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/raid1/www/Hosts/bankrupt/TCR_Public/030307.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, March 7, 2003, Vol. 7, No. 47 Headlines 21ST CENTURY HLDNG: Board of Directors Raises Dividend by 16.5% ALARIS MEDICAL: Narrows Net Capital Deficit to $32MM at Dec. 31 AMERCO: Enters into Forbearance Pact with Royal Bank of Canada AMERICAN TRANS: February Revenue Passenger Miles Jumps Up 16.8% AMPEX CORP: Dec. 31 Balance Sheet Insolvency Balloons to $148MM ANC RENTAL: Asks Court to Clear Chrysler Financing Agreement BUDGET GROUP: Committee Hires Covington & Burling as Counsel CAMBRIAN COMMS: Selling Substantially All Assets for $7.3 Mill. CASELLA WASTE: Enters Pact to Acquire Hardwick Sanitary Landfill CASELLA WASTE: Posts $1.6MM Net Loss on $95MM Revenue for Q3 CHAMPIONLYTE PRODUCTS: Initiates a Comprehensive Restructuring CNH GLOBAL: S&P Affirms BB Corp. Credit Rating & Stable Outlook CONSECO FINANCE: Flowers Group Bids $700M for Bulk of Assets CONSECO FINANCE: GE Consumer Finance Bids $310M for Mill Creek CONSECO FINANCE: Court Okays Greenberg as Committee's Co-Counsel CONSECO INC: TOPrS Committee Signs-Up Raymond James as Advisor CORNING INC: Continues Expansion of LCD Glass Facility in Taiwan DDI CORP: Appoints John Stumpf as Chief Financial Officer DELTA AIR LINES: February 2003 Traffic Slides-Down 1.1% DELTA MILLS: Launches "Modified Dutch Auction" Note Tender Offer DEVON MOBILE: Completes Private Sales of 72 Wireless Towers DIAMOND ENTERTAINMENT: Balmore S.A. Discloses 9.9% Equity Stake DICE INC: Gets Court Nod to Hire Ordinary Course Professionals DIVINE INC: Brings-in Latham & Watkins as Bankruptcy Counsel DOBSON COMMS: Fourth Quarter 2002 Results Show Strong Growth EKNOWLEDGE GROUP: Arranges Interim Financing with Amara Group ENCOMPASS SERVICES: Files Joint Plan and Disclosure Statement ENCOMPASS SERVICES: Committee Hires Chanin Capital as Advisors ENRON: Examiner Concludes SPEs Can & Should Be Challenged ENRON CORP: Sues Whitewing, et al., to Recover Preferences EOTT ENERGY: Wins Approval to Assume Amended TST Lease Agreement FACTORY 2-U STORES: February Sales Tumble 15.2% to $28.8 Million FIRST CONSUMERS: S&P Keeps Lowered Transaction Ratings on Watch GATEWAY INC: Undertakes Business and Cost-Reduction Plans GENTEK INC: Ingalls & Snyder LLC Discloses 3.1% Equity Stake GENZYME BIOSURGERY: Dec. 31 Working Capital Deficit Tops $282MM GLOBAL CROSSING: Exceeds Financial Targets in December 2002 GXS CORP: S&P Assigns B+ Rating to Planned $175M Sr. Sec. Notes HEALTHSOUTH CORP: S&P Lowers Corp. Credit Rating to BB- from BB INTEGRATED HEALTH: Files 1st Amended Disclosure Statement & Plan K & F INDUSTRIES: Completes Exchange Offer for 9-5/8% Notes KAISER ALUMINUM: Wants Nod for 4th Amendment to DIP Financing KEY3MEDIA: Taps Howrey Simon as Insurance Litigation Counsel KMART CORP: Court Allows Payment of $15MM Plan Investment Fees KNITWORK PRODUCTIONS: Signs-Up Garfunkel Wild as General Counsel LTV CORP: Secures Wind-Down and Superpriority Claim Approval MARTIN INDUSTRIES: Consummates Asset Sale to Monessen for $3.7MM MASSMUTUAL/DARBY: Fitch Downgrades Class B Notes to B+ from BBB- MERRILL LYNCH MORTGAGE: Fitch Rates Class B-5 Certificate at B+ MICRO COMPONENT: Dec. 31 Balance Sheet Upside-Down by $6 Million MITEC TELECOM: Initiates Restructuring of Swedish Subsidiary MOORE NORTH AMERICA: S&P Assigns BB+ to Proposed $850MM Facility NEENAH FOUNDRY: S&P Concerned about Company's Limited Liquidity NORTHWEST AIRLINES: Flies 5.1BB Revenue Passenger Miles in Feb. NTELOS INC: Receives Court Approval of "First Day Motions" NUTRITIONAL SOURCING: Brings-In Milbank Tweed as Special Counsel OAKWOOD HOMES: Court Establishes March 17, 2003 Claims Bar Date OMEGA HEALTHCARE: S&P Revise B Credit Rating Outlook to Stable OVERSEAS SHIPHOLDING: S&P Affirms & Assigns Low-B Debt Ratings OWENS CORNING: Completes Atlanta Facility Sale to Alcoa Home PEREGRINE: Committee Taps Milbank Tweed as Special Tax Counsel PINNACLE ENTERTAINMENT: S&P Rates $225M Sr. Sec. Bank Loan at B+ PLAYBOY ENTERPRISES: Offering $110-Million Senior Secured Notes PLAYBOY ENTERPRISES: S&P Assigns B Corporate Credit Rating PMA CAPITAL: Moody's Hatchets Long-Term Debt Ratings to Ba1 PRIVATE BUSINESS: Narrows Dec. 31 Net Capital Deficit to $6 Mil. PROVIDENT FIN'L: S&P Cuts Counterparty Credit Ratings to BB+/B RAILAMERICA INC: Reports Weaker Fin'l Results for Fourth Quarter ROGERS COMMS: Leverage Concerns Prompt S&P to Revise Outlook ROWECOM: Executes Pacts to Sell US Assets to EBSCO Industries SAKS INC: February 2003 Comparable Store Sales Decline 4.1% SATCON TECHNOLOGY: Expands Supplier Pact with Leading Chip Maker SBC COMMS: California ISPs Call on PUC to Stop New SBC Fees SEDONA CORP: Appoints Victoria V. Looney to Board of Directors SYSTEMONE TECHNOLOGIES: Extends Hansa Loan Pact to May 30, 2005 TEXAS COMMERCIAL ENERGY: Files Chapter 11 Petition in S.D. Texas TEXAS COMMERCIAL: Case Summary & 20 Largest Unsecured Creditors TRANSCARE: Taps Jackson Lewis as Employment Litigation Counsel TRIANGLE INDUSTRIES: All Proofs of Claim Due by May 8, 2003 TRINITY INDUSTRIES: Narrows Fourth Quarter Net Loss to $11 Mill. TYCO INT'L: Names Robert Ott & Richard Baran to 2 Key Positions UNIROYAL TECH: Retirees Committee Hires Ferry Joseph as Counsel UNITED AIRLINES: Air Wisconsin Demands Prompt Decision on Pacts US AIRWAYS: Revenue Passenger Miles Drop 15.8% in February 2003 WHEELING-PITTSBURGH: Settles Claims Dispute with Interstate Gas WORLDCOM: Taxpayer Group Urges SEC Chairman to Reconsider Action BOOK REVIEW: PANIC ON WALL STREET: A History Of America's Financial Disasters ********* 21ST CENTURY HLDNG: Board of Directors Raises Dividend by 16.5% --------------------------------------------------------------- The Board of Directors of 21st Century Holding Company (Nasdaq:TCHC), a vertically integrated financial services holding company, are raising the Company's dividend 16.5% from $.06 per share to $.07 per share payable on June 2, 2003 to shareholders of record as of May 5, 2003. Chairman and CEO, Edward J. Lawson, said, "The Board took this action to demonstrate the increasing profitability of 21st Century Holding Company and reward our shareholders. This is the third consecutive quarter where the dividend has been increased and as 21st Century Holding Company continues to increase its profitability, you can expect further dividend action will be taken." 21st Century Holding Company manages its insurance underwriting, distribution and claims process through its subsidiaries. -- The Company's wholly owned subsidiaries, Federated National Insurance Company and American Vehicle Insurance Company, underwrite standard and non-standard personal automobile insurance in the state of Florida. Federated National also has authority to underwrite flood insurance, mobile home insurance, and homeowners property and casualty insurance in the state of Florida. -- The Company's wholly owned managing general agent, Assurance Managing General Agents, Inc., has underwriting authority for Federated National, American Vehicle, and third- party insurance companies. -- The Company's wholly owned claims adjusting company, Superior Adjusting, Inc., processes claims made by the insureds of Federated National, American Vehicle, and third party insurance companies which contract with Superior. -- Federated Premium Finance, Inc., another wholly owned subsidiary, offers premium financing to insureds of Federated National and American Vehicle, as well as to third party insureds. -- Express Tax Service, Inc., an 80% owned subsidiary, licenses its tax preparation software products to retail tax preparers nationwide. -- EXPRESSTAX(R) Franchise Corporation, a wholly owned franchiser subsidiary of Express Tax Service, Inc., offers franchise opportunities to individuals to own and operate their own business under the name and support of EXPRESSTAX(R). -- The Company offers other ancillary services including electronic income tax filing, tax preparation and tag & title transfer services through Federated Agency Group, Inc., also a wholly owned subsidiary. -- Fed USA, Inc., a wholly owned franchiser company, offers single and master franchise opportunities to individuals to own and operate their own business under the name and support of Fed USA Insurance / Financial Services. As reported in Troubled Company Reporter's December 27, 2002 edition, 21st Century Holding Company said that AM Best reaffirmed ratings for Federated National Insurance Company ("B" rated) and American Vehicle Insurance Company ("B+" rated) and changing their outlook from negative to stable. ALARIS MEDICAL: Narrows Net Capital Deficit to $32MM at Dec. 31 --------------------------------------------------------------- ALARIS Medical Inc., (AMEX:AMI) reported a full-year sales increase of 12% and earnings per share of $.13 for 2002. Both figures exceeded the company's October guidance. The company also announced that it has reduced its debt by repurchasing $25 million of its Senior Discount Notes on Feb. 25, 2003. ALARIS Medical reported sales of $460.3 million for the year ended Dec. 31, 2002, an increase of $47.5 million, or 12% (10% in constant currency), compared with 2001. Adjusted EBITDA increased 15% to $95.0 million versus $82.8 million for the prior year. For the year, the company reported net income of $8.2 million, compared with a net loss of $9.8 million in the prior year. Fourth quarter sales increased 20% (16% in constant currency) to $134.4 million compared with $111.8 million for the fourth quarter of 2001. For the quarter, the company reported net income of $4.2 million compared with a net loss of $1.8 million for the fourth quarter of 2001. These full-year results exceeded the outlook indicated in the company's press release of Oct. 31, 2002. That release reported the company's 2002 outlook for 10% sales growth, $93 million of Adjusted EBITDA and earnings per share of $.11. David L. Schlotterbeck, president and chief executive officer, said, "We are pleased to report the first full year of profitability since the formation of ALARIS Medical in 1996. Our strong finish in 2002 provides us with tremendous momentum as we enter 2003. This momentum is fueled by the clear U.S. market acceptance of our medication safety strategy, positioning and products. We are very excited about the prospects this provides us for 2003." Schlotterbeck continued, "We are also pleased that we have begun to upstream funds to the parent company. We have met all requirements of our debt agreements to do this a full year before the beginning of interest payments on ALARIS Medical Inc.'s long term debt. This cash flow gave us the opportunity to begin repurchasing some of that debt." 2002 Results of Operations Sales. Sales increased $22.5 million, or 20% (16% in constant currency), in the fourth quarter of 2002 compared with the fourth quarter of 2001. North America sales grew 19% primarily due to an increase of $9.2 million, or 43%, in drug infusion instrument sales. This increase was driven by increased placements of our Medley(TM) Medication Safety Systems. International sales increased by 24% (8% in constant currency) due to an increase in volume of syringe pumps and disposable administration sets sales. For the year ended Dec. 31, 2002, sales were $460.3 million, an increase of $47.5 million, or 12% (10% in constant currency), over the prior year. Higher volumes of both drug infusion instruments and disposable administration sets in North America resulted in an increase in revenues of $32.1 million, or 11%, over the prior year. The increase in infusion instruments was primarily due to sales of our proprietary Guardrailsr safety software, primarily in the Medley(TM) Medication Safety System. We believe the increase in dedicated disposables is due to an increase in our installed base of infusion devices. The increase in other disposables and service was due to approximately $11.0 million in additional sales of SmartSite(R) non-dedicated disposables. The increases in drug infusion products in North America were partially offset by lower volumes of patient monitoring instruments and disposables compared with the prior year. International sales increased $15.4 million, or 12% (7% in constant currency), due to higher volumes and revenues of non- dedicated disposable administration sets, large volume pumps and syringe pumps compared with the prior year. The increase in large volume pump sales for the International business is primarily attributed to the Asena GW, a new product launched in late 2001. Gross Profit. Gross profit increased $26.2 million, or 13%, during 2002 compared with 2001 due to higher sales and an increase in gross margin percentage. The gross margin percentage increased to 49.4% in 2002 from 48.7% in 2001. In both North America and International, the improved margin percentage was due to increased volume and our continuing cost reduction efforts. International margins also benefited from a weaker U.S. dollar. Selling and Marketing Expenses. Selling and marketing expenses increased $8.5 million, or 11%, during the year ended Dec. 31, 2002, compared with the same period in 2001 as a result of higher sales volume, as well as higher selling and marketing costs related to increased personnel and related activities supporting the North America launch of the Medley(TM) Medication Safety System. Also contributing to this increase were higher marketing expenses related to the creation of new product strategies. These increases were partially offset by reductions in our distribution costs over the prior year by consolidating contracted distribution facilities, simplifying processes in our supply chain and optimizing freight channels. As a percentage of sales, selling and marketing expenses decreased to 19.2% for 2002 from 19.3% for 2001. General and Administrative Expenses. General and administrative expenses decreased $6.7 million, or 14%, during 2002 compared with 2001. As a percentage of sales, general and administrative expense decreased to 9.0% during 2002 compared with 11.6% for 2001. This decrease was primarily due to a $9.3 million reduction in amortization expense resulting from our adoption of new accounting requirements effective Jan. 1, 2002, under which our goodwill and certain other amortization expense ceased. Had these accounting requirements been in effect during 2001, general and administrative expense for such period would have been 9.5% of sales. Increases in 2002 general and administrative expenses included $1.8 million for our business process reengineering project, which we established to implement efficiencies throughout our administrative operations and to design a new enterprise-wide information system. These additional expenditures were generally offset by lower bonus expense during 2002 compared with 2001. Research and Development Expenses. Research and development expenses increased approximately $3.3 million, or 12%, during 2002 compared with 2001. The increase was due to spending associated with new product development primarily related to our medication safety strategy. This higher spending included increased salaries, benefits and consulting costs. As a percentage of sales, spending on research and development was 6.6% for 2002, consistent with 2001. Restructuring and Other Non-Recurring Items. During the first quarter of 2002, we recorded a non-recurring benefit of $1.1 million for an insurance settlement. The settlement related to damages and losses incurred at one of our disposable products manufacturing plants in Mexico in 1993 as a result of flooding. The contingency related to the insurance settlement was resolved in the first quarter of 2002, when we received proceeds of $1.0 million during the quarter and notification of an additional payment due of $.1 million, which we received during April 2002. Also during the first quarter of 2002, we initiated a plan to restructure our technical services operations in Central Europe. In this connection, we recorded a charge of $.5 million which included $.4 million for severance costs for 21 positions affected by the relocation of the German operation and $.1 million related to lease termination. As of December 31, 2002, all severance payments had been made to the identified employees. During 2001, we recorded a charge of $3.4 million for restructuring and other non-recurring activities. These activities were related to streamlining of operations in the North America business unit and resulted in the elimination of 71 positions. The restructuring and other non-recurring charges were composed of severance and related benefits of $2.6 million and consulting fees of $.8 million. We also incurred non- recurring charges of $3.5 million in 2001 related to obtaining an amendment to our then bank credit facility. The charges related to legal, advisory and other consultant expenses incurred by ALARIS Medical and our lenders, which we were required to pay. Income from Operations. Income from operations increased $27.7 million, or 63%, during 2002 compared with 2001 primarily due to an increase in gross profit and lower amortization expense. Interest Income. Interest income decreased $.9 million, or 47%, due to lower interest rates earned on cash balances in 2002 compared with 2001. Interest Expense. Interest expense decreased $1.4 million, or 2%, from 2001. This decrease was primarily due to the maturity and resulting pay-off of the $16 million ALARIS Medical 7-1/4% convertible subordinated debentures in January 2002. Additionally, interest expense decreased due to lower overall interest rates on our outstanding indebtedness resulting from the replacement of ALARIS Medical Systems' bank credit facility with the Senior Secured Notes in October 2001. These decreases were partially offset by increased accretion of $1.9 million on our 11-1/8% senior discount notes. Other, net. Other, net decreased $2.9 million during 2002 compared with 2001. Our foreign currency transaction losses decreased $2.7 million in the current year and were partially offset by an increase in cost of $.8 million related to our hedging program. During 2001, we received $.5 million of other income relating to the sale of a trade name which was not repeated in 2002. Also in 2001, we terminated our interest rate swap agreement in association with the repayment of our bank credit facility, resulting in a pre-tax charge of $1.6 million. Discontinued Operations. During the third quarter of 2000, we sold our Instromedix division to Card Guard Technologies Inc. (Card Guard). The agreement with Card Guard provided that we would assist the buyer in setting up a fully independent headquarters and manufacturing facility. During the first quarter of 2001, we completed our obligations related to the agreement and recorded a gain of $3.7 million, net of taxes. Financial Position ALARIS Medical reported net debt (total debt less cash on hand) of $457.7 million at December 31, 2002. Long-term debt was $527.5 million and cash was $69.7 million, which represents a $16.3 million reduction from net debt of $474.0 million at Dec. 31, 2001. The current portion of long-term debt was reduced during 2002 from $16.0 million at Dec. 31, 2001 to zero at Dec. 31, 2002, when the company retired at maturity on Jan. 15, 2002 its 7-1/4% convertible subordinated debentures. Based on the results for the year ended Dec. 31, 2002, ALARIS Medical Systems met the requirements under its debt agreements to make a restricted payment in the first quarter of 2003. As a result, in February 2003, ALARIS Medical Systems made distributions to ALARIS Medical in the amount of $30.8 million. ALARIS Medical used a portion of such distributions to repurchase in a private transaction $25.0 million face amount of the Senior Discount Notes at a total cost of $25.0 million representing a premium of $1.2 million, or 4.7%, over the then accreted carrying value. Such premium, along with a write-off of unamortized debt issue cost related to the purchased amount of debt, will be recorded as a charge of $1.5 million (approximately $1.0 million after tax) in the company's first quarter 2003 operating results. Due to the February 2003 Senior Discount Note repurchase and principal reduction discussed in the previous paragraph, semi- annual interest payments on these notes will be reduced from the originally scheduled $10.5 million to $9.1 million and ALARIS Medical's consolidated projected interest expense for 2003 will be reduced by $2.3 million ($2.8 million on an annualized basis). After receiving restricted payments from ALARIS Medical Systems in February 2003, and after purchasing the $25 million of Senior Discount Notes, ALARIS Medical Inc., on a stand-alone basis, had a cash balance of approximately $8.2 million. Based on projected 2003 first quarter earnings, we anticipate that in the second quarter of 2003, ALARIS Medical Systems will meet the required tests to make additional restricted payments to ALARIS Medical. As a result, management anticipates that in the second quarter of 2003, ALARIS Medical will have cash available sufficient to meet the first scheduled semi-annual interest payment, due Feb. 1, 2004, on the Senior Discount Notes. ALARIS Medical Inc.'s December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $32 million, down from about $47 million as reported a year ago. Recent Key Developments -- As detailed above, on Feb. 24, 2003 ALARIS Medical Inc. repurchased $25 million face value of its 11-1/8% senior discount notes due 2008, thus lowering total debt outstanding. -- In January, the company announced an online site designed to help reduce medication errors through education and technological innovation. The site, at http://www.alarismed.com/alariscenter/index.html is part of the ALARIS(R) Center for Medication Safety and Clinical Improvement that was opened in the fourth quarter of 2002. The ALARIS Center offers education and consulting services to promote best practices in medication safety for hospitals and health care institutions. -- On Dec. 9, 2002 ALARIS Medical and McKesson Corp. demonstrated at the American Society of Health-Systems Pharmacists Mid-Year Meeting in Atlanta a prototype of a point- of-care bar coding solution to improve IV medication safety. The product is being developed jointly by the two companies. Beta sites for the system will be the University of Wisconsin Hospital and Clinics and Ohio Valley General Hospital. -- David L. Schlotterbeck, president and chief executive officer of ALARIS Medical, was named Patient Monitoring CEO of the Year by Frost and Sullivan at its 2002 Excellence in Healthcare Banquet on Nov. 6, 2002. Frost and Sullivan is a global leader in strategic marketing training and growth consulting. Outlook For full year 2003, we are currently forecasting sales growth of 11% to 13% over 2002 with earnings per share of approximately $.21 to $.23 compared with the $.13 per share reported for 2002. Sales growth is expected to be driven by increased placements of our MedleyT Medication Safety System, as well as dedicated and nondedicated disposable administration sets in the North American market. For the first quarter of 2003, we are currently forecasting sales growth of approximately 14% over the $104.4 million reported for the first quarter of 2002. Earnings per share for the quarter are forecasted at $.02 which includes an after tax charge of approximately $1 million related to the $25 million repurchase of Senior Discount Notes. This compares with earnings per share of $.01 for the first quarter of the prior year. ALARIS Medical Inc. (AMEX: AMI), through its wholly owned operating company, ALARIS Medical Systems Inc., develops practical solutions for Medication Safety at the Point of Care(TM). The company designs, manufactures and markets intravenous (IV) medication delivery and infusion therapy devices, needle-free disposables and related monitoring equipment in the United States and internationally. ALARIS Medical's proprietary Guardrails(R) Safety Software, our other "smart" technologies and our "smart" services help to reduce the risks and costs of medication errors, help to safeguard patients and clinicians and also gather and record clinical information for review, analysis and transcription. The company provides its products, professional and technical support and training services to over 5,000 hospital and health care systems, as well as alternative care sites in more than 120 countries through its direct sales force and distributors. Headquartered in San Diego, ALARIS Medical employs approximately 2,900 people worldwide and operates manufacturing facilities in the United States, Mexico and the United Kingdom. AMERCO: Enters into Forbearance Pact with Royal Bank of Canada -------------------------------------------------------------- AMERCO (Nasdaq: UHAL) has entered into a Forbearance Agreement with the Royal Bank of Canada. The Forbearance provides for continued payments under an existing RBC Credit Agreement, which is in cross-default as a result of the October, 2002, non- payment of certain bond obligations by the Company. RBC joins a growing list of AMERCO creditors that have agreed to maintain the status quo of their lender relationship with AMERCO while the Company completes a financial restructuring through new financing. "This agreement will allow us time to continue working with our turn-around specialists, Crossroads, LLC, to implement a restructuring plan," said Joe Shoen, Chairman and CEO of AMERCO. "We are working diligently to implement a debt restructuring plan that is fair and equitable to our lenders, vendors and shareholders." Holly Etlin leads the Crossroads turnaround team. Detailed information about AMERCO's Citibank-Led $101 Million Facility, $205 Million JPMorgan-Led 3-Year Credit Facility and the forbearance agreements executed by those lenders appeared in Tuesday's edition of the Troubled Company Reporter. AMERCO is the parent company to U-Haul International, Inc., Oxford Life Insurance Company, Republic Western Insurance Company and Amerco Real Estate Company. U-Haul has served the do-it-yourself household-moving customer for 57 years, U-Haulr trucks and trailers can be rented from more than 15,000 independent dealers and 1,350 company operated moving centers. U-Haul, the undisputed leader in the truck and trailer rental industry, is one of the industry's largest operators of self- storage facilities, the world's largest installer of permanent trailer hitches and the world's largest Yellow Pages advertiser. AMERICAN TRANS: February Revenue Passenger Miles Jumps Up 16.8% --------------------------------------------------------------- American Trans Air, Inc., the principal subsidiary of ATA Holdings Corp. (Nasdaq:ATAH) reported that February scheduled service traffic, measured in revenue passenger miles (RPMs), increased 16.8 percent on 26.1 percent more capacity, measured in available seat miles, compared to 2002. ATA's scheduled service February passenger load factor decreased 5.3 points to 65.9 percent and passenger enplanements grew by 15.6 percent compared to 2002. Bill McKnight, Executive Vice President of Marketing and Sales, said, "February's decline in scheduled service load factor was caused primarily by softness in a few long-haul leisure markets, some of which were in their first month of operation. Strong demand for our military product-capacity was more than double last year's-offset some of the weakness in scheduled service." During the first two months of 2003, scheduled service traffic increased 26.1 percent on 28.8 percent more capacity compared to the same period in 2002. ATA's scheduled service block hours were up by 42.8 percent. Year to date passenger load factor for ATA's scheduled service was down by 1.4 points while enplanements for the same period were up by 24.1 percent. Year to date, the Company's system-wide traffic increased 16.1 percent on 25.8 percent more capacity when compared with 2002. The number of block hours flown system-wide increased by 35.4 percent during the two-month period. ATA Holdings Corp., common stock trades on the NASDAQ Stock Market under the symbol "ATAH." As of February 28, 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. AMPEX CORP: Dec. 31 Balance Sheet Insolvency Balloons to $148MM --------------------------------------------------------------- Ampex Corporation (AMEX:AXC) reported a net loss from continuing operations of $2.8 million for the year ended December 31, 2002. In 2001, the Company reported a net loss from continuing operations of $10.9 million. Revenues from the Company's continuing operations declined to $37.0 million in 2002 from $46.0 million in 2001, primarily owing to a decline in royalty income as the Company transitions its licensing agreements from analog to digital technology. The Company's royalty operations contributed operating income of $0.05 per diluted share in 2002 compared to $0.19 per diluted share in 2001. The Company's Data Systems subsidiary generated operating income of $0.07 per diluted share in 2002 compared to an operating loss of $0.07 in 2001. In 2002, restructuring charges accounted for $0.04 loss per diluted share, and interest expense and other financing costs, net, accounted for $0.14 loss per diluted share. In 2001, restructuring charges accounted for $0.06 loss per diluted share, and interest and other financing costs, net, accounted for $0.12 loss per diluted share. The Company's continuing operations in 2002 benefited from the non-cash reversal of reserves for foreign, federal, state and deferred income taxes, totaling $6.7 million or $0.11 per diluted share. Such reserves were provided in prior years that are now either closed to audit or otherwise determined not to be required. In 2001, the Company discontinued its Internet video operations which resulted in a charge of $0.29 per diluted share. The Company recorded a benefit from the extinguishment of preferred stock of $0.07 per diluted share in 2002 and $0.10 per diluted share in 2001. The Company reported net income applicable to common stockholders, including continuing and discontinued operations and the benefit from extinguishment of preferred stock, of $1.5 million or $0.02 per diluted share in 2002 compared to a net loss applicable to common stockholders of $22.4 million or $0.38 per diluted share in 2001. At December 31, 2002, the Company's balance sheet shows that total liabilities exceeded total assets by about $148 million. Ampex Corporation -- http://www.Ampex.com-- headquartered in Redwood City, California, is one of the world's leading innovators and licensors of technologies for the visual information age. ANC RENTAL: Asks Court to Clear Chrysler Financing Agreement ------------------------------------------------------------ ANC Rental Corporation and its debtor-affiliates seek to enter into an agreement with DaimlerChrysler Corporation, pursuant to which the Debtors will obtain postpetition financing in the form of an advance. Specifically, pursuant to the Agreement, the Debtors will agree to purchase a certain number of vehicles from Chrysler and, in turn, Chrysler will agree to advance $62,500,000 to the Debtors. The Debtors will repay the Chrysler Advance, in part, through Daily Rental Incentive Payments that will be earned by the Debtors as they purchase vehicles throughout the year. Bonnie Glantz Fatell, Esq., at Blank Rome LLP, in Wilmington, Delaware, relates that as an additional incentive to enter into the Agreement, Chrysler has also agreed that, in addition to the DRIP Incentives that will be earned by the Debtors, Chrysler will also pay the Debtors additional incentive payments with respect to the first 35,000 2004-model year vehicles purchased, in an aggregate amount up to $13,650,000. Accordingly, the Chrysler Advance will be decreased as the DRIP Incentives and Additional Incentive Payments that are earned by the Debtors are applied to the balance of the Chrysler Advance. Pursuant to the Agreement, on December 30, 2003, the Debtors will repay any remaining balance of the Chrysler Advance. Ms. Fatell informs the Court that the Debtors have met their daily cash needs since the Petition Date nearly 15 months ago through the agreed use of Cash Collateral. In the summer of 2002, however, the Debtors forecasted that the existing cash collateral would need to be supplemented from time to time. The Debtors determined that this additional liquidity would be needed to satisfy working capital needs and to provide the necessary over-collateralization to acquire additional vehicles for their peak revenue-generating season. In anticipation of needing this liquidity, the Debtors promptly began eliciting proposals from potential financing providers. Mr. Fatell reports that the Debtors have had extensive discussions with numerous parties regarding additional equity and debt financing. In particular, the Debtors had discussions regarding the terms on which Chrysler would be willing to provide the Chrysler Advance. After a series of good faith, arm's-length negotiations, the Debtors reached an agreement with Chrysler to provide postpetition financing on the terms and conditions set forth in the Term Sheet. While the Debtors have received other indications of interest from other potential lenders, Ms. Fatell believes that the terms of the Agreement, considering all of the circumstances, are the most attractive to the Debtors. The economic terms of the Agreement are significantly better than the other proposals, and will allow the Debtors to avoid the fees that are associated with typical debtor-in-possession credit facilities. In addition, the Chrysler proposal enables the Debtors to receive funding up-front without incurring interest payments. Finally, the Additional Incentive Payments will enable the Debtors to fleet-up and obtain additional cost-savings in an integrated transaction that will preserve resources of the Debtors' estates. Chrysler has informed the Debtors that, subject to final documentation, it is willing to enter into the Agreement and provide the Chrysler Advance to the Debtors on the terms and conditions set forth in the Term Sheet. The salient provisions of the Term Sheet are: A. Vehicle Purchase Obligation: The Debtors commit to purchase 60,000 2004 model year vehicles from Chrysler in the 2003 calendar year. B. Term of Agreement: 1 year. C. 2004 Model Year DRIP Incentive: $450 per vehicle. D. Additional Incentive Payments: $390 on the first 35,000 2004 model year vehicles. E. Chrysler Advance: $62,500,000 for the 2004 model year, which will be provided in three installments: -- $25,000,000 by March 16, 2003; -- $20,000,000 by April 16, 2003; and -- $17,500,000 by May 16, 2003. F. Payback Amount: The Debtors agree that they will forego the expected 2003/2004 Model Year DRIP Incentive and Additional Incentive Payments due or accrued after July 1, 2003 through December 30, 2003. The Payback Amount will act as a reduction of the DRIP Advance in calendar year 2003. On December 30, 2003, the Debtors will repay the outstanding Chrysler Advance, net of the Payback Amount and the Additional Purchase Incentive. In the event that the Chrysler Advance is not fully repaid on December 30, 2003, then from and after December 31, 2003, the outstanding Chrysler Advance will accrue at Libor + 3.50% per annum until the Chrysler Advance is paid in full. Beginning January 1, 2004, the Debtors will receive the normally scheduled DRIP Incentives and Additional Incentive Payments in accordance with customary practices. G. Expense Deposit: The Term Sheet provides that the Debtors will provide Chrysler with a $150,000 deposit to be paid to Chrysler for due diligence, necessary expenses and other reasonable fees. This fee will be subject to replenishment if the funds are expended, which reimbursement will apply to all actual, reasonable, necessary professional fees and expenses incurred by Chrysler in connection with the contemplated transaction, regardless of whether or not a commitment is actually delivered or the contemplated transactions closed. H. Priming Liens: All of the Debtors' obligations to Chrysler under the Agreement will be secured by a first priority security interest in and priming liens on the Corporate Collateral. Given the Debtors' outstanding secured and unsecured indebtedness and after discussions with numerous potential lenders, Ms. Fatell relates that the Debtors concluded that it would be impractical to seek postpetition financing that was unsecured or junior in priority to the Secured Creditors' liens. The Debtors held discussions with other potential providers of DIP financing -- several of which expressed interest -- but none of these alternatives resulted in a viable proposal that would enable the Debtors to obtain postpetition financing on an unsecured or junior priority basis. In addition, none of the alternative proposals were on terms as favorable as the financing provided by Chrysler. The Debtors firmly believe that the Chrysler Advance to be provided by Chrysler represents the best financing available to them at this time. (ANC Rental Bankruptcy News, Issue No. 28; Bankruptcy Creditors' Service, Inc., 609/392-0900) BUDGET GROUP: Committee Hires Covington & Burling as Counsel ------------------------------------------------------------ William Bowden, Esq., at Ashby & Geddes, in Wilmington, Delaware, informs the Court that prior to 1997, Budget Group Inc.'s German operations within BRACII EMEA were conducted through a master franchise agreement between BRACII and Sixt Rent A Car, the operator of the largest vehicle rental system in Germany. The Sixt master franchise agreement was terminated by BRACII in 1997 after disputes arose between BRACII and Sixt, and BRACII thereafter replaced Sixt with a corporate owned rental network operated by Budget Germany. According to Mr. Bowden, Budget Germany operated 69 corporate owned locations throughout Germany, which proved to be unprofitable. During fiscal year 2000, BRACII lost more than $14,000,000 due to Budget Germany alone as part of much larger European losses on corporate operations. After deciding to return to a franchisee-based network through Europe in 2001, BRACII engaged several potential licensees in negotiations over a potential new master franchise agreement for Germany. Mr. Bowden reports that the Committee is actively working with the Debtors to evaluate the potential solution proposed by the NordLeas Motion and to formulate, evaluate and implement a solution to Budget Germany's financial difficulties. In connection therewith, the Committee requires the advice and counsel of special transactional counsel for the Debtors' German business operations. Thus, the Official Committee of Unsecured Creditors sought and obtained the Court's authority to retain the law firm of Covington & Burling, as its special German transactional counsel for matters relating to Budget Deutschland GmbH, Autovermietung Westfehling GmbH, and Autohansa Autovermietung E. Seabert GmbH, effective as of November 25, 2002. According to Mr. Bowden, the Committee selected Covington due to its expertise in German transactional law and, in particular, Philipp Tamussino, Esq., of Covington. Mr. Tamussino has experience in German corporate transactional matters, both by reason of his education in Austria, his years spent practicing law in Brussels and his continuing representation of clients involved in transactions in Europe. His practice encompasses broad experience in international