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/raid1/www/Hosts/bankrupt/TCR_Public/030414.mbx T R O U B L E D C O M P A N Y R E P O R T E R Monday, April 14, 2003, Vol. 7, No. 73 Headlines 8X8 INC: Has Until July 7 to Meet Nasdaq Listing Requirements ADELPHIA BUSINESS: Asks Judge Gerber to Okay Teleport Settlement ADELPHIA COMMS: Wants More Time to File Schedules and Statements ADVANCED LIGHTING: Unit Obtains $2.7 Million Funding from DARPA AIR CANADA: Gets Court's Blessing to Indemnify Directors AMERICAN MEDIA: Names R.F. Leeds as New Natural Health Publisher AMERISTAR CASINOS: Appoints Steve Eisner as VP for Development AQUILA: $630 Million of New Financing Averts Bankruptcy Filing ARIBA INC: Completes Internal Review of All Accounting Matters AURORA FOODS: Brings-In Steve Smiley as VP for Purchasing BORDEN CHEMICALS: BCP Finance Wants Case Converted to Chapter 7 BUDGET GROUP: Committee Brings-In Gibson Dunn as French Counsel CINEMARK USA: Posts Improved Revenues for Fiscal Year 2002 CLASSIC COMMS: Wants Lease Decision Period Extended Until July 7 COLUMBIA CENTER: Fitch Hatchets $20.2M Class E Note Rating to BB CONSECO: Gets Court Okay for Herzog Separation & Consulting Pact COVANTA ENERGY: Earns Nod to Extend and Amend DIP Credit Pact CREST DARTMOUTH: Fitch Rates $12.25 Million Class D Notes at BB DDI CORP: Installs New Inspection Technology at San Jose Plant DIRECTV: Raven America Wants to Transfer Case to Florida Court DIXIE GROUP: Expects Lower Sales Volume & Higher Costs for Q1 EASYLINK: Fails to Regain Compliance with Nasdaq Requirements EBIZ ENTERPRISES: Ceases Operations after Asset Foreclosure ECHOSTAR COMMS: Shareholders' Meeting Scheduled for May 6, 2003 ENRON: EMPI Sues Connectiv Energy for Breach of Contract FANSTEEL: Seeks to Stretch Lease Decision Period through July 10 FEDERAL-MOGUL: Has Until April 21 to File Disclosure Statement FLEMING COS.: $76 Million Critical Vendor from Kmart was Wrong FLEMING COS.: Wants to Honor Open Prepetition Purchase Orders GENEVA STEEL: Hiring CH2M Hill as Environmental Consultant GLOBAL CROSSING: Court Approves Settlement Pact with Accenture GOODYEAR TIRE: S&P Cuts & Plucks B+ Class A-1 Rating from Watch HAWAIIAN AIRLINES: Wants to Engage Dow Lohnes as Special Counsel HEALTHSOUTH CORP: Bank Lenders Agree to Forbear Until May 1 HEARTLAND SECURITIES: Committee Taps Cole Schotz as Attorneys HOLLINGER INC: Dec. 31 Balance Sheet Insolvency Widens to $351MM HUGHES ELEC.: GM's Ratings Not Affected by Sale of Interests IMCLONE SYSTEMS: Fails to Satisfy Nasdaq Listing Requirements INTEGRATED INFO.: Commences Trading on OTCBB Under IISX Symbol INTERNATIONAL PAPER: Will be Paying Regular Quarterly Dividend ISLE OF CAPRI: Names Barron Fuller VP & GM of Marquette Casino J.CREW GROUP: Reports a Slight Decline in Revenues for March J.CREW: Commences Exchange Offer for Junk-Rated Sr. Debentures KENNY INDUSTRIAL: Committee Brings-In Arnstein & Lehr as Counsel KMART CORP: Dist. Ct. Says Critical Vendor Payments Improper KMART CORP: Appoints Nine Members to New Holding Company Board LODGENET ENTERTAINMENT: Fiscal Year Net Loss Balloons to $29-Mil MAGELLAN HEALTH: Employing Ordinary Course Professionals MAXXIM MEDICAL: Will Padlock Richmond, Virginia Facility MEDICALCV INC: Consummates $3.8 Million Refinancing Transaction MIDLAND STEEL: Pepper Hamilton Hired as Committee's Attorneys MOUNT SINAI-NYU: Fitch Cuts $665M Bond Rating to BB+ from BBB- NATIONAL STEEL: Has New Bids for Sale of All Principal Assets NATIONAL STEEL: AK Steel Reaffirms $1.25-Billion Bid for Assets NATIONAL STEEL: Steelworkers Outraged by AK Steel Proposal NATIONAL STEEL: U.S. Steel Delivers $975MM Bid to Acquire Assets NRG ENTERTAINMENT: Commences 1-For-125 Reverse Stock Split OBSIDIAN ENTERPRISES: Jan. 31 Balance Sheet Upside-Down by $1MM OWENS CORNING: Restructuring Toledo HQ Lease Obligations PACIFIC GAS: Makes $75-Mill. Tax Payments to California Counties PHOTRONICS INC: Prices $125 Million Conv. Sub. Debt Offering RAINIER: S&P Cuts 4 Class Note Ratings to Low-B & Junk Levels RELM WIRELESS: Independent Auditors Express Going Concern Doubt RICA FOODS: Brings-In Stonefield Josephson as New Auditors RITE AID: March 1 Balance Sheet Insolvency Stands at $112 Mill. RITE AID: Appoints Mary Sammons as New Chief Executive Officer ROHN INDUSTRIES: Inks Alliance Agreement with Clark Engineers SAFETY-KLEEN: Balks at Raygar's $1.4 Million or Billion Claim SEA CONTAINERS: S&P Ratchets Corporate Credit Rating Down to BB- SEITEL INC: Noteholders Agree to Extend Standstill Until May 15 SERVICE MERCHANDISE: Court Approves Amended Disclosure Statement SORRENTO NETWORKS: Net Loss from Q4 Operations Improve 45% SPIEGEL: Will Continue Using Existing Cash Management System SPIEGEL GROUP: March Net Sales Dwindle 28% to about $158 Million TOWER AUTOMOTIVE: Says Funds Sufficient to Maintain Operations UNITED AIRLINES: Seeks to Extend Section 1110(b) Stipulations USG CORP: Obtains Additional Time to Move Actions to Del. Court USG: Says Cash Sufficient to Fund Operations while in Bankruptcy VON EASTERN: Discontinues CCAC Contract to Restructure Operation VON EASTERN: Union Lobbies for Province to Provide Added Funding WARNACO GROUP: Court Confirms Class 5 Claims Distribution WHITE HALL: Pennsylvania Insurer Placed into Liquidation WHOLE FOODS: S&P Affirms & Revises BB Rating Outlook to Positive WORLDCOM INC: Wants to Establish Circuit Rejection Procedures WYNDHAM INT'L: Appoints Patricia Smith to SVP of Human Resources * BOND PRICING: For the week of April 14 - 18, 2003 ********* 8X8 INC: Has Until July 7 to Meet Nasdaq Listing Requirements ------------------------------------------------------------- 8x8, Inc., (Nasdaq: EGHT) announced that Nasdaq has notified 8x8 that it has been granted an additional ninety days, or until July 7, 2003, to regain compliance with Nasdaq's requirement that companies listed on the Nasdaq SmallCap Market maintain a closing bid price equal to or greater than $1.00. In order to regain compliance with the requirement, the closing bid price of 8x8's common stock must equal or exceed $1.00 for at least ten consecutive trading days within this ninety day period. Nasdaq's notice further stated that if 8x8 is unable to regain compliance with the $1.00 minimum bid price requirement by July 7, 2003, Nasdaq will notify 8x8 that its common stock will be delisted from the Nasdaq SmallCap Market. At that time, 8x8 may appeal that determination to a Nasdaq Listing Qualifications Panel. During this extension period 8x8 will maintain its listing on the Nasdaq SmallCap Market and will continue to trade under its Nasdaq security symbol, EGHT. 8x8, Inc., offers voice and video solutions under the Packet8 brand name -- http://www.packet8.net-- consumer videophones, hosted iPBX solutions (through its subsidiary Centile, Inc.), and voice and video semiconductors and related software (through its subsidiary Netergy Microelectronics, Inc.). For more information, visit 8x8's Web site at http://www.8x8.com * * * Liquidity and Capital Resources In its Form 10-Q for the period ended December 31, 2002, the Company reported: "As of December 31, 2002, we had cash and cash equivalents and short-term investments approximating $6.3 million, representing a decrease of approximately $2.2 million from September 30, 2002. We currently have no bank borrowing arrangements. "Cash used in operations of approximately $6.1 million for the first nine months of fiscal 2003 was primarily attributable to the net loss of $7.6 million, adjusted for $1.0 million of non- cash restructuring and other charges and $1.4 million of depreciation and amortization and net cash used for changes in operating assets and liabilities of $1.0 million. Cash used in operations of approximately $6.5 million for the first nine months of fiscal 2002 was primarily attributable to the net loss of $6.0 million, adjusted for the non-cash extraordinary gain of $779,000 and $3.2 million of depreciation and amortization and net cash used for changes in operating assets and liabilities of $2.8 million. Our negative operating cash flows primarily reflect our net losses resulting from the same factors affecting our revenues and expenses as described above. "Cash used in investing activities in the nine months ended December 31, 2002 was attributable to net purchases of marketable equity securities of $178,000 and capital expenditures of $130,000, partially offset by proceeds from the sale of equipment of $40,000. Cash provided by investing activities in the nine months ended December 31, 2001 is attributable to proceeds from the sale of an investment in marketable equity securities of $543,000 and proceeds from the sale of equipment of $116,000, partially offset by capital expenditures of $158,000. "Cash provided by financing activities during the first nine months of fiscal 2003 consisted primarily of proceeds resulting from the sale of common stock to employees through our employee stock purchase and stock option plans. Cash used in financing activities during the first three quarters of fiscal 2002 consisted of the $4.5 million payment associated with the redemption of the convertible subordinated debentures and certain costs incurred in connection with the redemption, offset partially by proceeds resulting from the sale of our common stock to employees through our employee stock purchase and stock option plans "As of December 31, 2002, our principal commitments consisted of obligations outstanding under noncancelable operating leases. "As noted previously, we redeemed our convertible subordinated debentures in December 2001. The consideration included the issuance of 1,000,000 shares of our common stock to the lenders. We have committed to maintaining the effectiveness of the registration statement filed with the Securities and Exchange Commission covering the resale of these shares. Should we fail to maintain the effectiveness of the registration statement, we may be required to pay cash penalties and redeem all or a portion of the shares at the higher of $0.898 or the market price of our common stock at the time of the redemption which could have a material adverse effect on our cash flows and results of operations. The value of the shares still held by the lenders of $678,000 at December 31, 2002, based upon the $0.898 per share minimum potential redemption price, is reflected as contingently redeemable common stock in the condensed consolidated balance sheet. "Based upon our current expectations, we believe that our current cash and cash equivalents and short-term investments, together with cash generated from operations, will satisfy our expected working capital and capital expenditure requirements through at least June 30, 2003. However, we believe we will need additional working capital to fund operations shortly thereafter. The possibility that we will not be able to meet our obligations as and when they become due over the next twelve months raises substantial doubt about our ability to continue as a going concern. Accordingly, we have been pursuing, and will continue to pursue, the implementation of certain cost reduction strategies. Additionally, we plan to seek additional financing and evaluate financing alternatives during the next twelve months in order to meet our cash requirements for fiscal 2004. We may also seek to explore business opportunities, including acquiring or investing in complementary businesses or products that will require additional capital from equity or debt sources. Additionally, the development and marketing of new products could require a significant commitment of resources, which could in turn require us to obtain additional financing earlier than otherwise expected. We may not be able to obtain additional financing as needed on acceptable terms, or at all, which may require us to reduce our operating costs and other expenditures, including reductions of personnel and suspension of salary increases and capital expenditures. Alternatively, or in addition to such potential measures, we may elect to implement other cost reduction actions as we may determine are necessary and in our best interests, including the possible sale or cessation of certain of our business segments. Any such actions undertaken might limit our opportunities to realize plans for revenue growth and we might not be able to reduce our costs in amounts sufficient to achieve break-even or profitable operations. If we issue additional equity or convertible debt securities to raise funds, the ownership percentage of our existing stockholders would be reduced and they may experience significant dilution. New investors may demand rights, preferences or privileges senior to those of existing holders of our common stock. If we are not successful in these actions, we may be forced to cease operations." ADELPHIA BUSINESS: Asks Judge Gerber to Okay Teleport Settlement ---------------------------------------------------------------- Adelphia Business Long Haul asks Judge Gerber to approve their settlement agreement with Digital Teleport, Inc. According to Judy G.Z. Liu, Esq., at Weil Gotshal & Manges LLP, in New York, ABIZ Long Haul and Digital Teleport are parties to a certain Indefeasible Right of Use and Telecommunications Services Agreement regarding, among other things, the granting by Digital Teleport to ABIZ Long Haul of an IRU in certain dark fiber strands in Digital Teleport's fiber optic communication transmission facilities, together with collocation spaces along these routes. Certain disputes have arisen between ABIZ Long Haul and Digital Teleport in connection with the IRU Agreement. Specifically, each party contends that the other party has not complied with the IRU Agreement. As a result, ABIZ Long Haul has filed a proof of claim for $3,000,000 in Digital Teleport's Chapter 11 case and Digital Teleport has filed a proof of claim for $4,000,000 in ABIZ Long Haul's Chapter 11 case. Moreover, Digital Teleport alleges that its $4,000,000 proof of claim includes a set-off of Long Haul's $3,000,000 proof of claim. The parties now want to settle all claims between them relating to the IRU Agreement. The salient terms of the Settlement Agreement are: A. Rejection of IRU Agreement: Digital Teleport and ABIZ Long Haul will both reject the IRU Agreement in their Chapter 11 cases. B. Withdrawal of Claims and Dismissal of Actions by ABIZ Long Haul: After the closing of the Settlement Agreement, ABIZ Long Haul will dismiss any actions it may have against Digital Teleport, withdraw its proof of claim in the Digital Teleport Chapter 11 case and waive any administrative claim it may have against Digital Teleport. C. Withdrawal of Claims and Dismissal of Actions by Digital Teleport: After the closing of the Settlement Agreement, Digital Teleport will dismiss any actions it may have against ABIZ Long Haul, withdraw its proof of claim in the ABIZ Long Haul Chapter 11 case and waive any administrative claim it may have against ABIZ Long Haul. D. Purchase of Lamda Services: ABIZ Long Haul will purchase Lamda services from Digital Teleport pursuant to the terms and conditions set forth on the Lamda Service Order and Lamda Service Order Terms and Conditions. In connection with the Lamda Service Order, the Debtors will pay to Digital Teleport a $400,000 initial payment and $250,000 subsequent payments for each of the two remaining years for the Lamda Service Order. E. Disputes: Digital Teleport and ABIZ Long Haul will settle all disputes between themselves. F. Release of Claims: Digital Teleport and ABIZ Long Haul will release all claims between themselves. ABIZ Long Haul believes that the terms of the Settlement Agreement are fair and equitable, and fall well within the range of reasonableness. Ms. Liu tells the Court that it is the product of hard-fought, arm's-length negotiations on both sides and approval of the Settlement Agreement is in the paramount interests of ABIZ Long Haul's creditors. Through the Settlement Agreement, the parties have avoided the uncertainties attendant to potentially complex and protracted litigation with respect to the disputes, which may have arisen from the IRU Agreement. The Settlement Agreement also provides for the purchase of certain high capacity circuits, known as Lamda Services, which ABIZ Long Haul requires in order to connect certain of its markets to its overall backbone network. Ms. Liu points out that the Settlement Agreement allows ABIZ Long Haul to purchase these services at a competitive purchase price. In addition, the Settlement Agreement obviates the need for ABIZ Long Haul and Digital Teleport to file duplicative motions to reject the IRU Agreement in their Chapter 11 cases and prevents the possible disputes that could arise from the dual rejections. Experienced counsel for each of the parties expended a great deal of time and effort in reaching a resolution. By avoiding this potential litigation and entering into the proposed settlement, ABIZ Long Haul's estate will maximize value for its creditors, and proceed with its Chapter 11 case without the distraction of a prolonged and costly litigation with Digital Teleport. (Adelphia Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADELPHIA COMMS: Wants More Time to File Schedules and Statements ---------------------------------------------------------------- Adelphia Communications and its debtor-affiliates ask the Court to further extend the time within which they are required to file their creditor list, list of equity security holders, and schedules and statements of financial affairs for an additional 120 days through August 1, 2003. Marc Abrams, Esq., at Willkie Farr & Gallagher, in New York, tells the Court that the ACOM Debtors have expended substantial efforts responding to the many exigencies and other matters that are incident to any Chapter 11 case but which are compounded in a case of this size and complexity. Since December 20, 2002, the date the ACOM Debtors' previous extension was granted, the Debtors have been actively engaged in numerous tasks incident to the Chapter 11 process and the operation of their businesses, including: A. following a lengthy period of negotiating and careful and deliberate consideration by ACOM's Board of Directors, executed employment agreements with William Schleyer to serve as Chairman of the Board and ACOM's Chief Executive Officer and Ronald Cooper to serve as ACOM's President and Chief Operating Officer, and filed a motion seeking authority to enter into these agreements. The Debtors were confronted with extensive litigation with the Equity Committee regarding these agreements, including a four- day evidentiary hearing. The Court issued a written decision approving the hiring of Messrs. Schleyer and Cooper; B. commenced a dialogue with the Committees and governmental units involving the implementation of a governance protocol designed to reconstitute the Board through the selection of new, independent directors; C. continued their migration efforts from Adelphia Business Solutions and the claims reconciliation process attendant thereto, including the filing of a request to conduct a 2004 examination seeking the production of documents and obtaining approval of a joint rejection procedure for executory contracts and unexpired leases, which has since been withdrawn; D. obtained approval of certain amendments and waivers in connection with their $1,500,000,000 debtor-in-possession financing facility; E. obtained approval of the terms of postpetition financing for Niagara Frontier Hockey, L.P. and general authority to negotiate a sale of these entities' operating assets; F. continued to analyze their executory contracts and leases to determine whether these agreements should be assumed or rejected by the various estates, and obtained a court order rejecting leases and agreements; G. continued to analyze the disposition of non-core assets; H. continued cooperation with the SEC and the Department of Justice in connection with their ongoing investigations and proceedings; I. worked closely with the Committees and senior secured lenders and their professionals to keep all parties fully informed of the Debtors' finances and efforts to formulate a business plan. Throughout the postpetition period, the Constituents' professionals have been given access to the Debtors' senior management. The Constituents' advisors have also had open access to Debtors' counsel and other advisors. In addition, the Constituents have directly participated in meetings with the Debtors and their professionals. The Debtors anticipate that this open exchange among the Debtors and the Constituents will continue; J. engaged in discussions with local franchise authorities in an effort to resolve issues relating to: (i) alleged prepetition defaults under franchise agreements; (ii) monetary and performance upgrade obligations required under the agreements; (iii) the continued provision of uninterrupted service to their customers; and (iv) the renewal or extension of numerous franchises. The Debtors are party to 3,000 franchise agreements with various municipalities. During the past several months, the Debtors spent a considerable amount of time responding to certain LFAs' motion in support of the formation of an official franchise committee and seeking relief in connection with the denial of three New Hampshire franchises. In addition, the Debtors are continuing to compile a database of all of their nationwide franchise obligations; and K. commenced litigation against their former auditors, Deloitte & Touche. Mr. Abrams adds that a team of the Debtors' employees is performing a complete internal review of the Debtors' books and records in connection with the re-audit of the Debtors' books and records and restatement of their financial statements. They are also compiling the information necessary to prepare the Schedules and Lists. These assignments are extremely time- consuming, not only due to the sheer size of the Debtors' operations, but also because of the unique circumstances that led up to the filing of these cases. While the Debtors are tackling both tasks simultaneously, much of the information simply will not be available until the re-audit process is completed. Accordingly, while the Debtors have taken steps towards compiling their Schedules and Lists, the review process and the completion of the Schedules and Lists will take at least a few additional months to complete. The Debtors submit that they have "cause" to further extend the time to file the Schedules and the Lists in view of the facts and circumstances of these cases. (Adelphia Bankruptcy News, Issue No. 32; Bankruptcy Creditors' Service, Inc., 609/392-0900) ADVANCED LIGHTING: Unit Obtains $2.7 Million Funding from DARPA --------------------------------------------------------------- Advanced Lighting Technologies, Inc., (OTCBB:ADLTQ) announced that APL Engineered Materials, Inc., a wholly owned subsidiary of Advanced Lighting Technologies, Inc., has been awarded $2.7 million in funding over the next three years, from DARPA through the Army Aviation and Missile Command to develop a new arc discharge light source for its High Efficiency Distributed Lighting project. DARPA, the Defense Advanced Research Projects Agency, selected APL Engineered Materials and its technology partners as the developers and suppliers for new key technologies in high- efficiency, full-spectrum quartz metal halide light sources for next generation lighting in ships and other military applications. APL Engineered Materials, the world's leading supplier of materials for high-intensity discharge lamp applications, has extensive capabilities in lamp materials fabrication and characterization. APL will apply its expertise in these areas to the problems inherent in making a low-wattage light source of high efficiency and brightness with a uniform spectral output. The technology developed under this effort will enhance and expand the use of QMH light sources for use in the HEDLight applications and for use in energy-efficient commercial lighting applications worldwide. ADLT's Venture Lighting International, Inc. division will be supplying equipment and design expertise to APL Engineered Materials. APL has teamed with Fiberstars, Inc., the world's largest fiber optic lighting company, and Venture Lighting International, another Advanced Lighting company, on the HEDLight project. Fiberstars will serve as technical advisors and consultants to APL in the development of this next generation light source. Fiberstars has recently announced the award of DARPA/AMCOM funding for work on the optics, luminaire and integrated illuminator technology components of the "HEDLight" program. Together, the total funding involving APL Engineered Materials, Fiberstars, Advanced Lighting Technologies and partner companies totals $9.5 million. Advanced Lighting Technologies CEO Wayne Hellman noted, "APL's participation is expected to supply key new technologies in light sources for high-efficiency distributed lighting. The results of the DoD-funded effort should enhance the existing commercial portfolios of both Advanced Lighting Technologies and its technology partners, providing a path for future growth of the successful technology in the commercial marketplace. The DoD will obtain better technology in the future by working with APL, Advanced Lighting Technologies and Fiberstars. We welcome the opportunity of working with DARPA and our partner companies on this exciting project. I congratulate Dr. Timothy R. Brumleve, APL Vice President of Technology, and his team for the fine job they did in submitting these successful proposals to DARPA." Advanced Lighting Technologies, Inc., is an innovation-driven designer, manufacturer and marketer of metal halide lighting products, including materials, system components, systems and equipment. The Company also develops, manufactures and markets passive optical telecommunications devices, components and equipment based on the optical coating technology of its wholly owned subsidiary, Deposition Sciences, Inc. Advanced Lighting filed for Chapter 11 protection on February 5, 2003 (Bankr. N.D. Ill. Bankr. Case No. 03-05256). Jerry L. Swizter, Jr., Esq., at Jenner & Block LLC, represents the Debtor. The Company's Dec. 31, 2002, balance sheet shows assets totaling $184,939,000. The Company has a debtor-in-possession credit facility with several financial institutions in place. The DIP Facility matures on July 30, 2003. As part of the bankruptcy process, the Company hopes to refinance its DIP Facility and pursue restructuring with its noteholders and equity holders. The DIP Facility requires the Debtor to begin a process to sell assets sufficient to satisfy indebtedness to the Banks if no refinancing can be accomplished by March 30, 2003. AIR CANADA: Gets Court's Blessing to Indemnify Directors -------------------------------------------------------- At Air Canada and its affiliated CCAA applicants' behest, Mr. Justice Farley approves in his Initial Order Air Canada's request to indemnify its directors for all non-criminal claims of any kind that may not be covered by existing directors and officers liability insurance where the director acted honestly and in good faith. This Directors' Charge is subject to a C$170,000,000 cap and takes a third and fifth-priority in the CCAA Proceedings. Specifically, in the event of a melt-down, subject to liens valid, enforceable and perfected prior to April 1, 2003, the proceeds of a liquidation of the Applicants' property will be distributed: * First, to professionals for fees covered by the Administrative Charge (with GE Captial's consent), up to a maximum of C$10,000,000; * Second, to GE Capital Canada, up to a maximum of US$700,000,000; * Third, up to C$70,000,000 on account of the Directors' Charge; * Fourth, any claims on account of the Administrative Charge exceeding C$10,000,000; and * Fifth, any claims on account of the Directors' Charge, exceeding C$70,000,000 and subject to a C$100,000,000 cap. (Air Canada Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) Air Canada's 10.250% bonds due 2011 (AC11CAR1) are presently trading at 24 and 28. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AC11CAR1for real-time bond pricing. AMERICAN MEDIA: Names R.F. Leeds as New Natural Health Publisher ---------------------------------------------------------------- Carolyn Bekkedahl, Executive Vice President of American Media, Inc., and Publishing Director of the Weider Active Lifestyle Group, named Randy Frank Leeds as the new publisher of Natural Health magazine. "Randy has been successfully selling the active lifestyle and wellness market for over six years," Ms. Bekkedahl said. "In addition, she also has a unique background that is well suited for the plans we have for Natural Health. An entrepreneur who has owned her own marketing company, Randy has also worked in television and cable, and has experience in international syndication ventures -- all areas of expertise that will come in handy as we re-launch and market Natural Health." Ms. Leeds added, "I fell in love with the magazine the minute Carolyn showed me the redesign done by Roger Black. The new Natural Health will have a very distinct personality that both readers and advertisers will find refreshing and engaging." Commenting on the appointment, American Media Chairman, David J. Pecker said, "We are making a multi-million dollar investment in Natural Health and choosing the right person to be the publisher is critical. We are very fortunate to now have Randy as part of our team." Ms. Leeds had been with Fitness magazine since 1996, most recently as Associate Publisher. Prior to Fitness, she had managed her own company, Frank Marketing Inc., and worked extensively in the cable TV industry. The titles in the Weider Active Lifestyle Group are Shape, Fit Pregnancy and Natural Health, and represent the leading publications in the women's active lifestyle, pre- & postnatal fitness and self-care categories. These titles have a readership in excess of 9 million. American Media, Inc., is one of the largest media companies in the U.S. The company publishes six of the 14 best selling weekly magazines, including the no.2 and no.4 titles, the National Enquirer and Star. AMI recently acquired Weider Publications, the leading publisher of health and fitness magazines, including Shape, Men's Fitness, Muscle & Fitness, Muscle & Fitness Hers, Flex, Fit Pregnancy and Natural Health. The company also publishes the best selling country music magazines, Country Weekly and Country Music; a Latino entertainment magazine, Mira!; two automotive magazines, AMI's Auto World and NOPI Street Performance Compact; and more than 200 Mini-Mags and Digests. AMI recently launched its own book division with seven titles released to date. In addition to print properties, AMI owns Distribution Services, Inc., the country's no.1 in-store magazine merchandising company. As reported in Troubled Company Reporter's January 9, 2003 edition, Standard & Poor's affirmed its 'B+' corporate credit rating for publisher American Media Operations Inc., following the company's pending acquisition of Weider Publications LLC for $350 million. In addition, Standard & Poor's assigned its 'B+' senior secured rating to American Media Operations Inc.'s $140 million tranche C-1 term loan, and 'B-' rating to the company's $150 million subordinated notes due 2011. The Boca Raton, Florida-based company has pro forma total debt of $1.02 billion as of September 23, 2002. The outlook is stable. "Standard & Poor's expects that the transaction, while largely debt-financed, will not materially alter credit measures over the near term due to potential operating synergies and cost- saving opportunities through the leveraging of American Media's existing infrastructure," said Standard & Poor's credit analyst Hal Diamond. AMERISTAR CASINOS: Appoints Steve Eisner as VP for Development -------------------------------------------------------------- Ameristar Casinos, Inc., (Nasdaq: ASCA) announced that Steve Eisner has been named Vice President of Development. The company also announced it has hired Greg Cooper as Vice President of Legal Affairs. In his new position, Eisner will focus on pursuing domestic and international development opportunities to expand and diversify the Company's portfolio of properties. He will also assist on governmental affairs, which will enhance the Company's depth in this critical area. He will continue to be based at Ameristar's office in Encino, Calif. Eisner joined Ameristar in 1999 as Vice President of Legal Affairs. Since that time, he has played a substantial role in the Company's debt and equity financing transactions; assisted in completing Ameristar's acquisition of the Missouri properties and their integration into the Company's operations; and supported Ameristar's construction and development groups, including providing legal support for the Company's development and construction of the new Ameristar Casino St. Charles. During his tenure with Ameristar, Eisner has also been responsible for negotiating a variety of real estate transactions, SEC reporting and compliance, and providing legal support for the Company's Finance Department. Eisner began his career with O'Melveny & Myers LLP in Los Angeles, where he handled a variety of corporate transactions, including mergers and acquisitions, securities offerings, bank financings, joint ventures and corporate start-ups. Eisner earned a Bachelor of Arts degree in Economics from The University of California, Berkeley, with high honors, and a Juris Doctorate from The University of California, Los Angeles School of Law. "The transition to Vice President of Development will be a natural one for Steve," said Gordon R. Kanofsky, Ameristar's Executive Vice President. "He has been involved with many development opportunities at Ameristar and has strong analytical and negotiating skills. His background in transactional law will also serve him well as we evaluate and pursue potential new opportunities to grow our company." As Vice President of Legal Affairs, Cooper will assume many of Eisner's prior responsibilities. These include providing legal support on real estate and construction contracts, financing transactions, SEC reporting and compliance, employee benefit plans and ERISA matters. Cooper joins Ameristar from Los Angeles, after practicing law at two top-tier national law firms: Akin, Gump, Strauss, Hauer & Feld; and Sullivan & Cromwell. His background includes general corporate and transactional law, securities offerings and mergers and acquisitions. He also served as a law clerk in the 9th Circuit Court of Appeals. Cooper earned a Bachelor of Arts degree in Politics from Princeton University, with summa cum laude honors. He holds a Juris Doctorate from Yale Law School; while at Yale he was lead article editor for the Yale Journal on Regulation. Cooper will be located at Ameristar's Corporate office in Las Vegas. Peter C. Walsh, Ameristar's Senior Vice President and General Counsel, noted: "We are very pleased to have Greg join our department. His experience as a transactional attorney, combined with his stellar educational and professional credentials, will be valuable assets to our Corporate legal team." Ameristar Casinos, Inc. (Nasdaq: ASCA) -- whose 10-3/4% Notes due Feb. 2009 are rated B3 by Moody's and at B by Standard & Poor's -- is an innovative, Las Vegas-based gaming and entertainment company known for its distinctive, quality conscious hotel-casinos and value orientation. Led by President and Chief Executive Officer Craig H. Neilsen, the organization's roots go back nearly five decades to a tiny roadside casino in the high plateau country that borders Idaho and Nevada. Publicly held since November 1993, the corporation owns and operates six properties in Nevada, Missouri, Iowa and Mississippi, two of which carry the prestigious American Automobile Association's Four Diamond designation. Ameristar's Common Stock is traded on the NASDAQ National Market System under the symbol: ASCA. Visit the Company's Web site at http://www.ameristarcasinos.com AQUILA: $630 Million of New Financing Averts Bankruptcy Filing -------------------------------------------------------------- Aquila, Inc. (NYSE: ILA) completed a new financing agreement Friday that replaces its short-term credit facilities. The package consists of two secured loan facilities: * a one-year $200 million loan to UtiliCorp Australia, Inc. and * a $430 million three-year term loan to Aquila. The initial amount drawn under the one-year loan will be $100 million, and the company will have an option to draw another $100 million within the next 30 days. The one-year loan is non- recourse to Aquila, Inc. "Completing this financing package is a key component of the overall plan we've been pursuing to achieve financial stability and return Aquila to its regulated utility roots," said Rick Dobson, Aquila's interim chief financial officer. "We clearly have more work ahead, but with this financing in place, plus our existing cash and cash flow from operations, the company should have sufficient liquidity to execute the remainder of its restructuring plan." Proceeds from the loan package will be used to terminate the company's existing 364-day senior bank facility, repay synthetic leases associated with two power plants in Illinois, and cash collateralized outstanding letters of credit. Initial interest rates on the loans are 7 percent for the one-year loan and 8.75 percent for the three-year term loan. These Are Secured Loans Collateral for the one-year loan includes the company's interests in its Australian investments, interests in its portfolio of U.S.-based independent power plants and two nonregulated power plants in Illinois. Collateral for the three-year term loan will include a combination of the company's non-regulated and regulated utility assets. Later this month Aquila will initiate regulatory proceedings to secure the three-year loan with additional U.S.