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/raid1/www/Hosts/bankrupt/TCR_Public/030421.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 21, 2003, Vol. 7, No. 77 Headlines ACCESS WORLDWIDE: Misses Mandatory Payment Under Credit Facility ADELPHIA BUS.: Agreement with Creditors Sets Stage for Emergence AIR CANADA: CAW Asks Court to Amend Initial CCAA Order ALPHARMA INC: S&P Rates Planned $220MM Sen. Unsecured Debt at B+ AMERICAN AIRLINES: Fitch Keeps Negative Outlook on CCC+ Rating AMERICAN AIRLINES: Pilots Applaud APFA's Agreement Ratification AMERICAN HOMEPATIENT: Dec. 31 Net Capital Deficit Tops $47 Mill. ANC RENTAL: Committee Turns to CONSOR Corp. for IP Valuation APPLIED DIGITAL: Plans to Commence 50,000 Shares Offering APPLIED DIGITAL: FY 2002 Revenues Drop 36.3% to $99.6 Million AQUILA CANADA: S&P Downgrades Senior Unsecured Rating to B- ARMSTRONG HLDGS: Gets Nod for Employee Suit Settlement Agreement BALLANTRAE: Seeks Approval to Hire Ordinary Course Professionals BETA BRANDS: Pursuing Restructuring Talks with Senior Lenders BETHLEHEM STEEL: ISG Confirmed as Qualified Bidder for Assets BURLINGTON: Plan Filing Exclusivity Extended Until May 31, 2003 CALPINE: Baytown Center Named Showcase Plant at DOE Conference COLONIAL ADVISORY: S&P Keeps Watch on Junk-Rated Class B Notes CNC: Fitch Cuts Ser. 1994-1 Note Ratings to Low-B & Junk Levels CREDIT SUISSE: S&P Cuts Ratings on 3 Note Classes to B+/B/CCC DELTA AIR LINES: Lauds Federal Reimbursement Legislation Passage DYNEGY: S&P Affirms B Credit Rating over Restructured Bank Loans EAST COAST POWER: S&P Keeps Watch on BB+ Senior Secured Rating ELCOM INT'L: Taps Cap Gemini E&Y as Preferred Systems Integrator EL PASO: Completes Bank Facilities' Restructuring & Refinancing EMAGIN CORP: Dec. 31 Balance Sheet Insolvency Widens to $13 Mil. ENRON CORP: Court Okays 2nd Modification to Leboeuf's Retention EXIDE TECH: Wants Approval for Hamburg Superfund Stipulation FAO, INC.: Plan Back on Track & Expects to Emerge Next Week FLEMING COMPANIES: Seek Nod for Proposed Trade Lien Agreement FLEMING: Judge Walrath Waives Investment & Deposit Requirements GENTEK: Court Approves Babst Calland as Environmental Counsel GEORGIA GULF: Fitch Affirms BB+/BB- Senior Sec. & Unsec. Ratings GENUITY INC: Signing-Up LeBoeuf Lamb as Disputes Special Counsel GLOBAL CROSSING: Releases February Operating Results GOODYEAR TIRE: USWA Agrees to Day-to-Day Contract Extension HOMELIFE: Delaware Court Confirms Liquidating Chapter 11 Plan IMPERIAL PLASTECH: Nov. 30 Working Capital Deficit Tops C$2-Mil INTEGRATED HEALTH: Demands National Union Pay Liability Claims JACKSON COUNTY HOSPITAL: S&P Cuts Bond Rating to BB+ from BBB- JACKSON PRODUCTS: S&P Drops Corp. Credit Rating to Default Level KAISER: Retains Kinsella as Publication Notice Consultant KMART: Judge Sonderby Approves Claims Resolutions Procedures LASERSIGHT: Gets Extension to Continue Nasdaq SmallCap Listing LEAP WIRELESS: S&P Slashes Credit & Sr. Unsec. Debt Ratings to D MADGE NETWORKS: Applying for Suspension of Payments in Amsterdam MAGNESIUM CORP: Lee Buchwald Appointed as Chapter 11 Trustee METRIS COMPANIES: First Quarter Net Loss Stands at $25 Million MICROFINANCIAL INC: Executes Final Amendment to Credit Agreement MILLICOM INT'L: Amends Terms of Exchange Offer for 13-1/2% Notes NAT'L CENTURY: Proposes to Reject Poulsen Consulting Agreement NATIONAL STEEL: U.S. Steels Delivers Winning $1,050,000,000 Bid NIAGARA MOHAWK: Settles Reconciliation Issues with NYPSC Staff NORTEL: Annual Shareholders Meeting to Convene on April 24, 2003 NORTEL: Financial Analysts Teleconference Set for April 24, 2003 NORTHWEST AIRLINES: Q1 Net Loss More than Doubles to $396 Mill. NORTHWEST AIRLINES: S&P Concerned about Low Q1 2003 Revenues NORTHWESTERN CORP: Dec. 31 Balance Sheet Upside-Down by $456MM NOVA COMMS: Completes $1-Million Debt-to-Equity Conversion Deal OBSIDIAN ENTERPRISES: Appoints Rick D. Snow as New EVP and CFO PACIFICARE HEALTH: Ups EPS Guidance for First Quarter & FY 2003 PHILIP SERVICES: Mulls Chapter 11 Filing to Effect Fin'l Workout PHOTRONICS INC: Closes Private Placement of $150MM Conv. Notes POLYONE CORP: Intends to Complete Debt Workout Early Next Month POLYONE CORP: Offering $250-Million of Senior Unsecured Notes POLYONE CORP: Anticipates Net Loss of Up to $20-Mil. for Q1 2003 RACE POINT II: S&P Rates Class D-1, D-2 & D-3 Notes at BB RYLAND GROUP: S&P Revises Outlook on Low-B Ratings to Positive SAGENT TECHNOLOGY: Group 1 to Acquire Assets for Up to $17 Mill. SEALY CORP: Narrows Net Capital Deficit to $101-Mill. at March 2 SHEFFIELD PHARMACEUTICALS: Ability to Continue Ops. Uncertain SONICBLUE INC: D&M Pitches Best Bid for ReplayTV and Rio Assets SONICBLUE INC: D&M Expects to Close Acquisition Deal in 10 Days SPIEGEL: Intends to Close 21 Retail Stores SPIEGEL: Seeks Nod for Proposed Interim Compensation Procedures STELCO INC: Anticipates $44 Million First Quarter 2003 Net Loss TCENET INC: Brian McGill Steps Down as Chief Financial Officer TRANSWITCH CORP: Reports $17 Million in Net Loss for Q1 2003 TRITON PCS: December 31 Balance Sheet Upside-Down by $36 Million UNILINK TELE.COM: Two Units Filing Proposals to Restructure Ops. VALENTIS INC: Continues Listing on Nasdaq SmallCap Market WESTPOINT STEVENS: Sr. Lenders Agree to Waive Potential Defaults WHX CORP: 2002 Year-End Results Swing-Down to Net Loss of $33MM WINSTAR COMMS: Seeks to Recover $36-Mil. Preferential Transfers YUM! BRANDS: S&P Ups Ratings to BB+ after Improved Performance * Dewey Ballantine Adds David J. Grais to New York Office * BOND PRICING: For the week of April 21 - 25, 2003 ********* ACCESS WORLDWIDE: Misses Mandatory Payment Under Credit Facility ---------------------------------------------------------------- Access Worldwide Communications, Inc. (OTC Bulletin Board: AWWC), a leading marketing services organization, reported financial results for the quarter and twelve months ended December 31, 2002. Revenues from continuing operations for the quarter ended December 31, 2002 increased by $4.5 million, or 53.6%, to $12.9 million, compared to $8.4 million for the quarter ended December 31, 2001. The revenue improvement was driven by an increase in medical education revenues following a decline in 2001 that was the result of the September 11 attacks and a slow- down in the U.S. economy, coupled with an increase in teleservices programs and production hours performed at the Company's three communication centers. The Company reported income from continuing operations and diluted earnings per share from continuing operations of $0.2 million and $0.02, respectively, for the fourth quarter of 2002, compared to a loss from continuing operations and diluted loss per share from continuing operations of $33.0 million and $3.38, respectively, for the quarter ended December 31, 2001. The improvement was the result of an impairment of intangible assets charge of $32.0 million that occurred in 2001 with no similar charge occurring in 2002. In addition, the Company benefited from an increase in revenues and a lower debt level combined with a lower prime rate of interest. Total weighted average diluted shares outstanding for the fourth quarters ended December 31, 2002 and December 31, 2001 were 9,767,640 and 9,740,001 shares, respectively. Revenues from continuing operations for the twelve months ended December 31, 2002 increased $0.2 million, or 0.4%, to $48.4 million, compared to $48.2 million for the twelve months ended December 31, 2001. The increase was caused by new consumer and pharmaceutical teleservices projects and an increase in hours performed on existing projects, and was offset by a decrease in the number of medical education meetings. The Company reported a loss from continuing operations and diluted loss per share from continuing operations of $0.3 million and $0.03, respectively, for the twelve months ended December 31, 2002, compared to a loss from continuing operations and diluted loss per share from continuing operations of $35.8 million and $3.67, respectively, for the twelve months ended December 31, 2001. The decrease in the loss was attributed to an impairment of intangible assets charge that took place in 2001 with no similar charge occurring in 2002 and a lower debt level combined with a lower prime rate of interest. Total weighted average shares outstanding for each of the years ended December 31, 2002 and December 31, 2001 were 9,740,001 shares. Assuming the Company adopted the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2001 and ceased amortization of goodwill, the Company would have reported a net loss on a pro forma basis of approximately $33.6 million and $34.4 million for the three and twelve months ended December 31, 2001, respectively. We would have reported basic and diluted loss per share on a pro forma basis of $3.45 and $3.53 for the three and twelve months ended December 31, 2001, respectively. The Company achieved the following accomplishments during 2002 and in recent weeks: * Reduction in Interest Expense. Net interest expense decreased $3.0 million, or 83.3%, to $0.6 million for 2002 compared to $3.6 million for 2001. The decrease was primarily due to a reduction in the outstanding debt made possible with funds generated from the sale of the Phoenix Marketing Group and Cultural Access Group divisions, and the cancellation of warrants issued to the Bank Group. * Increase in Consumer Services Revenues. Consumer Segment which includes communication centers in Florida, Maryland and Virginia increased revenues by $4.1 million, or 23.4%, to $21.6 million for 2002, compared to $17.5 million for 2001. * Expansion of Teleservices Capacity. In response to increased call volume and client programs, the communication center located in Arlington, Virginia has been expanded. The facility was built-out to include an additional 14,116 square feet. Available capacity at this location has doubled. "Several segments of Access Worldwide achieved impressive revenues in the fourth quarter and for the year," remarked Shawkat Raslan, Access Worldwide's Chairman and CEO. "In 2002, we invested heavily in infrastructure as well as human resources to strengthen our three businesses. I expect to see those investments showing positive contributions in 2003." As stated in recent filings with the Securities & Exchange Commission, the Company notified the Bank Group on April 1, 2003 that the company is in default due to its inability to make a mandatory payment required to reduce the outstanding debt of the Credit Facility to the $5.7 million limit which became effective on April 1, 2003. The default interest rate is the prime rate of interest plus 5%. On April 3, 2003, the Company received a letter from the Bank Group which allows the Company to continue to use cash proceeds generated in the ordinary course of business to fund working capital and operations. The Company can provide no assurance that the Bank Group will continue to provide such proceeds. The Credit Facility is due on July 1, 2003. "We have actively been taking steps to renegotiate or refinance the Credit Facility with the Bank Group or other lenders," stated Mr. Raslan. "It remains a top priority for me and the Company's finance team; however, we cannot assure you that we will be able to obtain refinancing or negotiated terms that are acceptable to us or at all." Founded in 1983, Access Worldwide provides a variety of sales, marketing and education services. Among other things, we reach physicians, pharmacists and patients on behalf of pharmaceutical clients, educating them on new drugs, prescribing indications, medical procedures and disease management programs. Our services include product stocking, medical education, database management, clinical trial recruitment and teleservices. For clients in the telecommunications, financial services, insurance and consumer products industries, we reach the growing multicultural markets with multilingual teleservices. Access Worldwide is headquartered in Boca Raton, Florida and has over 1,300 employees in offices throughout the United States. ADELPHIA BUS.: Agreement with Creditors Sets Stage for Emergence ---------------------------------------------------------------- TelCove, formerly known as Adelphia Business Solutions, a facilities- based competitive telecommunications provider offering Internet, Data, and Voice services, was recently commended by the New York Public Service Commission (NYPSC) for its excellent performance in providing telephone service to New York businesses. The NYPSC uses strict criteria on which it bases its recommendations that qualifying telecommunications companies be recognized for providing excellent service within the state. The criteria for competitive local exchange carriers or CLECs, the category under which TelCove was considered, include that the company had to still be in operation and that it reported service quality data for the entire calendar year to the Commission. One of the items examined is the number of complaints about a communications provider's service per 1,000 lines per year received by the NYPSC. To be considered, a provider needs to have a complaint rate of 0.5 or less. TelCove had a perfect record in that there were no complaints reported for the year 2002. "We are honored to be recognized for providing 'excellent service' by the New York Public Service Commission," said Barbara Dundon, general manager of TelCove's Syracuse, New York market. "This is another example of the positive results achieved by the partnering between TelCove and its customers. We have a team of local professionals whose main priority is to respond quickly and professionally to the needs of our customers. "It's also an affirmation of the security of our network. We constantly monitor our network via our Network Operations Control Center to ensure that its standards of transmission and availability are met or exceeded. Excellent telephone service quality is always the goal of every team within TelCove," said Dundon. Last month, TelCove and its creditor groups reached an agreement in principle on terms of a plan of reorganization indicative of a successful emergence from the Company's restructuring process. At the same time, the Company announced that it was beginning to conduct business under its new name, TelCove. "The agreement is an important step for TelCove on the road to emergence. With that, we fully anticipate being considered an 'excellent' communications provider by the NYPSC for years to come," said Jeff Donahue, vice president of TelCove's Northeast region. To view the complete report from the NYPSC, visit TelCove's Web site http://www.dps.state.ny.us/fileroom/doc13058.pdf Founded in 1991, TelCove is one of the longest-standing competitive communications providers in the nation offering integrated Internet, Data, and Voice services to more than 9,000 customers via its advanced, secure fiber optic network. For more information on TelCove, please visit http://www.telcove.com AIR CANADA: CAW Asks Court to Amend Initial CCAA Order ------------------------------------------------------ In Toronto, the Canadian Auto Workers union filed a motion that is expected to be heard in Ontario Superior Court April 22, 2003. The motion will ask the Court to amend the earlier CCAA temporary order which allows the company to unilaterally terminate or modify longstanding agreements with its unions. "Air Canada, indeed airlines generally, are in rough financial shape, but what is happening here will not resolve the immediate crisis," said CAW president Buzz Hargrove. "What we need is government support and a government enforced airline strategy to sustain a national flagship carrier. Without that we could work for nothing and the company would still be bankrupt, so going after the workers is no solution." "The sweeping interim order means Air Canada, even though it is not in bankruptcy, can amend the pensions, lower wages, layoff without regard to seniority, in essence, anything it wants to - the Court order allows them to even ignore Labour and Human Rights laws," Hargrove said. "We're challenging that - this company wants to set a precedent whereby a company, whether union or not, can strip people of their hard earned wages and pensions as a so- called way of staving off bankruptcy. Wages and benefits are less than 30% of the company's total costs - stripping pensions will do nothing to stave off bankruptcy but instead will cause enormous harm to workers and their families." "Every worker, unionized or not, who is a member of a pension plan should know that this is a new tactic to take away benefits and if the court approves this it is a dangerous precedent for the long term." The CAW represents 9500 workers at Air Canada and its related companies, Aeroplan, Jazz and Zip. Air Canada's 10.250% bonds due 2011 (AC11CAR1) are presently trading at 24 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AC11CAR1for real-time bond pricing. ALPHARMA INC: S&P Rates Planned $220MM Sen. Unsecured Debt at B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned a 'B+' senior unsecured debt rating to generic drug maker Alpharma Inc.'s proposed offering of up to $220 million in senior unsecured notes due 2011. At the same time, Standard & Poor's affirmed its 'BB-' corporate credit and senior secured debt ratings on Alpharma, as well as the company's 'B' subordinated debt rating. In addition, Standard & Poor's affirmed ratings on a subsidiary company, Alpharma Operating Corp., including its 'BB-' corporate credit and 'B' subordinated debt ratings. Proceeds from the proposed senior unsecured debt offering at Alpharma Inc. will be used to retire existing debt at Alpharma Operating Corp. The outlook on Fort Lee, New Jersey-based Alpharma is negative. The speculative-grade ratings on the company reflect its solid positions in human pharmaceutical and animal health businesses, offset by current manufacturing issues and competitive pressures in its animal health business, as well as its high debt leverage. "Alpharma's financial performance has been steadily improving, and funds from operations have been increasing quarter-to- quarter," said Standard & Poor's credit analyst Arthur Wong. "However, the sustainability of the company's recent improved performance is uncertain, given FDA compliance issues at two of its drug manufacturing plants and increased competition in animal health, which is unlikely to abate. Combined with a still-heavy debt load, these factors could lead to a downgrade." The company is currently closing four manufacturing facilities and has also enacted select pricing increases. A promising generic version of an anti-epileptic treatment should also provide significant proceeds and provide an opportunity for the company to accelerate its deleveraging plans. Alpharma Inc. holds leading positions in the topical and liquids generic drug market. In late 2001, the company also acquired the generic business of F.H. Faulding & Co., for $660 million, a purchase that made Alpharma a major player in the solid dose generic drug market. The company has 14 abbreviated new drug applications awaiting approval at the FDA. These include gabapentin, the generic version of Pfizer Inc.'s $2 billion anti-epileptic treatment Neurontin. Alpharma is the first to file for approval of the drug, which means the company may enjoy a six-month exclusivity on the generic version of the product. However, though proceeds from the product could help the company delever, gabapentin is not expected to reach market until 2004. AMERICAN AIRLINES: Fitch Keeps Negative Outlook on CCC+ Rating -------------------------------------------------------------- In anticipation of the ratification of new labor contracts by each of American Airlines' three main unions, Fitch Ratings is providing the following commentary on continuing credit challenges facing the airline. Fitch's senior unsecured debt rating for American, the principal operating subsidiary of AMR Corp., remains 'CCC+' and the Rating Outlook is 'Negative'. With the ratification of all new labor contracts complete and a Chapter 11 filing temporarily avoided, American will have achieved its objective of reducing annual labor costs by approximately $1.8 billion through cuts in pay rates, reduced benefits and modified union work rules. The contractual adjustments come on top of potential non-labor savings of as much as $2 billion annually derived in large part from operational changes in the American network, fleet simplification and the increased use of customer interaction technology. The newly-ratified contract pay rates and work rules become effective on May 1, and should deliver immediate savings, bringing American's unit labor costs closer to the low end of the network carrier labor cost spectrum (currently occupied by Continental, US Airways and a restructured United). Increased work rule flexibility will also allow American to operate its future schedule with fewer crews, resulting in near-term productivity gains. The completion of the labor cost restructuring does not, however, eliminate the ongoing credit challenges that will continue to complicate the airlines' effort to generate strong cash flow and begin the process of rebuilding a badly weakened balance sheet. Although some firming in bookings and traffic is likely to occur as the demand-suppressing effects of the Iraq war wane, American and the other network carriers continue to struggle with a destructive pricing environment, weak business travel demand and stiffening competition from low-cost carriers. While American's limited Pacific route presence (relative to United and Northwest) will mitigate the impact of SARS on near- term revenue performance, international demand remains very weak and may recover only slowly during the remainder of 2003. In domestic markets, American's unit revenue outlook is still clouded by a high degree of route overlap with low-cost carriers like Southwest and JetBlue. American reported in January that its network overlap with the low-cost carriers now extends to 82% of its domestic markets. In light of this fact, the outlook for a meaningful recovery in passenger yields and unit revenue in 2003 remains bleak. Beyond the weakness of the operating environment, American faces a number of ongoing cash flow challenges tied to its heavy debt load, growing fixed financing obligations and a substantially underfunded defined benefit pension liability. Between January 2001 and December 2002, AMR completed $8.3 billion in new debt issuance and other financings to fund operating losses and capital spending commitments (primarily new aircraft). This brought AMR's total balance sheet debt and capital leases to $13.1 billion (including current maturities) as of December 31, 2002. After adding off balance sheet lease obligations, AMR's total lease-adjusted debt reached approximately $27 billion at the end of 2002--up significantly from about $17 billion at the end of 2000. In addition to 2003 debt maturities of $627 million, AMR is facing scheduled annual debt payments of $540 million in 2004, $1.3 billion in 2005 and $1.1 billion in 2006. Absent refinancing of these maturities, American will be heavily reliant on strong cash flow from operations (and a markedly improved revenue environment) to meet these scheduled payments beyond 2003. Refinancing risk has increased as a result of the sharp decline in American's pool of unencumbered assets over the last two years. Critical debt covenant issues remain with respect to American's fully-drawn $834 million secured credit facility that matures in December 2005. The airline has successfully negotiated a waiver of a March 31 liquidity covenant and a June 30 cash flow coverage test that would have given American's lenders the option of accelerating repayment of the facility. Under the amended terms of the agreement, AMR will be required to maintain an unrestricted cash and short-term investment balance of at least $1.0 billion at the end of the second quarter of 2003 and beyond. The next test date for the EBITDAR interest coverage covenant has been moved from June 30, 2003 to March 31, 2004. As of May 15, American expects to pledge an additional 30 non- Section 1110 eligible aircraft ($451 million in estimated book value) to provide additional collateral support for the banks. This will further reduce the size of American's already diminished unencumbered asset base, potentially complicating the task of completing any future debt transactions. The company has noted recently that about $700 million in Section 1110 eligible aircraft remain available to be pledged as collateral in future borrowings. American's liquidity position has been further undermined in the first quarter of 2003 by large operating losses, but the impact on unrestricted cash balances will be offset in part by some unusual items. As of December 31, AMR reported an unrestricted liquidity (cash plus short-term investments) balance of $1.95 billion and restricted cash holdings of $783 million. The company elected in the first quarter of 2003 to pay down all $339 million of tax- exempt bonds that had been backed by letters of credit which, in turn, were secured by restricted cash. Because the face value of these bonds was less than the restricted cash holdings used to collateralize them, the redemption of the bonds will have a net positive impact on the airline's unrestricted cash balance at the end of the quarter. Restricted cash balances will decline correspondingly. American was expected to receive a tax refund of approximately $550 million in the first quarter, further offsetting liquidity changes tied to the large first quarter loss. Finally, the carrier in the coming weeks will receive its share of the cash payment from the U.S. Government funded by the supplemental war appropriations bill passed by Congress. Based on American's share of U.S. airline capacity, Fitch estimates that this cash payment could total as much as $450 million. These one-time items