corporate and regulatory matters, including mergers and acquisitions, financings, joint ventures and intellectual property transactions. The Committee believes that Covington is well qualified to represent them in these cases. The Committee anticipates that Covington will provide the required German transactional support to the Committee concerning Budget Germany, including advising and representing the Committee with respect to these issues: A. expertise with respect to evaluation of possible restructuring or strategic dispositions of the assets of Budget Germany under German transactional law; B. corporate, mergers and acquisitions, and securities law advice in respect of structuring Budget Germany's operations; and C. expertise with respect to German corporate arrangements and related issues. The primary attorney who will represent the Committee is Philipp Tamussino, a partner of the firm whose current hourly rate is $540. However, other Covington attorneys or paralegals will from time to time provide legal services on the Committee's behalf. The hourly billing rates of Covington's other professionals are: Partners $360 - 690 Associates 170 - 410 Paralegals 140 - 220 In addition to the hourly rates, Covington customarily charges its clients for all costs and expenses incurred, including travel costs, telecommunications, express mail, messenger services, document processing, photocopying costs, temporary employment of additional staff, overtime, meals, court fees, transcript costs and, in general, all identifiable expenses that would not have been incurred except for representation of a particular client. Covington has advised the Committee that it will apply to the Court for allowance of compensation for professional services rendered and reimbursement of charges and costs and expenses incurred in these Chapter 11 cases in accordance with the applicable provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules and Court orders. Mr. Bowden assures the Court that Covington, its partners, associates and paralegals do not represent or hold any interest adverse to the Debtors with respect to the matters on which the firm is to be employed and do not have any material connections with the Debtors, their officers, affiliates, creditors, or any other party-in-interest or their attorneys and accountants or the United States Trustee. However, Bowden currently represents these parties in matters unrelated to these cases: A. Insurance Companies: AIG, American Casualty Co., Continental Casualty, Evanston Insurance Co., Federal Insurance, Great American, Lancer Insurance, Liberty Mutual, Lloyd's, Lumberman's Mutual, National Insurance, National Union Insurance, Royal Indemnity, Specialty Indemnity, Transportation Insurance, Travelers, USF&G, Westchester Insurance, XL-Houston General, and Zurich Insurance; B. Vendors: DaimlerChrysler, Ford Motor Co., General Motors, Nissan Motor Acceptance Corp., Nissan Motor Co., and Toyota Motor Credit Corp.; C. 5% Stockholders: Deutsche Bank; D. Largest Unsecured Creditors: Ameritrade Holding Corp., AT&T, BT North America, Citibank NA, Prudential Securities, Sabre Group. State Street Bank & Trust Co., and WorldSpan; E. Indenture Trustees: Bank of New York, Bankers Trust, Chase Manhattan Bank, Credit Suisse First Boston, JP Morgan Chase, R2 Investments LP, Wells Fargo Bank Minnesota NA and Wilmington Trust Co.; and F. Professionals: Ernst & Young, Eversheds, KPMG, Lazard Freres and Weber Shandwick. (Budget Group Bankruptcy News, Issue No. 16; Bankruptcy Creditors' Service, Inc., 609/392-0900) CAMBRIAN COMMS: Selling Substantially All Assets for $7.3 Mill. --------------------------------------------------------------- Cambrian Communications LLC asks for approval from the U.S. Bankruptcy Court for the Eastern District of Virginia to sell substantially all of its assets to Orange Transition Company, LLC, a Delaware limited liability company. Following the Petition Date, the Debtor closely reviewed its operations. As a result, the Debtor determined that the best interests of the Debtor and its creditors would be served by selling substantially all of its assets. Orange Transition is a subsidiary of PPL Telcom, a wholesale telecommunications provider offering solutions to carriers, communications companies, emerging service providers, ISPs and major private network owners. PPLT is an indirect subsidiary of PPL Corporation, an energy and utility holding company, with headquarters in Allentown, Pennsylvania. The Assets to be sold are: (a) all contract rights related to the operations of the Debtor; (b) all the real property and equipment leases related to the Debtor; (c) all Books and Records related to the Debtor; (d) all fixtures and equipment used in the operations of the Debtor; (e) all proprietary rights related to the Debtor; (f) all permits related to the Debtor, to the extent transferable; (g) all items of personal property used in the operations of the Debtor; and (h) all other assets used or required to operate the business of the Debtor. The total book value of the Debtor's personal property is $61,138,205. Orange Transition is willing to pay: (1) $7,300,000 in cash, plus (2) plus 50% of Verified Vendor Deposits, less (3) a possible purchase price reduction. Additionally, Orange Transition will assume all obligations and liabilities arising out of events or occurrences happening after the Closing under the contracts and leases that are included among the Purchased Assets. The Debtor retains its right to seek and accept higher and better offers. In the event that the Agreement is terminated and the Debtor accepts a higher and better offer within six months thereafter and provided that termination was not due to Orange Transition's breach of its obligations, Orange Transition will be entitled to a $100,000 break-up fee and the Debtor will reimburse Orange up to $200,000 for expenses. The Debtor relates that worked diligently to find a potential buyer of the Debtor's operating assets, together with its counsel and its Management Team. Orange Transition's offer is the culmination of this process and the highest and most definitive offer that the Debtor has received for its assets. Because of the continuing cash burn suffered by the Debtor, the Debtor believes the assets must be sold promptly considering that the proposed sale will not prevent interested third parties from offering higher and better bids. The Debtor has lost a number of employees immediately prior to and after the Petition Date; the highly skilled professionals employed by the Debtor are in demand, and many will be lured away by competitors with the promise of greater job security. The pace of this exodus of employees may increase if the Asset Sale is not approved. This will cause the assets to decline in value, which will damage all parties involved, the Debtor adds. Cambrian Communications LLC, together with its affiliate Cambrian Holdings LLC, filed for chapter 11 protection on September 20, 2002 (Bankr. E.D. Va. Case No. 02-84699). Bradford F. Englander, Esq., at Linowes and Blocher LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed an estimated assets of over $10 million and estimated debts of over $50 million. CASELLA WASTE: Enters Pact to Acquire Hardwick Sanitary Landfill ---------------------------------------------------------------- Casella Waste Systems, Inc. (Nasdaq: CWST), a regional, non- hazardous solid waste services company, has entered into an agreement to acquire the Hardwick Sanitary Landfill in Hardwick, Mass. The facility is primarily a construction and demolition debris landfill, although it is allowed to accept a limited amount of municipal solid waste and certain difficult to manage wastes, the company said. The facility currently is permitted to accept 300 tons per day, including 50 tons per day of MSW. "Clearly, this is a significant milestone in our strategic effort not only to add disposal capacity in our core solid waste business, but also to strengthen and improve our eastern Massachusetts operations," John W. Casella, chairman and chief executive officer of Casella Waste Systems, said. "There is an opportunity here to work closely with state and local officials to develop this facility into a crucial part of Massachusetts' solid waste infrastructure." The company said the closing of the transaction for the purchase of the landfill is expected to take place in the fourth quarter of fiscal year 2003. The company received an operating permit for the facility's newly constructed Phase II this week. Casella Waste Systems, headquartered in Rutland, Vermont, is a regional, integrated, non-hazardous solid waste services company that provides collection, transfer, disposal and recycling services primarily in the northeastern United States. For further information, visit the company's Web site at http://www.casella.com As reported in Troubled Company Reporter's January 17, 2003 edition, Standard & Poor's assigned its 'BB-' rating to solid waste services company Casella Waste Systems Inc.'s new $325 million senior secured credit facilities and its 'B' rating to the company's $150 million senior subordinated notes due 2013. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating on Rutland, Vermont-based Casella. The outlook remains stable. CASELLA WASTE: Posts $1.6MM Net Loss on $95MM Revenue for Q3 ------------------------------------------------------------ Casella Waste Systems, Inc. (Nasdaq: CWST), a regional, non- hazardous solid waste services company, reported financial results for the third quarter of its 2003 fiscal year. For the quarter ended January 31, 2003, the company reported earnings before interest, taxes, depreciation and amortization (EBITDA) of $20.2 million; revenue for the quarter was $95.7 million. The company reported a GAAP net loss for the quarter of $1.6 million. The company noted certain items included in the current quarter's results: -- A $2.2 million after-tax non-cash expense from the early extinguishments of debt financing costs relating to the company's old credit facility, or $0.09 per diluted share; -- A pre-tax cash expense of $1.3 million due to the unwinding of five interest rate swap agreements in connection with the company's refinancing of the credit facility during the quarter, or $0.04 per diluted share. "Clearly, the most significant development in the quarter was the implementation of a new, more flexible capital structure," John W. Casella, chairman and chief executive officer of Casella Waste Systems, said. "We are now well-positioned to execute the next phase of our strategic growth plan. "Our day-to-day priorities remain the continuous improvement of our existing assets and businesses; adding disposal capacity in our core markets, and densifying our existing franchise," Casella said. Company Acquires Landfill Serving E. Mass. The company also said it will acquire the Hardwick Sanitary Landfill in Hardwick, Massachusetts. The facility, which will serve the company's eastern Massachusetts markets, is primarily a construction and demolition debris landfill, although it is permitted to accept a limited amount of municipal solid waste. The transaction will close in the fourth quarter. Casella Waste Systems, headquartered in Rutland, Vermont, is a regional, integrated, non-hazardous solid waste services company that provides collection, transfer, disposal and recycling services primarily in the northeastern United States. For further information, visit the company's Web site at http://www.casella.com As reported in Troubled Company Reporter's January 17, 2003 edition, Standard & Poor's assigned its 'BB-' rating to solid waste services company Casella Waste Systems Inc.'s new $325 million senior secured credit facilities and its 'B' rating to the company's $150 million senior subordinated notes due 2013. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating on Rutland, Vermont-based Casella. The outlook remains stable. CHAMPIONLYTE PRODUCTS: Initiates a Comprehensive Restructuring -------------------------------------------------------------- ChampionLyte Products, Inc., (OTC Bulletin Board: CPLY) unveiled a comprehensive campaign to completely restructure the company, which is the exclusive manufacturer and distributor of ChampionLyte(R), the first completely sugar-free entry into the multi-billion dollar isotonic sports drink market. Acting Interim Chief Operating Officer, Marshall Kanner, said the sweeping plan calls for a total overhaul of the entire company and its previous direction. "We've begun the process of fine tuning all aspects of ChampionLyte(R) and are looking at the company from a shareholder's perspective. Given the tenuous nature of the company's present financial position, we started by addressing the company's vendors and creditors. We are continuing to refine the company's strategy which may include changing the name of the public company and seeking acquisitions in addition to completely rewriting the Company's business plan with respect to our beverage products." Kanner added that in addition to many other changes, the Company will also re-position ChampionLyte(R) as an upscale, niche product and abandon any plans to go head-to-head with the other dominant companies in the market. "It's unrealistic to think that we can compete directly with such industry giants like Gatorade(R), which is a unit of Pepsico, Inc.," Kanner emphasized. "They own over 80 percent of the nearly $3 billion dollar isotonic market. While we don't have the financial resources to compete on that level, we feel we can be very competitive as a niche player in the sugar-free category." Kanner also said the Company is currently searching for one or more industry veterans to fill key management positions in the company and to assist it through the restructuring and re-launch and subsequent strategic initiatives. "Clearly, there are a number of significant issues that need to be addressed," Kanner added. "We are negotiating with several companies to manufacture the product through co-packing agreements. We're also in discussion with a number of firms concerning distribution." Kanner said the Company still has severe financial problems which are a primary focal point of his interim management team and therefore the Company must still address these capital issues. ChampionLyte Products, Inc., is a fully reporting public company whose shares are quoted on the OTC Bulletin Board under the trading symbol CPLY. Its primary product, ChampionLyte(R) is the first completely sugar-free entry into the isotonic sports drink market. At September 30, 2002, Championlyte Products' balance sheet shows a working capital deficit of about $1 million and a total shareholders equity deficit of about $9 million. CNH GLOBAL: S&P Affirms BB Corp. Credit Rating & Stable Outlook --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB' corporate credit rating and stable outlook on agricultural and construction equipment manufacturer CNH Global N.V., and related entities. This action follows the assignment of a long-term corporate credit rating of 'BB+' to CNH's 85.3% equity owner-- Italy-based Fiat SpA--and the lowering of the short-term corporate credit rating on Fiat to 'B' from 'A-3'. The outlook on Fiat is negative. CNH's consolidated debt at December 31, 2002, stood at $7.9 billion. "Ratings on CNH, with executive headquarters in Lake Forest, Illinois, reflect the firm's average business profile as one of the world's two leading agricultural equipment producers and third-largest manufacturer of construction equipment, offset by weak credit measures that are expected to improve only gradually over the intermediate term," said Standard & Poor's credit analyst Dan DiSenso. Ratings also factor in Fiat's strong liquidity support, in the form of intracompany loans and loan guarantees, and large equity investment. As a stand-alone entity, ratings on CNH would likely be significantly lower. Although CNH has made significant progress on its multiyear cost-reduction program, operating performance remains weak, reflecting very challenging industry conditions. For 2002 CNH lost $101 million, before the cumulative effect of an accounting change, a reduction from the 2001 $242 million loss, excluding 2001 goodwill amortization charges. Agricultural equipment operations were profitable, with still subpar segment income of $201 million, up from $105 million in 2001. However, construction equipment operations are very weak, reflecting in part the dramatic drop in demand from the equipment rental industry, as this segment lost $159 million versus a modest $13 million of operating income for 2001. CNH's operations could become profitable (before restructuring charges) in 2003, based on new lower-cost, higher-margin product introductions, and additional cost-reduction benefits. Moreover, CNH will benefit from an eventual market recovery. CNH, created in November 1999 through the merger of Case Corp. and New Holland N.V., is part way through a massive rationalization and integration program to improve profitability and cash flow generation. Since the merger, the firm has achieved $547 million of cost reductions, and is on target to achieve $850 million of reductions by 2005. In addition, CNH is also developing new products based on common product platforms, and expects to achieve $280 million of savings by 2005 from these efforts. Over the next two to three years, CNH's credit measures should strengthen to levels compatible with the 'BB' rating category, with funds from operations to debt of 15% to 20%, and debt to EBITDA of 3.5x to 4.0x, accounting for captive finance company operations by the equity method. CONSECO FINANCE: Flowers Group Bids $700M for Bulk of Assets ------------------------------------------------------------ At the conclusion of a 21-hour auction this week, CFN Investments (comprised of J. Christopher Flowers, Fortress Investment Group LLC and Cerberus Capital Management LP) advanced the highest and best bid for substantially all of Conseco Finance's assets. CFN outbid Berkadia, LLC (a joint venture between Warren Buffett's Berkshire Hathaway and Leucadia National (which bought FINOVA out of bankruptcy)) and another group comprised of GE Captial Corp., Bear Stearns Cos., Inc., and Charlesbank. Judge Doyle is scheduled to review the bids and objections to the sale transaction at a hearing today in Chicago. CONSECO FINANCE: GE Consumer Finance Bids $310M for Mill Creek -------------------------------------------------------------- GE Consumer Finance, the consumer lending unit of General Electric Company (NYSE: GE), plans to acquire Conseco Finance Corp.'s sales finance unit (known as Mill Creek Bank) with a bid valued at $310 million. The acquisition includes private label credit card receivables and certain consumer installment and home improvement loan assets. The transaction, which is subject to regulatory and bankruptcy court approval, is anticipated to close in the second quarter of 2003. The acquisition would add $2.4 billion of receivables to GE Consumer Finance's retail sales finance business in the Americas. The remaining Conseco Finance assets will be acquired by other parties. "This acquisition represents a significant step in the growth of our Americas consumer finance business," said Mark W. Begor, president and chief executive officer of GE Consumer Finance- Americas. "It complements our existing sales finance business, and it gives us a new platform to grow in other markets." The acquired assets would be managed by GE Consumer Finance's retail sales finance unit, based in Kettering, Ohio. GE Retail Sales Finance provides private label financing programs for national and regional retailers in six key industries: automotive/recreational vehicles, consumer electronics and appliances, furniture, floor covering, jewelry and health care. GE Retail Sales Finance supports a diversified portfolio of more than 60 regional and national clients with merchants in over 60,000 locations, including: Ford, Sony, PC Richard & Son, Tweeter, Ultimate Electronics, Suzuki, Ethan Allen, Brandsmart USA, H.H. Gregg Electronics, CareCredit, Whitehall Jewelers, Shaw Industries and Mohawk Industries. GE Consumer Finance helps retailers drive increased sales by providing flexible credit terms to consumers, giving them increased purchasing power at the point of purchase. Begor said consumers will benefit from a broader range of lending products and GE Consumer Finance's strong commitment to customer service. GE Consumer Finance, a unit of General Electric Company, with $77 billion in assets, is a leading provider of credit services to consumers, retailers and auto dealers in 36 countries around the world. GE Consumer Finance, based in Stamford, Conn., offers a range of financial products, including private label credit cards, personal loans, bank cards, auto loans and leases, mortgages, corporate travel and purchasing cards, debt consolidation and home equity loans and credit insurance. GE (NYSE: GE) is a diversified services, technology and manufacturing company with operations worldwide. More information about GE can be found online at http://www.ge.com CONSECO FINANCE: Court Okays Greenberg as Committee's Co-Counsel ---------------------------------------------------------------- The Official Committee of Unsecured Conseco Finance Corporation and Conseco Finance Securitization Corp. Creditors obtained permission to retain Greenberg Traurig as co-counsel, given its substantial experience representing committees, its familiarity with complex reorganization cases and its experience in the Bankruptcy Court for the Northern District of Illinois. Greenberg Traurig will: a) consult with the Debtors' professionals on case administration; b) prepare and review pleadings, motions and correspondence; c) appear and participate in Court hearings; d) provide legal counsel to the Committee in the investigation of the Debtors' acts, conduct, assets, liabilities and financial condition; e) analyze the Debtors' proposed use of cash collateral and DIP Financing; f) advise the Committee on its rights and powers; g) assist the Committee with the Debtors' other creditors; h) assist with any analysis of terms of a sale, plan of reorganization or other conclusion to these cases; i) assist the Committee in requesting the appointment of a trustee or examiner, if necessary; j) assist the Committee with its communications to the general creditor body; k) assist the Committee in determining actions that serve the interests of the unsecured creditors; and l) perform other acts as requested by the Committee. Greenberg Traurig will be compensated on an hourly basis and reimbursed of actual and necessary expenses incurred in the provision of services. The current hourly rates for the principal attorneys and paralegals are: Keith J. Shapiro $585 David D. Cleary 475 Nancy A. Mitchell 470 Patrick M. Jones 295 Kerry Carlson 175 (Conseco Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) CONSECO INC: TOPrS Committee Signs-Up Raymond James as Advisor -------------------------------------------------------------- The Official Committee of Conseco Trust Originated Preferred Debtholders of Conseco Inc., and debtor-affiliates seeks the Court's authority to retain Raymond James & Associates as its financial advisor. The TOPrS Committee must put a valuation on the assets and businesses of the various Debtors and non-debtor subsidiaries in these cases. This is a complex task that requires highly sophisticated professionals. The TOPrS Committee is faced with the difficult challenge of determining the value of the insurance companies in a short period of time. Daniel R. Murray, Esq., at Jenner & Block, Chicago, relates that prior to formal appointment, several members of the TOPrS Committee were advised by Raymond James in these cases. As a result, Raymond James became familiar with the Debtors' business operations and the restructuring proposals. This familiarity will reduce costs and serve the Committee's best interests. Raymond James earned $300,000 for its previous representation, which was paid directly by Conseco. Raymond James is a nationally recognized financial advisory and investment banking firm. Raymond James provides financial restructuring services as well as corporate finance, turnaround management, operations improvement and litigation analysis. As financial advisor, Raymond James will: a) analyze the Debtors' business, operations, properties and financial condition; b) monitor the Debtors' cash expenditures, receivable collections, asset sales and projected cash requirements; c) advise the Committee on employee retention plans; d) help with any investigation on the Debtors' prepetition acts; e) review the Debtors' business plan; f) provide DIP financial analysis; g) prepare and present to the Committee analyses and updates on diligence performed; h) evaluate any proposed restructuring plan by the Debtors; i) assist the Committee in analyzing the valuation of any competing offers as part of the Plan; j) assist the Committee in finding financing sources for a recapitalization; and k) provide any other financial advisory services requested by the Committee. Raymond James will charge a $175,000 flat monthly fee. Raymond James will be reimbursed for all out-of-pocket expenses and will receive a $600,000 completion fee at the end of the engagement. Patrick DeLacey, Managing Director at Raymond James, tells the Court that after reasonable inquiry, no professional associated with the firm have any connection with the Debtors or any of its creditors, their attorneys, accountants or other professionals. To this extent, Raymond James is disinterested and holds no materially adverse interest in these matters. (Conseco Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Conseco Inc.'s 10.75% 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. CORNING INC: Continues Expansion of LCD Glass Facility in Taiwan ---------------------------------------------------------------- Corning Incorporated (NYSE:GLW) officially celebrated the expansion of its liquid crystal display (LCD) glass manufacturing facility in the Tainan Science-based Industrial Park, Taiwan. The ceremony marked the start of construction of Corning's LCD glass melting facility in Taiwan, as announced by the company on November 5, 2002. With the addition of the Taiwan melting capability, Corning will become the only glass substrate supplier with four, fully-integrated manufacturing facilities located in all three of the key LCD-producing regions: Japan, Korea and Taiwan. The addition of melting to the Tainan facility is a key part of Corning's long term strategy to significantly increase its LCD glass manufacturing capacity to keep pace with the growing needs of its customers worldwide. By early 2004, the Tainan facility's melting will be operational and is expected to produce glass substrates to supply the growing number of customers installing fifth generation LCD fabrication lines. As a world leading supplier of active matrix liquid crystal displays glass substrates for flat panel desktop monitors, notebook computers, LCD-TVs and consumer electronics products, Corning's Display Technologies business revenue is expected to grow by 20% to 40% annually through 2006, with much of this growth centered in its Taiwan operations. "Corning is a worldwide leader in the growing display technologies industry," said Nitin Kulkarni, president of Corning Display Technologies Taiwan. "Our investment in Taiwan represents our commitment to the needs and demands of our global customers and ensures a constant, reliable supply of Corning's glass substrates with industry-leading attributes." By adding melting capability, Corning's Taiwan plant becomes the company's fourth fully integrated manufacturing facility, joining plants in Shizuoka, Japan and two Samsung Corning Precision (SCP) plants in Gumi and Asan, South Korea. SCP is Corning's equity venture with Samsung. In addition, Corning also operates a glass melting and forming plant in Harrodsburg, Kentucky. The company is simultaneously continuing capacity expansions at both the Shizuoka and Harrodsburg facilities, which are expected to be operational this year. Ongoing capacity expansions at SCP's Asan plant will also continue to be brought on line, as the company grows to keep pace with the high customer demand of the LCD industry in South Korea. "Corning's leading market position is directly attributable to our combination of customer partnerships, technical capability and manufacturing excellence," said James P. Clappin, general manager of Corning Display Technologies. "Our proprietary fusion technology is fully scalable to fifth and sixth generation and larger sheet sizes. We are currently producing glass that is approaching three square meters with what is considered to be the highest surface quality in the industry. We've perfected our fusion process, so that when our customers are ready to move to even larger glass substrates with tighter quality specifications - Corning plans to supply it." The rapid growth of the flat panel display industry, coupled with the movement to larger glass sheets by LCD manufacturers, has continued to increase customer demand for LCD glass substrates year-over-year. As noted by Peter F. Volanakis, president of Corning Technologies, at the company's annual investment conference in New York City on February 7, Corning expects over 70% of all desktop computer monitors to be LCD by 2006. Glass demand in Taiwan's AMLCD industry, which is focused on large displays used in LCD desktop monitors, notebook computers, and LCD-TVs, has more than doubled in volume over last year. Established in 1851, Corning Incorporated (www.corning.com) creates leading-edge technologies that offer growth opportunities in markets that fuel the world's economy. Corning manufactures optical fiber, cable and photonic products in its Telecommunications segment. Corning's Technologies segment manufactures high-performance display glass, and products for the environmental, life sciences and semiconductor markets. * * * As previously reported in the Troubled Company Reporter, Standard & Poor's lowered its ratings on two synthetic transactions related to Corning Inc., to double-'B'-plus from triple-'B'-minus. The lowered ratings follow the lowering of Corning Inc.'s long- term corporate credit and senior unsecured debt ratings on July 29, 2002. The two deals are both swap independent synthetic transactions that are weak-linked to the underlying collateral, Corning Inc.'s debt. The lowered ratings reflect the credit quality of the underlying securities issued by Corning Inc. RATINGS LOWERED Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-28 Trust $12.843 million corning debenture-backed series 2001-28 Rating Class To From A-1 BB+ BBB- Corporate Backed Trust Certificates Corning Debenture-Backed Series 2001-35 Trust $25.2 million corning debenture-backed series 2001-35 Rating Class To From A-1 BB+ BBB- DDI CORP: Appoints John Stumpf as Chief Financial Officer --------------------------------------------------------- DDi Corp. (Nasdaq: DDIC), a leading provider of time-critical, technologically advanced interconnect services for the electronics industry, announced the appointment of John Stumpf to Chief Financial Officer. Joe Gisch, the Company's current CFO, will become Senior Vice President, Strategic Planning and Business Development and lead the Company's financial restructuring initiatives. Mr. Gisch has served as Chief Financial Officer of DDi since 1995, leading the Company's financial activities and merger and acquisition initiatives. In his new position, he works with the Company's financial advisors and leads discussions with its senior lenders and noteholders to achieve a balance sheet restructuring that will reduce debt and improve DDi's financial health. Mr. Stumpf brings over 15 years of experience in the financial and accounting arenas to the position. He has served as DDi's Corporate Controller and Vice President of Finance since 1998, overseeing a wide range of financial matters including investor communications and financial reporting, planning and analysis. In addition, Mr. Stumpf has played a vital role on the merger evaluation and integration team leading to several successful acquisitions. He also has provided expertise during DDi's initial public offering, subsequent offerings and bank negotiations. Further, he has supported the Company's operations in numerous important business initiatives, including, most recently, operational restructuring and implementing processes to assess and optimize product profitability. "John has been an integral part of the management team at DDi and brings a wealth of experience to his new role," said Bruce McMaster, Chief Executive Officer of DDi. "As we move to address the Company's long term financing needs, John will manage the Company's day-to-day financial operations while Joe spearheads our financial restructuring efforts." Prior to joining DDi, Mr. Stumpf was Assistant Vice President of Finance Accounting at Avco Financial Services, a $2 billion multinational subsidiary of Textron, Inc. with responsibility for operational accounting and financial reporting. Previously, Mr. Stumpf served as a Senior Auditor at KPMG, overseeing audit engagements of mid-market enterprises in a number of industries. He has a B.S. in Business Administration from Cal-Poly State University at San Luis Obispo and is a Certified Public Accountant. DDi, whose December 31, 2002 balance sheet shows a total shareholders' equity deficit of about $37 million, is a leading provider of time-critical, technologically advanced, electronics manufacturing services. Headquartered in Anaheim, California, DDi and its subsidiaries, with fabrication and assembly facilities located across North America and in England, service approximately 2,000 customers worldwide. DELTA AIR LINES: February 2003 Traffic Slides-Down 1.1% ------------------------------------------------------- Delta Air Lines (NYSE: DAL) reported traffic results for the month of February 2003. System traffic for February 2003 decreased 1.1 percent from February 2002 on a capacity decrease of 3.8 percent. Delta's system load factor was 68.6 percent in February 2003, up 1.9 points from the same period last year. Domestic traffic in February 2003 increased 1.4 percent year over year on a capacity decrease of 2.7 percent. Domestic load factor in February 2003 was 69.0 percent, up 2.8 points from the same period a year ago. International traffic in February 2003 decreased 10.0 percent year over year on an 8.2 percent decrease in capacity. International load factor was 67.3 percent, down 1.3 points from February 2002. Inclement weather during the month of February adversely affected Delta's operational performance. During February 2003, Delta operated its schedule at a 96.9 percent completion rate, compared to 98.6 percent in February 2002. Delta boarded 7,616,824 passengers during the month of February 2003. Delta Air Lines, the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offers 5,619 flights each day to 438 destinations in 78 countries on Delta, Delta Express, Delta Shuttle, Delta Connection and Delta's worldwide partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. For more information, please go to http://www.delta.com Delta Air Lines' 10.375% bonds due 2022 are currently trading at about 65 cents-on-the-dollar. DELTA MILLS: Launches "Modified Dutch Auction" Note Tender Offer ---------------------------------------------------------------- Delta Woodside Industries, Inc., (NYSE: DLW) and its wholly- owned subsidiary Delta Mills, Inc., announced that Delta Mills has commenced a "Modified Dutch Auction" tender offer for a portion of its outstanding 9-5/8% Senior Notes due 2007. Delta Mills is inviting holders to submit offers to sell notes, at a price determined by each holder, within a range of $750 to $790 per $1,000 principal amount upon the terms and conditions specified in the Offer to Purchase dated March 5, 2003. Holders whose notes are accepted for purchase will also receive accrued and unpaid interest on those notes upon consummation of the tender offer. The tender offer will expire at 5:00 p.m., New York City time, on April 2, 2003, unless extended or earlier terminated. Tenders of notes may be made or withdrawn at any time prior to the Expiration Date. Delta Mills is making the tender offer by way of a "Modified Dutch Auction" procedure. Under this procedure, Delta Mills will accept notes offered for sale in the following order: first, offers to sell notes at $750 per $1,000 principal amount and continuing with offers to sell notes in order of increasing offer price, until Delta Mills has spent (at the Clearing Price described below) approximately $15.8 million (excluding accrued interest). Delta Mills will pay to all holders whose offers are accepted the highest price offered for notes that are accepted for purchase by Delta Mills, even if that price is higher than the price offered by such holder. If the aggregate principal amount of notes offered at the Clearing Price exceeds the maximum principal amount of notes that may be accepted by Delta Mills at the Clearing Price under the foregoing procedure, acceptances of offers at the Clearing Price will be allocated among such notes on a pro rata basis according to the principal amount so offered. The offer will be funded by borrowings under Delta Mills' revolving credit facility. Consummation of the tender offer is subject to the satisfaction of certain conditions described in the Offer to Purchase. The terms and conditions of the tender offer are set forth in Delta Mills' Offer to Purchase dated March 5, 2003. This press release is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of an offer to sell any notes. The offer may only be made pursuant to the terms of the Offer to Purchase and related Letter of Transmittal. Banc of America Securities LLC is the exclusive dealer manager, The Bank of New York is the depositary, and D.F. King & Co., Inc. is the information agent in connection with the tender offer. Copies of the Offer to Purchase and related offer documents may be obtained from the information agent at 800-967- 7921 (toll free) or 212-269-5550 (collect). Additional information concerning the terms of the tender offer may be obtained by contacting Banc of America Securities LLC at 888- 292-0070 (toll free) or 704-388-2842 (collect). The Company also announced the closing of its Catawba Plant, a yarn only facility located in Maiden N. C. The closing is consistent with the Company's mission of cost reductions to remain competitive in today's world market. The plant closing will not affect the weaving and finishing capacity of the Company. The Company is currently negotiating with yarn producers to outsource the Company's yarn requirements previously satisfied by the plant. The Company projects that it will incur third quarter costs in the range of $400,000 to $500,000 for asset impairments and closing costs. Bill Garrett, President and CEO commented, "This is a very difficult decision that we regret having to make; however, we can no longer justify keeping this facility open. The 112 associates displaced by this move have been loyal and dedicated employees and will be missed. We are working to place as many of these people as possible in our other facilities and with other employers in the area." Delta Woodside Industries, Inc. -- whose