- based regulated utility assets. Upon regulatory approval, the interest rate on the three-year loan will be reduced to 8.00 percent. Credit Suisse First Boston served as the sole arranger for the new loans. Additional details on the refinancing will be discussed when Aquila reviews its 2002 fourth quarter and year- end results during a webcast scheduled for April 15 at 9 a.m. Eastern. Through the first nine months of 2002, Aquila reported a net loss of $1.075 billion and the company indicates it incurred additional losses in the fourth quarter of 2002. Year-end results will be released tomorrow, April 15. Based in Kansas City, Missouri, Aquila operates electricity and natural gas distribution networks serving customers in seven states and in Canada, Australia and the United Kingdom. The company also owns and operates power generation assets. More information is available at http://www.aquila.com. ARIBA INC: Completes Internal Review of All Accounting Matters -------------------------------------------------------------- Ariba, Inc. (Nasdaq: ARBAE), the leading Enterprise Spend Management solutions provider, announced that the company's internal review of certain accounting matters is complete and the company's annual report on Form 10-K for the fiscal year ended September 30, 2002 and quarterly report on Form 10-Q for the quarter ended December 31, 2002 have been filed with the Securities and Exchange Commission. As a result of this review, Ariba has restated its financial statements for the fiscal years ended September 30, 2000 and 2001, and for the quarters ended December 31, 1999 through June 30, 2002. The company has also adjusted the preliminary financial statement information for the quarter and fiscal year ended September 30, 2002 (announced on October 23, 2002) and for the quarter ended December 31, 2002 (announced on January 23, 2003). More information is available in the updated periodic reports that have been filed with the SEC on Forms 10-K and 10-Q. The company has been in communication with Nasdaq and expects to be in compliance with its continued listing requirements upon filing its Forms 10-Q/A for the quarters ended March 31 and June 30, 2002. The net effect of all the accounting adjustments is to increase the company's net loss by $9.8 million in fiscal year 2000 and $14.1 million in fiscal year 2001, decrease the net loss by $22.1 million in fiscal year 2002, and increase the net loss by $2.0 million in the first quarter of fiscal year 2003. The cumulative net effect of the adjustments is to increase the company's accumulated deficit at December 31, 2002 by $3.8 million to $4.24 billion. None of these adjustments has any impact on the company's cash balances for any period. Details of the Review and Restated Items As previously announced, the review initially focused on a $10.0 million payment in March 2001 from Keith Krach, the company's chairman and co-founder to Larry Mueller, the company's president and chief operating officer at the time, and Mr. Krach's payment of $1.2 million for chartered air services provided to Mr. Mueller over the period from September 2000 through July 2001. Because no company funds were used in these transactions and there was no commitment to or from Ariba, the company originally viewed these payments as personal. Ariba has now concluded that, for accounting purposes, the company should treat these transactions as if they were capital contributions from Mr. Krach, which were then expensed by Ariba as compensation to Mr. Mueller. Accordingly, the company's restated consolidated financial statements for the fiscal years ended September 30, 2000 and 2001 reflect non-cash charges to operating expenses in connection with these transactions. Also as previously announced, the company reviewed its accounting for stock options issued by companies that Ariba acquired in fiscal year 2000. The company determined that certain stock options granted by these acquired companies to a limited number of individuals shortly before those acquisitions should be accounted for as stock-based compensation expense, rather than be included as part of the purchase price of these companies and amortized as goodwill. As a result, the company's restated consolidated financial statements for fiscal years 2000 and 2001 and the company's consolidated financial statements for fiscal year 2002 reflect an increase in non-cash stock-based compensation expense and a reduction of goodwill amortization expense. Ariba further determined that the fair value of certain unvested stock options granted by one of these companies to several consultants was not included in the measurement of stock compensation expense as required. The cumulative effect of these adjustments is a non-cash charge of $10.1 million, consisting of increases to the company's operating expenses for fiscal years 2000 and 2001 of $13.5 million and $10.5 million, respectively, and decreases for fiscal year 2002 and the first quarter of fiscal year 2003 of $13.1 million and $777,000, respectively. Ariba also reviewed its accounting policies and their application to various additional items and identified a number of transactions in which the company's accounting policies had not been consistently or appropriately applied. The company has included the adjustments described below for these items in the company's restated financial statements. Ariba identified three license arrangements that it entered into with vendors during fiscal years 2000 and 2001 at or about the same time the company incurred obligations to purchase goods or services from those vendors. Ariba has concluded that it should record expenditures associated with these obligations as reductions of license revenues received from the customer. The effect of these adjustments, while not affecting net loss in any year, is to decrease revenues by $583,000, $8.2 million and $275,000 in fiscal years 2000, 2001 and 2002, respectively. The company also determined that the timing of revenue recognition for several license arrangements should be adjusted between periods, which results in the acceleration of revenue in certain cases and the deferral of revenue in others. The net effect of these adjustments is to decrease revenues by $995,000 in fiscal year 2000 and to increase revenues by $6.4 million and $883,000 million in fiscal years 2001 and 2002, respectively. As a result of all of these revenue adjustments, the company's revenues decreased by $1.6 million and $1.8 million in fiscal years 2000 and 2001, respectively, increased by $608,000 in fiscal year 2002, and decreased by $311,000 in the first quarter of fiscal year 2003. In addition, the company identified several accrued expense items for which Ariba concluded that the amount of the liability, the initial timing of recording the liability, or the timing of releasing the liability should be adjusted. These items include accruals for payroll taxes, royalties payable, litigation, bonuses and benefits, and income taxes. These accrued expense adjustments, together with expense reductions resulting from the revenue adjustments described above, caused operating expenses to decrease by $5.3 million in fiscal year 2000, $10.8 million in fiscal year 2001, $6.0 million in fiscal year 2002 and $221,000 for the first quarter of fiscal year 2003. In addition, the provision for income taxes increased by $1.4 million in fiscal year 2001, decreased by $2.4 million in fiscal year 2002, and increased by $2.7 million for the first quarter of fiscal year 2003. These adjustments include a subsequent event relating to a tax claim resolved in fiscal year 2003 that reduced expenses in fiscal year 2002 and increased expenses in the quarter ended December 31, 2002 by $2.7 million compared to previously announced preliminary results for those periods. Update to Expense Guidance for the Quarter Ended March 31, 2003 Due to the unexpected length and breadth of the review process, the company has incurred higher-than-anticipated operating expenses during its second quarter of fiscal 2003 (ended March 31, 2003). As a result, Ariba now anticipates that operating expenses will be roughly $5 million higher than the previous guidance provided for the quarter, thereby increasing the company's net loss by approximately $0.02 per share. Ariba expects to announce its second quarter results after the close of the market on April 28, 2003. Ariba, Inc., is the leading Enterprise Spend Management (ESM) solutions provider. Ariba helps companies develop and leverage spend management as a core competency to drive significant bottom line results. Ariba Spend Management software and services allow companies to align their organizations with a spend-centric focus and deploy closed-loop processes for increased efficiencies and sustainable savings. Visit http://www.ariba.comfor more information on the Company. * * * Liquidity and Capital Resources In its report for the period ended June 30, 2002, filed with the Securities and Exchange Commission, the Company stated: "As of June 30, 2002, we had $167.6 million in cash, cash equivalents and short-term investments, $80.2 million in long- term investments and $30.6 million in restricted cash, for total cash and investments of $278.4 million and ($1.4 million) in working capital. As of September 30, 2001, we had $217.9 million in cash, cash equivalents and short-term investments, $43.1 million in long-term investments and $32.6 million in restricted cash, for total cash and investments of $293.6 million and $57.6 million in working capital. Our working capital declined $59.0 million from September 30, 2001 to June 30, 2002, reflecting a reduction of current assets by $90.8 million (of which $37.1 million related to transfers of investments to non-current investments due to longer maturities) and a $31.9 million reduction of current liabilities. "Net cash used in operating activities was approximately $19.0 million for the nine months ended June 30, 2002, compared to $17.6 million of net cash provided by operating activities for the nine months ended June 30, 2001. Net cash used in operating activities for the nine months ended June 30, 2002 is primarily attributable to decreases in accounts payable, accrued compensation and related liabilities, accrued liabilities and deferred revenue, and to a lesser extent, the net loss for the period (less non-cash expenses). These cash flows used in operating activities were partially offset by decreases in accounts receivable and, to a lesser extent, prepaid expenses and other assets. "Net cash provided by investing activities was approximately $42.8 million for the nine months ended June 30, 2002 compared to $135.6 million of net cash used in investing activities for the nine months ended June 30, 2001. Net cash provided by investing activities for the nine months ended June 30, 2002 is primarily attributable to the redemption of our investments partially offset by the purchases of property and equipment. Although the recent restructuring of our operations will reduce our capital expenditures over the near term, these expenditures may increase over the longer term. "Net cash provided by financing activities was approximately $8.1 million for the nine months ended June 30, 2002 compared to $80.5 million of net cash provided by financing activities for the nine months ended June 30, 2001. Net cash provided by financing activities for the nine months ended June 30, 2002 is primarily from the proceeds from the exercise of stock options offset by the repurchase of our common stock and payment of capital lease obligations. "In March 2000, we entered into a new facility lease agreement for approximately 716,000 square feet constructed in four office buildings and an amenities building in Sunnyvale, California as our headquarters. The operating lease term commenced in phases from January through April 2001 and ends on January 24, 2013. Minimum monthly lease payments are $2.2 million and will escalate annually with the total future minimum lease payments amounting to $347.9 million over the lease term. We also contributed $80.0 million towards leasehold improvement costs of the facility and for the purchase of equipment and furniture of which approximately $49.2 million was written off in connection with the abandonment of excess facilities. As part of this agreement, we are required to hold certificates of deposit totaling $25.7 million as a form of security through fiscal 2013, which is classified as restricted cash on the condensed consolidated balance sheets. In the quarter ended March 31, 2002, a certificate of deposit totaling $2.5 million as a security deposit for our headquarters was released. "Operating lease payments shown above exclude any adjustment for lease income due under noncancelable subleases of excess facilities, which amounted to $82.9 million as of June 30, 2002. Interest expense related to capital lease obligations is immaterial for all periods presented. "We do not have commercial commitments under lines of credit, standby lines of credit, guarantees, standby repurchase obligations or other such arrangements. "We expect to incur significant operating expenses, particularly research and development and sales and marketing expenses, for the foreseeable future in order to execute our business plan. We anticipate that such operating expenses, as well as planned capital expenditures, will constitute a material use of our cash resources. As a result, our net cash flows will depend heavily on the level of future sales, our ability to manage infrastructure costs and our assumptions about estimated sublease income related to the estimated costs of abandoning excess leased facilities. "Although our existing cash, cash equivalent and investment balances together with our anticipated cash flows from operations will be sufficient to meet our working capital and operating resource expenditure requirements for at least the next 12 months, given the significant changes in our business and results of operations in the last 12 to 18 months, the fluctuation in cash, cash equivalents and investments balances may be greater than presently anticipated. After the next 12 months, we may find it necessary to obtain additional equity or debt financing. In the event additional financing is required, we may not be able to raise it on acceptable terms or at all." AURORA FOODS: Brings-In Steve Smiley as VP for Purchasing --------------------------------------------------------- Aurora Foods Inc. (NYSE: AOR), a producer and marketer of leading food brands, announced another important step in the strengthening of its leadership team with the appointment of Steve Smiley as Vice President, Purchasing. Mr. Smiley joined Aurora on March 31 and reports directly to Eric Brenk, the Company's Co-President and Co-Chief Operating Officer. In his new position, Mr. Smiley will manage all of Aurora's supplier relationships. "Steve is a solid addition to our leadership team," said Dale F. Morrison, Aurora's Chairman and Chief Executive Officer. "He is a proven procurement and supply chain executive who knows the consumer packaged goods industry inside and out, having spent the majority of his career at Colgate and Mars. He will play a major role in maximizing our supplier relationships and making Aurora a more productive and profitable organization." Before working at Aurora, Mr. Smiley most recently was the Director, Strategic Procurement for Hill's Pet Nutrition, Inc., a $1.4 billion subsidiary of Colgate-Palmolive. Prior to Colgate, Mr. Smiley held senior purchasing positions for the M&M Mars and Uncle Ben's divisions of Mars, Inc. He has a MS in Food and Resource Economics from the University of Florida and a BA in Economics from Dartmouth College. Aurora Foods Inc., based in St. Louis, Missouri, is a producer and marketer of leading food brands, including Duncan Hines(R) baking mixes; Log Cabin(R), Mrs. Butterworth's(R) and Country Kitchen(R) syrups; Lender's(R) bagels; Van de Kamp's(R) and Mrs. Paul's(R) frozen seafood; Aunt Jemima(R) frozen breakfast products; Celeste(R) frozen pizza and Chef's Choice(R) skillet meals. More information about Aurora may be found on the Company's Web site at http://www.aurorafoods.com As reported in Troubled Company Reporter's February 28, 2003 edition, Standard & Poor's Ratings Services lowered its corporate credit rating on packaged foods company Aurora Foods Inc., to 'CCC' from 'B-'. The outlook on the St. Louis, Missouri-based company is negative. The company had a total debt of about $1.05 billion as of Dec. 31, 2002. The downgrade reflects Aurora's inability to meet Standard & Poor's expectation of improved operating and financial performance in a timely manner. "The ratings reflect Aurora's weak financial profile, including its high debt levels and limited financial resources," said Standard & Poor's credit analyst Ronald Neysmith. "These factors are partially mitigated by the company's niche position in the branded packaged food industry." DebtTraders says that Aurora Foods Inc.'s 9.875% bonds due 2007 (AOR07USR2) are trading at 43 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AOR07USR2for real-time bond pricing. BORDEN CHEMICALS: BCP Finance Wants Case Converted to Chapter 7 --------------------------------------------------------------- BCP Finance Corporation, one of the Debtors in the jointly consolidated case of Borden Chemicals and Plastics Operating Limited Partnership, wants to convert its Chapter 11 Case, Number 01-1269, to a liquidation proceeding under the Chapter 7 of the Bankruptcy Code. The Debtors point out that under Section 1112(a) of the Bankruptcy Code, a debtor has the absolute right to convert its chapter 11 case under Chapter 7 of the Bankruptcy Code, without notice and hearing unless: a) the debtor is not a debtor-in-possession; b) the case originally was commenced as an involuntary case under this chapter; or c) the case was converted to a case under this chapter other than on the debtor's request. BCP Finance says that none of these three conditions apply to its case. Moreover, no trustee has been appointed in this cases. BCP explains that it has no continuing operations and no more assets left to administer. Consequently, there is no benefit to continue the chapter 11 case and conversion is appropriate under the circumstances. Under the Debtors' plan, BCP Liquidating LLC, successor in inters to BCP, is the sole shareholder of BCP Finance. BCP Finance has no assets, however, it requires assistance from professionals to administer the last stages of BCP Finance Case. Accordingly, BCP Finance wants the Court to require BCP Liquidating LLC to pay for valid professional fees and reimburse valid expenses incurred in connection with the administration of the BCP Finance Case. DebtTraders reports that Borden Chemical & Plastics' 9.500% bonds due 2005 (BCPU05USR1) are trading between 0.5 and 1. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BCPU05USR1 for real-time bond pricing. BUDGET GROUP: Committee Brings-In Gibson Dunn as French Counsel --------------------------------------------------------------- Budget France S.A. is a wholly owned direct subsidiary of Societe Financiere et de Participation, a dormant holding company and a wholly owned subsidiary of BRACII. Budget France has been operating since the late 1980's and until approximately mid to late 1998 was largely a franchise operation with only a few corporate owned locations and a small corporate structure to support such locations. Beginning in the late end of 1998 and continuing throughout 1999, Budget France embarked on a strategy of acquiring franchises on a territorial basis and converting them to corporate owned locations. During this 18-month period of acquisitions, Budget France increased its gross revenues to approximately $80,000,000. This increase was primarily attributable to the higher profit margins associated with corporate owned locations as opposed to the royalty stream associated with franchised locations. On the other hand, Budget France's rapid growth created significant integration and corporation support problems. Budget France implemented a consolidation strategy and incurred significant expenses in attempting to integrate the acquired locations. Despite its best efforts, Budget France was unable to fully integrate the acquired locations in an efficient manner. As a consequence, Budget France lost approximately $75,000,000 in 2000. In 2001, consistent with the strategy Budget was implementing throughout Europe, Budget France began moving toward a master financing model designed to take advantage of the cost savings associated with a franchise model and the higher margins associated with certain strategically located corporate owned operations. Given the losses associated with the integration problems encountered in Budget France's acquisition strategy, and the significant amounts that were owed by Budget France in connection with the acquisitions, Budget France did not have sufficient capital to carry out this master franchising strategy. On July 25, 2002, Budget France was forced into receivership under French insolvency law, and Maitre Gilles Baronnie was appointed as its Receiver. Gibson's Retention The Official Committee of Unsecured Creditors sought and obtained the Court's authority to retain Gibson, Dunn & Crutcher LLP as its special French transactional counsel in connection with these Chapter 11 cases, nunc pro tunc to November 20, 2002. The Committee is actively working with the Debtors to formulate, evaluate and implement a solution to Budget France's difficulties. In connection therewith, the Committee requires the advice and counsel of a French transactional counsel. William Bowden, Esq., at Ashby & Geddes, in Wilmington, Delaware, explains that the Committee has selected Gibson due to its expertise in French transactional law, and in particular, Stephan Haimo, Esq. Mr. Haimo has extensive experience in French corporate and bankruptcy matters, both by reason of his years spent practicing law in Paris and his continuing representation of clients involved in transactions in France. His familiarity with French insolvency laws -- he obtained a post-graduate degree from the University of Paris with a concentration in creditors' rights and insolvency -- and his corporate finance practice have led him to be retained by investment funds and institutional investors in connection with workouts, loan restructurings, recapitalizations and buy-outs in a variety of French industries, including travel and hospitality, construction materials, consumer goods and retail distribution. The Committee believes that Gibson is well qualified to represent them in these cases. Gibson will provide the required French transactional support to the Committee concerning Budget France, including advising, representing the Committee with respect to: A. expertise with respect to evaluation of possible restructuring or strategic dispositions of Budget France's assets under French transactional law; B. French corporate, mergers and acquisitions, and securities law advice in respect of structuring Budget France's operations; and C. expertise with respect to French corporate arrangements and related issues. Gibson will charge the Committee for its legal services on an hourly basis in accordance with its ordinary and customary rates in effect on the date these services are rendered, and for reimbursement of all costs and expenses incurred in connection with these cases. Gibson's current billing rates generally range from: Partners $480 - 705 Associates 235 - 480 Paralegals 105 - 255 These hourly rates are reviewed annually and are set at a level designed fairly to compensate Gibson for the work of its legal staff and to cover fixed and routine overhead expenses. Gibson's hourly rates are appropriate for firms like Gibson's and comparable to the hourly rates charged by Gibson's competitors. Gibson competes on the basis of the quality of its lawyers, the responsiveness of its service and the creativeness and flexibility of its approach, rather than on hourly rates. Gibson tries particularly hard, however, to staff matters with the fewest number of lawyers possible, and to maintain consistency over the client relationship, to reduce inefficiencies and to hold costs down. Gibson Partner Stephen Haimo assures the Court that the firm, 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, Gibson will conduct an ongoing review of its files to ensure that no conflicts or other disqualifying circumstances exist or arise. If any new relevant facts or relationships are discovered, Gibson will disclose this to the Court. (Budget Group Bankruptcy News, Issue No. 18; Bankruptcy Creditors' Service, Inc., 609/392-0900) CINEMARK USA: Posts Improved Revenues for Fiscal Year 2002 ---------------------------------------------------------- Cinemark USA, Inc.'s revenues in 2002 increased to $939.3 million from $853.7 million in 2001, a 10.0% increase. The increase in revenues is primarily attributable to a 12.1% increase in attendance resulting from stronger film product in 2002. Revenues per average screen increased 7.8% to $311,555 for 2002 from $288,961 for 2001. Cost of operations, as a percentage of revenues, decreased to 73.6% in 2002 from 75.8% in 2001. The decrease is primarily related to the 10.0% increase in revenues and Cinemark's ability to effectively control its theatre operating costs (some of which are of a fixed nature). The decrease as a percentage of revenues resulted from a decrease in facility lease expense as a percentage of revenues to 12.4% in 2002 from 13.4% in 2001, a decrease in utilities and other costs as a percentage of revenues to 11.2% in 2002 from 11.9% in 2001, a decrease in salaries and wages as a percentage of revenues to 10.4% in 2002 from 10.6% in 2001, a decrease in concession supplies as a percentage of concession revenues to 17.3% in 2002 from 17.4% in 2001, partially offset by an increase in film rentals and advertising as a percentage of admissions revenues to 53.9% in 2002 from 53.7% in 2001 as a result of stronger film product in 2002. General and administrative expenses, as a percentage of revenues, increased to 5.1% in 2002 from 5.0% in 2001. General and administrative expenses increased to $48.2 million for 2002 from $42.7 million for 2001. The increase is primarily related to the write-off of $3.1 million of legal, accounting and other professional fees and costs associated with the parent company, Cinemark, Inc.'s, proposed initial public offering which was subsequently postponed due to unfavorable market conditions. Depreciation and amortization decreased to $66.9 million in 2002 from $73.5 million in 2001. Depreciation and amortization as a percentage of revenues decreased to 7.1% in 2002 from 8.6% in 2001. The decrease is partially related to the January 1, 2002 adoption of Statement of Financial Accounting Standards ("SFAS") No. 142 which required that goodwill and other intangible assets with indefinite useful lives no longer be amortized. The decrease is also related to a reduction in the depreciable basis of properties and equipment resulting from the devaluation in foreign currencies (primarily in Argentina, Mexico and Brazil) and the decline in new construction. The Company recorded asset impairment charges of $3.9 million in 2002 and $20.7 million in 2001 related to assets held for use. The asset impairment charges recorded in 2002 related to a $0.6 million write-down to fair value of goodwill associated with the Argentina operations, a $0.2 million write-down to fair value of one theatre property associated with the El Salvador operations, a $1.3 million write-down to fair value of one theatre property associated with the Chile operations and a $1.8 million write- down to fair value of two theatre properties and one real estate parcel in the U.S. All of the impairment charges recorded in 2001 were in the U.S. except for a $1.7 million write-down to fair value of one theatre property associated with the Brazil operations. In accordance with SFAS No. 144 and SFAS No. 121, the Company wrote down these assets to their estimated fair value in 2002 and 2001, respectively. Cinemark recorded a loss on sale of assets and other of $0.5 million in 2002 and $12.4 million in 2001. Included in loss on sale of assets and other in 2001 is a charge of $7.2 million to write down one property to be disposed of in the U.S. to fair value and a charge of $1.5 million to write down one property to be disposed of in Argentina to fair value. Interest costs incurred, including amortization of debt issue cost, decreased 18.5% to $57.8 million in 2002 from $70.9 million in 2001. The decrease in interest costs incurred during 2002 was due principally to a decrease in average debt outstanding under the Company's credit facility and the lower interest rates on its variable rate debt facilities. Income tax expense of $29.2 million was recorded in 2002 as compared to an income tax benefit of $14.1 million in 2001. The Company's effective tax rate for 2002 was 42.8% as compared to 77.8% in 2001. The change in the effective tax rate is mainly due to the recognition of the Mexico deferred tax asset in 2001. Income before the cumulative effect of an accounting change increased to $39.0 million for 2002 from a loss of $4.0 million for 2001 primarily as a result of the 10.0% increase in revenues and the decrease in interest expense and depreciation and amortization expense in 2002 in comparison with 2001. Cinemark USA is continuing to expand its U.S. theatre circuit. In 2002, it opened two new theatres with 16 screens. As of March 17, 2003, it has signed commitments for eight new theatres with 100 screens and a five screen expansion to an existing theatre scheduled to open in the U.S. in 2003 and thereafter. The Company estimates the remaining capital expenditures for the development of these 105 screens in the U.S. will be approximately $40 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities. Cinemark USA plans to fund capital expenditures for its continued development from cash flow from operations, borrowings under its credit facility, subordinated note borrowings, proceeds from sale leaseback transactions and/or sales of excess real estate. Additionally, it may from time to time, subject to compliance with its debt instruments, purchase on the open market its debt securities depending upon the availability and prices of such securities. Cinemark is also continuing to expand its international theatre circuit. In 2002, it opened five new theatres with 42 screens and added two additional screens to an existing theatre. As of March 17, 2003, it has five new theatres with 32 screens and a two screen expansion to an existing theatre scheduled to open in international markets in 2003 and thereafter. The Company estimates the remaining capital expenditures for the development of these 34 screens in international markets will be approximately $15 million. Actual expenditures for continued theatre development and acquisitions are subject to change based upon the availability of attractive opportunities. Cinemark anticipates that investments in excess of available cash will be funded by the Company or by debt or equity financing to be provided by third parties directly to Cinemark's subsidiaries. * * * As reported in August 13, 2002, edition of the Troubled Company Reporter, Standard & Poor's Ratings Services has revised its outlook on movie exhibitor Cinemark USA Inc., to stable from positive following the company's postponement of its planned IPO and bank loan refinancing. Standard & Poor's has also withdrawn its double-'B'-minus bank loan rating on the company's proposed $250 million bank facility. All other ratings, including the single-'B'-plus corporate credit rating, are affirmed. The Plano, Texas-based company had $784 million in debt outstanding as of March 31, 2002. CLASSIC COMMS: Wants Lease Decision Period Extended Until July 7 ---------------------------------------------------------------- Classic Communications, Inc., and its debtor-affiliates ask the U.S. Bankruptcy Court for the District of Delaware for more time to determine whether to assume, assume and assign, or reject their unexpired nonresidential real property leases. The Debtors want their lease decision period to run through July 7, 2003. The Debtors maintain their chapter 11 cases are complex, compounded by the overall size of the Debtors' businesses and by the large number of Unexpired Leases under which the Debtors are lessees. The Debtors' Unexpired Leases are an integral part of their business operations and are vital to the success of their Plan of Reorganization, which is in part premised upon the assumption and assignment of certain Unexpired Leases. The Confirmation Order provides that on the Effective Date all executory contracts and unexpired leases shall be deemed assumed unless specifically rejected. Until the Debtors have had an opportunity to fully complete their evaluation of the Unexpired Leases in conjunction with the Plan, rejection of the Unexpired Leases would be premature and may adversely affect the Debtors' ability to successfully reorganize. Classic Communications, Inc., a cable operator focused on non- metropolitan markets in the United States, filed for Chapter 11 petition on November 13, 2001 (Bankr. Del. Case No. 01-11257). Brendan Linehan Shannon, Esq. at Young, Conaway, Stargatt & Taylor represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $711,346,000 in total assets and $641,869,000 in total debts. COLUMBIA CENTER: Fitch Hatchets $20.2M Class E Note Rating to BB ---------------------------------------------------------------- Fitch Ratings downgrades Columbia Center Trust's commercial mortgage pass-through certificates, series 2000-CCT as follows: $114.6 million class A and interest-only class X1 to 'AA' from 'AAA'; $22.9 million class B to 'A' from 'AA'; $20.4 million class C to 'BBB+' from 'A+'; $17.0 million class D to 'BBB-' from 'A-' and $20.2 million class E to 'BB' from 'BBB'. In conjunction with the downgrades, class E is removed from Rating Watch Negative. The downgrades are a result of the increased vacancy at the subject property. The certificates are secured by a first priority deed of trust and security agreement on two adjacent buildings, Bank of America Tower and Columbia House, totaling 1.54 million square feet and located in downtown Seattle, WA. The class E bonds were originally placed on Rating Watch Negative in September 2002 due to the fact that the largest tenant in the Bank of America Tower, a 76-story class A office building, announced it would vacate in January 2003. Since then, several other tenants with lease expirations in 2003 either have announced they will vacate or have signed new leases at current market rents, which are significantly below previous rents. Fitch took into consideration new leases signed to date for the remainder of 2003 and the vacant space to determine a Fitch 2003 projected net cash flow of $19.5 million. The resulting Fitch stressed debt service coverage ratio based on a 9% refinance constant is a 1.11 times down from 1.45x at issuance. Current occupancy at the property is approximately 76%, but will fall to 73% as of year end 2003 if no new leases are signed. Occupancy at the property is below the market occupancy of 84%. Fitch continues to be concerned with rollover at the property, as an additional 13% of the leases expire in 2004. The lower market rents, increased vacancy and limited new leasing activity, may affect the borrower's ability to refinance the loan at maturity in December 2004. Even with the drop in rental income at the property projected throughout 2003, the loan's LIBOR +1.15% interest rate will keep actual DSCR high at 3.35x. Therefore, Fitch is not concerned about payment default within the loan term. The property has strong sponsorship in NY State Common and Equity Office Properties, the largest landlord of office space in the Seattle area. The property also benefits from a strong management team, Wright, Runstad & Company, who continues to actively market the office space. CONSECO: Gets Court Okay for Herzog Separation & Consulting Pact ---------------------------------------------------------------- David K. Herzog is the former general counsel of Conseco Inc. and served as a member of the Board of Directors of certain Conseco subsidiaries. Mr. Herzog's employment relationship with Conseco ended on February 12, 2003. The Debtors have since determined that it is in their best interest to retain Mr. Herzog's services as an independent consultant. The Debtors sought and obtained Judge Doyle's permission to enter into a separation and consulting agreement with Mr. Herzog. The Debtors also obtained Court approval to accord payments to Mr. Herzog with administrative expense priority under Section 503(b) of the Bankruptcy Code. Under the Consulting Agreement, Conseco will retain Mr. Herzog as an independent consultant for 18 months. Conseco will pay Mr. Herzog $600,000 in 18 equal monthly installments plus a $600,000 lump sum after the consulting period. Mr. Herzog will perform no more than 40 hours of service per month. Mr. Herzog will not disclose any confidential information at any time. He will not render services to any competitor or other industry participant. (Conseco Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) COVANTA ENERGY: Earns Nod to Extend and Amend DIP Credit Pact ------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York approved the motion to extend and amend the DIP Agreement in the Chapter 11 cases of Covanta Energy Corporation and its debtor- affiliates James L. Bromley, Esq., at Cleary, Gottlieb, Steen & Hamilton, in New York, reported that the finalized terms of the DIP Amendment are: -- The Stated Maturity Date of the DIP Agreement will be extended from April 1, 2003 to October 1, 2003; -- The Tranche A Commitments under the DIP Agreement will be reduced; -- Certain monthly reporting and financial budget requirement covenants of the DIP Agreement will be modified; and -- A $142,000 fee will be paid to the DIP Lenders, amounting to 1% of the Tranche A Commitments under the DIP Agreement following the DIP Amendment. A free copy of the Sixth DIP Amendment is available at: http://bankrupt.com/misc/Sixth_DIP_Amendment.pdf (Covanta Bankruptcy News, Issue No. 26; Bankruptcy Creditors' Service, Inc., 609/392-0900) CREST DARTMOUTH: Fitch Rates $12.25 Million Class D Notes at BB --------------------------------------------------------------- CREST Dartmouth Street 2003-1, Ltd's and CREST Dartmouth Street 2003-1, Corp.'s $280 million class A notes are rated 'AAA' by Fitch Ratings. Additionally, Fitch rates the $13.125 million class B-1 notes and $21 million class B-2 notes 'A', $14.875 million class C notes 'BBB' and $12.25 million class D notes 'BB'. The rating on the class A notes addresses the timely payment of interest and ultimate repayment of principal. The ratings on the class B-1, class B-2, class C and class D notes address the ultimate payment of interest and the ultimate repayment of principal. The ratings are based on the capital structure, quality and diversity of the portfolio assets and the experience and capabilities of MFS Investment Management. Net proceeds from issuance are used to purchase a diversified portfolio consisting of commercial mortgage-backed securities, real estate investment trust securities, and commercial mortgage loans. As of closing, the Fitch weighted-average rating factor is (WARF) 16.9 (between 'BBB' and 'BBB-') and the portfolio is 100% funded. There will be no reinvestment in the transaction and quarterly payments will begin in May 28, 2003 for all classes of notes. DDI CORP: Installs New Inspection Technology at San Jose Plant -------------------------------------------------------------- Dynamic Details, Inc. (DDI), (Nasdaq: DDIC), a leading provider of technologically advanced design, development, and manufacturing services, today announced that it has installed 3D X-ray automated inspection (5DX) equipment in its newly expanded 61,000-square-foot manufacturing facility in San Jose, California. "DDi specializes in cutting-edge manufacturing technology and the addition of this inspection technology increases our value- add for both NPI and low-volume, high-technology customers," commented Mike Coleman, site general manager. "Our Agilent 5DX Series III machine has been a great process and test addition for our customers since we began offering the technology in January." The 5DX utilizes a Laminography scanning principle, providing visibility and fault detection across the entire solder joint. The assembly industry consensus is that it can achieve an average of 98% coverage for solder joint inspection (including non-visible solder joints for BGAs, CSPs, etc.). Other advantages include: detecting marginal solder joints; enabling SPC monitoring and process improvement; eliminating time and cost of complex fixturing; and simplifying DFT and test development platforms in contrast to the more conventional electrical and mechanical methods. The Agilent 5DX compliments DDi's full scale testing solutions, which includes the 2DX X-ray, AOI process inspection, Takaya flying probe testers, Agilent 3070 series ICT, static and dynamic burn-in chambers, state-of-the-art automated tents, and full functional test development and implementation. DDi 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. * * * As reported in Troubled Company Reporter's April 3, 2003 edition, Standard & Poor's Ratings Services lowered its rating on circuit-board maker DDi Corp.'s senior secured bank loan to 'CC' from 'CCC-' and lowered the rating on the 6.25% convertible subordinated note to 'D' from 'C'. At the same time, Standard & Poor's affirmed the 'C' rating on the 12.5% senior discount note of DDi Capital Corp., a ratings family member. The ratings on DDi's senior secured bank loan and DDi Capital's 12.5% senior discount note remain on CreditWatch with negative implications, where they were placed on March 6, 2003. The corporate credit rating on both entities is 'SD'. The actions were taken because DDi's forbearance agreement with senior lenders expired today, and the company announced it would not make the interest payment today on the 6.25% convertible subordinated note maturing on April 1, 2007. The Anaheim, Calif.