/raid1/www/Hosts/bankrupt/TCR_Public/030207.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Friday, February 7, 2003, Vol. 7, No. 27
Headlines
ADVANCED LIGHTING: Files for Chapter 11 Protection in Illinois
ADVANCED LIGHTING: Voluntary Chapter 11 Case Summary
AMERICA WEST: Appoints Herbert M. Baum to Its Board of Directors
AMERISTAR CASINO: Positive Earnings Trend Continues in 2002
ANTARES PHARMA: Retains Duncan Capital as Investment Banker
ARMSTRONG: Wrestles with Carlino Development over $34 Mil. Claim
AMERICAN TRANS AIR: January Revenue Passenger Miles Jump-Up 36%
B/E AEROSPACE: Ships 2,000th Order of Jet Seats to Cessna
BELL CANADA: Issuing C$600 Million of Medium-Term Debentures
BETHLEHEM STEEL: Agrees in Principle to Sell All Assets to ISG
BORDEN CHEMICALS: Delaware Court Confirms Plan of Liquidation
BUFFETS: S&P Keeps Watch on Ratings over Weak Operating Results
CANWEST GLOBAL: Names Jim Orban Gen. Manager of Ottawa Citizen
CASCADES INC: S&P Ratchets Sr. Unsecured Debt Rating Up a Notch
CCC GLOBALCOM: Ex-CEO Contributes Personally-Owned 5-Mil. Shares
CONSECO FINANCE: Honoring Up to $70MM of Critical Vendor Claims
CONSECO INC: Gets Court Approval to Hire Milliman as Actuary
COVANTA ENERGY: Gets Nod to Enter into Prima Letter Agreement
COVENTRY HEALTH: Reports Record Results for Fourth Quarter 2002
CRITICAL PATH: Dec. 31 Balance Sheet Upside-Down by $8 Million
CRITICAL PATH: Paul Bartlett Named New Chief Financial Officer
DAIRY MART: Plan Confirmation Hearing Scheduled for February 26
DELTA AIR LINES: January 2003 System Traffic Climbs 6.3%
DT INDUSTRIES: Violates Sr. Credit Facility Financial Covenants
DOWNEY REGIONAL: S&P Downgrades Revenue Bonds Rating to BB+
DUN & BRADSTREET: Fourth Quarter 2002 Results Show Improvement
ENVIROGEN INC: Fails to Satisfy Nasdaq Minimum Requirements
FELCOR LODGING: S&P Keeping Watch on BB Rating over Weak Results
FLEMING COS.: S&P Hatchets Corporate Credit Rating to B from BB-
FONIX CORP: Commences Workout & Intends to Effect Reverse Split
GENUITY INC: Committee Signs-Up Deloitte & Touche as Consultants
GILAT SATELLITE: Principal Creditors Approve Debt Workout Plan
GLOBAL CROSSING: Brings-In Pachulski Stang as Litigation Counsel
GROUP HEALTH SERVICE: AM Best Cuts Fin'l Strength Ratings to B++
GUESS? INC: Reports Increased Retail Sales for January 2003
G-ZONE ENTERPRISES: Taps Keen Realty to Market La Vista Property
HOST MARRIOTT: S&P Places BB- Corp. Credit Rating on Watch Neg.
INTEGRATED HEALTH: Secures 9th Extension of Exclusive Periods
ITEX CORP: Shareholders Elects Company's New Board of Directors
JLG INDUSTRIES: S&P Hatchets Corp. Credit Rating to BB from BBB-
KASPER ASL: Has Until March 31 to Make Lease-Related Decisions
KEY3MEDIA MEDIA: Gets Interim Nod to Obtain $12.5 DIP Financing
LENNAR CORP: S&P Ratchets Various Low-B Ratings Up a Notch
LERNOUT: Committee Asks Court to Modify Exclusive Periods
METROCALL INC: Board Appoints Vincent D. Kelly, President & CEO
NAT'L CENTURY: Creditors Seek Separate Subcommittee Appointments
NATIONAL STEEL: Court Approves AFCO Insurance Finance Agreement
NATIONAL STEEL: Judge Squires Approves AK Steel as Lead Bidder
NATIONSRENT: Court OKs Modified Ordinary Professionals' Fee Cap
NEXTERA ENT.: Names Daniel Fischel as Chairman, Pres., and CEO
NORCROSS SAFETY: S&P Assigns B+ Corp. Credit & Bank Loan Ratings
NRG ENERGY: FirstEnergy Wants Nod to Proceed with Arbitration
OM GROUP INC: Fourth Quarter 2002 Net Loss Tops $305 Million
OWENS CORNING: Court Approves South Carolina Settlement Pact
PENNSYLVANIA FASHIONS: Wants Exclusivity Extended Until March 3
PROBEX: Reviewing Options -- Including Filing for Bankruptcy
QPS INC: Sells Assets and Brand Name to Digital Peripheral
QWEST: Secures Regulatory Approval to Sell Long-Distance Service
RBTT FINANCIAL: Fitch Affirms BB+ L-T Foreign Currency Ratings
REGUS BUSINESS: Hires NautaDutihl as Special Netherlands Counsel
REVLON INC: Perelman Prepares to Invest $150,000,000, Maybe More
SOLUTIA INC: Moody's Upgrades Debt Ratings Following Asset Sale
SPECTRULITE CONSORTIUM: Case Summary & Largest Unsec. Creditors
SPIEGEL GROUP: Finally Releases 2001 Financials & CFO Resigns
TCW LINC III: S&P Places Junk-Rated Notes' on Watch Neg.
TOKHEIM CORP: Auctioning Its Assets Today
TRW AUTOMOTIVE: Fitch Assigns Low-B Indicative Debt Ratings
UNITED AIRLINES: Court Okays Gavin Anderson as PR Consultants
UNITED PAN-EUROPE: Court Sets Confirmation Hearing for Feb. 15
UNIVANCE TELECOMM: UST Calls for Sec. 341(a) Meeting on March 3
US AIRWAYS: January 2003 Revenue Passenger Miles Slide-Down 9.4%
U.S. INDUSTRIES: S&P Ratchets Low-B Corp. Credit Rating Up to B+
U.S. STEEL CORP: Caps Price of $250MM Conv. Preferred Offering
U.S. STEEL CORP: S&P Rates Proposed $250-Million Preferreds at B
US UNWIRED INC: Fails to Meet Nasdaq Continued Listing Standards
WESTAR ENERGY: Completes Initial Sale of ONEOK Preferred Shares
WESTAR ENERGY: Bear Stearns & Lehman Brothers Providing Advice
WHOLE LIVING: Subsidiary Reports Positive Cash Flow for January
WORLDCOM INC: Intends to Assume Southwest Airlines Agreement
W.R. GRACE: Earns Nod to Hire Woodcock for Indiana Patent Suit
XML GLOBAL: Completes Financing Arrangement with Paradigm Group
YOUTHSTREAM MEDIA: Closes Debt Workout Resolving Default Claims
ZENITH NAT'L: S&P Revises Outlook on Low-B Ratings to Negative
* Hidayet L. Kutat Joins Renaissance Partners
* BOOK REVIEW: Bankruptcy Crimes
*********
ADVANCED LIGHTING: Files for Chapter 11 Protection in Illinois
--------------------------------------------------------------
Advanced Lighting Technologies, Inc., (OTCBB:ADLT) and all of
its U.S.-based operating subsidiaries (with the exception of
Deposition Sciences, Inc.) voluntarily filed for protection
under the provisions of Chapter 11 of the Federal Bankruptcy
Code. The filing was made in the United States Bankruptcy Court
for the Northern District of Illinois, Eastern Division in
Chicago, IL.
Wayne Hellman, Chairman and CEO of ADLT explained,
"[Wednes]day's filing will allow ADLT to continue to operate its
regular business while we work with our senior lenders and
bondholders to restructure our debt. All of our facilities are
open. We believe that Chapter 11 will provide the right
environment for us to further implement our initiatives in Lean
Manufacturing and improved market effectiveness as core
strategies in our turnaround. The Chapter 11 process allows us
to preserve jobs, continue to pay our vendors, and work to
realize the greatest possible value for our creditors. We plan
to emerge from Chapter 11 as quickly as possible, and we are
confident in our ability to continue to serve our customers'
needs and to maintain service levels."
Hellman stated that the voluntary action was initiated
specifically to enable the company to restructure its debt with
its senior lenders and its high yield bondholders and
restructure the preferred stock interests of General Electric
Company in an expedited manner. Negotiations among the company,
its senior lenders, high yield bondholders and GE are
progressing and expected to successfully conclude shortly.
Hellman went on to say, "Our operating subsidiaries all have
loyal customer bases and strong fundamental businesses as
evidenced by our operating results for the quarter ended
September 30. We are taking these actions to implement a
financial restructuring of our balance sheet driven by our
relations with our lenders, not an operational shortfall. We
feel the restructuring is best addressed in Chapter 11. The
protection of Chapter 11 is clearly in the best interest of our
employees, vendors, lending institutions and particularly our
customers."
ADLT has retained Jenner & Block as bankruptcy counsel. Debtor-
in-possession financing has been arranged with the existing bank
group led by PNC Bank. Sufficient cash and cash availability
exists to support ADLT's ongoing business requirements including
employee payroll and payments to vendors during the
restructuring. Upon approval, the new financing will provide
immediate funding if required.
Advanced Lighting Technologies, Inc., is an innovation-driven
designer, manufacturer and marketer of metal halide lighting
products, including materials, system components, systems and
equipment. The Company also develops, manufactures and markets
passive optical telecommunications devices, components and
equipment based on the optical coating technology of its wholly
owned subsidiary, Deposition Sciences, Inc.
ADVANCED LIGHTING: Voluntary Chapter 11 Case Summary
----------------------------------------------------
Debtor: Advanced Lighting Technologies Inc.
32000 Aurora Road
Cleveland, Ohio 44139
Bankruptcy Case No.: 03-05256
Type of Business: Through subsidiary Venture Lighting, the
Debtor makes metal halide lamps, ranging from
32 to 2,000 watts. Other lighting products
include lamp components, power supplies, and
lamp-making equipment.
Chapter 11 Petition Date: February 5, 2003
Court: Northern District of Illinois
Judge: John H. Squires
Debtor's Counsel: Jerry L. Swizter, Jr., Esq.
Jenner & Block LLC
One IBM Plaza
Chicago, IL 60611
Tel: 312-222-9350
Total Assets: $191,445,000 (as of Sept. 30, 2002)
Total Debts: $190,732,000 (as of Sept. 30, 2002)
AMERICA WEST: Appoints Herbert M. Baum to Its Board of Directors
----------------------------------------------------------------
America West Holdings Corporation (NYSE: AWA), parent company of
low-fare America West Airlines, Inc., and The Leisure Company,
announced that Herbert M. Baum, chairman, president and chief
executive officer of The Dial Corporation, has been elected to
its board of directors.
"We are very pleased that Herb Baum has agreed to join our
board," said Douglas Parker, chairman and chief executive
officer. "He brings a remarkable record of achievement for some
of the world's leading consumer products companies, and his
leadership will be a great asset to America West."
Prior to joining Arizona-based Dial Corporation in August 2000,
Baum was president and chief operating officer of Hasbro, Inc.,
a worldwide manufacturer and marketer of toys and games. From
1993 to 1999, Baum was chairman and chief executive officer of
Quaker State Corporation. Previously, he spent 15 years at
Campbell Soup Company, where he held many positions including
president of Campbell North and South America.
Baum is also a director of The Dial Corporation, Action
Performance, PepsiAmericas and Meredith Corporation.
America West Holdings Corporation is an aviation and travel
services company. Wholly owned subsidiary America West Airlines
is the nation's second largest low-fare carrier, serving 92
destinations in the U.S., Canada and Mexico. The Leisure
Company, also a wholly owned subsidiary, is one of the nation's
largest tour packagers.
As previously reported in the Troubled Company Reporter,
Standard & Poor's raised America West's junk corporate credit
rating to 'B-'.
AMERISTAR CASINO: Positive Earnings Trend Continues in 2002
-----------------------------------------------------------
Ameristar Casinos, Inc., (Nasdaq: ASCA) -- whose 10-3/4% Notes
due Feb. 2009 are rated B3 by Moody's and at B by Standard &
Poor's -- released financial results for the fourth quarter of
2002 and the year ended December 31, 2002.
Fourth quarter and year-end 2002 highlights:
-- Net revenues of $181.6 million for the quarter ended
December 31, 2002, an increase of $29.6 million, or 19.5
percent, over the fourth quarter of 2001. Net revenues
of $698.0 million for the year ended December 31, 2002,
an increase of $95.2 million, or 15.8 percent, over
2001.
-- Operating income of $25.1 million for the fourth quarter
of 2002, representing a decrease of $1.6 million, or 6.0
percent, as compared to the same quarter last year.
Adjusted operating income of $126.8 million for 2002
(excluding preopening expense of $6.4 million relating
to the new St. Charles facility and impairment loss on
assets held for sale of $5.2 million), representing an
increase of $11.9 million, or 10.4 percent, as compared
to the prior year.
-- EBITDA of $39.8 million during the three months ended
December 31, 2002, compared to $38.5 million for the
fourth quarter of 2001, representing an increase of 3.4
percent. EBITDA of $175.5 million for 2002, compared to
$155.0 million for 2001, representing an increase of
13.2 percent.
-- Net income of $5.0 million for the fourth quarter of
2002, down $4.2 million, or 45.7 percent, as compared to
the fourth quarter of 2001. Net income of $40.5 million
for 2002, up $7.3 million, or 22.0 percent, as compared
to the prior year.
-- Diluted earnings per share of $0.19 for the fourth
quarter of 2002 compared to $0.40 for the fourth quarter
of 2001. Diluted earnings per share for 2002 of $1.50,
compared to $1.51 for the prior year. Analysts'
consensus expectation for the fourth quarter of 2002 was
$0.21, as reported by Thomson's First Call.
-- For the fourth quarter of 2002, Ameristar Casinos was
the market share leader (based on gross gaming revenues)
in all of its markets.
The growth in revenues in the fourth quarter of 2002 as compared
to the prior-year quarter was driven primarily by increased
revenues at the new Ameristar St. Charles facility, which opened
August 6, 2002, as well as continued revenue improvements at all
other properties. Fourth quarter 2002 consolidated operating
income was adversely impacted by inefficiencies associated with
the initial operations of the new St. Charles facility, business
disruption from ongoing construction of the enhancements being
made to the casino and non-gaming amenities at the Kansas City
property and the general slowdown in the U.S. economy. The
Company's net income in the fourth quarter of 2002 was also
negatively affected by the substantial increase in the base of
depreciable assets and the reduction of capitalized interest
following the opening of the new St. Charles facility.
"While revenues and EBITDA continue to grow, we are implementing
a number of revenue enhancement and cost reduction initiatives
in order to further improve operating margins," said Chief
Executive Officer Craig H. Neilsen. "We are confident the
expanded and enhanced facilities at our Missouri properties will
generate improved operating results in 2003. We are employing
similar marketing and operating strategies at the Missouri
properties that have led to strong returns at the Council Bluffs
and Vicksburg properties following the completion of capital
improvement projects at those properties. Adjusted operating
income at Council Bluffs and Vicksburg increased by 37.6 percent
and 65.0 percent, respectively, from 2001 to 2002, and EBITDA at
these properties increased by 28.3 percent and 45.5 percent,
respectively, during the same period."
Ameristar St. Charles
Net revenues at Ameristar St. Charles improved to $58.6 million
for the quarter ended December 31, 2002 from $36.1 million for
the corresponding period in 2001, representing an increase of
62.3 percent and marking the eighth straight quarter of double-
digit revenue growth for the property. The level of growth in
revenues is principally due to the opening of the new facility
in August 2002. Ameristar St. Charles continued to improve its
market share, with an increase in the fourth quarter of 2002 to
29.4 percent, a record since Ameristar acquired the property in
December 2000, up from 19.9 percent in the prior-year quarter.
Operating income at Ameristar St. Charles was $9.5 million for
the three months ended December 31, 2002, a decrease of 6.9
percent from the quarter ended December 31, 2001. Ameristar St.
Charles' operating income margin declined from 28.1 percent in
the fourth quarter of 2001 to 16.3 percent in the fourth quarter
of 2002. These decreases are largely due to higher labor and
marketing costs and depreciation expense associated with the
opening of the new facility in August 2002, which collectively
increased fourth quarter operating expenses by $11.5 million.
Management expects to achieve improved operating margins in
future periods through increased labor and marketing
efficiencies and other operational initiatives. EBITDA margin
at Ameristar St. Charles improved to over 28 percent in January
2003, compared to 19 percent in September 2002, the first full
month of operations after the new facility opened. Management
attributes the improvement to the effect of the above measures
implemented to date as well as the heightened customer awareness
of the scope and quality of the new facility. Despite operating
inefficiencies associated with the opening of the new facility,
EBITDA at the property improved by $3.2 million in the fourth
quarter of 2002, an increase of 27.6 percent over the quarter
ended December 31, 2001.
Ameristar Kansas City
Ameristar Kansas City reported net revenues of $52.0 million in
the fourth quarter of 2002, representing an increase of $2.7
million, or 5.5 percent, over the prior-year quarter. The
property's 9.7 percent increase in gaming revenues as compared
to 2001 exceeded the 5.2 percent growth in the overall Kansas
City market and improved the property's market share in the
fourth quarter of 2002 to 34.3 percent, up from 32.5 percent in
the same period in 2001. Increased costs of targeted marketing
programs, including coin coupon offerings, which are recorded as
promotional allowances, caused net revenues to grow at a lower
rate than gaming revenues.
Fourth quarter 2002 income from operations at Ameristar Kansas
City improved to $8.7 million, compared to $8.3 million in the
corresponding period in 2001. EBITDA at Ameristar Kansas City
decreased $0.9 million, or 7.1 percent, in the fourth quarter of
2002 compared to the prior-year quarter. The comparability of
income from operations between the two periods was affected by
the absence of goodwill amortization expense in the fourth
quarter of 2002 compared to $0.7 million recorded in the prior-
year quarter. In accordance with Statement of Financial
Accounting Standards No. 142, which the Company adopted on
January 1, 2002, the Company no longer records goodwill
amortization expense.
Operating expenses (excluding depreciation) at Ameristar Kansas
City in the fourth quarter of 2002 were $3.6 million higher than
the corresponding period in 2001. This increase is principally
associated with increased costs of certain marketing and player
development initiatives and general and administrative expenses.
The property's results were also adversely impacted by business
disruption associated with the ongoing construction of
enhancements to the casino and entertainment facilities that
began in July 2002. The current projects, undertaken to further
improve its competitive position and operating results, include
significant improvements to the casino and land-based amenities
and are expected to be substantially completed in the first
quarter of 2003. Similar enhancement projects completed in 2001
at Ameristar Council Bluffs and Ameristar Vicksburg resulted in
significant improvement in operating results. Management
expects to achieve improved results at Ameristar Kansas City
after completion of the current projects.
Ameristar Council Bluffs
Net revenues at Ameristar Council Bluffs increased to $35.7
million, up $1.4 million, or 4.1 percent, from the fourth
quarter of 2001. The property continued to benefit from the
ongoing refinement of targeted marketing programs and the
installation of new gaming equipment. Ameristar Council
Bluffs improved its market share to an all-time record 39.4
percent in the fourth quarter of 2002, up from 37.6 percent in
the fourth quarter of 2001. Ameristar Council Bluffs has now
been the market share leader in Council Bluffs for sixteen
consecutive months. Despite the increase in net revenues,
operating income and EBITDA at Ameristar Council Bluffs
decreased slightly, down $0.2 million and $0.1 million,
respectively, from the same quarter in 2001. These declines are
largely attributable to increases in property insurance expense
and liability accruals.
Ameristar Vicksburg
Ameristar Vicksburg experienced significant improvement in the
fourth quarter of 2002, with net revenues increasing by $2.6
million, or 13.5 percent, over the fourth quarter of 2001, due
to the effectiveness of targeted marketing programs and new
gaming equipment. The 16.8 percent growth in casino revenues
far outpaced the 3.0 percent increase in the overall Vicksburg
gaming market. Ameristar Vicksburg, the long-time market share
leader in Vicksburg, improved its market share to 40.2 percent
in the fourth quarter of 2002, up from 35.5 percent in the
fourth quarter of 2001. Ameristar Vicksburg generated operating
income of $4.8 million and EBITDA of $7.1 million, up 33.3
percent and 22.4 percent, respectively, from the fourth quarter
of 2001. In addition, the Vicksburg property improved its
operating income margin from 18.6 percent to 21.8 percent and
EBITDA margin from 30.4 percent to 32.6 percent from the quarter
ended December 31, 2001 to the corresponding period in 2002.
Jackpot Properties
Net revenues at the Jackpot Properties in the fourth quarter of
2002 were $13.5 million, up 3.1 percent from the fourth quarter
of 2001. This improvement is attributable to more effective
marketing programs and milder weather conditions in the fourth
quarter of 2002 compared to the prior-year quarter. The Jackpot
Properties generated operating income of $1.4 million and EBITDA
of $2.4 million, up 7.7 percent and 4.3 percent, respectively,
from the fourth quarter of 2001.
Income tax rates
The effective income tax rate for the quarter ended December 31,
2002 was 37.3 percent compared to 23.6 percent for the prior-
year quarter. During the fourth quarter of 2001, the Company
recorded $1.7 million of previously unrecognized tax credits,
which reduced the effective tax rate for the quarter by 14.2
percentage points.
Capital structure and borrowing costs
The number of diluted shares outstanding increased by 17.4
percent from the fourth quarter of 2001 to the fourth quarter of
2002, primarily due to the issuance of 4.9 million shares in the
Company's December 2001 public equity offering. Among other
factors, this increase in outstanding shares affects the
comparability of earnings per share between the fourth quarter
of 2001 and the fourth quarter of 2002.
At December 31, 2002, the Company's total debt was $798.4
million, representing an increase of $42.5 million from
September 30, 2002. At December 31, 2002, the Company had $67.7
million of available borrowing capacity under the senior credit
facility. The Company's cash increased from $47.2 million on
September 30, 2002 to $90.6 million on December 31, 2002. The
Company has no off-balance sheet debt.
In October 2002, the Company borrowed $14 million from a
commercial bank to finance equipment purchases for the new St.
Charles facility. On December 2, 2002, the Company borrowed an
additional $100 million under the incremental term loan
commitment provisions of its senior credit facility and repaid
$67.7 million of the outstanding debt under the $75 million
revolving loan facility.
Interest expense (net of capitalized interest associated with
the Company's ongoing construction projects) for the quarter
ended December 31, 2002 was $17.3 million, up 22.7 percent from
$14.1 million for the quarter ended December 31, 2001, due to
the cessation of capitalization of interest on the new St.
Charles facility when it opened in August 2002. Total interest
cost before capitalizing interest was $17.7 million for the
quarter ended December 31, 2002, a decline of $0.8 million, or
4.6 percent, compared with the quarter ended December 31, 2001.
The reduction reflects a lower weighted-average interest rate on
the senior credit facility, which is largely attributable to the
May 2002 amendment of the facility, offset by a higher weighted-
average debt level in 2002 as a result of the additional
borrowings described above.
Earnings guidance for the first quarter of 2003
The Company plans to release earnings guidance for the first
quarter of 2003 on Wednesday, February 12 at 6 p.m. Eastern
Time. A conference call discussing the earnings guidance is
scheduled to follow the news release distribution on February 13
at 11 a.m. Eastern Time. Conference call participants are
requested to dial in at least five minutes early to ensure a
prompt start. The telephone number is 800-967-7185. This
conference call will be recorded and can be replayed until
February 21, 2003 at 8 p.m. Eastern Time. To listen to the
replay, call 888-203-1112. The replay access code number is
614899.
Ameristar Casinos, Inc., is an innovative, Las Vegas-based
gaming and entertainment company known for its distinctive,
quality conscious hotel-casinos and value orientation. Led by
President and Chief Executive Officer Craig H. Neilsen, the
organization's roots go back nearly five decades to a tiny
roadside casino in the high plateau country that borders Idaho
and Nevada. Publicly held since November 1993, the Company owns
and operates six properties in Missouri, Iowa, Mississippi and
Nevada, two of which carry the prestigious American Automobile
Association's Four Diamond designation. Ameristar's Common Stock
is traded on the Nasdaq National Market System under the symbol:
ASCA. Visit Ameristar Casinos' Web site at
http://www.ameristarcasinos.com
ANTARES PHARMA: Retains Duncan Capital as Investment Banker
-----------------------------------------------------------
Antares Pharma, Inc., (Nasdaq: ANTR) retained Duncan Capital LLC
as its investment banker.
Dr. Roger Harrison, CEO and President of Antares Pharma, said,
"We have retained Duncan Capital to assist us in seeking
additional capital as required and to help in the assessment of
strategic alternatives that enable us to better develop our
business prospects. Duncan Capital is a boutique firm whose
executives have extensive and diverse experience in both
business development and corporate finance."
"We are impressed with Antares Pharma's proprietary drug-
delivery technologies and the business opportunities opening up
to the Company. We look forward to working with management and
the Board of Directors and providing capital markets and
financial advisory services to both facilitate Antares Pharma's
business growth and to enhance shareholder value," said Michael
Crow, President and founder of Duncan Capital.
Duncan Capital LLC is a capital markets and financial advisory
firm with headquarters in New York City and offices in San
Francisco and San Diego. Duncan Capital focuses on serving
undervalued and overlooked public companies and selected private
businesses. Its services include capital raising and
restructuring, mergers and acquisitions advisory, independent
equity research, shareholder-value-enhancement initiatives,
going-private evaluation and execution, and corporate governance
counsel.
Antares Pharma, whose September 30, 2002 balance sheet shows a
working capital deficit of about $3.5 million, develops
pharmaceutical delivery systems, including needle- free and
mini-needle injector systems and transdermal gel technologies.
These delivery systems are designed to improve both the
efficiency of drug therapies and the quality of life for
patients.
The Company currently distributes its needle-free injector
systems for the delivery of insulin and growth hormone in more
than 20 countries and an estradiol transdermal patch for hormone
replacement therapy. In addition, Antares Pharma has a number of
products under development and is conducting ongoing research to
create new products that combine various elements of the
Company's technology portfolio. Antares Pharma has corporate
headquarters in Exton, Pennsylvania, with production and
research facilities in Minneapolis, Minnesota, and research
facilities in Basel, Switzerland.
For more information, visit Antares Pharma's Web site at
http://www.antarespharma.com
ARMSTRONG: Wrestles with Carlino Development over $34 Mil. Claim
----------------------------------------------------------------
Carlino Arcadia Associates, L.P. asks the Court to strike
Armstrong World Industries' Objection and allow its claim in
full.
Aaron A. Garber, Esq., at Pepper Hamilton LLP, in Philadelphia,
Pennsylvania, recounts that on July 1, 2002, Carlino Arcadia
filed an amended proof of claim against AWI for $34,254,844.98
in damages, resulting from AWI's rejection of an executory
contract between AWI and Carlino Arcadia. The proof of claim
was designated as Claim No. 4522.
Carlino Arcadia outlines the categories of damages resulting
from AWI's rejection of the Agreement:
1. Pre-development costs incurred
prepetition: $572,348.15
2. Pre-development costs incurred from
12/07/00 until 03/02/01: $324,892.94
3. Damages incurred in efforts to
enforce the Agreement and contest
AWI's rejection: $357,603.89
4. Lost profits: $22,000,000.00
5. Lost business opportunities: $11,000,000.00
Carlino also asks the Court to allow it administrative expense
priority for $682,496.83, comprising all postpetition expenses
incurred, and secured status for all expenses incurred to the
extent of the value of the Land, pursuant to Section 365(j) of
the Bankruptcy Code.
According to Carlino, AWI repeatedly encouraged its continued
performance of the agreement postpetition. In fact, the day
after AWI filed its voluntary Chapter 11 bankruptcy petition,
AWI summoned representatives of Carlino Arcadia and others to a
meeting at AWI headquarters to discuss the effect of the
bankruptcy filing on the Fairsted project. At the meeting, E.
Follin Smith, Armstrong's CFO, explicitly assured Carlino
Arcadia's representatives that AWI remained fully committed to
Fairsted and AWI would seek the Court's authority to assume the
Agreement under the Bankruptcy Code. Smith further urged
Carlino Arcadia to proceed as expeditiously as possible to
implement the Agreement, particularly by completing the
tentative PRD engineering drawings. Carlino Arcadia, in good
faith reliance on AWI's assurances and instructions, proceeded
expeditiously to perform its obligations under the Agreement, by
employing an engineering firm to acquire the necessary
governmental authorizations and approvals, at a significant
cost. In addition, because AWI represented that it would assume
the Agreement, Carlino Arcadia promptly engaged Pepper Hamilton
LLP to assist with the legal process of assumption.
AWI's announcement in March 2001 that it would not proceed was
still a mixed message. The AWI representatives attending the
March meeting explained that AWI's President had decided not to
commit any further "financial or managerial resources" to
Fairsted. However, those representatives -- specifically,
Douglas Brossman, Gary Nentwig and Steven Piguet -- explained
that they continued to support Fairsted.
Thereafter, AWI's President publicly announced his decision not
to proceed with the project. AWI's legal counsel advised that
AWI was prepared at any time to reject the Agreement but would
forbear from doing so, for the parties to attempt to achieve a
consensual resolution of the matter. AWI did not send any
formal written notice to Carlino Arcadia regarding its decision
to terminate the Agreement, as required by the Agreement, nor
did it ever take any affirmative steps in the bankruptcy
proceeding to reject the Agreement.
In light of (a) the substantial investments of time and money
already made by Carlino Arcadia, (b) the fact that AWI had
refrained from taking any affirmative steps to terminate or
reject the Agreement, and (c) the expressed desire of key AWI
executives to continue with the Fairsted project, Carlino
Arcadia decided to take the minimum steps necessary to preserve
the value of the project, including maintaining all existing
governmental approvals and obtaining the other approvals
required to proceed with the development of Fairsted in a timely
manner under the Agreement.
On September 25, 2001, as a direct result of Carlino Arcadia's
efforts, the Manor Township Planning Commission issued its
decision granting tentative PRD approval of Fairsted. Between
March 2001 and May 2002, Carlino Arcadia made numerous attempts
to meet with AWI to resolve the uncertainties surrounding the
Fairsted project. In October 2001, at the specific request of
AWI's counsel, Carlino Arcadia proposed numerous dates for a
meeting. However, neither AWI nor its counsel made any further
response, and no meeting ever took place.
AWI's rejection of the Agreement constitutes a breach deemed to
have occurred immediately prior to its bankruptcy filing. Under
Pennsylvania law, where one party breaches a contract, the other
party is entitled to recover damages, including lost profits, as
would naturally and ordinarily result from the breach, or as
were reasonably foreseeable and within the contemplation of the
parties at the time of the contract. AWI's breach of the
Agreement prevented Carlino Arcadia from proceeding with the
Fairsted development and constructing and selling improvements
on the Land. The natural and ordinary consequence of that
breach is that Carlino Arcadia will not realize any profits
from the sales. This consequence was foreseeable and well
within the contemplation of the parties at the time they entered
the Agreement.
AWI argues that Carlino Arcadia is not entitled to lost profits
because of a contractual limitation on damages.
But the contract expressly granted Carlino the right to sue for
specific performance in the event of AWI's default. But for
AWI's Chapter 11 filing, Carlino Arcadia would have been
entitled to file an action in state court and obtain a decree of
specific performance compelling AWI to comply with the
Agreement. In that case, it would not have been entitled to
seek the excluded categories of damages. However, AWI's Chapter
11 filing and its eventual rejection of the Agreement forever
stripped Carlino Arcadia of its bargained-for remedy of specific
performance. If Carlino cannot enforce its contractual remedy,
then surely equity will not permit AWI, the breaching party, to
invoke the corollary limitation to that remedy and deny Carlino
its common law right to recover lost profits and other damages
that naturally and ordinarily resulted from the breach.
AWI also argues that Carlino Arcadia is not entitled to recover
its expectation damages because Pennsylvania law limits damages
for good faith breach of a land sale contract to deposit monies
and reasonable expenditures incurred in reliance on the
contract. According to Mr. Garber, AWI is wrong for two
reasons:
(1) While the Agreement embodies the features of a land
sale contract, it is more than that; it is a
multi-faceted and long-term commercial development
contract and, is not subject to the common law
remedy limitations that apply to mere land sale
contracts; and
(2) Notwithstanding the Court's finding that AWI did not
act in "bad faith" in formulating its rejection
decision for purposes of federal bankruptcy law,
AWI's breach was a "bad faith breach" within the
meaning of applicable Pennsylvania law,
because it was a willful repudiation of AWI's
obligation to convey the Land, albeit carried out in
accordance with the Bankruptcy Code.
Thus, Carlino is entitled to recover damages under Pennsylvania
law for the loss of its bargain.
Moreover, even if the Agreement were simply a land sale contract
under Pennsylvania law, Carlino would still be entitled to its
lost profits, because AWI's breach was indisputably in "bad
faith" within the meaning of the relevant Pennsylvania case law.
Where a vendor arbitrarily and without reasonable excuse, to
escape the effects of a bad bargain, refuses to comply with a
contract, the vendee is entitled not only to compensatory
damages but to damages arising from the loss of the bargain. A
"bad faith" breach, on the other hand, can be found merely
when the seller "willfully refuses or disables himself from
conveying" the property.
By rejecting the Agreement, AWI willfully disabled itself from
conveying the Land. AWI did not inform Carlino Arcadia at the
time of entering the Agreement that it might later decide
against the sale. To the contrary, even after it filed for
Chapter 11, AWI actively encouraged Carlino Arcadia to rely on
the Agreement and perform under it. It was only later, after
AWI's President -- in disagreement with all of the other
managers involved -- determined to repudiate the Agreement
because he believed that AWI's management efforts needed to
be focused on its core businesses.
AWI insists that the Court made a specific finding that AWI
acted in good faith. But Mr. Garber clarifies that the Court
determined only that, as a matter of federal bankruptcy law,
AWI's rejection was based on sound business reasons and not on
whim, caprice or bad faith. The Court did not hold that AWI
acted in "good faith" for purposes of determining the measure of
damages under Pennsylvania contract law. This is a classic
example of "apples" and "oranges." The issues are distinct. For
purposes of approving contract rejection, a bankruptcy court
concerns itself only with the business judgment with which the
debtor's estate is being managed, and does not address the
competing rights of the contract parties. Indeed, the very
facts that would be sufficient to demonstrate "good faith" for
purposes of Section 365 of the Bankruptcy Code would also be
sufficient to demonstrate the "bad faith" necessary to support a
claim for lost profits under Pennsylvania law.