will provide AMR with a much-needed liquidity buffer during a period of extended revenue weakness and should offer the carrier some margin of safety in meeting its liquidity covenants for the remainder of 2003. Despite planned capacity cuts in 2003 related to weakening demand, American remains committed to take delivery of 11 new mainline aircraft (9 Boeing 767-300ERs and 2 Boeing 777-200ERs) this year. Backstop financing from Boeing Capital is in place for all of these 2003 deliveries. No additional mainline aircraft are scheduled to be delivered until 2006. AMR will also receive delivery of 22 Embraer and 10 Bombardier regional jets this year for use by American Eagle. All of the regional jet acquisitions have also been financed. Cash capital spending beyond aircraft purchases in 2003 is expected to total approximately $400 million. American reported in its recent 10K filing that its defined benefit pension plans were underfunded by approximately $3.4 billion on a projected benefit obligation (PBO) basis. American's plans are approximately 61% funded as of December 31, 2002. Estimated 2003 cash contributions to pension plans will be $200 million, but annual required contributions are likely to increase substantially starting in 2004. American's actual return on pension plan assets in 2002 (-0.3%) was significantly higher than that seen at the other U.S. airlines and limited the growth of its underfunded liability during 2002. American Airlines Inc.'s 11.110% ETCs due 2005 (AMR05USR30) are trading at 20 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=AMR05USR30 for real-time bond pricing. AMERICAN AIRLINES: Pilots Applaud APFA's Agreement Ratification --------------------------------------------------------------- The Allied Pilots Association, collective bargaining agent for the 13,500 pilots of American Airlines (NYSE: AMR), released the following statement regarding the Association of Professional Flight Attendants' ratification of their agreement with American Airlines management: "It is clear that all of the unionized employees of American Airlines have had to make some extraordinarily difficult decisions during the past couple of weeks. The members of all three unions are now facing the reality of significant personal sacrifices in light of the large pay cuts and additional furloughs we have each voted to approve as part of our respective agreements with American Airlines management. "That noted, it was clear that the bankruptcy process would prove even more onerous. For that reason we are grateful to be avoiding, at least for now, the additional expense and uncertainty that bankruptcy would bring. "The membership of the Allied Pilots Association met the cost- savings targets that management established at the onset of these negotiations, as did our coworkers at the Transport Workers Union and Association of Professional Flight Attendants. As we go about our daily duties, we will continue to do our part to help ensure the survival and viability of this great airline. It is our hope that management will now make the most of the valuable reprieve that the unionized employees of American Airlines have collectively provided with our sacrifices." Founded in 1963, APA is headquartered in Fort Worth, Texas. AMERICAN HOMEPATIENT: Dec. 31 Net Capital Deficit Tops $47 Mill. ---------------------------------------------------------------- American HomePatient, Inc., (Pink Sheets: AHOM) reported net income of $8.2 million on revenues of $82.2 million in its fourth quarter ended December 31, 2002, compared with net income of $2.7 million on revenues of $82.9 million in the 2001 fourth quarter. Joseph F. Furlong, president and chief executive officer, said, "We are pleased to report a profitable fourth quarter. The fourth quarter results demonstrate that the strategies we are implementing to improve profitability - especially those to strengthen our organizational and financial structure, to boost our sales effort and to reduce bad debt expense - are succeeding. Our improved financial results position us to fully pay all creditors and lenders according to the reorganization plan that the Company and the Official Unsecured Creditors Committee are proposing for confirmation in a hearing before the Bankruptcy Court, scheduled for April 23, 2003." As announced on December 5, 2002, the Company determined that it had incorrectly accounted for certain fees in financial reports preceding its July 31, 2002, bankruptcy filing. The Company had believed that its method of recording these fees was appropriate and its prior auditors, Arthur Andersen LLP, had concurred. At the time, the Company said it was necessary to restate its financial results for 2001 and the affected second, third and fourth quarters, as well as for the first and second quarters of 2002. The Company also announced at that time that it would delay reporting its financial results for the third quarter of 2002 until the restatements were completed. Accordingly, the Company reported a net loss of $2.4 million in the 2002 third quarter and of $61.2 million for the year ended December 31, 2002 and provided restatements of its financial results for the first and second quarters of 2002, for the year ended December 31, 2001 and all quarters for the year ended December 31, 2001. All references to amounts in this news release include the effects of restatements, unless otherwise stated. Fourth Quarter 2002 Results American HomePatient said that net income in the 2002 fourth quarter was $8.2 million, compared with net income of $2.7 million in the 2001 fourth quarter. Fourth quarter 2002 net income included non-recurring reorganization items of $1.6 million related to the bankruptcy reorganization, and excluded approximately $5.0 million of non-default interest expense that would have been paid during the period had the Company not sought bankruptcy protection. Net income in the 2001 fourth quarter included a gain of $2.6 million associated with the sale of certain non-core assets. EBITDA is a non-GAAP financial measurement that is calculated as revenues less expenses other than interest, taxes, depreciation and amortization. For the fourth quarter of 2002, EBITDA, excluding reorganization items of $1.6 million, was $15.2 million or 18.5 percent of revenues. EBITDA for the fourth quarter of 2001, excluding the gain on sale of assets of centers of $2.6 million, was $14.1 million or 17.0 percent of revenues. Revenues for the 2002 fourth quarter were $82.2 million, down slightly from the $82.9 million reported for the comparable 2001 period. As a result of sales of non-core assets in both 2001 and early 2002, revenues were negatively impacted by approximately $4.3 million in the fourth quarter of 2002. Furlong noted, "Excluding the revenues associated with the sold assets, revenues for the 2002 fourth quarter increased by approximately four percent, compared with 2001 fourth quarter revenues. We believe that our investment in sales and marketing over the past three years is paying off in growth in same-store locations." Operating expenses decreased in the 2002 fourth quarter compared with the 2001 fourth quarter, due primarily to improvements in bad debt expense and reductions in other operating expenses resulting from the disposition of certain non-core assets. The Company reported a $22.8 million cash balance as of December 31, 2002, compared with a cash balance of $9.1 million on December 31, 2001. At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $47 million. Third Quarter 2002 Results The Company reported a net loss of $2.4 million on revenues of $78.4 million in the third quarter ended September 30, 2002, compared with a net loss of $6.0 million on revenues of $86.5 million in the 2001 third quarter. Third quarter 2001 net loss includes a loss of $2.6 million on the sale of non-core assets. The Company said the improvement in bottom-line results for the 2002 third quarter reflects a slight increase in revenues excluding the negative impact from the sales of non-core assets, lower bad debt expense and lower depreciation and amortization expense, as well as lower interest expense as a result of the stay on interest payments during the bankruptcy proceedings. The Company's sale of certain non-core assets negatively impacted 2002 third quarter revenues by approximately $8.3 million. EBITDA for the third quarter of 2002, excluding reorganization items of $3.9 million and Chapter 11 financial advisory expenses incurred prior to filing bankruptcy of $0.5 million, was $10.6 million or 13.5 percent of revenues. EBITDA for the third quarter of 2001, excluding the loss on sale of assets of centers of $2.6 million, was $12.6 million or 14.6 percent of revenues. Operating expenses decreased in the third quarter of 2002 as compared with the same period in the prior year, primarily as a result of a decrease in bad debt expense. This improvement in bad debt expense primarily is attributable to the same factors that impacted fourth quarter bad debt expense. Year 2002 Results The Company's net loss for the year ended December 31, 2002 was $61.2 million, compared with a net loss of $12.9 million for the prior year. The loss in 2002 includes a $68.5 million charge for the cumulative effect of a change in accounting principle associated with the Company's adoption of Statement of Financial Accounting Standards No. 142, $5.5 million in reorganization items, $0.8 million in Chapter 11 financial advisory expenses incurred prior to filing bankruptcy, and a tax benefit of $1.9 million. Excluding these items, American HomePatient enjoyed improved income in 2002 compared to 2001 primarily due to increased same-location revenues, lower bad debt expense and lower depreciation and amortization expense, as well as lower interest expense as a result of the stay on interest payments during the bankruptcy proceedings. The Company recorded adequate protection payments in 2002 of $8.0 million as an offset to the principal amount of the debt. However, the Bankruptcy Court will determine the ultimate application of these payments, as principal, or interest and expenses, as part of the bankruptcy proceedings. For the year ended December 31, 2002, the Company reported revenues of $319.8 million, down from $348.2 million for the same period of 2001. Excluding the loss of revenues of sold locations, revenues for fiscal 2002 increased approximately $4.8 million over the prior fiscal year or 1.4 percent. EBITDA for the 2002 fiscal year, excluding reorganization items of $5.5 million, Chapter 11 financial advisory expenses incurred prior to filing bankruptcy of $0.8 million, gain on sale of assets of centers of $0.7 million, and cumulative effect of change in accounting principle of $68.5 million, was $48.5 million or 15.2 percent of revenues. EBITDA for the 2001 fiscal year, excluding the loss on sale of assets of centers of $0.1 million, was $51.2 million or 14.7 percent of revenues. Overall, operating expenses decreased in 2002 compared with 2001, due primarily to improvements in bad debt expense and the sales of the assets of non-core businesses in 2001 and in the first quarter of 2002. As a percentage of revenues, bad debt expense for 2002 declined to 3.6 percent, compared with 4.5 percent for 2001, primarily due to the previously cited factors. Restated 2001 and First and Second Quarter 2002 Results As announced on December 5, 2002, the Company determined that it had incorrectly accounted for certain fees associated with its Fifth Amended and Restated Credit Facility, although it previously believed that its method of recording these fees was appropriate and its prior auditors had concurred. At that time, the Company said it was necessary to restate its financial results for 2001 and the affected, second, third and fourth quarters, as well as for the first and second quarters of 2002. The restatements include corrections of the accounting for the credit facility fees and other adjustments not related to the credit facility fees that arose in connection with the re-audit of 2001 and audit of 2002. Bankruptcy Proceeding Update As announced previously, the American HomePatient, Inc. and 24 of its subsidiaries filed voluntary petitions for relief to reorganize under Chapter 11 of the U.S. Bankruptcy Code on July 31, 2002. The Company's joint ventures with unrelated parties are not part of the bankruptcy filing. The Company has been managing its assets and operating its business in the ordinary course as a debtor-in-possession since that date. The Company and the Official Committee of Unsecured Creditors appointed by the Office of the United States Trustee jointly have proposed a plan of reorganization for the Company pursuant to which all of the Company's creditors will be paid in full and the shareholders of the Company will retain all of their equity interests in the Company. The bankruptcy filing was prompted by the impending December 31, 2002, maturity of the Company's Bank Credit Facility. Over the last several years the Company unsuccessfully had attempted to reach a long-term agreement with its lenders to restructure the Bank Credit Facility and thus determined that filing the bankruptcy cases was the best way to restructure the Company's debt. The Company expects that the lenders will object to the proposed plan, even though the Company's financial results have continued to improve during the bankruptcy proceedings. The Company and the Official Unsecured Creditors Committee believe the proposed plan is feasible and in the best interests of all creditors, and the plan provides for full payment to all creditors, including the lenders. The hearing before the Bankruptcy Court on confirmation of the jointly proposed plan is scheduled for April 23, 2003. There can be no assurance as to the final outcome of the bankruptcy proceedings. American HomePatient, Inc., is one of the nation's largest home health care providers with 285 centers in 35 states. Its product and service offerings include respiratory services, infusion therapy, parenteral and enteral nutrition, and medical equipment for patients in their home. American HomePatient, Inc.'s common stock is currently traded in the Pink Sheets under the symbol AHOM. ANC RENTAL: Committee Turns to CONSOR Corp. for IP Valuation ------------------------------------------------------------ The Official Committee of Unsecured Creditors in the Chapter 11 cases of ANC Rental Corporation and its debtor-affiliates sought and obtained approval of an application authorizing it to retain CONSOR Corporation as its intellectual property valuation specialists, nunc pro tunc to January 13, 2003. Timothy P. Cairns, Esq., at Young Conaway Stargatt & Taylor LLP, in Wilmington, Delaware, explains that the Committee wants to retain CONSOR as its intellectual property valuation specialist because of the Firm's extensive expertise and knowledge as an intellectual property consulting firm. CONSOR is a leader in trademark and patent valuations, royalty rate opinions and all aspects of licensing. For nearly 20 years, CONSOR has been the only professional consulting firm devoted exclusively to intellectual property and intangible assets. CONSOR has the largest proprietary index of licensing, valuation and royalty information existing today. CONSOR serves a broad range of clients, including corporations, banks and investment firms, trademark/patent owners, tax attorneys, CPA and valuation firms, and international marketing professionals. Mr. Cairns states that CONSOR is retained solely by the Committee for the purpose of preparing a valuation report of the Debtors' intellectual property and "brand name" in connection with potential litigation with the Debtors. All of the services that CONSOR will provide to the Committee will be at the request of the Committee and appropriately directed by the Committee so as to avoid duplicative efforts among the professionals retained in the case. The services requested of CONSOR have been expressly carved out of the retention of FTI as financial advisor, so as preclude any duplication of effort. The services that CONSOR will render to the Debtors, will include: A. performing a valuation of the Debtors' trademarks and brand assets in these cases; B. preparing an informational presentation in appropriate form that describes the valuation of the brand assets and trademarks of the Debtors, the Debtors' other intellectual property assets, and any other information requested by the Committee; C. assisting, if requested by the Committee, in negotiations with prospective parties in the ongoing solvency analysis of the Debtors; and D. CONSOR may also be called upon to state their opinions as expert witnesses regarding their aforementioned analysis. Mr. Cairns informs the Court that compensation will be paid to CONSOR on an hourly basis. CONSOR professionals charge by the hour with the rates depending on the experience and training of the individuals working on the task. The hourly rates for CONSOR professionals are: Chairman, CEO and other Principals $650 Senior Consultants $450 Consultants $350 Analysts $250 Mr. Cairns relates that CONSOR has agreed to limit their, aggregate fee request with respect to the intellectual property and brand valuations in support of the preparation of a total solvency analysis to $75,000, under the assumption that the Debtors will cooperate with CONSOR's investigation. To the extent that CONSOR is later required to produce documents, participate in depositions, or testify in this matter, the stated fee limit will not apply. CONSOR will also be reimbursed for all actual out-of-pocket expenses incurred in connection with the services it renders to the Committee. To the best of the Committee's knowledge, CONSOR does not have any connection with the Debtors, their creditors, or any other party in interest in these Chapter 11 cases, or with their respective attorneys or accountants. CONSOR believes that its connections with the Debtors, their creditors or other parties- in-interest are not related to the services for which each is being retained in these cases. Accordingly, the Committee believes CONSOR is a "disinterested person," and that it does not hold or represent an interest adverse to the Debtors' estates. (ANC Rental Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) APPLIED DIGITAL: Plans to Commence 50,000 Shares Offering --------------------------------------------------------- Under a prospectus prepared by Applied Digital Solutions, Inc., the Company may offer up to 50,000,000 shares of its common stock, par value $.001 per share, utilizing a best efforts offering of its shares, through the efforts of its officers and directors. This means the Company is offering its shares of common stock directly to qualified investors. In the event that Applied Digital Solutions retains a broker dealer to assist in the offer and sale of the shares, the Company will file a post- effective amendment to its registration statement. The Company has reserved the right to offer warrants exercisable for shares of its common stock to potential purchasers. It will provide a prospectus supplement or amendment, if necessary, to add, update or change the information contained in the current prospectus. The Company is offering its shares in one or more transactions at an estimated offering price of $0.50 per share or other price based upon the market price. There is no minimum offering of shares that must be sold. Applied Digital Solutions shares are included in the Nasdaq SmallCap Market under the symbol "ADSX." On April 4, 2003, the last reported sale price of its common stock was $0.46 per share. Since January 1, 2000, Applied Digital Solutions has filed additional registration statements relating to secondary sales of an aggregate of 222,578,333 shares of its common stock. Applied Digital Solutions (Nasdaq: ADSX) is an advanced technology development company that focuses on a range of life- enhancing, personal safeguard technologies, early warning alert systems, miniaturized power sources and security monitoring systems combined with the comprehensive data management services required to support them. Through its Advanced Technology Group, the Company specializes in security-related data collection, value-added data intelligence and complex data delivery systems for a wide variety of end users including commercial operations, government agencies and consumers. Applied Digital Solutions is the beneficial owner of a majority position in Digital Angel Corporation (AMEX: DOC). For more information, visit the Company's Web site at http://www.adsx.com * * * It was previously reported that under the terms of the Third Amended and Restated Term Credit Agreement with IBM Credit Corporation, Applied Digital Solutions, Inc. was required to repay IBM Credit Corporation $29.8 million of the $77.2 million outstanding principal balance currently owed to them, plus $16.4 million of accrued interest and expenses (totaling approximately $46.2 million), on or before February 28, 2003. The Company did not make the payment by February 28, 2003, and IBM Credit Corporation notified the Company that it must make the payment on or prior to March 6, 2003. Applied Digital didn't make the payment in that 7-day grace period. Instead, Applied Digital filed suit against IBM Credit LLC and IBM Corporation in Florida state court. That lawsuit charges IBM with improperly attempting to takeover the company, conspiracy to commit RICO violations, fraud, breach of good faith and fair dealing, and breach of the Florida Uniform Trade Secrets Protection Act. Unless Applied Digital wins its lawsuit or the IBM Agreement is restructured, Applied Digital says it is likely its business will end. APPLIED DIGITAL: FY 2002 Revenues Drop 36.3% to $99.6 Million ------------------------------------------------------------- Applied Digital Solutions, Inc., is a Missouri corporation and incorporated on May 11, 1993. Its business has evolved during the past few years and has grown significantly through acquisitions. Since 1996 it has completed 51 acquisitions. During the last half of 2001 and during 2002 the Company sold or closed many of the businesses it had acquired that it believed did not enhance its strategy of becoming an advanced digital technology development company. It has emerged from being a supplier of computer hardware, software and telecommunications products and services to becoming an advanced technology company that focuses on a range of life enhancing, personal safeguard technologies, early warning alert systems, miniaturized power sources and security monitoring systems combined with the comprehensive data management services required to support them. To date, it has four such products in various stages of development. They are: * Digital Angel(TM), for monitoring and tracking people and objects; * Thermo Life(TM), a thermoelectric generator; * VeriChip(TM), an implantable radio frequency verification device that can be used for security, financial, personal identification/safety and other applications; and * Bio-Thermo(TM), a temperature-sensing implantable microchip for use in pets, livestock and other animals. The Company was recently delisted from the NASDAQNM, listed on the SmallCap, and cannot provide assurances that it will be able to maintain its listing on the SmallCap. The Company's revenue from continuing operations for 2002 was $99.6 million, a decrease of $56.7 million, or 36.3%, from $156.3 million in 2001. Revenue for 2001 represents an increase of $21.5 million, or 16.0% from $134.8 million in 2000. The decrease in 2002 was primarily attributable to the sale or closure of all businesses that were not cash positive or that did not fit into Applied Digital's strategy of becoming an advanced technology development company. The increase in 2001 was primarily attributable to the growth through acquisitions. Gross profit from continuing operations for 2002 was $31.9 million, a decrease of $14.6 million, or 31.4%, from $46.5 million in 2001. Gross profit for 2001 represents a decrease of $5.8 million, or 11.1% from $52.3 million in 2000. As a percentage of revenue, the gross profit margin was 32.0%, 29.7% and 38.8% for the years ended December 31, 2002, 2001 and 2000, respectively. Selling, general and administrative expenses from continuing operations were $66.5 million in 2002, a decrease of $35.9 million, or 35.1%, over the $102.3 million reported in 2001. Selling, general and administrative expenses from continuing operations increased $40.3 million in 2001, or 65.0%, over the $62.0 million reported in 2000. As a percentage of revenue, selling, general and administrative expenses from continuing operations have increased to 66.5% in 2002, from 65.5% in 2001 and 46.0% in 2000. The Company's net loss for the year ended December 31, 2002, was $112,485, as compared to the net loss of $215,642 for the prior year ended December 31, 2001. The net loss for the year ended December 31, 2000, was $116,190. As of December 31, 2002, cash and cash equivalents totaled $5.8 million, an increase of $2.1 million, or 56.8%, from $3.7 million at December 31, 2001. Cash used in operating activities totaled $3.9 million, $18.0 million and $43.4 million in 2002, 2001 and 2000, respectively. In each year, cash was used primarily to fund operating losses. By operation of the Digital Angel Trust agreement, Applied Digital Solutions' share of Digital Angel Corporation's net assets is effectively restricted. Although Digital Angel Corporation and SysComm may pay dividends, access to these subsidiaries' funds is restricted. Accounts and unbilled receivables, net of allowance for doubtful accounts, decreased by $5.4 million, or 24.7%, to $16.5 million at December 31, 2002 from $21.9 million at December 31, 2001. The decrease was primarily as a result of the sale and closure of businesses during 2001 and 2002. As a percentage of 2002 and 2001 revenue, accounts and unbilled receivable were 16.6% and 