-based company and related entities reported total debt of about $403 million as of Dec. 31, 2002. DDi continues to negotiate with its senior lenders and subordinated convertible noteholders, in efforts to restructure the company's debt. Independent accountants, engaged by management, have expressed a substantial doubt about the company's ability to continue as a going concern. DIRECTV: Raven America Wants to Transfer Case to Florida Court -------------------------------------------------------------- William H. Sudell, Esq., at Morris, Nichols, Arsht & Tunnel, in Wilmington, Delaware, relates that on November 10, 2000, DirecTV Latin America, LLC entered into a Stock Purchase Agreement with Grupo Clarin and Plataforma Digital, S.A., a wholly owned subsidiary of Grupo Clarin. Pursuant to the Stock Purchase Agreement, DirecTV purchased from Plataforma shares of Galaxy Entertainment Argentina, S.A., representing 51% of Galaxy's total outstanding shares, in exchange for the issuance to Plataforma of DirecTV's membership interests, representing 4% of DirecTV's total outstanding membership interests -- Debtor Interests. Moreover, Mr. Sudell informs Judge Walsh that Plataforma and DirecTV are also parties to a Put Agreement dated November 10, 2000. Pursuant to the Put Agreement, DirecTV agreed, under certain circumstances, to repurchase the Debtor Interests from Plataforma for $194,800,000. Plataforma subsequently merged with and into Multicanal S.A., a wholly owned Grupo Clarin subsidiary, with Multicanal as the surviving company. As a result, Multicanal became the Debtor Interests owner and the holder of the rights associated with the Put Agreement. Multicanal subsequently transferred its interest in the Put Agreement and the Debtor Interests to Raven Media Investments LLC, an Argentine company and a wholly owned subsidiary of Grupo Clarin, S.A. Pursuant to Section 1412 of the Judiciary Procedures Code and Rule 1014 of the Federal Rules of Bankruptcy Procedure, Raven asks the Court to transfer the venue of this case to the U.S. Bankruptcy Court for the Southern District of Florida, Fort Lauderdale Division. Mr. Sudell contends that the transfer should be granted because, although DirecTV was incorporated in Delaware, its headquarters and the majority of its 113 employees are located in Fort Lauderdale, Florida, over 700 of DirecTV's creditors are located in various cities throughout the State of Florida, and 10 of its 20 largest unsecured creditors are located in Florida. Thus: (a) it will be more convenient for all of these constituents to have the bankruptcy proceeding in Florida; (b) given that a large number of DirecTV's creditor relationships are centered in Florida, it is likely that Florida state law may apply to any disputes among other creditors; (c) the 20 largest creditors appears indicative of DirecTV's overall creditor body; (d) in all likelihood, both meeting of the official committee of unsecured creditors and with DirecTV will occur in south Florida; (e) many of DirecTV's employees and creditors would be able to avoid travel to and from Delaware, which can be expensive, time-consuming and difficult given the realities of today's air travel; (f) numerous parties-in-interest, as well as DirecTV's primary assets, are located in Latin America, which, due to its geographical proximity to Latin America, and the much greater availability of airline flights, the Florida Bankruptcy Court would be a considerable more convenient venue than the Delaware Bankruptcy Court; and (g) the Delaware Bankruptcy Court's per judge case load for Chapter 11 cases is significantly higher as compared to the Florida Bankruptcy Court. Debtor Objects "Raven's motion is a transparent attempt by an out-of-the-money equity interest holder to forum shop or, at a minimum, to delay the progress of DirecTV's bankruptcy case and thereby gain leverage in settlement negotiations," Joel A. Waite, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, declares. Raven claims to be a creditor based on its purported right under a Put Agreement to put, under certain circumstances, its 4% LLC equity interest in DirecTV. However, Mr. Waite explains that any claims that Raven might hold as a result of the Put Agreement is subject to mandatory subordination under Section 510(b) of the Bankruptcy Code and controlling Third Circuit precedent. Thus, Raven's claim must be treated as an equity interest for all purposes in this case. In contrast, the Southern District of Florida has less developed precedent interpreting and applying Section 510(b). While DirecTV is confident that, if confronted with the issue, the Eleventh Circuit would ultimately agree that the plain language of Section 510(b) requires the subordination of Raven's purported claim under the Put Agreement, a transfer of venue would likely result in costly and protracted litigation between the estate and Raven over the status of Raven's claim under the Put Agreement. Though Raven might desire that result, the estate's unsecured creditors would ultimately bear this unnecessary cost. As a substantive matter, Mr. Waite asserts that Raven has not established sufficient grounds for this Court to transfer venue as: (a) the transfer of venue would not benefit DirecTV's creditors, many of whom are sophisticated corporations with a national or multinational presence and are -- and throughout their relationship with DirecTV have been -- represented by counsel from place like California, New York, Illinois, Washington, London or Switzerland rather than from Florida. This is the case with Buena Vista International, Inc., HBO Latin America Partners, Music Choice, Kirch and Thomson Consumer Electronics -- each of which is on the Creditors' Committee -- and also with respect to Raven, its predecessors-in-interest and its affiliates; (b) DirecTV's assets are comprised largely of intangible contract rights, few of which are governed by Florida law. Most of DirecTV's contracts are governed by California or New York law. To the extent Interpretation of the law governing DirecTV's contracts becomes necessary in this case, it is clear that this Court has more than adequate experience in interpreting California or New York law and applying that law to any issues it may arise in this case; (c) DirecTV believes that Delaware's developed case law on Chapter 11 issues and significant experience dealing with large, complex cases will provide it and other parties-in-interest substantial certainty, finality and ease of administration in this case and that these factors outweigh the highly uncertain benefit that could be provided by the Southern District of Florida's lesser Chapter 11 case load; and (d) the transfer would delay DirecTV's reorganization efforts, would force DirecTV, the Creditors' Committee and various creditors to seek new or additional counsel, and overall would impose unnecessary administrative expense on this estate in exchange for which neither it nor its creditors would receive any discernable benefit. Accordingly, DirecTV asks the Court to deny the motion. Hughes Electronics Joins In Hughes Electronic Corporation an its wholly owned subsidiary, DirecTV Latin America Holdings, Inc. adopt by reference the Debtor's Objection to the Motion and ask the Court to deny the motion. John H. Knight, Esq., at Richards, Layton & Finger P.A., in Wilmington, Delaware, states that Hughes is the postpetition secured lender of the Debtor while Holdings owns about 75% of the Debtor's equity. Moreover, the aggregate prepetition claim of the Hughes Entities is the Debtor's largest unsecured prepetition claim. To supplement and amplify the Debtor's objection, Mr. Knight relates that: (a) Raven's characterization of the Debtor's Chapter 11 case is ill-informed and misleading because this is not a simple, uncomplicated case having no bearing beyond the confines of Fort Lauderdale, Florida; (b) the Debtor's creditor body is complex and national or multinational in scope; (c) the Debtor's primary, and perhaps sole, connection to Florida is the location of its headquarters in Florida, which is not an important factor in determining appropriate venue; and (d) Raven's characterization of itself as the Debtor's creditor protecting the interest of the majority is similarly misleading as it is in fact an equity holder. It is the Hughes Entities and the members of the Committee that hold at least 88% of the amount of the prepetition claims against the Debtors -- both of which oppose the motion. Creditors' Committee Supports DirecTV For the same reasons DirecTV raised in its objection to the Motion, the Official Committee of Unsecured Creditors objects to the motion and asks the Court to deny the change of venue request. (DirecTV Latin America Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) DIXIE GROUP: Expects Lower Sales Volume & Higher Costs for Q1 ------------------------------------------------------------- The Dixie Group, Inc., (Nasdaq/NM:DXYN) said its first quarter 2003 results would be adversely affected by lower-than-expected sales volume and higher costs. The Company had anticipated a small profit for the quarter ended March 29, 2003, but now expects to report a loss of approximately $.03 per diluted share. "Sales in our high-end businesses at Fabrica and Masland continue to show positive comparisons; however, weakness in our home center and factory-built housing markets will result in carpet revenues being approximately 7% below the prior-year level," commented Daniel K. Frierson, chairman and chief executive officer. "While the first quarter is generally the slowest of the year for the carpet industry, typically sales begin to build after January. This trend appears to have been delayed this year by general economic and geopolitical uncertainties, but we expect sales to improve, based on the stronger order entry we have experienced in late March and early April. "First quarter 2003 margins were negatively affected by lower sales volume, raw material price increases and expenses incurred launching our new Dixie Home product line," Frierson added. "Along with most of our competitors in the industry, we have announced selling price increases beginning in April 2003 to improve margins. "We addressed sales in our high-end markets in 2002 by intensifying our focus on new product introductions. Despite weakness in most carpet markets, these efforts have had a positive impact on sales levels at Fabrica and Masland. In early 2003, our North Georgia Operations introduced a new collection of products at Surfaces under the Dixie Home name. These products have received significant acceptance in the marketplace, resulting in excellent placement with leading national retailers. We expect this new collection of products to make a sound contribution to our sales and margins beginning in the third quarter." The Dixie Group -- http://www.thedixiegroup.com-- is a leading carpet and rug manufacturer and supplier to higher-end residential and commercial customers serviced by Fabrica International, Masland Carpets and products under the Dixie Home name, to consumers through major retailers under the Bretlin, Globaltex and Metro Mills brands, and to the factory-built housing and recreational vehicle markets through Carriage Carpets. Dixie's Candlewick Yarns serves specialty carpet yarn customers. As reported in Troubled Company Reporter's April 8, 2003 edition, Standard & Poor's Ratings Services raised its corporate credit rating on Calhoun, Georgia-based carpet and rug manufacturer The Dixie Group Inc. to 'B+' from 'B-'. At the same time, the subordinated debt rating was raised to 'B-' from 'CCC'. The outlook is stable. Total debt outstanding at Dec. 28, 2002, was about $149 million. "The rating actions reflect the company's improved operating performance and the related improvement in credit protection measures," said Standard & Poor's credit analyst Susan Ding. "In addition, in March 2003 the company made the final $50 million payment on its acquisition of Fabrica International Inc., substantially alleviating Standard & Poor's near-term liquidity concerns. Dixie acquired Fabrica in 2000." EASYLINK: Fails to Regain Compliance with Nasdaq Requirements ------------------------------------------------------------- EasyLink Services Corporation (NASDAQ: EASY) received a Nasdaq Staff Determination on April 8, 2003 indicating that the Company failed to regain compliance with Nasdaq's Marketplace Rules 4350(C) and (d) (2). Those rules require listed companies to maintain an audit committee of at least three members, comprised solely of independent directors. Its common stock is therefore subject to delisting from the Nasdaq National Market. The Company will request a hearing before the Nasdaq Listing Qualifications Panel to review the Staff Determination. EasyLink stock will continue to be listed on the Nasdaq National Market pending the final decision of the Qualifications Panel. The hearing is expected to occur within 45 days of its hearing request. At the hearing, the Company intends to submit a plan that it believes will demonstrate its ability to regain compliance with the three-member requirement. There can be no assurance the Panel will grant the Company's request for continued listing. A decision by the Panel is typically provided within four weeks of the hearing. EasyLink Services Corporation (NASDAQ: EASY), headquartered in Piscataway, New Jersey, is a leading global provider of services that power the exchange of information between enterprises, their trading communities, and their customers. EasyLink's networks facilitate transactions that are integral to the movement of money, materials, products, and people in the global economy, such as insurance claims, trade and travel confirmations, purchase orders, invoices, shipping notices and funds transfers, among many others. EasyLink helps more than 20,000 companies, including over 400 of the Global 500, become more competitive by providing the most secure, efficient, reliable, and flexible means of conducting business electronically. For more information, please visit http://www.EasyLink.com * * * As previously reported, EasyLink Services said it was seeking to restructure substantially all of approximately $86.2 million of outstanding indebtedness, including approximately $10.7 million of capitalized future interest obligations. The Company is currently in discussions with holders of its debt relating to the proposed restructuring. To date, the holders of approximately 70% of this debt have expressed interest in completing a restructuring on the terms discussed. Management seeks to restructure substantially all of the debt. If all of the debt were successfully eliminated on the currently proposed terms, the Company would pay approximately $2.0 million in cash and issue up to 35 million shares of its Class A common stock, including the shares issued to fund the cash payment. The number of shares to be exchanged for each class of debt was determined based on a deemed per share price of between $2.00 and $3.00. EBIZ ENTERPRISES: Ceases Operations after Asset Foreclosure ----------------------------------------------------------- EBIZ Enterprises, Inc.'s senior secured creditor has foreclosed upon substantially all of the Company's assets pledged to secure the obligations. The Company defaulted on those obligations earlier in 2003. As a result, the Company has discontinued its operations effective at the close of business on April 4, 2003. On September 7, 2001, Ebiz Enterprises, Inc., a Nevada corporation, and its wholly-owned subsidiary, Jones Business Systems, Inc., a Texas corporation filed separate voluntary petitions under Chapter 11 of the Bankruptcy Code in federal bankruptcy court in Phoenix, Arizona (Bankr. Case Nos. 01-11843- CGC; and 01-11844-CGC). ECHOSTAR COMMS: Shareholders' Meeting Scheduled for May 6, 2003 --------------------------------------------------------------- The Annual Meeting of Shareholders of EchoStar Communications Corporation will be held on Tuesday, May 6, 2003, at 12:00 noon, local time, at the Company's headquarters located at 5701 South Santa Fe Drive, Littleton, Colorado 80120, to consider and vote upon: 1. The election of the members of the Board of Directors; 2. A proposal to amend the Amended and Restated Articles of Incorporation to modify one of its indemnification provisions relating to payment of litigation expenses; 3. A proposal to ratify the appointment of KPMG LLP as independent auditors for the fiscal year ending December 31, 2003; and 4. Any other business that may properly come before the Annual Meeting or any adjournment of the meeting. Only shareholders of record at the close of business on March 21, 2003 are entitled to notice of, and to vote at, the Annual Meeting or any adjournment of the meeting. As of December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $1.2 billion. ENRON: EMPI Sues Connectiv Energy for Breach of Contract -------------------------------------------------------- Enron Power Marketing, Inc. seeks declaratory relief against Conectiv Energy Supply, Inc. Barry J. Dicther, Esq., at Cadwalader, Wickersham & Taft, in New York, informs Judge Gonzalez that EPMI and Conectiv entered into a Master Power Purchase and Sale Agreement on August 31, 2001. Pursuant to the Master Agreement, the Parties could engage in subsequent individual Transactions to buy or sell wholesale electric power at a specified price and for a fixed term. The Master Agreement provides a list of Events of Default, including, inter alia: (i) the failure to make, when due, any payment required pursuant to the Master Agreement if the failure is not remedied within three business days after written notice of the failure; (ii) the failure to perform any covenant set forth in the Master Agreement; and (iii) the bankruptcy of a Party. If one Party's conduct triggers an Event of Default, the Master Agreement provides that if an Event of Default occurs at any time during the term of the Master Agreement, the Non-Defaulting Party may, for so long as the Event of Default is continuing, designate an Early Termination Date on which all Transactions will terminate. When an Early Termination Date has been designated, one party owes the other a Termination Payment. The Termination Payment is determined by calculating a Settlement Amount for each Terminated Transaction and netting all Settlement Amounts together with other amounts due under the Master Agreement. In addition, interest at the Interest Rate is owed on the Termination Payment. On December 3, 2001, in light of EPMI's bankruptcy filing, Conectiv sent a letter to EPMI stating that it was suspending further performance under the Master Agreement. The letter also advised EPMI that it was in default of the Master Agreement and, thus, Conectiv was terminating the Agreement and designating December 5, 2001 as the Early Termination Date. Pursuant to its letter dated December 10, 2001, Conectiv acknowledged that a Termination Payment was due EPMI. However, Mr. Dicther notes that in calculating the Termination Payment, Conectiv invoked the Master Agreement's set-off provision, which purports to allow Conectiv to set off amounts owed to EPMI under the Master Agreement against the amounts an affiliate of EPMI allegedly owes Conectiv under separate agreements. Mr. Dicther asserts that the set-off provision in the Master Agreement purporting to allow for the non-mutual set-off of debts is invalid and unenforceable pursuant to Section 553 of the Bankruptcy Code. This provision is also invalid and unenforceable because EPMI's affiliates are not signatories to the Master Agreement. By improperly relying on the set-off provision of the Master Agreement, Mr. Dicther argues, Conectiv's calculation of the Termination Payment was approximately $8,000,000 less than the amount actually owed EPMI in connection with the Early Termination of the Master Agreement. Pursuant to a letter dated July 31, 2002, EPMI advised Conectiv of the accurate amount of the Termination Payment, and made a formal demand for payment of the Termination Payment. But Mr. Dicther notes that as of January 31, 2003, Conectiv has failed and refused to pay EPMI the Termination Payment. Thus, EPMI asks the Court to: (a) since the Termination Payment of $11,744,744, together with interest, is a matured debt owed to EPMI, and is property of the estate, compel Conectiv to turnover the estate's property to EPMI, pursuant to Section 542(b) of the Bankruptcy Code; (b) declare that Conectiv violated the automatic stay provided for by Section 362 of the Bankruptcy Code when it exercised control over property of the estate by wrongfully suspending performance required of it under the Master Agreement and by withholding property under the Master Agreement; (c) declare that Conectiv breached the Master Agreement that caused EPMI damages in the amount of at least $11,744,744, plus interest and attorneys' fees; (d) declare that EPMI and its creditors have suffered substantial damages in an amount to be proven at trial due to Conectiv's unjust enrichment; (e) declare that non-mutual set-off rights created by the Master Agreement is unenforceable pursuant to Section 553(a) of the Bankruptcy Code; and (f) declare that the Master Agreement's arbitration provision should not be enforced as EPMI's claims against Conectiv implicates numerous substantive core Bankruptcy Code issues. (Enron Bankruptcy News, Issue No. 61; Bankruptcy Creditors' Service, Inc., 609/392- 0900) FANSTEEL: Seeks to Stretch Lease Decision Period through July 10 ---------------------------------------------------------------- Fansteel Inc., and its debtor-affiliates want to stretch the time period within which they must decide whether to assume, assume and assign, or reject their unexpired nonresidential real property leases. The Debtors tell the U.S. Bankruptcy Court for the District of Delaware that they will need until July 10, 2003 to finalize their lease-related decisions. The Debtors report that since the Petition Date, management and the company's professionals have concentrated their time on, among other things: -- obtaining DIP financing; -- working on a decommissioning plan for the Muskogee facility; -- marketing assets; -- resolving issued relates to retention of professionals; -- maintaining and improving operations; and -- heavily engaged in litigation. Additionally, the Debtors relate that they are currently formulating a plan of reorganization, aiming to have the plan consensually adopted by the Official Committee of Unsecured Creditors and the Nuclear Regulatory Commission. The Debtors contend that until the plan is formulated, it is premature for the Debtors to decide whether or not to assume and assign of reject its real property leases. Fansteel Inc., and eight affiliates filed for chapter 11 protection on January 15, 2002 (Bankr. Del. Case No. 02-10109). Laura Davis Jones, Esq., at Pachulski, Stang, Ziehl Young & Jones & Weintraub, P.C., represents the specialty metal manufacturer of engineered metal components and tungsten carbide products. When Fansteel filed for chapter 11 protection it reported $64,805,176 in assets and $91,585,665 in liabilities. FEDERAL-MOGUL: Has Until April 21 to File Disclosure Statement -------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware's Judge Newsome extends Federal-Mogul Corporation and its debtor- affiliates' time to file a disclosure statement with respect to the Joint Reorganization Plan to and including April 21, 2003 and the Debtors' exclusive period to solicit plan acceptances through August 11, 2003. (Federal-Mogul Bankruptcy News, Issue No. 35; Bankruptcy Creditors' Service, Inc., 609/392-0900) FLEMING COS.: $76 Million Critical Vendor from Kmart was Wrong -------------------------------------------------------------- The Honorable John F. Grady sitting in the U.S. District Court for the Northern District of Illinois finds that Judge Sonderby's orders authorizing payment of approximately $300 million to Kmart's Critical Vendors for their prepetition claims were contrary to bankruptcy law and should be reversed. Approximately $76 million of that went to Fleming on account of its prepetition claim against Kmart. Kmart did its best to argue that Capital Factor's appeal is moot because the payments have already been made. Judge Grady rejects that and tells Judge Sonderby to issue an order directing recipients of Critical Vendor Payments like Fleming to return the money to Kmart's estates. The Bankruptcy Code "does not carve out priority or administrative expense status for prepetition general unsecured claims based on the 'critical' or 'integral' status of a creditor," Judge Grady says, explaining that the effect is to elevate the claims of select unsecured creditors and subordinating all other unsecured claims. Judge Grady finds that Judge Sonderby improperly altered the statutory priority scheme codified at 11 U.S.C. Secs. 503 and 507. Judge Grady recognizes that invoking the so-called doctrine of necessity "is well-intended and may even have some beneficial results" in Kmart's cases. "Nevertheless, it is clear that however useful and practical these payments may appear to bankruptcy courts, they simply are not authorized by the Bankruptcy Code." Until Congress codifies the doctrine of necessity, Judge Grady opines, pre-plan payments of pre-petition unsecured claims are illegal. "[I]t is not too late to order that the monies paid be returned," Judge Grady says. Judge Grady doesn't buy the Debtors' "doomsday speculation" that undoing the bankruptcy court's orders would paralyze Kmart by forcing it to undergo the Herculean task of immediately commencing thousands of lawsuits to collect hundreds of millions of dollars from thousands of vendors. It is not evident to the District Court that Kmart would have to sue anyone to recover the payments. The District Court suggests an order from Judge Sonderby directing the return of the monies paid will be sufficient. Kmart Corporation and its debtor-affiliates delivered their Notice of Appeal to the U.S. District Court for the Northern District of Illinois indicating their intention to seek review of Judge Grady's order reversing Judge Sonderby's orders allowing payment of pre-petition claims owed to Kmart's Critical Vendors, Foreign Vendors, Liquor Vendors and to JPMorgan on account of letter of credit reimbursement obligations. FLEMING COS.: Wants to Honor Open Prepetition Purchase Orders ------------------------------------------------------------- As a consequence of their Chapter 11 filing, Fleming Companies, Inc., and its debtor-affiliates believe that many of their vendors and suppliers may have become concerned that the postpetition delivery of goods subject to prepetition purchase orders will render the Suppliers prepetition general unsecured creditors of the Debtors' estates. The Suppliers may refuse to deliver the goods unless and until the Debtors issue substitute purchase orders or obtain a Court order granting administrative expense status to those goods delivered postpetition. As of the Petition Date, the Debtors had several purchase orders outstanding with the Suppliers for the goods necessary to their operations. In the ordinary course of their businesses, the Suppliers provide goods, including consumable goods, health and beauty products, and general merchandise products, essential to the Debtors' business operations. The Debtors believe that the Outstanding Orders aggregate up to $215,000,000 for various goods. The Debtors intend to pay their obligations to the Suppliers in the ordinary course of business to ensure a continuous supply of goods. The goods are indispensable to the Debtors' continuing operations and integral to a successful reorganization. Pursuant to Section 503(b)(1)(A) of the Bankruptcy Code, the purchase obligations that arise in connection with the postpetition delivery to, and acceptance by, the Debtors of goods, including those goods that are ordered prepetition, are in fact, administrative expense priority claims. Therefore, the Debtors note that granting administrative expense priority status to the Suppliers' deliveries will not provide the Suppliers with any greater priority. But without the Court order, the Debtors point out that they may need to expend substantial time and effort reissuing the numerous Outstanding Orders to assure that the Suppliers will be given administrative expense priority. The Debtors assert that the attendant disruption to the continuous and timely flow of goods used in their businesses could result in insufficient supply and materials to adequately conduct their operations. This could be detrimental at this critical juncture in the Debtors' efforts to successfully reorganize. At the Debtors' request, Judge Walrath grants administrative expense priority status to the Debtors' Outstanding Orders in accordance with Bankruptcy Code Section 503(b)(1)(A). Judge Walrath also authorizes the Debtors to pay all Outstanding Orders in the ordinary course of business consistent with their customary practices in effect before the Petition Date. (Fleming Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) Fleming Companies Inc.'s 10.625% bonds due 2007 (FLM07USR1), DebtTraders says, are trading at 1.5 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=FLM07USR1for real-time bond pricing. GENEVA STEEL: Hiring CH2M Hill as Environmental Consultant ---------------------------------------------------------- Geneva Steel LLC seeks approval from the U.S. Bankruptcy Court for the District of Utah to employ CH2M Hill as its Environmental Consultant. CH2M Hill will provide environmentally-related evaluation services in order to assist the Debtor in determining the extent of contamination on the Debtor's property. Those services will require CH2M Hill to: a) evaluate existing data regarding contamination on the Debtor's properly and determine where data gaps exist; b) evaluate data front findings to help estimate the magnitude of cleanup costs; c) prepare a PRTS Preliminary Analysis Summary Report for the Debtor which outlines findings; d) examine and evaluate options for the use or reuse of property depending on the level of cleanup; and e) perform other environmentally-related estimation services as specifically requested by the Debtor. The Debtor points out that CH2M Hill's evaluation of the scope of environmental contamination on its property is a vital step in preparation for marketing the its real property. CH2M Hill estimates that the effort to complete its preliminary PRTS analysis will take approximately four weeks. The Debtor agrees to pay CH2M Hill a total of $35,000 for the PRTS analysis. Geneva Steel owns and operates an integrated steel mill located near Provo, Utah. The Company filed for chapter 11 protection on January 25, 2002 (Bankr. Utah Case No. 02-21455). Andrew A. Kress, Esq., Keith R. Murphy, Esq., and Stephen E. Garcia, Esq., at Kaye Scholer LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed $264,440,000 in total assets and $192,875,000 in total debts. GLOBAL CROSSING: Court Approves Settlement Pact with Accenture -------------------------------------------------------------- Global Crossing Ltd., and its debtor-affiliates sought and obtained Judge Gerber's approval for their Settlement Agreement with Accenture LLP, which includes the assumption of certain underlying agreements between the parties. Michael F. Walsh, Esq., at Weil Gotshal & Manges LLP, in New York, informed the Court that Accenture LLP has completed a very significant consulting and software customization project for the GX Debtors. Accenture began the work before the Petition Date and completed the project in March 2002. Two disputes have arisen under the agreements concerning: -- what portion of the work performed is attributable to the postpetition period; and -- whether Accenture holds intellectual property rights that the GX Debtors need to continue to benefit from the work performed. The GX Debtors and Accenture have resolved those issues recently and have agreed to a settlement of amounts due under the Agreements dated November 22, 2002. The salient terms of the Settlement Agreement are: A. The Debtors will make these payments: -- $1,000,000 to Accenture without further delay; and -- $3,800,000, payable at the Debtors' option in the ordinary course of their business, from any administrative claim or reserve established under the Plan of Reorganization, or as an assumed liability of the Reorganized Debtors, in eight monthly installments of $475,000; B. Accenture will have a single allowed administrative expense claim against the Debtors in an aggregate amount not to exceed the Settlement Payments. Accenture will not be required to file any proof of claim in the Debtors' Chapter 11 cases; C. The Debtors will assume the Agreements. The Debtors are not required to make any cure payments in connection with the Assumption; D. The assumption and payments will result in a transfer of the IP Rights to the Debtors; E. During calendar years 2003 and 2004, the Debtors will grant Accenture a right to bid on formal requests for proposals with respect to systems development projects, which the Debtors wish to pursue. If, in the Debtors' sole and absolute discretion, Accenture's bid is equal to or superior than any other bids in all material respects, Accenture will be deemed a "Preferred Vendor" and the Debtors will negotiate in good faith with Accenture for these Services. The Debtors reserve the right to elect not to secure the applicable Services from Accenture or any other party; and F. The Debtors and Accenture exchange mutual releases, provided, however, that these releases will not affect obligations expressly preserved by or contained in the Settlement Agreement. (Global Crossing Bankruptcy News, Issue No. 37; Bankruptcy Creditors' Service, Inc., 609/392-0900) GOODYEAR TIRE: S&P Cuts & Plucks B+ Class A-1 Rating from Watch --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Corporate Backed Trust Certificates Goodyear Tire & Rubber Note- Backed Series 2001-34 Trust's class A-1 certificates and removed it from CreditWatch with negative implications, where it was placed March 10, 2003. The rating action follows the April 2, 2003 lowering of Goodyear Tire & Rubber Co.'s long-term corporate credit and senior unsecured debt ratings and their removal from CreditWatch. Corporate Backed Trust Certificates Goodyear Tire & Rubber Note- Backed Series 2001-34 Trust is a swap-independent synthetic transaction that is weak-linked to the underlying collateral, Goodyear Tire & Rubber Co.'s debt. The rating action reflects the credit quality of the underlying securities issued by Goodyear Tire & Rubber Co. RATING LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Corporate Backed Trust Certificates Goodyear Tire & Rubber Note-Backed Series 2001-34 Trust $43.628 million corporate bond-backed certs Rating Class To From A-1 B+ BB-/Watch Neg DebtTraders says that Goodyear Tire & Rubber's 8.500% Bond Due GT07USR1 2007 (GT07USR1) are trading at 74 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GT07USR1 for real-time bond pricing. HAWAIIAN AIRLINES: Wants to Engage Dow Lohnes as Special Counsel ---------------------------------------------------------------- Hawaiian Airlines, Inc., asks for approval from the U.S. Bankruptcy Court for the District of Hawaii to employ Dow, Lohnes & Albertson, PLLC as Special Counsel to provide legal services related to: i) the Debtor's certificate of public convenience and necessity issued by the United States Department of Transportation, and its operating certificate issued by the Federal Aviation Administration; ii) governmental and legislative issues arising from acts of regulatory agencies and the Congress of the United States of America; and iii) intellectual property issues arising from the ownership of trade marks and copyrighted materials. The Debtor relates that Dow Lohnes has represented the Debtor on transportation and aviation law issues since 1979. As a result, Dow Lohnes gained intimated familiarity with the complex legal issued that have arisen and are likely to arise in connection with the Debtor's transportation and aviation issues. Dow Lohnes' current hourly rates range from: Partners and Counsel $330 to $450 per hour Associates/Senior Counsel $160 to $375 per hour Paralegals/Legal Assistants $40 to $225 per hour Hawaiian Airlines Incorporated provides primarily scheduled transportation of passengers, cargo and mail. Flights operate within the South Pacific and to points on the west coast as well as Las Vegas. The Company filed for chapter 11 protection on March 21, 2003 (Bankr. Hawaii Case No. 03-00817). Lisa G. Beckerman, Esq., at Akin Gump Strauss Hauer & Feld LLP represent the Debtor in its restructuring efforts. When the Company filed for protection from its creditors, it listed debts and assets of more than $100 million each. HEALTHSOUTH CORP: Bank Lenders Agree to Forbear Until May 1 ----------------------------------------------------------- HEALTHSOUTH Corporation (OTC Pink Sheets: HLSH) and its bank lenders have executed a Forbearance Agreement on the Company's $1.25 billion credit facility through May 1, 2003. The agreement provides that the bank lending group, headed by JPMorgan Chase Bank and Wachovia Securities, will forbear from exercising remedies arising from the default of the Company's credit facility, which was announced on March 27, 2003, absent any new defaults under the credit facility or the Forbearance Agreement. During this forbearance period, the Company will continue discussions with its creditors to address the Company's current liquidity situation. HEALTHSOUTH is the nation's largest provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services, with nearly 1,700 locations in all 50 states, the United Kingdom, Australia, Puerto Rico, Saudi Arabia and Canada. HEALTHSOUTH can be found on the Web at http://www.HEALTHSOUTH.com Healthsouth Corp.'s 7.375% bonds due 2006 (HRC06USN1) are trading between 51.5 and 53.5. See http://www.debttraders.com/price.cfm?dt_sec_ticker=HRC06USN1for real-time bond pricing. HEARTLAND SECURITIES: Committee Taps Cole Schotz as Attorneys ------------------------------------------------------------- The Official Committee of Unsecured Creditors of Heartland Securities Corp., asks for authority from the U.S. Bankruptcy Court for the Southern District of New York to retain Cole, Schotz, Meisel, Forman & Leonard, P.A., as its counsel. The Committee tells the Court that it needs to retain Cole Schotz in this proceeding to: a) give the Committee legal advice with respect to its duties and powers; b) assist the Committee in its investigation of the acts, conduct, assets, liabilities, and financial condition of the Debtor and the operation of its business and the desirability of the continuation of such business, as well as any other matters relevant to the case or to the formulation of a plan of reorganization or orderly liquidation, including the examination of the Debtor's transactions with its secured creditors, former and present shareholders, and management; c) represent the Committee in any adversary proceedings, including, but not limited to, those commenced by or against the Committee and to represent the Committee in any court proceedings commenced by or against it in any other courts of competent jurisdiction; and d) perform all legal services for the Committee as may be necessary herein. Cole Schotz will charge the Debtor's estates at their standard hourly rates, which currently are: Hugh M. Leonard Partner $450 per hour Gerald H. Gline Partner $425 per hour Michael D. Sirota Partner $425 per hour Stuart Komrower Partner $375 per hour Leo V. Leyva Partner $375 per hour Leonard M. Wolf Partner $350 per hour Ilana Volkov Partner $325 per hour Warren A. Usatine Partner $285 per hour Kenneth L. Baum Partner $275 per hour Franck D. Chantayan Associate $175 per hour Jarod M. Stern Associate $150 per hour Kristin S. Elliot Associate $125 per hour Alexander R. Perez Associate $125 per hour Virginia M. Lane Paralegal $125 per hour Frances Pisano Paralegal $125 per hour Heartland Securities Corp., provider securities brokerage services for professional day traders, filed for chapter 11 protection on March 26, 2003 (Bankr. S.D.N.Y. Case No. 03- 11817). Thomas R. Califano, Esq., at Piper Marbury Rudnick & Wolfe LLP, represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $13,386,000 in total assets and $25,833,000 in total debts. HOLLINGER INC: Dec. 31 Balance Sheet Insolvency Widens to $351MM ---------------------------------------------------------------- Hollinger Inc., (TSX:HLG.C) reports a net loss for the year ended December 31, 2002 of $88.6 million compared to a net loss of $131.9 million in 2001. The net loss for the three months ended December 31, 2002 was $54.4 million compared to a net loss of $82.8 million in 2001. The results of both years have been impacted by a large number of unusual items that are discussed later in this release. Hollinger Inc.'s principal asset is its shareholding in Hollinger International Inc. (NYSE:HLR) that currently represents approximately 72.6% of the voting power and approximately 30.3% of the equity of the outstanding common stock of International. International's operations consist principally of the Chicago Group, the U.K. Newspaper Group, the Canadian Newspaper Group and the Community Group (now consisting only of the Jerusalem Post). Sales Revenue Sales revenue in 2002 was $1,628.2 million compared with $1,822.1 million in 2001, a decrease of $193.9 million. The reduction in sales revenue is primarily due to the sale of most of the remaining Canadian newspaper properties in July and November 2001 and the sale of the remaining 50% interest in the National Post in August 2001. Declines in U.K. advertising revenue in local currency for the full year, were partially offset by the strengthening of the pound sterling. Sales revenue, in local currency, for the Chicago Group was flat year over year. Sales revenue in the three months ended December 31, 2002 was $417.1 million compared with $408.1 million in 2001, an increase of $9.0 million. Increased sales revenue at the Chicago Group and the U.K. Newspaper Group were partly offset by lower sales revenue at the Jerusalem Post and at the Canadian Newspaper Group. U.K Newspaper Group revenue in local currency decreased, as a result of lower joint venture printing revenue offset in part by increased fourth