But for AWI's decision that its own interests were better served
by rejecting the Agreement, Carlino Arcadia would have developed
the Fairsted project and realized profits from home sales of
approximately $22,000,000. Damages flowing from the loss of
these profits were foreseeable and within the contemplation of
the parties at the time they entered the Agreement.
The limitation of remedy clause was included in the Agreement to
foreclose a claim for damages in light of the right to specific
performance granted to Carlino Arcadia. In addition, because
Fairsted was designed to be a showpiece example of a "smart
growth" community, it was foreseeable and within the
contemplation of the parties that the project would receive a
good deal of publicity and attention in the building community
and at large, and would serve as a springboard for other
opportunities for Carlino Arcadia to develop similar projects
elsewhere and to profit from those enterprises.
The death of Fairsted resulted in the stillbirth of those other
projects, with Carlino suffering a further loss of its
expectations under the Agreement.
AWI does not seriously dispute Carlino's entitlement to expenses
it incurred in reasonable reliance on the Agreement, but it
argues that the expenses must be cut off as of the March meeting
at which AWI's intent not to perform was announced. If only
AWI's conduct then were as unequivocal as its argument now,
Carlino would not have been induced to incur expenses after
March 2, 2001. But it was not the case.
The March meeting at AWI's headquarters was the second meeting
to be called by AWI after its Chapter 11 filing. At the first
meeting on December 7, 2000, AWI's Chief Financial Officer
assured Carlino that the Agreement would be assumed and that it
should continue to perform. At the second meeting, a group of
second-tier executives told Carlino that senior management, not
in attendance, had decided not to proceed "at this time," but
that they personally continued to support the Fairsted project.
AWI did not then or ever serve written notice of termination as
required by the Agreement, and it did not then or ever filed a
motion to reject the Agreement.
By the March meeting, Carlino Arcadia had already incurred
expenses of almost $900,000 and had already filed its
application for PRD approval, at AWI's express urging. In view
of AWI's theretofore equivocal conduct, its failure to take any
formal action toward rejection, and Carlino's own substantial
investment in and progress toward the development, the most
prudent course of action was to proceed to take the minimum
steps necessary to secure the PRD approval and preserve the
Fairsted project, for AWI's benefit as well as its own. The
value of AWI's Land has been enhanced as a result, and AWI has
retained that benefit. Thus, fundamental principles of unjust
enrichment as well as Section 503(b) of the Bankruptcy Code
mandate compensation to Carlino Arcadia for the significant
value conferred on AWI's estate.
The legal fees included in Carlino's post-March expenses are
likewise properly sought damages. In the spring of 2002,
deadlines were looming. AWI never served formal notice that it
was releasing Carlino Arcadia from its performance obligations,
so Carlino Arcadia was confronted with the difficult choice of
defaulting, performing at significant expense, or filing a
motion to compel assumption and thus finally ferret out AWI's
intentions. Given Carlino's overarching goal of preserving the
value of Fairsted, it could not risk a default. Of the two
remaining choices, filing the Section 365 Motion was clearly
the most reasonable and least expensive. If instead Claimant
had proceeded with the development and construction of the
project, the expenses incurred would have far exceeded those it
now seeks in the Claim.
The second component of the Claim is for pre-development costs
incurred from December 7, 2000 until March 2, 2001, totaling
$324,892.94. AWI objects to this part of the claim on the
ground that Carlino is not entitled to interest or attorneys'
fees. But the claim does not include an interest component, and
Carlino is not seeking an award of attorneys' fees under any of
the Bankruptcy Code sections argued by AWI. Rather, Carlino is
seeking recovery of the expenses it incurred in reasonable
reliance on the Agreement, a standard with which AWI agrees.
Those expenses necessarily included legal fees, both in
connection with the submission of the PRD application and in
connection with the promised assumption of the Agreement.
AWI does not dispute Carlino's entitlement to pre-development
costs incurred prepetition, equal to $572,348.15, but
nonetheless, argues that it should be expunged for failure to
supply sufficient documentation. However, AWI has already
conducted extensive discovery into the expense claim in
connection with the Section 365 Motion. As AWI is aware, the
documentation is too voluminous to attach to the proof of claim,
but it will be offered into evidence at the hearing on this
matter.
Carlino Arcadia incurred expenses after December 6, 2000, at
AWI's express urging to continue its performance under the
Agreement and press forward with the Fairsted development.
Those expenses did indeed arise from a postpetition transaction,
i.e., the filing of the application for tentative PRD, and they
were actual and necessary to preserve the value of Fairsted to
AWI. Moreover, Carlino Arcadia's performance conferred a clear
benefit on AWI. As will be shown at the evidentiary hearing on
the Objection, the value of AWI's Land was enhanced as a result
of Carlino Arcadia's postpetition expenditures.
AWI's final objection is that Carlino Arcadia is not entitled to
a secured claim under Bankruptcy Code Section 365(j), because it
did not make a "down payment" on the property.
Money is fungible. While it is true that the Agreement did not
call for the payment of monies explicitly denominated as a "down
payment" or "deposit," it clearly did call for the equivalent,
i.e., significant expenditures to be made by Claimant long
before the first deed was ever to be conveyed. With AWI's
knowledge and encouragement, Carlino in fact made the
expenditures. Those expenditures are the functional equivalent
of deposit monies. A down payment serves two primary purposes -
- it commits the buyer to the agreement and it benefits the
seller. Both factors are present, Mr. Garber asserts. Carlino
Arcadia incurred expenses amounting to $1,254,844.98 and was
thus substantially invested in the project by the time the
Agreement was finally rejected. AWI derived a clear and direct
benefit from these expenditures, first in the preservation of
the project until AWI finally decided to reject the Agreement,
and later, in the enhancement in the value of its Land resulting
from the PRD approval.
Accordingly, Mr. Garber contends, the expense components of the
Claim, totaling $1,254,844.98 are secured by a lien on the Land
under Section 365(j).
AWI Talks Back
AWI asserts that Carlino's claim of "bad faith" is squarely
contradicted by the admissions of its own Vice President,
Stephen Najarian, who was Carlino's primary contact with AWI,
that AWI representatives did not mislead him about the land sale
agreement, and that they were clear and straightforward in their
dealings with Carlino.
Lost profits are expressly not recoverable under the contract
itself. The Order authorizing rejection of the Carlino Contract
did not nullify the provision in the Carlino Contract limiting
the type of damages that Carlino is entitled to recover if AWI
does not deliver the land.
Furthermore, lost profits are not recoverable because they are
entirely speculative. Neither of Carlino's principals could
state what Carlino's profits or losses would be for the 10-year
development contemplated by the agreement and that the success
of the project would turn in part on Carlino's ability to flip
40% to 80% of the land as well as the number of homes actually
approved by the township for construction. Mr. Najarian
estimated that, if the development was successful, Carlino could
expect to make a profit of $10,000,000 to $12,000,000. This is
roughly one-third of the lost profits Carlino is now claiming.
Furthermore, the assertions made in support of Carlino's claimed
right to expenses after the March Meeting "are patently
specious" in light of the unrebutted record demonstrating that
AWI clearly and unequivocally notified Carlino, Wagman and the
public that it would not go forward with the land sale in March
2001, as well as the admissions of Carlino's two senior officers
that they understood AWI's decision but nonetheless undertook
the risks of litigating that decision.
AWI's counsel twice confirmed, in writing, that AWI would not
assume the contracts. Carlino's President acknowledged before
this Court that, after March 2001, he understood that there was
a risk that the contracts would not be consummated. Once
Carlino was put on notice in March 2001 that AWI did not intend
to assume the land sale contracts, Carlino was obligated to
mitigate its damages by not incurring any further expenses in
pursuit of the contracts. Most of Carlino's post-March expenses
relate to attorneys' fees for this litigation, in which it
unsuccessfully sought to compel AWI to assume the contracts.
Even a prevailing party is not entitled to recover attorney's
fees unless the contract so provides. A fortiori Carlino, which
was not the prevailing party, is not entitled to recover its
attorney's fees for the post-March period. Any reliance on the
contract was not reasonable after March 2001.
As to Carlino's claim that it has established the prima facie
validity of its claim, no documentation supporting charges has
been filed. Carlino claims that it engaged an engineering firm
at significant cost, but there is no documentation showing
either the amount of this expense, or payment by Carlino. Nor
is there documentation, like invoices or receipts, to support
Carlino's claim to prepetition expenses. Carlino claims that
its documentation is too voluminous, and that the burden is on
AWI to negate the claim. Carlino has misstated its burden of
proof of establishing the prima facie validity of its claim.
Moreover, AWI argues that Carlino's expenses are not the
functional equivalent of a down payment. The Carlino Contract
did not provide that Carlino's expenses would be credited to the
purchase price of the property, or be treated as a down payment.
In fact, the Carlino Contract provided the opposite -- that
Carlino's expenses were to be borne by it.
In sum, AWI insists that the Carlino Claim should be disallowed.
(Armstrong Bankruptcy News, Issue No. 35; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
AMERICAN TRANS AIR: January Revenue Passenger Miles Jump-Up 36%
---------------------------------------------------------------
American Trans Air, Inc., the principal subsidiary of ATA
Holdings Corp. (Nasdaq:ATAH), reported that ATA's January
scheduled service traffic, measured in revenue passenger miles,
increased 35.9 percent on 31.3 percent more capacity, measured
in available seat miles, compared to 2002. ATA's scheduled
service January passenger load factor increased 2.2 points to
66.3 percent and passenger enplanements grew by 33.0 percent
compared to 2002.
For the Company's system-wide traffic increased 26.8 percent in
January on 29.9 percent more capacity when compared with 2002.
The number of block hours flown system-wide increased by 38.5
percent during the first month of 2003 compared to last January.
ATA Holdings Corp., common stock trades on the NASDAQ Stock
Market under the symbol "ATAH". As of January 31, 2003, ATA has
a fleet of 30 Boeing 737-800's, 16 Boeing 757-200's, 10 Boeing
757-300's, and 10 Lockheed L1011's. Chicago Express Airlines,
Inc., the wholly owned commuter airline based at Chicago-Midway
Airport, operates 17 SAAB-340B's.
Now celebrating its 30th year of operation, ATA is the nation's
10th largest passenger carrier based on revenue passenger miles.
ATA operates significant scheduled service from Chicago-Midway
and Indianapolis to over 40 business and vacation destinations.
To learn more about the Company, visit the Web site at
http://www.ata.com
* * *
As reported in Troubled Company Reporter's January 22, 2003,
edition, Standard & Poor's affirmed its 'B-' corporate credit
ratings on ATA Holdings Corp., and subsidiary American Trans Air
Inc., and removed them from CreditWatch, where they were placed
September 13, 2001. However, Standard & Poor's lowered its
ratings on various enhanced equipment trust certificates. The
outlook is negative.
"The ratings were affirmed due to ATA's improved liquidity after
receipt of proceeds from a $168 million loan that was 90% backed
by a federal loan guarantee that closed in November 2002," said
Standard & Poor's credit analyst Betsy Snyder. Although the
company's liquidity has been enhanced, its fate will still
depend on the expected recovery in the airline industry.
Prolonged weakness in the industry would negatively affect ATA
and could result in a downgrade. "The downgrades of ATA's
enhanced equipment trust certificates reflect the substantial
deterioration in market values of the Boeing 757-200 aircraft
which form their collateral," Ms. Snyder noted. These planes,
while efficient and widely used, have been under pressure
following the shutdown of discount carrier National Airlines
(which operated solely B757's), US Airways Inc.'s bankruptcy
rejection and renegotiation of financings on its B757-200's, and
bankrupt United Air Lines Inc.'s attempts to reduce debt service
costs on many of its aircraft-backed obligations, including
those that finance B757-200's.
The ratings reflect ATA Holdings' substantial and growing debt
and lease burden and the price competitive nature of the markets
it serves.
B/E AEROSPACE: Ships 2,000th Order of Jet Seats to Cessna
---------------------------------------------------------
B/E Aerospace, Inc., (Nasdaq:BEAV) shipped its 2,000th order of
business jet seats to the Cessna Aircraft Company, reaching a
new milestone in its long-standing relationship with the
Wichita-based aircraft manufacturer.
B/E is the primary supplier of passenger seats for Cessna's
business jets. Most Cessna business jets also carry B/E's direct
and indirect lighting and oxygen products.
"We enjoy a strong relationship with Cessna based on our
commitment to providing high-quality products, on-time and at
the right price," said Mr. Mark Krosney, Group Vice President
and General Manager of B/E. "We are proud to provide world-class
cabin interior products to a world-class business jet
manufacturer such as Cessna."
B/E Aerospace, Inc., is the world's leading manufacturer of
aircraft cabin interior products and a leading aftermarket
distributor of aerospace fasteners. With a global organization
selling directly to the world's airlines, B/E designs, develops
and manufactures a broad product line for both commercial
aircraft and business jets and provides cabin interior design,
reconfiguration and conversion services. Products for the
existing aircraft fleet -- the aftermarket -- provide almost
two-thirds of sales. For more information, visit B/E's Web site
at http://www.beaerospace.com
As previously reported in the Troubled Company Reporter,
Standard & Poor's assigned a BB+ rating to B/E Aerospace's $150
million credit facility. However, the international rating
agency revised its ratings outlook to negative following the
September 11 terrorist attacks.
BELL CANADA: Issuing C$600 Million of Medium-Term Debentures
------------------------------------------------------------
Bell Canada announced the offering of C$600 million of Medium
Term Note Debentures pursuant to its medium term debenture
program. The 5.50% MTN Debentures, Series M-16, will be dated
February 12, 2003, will mature August 12, 2010 and will be
issued at a price of C$99.678 for a yield to the investor of
5.553% compounded semi-annually. A pricing supplement relating
to this issue will be filed by Bell Canada with the various
securities commissions in all provinces of Canada.
Scotia Capital Inc., BMO Nesbitt Burns Inc., RBC Capital Markets
Inc., National Bank Financial Inc., CIBC World Markets Inc., TD
Securities Inc., Merrill Lynch Canada Inc., Casgrain and Company
Limited, and HSBC Securities (Canada) Inc. will be acting as
agents with respect to the offering of the Series M-16
Debentures.
Bell Canada, Canada's national leader for communications in the
Internet world, provides connectivity to residential and
business customers through wired and wireless voice and data
communications, high speed and wireless Internet access, IP-
broadband services, and local and long distance phone services.
Bell Canada is owned by BCE Inc. of Montreal. For more
information please visit http://www.bell.ca
BETHLEHEM STEEL: Agrees in Principle to Sell All Assets to ISG
--------------------------------------------------------------
Bethlehem Steel Corporation has reached an agreement in
principle with International Steel Group for the sale of
substantially all of Bethlehem's assets.
The agreement is subject to the approval of Bethlehem's board,
the completion of an asset purchase agreement, the approval of
the bankruptcy court having jurisdiction of Bethlehem's chapter
11 case and the satisfaction of certain conditions to closing,
including required governmental approvals and other consents,
and the resolution of certain claims by the Pension Benefit
Guaranty Corporation.
The terms of the sale, which are under review by the board, will
be considered in a special meeting of Bethlehem's board this
Saturday, February 8.
"Following a thorough review of ISG's proposal, Bethlehem's
executive management and its advisors believe that the
acquisition by ISG will provide the best value achievable to
Bethlehem and will also allow Bethlehem's well-maintained
facilities to remain in operation, thereby preserving thousands
of jobs," said Robert S. Miller, Bethlehem's chairman and chief
executive officer. "I and our advisors have recommended to the
board that Bethlehem accept the ISG offer and complete an asset
purchase agreement that is essential to closing this
transaction."
Bethlehem's assets include steelmaking facilities in Burns
Harbor, Ind.; Sparrows Point, Md.; Steelton, Pa., and
Coatesville, Pa., as well as finishing locations in New York,
Pennsylvania and Ohio. In addition, Bethlehem participates in
several joint ventures. Other assets include land on the sites
of former Bethlehem operations in primarily New York and
Pennsylvania.
The agreement, if approved by the board and the bankruptcy
court, would be subject to a sale and auction process in the
bankruptcy court. A closing would occur following sale approval
by the court.
"The proposed sale to ISG would create, we believe, the most
value for Bethlehem's constituents and enable our plants to
continue to serve their customers without interruption. If the
board approves the terms of the proposed sale at its next
meeting late this week, we will then be prepared to move forward
with the various steps needed to transfer these assets to ISG
ownership and management," Mr. Miller said.
The sale of Bethlehem's assets to ISG will create the largest
steel company in North America with shipment capability of 16
million tons. "Completion of this sale will represent the most
significant consolidation action thus far in the domestic steel
industry. This dramatic turnaround in the prospects for the
industry has been made possible by the innovative new labor
agreement with the USWA, which will apply to Bethlehem's
facilities, and by President Bush's courageous steel trade
program initiated last spring," Mr. Miller concluded.
Bethlehem Steel Corp.'s 10.375% bonds due 2003 (BS03USR1) are
trading at about 3 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=BS03USR1for
real-time bond pricing.
BORDEN CHEMICALS: Delaware Court Confirms Plan of Liquidation
-------------------------------------------------------------
Borden Chemicals and Plastics Operating Limited Partnership said
that the U.S. Bankruptcy Court for the District of Delaware has
confirmed the Third Amended Joint Plan of Liquidation for BCP
and its general partner, BCP Management Inc. Judge Peter Walsh
entered the order Wednesday.
The court hearing was held to assure that all requirements for a
plan of liquidation had been met under the Bankruptcy Code,
including acceptance of the plan by the requisite creditors. The
plan was accepted by:
-- 92.05% in number and 97.65% in amount of the general
unsecured claims against BCP (Class C-4 Claims);
-- 94.2% in number and 95.14% in amount of the convenience
claims against BCP (Class C-7 Claims);
-- 93.06% in number and 99.69% in amount of general
unsecured claims against BCPM (CC-4 Claims).
The only classes entitled to vote that did not vote to accept
the plan were Classes C-2 (Other Secured Claims against BCP) and
C-10 (Senior Note claims). In confirming the plan of
liquidation, the court determined that the plan was in the best
interests of those creditors despite their non-acceptance of the
plan.
With the court's action, the assets of BCP and BCPM will be
reduced to cash and distributed to their respective claimants,
according to priorities dictated by the U.S. Bankruptcy Code,
through separate liquidating entities. Commonly held units of
Borden Chemical and Plastics Limited Partnership, the limited
partner of BCP, as well as the general partner interest of BCPM,
will be extinguished without any distribution to holders of
those interests. BCP expects the plan to be consummated during
the first quarter of 2003.
Some BCP assets were sold during the Chapter 11 proceedings.
During 2002, BCP completed the sale of its polyvinyl chloride
facilities in Addis, La., Illiopolis, Ill., and Geismar, La.,
to, respectively, Shintech Louisiana, Formosa Plastics Corp.,
and Geismar Vinyls Corporation, an affiliate of The Westlake
Group. Various other BCP assets, including real property,
emissions credits, equity interests, equipment and other
personal property, intangible rights and certain other property,
have either been sold to other parties or will be pursued as
sales by the liquidating trust.
Remaining BCP pre- and post-petition liabilities total $272
million as of December 31, 2002. Under the confirmed plan, the
estimated recoveries of BCP creditors are as follows:
-- Secured claims and unsecured priority claims are to
receive 100% recoveries in cash.
-- Convenience claims are to receive recoveries of 0.1% to
100% of the face value of their claims in pro rata
shares of available cash and through participation in
the BCP liquidating entity.
-- General unsecured claims, including claims related to
BCP's 9.5% Senior Notes ($200 million principal amount),
are to receive recoveries of 0.1% to 2.9% of the face
value of their claims in pro rata shares of available
cash from the BCP liquidating entity.
Under the confirmed plan, unsecured BCPM priority claims are to
receive 100% recoveries. Recoveries for general unsecured claims
against BCPM cannot be estimated at this time; however, they are
expected to be more than minimal. Holders of the BCP Senior
Notes have no recourse to BCPM because they contractually waived
and released their rights to recourse under the 1995 Indenture
agreement.
BCP and its subsidiary, BCP Finance Corporation, filed voluntary
petitions for protection under Chapter 11 of the U.S. Bankruptcy
Code in the United States Bankruptcy Court for the District of
Delaware on April 3, 2001. BCPM, the general partner of BCP,
filed for bankruptcy on March 22, 2002. A separate and distinct
entity, Borden Chemical, Inc., is not part of the bankruptcy.
BUFFETS: S&P Keeps Watch on Ratings over Weak Operating Results
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit rating on restaurant company Buffets Inc., on CreditWatch
with negative implications.
Eagan, Minnesota-based Buffets had about $444 million of debt
outstanding as of Dec. 18, 2002.
"The CreditWatch listing not only reflects the company's weak
operating performance, but performance that is substantially
weaker than we anticipated," said Standard & Poor's credit
analyst Robert Lichtenstein. "Furthermore, we do not expect that
the company will be able to reverse its weak operating
performance in the near term."
As a result of declining same-store sales, operating margins
dropped to 13.5% in the first half of fiscal 2003 from 16% the
year before. Operating performance has been negatively affected
by a weak economy and an intensely competitive restaurant
environment.
The company's poor operating performance has resulted in
weakened credit measures, with EBITDA coverage of interest of
about 2x for the 12 months ended Dec. 18, 2002, down from about
2.5x in the prior year. Standard & Poor's had expected credit
measures to improve incrementally over time.
Standard & Poor's expects to meet with management to review its
plan for improving operations.
CANWEST GLOBAL: Names Jim Orban Gen. Manager of Ottawa Citizen
--------------------------------------------------------------
Bob Calvert, CanWest Global Communications Corp.'s Senior Vice
President Operations, announced the appointment of Jim Orban,
General Manager of the Ottawa Citizen effective immediately. Mr.
Orban takes over from Gordon Fisher who has been acting as
interim publisher of the newspaper since June of 2002.
Mr. Orban, who has lived in Ottawa since the mid-1960s, holds a
Master of Business Administration degree from the University of
Ottawa. He started his newspaper career at the Ottawa Journal in
1972 and joined the Ottawa Citizen in 1975. Since 1976 he has
held various sales management positions. He worked at the
Edmonton Journal (1991-94) as Director of Advertising sales. Jim
returned to the Citizen in 1994, and was most recently Vice
President, Sales and Marketing responsible for advertising
sales, promotional activities, community relations, marketing
and research.
As General Manager, Mr. Orban will be responsible for all the
day-to-day business and editorial operations of the Citizen. The
Ottawa Citizen is the leading daily newspaper in the nation's
capital with daily paid circulation of nearly 140,000. The
Citizen is one of eleven metropolitan daily newspapers owned and
operated by CanWest Publications Inc.
CanWest Global Communications Corp., (NYSE: CWG; TSE: CGS.S and
CGS.A) -- http://www.canwestglobal.com-- is an international
media company. CanWest, now Canada's largest publisher of daily
newspapers, owns, operates and/or holds substantial interests in
newspapers, conventional television, out-of-home advertising,
specialty cable channels and radio networks in Canada, New
Zealand, Australia, Ireland and the United Kingdom. The
Company's program production and distribution division and
interactive media division operate in several countries
throughout the world.
* * *
As previously reported, Standard & Poor's lowered its long-term
corporate credit and senior secured debt ratings on
multiplatform media company CanWest Media Inc., to 'B+' from
'BB-'. At the same time, the ratings on the company's senior
subordinated notes were lowered to 'B-' from 'B'. The outlook is
now stable.
The downgrade reflects CanWest Media's continued relatively weak
financial profile, which was not in line with the 'BB' rating
category.
CASCADES INC: S&P Ratchets Sr. Unsecured Debt Rating Up a Notch
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on Cascades
Inc.'s US$450 million senior unsecured notes to 'BB+' from 'BB'.
At the same time, the 'BB+' long-term corporate credit rating
and 'BBB-' senior secured debt rating on the diversified paper
and packaging producer were affirmed. The outlook is stable.
The rating change stems from the redemption of the US$125
million 8.375% senior notes outstanding of Cascades' operating
subsidiary, Cascades Boxboard Group Inc. This redemption will be
financed by the senior unsecured notes offering, which was
increased to US$450 million from the proposed US$325 million.
"The transaction eliminates the structural subordination of the
notes at the parent level, and substantially reduces the amount
of priority debt that would rank ahead of senior unsecured
creditors in the event of default," said Standard & Poor's
credit analyst Clement Ma.
The ratings on Kingsey Falls, Quebec-based Cascades reflect its
good product diversity in paper, packaging, and tissue; its
leading market positions across several geographic and product
markets; and its relatively stable earnings and cash flow
generation through the industry cycle. These strengths are
offset by the company's use of debt to support an aggressive
growth strategy.
Cascades' diverse revenue base historically has mitigated the
cyclical volatility in earnings experienced by many of its
peers. The company operates in several markets including
boxboard, containerboard and corrugated products, specialty
packaging products, fine papers, and tissue. Cascades continues
to grow its business in packaging and tissue, with substantial
capital expansion and acquisitions completed, the most
recent being the purchase of two tissue mills from American
Tissue Inc. in July 2002.
The company's stable earnings and free cash generation, due to
its strong product diversity and exposure to less cyclical
commodity markets, should enable it to pursue a disciplined
acquisition strategy without substantially affecting credit
measures.
CCC GLOBALCOM: Ex-CEO Contributes Personally-Owned 5-Mil. Shares
----------------------------------------------------------------
CCC GlobalCom Corporation (OTCBB:CCGC), an emerging provider of
high-value telecommunications solutions, announced that
Z. Hakim, former CEO of CCC GlobalCom and currently chairman of
the board of the company, will contribute to the treasury of the
company 5,000,000 shares of common stock he currently owns to
restructure the equity of the company.
Paul E. Licata, chief executive officer of CCC GlobalCom
Corporation, stated, "This is an important move in restructuring
the company's equity. We feel that this is a positive step and
along with our recent debt restructure should help as we seek
additional equity capital. This restructuring should allow us to
go forward with our business plan designed to provide
significant growth and increased revenue. The company will
continue its focus on customer growth, reducing carrier cost
along with general and administrative expenses. We believe the
focus on these fundamentals will position the company for long-
term growth and increased market share."
CCC GlobalCom Corporation is an Integrated Communications
Provider (ICP) headquartered in Houston. CCC GlobalCom
Corporation offers a full range of communications services to
commercial and residential customers while providing a single
point of contact through bundled billing services. CCC GlobalCom
Corporation provides local, long distance, high-speed data,
Internet, paging and other enhanced communications services in
the United States. In addition, CCC GlobalCom Corporation has
franchise operations in Colombia - South America.
CCC GlobalCom Corporation -- whose Sept. 30, 2002 balance sheet
shows a working capital deficit of about $31 million, and a
total shareholders' equity deficit of about $27 million -- is
actively seeking opportunities to acquire existing
telecommunication service providers, customer bases and major
telecommunication switching equipment to be deployed in its
target markets.
For additional information on CCC GlobalCom Corporation, visit
http://www.cccglobalcom.com
CONSECO FINANCE: Honoring Up to $70MM of Critical Vendor Claims
---------------------------------------------------------------
Conseco Finance Corporation and its debtor-affiliates seek the
Court's authority to pay prepetition claims of critical vendors
and service providers. Anne Marrs Huber, Esq., at Kirkland &
Ellis, relates that the CFC Debtors cannot operate without the
continued support of their vendors. The vendors provide a
variety of essential services and have an irreplaceable
institutional knowledge of the CFC Debtors' complex financial
structure and servicing role.
The CFC Debtors are in the process of compiling their Critical
Vendor List. They estimate that they will need $18,000,000 to
ensure the Vendors' support. This represents $4,000,000 of
known claims and $14,000,000 that have not yet been received for
processing. There is a time lag of three to four weeks from
when the services or goods are provided, invoices are produced
and mailed to the CFC Debtors, then processed in the CFC
Debtors' internal accounts payable department, then paid.
For example, the CFC Debtors pay lockbox accounts fees to
vendors who remove payments from lockboxes and automatically
process them from customers on loans serviced by the CFC
Debtors. The CFC Debtors also pay vendors to print customer
statements, help originate loans and rely on carriers like the
U.S. Post Office and FedEx to transmit documents to the relevant
parties.
The CFC Debtors also operate an integrated accounts payable
system where they act as a central processor of invoices and
payables on behalf of non-debtor subsidiaries. Payments are
logged directly or counted as an intercompany obligation. They
process about $3,000,000 to $8,000,000 per week in this
capacity.
Ms. Huber relates that the CFC Debtors deal with thousand of
vendors on a daily basis. Hence, any interruption in payment
flow would be devastating to the Debtors, third parties and
their subsidiaries. This does not include other investors that
are not debtors in these proceedings and do not have the same
protections afforded by the automatic stay. Therefore, it is
essential to pay Critical Vendor Claims to ensure that the
services and goods are supplied without interruption.
The CFC Debtors have established a cap that should allow them to
pay all Critical Vendor claims. They estimate the amount at
$70,000,000 and promise to file status reports as the Critical
Vendor list develops and claims are paid.
* * *
Accordingly, the Court permits the Debtors to pay the Critical
Vendors on an interim basis.
James H.M. Sprayregen, Esq., at Kirkland & Ellis, reports that
the CFC Debtors have been evaluating their Critical Vendor list
and have had discussions with Critical Vendors on the terms of
prepetition claims payments. As of January 7, 2003, the CFC
Debtors have not made any payments under the Cap. (Conseco
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
CONSECO INC: Gets Court Approval to Hire Milliman as Actuary
------------------------------------------------------------
Conseco Inc., and its debtor-affiliates are parent companies to
insurance firms. These insurance firms utilize the services of
actuaries and have employed Milliman USA to assist in the
valuation of the insurance companies. In fact, Milliman has
prepared an actuarial appraisal of Conseco's insurance company
subsidiaries as of June 30, 2002 -- a free copy of which is
available at no charge at:
ftp://ftp.creditorinfo.com/conseco/docs/ds_Milliman_Valuation_Report.pdf
Accordingly, the Holding Company Debtors sought and obtained
Judge Doyle's authority to employ Milliman as actuary.
Conseco President and Chief Executive Officer, William J. Shea,
relates that because the valuation of insurance companies
established the valuation of the Holding Company Debtors, the
actuarial services that Milliman provides benefits the Holding
Company Debtors. The services that Milliman prepared will be
incorporated into the Disclosure Statement.
Mr. Shea tells the Court that Milliman has an excellent
professional standing. To illustrate, Milliman:
(a) has a wealth of experience in providing actuarial
services;
(b) is a leading actuarial consulting firm for mergers and
acquisitions of life insurance companies;
(c) is the largest life insurance actuarial consulting firm
in the U.S.; and
(d) has expertise in the types of businesses marketed by the
insurance subsidiaries of Conseco Inc.
In connection with its services, the Holding Company Debtors
intend to compensate Milliman in accordance with its customary
hourly rates:
Principals $500 - 450
Senior Consultants 425 - 300
Other Consultants 275 - 175
Administration/Paraprofessionals 80
Bruce W. Winterhof, principal at Milliman USA, reports that,
under his supervision, the firm completed a review of its
internal computer databases to identify potential conflicting
relationships. Milliman identified 55 entities that are either
shareholders, bondholders or recent clients of the Debtors.
However, Milliman's assistance to these parties has been related
to actuarial services, keeping Milliman's involvement in these
cases uncompromised.
Mr. Winterhof discloses that Milliman has received unapplied
advance payments from the Holding Company Debtors totaling
$300,000. These funds will be used to compensate Milliman for
prepetition services and will be applied against postpetition
billings. Milliman is not owed any money for prepetition fees
and expenses. All prepetition invoices have been paid. (Conseco
Bankruptcy News, Issue No. 6; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
DebtTraders reports that Conseco Inc.'s 10.750% bonds due 2008
(CNC08USR1) are trading at about 13 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=CNC08USR1for
real-time bond pricing.
COVANTA ENERGY: Gets Nod to Enter into Prima Letter Agreement
-------------------------------------------------------------
Covanta Energy Corporation and its debtor-affiliates obtained
the Court authority allowing, but not requiring, Covanta Waste
To Energy, Inc., to enter into a Letter Agreement with Prima
S.r.l., and Italian company in which CWTE holds a 13% equity
interest.
As previously reported, the Trezzo Project is owned by Prima
S.r.l. TTR Tecno Trattamento Rifiuti S.r.l holds the remainder
of the equity in the Project. The Project, which involves the
construction and operation of an 18-megawatt, mass-burn, waste-
to-energy facility near the city of Trezzo sulll'Adda in the
Lombardy region of Italy, will be operated by Ambiente 2000
S.r.l., an Italian special purpose limited liability company
that is 40% owned by Debtor Covanta Waste to Energy of Italy,
Inc. The solid waste supply for the Project will come from
municipalities under long-term contracts. The electrical output
from the Project will be sold at governmentally established
preferential rates under a long-term purchase contract to
Italy's state-owned utility company, Gestore della Rete di
Trasmissione Nazionale S.p.A.
On February 9, 2001, Prima entered into a credit agreement with
financing banks in connection with the financing of the Project.
The Trezzo Credit Agreement provides for a limited recourse loan
with a principal amount of $87,000,000.
On the same date, Prima entered into another agreement with
CWTE, Covanta Energy Group (a non-debtor affiliate), Inc., and
San Paolo IMI, S.p.A., for itself and as agent on behalf of the
Financing Banks, requiring CWTE to make certain equity
contributions on receipt of a Contribution Notice from Prima.
To date, CWTE has made contributions totaling $5,000,000, with
$800,000 remaining to be contributed, together with other
amounts as may be agreed in accordance with the DIP Agreement
dated April 1, 2002. Italian law governs both the Trezzo Credit
Agreement and the Equity Contribution Agreement.
Under the terms of the Trezzo Credit Agreement, an Event of
Insolvency by a Relevant Person constitutes an Event of Default.
Relevant Person includes CWTE as a Sponsor of the Project and
CEG as guarantor of Ambiente's obligations under the Service
Agreement between Prima and Ambiente. Shortly after CWTE filed
for Chapter 11 protection, the Agent issued a Notice of Default,
citing the Chapter 11 filing as the basis of the alleged Event
of Default under the Trezzo Credit Agreement.
