0 Westpoint Stevens 7.875% due 2005 30 - 32 0 Xerox Corporation 8.0% due 2027 61 - 63 +3 ********* 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. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 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. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***