quarter advertising revenue. However, as a result of the strengthening of the pound sterling, U.K Newspaper Group revenue increased in Canadian dollars. Chicago Group revenue in local currency increased as a result of increased advertising revenue partly offset by lower circulation revenue. Cost of Sales and Expenses Cost of sales and expenses in the full year 2002 were $1,453.9 million compared with $1,730.1 million in 2001, a decrease of $276.2 million. The decrease in cost of sales and expenses resulted primarily from the disposition of Canadian newspaper properties in 2001 as well as lower newsprint costs, lower compensation costs and general cost reductions at the Chicago Group and the U.K. Newspaper Group, primarily as a result of cost containment strategies. Lower cost of sales and expenses at the U.K. Newspaper Group, in local currency, were partially offset by the effect of the strengthening of the pound sterling. Cost of sales and expenses in the fourth quarter 2002 were $375.2 million compared with $399.9 million in 2001, a decrease of $24.7 million primarily at the U.K. Newspaper Group and the Chicago Group. Cost of sales and expenses in the U.K. Newspaper Group in the fourth quarter 2001 included an impairment charge in respect of betterments capitalized which accounted for most of the decrease in the U.K. Newspaper Group in the fourth quarter 2002 compared with 2001. Depreciation and Amortization Depreciation and amortization in the full year 2002 amounted to $88.2 million compared with $144.7 million in 2001, a reduction of $56.5 million. In the fourth quarter 2002, depreciation and amortization amounted to $21.2 million compared with $33.8 million in 2001, a reduction of $12.6 million. These reductions primarily result from both the disposition of Canadian properties in 2001 and the adoption on January 1, 2002 of CICA Handbook Section 3062, which resulted in goodwill not being amortized subsequent to January 1, 2002. In the year ended December 31, 2001, amortization of goodwill and intangible assets, including amortization of goodwill and intangible assets in respect of properties sold during 2001, which are not being amortized in 2002, approximated $53.3 million. Investment and Other Income Investment and other income in the full year 2002 amounted to $29.7 million compared with $97.3 million in 2001, a decrease of $67.6 million, and for the fourth quarter 2002 amounted to $7.1 million compared with $0.4 million in 2001, an increase of $6.7 million. Investment and other income in 2001 included interest on debentures issued by a subsidiary of CanWest Global Communications Corp., and a dividend on CanWest shares. In September 2001, CanWest temporarily suspended its semi-annual dividend. In the latter part of 2001, all of the CanWest shares were sold to the Hollinger Participation Trust and participation interests were sold in respect of nearly all of the CanWest debentures, resulting in significantly lower interest and dividend income in 2002. Most of the proceeds from the disposal of the CanWest investments were retained as short-term investments at low rates of interest until the end of the first quarter of 2002 when a portion of International's long-term debt was retired. Interest Expense Interest expense for 2002 was $121.7 million compared with $177.9 million in 2001, a reduction of $56.2 million, and for the fourth quarter 2002 was $32.3 million compared with $40.9 million in 2001. These reductions mainly result from lower average debt levels in 2002 compared with 2001. The Company reduced its senior credit facility in 2001 by $173.4 million and by $38.5 million in January 2002 and International reduced its long-term debt beginning in March 2002 by U.S. $290.0 million. In addition, since both the Company's Series II and Series III preference shares are financial liabilities, dividends on such shares are included in interest expense. Dividends paid on the Series II preference shares were lower in 2002 than in 2001, as a result of Series II preference share retractions and International reducing its dividend on Class A common shares, on which the Series II preference dividends are based. Net Foreign Currency Loss Net foreign currency losses increased to a loss of $19.7 million in the year ended December 31, 2002 from a loss of $7.5 million in 2001. Net foreign currency losses in 2002 includes a $10.4 million net loss on amounts sold to the Hollinger Participation Trust and a loss on a cross currency swap of $5.7 million. Net foreign currency losses in the fourth quarter 2002 were $16.5 million compared to $3.9 million in 2001. Unusual Items Unusual items in the full year 2002 amounted to a loss of $62.6 million compared with a loss of $295.4 million in 2001. Unusual items in 2002 included the loss on retirement of senior notes of Internationals' subsidiary, Hollinger International Publishing Inc. (Publishing), in the amount of $56.3 million, a $63.6 million write-off of investments, and a $43.3 million loss on the termination of the Total Return Equity Swap, partly reduced by a $20.1 million gain on the dilution of the Company's investment in International, a net $44.5 million foreign exchange gain on the reduction of net investments in foreign subsidiaries and a $34.4 million reduction of the pension valuation allowance. Unusual items in 2001 included a $240.1 million loss on sale of investments, a $23.0 million loss on sale of Publishing interests, a $79.9 million loss on write-off of investments and a $29.6 million realized loss on the Total Return Equity Swap partly offset by a $59.4 million gain on the sale of and dilution of the Company's investment in International and a $58.7 million reduction of the pension valuation allowance. Unusual items in the fourth quarter of 2002 were a gain of $5.0 million compared to a loss of $198.4 million in the fourth quarter of 2001. Unusual items in the fourth quarter 2002 included a write-off of investments, a decrease in the pension valuation allowance, a realized loss on the Total Return Equity Swap and a net foreign exchange gain on the reduction of the net investment in the Canadian Group. Unusual items in the fourth quarter of 2001 included gains and losses on the sale of certain Canadian properties, a gain on the dilution of the investment in International, gains and losses on the sales of investments, a one-time expense related to the pension and post retirement plan liability adjustment in respect of retired former Southam employees and a decrease in pension valuation allowance. Income Tax Expense In 2002 income tax expense for the full year was $124.0 million computed on a loss before income taxes and minority interest of $89.5 million primarily as a result of non-deductible expenses including the settlement of the Total Return Equity Swap and an increase in the tax valuation allowance of $74.0 million. For the full year 2001, the income tax recovery was $89.5 million on a loss before income taxes and minority interest of $454.9 million in part due to the impact of losses at the National Post for which a tax benefit was not recorded. Minority Interest Minority interest in the year ended December 31, 2002 was a recovery of $124.9 million compared to a recovery of $233.5 million in 2001 and for the fourth quarter 2002 was a recovery of $99.2 million compared to a recovery of $179.9 million in 2001. Minority interest primarily represents the minority share of the net loss of International and the net earnings of Hollinger Canadian Newspapers, Limited Partnership. In 2001, minority interest also included the minority's 50% share of the National Post net loss to August 31, which totalled $28.7 million. Refinancing of the Company's Bank and Other Indebtedness On March 10, 2003, Hollinger Inc. issued U.S. $120.0 million aggregate principal amount of 11-7/8% Senior Secured Notes due 2011. The total net proceeds were used to repay existing bank indebtedness of $90.8 million, to repay amounts due to the Company's ultimate parent company, The Ravelston Corporation Limited (RCL), of $48.8 million, to make advances to RCL of $16.4 million and for general corporate purposes. The Senior Secured Notes are secured by a first priority lien on 10,108,302 shares of International's Class A common stock and 14,990,000 shares of International's Class B common stock owned by the Company and a wholly owned subsidiary. Therefore the Company, directly and indirectly, in total holds only 1,380,529 shares of International Class A common stock which are unencumbered, the current market value of which is approximately $16.7 million. Immediately prior to the issue of Senior Secured Notes, a wholly owned subsidiary of the Company owed International approximately U.S.$46.2 million on a demand basis. Contemporaneously with the issue, International purchased for cancellation 2,000,000 shares of Class A common stock held by the Company's subsidiary, and redeemed all the Series E Redeemable Convertible Preferred Stock of Hollinger International held by the Company's subsidiary, thereby reducing the amount owing to U.S.$20.4 million. The remaining debt bears interest at 14.25% (or 16.5% in the event that the interest is paid in kind) and is subordinated to the Company's Senior Secured Notes (so long as the notes are outstanding). Cash Flow and Liquidity On a non-consolidated basis, the Company has experienced a shortfall between the dividends and fees received from its subsidiaries and its obligations to pay its operating costs, including interest on its debt and dividends on its preference shares. Such shortfalls have been funded by RCL and Ravelston Management Inc. (RMI) on an informal basis. On March 10, 2003, the date of issue of the Company's Senior Secured Notes, RMI entered into a support agreement with the Company. Under the agreement, RMI is required to make an annual support payment in cash to the Company on a periodic basis by way of contributions to the capital of the Company (without the issuance of additional shares of the Company) or subordinated debt. The annual support payment will be equal to the greater of (a) the Company's negative net cash flow for the relevant period (which does not extend to outlays for retractions or redemptions), determined on a non-consolidated basis, and (b) U.S.$14.0 million per year (subject to certain reductions), in either case as reduced by any permanent repayment of debt owing by RCL to the Company. The Company's issued capital stock consists of Series II preference shares, Series III preference shares and retractable common shares, each of which is retractable at any time at the option of the holder. There is uncertainty regarding the Company's ability to meet its future financial obligations arising from the retraction of preference shares and retractable common shares. Under corporate law, the Company is not required to make any payment to redeem any shares in certain circumstances, including if the Company's liquidity would be unduly impaired as a consequence. If, when shares are submitted by holders for retraction or when the Company is obliged to redeem the Series III shares on April 30, 2004, there are reasonable grounds for believing that, after making payment in respect of those shares, the Company's liquidity would be unduly impaired, the retractions and redemptions will not be completed. In such event, shareholders would not become creditors of the Company but would remain as shareholders until such time as the retractions or redemptions are able to be completed under applicable law. The Company's uncertain ability to make payments on future retractions and redemptions of shares is due to the fact that liquidity of its assets is limited at present given that substantially all of its shares of International common stock were provided as security for the Senior Secured Notes. The Company's Series III preference shares are redeemable on April 30, 2004 for a cash payment of $10.00 per share plus any accrued and unpaid dividends to that date. The total cost to redeem all of the issued and outstanding Series III preference shares is $101.5 million. The Company is proposing to make an offer to exchange all of its Series III Preference Shares for newly issued Series IV Preference Shares having comparable terms except for a higher dividend rate (8% as compared to 7% for the Series III Preference Shares) and a longer term to mandatory redemption (April 30, 2008 as compared to April 30, 2004). At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $351 million. Long-term Debt At December 31, 2002, the Company's consolidated long-term debt totalled $974.8 million and was all debt of International and its subsidiaries. In December 2002, Publishing completed the private placement of U.S.$300.0 million of 9% senior notes ("9% Senior Notes") due 2010 generating net proceeds of U.S.$291.7 million before expenses associated with the offering. Contemporaneously with that placement, Publishing closed an amended U.S.$310.0 million senior secured credit facility consisting of a U.S.$45.0 million revolving credit facility and a U.S.$45.0 million term loan both maturing September 30, 2008 as well as a U.S.$220.0 million term loan maturing September 30, 2009. No amounts have been drawn under the U.S.$45.0 million revolving credit facility. The proceeds from the 9% Senior Note offering and U.S.$265.0 million borrowed as term loans under the senior secured credit facility, along with cash on hand, were used, in part, to repay all amounts owed by International under its loan facility with Trilon International Inc., to retire the remaining Total Return Equity Swaps, thus canceling seven million shares of Class A common stock, and on January 22, 2003, to redeem the existing senior subordinated notes of Publishing due 2006 and 2007 in the amount of U.S$543.8 million, including early redemption premium and accrued interest. This debt is shown as a current liability at December 31, 2002 and the borrowings used to fund the redemption were held in escrow at December 31, 2002 and disclosed as escrow deposits in current assets. Transitional Impairment Charge The transitional provisions of CICA Handbook section 3062 required the Company to assess whether goodwill was impaired as of January 1, 2002. As a result of this transitional impairment evaluation, the Company determined that the carrying amount of the Jerusalem Post properties was in excess of the properties' estimated fair value. Accordingly, the value of goodwill attributable to the Jerusalem Post of $32.0 million has been written down in its entirety. The net write-down of $12.1 million (net of related minority interest) has been recorded as a charge to the opening deficit as at January 1, 2002. Restatement of 2002 Quarterly Results All of the Company's operations are owned through International and substantially all of the Company's goodwill and intangible assets are reflected in the accounts of International. Upon initial adoption on January 1, 2002 of the new accounting standards for goodwill and other intangible assets, International classified $186.8 million of advertiser and subscriber relationship intangible assets as goodwill. Also, on initial adoption on January 1, 2002, the Company made a similar reclassification to goodwill of such amounts which had been included within circulation for the Chicago Group. However, based on the consensus reached by the U.S. Emerging Issues Task Force in Issue No. 02-17, "Recognition of Customer Relationship Intangible Assets Acquired in a Business Combination" and a comment made by the Securities and Exchange Commission in their review of International's results for the nine months ended September 30, 2002, International has subsequently concluded that its advertiser and subscriber relationship intangible assets do meet the criteria for recognition apart from goodwill under SFAS No. 142 (which is substantially consistent with CICA Handbook Section 3062). Therefore, in the accounts of both International and the Company, the advertiser and subscriber relationship intangible assets were reclassified from goodwill to identifiable intangible assets during the fourth quarter of 2002 and continue to be amortized over their 30-year useful lives. Amortization expense was increased by $1,788,000, income tax recovery was increased by approximately $715,000, minority interest reduced by $727,000 and net loss was increased by $346,000 for each of the three months ended March 31, June 30 and September 30, 2002 to reflect the adjustment to amortization and related effects to income tax and minority interest. The Company's reclassification of advertiser and subscriber relationship intangible assets apart from goodwill had no impact on the asset impairment tests and the Company's cumulative effect of a change in accounting principle. Other Hollinger Inc.'s principal asset is its shareholding in Hollinger International Inc. that currently represents approximately 72.6% of the voting power and approximately 30.3% of the equity of the outstanding common stock of Hollinger International Inc. Hollinger International Inc. is a global newspaper publisher with English-language newspapers in the United States, Great Britain, and Israel. Its assets include The Daily Telegraph, The Sunday Telegraph and The Spectator magazine in Great Britain, the Chicago Sun-Times and a large number of community newspapers in the Chicago area, The Jerusalem Post and The International Jerusalem Post in Israel, a portfolio of new media investments and a variety of other assets. HUGHES ELEC.: GM's Ratings Not Affected by Sale of Interests ------------------------------------------------------------ Standard & Poor's Ratings Services said that its rating and outlook on General Motors Corp. (BBB/Negative/A-2) are not affected by the company's announced plan to sell its remaining 19.9% economic ownership interest in Hughes Electronics Corp. to News Corp. Ltd. The transaction would generate total proceeds of approximately $4.1 billion (pretax) -- $3.4 billion in cash and $700 million in News Corp. preferred American Depository Receipts. In its decision announced yesterday to revise GM's rating outlook to Negative from Stable, Standard & Poor's had assumed that GM would ultimately succeed in its long-standing efforts to monetize its investment in Hughes. Completion of this transaction (which is subject to shareholder, tax, and other regulatory approvals) will enhance GM's ability to meet its near-term pension funding objectives. Yet, the massive size of the company's unfunded pension liability ($25.4 billion at Dec. 31, 2002) and even larger retiree medical liability ($51.4 billion) will still pose significant concerns. IMCLONE SYSTEMS: Fails to Satisfy Nasdaq Listing Requirements ------------------------------------------------------------- ImClone Systems Incorporated (Nasdaq: IMCL), as a result of the delay in filing the Company's 2002 Form 10-K results and in accordance with standard practice, received a Nasdaq Staff Determination indicating the Company has failed to comply with filing requirements with respect to Marketplace Rule 4310(C)(14). As a result, the Company's securities are subject to delisting from The Nasdaq National Market. As previously announced, ImClone Systems delayed the filing of its 2002 Form 10-K based on its inability to finalize the Company's audited financial statements pending completion of an ongoing internal review. In accordance with Nasdaq 4800 series rules, ImClone Systems plans to promptly submit a request for a hearing before the Nasdaq Listing Qualifications Panel to appeal the Nasdaq Staff Determination and avoid a delisting of its securities. No delisting action will take place prior to the hearing, which, under Nasdaq regulation, is held within 45 days of the date of the hearing request. To the best of the Company's knowledge, there are no other deficiencies, qualitative or quantitative, that would prevent the Company's securities from continued listing on The Nasdaq National Market. It is the Company's understanding that its filing of its annual report on Form 10-K with the SEC will cure the only outstanding Nasdaq continued listing deficiency and will allow the Company's securities to regain compliance and remain listed on the Nasdaq Stock Market. The Company intends to cure the outstanding listing deficiency prior to a delisting action. As a result of ImClone Systems' inability to file its 2002 Form 10-K on a timely basis, the Company's trading symbol was changed by Nasdaq from "IMCL" to "IMCLE" effective Friday, April 11, 2003, and will not revert to "IMCL" until such time as the Company cures its listing deficiency by filing its 2002 Form 10- K. ImClone Systems Incorporated, whose September 30, 2002 balance sheet shows a total shareholders' equity deficit of about $117 million, is committed to advancing oncology care by developing a portfolio of targeted biologic treatments, designed to address the medical needs of patients with cancer. The Company's three programs include growth factor blockers, angiogenesis inhibitors and cancer vaccines. ImClone Systems' strategy is to become a fully integrated biopharmaceutical company, taking its development programs from the research stage to the market. ImClone Systems is headquartered in New York City with additional administration, manufacturing and laboratory facilities in Somerville, New Jersey and Brooklyn, New York. INTEGRATED INFO.: Commences Trading on OTCBB Under IISX Symbol -------------------------------------------------------------- Integrated Information Systems, Inc. (OTCBB:IISX), a leading provider of secure integrated information solutions, reported its second consecutive profitable quarter for the fourth quarter ended December 31, 2002. Net income for the quarter was $427,000 or $0.12 per share, compared to a net loss of $12.4 million for its fourth quarter ended December 31, 2001. Revenue for the quarter was $3.4 million, compared to revenue of $6.0 million for the fourth quarter of 2001. Net loss for the year 2002 was $11.8 million, compared to a net loss of $49.4 million for the year 2001. Revenue for the year 2002 was $23.3 million, compared to revenue of $31.3 million for the year 2001. The company's auditors issued an unqualified opinion in connection with their audit of the financial statements for 2002. The Company's December 31, 2002 balance sheet shows that total current liabilities exceeded its total current assets by about $3 million. Meanwhile, the Company's total shareholders equity has further diminished to about $600,000 from about $12 million as recorded a year ago. Some of the clients IIS worked with in the quarter include: ADM Group, ADP, ADT Security Systems, Alliant Energy, American Express, American Family Mutual Insurance, AnchorBank, Arizona State University, Arizona Department of Public Safety, Benson Industries, Blair Corporation, Boise Cascade, Buck Consultants, City of Cupertino, City of Phoenix, City of Sacramento, City of San Jose, City of Sausalito, City of Waukesha, Cox Communications, CUNA Mutual Group, Dane County, Dell, Diversified Healthcare, Hewlett Packard, Honeywell, IBM, JDA Software, Johnson Controls, Johnsonville Sausage, Johnson Wax, Kraft Foods, Maricopa Community College, Maricopa County, Marshall Erdman, Novell Corporation, Farmers Insurance Group, Partners Telemedicine, Phillip Morris, Rapid City Medical Center, Qwest Communications, Rayovac, Reed PLC, The Nautilus Group, Timberline Software, Tucson Medical Center, TriWest Healthcare Alliance, Wausau-Mosinee Paper, Wisconsin Department of Electronic Government, and Kenworth. The work included new technology solutions that were focused on helping our clients "do more with less." Some of the solutions provided in the quarter include: server consolidation, messaging migration, desktop and server operating system migration, application integration, application development, security assessment and implementation, directory services design and implementation, secure remote access, single sign-on integration, and data warehouse design and implementation "We have continued to relentlessly pursue our turnaround plan," said Jim Garvey, Chairman, Chief Executive Officer and President of IIS. "As part of our restructuring efforts, the third and fourth quarters of 2002 were favorably impacted by downward revisions to restructuring accruals and gains on the settlement of payables for less than the face amount, totaling $5.2 million, further improving our balance sheet, significantly reducing going-forward obligations, and enhancing our ability to grow the business profitably. As we complete the financial restructuring phases of our plan, which have allowed us to report gains for two quarters, we will be directing our efforts toward catching the next wave of technology spending and restoring solid organic growth to our business. Web services architecture and technology creates new integration opportunities for organizations. We expect a coming wave of inter-organization integration opportunities for our clients. These opportunities provide a high return on investment for our clients and can be completed with the latest technology in an economical and incremental fashion. In addition, web services provides for easy integration with existing systems so current technology investments can be leveraged with less incremental cost and time than complete system replacement or even previously available integration technologies." "The current economic environment has made near-term revenue growth difficult and has lowered our expectations of what we will be able to accomplish short-term," continued Garvey. "We expect revenues to remain flat to down but feel confident that we now have the right expense structure to weather this environment while building for the future. We will carefully continue our consolidation efforts this year around the Microsoft Partner Channel and expect to close a number of acquisitions that will open new markets for us during the year." Effective with the opening of business on April 10, 2003, the common stock of IIS commenced trading on the OTC Bulletin Board (OTCBB) under the symbol "IISX". The common stock of IIS had been trading on The Nasdaq SmallCap Market under the symbol "IISXC" pursuant to a conditional listing granted in 2002. The Nasdaq Listing Qualifications Panel determined that IIS did not meet the minimum stockholders' equity requirement for the conditional listing and, accordingly, determined not to permit continued inclusion on The Nasdaq SmallCap Market. Integrated Information Systems(TM) is a leading provider of secure integrated information solutions. IIS specializes in securely optimizing, enhancing and extending information applications and networks to serve employees, partners, customers and suppliers. IIS new technology solutions help organizations do more with less. Founded in 1988, IIS has operations in Denver; Madison; Milwaukee; Phoenix; Portland, Oregon and Bangalore, India. For more information on Integrated Information Systems, please visit its Web site: http://www.iis.com INTERNATIONAL PAPER: Will be Paying Regular Quarterly Dividend -------------------------------------------------------------- International Paper (NYSE: IP) announced a regular quarterly dividend of $0.25 per share for the period from April 1, 2003 to June 30, 2003, inclusive. The dividend on the common stock of the company is payable June 16, 2003 to holders of record at the close of business on May 23, 2003. Also, the company declared a regular quarterly dividend of $1 per share for the period April 1, 2003 to June 30, 2003, inclusive, on the preferred stock of the company, payable June 16, 2003 to holders of record at the close of business on May 23, 2003. International Paper -- http://www.internationalpaper.com-- is the world's largest paper and forest products company. Businesses include paper, packaging, and forest products. As one of the largest private forest landowners in the world, the company manages its forests under the principles of the Sustainable Forestry Initiative(R) (SFIsm) program, a system that ensures the continual planting, growing and harvesting of trees while protecting wildlife, plants, soil, air and water quality. Headquartered in the United States, International Paper has operations in over 40 countries and sells its products in more than 120 nations. As previously reported, Standard & Poor's Ratings Services has assigned its 'BB+' preferred stock ratings to International Paper Co.'s $6 billion mixed shelf registration. ISLE OF CAPRI: Names Barron Fuller VP & GM of Marquette Casino -------------------------------------------------------------- Isle of Capri Casinos, Inc., (Nasdaq: ISLE) has promoted Barron B. Fuller to vice president and general manager of the company's Marquette casino. Fuller, who most recently served as senior director of operations for the Isle--Marquette, has been with the Isle of Capri since the company acquired the property in 2000. His responsibilities will include overseeing the day-to-day operations of the 19,000-square-foot casino and hotel. Prior to his professional experience with the Isle of Capri, Fuller held various positions with the Miss Marquette Riverboat Casino since 1995. He holds a bachelor's of science degree in hotel and restaurant management from the University of Wisconsin-Stout. Isle of Capri Casinos, Inc. owns and operates 13 riverboat, dockside and land-based casinos at 12 locations, including Biloxi, Vicksburg, Lula and Natchez, Mississippi; Bossier City and Lake Charles (two riverboats), Louisiana; Black Hawk, Colorado; Bettendorf, Davenport and Marquette, Iowa; and Kansas City and Boonville, Missouri. The company also operates Pompano Park Harness Racing Track in Pompano Beach, Florida. As reported in Troubled Company Reporter's February 3, 2003 edition, Standard & Poor's Ratings Services assigned its 'B+' rating to Isle of Capri Black Hawk LLC's $210 million senior secured credit facility. In addition, Standard & Poor's assigned its 'B+' corporate credit rating to the Black Hawk, Colo.-based company. The outlook is stable. Isle of Capri Black Hawk is 57% owned by Isle of Capri Casinos Inc., (BB-/Stable/--) and 43% by Nevada Gold & Casinos Inc. (unrated entity). Upon consummation of the pending acquisition, the company will own and operate two casino properties in Black Hawk (Isle Black Hawk and Colorado Central Station; CCS) and one in Cripple Creek, Colo. The $84 million transaction is expected to close in the next several months, subject to regulatory approval and financing. J.CREW GROUP: Reports a Slight Decline in Revenues for March ------------------------------------------------------------ J.Crew Group, Inc., reported revenues for the five weeks ended April 5, 2003 of $58.2 million compared to revenues of $58.9 million for the five weeks ended April 6, 2002. Comparable store sales for the Retail division decreased 8% for the five weeks ended April 5, 2003 compared to the same five week period last year. Net sales for the Direct division were flat for the comparable five week period. Total inventories were down 20% compared to last year, despite a 10% increase in the store base versus a year ago. Revenues for the nine weeks ended April 5, 2003 were $103.8 million compared to $112.3 million for the nine weeks ended April 6, 2002, a decrease of 8%. Comparable store sales for the Retail division decreased 15% for the nine week period ended April 5, 2003 compared to the comparable period last year. Net sales for the Direct division decreased 8% for the comparable nine week period. J.Crew Group, Inc., is a leading retailer of men's and women's apparel, shoes and accessories. As of April 5, 2003, the Company operated 154 retail stores, the J.Crew catalog business, jcrew.com, and 42 factory outlet stores. * * * As reported in Troubled Company Reporter's April 11, 2003 edition, Moody's Investors Service drops several debt ratings of J. Crew Group and its operating unit, J. Crew Operating Corp down to low-Bs and junks. The downgrade follows the announcement of a $9 million write down on its previously reported net income. Rating Actions To From J. Crew Group: Senior implied B3 B2 13.125% Senior Discount Notes due 2008 Ca Caa3 Issuer rating Ca Caa3 J. Crew Operating Corp.: 10.375% senior subordinated notes due 2007 Caa3 Caa1 The downgrade reflects a very high leverage and the expectations of a weak performance and operating profitability in the coming months. Other factors considered are the seasonality and volatility associated with the company's apparel business. J.CREW: Commences Exchange Offer for Junk-Rated Sr. Debentures -------------------------------------------------------------- J. Crew Group, Inc. has commenced through J. Crew Intermediate LLC, its newly formed wholly-owned subsidiary, an offer to exchange the outstanding 13-1/8% Senior Discount Debentures due 2008 issued by the Company for Intermediate's unissued 16.0% Senior Discount Contingent Principal Notes due 2008. In conjunction with the exchange offer, Intermediate is also soliciting consents to proposed amendments to the existing debentures indenture which would eliminate most of the restrictive covenants. The exchange offer and consent solicitation are subject to customary conditions, including that a majority in principal amount of the outstanding existing debentures shall have been tendered pursuant to the exchange offer and not withdrawn. Holders of a majority of the principal amount of the outstanding existing debentures have agreed to tender all of their existing debentures in the exchange offer. Such tender of existing debentures would satisfy the minimum tender requirement. The Company will not pay accrued and unpaid interest on the existing debentures on the scheduled interest payment date of April 15, 2003. Rather, the Company will pay such interest on the settlement date of the exchange offer (which is expected to occur on or about May 6, 2003) together with interest thereon at a rate of 13-1/8% per annum from April 15, 2003 to the settlement date, to the holders of the existing debentures who do not tender their existing debentures in the exchange offer. The new notes will not be registered under the Securities Act of 1933, as amended. The exchange offer is being made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act and similar exemptions from registration provided by certain state securities laws. The new notes will only be offered to qualified institutional buyers, as that term is defined in Rule 144A under the Securities Act, and institutional accredited investors, as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, as well as in off shore transactions to person other than a U.S. person, as that term is defined in Regulation S under the Securities Act. * * * As reported previously, Moody's Investors Service drops several debt ratings of J. Crew Group and its operating unit, J. Crew Operating Corp down to low-Bs and junks. The downgrade follows the announcement of a $9 million write down on its previously reported net income. Rating Actions To From J. Crew Group: Senior implied B3 B2 13.125% Senior Discount Notes due 2008 Ca Caa3 Issuer rating Ca Caa3 J. Crew Operating Corp.: 10.375% senior subordinated notes due 2007 Caa3 Caa1 The downgrade reflects a very high leverage and the expectations of a weak performance and operating profitability in the coming months. Other factors considered are the seasonality and volatility associated with the company's apparel business. KENNY INDUSTRIAL: Committee Brings-In Arnstein & Lehr as Counsel ---------------------------------------------------------------- The U.S. Bankruptcy Court for the Northern District of Illinois gave its stamp of approval to the Official Committee of Unsecured Creditors of Kenny Industrial Services, LLC's application to retain Arnstein & Lehr as its counsel. The Committee says it selected Arnstein & Lehr as its counsel in this bankruptcy case because of the Firm's experience in representing all parties, including committees, in Chapter 11 cases. As Committee Counsel, Arnstein & Lehr will: a) advise and represent the Committee relative to its respective rights, duties, and powers in relation to the debtors-in-possession; b) advise and represent the Committee in negotiating and litigating to obtain authority for the use of cash collateral and in all other issues relating to the Debtors' use of cash collateral; c) advise and represent the Committee with regard to negotiation of the plan and disclosure statement as it relates to members of the Committee, other creditors, and the Debtors; d) review and analyze positions of secured creditors, including Bank One NA; e) examine and analyze executory leases and represent the interests of the Committee with regard to any such leases; f) review, analyze, advise, and represent the Committee in any matters involving self-insurance, health insurance, other employee issues, and union issues and concerns related to the Debtors; g) examine the value of the Debtors' assets and negotiate, if necessary, the sale of such assets; and h) provide such and further representation to the Committee as shall be necessary in this case. Arnstein & Lehr will bill the Debtor's estates at the Firm's current hourly rates, which are: James A. Chatz $460 per hour Barry A. Chatz $395 per hour Miriam R. Stein $270 per hour Dorislee Jackson $175 per hour William G. Nosek $340 per hour Mark F. Miller $340 per hour Cynde Hirschtick Munzer $340 per hour George P. Apostolides $260 per hour Erik L. Kantz $205 per hour Kenny Industrial Services is a provider of comprehensive industrial preservation and maintenance services, including chemical cleaning, waste separation and minimization, fireproofing, insulation, identification and tagging, and concrete restoration. The Company with its debtor-affiliates filed for chapter 11 protection on February 3, 2003 (Bankr. N.D. Ill. Case No. 03-04959). James A. Stempel, Esq., and Ryan Blaine Bennett, Esq., at Kirkland & Ellis represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $70,189,327 in total assets and $102,883,389 in total debts. KMART CORP: Dist. Ct. Says Critical Vendor Payments Improper ------------------------------------------------------------ The Honorable John F. Grady sitting in the U.S. District Court for the Northern District of Illinois finds that Judge Sonderby's orders authorizing payment of approximately $300 million to Kmart's Critical Vendors for their prepetition claims were contrary to bankruptcy law and should be reversed. Judge Grady rejects Kmart's argument that Capital Factor's appeal is moot because the payments have already been made. Judge Grady tells Judge Sonderby to issue an order directing recipients of Critical Vendor Payments to return the money to Kmart's estates. The Bankruptcy Code "does not carve out priority or administrative expense status for prepetition general unsecured claims based on the 'critical' or 'integral' status of a creditor," Judge Grady says, explaining that the effect is to elevate the claims of select unsecured creditors and subordinating all other unsecured claims. Judge Grady finds that Judge Sonderby improperly altered the statutory priority scheme codified at 11 U.S.C. Secs. 503 and 507. Judge Grady recognizes that invoking the so-called doctrine of necessity "is well-intended and may even have some beneficial results" in Kmart's cases. "Nevertheless, it is clear that however useful and practical these payments may appear to bankruptcy courts, they simply are not authorized by the Bankruptcy Code." Until Congress codifies the doctrine of necessity, Judge Grady opines, pre-plan payments of pre-petition unsecured claims are illegal. "[I]t is not too late to order that the monies paid be returned," Judge Grady says. Judge Grady doesn't buy the Debtors' "doomsday speculation" that undoing the bankruptcy court's orders would paralyze Kmart by forcing it to undergo the Herculean task of immediately commencing thousands of lawsuits to collect hundreds of millions of dollars from thousands of vendors. It is not evident to the District Court that Kmart would have to sue anyone to recover the payments. The District Court suggests an order from Judge Sonderby directing the return of the monies paid will be sufficient. Kmart Corporation and its debtor-affiliates delivered their Notice of Appeal to the U.S. District Court for the Northern District of Illinois indicating their intention to seek review of Judge Grady's order reversing Judge Sonderby's orders allowing payment of pre-petition claims owed to Kmart's Critical Vendors, Foreign Vendors, Liquor Vendors and to JPMorgan on account of letter of credit reimbursement obligations. KMART CORP: Appoints Nine Members to New Holding Company Board -------------------------------------------------------------- Kmart together with the plan investors, ESL Investments, Inc. and Third Avenue Trust, and the statutory committees have designated individuals