Immediately, the Debtors and the Agent engaged in extensive
discussions to resolve the alleged Event of Default, resulting
in a letter agreement. Without admitting to any wrongdoing or
liability, the Letter Agreement provides in pertinent part that
the Parties will amend the Equity Contribution Agreement as:
(a) CWTE's option to convert Subordinated Debt held by it
into Quota Capital pursuant to the terms of the Equity
Contribution Agreement will now be subject to the prior
written consent of the Agent until:
-- the confirmation of a plan of reorganization and the
emergence from bankruptcy of CWTE and its affiliates;
and
-- the confirmation by the Agent's legal counsel of the
termination of the Chapter 11 of OWTE and its
affiliates, with no negative outcome. The Banks
sought this concession out of concern that the
Project could fall under the control of a bankrupt
entity; and
(b) In consideration of the concession, the Banks agree to
waive the current Event of Default under the Trezzo
Credit Agreement that occurred on CWTE's filing for
Chapter 11 protection, as well as any Event of Default
arising under the Trezzo Credit Agreement in the event
that CEG files for Chapter 11 protection. (Covanta
Bankruptcy News, Issue No. 22; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
COVENTRY HEALTH: Reports Record Results for Fourth Quarter 2002
---------------------------------------------------------------
Coventry Health Care, Inc., (NYSE:CVH) reported operating
results for the quarter ended December 31, 2002. Operating
revenues totaled $946.3 million for the quarter, a 16.2%
increase over the fourth quarter of 2001. Net earnings were
$40.4 million, a 76.6% increase over net earnings for the fourth
quarter of 2001 and 97.1% on a per share basis. On a FAS 142
comparative basis, EPS increased 86.1% over the fourth quarter
of 2001. For the twelve months ended December 31, 2002, Coventry
had total revenues of $3.58 billion and net earnings of $145.6
million.
"By every measure, 2002 was an outstanding year for our
shareholders," said Allen F. Wise, president and chief executive
officer of Coventry. "In addition to our impressive EPS growth,
I am especially pleased about the balanced improvement we have
made in all aspects of our business, including new business
sales and customer service. We added two new health plans, New
Alliance and Mid-America, during 2002, and are off to a good
start in 2003 with the addition of PersonalCare on February 1.
While there are certainly challenges ahead, our continued focus
on the details and operational excellence positions Coventry
well for continued profitable growth."
Financial Highlights
-- 4th Quarter Operating Earnings Up 110%
-- 4th Quarter Operating Margin of 6.0%, Up 270 basis
points
-- 4th Quarter FAS 142 EPS Up 86.1%
-- 4th Quarter Annualized Return on Equity of 25.1% versus
13.5% in Q4 2001
-- Full Year Operating Earnings Up 120%
-- Full Year Operating Margin of 5.6%, Up 270 basis points
-- Full Year FAS 142 EPS Up 76.3%
-- Full Year Return on Equity of 21.8% versus 13.1% in
2001
Fourth Quarter Highlights:
-- Membership. As of December 31 2002, excluding network
rental members, Coventry had a total of 2.03 million members, an
increase of 194,190 members, or 10.5%, over the prior year and
an increase of 155,271 members, or 8.3%, over the prior quarter
due to organic growth of 36,952 members and the acquisition of
Mid-America Health Partners in Kansas City for 118,319 members.
For the year, Coventry had total organic growth of 51,126
members, or 2.8% - at the high end of the Company's previous
guidance.
-- Network Rental Membership. Coventry has not previously
reported membership figures for its network rental business
where Coventry rents its provider networks to various third
parties. Coventry acquired this line of business in its 1998
merger with Principal Health Care. Coventry will now report
these figures in conjunction with its recent acquisition of Mid-
America Health Partners and its significant network rental
business. As of December 31, 2002, Coventry had 787,551 network
rental members, including 127,954 from the Mid-America
acquisition. Total revenues related to the network rental
business were approximately $8.6 million in 2002.
-- Commercial Rate Increases. Coventry achieved commercial
rate increases exceeding 15.5% on fourth quarter renewals,
representing approximately 11% of commercial risk membership.
The Company expects commercial rate increases, net of benefit
buydowns, to be in the range of 13% to 15% in 2003.
-- Medical Loss Ratio (MLR). MLR was 83.0% for the quarter
including the impact of the Mid-America acquisition which closed
on December 1, 2002. Excluding the Mid-America results, MLR was
82.6%, a 320 basis point improvement over the prior year fourth
quarter. Commercial MLR of 82.5% was a 260 basis point
improvement over the prior year quarter and is the main driver
of overall MLR improvement.
-- Selling, General & Administrative Expenses. SG&A
expenses were 12.2% of operating revenues for the quarter, flat
to the prior quarter.
-- Balance Sheet. Cash and investments grew to $1.12
billion during the quarter, up $166.6 million from the prior
year-end. Premium Accounts Receivable of $71.0 million represent
6.9 days of sales, a 4% improvement over the prior year. Total
Days in Medical Claim Payables (DCP) were 59.5. Excluding the
impact of the Mid-America acquisition, DCP was 58.0, a decrease
of 1.9 days from the prior quarter. The decrease in DCP is due
to the timing of pharmacy invoice payments for 0.6 days, with
the remainder due to faster claims payment and reduced claim
inventory levels.
-- Cash Flow. Cash flow from operations for the fourth
quarter was $86.1 million as reported and $53.0 million when
adjusted for the timing of CMS payments for Medicare+Choice
beneficiaries compared to net income plus depreciation and
amortization of $45.2 million. Cash flow from operations for the
twelve months ended December 31, 2002 is $227.7 million versus
net income plus depreciation of $164.9 million.
-- Effect of Accounting Rule Changes. Effective January 1,
2002, the Company adopted FAS 142 which required companies to
cease amortization of goodwill. For the year ended December 31,
2001, goodwill amortization averaged approximately $1.9 million
per quarter.
-- Share Repurchase. During the fourth quarter, the Company
repurchased 1,180,300 shares under its existing share repurchase
program. The Company will continue to opportunistically
repurchase shares under its existing program, with outstanding
authority of 2.5 million shares.
Coventry Health Care is a managed health care company based in
Bethesda, Maryland operating health plans and insurance
companies under the names Coventry Health Care, Coventry Health
and Life, Carelink Health Plans, Group Health Plan,
HealthAmerica, HealthAssurance, HealthCare USA, PersonalCare,
Southern Health and WellPath. The Company provides a full range
of managed care products and services including HMO, PPO, POS,
Medicare+Choice, and Medicaid to 2.9 million members in a broad
cross section of employer and government-funded groups in 13
markets throughout the Midwest, Mid-Atlantic and Southeast
United States. More information is available on the Internet at
http://www.cvty.com
As reported in the Troubled Company Reporter yesterday, Standard
& Poor's affirmed its 'BB+' counterparty credit rating on
Coventry Health Care Inc., and revised the company's outlook to
positive reflecting its improved capital adequacy and very
strong profitability and operating cash flows.
At the same time, Standard & Poor's affirmed its 'BB+' debt
rating on Coventry's $175 million senior notes due 2012.
Standard & Poor's remains cautious about the company's
acquisition-based growth strategy and the potential for
aggressive competitor pricing in western and central
Pennsylvania, which is one of the company's core markets.
"The company's business position is expected to remain very
good," said Standard & Poor's credit analyst Joseph Marinucci.
"Excluding acquisitions, enrollment is expected to increase
moderately to between 2 million-2.1 million members in 2003."
CRITICAL PATH: Dec. 31 Balance Sheet Upside-Down by $8 Million
--------------------------------------------------------------
Critical Path, Inc. (Nasdaq:CPTH), a global leader in digital
communications software and services, announced financial
results for the fourth quarter and fiscal year ended
December 31, 2002.
Total net revenues for the quarter increased 14% to $21.8
million from the $19.2 million reported in the third quarter.
Cash operating expenses, excluding special charges, depreciation
and amortization, decreased 5% to $26.0 million from the $27.4
million reported in the third quarter.
Earnings before interest, taxes, depreciation, and amortization,
excluding special charges, amounted to a loss of $4.2 million
for the quarter, an improvement of $4.0 million compared to the
EBITDA loss, excluding special charges, of $8.2 million for the
third quarter of 2002.
Based on Generally Accepted Accounting Principals, net loss
attributable to common shares for the fourth quarter was $34.2
million, inclusive of a $5.3 million charge for revaluation of a
derivative instrument embedded in the preferred stock, compared
to a net loss of $29.6 million for the third quarter of 2002.
At December 31, 2002, the Company's balance sheet shows a total
shareholders' equity deficit of about $8 million.
"We're very pleased with our positive Q4 results and the
progress we've made," commented William McGlashan, Jr., chairman
and chief executive officer. "We believe we're starting 2003 on
a solid foundation to build a profitable business this year."
Total net revenues for fiscal year 2002 were $87.1 million,
compared with overall net revenues of $104.2 million and core
revenues of $82.2 million in 2001, which represents a 6%
increase in the ongoing business of Critical Path. Cash
operating expenses, excluding special charges, amortization and
depreciation, were $108.8 million, compared with $164.4 million
in 2001.
EBITDA, excluding special charges, for the year significantly
improved to a loss of $21.7 million, compared with a loss of
$60.2 million for the prior year.
GAAP net loss attributable to common shares for the year was
$131.8 million, compared with a net loss attributable to common
shares of $79.8 million for 2001, which includes a extraordinary
gain on the retirement of the Company's convertible subordinated
notes of $179.3 million.
Guidance
The Company expects that overall market conditions will remain
challenging, limiting its ability to forecast financial results.
For the first quarter of 2003, Critical Path expects to report
substantially flat revenues in the range of $20 million to $22
million. Resulting from the cost-reduction action taken early in
the first quarter, quarterly cash operating expenses are
expected to decrease to approximately $25 million to $26
million. The Company expects to reach the EBITDA break-even
point by the end of the second quarter of 2003 through continued
decline in expenses, in the range of 8% to 12%.
Critical Path, Inc., (Nasdaq: CPTH) is a global leader in
digital communications software and services. The company
provides messaging solutions -- from wireless, secure and
unified messaging to basic email and personal information
management -- as well as identity management solutions that
simplify user profile management and strengthen information
security. The standards-based Critical Path Communications
Platform, built to perform reliably at the scale of public
networks, delivers the industry's lowest total cost of ownership
for messaging solutions and lays a solid foundation for next-
generation communications services. Solutions are available on a
hosted or licensed basis. Critical Path's customers include more
than 700 enterprises, 190 carriers and service providers, eight
national postal authorities and 35 government agencies. Critical
Path is headquartered in San Francisco. More information can be
found at http://www.criticalpath.net
CRITICAL PATH: Paul Bartlett Named New Chief Financial Officer
--------------------------------------------------------------
Critical Path, Inc. (Nasdaq:CPTH), a global leader in digital
communications software and services, appointed Paul Bartlett as
executive vice president and chief financial officer, effective
February 13, 2003. He succeeds Laureen DeBuono, who has chosen
to step down as CFO, but will aid in the transition through
March.
"I would like to thank Laureen for her extraordinary work during
the Company's turnaround. She played an integral role in
restoring Critical Path to financial health, restructuring the
business, and building a solid finance team. With the
restructuring of the Company complete, Laureen has chosen to
move on to assist other companies in need of financial
restructuring," William McGlashan, Jr., chairman and chief
executive officer, said. "I am pleased to announce Paul's
appointment as CFO. He is a seasoned business executive with
public company experience and a track record of managing
companies during periods of tremendous growth."
Mr. Bartlett, 42, came to Critical Path with a background in
operations and financial management. He was formerly a director
and president of Hall Kinion and Associates, a staffing,
services and recruiting company, where, under his leadership,
revenue grew from $30 million annually as a private company to
$200 million annually as a public company. As a director, then
COO, of Quintus Corporation, he led the company's restructuring
and later sale. Earlier, he was a general partner at Sprout
Venture Capital Group, where he invested in late stage
technology companies. Prior to that, Bartlett spent five years
in several investment banks in their corporate finance
departments. He has an economics undergraduate degree from
Princeton University and an MBA from Stanford University.
DAIRY MART: Plan Confirmation Hearing Scheduled for February 26
---------------------------------------------------------------
On January 3, 2003, the U.S. Bankruptcy Court for the Southern
District of New York approved the Disclosure Statement prepared
by Dairy Mart Convenience Stores Inc., and its debtor-
affiliates, finding that it contains adequate information
explaining the Debtors' Plan to creditors.
A hearing to consider confirmation of the Debtors' Plan is
scheduled for February 26, 2003, at 10:00 a.m., before the
Honorable Arthur J. Gonzalez.
The Court also directs that creditors' ballots, indicating
whether they accept or reject the Plan, must be received by
February 21, 2003, in order to be counted.
Objections, if any, to confirmation of the Plan must be filed,
together with proof of service, with the Bankruptcy Court not
later than Feb. 17. Copies must also be served on:
a. Counsel for Dairy Mart
Milbank, Tweed, Hadley & McCloy LLP
Dennis F. Dunne, Esq.
1 Chase Manhattan Plaza
New York, NY 10005
b. Counsel for the Official Committee of Unsecured
Creditors
Akin Gump Strauss Hauer & Feld, LLP
Attn: Ira S. Dizengoff, Esq.
590 Madison Avenue
New York, NY 10022
c. the United States Trustee for the Southern District
of New York
Attn: Paul K. Schwartzberg, Esq.
33 Whitehall Street, 21st Floor
New York, NY 10004
Dairy Mart Convenience Stores, Inc., filed for chapter 11
protection on September 24, 2001, (Bankr. S.D.N.Y. Case No.
01-42400). Dennis F. Dunne, Esq., at Milbank, Tweed, Hadley &
McCloy LLP, represents the Debtors. When the Company filed for
protection from its creditors, it listed debts and assets of
over $100 million.
DELTA AIR LINES: January 2003 System Traffic Climbs 6.3%
--------------------------------------------------------
Delta Air Lines (NYSE: DAL) reported traffic results for the
month of January 2003. System traffic for January 2003
increased 6.3 percent from January 2002 on a capacity increase
of 2.1 percent. Delta's system load factor was 65.9 percent in
January 2003, up 2.6 points from the same period last year.
Domestic traffic in January 2003 increased 7.7 percent year over
year on a capacity increase of 2.4 percent. Domestic load
factor in January 2003 was 65.1 percent, up 3.1 points from the
same period a year ago. International traffic in January 2003
increased 1.6 percent year over year on a 0.8 percent increase
in capacity. International load factor was 68.7 percent, up 0.5
points from January 2002.
During January 2003, Delta operated its schedule at a 98.9
percent completion rate, compared to 97.2 percent in January
2002. Delta boarded 8,157,412 passengers during the month of
January 2003. Detailed traffic and capacity are attached.
Delta Air Lines' 10.375% bonds due 2022 are currently trading in
the market at about 69 cents-on-the-dollar.
DT INDUSTRIES: Violates Sr. Credit Facility Financial Covenants
---------------------------------------------------------------
DT Industries, Inc. (Nasdaq: DTII), a designer, manufacturer and
integrator of automated production systems used to assemble,
test or package industrial and consumer products, reported a net
loss of $5.4 million for the three months ended December 29,
2002 compared with a net loss of $905,000 in the corresponding
prior year period.
Net sales decreased $26.4 million to $62.3 million for the three
months ended December 29, 2002 from the corresponding prior year
period. The Company incurred an operating loss of $6.1 million
for the three months ended December 29, 2002, compared to
operating income of $3.2 million realized in the same period
last year. The operating loss in the second quarter of fiscal
2003 includes a $1.7 million restructuring charge following the
announcement on December 13, 2002 that the Company would be
closing its Erie, Pennsylvania facility and moving the
operations to its Buffalo Grove, Illinois facility as part of
the integration of its Precision Assembly segment. During the
second quarter of fiscal 2002, the Company recorded a
restructuring charge of $1.5 million related to the
consolidation of two Packaging Segment locations.
As a result of the second quarter financial results, the Company
did not meet certain financial covenants under its senior credit
facility, including the required minimum trailing 12 months
EBITDA covenant in October, November and December 2002. The
Company has been operating under a temporary waiver and expects
to finalize an amendment to the senior credit facility which
will provide a permanent waiver of these covenant defaults and
establish new covenant levels for the remainder of the term of
the facility. The Company anticipates that this amendment will
also reduce availability under the revolving credit line to
approximately $60.0 million from $66.0 million and increase
borrowing rates. The Company expects that the $60.0 million
revolving credit line provides sufficient funds to operate the
business and meet capital resources needs, as currently
anticipated.
Second quarter fiscal 2003 order inflow was $58.3 million, down
from $88.3 million in the prior year quarter and up slightly
from the $55.2 million in the first quarter. Backlog at the end
of the second quarter was $124.5 million, compared with $151.4
million a year earlier and $142.8 million at the end of fiscal
year 2002.
Stephen J. Perkins, President and CEO, said, "The continued slow
order pace for DTI's products resulted in a 12% decline in
orders for the first half of 2003 compared to last year's first
half." While proposal activity continues at reasonable levels,
the Company cannot project when ordering will return to levels
experienced prior to the onset of the current capital spending
recession. Due to its current fixed manufacturing costs, the
Company does not expect to achieve the production efficiencies
necessary to attain acceptable levels of gross profit margins
until the Company's backlog, presently $124.5 million, returns
to a sustainable level of at least $150 million.
For the six months ended December 29, 2002, the Company incurred
a net loss of $6.3 million on net sales of $131.7 million
compared to a net loss of $296,000 on net sales of $189.1
million during the comparable six months of the prior year.
The lower level of revenues contributed to a decline in the
Company's gross profit percentage realized on revenues from
20.4% in the first half of fiscal 2002 to 17.5% in the first
half of the current year. Approximately 1.1% of this decline was
a result of additional costs incurred on contracts which were
transferred from the Company's closed Rochester, New York
operation to other locations during the third quarter of fiscal
2002. The Company does not expect to incur this type of cost in
future periods.
As previously announced, the Company's consolidated financial
results have been restated for the first three quarters of
fiscal 2002 and fiscal years 2001, 2000 and 1999 as a result of
accounting adjustments made at its Erie, Pennsylvania plant,
which was part of the Precision Assembly Segment. For a full
discussion of the adjustments, please see the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2002 and
Current Report on Form 8-K/A dated December 27, 2002.
Segment Highlights
Financial results across all segments reflect the decrease in
volume and underabsorption of manufacturing overheads.
The Material Processing Segment experienced a decrease in sales
of $9.3 million, or 30%, to $22.0 million for the second quarter
of fiscal 2003 while the operating income on those sales
decreased to $917,000 compared to $3.6 million in the same
period last year. Backlog at the end of the second quarter of
fiscal 2003 was $50.9 million compared to $60.4 million at the
end of the second quarter last year and $54.7 million at the end
of fiscal year 2002. The Detroit Tool & Engineering division
within this segment incurred $900,000 of additional costs during
the second quarter of fiscal 2003 associated with the process
and equipment development for the initial line of Earthshell's
biodegradable foam laminate packaging equipment. DTE expects to
deliver the first machine during the third quarter of the
current fiscal year.
The Assembly and Test Segment, which primarily serves the auto,
truck and heavy equipment industries, saw its sales for the
second quarter of fiscal 2003 decline 39% to $20.0 million from
$33.0 million in the same period a year earlier. The segment
incurred an operating loss in the second quarter of fiscal 2003
of $2.1 million compared to an operating loss of $1.1 million in
the year earlier period. Backlog at the end of the second
quarter of fiscal 2003 was $46.9 million compared to $55.3
million at the end of the second quarter last year and $48.2
million at the end of fiscal year 2002.
The Precision Assembly Segment sales were $9.7 million for the
second quarter of fiscal 2003 compared to $15.2 million in the
same period last year. The segment incurred an operating loss of
$2.8 million compared to income of $1.6 million in last year's
quarter. The operating loss in the second quarter of fiscal 2003
included the $1.7 million restructuring charge resulting from
the decision to shut down the Erie, Pennsylvania facility.
Backlog at the end of the second quarter of fiscal 2003 stood at
$13.1 million compared to $25.5 million at the end of the second
quarter last year and $24.8 million at the end of fiscal year
2002.
The Packaging Segment sales for the second quarter of fiscal
2003 were $10.5 million compared to last year's second quarter
level of $9.0 million. The segment incurred an operating loss of
$23,000 compared to an operating loss of $736,000 recorded in
the year earlier period. During the second quarter of fiscal
2003, the Packaging Segment incurred $500,000 of costs to
complete the relocation and personnel training required to
transition the Kalish product line to Leominster, MA. The
Packaging Segment expects costs related to the relocation to be
nominal in the remainder of the current fiscal year as these
relocation activities are near completion. Backlog in the
Company's Packaging Segment stands at $13.6 million at the end
of the second quarter of fiscal 2003 compared to $16.7 million
in the same quarter last year and $15.0 million at the end of
fiscal year 2002.
Sale of Assets
In January 2003, the Company completed the sale of its former DT
Packaging Systems, Leominster, Massachusetts facility,
relocating that business to a new leased facility in Leominster.
Net proceeds of $1.3 million, which approximated the net book
value of the assets sold, were used to pay down the senior
credit facility.
The Company has entered into an agreement to sell its Erie
manufacturing facility. Net proceeds will be used to pay down
the senior credit facility. The transaction is expected to be
closed during the third quarter of the current fiscal year.
Outlook for Remainder of Fiscal Year 2003
Perkins concluded, "The weak economy continues to make
forecasting extremely challenging and our operating results
reflect the depressed level of capital equipment spending by our
customers as well as the effects of pricing pressures. We
continue to actively bid numerous projects across all of our
business segments but customers are still postponing buying
decisions.
"DTI will continue to focus on its continuous improvement/lean
thinking initiative to further reduce costs to reduce breakeven
levels, the completion of our previously announced consolidation
plans, and the development of new applications such as the
previously announced success in obtaining multiple orders for
Earthshell packaging equipment. We expect these efforts to
position DTI for a return to profitability once our customers'
capital spending levels return to normal."
The Company is discussing a proposed amendment with its senior
lenders to waive certain covenant defaults existing at
December 29, 2002 and to establish new covenants for the
remainder of the term of the facility. If the Company is not
able to satisfactorily complete the amendment prior to filing
its Quarterly Report on Form 10-Q, $47,967 of this debt will be
reclassified as current at December 29, 2002.
DOWNEY REGIONAL: S&P Downgrades Revenue Bonds Rating to BB+
-----------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating to 'BB+'
from 'BBB+' on the California Health Facilities Financing
Authority's outstanding revenue bonds issued for Downey Regional
Medical Center, based upon significant ongoing operational
losses. The outlook on the bonds is negative.
"Downey's operating losses have now continued for five years and
resulted in rate covenant violations in 2002 and 2002," said
Standard & Poor's credit analyst Lisa Zuckerman. "A lower rating
is precluded as Downey's available liquidity, while
substantially lower than in prior years, still exceeds
outstanding debt." Downey's losses stem largely from troubles
surrounding an integrated delivery system established with a
group of physicians practicing at the medical center; while the
arrangement was officially terminated in fiscal 1998, it
continued under a financially inadequate relationship through
the first half of fiscal 2002.
The lowered rating affects about $49 million in revenue debt
outstanding. The medical center has no concrete future debt
plans, although it estimates $50 million - $60 million will be
necessary to construct a replacement bed tower that complies
with seismic regulations.
Downey Regional Medical Center, formerly known as Downey
Community Hospital, is an acute care hospital in Downey, Calif.,
that serves an approximate population of one million and is a
major employer in the area.
DUN & BRADSTREET: Fourth Quarter 2002 Results Show Improvement
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Dun & Bradstreet Corporation (NYSE: DNB), the leading provider
of global business information and technology solutions,
reported diluted earnings per share for the quarter ending
December 31, 2002, of 84 cents, up 25 percent from 67 cents in
the prior year quarter.
For the year, D&B had diluted earnings per share of $2.15 before
restructuring charges totaling 28 cents. After restructuring
charges, 2002 EPS was $1.87, up 2 percent from $1.84 in the
prior year. Restructuring charges and one-time items,
collectively referred to as "net charges," are further described
below. (See Schedule 1 for results as reported after net
charges, Schedule 2 for results before net charges, and Schedule
3 for details of net charges.)
D&B's Fourth Quarter 2002 Results
Core revenue (defined as reported revenue less revenue from
divested businesses, as described on Schedule 3) was $356.1
million for the quarter, up 4 percent from the year-ago period
before the effect of foreign exchange and up 6 percent after the
effect of foreign exchange. This core revenue growth reflects 1
percent growth in Risk Management Solutions, 5 percent growth in
Sales & Marketing Solutions, and 35 percent growth in Supply
Management Solutions. The Company's acquisition of Data House in
the third quarter of 2002 contributed approximately one point of
revenue growth in the fourth quarter.
Total revenue in the fourth quarter of 2002 was up 3 percent
before the effect of foreign exchange and up 6 percent after the
effect of foreign exchange.
D&B continued to make progress in migrating its product delivery
to the Web, a more efficient delivery channel. In the fourth
quarter, D&B delivered 65 percent of its core revenue over the
Web, up from 59 percent in the 2002 third quarter, and from 33
percent in the fourth quarter of 2001.
Operating income for the fourth quarter was $107.3 million, up
13 percent from the year-ago period before 2001 net charges, and
up 31 percent as reported after 2001 net charges. The growth in
operating income reflects the benefits of the Company's revenue
growth and ongoing financial flexibility initiatives.
Non-operating income (expense) - net for the fourth quarter was
$1.9 million of expense, including a gain of $2.4 million
related to the sale of the Company's Korean operations. For the
prior year quarter, Non-operating income - net was $9.0 million
of income, including gains totaling $13.3 million related to
sales of the Company's businesses in Australia, New Zealand and
South Africa.
Net income for the quarter was $64.3 million, up 20 percent from
the year-ago period before 2001 net charges and up 19 percent
after 2001 net charges.
"We feel good about our progress in implementing our Blueprint
for Growth strategy," said Allan Z. Loren, chairman and chief
executive officer of D&B. "Despite challenging economic
conditions in the United States and Europe, each of our customer
solution sets contributed to our growth in the fourth quarter
and for the year as a whole. As we expected, our investments to
drive revenue growth have begun to gain traction."
"In addition, our profitability improved, driven by revenue
growth and our financial flexibility initiatives," Loren
continued. "Our international business had its most profitable
performance in over 5 years. We are clearly creating value for
our shareholders as we transform D&B into a growth company with
an important presence on the Web. With our progress to-date and
our ability to invest in our business, we are confident that we
will see continued growth in 2003 and beyond."
Fourth-Quarter Segment Results
North America
North America's fourth-quarter core revenue was $245 million, up
7 percent from the prior year period. This growth reflects
strength in all customer solution sets, with Risk Management
Solutions up 3 percent, Sales & Marketing Solutions up 10
percent, and Supply Management Solutions up 27 percent.
North America's operating income for the quarter was $99.3
million, up 13 percent from $87.8 million in the prior year
quarter, reflecting improved profitability as a result of the
Company's revenue growth and financial flexibility initiatives.
Europe
Europe's fourth-quarter core revenue was $102.4 million, down 4
percent over the 2001 fourth quarter, as European market
conditions continued to deteriorate. Risk Management Solutions
was down 2 percent and Sales & Marketing Solutions was down 18
percent, while Supply Management Solutions was up 84 percent.
These results include $5.3 million of Risk Management Solutions
revenue contributed in the 2002 quarter by the acquisition of
Data House. Growth rates are all before the effect of foreign
exchange.
Europe's fourth-quarter core revenue was up 5 percent after the
effect of foreign exchange.
Europe's operating income for the quarter was $24.1 million, up
17 percent over the prior year quarter despite the revenue
decline, reflecting the lower cost base associated with the
Company's financial flexibility initiatives.
Asia Pacific/Latin America
APLA's fourth-quarter core revenue was $8.7 million, in line
with the prior year quarter. This result reflects an 18 percent
increase in Sales & Marketing Solutions partially offset by a 5
percent decline in Risk Management Solutions. Growth rates are
before the effect of foreign exchange.
APLA's fourth-quarter core revenue was down 6 percent after the
effect of foreign exchange.
APLA's operating income for the quarter was $1.5 million,
compared with an operating loss of $0.3 million in the prior
year quarter.
D&B's Full-Year Results
The Company reported 2002 diluted earnings per share of $2.15,
up 26 percent from $1.71 for the comparable period a year ago,
before net charges. As reported after net charges, diluted
earnings per share for 2002 was $1.87, up 2 percent compared
with $1.84 a year ago.
Core revenue for 2002 was $1,275.6 million, up 3 percent from
2001 before the effect of foreign exchange and up 4 percent
after the effect of foreign exchange.
The Company's full-year core revenue growth was in line with its
previous guidance. The Company exceeded its previous 22 to 24
percent guidance for EPS growth.
Core revenue growth reflects one percent growth in Risk
Management Solutions, 7 percent growth in Sales & Marketing
Solutions, and 24 percent growth in Supply Management Solutions.
On a comparable year-on-year basis, the Company's acquisitions
of iMarket and Harris InfoSource in 2001, and Data House in the
third quarter of 2002, together contributed approximately 1.5
points of core revenue growth for the year.
Total revenue was down 3 percent in 2002 before the effect of
foreign exchange and down 2 percent after the effect of foreign
exchange.
Operating income for 2002 was $286.8 million, up 11 percent over
the prior year before net charges. As reported after net
charges, operating income was $255.9 million, up 15 percent over
the prior year period. Operating income results reflect the
benefits of the Company's revenue growth and ongoing financial
flexibility initiatives.
Non-operating income - net for 2002 was $16.7 million of
expense, including the $2.4 million fourth-quarter gain related
to the sale of the company's Korean operations, a $2.6 million
third-quarter gain on the sale of a portion of the Company's
investment in its Singapore joint venture, and a $2.9 million
second quarter charge to write off the Company's investment in
its joint venture with AIG (Avantrust). Non-operating income -
net for 2001 was $30.0 million of income, including one-time
items totaling $50.2 million of income. These one-time items,
which primarily represent gains on the 2001 sales of the
Company's Receivables Management Solutions business and its
Australia, New Zealand and South Africa businesses, are outlined
on Schedule 3.
Net income for 2002 was $165.0 million, up 18 percent from the
2001 period, before net charges. As reported, net income was
$143.4 million, down 4 percent for the same period after net
charges.
Cash provided by operating activities for 2002 was $213.1
million, compared to $217.1 million for 2001. Excluding $35.4
million received in 2001 as a one-time, upfront payment for a
multi-year data contract in connection with the sale of the
Receivables Management business, cash from operating activities
was up 17 percent over 2001.
Full Year Segment Results
North America
For 2002, North America's core revenue was $912.1 million, up 5
percent from the prior year period. This growth reflects growth
in all customer solution sets, with Risk Management Solutions up
1 percent, Sales & Marketing Solutions up 13 percent, and Supply
Management Solutions up 9 percent. On a comparable year-on-year
basis, the acquisitions of iMarket and Harris InfoSource in 2001
contributed one point of core revenue growth in the North
America segment.
North America's operating income for 2002 was $313.1 million, up
6 percent from $295.8 million in the prior year period. North
America's 2001 operating income includes the results of the
Company's Receivable Management Services business, which was
sold in the third quarter of 2001. Excluding this income, North
America's 2002 operating income would have been up 7 percent
compared to the prior year period.
Europe
For 2002, Europe's core revenue was $330.6 million, down 2
percent from the prior year period before the effect of foreign
exchange, reflecting ongoing weak market conditions. Risk
Management Solutions was down 1 percent and Sales & Marketing
Solutions was down 13 percent, while Supply Management Solutions
more than doubled. These results include $7.1 million of Risk
Management Solutions revenue in 2002 from the acquisition of
Data House, which contributed 2 points of core revenue growth in
the Europe segment. Growth rates are all before the effect of
foreign exchange.
After the effect of foreign exchange, 2002 core revenue from
Europe was up 2 percent compared with the prior year period. The
acquisition of Data House contributed 2 points of core revenue
growth in the Europe segment after the effect of foreign
exchange.
Europe's operating income was $38.8 million for the period, up
66 percent compared to operating income of $23.4 million in the
prior year period despite the revenue decline, reflecting the
lower cost base associated with the Company's financial
flexibility initiatives.
APLA
2002 core revenue from APLA was $32.9 million, a 7 percent
increase over the prior year period. This result reflects a 7
percent increase in Risk Management Solutions and a 7 percent
increase in Sales & Marketing Solutions. These growth rates are
before the effect of foreign exchange.
After the effect of foreign exchange, full year core revenue
from APLA was up 3 percent compared with the prior year period.
APLA's operating income was $4.7 million for the period compared
to an operating loss of $0.1 million in the prior year period.
Restructuring Charges and One-Time Items
In the 2002 second quarter, the Company recorded a $30.9 million
pre-tax ($21.6 million after-tax or 28 cents per diluted share)
restructuring charge as Corporate and Other expense, primarily
for severance and the write-off of assets resulting from its
financial flexibility initiatives. The actions associated with
that charge are expected to capture approximately $80 million in
funds that can be invested to create value for shareholders in
2003, bringing to $280 million the total amount of funds created
by the Company's financial flexibility initiatives that can be
reallocated for the year.
Details of 2001 net charges, totaling $0.6 million of pre-tax
income ($0.3 million after-tax with no impact on earnings per
share) in the fourth quarter and $14.7 million of pre-tax income
($10.4 million after-tax or $0.13 per diluted share) for the
full year are outlined on Schedule 3.
Non-Cash Restatement of Prior Period Financial Results
Results reported in this press release reflect the non-cash
restatement of the Company's prior period results to correct
timing errors in the recognition of some of the revenue
associated with 14 of the Company's 200+ products. The
restatement is expected to reduce the total amount of revenue
recognized during the period January 1, 1997 through September
30, 2002, by $32.3 million, or 0.4 percent of the revenue
reported during that 5-3/4 year period. It is expected to reduce
the total amount of net income for the same period by $21.5
million, or 1.9 percent of the net income reported during that
period.
The Company conducted a review of its revenue recognition from
1997 through 2002. During this review, it identified that some
revenue associated with 14 products had been recognized at the
time of billing, instead of being deferred and recognized over
the customer contract period (generally 12 months). The effect
of the errors over this entire period has been quantified, and
the impacts on 2001 and 2002 have been finalized. The Company
has estimated the inter-period impact of the errors on 1997
through 2000, and expects to finalize these amounts within four
weeks. The Company will shortly thereafter restate and amend its
financial statements for the years 1997 through 2001, and for
the first three quarters of 2002, as previously filed with the
Securities and Exchange Commission.
The correction of these errors affects the timing of revenue
recognition, but not the total amount of revenue recognized over
the customer contract period, and has no impact on the timing or
amount of the Company's cash flow.
"We have taken this restatement seriously," said Loren, "and
conducted our review with the assistance of our external
auditors and other outside advisors. As a result of this
restatement, we have strengthened our processes to prevent such
errors from occurring in the future," Loren said.