14.0%, respectively. Inventories remained relatively stable at $6.4 million at December 31, 2002 compared to $6.2 million at December 31, 2001. Other current assets decreased by $1.9 million, or 39.6%, to $2.9 million at December 31, 2002 from $4.8 million at December 31, 2001. This decrease is primarily attributable to receipt of a $0.8 million tax refund in 2002 and a decrease in prepaid expenses. Accounts payable decreased by $5.6 million, or 36.4%, to $9.8 million at December 31, 2002 from $15.4 million at December 31, 2001. The decrease was primarily a result of the sale and closure of businesses during the last half of 2001 and the first half of 2002. Accrued interest and other expenses increased by $12.1 million, or 70.3%, to $29.3 million at December 31, 2002 from $17.2 million at December 31,,2001. Investing activities provided cash of $8.0 million, $2.7 million and $18.4 million in 2002, 2001 and 2000, respectively. In 2002, cash was provided by $3.2 million collection of notes receivables, $4.9 million of proceeds from the sale of subsidiaries, business assets, property and equipment, and $2.6 million was received from buyers of divested subsidiaries. Cash was used primarily to purchase property and equipment and to fund Discontinued Operations. In 2001, $2.8 million was used to acquire property and equipment, offset by cash proceeds from the sale of subsidiaries and business assets of $1.7 million, proceeds from the sale of property and equipment of $1.3 million, collections of notes receivable of $1.3 million and a reduction in other assets of $0.9 million. In 2000, the Company collected $31.3 million from the purchaser of TigerTel included in decreases in notes receivable and $0.9 million from the sale of assets, and realized cash of $1.7 million for Company Discontinued Operations. The sources were partially offset by cash of $9.1 million used to acquire businesses, $8.4 million used to acquire property and equipment, and $1.0 million for other assets. Financing activities (used) provided cash of ($2.8) million, $10.9 million and $30.8 million in 2001, 2000 and 1999 respectively. In 2002, cash was used to pay $6.2 million in notes payable and long-term debt, offset by $1.7 million provided from issuance of common shares, $1.2 million from collections of notes receivable for shares issued, and $1.3 million provided by increases in notes payable. In 2001, cash of $14.0 million was obtained through notes payable, $0.6 million was provided by long-term debt and $0.7 million was provided from the issuance of common shares. Cash was used primarily for stock issuance costs of $0.8 million, and payments of long-term debt of $2.5 million. In 2000, $19.1 million was received from the issuance of Series C preferred stock, $16.0 million was obtained through long-term debt, $2.2 million was obtained from net increases in notes payable and $6.1 million was obtained through the issuance of common shares. Uses of cash in 2000 included payments of $11.6 million against long-term debt, and $0.8 million for other financing costs. AQUILA CANADA: S&P Downgrades Senior Unsecured Rating to B- ----------------------------------------------------------- Fitch Ratings has withdrawn the 'B+' rating of Aquila Asia Pacific Ltd. and downgraded the senior unsecured rating of Aquila Canada Finance to 'B-' from 'B+'. In addition, Fitch removes Aquila Canada Finance from Rating Watch Negative. The Rating Outlook for Aquila Canada Finance is Negative based on the entity's relationship with parent guarantor, Aquila, Inc. The 'B+' senior unsecured rating of Aquila Asia Pacific is withdrawn due to the repayment of this debt in entirety earlier in April. The senior unsecured rating of Aquila Canada Finance has been downgraded to 'B-' from 'B+' to reflect the entity's dependence on cash flows from Aquila, Inc, (rated 'B-' by Fitch) for debt service. Aquila Canada Finance is a financing subsidiary of Aquila Inc. that does not hold any Canadian utility operating assets nor does it have any claim upon upstream cash flows from the Canadian utility business. Cash flows to service debt at Aquila Canada Finance are derived exclusively from the parent guarantor, Aquila, Inc., and the entities are closely tied through tax relationships, thus the rating of Aquila Canada Finance is equal to the rating of Aquila, Inc. ILA provides network distribution of electricity and gas in the U.S., Canada, Australia and the UK. It also is in the wholesale power generating and trading business in North America. ILA is in the process of selling the Australian and U.K. operations. ARMSTRONG HLDGS: Gets Nod for Employee Suit Settlement Agreement ---------------------------------------------------------------- Armstrong World Industries sought and obtained Judge Newsome's approval to settle a class action certified by the United States District Court for the Eastern District of Pennsylvania in cases styled as "Dean A. Markley et al v. Retirement Committee of Armstrong World Industries, Inc." and "Lori Shearer et al v. Retirement Committee". This settlement includes a contribution by National Union Fire Insurance Company of Pittsburgh, PA, embodied in a separate agreement. National Union is an insurer of the Armstrong Defendants under AWI's fiduciary liability policy. Ms. Booth explains that in August 2001, and July 2002, complaints in these two class-action suits were brought asserting claims under ERISA by participants in the Debtors' Retirement Savings and Stock Ownership Plan of Armstrong World Industries Inc. and who ceased to be employed by AWI as a result of AWI's sale or divestiture of: (1) Armstrong Insulation Products on May 31, 2000; or (2) AWI's Installation Products Group on July 31, 2000. Each of the Class Plaintiffs is a former participant in AWI's Share in Success Plan. In 1996, SIS was merged with AWI's Retirement Savings Plan to form the Retirement Savings and Stock Ownership Plan of AWI. The Defendants included the AWI Retirement Committee, certain individual members of that Committee, the RSSOP, Armstrong Holdings, Inc., and Mellon Bank NA. In August 2001, an omnibus proof of claim was filed against AWI on behalf of the Class Plaintiffs and the class members in these suits. The total amount of this proof of claim is $3,865,324.53. In addition to this class proof of claim, approximately 70 individual proofs of claim relating to this suit were filed for a total of $1,390,919.08 against AWI. The Settlement Agreement Under this settlement agreement, which concludes the class actions suits and resolves all of the proofs of claim: (1) The class proof of claim will be amended to assert a prepetition, general, unsecured claim against AWI for $1,000,000; (2) The amended class proof of claim will be deemed to consist of individual claims held by class members, each in an amount not to exceed $10,000; (3) The amended class proof of claim will be treated as a "convenience" proof of claim under the Plan; (4) The amended class proof of claim will be paid as a Class 3 claim to be satisfied by paying $750,000, in cash, into the RSSOP on behalf of and to be credited for the accounts of individual class members; (5) The payment will be made on the earlier of five business days after the Effective Date, or December 15, 2003; (6) Even if AWI amends the Plan to provide for different treatment for Class 3 claims, this payment cannot be changed; (7) Each class member will receive a ballot entitling the member to vote on the Plan in an amount equal to that member's pro rata share in the amount of the class proof of claim; (8) The Pennsylvania Court retains exclusive jurisdiction to implement and enforce this settlement and resolve any disputes concerning it; and (9) The parties exchange mutual releases. The National Union and Mellon Bank Contributions National Union and Mellon Bank will contribute sufficient funds to bring the total settlement payment up to $1,465,000. National Union will pay $500,000, plus interest, to counsel for the class members. This payment will be distributed by class counsel according to an undisclosed schedule. This payment will be used to satisfy: (1) the class plaintiffs' attorneys' fees, costs and expenses as approved by the Pennsylvania court; (2) provide incentive awards to the class plaintiffs; and (3) make payments equal to $100 times the number of sub-zero class members in exchange for a release. The balance of the insurance payments will be paid to RSSOP. Mellon will contribute $215,000 plus interest directly to RSSOP. These Restorative Payments will be allocated on a pro rata basis in accordance with a Plan of Distribution and placed into a "Match Account" established for each class member in the RSSOP. Class counsel will provide the schedule, on which the Retirement Committee and RSSOP may conclusively rely. Thereafter, RSSOP may make lump sum distributions or further transfers of these individual accounts to other pension accounts for the benefit of class members or IRA rollover accounts. The National Union Agreement This Agreement between National Union and AWI provides that in exchange for a release from AWI and the Armstrong Defendants of liability for any claims that were or could have been asserted against National Union in connection with these class actions and the proofs of claim, National Union will make the described contributions and pay defense costs incurred in the defense of the class actions. (Armstrong Bankruptcy News, Issue No. 39; Bankruptcy Creditors' Service, Inc., 609/392-0900) BALLANTRAE: Seeks Approval to Hire Ordinary Course Professionals ---------------------------------------------------------------- Ballantrae Healthcare, LLC and its debtor-affiliates seek approval from the U.S. Bankruptcy Court for the Northern District of Texas, to continue employing the professionals they turn to in the ordinary course of business. The Debtors report that in the ordinary course of their businesses, they employ various professionals to render services relating to numerous issues that arise in the Debtors' businesses. Prior to the Petition Date, the Ordinary Course Professionals consisted mainly of attorneys who represent the Debtors in various capacities. The Debtors seek to continue the employment of the Ordinary Course Professionals subsequent to the Petition Date without having to file formal retention or fee applications for each of the Ordinary Course Professionals. On account of the number of Ordinary Course Professionals normally engaged by the Debtors, it would be burdensome to require each individual Ordinary Course Professional and the Debtors to require separate application to this Court for approval of the Ordinary Course Professional's retention. The Debtors want to retain the Ordinary Course Professionals and pay them 100% of the fees and disbursements not exceeding $25,000 per month per Ordinary Course Professional. Ballantrae Healthcare, LLC is a nursing home operator. The Company and its debtor-affiliates filed for chapter 11 protection on March 28, 2003 (Bankr. S.D. Tex. Case No. 03-33152). David Ellerbe, Esq., at Neligan, Tarpley, Andrews and Foley LLP represents the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $23,555,239 in total assets and $39,243,335 in total debts. BETA BRANDS: Pursuing Restructuring Talks with Senior Lenders ------------------------------------------------------------- Beta Brands Incorporated (TSX Venture Exchange: BBI), a leading manufacturer and distributor of quality confectionery and bakery products, is in discussions with its senior lenders with respect to a consensual restructuring of the Company and its subsidiaries. The Company anticipates that the restructuring proposed by the senior lenders could be completed within the next several weeks if these discussions are successful. The senior lenders have agreed to temporarily extend the date for payment of the interest and principal payments due on April 15, 2003 in conjunction with its senior debt facility to permit these discussions to continue and have also agreed to waive certain other covenants of the loan agreement for the period ended April 15, 2003. As of April 15, 2003, the total amount owed to Beta Brands' secured senior lenders is approximately US $33.6 million (approximately Cdn $48.8 million). Beta Brands also announced that its bridge financing lender has also agreed to extend the date for payment of the interest and principal payments due on April 15, 2003 in conjunction with its unsecured short-term bridge loan facility to permit discussions between the Company and its senior lenders to continue. The amount of interest and principal deferred with respect to the Loan is approximately US $2.6 million (approximately Cdn $3.8 million). In July 2002, the Company reported that the Loan is for a maximum principal amount of US $3.5 million and is provided by a company affiliated with the Company's controlling shareholder. As previously reported in September 2002, the Company has formed a special committee of the Board of Directors to address the Company's short and long-term financing requirements. Beta Brands is dependent on the continued support of its senior lenders of long-term debt and its lenders of bridge financing and on the availability of a credit facility to finance its working capital requirements. Beta Brands is a leading manufacturer and distributor of quality confectionery and bakery products for the Canadian, U.S. and certain international markets. The Company markets products under a variety of strong brand names including Breath Savers(R), Beech-Nut(R), McCormicks(R), Mill Wheat(R), Champagne(R), Bite-Life(R) and Goody(R). Beta Brands trades on the TSX Venture Exchange under the symbol BBI and has approximately 41.3 million common shares outstanding. BETHLEHEM STEEL: ISG Confirmed as Qualified Bidder for Assets ------------------------------------------------------------- Wednesday's confirmation of International Steel Group (ISG) as the only qualified bidder for the assets of bankrupt Bethlehem Steel Corp. (OTCBB:BHMSQ.OB), and the successful outcome of last week's auction for the assets of another bankrupt steelmaker, National Steel Corp. (OTCBB:NSTLB.OB), will solidify the trend toward consolidation of the American steel industry, Leo W. Gerard, President the United Steelworkers of America (USWA) said. "Adding Bethlehem's mills to ISG's existing operations at the former LTV Steel and Acme Steel facilities is a second gigantic step in the humane consolidation of the American steel industry that our union launched last September," Gerard said. "It's a process that will ensure a productive, well-capitalized industry while preserving the maximum number of steelworker jobs." Gerard noted that the outcome of Wednesday's auction in Chicago for the assets of National Steel Corp., could be another milestone in the consolidation process, and said that "U.S. Steel -- which has negotiated an enlightened labor agreement for its own operations and those of National Steel -- is the only bidder that has such an agreement with our Union." Gerard said, however, that federal reforms to alleviate the mounting health care crisis is "the real solution to a crisis that is decimating the health-care coverage of millions of retirees, robbing every American worker of real earnings, and undermining the competitiveness of American manufacturers. "America is the only industrial country in the world," Gerard said, "where workers, retirees and employers are forced to absorb these costs, and only federal action to bring about some form of universal coverage is going to save working families from crushing debt and arrest the devastating decline in manufacturing jobs." Some 2.4 million manufacturing jobs have been lost in America since April 1998, accounting for 90 percent of America's job loss over the past four years. More than 200,000 retirees have lost health-care coverage in the steel industry. BURLINGTON: Plan Filing Exclusivity Extended Until May 31, 2003 --------------------------------------------------------------- Burlington Industries, Inc., together with its debtor- affiliates, the Creditors' Committee and the Prepetition Lenders have agreed to resolve the Exclusivity Motion and the Creditors' Committee's Objection by entering into a stipulation. The parties stipulate and agree that: (a) The Creditors' Committee will withdraw their Objection; (b) The Debtors, the Creditors' Committee and the Prepetition Lenders agree that the Exclusive Solicitation Period should be extended through July 31, 2003, pursuant to Section 1121(d) of the Bankruptcy Code; (c) Nothing in this Stipulation will impair or affect the rights of the parties or any successor-in-interest to: (i) seek further extensions of the Exclusive Solicitation Period, or (ii) respond or object to any extension requests. All rights are expressly reserved by the parties; and (d) In accordance with applicable law and Sections 1121(c) and (d) of the Bankruptcy Code, no creditor or other party-in-interest may file a plan of reorganization for the Debtors in these Chapter 11 cases during the Exclusive Solicitation Period. * * * In the light of the termination of the Berkshire Hathaway Sale, the Court finds it appropriate to dispense with the argument on the Debtors' request. Accordingly, the Court extends the Debtors' exclusive right to file a plan until May 31, 2003, and the Debtors' right to solicit acceptances of that plan until July 31, 2003. (Burlington Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) CALPINE: Baytown Center Named Showcase Plant at DOE Conference -------------------------------------------------------------- Calpine Corporation (NYSE: CPN), one of North America's leading power companies, announced that its Baytown Energy Center near Houston has been named a "Showcase Plant" at the recent Texas Technology Showcase 2003 Conference, sponsored by the Department of Energy. It was one of only seven facilities -- and the only power generating plant -- to earn the coveted designation. The Texas Technology Showcase highlighted technologies and practices for reducing energy use in the chemical and refining industries. The Baytown Energy Center provides the nearby Bayer Corporation chemical facility with all its electricity and steam needs. The remaining capacity is sold on retail and wholesale markets. The Baytown facility, which began operations in June 2002, is a natural gas-fired combined-cycle, cogeneration plant capable of producing up to 700 megawatts of clean, efficient power and another 130 megawatts of "peaking" power during high-demand summer months. It is highly efficient, uses 30-40 percent less fuel and emits far fewer pollutants than the average fossil- fueled plant in Texas. As a cogeneration facility, the Baytown Energy Center generates electricity using three natural gas-fired combustion turbines in combination with one steam turbine to generate two types of energy -- electricity and steam -- for industrial processing and for wholesale power customers. This fuel-efficient technology allows Calpine to significantly reduce fuel use, resulting in lower energy costs and emissions. Advanced emissions control technology makes the Baytown Energy Center an environmentally responsible natural gas-fired facility. The plant emits 90 percent less nitrogen oxide, 45 percent less carbon dioxide and nearly 100 percent less sulfur dioxide emissions than the average Texas fossil-fueled plant. Moreover, using steam from the Baytown facility enabled Bayer to cease operation of its boilers and achieve a reduction in emission rates. "We are proud that the Baytown Energy Center has been named a Showcase plant," said Calpine's Dean Elkins, Director - Industrial Marketing. "Fuel-efficient, natural gas-fired power generating facilities like this will continue to help replace older, more polluting generating plants and improve air quality in the Houston-Galveston region. The Baytown facility is a clear example of Calpine's focus on producing clean, efficient, cost-competitive power in an environmentally responsible manner." The Baytown Energy Center is an integral part of Calpine's 6,000-megawatt Texas power portfolio. The company currently owns interest in and operates ten energy centers, six of which are cogeneration facilities serving industrial customers including Dow, Hoescht Celanese, Lyondell Citgo and Chevron Phillips Chemical. Calpine has the largest, cleanest and most fuel-efficient portfolio of natural gas-fired, combined-cycle facilities in Texas and North America. Sponsored by the U.S. Department of Energy and the Texas Industries of the Future Group, Texas Technology Showcase 2003 combined technical sessions, addresses by business, political and government leaders, special forums on selected topics, and tours of the Showcase plants -- http://www.oit.doe.gov/showcasetexas/tech_plants.html. Topics ranged from nitrogen oxide reduction to plant optimization, combined heat and power, and sustainability. Calpine Corporation is a leading North American power company dedicated to providing wholesale and industrial customers with clean, efficient, natural gas-fired and geothermal power generation. It generates and markets power through plants it owns, operates, leases and develops in 23 states, three provinces in Canada and in the United Kingdom. Calpine is also the world's largest producer of renewable geothermal energy, and it owns approximately one trillion cubic feet equivalent of proved natural gas reserves in Canada and the United States. The company was founded in 1984 and is publicly traded on the New York Stock Exchange under the symbol CPN. For more information about Calpine, visit its Web site at http://www.calpine.com * * * As reported in Troubled Company Reporter's December 11, 2002 edition, Calpine Corp.'s senior unsecured debt rating was downgraded to 'B+' from 'BB' by Fitch Ratings. In addition, CPN's outstanding convertible trust preferred securities and High TIDES were lowered to 'B-' from 'B'. The Rating Outlook was Stable. Approximately $9.3 billion of securities were affected. DebtTraders reports that Calpine Corporation's 10.500% bonds due 2006 (CPN06USR2) are trading between 73.5 and 75.5. See http://www.debttraders.com/price.cfm?dt_sec_ticker=CPN06USR2for real-time bond pricing. COLONIAL ADVISORY: S&P Keeps Watch on Junk-Rated Class B Notes -------------------------------------------------------------- Standard & Poor's Ratings Services placed its ratings on the class A and B notes issued by Colonial Advisory Services CBO I Ltd., on CreditWatch with negative implications. The rating on the class B notes was previously lowered Nov. 12, 2002. At that time, the rating on the class A notes was affirmed. The CreditWatch placements reflect factors that have negatively affected the credit enhancement available to support the notes since the previous rating action. These factors include a deterioration in the credit quality of the performing assets in the collateral pool securing the notes and a decline in the overcollateralization and interest coverage ratios. According to the Feb. 20, 2003 trustee report, $47.4 million, or approximately 15.9% of the total value of the collateral pool, is in default. The report also lists class A and B overcollateralization ratios of 123.3% and 96.4%, respectively, well below the minimum requirements of 140.0% and 118.0%. This compares to class A and B overcollateralization ratios of 131.8% and 103.0%, respectively, at the time of the November 2002 downgrade. The Feb. 20, 2003 trustee report also lists a Total Interest Coverage Ratio of 43.3%, which contrasts sharply with a 107% benchmark and a value of 47.9% when the transaction was last reviewed. As part of its analysis, Standard & Poor's will examine the results of current cash flow runs generated for Colonial Advisory Services CBO I Ltd. to determine the level of future defaults the rated tranches can withstand under various stressed default timings and interest rate scenarios, while still maintaining their ability to pay all of the interest and principal due on the rated notes. The results of these cash flow runs will be compared with the projected default performance of the performing assets in the collateral pool to determine whether the ratings currently assigned to the class A and B notes remain consistent with the credit enhancement available. RATINGS PLACED ON CREDITWATCH NEGATIVE Colonial Advisory Services CBO I Ltd. Rating Balance (mil. $) Class To From Original Current A AA-/Watch Neg AA- 325.0 229.2 B CCC-/Watch Neg CCC- 64.0 70.9 CNC: Fitch Cuts Ser. 1994-1 Note Ratings to Low-B & Junk Levels --------------------------------------------------------------- CNC's pass-through certificates, series 1994-1 classes are downgraded by Fitch Ratings and removed from Rating Watch Negative as follows: $23.6 million class A-1, $30 million class A-2 and $27.7 million class A-3 to 'BB-' from 'BB+'; $9.8 million class B to 'CC' from 'CCC'; $7.8 million class C to 'C' from 'CC'; and $7.8 million class D to 'C' from 'CC'. The downgrades follow Fitch's review of the transaction which closed in March 1994. The ratings downgrades are a result of further deterioration in the credit ratings of the largest tenant concentration, Kmart, which comprises 51% of the pool, as well as limited information on the underlying collateral. Fitch withdrew its corporate ratings of Kmart in March 2003. Fitch will closely monitor Kmart's decision to affirm or reject any more leases, and the further effect that decision may have on this transaction. The ratings of credit tenant lease transactions are highly sensitive to the movements of the corporate credit ratings of the underlying tenants. When the 51% of the pool secured by Kmart leases were withdrawn, the resulting subordination levels generated by Fitch's analysis necessitated the downgrades. Fitch will continue to monitor the transaction, as surveillance is ongoing. CREDIT SUISSE: S&P Cuts Ratings on 3 Note Classes to B+/B/CCC ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes F, G, and H of Credit Suisse First Boston Mortgage Securities Corp.'s commercial mortgage pass-through certificates series 1997-C1. At the same time, the ratings on classes A-1B, A-1C, and A-2 from the same transaction are affirmed. Standard & Poor's does not rate any other certificates in the transaction. The lowered ratings reflect anticipated credit support erosion upon the eventual disposition of some of the specially serviced assets, and concerns regarding the watchlist loans, particularly those secured by lodging properties. The affirmed ratings reflect credit enhancement levels that adequately support the existing ratings, after taking into account expected losses. As of March 2003, the trust collateral consisted of 145 commercial mortgages with an outstanding balance of $1.171 billion, down from 161 loans totaling $1.354 billion at issuance. The pool has paid down by 13.5%. The master servicer, First Union National Bank, now known as Wachovia Securities, reported interim or partial year 2002 net cash flow debt service coverage ratios (DSCR) for 85% of the non-credit tenant lease (CTL) loans. Approximately 13% of the pool is composed of CTLs (12 loans, or 12.9% of the pool) and defeased loans (two loans, or 0.30% of the pool). Wachovia also reported full year 2001 financial data for the net cash flow DSCRs for 79% of the non- CTL loans. Based on this information, Standard & Poor's calculated the DSCR for the pool at 1.69x for the partial year 2002 data, up from 1.38x at issuance and 1.66x for the full year 2001 data (excluding the CTLs and defeasance). The current weighted average DSCR for the 10 largest loans totaling $438 million, or 37.4% of the pool, is 1.81x for the partial year 2002 data and 1.71x for the full year 2001 data, compared to 1.38x at issuance. The pool has significant geographic concentrations in the states of New York (26%), California (14%), Florida (7%), Texas (6%), and New Jersey (5%). There is also one lodging property located in Aruba (4% or $48 million). Significant property type concentrations include retail (47%), lodging (18%), office (13%), multifamily (10%), and industrial (5%). There are nine specially serviced loans with a current combined balance of $156 million, or 13% of the pool. There are several loans that merit concern. The largest specially serviced loan, the Roosevelt Raceway Shopping Center, has a balance of $47.6 million, or 4% of the pool, and is secured by a 375,531-square- foot retail center located in Westbury, N.Y. on Long Island. It is real estate owned (REO). Current occupancy is 77%, and the most recent DSCR (as of Sept. 30, 2002) is 0.78x. A recent appraisal (September 2002) valued the property as is at $49.2 million. The second largest specially serviced loan, Schwegmann, has a current balance of $46.7 million (or 4% of the pool). The original balance was $66 million, which was reduced by the liquidation of six of the original 15 Schwegmann Giant Supermarkets (plus a distribution warehouse), which served as collateral for the original loan until Schwegmann declared bankruptcy in 1999. An additional four properties are expected to be auctioned shortly, the proceeds of which will be used to further pay down the debt. There are six re-leased operating grocery stores whose cash flows support the remaining debt. The special servicer, Lennar Partners Inc., estimates that the remaining debt can be serviced by some combination of those cash flows and approximately $4.5 million available in reserves can be used to cover any monthly shortfalls between the properties' cash flows and the final remaining debt. The loan is current. The third largest specially serviced loan, the Airlines Parking loan, has a balance of $19.5 million, or 2.2% of the pool, and is secured by two off-site airport parking lots with approximately 8,400 spaces located outside the Detroit Metropolitan Airport. The loan has just recently been brought current, but has a poor payment history. The remaining specially serviced loans consist of troubled lodging and cinema properties. The servicer's watchlist includes 30 loans totaling $205 million (17% of the pool). The largest loan on the watchlist, Hyatt Aruba, for $48 million (4.1%), has a DSCR of 0.91x as of Dec. 31, 2002, down from 1.30x in 2001. Occupancy has fallen to 71% in 2002 from 75% in 2001 and the Average Daily Rate (ADR) has also fallen 6.5% to $245.52 for 2002 from $262.72 for 2001. While the property is noted to be in excellent condition, the effects of Sept. 11 and the war in Iraq, combined with the difficulties in the economies of South America, from which the property draws a considerable number of clients (Aruba is approximately 20 miles off the coast of Venezuela), have all taken their toll on this leisure property. In addition, there are several other troubled lodging properties that appear on the watchlist, which total approximately $36 million, or 3% of the pool. Based on discussions with Wachovia and Lennar, Standard & Poor's stressed various loans in the mortgage pool as part of its analysis. The expected losses and resultant credit levels adequately support the rating actions. RATINGS LOWERED Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-thru certs series 1997-C1 Rating Class To From Credit Enhancement F B+ BB 6.59% G B BB- 5.44% H CCC B 3.12% RATINGS AFFIRMED Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-thru certs series 1997-C1 Class Rating Credit Enhancement A-1B AAA 34.10% A-1C AAA 34.10% A-2 AAA 34.10% DELTA AIR LINES: Lauds Federal Reimbursement Legislation Passage ---------------------------------------------------------------- Delta Air Lines (NYSE: DAL) Chairman and Chief Executive Officer Leo F. Mullin expressed Delta's appreciation to President George W. Bush and the United States Congress for their quick action to reimburse airlines with $2.9 billion for security costs and to provide extended unemployment benefits to airline and other employees. "This is a very welcome and important step as we continue the public-private partnership that has vastly improved security for air travelers," Mullin said. "This federal reimbursement for security costs will allow our industry increased flexibility to deal with issues of cost, competition and capacity that are solely ours to address. "Through its action, Congress has taken an important first step in recognizing that the federal government should bear the costs for national security in the airline industry, just as it does in other sectors of our economy. That acknowledgement will lead, hopefully, to permanent action to relieve the industry of security costs in the future." President Bush Wednesday signed a close to $80 billion emergency supplementary appropriations bill which included $3.5 billion in assistance to airlines and airports, and extended unemployment benefits for airline and other workers. Of the approximately $2.9 billion allocated for U.S. airlines, Delta expects to receive approximately $400 million. During the past year, Mullin testified twice before Congress on behalf of the industry as it sought relief from costs associated with mandated security programs put in place since Sept. 11, 2001. In addition, he and other industry leaders held dozens of meetings with Administration and Congressional leaders to explain the need for government reimbursement of national security costs, as with other sectors of the economy. "Our industry appreciates the willingness of the Administration and Congress to listen to our thoughts and concerns and to take this action now," Mullin said. "It reflects an understanding of the impact of mandated security costs on airlines, and represents appropriate relief to mitigate the associated financial harm." The legislation also requires that the cash compensation for the two top executives in the six major U.S. airlines be limited until April 2004 to their base salary level on April 1, 2003. At Delta, these limitations affect Mullin and Frederick W. Reid, Delta president and chief operating officer. Delta Air Lines, the world's second largest airline in terms of passengers carried and the leading U.S. carrier across the Atlantic, offers 5,382 flights each day to 423 destinations in 77 countries on Delta, Song, Delta Express, Delta Shuttle, Delta Connection and Delta's worldwide partners. Delta is a founding member of SkyTeam, a global airline alliance that provides customers with extensive worldwide destinations, flights and services. For more information, please go to http://www.delta.com DYNEGY: S&P Affirms B Credit Rating over Restructured Bank Loans ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B' corporate credit ratings on Dynegy Inc., and its subsidiaries and removed the ratings from CreditWatch with negative implications. The outlook is negative. Standard & Poor's also assigned its 'B+' rating to Dynegy Holdings Inc.'s (a Dynegy subsidiary) new $1.66 billion senior secured credit facility. The Houston, Texas-based company has $5.454 billion of debt outstanding. The CreditWatch removal reflects the successful restructuring of two revolving bank loans coming due in April and May 2003 and a third bank loan related to a communications operating lease. "The successful completion of the new bank facility relieves some concerns regarding Dynegy's liquidity position because it renews a significant amount of bank line capacity. However, the negative outlook reflects our uncertainty regarding Dynegy's ability to generate sustainable cash flow, given the current environment in electric generation, as well as the price volatility in gathering and processing of natural gas liquids," said Standard & Poor's credit analyst John Kennedy. "Given the firm's current weak financial profile, adverse economic conditions could result in thinner margins on generation and gathering and processing of natural gas liquids, which, in turn, could stress Dynegy's ability to produce reliable cash flow and meet debt service obligations," added Mr. Kennedy. Standard & Poor's also said that rating stability and/or upward ratings momentum is principally predicated on the predictability and sustainability of cash flows to meet debt service obligations commensurate with the level of risk inherent in the company's business strategy. The 'B+' secured bank loan rating is supported by Standard & Poor's analysis that the quality and dollar value of the collateral package underpinning the $1.66 billion senior secured credit facility indicates a strong likelihood of substantial recovery of principal in the event of a default or bankruptcy. DebtTraders says that Dynegy Inc.'s 7.450% bonds due 2006 (DYN06USR1) are trading between 80.5 and 82.5. See http://www.debttraders.com/price.cfm?dt_sec_ticker=DYN06USR1for real-time bond pricing. EAST COAST POWER: S&P Keeps Watch on BB+ Senior Secured Rating -------------------------------------------------------------- Standard & Poor's Ratings Services placed its 'BB+' rating on East Coast Power LLC's senior secured notes on CreditWatch with positive implications following the announcement that El Paso Merchant Energy, a business unit of El Paso Corp. ('B+'/Negative), has executed an agreement to sell its 99% interest in East Coast Power to GS Linden Power Holdings LLC, a subsidiary of The Goldman Sachs Group Inc. ('A+'/Stable/A-1), for $456 million in cash. East Coast Power owns a gas-fired, combined-cycle cogeneration facility located in Linden, New Jersey with aggregate capacity of 940 MW. This includes the 775 MW (average capacity) Linden 1- 5 plant, which was completed in 1992, and the 165 MW Linden 6 plant, which was completed in January 2002. All of East Coast Power's revenues currently come from the Linden facility. The 'BB+' rating on East Coast Power is currently a cap on the rating as a result of the ownership of that entity by El Paso. "The transfer of ownership to Goldman Sachs will allow East Coast Power to be rated at its 'BBB-' stand-alone credit quality," said credit analyst Scott Taylor. "Barring any prior changes to East Coast Power's stand-alone credit quality, we will raise the rating on East Coast Power's senior secured notes to 'BBB-' upon closing of this transaction." The outlook will be stable. Closing is subject to regulatory approvals, and is expected within 90 days. Standard & Poor's expects that the change of ownership will not substantially affect operations of the facilities. General Electric will continue to operate and maintain the facilities as part of its long-term contract, and Goldman Sachs expects to hire some existing employees to continue to manage the assets. In most circumstances Standard & Poor's will not rate the debt of a wholly owned subsidiary higher than the rating of the parent. Exceptions can be made, and were in this case, on the basis of the cumulative value provided by enhancements, such as structural protections, covenants, and an independent director, in conjunction with the stand-alone credit quality of the entity, which supports such elevation. These provisions served to make East Coast Power bankruptcy-remote from El Paso Corp., which has weaker credit quality, and allowed for a three-notch elevation of East Coast Power's rating above that of El Paso Corp. It is unclear at this point whether and to what extent these provisions will remain in place. However, this will only become a credit issue if Goldman Sachs' credit quality deteriorates to a level below 'BBB-', or if Goldman Sachs were to sell a substantial portion (i.e., greater than 80%) of its interest in East Coast Power to an entity rated below 'BBB-'. ELCOM INT'L: Taps Cap Gemini E&Y as Preferred Systems Integrator ---------------------------------------------------------------- Elcom International, Inc. (OTC Bulletin Board: ELCO), a leading international provider of remotely-hosted eProcurement and private eMarketplace solutions, announced that Cap Gemini Ernst & Young UK plc will become the Preferred Systems Integrator for Elcom's eProcurement and eMarketplace systems and offer Business Continuity Services to Elcom's clients. Robert J. Crowell, Elcom International's Chairman and CEO, said, "As the prime contractor for our eProcurement license with the Scottish Executive (Government of Scotland), CGE&Y is well aware of Elcom's robust eSourcing technology. The expansion of the relationship will provide more opportunities to work together with our mutual customer base. In addition CGE&Y will provide disaster recovery and optional business continuity services for our clients, creating a 100% "live" back up system for our clients." Robert J. Crowell continued, "We also expect to see our relationship expand as we are introduced to various Cap Gemini Ernst & Young Group business segments and practices in North America. Our current strong foothold in public utilities is a good example. We are looking forward to a very long and mutually beneficial relationship with CGE&Y." Caroline Booth Vice President responsible for Strategic Sourcing and eProcurement for Cap Gemini Ernst & Young in the UK said, "We have been working with Elcom's Pecos ASP technology for 3 years and our clients have expressed their satisfaction with the application service's ease of use and ease of implementation. As a result we are committed to extending the relationship into the provision of Business Recovery Services for Elcom's current and future customers." The Cap Gemini Ernst & Young Group is one of the world's largest providers of Consulting, Technology and Outsourcing services. The company helps businesses implement growth strategies and leverage technology. The organization employs approximately 53,000 people worldwide and reported 2002 global revenues of 7.047 billion euros. More information about individual service lines, offices and research is available at http://www.cgey.com Elcom International, Inc., (OTC Bulletin Board: ELCO) is a leading international provider of remotely-hosted eProcurement and private eMarketplace solutions. Through its elcom, inc. subsidiary, Elcom's innovative remotely-hosted technology establishes the next standard of value and enables enterprises of all sizes to realize the many benefits of eProcurement without the burden of significant infrastructure investment and ongoing content and system management. PECOS Internet Procurement Manager, elcom, inc.'s remotely-hosted eProcurement and eMarketplace enabling platform was the first "live" remotely-hosted eProcurement system in the world. Additional information can be found at http://www.elcominternational.com As reported in Troubled Company Reporter's March 18, 2003 edition, the Company announced its December 31, 2002 balance sheet shows a working capital deficit of about $500,000, while total shareholders' equity has shrunk to about $1.6 million from about $11 million at the year-ago date. The Company continues in its efforts to seek a strategic partner or investor(s) for the purpose of raising additional capital. Alternatively, the Company may seek to sell certain assets and/or rights to its technology in certain specific vertical markets and/or geographies. The Company believes that it has sufficient liquidity to fund operations into April 2003 without additional working capital becoming available. EL PASO: Completes Bank Facilities' Restructuring & Refinancing --------------------------------------------------------------- El Paso Corporation (NYSE: EP) has completed an important objective of its 2003 operational and financial plan by refinancing and restructuring its major bank facilities. "We are pleased with the support provided by our bank group that allowed for the completion of this important step in our operational and financial plan well ahead of schedule," said Ronald L. Kuehn, Jr., chairman and chief executive officer of El Paso Corporation. "These facilities provide significant value to all of our stakeholders as they further improve the company's liquidity position while simplifying and strengthening our balance sheet. They are designed to provide the company with the flexibility to aggressively reduce our leverage with our cash flow from operations and the proceeds from our asset sales program over the remainder of 2003 and 2004." New Credit Facilities The company has entered into a $3-billion revolving credit facility due June 2005, which replaces the company's previous $3-billion facility that had a one-year term-out option to May 2004. El Paso's existing $1-billion revolving facility, which matures in August 2003, and approximately $1 billion of other bank facilities (including leases, letters of credit and other facilities) will remain in place with no change in maturity. However, the key financial covenants of these facilities have been conformed to the $3-billion facility and they will share in the collateral being provided to that facility. In addition, the company restructured its approximately $750- million remaining outstanding Clydesdale preferred interests as a term loan that will amortize in equal quarterly amounts over the next two years. The term loan is secured by the assets currently supporting the Clydesdale transaction, consisting of a production payment from El Paso, various natural gas and oil properties, and El Paso's equity ownership in Colorado Interstate Gas Company. The $3-billion facility and the other bank facilities are secured by El Paso's equity interests in all of its 100-percent- owned pipelines (with the exception of Southern Natural Gas), the common and Series C units in El Paso Energy Partners that are currently owned by El Paso Corporation, and the equity interests in the El Paso subsidiaries that own the property securing the term loan. All of the facilities have a borrowing cost of LIBOR plus 350 basis points and letter of credit fees of 350 basis points. The key financial covenant in the facilities is a requirement for the company to maintain debt to total capitalization not in excess of 75 percent, as defined in the facilities. Next Steps of El Paso's Operational and Financial Plan "With the completion of this new bank facility, our recent agreement in principle to resolve the principal claims arising from the Western energy crisis, and the continuing progress of our 2003 non-core asset sale program, we have made significant strides toward the completion of the repositioning of El Paso," Mr. Kuehn added. "We are now focusing on the critical next steps of our operational and financial plan, including aggressive cost reductions, recovery of significant portions of our cash collateral, debt reduction, and other actions." These actions include: -- Targeting at least $250 million of additional pre-tax cost savings and business efficiencies beyond the $150 million previously announced by the end of 2004; -- Working to recover as promptly as practicable cash collateral currently committed to the company's trading, petroleum, refining, and other businesses; and -- Reducing the company's obligations senior to common stock by at least $2.5 billion by the end of 2003. El Paso's Board of Directors has formed a strategic planning committee to ensure that El Paso maximizes all opportunities inherent in its core businesses as the company moves forward with the 2003 operational and financial plan. "Our Board of Directors is committed to continuing the progress we have made under our plan in order to enhance the value of El Paso," Mr. Kuehn continued. "As we move beyond the repositioning phase of our plan, we will quickly and aggressively take actions to maximize value for all our shareholders." Financing Activity Update In order to further simplify its balance sheet, since year-end 2002 El Paso has: -- Refinanced the Clydesdale and Trinity River preferred interests of consolidated subsidiaries and restructured the related cash restrictions; -- Issued $700 million in senior unsecured notes at Southern Natural Gas Company and ANR Pipeline Company; -- Issued a $1.2-billion two-year guaranteed term loan secured by certain of the company's natural gas and oil properties; -- Repaid the $1-billion Limestone Notes in March; and -- Extended the maturity of its $3-billion revolving credit facility through mid-year 2005. To continue that process, the company expects to: -- Purchase the third-party equity in its Electron investment for $175 million in the second quarter of 2003, resulting in the consolidation of the assets and liabilities within that entity; -- Purchase the third-party equity in our Gemstone investment for $50 million in the second quarter of 2003, resulting in the consolidation of the assets and liabilities within that entity; and -- Repay the $1.2-billion two-year term loan issued in February 2003 through the issuance of longer-term debt in the capital markets in the second or third quarter of this year to eliminate the amortization requirements of that financing in 2004 and 2005. "We have significantly improved our liquidity over the last several months," said D. Dwight Scott, executive vice president and chief financial officer of El Paso Corporation. "While we will continue to manage our liquidity carefully, our focus in the coming months will be on implementing the additional steps of our plan that will strengthen our financial position and reduce debt at the company." In addition, the company filed the credit agreements and related documents with the SEC Wednesday in a Form 8-K. El Paso Corporation is the leading provider of natural gas services and the largest pipeline company in North America. The company has core businesses in pipelines, production, midstream services, and power. El Paso Corporation, rich in assets and fully integrated across the natural gas value chain, is committed to developing new supplies and technologies to deliver energy. For more information, visit http://www.elpaso.com EL PASO CORPORATION $3 BILLION REVOLVING CREDIT FACILITY SUMMARY Transaction: A $3 billion secured revolving credit facility with a $1.5 billion Letter of Credit sublimit. Maturity: June 30, 2005. Purpose: This transaction refinances the existing $3 billion 364-day revolving credit facility. Borrowers: There are four borrowers under the new revolving credit documents: -- El Paso Corporation -- ANR Pipeline Company -- El Paso Natural Gas Company -- Tennessee Gas Pipeline Company Guarantors: -- Guarantee by El Paso and the Subsidiary Guarantors (which include American Natural Resources Company, El Paso CNG Company, L.L.C., El Paso Tennessee Pipeline Co., and the legal entities that directly own the pledged equity interest) -- Pipeline Company Borrowers are only liable for the amount each Pipeline Company Borrower borrows. -- El Paso Natural Gas Company and Tennessee Gas Pipeline Company will continue as joint and several guarantors for approximately 120 days post closing and until completion of certain conditions. Collateral: The Secured Obligations to be equally and ratably secured by the Collateral listed on Annex I. Optional Prepayments: Permitted. Mandatory Commitment Reductions/Prepayments: Mandatory commitment reductions and/or prepayments will be required with respect to (i) the sale or disposition of the Series A Common Units and Series C Units of El Paso Energy Partners, L.P. that are pledged as Collateral (ii) the sale or disposition of pledged equity interests and (iii) subject to materiality thresholds and the failure to reinvest proceeds in FERC-regulated assets with respect to the Pipeline Company Borrowers within specified time periods, the sale or disposition of assets of the designated subsidiaries that are related to the subsidiary Guarantors. Fees: Commitment fees of 75 bps per annum. Applicable Rate: The applicable rate on all borrowings and issued LC's is LIBOR plus 350 bps. Key Financial Covenants: El Paso shall not permit the ratio of consolidated Debt and Guaranties of El Paso and its consolidated Subsidiaries (without duplication and determined as to all of the foregoing entities on a consolidated basis) to Capitalization of El Paso and its consolidated Subsidiaries (without