to serve on the initial board of directors of the New Holding Company. These individuals will oversee Kmart's operations when it emergences from Chapter 11. By the Debtors: Julian C. Day By the Plan Investors: Edward S. Lampert William C. Crowley Steven T. Mnuchin Thomas J. Tisch By Unsecured Creditors' Committee: E. David Coolidge III William S. Foss By the Financial Institutions Committee: Ann N. Reese Brandon Stranzl Kmart will seek approval of the nominees at the Court hearing today in Chicago. (Kmart Bankruptcy News, Issue No. 52; Bankruptcy Creditors' Service, Inc., 609/392-0900) LODGENET ENTERTAINMENT: Fiscal Year Net Loss Balloons to $29-Mil ---------------------------------------------------------------- LodgeNet Entertainment Corporation is the world's largest and leading provider of broadband, interactive TV systems and services to hotels, resorts and casinos throughout the United States and Canada as well as select international markets. More than 260 million guests a year can use a wide range of LodgeNet interactive services including digital movies, music and television on-demand programming as well as video games, high- speed Internet access and other services designed to make their stay more enjoyable, productive and convenient. As of December 31, 2002, the Company provided interactive television services to approximately 5,700 hotel properties serving more than 950,000 rooms, more properties and rooms than any other provider in the world. The Company's total revenue for 2002 was $235.0 million, an increase of $18.1 million, or 8.3%, compared to 2001. The increase resulted from a 10.2% increase in average Guest Pay interactive rooms in operation, driven by the addition of nearly 150,000 rooms served by the Company's next-generation interactive digital system, which represents a 129.8% increase over 2001. Guest Pay interactive service revenue increased 9.8%, or $20.2 million, in 2002 as compared to 2001. The increase was primarily due to the additional 77,800 average Guest Pay rooms in operation and the growth of Guest Pay rooms installed with the interactive digital system. Guest Pay interactive direct costs increased 12.6% to $96.0 million in 2002 from $85.3 million in the prior year. Guest Pay direct costs (movie license fees, music license fees within major motion pictures, license fees for other interactive services, Internet connectivity fees, and the commission retained by the hotel) are primarily based on related revenue, and such costs generally vary directly with revenue. The decrease of gross profit margin from 58.6% to 57.5% was primarily attributable to the costs that the Company absorbed upon termination of InnMedia and increases in hotel commissions, offset by reductions in video game royalties. InnMedia costs included Internet connectivity, hotel commissions, royalties, and technical support fees, and other direct expenses. Other direct costs associated with other revenue decreased $2.1 million, or 30.3%, in 2002 from the prior year and the gross profit margin increased from 37.6% in 2001 to 45.9% in 2002. The resulting increased gross profit margin was attributable to the reduction of lower margin sales of equipment to international licensees. The Company's overall gross profit increased 7.5% in 2002 to $134.2 million on an 8.3% increase in revenue as compared to 2001. As a percentage of revenue, the overall gross profit margin was 57.1% in 2002 compared to 57.5% in the prior year. The change was primarily due to the costs that the Company absorbed upon termination of InnMedia and increases in hotel commissions, offset by reductions in video game license fees and a nominal shift in sales from higher margin Guest Pay interactive services, such as movies, to lower margin free to guest and Internet services. Guest Pay operations expenses consist of costs directly related to the operation of systems at hotel sites. Guest Pay operations expenses increased by $1.5 million, or 5.3%, in 2002 from the prior year. This increase is primarily attributable to the 10.2% increase in average installed Guest Pay interactive rooms in operation during 2002 as compared to 2001. Offsetting the increased operating costs were greater operating efficiencies resulting from reduced truck rolls related to tape changes and related freight costs and improved economies of scale. Per average installed room, Guest Pay operations expenses decreased by 4.5% to $2.98 per month in 2002 as compared to $3.12 per month in 2001. Selling, general and administrative expenses increased 5.4% to $22.1 million in 2002 from $21.0 million in 2001. The increase was substantially attributable to an InnMedia bad debt charge of $471,000 taken in the second quarter and approximately $640,000 of professional fees connected with the InnMedia-related litigation that was dismissed with prejudice pursuant to a settlement reached in August 2002. As a percentage of revenue, selling, general and administrative expenses were 9.4% in 2002 and 9.7% in 2001. Depreciation and amortization expenses increased 15.0% to $75.9 million in 2002 from $66.0 million in the prior year. The increase was primarily due to the additional 77,800 average Guest Pay interactive rooms in operation. During the fourth quarter, the Company also expensed approximately $1.4 million of unamortized costs related to browser software that the Company replaced with new browser software that provides greater functionality. Additionally, the Company also incurred depreciation expense of $860,000 for other capitalized costs including new service vans, equipment, and computers, and additional amortization expense of $1.3 million for software development and other intangibles, offset by the changes in fully depreciated assets remaining in service. As a percentage of revenue, depreciation and amortization expenses increased to 32.3% in 2002 from 30.4% in 2001. Interest expense was $33.0 million in 2002 compared to $30.3 million in 2001 due to increases in long-term debt to fund the Company's continuing expansion of its business. The average principal amount of long-term debt outstanding during 2002 was approximately $339 million (at a weighted average interest rate of approximately 9.8%) as compared to an average principal amount outstanding of approximately $307 million (at a weighted average interest rate of approximately 9.9%) during 2001. The Company incurred a net loss in 2002 of $29.1 million as compared to a net loss of $26.4 million in 2001. Lodgenet disclosed a total shareholders equity deficit of about $101 million at Dec. 31, 2002. DebtTraders says that Lodgenet Entertainment's 10.250% bonds due 2006 (LNET06USR1) are trading at 96 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=LNET06USR1 for real-time bond pricing. MAGELLAN HEALTH: Employing Ordinary Course Professionals -------------------------------------------------------- Magellan Health Services, Inc., and its debtor-affiliates obtained the Court's permission, pursuant to Sections 105(a), 327, 328, and 330 of the Bankruptcy Code, to employ professionals that are utilized in the ordinary course of their businesses without the submission of separate employment applications, affidavits, and the issuance of separate retention orders for each individual professional. The Debtors will pay each Ordinary Course Professional, without a prior application to the Court, 100% of the fees and disbursements incurred, after the submission to, and approval by, the Debtors of an appropriate invoice setting forth in reasonable detail the nature of the services rendered and disbursements actually incurred, up to $25,000 per month per Ordinary Course Professional and up to $500,000 per month, in the aggregate, for all Ordinary Course Professionals. In the event that an Ordinary Course Professional seeks more than $25,000 per month, that professional will be required to file a fee application for the full amount of their fees in accordance with Sections 330 and 331 of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Bankruptcy Rules, the Fee Guidelines promulgated by the United States Trustee for the Southern District of New York, and any and all orders of the Court. In addition, each Ordinary Course Professional will serve on the Office of the United States Trustee and the Debtors and file with the Court: (i) an affidavit certifying that the professional does not represent or hold any interest adverse to the Debtors or their estates with respect to the matter on which the professional is to be employed; and (ii) a completed retention questionnaire. The Debtors reserve the right to supplement the list of Ordinary Course Professionals from time to time as necessary. In this event, the Debtors will file a notice with the Court stating that they intend to employ additional Ordinary Course Professionals and to serve the notices on: -- the United States Trustee; -- the attorneys for the statutory committee of unsecured creditors appointed in these cases; -- the attorneys for the Debtors' prepetition lenders; and -- all other parties that have filed a notice of appearance in these Chapter 11 cases. The Debtors also sought and obtained Court approval to dispense with the requirement of individual employment applications and retention orders with respect to each Ordinary Course Professional retained from time to time. (Magellan Bankruptcy News, Issue No. 5: Bankruptcy Creditors' Service, Inc., 609/392- 0900) MAXXIM MEDICAL: Will Padlock Richmond, Virginia Facility -------------------------------------------------------- After stating in early 2002 that it would consolidate several production sites to achieve production efficiencies and rationalize its manufacturing capabilities, Maxxim Medical, Inc. has now made the last announcement in this long-term effort with the phasing out of its Richmond, Va. facility and the transitioning of production of custom procedure trays from that location to its Clearwater headquarters plant on June 13, 2003. "During the past 18 months, Maxxim Medical has made significant strides in productivity improvement and process enhancements; advances that will now allow us to consolidate several of our production sites," says Thomas R. Cochill, president and chief executive officer. "Process improvements and automated assembly upgrades to the Clearwater facility have made this move possible as well as beneficial." He adds: "We obviously regret the impact this will have on our valued employees and our longstanding relationships within the Richmond business community." The Company does not anticipate this will affect the level of service and delivery provided to customers, noting that capacity is available in the Clearwater plant not only to absorb the Richmond production volume, but also to support anticipated future growth. Cochill adds that this process of asset rationalization is not related to the Company's recent filing for Chapter 11 (Reorganization). "This plan long predates our filing and reflects normal, sound business planning as part of our ongoing business management and improvement processes," he says. Based in Clearwater, Fla., Maxxim Medical -- http://www.maxximmedical.com-- is a major diversified manufacturer, assembler and marketer of specialty medical and surgical products including custom and standard procedure trays, single use drapes and gowns, medical and surgical gloves, vascular access and critical care products. Selling primarily to acute care hospitals, surgery centers and alternate care facilities, Maxxim has five plants in the United States and one in the Dominican Republic. U.S. plants are located in Athens, Texas; Clearwater, Fla.; Columbus, Miss.; Honea Path, S.C. and Richmond, Va. (plant due to be consolidated with Clearwater in June 2003). Maxxim Canada Limited has a plant in Mississauga, Ontario, Canada. MEDICALCV INC: Consummates $3.8 Million Refinancing Transaction --------------------------------------------------------------- MedicalCV, Inc. (OTC Bulletin Board: MDCVU), a Minnesota-based heart valve manufacturer, completed a $3.84 million refinancing transaction in which its headquarters facility, located in Inver Grove Heights, Minn., was sold in a sale-leaseback transaction to PKM Properties, LLC, thereby eliminating MedicalCV's bank debt. Under the terms of the transaction, MedicalCV received $1 million in cash, with PKM assuming $2.5 million of the company's outstanding bank debt and approximately $340,000 of additional obligations of the company. Of the net cash proceeds, $300,000 plus interest was applied to MedicalCV's indebtedness to PKM, pursuant to a discretionary credit agreement secured by MedicalCV's assets, leaving a balance due to PKM of approximately $943,000. MedicalCV also signed a 10-year lease on its headquarters building, with options to renew or repurchase the facility. "We are pleased that this transaction enabled us to pay off our outstanding bank debt and improve our liquidity and working capital position," said Blair Mowery, president and chief executive officer of MedicalCV, Inc. "This represents an important first step in our strategy to obtain additional longer term financing." The company plans on raising additional funds to finance its marketing and sales initiatives for the U.S. and key strategic markets in Europe. PKM Properties, LLC, is owned by Paul K. Miller, a member of MedicalCV's board of directors and its largest shareholder. As part of the transaction, MedicalCV issued to PKM a five-year warrant for the purchase of 350,000 shares of common stock at a purchase price of $0.625 per share. The refinancing transaction was approved by MedicalCV's board of directors and a special committee; Mr. Miller abstained from voting on the transaction. MedicalCV, Inc., is a Minnesota-based heart valve manufacturer with a fully integrated manufacturing facility, where it designs, tests and manufactures all of its products. Based on its Omnicarbon(TM) heart valve's 18 years of excellent clinical results in Europe, Japan and Canada, the U.S. Food and Drug Administration gave premarket approval for the Omnicarbon valve in July 2001 for use in the United States, without requiring additional U.S. clinical trials. To date, more than 30,000 Omnicarbon valves have been implanted in patients in more than 30 countries. For more information on the company, visit its Web site at http://www.medcvinc.com * * * As of January 31, 2003, MedicalCV had an accumulated deficit of $16,154,795. As stated, the Company has incurred losses in each of the last six fiscal years. Since 1994, it has invested in developing a bileaflet heart valve, a proprietary pyrolytic carbon coating process and obtaining premarket approval from the FDA to market its Omnicarbon 3000 heart valve in the U.S. Its strategy has been to invest in technology to better position it competitively once FDA premarket approval was obtained. The Company expects net losses to continue through fiscal year 2004 because of anticipated spending necessary to market the Omnicarbon 3000 heart valve in the U.S., and to establish and maintain a strong marketing organization for domestic and foreign markets. Subject to the uncertainties surrounding the need for financing MedicalCV expects to continue developing its business and to build market share in the U.S. now that it has FDA premarket approval of its Omnicarbon 3000 heart valve for sales in the U.S. These activities will require significant expenditures to develop, train and supply marketing materials to its independent sales representatives and to build its sales and marketing infrastructure. As a result, the Company anticipates that its sales and marketing and general and administrative expenses will continue to constitute a material use of its cash resources. The actual amounts and timing of capital expenditures will vary significantly depending upon the speed at which the Company is able to expand distribution capability in domestic and international markets and the availability of financing. MedicalCV expects its operating losses and negative operating cash flow will continue for the remainder of fiscal year 2003 and fiscal year 2004 as it expands its manufacturing capabilities, continues increasing its corporate staff to support the U.S. roll-out of its Omnicarbon 3000 heart valve, and add marketing programs domestically and internationally to build awareness of and create demand for its Omnicarbon heart valves. MedicalCV's ability to continue as a going concern is dependent on its ability to obtain debt and/or equity financing in the fourth quarter of fiscal 2003. The Company is currently pursuing the refinancing of its revolving line of credit and is seeking other financing to fund operations and working capital requirements. It is also considering the sale and leaseback of its real estate to retire its bank debt and increase working capital. MedicalCV indicates that it cannot provide any assurance that such additional financing will be available on terms acceptable to it or at all. The Company will need to obtain additional capital prior to the maturity date of its revolving line of credit or otherwise extend or restructure this debt to continue operations. MIDLAND STEEL: Pepper Hamilton Hired as Committee's Attorneys ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware gave the Official Committee of Unsecured Creditors of Midland Steel Products Holdings Company permission to employ Pepper Hamilton LLP as its attorney in Midland's on-going chapter 11 proceeding. The Committee is satisfied that Pepper Hamilton is qualified to represent it in a cost-effective, efficient and timely manner and that the Firm's employment will be in the best interest of the Committee and the estate. The Committee expects Pepper Hamilton to: a. advise the Committee with respect to the performance of its duties and powers in this case; b. assist and advise the Committee in its communications with the general creditor body regarding significant matters in this case; c. assist and advise the Committee in its consultation with the Debtor relative to the administration of this case; d. attend meetings and negotiate with the representatives of the Debtor; e. assist and advise the Committee in its examination and analysis of the conduct of the Debtor's affairs; f. assist and advise the Committee in the review, analysis and negotiation of any plan(s) of reorganization that may be filed and to assist the Committee in the review, analysis and negotiation of the disclosure statement accompanying any plan(s) of reorganization; g. assist the Committee in the review, analysis and negotiation of any financing agreements; h. take all necessary action to protect and preserve the interests represented by the Committee, including (i) the prosecution of actions on its behalf, (ii) negotiations concerning and participation in all litigation, whether adversary proceedings or contested matters, in which the Debtor or Committee is involved, and (iii) if appropriate, review, analyze and reconcile claims filed against the Debtor's estate; i. generally prepare on behalf of the Committee all necessary motions, applications, answers, responses, orders, reports and papers in support of positions taken by the Committee; j. appear, as appropriate, before this Court, any Appellate Court and any other tribunals in order to protect and promote the interests of the Committee before said Courts and tribunals; and k. perform all other necessary legal services in this case. Pepper Hamilton's current hourly billing rates are: Partner $325 - $445 per hour Associate $150 - $275 per hour Paralegal $95 - $140 per hour The Committee assures the Court that Pepper Hamilton is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code. Midland Steel Products Holding Company provides frames for the medium duty line at General Motors. The Debtors filed for chapter 11 bankruptcy protection on January 13, 2003 (Bankr. Del. Case No. 03-10136. Laura Davis Jones, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub and Shawn M. Riley, Esq., at McDonald, Hopkins, Burke & Haber Co., LPA represent the Debtors in their restructuring efforts. MOUNT SINAI-NYU: Fitch Cuts $665M Bond Rating to BB+ from BBB- -------------------------------------------------------------- Fitch Ratings downgrades approximately $665.6 million Mount Sinai-NYU Health System's bonds to 'BB+' from 'BBB-'. At the lower rating level, the Rating Outlook has been changed to Stable from Negative. The rating downgrade is based on the decline in financial performance of the system and the significant challenges faced by the system, primarily Mount Sinai Hospital. Both MSH and NYU Hospitals Center, the principal parties of the merger, acknowledge that the system was a failure and that they are in the process of unwinding all material administrative shared services, including a central billing office. Clinical services were never merged. The two main entities function autonomously under a 'campus centric' structure (implemented in late 2001). The only remaining material shared service planned to remain intact for the foreseeable future is the management of the outstanding debt. MSH and NYUHC plan to refinance the debt through HUD's FHA 242 program, although it is unlikely this refinancing will occur in the near-term. Also of concern is the likelihood of additional debt this year, which will further strain MS-NYU's weak financial profile. MS- NYU intends to transfer residential real estate owned by MSH, Mount Sinai School of Medicine, and Realty to a special purpose entity-which will undertake a borrowing of $100-150 million that will be secured by that real estate. MS-NYU's financial performance has deteriorated in 2002 and all financial ratios are below Fitch's investment grade medians. MS- NYU's financial ratios in fiscal 2002 include 65.1 days cash on hand, 37.4% cash to debt, negative 4.4% operating margin and 1.1x debt service coverage*. The decline in financial performance is driven mainly by MSH, which continues to experience significant operating losses. MSH implemented a turnaround plan in 2002, based on initiatives from a six-month study performed by The Hunter Group, a consulting firm that specializes in turn-arounds. However, many of the initiatives were slow to be implemented and thus failed to achieve their stated goals for 2002. MSH, which lost $46.8 million from operations (Fitch's calculation) in 2001, lost $64.3 million in 2002. MSH recently named a long-time member of the medical staff to run both the medical school and MSH, merging both responsibilities in a single position. The leadership change at MSH is the third such change in the last four years. In addition, MSH has engaged Cap Gemini Ernst & Young to assist in the implementation of many of the turnaround strategies. MSH is budgeting to lose $78.3 million from operations in 2003. Ongoing expense reduction initiatives include reducing staffed beds, FTEs, and support to the medical school. Interim financial statements for any period in 2003 are not available. Fitch calculates that NYUHC made $6.3 million from operations in 2002. Fitch believes MS-NYU faces numerous challenges ahead including the turnaround of MSH and significant industry pressures such as rising labor and pharmaceutical costs, increased capital needs, and the decline in Medicaid reimbursement. These challenges will impede the organization's return to profitability and Fitch believes the restoration of MS-NYU's financial health will be a long and slow process. MS-NYU, which came together on July 15, 1998, had total revenues of $1.8 billion in 2002. MS-NYU has covenanted to supply bondholders with quarterly financial statements and operating statistics, and has provided Fitch with information on a quarterly basis. * Fitch includes MSH, NYUHC, Hospital for Joint Diseases/Orthopedic Institute (HJD), NYU Downtown Hospital and MSMC Realty Corp., in its calculations. The obligated group consists of MSH, NYUHC and HJD only. Fitch's estimate of MADS includes all long-term indebtedness, including all non- cancellable capital and operating leases, bank loans, and long- term debt issued by MSMC Realty on behalf of MSH. NATIONAL STEEL: Has New Bids for Sale of All Principal Assets ------------------------------------------------------------- National Steel Corporation has received bids for the sale of substantially all of its principal steelmaking and finishing assets and iron ore pellet operations. First, AK Steel Corporation reaffirmed its bid for $1.125 billion, consisting of $925 million in cash and the assumption of certain liabilities approximating $200 million, but due to its failure to reach agreement with the United Steelworkers of America on a new labor agreement, its proposal is conditioned on the rejection of all of National Steel's collective bargaining agreements with the USWA and the termination of all retiree benefits in accordance with Sections 1113 and 1114 of the Bankruptcy Code. In addition, United States Steel Corporation submitted a bid to acquire substantially all of National Steel's principal steelmaking and finishing assets and iron ore pellet operations for $975 million, consisting of $775 million in cash and the assumption of certain liabilities approximating $200 million. U.S. Steel previously announced that it has reached a tentative agreement with the USWA on a new labor agreement. Also as previously announced, early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act with respect to the AK Steel proposal was granted and that the Department of Justice advised National Steel that it had closed its investigation under the HSR Act with respect to the U.S. Steel proposal. Both offers remain subject to the satisfaction of other closing conditions. The date of the auction for the sale of substantially all of National Steel's assets is scheduled for April 16, 2003. The Bankruptcy Court hearing to consider approval of the sale of such assets is scheduled for April 21, 2003. In addition, National Steel announced that the Bankruptcy Court approved an extension of the period during which National Steel has the exclusive right to file a plan of reorganization in its Chapter 11 case to April 30, 2003. National Steel filed its voluntary petition in the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago on March 6, 2002. Headquartered in Mishawaka, Indiana, National Steel Corporation is one of the nation's largest producers of carbon flat-rolled steel products, with annual shipments of approximately six million tons. National Steel employs approximately 8,200 employees. For more information about the company, its products and its facilities, please visit National Steel's Web site at http://www.nationalsteel.com DebtTraders reports that National Steel Corp.'s 9.875% bonds due 2009 (NSTL09USR1) are trading between 63 and 65. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NSTL09USR1 for real-time bond pricing. NATIONAL STEEL: AK Steel Reaffirms $1.25-Billion Bid for Assets --------------------------------------------------------------- AK Steel (NYSE:AKS) said that it had not reached agreement with the United Steelworkers of America on a new, lower cost labor contract, but reaffirmed its bid for substantially all the assets of National Steel Corporation for $1.125 billion. "After weeks of negotiations with the USWA, during which progress was made, meaningful differences remain between the parties in arriving at a labor agreement that would provide the cost-based synergies contemplated in our original bid for National Steel," said Richard M. Wardrop, Jr., chairman and CEO of AK Steel. "Unfortunately we could not reach a new labor agreement with the USWA that was economically feasible to profitably operate National Steel," said Mr. Wardrop. AK Steel said, however, that it remains interested in acquiring the assets under conditions submitted today to National Steel and its creditors. Under the conditions, AK Steel continues to offer $1.125 billion for substantially all of the assets of National Steel, however the labor approach will utilize Sections 1113 and 1114 of the U.S. Bankruptcy Code. It is anticipated that this labor approach would yield the savings necessary for AK Steel to realize some of the cost-based synergies for its acquisition of National to be successful. AK Steel produces flat-rolled carbon, stainless and electrical steel products for automotive, appliance, construction and manufacturing markets, as well as tubular steel products. The company has more than 10,000 employees in plants and offices in Middletown, Coshocton, Mansfield, Walbridge and Zanesville, Ohio; Ashland, Kentucky; Rockport, Indiana; and Butler, Pennsylvania. In addition, the company produces snow and ice control products and operates an industrial park on the Houston, Texas ship channel. NATIONAL STEEL: Steelworkers Outraged by AK Steel Proposal ---------------------------------------------------------- The United Steelworkers of America reacted with outrage in response to an announcement by AK Steel that it intends to continue with its bid for the assets of National Steel without the benefit of a labor agreement and will demand that National use Sections 1113 and 1114 of the U.S. Bankruptcy Code to abrogate National's labor agreement with the Steelworkers. "We are shocked and dismayed at AK's decision to declare war on the standard of living and health care security of our members and retirees at National Steel," said Leo W. Gerard, USWA International President. "This confrontation can only produce horrible results for National Steel, its creditors, and the communities where it operates." Just yesterday, the USWA successfully concluded a labor agreement with U.S. Steel that will enable U.S. Steel to purchase the assets of National Steel, reduce the company's operating costs, and protect the job security, retirement security and health care benefits for Steelworker members and retirees. "Long and thoughtful discussions with U.S. Steel produced an excellent agreement for both sides. Our negotiations with AK were disappointing, to say the least," Gerard said. "AK never demonstrated any real intention to reach an agreement." "This Union has demonstrated time and again that when companies take the high road -- treat our members and their union with respect, recognize their skills, and reward their loyalty -- we can work together to build strong viable companies that serve all stakeholders. We have done this in the recent past with numerous steel companies, including ISG, Bethlehem, Wheeling- Pitt, and now U.S. Steel. "On the other hand, those who choose the low road -- unnecessary confrontation with no recognition of the central role of labor in the success of a company -- have learned that nothing but bad will come for all involved. "We can be a smart company's best friend or a foolish company's worst enemy. U. S. Steel has chosen one path -- AK now appears to have chosen the other by adopting a confrontational mode that is a relic of a bygone era." "We can only pray that National Steel has the wisdom to recognize this destructive approach for what it is," Gerard said, "and act before it is too late." The USWA will be reconvening shortly its National Steel bargaining committee to discuss a strategic response to AK Steel's actions. It will also be contacting the other stakeholders involved in National's restructuring to discuss the potential dire consequences of AK Steel's brinkmanship tactics. NATIONAL STEEL: U.S. Steel Delivers $975MM Bid to Acquire Assets ---------------------------------------------------------------- United States Steel Corporation (NYSE: X) confirmed that it has submitted a bid to National Steel Corporation to purchase substantially all of National's steelmaking and steel finishing assets and the assets of National Steel Pellet Company for a price of $975 million, payable through $775 million in cash and the assumption of $200 million of National liabilities. This price is in addition to the significant value that U. S. Steel will provide to National's employees through its progressive new labor agreement with the United Steelworkers of America (USWA) announced on Wednesday. Commenting on the new tentative labor agreement, U. S. Steel Chairman and Chief Executive Officer Thomas J. Usher said, "This innovative agreement builds value for our employees and the employees of National Steel while providing us the flexibility to staff and operate our facilities on a world competitive basis. The agreement also allows us to address critical issues related to steel companies in bankruptcy in a humane way." U. S. Steel's bid is consistent with the terms of its January 9, 2003, Asset Purchase Agreement with National, adjusted for the addition of the National Steel Pellet assets. The January Agreement was conditioned on obtaining a satisfactory labor agreement. Because of the groundbreaking agreement reached with the USWA this week, the bid submitted to National on April 10 is not conditioned on a labor agreement. U. S. Steel has also received all necessary regulatory approvals to close the National acquisition, and the bid is subject only to customary closing conditions. Usher stated, "We remain the best solution for National's customers, employees, retirees, creditors, suppliers and the communities in which National operates. We have a labor agreement that ensures continuity of National's business operations and uninterrupted supply to National's customers, provides secure jobs and competitive wages for the National employees, and assists in the fair and humane resolution of the legacy problems that have plagued National and the domestic steel industry. It's time to resolve the National Steel bankruptcy in the best way for all interested parties. We have offered a fair value for National's assets, and we are prepared to close the deal immediately following Bankruptcy Court approval." National Steel has been operating under the protection of the U. S. Bankruptcy Code since March 6, 2002, and the United States Bankruptcy Court for the Northern District of Illinois has established a bidding procedure that includes an auction on April 16, 2003, and a hearing to confirm the winning bid on April 21, 2003. Under its bid, U. S. Steel would acquire facilities at National's two integrated steel plants, Great Lakes Steel, in Ecorse and River Rouge, Mich., and the Granite City Division in Granite City, Ill.; the Midwest finishing facility in Portage, Ind., near Gary, Ind.; ProCoil Corporation in Canton, Mich.; National Steel Pellet Company's iron ore pellet operations in Keewatin, Minn. and various other subsidiaries; and joint- venture interests, including National's share of Double G Coatings, L.P. in Jackson, Miss. For more information about U. S. Steel visit its Web site at http://www.ussteel.com NRG ENTERTAINMENT: Commences 1-For-125 Reverse Stock Split ---------------------------------------------------------- N.R.G. Entertainment, Inc. (NQB-EQS NRGA), announced that, effective Thursday, March 27, 2003, it has implemented a reverse share split of 1 new common share for each 125 old common shares. Global markets and investment conditions have created a financial atmosphere which has made it very difficult for many companies to survive. Despite this adversity over the past year, the company has made every effort possible to both maintain the ongoing operation of the company, as well as to secure appropriate financing to allow the company to successfully execute its business plan. Present management believes very strongly in the inherent potential value in the company's investment strategy, and thus has realized the necessity to consolidate the share structure to optimize their impending opportunities to protect shareholder value with a view to future success in the industry. The N.R.G. Entertainment corporate mandate is to find and develop new talent. N.R.G. is now well positioned to be the leading global supplier of new talent by providing independent artists with much needed integrated support and services through the Company's four basic business divisions; Indieland Music Services Ltd (sales, distribution and licensing), FATBOY Records Corp (record label division), Zanzara Music Publishing (publishing), and NRG Multimedia Group (Internet division). The Company believes strongly that its unique market focus will enable it to experience exceptional revenue and earnings growth over the intermediate and long-term. OBSIDIAN ENTERPRISES: Jan. 31 Balance Sheet Upside-Down by $1MM --------------------------------------------------------------- Obsidian Enterprises, Inc. (OTC Bulletin Board: OBSD), reports consolidated net revenues totaling $10,899,365 for the first quarter ended January 31, 2003. EBITDA from continuing operations was a deficit of $204,036, and net loss of $1,566,395 for the quarter ended January 31, 2003. The Company's overall operating results and financial condition during the three months ended January 31, 2003 were adversely affected by the overall economic situation in the United States, limited availability of raw materials in the butyl rubber reclaiming segment and adverse weather conditions in the Midwest United States that affected the Company's ability to deliver orders in the trailer and related transportation equipment manufacturing segment. In addition, the first quarter historically produces the lowest revenue and operating results due to the business seasonality in the trailer and related transportation equipment manufacturing and coach leasing segments. Sales and gross profits from continuing operations in the trailer and related transportation equipment manufacturing segment decreased $874,000 (10.6%) and $265,000 (29%) over the comparable period of 2002. The decrease was primarily related to two factors. First, sales of truck bodies decreased by $354,000 over the quarter ended January 31, 2002. This reduction was related to the continued depressed condition of the telecommunications industry which has historically been a significant consumer of truck bodies, as well as the bankruptcy filing of a significant truck body customer in late 2002. Sales to this customer in the first quarter did not decline significantly from 2002, but the Company anticipates little to no future sales from this customer after January 31, 2003. Second, the sale of cargo trailers decreased by $520,000 as a result of the general state of the U.S. economy and harsher weather during the winter of 2003. The gross profit decrease was primarily a result of decreased volume at the Company's truck body plant that resulted in an inability to absorb fixed overhead costs. To offset these costs, management began production of cargo trailers in this facility during late 2002. Inefficiencies in the start up of this operation have also had a negative impact in gross profit margins as compared to the three months ended January 31, 2002. Gross profits related to truck body production are anticipated to continue to be adversely impacted by the lack of sales volume in truck bodies during 2003. However, the additional cargo trailer capacity will help offset this gross profit reduction. Results for the quarter ended January 31, 2003 were also impacted negatively by a shortage of quality raw material for use in the butyl rubber reclaiming business in large part caused by the extreme winter weather in northern collection regions. Although sales in the segment increased by $243,000 (11%) over the comparable period for 2002, gross profit was impacted adversely by the raw material shortage. We are currently pursuing additional sources of raw material and continue to research alternative sources and processing methodologies to reduce reliance on current sources and return to more efficient operations in this segment. Obsidian Enterprises' January 31, 2003 balance sheet shows a total shareholders' equity deficit of about $1.2 million. OWENS CORNING: Restructuring Toledo HQ Lease Obligations -------------------------------------------------------- In a motion filed with the United States Bankruptcy Court for the District of Delaware, Owens Corning requests approval of an agreement in principle that would allow the company to restructure the financing obligations and other agreements relating to its World Headquarters building in Toledo, Ohio. The company, which filed for Chapter 11 protection in 2000 due to mounting asbestos liability, moved into its present location in 1996. A major component of the motion is an agreement reached with a group of bondholders that hold certain bonds used to finance the Owens Corning World Headquarters. These bonds, which were issued by the Toledo-Lucas County Port Authority, financed the majority of the construction costs with respect to the facility. Owens Corning's lease payments are used to make payments due on these bonds as well as to pay certain other funding obligations. "The agreement in principle is significant because it gets us to a lease structure that is in line with market rates," said Jim Eckert, Owens Corning's director of Real Estate and Facilities. "We believe that this approach balances the interests of all of our creditors. "Approval of the motion would enable us to move swiftly to complete the refinancing upon acceptance of the agreement by the remaining bondholders. Since the terms of the agreement will represent the best economic treatment available to the bondholders, we believe all bondholders will participate," he added. The company has previously indicated that it was prepared to move this year to an alternative location if it is unable to restructure its current lease obligations to be more consistent with market realities. "Staying in our current facility is our preference," said Mr. Eckert. "However we have no assurance at this time that these discussions will be successfully concluded or that the transaction will be approved by the bankruptcy court. Accordingly, Owens Corning remains actively engaged in discussions with several landlords in the general Toledo area for space to replace the World Headquarters building." The company has reached agreements with the Toledo-Lucas County Port Authority, its landlord; and the City of Toledo and First Energy Properties, Inc., owners of the site on which the World Headquarters building is located, that, subject to Bankruptcy Court approval of the entire contemplated transaction and 100 percent participation of the revenue bondholders, would enable the company to remain in its present location. "The community can take a lot of pride in how responsive both the City, the Port Authority and Toledo Edison have been to the tight timeframe we are in," said Mr. Eckert. "We really appreciate how hard they are working to help Owens Corning resolve questions about the company's ability to stay in its present location." Owens Corning is a world leader in building materials systems and composite systems. Founded in 1938, the company had sales of $4.9 billion in 2002. Additional information is available on Owens Corning's Web site at http://www.owenscorning.com PACIFIC GAS: Makes $75-Mill. Tax Payments to California Counties ---------------------------------------------------------------- Pacific Gas and Electric Company made property tax payments totaling $75.5 million to the 49 counties in which it operates. This amount represents full and timely payment of property taxes due for the period from January 1 to June 30, 2003. "Pacific Gas and Electric Company's payment of more than $75.5 million in property taxes to local governments will help fund vital public services -- public safety, education, health care and environmental protection," said Gordon R. Smith, president and chief executive officer of Pacific Gas and Electric Company. "PG&E's payment of property taxes, franchise fees and other taxes and fees remain a stable source of revenue for local governments in these times of tight budgets." This is the fifth property tax payment Pacific Gas and Electric Company has made to California counties since its Chapter 11 bankruptcy filing in April, 2001. The last of these twice-yearly payments was made on December 10, 2002, when the utility paid $75.3 million in property taxes. Since filing for Chapter 11 bankruptcy protection, Pacific Gas and Electric Company has continued to meet its obligations to local governments by paying timely property taxes, franchise payments and other fees. PHOTRONICS INC: Prices $125 Million Conv. Sub. Debt Offering ------------------------------------------------------------ Photronics, Inc., (Nasdaq: PLAB) announced the pricing of its offering of $125 million of 2-1/4% Convertible Subordinated Notes due 2008 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. These Notes are convertible into Photronics common stock at a conversion rate of 62.9376 shares per $1,000 principal amount of Notes, subject to adjustment in certain circumstances. This represents a 42.5% premium based on the closing price of $11.15 for the common stock on April 9, 2003. Photronics may not redeem the Notes prior to their final maturity on April 15, 2008. The Notes will be issued at 100% of their principal amount. Photronics has granted the initial purchasers of the Notes a one-time option to purchase up to an additional $25 million principal amount of Notes. A portion of the net proceeds from this offering will be used to redeem, on or after June 2, 2003, all $62.1 million principal amount of the Company's outstanding 6% Convertible Subordinated Notes due 2004. The Company will use the balance of the net proceeds for general corporate purposes. The Notes and the common stock issuable upon conversion of the Notes have not been registered under the Securities Act or any state securities laws, and may not be offered or sold in the United States absent registration under, or an applicable exemption from, the registration requirements of the Securities Act and applicable state securities laws. As reported in Troubled Company Reporter's Friday Edition, Standard & Poor's Ratings Services assigned its 'B' rating to Photronics Inc.'s pending sale of $125 million in convertible subordinated notes due 2008. The new issue is expected to repay outstanding higher-coupon debt, thereby reducing the company's interest expense, and extending its maturity schedule, while moderately increasing its cash balances. The company's banks are likely to relax the covenants in Photronics' revolving credit agreement. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit rating and its other ratings on Photronics. The outlook is negative. RAINIER: S&P Cuts 4 Class Note Ratings to Low-B & Junk Levels ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A-3L, A-4C, B-1L, B-1P (accreted amount), and B-2 notes issued by Rainier CBO I Ltd., an arbitrage CBO transaction, and removed them from CreditWatch where they were placed Jan. 16, 2003. At the same time, the 'AAA' ratings assigned to the class A-1L and A-2L notes are affirmed based on the level of overcollateralization available to support the notes. The lowered ratings reflect factors that have negatively affected the credit enhancement available to support the rated notes since the transaction was originated in July 2000. These factors include par erosion of the collateral pool securing the rated notes, deterioration in the credit quality of the performing assets in the pool, and a decline in the weighted average coupon generated by the performing fixed-rate assets in the pool. As of the most recent trustee report (March 17, 2003), the senior class A overcollateralization test and the class A overcollateralization test were still in compliance with ratios of 121.8% and 108.7% respectively, versus the minimum required ratios of 117.0% and 106.0%, respectively, as well as effective date ratios of 130.11% and 116.46%, respectively. The class B overcollateralization test was 101.0%, versus the minimum required ratio of 103.0%, and compared to an initial ratio of 104.6%. The credit quality of the collateral pool has deteriorated since the transaction was originated. Currently, 10.75% of the performing assets in the collateral pool come from obligors with ratings in the 'CCC' range, and 18.92% come from obligors with ratings currently on CreditWatch with negative implications. As part of its analysis, Standard & Poor's reviewed the results of the current cash flow runs generated for Rainier to determine the level of future defaults the rated tranches can withstand under various stressed default timing and interest rate scenarios, while still paying all of the interest and principal due on the notes. When the results of these cash flow runs were compared with the projected default performance of the performing assets in the collateral pool, it was determined that the ratings assigned to class A-3L, A-4C, B-1L, B-1P (accreted amount), and B-2 notes were no longer consistent with the amount of credit enhancement available. Standard & Poor's will remain in contact with Centre Pacific LLC, the collateral manager for the transaction. RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE Rainier CBO I Ltd. Rating Class To From Balance (mil. $) A-3L A AAA/Watch Neg 62.000 A-4C BB- A-/watch Neg 35.000 B-1L B- BBB-/Watch Neg 13.000 B-1P CCC+ BBB-/Watch Neg 8.022 B-2 CCC BB-/Watch Neg 8.000 RATINGS AFFIRMED Rainier CBO I Ltd. Class Rating Balance (mil. $) A-1L AAA 100.001 A-2L AAA 137.000 RELM WIRELESS: Independent Auditors Express Going Concern Doubt --------------------------------------------------------------- RELM Wireless Corporation (NASDAQ: RELM) announced its operating results for the fourth quarter and year ended December 31, 2002. Revenue for the fourth quarter of 2002 was $2.3 million, compared with $5.7 million for the same quarter last year. Fourth quarter net loss was $2.2 million compared with net income of $51,000 for the fourth quarter of the prior year. Net loss for the fourth quarter of 2002 includes non-recurring charges totaling approximately $0.7 million. Year-end 2002 revenue was $16.0 million compared with $22.8 million for the prior-year period. Net loss for the year 2002 was $3.6 million, compared with net income of $0.1 million for the prior-year period. Net loss for 2002 includes non-recurring charges totaling approximately $1.6 million. The results for the fourth quarter and the year ended December 31, 2002 were largely impacted by reduced sales of BK Radio-branded products to two of the Company's largest federal government customers. Additionally, customer demand in the business and industrial market segment was weak throughout 2002 compared to the prior year, reflecting the sustained challenging economic conditions. Responding to softening sales, the Company implemented key strategic initiatives in December 2002, including restructuring its sales and management organization and the hiring of a new executive sales management team. The new team brings to RELM a history of sales and marketing success with another large land mobile radio manufacturer and with other leading companies within the telecommunication industry. Additionally, the Company re-deployed other staff to focus entirely on critical new product introductions. For the year 2002, gross profit margins were 26.4% compared with 29.0% for the prior year. Due to lower volumes, unabsorbed manufacturing overhead costs were incurred as period expenses, adversely impacting cost of sales and gross profit margins. Accordingly, the Company reduced manufacturing staffing and related expenses during the fourth quarter. For the year 2002, selling, general, and administrative costs increased 9.3% to $6.5 million compared with $5.9 million for the same period last year. The increase is attributed primarily to expenses associated with new product development, and certain non- recurring charges. The Company's financial results for the fourth quarter and year- end 2002 include several non-recurring charges. These charges totaled approximately $1.6 million, of which $0.7 million were incurred during the fourth quarter. Allowances totaling approximately $1.1 million were established for two notes receivable from the purchasers of the assets of our former paper manufacturing and specialty-manufacturing subsidiaries. The businesses and events associated with these notes are legacies from before 1997 and are not at all related to land mobile radio operations. In addition to the notes, the remaining book value (approximately $300,000) of certain technology and investment banking agreements was written-off. Lastly, severance and other expenses (approximately $200,000) were incurred, associated with the restructuring of our sales and marketing organization. The Company's independent auditors have indicated in their report on our consolidated financial statements for the year ended December 31, 2002 that substantial doubt exists about the Company's ability to continue as a going concern because of the substantial net loss from operations for the year ended December 31, 2002 and because the Company is in default under the terms of its credit agreement. Because of the default, under the terms of the credit agreement, the lender may demand immediate payment of all amounts owed. The lender has not made such a demand. If such a demand were made the Company would have to find alternative financing or severely curtail or cease operations. Based upon discussions with the lender, the Company anticipates entering into a forbearance agreement. The Company believes that this agreement will have a term of 90 days and will increase the current interest rate (prime rate plus 1.25%) by 2%. The agreement may be reviewed for renewal at the end of its term. The Company is seeking a replacement line of credit to fund its working capital demands. David P. Storey, President and Chief Executive Officer commented: "2002 proved to be an extremely challenging year, given lower revenues from our two largest customers, certain non-recurring charges, and industry-wide softness. Despite obstacles, we are aggressively addressing our challenges and have already implemented clearly defined initiatives for improvement in 2003 and we remain optimistic about our future prospects. "We made significant progress on new product development during the year, which resulted from the success of our public rights offering in the first quarter 2002. Our first digital product is complete and has been approved for use by the FCC. It is also in the process of being tested by the U.S. Department of Interior for inclusion on their contract. The first four ESAS system installations are complete and set the stage for additional systems sales going forward. Late in the year we also introduced a new family of products, the RP Series, for business and industrial users. We believe that all of these new products, and others that are in development, combined with our new sales and marketing team, will serve as a solid foundation on which to grow the business profitably." For over 55 years, RELM has manufactured and marketed two-way FM business-band radios as well as high-specification public safety mobile and portable radios, repeaters and accessories, base station components and subsystems. Products are manufactured and distributed worldwide under RELM Communications, Uniden PRC and BK Radio brand names. The company maintains its headquarters in West Melbourne, Florida and can be contacted through its Web site at http://www.relm.com RICA FOODS: Brings-In Stonefield Josephson as New Auditors ---------------------------------------------------------- On April 1, 2003, the audit committee of Rica Foods, Inc. engaged the services of Stonefield Josephson, Inc., as its new independent auditors. Stonefield Josephson has been engaged to audit the financial statements of the Company for the fiscal year ending September 30, 2002 and review the financial statements of the Company for the quarter ended December 31, 2002 and each quarter thereafter on a go forward basis. As of December 31, 2002, the Company had $5.11 million in cash and cash equivalents. The working capital deficit was $9.99 million and $9.78 million as of December 31, 2002 and September 30, 2002, respectively. The current ratio was 0.81 as of December 31, 2002 and 0.79 as of September 30, 2001. RITE AID: March 1 Balance Sheet Insolvency Stands at $112 Mill. --------------------------------------------------------------- Rite Aid Corporation (NYSE, PCX: RAD) announced financial results for its fourth quarter, ended March 1, 2003. Revenues for the 13-week fourth quarter were $4.1 billion versus revenues of $4.0 billion in the prior year fourth quarter. Revenues increased 2.5 percent. Same store sales increased 4.7 percent during the fourth quarter as compared to the year-ago like period, consisting of a 6.8 percent pharmacy same store sales increase and a 1.5 percent increase in front-end same store sales. Prescription sales accounted for 61.8 percent of total sales, and third party prescription sales represented 92.7 percent of pharmacy sales. Net income for the fourth quarter increased to $7.0 million, including an extraordinary gain of $12.0 million resulting from the early extinguishment of debt, but resulted in a loss of $.02 per diluted share because of the negative impact of preferred stock dividends of $15.3 million or $.03 per share. This compares to a net loss of $257.9 million or a loss of $.51 per diluted share in the fourth quarter last year that included the negative impact of preferred stock dividends of $7.3 million. Significant factors impacting net income in the fourth quarter this year include $80.6 million of closed store and impairment charges, $7.5 million of legal expenses incurred to defend prior management and to defend against litigation related to prior management's business practices, a $27.7 million credit related to the elimination of severance liabilities for former executives, a $19.5 million reduction of LIFO reserves and a $12.0 million extraordinary gain on the early extinguishment of debt. Adjusted FIFO net income in the fourth quarter, as computed on the attached table, is $29.9 million and adjusted FIFO earnings per share, which includes the negative impact of $15.3 million of preferred stock dividends, is $.03 per diluted share. This compares to an adjusted FIFO loss per share of $.05 in the prior year fourth quarter. Adjusted EBITDA, also computed on the attached table, amounted to $178.1 million or 4.3 percent of revenues. This compares to $143.5 million or 3.6 percent of revenues for the like period last year. In the fourth quarter, the company opened one new store, remodeled eight stores, relocated one store and closed eight stores. Stores in operation at the end of the quarter totaled 3,404. Year-End Results For the 52-week fiscal year ended March 1, 2003, Rite Aid had revenues of $15.8 billion as compared to revenues of $15.2 billion for the prior year. Same store sales increased 6.7 percent, consisting of a 9.7 percent pharmacy same store sales increase and a 1.9 percent increase in front-end same store sales. Prescription sales accounted for 63.2 percent of total sales, and third party prescription sales were 92.7 percent of pharmacy sales. Net loss for the year was $112.1 million, or a loss of $.28 per diluted share, compared to a loss of $827.7 million or a loss of $1.82 per diluted share for last year. Net loss does not include the negative impact of the preferred stock dividends of $32.3 million this year and $34.0 million last year that are included in diluted loss per share. Significant factors impacting this year include $153.3 million of closed store and impairment charges, $20.7 million of legal expenses incurred to defend prior management and to defend against litigation related to prior management's business practices, a $27.7 million credit related to the elimination of severance liabilities for former executives, a $44.0 million tax benefit, a $13.6 million extraordinary gain on the early extinguishment of debt and $18.6 million of gain on sale of assets. As computed on the attached table, adjusted EBITDA for the year was $622.9 million or 3.9 percent of revenues compared to $451.3 million or 3.0 percent of revenues for the prior year. At March 1, 2003, the Company's balance sheet shows a total shareholders' equity deficit of about $112 million. "We had a very good fourth quarter and a very good year, especially in light of a weak retail environment," said Mary Sammons, Rite Aid president and chief operating officer. "Our focus on increasing sales, improving margin and containing costs delivered strong adjusted EBITDA results in the fourth quarter and a more than 38 percent increase in adjusted EBITDA for the year. This is a tribute to the hard work of everyone at Rite Aid. We're pleased with our progress and well positioned for further improvement in the new fiscal year." Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of nearly $16 billion and approximately 3,400 stores in 28 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's Web site at http://www.riteaid.com RITE AID: Appoints Mary Sammons as New Chief Executive Officer -------------------------------------------------------------- Rite Aid Corporation (NYSE, PSE: RAD) said that Mary Sammons, currently Rite Aid's president and chief operating officer, will become president and chief executive officer effective June 25, 2003. Bob Miller, currently Rite Aid chairman and CEO, will retain the position of chairman. Ms. Sammons, 56, will assume the CEO position at the company's annual stockholder meeting. Miller, 58, will remain as chairman until his term on the Rite Aid Board of Directors ends at the company's annual meeting in June, 2005. At that time, the decision will be made regarding his standing for re-election to the board. "I intend to be an active chairman, assisting with strategic planning and working with Mary and the senior management team," Miller said. Miller and Sammons both came to Rite Aid in December 1999 as part of a new executive team hired to develop and execute a turnaround plan for the company. "Since we arrived, Mary has had responsibility for running the business day to day and leading the change to a new corporate culture. She has done an outstanding job rebuilding Rite Aid, significantly increasing sales and dramatically improving operating results," Miller said. "She has experience supervising all aspects of the company and is one of the best retail executives in business today. I'm confident that under her leadership Rite Aid will continue down the road to success." "I'm pleased that Bob has agreed to remain as chairman and will continue to work with us on important issues affecting the company," said Sammons. "We have accomplished a great deal these past three years, resolving the many issues facing us when we arrived. Now we have even greater opportunities ahead of us, and I look forward to leading the team that will grow our company for the future." Before joining Rite Aid as president and COO, Sammons was president and chief executive officer of Fred Meyer Stores, a 137-store food, drug and general merchandise retailer in the Pacific Northwest and a unit of Fred Meyer, Inc, which was bought by The Kroger Company in 1999. In 26 years at Fred Meyer, she held positions of increasing responsibility in all areas of operations and merchandising before becoming ceo. Sammons is a member of Rite Aid's Board of Directors. She is also vice chairman of the National Association of Chain Drug Stores, the industry's trade association, and will assume the role of chairman later this month. Before joining Rite Aid, Miller served as vice chairman and chief operating officer at The Kroger Company, which he joined in May 1999 when Kroger acquired Fred Meyer, Inc. From 1991 until the acquisition, he served as CEO of Fred Meyer, Inc., a $15 billion food and drug retailer whose four main subsidiaries operated approximately 800 stores. Prior to Fred Meyer, Miller held a number of senior positions during a thirty-year tenure at Albertson's, Inc. He is a director of Harrah's Entertainment, Inc. and PathMark Stores, Inc. Rite Aid Corporation is one of the nation's leading drugstore chains with annual revenues of nearly $16 billion and approximately 3,400 stores in 28 states and the District of Columbia. Information about Rite Aid, including corporate background and press releases, is available through the company's Web site at http://www.riteaid.com ROHN INDUSTRIES: Inks Alliance Agreement with Clark Engineers ------------------------------------------------------------- ROHN Industries, Inc. (Nasdaq: ROHN), a provider of infrastructure equipment to the telecommunications industry, and Clark Engineers, Inc., an engineering firm that provides multi- disciplined engineering and design services, announced that the two Peoria-based firms have signed a Strategic Alliance Agreement that will join the strengths of both firms in the Peoria area, as well as nationwide. The alliance facilitates the sharing of personnel, software, design talent, and marketing efforts between the two firms. Clark will continue to provide specialized engineering services in support of ROHN's business needs and marketing support in the development of new markets nationwide. ROHN will provide specialized construction support to Clark's personnel on various types of projects. Horace Ward, President and CEO of ROHN, said today "We believe that there are several areas in which our two firms can share their expertise to enable both companies to better serve their customers." Sandy Moldovan, President and CEO of Clark, said, "We look forward to working with ROHN to further develop the engineering and design capabilities of the two companies to enhance their ability to provide creative solutions that match their customers' needs." A key component of this agreement will be the sharing of talent and expertise, as both ROHN and Clark have several talented engineers in Illinois and in other areas. As previously announced, ROHN is consolidating its manufacturing operations that were located in Peoria, Illinois and Frankfort, Indiana into its facilities in Frankfort, but ROHN expects to retain its engineering group in the Peoria area, along with their other positions in its sales administration, construction services and corporate management departments. ROHN Industries, Inc., is a manufacturer and installer of telecommunications infrastructure equipment for the wireless industry. Its products are used in cellular, PCS, radio and television broadcast markets. The company's products and services include towers, design and construction, poles and antennae mounts. ROHN has manufacturing [and sales] operations in Frankfort, Indiana; corporate, technical and administrative support and sales operations in Peoria, Illinois, and a sales office in Mexico City, Mexico. Clark Engineers, Inc., is an engineering firm providing multi- disciplined engineering and design services for projects of all types and sizes throughout the country. The firm has 144 employees based in its Peoria, Illinois home office and branch offices in Salem, Bloomington and Chicago, Illinois and Phoenix, Arizona. * * * As reported in Troubled Company Reporter's November 13, 2002 edition, the Company is experiencing significant liquidity and cash flow issues which have made it difficult for the Company to meet its obligations to its trade creditors in a timely fashion. The Company expects to continue to experience difficulty in meeting its future financial obligations. At September 30, 2002, the Company's balance sheet shows a working capital deficit of about $1 million. On November 7, 2002, the Company entered into an amendment to its credit and forbearance agreements with its bank lenders. The amendment to the credit agreement, among other things, further limits the Company's borrowing capacity by modifying the definition of the borrowing base to decrease the amount of inventory included in the borrowing base. Additionally, the amendment modifies the definition of the borrowing base to provide additional borrowing capacity of varying amounts during this period. The amendments also provide for a series of reductions in the Company's revolving credit facility that reduce the availability under that facility from $23 million currently to $16 million on and after December 31, 2002. In addition, the amendment also provides for additional term loan payments through January 1, 2003. Furthermore, the amendment provides for additional bank fees, some of which will be waived if the Company achieves a significant reduction in the aggregate loan balance at December 31, 2002. Finally, the current amendment also includes covenants measuring revenues, cash collections and cash disbursements. Under the amendment to the forbearance agreement, the bank lenders have agreed to extend until January 31, 2003 the period during which they will forbear from enforcing any remedies under the credit agreement arising from ROHN's breach of financial covenants contained in the credit agreement except for the covenants added to the credit agreement as a result of this new amendment. If these financial covenants and related provisions of the credit agreement are not amended by January 31, 2003, and the bank lenders do not waive any defaults by that date, the bank lenders will be able to exercise any and all remedies they may have in the event of a default. The Company continues to experience difficulty in obtaining bonds required to secure a portion of anticipated new contracts. These difficulties are attributable to the Company's continued financial problems and an overall tightening of requirements in the bonding marketplace. The Company intends to continue to work with its current bonding company to resolve its concerns and to explore other opportunities for bonding. SAFETY-KLEEN: Balks at Raygar's $1.4 Million or Billion Claim ------------------------------------------------------------- Safety-Kleen Corp. and its debtor-affiliates strenuously object to allowance of the proof of claim filed by RayGar Environmental Systems International, Inc. On October 27, 2000, RayGar filed a proof of claim in the amount of $1.4 million, attaching a complaint which seeks damages in the aggregate amount of $1.4 billion. The Proof of Claim On October 27, 2000, RayGar filed a proof of claim against SKC asserting a general unsecured claim. The cover page of the proof of claim reflects a claim in the amount of $1.4 million plus attorney's fees and costs; however, RayGar attached the Original Complaint asserting a claim in the amount of $1.4 billion. Although RayGar has not attached the Amended Complaint, the Debtors in this Objection will address the new allegations raised in it. The Objection Unhappy with its investment, RayGar filed an eighteen-count complaint based on virtually every legal theory imaginable, including breach of contract, fraud, interference with contract, breach of fiduciary duty, and violation of the antitrust laws. All of these claims fail and RayGar's claims must be expunged for numerous reasons: * As part of its investment in the Pascagoula Project, RayGar expressly acknowledged that no representations were made to it regarding either the financial prospects of the venture in general or the prospects for obtaining the necessary permits specifically. Those acknowledgments preclude several of RayGar's claims premised on purported misrepresentations. * RayGar filed its proof of claim against SKC, which is the indirect parent corporation of OSCO Holdings; however, SKC had no involvement in the Pascagoula Project. Moreover, when RayGar purchased its interest in OTSMI -- which occurred after many of the events set forth in RayGar's state-court Complaint -- RayGar and OSCO Holdings entered into a stock purchase agreement and a shareholder agreement, under which RayGar provided both SKC and OSCO Holdings a general release and RayGar agreed that SKC would not have any liability relating to the project pursuant to an "exculpation" clause in the agreement. * RayGar fails to state a claim with respect to any of the causes of action set forth in the Complaint. The allegations are pled as bare legal conclusions without linking the few "facts" it pled to the elements of any of its claims. * RayGar made a speculative investment in a proposed hazardous waste facility, which failed because of overwhelming political and public opposition to the project. The project's failure had nothing to do with any purported misconduct by the Debtors. The Mississippi JV In 1992, LESI acquired OSCO Holdings, which in turn owned an interest in OTSMI. OTSMI held the rights to a permit application for the Pascagoula Project. In 1994, LESI acquired United States Pollution Control, Inc. USPCI of Mississippi, a subsidiary of USPCI, was involved in a joint venture with Federated to build a hazardous waste landfill in Shuqualak, Mississippi. The joint venture was governed by the terms of a merger agreement dated December 1, 1993. Neither the Pascagoula Project nor the Shuqualak Project could be built without first obtaining a Resource Conservation Recovery Act Permit from the Mississippi Department of Environmental Quality. Although the Pascagoula Project and Shuqualak Project would have operated in different segments of the hazardous waste business, the projects were viewed as competing projects because some people in Mississippi did not believe that the MDEQ would grant more than a single RCRA Permit. RayGar's Investment in OSCO Treatment Systems In January 1996, to address conflicts created by the LESI ownership interest in the OSCO Holdings permit application in Pascagoula and the USPCMI permit application in Shuqualak, OSCO Holdings and USPCI agreed to enter into agreements with Federated and RayGar, a Federated affiliate, to pursue jointly the Pascagoula and Shuqualak projects. RayGar asserts that on or about January 5, 1996, it agreed to pay $1.25 million for a fifty percent interest in OSCO Treatment Systems of Mississippi, Inc., which was attempting to obtain a permit to construct and operate a hazardous wastewater treatment facility in Pascagoula, Mississippi. OSCO Holdings, Inc. (n/k/a Safety-Kleen OSCO Holdings), a Debtor subsidiary of SKC, held the remaining fifty percent interest in OTSMI and managed the Pascagoula Project. Federated acquired a fifty percent interest in the Shuqualak Project, and RayGar acquired a fifty percent interest in the Pascagoula Project. RayGar did not obtain any interest in the Shuqualak Project. The agreement between USPCI and Federated with respect to the Shuqualak Project is set forth in an agreement titled First Amendment of Shareholder Agreement Pursuant to Merger dated January 5, 1996. In the Federated Agreement, USPCI agreed to split equally the ownership of USPCI between itself and Federated, and Federated assumed responsibility for the daily operations of USPCI, including the administration of the Shuqualak permit process. Under the terms of a stock purchase agreement dated January 5, 1996, RayGar purchased fifty percent of the stock of OTSMI. RayGar agreed to pay $1.25 million for the stock, only $100,000 of which was paid at the time of closing. In the Stock Purchase Agreement, RayGar specifically acknowledged that no representations were being made regarding either the financial prospects of the venture in general or specifically the prospects for obtaining the necessary permit: "[OSCO Holdings] makes no representations or warranties, express or implied, to [RayGar Environmental Services, Inc.] with respect to the financial prospects of [OTSMI] or the likelihood of permit issuance. [OSCO Holdings] expressly disclaims any responsibility for any financial projections which may have been provided by Laidlaw to [RayGar Environmental Services, Inc.] prior to closing." OSCO Holdings and RayGar also signed a shareholder agreement dated January 5, 1996, which provided for OSCO Holdings to retain responsibility for OTSMI's daily operations and the administration of the Pascagoula permit process. Prior to entering the Shareholder Agreement, as part of the diligence process, LESI provided financial information to RayGar relating to OSCO Holding's wastewater treatment facility in Nashville, Tennessee, which was intended to be used as a model for the Pascagoula Project. The financial information indicated that Laidlaw projected earnings before interest and taxes in 1995 of only $520,000 for its Nashville facility. With respect to the value of the Pascagoula Project, in November 1995, the total value of OTSMI was estimated as $2,481,617. OSCO Holdings Diligently Pursued the Permit Beginning in early 1995, James Hattler was the Chairman of OTSMI and the to obtain the permit. The process of obtaining a permit for a hazardous waste project is long and arduous and a very low percentage of permits that are applied for are actually granted. The project manager in charge of the Pascagoula Project was not aware of a permit ever being granted in an area as populated as Pascagoula. Some of the hurdles in obtaining permission to construct such a facility include: (i) obtaining a RCRA Permit, (ii) obtaining a "pretreatment permit", (iii) obtaining a "stormwater permit", (iv) obtaining an "air permit", (v) demonstrating that the facility meets the location standards established by the MDEQ, (vi) disclosing corporate compliance history, (vii) proving corporate financial capability to operate and close the facility at the end of its service life, and (viii) demonstration of need. Further, the process is complicated by the fact that "[t]he public [has] the opportunity to comment on the draft permits and other documents during a required public comment period and at a public hearing" and most citizens do not want a hazardous waste facility constructed in their vicinity. Even when the MDEQ grants a permit, a project often still faces a long fight in the court system before ultimately being resolved. Despite the numerous obstacles that the Pascagoula Project faced, OTSMI officials met on several occasions with the MDEQ, coordinated meetings with politicians, and handled the needs assessment and compliance history that needed to be submitted to the state. In September 1996, OSCO Holdings filed the required Demonstration of Need with the MDEQ. On December 5, 1996, a five-hour public hearing was held regarding the proposed permit with over a thousand people in attendance. All but one of the speakers opposed the Pascagoula Project. None of the public officials who attended the hearing spoke in favor of the project. Two state senators spoke against the project. A member of the County Board of Supervisors spoke against the project. Additionally, the Mayor of Pascagoula presented a resolution by the Pascagoula City Council against the project. Mr. Hattler, the point person in charge of the project, understandably left the meeting believing that it was going to be a long and costly battle to obtain a permit. Following the public hearing, Henry Taylor succeeded James Hattler as the point person in charge of the project. Shortly after the public hearing, OSCO Holdings informed RayGar of the challenges they were facing in obtaining permit approval: "Laidlaw and [RayGar Environmental Systems, Inc.] must recognize that we face a genuine challenge regarding the OTSM permit approval . . . it is now obvious to those closely involved that the OTSM permitting effort faces protracted legal administration and wrangling prior to ultimate conclusion." Over time, the prospects for obtaining a permit continued to diminish. In January 1997, due to economic reasons, OSCO Holdings was forced to close its Nashville facility. The closure raised questions regarding the need for a similar facility in Mississippi if there was not sufficient demand to sustain such a facility in Nashville. In a March 5, 1997 letter from Henry Taylor to Claiborne McLemore, Mr. Taylor reiterated OSCO Holdings' commitment to the Pascagoula Project despite the challenges they were facing: "As you know, we have questioned the economic viability of both OTSM and USPCI of Mississippi, Inc. (USPCIM) from the first day that representatives of our companies came face-to-face. Notwithstanding this concern, LESI has not wavered from its commitment to its fellow shareholders in these projects." In May 1997, LESI merged with Rollins Environmental Services, Inc. The surviving corporation continued to use the name LESI. OSCO Holdings and USPCI became subsidiaries of LESI. The Rollins merger necessitated filing an amended disclosure history with the MDEQ, which delayed the permit process. Despite the delay, OSCO Holdings continued diligently to pursue the permit process. The Decision to Terminate the Pascagoula Project The public opposition to the Pascagoula Project reached its culmination in November 1997. On November 4, 1997, the Pascagoula City Council unanimously passed a resolution precluding OTSMI from sending its wastewater through city-owned pipes -- effectively ending the permit process. The Resolution cited both public safety concerns and concerns regarding the feasibility of the proposed project: WHEREAS, we believe that the construction and operation of said plant near the City will harm the health and welfare of the citizens of the City * * * WHEREAS, the City's sewerage system does not have the capacity to handle this additional load * * *. Based on those concerns, the City Council resolved "that the City will not accept the wastewater discharged by the proposed OSCO plant into its sewerage system for transport to the treatment system owned and operated by the Mississippi Gulf Coast Regional Wastewater Authority." Not only did the City Council bar use of its sewerage system, it further resolved to send its resolution to the other government agencies involved in the permit process and directed a Councilman to present the resolution at the next MDEQ public hearing regarding the Pascagoula Project. The Shareholder Agreement and the Amended and Restated Bylaws of OTSMI vested control and discretion to make