Outlook
"Our Blueprint strategy continues to deliver solid results,"
said Loren. "We are confident that with the superb leadership of
our team members and the benefits of our investments for growth,
we will continue to see top line growth that will enable us to
achieve our aspiration."
The Company's aspiration is to become a growth company with an
important presence on the Web. It has described a growth company
as one with revenue growth of 7 to 9 percent before the effect
of foreign exchange and earnings per share growth in the mid-to-
upper teens, on a consistent basis. A company with an important
presence on the Web is one that delivers approximately 80
percent of its revenues over the internet.
For 2003, assuming the current economic conditions in the United
States and Europe continue, the Company expects core revenue
growth of 4 to 5 percent before the effect of foreign exchange.
This growth rate assumes that D&B completes its recently-
announced acquisition of Hoover's Inc. during the first quarter
of 2003. Hoover's is expected to contribute approximately 1.5
points of full-year core revenue growth to D&B's 2003 results.
The Company previously announced 2003 net charges (a $16 million
pre-tax restructuring charge and a $13 million pre-tax loss on
the monetization of real estate, both related to financial
flexibility initiatives, and a $7 million pre-tax insurance
recovery) totaling $0.25 per share in a January 13, 2003 news
release.
The Company expects full-year diluted earnings per share between
$2.50 and $2.54 before net charges, representing between 16 and
18 percent EPS growth. It expects to report diluted earnings per
share between $2.25 and $2.29, representing between 20 and 22
percent EPS growth, after net charges. This 2003 guidance
includes the previously-announced $0.08 per share dilutive
impact of the Hoover's acquisition.
Further with respect to guidance for full year 2003, the Company
expects that:
-- It will deliver 70+ percent of its revenue over the Web
by the end of the year, compared with 65 percent at the
end of 2002;
-- Capital expenditures and capitalized software costs will
be between $40 and $50 million, compared with $53.5
million in 2002;
-- Depreciation and amortization expense will be between $75
and $80 million, compared with $84.2 million in 2002; and
-- Its effective tax rate will be between 37 and 38 percent.
D&B (NYSE: DNB) provides the information, tools and expertise to
help customers Decide with Confidence. D&B enables customers
quick access to objective, global information whenever and
wherever they need it. Customers use D&B Risk Management
Solutions to manage credit exposure, D&B Sales & Marketing
Solutions to find profitable customers and D&B Supply Management
Solutions to manage suppliers efficiently. D&B's E-Business
Solutions are also used to provide Web-based access to trusted
business information for current customers as well as new small
business and other non-traditional customers. Over 90 percent of
the Business Week Global 1000 rely on D&B as a trusted partner
to make confident business decisions. For more information,
please visit http://www.dnb.com
As previously reported, The Dun & Bradstreet Corporation's
September 30, 2002 balance sheet shows a working capital deficit
of about $145 million, and a total shareholders' equity deficit
of about $34 million.
ENVIROGEN INC: Fails to Satisfy Nasdaq Minimum Requirements
-----------------------------------------------------------
Envirogen, Inc., (Nasdaq: ENVG) announced that the Nasdaq
Listing Qualifications Staff notified Envirogen on January 29,
2003 that it has not complied with the minimum $1.00 closing bid
price per share requirement for continued listing set forth in
Marketplace Rule 4310(C)(4), and that it does not meet the
initial inclusion requirements of The Nasdaq SmallCap Market
under Marketplace Rule 4310(C)(2)(A).
Accordingly, Envirogen's common stock will be delisted from The
Nasdaq SmallCap Market at the opening of business today. Robert
S. Hillas, President and CEO of Envirogen stated, "Our pending
agreement for Shaw Environmental & Infrastructure, Inc. to
acquire Envirogen announced January 31, 2003 convinced us that
appealing Nasdaq's decision would be unnecessarily costly with
no ultimate benefit to shareholders."
Envirogen's common stock will be eligible for trading on the
Over-the-Counter Bulletin Board beginning today. The OTC
Bulletin Board is a regulated quotation service that displays
real-time quotes, last sale price, and volume information in
over-the-counter equity securities. OTC Bulletin Board
securities are traded by a community of market makers that enter
quotes and trade reports through a highly sophisticated computer
network. Investors work through a broker/dealer to trade OTC
Bulletin Board securities. Information regarding the OTC
Bulletin Board, including stock quotations, can be found on the
Internet at http://www.otcbb.com
Envirogen's trading symbol will remain "ENVG" on the OTC
Bulletin Board. However, some Internet quotation services add an
"OB" to the end of the symbol and will use "ENVG.OB" for the
purpose of providing stock quotes.
Envirogen is a broad-based environmental systems and services
company providing its customers with the maximum benefit per
dollar spent for environmental protection. Through the
application of its industry leading technologies, Envirogen
provides cost-effective means to remove pollution from the air,
water and soil.
* * *
Liquidity and Capital Resources
The Company has funded its operations to date primarily through
revenues from commercial services, sales of biodegradation
systems, public offerings and private placements of equity
securities, research and development agreements with major
industrial companies and research grants from government
agencies. At September 30, 2002, the Company had cash and cash
equivalents of $1,373,748 and working capital of $1,392,550.
Cash and cash equivalents decreased $1,445,280 from December 31,
2001 to September 30, 2002 due primarily to cash used in
operations of $1,240,569 and capital expenditures of $185,029.
From December 31, 2001 to September 30, 2002, net accounts
receivable decreased by $2,287,915 due primarily to lower
revenues and the timing of billing as explained by the increase
in unbilled revenue of $107,865. In the same period, accounts
payable decreased by $534,435 due to reduced expense levels on
lower revenues. At September 30, 2002, the Company had
$2,129,842 in reserve for claim adjustments and warranties,
$2,043,929 of which is available with respect to potential PECFA
claim adjustments related to approximately $24 million in
unsettled PECFA submittals and $85,913 of which is available
with respect to potential warranty claims and other contract
issues. The Company routinely evaluates these reserves based
upon historical trends and ongoing activity. The amount of
unsettled PECFA submittals declined from approximately $35
million at December 31, 2001 to approximately $24 million at
September 30, 2002. The corresponding reserve has been reduced
from $2,772,737 at December 31, 2001 to $2,043,929 at September
30, 2002.
The Company's currently available cash, cash equivalents and
cash expected to be generated from operations may not provide
sufficient operating capital for the next twelve months. The
Company is currently engaged in reviewing strategic alternatives
and may seek additional funds through equity or debt financing.
However, there can be no assurance that the current initiatives
will be successful or that such additional funds will be
available on terms favorable to the Company, if at all.
FELCOR LODGING: S&P Keeping Watch on BB Rating over Weak Results
----------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit rating on FelCor Lodging Trust Inc., on CreditWatch with
negative implications.
"The CreditWatch placement follows FelCor's fourth quarter 2002
earnings release, and reflects ongoing weakness within the
lodging environment and the expectation that FelCor's credit
measures are not likely to improve to levels consistent with the
rating during the intermediate term," said Standard & Poor's
credit analyst Stella Kapur.
Debt leverage, as measured by total debt to EBITDA, was weak for
the rating at 6.6x as of Dec. 31, 2002 (this includes pro rata
share of unconsolidated debt). Given management's guidance for
2003 EBITDA of $277 million to $289 million, little improvement
in credit measures is expected in 2003.
In resolving the CreditWatch listing, Standard & Poor's will
meet with management to discuss the lodging operating
environment and management's intermediate-term financial
strategy.
Based in Irving, Texas, FelCor is the nation's second-largest
lodging REIT and the largest owner of full service, all suite
hotels. FelCor's portfolio is comprised of 169 hotels, located
in 35 states and Canada.
FLEMING COS.: S&P Hatchets Corporate Credit Rating to B from BB-
---------------------------------------------------------------
Standard & Poor's Feb. 5
Standard & Poor's Ratings Services lowered its corporate credit
rating on grocery wholesaler Fleming Cos. Inc., to 'B' from
'BB-'. The rating remains on CreditWatch with negative
implications, where it was placed on September 5, 2002.
Lewisville, Texas-based Fleming has no debt maturities until
2007.
The downgrade reflects the increased challenges Fleming faces in
its core wholesale business now that the Kmart Corp. supply
contract has been terminated, as well as ongoing difficulties
with the integration and exit of other business units. Since the
Kmart contract represented about $3 billion in revenues, Fleming
will likely need to reduce its distribution capacity, incurring
substantial one-time costs, unless it can replace the volume
quickly. Although the Kmart business was low-margin and the
lower distribution volume will reduce working capital needs, the
impact on Fleming's overall operating efficiency is uncertain.
"The loss of the Kmart contract comes at a time when Fleming's
core business is not meeting expectations due to soft sales at
the company's supermarket customers, a promotional retail
environment, and higher employee benefit costs. Fourth quarter
2002 earnings (ended Dec. 2002) were down 25% from earlier
expectations," stated Standard & Poor's credit analyst Mary Lou
Burde.
Moreover, Fleming still needs to fully integrate the CoreMark
International Inc., acquisition, complete the sale of its retail
assets, and reduce debt. Management's earlier expectations of
$450 million in proceeds from the sale of all retail assets are
now expected not to be fully realized. The operational
shortfalls and lower-than-anticipated asset sale proceeds could
hinder debt reduction and earlier anticipated improvement in
credit ratios. Standard & Poor's believes management will
be challenged to manage these processes smoothly while
maintaining focus on executing its core distribution business.
An additional concern is an informal inquiry by the SEC into
several matters, including vendor trade practices, its
presentation of second quarter 2001 adjusted earnings per share
data, accounting for drop-ship sales transactions with an
unaffiliated vendor in Fleming's discontinued retail operations,
and the calculation of comparable-store sales in its
discontinued retail operations.
The company has sufficient room under its $550 million revolving
credit facility for further borrowings if needed, although
further covenant relief may be required in the future. The
company obtained an amendment from its bank group allowing for
the sale of the retail operations and providing covenant
flexibility. Fleming is currently in negotiations to revise its
bank loan agreement to focus on asset-based measures for
financial covenants.
Standard & Poor's will meet with management to assess Fleming's
revised business strategy, including its plans to replace lost
volume of the Kmart and retail business, prospects for debt
reduction, and the SEC inquiry.
Fleming Companies' 10.125% bonds due 2008 are now trading at
about 71 cents-on-the-dollar.
FONIX CORP: Commences Workout & Intends to Effect Reverse Split
---------------------------------------------------------------
Fonix Corporation (OTC Bulletin Board: FONX), a leading provider
of speech interface solutions, plans a significant corporate re-
structuring program to enable the Company to continue to deliver
its premier speech solutions and support its revenue growth
trends. Based on the Company's access to a $20 million equity
line of credit and the Company's growing quarterly revenue
trends, Fonix has re-structured its operations, market focus,
and speech solutions and intends to seek shareholder approval
for a reverse split of its common shares.
New appointments were also announced:
* Rolf-Juergen Bruess has been named president, Fonix
International and Strategic Marketing, and
* Brandon T. O'Brien, has been named vice president finance.
Mr. Bruess has 20 years senior and executive management
experience in semiconductors, communications, consumer and
automotive electronics and strategic technical marketing/sales
with Siemens AG and Mannesmann VDO. He has managed 1,500 world-
wide engineering and sales teams achieving $750 million in
annual sales.
Mr. Bruess will work directly with the executive management team
to implement strategic marketing and development initiatives,
and standardize speech solutions. "Fonix has real speech
solutions that can be used in multiple markets and products. We
are just starting to see Fonix leverage its rich technology IP
into revenue generating channels," said Bruess.
Brandon T. O'Brien, CPA, has joined the Fonix team as vice
president, finance. Mr. O'Brien has over 7 years experience as
a senior auditor with a major independent accounting firm,
consultant, and controller and as the financial reporting
manager at Iomega Corp. He is experienced with product line
profitability analysis, cash flow projection models, budgetary
projection models, the preparation and review of all SEC reports
and the processes and procedures for revenue recognition
peculiar to high tech companies. Mr. O'Brien received his BS in
accounting from Utah State University and his MBA from the
University of Utah.
Thomas A. Murdock, president and CEO, said, "After the past 18
months of a close association with Mr. Bruess, we are pleased to
have him join the executive team. His experience and drive have
resulted in the market definition that will enhance revenue
visibility and growth. Fonix is pleased to benefit from his
professional expertise in our emerging markets. Likewise, we
welcome Brandon and know Fonix will benefit from his accounting
and financial reporting experience."
Mr. Murdock continued, "The restructuring plan enables Fonix to
support its revenue growth trends, maximize product and market
deliverables, and create a more attractive investment
opportunity for current and potential investors. Our employees
and vendors stuck by us for six months while we resolved the
issues relating to our primary source of financing -- an equity
line of credit. We are pleased that the Securities and Exchange
Commission has now declared effective our registration statement
for the new $20 million equity line. During this challenging
period, our employees have been remarkably committed to
delivering Fonix speech solutions that have resulted in
increasing quarterly revenues. We expect these revenue trends to
continue."
Reverse Split of Common Stock
The Company's board of directors has approved a reverse split of
the Company's common stock in a range of 25:1 to 40:1. Fonix
intends to ask its shareholders to approve such a reverse spilt,
as will be described in a proxy statement to be filed with the
Securities and Exchange Commission. If the shareholders approve
the proposal, the Fonix board of directors will have the
authority to determine the eventual amount of the reverse split.
Market Segment Focus
Newly streamlined and focused operations have resulted in
delivery of Fonix speech solutions in five primary market
segments:
-- Wireless /Mobile devices and Game consoles: (cell
phones, PDA's, PDA's with PhoneEditions, and Xbox).
-- Telephony Applications: (Speak@Me and 511 Information
System)
-- Assistive and Language Learning Interface Tools
-- End-2-End -- Distributive speech solutions.
-- Automotive in-dash and after market voice controlled
electronic functions.
"The combination of increasing revenues, operating reductions,
strong market focus and the availability of working capital from
revenue and the equity line of credit will assist the Company to
meet its operating requirements and pay its accrued
liabilities," said Roger D. Dudley, executive vice president and
CFO. "We are sincerely appreciative of the employees that have
diligently delivered speech solutions to the market during the
last six months. We acknowledge our vendors that have worked
with us. We are eager to move forward and continue to deliver
the kind of voice solutions that will enable Fonix to become
profitable," said Dudley.
Fonix Corporation (OTC Bulletin Board: FONX) is a leading
provider of natural-user interface technology solutions for
wireless and mobile devices, Internet and telephony systems, and
vehicle telematics. Leading chip manufacturers, independent
software and hardware vendors, and Internet content and service
provider's incorporate Fonix technology to provide their
customers with an easier and more convenient user experience.
For more information visit http://www.Fonix.com
As reported in Troubled Company Reporter's December 26, 2002
edition, Fonix incurred negative cash flows from operating
activities of $4,810,053 during the three months ended March 31,
2002. Sales of products and revenue from licenses based on the
Company's technologies have not been sufficient to finance
ongoing operations. As of March 31, 2002, the Company had
negative working capital of $4,611,713 and an accumulated
deficit of $179,353,995. The Company has limited capital
available under its equity lines of credit. These matters raise
substantial doubt about the Company's ability to continue as a
going concern. The Company's continued existence is dependent
upon several factors, including the Company's success in (1)
increasing license, royalty and services revenues, (2) raising
sufficient additional funding and (3) minimizing operating
costs.
The Company must raise additional funds to be able to satisfy
its cash requirements during the next 12 months. Research and
development, corporate operations and marketing expenses will
continue to require additional capital. Because the Company
presently has only limited revenue from operations, the Company
intends to continue to rely primarily on financing through the
sale of its equity and debt securities to satisfy future capital
requirements until such time as the Company is able to enter
into additional third-party licensing, collaboration or co-
marketing arrangements such that it will be able to finance
ongoing operations from license, royalty and services revenues.
There can be no assurance that the Company will be able to enter
into such agreements. Furthermore, the issuance of equity or
debt securities which are or may become convertible into equity
securities of the Company in connection with such financing
could result in substantial additional dilution to the
stockholders of the Company.
GENUITY INC: Committee Signs-Up Deloitte & Touche as Consultants
----------------------------------------------------------------
The Official Committee of Unsecured Creditors of Genuity Inc.,
and debtor-affiliates sought and obtained the Court's authority
to retain Deloitte & Touche LLP as consultants and financial
advisors in these Chapter 11 cases.
Deloitte is expected to:
A. assist and advise the Committee in its analysis of the
Debtors' current financial position and near term
prospects;
B. assist and advise the Committee in its analysis of the
Debtors' business plans, cash flow projections,
restructuring programs, selling and general administrative
structure, and other reports or analyses prepared by the
Debtors or their professionals to advise the Committee;
C. assist and advise the Committee in its analysis of proposed
transactions, and other matters for which the Debtors may
seek Bankruptcy Court approval including asset sale
transactions, assumption/rejection of executory contracts,
management compensation and retention and severance plans;
D. assist and advise the Committee and its counsel in the
evaluation, or development and documentation of any plan of
reorganization or strategic transaction. This advice and
assistance may include assistance in developing,
structuring and negotiating the terms and conditions of
potential plans or strategic transactions, and the
evaluating the adequacy of the consideration offered to the
unsecured creditors;
E. assist and advise the Committee in its efforts to
understand its recovery under various scenarios, ranging
from a forced liquidation of assets to an orderly
disposition of assets, as well as a sale of the business as
a going concern;
F. attend and advise at meetings with the Committee and its
counsel, the Debtors and its professionals, and other
parties-in-interest as required; and
G. any other services, as requested by the Committee and as
may be agreed to by Deloitte.
Deloitte Member Sheila T. Smith assures the Court that neither
the firm nor its employees hold or represent any interest
adverse to the Debtors or its estate in the matters for which it
is retained. Deloitte is a "disinterested person," as that term
is defined in Sections 101(14) and 1107(b) of the Bankruptcy
Code.
However, from time to time, Deloitte has or may have provided
professional services to, currently provide or may currently
provide professional services to, and may in the future provide
professional services to certain of the Debtors' creditors,
other parties-in-interest in these Chapter 11 cases and their
attorneys and accountants in matters unrelated to these Chapter
11 cases. These parties include: Integra Net UK Ltd., Level 3
Communications, Verizon Communications, Ropes & Gray, Kramer
Levin Naftalis & Frankel LLP, CitiCorp USA, Wachovia Bank, JP
Morgan Chase, Ernst & Young, KPMG LLP, and
PricewaterhouseCoopers LLP.
Despite the efforts to identify and disclose Deloitte's
connections with parties-in-interest in these Chapter 11 cases,
because Deloitte is a large, multi-national firm with tens of
thousands of employees, Ms. Smith admits that Deloitte is unable
to state with certainty that every client relationship or other
connection has been disclosed. In this regard, if Deloitte
discovers additional information that it determines requires
disclosure, the firm will file a supplemental disclosure with
the Court promptly.
Deloitte will be compensated at a fixed monthly fee arrangement,
with a cumulative engagement fee cap that will limit its total
fees in these Chapter 11 cases to the lesser of:
-- the aggregate amount of the fixed monthly fees; or
-- 80% of its standard hourly rates multiplied by the
aggregate number of hours expended by Deloitte personnel in
the performance of services for the Committee in these
Chapter 11 cases.
With respect to the fixed monthly fees, Ms. Smith explains that
Deloitte will initially charge the Debtors' estate $125,000 in
fixed fee per month. Subsequently, Deloitte will reduce the
fixed fee amount to $75,000 per month. The Initial Monthly Fee
Rate will be utilized from December 10, 2002, prorated for the
first month, through the consummation of a transaction to
dispose of substantially all of the assets of the Debtors'
estates. Thereafter, the monthly fee will be reduced to the
Post-Closing Fee Rate throughout the remainder of these Chapter
11 cases.
Each month, prior to submitting its monthly fee application,
Deloitte will calculate the Aggregate Fee Cap Amount, defined as
the product of:
-- the cumulative actual time expended by all Deloitte
personnel for the current and prior months; multiplied by
-- 80% of its billing rates for those individuals.
Deloitte will then compare the Aggregate Fee Cap Amount to the
sum of:
-- the applicable fixed monthly fee for the then current
month; and
-- the aggregate value of the fees requested and approved in
all prior months.
If the Aggregate Fee Amount exceeds the Aggregate Fee Cap
Amount, Deloitte will voluntarily reduce the amount sought for
the then current month by the amount of the excess.
Ms. Smith relates that the hourly rates charged by Deloitte for
the services provided by its personnel differ based on each
professional's level of experience, geographic differentials,
and types of services being provided. In the ordinary course of
business, Deloitte periodically revises its hourly rates to
reflect promotions and other changes in personnel
responsibilities, increases in experience, and the increases in
the cost of doing business. Presently, Deloitte's standard
billing rates by classification are:
Partner/Principal $600 - 660
Senior Manager 500 - 575
Manager 400 - 475
Senior Consultant 250 - 350
Consultant 180 - 275
Support Staff 70 - 100
In addition to professional fees, Ms. Smith continues,
Deloitte's monthly fee statements will include requests for
reimbursement of reasonable and customary expenses, including
travel, report production, delivery services, and other costs
incurred in providing the services. As a component of these
monthly statements, Deloitte will provide descriptions of the
services performed, and the related time expended by each
professional. (Genuity Bankruptcy News, Issue No. 6; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
GILAT SATELLITE: Principal Creditors Approve Debt Workout Plan
--------------------------------------------------------------
Gilat Satellite Networks Ltd., (NASDAQ:GILTF) announced that its
bank lenders and the holders of its 4.25% Convertible
Subordinated Notes due 2005 voted to approve the Company's debt
restructuring plan as previously announced and filed on
November 14, 2002.
The approval of the plan, allowing the Company to restructure
its principal debt obligations, including the Notes, is the
final creditor approval required for the Company's debt
restructuring process. The Company expects to make a filing with
the Israeli District Court in Tel Aviv to obtain the court's
approval of the terms of the arrangement.
"The approval of our debt restructuring plan by our principal
creditors is a key ingredient to position the Company for future
growth," said Yoel Gat, Gilat's Chairman and CEO. "We have
received overwhelming support from our banks and bondholders --
receiving the support of 91.9% of the number of bondholders who
were represented and voted for the plan, representing 99.5% of
the principal amount of bonds that voted at the bondholder
meeting. With this support, we can move forward to execute our
strategy with a significantly improved balance sheet and cost
structure," he added.
The plan of arrangement includes an offer by the Company to
issue a combination of 4.00% Convertible Notes due 2012 and its
ordinary shares, par value NIS 0.01, in exchange for all the
Notes and a portion of bank debt. As a result, the Company
expects to reduce its principal debt by approximately US$300
million. The plan of arrangement also includes the restructuring
of the terms of its bank debt. The above plan significantly
reduces the Company's financing costs. The Company expects to
close the process by mid-March 2003.
Gilat Satellite Networks Ltd., with its global subsidiaries
Spacenet Inc., Gilat Latin America, Inc., and rStar Corporation,
is a leading provider of telecommunications solutions based on
Very Small Aperture Terminal satellite network technology - with
nearly 400,000 VSATs shipped worldwide. Gilat markets the
Skystar Advantage, DialAw@y IP, FaraWay, 360E and SkyBlaster(a)
360 VSAT products in more than 70 countries around the world.
The Company provides satellite-based, end-to-end enterprise
networking and rural telephony solutions to customers across six
continents, and markets interactive broadband data services. The
Company is a joint venture partner in SATLYNX, a provider of
two-way satellite broadband services in Europe with SES GLOBAL.
Skystar Advantage(R), DialAw@y IP(TM) and FaraWay(TM) are
trademarks or registered trademarks of Gilat Satellite Networks
Ltd. or its subsidiaries. Visit Gilat at http://www.gilat.com
GLOBAL CROSSING: Brings-In Pachulski Stang as Litigation Counsel
----------------------------------------------------------------
Global Crossing Corporate Secretary Mitchell C. Sussis tells the
Court that the Global Crossing Debtors rely on over 1,100
telecommunications companies for "last mile" telecommunications
services in areas where the GX Debtors cannot connect directly
to their customers. The services provided to the GX Debtors by
the Access Providers include the hardware that physically
connects their network to the networks of the Access Providers,
as well as the ability to send traffic over the Access
Providers' lines. These services are provided to the GX
Debtors, in most instances, under either interconnection
agreements or tariffs, which are filed by the Access Providers
with the Federal Communications Commission. The Access
Providers asserted $375,000,000 in claims against the GX Debtors
for amounts outstanding under both interconnection agreements
and tariffs.
To maintain their network, Mr. Basta relates that the GX Debtors
intend to assume certain interconnection agreements with the
Access Providers on the effective date of the Plan. Moreover,
the GX Debtors will require the continued provision of certain
tariff services from the Access Providers. Because the GX
Debtors do not believe that tariffs are executory contracts,
however, the Plan provides that the GX Debtors are not required
to cure prepetition amounts outstanding for tariff services in
order to continue to receive these services. Accordingly, the
GX Debtors only listed cure amounts for those services that are
provided pursuant to either executory contracts or other
arrangements that are deemed to be executory contracts under the
Plan, or in accordance with separate settlement agreements
negotiated with individual Access Providers.
Mr. Sussis relates that the treatment of the Access Providers
under the Plan was not contested as the Debtors had successfully
negotiated settlements with most of their Access Providers prior
to the hearings on confirmation of the Plan. Many of these
settlements, however, were not consummated until days before the
hearings. Accordingly, the Debtors were required to engage
Pachulski prior to the confirmation hearings to prepare for any
potential litigation with the Debtors' Access Providers that
could have resulted if the settlements had not be reached. The
litigation, if it had occurred, would have gone forward as part
of the hearings on confirmation of the Plan.
Mr. Sussis continues that many of the issues and disputes
between the Debtors and the Access Providers are now settled,
subject to the execution of settlement agreements acceptable to
the parties. The Debtors are in the process of securing
settlement agreements and intend to file a motion seeking
approval of these settlements after the completion of this
process. Nevertheless, to the extent that the Debtors do not
reach final agreement with some of the Access Providers on the
terms of the settlement agreements, the Court does not approve
the settlements, or the effective date of the Plan becomes an
impossibility, the Debtors could still be required to litigate
numerous issues with their Access Providers.
Weil Gotshal & Manges LLP would normally represent the Debtors
in these litigated matters. However, Mr. Sussis notes that Weil
Gotshal represents certain of the Access Providers in matters
unrelated to these Chapter 11 cases. Weil Gotshal and the
Debtors determined that, to avoid duplication of efforts,
minimize expenses to the estate, and avoid any issues concerning
conflicts of interest, the Debtors should retain another counsel
to handle any and all litigation with the Access Providers.
Accordingly, the GX Debtors sought and obtained the Court's
authority to employ Pachulski, Stang, Ziehl, Young & Jones P.C.,
nunc pro tunc to November 13, 2002, as their litigation counsel
in these Chapter 11 cases, to represent them in any negotiations
or litigation with their telecommunications providers that may
be required in these cases.
Specifically, Pachulski will be primarily responsible for any
litigation attendant in the assumption of certain agreements and
the continued provision of services by the Access Providers.
This litigation would include both the determination of cure
costs with any of the Access Providers in the event the
settlements fail or are disapproved and any litigation between
the Debtors and WorldCom, Inc.
Mr. Sussis explains that the Debtors have selected Pachulski as
litigation counsel because of the firm's expertise, experience
and knowledge in the field of bankruptcy litigation. In
preparing for its representation of the Debtors, Pachulski has
become familiar with the legal issues with respect to its
engagement. The Debtors believe that Pachulski is both well
qualified and uniquely able to represent them as litigation
counsel in an efficient manner.
Pachulski has been providing services to the Debtors since
November 13, 2002, in connection with confirmation of their
Plan. Nevertheless, Pachulski could not file its employment
application until it obtained court approval for the waivers it
obtained from Pacific Crossing, Ltd., PC Landing Corporation,
PCL Japan, Ltd., Pacific Crossing, UK, Ltd. and SCS Bermuda,
Ltd, all of whom are the Debtors' creditors and are represented
by Pachulski in their pending bankruptcy cases in the United
States Bankruptcy Court for the District of Delaware Case No.
02-12086 (PJW). This approval was not obtained until December
3, 2002.
William P. Weintraub, Esq., a member of Pachulski Stang Ziehl
Young & Jones P.C., assures the Court that the Firm does not
hold or represent any interest adverse to the Debtors or to
their estates in the matters with respect to which the firm is
to be engaged by the Debtors.
As litigation counsel:
A. Pachulski will be primarily responsible for litigation
attendant in the assumption of certain agreements and the
continued provisions of services by the Access Providers;
B. Pachulski has been asked to handle plan confirmation
matters relating to the assumption of Interconnection
Agreements and Circuit Agreements between the Debtors and
AT&T in connection with the Joint Plan of Reorganization;
and
C. Pachulski has been asked to handle any litigation between
the Debtors and WorldCom, Inc., relating to the amount of
the cure payments, if any, that may be required to be
made to WorldCom and MCI after the assumption of any
executory relationships with WorldCom or MCI under the
Plan.
Mr. Weintraub relates that Pachulski intends to apply for
compensation for professional services rendered in connection
with these Chapter 11 cases, on an hourly basis, plus
reimbursement of actual, necessary expenses and other charges
incurred. The principal attorneys and paralegals designated to
represent the Debtors and their current standard hourly rates
are:
William P. Weintraub $550
Robert J. Feinstein 550
Maxim B. Litvak 280
Maria A. Bove 235
Denise A. Harris 160
Mr. Weintraub reports that the total fees incurred by
Pachulski's attorneys and staff from November 13, 2002 through
December 4, 2002 amounts to $64,381.50 while the total amount of
expenses incurred for this period is $5,425.90. (Global Crossing
Bankruptcy News, Issue No. 33; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
Global Crossing Holdings' 9.625% bonds due 2008 (GBLX08USR1) are
trading at about 4 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX08USR1
for real-time bond pricing.
GROUP HEALTH SERVICE: AM Best Cuts Fin'l Strength Ratings to B++
----------------------------------------------------------------
A.M. Best Co. downgraded the financial strength ratings to B++
(Very Good) from A- (Excellent) of Group Health Service of
Oklahoma (d/b/a Blue Cross & Blue Shield of Oklahoma) (BCBSOK)
and its wholly owned affiliate, Member Service Life Insurance
Company.
Additionally, the financial strength rating of B++ (Very Good)
of GHS Health Maintenance Organization (d/b/a BlueLincs HMO)
(BlueLincs HMO) was affirmed. All of the companies are located
in Tulsa, OK. The outlook for all ratings remains negative.
The rating of BCBSOK reflects its significantly lower earnings
in 2002, the overall organization's reduced surplus strength and
liquidity position and diverse competition within the state.
Factors that offset these negative components include the
organization's strong market presence throughout Oklahoma,
diverse product base and improved operating performance at
BlueLincs HMO.
While results at BlueLincs HMO and MSL improved in 2002,
BCBSOK's earnings were impacted by higher than anticipated cost
trends and utilization, some of which was attributable to growth
but mostly due to higher than normal utilization. A.M. Best
notes that BCBSOK conservatively estimates claims reserves and
has increased them by more than $45 million in 2002. BCBSOK's
decline in capital was directly impacted by negative earnings
reported in 2002 that were exacerbated by an $8.5 million
pension charge. The company has taken various actions in
addressing these issues, specifically by adjusting its rating
strategies in all lines of business. On the cost side, primarily
provider contracting, these new payment levels have been taken
into account.
BCBSOK is the largest health care benefits provider within
Oklahoma. Its consolidated subscriber base represents
approximately 25% of the insured population--31% including the
National Blue Card Program. Through its diverse product
offerings, BCBSOK has positioned itself as a company that is a
"one-stop insurance resource" for Oklahoma businesses.
Turnaround initiatives introduced at BlueLincs in 2000 have
reversed the earnings losses of the last four years. These
actions resulted in significant membership losses; however,
profitability notably improved.
GUESS? INC: Reports Increased Retail Sales for January 2003
-----------------------------------------------------------
Guess?, Inc., (NYSE:GES) reported January retail sales results
for the fiscal month ended February 1, 2003. Fiscal January 2003
contained 32 days compared to 33 days in the January 2002 fiscal
period.
Total retail sales for the January 2003 fiscal period were $26.0
million, an increase of 5.9% from sales of $24.5 million for the
January 2002 fiscal period ended February 2, 2002. Comparable
store sales for the January period decreased 1.6%. Comparable
store sales for the Company's full priced retail stores
decreased 2.8%, and comparable store sales at the factory outlet
stores increased 1.8%.
On a comparable 32-day basis, comparable store sales for January
2003 increased 2.0%; comparable store sales for the Company's
full priced retail stores increased 0.7%; and comparable store
sales at the factory outlet stores increased 5.8%.
Guess?, Inc., designs, markets, distributes and licenses one of
the world's leading lifestyle collections of contemporary
apparel, accessories and related consumer products.
As reported in Troubled Company Reporter's January 17, 2003
edition, Standard & Poor's lowered its corporate credit rating
on apparel manufacturer and retailer Guess? Inc., to 'BB-' from
'BB'.
At the same time, Standard & Poor's lowered its subordinated
debt rating on the company to 'B' from 'B+'. The outlook is
negative. The Los Angeles, California-based company had
approximately $86 million in total debt outstanding as of
September 28, 2002.
"The downgrade reflects the continued erosion of Guess?'s
operating performance and weakened credit protection measures.
The company's performance in recent years has been hurt by the
intensely competitive retail environment, waning consumer
confidence, and consumers' poor response to its product line,"
said Standard & Poor's credit analyst Diane Shand.
G-ZONE ENTERPRISES: Taps Keen Realty to Market La Vista Property
----------------------------------------------------------------
G-Zone Enterprises has retained Keen Realty, LLC to market and
dispose of their indoor driving range located in La Vista, Neb.
Keen Realty is a real estate firm specializing in restructuring
real estate portfolios and selling excess assets.
G-Zone's Fifth Year of Bankruptcy
G-Zone Enterprises is now in a Chapter 11 proceeding filed on
January 29, 2002 in the United States Bankruptcy Court for the
Eastern District of Michigan (Case No. 02-42243). Thomas
Elkins, Esq., at Elkins & Assocs., P.L.L.C., represents the
Company. While Judge Shapero has approved Keen's retention and
put uniform bidding procedures in place to facilitate a sale of
substantially all of G-Zone's assets under Sec. 363, a motion by
the U.S. Trustee (supported by two large creditors, Peoples
National Bank Iowa, and Darland Construction Company) to convert
the case to a chapter 7 liquidation kicks around on the Court
docket. Mary Theresa Moran, Esq., in Bloomfield Hills, Mich.,
represents the Bank. G-Zone filed a chapter 11 plan in July
2002, but the Debtor's disclosure statement couldn't pass
muster. G-Zone previously filed for chapter 11 protection in
1999 (Bankr. Neb. Case No. 99-81437), but that proceeding was
dismissed in 2001 at the request of the U.S. Trustee after
Richard D. Myers, Esq., at McGill, Gotsdiner, Workman & Lepp,
withdrew as counsel and it was apparent to Judge Mahoney that no
viable plan of reorganization was forthcoming.