corporate credit rating is currently rated at CCC by Standard & Poor's -- is headquartered in Greenville, South Carolina. Through its wholly owned subsidiary, Delta Mills, it manufactures and sells textile products for the apparel industry. The Company employs about 1,600 people and operates five plants located in South Carolina. DEVON MOBILE: Completes Private Sales of 72 Wireless Towers ----------------------------------------------------------- Devon Mobile Communications, L.P., has closed on the sale of 72 of its 75 wireless communications towers through an auction conducted on November 8, 2002 and private sales shortly thereafter under Section 363 of the United States Bankruptcy Code. Devon Mobile's financial advisor, Legg Mason Wood Walker, Incorporated was assisted by Nations Media Partners in the sale of these towers. Seven bidders participated in the auction and each bidder acquired at least one tower. The towers were located in Devon Mobile's Pennsylvania, New York and Virginia wireless markets. Devon Mobile expects the remaining three towers to close during the upcoming months. Devon Mobile also announced that it has received Federal Communications Commission approval for the assignment of its wireless PCS licenses in the Roanoke, Charlottesville and Harrisonburg, Virginia markets to a subsidiary of T-Mobile USA, Inc., who purchased Devon's rights to the licenses in an auction conducted on December 12, 2002. These markets comprise a total population of approximately 1 million. T-Mobile also agreed to acquire various network assets in six of Devon Mobile's eight Virginia wireless markets. Devon Mobile issued public notice on February 18, 2003 that it will auction its nine contiguous Pennsylvania wireless markets, including 10 MHz in Pittsburgh, on March 12, 2003. These markets cover territories that comprise a total population of approximately 3.5 million. This auction will take place at 11:00 a.m. in the offices of Devon Mobile's bankruptcy counsel, Brown Raysman Millstein Felder & Steiner in New York City. Bid procedures have been approved by the Bankruptcy Court and may be obtained from Brown Raysman -- Attention: Gerard S. Catalanello, (212) 895-2635 or Legg Mason -- Attention: Steven R. Soraparu, (410) 454-5104. Qualifying offers are due by 5:00 p.m. March 7, 2003. "We have carefully examined our options and have chosen a course that maximizes value for all interested parties," said Lisa-Gaye Shearing Mead, president of Devon G.P., Inc. "We are also pleased that we have been able to make significant progress in this difficult market environment." Legg Mason managing director Jeffrey R. Manning added, "The team at Devon Mobile has continued to work hard for the benefit of all stakeholders." Devon Mobile was established in 1995. Devon GP owns 50.1% of the partnership interests and Adelphia Communications Corporation owns 49.9%. Together with its direct debtor and non-debtor subsidiaries, Devon Mobile is a personal communications service company with PCS networks and/or licenses in six states: Maine, New Hampshire, western New York, western Pennsylvania, Vermont and western Virginia. Devon Mobile and its subsidiaries hold 31 Federal Communications Commission licenses that permit them to build, operate and maintain PCS networks in certain areas of those states. The license areas comprise a total population of approximately 8.8 million. Legg Mason Wood Walker, Incorporated is a wholly-owned subsidiary of Legg Mason, Inc. (NYSE: LM), a Baltimore, MD-based holding company that provides asset management, securities brokerage, investment banking, and related financial services through its subsidiaries. DIAMOND ENTERTAINMENT: Balmore S.A. Discloses 9.9% Equity Stake --------------------------------------------------------------- Balmore S.A. beneficially owns 9.9% of the outstanding common stock shares of Diamond Entertainment Corporation. Of the total 55,835,350 shares held the firm has sole voting and dispositive powers. The aggregate amount of stock reported represents the maximum number of shares that Balmore S.A. can beneficially control under a contractually stipulated 9.9% ownership restriction. The full conversion of Balmore's Convertible Preferred Stock and the exercise of its warrants would exceed this restriction. The company distributes budget videos and DVDs (priced $1.99- $12.99), including collections starring Abbott and Costello, Ozzie and Harriet, and Martin and Lewis. Its some 750 video titles -- most in the public domain -- include motion pictures, television episodes, sports, software tutorials, cartoons, and educational programs. Diamond Entertainment also sells childrens' toys through Jewel Products International. Its CineChrome division sells greeting cards. The company sells through mass merchandisers, consignment arrangements with a mail order catalog and retail chain, and through its Web site. Diamond Entertainment's December 31, 2002 balance sheet shows a working capital deficit of over $1 million, and a total shareholders' equity deficit of about $509,000. DICE INC: Gets Court Nod to Hire Ordinary Course Professionals -------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York gave its nod of approval to Dice Inc.'s application to continue the employment of the professionals it utilizes in the ordinary course of its business. The Debtor reports that the services provided by the ordinary course professionals include legal services with regard to certain specialized matters or areas of the law other than reorganization and bankruptcy law, investor relations services and public relations services. In addition, the Debtor may employ other professionals in the ordinary course of business, such as appraisers, brokers, consultants, engineers, and auctioneers. The Debtor is authorized to pay the professionals 100% of the fees and disbursements incurred, upon the submission and the Debtor's approval of an appropriate invoice setting forth in reasonable detail the nature of the services rendered and disbursements actually incurred. Provided, however, that such interim fees and disbursements do not exceed $10,000 per month per Ordinary Course Professional on average over any six-month period. Dice Inc., provides career management solutions to tech professionals via online job board, dice.com, through non-debtor subsidiary Dice Career Solutions, Inc., and certification preparation and assessment products through non-debtor subsidiary MeasureUp, Inc. The Company filed for chapter 11 protection on February 14, 2003 (Bankr. S.D.N.Y. Case No. 03- 10877). Robert Joel Feinstein, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, represents the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $38,795,000 in total assets and $82,080,000 in total debts. DIVINE INC: Brings-in Latham & Watkins as Bankruptcy Counsel ------------------------------------------------------------ divine, inc., and its debtor-affiliates ask for authority from the U.S. Bankruptcy Court for the District of Massachusetts to retain Latham & Watkins Illinois LLC as their attorneys. The attorneys leading the engagement are Douglas Bacon, Esq., Stephen R. Tetro, Esq., Adam R. Skilken, Esq., Mark D. Gerstein, Esq., Julian T. H. Kleindorfer, Esq., Alex Voxman, Esq., and Steven L. Scesa, Esq. Because of their prepetition representation of the Debtors and their work done in assisting the Debtors with the preparation for filing these bankruptcy cases, Latham & Watkins' attorneys have become familiar with the complex factual and legal issues that will have to be addressed in these cases. The retention of Latham & Watkins, with its knowledge of and experience with the Debtors and the industry in which they operate will contribute to the efficient administration of the estates thereby minimizing the expense to the estates. The Debtors require Latham & Watkins to render legal services relating to the day-to-day administration of these chapter 11 cases and the myriad problems that may arise in this case, including: a. advising the Debtors of their powers and duties as debtors- in-possession in the continued management of their affairs; b. providing assistance, advice and representation concerning the confirmation of any proposed plan of reorganization or liquidation and solicitation of any acceptances or responding to rejections of such plan; c. providing assistance, advice and representation concerning the possible sale or liquidation of the Debtors' assets; d. providing assistance, advice and representation concerning any further investigation of the assets, liabilities and financial condition of the Debtors that may be required under local, state or federal law; e. representing the Debtors at hearings or matters pertaining to their affair as debtors-in-possession; f. prosecuting and defending pending litigation matters and such other matters that might arise during the chapter 11 cases; g. providing counseling and representation with respect to assumption or rejection of executory contracts and leases, sale of assets and other bankruptcy-related matters arising from these cases; h. in conjunction with other counsel, rendering advice with respect to general corporate and litigation issues relating to these cases, including, but not limited to, securities, corporate finance, tax, and commercial matters; and i. performing such other legal services as may be necessary and appropriate for the efficient and economical administration of these chapter 11 cases. Latham & Watkins' hourly rates range from: Partners $395 to $625 per hour Of Counsel $350 to $395 per hour Associates $195 to $360 per hour Paralegals $115 to $245 per hour Paralegal Assistants $70 to $100 per hour The Professionals expected to be most active in divine's case and their hourly billing rates are: Partners -------- Douglas Bacon $520 per hour Nancy Hunter $495 per hour Mark Gestein $550 per hour Alex Voxman $475 per hour Julian Kleindorfer $425 per hour Associates ---------- Stephen R. Tetro $360 per hour Steven Scesa $345 per hour Adam Skilken $285 per hour Darren Erman $285 per hour Angelique Smith $260 per hour Brendan Beasley $225 per hour Paralegal --------- Brigitte Windley $170 per hour Divine, Inc., an affiliate of RoweCom Inc., is an extended enterprise company, which serves to make the most of customer, employee, partner, and market interactions, and through a holistic blend of Technology, services, and hosting solutions, assist its clients in extending their enterprise. The Company filed for chapter 11 protection on February 25, 2003 (Bankr. Mass. Case No. 03-11472). Richard E. Mikels, Esq., at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo represents the Debtors in their restructuring efforts. When the Debtors filed or protection from their creditors, they listed $271,372,593 in total assets and $191,957,065 in total debts. DOBSON COMMS: Fourth Quarter 2002 Results Show Strong Growth ------------------------------------------------------------ Dobson Communications Corporation (Nasdaq:DCEL) reported net income of $8.3 million for its fourth quarter ended December 31, 2002, compared with a net loss of $29.4 million for the final quarter of the previous year. Net income for the fourth quarter of 2002 included non-cash income tax expense of $5.3 million. Dobson recorded net income applicable to common shareholders for the final quarter of $25.6 million, which included non-cash dividends of $22.8 million on preferred stock and a gain of $40.1 million for the excess of carrying value over the repurchase price of preferred stock. This $40.1 million reflected the repurchase, through a subsidiary of Dobson Communications, of $66.6 million (liquidation preference amount) of its 12.25% and 13% Senior Exchangeable Preferred Stock during the fourth quarter. For the fourth quarter of 2001, Dobson recorded a $52.3 million net loss applicable to common shareholders, which was based on a net loss of $29.4 million and non-cash dividends of $22.9 million on preferred stock. Dobson's fourth quarter 2001 net loss of $29.4 million also included a charge of $16.7 million, net of taxes, for amortization of licenses. Licenses are not amortized in 2002 results due to the adoption of SFAS No. 142. Dobson's EBITDA was $70.2 million for the fourth quarter of 2002, an 18 percent increase over last year's fourth quarter EBITDA of $59.5 million. This strong increase reflected an EBITDA margin of 44.0 percent of total revenue in the fourth quarter, compared with 39.7 percent for the same quarter last year. Higher profitability in its local service business helped the Company's margins in the fourth quarter, along with lower sales volumes that reduced variable sales and marketing expenses. EBITDA represents earnings before interest, taxes, depreciation, amortization, loss from investment in joint venture, income (loss) from discontinued operations, loss from change in accounting principle and income from extraordinary items. Dobson's reported 58,200 gross subscriber additions for the fourth quarter of 2002, compared with 65,000 for the same quarter last year. Net subscriber additions for the quarter of 18,900, reflecting customer churn of 1.8 percent. For the fourth quarter last year, Dobson reported 30,400 total net subscriber additions and churn of 2.1 percent. The Company reported total revenue of $159.4 million for the fourth quarter ended December 31, 2002, an increase of 6 percent over total revenue of $150.1 million for the same quarter of the previous year. Local service revenue increased 11 percent to $94.8 million, compared with $85.4 million for the fourth quarter last year. Fourth quarter roaming revenue declined slightly to $59.7 million from $59.9 million in the fourth quarter of 2001. Roaming traffic on the Dobson network was approximately 36 percent higher in the fourth quarter of 2002 than it was in the same period last year, offset by expected declines in roaming yields in 2002. In the fourth quarter, Dobson continued to sell a high percentage of calling plans that concentrate call traffic on its network and those of its major roaming partners. Sales of local and preferred network calling plans accounted for 69 percent of gross subscriber additions. Average revenue per unit for the fourth quarter of 2002 of approximately $43, in line with ARPU for the same quarter last year. The Company continued to reduce cash cost per unit (CCPU) on a year-over-year basis. In the fourth quarter of 2002, CCPU was approximately $21, down from $23 for the same period last year, despite average customer minutes of use (MOUs) increasing almost 20 percent in the most recent quarter. CCPU reflects local operating costs and excludes the costs of subscriber acquisition and costs associated with the Company's roaming, or wholesale, business. Consequently, Dobson's fourth quarter EBITDA margin on its local service revenue rose to 23.7 percent, compared with 13.6 percent for the same quarter last year. Capital expenditures were approximately $18.8 million in the fourth quarter, bringing total 2002 capital expenditures to $83.9 million. At December 31, 2002, Dobson had $294.5 million in unrestricted cash and approximately $14.2 million in restricted cash in escrow related to the four properties it sold to Verizon. However, approximately $7.1 million was released from escrow in February 2003 and, as required, was used to pay down Dobson credit facilities. At the end of the quarter, Dobson had approximately $125 million in available borrowing capacity under its subsidiaries' credit facilities. Debt and Preferred Stock Obligations Reduced From the inception of its repurchase program to date, Dobson has repurchased a total of approximately $168 million (liquidation preference amount) of its preferred stock. Of this amount, the Company repurchased $41.1 million in the third quarter of 2002, $66.6 million in the fourth quarter, and $59.9 million in the first quarter of 2003, at a costs of $10.9 million, $27.8 million and $36.4 million respectively. Dobson also repurchased $11.5 million (principal value) of 12.25% Dobson/Sygnet Senior Notes in the third quarter, at a cost of $8.9 million. This reflects the cancellation of $107.7 million in preferred stock that was repurchased prior to year-end 2002, along with $1.3 million in dividends. The effects of the $59.9 million in preferred stock that was repurchased in the first quarter of 2003 will be reflected on the March 31, 2003 balance sheet when Dobson reports its first quarter. Dobson's current balance sheet also continues to include $200 million in Dobson Series AA Preferred Stock, which is owned by AT&T Wireless. In December 2002, Dobson signed a definitive agreement to exchange its two properties in California for AT&T Wireless' two properties in Alaska. Upon completion of this agreement, AT&T Wireless has agreed to transfer to Dobson all of its outstanding Series AA preferred stock, which Dobson plans to cancel. Completion of the exchange remains subject to federal regulatory approvals and certain other conditions, as set out in the Asset Exchange Agreement. "We are focused on strengthening our balance sheet by reducing overall leverage," said Everett R. Dobson, president, chairman and chief executive officer. "We began last year by selling four properties to Verizon Wireless and using the proceeds to reduce debt by $325 million. Since then we have repurchased another $168 million in preferred stock, which we have cancelled or will cancel at the end of the current quarter. "Altogether since the beginning of 2002, we have reduced our net debt and PIK leverage multiple to 5.8X from 8.2X. This includes the reduction in Dobson's credit facility and all PIK and debt repurchases, and it assumes completion of the AT&T Wireless property swap," he said. "These balance sheet improvements will also save slightly more than $50 million annually in dividend and interest payments." The Company may from time to time continue to repurchase preferred stock or senior notes in open market or privately negotiated transactions at prices that the Company deems appropriate. Dobson CC Limited Partnership As previously disclosed, Dobson's principal stockholder, Dobson CC Limited Partnership has a credit agreement with Bank of America, N.A. DCCLP has pledged certain assets, including securities that represent controlling interests in DCCLP and in Dobson Communications, against the loan. The current term of the loan expires on March 31, 2003, unless extended. If the loan is not paid at maturity or if a default occurs under the loan agreements, and if the lender elects to foreclose on the collateral, Dobson could experience a change of control. Upon a change of control, Dobson Communications and its subsidiary, Dobson/Sygnet Communications Company (Dobson/Sygnet), would be required to offer to purchase each of their outstanding senior notes at 101% of the principal amount, plus accrued and unpaid interest. In addition, Dobson Communications would be required to offer to purchase its outstanding senior preferred stock at 101% of the aggregate liquidation preference. There can be no assurance that the two entities would have the funds necessary to complete these repurchases. If either failed to complete the purchases of the tendered senior notes, the note holders or their indenture trustees would be entitled to accelerate the maturity of the senior notes. If Dobson Communications failed to complete the purchase of its outstanding senior preferred stock, the holders of those two series of senior preferred stock would be entitled to elect two additional directors to Dobson's board of directors. The Dobson and Dobson/Sygnet credit facilities prohibit them from making the required offers to purchase. A change of control would also constitute an event of default under the bank credit facilities of Dobson and Dobson/Sygnet, entitling the lenders to accelerate the maturity of credit facility debt. Representatives of DCCLP are currently in discussions with Bank of America concerning a possible extension or restructuring of the loan. There can be no assurance that DCCLP will be successful in these discussions. American Cellular Corporation American Cellular reported a net loss applicable to common shareholders of $424.1 million for the quarter ended December 31, 2002, almost all of which was attributable to an impairment of goodwill of $423.9 million. Under SFAS No. 142, wireless companies must re-evaluate at least annually the value of their licenses and goodwill related to acquisitions, recording charges if current values on licenses and properties have declined. American Cellular's impairment charge in the fourth quarter of 2002 did not impact Dobson, because Dobson had previously written off its investment in American in June 2002. For the fourth quarter of 2001, American recorded a net loss of $37.0 million. This included a charge of $23.1 million, net of taxes, related to the amortization of licenses and goodwill. American Cellular's EBITDA increased approximately 19 percent to $45.1 million for the quarter, compared with $37.9 million for the same period last year. EBITDA margin was 39.9 percent, compared with 36.4 percent in the fourth quarter last year. American Cellular's increased EBITDA reflected its continued success in selling calling plans that concentrate customer traffic on its networks and those of its major roaming partners. Approximately 77 percent of fourth quarter gross subscriber additions represented sales of local and preferred calling plans. A lower number of analog-to-digital migrations in this year's fourth quarter - 5,000 versus 11,500 last year - also accounted for some of the improvement in EBITDA margin. Net subscriber additions for the quarter were 17,300, compared with 24,400 for the same quarter last year. American's churn for the fourth quarter was 2.0 percent, compared with 1.8 percent in the fourth quarter of 2001. American reported total revenue of $112.9 million for the fourth quarter of 2002, an increase of 8 percent over $104.3 million for the same period last year. Local service revenue at the company was $76.3 million for the quarter, an increase of 12 percent over the total of $68.4 million for the same quarter of 2001. Roaming revenue for the fourth quarter of 2002 was approximately $32.7 million, compared with $31.1 million for the same quarter last year. Average revenue per unit (ARPU) for the fourth quarter of 2002 was approximately $39, compared with $38 for the same quarter last year. Cash cost per unit (CCPU) in the fourth quarter was approximately $18, compared with CCPU of approximately $21 for the same period last year, despite a 15 percent increase in its monthly average customer minutes of use (MOUs). EBITDA margin on local service revenue consequently rose to 24.8 percent for the fourth quarter, compared with 19.2 percent for the same quarter last year. American Cellular's capital expenditures were approximately $10.0 million in the fourth quarter, bringing its year-to-date total to $48.8 million. American Cellular had approximately $15.9 million unrestricted cash and $42.3 million in restricted cash on its balance sheet as of December 31, 2002. Of the restricted cash, $34.1 million is in escrow to pay the April 2003 interest payment on its 9.5% Senior Subordinated Notes. The remaining $8.2 million was in escrow on December 31, 2002, related to the sale of the Tennessee RSA No. 4 to Verizon. In February 2003, approximately $4.1 million was released from escrow and used to reduce the amount outstanding on American's bank credit facility. Since June 30, 2002, American Cellular has not been in compliance with the total debt leverage ratio covenant in its bank credit facility. Consequently, American Cellular's banks have the right, but not the obligation, to accelerate repayment of the outstanding balance of its credit facility, which at December 31, 2002, was approximately $894.3 million, down from $904.9 million at September 30, 2002. To date, no such acceleration has occurred, and American Cellular's management continues to hold discussions with its bank lenders and with representatives of certain of the ACC bondholders concerning a potential reorganization. As a result of the non-compliance, the bank commitment amount on the American Cellular credit facility was reduced to outstanding borrowings on December 31, 2002, and the company currently has no available borrowing capacity. American Cellular's debt is non-recourse to Dobson Communications and to American Cellular's other owner, AT&T Wireless. Dobson Communications is a leading provider of wireless phone services to rural and suburban markets in the United States. Headquartered in Oklahoma City, the rapidly growing Company owns or manages wireless operations in 17 states. For additional information on the Company and its operations, please visit its Web site at http://www.dobson.net As reported in Troubled Company Reporter's February 26, 2003 edition, Moody's Investors Service confirmed its ratings for Dobson Communications Corporation, and its subsidiaries. The rating action mirrors Dobson's strong liquidity and modest near term debt amortization requirements. Outlook is revised to negative from stable, reflecting the challenges that the communications business encounters today. Ratings Confirmed Dobson Communications Corporation Ratings * Senior Implied B1 * $300 million 10.875% Senior Notes due 2010 B3 * 12.25% Exchangeable Preferred Stock due 2008 Caa2 * 13.0% Exchangeable Preferred Stock due 2009 Caa2 Dobson Operating Company, LLC * $925 million secured credit facility Ba3 Dobson/Sygnet Communications Company * $200 million 12.25% Senior Notes due 2008 B3 EKNOWLEDGE GROUP: Arranges Interim Financing with Amara Group ------------------------------------------------------------- Corona, CA based eKnowledge Group, Inc. (OTC Bulletin Board: EKWL) has opened a working capital line with The Amara Group, Inc., as part of its impending merger with American Affinity Partners, Inc. The working capital line provides up to $250,000 in capital under certain conditions including but not limited to operating performance objectives, restructuring the existing balance sheet and completion of the merger with American Affinity Partners, Inc. Gary Saunders, CEO of eKnowledge added, "Unaudited financials from American Affinity Partners shows that they will add over $2 million in revenue to our company, and with the ability to add some working capital and reducing some of our balance sheet stress, a strong company poised for attractive growth is the expected result." David Walters, Managing Director of The Amara Group, Inc. commented, "We believe that the combined intellectual property, customer bases and distribution channels for the combined companies makes for an attractive investment opportunity. We look for undervalued and profitable businesses to support and this combination fits the mark." eKnowledge is an e-Learning Company utilizing interactive video and active learning to meet knowledge objectives. Through its products, eKnowledge provides training to over 500 local government cities, counties, agencies, districts, and risk pools via a Public Sector e-Learning Coalition. Through its services, eKnowledge customizes other organizations' training, education, marketing, and other programs for delivery over the Internet or upon CD-ROM. EKnowledge Group's September 30, 2002 balance sheet shows a working capital deficit of about $1.5 million, and a total shareholders' equity deficit of about $1.4 million. The Amara Group, Inc.(TM) is a Southern California based merchant banking firm. As a "transition investor", Amara focuses on companies and investors that are experiencing challenges in the micro and small cap market space, generally companies with under a $500 million market capitalization. Amara can deliver capital and advice to help companies create and execute appropriate "capital market strategies" to enhance and create stakeholder value and liquidity. Additionally, Amara is a sponsor of the "Value Under the Radar" series of conferences focused on "Orphan Public Companies" with market capitalizations under $500 million. More information about Amara can be found at http://www.amaragroup.com AAP is a provider of software solutions and services to human resource departments in various vertical markets servicing such industries as auto, diesel repair, aircraft repair and maintenance and related industries. AAP has a suite of solutions and proprietary delivery mechanisms for its benefit programs including products specifically tailored for the PEO industry. For more information visit http://www.americanaffinitypartners.com ENCOMPASS SERVICES: Files Joint Plan and Disclosure Statement ------------------------------------------------------------- Encompass Services Corporation has taken a significant step toward completion of its restructuring by filing its Joint Plan of Reorganization and Disclosure Statement with the United States Bankruptcy Court for the Southern District of Texas. The plan contemplates that the Residential Services Group of Encompass, which specializes in installing and servicing heating, ventilation and air conditioning and plumbing systems in newly constructed and existing homes, will be reorganized as a new entity. The new company will be headquartered in Dayton, Ohio, with operations in nine states. The plan of reorganization is supported by an investment from Wellspring Capital Management, a New York-based private equity firm. The agreement will result in Wellspring and the Residential Services Group management team owning all outstanding shares of the new entity established to carry forward the business. "Upon confirmation of the reorganization plan, our new company will be focused exclusively on residential services," said Eric Salzer, who is the designated Chief Executive Officer of the new organization. "We see tremendous potential for developing this business going forward." "Upon confirmation of the plan, the new company will be positioned for solid growth and profitability with a well- financed balance sheet," said Carl Stanton, Partner, Wellspring Capital Management. "This business has an experienced management team, a diversified customer base and a proven financial track record. We are excited to be associated with the Residential Services Group." Encompass stated that it has completed the sale of substantially all of the Company's assets outside of the Residential Services Group during the pendency of the case. "We are pleased to be submitting this plan to the Court," said Michael F. Gries, Chief Restructuring Officer of Encompass Services Corporation. "We have made significant progress with our restructuring efforts in a short period. We expect to emerge from Chapter 11 in the second quarter of 2003." Hearings on the approval of the Disclosure Statement and confirmation of the Plan are tentatively scheduled for April 9, 2003 and May 21, 2003, respectively. The full text of the draft Joint Plan of Reorganization and Disclosure Statement is available at www.encompass.com and, following the filing of these documents with the Securities and Exchange Commission, will be available at the SEC's Web site at http://www.sec.gov The Residential Services Group provides heating, ventilation and air conditioning, plumbing and other contracting services primarily in single family, low-rise multifamily housing units and small commercial buildings. Its services include new installation and maintenance, repair and replacement work. The Residential Services Group has approximately 2,300 employees. Wellspring Capital Management LLC is a New York-based private equity firm. The firm is focused on acquiring companies where it can realize substantial value by contributing management expertise, innovative operating and financing strategies, and capital. For additional information, visit http://www.wellspringcapital.com ENCOMPASS SERVICES: Committee Hires Chanin Capital as Advisors -------------------------------------------------------------- In October 2002, Encompass Services Corporation and its debtor- affiliates commenced negotiations with an informal committee comprised of certain holders of the Debtors' 10-1/2% Senior Subordinated Notes due 2009 in an effort to reach a consensual restructuring of their debt obligations. During this time, the Informal Committee retained Chanin Capital Partners LLC as its financial advisor. The Informal Committee later dissolved and Chanin was released. From the Petition Date through the formation of an official unsecured creditors' committee, Chanin again provided advisory services to the members of the Informal Committee and the Debtors' unsecured creditors in general. Two Informal Committee members were later appointed to the official committee. Subsequently, the Official Committee of Unsecured Creditors sought and obtained the Court's authority to retain Chanin as its financial advisors in these cases. In particular, Chanin will provide: (a) analysis of the Debtors' operations, business strategy, and competition as well as an analysis of the industry dynamics affecting the Debtors; (b) analysis of the Debtors' financial condition, business plans, operating forecasts, management, and the prospects for future performance; (c) analysis of any merger, acquisition, divestiture, joint- venture, or new project transactions proposed by the Debtors; (d) financial valuation of the Debtors' ongoing operations; (e) assistance in developing, evaluating, structuring and negotiating the terms and conditions of a potential recapitalization, including the value of the securities, if any, that may be issued to unsecured creditors under a plan of reorganization or liquidation; (f) analysis of potential divestitures of the Debtors' operations; (g) forensic analysis and investigation of the Debtors, including all related party transactions; and (h) other financial advisory services with respect to financial, business and economic issues, as may arise during the course of the Debtors restructuring and as requested by the Committee. Chanin will be paid $117,000 as monthly compensation for its services. Chanin will also be reimbursed of all reasonable out- of-pocket expenses in connection with its engagement. The Creditors' Committee relates that the Debtors have paid Chanin $150,000 for the services it rendered to the Informal Committee from October 24, 2002 to November 24, 2002. But Chanin was not reimbursed for its expenses during this period. Brent C. Williams, Senior Vice President of Chanin, assures Judge Greendyke that the firm does not represent any other entity having adverse interests in connection with these cases. In addition, Chanin is a "disinterested person" within the meaning of Section 101(14) of the Bankruptcy Code. (Encompass Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: Examiner Concludes SPEs Can & Should Be Challenged --------------------------------------------------------- Neal Batson, Esq., at Alston & Bird LLP, in his role as the Court-appointed Examiner in Enron Corp.'s chapter 11 cases, delivered his Second Interim Report dated January 21, 2003, to the U.S. Bankruptcy Court for the Southern District of New York late Wednesday. Mr. Batson advises that a future report will dig into equitable subordination issues and look at whether Enron's officers, directors, professionals and other third parties face liability as a result of their involvement in Enron transactions -- especially those charged with disclosing or approving transactions. In his Second Interim Report, Mr. Batson relates and concludes that: (a) the special purpose entities played a significant role in Enron's collapse. The risks described in a prophetic nid-2001 report to Enron's Board about a meltdown came true in the precise order described; (b) some SPE structures were not true sales, they should be recharacterized as loans, and they can be defeated through substantive consolidation -- and if successful, Mr. Batson sees $1.7 to $2.1 billion of value being restored to the Debtors' estates; (c) certain transfers made to Ken Lay and other Enron employees and professionals can be avoided using the bankruptcy code's strong-arm provisions; (d) some transfers from Enron to various SPEs can be avoided as constructively fraudulent or preferential under chapter 5 of the bankruptcy code and other applicable law -- potentially bringing another $2.9 billion of value to the Debtors' estates; (e) Enron employed, misused and exploited six specific accounting techniques: (1) FAS 140 Transactions used as bridge financings of illiquid assets that Enron intended to sell; (2) Tax Transactions having no business purpose and first made public in a Washington Post article dated May 21, 2002; (3) Non-Economic Hedges designed so that Enron would show profits as the value of underlying assets decreases; (4) Share Trust Transactions like Marlin and Whitewing; (5) Minority Interest Transactions that made equity investments look like debt obligations; and (6) Prepay Transactions became the "quarter-to- quarter cash flow lifeblood of Enron" and transactions like Yosemite IV were debt because no commodity price risk ever transferred to Citibank or Delta. In 2000, Mr. Batson's discovered, these six types of accounting transactions accounted for 96% of Enron's reported net income and 105% of its reported flow of funds from operations. Were it not for these transactions, Enron's reported debt at Dec. 31, 2000, would have been $22.1 billion rather than $10.2 billion. (f) Enron used the SPEs to manipulate its financial statements in violation of GAAP and other applicable law; and (g) Enron did not make adequate public disclosure about the SPEs and their economic risks. "The total mix of information available about Enron," Mr. Batson says, "while sprinkled (particularly in hindsight) with omens of what was to come -- was not such that Enron can effectively claim that 'everyone knew' what it was doing." Mr. Batson's First Interim Report reported on the results of the Examiner's fact-finding activities and provided an initial roadmap for where his investigation would go. The Examiner's Second Interim Report was filed with the Bankruptcy Court on March 5, 2003 (Doc. 9551). In seven parts, free copies of Mr. Batson's report are available at http://www.elaw4enron.com ENRON CORP: Sues Whitewing, et al., to Recover Preferences ---------------------------------------------------------- Pursuant to Sections 547 and 550 of the Bankruptcy Code, Enron Corp. seeks to avoid and recover preferential transfers made to Whitewing Associates LP, The Osprey Trust, Wilmington Trust Company, United States Trust Company of New York, Oaktree Capital Management LLC and John Hancock Life Insurance Company. Enron controlled Whitewing, subject to the rights accorded to Osprey. The payments made that are subject to this Action are made only to Whitewing. However, Enron enjoined Osprey, Wilmington, US Trust, Oaktree and Hancock as parties to this Action to give them the fullest relief and conserve estate money by having the disputes fully resolved with all interested parties being provided the opportunity to be heard. Peter Gruenberger, Esq., at Weil, Gotshal & Manges LLP, in New York, relates that on October 5, 2000, Enron executed a revolving promissory note in the maximum principal amount of $1,715,105,859 in Whitewing's favor. Within the one-year period prior to the Petition Date, between December 3, 2000 and December 2, 2001, Enron made these payments by check, wire transfer or its equivalent