decisions affecting OTSMI in its Chairman, who was appointed by OSCO Holdings: "Except for matters reserved to the Board of Directors by applicable law or the Shareholder Agreement or matters constituting Major Decisions, the management and control of the corporation's business and affairs shall be vested exclusively in the Chairman of the Board." On or about November 6, 1997, OSCO Holdings met with RayGar to discuss the future of the Pascagoula Project. OSCO Holdings stated that: (1) it interpreted the Shareholder Agreement as giving it the unilateral right to make the decision to terminate the efforts to obtain a permit, and (2) it was inclined to exercise its discretion to make such a decision given the public and political opposition to the project. At the meeting, RayGar officials agreed with OSCO Holdings' interpretation of the Shareholder Agreement. On or about November 7, 1997, OTSMI held its annual directors meeting. Henry Taylor, Chairman of the Board, reviewed the decision of the Laidlaw directors to terminate the Pascagoula Project and the other directors "unanimously agreed that the most cost effective plan be implemented to terminate the permitting activities associated with the OTSM project." On December 1, 1997, OTSMI sent a letter to the MDEQ officially withdrawing its permit application. The Pascagoula Project eventually failed due, in the Debtors' opinion, to (i) public opposition to it and (ii) the Pascagoula City Council's refusal to allow the proposed facility to use the City's public sewer system. In November 1997, OTSMI then sold the property for approximately $300,000. LESI's Merger with Safety-Kleen In March 1998, after the termination of the Pascagoula Project, LESI initiated a hostile tender offer for the outstanding shares of Safety-Kleen Corp., a publicly-traded corporation engaged in the business of waste collection, treatment, and disposal. After completion of the tender offer and following the merger in 1998, the surviving corporation continued to use the name Safety-Kleen Corp. The RayGar Suit On November 5, 1999, RayGar filed suit in the Circuit Court of Covington County, Mississippi, against SKC and other defendants, including certain Laidlaw affiliates. Thereafter, "certain defendants" removed the State Court Litigation to the United States District Court for the Southern District of Mississippi. The RayGar Action asserts, among other things, antitrust, breach of contract, tort, and common law theory claims in connection with the Pascagoula Project. On August 7, 2000, approximately two months after the Debtors commenced their chapter 11 cases, RayGar filed an amended complaint in the Mississippi Federal Court without first obtaining relief from the automatic stay. The defendants in the Amended Complaint include: (a) (i) Laidlaw, Inc., (ii) Laidlaw Investments, Ltd., (iii) Laidlaw Transportation, Inc., and (iv) Laidlaw International, each a debtor in the Laidlaw chapter 11 cases; and (b) (i) Laidlaw Environmental Services, Inc. (k/n/a SKC), (ii) LES, Inc. (k/n/a Safety-Kleen Services, Inc.), (iii) Laidlaw Environmental Services (US) Inc. (k/n/a Safety-Kleen (US), Inc.), (iv) OSCO Holdings, Inc. (k/n/a Safety-Kleen OSCO Holdings, Inc.), and (v) SKC (each Safety-Kleen defendant being a debtor in these chapter 11 cases). Thus, the Amended Complaint is void ab initio and the RayGar proof of claim should be disallowed in its entirety. The Federated Suit On November 6, 2000, Federated Holdings, Inc., filed a complaint in the Mississippi Federal Court -- without obtaining relief from the automatic stay -- against substantially all of the same parties named as defendants in the RayGar Action, including SKC -- again without any relief from the automatic stay. By order filed on June 21, 2001 by the Mississippi Federal Court, the RayGar Action and the Federated Action were consolidated. The Stay Relief Motion In December 2001, RayGar, together with Federated, filed a motion seeking relief from the automatic stay against the Laidlaw defendants in the Laidlaw chapter 11 cases. Federated did not file a proof of claim against the Safety-Kleen Debtors. RayGar filed a motion for relief from the automatic stay in these Chapter 11 cases, to which the Debtors filed an objection. This Court has now denied RayGar's motion. On December 12, 2002, in the Laidlaw chapter 11 cases, the United States Bankruptcy Court for the Western District of New York: (i) disallowed RayGar's and Federated's claims and (ii) denied their motion for relief from the automatic stay because it was moot. The Amended Complaint and the Claim Based On It Are Baseless On Their Face Even if it were not void, in the Amended Complaint underlying the Claim, RayGar asserts 18 causes of action against, inter alia, the Safety-Kleen Defendants. Generally, these causes of action fall into four categories: (a) fraud, misrepresentation, and related claims (Counts VII, VIII, XIV, and XVI); (b) contract and tortuous interference claims (Counts I, II, IV, XI, XII, and XIII); (c) fiduciary duty claims (Counts III, V, VI, and XV), and (d) antitrust claims (Counts IX, X, XVII, and XVIII). The Debtors claim that none of these causes of action have any merit and, accordingly, the Claim should be disallowed in its entirety. No Evidence of Value of Claim For RayGar to recover on its billion-dollar claim it would need to prove its damages with reasonable certainty. Generally, the loss of future profits stemming from a new business are not recoverable because they are by their very nature too speculative. Here, RayGar's assertion that it is owed over a billion dollars is pure fiction. First, RayGar has not alleged a basis to justify that the venture could have earned sufficient profits to justify such a valuation. Prior to RayGar's investment, when OTSMI had a more realistic prospect of obtaining the necessary permits, OTSMI was valued at less than $2.5 million, and RayGar eventually agreed to pay only $1.25 million for its fifty percent interest in OTSMI. The projected earnings for similar facilities were less than $1 million per year. Second, RayGar's prospects of obtaining any profits from the venture were speculative. Before earning a profit, in a market already facing overcapacity, OTSMI would have had to overcome numerous regulatory hurdles facing the project, survived court challenges to the permits, constructed the facility, and attracted enough customers to become profitable. RayGar cannot offer any proof that those hurdles would have been cleared, much less competent evidence to support the profits that the project would have earned. Indeed, RayGar's damages claim that OSCO Holdings intentionally terminated a billion dollar project in which it owned a fifty percent interest solely to harm the other shareholder makes no sense. Fraud, Misrepresentation, and Related Claims RayGar has asserted various claims based on unidentified purported misrepresentations and fraudulent statements. All of the claims fail for three reasons: 1. RayGar Has Failed to Plead Facts Supporting Its Claims RayGar's fraud and misrepresentation claims must be disallowed because RayGar has failed to allege specific facts supporting the various elements required to establish liability under theories of either fraudulent or negligent misrepresentation. To establish fraud or fraudulent misrepresentation under Mississippi law, a complaint must on its face allege "with specificity" facts showing that there was: "(1) a representation, (2) its falsity, (3) its materiality, (4) the speaker's knowledge of its falsity, or ignorance of the truth, (5) the speaker's intent that it should be acted on by the hearer and in a manner reasonably contemplated, (6) the hearer's ignorance of its falsity, (7) the hearer's reliance on its truth and right to rely thereon; and (8) the hearer's consequent and proximate injury." Fraud will not be "inferred or presumed" and cannot be "charged in general terms," but "the specific and positive facts which constitute it must be distinctly and definitely averred, and it must be shown that defendants participated therein." RayGar's complaint fails to allege specific facts constituting any alleged fraud, much less specific facts demonstrating that the Debtors participated in any alleged fraud. The alleged misrepresentations are never identified at all, much less identified with the specificity required under governing precedent and Federal Rule of Civil Procedure 9(b). Nor are the alleged makers of the misrepresentations identified. For similar reasons, RayGar's claim for negligent misrepresentation (Count VII) should be disallowed. Under Mississippi law, a claim of negligent misrepresentation requires these elements: "(1) a misrepresentation or omission of fact; (2) materiality; (3) the failure to exercise ordinary care; (4) reasonable reliance; and (5) injury." RayGar's Amended Complaint does not identify an alleged misrepresentation (the first element), much less contain well- pled factual allegations that, if true, would establish the other required elements of a claim for negligent misrepresentation against the Debtors. Accordingly, RayGar's negligent misrepresentation claims also should be disallowed. 2. RayGar Released Its Purported Claims The Shareholder Agreement includes comprehensive release provisions that bar any misrepresentation claims arising before January 5, 1996. In addition to the broad release, the Shareholder Agreement specifically excluded from the list of prohibited interests "any interest in the permits now being sought by USPCI of Mississippi, Inc. and/or Federated Holdings, Inc. for a hazardous waste facility in Noxubee County, Mississippi" - i.e., the very interest that RayGar cites as a purported conflict of interest. The Shareholder Agreement also contained a provision entitled "Exculpation of Affiliates and Others" in which the parties agreed that any future liability under the agreement would lie only with the actual contracting parties, i.e., OSCO Holdings and RayGar. Limitation on liability provisions are fully enforceable under Mississippi law. Thus, RayGar: (i) released any existing claims it had against all the Debtors as of January 5, 1996, (ii) waived the purported conflict of interest, and (iii) expressly agreed that all Debtors other than OSCO Holdings would have no liability under the Shareholder Agreement in the future. The Laidlaw Bankruptcy Court relied, in part, on this Release in ruling that RayGar had no claim against any of the Laidlaw Debtors. Those provisions clearly and unambiguously bar any claims that result from the acquisition of OSCO Holdings in 1992, the USPCI acquisition in 1994, and the alleged misrepresentations in 1995. The Release is enforceable under Mississippi law. Each of these provisions, as well as the fact that SKC had no involvement in the project, bar any claim by RayGar against SKC - the entity against which RayGar filed its claim. 3. RayGar's Claims Are Time Barred RayGar alleges that in 1995 "Laidlaw persuaded RayGar through misrepresentations, concealment, and fraud, to acquire a fifty percent (50%) interest . . . in the Pascagoula . . . project." Because the purported misrepresentations are alleged to have occurred in 1995, four years before RayGar filed suit in November 1999, RayGar's claims for negligent misrepresentation, fraudulent misrepresentation, and fraud (counts VII, VIII, and XIV, respectively) are all time-barred under Mississippi's three-year statute of limitations and therefore the prof of claim based on them should be disallowed. Punitive Damages Claim Barred RayGar alleges that "Defendants' conduct has been willful, reckless and in bad faith and in such gross, careless, indifferent and reckless disregard of the rights of RayGar as to entitle RayGar to an award of punitive damages." This "claim" for punitive damages is purely derivative of other claims in the complaint: the very concept of punitive damages presupposes an underlying wrong of an extreme character to which those damages are potentially applicable. RayGar's complaint evidences a complete lack of well-pled factual allegations that, if true, could potentially establish entitlement to punitive damages. In order for punitive damages to be awarded, a claimant must demonstrate a willful or malicious wrong or the gross, reckless disregard for the rights of others. RayGar has failed to plead any specific facts supporting the applicability of punitive damages against anyone, much less any of the Debtors. Accordingly, RayGar's request for punitive damages should be disallowed. (Safety-Kleen Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) SEA CONTAINERS: S&P Ratchets Corporate Credit Rating Down to BB- ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on Sea Containers Ltd., including lowering the corporate credit rating to 'BB-' from 'BB'. Ratings remain on CreditWatch with negative implications, where they were placed Nov. 14, 2002. "The ratings were lowered as a result of Sea Containers' reduced financial flexibility due to significant near-term refinancing risk," said Standard & Poor's credit analyst Betsy Snyder. "Ratings remain on CreditWatch pending the outcome of its planned refinancing of $158 million of debt maturities that mature on July 1, 2003," the analyst continued. The company intends to sell approximately $160 million of assets and to exchange senior notes due in 2003 and 2004 for new securities with higher coupons and/or longer maturities. Proceeds from the asset sales will be used to redeem senior notes that are not exchanged. The company is also in the process of arranging a $160 million bridge facility that would be used to redeem the senior notes if the planned asset sales do not close by the July 1, 2003 maturity. Although the assets to be sold are noncore, the company will be left with reduced cash flow and fewer assets available for sale if it encounters further financial difficulties in the future. If Sea Containers is not able to refinance its July 1, 2003, debt maturities, ratings will be lowered significantly. If the company is successful in refinancing these maturities, ratings would likely be affirmed. The ratings reflect Bermuda-based Sea Containers' heavy upcoming debt maturities, including $158 million of senior notes due July 1, 2003, and reduced financial flexibility; partially offset by fairly strong competitive positions in its major businesses. Sea Containers is involved in passenger transport operations and marine cargo container leasing. It also has a 47% stake in Orient-Express Hotels Ltd. (OEH). Passenger transport is the largest operation, accounting for approximately 79% of total revenues, and includes passenger and vehicle ferry services in the English Channel, the Irish Sea, and the Northern Baltic Sea; and passenger rail service between London and Scotland, GNER (Great North Eastern Railway). While Sea Containers is one of the larger ferry participants on routes it serves, this is a highly competitive business, with several participants. In 2002, Sea Containers acquired the 50% of Silja OyjAbp--a major ferry operator in the Baltic Sea--that it did not already own. GNER operates under a U.K. government franchise that expires in 2005. Marine cargo container leasing primarily includes Sea Containers' share of its joint venture with General Electric Capital Corp., GESeaCo SRL, one of the largest marine cargo container lessors in the world. Leisure investments include the company's 47% stake in OEH, which owns and/or manages deluxe hotels, tourist trains, river cruise ships, and restaurants located around the world. Sea Containers had previously owned 100%, but has been selling its stake over the past few years, using proceeds to reduce debt. Sea Containers also owns a variety of smaller businesses. DebtTraders reports that Sea Containers' 12.500% bonds due 2004 (SCR04USR1) are trading at 91 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=SCR04USR1for real-time bond pricing. SEITEL INC: Noteholders Agree to Extend Standstill Until May 15 --------------------------------------------------------------- Seitel, Inc., (OTC Bulletin Board: SEIE; Toronto: OSL) and its Noteholders have amended their existing standstill agreement to require that the documents necessary for a restructuring be completed by May 15, 2003. Previously, these documents were required to be completed by April 10, 2003. Seitel markets its proprietary seismic information/technology to more than 400 petroleum companies, licensing data from its library and creating new seismic surveys under multi-client projects. SERVICE MERCHANDISE: Court Approves Amended Disclosure Statement ---------------------------------------------------------------- At the Disclosure Statement Hearing in Nashville, Tennessee, Judge Paine determined that Service Merchandise Company, Inc., and its debtor-affiliates' Amended Disclosure Statement contains adequate information pursuant to Section 1125 of the Bankruptcy Code. Judge Paine found that the document -- as it will be amended by the Debtors to satisfy additional information requests proposed by the Objectors -- contains the right amount of the kind of information necessary to permit creditors to make informed decisions when voting to accept or reject the plan. American Income Life Insurance Company advised the Court that it would withdraw its objection to the Disclosure Statement. To the extent not resolved or withdrawn, Judge Paine overrules Priscilla West's objection. Accordingly, Judge Paine approved the Disclosure Statement. Printed and bound copies of the Debtors' Disclosure Statement and ballots are now in the mail to all known creditors entitled to vote on Service Merchandise's Plan. Judge Paine will convene a hearing to consider confirmation of the Amended Liquidating Plan on May 12, 2003. Any objections to Plan confirmation are due by May 5, 2003. (Service Merchandise Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) SORRENTO NETWORKS: Net Loss from Q4 Operations Improve 45% ---------------------------------------------------------- Sorrento Networks Corporation (Nasdaq NM: FIBR), a leading supplier of intelligent optical networking solutions for metro and regional applications, announced financial results for its fourth quarter and fiscal year 2003 ended January 31, 2003. The Company also provided a status report on its capital restructuring and announced that the Nasdaq Appeal Panel has given the Company additional time to implement the restructuring. Fourth Quarter and Fiscal Year Financial Performance Revenues for Sorrento Networks Corporation in its fiscal 2003 fourth quarter were $8.4 million, a 52% increase from revenues of $5.5 million in the prior quarter and a 2% increase from revenues of $8.3 million in the fourth quarter of fiscal 2002. Following significant declines in telecom industry spending, this is the first time in the past 12 months that the Company's quarterly revenues exceeded comparable quarterly revenues in the prior year. Net loss from operations for the fourth quarter of fiscal year 2003 improved 45% to $5.1 million compared with $9.2 million for the same quarter of the prior year. Net loss from operations for fiscal year 2003 improved 16% to $31.3 million compared with $37.2 million for the prior year. Net loss applicable to common shares was $7.5 million, an 8% increase compared with a net loss of $6.9 million in the prior quarter and a 29% improvement from a net loss of $10.5 million in the fourth quarter of fiscal 2002. Net loss applicable to common shares in the fourth quarter reflects a $3.7 million adjustment. This adjustment relates to the amortization of both the beneficial conversion feature of the debentures and the value allocated to the issuance of warrants on the Company's Senior Convertible Debentures. Net loss per common share was $8.42, compared with net loss per common share of $8.86 in the prior quarter and $14.80 in the fourth quarter of fiscal 2002. Revenues for the fiscal year ended January 31, 2003 totaled $25.1 million, compared with revenues of $40.8 million in the prior year, a 38% decline. The Company stated that the revenue reduction reflects the downturn in the telecom market, as well as management's decision not to pursue low-margin business. Net loss applicable to common shares for fiscal 2003 was $26.2 million, compared with a net loss of $43.1 million for the prior year. Net loss per common share for fiscal 2003 was $33.29, compared with net loss per common share of $62.00 for the prior year, a 46% improvement. Earnings for the fiscal year would have been $3.6 million higher except for legal expenses associated with the capital restructuring and other expenses associated with severance fees and the shutdown of remote offices. Gross margin for the Company increased to 38% in the fourth quarter of fiscal 2003, compared with 17% in the prior quarter and 21% in the fourth quarter of fiscal 2002. Gross margins for fiscal year 2003 decreased to 13% from 23% in the prior fiscal year mainly due a large inventory reserve taken in the second quarter. The Company also made significant progress in reducing its inventory level to $13.9 million, a 26% improvement compared with inventory of $18.8 million as of January 31, 2002. The Company entered the first quarter of fiscal year 2004 with an order backlog of $5 million. In addition, the Company's days sales outstanding were cut by more than one half to 60 days compared with 124 days in the prior quarter and reduced by 32% compared with 88 days in the prior fiscal year. "I am encouraged by our revenue growth and balance sheet improvement in light of continued softness in the telecom market," said Phil Arneson, chairman and chief executive officer of Sorrento Networks. "We continue to focus our attention and product development primarily on the needs of our existing blue- chip customers and partners, including AT&T Broadband (now Comcast), Cox Communications, Deutsche Telekom, and DeltaNet. Generating a 52% increase in quarterly revenue and entering our next quarter with a healthy backlog are remarkable in this environment. I am proud of our dedicated Sorrento employees for their accomplishments." Highlights from the fiscal year include: -- Added Larry Matthews, a respected businessman and seasoned entrepreneur with over 35 years experience, to the board of directors. -- Added Mitch Truelock as vice president sales and marketing. Truelock previously worked as a consultant for the Company and has extensive background in the industry as a result of his senior technology investment banking positions at Robertson Stephens and RBC Capital. -- Implemented aggressive expense reduction and margin improvement measures, yielding savings of more than $3 million per quarter. -- Improved revenue per employee by 169% from approximately $29,000 in the first quarter to nearly $73,000 in the fourth quarter. -- Added eight new customers and distribution partners, including ING BHF-BANK, FiberNet Communications, and Unitech Networks. -- Expanded the existing relationship with Deutsche Telekom, the incumbent telecom carrier for Germany, enabling all their subsidiaries and affiliates to have access to the Company's family of optical access, transport, and network management products. -- Began volume shipments of the Company's JumpStart-400 CWDM platform. -- Established a strategic partnership and 5-year exclusive supply agreement with UFO Communications, a leading provider of enterprise broadband optical communications services in major metropolitan areas. The Company was selected as the exclusive supplier of DWDM and CWDM equipment for UFO services, currently planned to be offered in 13 key markets. -- Achieved increased traction with new and existing distribution partners for the GigaMux DWDM and JumpStart CWDM product lines, including significant business with DeltaNet (Switzerland), Marubeni Network Systems (Japan), and Infraconcepts (Northern Europe). -- Announced that Germany's Landeskreditbank (L-Bank) has deployed an innovative data mirroring application using GigaMux whereby the bank became the first computing center to synchronously mirror its data over a distance of 100 kilometers. The second computing center was set up to improve system and data access in the event of a major disaster. -- Established a global partnership with Clear Communications to deliver service providers a reliable, proactive optical network operations management solution. -- Introduced new capabilities for GigaMux, including a highly integrated filter core, a substantially improved optical protection module, as well as a state-of-the-art multi-rate 3R/2R transponder that substantially improves performance, density, and power consumption. The new filter core more than doubles the previous filter density and includes integrated optical power adjustment. Providing an upgrade path to 128 channels, GigaMux now enables 32 fully protected channels to be implemented in a single rack - a 33% improvement in total system density. Sorrento Networks' January 31, 2003 balance sheet shows a working capital deficit of about $36 million, and a total shareholders' equity deficit of about $34 million. Arneson continued, "I am pleased that our aggressive focus on cost reduction and gross margin improvement is taking effect. Even though it has been difficult to trim expenses, facilities, and personnel, we believe that the success of our efforts will position us to achieve additional operating improvements in future periods." Capital Restructuring Agreement In early March 2003, the Company announced the execution of a definitive restructuring agreement with its Senior Convertible Debenture Holders and the Series A Preferred Shareholders of its optical networking subsidiary, Sorrento Networks, Inc. The Company plans to mail the proxy statement to shareholders on or about April 15, 2003, and hold a shareholder meeting in San Diego, CA, on May 19, 2003, for the approval of the capital restructuring. The terms of the definitive agreement are described in the March 6, 2003, Schedule 14A SEC filing and were also summarized in the Company's March 7, 2003, press release. Briefly, the agreement provides that the Company's $32.2 million in convertible bonds and all Series A Preferred shares will be converted into common shares of the Company and into a portion of $12.5 million in secured convertible debentures. The outstanding Series A "put" of $48.8 million against Sorrento Networks, Inc. will be withdrawn. The Senior Convertible Debenture Holders and Series A Preferred Shareholders will receive common shares and new convertible debentures, which, in the aggregate, will represent approximately 87.5% of the Company's common stock on a diluted basis. Existing shareholders will retain 7.5% of the common stock of the Company on the same diluted basis and will receive non-transferable warrants to purchase approximately 5% of the Company's common stock. The Company will reincorporate in Delaware and, post-closing, will simplify its corporate structure by merging its operating and non-operating subsidiaries into the new Delaware corporation. Nasdaq Listing In late January 2003, the Company submitted an appeal to the Nasdaq Listing Qualifications Panel regarding a decision by Nasdaq to delist the Company's securities from the Nasdaq National Market as a result of not meeting the minimum shareholders' equity requirement. Based on the Company's progress on capital restructuring and the oral representations made to the Panel on March 6, 2003, the Panel determined, on April 4, 2003, to continue the listing of the Company's securities subject to two provisions. First, the Company must file with the SEC, by May 16, 2003, a pro forma balance sheet demonstrating compliance with the $10 million shareholders' equity requirement. Second, the Company's Form 10-Q for the quarter ending April 30, 2003 must be filed by June 15, 2003, and must demonstrate continued compliance with the $10 million shareholders' equity requirement. The Company's plan is to demonstrate compliance after the capital restructuring is completed. However, since the restructuring will not be complete by May 16, the Company will request a short extension of the May 16 deadline set by the Panel. There can be no assurance that the Panel will approve the request for an extension. "Completing our capital restructuring has been a costly and time-consuming process, but will be a key milestone toward improving our capital structure and balance sheet," stated Joe Armstrong, Sorrento's chief financial officer. "Our new capital structure is expected to address the Nasdaq listing requirements, permit additional capital infusion, and lead to new customer and product opportunities that have not been available to the Company in the past." Arneson concluded, "Although we are pleased with our accomplishments, critical challenges still face the Company. Our ability to maintain a strong balance sheet while completing the restructuring as well as finding ways to raise additional working capital is essential to our success. With the restructuring completed and a capital infusion in place, the Sorrento team will be ready to take advantage of new opportunities for future growth." Sorrento Networks, headquartered in San Diego, is a leading supplier of intelligent optical networking solutions for metro and regional applications worldwide. Sorrento Networks' products support a wide range of protocols and network traffic over linear, ring and mesh topologies. Sorrento Networks' existing customer base and market focus includes communications carriers in the telecommunications, cable TV and utilities markets. The storage area network (SAN) market is addressed though alliances with SAN system integrators. Additional information about Sorrento Networks can be found at http://www.sorrentonet.com SPIEGEL: Will Continue Using Existing Cash Management System ------------------------------------------------------------ The Spiegel Group and its debtor-affiliates sought and obtained Court permission to continue using its present centralized cash management system that mirrors the structures of their main operating units: (A) Spiegel Catalog division, (B) the Eddie Bauer division, (C) the Newport News division, (D) the Spiegel Group Teleservices division, (E) Distribution Fulfillment Services, Inc., and (F) Spiegel Management Group, Inc. and divisions: (1) Spiegel Group's merchant division consists of the Spiegel Catalog, Newport News and Eddie Bauer; (2) Spiegel Management provides the personnel to support each Merchant Division; and (3) Spiegel Teleservice and DFS provide customer services and shipping and transportation to the Merchant Division. The Spiegel Group's Cash Management System is funded primarily by receipts received from its retail stores, e-commerce operation and telephonic and mail catalog transactions. Funds generated through the operations of the Merchant Divisions are deposited daily into depository and transferred to concentration accounts maintained at LaSalle National Bank, Bank of America, Sun Trust Bank or Scotiabank, depending on the Merchant Division generating the receipts. Most of the Debtors maintain multiple disbursement accounts from which their obligations are paid. Those accounts are zero balance accounts, and are funded by one of the concentration accounts. (Spiegel Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) SPIEGEL GROUP: March Net Sales Dwindle 28% to about $158 Million ---------------------------------------------------------------- The Spiegel Group reported net sales of $157.8 million for the five weeks ended March 29, 2003, a 28 percent decrease from net sales of $217.8 million for the five weeks ended March 30, 2002. For the 13 weeks ended March 29, 2003, net sales declined 23 percent to $413.6 million from $537.0 million in the same period last year. The company also reported that comparable-store sales for its Eddie Bauer division decreased 14 percent for the five-week period and 10 percent for the 13-week period ended March 29, 2003. The Group's net sales from retail and outlet stores fell 15 percent compared to last year, reflecting a decline in comparable-store sales and a reduction in the number of stores. Net direct sales (catalog and e-commerce) decreased 36 percent compared to last year, primarily due to lower customer demand and a planned reduction in catalog circulation. The company believes that direct sales and, to a lesser extent store sales, were adversely impacted by the company's decision in early March to cease honoring the private-label credit cards issued by First Consumers National Bank to customers of its merchant companies (Eddie Bauer, Newport News and Spiegel Catalog). To enable its merchant companies to issue new private- label credit cards as soon as possible, the company is actively seeking a third-party credit provider to finance and service receivables generated from these new cards. The Spiegel Group is a leading international specialty retailer marketing fashionable apparel and home furnishings to customers through catalogs, more than 550 specialty retail and outlet stores, and e-commerce sites, including eddiebauer.com, newport- news.com and spiegel.com. The Spiegel Group's businesses include Eddie Bauer, Newport News and Spiegel Catalog. The company's Class A Non-Voting Common Stock trades on the over-the-counter market under the ticker symbol: SPGLA. Investor relations information is available on The Spiegel Group Web site at http://www.thespiegelgroup.com TOWER AUTOMOTIVE: Says Funds Sufficient to Maintain Operations -------------------------------------------------------------- Tower Automotive, Inc.'s revenues for the year ended December 31, 2002 were $2,754.5 million, an 11.6 percent increase, compared to $2,467.4 million for the year ended Dec. 31, 2001. The net $287.1 million increase was composed of net volume increases of $351.3 million, primarily in the platforms of Dodge Ram pickup; Cadillac CTS; Ford Thunderbird, Econoline, Expedition, and Explorer; BMW X5; and Toyota Camry and Corolla, partially offset by volume decreases primarily in the Ford Ranger and Dodge Durango platforms. Revenue also increased in the 2002 period due to incremental revenues of $23.3 million associated with the consolidation of Tower Golden Ring, which first occurred in the third quarter of 2001. These increases were offset by a decline in revenues of $87.5 million, which were attributable to the sale of the Iwahri, Korea plant to an affiliate of Hyundai, which occurred during the first quarter of 2002. Cost of sales as a percent of total revenues for the year ended December 31, 2002 was 89.1 percent compared to 88.8 percent for the year ended December 31, 2001. The Company's gross profit margin declined slightly in the 2002 period compared to the 2001 period. The decline was due primarily to changes in product mix on light truck, sport utility and other models served by the Company in addition to increases in module assembly sales by the Company in the 2002 period, offset by increased production volumes and the lack of significant product launch activity. Gross profit margins in 2002 were also negatively impacted by increased operating lease costs and operational inefficiencies associated with the production of the new generation Ford Explorer frame. The Company also experienced certain adjustments in the 2002 period impacting cost of sales that were not incurred in 2001. The most significant items included favorable adjustments of $9.8 million related to changes in estimate to certain purchase accounting reserves, reflecting certain plant closures, product changes and contract revisions related to the Company's restructuring actions, offset by additional expenses related to postretirement and other employee fringe benefits of $9.7 million. Selling, general and administrative expenses increased to $143.8 million, or 5.2 percent of revenues, for the year ended December 31, 2002 compared to $139.2 million, or 5.6 percent of revenues, for the year ended December 31, 2001. The $4.6 million year- over-year increase in expense is due to $2.9 million increased program management costs in the engineering and support activities of the launch of the Company's upcoming new programs related to Volvo, Ford and Nissan and incremental costs of $1.7 million associated with the Company's consolidation of Tower Golden Ring. The Company's selling, general and administrative expenses as a percentage of revenues have declined due to efficient use of management resources to support the Company's growing revenue base. Amortization expense for the year ended December 31, 2002 was $4.2 million compared to $24.8 million for the year ended December 31, 2001. The decrease was due to the adoption of the requirements of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets", and as a result, beginning January 1, 2002, the Company no longer records amortization expense of goodwill. Goodwill amortization for the 2001 period was $21.1 million. Interest expense, net of interest income, for the year ended December 31, 2002 was $66.9 million compared to $73.8 million for the year ended December 31, 2001. The $6.9 million reduction in net interest expense is attributable to $13.3 million due to reduced borrowings in 2002 and $6.5 million due to lower interest rates, which was partially offset by decreased capitalized interest on construction projects of $8.6 million and decreased interest income of $4.3 million in 2002. The effective income tax rate was 35.0 percent and 21.3 percent in 2002 and 2001, respectively. The effective income tax rate is not comparable between the years as the Company did not receive tax benefit for the full amount of the loss in 2001 due to the amortization and write-off of nondeductible goodwill and the provision for a valuation allowance associated with loss carryforwards. Equity in earnings of joint ventures, net of tax, was $16.8 million and $17.3 million for the years ended December 31, 2002 and 2001, respectively. These amounts represent the Company's share of the earnings from its joint venture interests in Metalsa, Yorozu, and DTA Development in the 2002 and 2001 periods. In addition, the 2001 period includes the Company's share of earnings from its joint venture interest in Tower Golden Ring prior to its consolidation. The decrease in equity earnings in the 2002 period as compared to the 2001 period was due to the Company's share of joint venture earnings in Metalsa and Yorozu increasing by $4.8 million, offset by a reduction in equity earnings of $5.3 million due to the consolidation of Tower Golden Ring beginning in the third quarter of 2001. Minority interest, net of tax, for the years ended December 31, 2002 and 2001 represents dividends, net of income tax benefits, on the 6-3/4% Trust Preferred Securities and the minority interest held by the 40 percent joint venture partners in Tower Golden Ring. The increase in minority interest expense was due to the full year of consolidation of Tower Golden Ring during 2002 compared to the third and fourth quarter consolidation of Tower Golden Ring during 2001. The Company adopted SFAS No. 142 relating to the accounting for goodwill and other intangible assets as of January 1, 2002. Application of the nonamortization provisions of SFAS No. 142 resulted in a reduction in goodwill amortization expense of approximately $16 million in fiscal 2002, after reflecting the 2001 goodwill write downs of $196.1 million. Under SFAS No. 142, the Company designated four reporting units: 1) United States/Canada, 2) Europe, 3) Asia and 4) South America/Mexico. During the second quarter of 2002, the Company completed its formal valuation procedures under SFAS No. 142, utilizing a combination of valuation techniques including the discounted cash flow approach and the market multiple approach. As a result of this valuation process as well as the application of the remaining provision of SFAS No. 142, the Company recorded a transitional impairment loss of $112.8 million, representing the write-off of all of the Company's existing goodwill in the reporting units of Asia ($29.7 million) and South America/Mexico ($83.1 million). The write-off was recorded as a cumulative effect of a change in accounting principle in the Company's consolidated statements of operations for the year ended December 31, 2002. There was no tax impact since the Company recorded a $24.2 million tax valuation allowance for the deductible portion of the goodwill written off in the reporting unit of South America/Mexico. The Company determined that it was appropriate to record a valuation allowance against the entire amount of the $24.2 million deferred tax asset recognized in adopting SFAS No. 142, given the uncertainty of realization and the lack of income in the reporting unit. The Asia goodwill was not deductible for tax purposes. The net loss for the year ended December 31, 2002 was $97,606, as compared to the net loss of $267,524 for the prior year ended December 31, 