Information about the Property
"This indoor driving range is an excellent investment or
development opportunity due to the must-sell situation and
potential for alternative uses," said Mike Matlat, Keen Realty's
Vice President. "The marketing has just begun and there is an
auction set for April 2, 2003. Interested parties must act
immediately," Matlat added.
Available to users and investors is a 60,000+/- square foot dome
and 2,520+/- square foot retail building on 3.475+/- acres. The
facility was constructed in 1998 as an indoor driving range.
However, it can also be used for other indoor recreational
activities, as well as special events such as parties and trade
shows. The operational capacity of the dome is 50 tee-off
stations on a bi-level platform. Available equipment includes a
golf cart, tees, tee dividers, mats, a ball picker, a ball
washer, safes, and cash registers.
For more information regarding the sale of the property for G-
Zone Enterprises, please contact Keen Realty, LLC, 60 Cutter
Mill Road, Suite 407, Great Neck, NY 11021, Telephone: 516/482-
2700, Fax: 516/482-5764, e-mail: krc1@keenconsultants.com Attn:
Mike Matlat.
Keen Realty's a Pro
For over 20 years, Keen Consultants has had extensive experience
solving complex problems and evaluating and selling real estate,
leases and businesses in bankruptcies, workouts and
restructurings. Keen Consultants, a leader in identifying
strategic investors and partners for businesses, has consulted
with over 130 clients nationwide, evaluated and disposed of over
200,000,000 square feet of properties, and repositioned nearly
11,000 stores across the country.
Companies that the firm has advised include: Arthur Andersen,
Tommy Hilfiger, General Media International, Warnaco, Foot
Locker, Just for Feet, and FOL Liquidation Trust. Most recently
Keen has sold a distribution facility in Montgomery, N.Y. for
$23,200,000 for Service Merchandise, raised approximately $125
million in the sale of 110 Family Golf Center locations, sold a
$19.5 million warehouse/distribution facility for Merry Go
Round, sold Speco Corp.'s industrial facility for $1,750,000,
and an industrial property for Rodolitz for $8,500,000.
HOST MARRIOTT: S&P Places BB- Corp. Credit Rating on Watch Neg.
---------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit rating on Host Marriott Corp., on CreditWatch with
negative implications.
"The CreditWatch placement reflects ongoing weakness within the
lodging environment and the expectation that Host Marriott's
credit measures are not likely to improve to levels consistent
with the ratings during the intermediate term," said Standard &
Poor's credit analyst Stella Kapur.
Standard & Poor's also said that debt leverage, as measured by
total operating lease-adjusted debt to EBITDA as of Sept. 30,
2002, was weak for the rating at 7.5x. Based on management's
guidance of additional revenue per available room declines
expected for the first quarter of 2003 and additional margin
deterioration in 2003, material improvement in credit measures
is not expected in 2003.
In resolving the CreditWatch listing, Standard & Poor's will
meet with management to discuss the lodging operating
environment and management's intermediate-term financial
strategy.
Based in Bethesda, Maryland, Host Marriott is the nation's
largest lodging REIT with 122 upscale and luxury full-service
hotel properties primarily operated under Marriott, Ritz-
Carlton, Four Seasons, Hyatt and Hilton brands.
INTEGRATED HEALTH: Secures 9th Extension of Exclusive Periods
-------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates
obtained Court approval to further extend their Exclusive
Period, within which they must file a plan, to and including
April 28, 2003, and their Exclusive Period to solicit
acceptances of that plan, to and including June 30, 2003. In
essence, the Debtors obtained a 90-day extension with respect to
each of the Exclusive Periods, without prejudice to their right
to seek further extensions or the right of any party-in-interest
to seek to reduce the Exclusive Periods. This is the Company's
ninth request to extend the exclusive period under 11 U.S.C.
Sec. 1121(d). Integrated is currently in the process of selling
its assets in a spirited and contested auction process under
Judge Walrath's supervision. (Integrated Health Bankruptcy
News, Issue No. 50; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
ITEX CORP: Shareholders Elects Company's New Board of Directors
---------------------------------------------------------------
ITEX Corporation (OTC Bulletin Board: ITEX.OB), a business
services and trading company, announced the election results for
the Board of Directors from its annual meeting of stockholders
on January 31, 2003. The results of the meeting were certified
by IVS Associates, Inc., independent election inspectors located
in Delaware. The ITEX outside Director nominees had been
contested by The Committee for the Advancement of Stockholder
Equity, whose nominees won the majority of the votes. Of the
10,880,870 votes cast, approximately 7,000,000 votes were in
favor of the CASE nominees and between 3,200,000 to 3,700,000
voted for the incumbent outside directors. In addition, two
other measures were voted on at the annual meeting; the
ratification of auditors, Ehrhardt, Keefe, Steiner & Hottman PC
and the proposed 2003 Equity Incentive Plan. Both measures
failed to be approved by a majority of the shareholders.
The Board of Director nominees receiving the highest number of
votes at the annual meeting were Steven White, Eric Best, John
Wade, Alan Zimmelman, Lewis "Spike" Humer and Jay Abraham.
Subsequent to the certification of the election results,
Mr. Abraham removed his candidacy. Mr. Humer will continue as
President and Chief Executive Officer.
The new Board convened immediately after the certification
Wednesday. Measures taken by the Board at Wednesday's meeting
included:
-- Mr. White was elected Chairman; Mr. Wade will serve as
Secretary and Treasurer.
-- Board compensation of 40,000 shares was approved for each
outside director for the current term.
-- Board compensation for the current term was revised by
eliminating cash and trade dollar compensation.
-- Additional compensation for serving on any committee was
eliminated.
-- Fiscal 2003 annual meeting date was set as December 18,
2003, with the location to be announced at a later date.
-- Committees:
-- Audit -- John Wade (Chair), Steven White
-- Compensation and Nominating -- Steven White (Chair),
Eric Best, John Wade. This Committee will administer
the ITEX Stock Option Plan.
-- Election Review Committee -- Steven White (Chair),
Lewis Humer
-- Newly formed Strategic Committee -- Steven White
(Chair), Lewis Humer, Eric Best, John Wade, Alan
Zimmelman, and ITEX COO, Mel Kerr
-- Initiated a review of the transactions of the former
outside board, including granting itself shares as
compensation.
-- Notice to former directors that their trade accounts will
begin accruing usual and customary fees.
-- Initiated committee review of whether to reimburse CASE
pursuant to a suitable payment plan.
-- Retained Tollefsen Business Law P.C. as SEC counsel
Lewis "Spike" Humer, CEO stated, "I'm pleased with the voting
results and the caliber of the individuals serving on the board.
Our commitment is to stay focused on increasing revenues,
controlling costs, and improving our bottom line performance.
Although the costs of the proxy contest will negatively impact
earnings for the quarter ending, January 31, 2003, we expect
that the substantial long-term savings from reduced Directors
fees will greatly benefit ITEX."
Founded in 1982, ITEX Corporation -- http://www.itex.com--
whose October 31, 2002 balance sheet shows a working capital
deficit of about $1.1 million -- is a business services and
trading company with domestic and international operations.
ITEX has established itself as the leader among the roughly 450
trade exchanges in North America by facilitating barter
transactions between member businesses of its Retail Trade
Exchange. At the retail, corporate and international levels,
modern barter business enjoys expanding sophistication,
credibility, and acceptance. ITEX helps its member businesses
improve sales and liquidity, reduce cash expenses, open new
markets and utilize the full business capacity of their
enterprises by providing an alternative channel of distribution
through a network of five company offices and more than ninety
licensees worldwide.
JLG INDUSTRIES: S&P Hatchets Corp. Credit Rating to BB from BBB-
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate
credit rating on JLG Industries Inc., to 'BB' from 'BBB-'. At
the same time, the rating on JLG's $250 million senior bank
credit facility was lowered to 'BB' from 'BBB-' and the rating
on JLG's $175 million senior subordinated notes was lowered to
'B+' from 'BB+'. All ratings on the company were removed from
CreditWatch, where they were placed Sept. 26, 2002. The outlook
is now negative.
"The downgrades reflect Standard & Poor's concern over limited
prospects for a significant turnaround in the company's end
markets over the near term and resulting reduced credit measures
compared to previous expectations," said Standard & Poor's
credit analyst Nancy Messer. Although JLG remains profitable,
its financial results have deteriorated materially from levels
achieved before the recent economic downturn due to a continuing
difficult economic environment that has depressed the
nonresidential construction and industrial markets, aggravated
excess capacity in the industry, pressured prices in the used
equipment market, and prompted a credit crunch for some of JLG's
customers. Hagerstown, Maryland-based JLG is a construction
equipment manufacturer with a total debt of about $254 million
at Oct. 31, 2002, excluding nonrecourse debt.
The ratings reflect Standard & Poor's assessment that the
company's overall business position is below average. Although
JLG is the world's largest manufacturer of aerial work
platforms, it is exposed to cyclical and competitive markets.
JLG sells a well-respected, but narrow, product line and has
only one significant competitor in the U.S. (Genie, which was
purchased in late 2002 by Terex Corp. (BB-/Stable/--)). The
competitive impact of Genie's purchase by the larger, more
diverse Terex is not yet clear, but a price war is not expected.
Although JLG is somewhat geographically diverse, operations are
affected by both cyclical and seasonal demand in construction
and manufacturing activity. JLG's concentrated customer base
(equipment rental companies) presents another significant risk
factor, although the ultimate end-customer base is diverse.
JLG's sales and EBITDA (including restructuring charges)
declined 20% and 46%, respectively, year-over-year, in fiscal
year 2002 (ended July), despite a continuing series of cost-
saving and restructuring efforts initiated by management,
because a significant contraction in the private nonresidential
construction industry led equipment rental companies to
scale back on planned purchases. JLG's assumption of a financial
service role, through its customer-financing subsidiary, Access
Financial Solutions Inc., adds incremental risk. However,
receivable quality for AFS has been satisfactory to date and
financing arrangements limit the size of AFS.
Standard & Poor's expects credit protection measures for JLG
over the intermediate term of total debt to EBITDA in the range
of 3x to 3.5x and funds from operations to total debt
approaching 20% to 25%, treating AFS on an equity basis.
Standard & Poor's views the limited recourse debt associated
with AFS as nonrecourse to JLG. AFS expects to periodically
monetize its finance receivables, allowing the company to
originate receivables while remaining within a $150 million
limitation of unsold loans imposed by JLG's senior credit
facilities. Financial flexibility improved in June 2002 with
JLG's issuance of $175 million in subordinated
debt having a maturity of 2012.
KASPER ASL: Has Until March 31 to Make Lease-Related Decisions
--------------------------------------------------------------
The U.S. Bankruptcy Court for the Southern District of New York
gave its nod of approval to Kasper A.S.L., Ltd., and its debtor-
affiliates' application extending the Debtors' time to decide
what to do with their unexpired leases. The Debtors have until
the earlier of:
i) confirmation of a chapter 11 plan of reorganization; and
ii) March 31, 2003
to decide whether to assume, assume and assign, or reject their
unexpired nonresidential real property leases.
Kasper A.S.L., Ltd., one of the leading women's branded apparel
companies in the United States, filed for chapter 11 protection
on February 5, 2002 (Bankr. S.D.N.Y. Case No. 02-10497). Alan
B. Miller, Esq. at Weil, Gotshal & Manges, LLP, represents the
Debtors in their restructuring efforts. When the Company filed
for protection from its creditors, it listed $308,761,000 in
assets and $255,157,000 in debts.
KEY3MEDIA MEDIA: Gets Interim Nod to Obtain $12.5 DIP Financing
---------------------------------------------------------------
Key3Media Group, Inc., and its debtor-affiliates sought and
obtained the U.S. Bankruptcy Court for the District of
Delaware's approval to finance their ongoing operations through
a $30 million of postpetition financing from Thomas Weisel
Strategic Opportunities Partners, L.P., a prepetition creditor
of the Debtors who's negotiated to own the lion's share of the
business once Key3Media emerges from bankruptcy. On an interim
basis, pending a final hearing, the Debtors may borrow up to
$12.5 million.
The Debtors explain that Funds borrowed under the DIP Facility
are required to fund their day-to-day operations, including the
payment of wages and other employee benefits that are vital to
the continued operation of the Debtors' businesses. Without the
fresh working capital financing, the Debtors will be unable to
meet their ordinary course business expenditures that are
critical to the ability to maintain ongoing operations and
preserve the value of the estates. The Debtors explain that
without immediate access to a postpetition financing facility,
the Debtors will lack sufficient liquidity to maintain their
operations and continue as a going concern.
As of the Petition Date, Key3Media Group, Inc. borrowed,
$80,000,000 under a Revolving Credit Agreement and the
Prepetition Lenders are backing $1,768,986 of Letter of Credit.
Shortly before the Petition Date, Weisel, holding 68% of the
commitments under the Prepetition Credit Agreement agreed to a
5th Amendment, Waiver and Consent to Amended and Restated Credit
Agreement. The Fifth Amendment modifies the Prepetition
Security Agreement to permit the Debtors to grant senior liens
on certain assets in favor of the DIP Lender to secure the DIP
Financing and to use cash collateral in compliance with the
terns of the Prepetition Security Agreement.
The Debtors disclose that as of the Petition Date, they have
$1 million in cash on hand. The Debtors don't believe this money
constitutes the cash collateral because these funds are the
proceeds from the sale of assets that were not subject to the
Secured Lenders' liens. However, in an abundance of caution,
the Debtors ask authority from the Court to use these funds to
the extent they may be deemed Existing Cash Collateral.
The Debtors tell the Court that they made inquiries with other
prospective lenders to obtain postpetition financing on the best
terms possible. Because of the Debtors' dire need for immediate
financing, the Debtors believed that Weisel's approval, being
the holder of a majority of the Prepetition Secured Debt, is
essential. Ultimately, the Debtors were able to secure
commitments from Weisel for a DIP financing facility, which
offers the Debtors appropriate levels of borrowing on their
assets.
The Postpetition Credit Facility affords the Debtors a loan up
to $30 million from Thomas Weisel Strategic Opportunities
Partners, LP, and its successors and assigns, as Lender; and
Wilmington Trust Company as Collateral Agent and Administrative
Agent. The terminates at the earliest of:
(i) the June 30, 2003, Stated Maturity Date,
(ii) the date on which the Commitments terminate for any
reason,
(iii) the date that is 45 days after the Petition Date if the
Final Order has not been entered by the Bankruptcy
Court on or prior to such date,
(iv) the Consummation Date, or
(v) the l0th day after any Loan Party supports, endorses or
sponsors any Qualified Alternate Transaction.
Proceeds of the loan will be used to:
(i) fund payroll and other ongoing working capital and
general corporate needs of the Debtors;
(ii) pay the fees, costs, expenses, and disbursements of
professionals retained by the Debtors or any statutory
committees subsequently appointed in the cases and
bankruptcy related charges; and
(iii) pay fees and expenses owed to the DIP Lender under the
DIP Agreement and its ancillary documents.
Borrowings under the DIP Facility accrue interest a 7% per year.
The Lender will receive from the Debtors an Arrangement Fee of
up to $1,500,000 plus the lesser of $300,000 and the amount that
payable to the Joint Arranging Lenders as a fee for
participating in the Loan. The Debtors must also pay on demand
all reasonable fees, costs and expenses incurred by or on behalf
of the Administrative Agent and the Lender. The Debtors will
also pay an Exit Fee of $5,000,000.
The Postpetition Financing Documents also contemplate that all
of the Debtors' Postpetition Obligations to the DIP Lender will
be granted superpriority administrative expense status in
accordance with section 364(c)(1) of the Bankruptcy Code over
any and all expenses of and claims against the Debtors.
The Debtors told the Court that they were unable to obtain
unsecured credit or debt allowable as an administrative expense
under the Bankruptcy Code in an amount sufficient and readily
available for them to maintain ongoing operations. The Debtors
believed that the proposal negotiated with the DIP Lender was
presently the only financing that met the Debtors' needs for
immediate availability of funds.
Key3Media Group, Inc.'s business consists of the production,
management and promotion of a portfolio of trade shows,
conferences and other events for the information technology
industry. The Company filed for chapter 11 protection on
February 3, 2003 (Bankr. Del. Case No. 03-10323). John Henry
Knight, Esq., and Rebecca Lee Scalio, Esq., at Richards, Layton
& Finger, P.A., represent the Debtors in their restructuring
efforts. When the Debtors filed for protection from its
creditors, it listed $241,202,000 in total assets and
$441,033,000 in total debts.
KEY3MEDIA GROUP: Final DIP Financing Hearing Slated for March 7
---------------------------------------------------------------
Key3Media Group, Inc. (OTCBB: KMED), the world's leading
producer of information technology tradeshows and conferences,
announced that the United States Bankruptcy Court for the
District of Delaware has granted the Company's request for
interim approval to utilize the initial $12.5 million of the $30
million debtor-in-possession (DIP) financing to be provided by
Thomas Weisel Capital Partners.
A hearing has been scheduled for March 7, 2003 for final
approval.
On February 3, 2003, Key3Media announced a plan of
reorganization, backed by investment funds managed by Thomas
Weisel Capital Partners, that would enable the Company to hold
all scheduled tradeshows and conferences without interruption.
Under the plan, Key3Media will reduce its total debt by 87% from
approximately $372 million to $50 million.
LENNAR CORP: S&P Ratchets Various Low-B Ratings Up a Notch
----------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on Lennar Corp., to 'BBB-' from 'BB+'. At the same time,
ratings are raised on approximately $2.185 billion senior debt,
including bank lines, and on $254 million subordinated debt. The
company's outlook is revised to stable from positive.
The ratings and outlook acknowledge Lennar's solid market
position, highly profitable operations, successful track record
of integrating acquisitions, and sound financial risk profile.
These credit strengths, coupled with management's discipline
with regard to debt leverage, should enable Lennar to perform
solidly even if housing demand does soften.
Miami, Fla.-based Lennar markets homes to first-time, move-up
and active adult buyers. The company, which maintains operations
in 16 states, including California, Florida, and Texas, has been
in business for more than 48 years and has a long track record
of operating successfully through a number of housing cycles.
With $6.8 billion in fiscal 2002 homebuilding revenues (more
than 27,000 units delivered), Lennar is among the largest
homebuilders in the country. Its market position has been
bolstered in recent years by its aggressive expansion efforts,
which included the acquisition of nine builders in 2002 for an
aggregate $600 million. Lennar continues to successfully
integrate these franchises without leveraging its balance sheet.
The company has effectively managed its broadened business, with
fiscal year 2002 performance benefiting from a significant
increase (roughly 15%) in unit deliveries and a moderate (4%)
increase in average selling prices. Lennar's strong homebuilding
gross and operating margins at 24% and 14%, respectively,
compare very favorably with other larger, national homebuilders.
The company's financial position is appropriate for the raised
rating. Leverage at fiscal year ended November 2002 was 42%
debt-to-book capitalization or 28%, net of a sizable level ($731
million) of cash and equivalents. The company does have off-
balance sheet land financing joint ventures, with an estimated
$1.2 billion in total capitalization, which is just less than
half the size of Lennar's current on-balance sheet inventory
position. However, because the leverage for these ventures is
comparable to that of Lennar, even full consolidation results in
only a modest increase in leverage to a still acceptable 49%
debt-to-book capitalization or 38% net of cash. The company does
control just more than half its 158,000-land lot position
through options and joint ventures, the bulk of which are
nonperformance based. Only a modest portion of Lennar's total
options are financed with financial intermediaries, as these
represent just less than 5% of total lots controlled. The
company's debt maturity schedule is very manageable, and
Lennar's weighted average debt maturity (roughly nine years)
appropriately matches its longer land position (approximately
five years controlled).
Liquidity
The company's solid cash flow produced homebuilding
EBITDA/interest coverage of 7.1x and homebuilding debt-to-
homebuilding EBITDA of 1.7x, both of which are above average and
supported by a largely fixed-rate debt structure. In addition to
Lennar's strong internal cash flow and substantial cash on hand
($731 million at fiscal year end), the company has access to
$926 million aggregate bank facilities that were fully available
at fiscal year end. Lennar has been a more aggressive issuer of
zero coupon debt than its rated peers, with two issues
outstanding, the first of which ($272 million estimated balance
in July 2003) can be put/called in July 2003. However, given the
strong appreciation of Lennar's stock since initial issuance
(currently $54/share) relative to the July 2003 accreted
conversion price ($45/share), it is probable that this issue
will convert to equity. (Should the conversion not occur, Lennar
could easily meet this maturity with bank line availability.)
The company does not currently pay a meaningful dividend, and
Standard & Poor's estimates that Lennar's existing homebuilding
inventory, which does appear to be carried at conservative
values, can comfortably cover net debt outstanding by more than
3.7x.
Outlook: Stable
Lennar has performed solidly during the past few years. With
substantial internal and external liquidity, a talented
management team, and a strong track record of integrating
acquisitions, this national homebuilder is well positioned to
pursue other acquisitions and to weather any eventual softening
in home buying demand. The ratings are based on the assumption
that Lennar will continue to pursue acquisitions that provide a
clear strategic benefit to the company, while maintaining a
solid financial profile.
RAISED RATINGS
Lennar Corp.
Ratings
To From
Corporate credit BBB-/Stable BB+/Positive
$2.185 bil. sr debt BBB- BB+
$254.19 mil. sub debt BB+ BB-
U.S. Homes Corp.
Ratings
To From
Corporate credit BBB- BB+
$2.181 mil. sr debt BBB- BB+
$6.187 mil. sub debt BB+ BB-
LERNOUT: Committee Asks Court to Modify Exclusive Periods
---------------------------------------------------------
The Official Committee of Unsecured Creditors, represented by
lawyers at Akin Gump Strauss Hauer & Feld, asks Judge Wizmur to
modify Lernout & Hauspie Speech Products N.V.'s exclusive
periods to allow the Committee to propose a plan of liquidation
because:
(1) the case is over two years old;
(2) the Committee believes that the plan of liquidation
currently on file is not confirmable; and
(3) the Committee believes that it could be in a
position to file its own plan shortly.
The Committee reminds Judge Wizmur that L&H NV's most recent
motion seeking an extension of the exclusivity periods provided
the Committee with the right to seek to terminate the exclusive
periods on 15 days' notice, with the burden of proof resting
with L&H NV to show that cause exists for exclusivity to
continue.
L&H NV advised the Court that the issues relating to the
Stonington entities cannot be resolved at this time. The
Committee believes that, even if a settlement with Stonington is
reached, no "global peace" will result due to the myriad of
similarly situated creditors who can still assert the same type
of claims as Stonington in Belgium and seek pari passu
treatment. As a result, the Committee believes that L&H NV is
unable to propose a plan of liquidation capable of being
confirmed by the Court. The Committee, however, believes that
it is in a position to propose a confirmable plan because it is
not under the same constraints as the Debtor, and can propose a
plan that fully recognizes the priority scheme in the Bankruptcy
Code.
The Committee complains that, during this case, L&H NV has
sought and received nine extensions of the exclusive periods.
Despite the fact that L&H NV sold substantially all of its
assets one year ago, the Committee believes that the plan of
liquidation currently on file is not capable of being confirmed
due to conflicts in priority schemes between Belgium and the
United States. Allowing the exclusive periods to remain intact
will only result in the continued accumulation of administrative
expenses, to the detriment of the Debtor's creditors, and will
not facilitate the progress of this case. In fact, the
Committee believes that a plan of liquidation that they will
propose is likely the quickest and most efficient way to bring
this case to a conclusion.
Banks Agree the Committee Should File a Plan
KBC Bank NV, Fortis Bank NV, Dexia Bank Belgium, Deutsche Bank
NV, and Deutsche Bank AG, represented by Adam G. Landis, Esq.
And Kathleen Makowski, Esq., at Klett Rooney Lieber & Schorling,
and by Howard Seife, Esq., and N. Theodore Zink, Jr., Esq., at
Chadbourne & Parke LLP, support the Committee's request.
Ms. Makowski observes that "the plan process has ground to a
halt." L&H NV appears to be unable to propose a plan within a
reasonable period of time, and this case is now more than two
years old. The Banks believe that terminating exclusivity to
enable the Committee to propose and seek confirmation of a plan
will promote a more expeditious resolution of this case.
(L&H/Dictaphone Bankruptcy News, Issue No. 35; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
METROCALL INC: Board Appoints Vincent D. Kelly, President & CEO
---------------------------------------------------------------
Metrocall Holdings, Inc., (OTCBB:MTOHV) announced that effective
immediately its board of directors has appointed Vincent D.
Kelly to assume the role of President and Chief Executive
Officer.
The board also named an existing independent board member, Royce
Yudkoff, Chairman of the Board of Directors of Metrocall
Holdings, Inc. These moves follow the termination of William L.
Collins III, from his positions of President, Chief Executive
Officer and Chairman of Metrocall Holdings, Inc.
Vincent D. Kelly has been employed by the Company since 1987 and
has served in a variety of roles over the years including
Director, Executive Vice President, Chief Operating Officer, and
Chief Financial Officer. He had primary responsibility last year
for Metrocall's successful reorganization and has been
integrally involved in every aspect of Metrocall's internal and
external operations, including strategic and business planning.
Mr. Kelly stated, "I appreciate the confidence and support of
Metrocall's board, lenders and owners and I am committed to
achieving our strategic, operating and financial goals. I look
forward to continuing to work with Royce, the rest of the Board
and my colleagues at Metrocall to make us successful, profitable
and a leader in low cost, wireless communications."
Royce Yudkoff has been a member of the Company's board of
directors since April 1997. Mr. Yudkoff is the Managing Partner
of ABRY Partners, LLC., a private equity investment firm. Prior
to co-founding ABRY in 1989, Mr. Yudkoff was a partner with Bain
& Company, an international management consulting firm. "I am
delighted to team with Vince, his management team and the board
of directors. He has my full faith and confidence as an
executive and businessman, and I look forward to working with
him as we face the challenges and opportunities of wireless
messaging."
In related moves Stan F. Sech was named Chief Operating Officer
and George Z. Moratis was named Chief Financial Officer. Mr.
Sech has been with the Company since early 2000 and has served
as Senior Vice President of Corporate and Business Development.
Prior to joining Metrocall, Mr. Sech served as CEO of Page One
Communications in the United Kingdom and prior to Page One, Mr.
Sech was President and COO of USA Mobile Communications. Mr.
Moratis has been with Metrocall in various financial roles since
1998 and has most recently served as Senior Vice President of
Finance.
Prior to joining Metrocall, Mr. Moratis served as senior manager
for financial reporting at MCI Communications. Mr. Moratis has
also worked within the Division of Corporation Finance of the
Securities and Exchange Commission and in public accounting with
Deloitte & Touche.
Metrocall, Inc., headquartered in Alexandria, Virginia, is one
of the largest narrowband wireless data and messaging companies
in the United States providing both paging products and other
wireless services to approximately 3.7 million business and
individual subscribers. Metrocall was founded in 1965 and
currently employs approximately 1,900 people nationwide.
The Company currently offers two-way interactive messaging,
wireless e-mail and Internet connectivity, cellular and digital
PCS phones, as well as one-way messaging services. Metrocall
operates on nationwide, regional and local networks and can
supply a wide variety of customizable Internet-based information
content services.
Also, Metrocall offers integrated resource management systems
and communications solutions for business and campus
environments. For more information on Metrocall please visit the
Company's Web site and on-line store at http://www.Metrocall.com
Metrocall Inc., filed for Chapter 11 protection on June 3, 2002,
in the U.S. Bankruptcy Court for the District of Delaware
(Bankr. Del. Case No. 02-11579-RSB). Laura Davis Jones, Esq., at
Pachulski Stang Ziehl Young & Jones, represent the Debtor in
this case.
Metrocall Inc.'s 10.375% bonds due 2007 (MCLL07USR2) are trading
at about 4.5 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=MCLL07USR2
for real-time bond pricing.
NAT'L CENTURY: Creditors Seek Separate Subcommittee Appointments
----------------------------------------------------------------
Robert Jay Moore, Esq., at Milbank, Tweed, Hadley & McCloy, in
Los Angeles, California, relates that of the 14 National Century
Financial Enterprises Debtors, on a combined basis, NPF VI, Inc.
and NPF XII, Inc. hold 99% of all the assets and liabilities.
This reality is reflected in the fact that, at the present time,
NPF VI and NPF XII have more than $185,000,000 in their debtor-
in-possession bank accounts, while the other 12 debtors have
less than $1,000,000 in their bank accounts. Also, the
noteholders of NPF VI and NPF XII hold undisputed claims of
approximately $3,000,000,000, while the trade creditors' claims
against the 14 Debtors is estimated to be less than $30,000,000
in the aggregate. Moreover, all of the funds in the NPF VI and
NPF XII bank accounts are subject to the liens of the NPF VI and
NPF XII indenture trustees for the noteholders' benefit. Thus,
Mr. Moore points out, it is not surprising that the Debtors have
filed a cash collateral motion under which they propose to fund
all of the costs of these Chapter 11 cases out of the cash
collateral of the NPF VI and NPF XII indenture trustees. Also,
a number of medical providers who are account debtors of NPF VI
and NPF XII have moved to dismiss the NPF VI and NPF XII Chapter
11 cases.
In view of the central positions of NPF VI and NPF XII to all
these Chapter 11 cases and the critical need of the NPF VI and
NPF XII Noteholders to protect their huge exposure in an
adequate and effective manner, holders of $1,600,000,000 of NPF
XII Notes -- 80% of the total debt of NPF XII -- originally
asked the Office of the United States Trustee to appoint a
separate official committee of Noteholders. Thereafter, those
NPF XII Noteholders joined together with Noteholders holding a
majority of NPF VI Notes to ask the U.S. Trustee to appoint
subcommittees of NPF VI and NPF XII creditors within the
Official Creditors' Committee.
Unfortunately, the U.S. Trustee has determined that it will not
grant the Joint Subcommittee's Request. In taking that
position, the U.S. Trustee failed to cure a problem that is now
acknowledged by every NPF VI and NPF XII creditor that is a
member of the Official Creditors' Committee, and by many other
parties-in-interest. Simply stated, Mr. Moore explains, the
refusal to designate separate creditor representative bodies for
NPF VI and NPF XII will severely hamper the effective
administration of these Chapter 11 cases, and will hinder
greatly the abilities of the NPF VI and NPF XII Noteholders to
protect their overwhelming interests in these cases.
Accordingly, the Official Committee of Unsecured Creditors and
the NPF XII Noteholders, who are holding more than 80% of the
undisputed claims in these Chapter 11 cases, ask the Court to
appoint separate official subcommittees for the creditors of
Debtors NPF XII and NPF VI within the Official Unsecured
Creditors' Committee. In the alternative, the Creditors seek
the appointment of separate official creditors' committees for
Debtors NPF XII and NPF VI.
For the Debtors to respond promptly to healthcare providers that
are often in dire need of alternative financing, the Debtors
must seek direction from the NPF VI and NPF XII noteholders,
who, through their indenture trustees, hold security interests
in the assets of these health care providers. The indentures
under which the Noteholders hold their Notes contain provisions
pursuant to which the noteholders may direct their trustees to
act, but these indenture provisions do not contemplate the sort
of quick, daily responses that the Debtors require, if these
Chapter 11 cases are to succeed. The indentures also allow the
indenture trustees to require written indemnification from the
Noteholders before they will take many of the actions that the
Debtors request they take. Mr. Moore contends that the
Subcommittees proposed would go a long way towards enabling the
Noteholders to act promptly and authoritatively without the
inefficient delay they have experienced to date.
Many issues of great importance have arisen in the Debtors'
bankruptcy cases that relate exclusively to the interests of
either NPF VI or NPF XII2, and their Noteholder creditors, among
which:
-- Throughout the country many Chapter 11 cases have been
commenced by health care providers that previously were
funded by NPF VI and/or NPF XII. In each of these cases,
the health care providers have sought to use the funds
owned either by NPF VI or NPF XII, or the cash collateral
of either NPF VI or NPF XII, to fund ongoing operations
and the costs of administering their respective Chapter
11 estates;
-- A number of health care providers have filed motions to
dismiss the NPF VI and NPF XII Chapter 11 cases;
-- The Debtors have moved the Court for authority to use the
cash collateral of NPF VI and NPF XII in order to operate
the 14 Debtors businesses; and
-- The Debtors have begun to place before the Court
settlements with non-bankrupt providers that require the
consent of the NPF VI and NPF XII Noteholders.
All of these and many other issues, Mr. Moore points out, are
pressing matters that might be resolved without the necessity of
lengthy court hearings if there were official Chapter 11 bodies
that could speak authoritatively for the NPF VI and NPF XII
Noteholders. "This is what the motion seeks to accomplish," Mr.
Moore maintains.
According to Mr. Moore, the Court has express statutory
authority to appoint additional creditors committees under
Section 1102(a)(2) of the Bankruptcy Code. The Court has
additional authority under Section 105(a) of the Bankruptcy Code
to enter an order designating official Subcommittees in this
case. If this motion is granted, the NPF VI and NPF XII
noteholders on the Official Creditors' Committee would become
the core of the official NPF VI and NPF XII subcommittees. It
is anticipated that the Subcommittees will add a number of ex-
officio members, including the indenture trustees.
Using the general factors in considering the motion under
Section 1102(a), Mr. Moore asserts that two separate official
subcommittees or two separate committees for NPF VI and NPF XII
should be created because:
(i) These are truly complex Chapter 11 cases. Never before
has a single Chapter 11 filing been so directly related to
so many other Chapter 11 cases. Indeed, by the second day
of the Debtors' cases, other Chapter 11 debtors throughout
the Atlantic seaboard and in California, began moving this
Court for emergency relief. The Court, the Debtors and
the key creditor constituencies were all hampered in those
early days by the absence of authoritative bodies that
could speak and negotiate for the NPF VI and NPF XII
bondholders. Many a lengthy hearing could have been
avoided had the NPF VI and NPF XII Noteholder
Subcommittees been appointed. The inefficiencies of those
days have reached near crisis proportions today in terms
of the Debtors' ability to respond effectively to
provider proposals, particularly those providers not yet
in Chapter 11 who need alternative financing to stay out
of bankruptcy.