to Whitewing in partial payment of an antecedent debt represented by the Revolving Note: Payment Date Payment Amount ------------ -------------- December 7, 2000 $264,747,029 December 21, 2000 281,660,566 December 21, 2000 16,287,372 December 22, 2000 37,723,332 December 22, 2000 11,689,749 December 29, 2000 158,236,533 December 29, 2000 11,463,466 February 23, 2001 11,689,749 March 23, 2001 9,351,800 March 29, 2001 375,000 March 30, 2001 24,556,306 May 25, 2001 7,013,849 June 29, 2001 121,865,681 June 29, 2001 10,595 ------------- TOTAL $956,671,026 Mr. Gruenberger contends that the payments made, plus interest constitute the preferential transfers than Enron seeks to avoid and recover because: (a) the aggregate amount of the Voidable Transfers was property of Enron's estate; (b) during the time the Voidable Transfers were made, Whitewing was a creditor of Enron and Enron made the payments on account of the Revolving Note; (c) at the time of the payment of the Voidable Transfers, Enron was insolvent for purposes of Section 547(b) of the Bankruptcy Code; (d) Whitewing was an insider of Enron during the time the Voidable Transfers were made since at the time, Whitewing was, and still is, an Enron affiliate; and (e) the Voidable Transfers enabled Whitewing to receive more than it would have received if the case were a case under Chapter 7 of the Bankruptcy Code, the transfers had not been made and Whitewing had received payment of the debt to the extent provided by the Bankruptcy Code. Accordingly, Enron seeks a Court order: (a) determining that the Voidable Transfers be avoided and set aside; (b) directing Whitewing to pay to Enron's estate the Voidable Transfers amounting to $956,671,026, plus interest accruing on the amount from and after the date each transfer was made; and (c) awarding to Enron attorney's fees, costs and interest. (Enron Bankruptcy News, Issue No. 58; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003 (ENRN03USR3) are trading at about 15 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3 for real-time bond pricing. EOTT ENERGY: Wins Approval to Assume Amended TST Lease Agreement ---------------------------------------------------------------- EOTT Energy Partners, L.P., and its debtor-affiliates sought and obtained a Court order: (i) approving a settlement resolving all claims asserted by TST Briar Lake; and (ii) authorizing the assumption of the Lease, as modified by the Third Amendment dated January 27, 2003, the issuance of a replacement letter of credit and the release of the Old Letter of Credit. Trey A. Monsour, Esq., at Haynes and Boone, LLP, in Dallas, Texas, relates that, as part of their prepetition business operations, the Debtors, as tenant, entered into a non- residential lease of real property with TST, as landlord, on March 13, 2000. The Lease is for 67,500 square feet of office space in One BriarLake Plaza located at 2000 West Sam Houston Parkway South in Houston, Texas. On September 5, 2000, the Debtors and TST amended the Lease by the First Amendment to the Lease Agreement. The First Amendment stipulated the rentable space of the Premises to be 64,057 square feet. The Lease has been further amended by a Second Amendment to the Lease Agreement dated April 25, 2001. The Lease will expire on November 30, 2006. Currently, Mr. Monsour informs the Court that the Debtors are in default under the Lease for the October 2002 rent amounting to $138,762. Mr. Monsour explains that the October 2002 payment did not clear the Debtors' bank account due to the Debtors' commencement of their bankruptcy cases on October 8, 2002. The Debtors continue to occupy the premises, pay rent obligations timely, and there are no other defaults under the Lease. On January 8, 2003, TST filed a proof of claim against the Debtors for $7,105,788. Mr. Monsour explains that as a form of a security deposit required under the Lease, Enron Corp., in connection with Enron's credit facility with Standard Chartered Bank, caused to be issued to TST a $1,500,000 letter of credit from Standard Chartered -- the Old Letter of Credit. As a condition to the closing of the Enron Settlement Agreement, the Debtors agreed that the Old Letter of Credit held by TST would be terminated and a replacement letter of credit would be issued by Standard Chartered Bank in the Debtors' name. The Debtors and TST have diligently negotiated the terms of a release of the Old Letter of Credit and replacement with an identical letter of credit. To effectuate their reorganization, the Debtors have decided to assume the Lease with certain modifications memorialized in the Third Amendment to the Lease Agreement dated January 27, 2003: A. Reduction of Premises Effective as of the Debtors' delivery of vacant possession of space to TST, which will be no later than March 31, 2003 -- Relinquishment Date, TST does agree to terminate the Debtors' possession with respect to a portion of the Premises equal to 13,849 Rentable Square Feet on Floor 6 of the Building. The Parties acknowledge and agree that from the Relinquishment Date: -- the Premises will consist of the Premises less the Relinquishment Premises; -- the Premises and the Agreed Area of the Premises will be stipulated by both Parties for all purposes to be 50,208 Rentable Square Feet; -- the Debtors' Proportionate Share will be stipulated to be 9.993%; and -- all of the Debtors' rights, privileged, duties and obligations accruing with respect to the Relinquishment Premises, including, without limitation, the Debtors' right to possession and use of the Relinquishment Premises, will terminate in all respects. The Debtors acknowledge and agree that although their rights of possession and use of the Relinquishment Premises are being terminated as of the Relinquishment Date, in no way will this be interpreted as a termination of the Lease with respect to the Relinquishment Premises, until the time as the earlier to occur of: (a) September 30, 2003; or (b) if TST relets the entirety of the Relinquishment Premises, the final commencement date under the new lease consummated by TST and third parties covering the entirety of the Relinquishment Premises, if no Event of Default exists at that time. At the Floor 6 Rent Termination Date, if no Event of Default by the Debtors exist, the Debtors will be released of all liabilities and obligations with respect to the Relinquishment Premises; B. Rent Until February 28, 2003, the Debtors will continue to pay the Fixed Rent, Tenant's Operating Payment and other sums payable pursuant to the Lease with respect to the entire Premises as currently provided in the Lease. From and after March 1, 2003, and continuing through the Expiration Date, the Fixed Rent with respect to the reduced Premises during the remaining portion of the Term will be computed in this schedule: Time Period Per Annum Per Month ----------- --------- --------- 03/01/03-11/30/03 $1,230,096 $102,508 12/01/03-11/30/04 1,255,200 104,600 12/01/04-11/30/05 1,280,304 106,692 12/01/05-11/30/06 1,305,408 108,784 Fixed Rent will be payable in equal monthly installments in advance on the first day of each month. Effective March 1, 2003, and continuing through the Expiration Date, the Debtors' Operating Payment payable with respect to the reduced Premises will be determined by TST and paid by the Debtors based on a revised Expense Stop equal to actual Operating Expenses and Taxes incurred by TST during the 2003 calendar year. In addition, the Debtors will continue to pay Fixed Rent with respect to the Relinquishment Premises from and after March 1, 2003 and continuing through the Floor 6 Rent Termination Date, at the rate of $24.50 per square foot within the Relinquishment Premises per year or $28,275 per month. C. Condition of the Premises The Debtors agree to retain possession of the reduced Premises as of the Relinquishment Date in its then current condition. The Parties each agree that this document constitutes the entire agreement of the Parties and there are no verbal representations, warranties or understandings pertaining to this Third Amendment. The Debtors further acknowledge and agree that TST does disclaim any and all warranties, express or implied, including but not limited to those of fitness for a particular purpose, with respect to the premises or the improvements located therein. D. Letter of Credit TST acknowledges the Debtors' delivery of a replacement Letter of Credit amounting to $1,250,000 issued by Standard Chartered Bank to be held as the Security Deposit under the Lease from and after the date thereof. The Debtors acknowledge TST's release and delivery of the original Letter of Credit to them. Provided that no Event of Default by the Debtors is then continuing at any time, the required amount of the replacement Letter of Credit will be reduced in these amounts: Time Period Amount ----------- ------ 3rd Amendment Effective Date - 09/30/03 $1,250,000 10/01/03-09/30/04 750,000 10/01/04-11/30/05 375,000 E. Relocation Article 28 will be added to the Lease regarding the Relocation Right and Condition of Substitute Premises. F. Parking The Debtors will continue to pay parking rent on the existing allotment of 215 unreserved Employee Parking Spaces at the existing rates through February 28, 2003. Effective as of March 1, 2003 through the Expiration Date, the Debtors parking allotment will be amended to be 215 unreserved Employee Parking Spaces and the Debtors' right to any spaces in excess of the 215 will be terminated on February 28, 2003. The Debtors will lease the 215 unreserved Employee Parking Spaces on a "must-take and pay" basis throughout the remaining portion of the Term at $45 per space, which rate is subject to change from time to time. The Debtors will not be required to pay parking rent with respect to the 215 unreserved Employee Parking Spaces from March 1, 2003 to December 31, 2004. TST will continue to provide the Debtors $100 per month in visitor parking validation coupons as currently provided in the Lease throughout the remaining portion of the Term. If the Debtors require unreserved parking exceeding the 215 leased, TST will provide the spaces to the Debtors on a month-to-month basis at then current rate. G. Deletion of Options The Expansion Option, Right of First Offer and Renewal Term provisions of the Lease are deleted in their entirety. H. Signage The Debtors will no longer be entitled to identification signage in "first-tier" position on the Building's monument sign. TST will be entitled to relocate the Debtors' existing sign from the first tier to another location on either the second tier or the third tier of the monument. I. No Brokerage Commissions The Debtors represent and warrant to TST that they have not employed any agents, brokers or other parties who would be entitled to a commission in connection with this Third Amendment, and the Debtors agree to protect, defend, indemnify and hold TST harmless from and against any and all claims of all agents, brokers or other parties claiming a commission by or through the Debtors in connection with this Third Amendment. The Debtors will not be responsible for any brokerage commissions payable in connection with TST's reletting of the Relinquishment Premises to third parties. In view of the settlement, Mr. Monsour remarks, TST agreed to release all prepetition claims other than the rent obligations created by the Third Amendment and the claim for the cure of the October 2002 rent amounting to $144,141. Moreover, TST agreed to release all postpetition claims, arising before the execution of the Third Amendment, including the withdrawal of Proof of Claim No. 7755. Mr. Monsour convinced the Court that the Debtors' request is warranted because: (a) the Lease is necessary for the Debtors' reorganization as the Premises are being used as their corporate headquarters where they run their day-to-day operations; (b) the assumption of the Lease, as modified, resolves all of TST's prepetition claims, including, but not limited to, the Proof of Claim; (c) the assumption resolves all postpetition claims that may have arisen before the execution of the Third Amendment; (d) with the assumption, the Debtors will not be forced to seek out new commercial office space for its day-to-day operations, which would be an additional administrative expense of these estates and would distract certain of the Debtors' key personnel from the reorganization efforts; (e) the settlement eliminates the potential for time consuming and costly litigation with an uncertain outcome; (f) the settlement provides for the release of the Old Letter of Credit, a condition to the closing of the Enron Settlement Agreement; and (g) the Debtors are able to resolve any dispute with TST concerning the Lease and they can move forward with their reorganization efforts. (EOTT Energy Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) FACTORY 2-U STORES: February Sales Tumble 15.2% to $28.8 Million ---------------------------------------------------------------- Factory 2-U Stores, Inc., (Nasdaq:FTUS) said that sales for the four-week period ended March 1, 2003 were $28.8 million, a decrease of 15.2% over sales of $34.0 million for the four-week period ended March 2, 2002. Comparable store sales for the four- week period ended March 1, 2003 decreased 7.7% versus a decrease of 10.2% for the same period last year. The Company did not open or close any stores for the four-week period ended March 1, 2003. Bill Fields, Chairman and Chief Executive Officer, commented, "Comparable store sales for February decreased primarily as a result of low in-store inventories and, to a lesser extent, inclement weather during the last week of February in many parts of Texas and California. We ended the month of February with average in-store inventories for comparable stores down 33%. For February, our transaction counts were up 5%, while average purchase size was down 13%. Our Home category business performed the best with positive low single-digit comparable store sales while all other merchandise categories had comparable store sales in the negative high single-digit to low double-digit range. Geographically, the San Antonio and Dallas, TX areas and San Diego and Sacramento, CA areas performed the best with comparable store sales in the negative low single-digit to positive low single-digit range, while areas of the Pacific Northwest and New Mexico performed the poorest with comparable store sales in the negative low teens. " Mr. Fields concluded, "We are beginning to see an increase in the flow of new merchandise receipts and expect to reach optimal inventory levels by the end of March. With the expected completion of liquidating slow moving and aged goods from our inventory mix in March and the improved flow of new goods into our stores, we expect to be in a strong inventory position for Easter business." "We will provide a mid-month sales update for March on March 24, 2003 at 5:00 P.M. Eastern Standard Time. Those interested can access this update message at 1-888-201-9603. This message will remain available until April 21, 2003. We will release our March sales results on April 9, 2003 after the market closes, or approximately 4:00 P.M. Eastern Standard Time." Factory 2-U Stores, Inc., operates 244 "Factory 2-U" off-price retail stores which sell branded casual apparel for the family, as well as selected domestics and household merchandise at prices which generally are significantly lower than the prices offered by its discount competitors. The Company operates 32 stores in Arizona, 3 stores in Arkansas, 64 stores in southern California, 63 stores in northern California, 1 store in Idaho, 8 stores in Nevada, 9 stores in New Mexico, 1 store in Oklahoma, 15 stores in Oregon, 34 stores in Texas, and 14 stores in Washington. At February 1, 2003, Factory 2-U Stores, Inc.'s balance sheet shows that its total current liabilities exceeded its total current assets by about $3 million, while its total shareholders' equity shrank to $44 million, from about $70 million recorded a year earlier. FIRST CONSUMERS: S&P Keeps Lowered Transaction Ratings on Watch --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on all classes of First Consumers Master Trust's series 1999-A and First Consumers Credit Card Master Note Trust's series 2001-A. The ratings on all classes remain on CreditWatch with negative implications, where they were placed March 28, 2002. The lowered ratings reflect the reduced probability that First Consumers National Bank's bankcard portfolio will be sold prior to April 1, 2003, a date set by the Office of the Comptroller of the Currency at which time FCNB must stop granting new credit to its existing accounts as part of a plan to begin the liquidation of its bankcard portfolio. The closing of the underlying bankcard accounts may have some short-term positive impact on the portfolio payment rate if higher quality obligors pay off their accounts in full or complete balance transfers. In the longer term however, it will most likely have a negative effect, resulting in adverse selection from reduced payment collections and fewer creditworthy obligors remaining in the pool. In addition, eliminating the cardholder's ability to use the card for purchases and cash advances may also reduce the incentive to repay the loan to keep the credit line open and may lead to higher charge-offs. A slowdown in obligor repayments will likely extend the ultimate repayment period of the ABS transactions and increase the loan loss exposure period. Independent of the expected account closings, it is also possible that series 1999-A and 2001-A will breach their respective base rate triggers after the February 2003 performance month. Excess spread levels for both series have been negative for December 2002 and January 2003 due primarily to lower yield numbers following reduced sales of charge-off accounts. Recoveries from these sales had been part of the portfolios reported yield. Unless February excess spread levels are greater than 4.3% and 5.5%, respectively, the three-month average excess spread level will be negative. If this occurs, an early amortization period will begin and investors should begin to receive principal distributions in April 2003 as part of the rapid amortization feature in each series. The ratings on these transactions remain on CreditWatch due to Standard & Poor's ongoing concern regarding the future servicing of the portfolio in light of the OCC's direction that FCNB relinquish its role as servicer for the master trust collateral as part of its liquidation plan and performance implication as a result of such a transfer. In November 2002, the OCC approved FCNB's disposition plan providing for the sale or liquidation of the company's bankcard portfolio by April 30, 2003. The company's public filings indicate that, since it was not able to sell the portfolio by January of this year, it must now implement plans to liquidate the portfolio. On Feb. 14, 2003, FCNB received instructions from the OCC outlining a plan to liquidate its bankcard portfolio, which included the following steps: -- To notify the trustee for each of its series that it is required to either be replaced with a successor servicer or to resign as servicer; -- To stop accepting new credit card applications and stop granting credit line increases to any of its existing credit card accounts; and -- To notify its existing cardholders that FCNB will not accept any new charges on their accounts after April 1, 2003. In line with these requirements, FCNB has notified the Bank of New York, the trustee for both transactions, that it intends to either replace itself with a successor servicer, or resign as servicer under the pooling and servicing agreement and the transfer and servicing agreement for these series. According to the governing documents for both transactions, the trustee for each series is obligated to assume servicing responsibilities until a successor servicer is appointed. The OCC's restrictions on FCNB's ability to extend new credit and increase credit lines have had the effect of slowing portfolio growth, thereby increasing loss rates on a percentage basis. Additionally, if FCNB stops funding new purchases as of April 1, 2003, the utility on the FCNB bank cards will cease, no new receivables will be added, and the portfolio will begin to liquidate. On May 13, 2002, Standard & Poor's lowered its ratings on the class A and B notes from First Consumers Master Trust's series 1999-A and First Consumers Credit Card Master Note Trust's series 2001-A, reflecting the adverse performance trends displayed by the underlying pool of credit card receivables. There is the risk that portfolio performance for these series will deteriorate further if the underlying credit card accounts are closed and servicing is transferred. Under revised performance assumptions for FCNB accounts and receivables, the available credit support for each class is not currently viewed as sufficient to support the outstanding ratings on either series. Standard & Poor's will continue to monitor the performance of the key risk indicators associated with the series listed below and will continue to advise the market as developments become available. RATINGS LOWERED AND REMAIN ON CREDITWATCH NEGATIVE First Consumers Master Trust Series 1999-A Rating Class To From A BBB+/Watch Neg AA/Watch Neg B BB-/Watch Neg BBB/Watch Neg First Consumers Credit Card Master Note Trust Series 2001-A Rating Class To From A BBB+/Watch Neg AA/Watch Neg B BB/Watch Neg BBB+/Watch Neg C BB/Watch Neg BBB/Watch Neg GATEWAY INC: Undertakes Business and Cost-Reduction Plans --------------------------------------------------------- Speaking at an investor conference Wednesday, Gateway, Inc. CFO and Executive Vice President Rod Sherwood outlined the company's business and cost-savings plans, with the objective of achieving its previously announced goal of returning to profitability by the fourth quarter of 2003. He said Gateway will reduce its quarterly selling, general and administrative spending to below $200 million by the fourth quarter, down from $250 million a year earlier. In addition, it will reduce its cost of goods sold by approximately $200 million annually. The company expects by the end of the year to be cash-flow positive and to have more than $1 billion in cash and marketable securities on its balance sheet, he said. As part of this effort, Mr. Sherwood said Gateway may take a restructuring charge this quarter that is "conservatively north of $80 million," related to cost-reduction plans which the company will detail by quarter's end. The cash component expected to be incurred this quarter may be approximately one- third of the charge, which could grow to approximately two- thirds in subsequent quarters. Mr. Sherwood's previously announced remarks were made at the Morgan Stanley Semiconductor & Systems Conference in Dana Point, California. His presentation was simultaneously carried on a webcast. Gateway, Inc. (NYSE: GTW), a personal technology company, improves people's lives through a combination of the latest and best hardware, communication tools, applications, training and service, all offered with a custom financing package. The company takes a localized approach, utilizing its Web site, call centers and nationwide network of Gateway retail stores to build direct relationships with consumers, small and medium businesses and government and education institutions. In 2003, Gateway was named the second most admired American company in the computer industry by Fortune magazine(1). In 2002, Gateway's products and services received more than 90 awards and accolades and the company's retail stores outperformed its competitors in a "mystery shopper" comparison(2). For more information, visit Gateway's Web site at http://www.gateway.com As previously reported, Standard & Poor's lowered its corporate credit rating on Gateway Inc. to 'B+' and removed it from CreditWatch where it had been placed on March 1, 2002. Outlook is stable. Ratings on the San Diego, California-based Gateway reflect extremely competitive industry conditions, diminished market share, and operating losses, offset by a good financial profile for the rating. GENTEK INC: Ingalls & Snyder LLC Discloses 3.1% Equity Stake ------------------------------------------------------------ Ingalls & Snyder LLC, a Delaware Limited Partnership, discloses in a regulatory filing dated February 12, 2003 with the Securities and Exchange Commission that it holds a 3.1% equity stake in GenTek Inc. Ingalls & Snyder is a broker-dealer registered under Section 15 of the Securities and Exchange Act of 1934 and an investment adviser registered under Section 203 of the Investment Advisers Act of 1940. As of December 31, 2002, Ingalls & Snyder may be deemed as the beneficial owner of 780,300 shares of GenTek common stock. Ingalls & Snyder has the sole power to cast 217,300 shareholder votes. Ingalls & Snyder also has the sole power to sell -- but not to vote -- 217,300 GenTek shares. The securities include those owned by certain managing directors of Ingalls & Snyder. In addition, Ingalls & Snyder has a shared power to cast 500,000 shareholder votes. These shares are owned by Ingalls & Snyder Value Partners L.P., an investment partnership managed under an Investment Advisory Contract with Ingalls & Snyder. Robert L. Gipson, Ingalls & Snyder's Senior Director, and Thomas O. Boucher, Jr., Ingalls & Snyder's Managing Director, share that power to vote. Mr. Gipson and Mr. Boucher are general partners of Ingalls & Snyder Value Partners. (GenTek Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENZYME BIOSURGERY: Dec. 31 Working Capital Deficit Tops $282MM --------------------------------------------------------------- Genzyme Biosurgery (Nasdaq: GZBX), a division of Genzyme Corp., reported financial results for the fourth quarter and full year of 2002. In its second full year of operations, Genzyme Biosurgery reported growth of 11 percent over comparable revenue in 2001, while reducing operating expenses from the prior year and strengthening the near- and long-term biotechnology product pipeline. For comparison purposes, revenues from 2001 do not include sales of Snowden-Pencer products, which were divested in the fourth quarter of 2001. "In 2002 we continued to execute the strategic plan we outlined when we formed Genzyme Biosurgery more than two years ago," said Genzyme Biosurgery President Duke Collier. "We have expanded the market presence of two key revenue drivers -- Synvisc(R) and Sepra(TM) -- while continuing to reduce operating costs and to advance the programs that will help sustain our growth." Division-wide revenues totaled $58.8 million for the fourth quarter of 2002, compared to $54.6 million in the fourth quarter of 2001. Total 2002 revenues were $240.1 million, compared with $217.2 million in 2001. Genzyme Biosurgery's net loss for the fourth quarter of 2002 was $14.5 million, compared with a loss in the fourth quarter of 2001 of $44.0 million. For the full year 2002, the division's net loss was $167.9 million, compared with a net loss in 2001 of $127.0 million. The 2002 net loss included a one-time goodwill impairment charge of $98.3 million taken in the first quarter as a result of the implementation of the new accounting standard FAS 142. Genzyme Biosurgery has approximately 40 million average shares outstanding. Reported operating loss for the fourth quarter of 2002 was $15.1 million, compared to $23.7 million in the fourth quarter of 2001. Operating loss, excluding amortization and a one-time expense related to the reversal of a reserve account for restructuring in Europe, was $8.6 million in the fourth quarter of 2002, compared with $7.3 million in the same quarter of 2001. For the full year of 2002, operating loss prior to amortization and one-time items was reduced to $24.5 million, from $34.7 million in the prior year. Genzyme Biosurgery's gross margin improved to 54 percent in 2002, up from 46 percent in 2001. Selling, general and administrative expenses were reduced to $107.0 million, or 45 percent of revenue, from $122.0 million, or 52 percent of revenue in 2001. Research and development expenses were $52.3 million in 2002, compared with $47.2 million in 2001. Genzyme Biosurgery had $32.7 million in cash and equivalents at the end of 2002. The Company recorded in its December 31, 2002 balance sheet a working capital deficit of about $282 million, while its division equity plunged half down to $186 million. Revenue by Business Unit Genzyme Biosurgery's 11 percent revenue growth in 2002 excluding Snowden Pencer was led by Synvisc (Hylan G-F 20), the division's leading product, which is used to improve pain and mobility in patients with osteoarthritis of the knee. In the Orthopaedics business unit, revenue is generated through sales of Synvisc as well as Carticel(R) (autologous cultured chondrocytes), a treatment for the repair of cartilage defects in the thigh-bone part of the knee. Revenue generated by the Orthopaedics business unit in the fourth quarter totaled $23.8 million, compared with $25.2 million in 2001. For the year, Orthopaedics revenue totaled $110.2 million, compared with $101.8 million in 2001. Synvisc revenue was $16.9 million for the fourth quarter of 2002, compared with $20.1 million in the fourth quarter of 2001. For the full year 2002, Synvisc revenue totaled $89.8 million, compared with $83.4 million in 2001. Synvisc revenue in the fourth quarter of 2002 was impacted by a reduction in inventory levels held by the product's main distributor, Wyeth Pharmaceuticals, and a complete drawdown of the inventory held by Boehringer Ingelheim, the product's former distributor in France. Beginning January 1, 2003 Genzyme Biosurgery began to sell Synvisc in France directly through its own sales force. In 2002, Genzyme Biosurgery and its distributors successfully enlarged the market penetration of Synvisc throughout the world. Synvisc is now approved for sale in more than 60 countries. In Europe, the product received approval for use in the hip in 2002, marking the first expansion of the product line into a joint other than the knee. Product plus research and development revenues in the Biosurgical Specialties business unit totaled $14.1 million for the fourth quarter, compared with $12.5 million in 2001. For the year revenues in this business unit rose 22 percent to $58.2 million, up from $47.6 million in the prior year. The Sepra(R) line of products led this growth, contributing revenue totaling $10.4 million for the fourth quarter, up from $7.9 million in 2001. Sepra revenue grew 36 percent to $39.1 million for the year, up from $28.8 million in 2001. The Sepra line includes Seprafilm(R), which is used to reduce the incidence of adhesions following surgery, Sepramesh(TM) for the reconstruction of soft- tissue deficiencies such as the repair of hernias, and Sepragel(R) Sinus and Seprapack(TM) for use in sinus and nasal surgery. Revenues in the Cardiothoracic unit totaled $20.8 million for the quarter, up from $16.9 million in the same quarter of 2001. For the year revenues in this unit were $71.7 million, compared with $67.8 million in 2001. Revenues in this unit, which are primarily derived from a suite of devices used in surgery, were largely stable throughout the year. The division continued to take steps to reduce expenses and improve this unit's financial contribution to the business. The strongest performers in the cardiothoracic business unit included a line of higher margin surgical devices related to minimally invasive heart surgery and vein harvesting, as well as FocalSeal(R)-L surgical sealant for use in thoracic surgery. Product Development Update Genzyme Biosurgery made strong product development progress in 2002, advancing new and next generation product candidates across its three development platforms: surgical biomaterials, cell therapy, and gene therapy. Highlights in each area include: Biomaterials -- Expanding the use of Synvisc: The division gained European approval for the use of Synvisc for the treatment of osteoarthritis in the hip in 2002 and began to market it for this use in the second half of the year. It expects to begin a pivotal trial for Synvisc for the treatment of osteoarthritis in the hip in the United States during the first half of 2003, and to start trials for the use of Synvisc in other joints in Europe during the same period. -- Developing next generation Sepra products: The division completed enrollment of a pivotal clinical trial of Seprafilm II in the United States. Seprafilm II is designed to be easier for surgeons to use and handle. It is currently marketed in Europe. -- Launching a US clinical trial for Hylaform(R): Genzyme Biosurgery and development and marketing partner Inamed Corp. have completed enrollment in a U.S. clinical trial of Hylaform, investigating this hyaluronan-based dermal facial filler for the cosmetic and plastic surgery market. Cell Therapy -- Launching a major cardiac cell therapy trial: Genzyme Biosurgery enrolled the first patients in a planned 300 patient Phase 2 clinical trial of autologous cell therapy for heart failure, giving the division the only Phase 2 program of its kind in the world. Gene Therapy -- Advancing gene therapy for heart disease: Genzyme Biosurgery completed enrollment in a Phase 1 clinical trial evaluating the use of the HIF-1 alpha gene for angiogenesis to treat peripheral vascular disease. Clinical data is expected in the spring of 2003. Enrollment continues in a trial testing HIF-1 alpha as an adjunct to bypass surgery. Genzyme Biosurgery is a leading developer of novel biotherapeutic and biomaterial products used to treat serious diseases. Its products and pipeline are concentrated in the rapidly growing markets of orthopaedics and heart disease, and in broader surgical applications. Genzyme Biosurgery is a division of Genzyme Corporation. Upcoming Events Genzyme Corporation will report first quarter 2003 financial results on April 16. If you would like to participate in any of these calls, please dial 719-457-2642 at 11:00 a.m. for Genzyme General, at 1:00 p.m. for Genzyme Molecular Oncology, and 3:00 p.m. for Genzyme Biosurgery. There is no passcode necessary. Please refer to www.genzyme.com for any updates to this information. These calls will also be webcast live over the Internet at http://www.genzyme.com/corp/investors/events_home.asp GLOBAL CROSSING: Exceeds Financial Targets in December 2002 ----------------------------------------------------------- Global Crossing continued to meet key performance targets during December 2002. The performance targets were established for Global Crossing (excluding Asia Global Crossing) in the operating plan presented to its creditors in March 2002. The Operating Results that compare to that plan are described in the following section of this press release. Results for the month of December as reported in the Monthly Operating Report filed with the U.S. Bankruptcy Court in the Southern District of New York are summarized later in this press release. Operating Results In December 2002, Global Crossing reported Service Revenue of $239 million, $37 million above the monthly Service Revenue target set forth in the operating plan. In December, Service EBITDA was reported at a deficit of $8 million, slightly better than the operating plan. Total cash in bank accounts exceeded targets set forth in the operating plan, with $782 million as of December 31, 2002, compared to a plan of $611 million. Operating expenses of $69 million were behind the operating plan target of $60 million in December, while third-party maintenance costs were reported at $11 million in December, beating the operating plan by $4 million. "In December 2002, Global Crossing continued to achieve its key financial and operational goals," said John Legere, Global Crossing's chief executive officer. "We ended the year on a positive note by increasing our cash in bank accounts for the second month in a row." MOR Results For December 2002 Global Crossing today filed a Monthly Operating Report for the month of December with the U.S. Bankruptcy Court for the Southern District of New York, as required by its Chapter 11 reorganization process. The MOR results report revenue according to accounting principles generally accepted in the United States of America (US GAAP). US GAAP revenue includes revenue from sales of capacity in the form of indefeasible rights of use that occurred in prior periods, recognized ratably over the lives of the relevant contracts. Beginning on October 1, 2002, Global Crossing ceased recognizing revenue from exchanges of leases of capacity. Results reported in the December MOR include the following: For continuing operations in December 2002, Global Crossing reported consolidated revenue of approximately $178 million ($238 million before the impact of restating certain transactions involving exchanges of capacity -- see Definitions and Notes below). Consolidated other operating expenses were $120 million (which included the entire estimated cost of the 2002 annual incentive bonus program), while access and maintenance costs were reported as $140 million ($181 million before the impact of restating certain transactions involving exchanges of capacity -- see Definitions and Notes below) in December 2002. Global Crossing reported a consolidated US GAAP cash balance of approximately $750 million as of December 31, 2002. The US GAAP cash balance is comprised of $361 million in unrestricted cash, $331 million in restricted cash and $58 million of cash held by Global Marine. Global Crossing reported consolidated net income of $192 million for December 2002. This includes the following non-operating items: $254 million of income related to settlements of vendor claims, $38 million of other income related to the termination of certain obligations to deliver service, and $97 million of income tax benefits. "In December, our business generated $81 million in cash from operating activities," said Dan Cohrs, Global Crossing's chief financial officer. Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. Commencing January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) instituted consolidated Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) (Bankruptcy Case No. 02-40188) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). The Bermuda Court has appointed joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, includes a capital structure in which existing common and preferred equity will retain no value. Global Crossing expects to emerge from bankruptcy in the first half of 2003. On November 18, 2002, Asia Global Crossing Ltd., a majority- owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Please visit http://www.globalcrossing.comfor more information about Global Crossing. Global Crossing Ltd.'s 9.125% bonds due 2006 (GBLX06USR1) are trading at about 2 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GBLX06USR1 for real-time bond pricing. GXS CORP: S&P Assigns B+ Rating to Planned $175M Sr. Sec. Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to GXS Corp.'s proposed $175 million senior secured floating-rate notes due 2008 and affirmed its 'BB-' corporate credit and 'B' subordinated debt ratings on the company. The proceeds from the proposed notes issue will be used to repay GXS' existing $175 million senior secured term bank loan. The outlook is negative. At the same time, Standard & Poor's raised the bank loan rating on the Gaithersburg, Maryland-based company's expected $40 million revolving credit facility to 'BB+' from 'BB-', reflecting significantly improved recovery prospects following repayment of the term loan. GXS provides transaction-management infrastructure products and services that enable companies to exchange business documents using electronic data interchange (EDI). It is expected to have total funded debt following the recapitalization of about $410 million. The $175 million senior secured notes are rated one notch below GXS' corporate credit rating, reflecting the amount of bank debt with first priority liens in the capital structure. The notes have second-priority liens on the same assets. Both the notes and the company's $40 million credit facility are to be secured by substantially all assets of GXS Corp. and its guarantors, a pledge by GXS' equity sponsors of all stock owned in the company, and a pledge by GXS of all stock owned in its U.S. subsidiaries and 66% of the stock owned in its material foreign subsidiaries. "EDI usage is relatively insensitive to macroeconomic conditions, and alternative technologies and protocols are not expected to have a major impact for established providers for at least several years, if at all. Additional modest growth opportunities may come from the increasing number of transactions/documents processed, as well as the addition of new trading partners," said Standard & Poor's credit analyst Emile Courtney. HEALTHSOUTH CORP: S&P Lowers Corp. Credit Rating to BB- from BB --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit and senior unsecured ratings on HEALTHSOUTH Corp. to 'BB-' from 'BB'. At the same time, the subordinated rating was lowered to 'B' from 'B+'. The downgrade reflects the company's weaker-than- expected operating results and the announcement of significant charges taken in the fourth quarter of 2002. The ratings remain on CreditWatch with negative implications, where they were placed August 27, 2002. The CreditWatch placement reflects the company's uncertain liquidity position as it seeks an amendment on its bank facility. HEALTHSOUTH, based in Birmingham, Alabama, had about $3.3 billion of debt outstanding as of December 31, 2002. "Before taking further rating action, Standard & Poor's will monitor HEALTHSOUTH's progress in attaining a bank amendment to determine its liquidity as well as its progress in the completion of a necessary note refinancing," said Standard & Poor's credit analyst David Peknay. The speculative-grade ratings on HEALTHSOUTH Corp. reflect the company's participation in a competitive industry with significant reimbursement risk. A key component of the company's decline in operating performance was a 25% decrease in revenues in its outpatient rehabilitation business in the fourth quarter. This decrease was driven by the company's required adoption in 2002 of Medicare's billing methodology for the reimbursement of outpatient therapy. There has also been a significant decline in patient volume. The overall adverse effect on the business was more severe than originally anticipated. In addition, the company took $630 million in total charges in the fourth quarter. Of this, $175 million relates to accounts receivables and bad debt reserves, indicating a measure of overstatement in historical earnings. A large portion of the remaining charges ($256 million) is for restructuring--part of the company's response to changes in outpatient therapy reimbursement. As part of its restructuring effort, the company closed, consolidated, or sold about 220 outpatient rehabilitation facilities. The terms of a possible bank facility amendment sought by the company will be an important factor in assessing its liquidity. The amendment, expected to be completed by the end of March according to the company, should include revised financial covenants. Otherwise, HEALTHSOUTH could violate its maximum debt to EBITDA covenant requirement of 3.5x for the period ending Dec. 31, 2002. HEALTHSOUTH is also contending with the maturity of $344 million of convertible notes on April 1, 2003. The company ranks as the largest U.S. provider of rehabilitative health-care services, outpatient surgery, and diagnostic imaging. With nearly 1,700 facilities, the company's prominent presence in rehabilitation and outpatient surgery provides some competitive advantage. However, earnings will continue to be constrained by ongoing reimbursement pressure, as well as challenges to control costs. Significant capital expenditures are likely to continue to limit future free cash flow. INTEGRATED HEALTH: Files 1st Amended Disclosure Statement & Plan ---------------------------------------------------------------- In an attempt to resolve the issues on a consensual basis, the Integrated Health Services Debtors have drafted and included in the Disclosure Statement additional information that is responsive to the objections filed by various creditors. The material modifications to the Disclosure Statement include: A. The estimation of recoveries makes these assumptions: -- the aggregate amount of subordinated debt claims in Classes 9 and 10, which are contractually subordinated to senior lender claims, is $1,297,600,000; -- the United States Claims will be settled by a $19,100,000 cash payment, a portion of which will be set off against certain underpayments due to the Debtors; and -- the aggregate amount of allowed Premiere Unsecured Claims is estimated to be up to $20,000,000. B. Class 3-A consists of the secured claim of Beal Bank SSB, as the successor-in-interest to all the obligee/mortgagee's right, title and interest in and to the certain mortgage note, the certain mortgage, and the certain security agreement, all as amended and supplemented, each dated December 17, 1985, between Ver Lee Associates, a Michigan co-partnership, as obligor, and Comerica Bank, as obligee. The original principal amount of the mortgage note was $3,580,500; but, pursuant to modification of mortgage and mortgage note instrument dated May 9, 1988, the principal amount of the note was reduced to $3,396,800. Beal has asserted that it has a valid and perfected first priority liens and security interests in and to all of the assets comprising the Clarkston facility and that the amount of obligation secured by the Clarkston facility, as of January 31, 2003, was $3,302,196.84, with interest continuing to accrue and fees and costs having accrued and continuing to accrue. C. Subclass 3-D consists of the secured claim of Canada Life Assurance Company, as assignee under a Deed of Trust Note, dated December 16, 1987, in the original principal amount of $2,700,000 between Arbor Living Centers of Texas Inc. and Mortgage Trust Inc. The Deed of Trust Note is secured by a mortgage on the IHS Texoma at Sherman facility. On the effective date, the Texoma Note will be reinstated in accordance with its terms, as modified on or prior to the effective date. After the reinstatement, any acceleration of any obligation and instrument of default in connection with the Texoma Note will be deemed rescinded, waived or cured and of no force or effect, and any liens created pursuant to the Texoma Note will not be affected by sections 10.2 or 10.3 of the plan. D. Subclass 3-E consists of Bank of America N.A.'s secured claims under a note dated May 27, 1993 between NationsBank and Magnolia Group Inc, which is secured by a mortgage note between the parties. On the effective date, BofA will receive a $1,800,000 cash payment in full settlement and satisfaction of all claims arising out of or related to the Magnolia Note, including any claims for principal, interest or fees. Pending the occurrence of the effective date and the receipt by BofA of the payment, the stipulation dated September 9, 2001 will continue in full force and effect. After payment, all liens on the collateral securing the Magnolia Note will be deemed to have been released and BofA and the Debtors will be deemed to have released each other from and any and all claims arising out of or related to the Magnolia Note, including all obligations under the BofA stipulation. E. Subclass 3-K consists of Beal's secured claim, as successor to all the obligee's right, title and interest in and to certain Deed of Trust Note, the certain Deed of Trust and the Security Agreement dated January 28, 1993. The original principal amount of the Deed of Trust was $4,082,200. Pursuant to the Release, Assumption and Modification Agreement dated November 19, 1997, IHS at Treyburn Inc. agreed to be bound by the terms of the note. On the effective date, Beal will receive either the net proceeds of the sale or disposition of the collateral securing the Treyburn Note or the collateral securing the allowed other secured claim in full satisfaction and release of all claims of Beal arising out of the Treyburn Note. F. If the stand-alone transactions are implemented, then each holder of Allowed Senior Claim will receive a class 4 pro rata share of: -- 2,500,000 shares of new common stock, representing 100% of the total shares of new common stock to be issued and outstanding immediately as of the effective date, less any shares of new common stock to be issued to the holders of Premiere Unsecured Claims; -- the New Subordinated Notes, less any New Subordinated Notes to be issued to the holders of Premiere Unsecured Claims pursuant to Section 4.7 of the Plan; and -- any net proceeds of any settlement or judgment obtained in the compensation action, provided, however that solely with respect to the first $15,000,000 of these net proceeds, if any, the class 4 pro rata share and class 6 pro rata share will be calculated as if there were no subordinated debt claims. G. If the stand-alone transactions are implemented, then each holder of and allowed General Unsecured Claim in Class 6 will receive its class 6 pro-rata share of: -- 2,500,000 shares of new common stock, representing 100% of the total shares of new common stock to be issued and outstanding immediately as of the effective date, less any shares of new common stock to be issued to the holders of Premiere Unsecured Claims; -- the New Subordinated Notes, less any New Subordinated Notes to be issued to the holders of Premiere Unsecured Claims pursuant to Section 4.7 of the Plan; and -- any net proceeds of any settlement or judgment obtained in the compensation action, provided, however that solely with respect to the first $15,000,000 of these net proceeds, if any, the class 4 pro rata share and class 6 pro rata share will be calculated as if there were no subordinated debt claims. Under certain circumstances, a holder of a general Unsecured claim, which becomes allowed in an amount equal to or less than $100,000 may receive a one-time, all cash distribution. Each holder of a general unsecured claim in Class 6 may elect to receive a distribution of cash equal to the lesser of 3% of its Allowed General Unsecured Claim and $3,000. If the Sale transactions are implemented, each holder of a general unsecured claim in Class 6, which made the Class 6 cash-out election will receive a distribution of cash equal to the lesser of 3% of its Allowed General Unsecured Claim and $3,000, which will be paid by the Liquidating LLC on or as soon as reasonable practicable after the later of initial member distribution date and the date the claim becomes an Allowed General Unsecured Claim. However, if the stand- alone transactions are implemented, then the Debtors will determine whether they will give effect to the Class 6 cash-out election. The Debtors will disclose their determination no later than the Confirmation Hearing. If the Debtors determine that they will give effect to the Class 6 cash-out election, then each General Unsecured Claim in Class 6 which made the Class 6 cash-out election will receive a distribution of cash equal to the lesser of 3% of its Allowed General Unsecured Claim and $3,000, which will be paid by the Reorganized Debtors on or as soon as reasonable practicable after the later of initial stand-alone distribution date and the date the claim becomes an Allowed General Unsecured Claim. H. Class 7 consists of claims against the Premiere Debtors. The Debtors estimate that the maximum allowed claims in Class 7 will be $20,000,000. The Plan provides treatment of the Claims in Class 7 separate from that of Class 6 only if the provisions of the plan providing for substantive consolidation of the premiere Debtors do not become effective as a result of a Court order. In this event and if the Sale Transactions are implemented, then prior to the Effective Date, the value of the assets of the Premiere Debtors will be determined by the Debtors by reference to the net proceeds receivable by the Debtors as a result of the Sale Transactions. The Debtors will also determine the residual value of the Premiere Debtors' assets, which will be the remaining value of the Premiere Debtors' assets after deducting the aggregate amount of administrative expense claims and other priority claims allocable to the Premiere Debtors and the amount of all Other Secured Claims against the Premiere Debtors. On the initial member distribution date, each holder of an allowed Premiere Unsecured Claim will receive: -- a Class 7 pro rata share of all cash distributed pursuant to section 6.2(m) of the Plan; and -- a Class 7 membership interest representing the right to receive distributions contemplated by sections 6.2(m) and (n) of the Plan. In no event will any holder of an Allowed Premiere Unsecured Claim be entitled to receive distributions exceeding the holder's Class 7 pro rata share of the residual value of the Premiere Debtors' assets. If the stand-alone transactions are implemented, then, on or prior to the effective date, the value of the Premiere Debtors' assets will determined as provided, except that the value need not be determined by reference to the net proceeds that would have been receivable by the Debtors if the Sale Transaction were implemented. On the effective date, each holder of an Allowed Premiere Unsecured Claim Class 7 will receive its pro rata share of new common stock and new subordinated notes with an aggregate value to be determined by the Debtors to be equal to its Class 7 pro rata share of the residual value of the assets of the Premiere Debtors. A free copy of the Debtors' Amended Disclosure Statement and Reorganization plan is available at: http://bankrupt.com/misc/8973_blacklined_disclosure_statement&plan.pdf (Integrated Health Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service, Inc., 609/392-0900) K & F INDUSTRIES: Completes Exchange Offer for 9-5/8% Notes ----------------------------------------------------------- K & F Industries, Inc., has successfully completed its offer to exchange all of its outstanding 9-5/8% Series A Senior Subordinated Notes due 2010, that were privately placed in December, 2002, with a new issue of 9-5/8% Series B Subordinated Notes due 2010, which have been registered with the Securities and Exchange Commission. Holders of 100 percent of the total principal amount of the Outstanding Notes tendered their Outstanding Notes for an equal principal amount of the Exchange Notes. The Exchange Notes were issued on March 5, 2003. K & F Industries, Inc., through its Aircraft Braking Systems Corporation subsidiary, is a leading manufacturer of wheels, brakes and brake control systems for commercial transport, general aviation and military aircraft. K & F's other subsidiary, Engineered Fabrics Corporation, is a major producer of aircraft fuel tanks and de-icing equipment and specialty coated fabrics used for storage, shipping, environmental and rescue applications for commercial and military uses. At September 30, 2002, K&F Industries' balance sheet shows a total shareholders' equity deficit of about $28 million. As reported in Troubled Company Reporter's December 11, 2002 edition, Standard & Poor's Ratings Services assigned its 'B' rating to K & F Industries Inc.'s proposed $250 million senior subordinated notes due 2010 offered under Rule 144A with registration rights and its 'BBB-' rating to a new $30 million senior secured revolving credit facility maturing 4.5 years from closing. At the same time, Standard & Poor's affirmed its ratings, including the 'BB-' corporate credit rating, on K & F, a braking system supplier. The outlook is stable. "The affirmation of the current ratings is based on an expectation that the firm will employ its sizable free cash flow to reduce significantly higher debt levels incurred from the $200 million dividend," said Standard & Poor's credit analyst Roman Szuper. KAISER ALUMINUM: Wants Nod for 4th Amendment to DIP Financing ------------------------------------------------------------- Kaiser Aluminum Corporation and its debtor-affiliates ask the Court to approve a fourth amendment to the February 12, 2002 Postpetition Credit Agreement with the Bank of America N.A., as agent, and a syndicate of financial institutions. The Debtors and the Lenders have agreed to modify the DIP Financing Agreement to address certain pension funding issues, including the potential termination of the pension plans in the future. Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, explains that, pursuant to the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code, the Debtors were required on January 15, 2003 to make a $17,000,000 liquidity contribution to the Kaiser Aluminum Salaried Employees Retirement Plan Pension. Beginning April 15, 2003, the Debtors are also obligated to make additional liquidity contributions and other minimum funding payments with respect to the Salaried Pension Plan and other pension plans. But for some reasons, the Debtors opted not to make the January liquidity contribution. The Debtors also expect that they will not make future liquidity contributions or minimum funding payments with respect to their pension plans. Mr. DeFranceschi elaborates that the failure to make the required payments results in the automatic creation of a lien, enforceable by the Pension Benefit Guaranty Corporation on all assets of the plan sponsor and all members of the plan sponsor's "controlled group". The termination of a pension plan also would give rise to a lien on the plan sponsor's and the controlled group's assets to the extent of any under-funding of the plan. The failure to make the mandatory pension payments could result in the imposition of certain taxes, which, if not paid, would again result in the creation of a lien on the plan sponsor's and the controlled group's assets. Pursuant to 26 U.S.C. Section 412(c)(11), a "controlled group" consists of two or more corporations that are part of a parent- subsidiary relationship where one corporation controls, directly or indirectly, at least 80% of the outstanding voting stock or 80% of the total value of all stock of one or more corporations. Although the potential liens could not arise with respect to the Debtors and their assets because of the automatic stay, Mr. DeFranceschi informs the Court that the liens could be imposed on certain non-debtor affiliates in the Debtors' controlled group. Even if the non-debtor affiliates are inactive or have minimal assets, the imposition of liens nevertheless could trigger an event of default under the DIP Facility. It would prevent the Debtors from making certain representations and warranties that are required as a condition to any credit extension under the DIP Facility. The Debtors have filed a complaint with the Court seeking to extend to automatic stay to prevent the creation and attachment of liens by the PBGC against non-debtor subsidiaries, Trochus Insurance Company, Ltd. and Volta Aluminum Company Limited. In that proceeding, the Debtors indicated that they were required to make a $15,500,000 pension contribution in January to the Salaried Pension Plan. Recently, the Debtors and PBGC have agreed to extend the automatic stay to Trochus and Valco. On January 13, 2003, the Debtors obtained a short-term waiver from the Lenders to account for potential events of default under the DIP Facility that would result from the Debtors' failure to make the January liquidity contribution. The Debtors and Bank of America also agreed to amend the DIP Credit Agreement to avoid potential events of default based on the Debtors' failure to make pension plan payments. The amendments will permit the Debtors to obtain credit extensions despite the imposition of certain permitted liens. The Fourth DIP Credit Amendment has been circulated to the Lenders for approval. The Debtors expect to obtain the requisite Lenders' approval before March 17, 2003. The Fourth Amendment adds to the Postpetition Credit Agreement certain definitions related to the Debtors' pension funding contributions. These additional definitions include: (a) "January Liquidity Contribution," which refers to the $17,000,000 liquidity contribution that the Debtors failed to make to the trust established under the Salaried Pension Plan on January 15, 2003; (b) "Future Minimum Funding and Liquidity Contributions," which refers to the minimum funding and additional liquidity contributions required to be made by the Debtors under the ERISA to the trust established under the Salaried Pension Plan and other pension plans of the controlled group after January 15, 2003; and (c) "Permitted PBGC Liens," which refers to: -- unperfected liens, if any, imposed under the ERISA or the IRC on assets of the Debtors, Valco and Trochus as a result of: (i) the failure to make the January Liquidity Contribution and the Future Minimum Funding and Liquidity Contributions on or before the dates when due or the failure to pay any imposed taxes; or (ii) the termination of any pension plans; and -- perfected or unperfected liens imposed under the ERISA or the IRC on the assets of controlled group members other than the Debtors, Valco and Trochus as a result of: (i) the failure to make the January Liquidity Contribution and the Future Minimum Funding and liquidity Contributions on or before the dates when due or the failure to pay any imposed taxes; or (ii) the termination of any pension plan. The Fourth Amendment also modifies the DIP Credit Agreement to: -- prevent any breach of the representation and warranty indicated in the DIP Credit Agreement as the result of the imposition of Permitted PBGC Liens; -- include the Permitted PBGC Liens as permitted liens; and -- provide that the imposition of the Permitted PBGC Liens will not trigger an event of default under the DIP Credit Agreement. As a condition to the effectiveness of the Fourth Amendment, Debtors Alwis Leasing, LLC and Kaiser Center, Inc., and New Debtors Alpart Jamaica Inc., KAE Trading, Inc., Kaiser Bauxite Company, Kaiser Center Properties, Kaiser Export Company and Kaiser Jamaica Corporation would each: (1) provide unsecured guarantees of the DIP Facility; and (2) grant superpriority administrative status to any claims by Bank of America and the Lenders arising under the DIP Credit Agreement. Other than Kaiser Center and Alwis Leasing, the Debtors are all either secured guarantors or borrowers under the DIP Facility. The Debtors have granted superpriority administrative expense status to the Lenders' claims under the DIP Facility. The members of the lending consortium under the Fourth Amended DIP Credit Agreement are: * Bank of America, N.A., * General Electric Capital Corporation, * Foothill Capital Corporation, * The CIT Group/Business Credit Inc., * Merrill Lynch Business Financial Services Inc., * PNC Bank, National Association, * GMAC Commercial Finance LLC, and * The Provident Bank. (Kaiser Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) Kaiser Aluminum's 12.750% bonds due 2003 (KLU03USR1) are trading at about 6 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KLU03USR1for real-time bond pricing. KEY3MEDIA: Taps Howrey Simon as Insurance Litigation Counsel ------------------------------------------------------------ Key3Media Group, Inc., and its debtor-affiliates ask for authority from the U.S. Bankruptcy Court for the District of Delaware to hire Howrey Simon Arnold & White, LLP, as their Special Insurance Litigation Counsel. Howrey Simon is a law firm of approximately 500 attorneys. Prior to the Petition Date, the Debtors retained Howrey Simon to provide legal representation and advice in on-going Insurance Litigation with Commerce & Industry Insurance Company. The Debtors now seek to continue Howrey Simon's engagement as Debtors' insurance litigation counsel in the Insurance Litigation for the duration of the bankruptcy proceedings because of the firm's familiarity with the matter as a result of its prior representation. Howrey Simon will be primarily responsible on the matter related to obtaining insurance coverage from Commerce & Industry Insurance Company for losses suffered by the Debtors at certain of their tradeshows resulting from the September 11, 2001 terrorist events. Howrey Simon will collect 33-1/3% of all recoveries from or on behalf of Commerce & Industry Insurance Company. The percentage of recovery will be increased to 40% if the matter ultimately proceeds to trial or arbitration. 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 Inc.'s 11.250% bonds due 2011 (KME11USR1) are trading at about 4 cents-on-the-dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KME11USR1for real-time bond pricing. KMART CORP: Court Allows Payment of $15MM Plan Investment Fees -------------------------------------------------------------- Kmart Corporation and its debtor-affiliates obtained permission from the Bankruptcy Court to pay the Commitment Fee and reimburse ESL Investment Inc., and the Third Avenue Trust pursuant to their Investment Agreement. As previously reported, this is to ensure the Plan Investors' continued commitment to fund the reorganization plan. The Investment Agreement obligates the Debtors to pay to ESL a $10,000,000 commitment fee on the earlier of: (i) May 30, 2003, the effective date of the reorganization plan; and (ii) the date the Investment Agreement is terminated as a result of an alternate investment transaction between the Debtor and a third party. The Commitment Fee will be payable unless the Plan Investors breach their obligations under the Investment Agreement or choose to terminate their commitment pursuant to certain circumstances provided under the Investment Agreement. The Plan Investors agree that ESL will recover 87.8% of the Commitment Fee and that Third Avenue will receive the other 12.2%. The Debtors are also required to reimburse ESL for up to $5,000,000 of its reasonable out-of-pocket costs and expenses incurred in the evaluation, due diligence, negotiation, and consummation of the Debtors' Reorganization Plan, the Investment Agreement, the Debtors' restructuring, and certain other contemplated transactions. Up to $2,000,000 of the expenses were payable on February 28, 2003, the hearing date for this Motion. The remainder will be payable on the Effective Date of the Plan. However, ESL will refund the payments in the event it breaches its obligations under the Investment Agreement. (Kmart Bankruptcy News, Issue No. 49; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that Kmart Corp.'s 9.000% bonds due 2003 (KM03USR6) are trading at about 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for real-time bond pricing. KNITWORK PRODUCTIONS: Signs-Up Garfunkel Wild as General Counsel ---------------------------------------------------------------- Knitwork Productions Corp., a/k/a American Attitudes, a/k/a Say What, asks for permission from the U.S. Bankruptcy Court for the Southern District of New York to employ and retain Garfunkel, Wild & Travis, P.C. as its general bankruptcy counsel. The Debtor tells the Court it needs to employ Garfunkel Wild to: a) assist, advise and represent the Debtor in the preparation for, and prosecution of, the Chapter 11 case and in its consultations with the creditors' committee and other parties in interest regarding the administration of this case. b) assist, advise and represent the Debtor in any investigation of the acts, conduct, assets, liabilities and financial condition of the Debtor, the operation of the Debtor's business and the desirability of the continuation of such business, and any other matter relevant to this case or to the formulation of a plan. c) assist, advise and represent the Debtor in the confirmation of a plan, and in the collection and filing with the Bankruptcy Court of any acceptances of a plan. d) assist, advise and represent the Debtor in the performance of all of its duties and powers under the Bankruptcy Code and the Bankruptcy Rules and in the performance of such other services as are in the best interests of the Debtor, the creditors and the estate generally. Burton S. Weston, Esq., the partner in charge of the creditors' rights and bankruptcy group at Garfunkel Wild, discloses that the firm's compensation will be based on standard hourly billing rates ranging from $180 to $375 per hour. Knitwork Productions Corp., a private label, sweater manufacturer, filed for chapter 11 protection on February 24, 2003 (Bankr. S.D.N.Y. Case No. 03-11040). Burton S. Weston, Esq., at Garfunkel, Wild & Travis, P.C., represents the Debtors in its restructuring efforts. When the Company filed for protection from its creditors, it listed debts and assets of over $10 million each. LTV CORP: Secures Wind-Down and Superpriority Claim Approval ------------------------------------------------------------ Bankruptcy Judge Bodoh takes up The LTV Steel's Motion (for approval of its wind-down and superpriority claim Plan) and the many objections to it, noting the Debtors' argument that, because it will not be able to pay all of its administrative claims in full, it cannot present a plan of reorganization or liquidation. During the hearing on this Motion, all parties appearing acknowledged that conversion to a chapter 7 liquidation case is "unwise". The issue before Judge Bodoh arises because, in the wind-down plan, the Debtor does not propose to change the effective priority of administrative claims already paid under the APP. Isolating the divisive issue, Judge Bodoh reviews the Debtor's argument that there is a legal basis to grant post-APP claims "superpriority above pre-APP claims, and the opposing arguments that there is none. The clear language of the Bankruptcy Code states that all administrative expenses are entitled to treatment pari passu. The equitable powers of a bankruptcy court can only be exercised within the confines of the Bankruptcy Code. These equitable powers may not be used to disregard unambiguous statutory language, or to create rights or authority where none exists. But these powers may be used in furtherance of the goals of the Bankruptcy Code. Judge Bodoh therefore orders that all parties extending credit to the Debtor during the wind-down process, on other than on the basis of COD or cash in advance, are granted superpriority status and shall be treated equally by the Debtor. He orders the Debtor to file a proposed wind-down budget to be supplemented monthly, or periodically, as the budget may change, or as further order directs. The budget is to include all anticipated wind-down expenses. Judge Bodoh says that all APP claims are not at issue in this motion. In his earlier order, Judge Bodoh states that his intention was to authorize the Debtor to sell assets, and to carry out those sales, the Debtor and its lenders agreed that APP expenses were to be paid from cash collateral - not assets of the Debtor's estate. (LTV Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-00900) MARTIN INDUSTRIES: Consummates Asset Sale to Monessen for $3.7MM ---------------------------------------------------------------- Martin Industries, Inc., (OTCBB:MTIN) has completed the sale of its operating assets including certain intellectual property to Monessen Hearth Systems Company for a purchase price of approximately $3.7 million. The proceeds from the sale received by Martin will be used to pay down secured bank debt owed to its primary lender. The sale has been approved by the United States Bankruptcy Court for the Northern District of Alabama in Decatur, Alabama. Martin filed for bankruptcy protection under Chapter 11 on December 27, 2002, and has operated as debtor-in-possession since that time. Effective with the close of the sale, Martin will no longer be an operating entity. The Company's current purchase orders from customers have been transferred with the sale to Monessen. The real estate of Martin was not included in the assets sold to Monessen; however, under the asset purchase agreement, Martin will lease its manufacturing facility in Athens, Alabama to Monessen for a period of at least one year. Martin is in the process of seeking a buyer for that property, as well as all of the other real estate owned by Martin, subject to the approval of the Bankruptcy Court. Martin also anticipates seeking approval from the Bankruptcy Court of a plan of liquidation, which Martin anticipates filing by the end of the first quarter. Martin Industries designs, manufactures and sells high-end, pre- engineered gas and wood-burning fireplaces, decorative gas logs, fireplace inserts and gas heaters and appliances for commercial and residential new construction and renovation markets, and do- it-yourself utility trailer kits known as NuWay. The Company filed for Chapter 11 protection under the federal bankruptcy laws on December 27, 2002 (Bankr. N. D. Ala. Case No. 02-85553). MASSMUTUAL/DARBY: Fitch Downgrades Class B Notes to B+ from BBB- ---------------------------------------------------------------- Fitch Ratings has downgraded its rating on one class of notes issued by MassMutual/Darby CBO LLC, a collateralized bond obligation backed by corporate high yield bonds and emerging market bonds. Fitch also places one class of notes on Rating Watch Positive. The following actions are effective immediately. -- $268,770,106 class A-2 notes 'AA' placed on Rating Watch Positive; -- $44,669,704 class B notes downgraded to 'B+' from 'BBB-'. According to its February 2, 2003 trustee report, MassMutual/Darby CBO LLC's collateral includes a par amount of $16.097 million (4.61%) defaulted assets. The class A overcollateralization is failing at 122.2% with a trigger of 125% and the class B OC test is passing at 775.6% with a trigger of 110%. The class A-2 notes are being placed on Rating Watch Positive due to the fact that the revolving period has ended and the class A-2 notes are being paid down. The class A-2 notes have also been paying down with interest proceeds due to a failure of the class A OC test over the past 7 payment dates; the class A OC test failures have been causing the class B notes to PIK their coupon payments over the same period. In reaching its rating actions, Fitch reviewed the results of its cash flow model runs after running several different stress scenarios. Also, Fitch had conversations with D.L. Babson, the Collateral Manager, regarding the portfolio. MERRILL LYNCH MORTGAGE: Fitch Rates Class B-5 Certificate at B+ --------------------------------------------------------------- Fitch rates Merrill Lynch Mortgage Investors Trust, mortgage pass-through certificates, series MLCC 2003-A; $1.62 billion collateralized mortgage pass-through certificates as follows: $1.57 billion class 1A, 2A-1, 2A-2, X-1A, X-2A1, X-2A2, X-1B, X- 2B, X-3B and A-R (senior certificates) 'AAA', $17 million class B-1 certificate 'AA+', $13 million class B-2 certificates 'A+', $5.7 million class B-3A certificate 'A', $3.2 million class B-3B certificate 'BBB+', $2.4 million class B-4 certificate 'BBB-' and $3.3 million class B-5 certificate 'B+'. The 'AAA' rating on the senior certificates reflects the 3.10% subordination provided by the 1.05% class B-1, 0.80% class B-2, 0.35% class B-3A, 0.20% privately offered class B-3B, 0.15% privately offered class B-4, 0.20% privately offered class B-5 and 0.35% privately offered class B-6 certificate. The trust consists of two groups of mortgage loans with an aggregate principal balance of $1,627,897,450 as of cut of date. The mortgage loans are divided into two groups designated as Group 1 loans and Group 2 loans. The Certificates whose class designation begins with '1' and '2' corresponds to loan groups 1, and 2 respectively. The Group 1 loans consists of 1,287 fully amortizing 25-year adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate original principal balance of $561,735,032. The average unpaid principal balance as of the cut-off date is $436,469. The weighted average original loan-to-value ratio is 64.40%. The weighted average FICO is 728. Cash-out refinance loans represent 42.58% of the loan pool. None of the mortgage loan provides any payments of scheduled principal until the tenth anniversary of the date on which their initial monthly payment is due. The three states that represent the largest portion of the mortgage loans are California (26.79%), Florida (7.36%) and New Jersey (5.99%). No mortgage loan is covered under the Georgia Fair Lending Act, effective as of October 2002. The Group 2 loans consists of 2,840 fully amortizing 25-year adjustable-rate mortgage loans secured by first liens on one- to four-family residential properties with an aggregate original principal balance of $1,066,162,419. The average unpaid principal balance as of the cut-off date is $375,409. The weighted average original LTV is 64.63%. The weighted average FICO is 728. Cash-out refinance loans represent 40.60% of the loan pool. None of the mortgage loan provides any payments of scheduled principal until the tenth anniversary of the date on which their initial monthly payment is due. The three states that represent the largest portion of the mortgage loans are California (16.02%), Florida (9.25%) and New York (6.93%). No mortgage loan is covered under the Georgia Fair Lending Act, effective as of October 2002. Merrill Lynch Mortgage Investors, Inc., the depositor, will assign all its interest in the mortgage loans to the trustee for the benefit of certificate holders. For federal income tax purposes, an election will be made to treat the trust fund as three real estate mortgage investment conduits (REMICs). Wells Fargo Bank Minnesota, National Association will act as trustee. MICRO COMPONENT: Dec. 31 Balance Sheet Upside-Down by $6 Million ---------------------------------------------------------------- Micro Component Technology, Inc., (OTCBB:MCTI) reported results for its fourth quarter and fiscal year ended December 31, 2002. Net sales for the fourth quarter ended December 31, 2002 were $2.1 million, a decrease of 50.1% from net sales of $4.3 million in the comparable period ended December 31, 2001 and a decrease of 22% from the previous 2002 quarter. The net loss for the current quarter was $3.1 million compared to a $2.4 million loss in the fourth quarter of 2001. Exclusive of an inventory revaluation charge and restructuring charge in the current quarter, the net loss was $2.1 million compared to the fourth quarter 2001 loss of $2.4 million. Net sales for the year ended December 31, 2002 were $12.2 million, a decrease of 51.9% from net sales of $25.4 million in the prior year. The net loss for the 2002 year was $10.3 million, compared to a net loss of $31.4 million in 2001. Excluding inventory revaluation charges and restructuring charges in both years and amortization of intangible assets and other one-time charges in 2001, the loss was $9.2 million in 2002, compared to a loss of $9.0 million