2001. Tower Automotive maintained significant negative levels of working capital of $305.5 million and $379.8 million as of December 31, 2002 and 2001, respectively, as a result of its continuing focus on minimizing the cash flow cycle. The $74.3 million net increase in working capital in 2002 was due to a $33.6 million increase in accounts receivable and a $20.5 million increase in inventories attributable to the significant sales and production increases in December 2002 relative to December 2001, a $36.5 million timing-related increase in tooling, and $37.1 million in restructuring reserve payments made during 2002, offset by a $39.7 million increase in accounts payable and other current liabilities resulting from the increase in production volumes, in addition to a $13.7 million decrease in other current assets. The Company's management of its accounts receivable includes participation in specific receivable programs with key customers which allow for accelerated collection of receivables, subject to interest charges ranging from 4.5 percent to 6.5 percent at an annualized rate. The Company expects to continue its focus on maintaining a large negative working capital position through a continuation of the efforts discussed above and continued focus on minimizing the length of the cash flow cycle. The Company believes that the available borrowing capacity under its credit agreement, together with funds generated by operations, should provide sufficient liquidity and capital resources to pursue its business strategy for the foreseeable future, with respect to working capital, capital expenditures, and other operating needs. UNITED AIRLINES: Seeks to Extend Section 1110(b) Stipulations ------------------------------------------------------------- United Airlines Inc. asks Judge Wedoff for permission, pursuant to Section 1110 of the Bankruptcy Code, to enter into stipulations with aircraft financiers and lenders extending the Section 1110(b) Stipulations without further Court approval. UAL also wants to file the Extension Stipulations under seal. James H.M. Sprayregen, Esq., at Kirkland & Ellis, relates that most of United's fleet is subject to Section 1110. The Debtors have been in continuous efforts to restructure the Section 1110 Fleet costs. The 60-day period afforded under Section 1110 set an impossible timetable to reconcile a fleet with financings as intricately structured or with as many stakeholders as there are in United's fleet. In fact, the parties with interests in United's Section 1110 Fleet number in the thousands. Mr. Sprayregen reminds the Court that it issued an order on February 7, 2003, allowing the Debtors to enter into stipulations extending the time to comply with Section 1110. While the Debtors have entered into several Section 1110 Stipulations, many have expired or will expire shortly. The Debtors believe that the previous Order provides authority to enter into Extension Stipulations, but out of an abundance of caution, the Debtors make this request for further assurance. Mr. Sprayregen warns that unless the Court grants the Debtors' request, it is unlikely that the Debtors will be able to enter into the Extension Stipulations for the Section 1110 Fleet. As a result, it is unclear whether the Debtors will lose aircraft that will prove valuable to their reorganized fleet. This may cause major disruption to the Debtors' operation of their fleet, Mr. Sprayregen says. The Debtors also want the Court's permission to file their Extension Stipulations under seal because, otherwise, competitors will utilize these documents to the Debtors' disadvantage. Other counterparties will use the modifications to exploit favorable terms in their ongoing negotiations. By filing the documents under seal, the Debtors will preserve the confidentiality of the terms of these deals and maintain a level playing field amongst competitors and Aircraft Creditors. (United Airlines Bankruptcy News, Issue No. 15; Bankruptcy Creditors' Service, Inc., 609/392-0900) United Airlines' 10.670% bonds due 2004 (UAL04USR1) are presently trading at 4 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=UAL04USR1for real-time bond pricing. USG CORP: Obtains Additional Time to Move Actions to Del. Court --------------------------------------------------------------- USG Corporation and its debtor-affiliates intended to remove some or all of the pending products liability actions and certain non-asbestos-related cases from state court to federal court and subsequently transfer some or all of these cases to the Delaware District Court for final resolution. However, the Debtors did not want to take these steps unless and until they prove necessary or useful in the administration of these Chapter 11 cases. Accordingly, the debtors sought and obtained a further extension on its removal period provided under Rule 9027 of the Federal Rules of Bankruptcy Procedure through September 30, 2003. (USG Bankruptcy News, Issue No. 45; Bankruptcy Creditors' Service, Inc., 609/392-0900) USG: Says Cash Sufficient to Fund Operations while in Bankruptcy ---------------------------------------------------------------- United States Gypsum Company was incorporated in 1901. USG Corporation was incorporated in Delaware on October 22, 1984. By a vote of stockholders on December 19, 1984, U.S. Gypsum became a wholly owned subsidiary of the Corporation, and the stockholders of U.S. Gypsum became the stockholders of the Corporation, all effective January 1, 1985. Through its subsidiaries, the Corporation is a leading manufacturer and distributor of building materials producing a wide range of products for use in new residential, new nonresidential, and repair and remodel construction, as well as products used in certain industrial processes. Acting as Debtor-in-possession, the Company's net sales in 2002 were $3,468 million, up 5% from 2001. This increase reflects higher levels of sales for the Corporation's North American Gypsum and Building Products Distribution segments, partially offset by lower sales for its Worldwide Ceilings business. Net sales for North American Gypsum were up in 2002 primarily due to a 17% increase in average selling prices for SHEETROCK brand gypsum wallboard sold by U.S. Gypsum. Shipments of U.S. Gypsum's gypsum wallboard were up 2% in 2002 versus 2001. Net sales for Building Products Distribution were up in 2002 primarily due to increased shipments and selling prices for gypsum wallboard sold by L&W Supply. Net sales for Worldwide Ceilings declined as a result of lower domestic and export shipments of ceiling tile and lower shipments of domestic and internationally produced ceiling grid. Cost of products sold totaled $2,884 million in 2002, $2,882 million in 2001 and $2,941 million in 2000. Cost of products sold for 2002 included an $11 million charge recorded in the fourth quarter related to the downsizing of operations in Europe. However, manufacturing costs in 2002 for SHEETROCK brand gypsum wallboard declined versus 2001 primarily due to lower energy costs, partially offset by higher prices for wastepaper, the primary raw material of wallboard paper. In addition, cost reductions were realized for ceiling tile as a result of lower energy and raw material costs and from the closure of a high- cost ceiling tile production line in the fourth quarter of 2001. Selling and administrative expenses totaled $312 million in 2002, $279 million in 2001 and $309 million in 2000. As a percentage of net sales, these expenses were 9.0%, 8.5% and 8.2% in 2002, 2001 and 2000, respectively. Higher selling and administrative expenses in 2002 reflect the impact of a Bankruptcy Court approved key employee retention plan, which became effective in the third quarter of 2001. Expenses associated with this plan amounted to $20 million in 2002 and $12 million in 2001. Expenses for 2002 also reflect a higher level of accruals for incentive compensation associated with the attainment of profit and other performance goals. In connection with the Filing, the Corporation recorded pretax chapter 11 reorganization expenses of $14 million in 2002. These expenses consisted of legal and financial advisory fees of $22 million, partially offset by bankruptcy-related interest income of $8 million. In 2001, the Corporation recorded pretax chapter 11 reorganization expenses of $12 million, which consisted of legal and financial advisory fees of $14 million and accelerated amortization of debt issuance costs of $2 million, partially offset by bankruptcy-related interest income of $4 million. Operating profit totaled $258 million in 2002 and $90 million in 2001. An operating loss of $369 million was incurred in 2000. Operating profit in 2001 included the charges for impairment and restructuring. The operating loss in 2000 included the charges for asbestos claims and restructuring. Interest expense was $8 million, $33 million and $52 million in 2002, 2001 and 2000, respectively. Under SOP 90-7, virtually all of the Corporation's outstanding debt is classified as liabilities subject to compromise, and interest expense on this debt has not been accrued or recorded since the Petition Date. Consequently, comparisons of interest expense for 2002, 2001 and 2000 are not meaningful. Contractual interest expense not accrued or recorded on pre-petition debt totaled $74 million in 2002 and $41 million in 2001. Interest income was $4 million, $5 million and $5 million in 2002, 2001 and 2000, respectively. Other income, net was $2 million in 2002 compared with other expense, net of $10 million and $4 million in 2001 and 2000, respectively. For 2001, other expense, net included $7 million of net realized currency losses related to the repayment of intercompany loans by a Belgian subsidiary that is being liquidated. Income taxes amounted to $117 million in 2002 and $36 million in 2001. An income tax benefit of $161 million was recorded in 2000 due to the loss before taxes resulting from the charges for asbestos claims and restructuring. The Corporation's effective tax rates were 45.6%, 70.0% and 38.4% in 2002, 2001 and 2000, respectively. Net earnings amounted to $43 million in 2002 and $16 million in 2001. A net loss of $259 million was recorded in 2000. Working capital (current assets less current liabilities) as of December 31, 2002, amounted to $955 million, and the ratio of current assets to current liabilities was 3.18-to-1. As of December 31, 2001, working capital amounted to $914 million, and the ratio of current assets to current liabilities was 3.85-to-1. Cash, cash equivalents and marketable securities as of December 31, 2002, amounted to $830 million, compared with $493 million as of December 31, 2001. During 2002, net cash flows from operating activities totaled $445 million. Net cash flows to investing activities totaled $289 million and consisted of capital spending of $100 million, purchases of marketable securities, net of sales and maturities, of $181 million, acquisitions of businesses of $10 million, offset slightly by proceeds of $2 million from asset sales. Because of the Filing, there were no financing activities during 2002. As of December 31, 2002, $131 million was invested in long-term marketable securities and $50 million in short-term marketable securities. The Corporation's marketable securities are classified as available-for-sale securities and reported at fair market value with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive loss on the Company's consolidated balance sheet. Receivables increased to $284 million as of December 31, 2002, from $274 million as of December 31, 2001, primarily reflecting a 11% increase in net sales for the month of December 2002 as compared with December 2001. Inventories and payables also were up from December 31, 2001, primarily due to the increased level of business. Inventories increased to $270 million from $254 million, and accounts payable increased to $170 million from $140 million. As of December 31, 2002, total debt amounted to $1,007 million, of which $1,005 million was included in liabilities subject to compromise. These amounts were unchanged from the December 31, 2001, levels. As of December 31, 2002, the Corporation, on a consolidated basis, had $830 million of cash and marketable securities, of which $171 million was held by non-Debtor subsidiaries. The Corporation also had a $350 million DIP Facility available to supplement liquidity and fund operations during the reorganization process. Borrowing availability under the DIP Facility is based primarily on accounts receivable and inventory levels and, to a lesser extent, property, plant and equipment. Given these levels, as of December 31, 2002, the Corporation had the capacity to borrow up to $288 million. There were no outstanding borrowings under the DIP Facility as of December 31, 2002. However, $16 million of standby letters of credit were outstanding, leaving $272 million of unused borrowing capacity available as of December 31, 2002. In January 2003, the Corporation reduced the size of the DIP Facility to $100 million. This action was taken at the election of the Corporation due to the levels of cash and marketable securities on hand and to reduce costs associated with the DIP Facility. The resulting DIP Facility will be used largely to support the issuance of standby letters of credit needed for the Corporation's business operations. The Corporation believes that cash and marketable securities on hand and future cash available from operations will provide sufficient liquidity to allow its businesses to operate in the normal course without interruption for the duration of the chapter 11 proceedings. VON EASTERN: Discontinues CCAC Contract to Restructure Operation ---------------------------------------------------------------- This week the governing Board of VON Eastern Lake Ontario gave notice that it will no longer provide nursing services through the Kingston Community Care Access Centre nursing contract. "This was a very difficult decision and we truly regret the impact it will have on our clients, staff, volunteers and the community," states Caroline Manley, Executive Director, VON Eastern Lake Ontario. "VON has held this contract since 2000 but we are losing money daily and can no longer afford to subsidize the nursing contract." The Kingston CCAC has the lowest nursing services rates in Ontario. "VON wants to continue to deliver care and support services to the people in this community so we are developing a restructuring plan to look at the way we do business and make the changes necessary for us to be able to retain a nursing program," adds Manley. "We will continue to deliver Meals on Wheels and our Community Alzheimer Respite Enrichment (CARE) Program to people in the Kingston area." VON remains committed to this community, our clients, staff, and volunteers, and will work together with the CCAC to ensure the orderly transition of clients to new nursing providers. VON Eastern Lake Ontario appreciates and depends on the community support and financial donations that we have enjoyed and we are counting on your ongoing support so that we can continue to identify and meet the health needs in our community for years to come. VON is a national health organization and registered charity offering a wide range of community health care solutions that meet the needs of Canadians from coast to coast. We are dedicated to being a leader in the delivery of innovative comprehensive health and social services and to influencing the development of health and social policy in Canada. VON is committed to quality improvement and is accredited by the Canadian Council on Health Services Accreditation. VON EASTERN: Union Lobbies for Province to Provide Added Funding ---------------------------------------------------------------- The Victorian Order of Nurses, Eastern Lake Ontario Branch, is on the brink of closure, and patients who rely on homecare in the Kingston area are at risk of losing vital services, says the union that represents half of the 200 workers at the agency. "The local Community Care Access Centre does not have sufficient funds to properly pay the VON," says Sue Balog, president of CUPE Local 3932, representing 90 registered nurses (RNs) and 10 office workers at the Kingston VON. "The amount paid to VON for home visits in this area is well below the provincial average, and our agency is unable to keep functioning at this level. We are the only home care agency in the area that is not-for- profit, and the primary agency servicing the rural areas surrounding Kingston. This is nothing short of a crisis." The funding crisis for CCACs has been well documented in recent years. The situation has been worsened by the province's introduction of a compulsory competitive bidding process for home care, which has ensured that already-limited resources have been diverted away from patient care, and toward administrative costs and profit generation. "Health Minister Tony Clement created this mess," says Balog, "and he should answer to the patients who rely on us every day. What will happen to them if the VON closes its doors? The disruption to their lives and well-being will be incredibly harmful. The remaining agencies in the area - all for- profit corporations - are not likely to pick up our full load of patients, especially in the rural communities. Furthermore, most of our workers will leave the community nursing sector altogether, and this will intensify an already critical nursing shortage in the area." The union is also calling on the local CCAC to lobby the province for additional funds. The Kingston VON is currently carrying a caseload of over 1100 clients in the Kingston, Napanee, Sharbot Lake, and Clyone areas. WARNACO GROUP: Court Confirms Class 5 Claims Distribution --------------------------------------------------------- Warnaco Group, Inc., and its debtor-affiliates sought and obtained Court confirmation for distribution purposes the amount of 754 undisputed allowed claims in Class 5 under the Debtors' First Amended Joint Plan of Reorganization. Shalom L. Kohn, Esq., at Sidley Austin Brown & Wood LLP, in New York, recounted that under the Plan, each holder of an Allowed Class 5 Claim will receive its pro rata share of 2.549% of the New Warnaco Common Shares, subject to Dilution. Moreover, the Plan provides that the distributions to Allowed Class 5 Claimants will be made 45 days after the Effective Date or as determined by the Reorganized Debtors in consultation with the Post-Effective Date Committee. The Debtors have not objected to 754 Undisputed Class 5 Proofs of Claim. Mr. Kohn asserted that the order will facilitate a prompt distribution of the New Warnaco Common Shares to the Allowed Class 5 Claimants and is contemplated and consistent with Section 8.1 of the Plan. (Warnaco Bankruptcy News, Issue No. 47; Bankruptcy Creditors' Service, Inc., 609/392-0900) WHITE HALL: Pennsylvania Insurer Placed into Liquidation -------------------------------------------------------- The Commonwealth Court of Pennsylvania, finding that White Hall Mutual Insurance Company is insolvent, granted Pennsylvania Insurance Commissioner M. Diane Koken's petition to liquidate the company. A full-text copy of the Commonwealth Court's Order of Liquidation entered April 10, 2003 (Pa. Commw. Ct. Docket No. 231 MD 2003) is available at no charge at: http://www.ins.state.pa.us/ins/lib/ins/statliq/companies/whitehall_liq_order.pdf All aspects of the liquidation process in Pennsylvania are governed by the insurer's liquidation statute, Article V of the Insurance Department Act of 1921, as amended, 40 P.S. Sec. 211, et seq. When the Pennsylvania Insurance Department determines that a Pennsylvania chartered insurance company is insolvent or operating in a financially hazardous manner, the Insurance Commissioner may request the Court to order the company into liquidation. Based on the consent of the Board of Directors of the company or on evidence presented at a hearing, the Court issues an order of liquidation appointing the Insurance Commissioner as Liquidator of the company. Under the Court's oversight, the Liquidator is charged with gathering the company's assets, converting them into cash and distributing the cash to claimants against the company's estate. Shortly after the liquidation order is issued, staff from the Office of Liquidations, Rehabilitations and Special Funds take possession of the company's offices, equipment, records and assets. At that time a notice is sent to all potential claimants informing them of the company's liquidation and the process they must follow to file a claim against the estate. The liquidation statute establishes a set of priorities for the payment of claims. All claims in a class must be paid in full (or reserves set aside to cover the class in full) before any payment is made to the next class. Within a class, all claims are equal and are paid equal pro rata shares if sufficient funds are not available to pay the class in full. There are nine classes of claims: the first is payment of the administrative expenses of the estate, followed by payment of claims for benefits under the policies or contracts of insurance written by the company. The last class is payment to the owners of the company. Ordinarily, the general revenues of the Commonwealth are not available to fund the liquidation of insolvent companies. After all assets are converted to cash and all claims are prioritized and valued, the Liquidator will file a petition with the Court asking for the authority to distribute the cash according to the priority schedule. The liquidation process can take many years. WHOLE FOODS: S&P Affirms & Revises BB Rating Outlook to Positive ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+' corporate credit rating on food retailer Whole Foods Market Inc. At the same time, Standard & Poor's revised its outlook to positive from stable. The revised outlook reflects strong same-store sales trends through the first quarter of 2003 despite a weakened economy, and a more moderate financial policy due to reduced debt levels in 2002 and less expected reliance on acquisitions to grow its store base in future years. Approximately $169 million of debt is affected by this action. "Should Whole Foods continue to grow its store base while improving credit protection measures and liquidity over the next few years, a higher rating will be considered," stated Standard & Poor's credit analyst Patrick Jeffrey. Austin, Texas-based Whole Foods operates within the rapidly growing natural food retailing sector. Increased sales are being driven by rising consumer preoccupation over the purity and safety of food, environmental concerns, and healthier eating patterns. Despite a weakened U.S. economy, through the first quarter of 2003 Whole Foods continued to achieve strong same-store sales growth in the high single-digits to low double- digits range. Both average ticket and customer counts continue to be positive. Growth prospects should remain favorable because the company is in only 30 of the top 50 largest U.S. metropolitan markets. Standard & Poor's expects that skillful store execution and operating efficiency will allow Whole Foods to maintain its credit quality despite increasing competition and a weakened U.S. economy. If Whole Foods is able to continue to improve credit measures and liquidity while growing its store base over the next few years, a higher rating will be considered. WORLDCOM INC: Wants to Establish Circuit Rejection Procedures ------------------------------------------------------------- Worldcom Inc. purchases certain telecommunications services pursuant to master service agreements with, and tariff schedules filed by, telecommunications service providers. The network capacity purchased by WorldCom falls into two general categories: (i) capacity needed for WorldCom's network; and (ii) capacity needed when WorldCom acquires a new residential or commercial customer or when an existing customer modifies its service requirements. Alfredo R. Perez, Esq., at Weil Gotshal & Manges LLP, in New York, informs the Court that customer Circuits usually comprise low level capacity of less than or equal to DS3. Since the Petition Date, Mr. Perez states that WorldCom has reviewed the operating capacity of its network. This network rationalization process is an ongoing, integral component of WorldCom's long-range business plan. WorldCom has filed rejection notices and motions to terminate hundreds of Network Circuits. In determining to reject Network Circuits, WorldCom considers network overcapacity, costs, overlap and other inefficiencies, as well as the ability to move traffic to alternative circuits in a more cost-effective manner. Mr. Perez relates that Customer Circuits are purchased by WorldCom based on the capacity requirements of its customers. In most instances, Customer Circuits are purchased under tariff from Southwestern Bell Telephone Company, BellSouth Telecommunications, Inc., Verizon Communications, Inc., Sprint Communications Company, AT&T and Qwest Communications Corporation, or any of their subsidiaries or affiliates. As the needs of a residential or commercial customer change or a customer switches to a competitor, WorldCom no longer requires the Customer Circuits purchased to provide service to the customer. In circumstances in which WorldCom no longer requires a Circuit, Mr. Perez tells the Court that WorldCom will send a notice of disconnection to the applicable service provider from whom WorldCom purchased the Circuit. In the ordinary course of business, WorldCom transmits over 15,000 Customer Circuit Disconnect Notices per month and 3,000 Network Circuit Disconnect Notices per month. Disconnecting Circuits with a term of greater than 30 days gives rise to a termination liability. Termination liability in respect of Customer Circuit Disconnect Notices alone exceeds $1,000,000 each month. The Debtors seeks a uniform circuit rejection procedure in order to ensure that these termination liabilities are treated as prepetition damage claims. Mr. Perez admits that ensuring these liabilities are treated as prepetition damage claims is impractical for the Debtors because they are invoiced for thousands of Circuits each month. In order to ensure timely payment of these invoices, the Debtors are not able to undertake an analysis of whether and to what extent the charges for each individual Circuit are accurate and appropriate. This analysis must be done subsequent to making payments by auditing the invoices, which may take as much as 60 to 90 days following receipt of an invoice. To date, absent situations in which the Debtors are able to plan ahead and obtain an order authorizing the rejection of a Circuit on or about the time of disconnection, the Providers have been billing the Debtors for termination liabilities associated with disconnected Circuits. To ensure timely payments of postpetition invoices in accordance with this Court's order granting adequate protection to the Providers, the Debtors have no option but to pay the invoices and attempt to "true-up" through the audit process. Accordingly, the Debtors ask Judge Gonzalez to approve these procedures for the rejection of certain Circuits: A. Any Circuit that was ordered prior to July 21, 2002, was purchased pursuant to state or federal tariff, was ordered for a term of not less than 30 days, provides capacity less than or equal to DS3, was purchased from the Providers, and is determined by the Debtors to be unnecessary and burdensome to their ongoing business operations will be deemed rejected after the submission to the relevant Provider of a Disconnect Notice in the ordinary course of the Debtors' business and in accordance with the affected Provider's currently existing procedures or modified procedures that are mutually agreed on by the Debtors and the affected Provider. B. Any and all termination liability associated with the rejection of an Applicable Circuit will be treated by the Provider as a prepetition liability and the Providers will not include in any postpetition invoice any liabilities; provided, however, that, to the extent a Provider inadvertently includes any portion of a termination liability in a postpetition invoice that is paid by the Debtors, the Debtors will be entitled to recover these amounts by credits applied to, or offset against, subsequent invoices. C. The Debtors will file a notice identifying: (i) all Applicable Circuits for which the Debtors have submitted Disconnect Notices; (ii) the date the Debtors submitted such Disconnect Notices to the relevant Provider; and (iii) the name of the Debtor entity that purchased these Applicable Circuits. D. The Debtors will also file a quarterly notice, within 90 days after the end of each calendar quarter, identifying: (i) all Applicable Circuits disconnected within the preceding quarter; (ii) the date the Debtors submitted a Disconnect Notice for each Applicable Circuit; and (iii) the name of the Debtor entity that purchased each Applicable Circuit. To the extent necessary, the Providers will provide the Debtors with information sufficient to enable the Debtors to complete each Subsequent Notice. E. Objections, if any, to the Initial Notice or any Subsequent Notice must be filed, served on, and actually received by counsel to the Debtors without further delay. The Debtors will schedule a hearing to consider the objection at an omnibus hearing in these cases that is at least three business days after the Debtors provide telephonic, e-mail, or facsimile notice to counsel for the statutory committee of unsecured creditors and the objecting party of the scheduled hearing date. F. If no objection to an Initial Notice or a Subsequent Notice is timely received, the Applicable Circuits identified in the notice will be deemed rejected effective as of the date the Debtors submitted a Disconnect Notice for each Applicable Circuit. G. If a timely objection to an Initial Notice or a Subsequent Notice, as applicable, is received, and the Court ultimately upholds the Debtors' determination to reject the Applicable Circuits, then the Applicable Circuits will be deemed rejected as of: (i) the date the Debtors submitted a Disconnect Notice for each such Applicable Circuit; or (ii) any other date as determined by the Bankruptcy Court as set forth in any Order overruling the objection. H. Claims arising out of the rejection of Applicable Circuits must be filed with Bankruptcy Services LLC, the Court-approved claims processing agent, on or before: (i) the date that is 30 days after the filing of the Initial Notice or Subsequent Notice, as applicable; or (ii) any other date as determined by the Bankruptcy Court. Mr. Perez explains that the Debtors want to streamline the process of rejecting Circuits in a manner that: (i) will reduce administrative expenses; (ii) eliminates the burden to the Court of the Debtors having to file a myriad of rejection motions; and (iii) enables the Debtors to properly designate prepetition claims. The Circuits that the Debtors will seek to reject utilizing the Procedures are those that provide no further benefit to the Debtors' estates. Accordingly, rejection of the Applicable Circuits, and the attendant reduction in the estates' administrative costs, reflects the Debtors' exercise of sound business judgment. Mr. Perez assures the Court that the counter-parties to the Applicable Circuits will not be prejudiced by the Procedures because, after receipt of a Disconnect Notice, these counter- parties will have received the same form of notice provided in the ordinary course. The Debtors submit that the proposed Procedures balance the need for an expeditious reduction of burdensome costs to the Debtors' estates while providing due notice of the proposed rejection to the counter-parties. In addition, the Procedures will provide a fair and equitable manner for the parties to account for the amount of the Providers' claims arising from Applicable Circuit rejection. Finally, Section 105 of the Bankruptcy Code provides in relevant part that "[t]he Court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." Mr. Perez points out that the Debtors' Chapter 11 cases are the largest ever filed in the United States. In recognition of the size and scope of the Debtors' contract rejection process, the Court already has approved expedited rejection procedures. The Debtors submit that authority to implement the proposed Procedures are appropriate in these Chapter 11 cases and are well within the Court's equitable powers under Section 105. (Worldcom Bankruptcy News, Issue No. 23; Bankruptcy Creditors' Service, Inc., 609/392-0900) Worldcom Inc.'s 8.000% bonds due 2006 (WCOE06USR2), DebtTraders says, are trading at 26 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WCOE06USR2 for real-time bond pricing. WYNDHAM INT'L: Appoints Patricia Smith to SVP of Human Resources ---------------------------------------------------------------- Ted Teng, Wyndham International Inc.'s (AMEX:WBR) president and chief operating officer, announced the appointment of Patricia Smith to senior vice president of human resources. Smith is responsible for leading the entire human resources team, who supports and provides services for Wyndham's 26,000 employees. Specific human resource functions under Smith's leadership include human resource operations; staffing and talent acquisition; compensation and benefits; labor and employee relations; organization development; training; and employee communications. "Patricia's new position is also responsible for a network of regional human resource offices across North America and the Caribbean, and partners closely with Donna DeBerry, Wyndham's senior vice president of diversity, on the company's diversity initiative," stated Teng. "She will focus on integrating employee initiatives to the business strategy, the alignment of processes, and creating an employee experience based on personalization by expanding Wyndham ByRequest(R), the company's guest recognition program, to the company's associates." Smith joined Wyndham in 2000 as the vice president of organization development and training, responsible for organization development, training, diversity, and employee communications. Prior to Wyndham, she was the director of strategy implementation and a senior consultant with Wilson Learning Corporation in Longwood, Fla., where she designed and implemented cultural evolution strategies, diversity and training solutions for corporations in such industries as pharmaceutical, manufacturing, insurance and lodging. Before that, Smith spent 15 years with The Walt Disney Company in various positions, including Disney University in training and employee communications, and the Disney Employment & Casting Center, where she led a team who designed and implemented innovative recruiting strategies. She also held key leadership roles in human resources and organization development at various Disney theme park, hotel and vacation ownership start-ups. Smith began her career in the medical field as a licensed practical nurse at the Orlando Medical Center. Smith received her Practical Nursing Certificate from Orange County School of Nursing in Orlando before moving on to receive an A.A. in Journalism from Valencia Community College in Florida, a B.A. in Communications from Rollins College in Florida, a B.S. in Metaphysics from the American Institute of Theology in Ohio, and a M.S. in Career and Human Resource Development from Rochester Institute of Technology in New York. Wyndham International, Inc. offers upscale and luxury hotel and resort accommodations through proprietary lodging brands and a management services division. Based in Dallas, Wyndham owns, leases, manages and franchises hotels and resorts in the United States, Canada, Mexico, the Caribbean and Europe. For more information, visit http://www.wyndham.com As reported in Troubled Company Reporter's April 4, 2003 edition, Wyndham International failed to pay the rent due on April 1, 2003 to Hospitality Properties Trust (NYSE:HPT). HPT owns 27 hotels that are leased to Wyndham under two combination leases: -- One lease for 15 Summerfield by Wyndham hotels requires minimum rent of $2,083,333/month. -- A second lease for 12 Wyndham hotels requires minimum rent of $1,527,083/month. HPT was holding security deposits for both leases totaling $33.3 million. The notice of default which HPT forwarded to Wyndham earlier today announced that HPT will retain these deposits against the damages it may incur under the leases for lost rent or otherwise. * BOND PRICING: For the week of April 14 - 18, 2003 --------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Abgenix Inc. 3.500% 03/15/07 73 Adelphia Communications 3.250% 05/01/21 8 Adelphia Communications 6.000% 02/15/06 8 Adelphia Communications 10.875% 10/01/10 44 Advanced Micro Devices Inc. 4.750% 02/01/22 70 Alexion Pharmaceuticals 5.750% 03/15/07 71 Alkermes Inc. 3.750% 02/15/07 65 American & Foreign Power 5.000% 03/01/30 67 Amkor Technology Inc. 5.000% 03/15/07 70 AMR Corp. 9.000% 09/15/16 34 AnnTaylor Stores 0.550% 06/18/19 63 Aquila Inc. 6.625% 07/01/11 70 Atlas Air Inc. 9.250% 04/15/08 16 Axcelis Technologies 4.250% 01/15/07 74 BE Aerospace Inc. 8.000% 03/01/08 66 BE Aerospace Inc. 8.875% 05/01/11 65 Best Buy Co. Inc. 0.684% 06/27/21 71 Burlington Northern 3.200% 01/01/45 54 Burlington Northern 3.800% 01/01/20 75 Calpine Corp. 4.000% 12/26/06 72 Calpine Corp. 8.500% 02/15/11 61 Calpine Corp. 8.625% 08/15/10 64 Capstar Hotel 8.750% 08/15/07 70 Charter Communications, Inc. 4.750% 06/01/06 27 Charter Communications, Inc. 5.750% 10/15/05 30 Charter Communications Holdings 8.250% 04/01/07 57 Charter Communications Holdings 8.625% 04/01/09 56 Charter Communications Holdings 9.625% 11/15/09 55 Charter Communications Holdings 10.000% 05/15/11 56 Charter Communications Holdings 10.250% 01/15/10 56 Charter Communications Holdings 10.750% 10/01/09 57 Cincinnati Bell Telephone (Broadwing) 6.300% 12/01/28 71 Comcast Corp. 2.000% 10/15/29 25 Conexant Systems 4.000% 02/01/07 60 Conseco Inc. 8.750% 02/09/04 14 Continental Airlines 8.000% 12/15/05 53 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 32 Crown Cork & Seal 7.375% 12/15/26 72 Cummins Engine 5.650% 03/01/98 63 Curagen Corporation 6.000% 02/02/07 71 Delta Air Lines 7.700% 12/15/05 67 Delta Air Lines 7.900% 12/15/09 58 Delta Air Lines 10.375% 02/01/11 54 Dynex Capital 9.500% 02/28/05 2 El Paso Corp 7.750% 01/15/32 72 El Paso Energy 7.800% 08/01/31 72 Elwood Energy 8.159% 07/05/26 67 Emcore Corp. 5.000% 05/15/06 50 Finova Group 7.500% 11/15/09 37 Fleming Companies Inc. 5.250% 03/15/09 2 Fleming Companies Inc. 9.250% 06/15/10 17 Fleming Companies Inc. 10.125% 04/01/08 17 Foamex LP/Capital 10.750% 04/01/09 68 Ford Motor Co. 6.625% 02/15/28 73 Goodyear Tire & Rubber 7.875% 08/15/11 71 Gulf Mobile Ohio 5.000% 12/01/56 66 Health Management Associates Inc. 0.250% 08/16/20 66 HealthSouth Corp. 3.250% 04/01/49 20 HealthSouth Corp. 7.000% 06/15/08 46 Incyte Genomics 5.500% 02/01/07 67 Inhale Therapeutic Systems Inc. 3.500% 10/17/07 57 Inhale Therapeutic Systems Inc. 5.000% 02/08/07 63 Inland Steel Co. 7.900% 01/15/07 75 Isis Pharmaceutical 5.500% 05/01/09 64 Kmart Corporation 9.375% 02/01/06 13 Kulicke & Soffa Industries Inc. 4.750% 12/15/06 66 Kulicke & Soffa Industries Inc. 5.250% 08/15/06 70 Lehman Brothers Holding 8.000% 11/13/03 62 Level 3 Communications 6.000% 09/15/09 62 Level 3 Communications 6.000% 03/15/10 61 Liberty Media 3.500% 01/15/31 65 Liberty Media 3.750% 02/15/30 55 Liberty Media 4.000% 11/15/29 58 LTX Corp. 4.250% 08/15/06 73 Lucent Technologies 6.450% 03/15/29 66 Lucent Technologies 6.500% 01/15/28 67 Magellan Health 9.000% 02/15/08 25 Manugistics Group Inc. 5.000% 11/01/07 55 Mirant Corp. 5.750% 07/15/07 54 Missouri Pacific Railroad 4.750% 01/01/20 72 Missouri Pacific Railroad 4.750% 01/01/30 72 Missouri Pacific Railroad 5.000% 01/01/45 62 NTL Communications Corp. 7.000% 12/15/08 19 Natural Microsystems 5.000% 10/15/05 64 NGC Corp. 7.625% 10/15/26 65 Northern Pacific Railway 3.000% 01/01/47 51 Northwest Airlines 7.625% 03/15/05 57 Northwest Airlines 7.875% 03/15/08 50 Northwest Airlines 9.875% 03/15/07 54 Quanta Services 4.000% 07/01/07 71 Redback Networks 5.000% 04/01/07 28 Regeneron Pharmaceuticals 5.500% 10/17/08 68 Ryder System Inc. 5.000% 02/25/21 72 Tenneco Inc. 10.000% 03/15/08 70 Tenneco Inc. 10.200% 03/15/08 70 Terayon Communications 5.000% 08/01/07 67 Transwitch Corp. 4.500% 09/12/05 59 United Airlines 10.670% 05/01/04 4 United Airlines 11.210% 05/01/14 5 Universal Health Services 0.426% 06/23/20 59 Utilicorp United 8.000% 03/01/23 71 Utilicorp United 8.270% 11/15/21 71 US Timberlands 9.625% 11/15/07 72 Vector Group Ltd. 6.250% 07/15/08 74 Weirton Steel 10.750% 06/01/05 40 Weirton Steel 11.375% 07/01/04 58 Westpoint Stevens 7.875% 06/15/05 27 Westpoint Stevens 7.875% 06/15/08 26 Xerox Corp. 0.570% 04/21/18 64 ********* 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 ***