(ii) The principal creditor constituencies in the Debtors'
Chapter 11 cases support the Motion -- the two indenture
trustees, Bank One, N.A. and JPMorgan Chase Bank, and
their professionals; the ad hoc committee representing the
holders of 80% -- $1,600,000,000 out of $2,000,000,000 --
of undisputed noteholder claims against NPF XII; and the
holders of 80% -- $720,000,000 out of $950,000,000 -- of
the noteholder claims against NPF VI. Also, the Creditors
expect that by the hearing on this motion, the newly
constituted Official Creditors' Committee and the Debtors,
will add their support to the motion; and
(iii) It is obvious that the Official Creditors' Committee,
composed of a mix of trade creditors and NPF VI and NPF
XII creditors, cannot speak authoritatively for the
Noteholders of NPF VI and NPF XII and negotiate on their
behalf. Only separate NPF VI and NPF XII noteholder
subcommittees or committees, represented by their own
counsel, can speak authoritatively for the creditors of
NPF VI and NPF XII.
Mr. Moore claries that whether the Court deems it appropriate to
appoint Subcommittees of the Official Creditors Committee for
NPF VI and NPF XII, or separate official committees for NPF VI
and NPF XII, the expenses of these representative bodies,
including their professionals, would be paid solely out of the
estates of NPF VI and NPF XII. Accordingly, Mr. Moore
emphasizes, granting this request will not deplete the assets
available to pay the trade creditors' claims.
Every effort would be made to avoid duplication of professional
services amongst the professionals employed at the expense of
the bankruptcy estates. In addition, the Noteholders of NPF VI
and NPF XII would work out a consensual arrangement for the use
of their cash collateral to pay for the expenses of the Official
Creditors' Committee. The creditors of the NPF VI and NPF XII
estates, as the largest creditors in these cases, have the
greatest economic incentive in avoiding duplication of effort
between their counsel and the counsel for the Official
Creditors' Committee, and realizing efficiencies through the
cooperative allocation of professional resources amongst the
committees. (National Century Bankruptcy News, Issue No. 7;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
NATIONAL STEEL: Court Approves AFCO Insurance Finance Agreement
---------------------------------------------------------------
Pursuant to Sections 364(c) and 105 of the Bankruptcy Code and
Rule 4001(c) of the Federal Rules of Bankruptcy Procedure,
National Steel Corporation and its debtor-affiliates sought and
obtained the Court's authority to enter into an insurance
premium financing agreement with AFCO Premium Credit LLC,
wherein AFCO will finance certain of the Debtors' insurance
premiums.
AFCO Premium Credit is a joint venture of AFCO Credit
Corporation and Marsh USA Inc.
The Debtors will finance the premiums for umbrella and punitive
damages policies in accordance with a Commercial Premium Finance
Agreement. These new policies would replace the Debtors'
existing policies that expired on, and require renewal payments
by, January 31, 2003.
The annual premiums for the new policies are $2,007,500.
Pursuant to the Finance Agreement, the Debtors will finance
$1,405,250 of the premium payments through AFCO. AFCO will
charge a 3.37% annual percentage interest rate.
David N. Missner, Esq., at Piper Rudnick, in Chicago, Illinois,
explains that the Debtors have been unable to locate any source
of financing for the premiums with terms that are as
advantageous as those offered by AFCO.
To finance the premiums, Mr. Missner relates that AFCO has
required the Debtors to enter into the Finance Agreement which
includes a security agreement that grants AFCO a security
interest in the gross unearned premiums that would be payable in
the event of cancellation of the insurance policies. The
Agreement further authorizes AFCO to cancel the financed
insurance policies and obtain the return of any unearned
premiums in the event of a default in the payment of any
installment due.
Mr. Missner asserts that it is very important to maintain
insurance coverage with respect to business activities and
preserve the Debtors' cash flows and estate by financing the
insurance premiums. (National Steel Bankruptcy News, Issue No.
24; Bankruptcy Creditors' Service, Inc., 609/392-0900)
NATIONAL STEEL: Judge Squires Approves AK Steel as Lead Bidder
--------------------------------------------------------------
AK Steel Corporation (NYSE:AKS) said that Federal Judge John H.
Squires approved a motion making AK Steel the lead bidder with
its offer to acquire substantially all the assets of National
Steel Corporation for $1.125 billion. Judge Squires made the
ruling in the U.S. Bankruptcy Court for the Northern District of
Illinois in Chicago. Attorneys for National Steel Corporation
had filed the motion and supported AK Steel's proposed Asset
Purchase Agreement, which AK Steel and National Steel signed
January 30. The judge also approved procedures and threshold bid
amounts others must follow in bidding and set a date of April 7,
2003 for a hearing on the auction of the National assets.
Under terms of the APA, AK Steel has until March 17, 2003, to
reach agreement with the United Steelworkers of America on a new
contract for the National employees represented by the union. If
no agreement is reached by that date, either AK Steel or
National Steel may terminate the APA.
AK Steel's bid includes $200 million consisting of the
assumption of certain liabilities with the remaining $925
million payable to National in cash, with $450 million of that
amount for net working capital. AK Steel said it believes the
acquisition would give the company the potential to realize
cost-based synergies in excess of $250 million annually.
Under the purchase agreement AK Steel would acquire National's
integrated steel plants in Ecorse and River Rouge, Michigan, and
Granite City, Illinois, as well as the Midwest finishing
facility in Portage, Indiana. AK Steel will also acquire the
assets of National Steel Pellet Company in Keewatin, Minnesota,
the administrative offices in Mishawaka, Indiana, various
subsidiaries, and National's share of the Double G joint venture
in Jackson, Mississippi.
AK Steel said its offer continues to be contingent upon
regulatory approvals and contemplates negotiation of a new
contract with the United Steelworkers of America, which
represents most of National's hourly employees. AK Steel said
its bid does not include the assumption of pension and other
post-retirement employee benefits, which consist primarily of
retiree health care obligations.
"The acquisition of the National Steel assets would represent
another step in AK Steel's continuing plan of strategic growth
in value-added products, such as tin mill and construction
building products," said Richard M. Wardrop, Jr., chairman and
CEO of AK Steel. "Likewise, our plan represents the opportunity
for National Steel employees to become part of AK Steel, which
has led the industry in employee safety, customer quality,
productivity and operating profit per ton for nearly a decade.
Further, no other domestic steel company has invested more
capital recently in the United States for steel making and steel
finishing technology than AK Steel," he said.
National Steel, headquartered in Mishawaka, Indiana, filed a
voluntary petition under Chapter 11 of the Bankruptcy Code in
March of 2002, but has continued to operate its facilities.
National operates steel producing and finishing facilities in
Indiana, Illinois and Michigan. More information is available on
the company's Web site at http://www.nationalsteel.com
Headquartered in Middletown, Ohio, AK Steel produces flat-rolled
carbon, stainless and electrical steel products for automotive,
appliance, construction and manufacturing markets, as well as
tubular steel products. The company operates steel producing and
finishing facilities in Ohio, Kentucky, Pennsylvania and
Indiana. Additional information about AK Steel is available on
the company's Web site at http://www.aksteel.com
NATIONSRENT: Court OKs Modified Ordinary Professionals' Fee Cap
---------------------------------------------------------------
NationsRent Inc., and its debtor-affiliates obtained the Court's
approval to modify the Caps with respect to these Ordinary
Course Professionals:
New Case Original
Professional Services Provided Cap Case Cap
------------ ----------------- -------- --------
Agovino & Asselta collection matters $60,000 $10,000
Akerman, Senterfitt Real estate, gen. 800,000 1,200,000
& Eidson litigation counsel
Bell, Nunnally collection matters 200,000 150,000
& Martin
Collins, Norman collection matters 30,000 New OCP
& Basinger
Guest & Associates collection matters 20,000 80,000
Locke Reynolds LLP collections matters 15,000 New OCP
Mason, Slovin & collection matters 150,000 New OCP
Schilling
Niederman, Stanzel collections matters 30,000 New OCP
& Lindsey
Rego & Hagan Co. collection matters 7,500 New OCP
Schlanger, Mills, collection matters 30,000 New OCP
Mayer & Silver
Seiller & Handmaker collection matters 25,000 10,000
Smith & Sellers collection matters 25,000 7,500
Winstead Sechrest collection matters 75,000 80,000
& Minick PC
----------
TOTAL $2,813,500
(NationsRent Bankruptcy News, Issue No. 26; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
NEXTERA ENT.: Names Daniel Fischel as Chairman, Pres., and CEO
--------------------------------------------------------------
Nextera Enterprises, Inc. (NASDAQ: NXRA), which consists of
Lexecon, one of the world's leading economics consulting firms,
announced that Lexecon President, Daniel R. Fischel, has been
named Chairman, President and Chief Executive Officer of
Nextera, effective immediately.
He replaces David M. Schneider, Nextera's Chairman and Chief
Executive Officer, who has resigned to pursue other career
opportunities.
On February 11, 2003, Nextera will announce fourth quarter
earnings of modest profitability with lower sequential revenue,
due to seasonal softness in demand, in-line with expectations
provided in the third quarter.
Keith D. Grinstein, one of Nextera's Independent Directors,
said, "On behalf of the Board of Directors, I would like to
thank David for his significant contributions to Nextera over
the past few years. Under David's leadership, the Company
successfully completed its transformation and returned to
profitability, while expanding Lexecon's service offerings to
better meet the demands of its clients. We are pleased that
David has agreed to serve as consultant to the Company over the
next six months and wish him the best of luck in his future
endeavors."
Grinstein concluded, "As a member of Lexecon for over 20 years,
Dan possesses an unparalleled understanding of the industry and
the factors that drive Lexecon's business. The Board firmly
believes that Dan is the right person to continue to guide the
Company to improved performance for our shareholders."
Fischel said, "I look forward to building on Lexecon's 25-year
track record of providing high-quality economic insight to its
clients. I am fully committed to enhancing our core practice
areas and to exploring expansion into complementary markets to
create long-term value for our shareholders."
Nextera also announced that it has realigned its corporate
management. As part of the realignment, Chief Financial Officer
Michael P. Muldowney will assume additional responsibilities as
Chief Operating Officer and Michael Dolan, Corporate Controller,
will also assume the role of Chief Accounting Officer. The
Company has also named board member Richard V. Sandler as Vice
Chairman of Nextera. Nextera's Board consists of eight members,
three of whom are independent directors.
Fischel, 52, was most recently President of Lexecon. Fischel is
also the Jack N. Pritzker Distinguished Visiting Professor of
Law at Northwestern University and the Lee and Brena Freeman
Professor of Law and Business at The University of Chicago Law
School, where he previously served as Dean. Fischel has served
as a consultant and/or advisor to the U.S. Department of
Justice, the New York Stock Exchange, the U.S. Department of
Labor, the Federal Trade Commission, the U.S. Securities and
Exchange Commission, and The Chicago Board of Trade.
Additionally, Fischel's written works in securities,
commodities, corporate law, regulation of markets and economics
in corporate finance are widely cited.
Nextera Enterprises Inc., through its wholly owned subsidiary,
Lexecon, provides a broad range of economic analysis, litigation
support, regulatory and business consulting services. One of the
nation's leading economics consulting firms, Lexecon assists its
corporate, law firm and government clients reach decisions and
defend positions with rigorous, objective and independent
examinations of complex business issues that often possess
regulatory implications. Lexecon has offices in Cambridge and
Chicago. More information can be found at http://www.nextera.com
and http://www.lexecon.com
* * *
Liquidity And Capital Resources
In its SEC Form 10-Q filed on November 14, 2002, the Company
stated:
"Consolidated working capital was $1.0 million on September 30,
2002, compared to a working capital deficit of $5.1 million on
December 31, 2001. Included in working capital were cash and
cash equivalents of $1.5 million and $4.5 million on September
30, 2002 and December 31, 2001, respectively.
"Net cash used in operating activities was $2.4 million for the
nine months ended September 30, 2002. The primary components of
net cash used in operating activities was a decrease of $7.9
million in accounts payable and accrued expenses, due primarily
to bonus payments and restructuring payments, and an increase of
$5.7 million in accounts receivable. These cash outflows were
primarily offset in part by net income of $5.6 million, an
increase in other long-term liabilities of $1.8 million and non-
cash items relating to depreciation and interest paid-in-kind of
$3.6 million.
"Net cash provided by investing activities was $12.0 million for
the nine months ended September 30, 2002, substantially
representing proceeds of $14.7 million received from the sale of
the human capital consulting business offset by restricted cash
of $2.1 million and the purchase of fixed assets of $0.6
million.
"Net cash used in financing activities was $12.5 million for the
nine months ended September 30, 2002. The primary components of
net cash used in financing activities were $10.6 million of
repayments under the Company's Senior Credit Facility and $2.5
million of payments of other debt and capital leases
obligations.
"Effective March 29, 2002, the Company entered into the Senior
Credit Facility with the Company's senior lenders. Under the
Senior Credit Facility, the Company agreed to permanently reduce
the borrowings outstanding under the facility by $6.5 million in
2002 and by $8.0 million in 2003. The Senior Credit Facility
matures on January 2, 2004. Borrowings under the facility will
bear interest at the lender's base rate plus 2.0%, with the
potential for the interest rate to be reduced 100 basis points
upon Nextera achieving certain financial and operational
milestones. In connection with the Senior Credit Facility, the
Company agreed to pay a $0.9 million fee to the senior lenders
over the next two years and issued the senior lenders additional
warrants to purchase 400,000 shares of the Company's Class A
Common Stock at an exercise price of $0.60 per share,
exercisable at the senior lenders' sole discretion at any time
prior to 18 months after payment in full of all of the Company's
obligations due under the Senior Credit Facility. The senior
lenders can elect in their sole discretion to require the
Company to redeem the warrants for a $0.2 million cash payment.
An affiliate of Knowledge Universe, an entity that indirectly
controls Nextera, has agreed to continue to guarantee $2.5
million of the Company's obligations under the Senior Credit
Facility. The Senior Credit Facility contains covenants related
to the maintenance of financial ratios, extending employment
agreements with certain key personnel (which begin to expire on
December 31, 2002) by January 1, 2003, operating restrictions,
restrictions on the payment of dividends, restrictions on cash,
and disposition of assets. The covenants were based on the
Company's operating plan for 2002 and 2003. The Company is
engaged in ongoing discussions with the senior lenders with
respect to its future liquidity requirements, debenture
subordination terms and related matters. As of September 30,
2002, the Company was in compliance with the covenants contained
in the Senior Credit Facility.
"There is no assurance that the Company will be able to meet all
future financial covenants or obtain extensions of the
employment agreements of certain key personnel by January 1,
2003. Failure to achieve either of the above will place the
Company in default of its bank covenants and could have a
material adverse effect on the financial position of the
Company. Moreover, if we are able to obtain extension of these
employment contracts, the cost associated with the extensions
could have a material adverse impact on the financial condition
of the Company.
"The terms of the Senior Credit Facility require the Company to
restrict a portion of its cash on a monthly basis based on
earned bonus amounts in order that a certain percentage of
projected earned bonus amounts is escrowed or paid by the end of
2002. The escrowed funds may only be used by the Company to pay
specified bonuses and the restrictions on cash reduce the
Company's liquidity. At September 30, 2002, Nextera had $2.1
million of cash subject to these escrow arrangements."
NORCROSS SAFETY: S&P Assigns B+ Corp. Credit & Bank Loan Ratings
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' corporate
credit rating to Norcross Safety Products LLC and its 'B+'
secured bank loan rating to the company's proposed $167 million
senior secured credit facility that matures in 2009. The outlook
is stable.
"The ratings on Oak Brook, Illinois-based Norcross Safety
Products reflect the company's niche positions in small, highly
fragmented markets combined with its high leverage and limited
financial flexibility," said Standard & Poor's credit analyst
John Sico. The rating incorporates the expectation that the
company's existing $95 million subordinated notes will be
refinanced or extended before February 2005.
Norcross Safety Products is a supplier of personal protection
equipment, with large and diverse consumable product lines and a
large customer base that is somewhat recession resistant. The
company offers a high level of protection with branded and
patented products that are critical, especially to the life-
threatening occupations in the high-voltage electric and
firefighting jobs where they are used. They have niche
positions in respiratory, hand, and footwear, with a diverse
portfolio. The company provides gloves and respiratory devices
that are at the high-end and are more diverse than some of their
single product competitors. The safety business is OSHA driven
and is also driven by the aversion to litigation. Currently
there is a good opportunity for their products due to heightened
emphasis on domestic preparedness.
Norcross Safety Products has broadened its markets through
acquisitions made between 2000 and 2002. The company has grown
its presence internationally with strong growth in Canada
following the acquisition of Arkon Safety Equipment in 2000.
Additional tuck-in acquisitions are expected to augment the hand
and respiratory protection areas.
Sales have been relatively flat from 2000 to 2002, up 1.6% per
year. However, the company was able to raise EBITDA 14% over the
same period due to cost-saving initiatives. The company's recent
restructuring in 2002 of $9.2 million is primarily noncash.
The company's leverage pro forma for the transaction is high at
4.6x (adjusted for operating leases) and Standard & Poor's
expects total debt/EBITDA to average 4x over time. Cash flow
protection is thin, with funds from operations to total debt
(adjusted for operating leases) at about 12% pro forma 2002 and
is expected to rise to about 15% over time.
NRG ENERGY: FirstEnergy Wants Nod to Proceed with Arbitration
-------------------------------------------------------------
FirstEnergy Corp., (NYSE: FE) subsidiaries submitted filings
today with U.S. Bankruptcy Court in Minnesota seeking permission
to file a demand for arbitration against NRG Energy, Inc.,
regarding the $1.5 billion sale of four power plants to NRG Able
Acquisitions LLC. NRG Energy guaranteed the obligations of its
Able Acquisitions affiliate under the agreements.
The sale was cancelled on August 8, 2002, because of the
anticipatory breach of certain obligations in the agreements by
NRG Able Acquisitions. Under terms of the agreements, announced
on November 29, 2001, NRG would have purchased the Ashtabula,
Bay Shore, Eastlake, and Lakeshore plants, which have a
generating capacity of 2,535 megawatts.
FirstEnergy is a registered public utility holding company
headquartered in Akron, Ohio. Its electric utility subsidiaries
comprise the nation's fourth largest investor-owned electric
system, based on serving 4.3 million customers. Its subsidiaries
and affiliates are involved with the generation, transmission
and distribution of electricity; exploration and production of
oil and natural gas; transmission and marketing of natural gas;
and energy management and other energy-related services.
OM GROUP INC: Fourth Quarter 2002 Net Loss Tops $305 Million
------------------------------------------------------------
OM Group, Inc., (NYSE: OMG) reported fourth quarter and year-end
results for 2002, which were in line with its revised
expectations. The Company further stated that certain non-core
assets that had been identified for sale are now classified as
discontinued operations in the financial statements. The
reported results and non-core asset sales are consistent with
the Company's restructuring and cost reduction program to
improve cash flow and strengthen the balance sheet.
As previously announced, the Company recorded restructuring,
non-recurring and unusual charges of $329.7 million ($294.9
million after-tax), in the fourth quarter. The charges related
to continuing operations totaled $209.1 million ($174.4 million
after-tax). The charges related to discontinued operations,
primarily associated with the planned disposal of non-core
assets, totaled $120.6 million. There was no tax benefit
recorded for the charges related to discontinued operations.
For the year the charges totaled $437.9 million ($388.7 million
after-tax). The charges for the year related to continuing
operations totaled $317.3 million ($268.1 million after-tax) and
for discontinued operations totaled $120.6 million.
FOURTH QUARTER RESULTS
For the fourth quarter ended December 31, 2002, the Company
posted net sales from continuing operations of $1.2 billion
compared to net sales of $1.1 billion in the same period last
year. Loss from continuing operations, excluding the charges,
was $10.6 million, compared to income of $23.3 million last
year. Including the charges, the loss from continuing operations
was $185.0 million.
Discontinued operations reported a loss in the fourth quarter of
$0.1 million, excluding the charges, compared to a loss of $3.3
million last year. Including the charges, the loss from
discontinued operations was $120.7 million.
Net loss for the quarter excluding the charges was $10.7 million
compared to net income of $15.4 million in 2001. Including the
charges, the Company had a net loss of $305.6 million.
2002 RESULTS
For the full year sales from continuing operations increased to
$4.9 billion from $2.2 billion last year. The increase is
principally due to the acquisition of the precious metals
business in August of 2001. Income from continuing operations,
excluding the charges, was $69.8 million compared to $90.4
million in 2001. Including the charges, the loss from continuing
operations was $198.3 million.
For the year, discontinued operations, excluding the charges,
had a net loss of $9.0 million compared to a net loss of $10.2
million last year. Including the charges, the loss from
discontinued operations was $129.6 million.
The net income for the full year for both continuing and
discontinued operations, excluding the charges, totaled $60.8
million compared to $75.6 million last year.
Including the charges the net loss for the year from continuing
and discontinued operations was $327.9 million.
BUSINESS SEGMENT RESULTS
The following results are discussed as if all businesses were
continuing and exclude the charges.
The base metal chemistry segment includes the cobalt, nickel,
copper and other base metal manufacturing businesses. Net sales
for the fourth quarter 2002 were $217.3 million, or a 31%
increase, compared to $166.0 million one year ago. Excluding
charges of $285.7 million, operating profit for the quarter was
$4.1 million versus $32.4 million reported for the same period
in 2001. These results reflect a combination of low metal
prices, which reduced or eliminated cobalt refining profits, and
the Company's inventory reductions to raise cash.
The precious metal chemistry segment includes the auto catalyst
business and other precious metals manufacturing businesses. Net
sales for the 2002 fourth quarter totaled $396.0 million, or a
16% increase from the 2001 fourth quarter. Excluding charges of
$17.1 million, operating profit was $13.6 million, compared to
$15.8 million one year ago. The Company's auto catalyst business
continued to perform well; however, weak economic conditions
limited the performance of the segment's other businesses,
particularly precious metal refining.
The metal management segment includes the metal sourcing and
trading business that supports the precious metals manufacturing
business. Net sales for the 2002 fourth quarter were $646.2
million, compared to $661.1 million one year ago. Operating
profit was $2.1 million, compared to $4.9 million one year ago.
The results exceeded previous expectations despite challenging
business conditions.
OUTLOOK
James P. Mooney, chairman and ceo, stated, "In the face of
uncertain economic conditions and a challenging business
environment, our focus remains unchanged. Reducing debt,
increasing profitability, boosting productivity and driving the
restructuring and cost reduction initiatives already underway
represent our blueprint for achieving our 2003 objectives. For
the first quarter, we expect earnings per diluted share from
continuing and discontinued operations will be in the range of
$.07 to $0.10 and for the full year $1.00 to $1.20."
OM Group, Inc., through its operating subsidiaries, is a
leading, vertically integrated international producer and
marketer of value-added, metal-based specialty chemicals and
related materials. OMG is a recognized leader in manufacturing
products from base and precious metals and managing metals
procurement related to these activities. The Company supplies
more than 1,700 customers in 50 countries with over 3000-product
offerings.
Headquartered in Cleveland, Ohio, OMG operates manufacturing
facilities in the Americas, Europe, Asia, Africa and Australia.
For additional information on OMG, visit the Company's Web site
at http://www.omgi.com
* * *
As reported in Troubled Company Reporter's November 18, 2002
edition, Standard & Poor's lowered its corporate credit rating
on metal-based specialty chemical and refined metal products
producer OM Group Inc., to 'B+' from 'BB-' based on an expected
diminished business profile following management's announcement
that it is exploring strategic alternatives for its precious
metals operations.
Standard & Poor's said that its ratings on OM Group remain on
CreditWatch with negative implications where they were placed
October 31, 2002. Cleveland, Ohio-based OM Group has about $1.2
billion of debt outstanding.
OWENS CORNING: Court Approves South Carolina Settlement Pact
------------------------------------------------------------
Owens Corning and its debtor-affiliates obtained the Court's
approval of their settlement agreement with the State of South
Carolina Department of Health and Environmental Control.
As previously reported, the Debtors are responsible for the
proper operation and maintenance of a wastewater treatment
facility serving the Debtors' Anderson Plant located in Anderson
County, South Carolina. The Site is subject to certain
discharge control laws and rules of the Department of Health.
The Department of Health performed a review of the discharge
monitoring reports submitted by the Debtors and determined that
the facility failed to comply with permitted discharge limits
for ammonia-nitrogen, copper, fecal coliform, and chronic
toxicity contained in the National Pollutant Discharge
Elimination System Permit. The Department of Health alleged
that the Debtors violated the Pollution Control Act and Water
Pollution Control Permits by failing to comply with the effluent
limitations as required. Because of these alleged violations,
the Debtors could incur a civil penalty not to exceed $10,000
per day of violation.
The Debtors denied the Department of Health's allegations and
findings.
To resolve the dispute, the Department of Health and the Debtors
entered into a consent order. The salient terms of the Consent
Order are:
A. The Debtors agree to the terms of the Consent Order without
admission of any liability or violation of the law;
B. The Debtors agree to:
-- operate and maintain the facility in accordance with
applicable State and Federal regulations;
-- submit to the Department of Health a summary report of
the results of an investigation conducted by the Debtors
to determine the causes and sources of the toxicity
failures at the facility and corrective actions already
taken;
-- submit to the Department of Health corrective action
plans detailing measures to be taken to attempt to
eliminate chronic toxicity failures at the facility; and
-- conduct a conductivity analysis to accurately determine
and confirm the extent that mixing is occurring at the
present location of the outfall;
C. The Department of Health agrees to assess a $12,950 penalty
against the Debtors, which will be deemed to be an allowed
administrative expense priority claim against the Debtors.
The Debtors will pay to the Department of Health the
allowed administrative claim without further delay.
Payment of this penalty resolves any and all claims
currently pending against the Debtors from the Department
of Health for the violations cited in the Consent Order;
and
D. The Consent Order constitutes full and final settlement
of all matters addressed and the Department of Health
agrees to withdraw all bankruptcy claims filed against the
Debtors for alleged violations of the Water Pollution
Control Act. (Owens Corning Bankruptcy News, Issue No. 45;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
PENNSYLVANIA FASHIONS: Wants Exclusivity Extended Until March 3
---------------------------------------------------------------
Pennsylvania Fashions, Inc., wants to extend its exclusive time
period to file a Chapter 11 Plan and solicit acceptances of that
plan without interference from other parties-in-interest. The
Debtor tells the U.S. Bankruptcy Court for the District of New
Jersey that it needs until March 3, 2003, to file a plan and
asks that its time to solicit acceptances of that from creditors
be extended until May 1, 2003.
The Debtor points out that the extension is necessary to:
(a) avoid premature formulation of a chapter 11 plan and
(b) to ensure that the formulated plan takes into account the
interests of the Debtor, its employees, its creditors and
its estate.
Since the petition Date, the Debtor has worked diligently
towards formulating a plan. The Debtors' efforts have been
focused on restructuring its assets in the most efficient and
expeditious fashion possible under the circumstances. The
Debtor, its secured creditors and the Official Committee of
Unsecured Creditors have had numerous conference calls and
meetings to negotiate and formulate a plan of reorganization.
The Debtor relates that it has, in fact, proposed a draft plan
of reorganization and disclosure statement and sent it to
counsel for the DIP lenders, the pre-petition agent and the
Committee. The Debtor has reviewed comments received from these
constituents and is in final negotiations regarding the Plan.
Additionally, the Debtor is finalizing the terms of its exit
financing options and completing a review of its 171 retail
store leases.
To date, the Debtor has devoted most of its time and resources
to meeting its liquidity needs, closing unprofitable store
locations and restructuring substantially all of the Debtor's
business and assets.
In addition to closing unprofitable store locations, other key
components of the Debtor's progress include:
a. analyzing and rejecting numerous burdensome unexpired
leases;
b. preparation of schedules and statements of financial
affairs;
c. attempting to sell certain store leases;
d. new merchandising program to enable Debtor to maintain
fashion merchandise in stock;
e. overhauling of executive management and implementation
of new procedures;
f. preparation and evaluation of financial projections;
g. preparation of its stores for the Back-to-School and
Holiday season;
h. meetings with secured creditors and the Committee to
discuss case status and negotiations regarding plan;
i. discussions with secured creditors regarding the term
sheet associated with exit financing;
j. drafting and negotiation of its plan and disclosure
statement, and
k. securing alternative exit financing necessary for the
implementation of the plan.
Consequently, the requested extension is reasonable given the
Debtor's progress in its reorganization efforts and the current
situation of this case.
Pennsylvania Fashions, Inc., a Pennsylvania corporation
headquartered in Warrendale, Pennsylvania, currently operates
173 retail clothing stores in 39 states mostly under the "Rue
21" brand name. The Company filed for chapter 11 protection on
February 4, 2002 (Bankr. N.J. Case No. 02-31152). Kenneth
Rosen, Esq., at Lowenstein Sandler represents the Debtor in its
restructuring efforts.
PROBEX: Reviewing Options -- Including Filing for Bankruptcy
------------------------------------------------------------
Probex Corp. (AMEX:PRB), a technology based, renewable resource
company, reported several developments affecting its financial
condition and provided an update concerning its efforts to
obtain financing for the construction and start-up of its
proposed Wellsville, Ohio reprocessing facility. As discussed in
the company's most recent Annual Report on Form 10-KSB, the
company has been working with the Swiss Re Group to evaluate its
willingness to issue a new commitment to provide a technology
and market risk facility as part of the project financing. The
purpose of the technology and market risk facility is to protect
potential project lenders from certain risks associated with
funding the construction and start-up process. Swiss Re has now
informed the Company that it will not provide a technology and
market risk facility. Without this commitment, management
believes that the probability of its obtaining financing for its
Wellsville, Ohio facility has been reduced.
The Company has approximately $26.4 million in debt that becomes
due on February 28, 2003, and currently does not have the
ability to pay this debt or its other obligations as they come
due. Unless it receives significant additional funding from
outside sources, the Company has insufficient cash and cash flow
to permit it to continue operating for much longer. As
previously disclosed, the Company is continuing to work with
creditors in an effort to extend or restructure the debt that
matures on February 28. The Company is also working with these
creditors and other outside sources to attempt to obtain the
additional funding required for it to continue operating. At the
same time, the Company is evaluating any other options that may
be available to it, including filing for protection from
creditors under the bankruptcy code.
The American Stock Exchange has recently informed the Company
that a review of the Company's most recent Annual Report of Form
10-KSB indicates that the Company does not meet certain of the
exchange's continued listing standards. For the Company to
retain its listing on the American Stock Exchange, it, at a
minimum, must file a plan by March 5, 2003, that demonstrates to
the exchange that the Company will return to compliance with the
exchange's listing standards within an 18 month period. In light
of its current circumstances, the Company is continuing to
evaluate whether it will seek to retain its listing on the
American Stock Exchange by submitting a proposed compliance plan
to the exchange by March 5, 2003. There can be no assurance that
the Company will be able to retain its listing on the American
Stock Exchange at this time regardless of whether it submits a
plan.
The Company recently reported in its Annual Report on Form
10-KSB that on December 6, 2002, it entered into a joint venture
arrangement with two subsidiaries of a European company to build
and operate used oil reprocessing facilities using our patented
ProTerra technology in Europe. The first phase of the project
involves the satisfaction of several commencement conditions,
which must be fulfilled in order for the project to proceed to
construction. The planned French facility is expected to cost
the joint venture about $50 million to develop, build and
startup. As part of the agreements creating the joint venture,
the Company agreed to make an initial contribution of $159,300
reflecting 15% of the development expenses incurred as of
October 31, 2002. The Company anticipates that approximately
$1.9 million will be required to fund its equity share of the
project through start-up and construction. The Company does not
have enough funds to meet its obligations under the joint
venture agreements and currently does not anticipate that it
will be able to meet its obligations under these agreements in
the future. The Company currently intends to attempt to
terminate or restructure the joint venture agreements although
there can be no assurance that it will be successful in its
efforts to do so.
In addition, as previously reported, the Company has two
registration statements under review at the Securities and
Exchange Commission. On November 26, 2002 the Company filed a
registration statement with the Securities and Exchange
Commission for a proposed public offering by Fusion Capital Fund
II, LLC, of up to 16,923,077 shares of Probex common stock which
were to be sold to Fusion Capital Fund II, LLC, under the terms
of a previously announced common stock purchase agreement. In
light of these developments, the Company believes it highly
unlikely that it will be able to satisfy the conditions required
for Fusion Capital's funding obligation to commence. A second
registration statement was filed with the SEC on January 3, 2003
to register for resale 51,077,885 shares of common stock held by
investors with registration rights that were triggered by the
filing of the Fusion Capital registration statement. The Company
believes that these developments effectively eliminate Fusion
Capital as a potential source of funding and consequently will
seek to withdraw both registration statements.
Probex is a technology-based, renewable resource company that is
engaged in the commercialization of its patented ProTerra(R)
process. We have invested the majority of our resources since
inception on research, development and commercialization of our
patented ProTerra technology, which has the ability to reprocess
used lubricating oil into products that we intend to market to
commercial and industrial customers. For more information about
Probex, visit the company's Web site at http://www.probex.com
QPS INC: Sells Assets and Brand Name to Digital Peripheral
----------------------------------------------------------
Digital Peripheral Solutions Inc. purchased the assets and brand
name of QPS Inc., a leading producer of award-winning computer
hard drives, CD burners and DVD burners, as part of QPS's
reorganization under Chapter 11 bankruptcy protection.
Under terms of the purchase and reorganization plan, DPS will
assume sole ownership of QPS. At the conclusion of the
restructuring process and assuming full dilution of all
outstanding warrants, the plan will provide DPS with full
control of the new company.
"DPS's acquisition allows us to continue manufacturing our Que!-
brand products and distribute them through the retail channel,"
said DPS CFO Rajeev Sharma, "It also enables us to continue
providing customer and technical support.
"More important, it gives us the financial strength to move
forward in developing our new generation of computer
peripherals, especially those based on convergence technology,
that continue the QPS tradition of offering leading edge
products at an affordable price."
DPS plans to begin introducing its new products in the coming
months.
QPS-brand products are available through retail stores,
catalogs, e-tailers and other computer product suppliers. These
include Fry's, Apple Stores, CDW, Micro Warehouse, PC
Connection, Creative Computer, Zones, Amazon, AOL, Buy.com and
others. QPS-brand products are distributed in the United States
through Ingram Micro, D&H and Wynit Inc. In addition, QPS-brand
products are distributed to retail markets throughout Europe,
Canada, Japan, Australia and Mexico.