duplication and determined as to all of the foregoing entities on a consolidated basis) to exceed 75%. Each Pipeline Company Borrower shall not, and shall not permit its consolidated Subsidiaries to, incur Debt or liabilities under Guaranties if, after giving effect thereto, the ratio of consolidated Debt and Guaranties of such Pipeline Company Borrower and its consolidated Subsidiaries to EBITDA would exceed 5 to 1. The proceeds of any such Debt or Guaranties are to be used only for maintenance and expansion expenditures or investments in other FERC-regulated assets (other than acquisitions of other companies or business divisions). ANNEX I COLLATERAL FOR THE SECURED OBLIGATIONS The equity interest in each of the Subsidiaries of El Paso as described below, together with the EPN Units, will be pledged as Collateral for the $3 Billion Facility and the other Secured Obligations: Tennessee Gas Pipeline Related Collateral Pledge of 100% of the outstanding equity interests in Tennessee Gas Pipeline Company. Bear Creek Storage Related Collateral Pledge of 100% of the outstanding equity interests in Tennessee Storage Company, which owns 50% of the outstanding equity interests in Bear Creek Storage Company. Pledge of 100% of the outstanding equity interests in Southern Gas Storage Company, which owns 50% of the outstanding equity interest in Bear Creek Storage Company. ANR Pipeline Related Collateral Pledge of 100% of the outstanding equity interests in (i) ANR Pipeline Company and (ii) ANR Storage Company. EPNG Pipeline Related Collateral Pledge of 100% of the outstanding equity interests in El Paso Natural Gas Company. Mojave Pipeline Company Related Collateral Pledge of 100% of the outstanding equity interests in El Paso Mojave Pipeline Company, which owns 50% of the outstanding equity interests in Mojave Pipeline Company. Pledge of 100% of the outstanding equity interests in EPNG Mojave Inc., which owns 50% of the outstanding equity interests in Mojave Pipeline Company. Wyoming Interstate Related Collateral Pledge of 100% of the outstanding equity interests in (i) CIG Gas Supply Company, which owns the sole general partner interest in Wyoming Interstate Company Ltd.; and (ii) Wyoming Gas Supply Inc., which owns the sole limited partner interest in Wyoming Interstate Company Ltd. Mustang (Clydesdale) Related Collateral (CIG Pipeline) Pledge of 100% of the outstanding equity interests in Noric Holdings III, L.L.C., which is the owner of 100% of the outstanding equity interests in Colorado Interstate Gas Company. Mustang (Clydesdale) Related Collateral (Non-CIG Pipeline) Pledge of 100% of the outstanding equity interests in Noric Holdings I, L.L.C. and Noric Holdings IV, L.L.C., which owns directly 100% of the outstanding equity interests in the entities that hold the natural gas and oil assets and production payments within the Mustang structure. El Paso Energy Partners, L.P. Units Pledge of 11,674,245 Series A Common Units and 10,937,500 Series C Units issued by El Paso Energy Partners, L.P. EL PASO CORPORATION $753 MILLION TERM LOAN SUMMARY Transaction: A $753 million amortizing secured term loan. Maturity: February 7, 2005 Purpose: To refinance the remaining $753 million Clydesdale preferred interests. Borrowers: There are four borrowers: -- Noric Holdings, LLC -- Noric Holdings I, LLC -- Noric Holdings III, LLC -- Noric Holdings IV, LLC Guarantor: El Paso Corporation. Collateral: The loan is equally and ratably secured by the assets pledged in the existing Clydesdale transaction which consist of a production payment from El Paso, various oil and natural gas properties, and El Paso's equity ownership interest in Colorado Interstate Gas Company. Optional Prepayments: Permitted. Amortization: $100,000,000 due quarterly through November, 2004. Remaining amounts are due on the final payment date, February 7, 2005. Applicable Rate: At closing, the applicable rate all borrowings Is LIBOR plus 396 bps Covenants: Similar to existing Clydesdale Covenants and modified, as it relates to El Paso, to conform to El Paso's $3 billion revolving credit facility. El Paso Corp.'s 6.950% bonds due 2007 (EP07USR1) are trading at 83 cents-on-the-dollar. For real-time bond pricing, go to http://www.debttraders.com/price.cfm?dt_sec_ticker=EP07USR1 EMAGIN CORP: Dec. 31 Balance Sheet Insolvency Widens to $13 Mil. ---------------------------------------------------------------- eMagin Corporation (AMEX:EMA) reported results for its fourth quarter and full year ended December 31, 2002. Revenue for the fourth quarter ended December 31, 2002 was $1.20 million, up 17% compared to revenue for the fourth quarter of 2001, and up sequentially 142% from the third quarter of 2002. The company reported a net loss for the fourth quarter of 2002 of $1.67 million, or $0.05 per share, a 70% improvement when compared to the net loss for the fourth quarter of 2001 of $5.58 million, or $0.22 per share. For the twelve months ended December 31, 2002, revenues were $2.13 million and the net loss was $14.91 million, or $0.51 per Common Share, as compared to revenue of $5.85 million with a loss of $68.49 million, or $2.73 per share, for the 2001 fiscal year. This represents a reduction in revenue of 64%, and a reduction in loss of 78%. The revenue reduction was primarily based on the company transitioning from contract R&D to product sales, under a highly constrained working capital situation. 2002 product sales revenue increased to $1.29 million in 2002 from $0.84 million in 2001, a 53% increase, representing the beginning of eMagin's shift from primarily government contracts to product sales. Expenses were reduced significantly during 2002 as a result of cost cutting measures including staff reductions in 2001, as well as smaller writedowns of intangibles and goodwill during 2002. The Company's December 31, 2002 balance sheet shows a working capital deficit of about $13 million and a total shareholders' equity deficit of about $13 million. "In the fourth quarter, we continued to successfully work with our customers to build the market demand for our award winning OLED microdisplays while improving our yields and cost structure," said Gary Jones, eMagin's chief executive officer, and president. "Considerable progress was made in microdisplay product refinements. We managed to increase our display product revenue by improving efficiency and working closely with key customers. Yet, in spite of the increasing demand for our products, 2002 was a difficult year in which we struggled without adequate supplies and working capital. Restructuring of debt and payables to prepare the company for a potential recovery has been a challenging and ongoing task, but we now have a leaner cost structure and we expect to achieve a more efficient business with a more effective organizational framework during 2003." Mr. Jones continued, "We have a backlog of approximately $27 million in purchase agreements and purchase orders to fill, and we continue to see robust new business prospects for our OLED microdisplay products. The opportunities for entertainment game systems, industrial applications, and the military are all moving forward solidly, and we continue to maintain our technology leadership and deepen our relationship with key customers to take the technology and the market to the next level of deployment. While our lack of financial resources in 2002 and early 2003 is likely to continue to constrain the company until resolved, the opportunity for eMagin's business plan to succeed appears to improving, and we remain committed to examining all options available to rectify our financial situation." eMagin, the first company worldwide to commercialize active matrix OLED-on-silicon microdisplays, is currently providing full color SVGA+ resolution microdisplays with 1.53 million picture elements and stereovision-capable SVGA-3D microdisplays with 1.44 million picture elements. OLED microdisplays offer a number of advantages over current liquid crystal microdisplays, including increased brightness, lower power consumption, less weight, faster response time, and angular emission characteristics more suitable for optical systems offering wide fields of view. Because the emissive OLED microdisplay requires no backlight and has system functionality built into the display, the entire system is more compact than previous high- resolution display systems. All the imaging data is stored at each pixel between frames, eliminating the flicker and breakup observed on many other display systems when the user is actively mobile. Selected highlights of the year 2002 include: -- Announced selection of its OLED microdisplay for the Helmet Mounted Display for the US Army Land Warrior Program. Land Warrior, a core program in the Army's drive to digitize the battlefield, is an integrated digital system that incorporates computerized communication, navigation, targeting, and protection systems for use by the twenty-first century infantry soldier. Kaiser Electro-Optics, a Rockwell Collins company and the principal contractor for the US Army HMD system, and eMagin are applying their respective expertise in HMD and imaging technology to develop rugged, yet lightweight and energy efficient military systems. -- Announced that Liteye selected eMagin's high resolution SVGA+ OLED microdisplays for the wearable computer applications it will manufacture under a license agreement with IBM and in innovative thermal imaging products which can detect objects in total darkness as well as harsh combat and environmental conditions, and pinpoints heat generating objects through smoke, fog, dust, and total darkness. Liteye disclosed that it had begun shipping products using eMagin's display technologies to over 25 of its industrial and military customers with excellent feedback. -- Announced that ROHM Company LTD, one of the largest Japanese semiconductor and electronic component manufacturers, had made a strategic investment in eMagin to purchase shares and warrants to purchase additional shares for an investment of $1 million. . -- Presented the first US showing of a binocular headset with built-in stereovision capability. The integrated SVGA-3D OLED is the world's first display to have left and right eye stereovision capability embedded directly in the display substrate, an advancement which will reduce cost, weight, and power requirements for OEM customers who are building stereovision PC games, CAD systems, and simulation systems for consumer, industrial, and military applications. -- Demonstrated the world's first binocular headset with combined real-time 3D and headtracking. The headtracker allows a high degree of user immersion, with the 3D graphic environment changing real time as the player moves his or her head. -- Presented the first public showing of eMagin's SVGA+ See- Through OLED display. The see-through display provides a green emitter image through a combiner optic with luminance capability of over 1,000 cd/m2 for potential applications including military targeting and industrial overlay. -- Technical innovations included a patent for a "sandwich" structure device which can significantly increase lifetime and luminance in OLED displays. The invention is potentially most useful in manufacturing OLED displays that require operation at high luminance levels, such as aircraft HMDs and sunlight- readable displays, or in applications with frequent long-term fixed image patterns such as instrument displays. -- Announced receipt of Dual Use Science and Technology Achievement Award from the Department of Defense, recognizing key technology eMagin has developed in cooperation with the US Air Force for development of a high performance imaging display to be integrated in military helmet-mounted display systems. -- Announced receipt of Electronic Products Product-of-the-Year Award for the development of the SVGA+ high-resolution active matrix OLED microdisplay, designating the display as one of the most significant of the thousands of new products introduced during the year, based on advances in technology or its application, a decided innovation in design, or a substantial gain in price-performance. The world leader in organic light emitting diode-on-silicon technology, eMagin combines integrated circuits, microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin invented the award-winning SVGA+ and SVGA-3D OLED microdisplays, the world's first single-chip color video OLED microdisplay and embedded controller for advanced virtual imaging. eMagin's microdisplay systems are expected to enable new mass markets for wearable personal computers, wireless Internet appliances, portable DVD- viewers, digital cameras, and other emerging applications for consumer, industrial, and military applications. OLED microdisplays demonstrate performance characteristics important to military and other demanding commercial and industrial applications including low power consumption, high brightness and resolution, wide dimming range, wider temperature operating ranges, shock and vibration resistance, and insensitivity to high G-forces. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its campus in East Fishkill, N.Y. Optics and system design facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. Additional information is available at http://www.emagin.com ENRON CORP: Court Okays 2nd Modification to Leboeuf's Retention --------------------------------------------------------------- Enron Corporation and its debtor-affiliates sought and obtained Court approval to expand the scope of LeBoeuf, Lamb, Green & MacRae, LLP's retention, nunc pro tunc to November 1, 2002, as Enron Corporation and its debtor-affiliates' special counsel for the continued representation in or with respect to matters that LeBoeuf has historically handled for the Debtors or where it has unique expertise, like the sale or assignment of retail and wholesale power contracts, certain state and federal regulatory matters, to expand the scope of the retention nunc pro tunc to November 1, 2002. In addition, the Debtors obtained the Court's authority to pay LeBoeuf its customary hourly rates as they may be adjusted from time to time for services rendered and to reimburse its out-of-pocket expenses. Irena M. Goldstein, Esq., at LeBoeuf, Lamb, Greene & MacRae, LLP, in New York, relates that recently the Debtors asked LeBoeuf to represent them in connection with certain additional matters: A. Certain Enron Broadband Services Matters The Debtors want LeBoeuf to represent Enron Broadband Services, Inc. in connection with the sales of assets and negotiation and documentation of settlements of various EBS contracts. While LeBoeuf has not historically represented EBS on these types of transactions or matters prepetition, this type of work is substantially similar to the contract sale and settlement work it has been handling for other Enron entities in these cases, namely Enron Energy Services, Inc. and Enron Power Marketing, Inc. While the Debtors believe that these matters are likely within the scope of the matters for which it has been retained by the Debtors in these cases, the Debtors seek a Court order out of abundance of caution. B. Adversary and Litigation Matters The Debtors ask LeBoeuf to represent Enron North America Corp., Enron Power Marketing, Inc. and Enron Corp. in adversary proceedings currently pending, or potentially to be commenced depending on the outcome of various settlement discussions, as well as in certain cases related to state or federal district court litigation matters. These matters include litigation involving the Debtors' prepetition relationships with lenders, power purchasers and sellers, issuers and beneficiaries of letters of credit and similar types of adversary or litigation matters. While LeBoeuf has historically provided substantial services to these Debtors, it has not historically provided substantial litigation services for the Debtors outside the regulated energy arena. Certain of these requests for LeBoeuf to provide services of the Litigation Matters arise from the Debtors' desire to transfer responsibility for the particular matter from another law firm to LeBoeuf and other new matters that the Debtors have requested it to handle in certain cases due to conflicts of other counsel in these cases. Ms. Goldstein reports that LeBoeuf agreed to undertake these representations. So as not to have any duplication of responsibilities, LeBoeuf will coordinate its efforts with Weil, Gotshal & Manges. (Enron Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) EXIDE TECH: Wants Approval for Hamburg Superfund Stipulation ------------------------------------------------------------ Kathleen Marshall DePhillips, Esq., at Pachulski Stang Ziehl Young Jones & Weintraub, P.C., in Wilmington, Delaware, relates that prior to the Petition Date, the United States of America brought a suit against Exide Corporation in the United States District Court for the Eastern District of Pennsylvania (C.A. No. 00-CV-3057). The government sought to recover costs associated with the Hamburg Lead Superfund Site. The parties entered into a stipulation to avoid unnecessary discovery and litigation costs. Accordingly, the Debtors ask the Court to approve the Joint Stipulation Concerning Costs Involving the Hamburg Lead Superfund Site. The salient terms of the Stipulation are: A. The Environmental Protection Agency Cost Summary Report dated July 9, 2002 accurately summarizes the costs identified by EPA's financial management system as having been spent at or in connection with the Hamburg Lead Superfund Site. These costs are referred to as "Past Response Costs." B. The United States has incurred at least $6,816,346.59, including prejudgment interest, in response costs at or in connection with the Hamburg Lead Superfund Site. These costs include: -- direct and indirect costs incurred by EPA through February 28, 2002 amounting to $5,699,323.73; -- costs incurred by the Department of Justice through February 2002 amounting to $193,579.28; -- costs incurred by the Agency for Toxic Substances and Disease Registry through March 9, 2002 amounting to $378,167.99; and -- pre-judgment interest amounting to $545,275.59 incurred through July 1, 2002 on all of these costs. C. All Past Response Costs are recoverable under Section 107 of the Comprehensive Environmental Response, Compensation and Liability Act, and were incurred not inconsistent with the National Contingency Plan. D. Pre-judgment interest on the Past Response Costs, recoverable under Section 107 of CERCLA, 42 U.S.C. Section 9607, began to accrue on September 1, 1999. E. Pre-judgment interest through July 9, 2002 is $545,275.59. Additional interest accrues daily. F. Without waiving any right of appeal on the issue of liability, defendant Exide stipulates to entry of a judgment on costs amounting to $6,475,529.20 in reimbursement of Past Response Costs. G. The $6,475,529.20 represents 95% of the Past Response Costs and pre-judgment interest, as documented in the Attached Cost Summary Report dated July 9, 2002. H. Response Costs incurred since February 2002, and pre-judgment interest from July 9, 2002, are "Future Response Costs." I. Defendant Exide stipulates to entry of a declaratory judgment pursuant to Section 113(g)(2) of CERCLA, 42 U.S.C. Section 9613(g)(2), establishing that Exide is liable for response costs incurred with respect to the Site, that will be binding in any subsequent actions to recover Future Response Costs incurred by the United States in connection with the Site. J. Exide may challenge Future Response Costs only on the basis of accounting errors or inconsistency with the National Contingency Plan, 40 C.F.R. Part 300. Exide will bear the burden of proving accounting errors or inconsistency with the NCP. K. The United States may only seek enforcement of the judgments for Past Response Costs and Future Response Costs in the Bankruptcy Court for the District of Delaware as part of Exide's bankruptcy proceeding. L. The United States' Proof of Claim to be filed in Exide's bankruptcy proceeding will contain the United States' estimate of Future Response Costs as of the date of filing of the Proof of Claim. The United States will periodically provide the Bankruptcy Court with an update of the United States' Future Response Costs. (Exide Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service, Inc., 609/392-0900) FAO, INC.: Plan Back on Track & Expects to Emerge Next Week ----------------------------------------------------------- FAO, Inc. (Nasdaq: FAOOQ), said last week that additional support from its vendors and lenders allowed it to reach agreement on final terms with its new lenders, led by Fleet Retail Finance and the group of investors purchasing $30 million of the Company's convertible preferred stock. The group is led by Hancock Partners and Kayne Anderson Capital Advisors and includes Fred Kayne, Chairman of FAO, Inc., Richard Kayne, a board member and Chief Executive Officer of Kayne Anderson, and Saks Incorporated. In addition, the Company announced that its right to use cash collateral has been extended through Thursday, April 24, 2003. The extension was consented to by the Company's existing lenders at a hearing this morning at the U.S. Bankruptcy Court for the District of Delaware before The Honorable U.S. Bankruptcy Judge Lloyd King. As a result, Company now expects its confirmed plan of reorganization to become effective early next week, at which point the Company will emerge from bankruptcy and begin making distributions to creditors pursuant to the terms of the Plan. FAO, Inc., along with its wholly-owned subsidiaries, is a specialty retailer of high-quality, developmental, educational and care products for infants and children and high quality toys, games, books and multimedia products for kids through age 12. The Company filed for Chapter 11 protection on January 13, 2003 (Bankr. Del. Case No. 03-10119). Rebecca L. Booth, Esq., Mark D. Collins, Esq., and Daniel J. DeFranceschi, Esq., at Richards, Layton & Finger, P.A. and David W. Levene, Esq., and Anne E. Wells, Esq., at Levene, Neale, Bender, Rankin & Brill represent the Debtors in their restructuring efforts. When the Company filed for protection from its creditors, it listed $257,400,000 in total assets and $238,374,000 in total debts. FLEMING COMPANIES: Seek Nod for Proposed Trade Lien Agreement ------------------------------------------------------------- Fleming Companies, Inc., has taken a number of key actions intended to strengthen its liquidity, further support trade vendors and assist its restructuring efforts as it proceeds through the Chapter 11 process. Specifically, the company filed a motion in the U.S. Bankruptcy Court in Wilmington, Delaware, seeking approval for: -- a $150 million senior secured debtor-in-possession (DIP) financing facility; and -- the creation of a trade lien on company assets to provide further financial assurance and protection to trade vendors and to restore trade terms from the vendors who participate in the trade lien program. Pete Willmott, Interim President and Chief Executive Officer, said, "Fleming is focused on continuing to stabilize its operations and ensuring timely and reliable distribution to customers. We recognize that this can be accomplished only through building liquidity for our company, and providing further financial assurances and protections to trade vendors, who are key to our ability to effectively serve customers. "The actions that we are taking are intended to provide our company with a solid foundation on which to move forward in this process - both immediately and into the longer run - and we are hopeful that we will gain the court's approvals of this important motion." The motion is scheduled to be heard by the Court in a hearing scheduled for April 21, 2003. Proposed $150 Million Dip Financing Package Fleming's proposed $150 million DIP facility will be used to supplement the company's existing cash flow during its restructuring process. The $150 million DIP financing is inclusive of the $50 million interim funding commitment that the company received as a bridge on April 3, 2003. The lead lenders in the DIP financing package are Deutsche Bank Trust Company Americas and JP Morgan Chase Bank. Proposed Trade Lien Agreement Under Fleming's proposed trade lien agreement, trade vendors who meet certain requirements - such as agreeing to ship to the company and restoring trade terms - will be eligible to participate in a lien on the company's assets. This proposed program has been agreed upon in principle with the Unsecured Creditors Committee and the company's bank group. "This is a key vendor support program that should provide steady product flow to Fleming, thereby strengthening relations with vendors and improving service to customers, " said Mr. Willmott. Fleming Companies, Inc. and its operating subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on April 1, 2003. The filings were made in the U.S. Bankruptcy Court in Wilmington, Delaware. The case has been assigned to the Honorable Judge Mary F. Walrath under case number 03-10945 (MFW) (Jointly Administered). Fleming's court filings are available via the court's Web site at http://www.deb.uscourts.gov Fleming is a leading supplier of consumer package goods to independent supermarkets, convenience-oriented retailers and other retail formats around the country. To learn more about Fleming, visit the firm's Web site at http://www.fleming.com Fleming Companies Inc.'s 10.125% bonds due 2008 (FLM08USR1) are presently trading between 15.5 to 16.5 . See http://www.debttraders.com/price.cfm?dt_sec_ticker=FLM08USR1for real-time bond pricing. FLEMING: Judge Walrath Waives Investment & Deposit Requirements --------------------------------------------------------------- Section 345(a) of the Bankruptcy Code authorizes a debtor-in- possession to deposit or invest the money of a bankruptcy estate in a manner that will "yield the maximum reasonable