in 2001. At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $6 million. MCT's President, Chairman and Chief Executive Officer, Roger E. Gower, commented, "Our markets remain difficult as a result of the continued downturn in the semiconductor capital equipment markets and overall global economic conditions. However, we undertook many significant cost reduction actions in 2002 that will position us to operate more efficiently and cost effectively at these low revenue levels in 2003. These efforts, coupled with the transfer of our core manufacturing to Penang, Malaysia should significantly benefit our financial performance in 2003. We remain confident of our product technology capabilities as recently demonstrated by our recent $2.1 million repeat order for our strip based technologies." "Although it appears that the semiconductor capital equipment market downturn has stabilized, the exact timing of the upturn in test, assembly and packaging capital equipment in 2003 remains impossible to identify. We continue to be very optimistic regarding the long-term potential of the markets we serve and MCT's ability to capitalize on their eventual recovery, " concluded Gower. MCT is a leading manufacturer of test handling and automation solutions satisfying the complete range of handling requirements of the global semiconductor industry. MCT has recently introduced several new products under its Smart Solutions(TM) line of automation products, including Tapestry(TM), SmartMark(TM), and SmartSort(TM), designed to automate the back- end of the semiconductor manufacturing process. MCT believes it has the largest installed IC test handler base of any manufacturer, with over 11,000 units worldwide. MCT is headquartered in St. Paul, Minnesota, with its core manufacturing operation in Penang, Malaysia. MCT is traded on the OTC Bulletin Board under the symbol MCTI. For more information on the Company, visit its Web site at http://www.mct.com MITEC TELECOM: Initiates Restructuring of Swedish Subsidiary ------------------------------------------------------------ Mitec Telecom Inc. (TSX: MTM), a leading designer and provider of wireless network products for the telecommunications industry, announced that it has initiated the process to restructure its Swedish subsidiary. As part of Mitec's ongoing corporate strategy to reorganize and streamline its global manufacturing operations, BEVE has filed a request with Swedish authorities for a Stoppage of Payments order. The order will allow BEVE 90 days in which to restructure its operations, and give it the ability at the same time to carry out normal business operations. This initiative has no effect on Mitec's other operations worldwide. "We have initiated this restructuring of our Swedish subsidiary as one of the key elements in our global reorganization activities," said Rajiv Pancholy, Mitec's President and CEO. "The overall objective of this strategy, which we originally announced last August, is to substantially improve our balance sheet and return Mitec to profitability. I am pleased to report that the customers of our Swedish subsidiary have given this initiative their full support, which will permit BEVE to ship its $5.9 million backlog. We have been very successful over the past few months in improving Mitec's financial position, and the restructuring of BEVE's operations will further strengthen that position." Mitec Telecom is a leading designer and provider of wireless network products for the telecommunications industry. The Company sells its products worldwide to network providers for incorporation into high-performing wireless networks used in voice and data/Internet communications. Additionally, the Company provides value-added services from design to final assembly and maintains test facilities covering a range from DC to 60 GHz. Headquartered in Montreal, Canada, the Company also operates facilities in the United States, Sweden, the United Kingdom, China and Thailand. Mitec Telecom Inc., whose October 31, 2002 balance sheet shows a working capital deficit of about C$7 million, is listed on the Toronto Stock Exchange under the symbol MTM. On-line information about Mitec is available at http://mitectelecom.com MOORE NORTH AMERICA: S&P Assigns BB+ to Proposed $850MM Facility ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'BB+' rating to Moore North America Inc.'s proposed US$850 million two tranche senior secured credit facility due between 2008 and 2010. In addition, Standard & Poor's assigned its 'BB-' rating to Moore North America Finance Inc.'s proposed US$400 million senior unsecured notes due 2011. Both issues are placed on CreditWatch with positive implications. Both companies are wholly owned subsidiaries of printing company Moore Corp. Ltd. Net proceeds from the transactions will be used to finance the acquisition of Wallace Computer Services Inc., repay existing indebtedness, and for general corporate purposes. Gross proceeds from the senior unsecured notes offering will be placed in an escrow account pending the consummation of the Wallace Computer acquisition. The long-term corporate credit ratings on Mississauga, Ontario- based Moore Corp. and its subsidiaries remain on CreditWatch with positive implications. In addition, the long-term corporate ratings on Lisle, Illinois-based Wallace Computer remain on CreditWatch with negative implications. The ratings on both companies and related entities were placed on CreditWatch on Jan. 21, 2003, following the announcement that Moore and Wallace had signed a definitive merger agreement to create the third- largest printing firm in North America, Moore Wallace Inc. "The resolutions of the CreditWatch placements are dependent upon the successful completion of the announced merger largely as indicated, after which Standard & Poor's anticipates that the ratings on Moore will be affirmed with a positive outlook, while the ratings on Wallace Computer will be equalized with that of Moore," said Standard & Poor's credit analyst Barbara Komjathy. The 'BB+' rating on Moore North America's bank facility equals the long-term corporate credit rating. The credit facility has a US$350 million revolving tranche due in 2008 and a US$500 million term loan B tranche due in 2010. The credit facilities will be secured by a perfected lien on Moore Wallace's and its restricted current and future subsidiaries' assets (excluding accounts receivables, but representing the majority of all other assets of the company), and capital stock (limited to 65.0% for non-U.S. and non-Canadian subsidiaries). The facility also is supported by upstream guarantees of Moore North America's subsidiaries and downstream guarantees of its parent companies, including Moore Wallace. Based on Standard & Poor's simulated default scenario, a distressed enterprise value is likely to provide a meaningful (in excess of 50%) recovery of fully drawn facilities for the lenders. The 'BB-' rating on Moore North America Finance is two notches below that of Moore Corp.'s long-term corporate credit rating, reflecting material priority indebtedness for the consolidated entity. The notes are unsecured obligation and are guaranteed on an unsecured, joint, and several basis by all the U.S. and Canadian subsidiaries and certain other international subsidiaries of the combined company. NEENAH FOUNDRY: S&P Concerned about Company's Limited Liquidity --------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'B-' corporate credit rating on Neenah Foundry Co., a manufacturer in the North American casting, forging, and machining industries, on CreditWatch with negative implications. "The CreditWatch listing is the result of Standard & Poor's concerns that Neenah Foundry's limited liquidity, significant debt obligations, and near-term refinancing risk could lead to a restructuring of the company's debt or a potential default," said Standard & Poor's credit analyst Eric Ballantine. The Neenah, Wisconsin-based company had about $450 million in debt securities outstanding as of Dec. 31, 2002. Neenah Foundry faces approximately $40 million of debt maturities in the near term, as the company's $29.6 million revolving credit facility (which had approximately $28.5 million drawn as of Dec. 31, 2002) matures in September 2003, and the company has about $12 million in debt amortization payments associated with various term loans. In addition, interest payments associated with the company's subordinated notes total more than $30 million annually (payments are due on May 1, and Nov. 1). It appears that without a significant improvement in operating performance or an equity infusion, the company will likely not be able to meet its debt obligations. As of Dec. 31, 2002, Neenah Foundry had about $26 million in cash on the balance sheet. However, that balance was expected to decline due to normal working capital usage in the firm's second quarter. Neenah continues to experience very challenging end-market conditions as a result of the soft economic conditions in the U.S. as well as modest pricing pressure from foreign competition. As a result, cash generation remains weak and a material improvement in financial performance is not expected in the near term. Neenah is a manufacturer of ductile and gray iron castings for the industrial and municipal markets. In addition, the company engineers, manufactures, and sells related products to other iron foundries. Some of the company's products include components for heavy-duty trucks, mining equipment, man-hole covers, and storm sewer frames and grates. Standard & Poor's will meet with management to address the company's current liquidity situation, potential financing plans, and operating initiatives to improve financial performance. Failure to restore liquidity in the very near term will result in ratings being lowered. NORTHWEST AIRLINES: Flies 5.1BB Revenue Passenger Miles in Feb. --------------------------------------------------------------- Northwest Airlines (Nasdaq: NWAC) announced a systemwide February load factor of 73.3 percent, 1.1 points below February 2002. Systemwide, Northwest flew 5.10 billion revenue passenger miles and 6.96 billion available seat miles in February 2003, a traffic increase of 1.1 percent on a 2.6 percent increase in capacity versus February 2002. Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents. In 2002, consumers from throughout the world recognized Northwest's efforts to make travel easier. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for second place among large domestic airports in overall customer satisfaction. Business travelers who subscribe to OAG print and electronic flight guides rated nwa.com as the best airline Web site. Readers of TTG Asia and TTG China named Northwest "Best North American airline." For more information, contact Northwest Media Relations at 612/726-2331 or consult our award-winning Web site at http://www.nwa.com As reported in Troubled Company Reporter's February 27, 2003 edition, Fitch Ratings has lowered the senior unsecured debt rating of Northwest Airlines, Inc., to 'B' from 'B+'. The rating change affects approximately $1.6 billion of the airline's outstanding debt obligations. The Rating Outlook for Northwest remains Negative. Shareholder equity on Northwest's balance sheet has evaporated. Although Northwest's continuing focus on liquidity preservation and cost control has supported the airline's ability to cope successfully with an adverse industry operating environment, Fitch remains concerned about Northwest's ability to avoid further deterioration in its credit profile as fixed financing obligations (interest, rents, scheduled debt payments and required pension contributions) continue to rise. In light of the discouraging industry revenue outlook for 2003, characterized by weak passenger yields and still sluggish business travel demand, prospects for Northwest to generate strong operating cash flow this year remain poor. Senior management has made it clear in recent weeks that a reduction of labor costs will be a necessary component of the airline's effort to realign expenses with a revenue base that has been eroded substantially. Accordingly, Fitch will be focused on future labor contract revisions as the key to a successful restructuring and a return to profitability and strong cash flow generation. Northwest Airlines' 10.150% bonds due 2005 (NWAC05USR2) are trading at about 85 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NWAC05USR2 for real-time bond pricing. NTELOS INC: Receives Court Approval of "First Day Motions" ---------------------------------------------------------- NTELOS (Nasdaq: NTLO) has received bankruptcy court approval for its "first day motions" to, among other things, access up to $10 million of its $35 million debtor-in-possession financing facility under an interim court order; continue to pay employee salaries, wages and benefits; honor warranty and service obligations to customers; and pay vendors for the post-petition delivery of goods and services. As previously announced, NTELOS and certain of its subsidiaries filed voluntarily petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on March 4, 2003. In connection with the Chapter 11 filings, the company had received a commitment for $35 million in DIP financing from Wachovia Bank. The committed DIP facility, along with normal cash flow from operations and cash currently on hand of over $15 million, will be available to meet ongoing obligations in connection with regular business operations, including obligations to employees and prompt payment to vendors for goods and services. The full $35 million DIP commitment is subject to final court approval, certain state regulatory approvals and the banks' receiving satisfactory assurances regarding the bondholders' proposed new investment in the company upon emergence from bankruptcy. "We are very pleased with the courts approval of these motions, which enable the company to operate without interruption, meet normal business obligations and serve its customers as it proceeds with the reorganization process," said James S. Quarforth, Chief Executive Officer. NTELOS Inc., (Nasdaq: NTLO) is an integrated communications provider with headquarters in Waynesboro, Virginia. NTELOS provides products and services to customers in Virginia, West Virginia, Kentucky, Tennessee and North Carolina, including wireless digital PCS, dial-up Internet access, high-speed DSL (high-speed Internet access), and local and long distance telephone services. Detailed information about NTELOS is available online at http://www.ntelos.com NUTRITIONAL SOURCING: Brings-In Milbank Tweed as Special Counsel ---------------------------------------------------------------- Nutritional Sourcing Corporation asks for approval from the U.S. Bankruptcy Court for the District of Delaware to employ Milbank, Tweed, Hadley & McCloy LLP, nunc pro tune to January 27, 2003, as its special counsel. The Debtor has retained Kaye Scholer LLC as its lead bankruptcy counsel and Duane Morris LLP as its local bankruptcy co-counsel in this case. Kaye Scholer LLC, Duane Morris LLP and Milbank Tweed have assured the Debtor that they will make every effort to avoid and minimize duplication of services in this case. On January 31, 2003, the Debtor filed a consensual plan of reorganization negotiated with the Committee. Under the Plan, a new indenture will be required to govern the New Notes. The Debtor desires to employ Milbank Tweed to negotiate and draft the New Indenture. The Debtor believes that Milbank Tweed is well qualified to assist the Debtor with the negotiation and drafting of the New Indenture based on its experience with the Debtor and its familiarity with the existing indenture. The Debtor explains that prior to the Petition Date, Milbank Tweed was the Debtor's corporate counsel. Milbank Tweed also represents the Operating Subsidiaries and the Debtor's equity holder. The Debtor believes that retention of special counsel is necessary and is the most efficient way to accomplish the negotiation and drafting of the New Indenture. The Debtor will pay Milbank Tweed its customary hourly rates, which are: Richard J. Wright $695 per hour Robert S. O'Hara, Jr. $685 per hour John T. Ryan $465 per hour Nutritional Sourcing Corporation is a holding company with no business operations of its own. The sole assets of the Debtor are its equity interests in its non-debtor operating subsidiaries and intercompany notes. On September 4, 2002, certain members of the 9 1/2% Senior Noteholders' Ad Hoc Committee filed an involuntary petition against the Debtor for reorganization under Chapter 11 of the Bankruptcy Code (Bankr. Del. Case No. 02-12550). On September 24, 2002, the Debtor consented to the involuntary petition. William Harrington, Esq., at Kaye Scholer LLC represents the Debtor as it winds down its operations. OAKWOOD HOMES: Court Establishes March 17, 2003 Claims Bar Date --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware directs all creditors, except for governmental units, of Oakwood Homes Corporation and its debtor-affiliates to file their proofs of claim against the Debtors, on or before March 27, 2003, or be forever barred from asserting their claims. The Bar Date for Governmental Claims is May 14, 2003. All proofs of claim must be submitted to the Debtors' Noticing and Balloting Agent before 5:00 p.m., Prevailing Eastern Time, on March 27. If sent by mail, claims must be addressed to: Bankruptcy Services LLC Attn: Oakwood, Claims and Processing Department PO Box 5270 FDR Station New York, NY 10150-5270 If delivered by hand, to: Bankruptcy Services LLC Attn: Oakwood, Claims Processing Department Heron Tower 70 East 55th Street New York, NY 10022 Proofs of Claim need not be filed if they are on account of: i. Claims already properly filed with the Bankruptcy Court or BSI; ii. Claims not listed as disputed, contingent, or unliquidated; iii. Claims previously allowed by Order of the Bankruptcy Court; iv. Intercompany claims; and v. Claims limited to the repayment of principal and interest under Senior Notes issued by the Debtors. Oakwood Homes Corporation and its subsidiaries are engaged in the production, sale and financing of manufactured housing. The Company's products are sold through Company-owned stores and an extensive network of independent retailers. On November 15, 2002, Oakwood Homes filed for protection under Chapter 11 of the federal bankruptcy code (Bankr. Del. Case No. 02-13396), listing $705 million of debts (including almost $300 million in senior notes) and $842 million in total assets. The bankruptcy filing came amid a slump in mobile home sales and a cutback in lending by Oakwood Homes lenders including Conseco Inc., Greenpoint Financial Corp., and others. Robert J. Dehney, Esq., Derek C. Abbott, Esq., and Gilbert R. Saydah, Jr., Esq., at Morris, Nichols, Arsht & Tunnell and C. Richard Rayburn, Esq., Albert F. Durham, Esq., and Patricia B. Edmondson, Esq., at Rayburn Cooper & Durham, PA represent the Debtors in their restructuring efforts. OMEGA HEALTHCARE: S&P Revise B Credit Rating Outlook to Stable -------------------------------------------------------------- Standard & Poor's Ratings Services revised its ratings outlook for Omega Healthcare Investors Inc., to stable from positive. At the same time, the ratings are affirmed. The outlook revision follows Omega's recently announced restructuring negotiations with its largest operator, Sun Healthcare, and to less of an extent, its negotiations with Alterra. These negotiations are likely to result in a reduction of current rents, which may, in turn, stem the previous improvement in Omega's operating cash flow and may defer the planned reinstatement of the trust's preferred and common dividend payments. Omega does face a bank loan maturity in December of this year, but appears to have adequate collateral available to refinance this loan, without tripping debt covenants related to its remaining unsecured public notes. Maryland-based Omega is a public REIT, which invests in and provides financing to the long-term care industry. The company owns or holds mortgages on 222 skilled-nursing facilities and, to less of an extent, assisted living facilities with approximately 22,500 beds located in 28 states and operated by 34 third-party health care operating companies. While Omega has a large number of core operators, its largest nine tenants represent nearly 80% of investments and just more than 80% of revenues. Similar to other health care REITs focused on skilled-nursing facilities, Omega's operator base has faced significant challenges during the past few years (partly, as a result of the implementation of the Prospective Payment System) that led to operator bankruptcies and lease/mortgage restructurings. Omega's management team has done an excellent job of renegotiating and restructuring lease/mortgage agreements with its operators, while selling troubled assets. The occupancy rate in Omega's portfolio has held up relatively well at 82%, while operator coverage, after a 4% management fee, declined slightly from 1.2x EBITDA for the trailing-12 months ended June 30, 2002, to 1.13x for the same period ended September 30, 2002. Notably, these coverage measures do not account for the Medicare 'cliff' effective Oct. 1, 2002, which will likely further weaken operator coverage. LIQUIDITY Omega's new management team (and major investor) has achieved success in restoring Omega's liquidity position through its releasing efforts of the company's owned and operated portfolio, using proceeds from asset sales and suspended dividends to reduce outstanding debt. This, coupled, with extensive core portfolio restructuring and a rights offering and private placement in 2002, enabled the company to meet maturing debt obligations, achieve an extension on its bank line, and reduce leverage from 48% debt-to-book capitalization at fiscal year-end 2001 to 39% at fiscal year-end 2002. Debt coverage measures have also been favorably impacted, increasing from 1.3x debt service in 2001 to roughly 2x in 2002. The company currently has $112 million outstanding under its $160 million secured bank revolver that expires December 31, 2003. Management is in the process of negotiating an extension of the facility and/or arranging a new bank financing to refinance the outstanding balance. The company will have to work around covenants within Omega's public unsecured notes ($100 mil. remaining), which require unsecured asset coverage of 2x. With roughly $550 million in owned assets (depreciated basis) and an additional $211 million in mortgage and other investments, there appears to be sufficient room to accommodate the expected refinancing. Unrestricted cash balances have grown modestly throughout 2002, and currently stand at roughly $15 million. OUTLOOK: STABLE Management has indicated that it will appropriately defer dividend reinstatement until the bank debt refinancing has been completed. Omega's strong coverage measures for the current rating should provide sufficient room to absorb moderately lower lease rates upon operator restructuring and moderately higher leverage, if necessary, upon reinstatement of preferred dividends. However, Standard & Poor's will closely monitor Omega's restructuring efforts with Sun Healthcare and Alterra. Ratings would be lowered if discussions become protracted and/or rents are reduced more severely than expected. OUTLOOK REVISED Omega Healthcare Investors Inc. Rating To From Corporate credit B/Stable B/Positive RATINGS AFFIRMED Omega Healthcare Investors Inc. Rating $100 mil. 6.95% senior notes due 2007 CCC+ $57.5 mil. 9.25% cum pref stk ser A D $50 mil. 8.625% cum pref stk ser B D OVERSEAS SHIPHOLDING: S&P Affirms & Assigns Low-B Debt Ratings -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed all ratings on Overseas Shipholding Group Inc., including its 'BB+' corporate credit rating. At the same time, Standard & Poor's assigned its 'BB+' senior unsecured debt rating to the company's proposed 10- year $200 million note offering. The rating outlook is stable. New York-based Overseas Shipholding Group is engaged primarily in the ocean transportation of crude oil and petroleum products. The company recently announced a $200 million senior unsecured note offering, to be used to repay $70 million of notes maturing in December 2003 and a portion of the outstanding bank revolver balance. This transaction extends the near-term maturity of the debt structure and frees up borrowing capacity on the bank revolver. Overseas Shipholding owns and operates a modern fleet of 50 oceangoing vessels. Overseas Shipholding's customers include many of the world's largest oil companies and oil trading companies as well as governments and governmental agencies. The company's fleet size is substantial, with vessels that are relatively modern due to an ongoing fleet modernization program. The company participates in commercial pools with other owners of modern vessels to provide additional flexibility and high levels of service to customers while providing scheduling efficiencies to the overall pool. The company has approximately $1.1 billion of lease-adjusted debt. "Ratings for Overseas Shipholding Group reflect the company's participation in the volatile, highly fragmented, and fixed capital-intensive bulk ocean shipping industry," said Standard & Poor's credit analyst Kenneth L. Farer. The company's position as a major operator of tankers, a relatively solid balance sheet, and good access to liquidity are positives in the credit profile. Tanker rates increased dramatically in the fourth quarter of 2002, reversing declines during the second half of 2001 and most of 2002, and have remained high, reflecting a cold winter, war premiums associated with a potential conflict with Iraq, and an extension of transit time to supply North America due to the oil company strike in Venezuela. Although rates may moderate from the current high levels, industry fundamentals over the near to intermediate term are expected to remain favorable. Additional rate increases and long-term charter contracts for quality modern tankers are possible due to environmental concerns after the November 2002 sinking of the tanker Prestige off the coast of Spain. Overseas Shipholding's operating margin after depreciation and amortization for 2002 was 17%. At Dec. 31, 2002, lease-adjusted debt to capital was 58%, with lease-adjusted debt to EBITDA of 9.7x and pretax interest coverage of only 0.6x. These numbers reflect the poor tanker market for most of 2002. For 2003, these figures are expected to improve to levels similar to those recorded in 2000 and 2001 (2001 operating margin of 53%, lease- adjusted debt to EBITDA of 3.4x and pretax interest coverage of over 3x) when the tanker rate environment was quite robust. Overseas Shipholding's liquidity available under credit facilities and fairly strong market position should enable the company to maintain a credit profile consistent with the rating in this competitive and cyclical industry. OWENS CORNING: Completes Atlanta Facility Sale to Alcoa Home ------------------------------------------------------------ Alcoa Home Exteriors, Inc., a wholly owned subsidiary of Alcoa, Inc., has completed its acquisition of Owens Corning's vinyl production facility in Atlanta, Georgia. The purchase of the 225,000 square foot site brings to three the number of vinyl extrusion facilities owned by Alcoa Home Exteriors, including sites in Stuarts Draft, Va. and Denison, Texas. The company first announced its agreement to acquire the plant in late January. Details of the transaction were not disclosed. Alcoa Home Exteriors produces and markets more than 3,000 siding, trim and accessory products for residential remodeling, new construction and light commercial applications. The Owens Corning deal follows its purchase of Richwood Building Products, a gable and shutter supplier, based in Richwood, Ky. in November, and the announcement earlier this month of the expansion of its injection molding facility in Gaffney, S.C. Gary Acinapura, president of Alcoa Home Exteriors, said the moves, which include the company's new name, support an organic growth strategy. "Our vision is to be the leading provider of color and design solutions in the home exteriors market. With the programs we are putting in place, and the increased capacity to our overall system through expansions and acquisitions, we are sending a signal to the marketplace that we are committing the resources, and have the capacity, to meet our customers' needs." While no physical expansions are planned for the Atlanta location, most of the current 120-member workforce will be retained as it is integrated into Alcoa's vinyl siding production operations. The facility was scheduled for closure by Toledo, OH-based Owens Corning, which is reorganizing under Chapter 11 bankruptcy protection. Headquartered in Pittsburgh, PA, Alcoa Home Exteriors, Inc., a wholly owned subsidiary of Alcoa, Inc., is a leading U.S. manufacturer of vinyl and aluminum products for the remodeling and new construction markets, featuring both the Masticr premium brand siding and the Alcoa Classic Living Siding. Alcoa Home Exteriors offers 41 years of experience in manufacturing and marketing a broad selection of exterior building products, including premium siding, soffit, shutters, decorative accessories and aluminum gutters, soffit, fascia and trim. Alcoa Home Exteriors operates manufacturing and warehousing facilities in Ohio, Virginia, South Carolina, Texas, and Georgia. For more information, visit http://www.alcoahomes.com Owens Corning is one of the world's top makers of fiberglass and composite materials. The company, which uses the Pink Panther cartoon character as its pitchman, sells fiberglass and foam insulation. Owens Corning's building-materials unit also manufactures roofing materials, vinyl windows, patio doors, vinyl siding, and rain gutters and downspouts. The company's composite-materials segment makes composites used in the automotive, electronics, and telecommunications industries. Owens Corning operates manufacturing facilities in the US and about a dozen other countries. The company has filed for bankruptcy protection to help it cope with billions of dollars in asbestos-related lawsuits. PEREGRINE: Committee Taps Milbank Tweed as Special Tax Counsel -------------------------------------------------------------- The Official Committee of Unsecured Creditors of Peregrine Systems, Inc., and its debtor-affiliates, asks for permission from the U.S. Bankruptcy Court for the District of Delaware to hire Milbank, Tweed, Hadley & McCloy LLP as Special Tax Counsel, nunc pro tunc to November 6, 2002. Among other things, the Committee anticipates that it will require Milbank Tweed to: a. assist and advise the Committee on the tax consequences in connection with the sale of Peregrine Remedy, Inc., including, (i) issues relating to offsetting the gain on the sale of Remedy with prior losses, and (ii) issues as to Ireland tax law on the sale of an Irish subsidiary; and b. render such other services as the Committee may require to assist in the performance of its statutory duties. Milbank Tweed will not be responsible for appearances before any court or agency nor be required to devote attention to, form professional opinions as to, or advise the Committee with respect to issues other than the tax matters set forth. The Committee requests approval of Milbank Tweed's employment nunc pro tunc to November 6, 2002, when the Committee commences engaging Milbank Tweed in connection to the Remedy Sale. The Debtors argue that granting such relief is appropriate under the circumstances because the services provided by Milbank Tweed to the Committee were necessary to the successful negotiation and consummation of the sale of Remedy at the increased sale price. In fact, the Committee, with the benefit of Milbank Tweed's advice, negotiated a $5 million increase in the Remedy sale price to BMC Software, Inc. The benefit to the estates of Milbank Tweed's services is highly material, as it resulted in significantly more assets for the Debtors' estates. Milbank Tweed will be compensated in its normal hourly rates, which are: attorneys $225 to $725 per hour legal assistants $125 to $265 per hour Peregrine Systems, Inc., the leading global provider of Infrastructure Management software, filed for chapter 11 protection on September 22, 2002 (Bankr. Del. Case No. 02- 12740). Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young Jones & Weintraub represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed estimated debts and assets of more than $100 million. PINNACLE ENTERTAINMENT: S&P Rates $225M Sr. Sec. Bank Loan at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its 'B+' rating to Pinnacle Entertainment Inc.'s proposed $225 million senior secured bank facility. At the same time, Standard & Poor's affirmed its 'B' corporate credit rating on the Las Vegas, Nevada-based owner and operator of casino facilities. The rating on the company's existing senior secured bank facility will be withdrawn once the new facility is funded. The outlook is stable. Total debt outstanding at December 31, 2002, was slightly less than $495 million. Proceeds from the proposed bank facility will be used to help provide funding for several of the company's planned capital investments, including the Lake Charles, Louisiana development project and the Belterra (southern Indiana riverboat facility) expansion. "The Belterra struggled during 2001 due to competitive market conditions, a disadvantaged location, and weak economy," said Standard & Poor's credit analyst Michael Scerbo. He added, "However, a lower cost structure, refined marketing programs, and dockside gaming have led to a significant improvement in EBITDA. The addition of a 300-room hotel tower in early 2004 is expected to enhance performance further." In addition, the company's future growth opportunities include the construction of a $325 million dockside gaming facility in Lake Charles. This market currently consists of two dockside casinos; a nearby Native American facility and a renovated racetrack with slot machines (racino). While the market has steadily grown, the Pinnacle project will increase capacity significantly. The facility is likely to be the nicest in the Lake Charles area, however, being the last entrant, a ramping up period is expected to create customer loyalty and growth in the market. Construction risks exist with any project, but the company's estimated costs are expected to include significant contingencies to cover cost overruns. Groundbreaking is scheduled during the second quarter of 2002, with opening planned the fourth quarter of 2004. PLAYBOY ENTERPRISES: Offering $110-Million Senior Secured Notes --------------------------------------------------------------- Playboy Enterprises, Inc., (NYSE: PLA, PLAA) is pursuing an offering of senior secured notes in the principal amount of $110 million with a maturity of seven years. The senior secured notes would be issued by PEI Holdings, Inc., a wholly-owned subsidiary of Playboy Enterprises, Inc., and would be guaranteed by Playboy Enterprises, Inc., and most of its other domestic wholly-owned subsidiaries. The offering would be made in the United States only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, and potentially to certain persons in offshore transactions in reliance on Regulation S under the Securities Act. The net proceeds from the offering would be used to repay outstanding indebtedness under Playboy's existing bank credit facility, to pay a portion of the deferred purchase price for the Califa acquisition and for general corporate purposes. The senior secured notes to be offered would not be registered under the Securities Act and could not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Playboy Enterprises is a brand-driven, international multimedia entertainment company that publishes editions of Playboy magazine around the world; operates Playboy and Spice television networks and distributes programming via home video and DVD globally; licenses the Playboy and Spice trademarks internationally for a range of consumer products and services; and operates Playboy.com, a leading men's lifestyle and entertainment Web site. At September 30, 2002, Playboy Enterprises' balance sheet shows a working capital deficit of about $40 million. * * * Liquidity and Capital Resources In its SEC Form 10-Q filed on November 8, 2002, the Company reported: "As of September 30, 2002, we had no cash and cash equivalents and $101.1 million in total financing obligations compared to $4.6 million in cash and cash equivalents and $101.6 million in total financing obligations at December 31, 2001. Our financing obligations as of September 30, 2002 and December 31, 2001 included $27.2 million and $20.0 million, respectively, in loans made directly from Hugh M. Hefner to Playboy.com, Inc., or Playboy.com. In July 2002, Mr. Hefner and Playboy.com amended an expiring $5.0 million note by extending the maturity date to July 2003. In September 2002, Mr. Hefner agreed to accept a new $12.2 million note from Playboy.com in satisfaction of two $5.0 million notes, plus accrued interest, which matured in September 2002. The new note bears interest at an annual rate of 8.00% (compared to 10.50% and 12.00% for the two original notes), with $0.5 million due in March 2003 and $11.7 million due in September 2003. "Our current liquidity requirements, excluding those of Playboy.com, are being provided by a $98.8 million credit facility, comprised of $63.8 million of term loans and a $35.0 million revolving credit facility. As of September 30, 2002, $10.0 million of borrowings and $3.9 million in letters of credit were outstanding under the revolving credit facility. The weighted average interest rates as of September 30, 2002 were 5.86% for the term loans and 5.20% for the revolving credit facility. We plan to finance our working capital requirements through cash generated from operations and our revolving credit facility. If additional funds become necessary, we will seek additional capital from the debt and/or equity markets. Playboy.com's funding requirements have been obtained from loans made available by Mr. Hefner. "In connection with the Califa acquisition, we have the option of paying up to $71 million of the purchase price in cash or Class B common stock through 2007. On April 17, 2002, a registration statement for the resale of approximately 1,475,000 shares became effective. These shares were issued in payment of two installments of consideration which totaled $22.5 million plus $0.3 million of accrued interest. The Califa principals elected to sell the shares and realized net proceeds from the sale of $19.2 million. As a result, we are required to provide them with a make-whole payment in either cash or stock of approximately $3.6 million, plus interest through the date of the next payment. The make-whole amount plus interest will be added to the payment scheduled to be made on March 3, 2003. "We are in late stage negotiations with Claxson, our venture partner, to restructure the ownership and terms of our international TV joint ventures. We expect that the restructuring will result in, among other things, our trading our right to the September 2002 and future library license and programming output payments from PTVI for additional ownership interests in PTVI. We are working to execute definitive agreements