Digital Peripheral Solutions specializes in external storage
devices that include DVD, CD and hard drives for PCs, Macs,
notebooks and other devices. The company's mission is to deliver
advanced, award-winning products complete with all appropriate
software and cables.
QWEST: Secures Regulatory Approval to Sell Long-Distance Service
----------------------------------------------------------------
Qwest Communications International Inc., (NYSE: Q) received
approval of interim long-distance rates from the Montana Public
Service Commission, allowing Qwest to begin taking orders from
Montana customers on Tuesday, February 11. Qwest's entry into
the long-distance business in Montana means that customers in
the state will soon benefit from more choice in long-distance
service.
Customers will be able to take advantage of plans designed to
meet specific customer calling needs. With Qwest's new long-
distance offerings, the company continues to deliver the Spirit
of ServiceT through simple pricing, the convenience of one bill
and additional savings for customers who purchase a package of
Qwest services.
"Qwest is pleased to have the PSC's approval and we'll soon be
able to offer Qwest long-distance to our local service
customers," said Rick Hays, Qwest president for Montana. "We
have been working toward this day for many years and soon
customers will benefit from a full suite of telecommunications
services available to them from Qwest."
Qwest long-distance customers will experience exceptional
service quality with clear and reliable calls, simple bills and
a renewed commitment to a great customer experience. Qwest now
provides long-distance service in 43 states including Colorado,
Idaho, Iowa, Nebraska, North Dakota, Utah, Washington and
Wyoming. Qwest has filed long-distance applications for New
Mexico, Oregon and South Dakota and expects to file for FCC
approval in Minnesota and Arizona later this year.
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
Qwest Communications' 7.500% bonds due 2008 (Q08USR3) are
trading at about 82 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=Q08USR3for
real-time bond pricing.
RBTT FINANCIAL: Fitch Affirms BB+ L-T Foreign Currency Ratings
--------------------------------------------------------------
Fitch Ratings affirmed RBTT Financial Holdings Limited's long-
term foreign currency rating of 'BB+'. However, the Rating
Outlook is revised to Negative from Stable. Fitch has also
affirmed RBTT Bank Limited's long-term foreign currency rating
of 'BBB-' and the Rating Outlook remains Stable.
The change of Rating Outlook at the holding company level is
reflective of the sluggishness of many Caribbean economies where
the group operates. Following a strategy of geographic
expansion, RBTT Financial Holdings Limited has built a pan-
Caribbean financial services group through several acquisitions
over the past few years. Expansion into other Caribbean
countries is positive from a strategic standpoint, providing
additional opportunities for business growth and revenue
diversification. Today, almost half of the group assets are
outside of Trinidad & Tobago as RBTT now operates in more than
11 countries in the Caribbean region, including Jamaica,
Suriname, The Netherlands Antilles, Aruba, St. Lucia, St.
Vincent, and Grenada. However, depressed economic conditions in
most of these jurisdictions, a result of both a slump in tourism
exacerbated by the events of September 11 and weaknesses in the
agricultural export sector, could pressure asset quality and
loan loss levels. That said, RBTT's ratings continue to take
into account the company's consistent earnings trends and
relatively sound capital ratios. RBTT Bank Limited (RBTTBL), the
second largest T&T commercial bank with approximately 25% of
system deposits, continues to benefit from T&T's relatively
stronger economic environment hence the affirmation of RBTTBL's
ratings with a Stable Rating Outlook.
RBTT Financial Holdings Limited is a financial services
conglomerate consisting of 33 subsidiaries and associated
companies located in 11 legal jurisdictions in the Caribbean
region, including 9 licensed commercial banks with 79 branches.
The company's major subsidiaries include RBTT Bank Limited and
RBTT Merchant Bank Limited, a leading regional merchant bank and
one of the largest mortgage financiers in T&T.
Ratings:
RBTT Financial Holdings Limited
-- Long-term foreign currency rating 'BB+';
-- Short-term foreign currency rating 'B';
-- Individual rating 'C/D';
-- Support rating '5';
-- Outlook to 'Negative' from 'Stable'.
RBTT Bank Limited
-- Long-term foreign currency rating 'BBB-';
-- Short-term foreign currency rating 'F3';
-- Individual rating 'C';
-- Support rating '2';
-- Outlook 'Stable'.
REGUS BUSINESS: Hires NautaDutihl as Special Netherlands Counsel
----------------------------------------------------------------
Regus Business Centre Corp., and its debtor-affiliates ask for
authority from the U.S. Bankruptcy Court for the Southern
District of New York to employ and retain NautaDutihl as Special
Counsel to handle matters arising under the laws of the
Netherlands, and all other matters requiring advice of Dutch
counsel.
NautaDutihl has been providing the Debtors legal assistance
since August 12, 2002, on various general matters of Dutch law.
During this time, in its capacity as counsel to Debtors,
NautaDutihl has developed extensive knowledge concerning
Debtors' businesses and their financial affairs.
The professional services that NautaDutihl will render to
Debtors include, but are not limited to, providing legal advice
with respect to Debtors' operation of their businesses in the
Netherlands, and all matters arising under the laws of the
Netherlands.
The attorneys and paralegals presently designated to represent
Debtors and their current standard hourly rates are:
Attorney Position Hourly Rate
-------- -------- -----------
Dick A. van der Stelt Partner EUR400
Boudewijn M. Nijboer Assoicate EUR225
Jr. Associates EUR185 to EUR325
Regus Business Centre Corp., filed for chapter 11 protection on
January 14, 2003 (Bankr. S.D.N.Y. Case No. 03-20026). Karen
Dine, Esq., at Pillsbury Winthrop LLP represents the Debtors in
their restructuring efforts. When the Debtors filed for
protection from its creditors, it listed debts and assets of:
Total Assets: Total Debts:
------------- ------------
Regus Business Centre Corp. $161,619,000 $277,559,000
Regus Business Centre BV $157,292,000 $160,193,000
Regus PLC $568,383,000 $27,961,000
Stratis Business Centers Inc. $245,000 $2,327,000
REVLON INC: Perelman Prepares to Invest $150,000,000, Maybe More
----------------------------------------------------------------
Revlon, Inc., (NYSE:REV) announced that its Board of Directors,
following the recommendation from its Special Committee of
independent directors, has approved a proposal by MacAndrews &
Forbes, wholly-owned by Ronald O. Perelman, to provide Revlon up
to $150 million in cash through the combination of an equity
rights offering and debt financing to help fund the Company's
strategic plan.
In addition to the $150 million investment, MacAndrews & Forbes
has agreed to continue its commitment to provide Revlon with
additional liquidity of up to $40 million through December 31,
2003 and has increased the commitment to up to $65 million
through December 31, 2004, in the form of a senior unsecured
line of credit at an interest rate 25 basis points lower than
the rate under Revlon's Bank Credit Agreement.
Revlon also announced that it has obtained the necessary
amendment to its Credit Agreement to complete the transactions.
In addition, the Company indicated that it obtained a waiver to
its EBITDA and certain other financial covenants for the fourth
quarter of 2002, elimination of such covenants for the first
three quarters of 2003, and a waiver of the fourth quarter of
2003 financial covenants through January 31, 2004. The
Agreement was also amended to provide a minimum liquidity
covenant for 2003 and a 50 basis point increase in the interest
rate.
The decision follows a review by the Special Committee of the
Board, established in December 2002 to consider the MacAndrews &
Forbes proposal and negotiate terms. Commenting on the
announcement, Revlon President & CEO Jack Stahl stated, "I am
pleased with the recommendation of the Special Committee and the
support of both MacAndrews & Forbes and our bank group during
this very important period for the Company. This investment will
be used to help fund our strategic plan."
The investment by MacAndrews & Forbes includes:
(i) providing a $100 million senior unsecured term loan at
an interest rate of 12 percent per annum, with no
interest payable until final maturity on December 1,
2005;
(ii) committing to participate on a pro-rata basis with
other Revlon common stockholders in a $50 million
equity rights offering and agreeing to back the rights
offering by purchasing all of the shares offered but
not purchased by other stockholders;
(iii) providing the Company with a $50 million advance, if
needed, prior to completing the rights offering,
through the purchase of non-convertible, non-voting
preferred stock that does not pay a dividend and which
would be redeemed upon consummation of the rights
offering; and
(iv) providing the Company with a senior unsecured line of
credit of up to $40 million through December 31, 2003,
increasing to $65 million through December 31, 2004.
The $50 million rights offering will allow stockholders to
purchase additional shares of Revlon Class A common stock.
Pursuant to the rights offering, Revlon will distribute, at no
charge, to each stockholder of record of its Class A and Class B
common stock, as of the close of business on a record date to be
set by the Board of Directors, transferable subscription rights
that will enable holders to purchase shares of Class A common
stock at a subscription price equal to the greater of $2.30 per
share or 80% of the NYSE closing price of one share of Revlon
Class A common stock on the record date for the rights offering,
which offering is expected to occur in the second quarter of
2003. Pursuant to the over-subscription privilege, each rights
holder that exercises its basic subscription privilege in full
may also subscribe for additional shares at the same
subscription price per share, to the extent that other
stockholders do not exercise their subscription rights in full.
If an insufficient number of shares is available to fully
satisfy the over-subscription privilege requests, the available
shares will be sold pro-rata among subscription rights holders
who exercised their over-subscription privilege, based on the
number of shares each subscription rights holder subscribed for
under the basic subscription privilege.
MacAndrews & Forbes has agreed to purchase its pro-rata share of
the Class A common stock offered in the rights offering and not
to exercise its over-subscription privilege. However, if any
shares remain following the exercise of the basic subscription
privilege and the over-subscription privilege by other rights
holders, MacAndrews & Forbes will back the rights offering by
purchasing the remaining shares of Class A common stock offered
but not purchased by other stockholders.
The Company filed a registration statement with the SEC for the
$50 million rights offering as well as a Form 8-K with all of
the relevant documents.
At September 30, 2002, Revlon Inc.'s balance sheet shows a total
shareholders' equity deficit of about $1.4 billion.
SOLUTIA INC: Moody's Upgrades Debt Ratings Following Asset Sale
---------------------------------------------------------------
Moody's Investors Service raised the debt ratings of Solutia
Inc., and its affiliate Solutia Europe SA/NV, after the sale of
the company's resins, additives and adhesives businesses. Total
consideration is $510 million, with $10 million as exclusivity
fee.
The rating upgrade mirrors the improved financial profile of
Solutia as a result of the sale. Proceeds from the transaction
will be used to pay debts and revolving credit bank loans.
Outlook is stable.
Ratings actions
Solutia Inc. To From
-- ----
* Senior implied rating: Ba3 B1
* Issuer rating: B1 B2
* Secured credit facility and term loan; Ba2 Ba3
* Guaranteed senior unsecured notes; Ba3 B1
* Senior unsecured notes and debentures; B1 B2
* Universal shelf (gtd. senior unsecured (P)Ba3 (P)B1
Solutia Europe SA/NV:
* Guaranteed senior unsecured Euro notes; B1 B2
Solutia Inc., based in St. Louis Missouri, is an integrated
chemical and fibers company with primary business positions in
nylon-based products, intermediates, acrylic fibers, Saflex
brand protective glass, and industrial fluids and lubricants.
SPECTRULITE CONSORTIUM: Case Summary & Largest Unsec. Creditors
---------------------------------------------------------------
Debtor: Spectrulite Consortium, Inc.
1001 College Avenue
Madison, Illinois 62060
Tel: 618-452-5190
Bankruptcy Case No.: 03-30329
Type of Business: Spectrulite Consortium is a major supplier of
aluminum and magnesium products including
sheet, plate, bar, rod and extrusions.
Chapter 11 Petition Date: January 29, 2003
Court: Southern District of Illinois (East St. Louis)
Judge: Kenneth J. Meyers
Debtors' Counsel: David A. Warfield, Esq.
Husch & Eppenberger, LLC
109 Carondelet Plaza
Suite 600
St. Louis, Missouri 63105
Tel: (314) 480-1728
Fax : (314) 480-1505
Estimated Assets: $10 to $50 Million
Estimated Debts: $10 to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Pension Benefit Guaranty Underfunded Pension $4,767,911
Corp. Liability
1200 K St. NW
Washington, DC 20005-4026
Tel: 202-326-4100x3244
UMB Bank Industrial Development $4,040,000
Corp. Trust Division
2 South Broadway, Suite 435
St. Louis, MO 63102
Solmin Magnesium Corp. Trade Debt $505,435
7 Rolling Way
New City, NY 10956
Tel: 845-639-4034
IMCO Recyling Inc. Trade Debt $331,361
PO Box 28
Rockwood, TN 37854
Tel: 972-401-7384
Magnesium Corp. of America Trade Debt $259,050
238 North 2200 West
Salt Lake City, UT 84116
Tel: 801-532-2043
Midwest Metals Corp. Trade Debt $195,668
Dead Sea Magnesium Ltd. Trade Debt $140,427
Clifton Steel Co. Trade Debt $135,575
Rossborough Mfg. Co. LP Trade Debt $126,107
Columbia Metals Trade Debt $121,079
Illinois Power Company Utility $109,274
Halaco Inc. Trade Debt $97,773
Centerpoint Energy Gas Trade Debt $97,093
City Treasuruer Utility Wave Water $41,390
Treatment
Grace & Company P.C. Trade Debt $45,998
Hydro-Aluminum Louisville Trade Debt $60,094
Loewy Machine Supplies Trade Debt $28,725
Co. Inc.
Malone Frt Lines Inc. Trade Debt $46,023
Pierce Aluminum Trade Debt $39,243
Weld-Met Int'l Inc. Trade Debt $49,804
SPIEGEL GROUP: Finally Releases 2001 Financials & CFO Resigns
-------------------------------------------------------------
The Spiegel Group, whose businesses include Eddie Bauer, Newport
News, Spiegel Catalog and First Consumers National Bank,
delivered its annual report to the Securities & Exchange
Commission this week -- 10 months late -- and disclosed that its
Chief Financial Officer, James R. Cannataro, will leave on
February 12 to go work for Nintendo.
Dismal Results in 2001
Spiegel fell out of compliance with its 2001 loan covenants over
a year ago and has been working with its bank group to amend and
replace its existing credit facilities with a new credit
facility. No 2002 financial statements have yet to be delivered
to the SEC. For the year ending December 29, 2001, Spiegel
reports $2.9 billion in sales (down sharply from 2000) and a
$587 million net loss (a $700 million downward swing from 2000
results). The balance sheet shows $1.9 billion in assets and
less than a quarter-billion in shareholder equity. If 2002 was
no better than 2001, the company's balance sheet is now upside-
down.
The Bank Facilities
The Company has a $600,000,000 revolving credit agreement with a
group of banks that matures in July 2003 and a $150,000,000 364-
Day Facility that matured in June 2002. The Company reports
that $700,000,000 was outstanding at February 18, 2002.
Information obtained from http://www.LoanDataSource.comshows
that ABN Amro Bank N.V.; Banca Commerciale Italiana, New York
Branch; Bank of America, N.A.; Bankgesellschaft Berlin AG;
Bayerische Hypo und Vereinsbank AG; Commerzbank AG, New York and
Grand Cayman Branches; Credit Lyonnais, New York Branch; Credit
Suisse First Boston; Den Danske Bank; Deutsche Bank AG, New York
and/or Cayman Island Branches; Deutsche Bank AG, New York
Branch; DG Bank Deutsche Genossenschaftsbank AG; Dresdner Bank
AG, New York and Grand Cayman Branches; HSBC Bank USA;
Landesbank Hessen-Thuringen; Morgan Guaranty Trust Company of
New York; Norddeutsche Landesbank Girozentrale, New York Branch
and/or Cayman Island Branch; The Bank of New York; The Hongkong
and Shanghai Banking Corporation Limited; and Westdeutsche
Landesbank Girozentrale, New York Branch, are the financial
institutions with exposure under these loan facilities.
Needing continued access to working capital financing, in
September 2001, the Company entered into a revolving credit
agreement with Otto Versand (GmbH & Co), a related party, to
obtain access to $100,000,000 of financing through June 15,
2002. As of February 2002, this credit facility was fully
drawn. This loan was extinguished with the proceeds of new term
loans totaling $100,000,000 from Otto-Spiegel Finance G.m.b.H. &
Co. KG, a related party. The term loans matured on December 31,
2002, but as of January 2003, the $100,000,000 term loans are
still outstanding.
Late last year or early this year, Spiegel borrowed an
additional $60,000,000 on a senior unsecured basis from Otto
Versand (GmbH & Co) to keep operations going.
Looking for a New CFO
Spiegel says it is conducting a search to find a new CFO.
"I would like to thank Jim for his many contributions during his
18 years of service with The Spiegel Group. Jim has been a key
member of our management team and was instrumental in guiding
Eddie Bauer during its rapid growth in the nineties. We wish
Jim continued success in his future endeavors," said Martin
Zaepfel, vice chairman, president and chief executive officer of
The Spiegel Group.
Mr. Cannataro joined The Spiegel Group in 1984 and was promoted
to corporate controller in 1988. In 1990, he was appointed vice
president of finance at the company's Eddie Bauer subsidiary and
was later promoted to executive vice president and chief
financial officer for Eddie Bauer. Mr. Cannataro assumed his
current position in July 2001.
SEC Investigation
Spiegel discloses that the SEC is conducting an investigation
concerning the Company's delinquent filing of its Form 10-K for
2001 and its Form 10-Q's for 2002.
"We are cooperating with the SEC in its investigation, but we
cannot predict the duration, scope or outcome of, or potential
sanctions resulting from the investigation," the Company says.
KPMG Has Doubts
Because (1) the Company is not in compliance with its debt
agreements, and accordingly, substantially all of the Company's
debt is currently due and payable and (2) the Company has
violated certain provisions of agreements with MBIA Insurance
Corporation, the insurer of its asset-backed securitization
transactions, KPMG LLP expresses doubt about the Company's
ability to continue as a going concern.
The Spiegel Group is a leading international specialty retailer
marketing fashionable apparel and home furnishings to customers
through catalogs, nearly 570 specialty retail and outlet stores,
and e-commerce sites, including eddiebauer.com, newport-news.com
and spiegel.com. The Company's corporate headquarters and
Spiegel operations are located in leased office space in Downers
Grove, Illinois. The Company owns its Westmont, Illinois
corporate data center. The company's Class A Non-Voting Common
Stock trades on the over-the-counter market under the SPGLA
ticker symbol. Otto Versand (GmbH & Co), a privately-held
German partnership, acquired the Company in 1982. In April
1984, Otto Versand transfered its interest in the Company to its
partners and designees. Otto Versand and the Company have
"entered into certain agreements seeking to benefit both parties
by providing for the sharing of expertise" and have lots of
relationships in far-flung places around the globe as a result.
In October 2002, the German partnership changed its name from
Otto Versand (GmbH & Co) to Otto (GmbH & Co KG). Investor
relations information is available on The Spiegel Group Web site
at http://www.thespiegelgroup.com
TCW LINC III: S&P Places Junk-Rated Notes' on Watch Neg.
--------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on the
class A-1F, A-1, A-2L, A-2, A-3A, and A-3B notes issued by TCW
LINC III CBO Ltd., an arbitrage CBO transaction originated in
July 1999, on CreditWatch with negative implications. At the
same time, the 'AAA' rating assigned to the class A-1L notes is
affirmed. The ratings assigned to the class A-2L, A-2, A-3A, and
A-3B notes were previously lowered on Dec. 31, 2002.
The CreditWatch placements reflect factors that have negatively
affected the credit enhancement available to support the notes
since the Dec. 31, 2002 rating action. These factors include an
erosion of the par value of the collateral pool securing the
rated notes, and a deterioration in the credit quality of the
performing assets in the pool.
Standard & Poor's noted that, as a result of new asset defaults,
the par value of the collateral pool has deteriorated since the
previous rating action. As of the most recent monthly report
(Jan. 17, 2003), the class A overcollateralization ratio was
98.03%, versus a minimum required ratio of 110.0% and a ratio of
approximately 108% at the time of the Dec. 31, 2002 rating
action. The same monthly report listed a class B
overcollateralization ratio of 88.57%, which contrasts with a
minimum requirement of 103.0% and a ratio of 97.9% at the time
of the last downgrade.
The credit quality of the collateral pool has also deteriorated.
According to the monthly report, three of the transaction's five
required rating distribution tests are failing. Currently, 33.7%
of the performing assets in the collateral pool come from
obligors rated 'B+' or higher (versus a 36% minimum
requirement), 51.8% come from obligors rated 'B' or higher
(versus a 73% minimum requirement), and 63.1% come from obligors
rated 'B-' or higher (versus a 95% minimum requirement).
Standard & Poor's will review the results of current cash flow
runs generated for TCW LINC III CBO Ltd. to determine the level
of future defaults the rated tranches can withstand under
various stressed default timing and interest rate scenarios,
while still being able to pay all of the interest and principal
due on the notes. The results of these cash flow runs will be
compared to the projected default performance of the performing
assets in the collateral pool to determine if the ratings
currently assigned to the notes remain consistent with their
credit enhancement.
Ratings Placed on Creditwatch Negative
TCW LINC III CBO Ltd.
Rating
Class To From Current Balance (Mil. $)
A-1F AAA/Watch Neg AAA 15.00
A-1 AAA/Watch Neg AAA 96.00
A-2L BBB+/Watch Neg BBB+ 21.50
A-2 BBB+/Watch Neg BBB+ 82.00
A-3A CCC+/Watch Neg CCC+ 34.00
A-3B CCC+/Watch Neg CCC+ 45.00
Rating Affirmed
TCW LINC III CBO Ltd.
Class Rating Current Balance (Mil. $)
A-1L AAA 118.61
TOKHEIM CORP: Auctioning Its Assets Today
-----------------------------------------
Pursuant to uniform sale and bidding procedures approved by the
U.S. Bankruptcy Court for the District of Delaware, Tokheim
Corporation and its debtor-affiliates will hold an auction today
to flush-out any superior bids for substantially all of the
assets related to their U.S. and Canadian operations.
Right now, First Reserve Fund IX, L.P. (which intends to assign
its rights under a purchase contract with Tokheim to Dresser,
Inc.), is the lead bidder for Tokheim's North American
operations, offering, subject to adjustment, $42,000,000 in cash
and assuming specified liabilities. 71.43% of the cash
consideration will be allocated to the Debtors' Gasboy Assets
and the rest will be allocated to Tokheim Assets.
The Debtors will conduct an auction among qualified bidders at
10:00 a.m. at the Illinois offices of the Debtors' Counsel,
Skadden, Arps, Slate, Meagher & Flom located at 333 West Wacker
Drive, Suite 1900, in Chicago.
Following the auction, a hearing to approve the sale of the
Assets to the highest and best bidder will convene on February
25, 2003, at 2:00 p.m. before the Honorable Randall J. Newsome
in Wilmington.
Houlihan, Lokey, Howard & Zukin provides the Debtors with
financial advisory services. Dennis J. Friedman, Esq., and
Barbara L. Becker, Esq., represent First Reserve in this
transaction.
Tokheim Corporation, manufacturer of electronic and mechanical
petroleum dispensing systems, field for chapter 11 protection on
November 21, 2002 (Bankr. Del. Case No. 02-13437). Gregg M.
Galardi, Esq., and Mark L. Desgrosseilliers, Esq., at Skadden,
Arps, Slate, Meagher & Flom LLP represent the Debtors in their
liquidating chapter 11 cases. When the Company filed for
protection from its creditors, it listed $249.5 million in total
assets and $457.8 million in total debts.
TRW AUTOMOTIVE: Fitch Assigns Low-B Indicative Debt Ratings
-----------------------------------------------------------
Fitch Ratings assigned an indicative rating of 'BB' to the
proposed $1.8 billion Senior Secured Credit Facilities, 'B+' to
the proposed $1.0 billion Senior Notes Due 2013 and 'B' to the
proposed $0.4 billion Senior Subordinated Notes due 2013, to be
issued by TRW Automotive Acquisition Corp. to fund Blackstone
Group L.P.'s acquisition of TRW Automotive from Northrop Grumman
Corp. The ratings reflect TRW Automotive's good revenue
diversity by customer, product and geography with historical
operating margins in the middle range amongst large global Tier
one suppliers and a relatively high degree of financial
leverage. The Rating Outlook is Stable.
While 2002 saw relatively healthy automotive build rates in
North America and Europe fueled by the deeply discounted
automotive retail market in North America and in Europe, Fitch
expects that there is greater downside risk for automotive build
rates in 2003. North American build rate is forecasted to be
down by mid single digit rates while European build rate is
forecasted to be down by low single rates. In addition, Fitch
expects that TRW Automotive will continue to face intense
pricing pressures in 2003 which will constrain margin
improvements. Given the heavy debt load of the pro-forma
capitalization and the risk of operating volatilities related to
volume cyclicality and other potential cost and pricing
headwinds, Fitch expects that 2003 will produce limited cashflow
available for debt reduction. While the restructuring and
rationalization actions taken over the last several years, along
with productivity and other cost saving measures under way could
largely offset these cost and pricing pressures, Fitch
anticipates that a greater than anticipated volume falloff could
necessitate further restructuring and rationalization
activities.
Expected pro-forma capitalization of TRW Automotive at December
31, 2002, showed a high degree of financial leverage with total
debt, including $245 million of A/R securitized funding and $600
million of seller notes, amounting to around $3.7 billion or 81%
of total debt and equity capitalization. The seller notes are
subordinate to all proposed debt and provide for payment-in-kind
interest and have a maturity beyond all proposed debt. Fitch
conservatively incorporates these notes as debt due to the
relevant and increasing portion of the capital structure they
represent and the enterprise value accruing to the holders.
However, Fitch recognizes that the terms provide meaningful
support to the debt senior to it in the capital structure.
Expected cash EBITDA for 2002 (adjusted to show benefit costs on
a cash basis and before cash charges of $33 million) of $989
million amounted to 3.8x the $3.7 billion of total debt.
Expected cash EBITDA coverage of projected cash interest expense
of the pro-forma capital structure amounts to 3.7x for 2002.
Following the pro-forma capitalization, TRW Automotive is
expected to have good liquidity with $163 million of operating
cash (2002 year-end expected) and access to a mostly un-drawn
$500 million revolver and $800 million of A/R securitization
facility (expected to be about a third utilized at year-end
2002). Principal amortization and/or maturity is expected to be
very light for the near to medium term.
TRW Automotive's overall pension situation is quite manageable
with about $80 million of cash funding requirements over the
next several years in the smaller and under-funded U.S. and
other pension programs while the larger and overfunded U.K.
pension program will continue to see pension related accounting
income. Due to indemnification agreement with Northrop Grumman,
risks associated with significant healthcare care cost increases
affecting OPEB expenses are contained.
As one of the world's 10 largest automotive suppliers, based on
2002 estimated sales of $10.6 billion, TRW Automotive enjoys
diverse revenue exposure serving virtually all the major global
vehicle manufacturers (Ford, DaimlerChrysler, and GM global
revenue exposure amount to just over 50%) from a geographically
diversified manufacturing base with a range of products and
services in vehicle segments with relatively decent growth
prospects. TRW Automotive's businesses are managed along three
principal operating segments; Chassis Systems (about 57% of
sales) which supplies braking and steering systems, Occupant
Safety Systems (about 30% of sales) which supplies airbag
systems and seatbelts, and Other Automotive (13% of sales) which
supplies engine valves and various other automotive components.
Driven by regulatory and/or market dynamics, vehicle penetration
of TRW Automotive's key products in active and passive safety
systems have been good. Reflecting these dynamics and TRW
Automotive's ability to win both incumbent and new vehicle
manufacturer program contracts, TRW Automotive shows nearly full
book of forward business for the next few years.
UNITED AIRLINES: Court Okays Gavin Anderson as PR Consultants
-------------------------------------------------------------
James H.M. Sprayregen, Esq., at Kirkland & Ellis, relates that
Gavin Anderson & Company is a communications firm that has
extensive experience in crisis communications for corporate
transactions, bankruptcies, reorganizations and restructurings.
Gavin Anderson has extensive experience in assisting financially
troubled companies with public relations, including companies
that have been in bankruptcy.
Accordingly, UAL Corporation and its debtor-affiliates sought
and obtained the Court's authority to employ Gavin Anderson as
public relations consultants.
The Debtors believe that Gavin Anderson is well qualified and
able to represent the Debtors in a cost-effective, efficient and
timely manner.
Mr. Sprayregen notes that employees, trading partners,
counterparties to executory contracts and leases, equity
holders, financial markets, potential investors, governmental
entities, trade and other creditors, the media, and the general
public are interested in the Debtors' bankruptcy. The
cooperation of many these entities will be necessary for the
Debtors to successfully reorganize. Gavin Anderson will be able
to assist Debtors in protecting, retaining and developing the
goodwill and confidence of these constituencies. Specifically,
Gavin Anderson will be:
(a) preparing materials to be distributed to Debtors'
employees explaining the impact of the Chapter 11 cases;
(b) drafting correspondence to creditors, vendors, employees
and other interested parties on the Chapter 11 cases;
(c) preparing written guidelines for head office and
location managers to assist in addressing employee and
customer concerns;
(d) preparing news releases for dissemination to the media;
(e) interfacing and coordinating media reports to assure the
correct facts and the Debtors' perspective as a
business;
(f) assisting the Debtors in maintaining their public image
as a viable business and going concern during the
Chapter 11 reorganization process;
(g) assisting the Debtors in handling inquiries, e.g.,
shareholders, employees, vendors, customers, retirees,
etc., constituents and developing internal systems for
handling the inquiries;
(h) coordinating public relations services with a third
party making an investment in the Debtors; and
(i) performing other strategic communications consulting
services as may be required by the Debtors.
By having a public relations consultant provide these services,
other professionals and officers who might otherwise handle
public relations matters will be able to focus on their
competencies and jobs. Gavin Anderson, at the Debtors' request,
may provide additional public relations services deemed
appropriate and necessary.
Since January 10, 2002, Gavin Anderson has rendered public
relations and communications services to the Debtors in
connection with their restructuring efforts. Gavin Anderson has
become familiar with the Debtors' operations and is well
qualified to represent the Debtors as public relations
consultants in a cost-effective and efficient manner.
The Debtors will reimburse Gavin Anderson for any out-of-pocket
expenses reasonably incurred by the firm in the performance of
its services. Production related expenditures -- e.g.,
photography, printing, etc. -- will be charged to the Debtors at
cost. Also included in each invoice will be a research charge
equal to 3.5% of the total amount of professional fees for the
period covered by the invoice, because these costs cannot be
economically monitored on a client-by-client basis.
Robert Mead, Gavin Anderson President and Head of Americas,
assures Judge Wedoff that the firm is a "disinterested person"
as defined in Section 101(14) of the Bankruptcy Code. Gavin
Anderson intends to update and expand its ongoing conflict
search for additional parties-in-interest. Gavin Anderson is
confident that the representation of other creditors and equity
security holders in unrelated matters will not affect its
representation of the Debtors in these proceedings.
UAL will pay Gavin $50,000 upon signing the Engagement Letter.
Thereafter, Gavin Anderson will charge a minimum monthly fee of
$15,000. Hourly charges will be credited against the monthly
fee with any excess being charged to the Debtors. The firm's
current hourly rates are:
President $450
Chief Financial Officer 350
Managing Director 350
Director 275
Associate Director 225
Senior Executive 185
Executive 150
Administrative Assistant 60
(United Airlines Bankruptcy News, Issue No. 7; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
UNITED PAN-EUROPE: Court Sets Confirmation Hearing for Feb. 15
--------------------------------------------------------------
On January 7, 2003, the U.S. Bankruptcy Court for the Southern
District of New York approved the Second Amended Disclosure
Statement with respect to the Second Amended Chapter 11 Plan of
Reorganization jointly proposed by United Pan-Europe
Communications N.V. and New UPC, Inc.
The Court fixes Feb. 15, 2003 as both the deadline for
submitting votes to accept or reject the Plan and submitting
objections, if any, to the confirmation of the Plan.
Copies of the Objections must also be served upon:
a. Counsel for the Debtor
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attn: Howard S. Beltzer, Esq.
b. Counsel to UnitedGlobalCom, Inc. and New UPC Inc.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Attn: Richard Levin, Esq.
c. Counsel to the Participating Noteholders (Proposed
Counsel to the Creditors Committee)
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attn: Jeffrey D. Saferstein, Esq.
d. the Office of the United States Trustee
33 Whitehall Street
Suite 2100
New York, NY 10004
Attn: Paul Schwartzberg, Esq.
The Plan's Confirmation Hearing will be held before the
Honorable Burton Lifland on February 20, 2003, at 10 a.m. (New
York City time), or as soon thereafter as counsel can be heard.
United Pan-Europe Communications N.V. is a holding company which
owns various direct and indirect subsidiaries that operate
broadband communications networks providing telephone, cable and
internet services to both residential and business customers in
Europe. United Pan-Europe a subsidiary of UnitedGlobalCom, Inc.
The company filed for Chapter 11 protection on December 3, 2002,
(Bankr. S.D.N.Y. Case No. 02-16020). Howard S. Beltzer, Esq., at
White & Case, LLP represents the Debtor in its restructuring
efforts.
UNIVANCE TELECOMM: UST Calls for Sec. 341(a) Meeting on March 3
---------------------------------------------------------------
The United States Trustee for Region 19, will convene a meeting
of Univance Telecommunications, Inc.'s creditors on March 3,
2003 at 1:00 p.m., at the U.S. Custom House, 721 19th St., Room
104 in Denver, Colorado. This is the first meeting of creditors
required under 11 U.S.C. Sec. 341(a) in all bankruptcy cases.
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.
Univance Telecommunications, Inc., Univance went on an
acquisition spree in 2001 and rapidly build an IP transport
network connecting Los Angeles, San Diego, San Francisco and Las
Vegas. Colorado's fifth-largest privately held minority-owned
business filed for chapter 11 protection on January 23, 2003, in
the U.S. Bankruptcy Court for the District of Colorado (Case No.
03-11156). Douglas W. Jessop, Esq., at Jessop & Company, PC,
represents the Debtor in its restructuring efforts. When the
Company filed for protection from its creditors, it listed
assets of less than $10 million and debts of over $10 million.
US AIRWAYS: January 2003 Revenue Passenger Miles Slide-Down 9.4%
----------------------------------------------------------------
US Airways reported its January 2003 passenger and cargo
traffic.
Revenue passenger miles for January 2003 decreased 9.4 percent
on 12.4 percent less capacity, compared to January 2002. The
passenger load factor for the month was 62.2 percent, a 2.1
percentage-point increase compared to January 2002.
The three wholly owned subsidiaries of US Airways Group, Inc. --
Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc.