net return on such money, taking into account the safety of such deposit or investment." For deposits or investments that are not "insured or guaranteed by the United States or by a department, agency, or instrumentality of the United States or backed by the full faith and credit of the United States," Section 345(b) provides that the estate must require from the entity with which the money is deposited or invested a bond in favor of the United States secured by the undertaking of an adequate corporate surety. However, Fleming Companies, Inc., and its debtor-affiliates believe that they do not have to satisfy the investment and deposit restrictions under Section 345. The Debtors intend to continue investing their cash in accordance with their typical investment practices. The Debtors explain that their investment account with the Bank of Montreal -- which they plan to maintain after the Petition Date -- is used only as an overnight sweep account for funds received from their Canadian Debtor entities. Typically, no more than CND2,000,000 to CND3,000,000 are held in the Bank of Montreal Account at any given time. The Debtors note that the Bank of Montreal is a well-known and fiscally strong institution and provides critical services to the management of their funds in their Canadian operations. The Debtors insist that their present investment practices already provide sufficient protection for their cash. At the First Day Hearing, Judge Walrath waives the investment and deposit requirements under Bankruptcy Code Section 345. (Fleming Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) GENTEK: Court Approves Babst Calland as Environmental Counsel ------------------------------------------------------------- GenTek Inc. and its debtor-affiliates sought and obtained the Court's authority to employ Babst Calland as their national environmental counsel beginning March 1, 2003. Having a nationally recognized practice in environmental laws, Babst Calland will handle all environmental matters arising during the pendency of the Debtors' cases. Babst Calland has been representing the Debtors for more than 11 years in numerous environmental matters affecting the Debtors in various states. The Debtors note that the firm's lead environmental counsel has been, and will likely continue to be, Dean A. Calland, who will also oversee the work of other Babst Calland professionals on behalf of the Debtors and their estates. The litigation services will be provided by Chester Babst and Mark Shepard. The Debtors will pay Babst Calland for its services in accordance with the firm's customary hourly rates. Babst Calland's rates are: Hourly Rates Professional ------------ ------------ $215 - 325 Shareholders 130 - 200 Associates 55 - 105 Paraprofessionals (GenTek Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service, Inc., 609/392-0900) GEORGIA GULF: Fitch Affirms BB+/BB- Senior Sec. & Unsec. Ratings ---------------------------------------------------------------- Fitch Ratings affirmed Georgia Gulf Corporation's senior secured debt rating at 'BB+' and its senior subordinated debt at 'BB-'. The Rating Outlook is Stable. The ratings affirmation reflects Georgia Gulf's overall financial performance and cost improvements in 2002; integration in the vinyls chain; its market position; its solid cash flow and its debt level. Georgia Gulf's revenue and EBITDA strengthened in 2002 over 2001 levels and total debt (including A/R program balance) declined to $552 million at Dec. 31, 2002. Improved profitability was driven by higher volumes in both polyvinyl chloride resins and compounds as well as lower energy and raw material costs relative to 2001 levels. As a result, leverage improved to 3.3 times (with A/R program balance) from 5.8x at YE 2001 and interest coverage improved to 3.3x from 1.9x at YE 2001. In addition to these operating improvements, Georgia Gulf lowered its interest expense by replacing Term Loans A and B with Term Loan C at a slightly lower (25 bps) interest rate and extended the payments over a longer period. The company also reinstated its $75 million A/R securitization program in Q4 2002 which also lowered interest expense. The company has remained cash flow positive during the cyclical downturn. The Stable Rating Outlook indicates the likelihood that the company's near-term financial performance would not significantly deteriorate despite margin pressure in 2003. Financial performance is expected to weaken in 2003 from 2002 levels due to higher average costs and uncertain demand strength. However, the expected weaker performance remains within the current rating category. Georgia Gulf is one of the major producers of PVC resin in the U.S. The company also produces vinyl chloride monomer, vinyl compounds, chlorine, caustic soda, phenol and acetone. Among other things, its products are used in PVC pipe, vinyl siding, window and door frames, adhesives, compact discs and cars. In 2002, Georgia Gulf had revenue of $1.2 billion and EBITDA of approximately $166 million. GENUITY INC: Signing-Up LeBoeuf Lamb as Disputes Special Counsel ---------------------------------------------------------------- Genuity Inc., and its debtor-affiliates seek the Court's authority to employ the law firm of LeBoeuf, Lamb, Greene & MacRae, L.L.P. as their special counsel. Don S. DeAmicis, Esq., at Ropes & Gray, in Boston, Massachusetts, informs the Court that the Debtors have asked LeBoeuf to consult with them as special counsel for the purpose of assisting them in investigating and prosecuting certain customer and vendor disputes. In particular, LeBoeuf has been retained to pursue litigation against numerous large customers of the Debtors for non-payment of services rendered. These claims have a cumulative face value in excess of $100,000,000. It is also anticipated that many defendants will assert defenses and counterclaims based on the Debtors' performance under the contracts in question. According to Mr. DeAmicis, LeBoeuf is a national firm with experience representing debtors, trustees, creditors committees and equity committees in large and complex cases involving corporate, litigation, environmental, insurance and other matters and is qualified to represent the Debtors. To pursue the anticipated litigation, the Debtors require the particular services of Paul R. Gupta, a member of LeBoeuf. Mr. Gupta has personally performed a substantial amount of work for the Debtors and for the predecessor of Genuity Inc., and is familiar both with the businesses of the Debtors and with the contractual issues in the customer and vendor disputes. LeBoeuf Member Peter Ivanick assures the Court that the Firm: A. does not have any connection with any of the Debtors, their affiliates, the creditors and any other party-in- interest, the United States Trustee, the Assistant United States Trustee, or the attorney to that office assigned to these cases; B. is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code; and C. does not hold or represent any interest adverse to the estates. However, Mr. Ivanick discloses that LeBoeuf currently represents or has represented various creditors or affiliates of the Debtors' creditors in matters unrelated to the Debtors, including: Allegiance Telecom Company Worldwide, AOL Time Warner Inc., BellSouth Telecommunications Inc., BNP Paribas, Deutsche Bank AG, Fleet Business Credit, Fleet Capital Corporation, Hewlett Packard Company, JP Morgan Chase Bank, Lucent Technologies Inc., MCI WorldCom Network Services, Mizuho Corporate Bank Ltd., Quest Communications Corp., Sun Life Assurance Co. of Canada, Time Warner Telecom Inc., WilTel Communications Group Inc., and XO Communications Inc. Mr. Ivanick informs the Court that LeBoeuf will charge the Debtors its standard hourly rates plus expenses for services rendered. The customary and current standard hourly rates charged by LeBoeuf for the services to be rendered to the Debtors are: Partners and Counsel $420 - 625 Associates 190 - 435 Paralegals and Clerks 105 - 195 These hourly charges may be increased in the ordinary course from time to time during the pendency of these cases. LeBoeuf will apply for payment of fees and expenses pursuant to the terms and provisions of the Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, the Local Rules of this Court and the U.S. Trustee Guidelines pertaining to the payment of retained professionals. LeBoeuf will maintain detailed records of the nature of services rendered and the time spent and necessary expenses incurred in rendering the professional services on the Debtors' behalf. Due to the need for immediate assistance in investigating and prosecuting customer and vendor disputes, at the Debtors' request, LeBoeuf began providing legal services to the Debtors on March 3, 2003. The Debtors submit that LeBoeuf's employment nunc pro tunc to March 3, 2003 is, therefore, appropriate in these cases. (Genuity Bankruptcy News, Issue No. 10; Bankruptcy Creditors' Service, Inc., 609/392-0900) GLOBAL CROSSING: Releases February Operating Results ---------------------------------------------------- Global Crossing filed its Monthly Operating Report (MOR) with the U.S. Bankruptcy Court for the Southern District of New York, as required by its Chapter 11 reorganization process. Unaudited results reported in the February 2003 MOR include the following: For continuing operations in February 2003, Global Crossing reported consolidated revenue of approximately $222 million. Consolidated access and maintenance costs were reported as $168 million, while other operating expenses were $63 million. "While February proved to be a challenging month, we did see some bright spots in our business," said John Legere, Global Crossing's chief executive officer. "Although our overall revenues were slightly lower in February due in part to fewer calendar days, our gross profit margin improved. We also made strides in February to drive our EBITDA closer to profitability." Global Crossing reported a consolidated cash balance of approximately $604 million as of February 28, 2003. The cash balance is comprised of approximately $226 million in unrestricted cash, $331 million in restricted cash and $47 million of cash held by Global Marine. Global Crossing reported a consolidated net loss of $142 million for February 2003. February's net loss increased from January primarily due to foreign exchange losses. Consolidated EBITDA was posted at a loss of $8 million. MOR RESULTS MONTHLY RESULTS DECEMBER THROUGH FEBRUARY 2003 CONSOLIDATED CONSOLIDATED NET INCOME MONTH REVENUE EBITDA (LOSS) ------------- ------------ ------------- --------------- February 2003 $222 million $(8) million $(142) million January 2003 $236 million $(11) million $(93) million December 2002 $178 million* $(82) million $192 million** * $238 million before the impact of restating certain transactions involving exchanges of capacity. ** Reflects $389 million of gains on settlements, other income items, and tax benefits. Notes The MOR reports revenue and cash balances according to generally accepted accounting principles in the United States of America (US GAAP). US GAAP revenue includes revenue from sales of capacity in the form of indefeasible rights of use (IRUs) that occurred in prior periods, recognized ratably over the lives of the relevant contracts. Beginning on October 1, 2002, Global Crossing ceased recognizing revenue from exchanges of leases of capacity. The information contained in this press release is qualified in its entirety by reference to the MORs for the months of February 2002 through February 2003, including the footnotes to the financial statements contained therein, copies of which are available through the U.S. Bankruptcy Court for the Southern District of New York and on Global Crossing's Web site at http://www.globalcrossing.com/pdf/investors/inv_mor_feb_03.pdf. These MORs have been prepared pursuant to the requirements of the Bankruptcy Code and the unaudited consolidated financial statements contained in these MORs do not include all footnotes and certain financial presentations normally required under GAAP. In addition, any revenues, expenses, realized gains and losses, and provisions resulting from the reorganization and restructuring of Global Crossing are reported separately as reorganization items in these MORs. As discussed more fully in the footnotes to the financial statements contained in the MORs, Global Crossing has not yet filed its Annual Report on Form 10-K for the year ended December 31, 2001. On November 25, 2002, the United States Trustee appointed Martin E. Cooperman, a partner of Grant Thornton LLP, as the Examiner in Global Crossing's bankruptcy proceedings. In general, the Examiner's role is limited to reviewing the financial statements of the Global Crossing companies in bankruptcy for the fiscal years ended December 31, 2001 and 2002 and earlier periods if any restatement of those periods is necessary. As part of his role, the Examiner, with the assistance of Grant Thornton LLP, will audit any revised financial statements and issue a report as to such financial statements. Separately, on January 8, 2003, Grant Thornton was appointed as independent auditors of Global Crossing effective as of November 25, 2002. The Examiner's first interim report to the Bankruptcy Court was filed on February 24, 2003. Certain matters relating to Global Crossing's accounting for, and disclosure of, concurrent transactions for the purchase and sale of telecommunications capacity between Global Crossing and its carrier customers are being investigated by the Securities and Exchange Commission (SEC) and other governmental authorities. In addition, the U.S. Department of Labor is conducting an investigation into the administration of Global Crossing's benefit plans. These and other investigations are described more fully in footnote one to the financial statements contained in the February MOR. Any changes to the financial statements resulting from any governmental investigations and adjustments arising out of the 2001 and 2002 financial statement audits could materially affect the unaudited consolidated financial statements contained in the MORs and the information presented in this press release. On October 21, 2002, Global Crossing announced that it would restate certain financial statements previously filed with the SEC. These restatements, which are more fully described in footnote one to the financial statements contained in the February MOR, will record exchanges between carriers of leases of telecommunications capacity at historical carryover basis, resulting in no recognition of revenue. Reflecting this accounting treatment, the February MOR excludes amounts previously recognized as revenue over the lives of the lease contracts governing these capacity exchanges. The restatements have no impact on cash flow. As previously announced, Global Crossing's net loss for the three months ended December 31, 2001, which has not yet been reported pending the completion of the audit of financial statements for 2001, is expected to reflect the write-off of the remaining goodwill and other intangible assets, which total approximately $8 billion. Furthermore, as previously disclosed, Global Crossing has determined that it will write down its tangible assets in light of the terms contained in the previously announced agreement with Hutchison Telecommunications and Singapore Technologies Telemedia, and the bankruptcy filings of Asia Global Crossing and its subsidiary, Pacific Crossing Ltd. Global Crossing is in the process of evaluating its cash flow forecasts and other pertinent data to determine the amount of the impairment of its long-lived tangible assets. The impairment is now anticipated to be at least $7 billion, an estimate that excludes any amounts attributable to the restatement of exchanges of capacity leases described above and excludes any impairment attributable to the assets of Asia Global Crossing and its subsidiaries, which Global Crossing deconsolidated effective November 18, 2002. The financial information included within this press release and the February MOR reflects the restatement of exchanges of capacity leases as described above and the $8 billion write-off of all of the goodwill and other identifiable intangible assets, but does not reflect any write-down of tangible asset value. Accordingly, the net loss of $142 million for the month of February 2003 would have been reduced substantially if the financial statements in the February MOR had reflected the reduction in depreciation and amortization expense resulting from this tangible asset write- down. The write- off of the intangible assets and the write- downs of tangible assets are described more fully in the February MOR. ABOUT GLOBAL CROSSING Global Crossing provides telecommunications solutions over the world's first integrated global IP-based network, which reaches 27 countries and more than 200 major cities around the globe. Global Crossing serves many of the world's largest corporations, providing a full range of managed data and voice products and services. On January 28, 2002, Global Crossing Ltd. and certain of its subsidiaries (excluding Asia Global Crossing and its subsidiaries) commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York (Bankruptcy Court) and coordinated proceedings in the Supreme Court of Bermuda (Bermuda Court). On the same date, the Bermuda Court granted an order appointing joint provisional liquidators with the power to oversee the continuation and reorganization of the Bermuda-incorporated companies' businesses under the control of their boards of directors and under the supervision of the Bankruptcy Court and the Bermuda Court. Additional Global Crossing subsidiaries commenced Chapter 11 cases on April 23, August 4 and August 30, 2002, with the Bermuda incorporated subsidiaries filing coordinated insolvency proceedings in the Bermuda Court. The administration of all the cases filed subsequent to Global Crossing's initial filing on January 28, 2002 has been consolidated with that of the cases commenced on January 28, 2002. Global Crossing's Plan of Reorganization, which was confirmed by the Bankruptcy Court on December 26, 2002, does not include a capital structure in which existing common or preferred equity will retain any value. Global Crossing expects to emerge from bankruptcy in the first half of 2003. On November 18, 2002, Asia Global Crossing Ltd., a majority- owned subsidiary of Global Crossing, and its subsidiary, Asia Global Crossing Development Co., commenced Chapter 11 cases in the United States Bankruptcy Court for the Southern District of New York and coordinated proceedings in the Supreme Court of Bermuda, both of which are separate from the cases of Global Crossing. Asia Global Crossing has announced that no recovery is expected for Asia Global Crossing's shareholders. Asia Netcom, a company organized by China Netcom Corporation (Hong Kong) on behalf of a consortium of investors, has acquired substantially all of Asia Global Crossing's operating subsidiaries except Pacific Crossing Ltd., a majority-owned subsidiary of Asia Global Crossing that filed separate bankruptcy proceedings on July 19, 2002. Global Crossing no longer has control of or effective ownership in any of the assets formerly operated by Asia Global Crossing. Visit http://www.globalcrossing.comfor more information about Global Crossing. GOODYEAR TIRE: USWA Agrees to Day-to-Day Contract Extension ----------------------------------------------------------- Goodyear (NYSE: GT) and the United Steelworkers of America have agreed to extend their contract on a day-to-day basis. The contract covering USWA members at 11 plants was due to expire at midnight on Saturday. Contracts at three Kelly-Springfield plants expire in July. Either side can end the day-to-day agreement with 72-hour notification. Jim Allen, Goodyear's director of global labor relations, and Andrew Palm, USWA vice president of administration, said the extension gives negotiators an opportunity to further consider and discuss proposals in this particularly challenging set of talks. Goodyear and union negotiators have been meeting in Cincinnati since March 13. The USWA selected Goodyear as the target for rubber industry bargaining on April 7. Goodyear is the world's largest tire company. The company manufactures tires, engineered rubber products and chemicals in more than 90 facilities in 28 countries. It has marketing operations in almost every country around the world. Goodyear employs about 92,000 people worldwide. Goodyear Tire & Rubber's 8.500% bonds due 2007 (GT07USR1) are trading at about 76 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=GT07USR1for real-time bond pricing. HOMELIFE: Delaware Court Confirms Liquidating Chapter 11 Plan ------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware confirmed HomeLife Corporation and its debtor-affiliates' Joint Liquidating Chapter 11 Plan after finding that the Plan complies with each of the 13 standards articulated in Section 1129 of the Bankruptcy Code: (1) the Plan complies with the Bankruptcy Code; (2) the Debtors have complied with the Bankruptcy Code; (3) the Plan was proposed in good faith; (4) all plan-related cost and expense payments are reasonable; (5) the Plan identifies the individuals who will serve as officers and directors post-emergence; (6) all regulatory approvals that are necessary have been obtained or are respected; (7) creditors receive more under the plan than they would in a chapter 7 liquidation; (8) all impaired creditors have voted to accept the Plan, or, if they voted to reject, then the plan complies with the absolute priority rule; (9) the Plan provides for full payment of Priority Claims; (10) at least one non-insider impaired class voted to accept the Plan; (11) the Plan is feasible and confirmation is unlikely to be followed by a liquidation or need for further financial reorganization; (12) all amounts owed to the Clerk and the U.S. Trustee will be paid; and (13) The Debtors do not maintain retiree benefits as that term is defined in Sec. 1114. No later than 30 days after the Confirmation Date, Claims arising out of the rejection of executory contracts or unexpired leases must be filed with Bankruptcy Management Corporation, otherwise, such shall be forever barred. All leases specified in the Settlement and Compromise Agreement that have not already been assumed and assigned or rejected, shall vest in the Post- Confirmation Estate, pending any assumption and assignment or rejection, as directed by the Sears Entities. On the Confirmation Date, HomeLife shall be deemed to transfer to the Post-Confirmation Estate all its right, title and interest in all of its assets. The Post-Confirmation Estate is a successor-in-interest of the Liquidating Debtors for the purposes of continuing to receive benefits under any contracts entered into by the Liquidating Debtors prior to Confirmation. The Plan Administrator may act in the name of the Post- Confirmation Estate for all purposes including entering into contracts and leases and prosecuting and settling any Claims or Causes of Action. On the Effective Date all of the property of the Debtors' Estates is vested in the Reorganized Debtor. The Reorganized Debtor shall continue to exist after the Effective Date as a separate corporate entity with all the powers of a corporation under the state of incorporation. Privately held HomeLife shut down all of its 128 retail locations before it filed for chapter 11 bankruptcy protection on July 16, 2001 (Bankr. Del. Case No. 01-2412). The Debtors listed both assets and liabilities of over $100 million each in their petition. Laura Davis Jones, Esq. at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, PC represents the Debtors in these proceedings. IMPERIAL PLASTECH: Nov. 30 Working Capital Deficit Tops C$2-Mil --------------------------------------------------------------- Imperial PlasTech Inc., (TSE: Symbol IPQ) announced results for the year ended November 30, 2002. Sales from continuing operations were $35.9 million compared to $46.7 million last year as the Company's US operations were negatively impacted by lower shipments of its telecommunications products and continued excess capacity in the polyethylene pipe industry. However, management was successful in launching its building products and this business, which started shipping in the second quarter of 2002 accounted for approximately 8% of total sales. Gross profit in the year reduced significantly from the already low level in 2001 as capacity utilization in the polyethylene industry remained at approximately fifty percent in the year. In recent months several producers have moved to shut down plants and rationalization of excess capacity should help restore profitability. Faced with continued poor profitability in its pipe operations management decided to dispose of its non core assets and to reorganize its US pipe operations. The sale of the PVC hose business has been completed and the company expects to sell other surplus assets shortly. A loss from discontinued operations of $3.5 million was recorded on the sale of the PVC hose business and the company wrote down the capital assets and inventory associated with its PVC pipe and US pipe operations by $10.5 million in anticipation of winding down these operations. Selling, general and administrative expenses were $612,000 lower from the same period last year. Bad debt expense, included in SG&A was reduced from $880,000 in 2001 to $160,000 in 2002, however higher sales and marketing expenses associated with the launch of the building products operation were incurred. As a result of the lower sales during the year and the additional write downs taken in the fourth quarter, the Company incurred a net loss of $24.4 million or $0.58 per share in the year compared to net loss of $5.3 million or $0.13 per share in 2001. The losses incurred in the year have weakened the company's financial