and close the restructuring in the fourth quarter of 2002. In the event that we are unable to complete the restructuring of our joint venture relationships, PTVI's ability to finance its operations, including making library license and programming output payments to us, will depend principally on the ability of Claxson and also us to make capital contributions, until PTVI generates sufficient funds from operations. In a June 27, 2002 filing with the Securities and Exchange Commission, Claxson indicated that its auditors have expressed a 'going concern opinion.' The reasons cited were Claxson's losses from operations, working capital deficiency and its default on debt. PTVI's independent auditors have also expressed a 'going concern opinion' in their report relating to PTVI's financial statements for the fiscal year ended December 31, 2001. The reasons cited as the basis for raising substantial doubt as to PTVI's ability to continue as a going concern are the potential inability of Claxson to make required capital contributions combined with PTVI's losses from operations. As of September 30, 2002, we had a $7.9 million net receivable from PTVI related to programming output, including $3.0 million of revenues recorded in the third quarter and $9.0 million for the nine-month period. In September 2002, we were scheduled to receive a $7.5 million library license payment from PTVI which, as expected, was not paid when due. We do not expect to receive these amounts in cash. However, we expect that if ongoing negotiations concerning the restructuring of the PTVI joint venture with Claxson are successfully completed, we will receive assets of equivalent or greater value than these amounts. If we are unable to successfully complete negotiations with Claxson and PTVI is unable to make these and other required payments to us in a timely manner, either because of Claxson's failure to fund its capital contribution obligations or otherwise, we will be required to address this failure by, among other matters, exercising our remedies under the PTVI joint venture agreements, reducing operating expenses, seeking amendments to our credit facility or seeking additional capital. If these efforts are not successful, our future financial condition and operating results could be materially adversely affected." PLAYBOY ENTERPRISES: S&P Assigns B Corporate Credit Rating ---------------------------------------------------------- Standard & Poor's Ratings Service assigned its 'B' corporate credit rating to Playboy Enterprises, Inc. At the same time, Standard & Poor's assigned its 'B' rating to the proposed $110 million senior secured notes due 2010, issued by PEI Holdings. PEI Holdings is the holding company through which Playboy owns all of its operating subsidiaries. Net proceeds will be used to repay the existing credit facility and acquisition liabilities. Chicago, Illinois-based Playboy had total debt outstanding of $144.2 million, including $43.1 million in acquisition liabilities, on September 30, 2002. The outlook is stable. "The ratings on Playboy reflect the company's significant presence in the non-cyclical adult entertainment industry, strong brand recognition, and good direct-to-home satellite TV coverage," said Standard & Poor's credit analyst Andy Liu. He added, "These factors are balanced by the proliferation of free adult materials online, declining newsstand sales of the magazine, weak cable TV distribution due to the narrow audience for paid adult content, and high financial risk." Founded in 1953, Playboy is a major creator and distributor of adult programming. The company invests heavily in original programming and has exclusive licensing arrangements with major adult studios to supplement its proprietary content. Although sales are generated from several revenue streams, the company exhibits significant cash flow concentration. Playboy's pay TV networks contribute more than 40% of consolidated revenue and more importantly, the vast majority of company's free cash flow. Print publications generate a similar percentage of overall revenue but their cash flow contribution is minimal, reflecting both a high cost structure and the general competitiveness of the print industry. Playboy's online group was in investment mode during the past several years. Since the fourth quarter of 2002, the online group has become profitable and cash flow positive due to a combination of rate increases and subscriber growth. This is a significant turnaround. However, given the short track record of profitability and positive cash flow, and competition from free online content, the online group could still be a concern for the company in the near term. PMA CAPITAL: Moody's Hatchets Long-Term Debt Ratings to Ba1 ----------------------------------------------------------- PMA Capital (NASDAQ:PMACA) announced that Moody's Investors Service issued a news release stating that it has lowered the long-term debt ratings of PMA Capital Corporation to Ba1 from Baa3 and the insurance financial strength rating of PMA Capital Insurance Company to Baa1 from A3. Separately, the rating agency affirmed the Baa1 insurance financial strength ratings on the members of The PMA Insurance Group. Moody's has a negative outlook on the ratings of PMACC, PMACIC and The PMA Insurance Group. Commenting on Moody's decision to move forward with a ratings action at this time, John W. Smithson, President and Chief Executive Officer of PMA Capital Corporation stated, "We value our relationship with Moody's. However, we continue to believe that we will ultimately be successful in executing on various aspects of our capital plan, which we believe will provide us with the capital necessary to refinance our $45 million of outstanding bank debt and accomplish our business plan. We do not believe that Moody's concern regarding the recent performance of our share price will prevent us from accomplishing our objectives. As a shareholder of PMA Capital myself, I am obviously disappointed that the market has chosen to value our shares on the basis of speculation about our capital raising plans. However, as we stated in a release earlier today, none of the alternatives currently being considered involve the issuance of our common stock or debt convertible into common stock." PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an insurance holding company, whose operating subsidiaries provide specialty risk management products and services to customers throughout the United States. The primary product lines of PMA Capital's subsidiaries include property and casualty reinsurance, underwritten and marketed through PMA Re, and workers' compensation, integrated disability and other commercial property and casualty lines of insurance in the eastern part of the United States, underwritten and marketed under the trade name The PMA Insurance Group. For additional information about PMA Capital and its specialty insurance businesses, visit http://www.pmacapital.com PRIVATE BUSINESS: Narrows Dec. 31 Net Capital Deficit to $6 Mil. ---------------------------------------------------------------- Private Business, Inc. (NASDAQ:PBIZ), a leading provider of cash flow and retail inventory management solutions for community banks and small businesses, announced its operating results for the quarter and year ended December 31, 2002. For the year ended December 31, 2002, revenues totaled $54.5 million, compared with revenues of $55.8 million in 2001. Results for 2002 included $13.2 million in revenues from Towne Services, Inc., which was acquired in August 2001. Results for 2001 included $6.9 million in revenues from Towne. Operating income for 2002 increased to $6.9 million, compared with $3.1 million in the previous year. Net income available to common shareholders improved to $2.9 million, compared with a net loss of $270,000 in the year ended December 31, 2001. The Company's EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $12.0 million in 2002. Revenues for the quarter ended December 31, 2002, totaled $12.1 million, compared with revenues of $16.2 million in the fourth quarter of 2001. Results for the most recent quarter included $2.6 million in revenues from Towne, compared with a $4.2 million revenue contribution from Towne in the prior-year quarter. Operating income declined to $508,000 in the quarter ended December 31, 2002, versus operating income of $2.3 million in the year-earlier period. The Company reported net income available to common shareholders of $25,000 in the fourth quarter of 2002, versus net income of $992,000 in the corresponding period of the previous year. The Company's EBITDA totaled $1.8 million in the fourth quarter of 2002. All share and per share amounts in this news release have been adjusted to reflect a one-for-three reverse stock split in August 2001. Per share amounts include 4.6 million common shares issued in conjunction with the Towne Services merger. Results for the year ended December 31, 2001 included an after- tax charge of $2.5 million for the write down of the Company's former headquarters building to its estimated fair market value, and merger-related expenses of approximately $183,000, net of taxes. Excluding these items, the Company would have reported pro forma net income of $2.4 million for the year ended December 31, 2001. The Company completed the sale of its former headquarters in March 2002 and consolidated its operations into more cost-effective facilities in the first quarter of 2002. At December 31, 2002, the Company's balance sheet shows a working capital deficit of about $4 million, and a total shareholders' equity deficit of about $6 million. "While not satisfied with our Company's recent performance, it is important to note that our earnings per share for 2002 came in at the upper end of the range projected in our news release dated January 27, 2003," stated Henry Baroco, Chief Executive Officer of Private Business, Inc. "To improve upon our break even level earnings during the fourth quarter, we have taken significant steps to re-energize our core business since I was appointed Chief Executive Officer in January." "Revenues derived from our core business product, Business Manager(R), declined by approximately 23% in the final quarter of 2002, when compared with the prior-year quarter. While a soft economic environment has had a negative impact on our core business for some time, we believe Private Business has not adequately capitalized upon the substantial value that Business Manager delivers to the community banks and small businesses that comprise our primary customer base. During the past few weeks, we have implemented changes within our Sales and Marketing organization that are designed to rejuvenate our core business, and I am confident that such changes will have a positive effect on the Company's financial performance in coming quarters." "We will continue to evaluate various opportunities to provide complementary products and services that can generate incremental revenues," continued Baroco. "Private Business is in a unique position to offer additional revenue generating products and services to community banks, their merchants, and other small businesses. With the sales teams already in place, we are confident that we can market such new initiatives, without the need for additional capital, by leveraging our customer relationship infrastructure." "The Company's balance sheet continued to improve in 2002. Strong operating cash flows allowed us to reduce total debt obligations by approximately $6.9 million. We are currently in discussions with our lending banks to resolve a previously disclosed non-monetary default involving certain debt covenants that existed at December 31, 2002. I emphasize that this is a technical, non-monetary default involving Minimum EBITDA and the Ratio of Consolidated Debt to EBITDA requirements under the terms of our senior loan agreement. We have made all payments, in full and on time, in accordance with our note agreements. Along with our banks, we have recently completed a rigorous review of 2003 budgets and financial plans, and we expect to report additional information on our banking relationship in the next several weeks," concluded Baroco. Private Business, Inc., is a leading provider of cash flow and retail inventory management solutions for community banks and middle-market businesses. The Company is headquartered in Brentwood, Tennessee, and its common stock trades on The NASDAQ Stock Market under the symbol "PBIZ." PROVIDENT FIN'L: S&P Cuts Counterparty Credit Ratings to BB+/B -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Cincinnati, Ohio-based Provident Financial Group Inc., including the company's counterparty credit ratings, which were lowered to 'BB+/B' from 'BBB-/A-3'. Standard & Poor's also lowered its ratings on Provident's units, Provident Bank, PFGI Capital Corp., Provident Capital Trust I, Provident Capital Trust II, Provident Capital Trust III, and Provident Capital Trust IV. The outlook on all Provident entities remains negative. The ratings actions reflect a greater degree of uncertainty regarding Provident's ability to generate earnings of reasonably consistent quality following the recent announcement that the company has had to restate its earnings for the past six years. The need to restate earnings was attributed to errors in the accounting for nine auto lease financing transactions originated between 1997 and 1999. The restatement has resulted in a reduction of reported earnings for each of these years, with a significant impact especially in years 2002 and 2001. "This restatement of earnings occurs at a time in which Standard & Poor's has concerns about several of the company's credit risk exposures in the current economic environment," said credit analyst Daniel Martin. "Consequently, it is not as clear what the company core earnings capacity is at a time when the need to generate a predictable stream of income to absorb potential asset quality problems is critical." RAILAMERICA INC: Reports Weaker Fin'l Results for Fourth Quarter ---------------------------------------------------------------- RailAmerica, Inc.,,(NYSE: RRA) reported its financial results for the fourth quarter and year ended December 31, 2002. Financial highlights for the quarter and year included: * Net income for the fourth quarter of 2002 was $4.1 million and for the year was $24.6 million, excluding previously announced special charges * Australia drought negatively impacts earnings per share by $.09 in fourth quarter and $.18 for full year * Chilean results moved to discontinued operations due to announced intention to divest * Fourth quarter North American operating ratio improves 210 basis points to 74.2% * ParkSierra and StatesRail EBITDA exceed Company expectations * After-tax return on invested capital at 9.3%, among industry's best Net income for the fourth quarter ended December 31, 2002, excluding certain charges, was $4.1 million on 32.1 million shares, compared to $5.2 million on 28.2 million shares, in 2001. The 2002 results exclude a charge of $2.3 million after- tax related to the previously announced December restructuring and bid costs. Including this charge, net income for the 2002 quarter was $1.8 million. Fourth quarter 2001 net income included special items that increased earnings by $.10 per share. The Company's 2002 fourth quarter results continued to be negatively impacted by a decrease in grain shipments as a result of the severe drought in Australia. Based on the decrease in shipments and historical profit margins, the Company estimates the decrease in grain shipments reduced quarterly earnings by approximately $.09 per share compared to last year's fourth quarter. In addition, due to the Company's previously announced intention to divest its ownership in Ferronor, its Chilean railroad, results for this segment have been moved to discontinued operations for 2001 and 2002. Consolidated revenues, excluding the Chilean operations, for the quarter ended December 31, 2002 increased 21% to $104.2 million, from $85.8 million during the same period in 2001. Adjusted operating income for the fourth quarter was $16.3 million, compared to $16.5 million in 2001. Fourth quarter 2002 net gains on sale of assets of $3.8 million were $0.7 million less than in the prior year quarter. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $25.5 million, versus $23.4 million in 2001. The results for 2002 have been adjusted for the aforementioned special charge. Operating income and EBITDA for the fourth quarter of 2002, including the special charge, were $12.6 million and $21.8 million, respectively. North American revenues for the fourth quarter of 2002 increased 36% to $83.5 million, from $61.2 million in 2001, reflecting the contribution of the ParkSierra and StatesRail railroads acquired in January 2002 and a 2% increase in "same railroad" revenues. The North American operating ratio for the quarter improved 210 basis points to 74.2%, from 76.3% in 2001. Australia revenues for the fourth quarter were $20.6 million, 18% lower than the $24.9 million in 2001. Grain revenues were $5.2 million lower in the fourth quarter, which resulted in a quarterly operating ratio of 127.4%, versus 89.2% in 2001. As noted in prior guidance from the Company, this deterioration in grain revenue and operating ratio in 2002 was due to the severe drought impacting agricultural shipments at Freight Australia. For the year ended December 31, 2002, net income was $2.2 million on 32.6 million diluted shares. Excluding special charges in 2002 for the refinancing, restructuring and bid costs of $22.4 million, after-tax, net income for 2002 was $24.6 million. This compares with net income of $17.0 million on 25.4 million shares in 2001. Operating revenues for 2002 rose 23% to $428.2 million, from $347.5 million in 2001. Adjusted operating income and EBITDA were $79.2 million and $112.4 million, respectively, in 2002 compared to $71.2 million and $95.6 million, respectively, in 2001. Including the special charges, operating income and EBITDA for 2002 were $70.5 million and $103.7 million, respectively. Commenting on the quarter, Gary O. Marino, Chairman, President and CEO of RailAmerica, said, "We cannot emphasize enough that our fourth quarter 2002 operational performance was adversely affected by the severe drought conditions across the Australian continent. In 2002, our Australian railroad saw grain tonnage shipped drop more than 25% from the prior year, causing an $11.4 million decline in our high margin grain revenue, based on historical profit margins. For the year, we estimate that our consolidated earnings were negatively impacted by approximately $.18 per share due to the reduced grain shipments." Continued Marino, "Conversely, our North American business unit achieved its best year ever. As a result of our ParkSierra and StatesRail acquisitions, we posted record annual revenues and EBITDA. The outstanding performance of our ParkSierra and StatesRail railroads exceeded our pre- acquisition expectations in several financial measures, including revenue, EBITDA and return on invested capital. In North America, through stringent cost controls and superior safety results, we improved our operating ratio to 74.8% for the year, from 75.5% last year. "Looking ahead, despite the current geopolitical climate, we are realizing growth in select North American commodity groups such as chemicals, petroleum and lumber & forest products that should lead to 'same railroad' revenue growth in the 4-6% range in 2003. Our operating ratio in North America is one of the best in the industry and expense control is a constant focus. In Australia, as previously disclosed, the effect of the drought is expected to continue to affect revenues during 2003. We anticipate that Freight Australia will ship approximately 2 million tons of grain in 2003, down from 5 million tons in 2001. Accordingly, we implemented new cost reduction measures at Freight Australia to mitigate the impact of the drought. Notwithstanding the reduction in grain and assuming no prolonged negative impact from higher fuel costs, we remain comfortable with our previous 2003 earnings guidance of $.80 - $.85 per share, including the results of Chile. However, we do expect that the previously announced transportation contracts that Freight Australia has entered into over the past six months, along with potential new business and an anticipated rebound of grain, offer significant upside opportunities for RailAmerica in 2004." Michael J. Howe, RailAmerica's Senior Vice President & CFO, said, "Overall, we made significant progress last year in improving RailAmerica's fundamentals, including strengthening our balance sheet and improving liquidity. The new financing of our senior debt in May 2002 significantly lowered our cost of debt, improved liquidity, enhanced free cash flow and resulted in an improved credit rating. The ParkSierra and StatesRail acquisitions, completed with approximately two-thirds equity, resulted in a de-levering of the balance sheet. We will continue to focus on generating free cash flow, earning in excess of our cost of capital, managing risk, controlling costs and improving our capital structure. In 2002, our after-tax return on invested capital was 9.3%, compared to our weighted average cost of capital of 7.0%. For 2003, we have hedged 35% of our projected North American fuel consumption and all of our variable-rate debt, including a blended average rate of 4.2% on our senior debt. "Our primary financial goal, as we announced earlier this year, is to reduce our net debt-to-capital ratio to 50% by year-end 2004 through our $100 million asset rationalization plan. Our $29 million of cash on hand at year-end 2002, coupled with our $100 million unused revolving credit facility, provides substantial liquidity to meet future business needs, including continued repurchase of the Company's common stock in the open market under its existing stock repurchase plan, and possible selective, accretive acquisitions." RailAmerica, Inc. (NYSE: RRA) is the world's largest short line and regional railroad operator with 49 railroads operating over 12,800 miles in the United States, Canada, Australia and Chile. In Australia and Argentina, an additional 4,300 miles are operated under track access arrangements. The Company is a member of the Russell 2000(R) Index. For more information, visit the Company's Web site at http://www.railamerica.com * * * As previously reported in Troubled Company Reporter, Standard & Poor's raised its long-term corporate credit rating on RailAmerica Inc., citing the rail operator's improved financial flexibility. The senior secured debt rating was raised to 'BB' from 'BB-', and the subordinated debt rating was raised to 'B' from 'B-'. Standard & Poor's also assigned its 'BB' rating to $475 million in senior secured credit facilities issued by RailAmerica Transportation Corp. and guaranteed by RailAmerica Inc. Local and Foreign Currency Ratings are assigned at 'BB-' and 'BB+' respectively. Ratings outlook is stable. The rating actions reflected the company's successful expansion of operations and improved financial profile. Nevertheless, debt leverage remains elevated, in the 70% debt to capital area, and management's active acquisition strategy carries potential for additional debt financing. ROGERS COMMS: Leverage Concerns Prompt S&P to Revise Outlook ------------------------------------------------------------ Standard & Poor's Ratings Services revised the outlook to negative from stable on Rogers Communications Inc., and its subsidiary, Rogers Cable Inc. At the same time, the ratings on Rogers Communications, including its 'BB+' long-term corporate credit rating, as well as the ratings on its subsidiaries, were affirmed. The outlook reflects Standard & Poor's concerns about Rogers Communications' financial profile, particularly its leverage, which is high for the rating. Lease-adjusted total debt to EBITDA has increased to 5.9x in 2002 from 5.3x in 2001, largely due to negative free cash flows as the company completes its cable system upgrades. "Although capital spending for Rogers Communications' cable subsidiary is projected to decrease by about 20% in 2003 to approximately C$520 million, it is not expected to generate positive free cash flows until 2004 or 2005," said Standard & Poor's credit analyst Barbara Komjathy. "As a result, debt levels are expected to increase in the medium term, albeit mitigated by continued EBITDA expansion." "In addition, Standard & Poor's expected that Rogers Communications would address concerns about its capital structure in 2002," Ms. Komjathy added. The ratings on Rogers Communications reflect the above-average business position of its key cable television subsidiary, Rogers Cable Inc., and the added business diversity provided by its media subsidiary, Rogers Media Inc. These factors are offset by Rogers Communications' aggressive financial profile as reflected by a relatively heavy consolidated debt burden, negative free cash flow generation, and ongoing losses associated with its sports initiatives. The company's 55.8%-owned subsidiary, Rogers Wireless Inc., is rated separately on a stand-alone basis. All financial references to Rogers Communications exclude the impact of Rogers Wireless Inc. (BB+/Stable/--). Rogers Communications generated revenues of C$2.4 billion and lease-adjusted EBITDA of C$608.3 million in 2002, and had C$3.6 million of lease-adjusted debt outstanding at the end of the period. The ratings on Rogers Communications and its cable subsidiary could be lowered if the company fails to improve its credit measures in 2003 to be more in line with the ratings category through the reduction of total debt outstanding and/or expanding EBITDA generation. ROWECOM: Executes Pacts to Sell US Assets to EBSCO Industries ------------------------------------------------------------- EBSCO Industries, Inc. (EBSCO), the global leader for the delivery of integrated information systems and services, has executed definitive agreements to acquire the U.S. operations of RoweCom, Inc., which includes the operations of Dawson, Inc., Dawson Information Quest, Inc., The Faxon Company, Inc., Turner Subscription Agency, Inc., McGregor Subscription Service, Inc., and Corporate Subscription Services, Inc. The acquisition is contingent on, among other things, (1) U. S. bankruptcy court approval, (2) successful closure by EBSCO of its acquisition of RoweCom's European operations, and (3) support of publishers representing at least 50 percent of the aggregate monetary amount paid to RoweCom by customers which was not subsequently forwarded on to publishers on behalf of these customers. U.S. bankruptcy court approval is expected by early April. EBSCO expects to receive French regulatory approval and close the RoweCom Europe acquisition in two to three weeks. The publisher support contingency could be satisfied even sooner. Following is a brief status of actions that have been taken and are underway to secure support of publishers. Between February 20th and 24th, letters were sent to all of the publishers (approximately 25,000) with whom RoweCom has a business relationship to solicit their support (participation). When a publisher agrees to participate, they agree to fulfill subscriptions to their publications for which a RoweCom customer paid RoweCom, but for which the publisher did not receive payment. In exchange for agreeing to send issues, publishers are to receive the equivalent of the RoweCom customer's claim on the bankrupt RoweCom estate to the extent of the value of the subscriptions they have agreed to fulfill. To effect this exchange and to receive the full benefit of said publisher participation, library creditors of RoweCom should execute the assignment of their claim to participating publishers. The mechanics of how this works are more fully described in the next paragraph and subsequent example. Simultaneous to the publisher mailing, letters were also sent to all U.S. customers of RoweCom U.S.A. The purpose of these letters was to ascertain if a RoweCom customer who currently has a claim against the bankrupt RoweCom estate (i.e., had paid RoweCom for journal orders for which payment was never forwarded to publishers) would agree to participate by assigning their bankruptcy claims to publishers agreeing to participate. RoweCom customers would only be agreeing to exchange their claim to the extent publishers agree to fulfill issues. EBSCO Industries, Inc., is a global corporation with sales, service and manufacturing subsidiaries at work in 19 countries around the world. EBSCO's business interests include information management services, online and print journal subscription services, online research databases, real estate development, commercial printing and more. EBSCO, an acronym for Elton B. Stephens Company, is based in Birmingham, Alabama and employs 4,000 people around the world. Additional information on EBSCO Industries is available from http://www.ebscoind.com RoweCom, acquired by divine in November 2001, offers a wide range of content sources and innovative technologies and provides information specialists, particularly in the library, with complete solutions serving all their information needs, in print or electronic format. SAKS INC: February 2003 Comparable Store Sales Decline 4.1% ----------------------------------------------------------- Retailer Saks Incorporated (NYSE:SKS) reported that comparable store sales for the four weeks ended March 1, 2003 compared to the four weeks ended March 2, 2002 decreased 4.1% on a total company basis. By segment, comparable store sales increased 1.2% for SDSG and decreased 11.4% for SFAE for the month. Sales below are in millions and represent sales from owned departments only. February sales were negatively affected by winter snowstorms in the Midwest and Northeast. Additionally, at SFAE there was a promotional shift related to a deferral in the distribution of annual gift card rewards for SaksFirst loyalty members this year compared to last year. Redemption of the gift cards typically generates incremental sales. Merchandise categories with the best sales performances for SDSG in February were private brand merchandise, women's special size sportswear, accessories, soft home, shoes, and cosmetics. Categories with softer sales performances for SDSG in February were junior's apparel, women's moderate sportswear, and hard home. Categories with the best sales performances for SFAE in February were men's clothing, dress furnishings, and shoes; cosmetics; fashion jewelry; and contemporary sportswear. Categories and businesses with the softest performances for SFAE in February were women's designer and bridge apparel, children's apparel, and Saks Off 5th. Saks Incorporated operates Saks Fifth Avenue Enterprises, which consists of 60 Saks Fifth Avenue stores and 52 Saks Off 5th stores. The Company also operates its Saks Department Store Group (SDSG) with 244 department stores under the names of Parisian, Proffitt's, McRae's, Younkers, Herberger's, Carson Pirie Scott, Bergner's, and Boston Store. * * * As previously reported in Troubled Company Reporter, Fitch Ratings affirmed its 'BB+' rating of Saks Incorporated's $700 million bank facility and its 'BB-' rating of the company's senior notes. Approximately $1.2 billion of senior notes are affected by the action, which follows Saks' announcement that it has agreed to sell its credit card receivables to Household International. The Rating Outlook remains Negative. The ratings reflect Saks' solid position within its markets balanced against its weak operating results and high financial leverage. Saks' operations have been pressured by soft apparel sales and growing competition from specialty and discount retailers. Saks Incorporated's 8.25% bonds due 2008 (SKS08USR1) are trading slightly below par at 96 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=SKS08USR1 for real-time bond pricing. SATCON TECHNOLOGY: Expands Supplier Pact with Leading Chip Maker ---------------------------------------------------------------- SatCon Technology Corporation(R) (Nasdaq: SATC), a leader in power and energy management, has entered into an expanded global supplier agreement with a leading chip equipment manufacturer. This GSA will allow SatCon to expand its product offerings to this company beyond the current supply agreement that is limited to SatCon's proprietary silicon wafer manufacturing technology. "We see this agreement as an opportunity to grow an already strong relationship with an industry leader," said David Eisenhaure, SatCon president and chief executive officer. "The product that we currently provide this company has represented strong revenues for our Power Systems business unit in the past and with this GSA in place we are looking to expand that relationship to include other products and systems such as power supplies, controllers, servo-mechanisms and continuous quality power systems such as our Rotary Uninterruptible Power Supply while extending our relationship into the future." SatCon Technology Corporation manufactures and sells critical power products including power systems for distributed power generation; power quality and factory automation; inverter electronics from 5 kilowatts to 5 megawatts; power switches; telecommunications electronics; and hybrid microcircuits for industrial, medical, military and aerospace applications. SatCon also develops advanced technology in digital power electronics, high-efficiency machines and control systems for a variety of defense applications with the strategy of transitioning those technologies into multiyear production programs. For further information, please visit the SatCon Web site at http://www.satcon.com * * * The Company says it needs an immediate infusion of capital to sustain its operations and it is endeavoring to raise capital through a debt and equity financing transaction. However there can be no assurance that it will be able to raise the required capital. It is currently in default under its Loan and Security Agreement, dated September 13, 2002, with Silicon Valley Bank due to its failure to obtain additional capital and to maintain adjusted tangible net worth, as defined. The Company entered into a forbearance agreement with the Bank on December 19, 2002 which was extended until January 25, 2003 at which time it expired. If the Bank decides not to fund Satcon's operations, which it has the right to do, or if Satcon is unable to raise additional capital in the immediate near term, it will be forced to furlough or permanently lay off a significant portion of its work force which will have a material adverse impact on Satcon including its financial position and the results from operations. Under these circumstances, the Company may not be able to continue its operations. Further, without additional cash resources, it may not be able to keep all or significant portions of its operations going for a sufficient period of time to enable it to sell all or portions of its assets or operations at their market values. SBC COMMS: California ISPs Call on PUC to Stop New SBC Fees ----------------------------------------------------------- The California Internet Service Providers Association warned that an upcoming vote by the California Public Utilities Commission on a measure favored by SBC Communications would bankrupt dozens of Internet service providers, raise Internet rates for consumers and expose rural and outer suburban consumers to much higher Internet bills. The Commissioners are scheduled to vote on Thursday, March 13, 2003 on an interconnection agreement between SBC and Pac-West Telecomm that would allow the Texas-based phone giant to charge competitors new per-minute and per-mile fees. In this case, the $40 million in "transport charges" would approximate one-third of Pac-West's annual revenue, a debilitating blow to one of SBC's rare facilities-based local competitors and a move that would further restrict Internet access, especially for those rural users with the fewest alternatives. A neutral Administrative Law Judge issued a draft decision striking down the new proposed fees, but they were re-inserted in a recent "alternate" introduced by a Commissioner. "This last minute assault from Pac Bell is simply awful for ISPs, residential Internet users, and small businesses that depend on the Internet," said Mike Jackman, CISPA's executive director. "We urge the California PUC to 'stay the course,' uphold the findings of its neutral judge and bring a dose of badly needed regulatory certainty to the Internet sector." CISPA also released a study by Yale Braunstein, a professor in the School of Information Management and Systems at the University of California at Berkeley, which showed that SBC's proposed changes could cause dial-up Internet rates to rise more than 30 percent, particularly in rural and outer suburban areas. (A copy of the study can be made available for review by contacting Mike Jackman at 415-388-3216). Currently, competitive phone companies can serve the state from a single location and Internet calls are treated as local. The alternative to paying the per-minute, per-mile fee would be for CLECs to install switching facilities, which can cost as much as millions, in the hundreds of local calling areas in the state. Professor Braunstein's analysis showed that such a set-up would make it economically unfeasible for anyone but the local phone giants to serve rural communities -- those areas that have fewer then 50,000 potential customers and are more than 16 miles from an installed switch. SBC Communications Inc. -- http://www.sbc.com-- is one of the world's leading data, voice and Internet services providers. Through its world-class networks, SBC companies provide a full range of voice, data, networking and e-business services, as well as directory advertising and publishing. A Fortune 30 company, America's leading provider of high- speed DSL Internet Access services, and one of the nation's leading Internet Service Providers, SBC companies currently serve 58 million access lines nationwide. In addition, SBC companies own 60 percent of America's second-largest wireless company, Cingular Wireless, which serves more than 22 million wireless customers. Internationally, SBC companies have telecommunications investments in 25 countries. At September 30, 2002, SBC Communications' balance sheet shows a working capital deficit of about $7 billion. SEDONA CORP: Appoints Victoria V. Looney to Board of Directors -------------------------------------------------------------- SEDONA(R) Corporation (OTC:SDNA) -- http://www.sedonacorp.com-- the leading provider of Internet-based Customer Relationship Management solutions for small and mid-sized financial services companies, announced that Victoria V. Looney has been appointed to its Board of Directors. Ms. Looney fills a Board seat recently vacated by the resignation of R. Barry Borden. Vicki Looney is President and Co-founder of COPY.doc, D.C., LLC, a privately held secure document management firm providing business services to corporate, government and law firm clients. Prior to founding COPY.doc in 2001, Ms. Looney was Vice President of Sales for GroupSystems.com, and earlier held positions with IDCertify, Inc. as Vice President of Business Development, Dakotah Direct (a unit of Genesis Teleserv Corporation) as its Vice President of Sales & Marketing, EDS, as Director, Global