-- reported a 3.9 percent decrease in revenue passenger miles
for the month on 4.4 percent less capacity year-over-year. The
passenger load factor was 43.4 percent, an increase of 0.2
percentage points compared to January 2002.
US Airways ended the month by completing 99.1 percent of its
scheduled flights in January, a 0.7 percentage point improvement
compared to January 2002.
System mainline passenger unit revenue for January 2003 is
expected to increase between 0.5 percent and 1.5 percent
compared to January 2002.
Bankruptcy law does not permit solicitation of votes on a
reorganization plan until the Bankruptcy Court approves the
applicable disclosure statement relating to the plan as
providing adequate information of a kind, and in sufficient
detail, as far as is reasonably practicable in light of the
nature and history of the debtor and the condition of the
debtor's books and records, that would enable a hypothetical
reasonable investor typical of the holder of claims or interests
of the relevant class to make an informed judgment about the
plan. On January 17, 2003, the Bankruptcy Court approved the
company's Disclosure Statement with respect to its First Amended
Plan of Reorganization (Amended Plan) and authorized a balloting
and solicitation process that commenced on January 31, 2003, and
will conclude on March 10, 2003. A hearing on confirmation of
the Amended Plan is scheduled to commence in the Bankruptcy
Court on March 18, 2003. Persons who are entitled to vote on the
Amended Plan should obtain and read the Bankruptcy Court-
approved Disclosure Statement prior to voting to accept or
reject the Amended Plan. The Company will emerge from Chapter 11
if and when the Amended Plan receives the requisite creditor
approvals and is confirmed by the Bankruptcy Court.
U.S. INDUSTRIES: S&P Ratchets Low-B Corp. Credit Rating Up to B+
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on bath and plumbing products manufacturer U.S.
Industries Inc., to 'B+' from 'B' because of its strengthening
cash flow protection measures. The current outlook is stable.
As of early 2003, the West Palm Beach, Florida-based company had
total debt of about $565 million.
"Completion of the major asset divestiture program, the
extension of the company's credit facilities to October 2004,
and the exchange of a new senior note issue maturing in December
2005 for outstanding notes due in October 2003 are clearly
meaningful positives for credit quality," said Standard & Poor's
credit analyst Wesley E. Chinn. "Financial measures should
benefit from management's ability to now devote greater
attention to improving the sales and profitability of its
product lines, especially whirlpool baths in the U.S."
Standard & Poor's said that its ratings on U.S. Industries Inc.
incorporate its well-established positions in bath and plumbing
products, offset by very competitive industry conditions, the
relatively narrow focus of the principal product lines, and an
aggressive debt load.
U.S. STEEL CORP: Caps Price of $250MM Conv. Preferred Offering
--------------------------------------------------------------
United States Steel Corporation (NYSE: X) completed the pricing
of an offering of 5 million shares of Series B Mandatory
Convertible Preferred Shares (liquidation preference $50 per
share). The company also granted the underwriters an over-
allotment option to purchase up to an additional 750,000
preferred shares. The Mandatory Convertible Preferred Shares
will be issued under U. S. Steel's shelf registration. JPMorgan
acted as bookrunning manager for the offering.
The mandatory convertible preferred shares have a dividend yield
of 7.0 percent, a 20 percent conversion premium (for an
equivalent conversion price of $15.66 per common share), and
will mandatorily convert into U. S. Steel common shares on June
15, 2006. An application has been filed to list the mandatory
convertible preferred shares on the New York Stock Exchange
under the ticker symbol X PrB.
Net proceeds will total approximately $242 million. Proceeds
from the offering will be used for general corporate purposes,
including funding working capital, financing potential
acquisitions, debt reduction and voluntary contributions to
employee benefit plans.
United States Steel Corporation is an integrated steel producer
with annual raw steelmaking capability of 17.8 million tons. U.
S. Steel is engaged in the production, sale and transportation
of sheet, plate, tin mill and tubular steel mill products, coke,
taconite pellets and coal; the management of mineral resources;
real estate development; and engineering and consulting services
in the United States; and, through its subsidiary U. S. Steel
Kosice, the production and sale of steel products and coke in
Central Europe.
* * *
As reported in Troubled Company Reporter's January 13, 2003
edition, Standard & Poor's placed its 'BB' corporate credit
rating on United States Steel Corp., on CreditWatch with
negative implications following the company's announcement that
it plans to acquire substantially all of bankrupt National Steel
Corp.'s steelmaking and finishing assets.
"Although the acquisition of National Steel would improve the
United States Steel's market position and result in annual
synergies of $170 million in two years", said Standard & Poor's
credit analyst Paul Vastola, "Standard & Poor's is concerned
that these benefits may be more than offset by weaker credit
protection measures given the increase in debt leverage,
declining steel prices and increasing pension costs at USS". Mr.
Vastola added that the acquisition of National and the expected
sale of United States Steel's more stable mining and
transportation assets to Apollo Management LP would be somewhat
detrimental to the company's business profile.
U.S. STEEL CORP: S&P Rates Proposed $250-Million Preferreds at B
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B' preferred
stock rating to United States Steel Corp.'s proposed $250
million series B mandatory convertible preferred shares.
Standard & Poor's said that the new rating was placed on
CreditWatch with negative implications.
Standard & Poor's noted that its ratings on United States Steel,
including its 'BB' corporate credit rating, remain on
CreditWatch with negative implications where they were placed
Jan. 9, 2003. Pittsburgh, Pennsylvania-based United States Steel
had about $1.4 billion in debt at Dec. 31, 2002.
Standard & Poor's originally placed its ratings on the company
on CreditWatch after the company announced that it planned to
acquire substantially all of bankrupt National Steel Corp.'s
steelmaking and finishing assets for approximately $950 million.
"Standard & Poor's is concerned that potential acquisitions,
together with increasing pension costs at United States Steel,
weakened steel prices in the spot market, and higher interest
costs incurred from debt-financed acquisitions will weaken the
company's financial profile," said Standard & Poor's credit
analyst Paul Vastola. "Moreover, despite its greater size and
improved steel market position, Standard & Poor's deems a
possible acquisition of National and the expected sale of United
States Steel's more stable mining and transportation assets to
Apollo Management LP to be somewhat detrimental to the company's
business profile."
Standard & Poor's said that in completing its review, it will
monitor steel industry fundamentals as well as the impact from
additional potential acquisitions on the United States Steel's
financial profile.
US UNWIRED INC: Fails to Meet Nasdaq Continued Listing Standards
----------------------------------------------------------------
US Unwired Inc., (Nasdaq/NM:UNWR) received notice from The
Nasdaq Stock Market that it has failed to comply with Nasdaq's
minimum bid price requirement for continued listing pursuant to
Marketplace Rules 4450(a)(5) and (b)(4). Therefore, US Unwired's
common stock is subject to delisting from the Nasdaq National
Market at the opening of business on February 10, 2003. US
Unwired intends to request a hearing before a Nasdaq Listing
Qualifications Panel to respond to Nasdaq's determination. Under
Nasdaq rules, US Unwired's common stock will continue to trade
on the Nasdaq National Market pending the issuance of a written
decision by the Panel after the hearing. Should listing on the
Nasdaq National Market become unavailable to US Unwired, the
company will pursue alternatives to ensure availability of a
liquid trading market. There is no assurance that the Panel
determination will be favorable.
US Unwired Inc., headquartered in Lake Charles, La., holds
direct or indirect ownership interests in five PCS Affiliates of
Sprint: Louisiana Unwired, Texas Unwired, Georgia PCS, IWO
Holdings and Gulf Coast Wireless. Through Louisiana Unwired,
Texas Unwired, Georgia PCS and IWO Holdings, US Unwired is
authorized to build, operate and manage wireless mobility
communications network products and services under the Sprint
brand name in 67 markets, currently serving over 500,000 PCS
customers. US Unwired's PCS territory includes portions of
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi,
Oklahoma, Tennessee, Texas, Massachusetts, New Hampshire, New
York, Pennsylvania, and Vermont. In addition, US Unwired
provides cellular and paging service in southwest Louisiana. For
more information on US Unwired and its products and services,
visit the company's web site at http://www.usunwired.com.US
Unwired is traded on the NASDAQ exchange under the symbol
"UNWR".
* * *
In its SEC Form 10-Q filed on November 14, 2002, the Company
reported:
"Our business is being adversely affected by slower subscriber
growth than we anticipated, increased churn, higher
uncollectible receivables, general economic conditions and other
factors. If our business does not improve it is likely that we
will have to ask our bank lenders to waive compliance with
covenants in our current bank agreements. If they refuse, we
would be in default on our bank debt and our bank lenders could
refuse to advance more loans and demand payment of what we owe
them. If payment is demanded, we would also be in default under
our indentures. If these events occur it is likely that we will
not have enough cash to operate.
"Our business has been adversely affected in recent months
particularly by the following factors:
. Our subscriber growth has slowed from what we had expected.
. Our churn has increased as described in a risk factor above.
. Our uncollectible accounts have increased.
. General economic conditions in our markets have not been
good, further adversely affecting subscriber growth and
churn.
"In addition, these are other factors that could contribute to a
continuation of poor business conditions for us. These include:
. Uncertainty whether our expected level of capital
expenditures will be sufficient to support our networks.
. Uncertainty about charges that Sprint PCS may seek to impose
on us, as described above.
. Uncertainty about achieving operating efficiencies from our
mergers as quickly as we expected.
"If our adverse business conditions continue, due to the above
or other factors, it is likely that US Unwired and IWO will fail
during 2003 to meet some of the loan covenants with our banks.
Loan covenants are promises that borrowers make either to do or
not to do specified things or not to allow specified things
to happen.
"A failure to meet a loan covenant has three principal
consequences. First, it permits the lender to refuse to advance
additional borrowings. US Unwired and IWO would not have
sufficient cash to operate if they are unable to obtain the
proceeds under their bank loan agreements or comparable amounts
from alternative financing sources. Alternative financing would
probably not be available on terms that we would normally
accept. Second, failure to meet a loan covenant allows the
lender to declare the loan to be in default and to insist on
payment of all amounts due under the loan. US Unwired and IWO
would not have sufficient cash to repay these loans, and their
failure to repay them, if repayment is demanded by the banks,
would allow their noteholders to declare a default under the
indentures that govern the notes and to insist on payment of all
amounts due under the notes. If these things happen and we were
unable to work out a debt restructure with our banks and
noteholders on mutually acceptable terms, we likely would have
no other alternative than to seek protection under bankruptcy
laws. Third, during any time that a default exists, even if the
lenders do not insist on payment, our debt would be classified
as a current liability on our balance sheet and our outside
auditors would place a going concern qualification on their
opinion on our financial statements.
"Because of the potentially material adverse consequences of any
default on US Unwired's or IWO's bank loans or indentures, US
Unwired and IWO plan to ask their bank groups to revise the bank
loan covenants as necessary to keep US Unwired and IWO in
compliance with them. We cannot assure you that our banks will
cooperate with us.
"On October 31, 2002 IWO made a request to borrow $15,000,000
under its revolving credit agreement with its banks with
proceeds from the borrowing due to IWO on November 7, 2002. On
November 7, 2002 we received $13,200,000 from the bank group
with one bank failing to fund its portion of the request. IWO
believes that it met all conditions for the borrowing request
and has forwarded a notice of default to the bank failing to
make its funding. Any such failure of our banks to fund a valid
borrowing request may leave us with insufficient funds to meet
our cash requirements even if we are in compliance with our bank
covenants.
WESTAR ENERGY: Completes Initial Sale of ONEOK Preferred Shares
---------------------------------------------------------------
Westar Energy, Inc., (NYSE:WR) completed its initial sale of
ONEOK, Inc. (NYSE:OKE) preferred shares to ONEOK. Wednesday's
transaction resulted in an immediate receipt by Westar Energy of
$300 million -- $50 million more than estimated earlier.
"This sale is an important step toward returning Westar Energy
to being a pure electric utility," said James Haines, Westar
Energy president and chief executive officer. Net proceeds will
be used exclusively for debt reduction as part of a
comprehensive plan scheduled to be filed Thursday with the
Kansas Corporation Commission.
In Wednesday's sale, ONEOK has repurchased 9,038,755 shares of
its Series A Convertible Preferred Stock from Westar Industries,
a wholly owned subsidiary of Westar Energy. Westar Industries
also exchanged its remaining shares of Series A Convertible
Preferred Stock for 21,815,386 new shares of ONEOK's Series D
Convertible Preferred Stock. Westar Industries continues to hold
4,714,433 shares of ONEOK common stock. Westar Industries now
has a total ownership interest of 27.4 percent in ONEOK.
In addition, ONEOK has agreed to register the Series D
Convertible Preferred and common stock held by Westar Industries
for future sale, subject to the effectiveness of such
registration, the expiration of a 180-day lock-up period and
future market conditions.
"We are pleased this first step in reducing debt could be
accomplished so quickly and for a larger amount than we
originally contemplated," Haines said.
"We are absolutely committed to restoring Westar Energy's
financial health in a responsible way. This sale not only helps
accomplish that, but we believe it demonstrates the depth of our
commitment," Haines added.
As required by Westar Energy's credit facility, the after-tax
proceeds of the sale of the Series A Preferred Stock of
approximately $244 million have been deposited in a segregated
account. Westar Energy must use the funds to prepay a term loan
within 120 days unless the funds are first used to repurchase
Westar Energy's 6.25 percent Senior Unsecured Notes due August
2018 that can be put and called in August 2003 or Westar
Energy's 6.875 percent Senior Unsecured Notes due August 2004.
Westar Energy, Inc., (NYSE: WR) is a consumer services company
with interests in monitored services and energy. The company has
total assets of approximately $7 billion, including security
company holdings through ownership of Protection One, Inc.
(NYSE: POI) and Protection One Europe, which have approximately
1.2 million security customers. Westar Energy is the largest
electric utility in Kansas providing service to about 647,000
customers in the state. Westar Energy has nearly 6,000 megawatts
of electric generation capacity and operates and coordinates
more than 34,700 miles of electric distribution and transmission
lines. Through its ownership in ONEOK, Inc. (NYSE: OKE), a
Tulsa, Okla.-based natural gas company, Westar Energy has a 27.4
percent interest in one of the largest natural gas distribution
companies in the nation, serving more than 1.4 million
customers. For more information about Westar Energy, visit
http://www.wr.com
As reported in Troubled Company Reporter's January 31, 2003
edition, Fitch Ratings revised the Rating Watch status for
Westar Energy to Negative from Evolving. The Rating Watch
revision is driven by the markedly lower likelihood that the
combined impact of regulatory action currently underway and
Westar's response to these actions will lead to sufficient
improvement in Westar's credit profile to merit an upgrade in
the near-term. Fitch's revised expectation is now that positive
resolution of many of the challenges facing Westar would most
likely result in a stabilization at current rating levels,
rather than a near-term upgrade, and thus the Rating Watch
status has been revised to Negative. Westar's ratings are as
follows: senior secured debt 'BB+'; senior unsecured debt 'BB-';
and, preferred stock 'B+'. The trust preferred securities of
Western Resources Capital Trust I and II are also rated 'B+' by
Fitch.
Westar's ratings reflect the company's weak cash flows relative
to debt, and a highly leveraged balance sheet. Key risk factors
for Westar investors include the overhang from ongoing federal
investigations, and execution risk associated with management's
plan to exit its non-utility operations. In a constructive
development, Westar has overhauled senior management and
revamped its business strategy. Fitch expects Westar's new
financial plan, which is scheduled to be filed with the
commission by Feb. 6, 2003, will propose the divestiture of the
company's non-electric utility operations, with the proceeds
used to reduce the company's debt burden. Westar's filing and
subsequent actions by management to implement its plan could
improve the historically contentious relationship with the KCC.
WESTAR ENERGY: Bear Stearns & Lehman Brothers Providing Advice
--------------------------------------------------------------
Westar Energy (NYSE: WR) and Protection One (NYSE: POI) retained
financial advisers to develop strategic alternatives for
Protection One, including the possible sale of the company.
A special committee comprised of independent directors of
Protection One's board of directors has been formed and has
retained Bear, Stearns & Co. Inc., to serve as its financial
adviser. Westar Energy has retained Lehman Brothers Inc.
Richard Ginsburg, president and chief executive officer of
Protection One, said: "We are working with Westar Energy, our
majority shareholder, to develop strategic alternatives that
will be in the best interests of Protection One's stakeholders.
We are optimistic the progress Protection One employees have
made during the past 20 months in improving the operating
metrics of the business will be reflected in the alternatives
developed for consideration by our special committee."
Westar Energy, Inc., (NYSE: WR) is a consumer services company
with interests in monitored services and energy. The company has
total assets of approximately $7 billion, including security
company holdings through ownership of Protection One, Inc.
(NYSE: POI) and Protection One Europe, which have approximately
1.2 million security customers. Westar Energy is the largest
electric utility in Kansas providing service to about 647,000
customers in the state. Westar Energy has nearly 6,000 megawatts
of electric generation capacity and operates and coordinates
more than 34,700 miles of electric distribution and transmission
lines. Through its ownership in ONEOK, Inc. (NYSE: OKE), a
Tulsa, Okla.-based natural gas company, Westar Energy has a 44.7
percent interest in one of the largest natural gas distribution
companies in the nation, serving more than 1.4 million
customers. For more information about Westar Energy, visit
http://www.wr.com
WHOLE LIVING: Subsidiary Reports Positive Cash Flow for January
---------------------------------------------------------------
Whole Living Inc., (OTCBB: WLIV) and The Brain Garden announced
after preliminary review, January 2003 revenues were over $900k
with positive cash flow.
This compared to January of 02' is an increase of 245%.
The whole foods manufacturer projects revenues for the first
quarter of 2003 to be over $3.0 million, compared to the $1.4
million revenues reported for the same period a year ago.
"I look at 2003 to become Brain Garden's break out-year which
will at least double, if not, triple our 2002 results. In the
second quarter I expect another significant rise in our fiscal
numbers as we make our global Food First launch," stated
President Doug Burdick.
Brain Garden, Inc., is a primary nutrition company in the
direct-selling industry, with premium products reaching
consumers throughout the US, Canada, Japan, Korea, Australia,
Mexico, New Zealand, and the United Kingdom.
Whole Living, Inc.'s September 30, 2002 balance sheet shows that
total current liabilities exceeded total current assets by about
$3 million.
WORLDCOM INC: Intends to Assume Southwest Airlines Agreement
------------------------------------------------------------
Worldcom Inc., and its debtor-affiliates seek the Court's
authority to assume a frequent flyer agreement with Southwest
Airlines, as amended.
Prior to the Petition Date, the Debtors and Southwest Airlines
Co. entered into an agreement dated January 1, 2000. SWA hosts
a frequent flyer program under which individuals enrolled in the
program are issued "Rapid Rewards Credits" for traveling on SWA
that they may exchange for free travel. Pursuant to the
Agreement, the Debtors and SWA have instituted a program whereby
SWA awards Credits to the Debtors' customers who have enrolled
in the Program, for ongoing usage of the Debtors' services or in
connection with special bonuses, including enrollment bonuses,
retention offers, usage stimulation, and other bonuses. The
Debtors are obligated to pay SWA $10 for each Credit posted
under the Program.
According to Lori R. Fife, Esq., at Weil Gotshal & Manges LLP,
in New York, the Debtors have the ultimate responsibility for
marketing the Program and are obligated to spend at least
$2,000,000 each year of the Agreement to market and promote the
Program. In addition, the Debtors are obligated to allocate
$200,000 each year of the term of the Agreement to be used for
mutually agreed on promotional activities. In exchange, no less
than four times per year, SWA must provide a list including
names, addresses and phone numbers of its Members and any other
SWA customers to the Debtors to enable them to market the
Program directly via mail and telemarketing. Finally, the
Agreement provides that the Debtors will be the exclusive
telecommunications provider associated with the Program. By its
terms, the Agreement is scheduled to expire on February 28,
2003. As of the Petition Date, the Debtors owed SWA about
$2,200,000 for Credits posted prepetition.
Ms. Fife informs the Court that the Program provides the Debtors
with the opportunity to market to the SWA customer base by
offering additional ways to earn Credits. If the Agreement is
allowed to expire by its terms, the Debtors estimate that they
will lose more than $50,000,000 in revenue and lose significant
EBITDA due to the loss of the opportunity to market to this
additional customer base and the potential loss of customers
currently enrolled in the Program. If the Agreement is not
renewed, the Debtors expect an increased customer churn and a
significant loss of telemarketing data in both the long distance
and local campaigns because the SWA List would be unavailable to
the Debtors. Therefore, on January 8, 2003, the Debtors
executed Amendment Number 3 to the Agreement, which extends the
term of the Agreement through December 31, 2003. The Amendment
also provides that the Debtors must file a motion requesting
approval of the assumption of the Agreement, as modified by the
Amendment, and to allow payment of all prepetition arrearages
amounting to about $2,200,000. (Worldcom Bankruptcy News, Issue
No. 19; Bankruptcy Creditors' Service, Inc., 609/392-0900)
W.R. GRACE: Earns Nod to Hire Woodcock for Indiana Patent Suit
--------------------------------------------------------------
The W.R. Grace Debtors obtained permission from the Court to
employ Woodcock Washburn LLP as special litigation counsel to
intervene in a case styled David B. Bartholic and Intercat, Inc.
v. Nol-Tec Systems, Inc., pending in the United States District
Court for the Northern District of Indiana. The Debtors want to
intervene in the Intercat patent infringement suit in order to
protect a significant part of their business.
The Intercat suit commenced on October 18, 2002. Intercat
alleges that Nol-Tec is inducing infringement, or contributing
to the infringement, of U.S. Patent No. 5,389,236 issued
February 14, 1995. Intercat is seeking damages for willful
infringement, as well as preliminary and permanent injunctive
relief. No alleged direct infringer is identified in Intercat's
complaint, and none of the Debtors are currently parties to the
Intercat suit. However, the Intercat suit may directly affect
Grace's business.
Compensation
The Debtors will compensate Woodcock on an hourly basis at its
customary rates for services rendered. The primary partners,
associates and paralegals of Woodcock who will be handling this
matter, and their current standard hourly rates are:
Attorney/Paralegal Hourly Rate
------------------ -----------
Gary H. Levin $435
David R. Bailey $360
Frank T. Carroll $250
Karen M. Whitney $190
Cathy Branka $145
These hourly rates are subject to periodic adjustments to
reflect economic and other conditions. Other attorneys or
paralegals may from time to time serve the Debtors in the matter
for which Woodcock's retention is sought. (W.R. Grace Bankruptcy
News, Issue No. 36; Bankruptcy Creditors' Service, Inc.,
609/392-0900)
XML GLOBAL: Completes Financing Arrangement with Paradigm Group
---------------------------------------------------------------
XML Global Technologies, Inc. (OTC BB: XMLG), a developer of XML
middleware, announced that Paradigm Group has completed the
balance of the $2 million financing previously announced on
August 23, 2002. XML Global received an immediate $415,000 cash
payment and a fully guaranteed promissory note for the balance
of $200,000. The balance is to be paid with interest upon the
completion of a registration of the underlying shares.
The Paradigm Group is a private investment firm, which
originates, structures and acts as an equity investor in growth
capital financing. These financings include, but are not limited
to, private or venture financing, bridge loans, and public
equity financing. The Paradigm Group has invested over $100
million of equity in approximately 70 corporate transactions. In
March 2001, the firm embarked upon funding the Paradigm
Millennium Fund. This fund will invest primarily in the public
equity markets and Paradigm will utilize its vast resources to
aid in helping portfolio companies achieve their personal
financial goals. Paradigm conducts its investment activities
through its wealth of strategic investors as well as its
strategic relationships and it leverages these resources through
the diversity and experience of its partners. For more
information visit http://www.paradigmventure.com
XML Global Technologies, Inc., is an XML middleware company
focused on providing a methodical approach to the adoption of
XML-based solutions. The Company's GoXML(TM) Transform product
line provides an intuitive, modular solution for integration of
structured data. Its powerful transformation engine links XML to
traditional data formats, like relational and EDI. It also
transforms data between various XML dialects. Transformation
solutions developed with the XML Integration Workbench can be
deployed to GoXML Transform Enterprise Edition for centralized
management and connectivity to integration platforms, message
queues, and workflow engines. Interfaces for Web Services and
ebXML allow it to plug into popular e business infrastructures.
The Company is an active member of the ebXML, UDDI, OAG, W3C and
OASIS standards initiatives. Founded in May 1999, XML Global has
its US headquarters in New York, NY, and a research and
development office in Vancouver, BC. To find out more about XML
Global Technologies (OTCBB: XMLG), visit our Web site at
http://www.xmlglobal.com
As previously reported, XML Global's independent auditor's
report stated that XML's consolidated financial statements for
the year ending June 30, 2002 have been prepared assuming that
the Company will continue as a going concern. However, the
Company has incurred losses since inception and has an
accumulated deficit. These conditions raise substantial doubt
about its ability to continue as a going concern.
It has incurred costs to design, develop and implement search
engine and electronic commerce applications and to grow its
business. As a result, it has incurred operating losses and
negative cash flows from operations in each quarter since
commencing operations. As of September 30, 2002 the Company had
an accumulated deficit of $12,860,900.
At September 30, 2002 XML's cash funds are insufficient to fund
operations through the end of fiscal 2003 based on historical
operating performance. In order for the Company to maintain its
operations it will have to seek additional funding, generate
additional sales or reduce its operating expenses, or some
combination of these. At current and planned expenditure rates,
taking into consideration cash received from the first part of
the Paradigm financing, current reserves are sufficient to fund
operations only through December 2002.
YOUTHSTREAM MEDIA: Closes Debt Workout Resolving Default Claims
---------------------------------------------------------------
YouthStream Media Networks (OTC Bulletin Board: YSTM) completed
its planned debt restructuring, allowing it to resolve the
default claims that had been made by the Company's largest note
holders.
The Company announced that with the restructuring completed a
new Board of Directors and management would begin the process to
rebuild shareholder value in several ways. First, by exploring
strategic opportunities to acquire operating companies that meet
specific criteria, including a history of profitability,
positive cash flow, strong management and favorable long-term
prospects. Second, by seeking to maximize the value of the
Company's remaining operating subsidiary, Beyond the Wall, Inc.
The Company also expects to continue its recent efforts to
settle remaining liabilities and further streamline operations.
Jon Diamond, previously a director and Interim CEO of
YouthStream, rejoined the Company as its Chairman, and Hal Byer
and Robert Scott Fritz also joined the board. At the close of
the restructuring, the Company's former directors and officers
resigned.
ZENITH NAT'L: S&P Revises Outlook on Low-B Ratings to Negative
--------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on Zenith
National Insurance Corp., and its subsidiaries to negative from
stable after Zenith's announcement on Jan. 20, 2003, that it has
increased its workers' compensation reserves by 4.5% ($30
million; $19.5 million after taxes) and its Feb. 4, 2003,
announcement that, as a result, it has posted a net after-tax
loss of $7.8 million for the fourth quarter of 2002.
Zenith is a holding company. Through its subsidiaries,
principally Zenith Insurance Co., Zenith writes workers'
compensation insurance. The reserve addition is attributable to
increases in both health care and indemnity costs in California,
the state where it writes the most premium, partly offset by
favorable trends outside California.
Zenith posted a net after-tax profit of $10.2 million for 2002,
and it has benefited from rates that, overall, were 18% higher
in 2002 than in 2001 (27% higher in California). Moreover, the
company estimates that in 2003, rates will be 21% higher overall
(30% in California). Standard & Poor's considers Zenith to be a
disciplined writer of workers' compensation insurance that has
strengthened reserves in the past but generally has a history of
posting conservative reserves. The holding company has drawn on
its bank lines to contribute $45 million of additional capital
to the operating companies to fund the reserve increase and the
additional capital needed to support a higher level of
operation. After taking into account these transactions,
operating and holding company capitalization appear to meet
Standard & Poor's criteria for the current ratings at this time.
"There is concern that despite the strong premium increases
Zenith has achieved and expects to achieve, loss costs in
California could keep rising rapidly," said Standard & Poor's
credit analyst Charles Titterton. "In addition, the
organization, which has a market share of less than 3% in
California, must contend with a tough competitive situation in
the state." Standard & Poor's expects to meet with the company
for its full annual review on March 6, 2003.
As previously reported, Standard & Poor's lowered its
counterparty credit rating on Zenith National Insurance Corp.,
to double-'B'-plus from triple-'B'-minus and its ratings on
ZNT's affiliates, Zenith Insurance Co., and ZNAT Insurance Co.,
to triple-'B'-plus from single-'A'-minus due to poor but
improving operating results in workers' compensation and large
losses in 2000 and 2001 in assumed reinsurance.
* Hidayet L. Kutat Joins Renaissance Partners
---------------------------------------------
Renaissance Partners, L.C., announced that Hidayet L. Kutat has
joined this turnaround management and consulting firm as a
Principal and Manufacturing Practice Leader, based in Bradenton,
FL. Mr. Kutat has thirty years of manufacturing profit
improvement, project management and engineering experience
including operational turnaround, corporate restructuring and
revitalization assignments.
From 1996-2003, Mr. Kutat has served as Founder and Principal of
Management Consulting Services where he provided CRO, Interim
President, COO, Manufacturing Consultant to CEO, Interim GM and
Plant Manager to a host of manufacturers including Alpha/Owens
Corning, LLC, Molded Fiberglass Companies/Texas, LP, Vision
Group International Corporation, MonierLifetile, LLC, WM Barr &
Company, Inc., On-Board Engineering Corporation, Refrigerant
ONE, LTD, Sun-Glo Plating Company and Youngquist Brothers, Inc.
MCS will be merged into Renaissance Partners, L.C.
Previously, from 1973-1996, Hidayet was employed by E.I. Dupont
de Nemours & Company, throughout the United States, with
increasing responsibility and authority in numerous
manufacturing roles including Facilities Planning Manager,
Global Phase-Out Business Manager, Technical Services Manager,
New Technology Project Manager, R&D Site Manager, Operations
Manager, Site Safety Health and Environmental Manager. Mr. Kutat
holds B.S. and M.S. degrees in Chemical Engineering from
Virginia Tech and an M.B.A., from Goldey-Beacom College of
Business in Wilmington, DE.
Renaissance Partners, L.C., provides profit improvement,
restructuring, corporate renewal consulting, strategic
assessment and planning, crisis and interim management,
bankruptcy, wind-down and CFO services. The firm's profit and
cash flow enhancement services focus on expense reductions,
productivity and process improvement, strategic and financial
assessment and planning, merchandising and marketing strategy
and planning, information technology right-sizing, distribution,
logistics, consumer research, and human resources to retailers,
manufacturers, consumer goods suppliers, service, technology
companies. Renaissance provides experienced, hands-on senior
management to its clients in financial, strategic and operations
management, merchandising and merchandise planning, product
development and sourcing, marketing, information technology,
distribution, logistics, real estate and human resources from
locations in Bradenton, Charlotte, Cleveland, Columbus, Houston,
Memphis, Miami, Pompano Beach and Tampa. For additional
information visit http://www.renaissancelc.comor contact the
firm by e-mail at renparlc@gate.net
* BOOK REVIEW: Bankruptcy Crimes
--------------------------------
Author: Stephanie Wickouski
Publisher: Beard Books
Softcover: 395 Pages
List Price: $124.95
Review by Gail Owens Hoelscher
Order your personal copy today at
http://amazon.com/exec/obidos/ASIN/1893122832/internetbankrupt
Did you know that you could be executed for non-payment of debt
in England in the 1700s? Or that the nailing of an ear was the
sentence for perjury in bankruptcy cases in 1604? While ruling
out such archaic penalties, Stephanie Wickouski does believe "in
the need for criminal sanctions against bankruptcy fraud and for
consistent, effective enforcement of those sanctions." She
decries the harm done to individuals through fraud schemes and
laments the resulting erosion in public confidence in the
judicial system. This leading authoritative treatise on the
subject of bankruptcy fraud, first published in August 2000 and
updated annually with new material, will prove invaluable for
bankruptcy law practitioners, white collar criminal
practitioners, and prosecutors faced with criminal activity in
bankruptcy cases. Indeed, E. Lawrence Barcella, Jr. of Paul,
Hastings, Janofsky, and Walker, in Washington, DC, says, "If I
were a lawyer involved in a bankruptcy matter, whether civil or
criminal, and had only one reference work that I could rely
upon, it would be this book." And, Thomas J. Moloney with
Cleary, Gottlieb, Steen & Hamilton describes the book as "an
essential reference tool."
An estimated ten percent of bankruptcy cases involve some kind
of abuse or fraud. Since launching Operation Total Disclosure in
1992, the U.S. Department of Justice has endeavored to send the
message that bankruptcy fraud will not be tolerated. Bankruptcy
judges and trustees are required to report suspected bankruptcy
crimes to a U.S. attorney. The decision to prosecute is based on
the level of loss or injury, the existence of sufficient
evidence, and the clarity of the law. In some cases, civil
penalties for fraud are deemed sufficient to punish and deter.
Ms. Wickouski suggests that some lawyers might not recognize
criminal activity that the DOJ now targets for investigation.
She gives several examples, including filing for bankruptcy
using an incorrect Social Security number, and receiving
payments from a bankruptcy debtor that were not approved by the
bankruptcy court. In both of these real life examples, DOJ
investigations led to convictions and jail time.
Ms. Wickouski says that although new schemes in bankruptcy fraud
have come along, others have been around for centuries. She
takes the reader through the most common traditional schemes,
including skimming, the bustout, the bleedout, and looting, as
well as some new ones, including the bankruptcy mill. The main
substance of Bankruptcy Crimes is Ms. Wickouski's detailed
analysis of the U.S. Bankruptcy Criminal Code, chapter 9 of
title 18, the Federal Criminal Code. She painstakingly analyzes
each provision, carefully defining terms and providing clear and
useful examples of actual cases. She ends with a good chapter
on ethics and professional responsibility, and provides a
comprehensive set of annexes.
Bankruptcy Crimes is never dry, and some of the cases will make
you nostalgic for the days of ear-nailing. This comprehensive,
well researched treatise is a particularly invaluable guide for
debtors' counsel in dealing with conflicts, attorney-client
relationships, asset planning, and an array of legal and ethical
issues that lawyers and bankruptcy fiduciaries often face in
advising clients in financially distressed situations.
Stephanie Wickouski is a Washington, D.C.-based partner in
Gardner Carton & Douglas' Corporate Restructuring Practice.
Ms. Wickouski has over twenty years of experience in complex
reorganization cases before federal bankruptcy courts throughout
the country, and in counseling clients on all aspects of credit
and financial relationships.
*********
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
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*** End of Transmission ***