position and the company's working capital has been eroded to a deficit of $2.1 million compared to a surplus position of $11.3 million at the end of 2001. As a result of the asset write downs , shareholders' equity decreased to $11.3 million or $0.27 per common share from $35.5 million or $0.85 per share at the end of fiscal 2001. The Company used cash in operations of approximately $5 million compared to a use of cash of $4.5 million in 2001. The loss incurred for the year was offset by a decrease in accounts receivable and inventory and the receipt of income tax refunds of $2.3 million. Investments in acquisitions and capital assets totaled $3 million, down sharply from $11.3 million in 2001. The losses generated and the deterioration of the company's balance sheet has put the company in default of its operating lender's financial covenants, and the company is seeking alternative financing to replace its current lender. In light of the operating losses and the current credit environment this financing may not be available and the company may have to liquidate part of its assets to ensure that it can meet its debt obligations. To address this situation the company has taken a number of measures to reduce its operating costs including the above mentioned consolidation of Ameriplast's operations. The company intends to sell surplus assets, proceeds from which will be used to reduce debt and to provide working capital. As of November 30, 2002, the company's working capital deficit is reported at C$2 million. "The continuing depressed condition of the telecom market and substantial excess capacity in the polyethylene pipe industry has taken a substantial toll on our company. We have responded to this situation with steps to diversify our customer base and to reduce our cost structure. In light of the telecom meltdown our investment in Ameriplast in January 2001 has proven to be a costly foray and we have taken steps to stop the losses and have written down the investment." commented Victor D'Souza, President and CEO. "Despite these setbacks, our building products operation, which started as an R&D effort in 1999 and was successfully launched in 2002 has experienced strong growth and good profitability." INTEGRATED HEALTH: Demands National Union Pay Liability Claims -------------------------------------------------------------- National Union Fire Insurance Company of Pittsburgh, Pennsylvania, for consideration, issued to Integrated Health Services, Inc. and various subsidiaries and related companies a Commercial Umbrella Policy, numbered BE 357-43-43. The Policy provides general liability and medical professional liability excess coverage for the policy period January 1, 1999 through January 1, 2000. The Policy provides PL/GL excess coverage of $25,000,000 per occurrence and $25,000,000 in the aggregate. Ian Connor Bifferato, Esq., at Bifferato Bifferato & Gentilotti, in Wilmington, Delaware, relates that Article I of the Policy defines National Union's coverage obligation as: "We will pay on behalf of the insured those sums in excess of the Retained Limits that the insured becomes legally obligated to pay by reason of liability imposed by law or assumed by the Insured under an Insured Contract because of Bodily Injury, Property Damage, Personal Injury or Advertising Injury that takes place during the Policy Period and is caused by an Occurrence happening anywhere in the world. The amount we will pay for damages is limited as described in Insuring Agreement III, Limits of Insurance." The Policy provides coverage in excess of the Retained Limits. The Retained Limits under the Policy are $2,000,000 per professional liability occurrence, and $9,000,000 in the aggregate. Article VI of the Policy sets forth various conditions of the Policy. Article VI.P specifies "When Loss Is Payable." That section provides: "Coverage under this policy will not apply unless and until the Insured or the Insured's underlying insurer is obligated to pay the Retained Limit. When the amount of loss has finally been determined, we will promptly pay on behalf of the Insured the amount of loss falling within the terms of this policy. You shall promptly reimburse us for any amount within the Self Insured Retention paid by us on behalf of an Insured." In addition, Article VI.C expressly provides that neither the insolvency nor inability to pay nor bankruptcy of IHS, or of its' primary insurance carrier, will relieve National Union of any obligation to pay a covered claim. Article VI.C states, in relevant part: "Your bankruptcy, insolvency or inability to pay or the bankruptcy, insolvency or inability to pay of any of your underlying insurers will not relieve us from the payment of any claim covered by this policy." According to Mr. Bifferato, the Debtors have resolved 1999 PL/GL claims in excess of the $9,000,000 aggregate Retained Limit under the Policy. The resolved 1999 PL/GL claims have been liquidated in amount by judgments or settlement agreements constituting binding legal obligations. Accordingly, by reason of these judgments and settlements, IHS is, in the words of Article I of the Policy, "legally obligated" to pay amounts in excess of the Retained Limits under the Policy. Under Article I and Article VI of the Policy, National Union is obligated to "promptly pay" all these excess amounts. Mr. Bifferato reports that, in large part, the judgments and settlements giving rise to IHS' legal obligations have not been paid by IHS or its primary insurance carrier, Reliance Insurance Company, because IHS is in bankruptcy and Reliance is the subject of its own liquidation proceeding in the Pennsylvania Commonwealth Court. Moreover, it is likely that IHS and Reliance will never pay out, or be able to pay out, the entire $9,000,000 of primary coverage constituting the Retained Limits under the Policy because the assets of the IHS bankruptcy estate and the assets of the Reliance liquidation estate will be insufficient to pay this liability in full. Nevertheless, as confirmed by the express language of Article VI.C of the Policy, the insolvency and bankruptcy of IHS and Reliance do "not relieve [National Union] from the payment of any claim covered by" the Policy. IHS estimates that the total amount of allowed 1999 PL/GL claims will aggregate to $40,000,000 or more. There is no doubt that the entire $25,000,000 of excess coverage provided by the Policy will be payable. Mr. Bifferato states that the Debtors' representatives have periodically been in contact with National Union with regard to the administration of Plaintiffs 1999 PL/GL claims since the Policy was issued. In the past several months, because certain large 1999 PL/GL claims were approaching trial or settlement, and because the time was fast approaching that the aggregate total of liquidated 1999 PL/GL claims would exceed $9,000,000, the Debtors' communications with National Union became more frequent. During the course of those discussions, the parties have often discussed the protocols under which National Union would assume control over files relating to the remaining unresolved 1999 PL/GL claims. Until March 17, 2003, IHS understood that National Union was in fact preparing to assume the administration and defense of those open claims files. However, on March 17, 2003, Phillip Mancuso, IHS Senior Corporate Counsel received a letter from Donna DiTuri, of AIG Technical Services, Inc., written on National Union's behalf. In the letter, National Union advised IHS that National Union would not provide any coverage under the Policy unless and until IHS or its primary carrier makes actual claim payments totaling in excess of the $9,000,000 Retained Limits. Mr. Bifferato tells the Court that because neither IHS nor Reliance are expected to make actual claim payments totaling in excess of the $9,000,000 Retained Limits, National Union has, in effect, disclaimed all coverage under the Policy. It is likely that 1999 PL/GL claims will aggregate to $40,000,000 or more, and therefore, the entire $25,000,000 of excess coverage provided by the Policy will be payable. National Union's refusal to provide coverage in accordance with the Policy therefore deprives IHS and its 1999 PL/GL claimants of a full $25,000,000 of coverage. The Plan and Disclosure Statement reflect the Debtors' belief that it has excess coverage under the Policy, which will be available, with other insurance funds, for distribution pro rata to holders of allowed 1999 PL/GL claims. Notwithstanding the fact that National Union and IHS have been in discussions for many months with respect to the administration of 1999 PL/GL claims, and notwithstanding the fact that National Union has at all times been aware of the status of proceedings in these Chapter 11 cases with respect to the Plan and the Disclosure Statement, National Union did not advise IHS until March 17, 2003, after the Disclosure Statement had been approved and preparations were completed to distribute the Plan and Disclosure Statement for a vote of the creditors. Accordingly, both by the content and the timing of its March 17 Letter, National Union has caused the maximum confusion and concern among the Debtors and the 1999 PL/GL claimants with respect to the recovery they can expect in these Chapter 11 cases. Mr. Bifferato contends that National Union's interpretation of the Policy, and its refusal to honor its obligations under the Policy are contrary to the express and unambiguous provisions of the Policy and are without a reasonable basis. National Union's bad-faith disclaimer of coverage under the Policy has implications not only with respect to the Debtors and its 1999 PL/GL claimants, who are deprived of coverage, but also to other insureds of National Union who have sought protection, or may seek protection, under the Bankruptcy Code. The Policy is a standard policy document under which National Union and its related AIG entities have no-doubt provided excess insurance to hundreds of companies. The position taken in the March 17 Letter by National Union, and implicitly by the entire AIG Group, would effectively eliminate coverage under all AIG excess policies for all insolvent insureds and their personal injury claimants. Mr. Bifferato insists that the Debtors are entitled to a declaration that the Policy obligates National Union to pay covered professional liability claims which have been liquidated in amount by judgment or settlement to the extent that these liquidated claims are in excess of $2,000,000 per occurrence or $9,000,000 in the aggregate, whether or not the applicable per occurrence or aggregate limit of the Debtors' primary insurance coverage has been paid. In addition, National Union's disclaimer of all coverage under the Policy was made without reasonable basis and in bad faith, at the most disadvantageous time possible for the Debtors and their 1999 PL/GL claimants. The disclaimer of all coverage under the Policy constitutes a breach of the Policy for which the Debtors are entitled to recover its damages from National Union. The Debtors have incurred additional administrative costs and will incur additional costs by reason of National Union's 11th-hour disclaimer. The Debtors are therefore entitled to judgment against National Union for all costs, in an amount as may be demonstrated at trial. Accordingly, the Debtors ask Judge Walrath to enter a judgment: A. declaring that the Policy obligates National Union to pay covered professional liability claims, which have been liquidated in amount by judgment or settlement to the extent that the liquidated claims are in excess of $2,000,000 per occurrence or $9,000,000 in the aggregate, whether or not the applicable per occurrence or aggregate limit of the Debtors' primary insurance coverage has been paid; B. awarding compensatory damages in an amount to be determined at trial, together with appropriate interest; C. awarding punitive damages in an amount to be determined by the Court; and D. awarding the costs and disbursements of the action. (Integrated Health Bankruptcy News, Issue No. 55; Bankruptcy Creditors' Service, Inc., 609/392-0900) JACKSON COUNTY HOSPITAL: S&P Cuts Bond Rating to BB+ from BBB- -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the Jackson County Health Care Authority, Alabama's bonds, issued for Jackson County Hospital, to 'BB+' from 'BBB-'. The outlook is stable. The downgrade reflects substantial operating losses over the last three years that resulted in rate covenant violations in 2000 and 2001. Jackson County remains reliant on tax support and supplemental Medicaid payments. A lower rating is precluded by an adequate cash position -- although the average age of plant is high, suggesting capital needs -- and steps taken by management that improved profitability and volume in 2002. JACKSON PRODUCTS: S&P Drops Corp. Credit Rating to Default Level ---------------------------------------------------------------- Standard & Poor's Rating Services lowered its corporate credit rating on Jackson Products Inc. to 'D' from 'CCC'. The action followed Jackson's recent 8-K filing that stated it was in default under its credit facility and that the senior lenders blocked the April 15, 2003, senior subordinated debt interest payment. At the same time Standard & Poor's lowered its senior secured bank loan and subordinated debt ratings on the company to 'D'. All ratings were removed from CreditWatch, where they had been placed on Jan. 13, 2003. The St. Charles, Missouri-based manufacturer of personal safety and highway safety products, had about $215 million of debt securities outstanding, as of September 2002. The company has not yet filed its 2002 year-end results with the SEC. Jackson Products has indicated that its senior lenders do not intend to waive any defaults under the senior credit facility. However, the company is seeking a new forbearance agreement. In addition, Jackson Products is in the 30-day grace period to cure the default on its subordinated notes. "There appears to be a high probability that the company will be unable to make the interest payment within the cure period, resulting in payment default," said Standard & Poor's credit analyst Eric Ballantine. Jackson Products continues to experience very weak market conditions, which have significantly affected the company's operating results. KAISER: Retains Kinsella as Publication Notice Consultant --------------------------------------------------------- Kaiser Aluminum Corporation sought and obtained the Court's authority to employ Kinsella Communications Ltd. as publication notice consultant in these Chapter 11 cases, nunc pro tunc to November 12, 2002. At the time the Bar Date Order was entered, the Debtors contemplated that their claims and noticing agent, Logan & Company, Inc. would assist with the placement of the publication notices. But after discussing this with Logan, it became apparent that it would be more cost effective to use a service that specializes in the placement of such notices, given the size and scope of the intended notice program. Accordingly, the Debtors determined to hire Kinsella to coordinate with the placement of ads for the Publication Notice. The Debtors relate that Kinsella had recommended that the Publication Notice be substantially shortened for the newspapers other than The Wall Street Journal and The New York Times. Kinsella also suggested that, instead of running the Publication Notice as the Debtors originally planned, the Debtors would place the shortened Notice in a considerably efficient and cost- effective manner, like placing the Notice in the Sunday newspaper supplements Parade magazine and USA Weekend, which are delivered as an insert in 925 newspapers nationwide. The revised Notice Program allowed the Debtors to reach a far wider audience than originally planned, at a substantially lower cost. Based on the limited, administrative nature of the tasks that Kinsella was performing, the Debtors determined that Kinsella's retention as an ordinary course professional was appropriate. However, the U.S. Trustee expressed reservations about Kinsella's status and asked the Debtors to file an employment application. Kinsella is a leading advertising and notification firm that specializes in the design and implementation of class action and bankruptcy notification programs to reach unknown putative claimants in mass tort bankruptcies and class actions. Kinsella has assisted with some of the largest and most complex national notification programs, including mass tort bankruptcy cases of In re Johns Manville Corp., In re Celotex Corp., In re Dow Corning, In re Babcock & Wilcox Co., In re Armstrong World Industries, Inc., In re W.R. Grace & Co. and In re USG Corp. The Debtors believe that Kinsella is well qualified and able to represent them in a cost-effective, efficient and timely manner. With respect to any additional notice programs, Kinsella's services may include: (a) developing and implementing a comprehensive notification plan of the appropriate bar date or information with recommendations for materials and media distribution; (b) creating all relevant and necessary notice materials, including print, and if necessary, television advertisements; (c) implementing media buys and placement; (d) executing an affidavit or other documentation and testimony as the Court requires or as the Debtors request, describing the notification services provided; (e) providing a summary and analysis of the notification activities and media placements as the Debtors require; and (f) performing all other services that may be appropriate in connection with any notice programs. Kinsella has agreed to render services to the Debtors on a commission basis, plus reimbursement of actual, necessary expenses and charges incurred. Kinsella's current standard commission rate is 15% on all gross media buys the Debtors approved, which is within the industry standard. The Debtors disclose that they have previously paid Kinsella as an ordinary course professional $654,860 for its services and expenses relating to the shortened Publication Notice. Of this payment, $555,636 was for media expenses associated with placing the ads with each publication for the Debtors' General Bar Date and $99,224 was Kinsella's commission. Katherine M. Kinsella, the firm's president, assures Judge Fitzgerald that the firm represents no interest adverse to the Debtors or their estate. Kinsella is a "disinterested person" as defined in Section 101(14) of the Bankruptcy Code and as required by Section 327(a). Ms. Kinsella, nonetheless, relates that as part of its diverse practice, the firm has assisted with numerous unrelated cases, proceedings and transactions that involve many different professionals that may represent the claimants and parties-in- interest in the Debtors' cases. But none of these business relationships create materially adverse interests to the Debtors. Kinsella is also engaged in other asbestos-related consulting engagements. (Kaiser Bankruptcy News, Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900) KMART: Judge Sonderby Approves Claims Resolutions Procedures ------------------------------------------------------------ Kmart Corporation and its debtor-affiliates sought and obtained Judge Sonderby's approval to establish a streamlined comprehensive claims resolution procedure in order to compromise or settle certain prepetition claims and allow claims based on those settlements without further court permission. Of the 46,397 claims filed against the estates, the Debtors found 17,917 claims involving slight differences between the asserted amount and the amount reflected in their schedules, or, in their books and records. These claims account for 12% of the total dollar amount of all controversial claims. Consequently, the Debtors believe that these claims are ripe for an informal claims resolution procedure given the vast number of these claims. J. Eric Ivester, Esq., at Skadden, Arps, Slate, Meagher & Flom, tells the Court that the Debtors will settle disputed claims without further Court approval where the disputed amount is $1,000,000 or less and so long as the aggregate amount in controversy that they resolved does not exceed $2,000,000,000. The Debtors will also implement an alternative dispute resolution protocol to expedite and facilitate the determination of a claim against the estates, where they have reached an impasse with respect to that claim. The Debtors will implement the ADR Procedures with respect to claims for which the Prepetition Claims Resolution Procedures do not apply -- that is, those claims where the Amount in Controversy exceeds $1,000,000, except for personal injury claims. The Debtors will adopt these ADR Procedures: A. Referral and Notice The Debtors will refer a Disputed Claim to mediation, and upon that referral, the Disputed Claim will be classified as an ADR claim. The Debtors will then select a mediator to conduct a mandatory, non-binding mediation, subject to the affected claimant's right to object to the Debtors' choice. The Mediator will serve the affected Claimant with an ADR notice which will: (i) schedule the exchange of Mediation statements; (ii) identify the format of and procedures to be followed during the Mediation; (iii) describe who should attend; (iv) describe the fee structure and timing of payment of the required Mediation fees; and (v) describe the effect of a mediated settlement. The ADR Notice must be returned within 30 calendar days after the ADR Notice date along with payment of the required fee and execution of the required Mediation agreement. The completed and signed ADR Notice must be sent to: Kmart Corporation c/o Trumbull Services LLC 4 Griffin Road North Windsor, Connecticut 06095 B. Mediation Fees Each party to a Mediation will be responsible for half of the Mediator's fees, which will be consistent with industry standards. Any Claimant subject to a Mediation will make an initial deposit against the fees, payable to the Mediator, by the ADR Return Deadline. The initial deposit will not exceed $750. All fees required to be paid must be paid within 30 calendar days after the relevant Mediation conference. Any excess payments will be returned to the Claimant on the conclusion of the Mediation. In the event a Claimant defaults in the payment of mediation fees, the Debtors will remain responsible for the payment of the Mediator. C. Mediation Statement The ADR Notice will schedule the first mediation conference no sooner than 20 days and no more than 40 days after the ADR Notice Date, and will set the ADR Return Deadline for the submission of a Mediation statement. The Return Deadline will not be earlier than the date of the first mediation conference. The Mediation Statement must indicate certain required information including, but not limited to: * the Claimant's name and address; * a short statement of the Claimant's contentions including the legal and factual basis for the ADR Claim; * the name and address of any attorney representing a Claimant; * the alleged amount of the Claimant's ADR Claim; * the name and address of the applicable Debtor; and * evidence that the Claimant wishes to present in support of his ADR Claim, including contracts, invoices or other documentary evidence. D. Good Faith Compliance A Claimant's failure to comply with the ADR Procedures may result in the disallowance of an ADR Claim. Upon any failure to comply, the Debtors may serve a notice of that failure on the Mediator and the Claimant. If the Debtors and the Claimant are unable to agree on a resolution of the Default Notice within seven days after mailing, the Debtors may schedule a hearing for the resolution of the Default Notice by the Court. There will be a presumption in favor of disallowance of an ADR Claim for the Claimant's failure to: (i) timely pay the Mediator's fees; (ii) attend a Mediation conference; (iii) timely submit the Mediation Statement; or (iv) execute a Mediation agreement. E. Settlement Approval Procedures In case the ADR Procedures result in the settlement of an ADR Claim, the Debtors and the Claimant will execute a stipulation that will only become effective on compliance with any existing settlement procedures, including without limitation the Prepetition Claims Resolution Procedures, if applicable. If the Debtors and a Claimant settle an ADR Claim outside of existing settlement parameters, the Debtors will ask the Court to approve the settlement on 10 days notice of the Stipulation. The Debtors will serve the Stipulation to the Office of the U.S. Trustee and the statutory committees' counsel. If no objections are timely filed, the Debtors will submit an order approving the Stipulation without further notice or hearing. If an objection is timely filed, the matter will be scheduled for hearing at the next omnibus hearing or special claims hearing date. F. Termination A Mediation will be terminated at any time, by agreement of the parties or on the determination of the Mediator on the request of one party. After the termination, the ADR Claim will be resolved by the Court, or by other forum as required by applicable law. G. Holders of ADR Claims Must Have Timely Filed Proofs of Claim Nothing in the ADR Procedures alters the requirement that each Claimant must have timely filed a proof of claim. (Kmart Bankruptcy News, Issue No. 52; Bankruptcy Creditors' Service, Inc., 609/392-0900) LASERSIGHT: Gets Extension to Continue Nasdaq SmallCap Listing -------------------------------------------------------------- LaserSight Incorporated's (Nasdaq: LASEC) request for a second extension of the period during which its common stock will continue to be listed on the Nasdaq SmallCap Market has been granted. The earlier extension required a filing of its definitive proxy statement with the Securities and Exchange Commission on or before April 15, 2003. The Company was unable to meet that time deadline. The exception requires that on or before May 1, 2003, the Company must file a definitive