Development, and CITICORP Information Management Services, as an Executive Sales Manager. She is a graduate of The School of International Service, College of Public and International Affairs, of The American University, Washington, DC, where she received Baccalaureate in International Studies. "We are indeed pleased to have Vicki Looney join the SEDONA Board of Directors," said Marco Emrich, CEO and a Director of SEDONA. "Her knowledge and experience in the software and information services industry will prove to be valuable to our Company. Ms. Looney's recommendation to the board comes as a result of our new funding which further highlights the overall positive effect and new direction for SEDONA. Vicki Looney stated that, "I am delighted to be joining the Board of SEDONA. Having already dedicated considerable time and effort to better understand SEDONA's business and its tireless commitment to innovative software product development, I believe that the Company is gaining impressive momentum. With the team's continued focus and hard work, SEDONA will not only secure its leadership position in the financial services market, but will also be well positioned to penetrate additional new vertical segments to further its growth and revenue opportunities." SEDONA(R) Corporation (OTC:SDNA) is a leading technology and services provider that delivers Customer Relationship Management solutions specifically tailored for small and mid-sized financial services businesses such as community banks, credit unions, insurance companies, and brokerage firms. By using SEDONA's CRM solutions, financial institutions can effectively identify, acquire, foster, and retain loyal, profitable customers. Leveraging SEDONA's CRM solution, leading financial services solution providers such as Fiserv, Inc., Open Solutions Inc., COCC, Financial Services Inc. (FSI), Sanchez Computer Associates, Inc., and AIG Technologies, Inc. offer best-in- market CRM to their own clients and prospects. SEDONA Corporation is an Advanced Level Business Partner of IBM Corporation. For additional information, visit the SEDONA Web site at http://www.sedonacorp.com As previously reported in the November 22, 2002 edition of Troubled Company Reporter, SEDONA(R) said it was aggressively pursuing several alternatives and anticipates this concern will be resolved. If such funding did not become available on a timely basis, however, the Board would explore additional alternatives to preserving value for its creditors and stockholders which might include a sale of all or part of the Company or a reorganization or liquidation of the Company. SYSTEMONE TECHNOLOGIES: Extends Hansa Loan Pact to May 30, 2005 --------------------------------------------------------------- SystemOne Technologies Inc. (OTC Bulletin Board: STEK) and Hansa Finance Limited Liability Company, the lender under the Company's Revolving Credit Loan Agreement dated November 30, 2000 have amended the agreement effective February 15, 2003. The amendment extends the maturity date of the revolving credit loan issued thereunder from May 30, 2003 to May 30, 2005. Paul I. Mansur, the Company's Chief Executive Officer, stated that, "The extension of the maturity date of the Company's senior revolver together with the completion of the exchange of the Company's outstanding indebtedness which was completed in December 2002, significantly improve the Company's financial position and financial flexibility." Founded in 1990, the Company designs, manufactures, sells and supports a full range of self-contained, recycling industrial parts washing products for use in the automotive, aviation, marine and general industrial markets. The Company has been awarded eleven patents for its products which incorporate innovative, proprietary resource recovery and waste minimization technologies. The Company is headquartered in Miami, Florida. At September 30, 2002, SystemOne Technologies Inc.'s balance sheet posts a working capital deficit of about $29 million and a total shareholders equity deficit of about $42 million. TEXAS COMMERCIAL ENERGY: Files Chapter 11 Petition in S.D. Texas ---------------------------------------------------------------- Texas Commercial Energy has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas-Corpus Christi. Due to the significantly higher volatility and uncertainty in the Texas wholesale power supply market during the first part of 2003, TCE determined that it was necessary to take this action in order to preclude creditor action likely to adversely affect service to its customers. TCE has been working diligently with the Public Utility Commission of Texas and Electric Reliability Council of Texas over the past week to minimize customer impact created by this course of action. TCE continues to support the PUCT'S investigative efforts unveiled Tuesday in a public report filed by Parviz Adib, Division Director for Market Oversight in response to a formal inquiry that has been launched by the PUCT into price spikes "The decision to file for bankruptcy protection was difficult, but we feel it represents the most viable approach for our business. Our objective is to move through the Chapter 11 reorganization process as quickly possible without disruption to our operations or inconvenience to our customers. We remain committed to providing a high level of service to our customers," stated Scott Hart, president of TCE. "The company is in active discussions with leading financial lending institutions and major energy companies to provide the credit facilities necessary to support its business plan. "While uncertainty during the past few weeks has created challenges for TCE, we are taking the steps announced today to stabilize our business, maintain the confidence of our suppliers, and enhance our ability to compete in the ERCOT market," says Hart. "We also continue to work with the PUCT and ERCOT to understand the events of the past several weeks." Texas Commercial Energy is a Retail Electric Provider serving business and industrial customers throughout Texas that was launched in January 2002 in response to deregulation of Texas energy markets. TEXAS COMMERCIAL: Case Summary & 20 Largest Unsecured Creditors --------------------------------------------------------------- Debtor: Texas Commercial Energy, LLC 615 North Upper Broadway, Suite 624 Corpus Christi, TX 78477 aka Hino Energy Services Company Bankruptcy Case No.: 03-20366 Type of Business: The Debtor is a retail electric provider. Chapter 11 Petition Date: March 6, 2003 Court: Southern District of Texas (Corpus Christi) Judge: Richard S. Schmidt Debtor's Counsel: Harlin C Womble, Jr, Esq. Jordan Hyden Womble and Culbreth, PC 500 N Shoreline Blvd Suite 900 Corpus Christi, TX 78471 Tel: 361-884-5678 Fax : 361-888-5555 Estimated Assets: $10 Million to $50 Million Estimated Debts: $10 Million to $50 Million Debtor's 20 Largest Unsecured Creditors: Entity Nature Of Claim Claim Amount ------ --------------- ------------ Ercot Goods and/or Services $5,848,421 7620 Metro Center Drive Austin, TX 78744-1654 Ercot Central Power & Light Goods and/or Services $2,794,822 American Electric Power 700 Morrison Road Gahana, OH 43230 TXU Electric Goods and/or Services $1,844,235 P.O. Box 660476 Dallas, TX 75266 Texas Comptroller of Public Sales Taxes $1,260,182 Accounts 111 E. 17th Street Austin, TX 78744-0100 Reliant Energy Goods and/or Services $828,779 P.O. Box 1700 Houston, TX 77251-1700 Texas Comptroller of Public Gross Receipts Tax $853,113 Accounts 111 E. 17th Street Austin, TX 78744-0100 Public Utilities Commission PUC Assessment $159,231 TNMP Goods and/or Services $112,772 P.O. Box 2943 Fort Worth, TX 76109 Viterra Energy Services Goods and/or Services $87,059 West Texas Utilities Goods and/or Services $73,612 American Electric Power Bob Lilly Professional Goods and/or Services $40,464 Promotions Alliance Data Systems Goods and/or Services $66,039 ADP Total Source Goods and/or Services $30,832 PC Connection Goods and/or Services $12,630 The 10x Group, L.P. Goods and/or Services $3,247 GDRA Goods and/or Services $3,000 Tom J. Hancock Goods and/or Services $2,500 Bryan Texas Utilities Goods and/or Services $2,600 Prime Office Products Goods and/or Services $1,665 CDW Goods and/or Services $863 TRANSCARE: Taps Jackson Lewis as Employment Litigation Counsel -------------------------------------------------------------- TransCare Corporation and its debtor-affiliates ask for permission from the U.S. Bankruptcy Court for the Southern District of New York to retain Jackson Lewis LLP as special employment and employment litigation counsel. Prior to the Petition Date, Jackson Lewis represented certain of the Debtors in various employment matters which arose in the ordinary course of business. In addition, Jackson Lewis currently is counsel with regard to a charge of discrimination filed with the Equal Employment Opportunity Commission, which matter currently is pending. Jackson Lewis is approved by the insurer as "defense panel counsel." TransCare is responsible for a deductible of $100,000 per covered claim, including defense costs, all subject to and defined by the terms of the Policy. The Debtors now desire to continue to employ Jackson Lewis to handle the EEOC Complaint, as well as other employment and employment litigation matters when consistent with the Policy. The Debtors are confident that Jackson Lewis' attorneys have extensive experience and knowledge in the field of employment law exclusively representing management in workplace law, including employment litigation. Accordingly, the Debtors believe that Jackson Lewis is well qualified to represent them in these matters. Jackson Lewis will bill the Debtors in its special hourly rate of: partners $215 per hour associates $190 per hour paralegals $75 per hour TransCare, a privately held corporation, is one of the largest privately owned providers of ambulance and ambulette services in the United States, providing both emergency and non-emergency services, primarily on a fee-for-service basis. The Company filed for chapter 11 protection on September 9, 2002 (Bankr. S.D.N.Y. Case No. 02-14385). Matthew Allen Feldman, Esq., at Willkie Farr & Gallagher represents the Debtors in their restructuring efforts. When the Debtors sought protection from its creditors, it listed an estimated assets of $10 million to $50 million and debts of over $100 million. TRIANGLE INDUSTRIES: All Proofs of Claim Due by May 8, 2003 ----------------------------------------------------------- On August 4, 1997, the SEC filed a civil action against seven foreign nationals and two foreign entities alleging insider trading in the securities of Triangle Industries, Inc. shortly before a November 21, 1988 tender offer by Pechiney Corporation. The SEC reached settlements with several of the defendants, collecting approximately $6.5 million. The U.S. Bankruptcy Court for the Southern District of New York ordered that a disgorgement fund be established to distribute monies to investors harmed by the illegal trading in Triangle Industries stock. Under the Court's Order, investors who sold the common stock of Triangle Industries during the trading period August 18, 1988, through November 21, 1988, may be eligible for a disbursement from the fund. The Court has appointed Susan E. Brune as the Receiver of the fund. Ms. Brune has sent proof of claim forms to potential claimants. To participate in any possible distribution, claimants must have their claim forms (including relevant documentation) postmarked no later than May 8, 2003. If you believe you may qualify under the Court's Order but have not received a claim form, you should contact the Receiver at: Susan E. Brune Brune & Richard LLP 26 Broadway, 20th Floor New York, NY 10004 Phone: (212) 668-1900 Fax: (212) 668-0315 Email: triangle@bruneandrichard.com TRINITY INDUSTRIES: Narrows Fourth Quarter Net Loss to $11 Mill. ---------------------------------------------------------------- Trinity Industries, Inc., (NYSE: TRN) reported financial results for the three months and year ended December 31, 2002. For the year ended December 31, 2002, the company reported a net loss of $19.6 million on revenues of $1.5 billion. This compares with a net loss (including unusual charges discussed below) of $74.4 million on revenues of $1.8 billion for 2001. For the quarter ended December 31, 2002, the company reported a net loss of $11.5 million on revenues of $349 million. This compares with a net loss of $52.2 million on revenues of $507.3 million in the same quarter of 2001. In the year and quarter ended December 31, 2001, the company recorded pretax charges of $122.2 million and $66.4 million, respectively ($2.25 per share and $1.30 per share after tax for the year and quarter, respectively), related to restructuring the Rail Group in connection with the Thrall merger and the down cycle in the North American railcar industry and other matters. "While I am not pleased with a net loss for the year, I am pleased with the progress we have made in positioning ourselves for the eventual upturn in railcar demand and in managing through the current business cycle," said Timothy R. Wallace, Trinity's Chairman, President and CEO. "During this economic downturn, we have been able to reduce costs, improve our products and processes, eliminate unprofitable products, and increase the focus on our customers," added Wallace. "At the same time, we have reduced our investment in inventory and accounts receivable by $88 million and secured new long-term financing arrangements to support the growth in our lease fleet at a time when new credit was very tight." "Industry railcar demand in North America has improved over the last two quarters and our market share of new orders was about 45% in the fourth quarter. Industry orders for railcars in North America have been at a healthy pace the last two quarters and, if they are sustained at this level over a longer period, it should bode well for us and our industry. With the investment we have made in our lease fleet, our Railcar Leasing and Management Services Group continues to contribute stable earnings," said Wallace. Trinity Industries, Inc., with headquarters in Dallas, Texas, is one of the nation's leading diversified industrial companies. Trinity reports five principal business segments: the Trinity Rail Group, Trinity Railcar Leasing and Management Services Group, the Inland Barge Group, the Construction Products Group, and the Industrial Products Group. Trinity's Web site may be accessed at http://www.trin.net * * * As previously reported, Standard & Poor's Ratings Services assigned its preliminary triple-'B'-minus senior unsecured debt rating and its preliminary double-'B'-plus subordinated debt rating to Trinity Industries Inc.'s $150 million shelf registration. At the same time, Standard & Poor's affirmed its triple-'B'- minus corporate credit rating on the general industrial manufacturer. The outlook remains negative. TYCO INT'L: Names Robert Ott & Richard Baran to 2 Key Positions --------------------------------------------------------------- Tyco International Ltd. (NYSE: TYC, BSX: TYC, LSE: TYI) announced the appointments of Robert J. Ott as Vice President Corporate Audit and of Richard L. Baran as the Company's new Corporate Ombudsman. Both these positions will report directly to the Audit Committee of the Board of Directors. Mr. Ott will be responsible for overseeing all aspects of the Tyco's internal audit program, including developing an audit plan, managing and executing audits, and recommending improvements to internal controls and operating processes. To that end, he will bring a systematic, disciplined approach to evaluating and improving controllership, and perform audits to determine the reliability and integrity of financial information and compliance with policies. As Corporate Ombudsman, Mr. Baran will act as an impartial, confidential and independent source in addressing and resolving any concerns about Tyco's operations and management from various sources, including employees, customers, suppliers, and the financial and regulatory communities. To further bolster the effectiveness of the Ombudsman, the Company has established a confidential toll free number that these sources can use to report their concerns to the Ombudsman. Ed Breen, Tyco Chairman and CEO, said: "Good corporate governance does not result from a single appointment at the top of the management pyramid. It takes a concerted effort throughout the organization and clear lines of responsibility for instituting and maintaining the highest standards. The assignment of these two respected, experienced executives will further strengthen the team that we are establishing to ensure that Tyco is known throughout the financial community for best practices in the area of corporate governance." Jerry York, Chairman of the Audit Committee of the Board of Directors, said, "Bob Ott and Rick Baran have the right background and the necessary personal integrity for these sensitive positions and I know they will help us build the credibility of this company. Tyco's decision to significantly reinforce their independence by having both men report to the Audit Committee of the Board rather than to senior management reflects Tyco's commitment to strengthen corporate governance infrastructure and to institute strict oversight throughout the company. As far as I know, this practice is unique to Tyco, but I believe it should become an industry standard." Since August 2002, Mr. Ott has been Tyco's Vice President of Finance-Corporate Governance, responsible for coordinating the second phase of the Company's internal investigation into the conduct of Tyco's previous management, as well as performing an assessment of business controls throughout the corporation. Prior to his Tyco appointment, Robert Ott was Chief Financial Officer of Multiplex, Inc. Before that, he held senior financial positions at SourceAlliance, Motorola, General Instrument, and Deloitte & Touche. Mr. Ott is a Certified Public Accountant and holds a Bachelor's degree in accounting from the University of Notre Dame. Richard Baran comes to Tyco from General Electric, where he was most recently Manager Finance, Global Sourcing for GE Power Systems. Since 1993, he has held a variety of financial management positions at a number of General Electric divisions, including GE Energy Services, GE Hydro, Power Plant Systems, Corporate Environmental Programs and the Plastics Division. Mr. Baran holds a Master's degree in Business Administration and a law degree from the University of Connecticut and earned his Bachelor's degree in Business Administration from the University of Massachusetts. Tyco International Ltd. is a diversified manufacturing and service company. Tyco is the world's largest manufacturer and servicer of electrical and electronic components; the world's largest designer, manufacturer, installer and servicer of undersea telecommunications systems; the world's largest manufacturer, installer and provider of fire protection systems and electronic security services and the world's largest manufacturer of specialty valves. Tyco also holds strong leadership positions in medical device products, and plastics and adhesives. Tyco operates in more than 100 countries and had fiscal 2002 revenues from continuing operations of approximately $36 billion. Tyco International Ltd.'s December 31, 2002 balance sheet shows a working capital deficit of about $3 billion. UNIROYAL TECH: Retirees Committee Hires Ferry Joseph as Counsel --------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave its stamp of approval to a request by Official Committee of Retirees of Uniroyal Technology Corporation to bring-in Ferry, Joseph & Pearce, P.A. as counsel, nunc pro tunc to December 6, 2002. Ferry Joseph will represent the Committee as local counsel in these proceedings, and perform the necessary legal services for the Committee. Ferry Joseph will work closely with the firm of Leone Halpin & Konopinski, LLP and will divide tasks and responsibilities to avoid rendering unnecessary and duplicative services. Ferry Joseph will be paid on an hourly basis: Partners $200 to $325 per hour Associates $130 to $185 per hour Paralegals $ 80 per hour Uniroyal Technology Corporation and its subsidiaries are engaged in the development, manufacture and sale of a broad range of materials employing compound semiconductor technologies, plastic vinyl coated fabrics and specialty chemicals used in the production of consumer, commercial and industrial products. The Company filed for chapter 11 protection on August 25, 2002 (Bankr. Del. Case No. 02-12471). Eric Michael Sutty, Esq., and Jeffrey M. Schlerf, Esq., at The Bayard Firm represents the Debtors in their restructuring efforts. When the Debtors filed for protection from its creditors, it listed $85,842,000 in assets and $68,676,000 in debts. UNITED AIRLINES: Air Wisconsin Demands Prompt Decision on Pacts --------------------------------------------------------------- Air Wisconsin Airlines asks the Court to compel United Airlines to assume or reject, no later than March 25, 2003, their agreement for air transportation services. Air Wisconsin demands compensation for all its postpetition services provided under the United Express Agreement, at previously stipulated rates. In the fall of 2000, United obtained the right under its collective bargaining agreement with its pilots to dramatically increase the number of regional jets flown by its United Express partners, including Air Wisconsin. United proposed that Air Wisconsin expand its fleet of 50-seat regional jets from nine to 60, which United would agree to schedule into service at specified contractual rates. Air Wisconsin agreed and the parties renegotiated their existing agreement. To fulfill its obligations, Air Wisconsin negotiated an aircraft purchase agreement with Bombardier, a regional jet manufacturer. Air Wisconsin made a firm commitment to accept delivery of 51 aircraft, all of which were designated for the United Express Agreement. Each aircraft costs over $18,000,000. Jeff J. Marwil, Esq., at Jenner & Block, in Chicago, tells Judge Wedoff that Air Wisconsin is faced with substantial commitments to expand its fleet that would be unnecessary and potentially disastrous if the Debtors reject the Agreement. The longer the Debtors wait, the more aircraft Air Wisconsin will take delivery of and the more dire the financial consequences of rejection. Additionally, under the Agreement, Air Wisconsin must give United notice of the number of aircraft available for each calendar quarter. Once Air Wisconsin notifies United of the size of its available fleet, the Agreement requires that number of aircraft be available so United does not schedule flights for planes that cannot be utilized. Thus, no later than April 1, 2003, Air Wisconsin must make this disclosure to United. Air Wisconsin will face the same dilemma at the end of the third and fourth quarters of this year. Mr. Marwil says that if United timely rejects the Agreement, Air Wisconsin can renegotiate aircraft delivery with Bombardier to mitigate damages. If United assumes the Agreement, Air Wisconsin can accept delivery of the aircraft in an orderly fashion and take advantage of favorable financing to generate maximum profit. Making this decision should not place undue hardship on the Debtors, Mr. Marwil asserts. (United Airlines Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) DebtTraders reports that United Airlines' 10.670% bonds due 2004 (UAL04USR1) are trading at about 4 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. US AIRWAYS: Revenue Passenger Miles Drop 15.8% in February 2003 --------------------------------------------------------------- US Airways reported its February 2003 passenger traffic. Revenue passenger miles for February 2003 decreased 15.8 percent on 15.8 percent less capacity compared to February 2002. The passenger load factor for the month was 67.1 percent, no change from February 2002. For the first two months of 2003, revenue passenger miles decreased 12.6 percent on 14.0 percent less capacity compared to the first two months of 2002. The passenger load factor for the period was 64.5 percent, a 1 percentage point increase compared to the same period in 2002. The three wholly owned subsidiaries of US Airways Group, Inc. -- Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc. -- reported an 11.6 percent decrease in revenue passenger miles for the month of February on 15.6 percent less capacity. The passenger load factor was 51.0 percent, a 2.3 percentage point increase compared to February 2002. For the first two months of 2003, Allegheny Airlines, Inc., Piedmont Airlines, Inc., and PSA, Inc. reported a 7.9 percent decrease in revenue passenger miles on 9.9 percent less capacity. The passenger load factor was 46.9 percent, a 1.0 percentage point increase compared to the first two months of 2002. US Airways ended the month by completing 94.1 percent of its scheduled flights. "The month of February proved extremely difficult from an operational perspective as we faced unusually harsh winter conditions throughout the East," said US Airways President and Chief Executive Officer David Siegel. "The dedication and professionalism of our employees lessened the impact of these storms and enabled US Airways to return to normal operations in a short amount of time." System mainline passenger unit revenue for February 2003 is expected to decrease between 1.5 percent to 2.5 percent compared to February 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 reorganization 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 Jan. 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 Jan. 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. WHEELING-PITTSBURGH: Settles Claims Dispute with Interstate Gas --------------------------------------------------------------- Wheeling-Pittsburgh Steel Corp. asks Judge Bodoh to approve the settlement of all pre- and post-petition claims that WPSC and Interstate Gas Supply, Inc., have against each other. ISG was a supplier of natural gas to WPSC prior to the Petition Date. In December 2000, IGS filed an adversary proceeding captioned "Interstate Gas Supply Inc. v. Columbia Gas of Ohio and Wheel-Pittsburgh Steel Corporation" arising from a contract dispute for the supply of natural gas from IGS to WPSC and payment by WPSC for that natural gas. WPSC counterclaimed, seeking damages for IGS's failure to supply natural gas during the latter half of November 2000 and during the month of December 2000. Most recently, Judge Bodoh has signed an order denying in part and granting in part WPSC's motion for summary judgment on its counterclaim, and awarded WPSC $84,595.68 as damages for IGS's failure to deliver natural gas during the month of November 2000. In a subsequent and separate order, Judge Bodoh awarded WPSC damages for the month of December 2000 in the amount of $1,028,449.80. Together with the earlier order, the damages awarded to WPSC total $1,113,045.48. Immediately after entry of the second order, IGS filed a notice of appeal. During the 90-day prepetition period, WPSC delivered payments to IGS by check, wire transfer and other means, and in November 2002, WPSC brought a preference suit against IGS to avoid and recover these transfers. IGS asserts that it has valid defenses to this action. After arm's length negotiations over the course of several days, WPSC and IGS have negotiated a proposed settlement of the Supply Contract Litigation, IGS's appeal of the Supply Contract Litigation, the Preference Action, and any other claims, causes of action and rights which WPSC and IGS may have against each other. The Settlement (1) IGS will pay WPSC $1,100,000 by wire transfer to WPSC's account before the close of business on the day the Court enters an order approving the settlement; (2) IGS will have an allowed general unsecured claim against WPSC in WPSC's chapter 11 case in the amount of $1,551,830.66; (3) The parties will enter an agreed dismissal, with prejudice, of all claims and counterclaims asserted in the Supply Contract Litigation and the Preference Action. It is the intent of the parties that the Settlement Agreement will resolve all disputes and release all claims, causes of action and rights that the parties may have against each other, except for claims relating to the enforcement of the terms of the settlement itself. Relieved to remove the appeal and litigation from the docket of this case, Judge Bodoh promptly approves this settlement. (Wheeling-Pittsburgh Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) WORLDCOM: Taxpayer Group Urges SEC Chairman to Reconsider Action ---------------------------------------------------------------- Citizens Against Government Waste today urged Securities and Exchange Commission Chairman William Donaldson to show he is tough on corporate crime by levying an appropriate monetary penalty on WorldCom. In a letter sent to Donaldson Tuesday, CAGW President Tom Schatz said, "Unfortunately, on the issue of WorldCom, the SEC failed to set a firm but fair example for the financial community." Schatz suggested focusing on the penalty phase of the settlement with WorldCom, "the largest corporate criminal in U.S. history," which "misstated earnings by more than $9 billion while investors lost more than $150 billion." The attached letter further stated, "Our concern about WorldCom arises from the fact that it continues to receive federal contracts even while private industry has opted to do business with more stable telecommunications firms. WorldCom appears to be receiving undo support from the federal government at the expense of taxpayers. If private industry operating on free market principles opts not to do business with WorldCom, why does the federal government continue to award the company lucrative contracts?" While a financial penalty against WorldCom has yet to be determined, the partial settlement reached on November 26, 2002, noted that the final amount, if any, would be influenced by WorldCom's behavior. Schatz pointed out in his letter that WorldCom misled the public about its financial condition in its September to November multi-million ad campaign. Schatz cited a January 30 New York Times article which "reveals that these WorldCom ad statements are optimistic fabrications at best, and a recurring deceit at worst. In either case, WorldCom has again displayed unacceptable behavior -- it cannot be trusted to convey to the American public truthful and honest information about its financial situation." Schatz concluded by urging Donaldson to "put taxpayers' money to good use and take any and all necessary action against WorldCom in order to restore confidence in our financial markets by demonstrating that costly corporate crimes will be appropriately punished." Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government. The complete text of the letter follows: Citizens Against Government Waste -- a non-profit organization representing more than one-million people working to eliminate waste, mismanagement, and inefficiency in the federal government -- would like to welcome you as the new Chairman of the Securities and Exchange Commission. Your background and experience should enhance the SEC's mission of protecting investors, maintaining corporate accountability, and prosecuting violators of the nation's securities laws. In the wake of the WorldCom, Enron and Arthur Andersen scandals, the SEC faces numerous hurdles in establishing and enforcing rules that will restore investor confidence in U.S. financial markets. Ensuring that companies involved in fraud are held accountable is a critical part of the SEC's mission. Swift and decisive action will send a clear message that the SEC is under new leadership and will not tolerate criminal activity. Unfortunately, on the issue of WorldCom, the SEC failed to set a firm but fair example for the financial community. WorldCom -- the largest corporate criminal in U.S. history -- misstated earnings by more than $9 billion while investors lost more than $150 billion. On Nov. 26, 2002 (Litigation Release 17866), the SEC deferred final judgment on WorldCom, stating, "The judgment further provides that the amount of the civil penalty, if any, to be paid by WorldCom shall be determined by the Court in light of all the relevant facts and circumstances, following a hearing. At that hearing, the issues will be limited to determining the appropriateness and amount of any such civil penalty, WorldCom will be precluded from arguing that it did not violate the federal securities laws as alleged in the Commission's amended complaint, and the allegations of the complaint will be accepted as true by the Court." To the public, it appears that heavy fines have been imposed on other companies that engaged in less serious activities, such as Xerox, Arthur Andersen and Dynegy, while WorldCom seems to operate with impunity. There are several reasons for this conclusion. First, WorldCom continues to receive lucrative federal contracts at taxpayer expense while private industry has opted to do business with more stable telecommunications firms. In December 2002, CAGW sent a letter to the U.S. General Services Administration requesting that WorldCom be debarred from the federal contract process. Unfortunately, GSA opted to continue its relationship with WorldCom through January of 2004, while relying on the SEC or the U.S. Department of Justice to make a determination in the WorldCom case. Second, it appears WorldCom is still misstating its financial position. On January 30, 2003, the New York Times reported that net monthly gains in new business at five key WorldCom sales divisions fell sharply after WorldCom filed for bankruptcy in July 2002. Specifically, the net value of new business in these divisions declined to $8.5 million in July, $6 million in September, and $3 million in November. The Times noted "a sharp drop in the acquisition of new contracts even as cancellations remained fairly constant." This information directly contradicts the multi-million dollar public relations campaign run by WorldCom in its "WorldCom Wants You to Know" campaign from September to November 2002. In its "Customer Commitment" ad, WorldCom noted "customer renewals and contract extensions are ahead of historic levels ... since July we have acquired hundreds of new accounts ... " In its "Recent Wins" ad, WorldCom stated "Of course a business can't thrive on customer retention alone. It must earn new customers. Here again, WorldCom has exceeded expectations. We continue to be chosen over our closet competitors for both corporate and government contracts. Specifically, since July, we have acquired hundreds of brand new accounts worth tens of millions in annual revenue." The Times article reveals that these WorldCom ad statements are optimistic fabrications at best and a recurring deceit at worst. In either case, WorldCom has again displayed unacceptable behavior. The company cannot be trusted to convey to the American public truthful and honest information about its financial situation. On behalf of the one million members and supporters of CAGW, as well as those damaged by WorldCom's bankruptcy, I respectfully request that you commission a new investigation and hearing into these new WorldCom misstatements, and that you take them into account in considering levying an appropriate fine during the next stage of the settlement with the company. Mr. Donaldson, President Bush has called for an increase in the budget for the SEC including money for enforcement. We hope that you will put taxpayers' money to good use and take any and all necessary action against WorldCom in order to restore confidence in our financial markets by demonstrating that costly corporate crimes will be appropriately punished. BOOK REVIEW: PANIC ON WALL STREET: A History Of America's Financial Disasters --------------------------------------------------------- Author: Robert Sobel Publisher: Beard Books Softcover: 469 Pages List Price: $34.95 Review by: Gail Owens Hoelscher "Mere anarchy is loosed upon the world, the blood-dimmed tide is loosed, and everywhere the ceremony of innocence is drowned; the best lack all conviction, while the worst are full of passionate intensity." What a terrific quote to find at the beginning of a book on a financial catastrophe! First published in 1968. Panic on Wall Street covers 12 of the most painful episodes in American financial history between 1768 and 1962. Author Robert Sobel chose these particular cases, among a dozen or so others, to demonstrate the complexity and array of settings that have led to financial panics, and to show that we can only make ;the vaguest generalizations" about financial panic as a phenomenon. In his view, these 12 all had a great impact on Americans of the time, "they were dramatic, and drama is present in most important events in history." They had been neglected by other fiancial historians. They are: William Duer Panic, 1792 Crisis of Jacksonian Fiannces, 1837 Western Blizzard, 1857 Post-Civil War Panic, 1865-69 Crisis of the Gilded Age, 1873 Grant's Last Panic, 1884 Grover Cleveland and the Ordeal of 183-95 Northern Pacific Corner, 1901 The Knickerbocker Trust Panic, 1907 Europe Goes to War, 1914 Great Crash, 1929 Kennedy Slide, 1962 Sobel tells us there is no universally accepted definition if financial panic. He quotes William Graham Sumner, who died long before the Great Crash of 1929, describing a panic as ".a wave of emotion, apprehension, alarm. It is more or less irrational. It is superinduced upon a crisis, which is real and inevitable, but it exaggerates, conjures up possibilities, take away courage and energy." Sobel could find no "law of panics" which might allow us to predict them, but notes their common characteristics. Most occur during periods of optimism ("irrational exuberance?"). Most arise as "moments of truth," after periods of self-deception, when players not only suddenly recognize the magnitude of their problems, but are also stunned at their inability to solve them. He also notes that strong financial leaders may prove a mitigating factor, citing Vanderbilt and J.P. Morgan. Sobel concludes by saying that although financial panics have proven as devastating in some ways as war, and while much research has been carried out on war and its causes, little research has been done on financial panics. Panics on Wall Street stands as a solid foundation for later research on the topic. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com. Bond pricing, appearing in each Thursday's edition of the TCR, is provided by DebtTraders in New York. DebtTraders is a specialist in global high yield securities, providing clients unparalleled services in the identification, assessment, and sourcing of attractive high yield debt investments. For more information on institutional services, contact Scott Johnson at 1-212-247-5300. To view our research and find out about private client accounts, contact Peter Fitzpatrick at 1-212-247-3800. Real-time pricing available at http://www.debttraders.com/ Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Trenton, NJ USA, and Beard Group, Inc., Washington, DC USA. Yvonne L. Metzler, Bernadette C. de Roda, Donnabel C. Salcedo, Ronald P. Villavelez and Peter A. Chapman, Editors. Copyright 2003. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $675 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***