proxy statement with the Securities and Exchange Commission and Nasdaq evidencing its intent to seek shareholder approval for the implementation of a reverse stock split. Thereafter, on or before June 6, 2003 the company must demonstrate a closing bid price of at least $1.00 per share and, immediately thereafter, a closing bid of at least $1.00 per share for a minimum of ten consecutive trading days. In addition, the Company must be able to demonstrate compliance with all requirements for continued listing on the Nasdaq SmallCap Market. In the event the Company fails to comply with the terms of the exception, its securities will be delisted from the Nasdaq Stock Market. If at some future date the Company's securities should cease to be listed on the Nasdaq SmallCap Market, they may continue to be listed in the OTC-Bulletin Board. For the duration of the exception, the Company's Nasdaq symbol will remain LASEC. LaserSight(R) is a leading supplier of quality technology solutions for laser vision correction and has pioneered its patented precision microspot scanning technology since it was introduced in 1992. Its products include the LaserScan LSX(R) precision microspot scanning system, its international research and development activities related to the Astra family of products used to perform custom ablation procedures known as CustomEyes and its MicroShape(R) family of keratome products. The Astra family of products includes the AstraMax(R) diagnostic workstation designed to provide precise diagnostic measurements of the eye and CustomEyes CIPTA and AstraPro(R) software, surgical planning tools that utilize advanced levels of diagnostic measurements for the planning of custom ablation treatments. In the United States, the Company's LaserScan LSX excimer laser system operating at 300 Hz is approved for the LASIK treatment of myopia and myopic astigmatism. The MicroShape family of keratome products includes the UltraShaper(R) durable keratome and UltraEdge(R) keratome blades. * * * In the Company's Form 10-Q for the period ended September 30, 2002, LaserSight's independent auditors, KPMG, in its report, stated: "We have reviewed the condensed consolidated balance sheet of LaserSight Incorporated and subsidiaries as of September 30, 2002, and the related condensed consolidated statements of operations for the three and nine-month periods ended September 30, 2002 and 2001 and the condensed consolidated statements of cash flows for the nine-month periods ended September 30, 2002 and 2001. These condensed consolidated financial statements are the responsibility of the Company's management. "We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. "Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America. "We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of LaserSight Incorporated and subsidiaries as of December 31, 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 22, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2001, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. "Our report dated March 22, 2002, on the consolidated financial statements of LaserSight Incorporated and subsidiaries as of and for the year ended December 31, 2001, contains an explanatory paragraph that states that the Company's recurring losses from operations and significant accumulated deficit raise substantial doubt about the entity's ability to continue as a going concern. The consolidated balance sheet as of December 31, 2001, does not include any adjustments that might result from the outcome of that uncertainty." The Company's management, in the same filing, said: "We have significant liquidity and capital resource issues relative to the timing of our accounts receivable collection and the successful completion of new sales compared to our ongoing payment obligations and our recurring losses from operations and net capital deficiency raises substantial doubt about our ability to continue as a going concern. We have experienced significant losses and operating cash flow deficits, and we expect that operating cash flow deficits will continue without improvement in our operating results. In August 2002, we executed definitive agreements relating to our China Transaction. As a result, the Company's short-term liquidity has improved and its operations are improving. Further improvements in revenues will be needed to achieve profitability and positive cash flow." LEAP WIRELESS: S&P Slashes Credit & Sr. Unsec. Debt Ratings to D ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered the corporate credit and senior unsecured debt ratings on San Diego, California-based wireless provider Leap Wireless International Inc. to 'D' from 'CC' and 'C', respectively. At the same time, the ratings are removed from CreditWatch. These actions follow the company's recent Chapter 11 bankruptcy filing. As of Sept. 30, 2002, the company had about $2.2 billion of total debt outstanding. Ratings Lowered, Removed from CreditWatch Leap Wireless International Inc. To From Corporate credit rating D CC/CreditWatch Neg Senior unsecured debt rating D C/CreditWatch Neg Leap Wireless International Inc.'s 12.500% bonds due 2010 (LWIN10USR1) are trading at 13 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=LWIN10USR1 for real-time bond pricing. MADGE NETWORKS: Applying for Suspension of Payments in Amsterdam ---------------------------------------------------------------- Madge Networks N.V. (OTCBB: MADGF), a global supplier of advanced wired and wireless networking product solutions, has filed an application for a suspension of payments order in the Dutch courts, a process similar to that of Chapter 11 reorganization under U.S. law. Tuesday last week, an Administrative Receiver in the UK was appointed by the largest secured creditor over the Madge groups' main UK operating subsidiary, Madge Networks Limited and its UK subsidiary Madge Logistics Limited. Following this appointment a group of senior employees acquired the business of these two UK companies from the Administrative Receiver. Payments received from the employees for these assets will go towards settling the debts of these two UK companies. The new company has not assumed the existing liabilities of Madge Networks Limited, or any other Madge company. This new company also purchased all rights to the Madge brand and will trade going forward as Madge Limited starting operations and product shipments today. Although this announcement only relates to Madge Networks N.V. (the group parent company), Madge Networks Limited and Madge Logistics Limited, it is likely that the other trading entities of the Madge group will seek bankruptcy type protection as well, as is applicable in their relevant jurisdictions. MAGNESIUM CORP: Lee Buchwald Appointed as Chapter 11 Trustee ------------------------------------------------------------ The Honorable Robert E. Berger approved the Ad Hoc Committee of Senior Noteholders for Magnesium Corporation of America's request to appoint a chapter 11 trustee. The Ad Hoc Committee points out that given the sale and the current administrative insolvency of the Debtors' estates, there will be no meaningful distribution, if any, to unsecured creditors unless potential claims are investigated and, to the extend viable, pursued and recoveries effected. The Ad Hoc Committee asserts that since a primary target of possible avoidance actions and other claims is Ira Rennert, who owns and controls the Company, a conflict of interest is certain that these valuable actions will not be pursued in the absence of a chapter 11 trustee. Accordingly, Carolyn S. Schwartz, the United States Trustee for Region 2 consulted with these 4 parties-in-interest regarding the appointment of Lee E. Buchwald as the Chapter 11 Trustee in these cases: 1) Joseph H. Smolisky, Esq. Chadbourne & Parke, LLP Attorneys for Debtors; 2) Franklin H. Top, Esq. Chapman and Cutler Attorneys for the Creditors' Committee; 3) Janice Grubin, Esq. Golenbock, Eseman, Assor, Bell & Peskoe Attorneys for Ad Hoc Committee of Senior Noteholders; and 4) Jeanette L. Cotting, Esq. Stoel Rives LLP Attorneys for PacifiCorp. Lee E. Buchwald is the President and sole owner of Buchwald Capital Advisors, LLC, an investment banking firm specializing in financial restructuring advisory services. Prior to founding his own company, Mr. Buchwald was a Managing Director of Chanin Capital Partners and Corporate Finance Managing Director at Rothschild Inc. Mr. Buchwald has 20 years experience as an investment banker and financial advisor in restructurings. Mr. Buchwald assures the Court that he is a "disinterested person" within the meaning of Bankruptcy Code, Section 101(14). Consequently, the Court approved Mr. Buchwald's appointment provided that he posts a $275,000 bond pursuant to Section 322. Magnesium Corporation of America, a unit of Renco Group Inc., is the largest single producer of magnesium in the United States. The Company filed for chapter 11 protection on August 2, 2001 (Bankr. S.D.N.Y. Case No. 01-14312). Joseph H. Smolisky, Esq., at Chadbourne & Parke, LLP represents the Debtors. When the Company filed for protection from its creditors, it listed debts and assets of over $100 million in their petition. METRIS COMPANIES: First Quarter Net Loss Stands at $25 Million -------------------------------------------------------------- Metris Companies Inc., (NYSE:MXT) reported a net loss for the quarter ended March 31, 2003 of $25.0 million. These results include approximately $12.0 million in pre-tax write-downs of excess property, equipment and operating leases and another $4.8 million charge for a workforce reduction. "We are pleased with the progress that we have made during the quarter," said David Wesselink, Metris chairman and chief executive officer. "We have completed the key steps in our liquidity plan, including $850 million in bank conduit facilities, an operating agreement with the OCC that resulted in a $155 million dividend from our bank and a term loan commitment from Thomas H. Lee Equity Fund IV, L.P. as a backup facility. Our management team continues its focus on improving portfolio performance and returning to profitability." At March 31, 2003, the Company's owned credit card portfolio was $686 million, down from $846 million at December 31, 2002. Managed credit card loans at March 31, 2003 declined by approximately $745 million to $10.7 billion. The decrease in managed portfolio balances was due to continued slower account growth, tighter underwriting standards and more stringent credit line management strategies. In the first quarter, the owned net charge-off rate was 3.9 percent, compared with 34.2 percent in the fourth quarter of 2002. The managed net charge-off rate for the first quarter was 17.9 percent, compared to 18.0 percent for the fourth quarter 2002. In the fourth quarter of 2002, the Company sold a $72.5 million portfolio of revoked and 2-cycle plus delinquent assets. Excluding the sale, the owned net charge-off rate would have been 5.8 percent and the managed net charge-off rate would have been 15.9 percent in the fourth quarter 2002. The Company has experienced a higher charge-off rate over the last year due to the weak economic environment, higher bankruptcies, a declining receivable base and the 2001 credit line increase program. The owned delinquency rate was 8.2 percent at March 31, 2003, compared to 0.9 percent at December 31, 2002. The managed delinquency rate was 11.5 percent for the first quarter, compared to 11.0 percent in the fourth quarter. Excluding the sale of revoked and 2-cycle plus delinquent assets, the owned delinquency rate would have been 8.7 percent and the managed delinquency rate would have been 11.6 percent in the fourth quarter 2002. Metris Companies Inc., (NYSE:MXT) is one of the nation's leading providers of financial products and services. The Company issues credit cards through its wholly owned subsidiary, Direct Merchants Credit Card Bank, N.A. Through its enhancement services division, Metris also offers consumers a comprehensive array of value-added products, including credit protection and insurance, extended service plans and membership clubs. For more information, visit http://www.metriscompanies.comor http://www.directmerchantsbank.com As reported in Troubled Company Reporter's March 3, 2003 edition, Fitch Ratings lowered the senior and bank credit facility ratings of Metris Companies Inc. to 'CCC' from 'B-'. In addition, the long-term deposit rating of Direct Merchants Credit Card Bank, N.A. has been lowered to 'B' from 'B+'. The short-term deposit rating remains at 'B'. The ratings have been removed from Rating Watch Negative where they were placed on Dec. 20, 2002. The Rating Outlook is Negative for Metris and DMCCB. Approximately $350 million of holding company debt is affected by this rating action. The action reflects heightened execution risk as Metris attempts to address liquidity concerns with its various credit providers. Fitch remains concerned with Metris' ability to renew or replace conduit facilities that mature in the June and July 2003 timeframe, coupled with a $100 million term loan drawn under the company's bank credit facility due in June 2003. While Metris is in active negotiations with its credit providers, Fitch believes the pace and complexity of this process has increased overall risk to the company. The downgrade of DMCCB reflects its operational ties to the holding company, which it relies on to fund assets longer term. Furthermore, Fitch remains concerned with low excess spread levels in the Metris Master Trust, Metris' primary securitization vehicle. Excess spread levels have declined significantly over the past few months, and for many series are below 2%, eroding the cushion that once existed. Under the company's current bank credit agreement, Metris must maintain minimum excess spread in the MMT. Moreover, if trust level excess spread becomes negative, on a three month rolling average, an early amortization of the MMT would occur. If an early amortization of the trust were to take place, Fitch does not believe that Metris would have sufficient liquidity to withstand such an occurrence. In Fitch's opinion, even if near-term liquidity issues are satisfactorily resolved, Metris will remain challenged to address earnings and asset quality concerns in a difficult economic and capital markets environment. In addition, federal bank regulators have imposed more stringent requirements on credit card lending, namely higher capital and reserves for subprime loans along with greater scrutiny of fee and finance charges. While Metris has complied with these regulatory changes, Fitch believes that these actions have negatively impacted the economics of Metris' credit card business. MICROFINANCIAL INC: Executes Final Amendment to Credit Agreement ---------------------------------------------------------------- MicroFinancial Incorporated (NYSE-MFI), a leader in Microticket leasing and finance, has secured an amendment to its Credit Agreement and received permanent waivers under its securitization facility. The Company indicated that it has signed an agreement that amends its credit facility and stabilizes the Company's relationship with its lenders. The agreement also modifies the final maturity date to January of 2005. The terms of the amended credit facility require the balance of the approximately $110 million senior term loan be paid out over the next 22 months. The loan will accrue interest at a rate of prime plus 2%, which will be payable monthly. Certain financial covenants such as fixed charge coverage, debt to net worth ratios, and minimum allowance balance requirements were eliminated. The credit facility was originally entered into on August 2000. This amendment replaces the Forbearance and Modification Agreement from the senior credit facility that expired on February 7, 2003. The Company also has obtained a permanent waiver for its securitization agreements that will waive each existing event of default retroactively to the date the event of default occurred. It will also waive specific future events of default under the terms of the securitization agreements. This document will replace the temporary waiver which expired on April 15, 2003. Richard Latour, President and Chief Operating Officer stated, "We are pleased to have secured a long-term amendment of our credit facility and securitzation from both our bank group and our securitzation lenders. We believe that this provides a solid foundation that will allow us to focus our attention on seeking a financial partner as we actively consider various financing, restructuring and strategic alternatives." The Company filed its Form 10K with the Securities and Exchange Commission on April 15, 2003. MicroFinancial Inc. (NYSE: MFI), headquartered in Woburn, MA, is a financial intermediary specializing in leasing and financing for products in the $500 to $10,000 range. The company has been in operation since 1986. MILLICOM INT'L: Amends Terms of Exchange Offer for 13-1/2% Notes ---------------------------------------------------------------- Millicom International Cellular S.A. (Nasdaq:MICC), the global telecommunications investor, has received unconditional commitments from approximately 67% of the holders of its 13-1/2% Senior Subordinated Discount Notes due 2006, or the "Old Notes" to tender their Old Notes in Millicom's ongoing private exchange offer and consent solicitation under certain amended terms as discussed below. In accordance with its agreement with certain holders, as varied by a reduction in unconditional commitments from 68% to 65%, Millicom is amending the terms of its ongoing exchange offer and consent solicitation as follows: Holders of the Old Notes who tender their Old Notes will receive for each $1,000 of Old Notes validly tendered $720 of Millicom's newly issued 11% Senior Notes due 2006, or the "11% Notes", and $81.7 of Millicom's newly issued 2% Senior Convertible PIK (payment in kind) Notes due 2006, or the "2% Notes," both maturing June 1, 2006 (which, when issued, could result in a maximum dilution to existing Millicom stockholders of approximately 30%, assuming no issuance of additional 2% Notes in lieu of cash interest). The 11% Notes will have the right to receive semi-annual amortization payments due June 1, 2004, December 1, 2004, June 1, 2005 and December 1, 2005. The 2% Notes will be convertible into Millicom's common stock at a conversion price of $10.75 per share (taking into consideration Millicom's recent reverse stock split). At maturity or upon redemption, Millicom will have the right to, at its option, in whole or in part, pay the then outstanding principal amount of the 2% Notes, plus accrued and unpaid interest thereon, in cash or in shares of its common stock. Millicom International Operations B.V., an indirect wholly owned subsidiary of Millicom, will irrevocably and unconditionally guarantee the 11% Notes and 2% Notes. In addition, Millicom continues to solicit consents to certain amendments to the indenture under which the Old Notes were issued. For each $1,000 of Old Notes who validly deliver a consent and are entitled to vote, Millicom will pay a cash fee of $50, provided that at least a majority of the holders of Old Notes so consent. The private exchange offer and consent solicitation on these amended terms will be subject to certain conditions as set forth in the revised offering documents (including a tender of 85% of the holders of Old Notes in the exchange offer, unless otherwise waived by Millicom) and will continue to be made only to holders of Old Notes who are not U.S. persons, or who are U.S. persons that are either "qualified institutional buyers" or institutional "accredited investors" (as each of those terms are defined under the Securities Act of 1933, as amended) and who can make the representations to exchange set forth in these offering documents. Subject to these revised terms, the expiration date for the exchange offer and consent solicitation is extended until May 2, 2003. The record date for holders eligible to participate in the exchange offer is moved to April 16, 2003. The rights of withdrawal for those bondholders who have already tendered their acceptance to the exchange offer and consent solicitation will continue until the new expiration date in accordance with the terms of the private offering documents. This press release is neither an offer to purchase nor a solicitation of an offer to sell Millicom's securities and is not being made to, nor will tenders be accepted from, or on behalf of, holders of Old Notes in any jurisdiction in which the making of the exchange offers and consent solicitations or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Millicom's securities referred to herein have not been registered under the Securities Act of 1933, as amended, and such securities may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Visit Millicom's homepage at http://www.millicom.comfor more information. Millicom International Cellular S.A. is a global telecommunications investor with cellular operations in Asia, Latin America and Africa. It currently has a total of 16 cellular operations and licenses in 15 countries. The Group's cellular operations have a combined population under license (excluding Tele2) of approximately 382 million people. In addition, MIC provides high-speed wireless data services in six countries. MIC also has a 6.8% interest in Tele2 AB, the leading alternative pan-European telecommunications company offering fixed and mobile telephony, data network and Internet services to 16.8 million customers in 22 countries. The Company's shares are traded on the Luxembourg Bourse and the Nasdaq Stock Market under the symbol MICC. As reported in Troubled Company Reporter's December 12, 2002 edition, Millicom announced it retained Lazard to assist it in reviewing strategic alternatives to address Millicom's ongoing liquidity needs, including other potential asset sales and divestitures, the availability of new debt and equity financing and potential debt restructuring alternatives. NAT'L CENTURY: Proposes to Reject Poulsen Consulting Agreement -------------------------------------------------------------- National Century Financial Enterprises, Inc., and its debtor- affiliates seek the Court's authority to reject an alleged consulting agreement with Lance Poulsen pursuant to Section 365 of the Bankruptcy Code. Charles M. Oellermann, Esq., at Jones, Day, Reavis & Pogue, in Columbus, Ohio, recalls that the Debtors sought and obtained the Court's authority to reject the employment and consulting agreements with Donald Ayers, Rebecca Parrett and Lance Poulsen. Mr. Poulsen alleged that the NCFE board of directors approved the Alleged Consulting Agreement at a board meeting at noon on November 8, 2002. Mr. Oellermann refutes that this is contrary to the Debtors' books and records. The approval of the Alleged Consulting Agreement was reflected in a set of draft resolutions that were attached to the Poulsen Objection. According to these draft resolutions, Mr. Poulsen would have been entitled to continue to receive his current base salary and benefits in exchange for his consultation with NCFE on bankruptcy matters and working with the regulatory agencies investigating NCFE. Mr. Oellermann argues that the draft resolutions were never approved by the NCFE board of directors and were not drafted by the Debtors' counsel. At the Rejection Hearing, the Debtors presented two witnesses who had participated in the Board Meeting and testified that the Alleged Consulting Agreement was not discussed or approved at that meeting. Nonetheless, the Debtors now seek the Court's authority to reject that agreement, to the extent it exists. Rejection of the Alleged Consulting Agreement, Mr. Oellermann explains, will ensure that Mr. Poulsen cannot even assert that any administrative expense claims continue to accrue under the alleged agreement. Mr. Poulsen resigned his position with the Debtors prior to the Petition Date, and the Debtors no longer need any consulting services from him. To the extent that the Debtors or any other party-in-interest desires historical factual information from Mr. Poulsen regarding the Debtors or their operations, they may obtain information either informally on a consensual basis or through the judicial process, without the need to pay Mr. Poulsen under the terms of the Alleged Consulting Agreement or on any other basis. (National Century Bankruptcy News, Issue No. 13; Bankruptcy Creditors' Service, Inc., 609/392-0900) NATIONAL STEEL: U.S. Steels Delivers Winning $1,050,000,000 Bid --------------------------------------------------------------- National Steel Corp. announced that United States Steel Corporation has emerged as the highest and best bidder in a competitive auction held Wednesday and Thursday last week for substantially all of National Steel's principal steelmaking and finishing assets and iron ore pellet operations, subject to bankruptcy court approval. U.S. Steel's bid calls for the payment of $850 million in cash at closing and the assumption of certain liabilities of approximately $200 million. The results of the auction will be presented for approval of the sale of such assets by the United States Bankruptcy Court for the Northern District of Illinois in Chicago at a hearing in Chicago on April 21, 2003. National Steel exercised its rights to terminate a prior asset purchase agreement with AK Steel Corporation. AK Steel failed to secure a collective bargaining agreement with the United Steel Workers of America. National Steel filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Code in 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 website at http://www.nationalsteel.com NIAGARA MOHAWK: Settles Reconciliation Issues with NYPSC Staff -------------------------------------------------------------- As previously reported, on November 29, 2002, during an audit, the New York State Department of Public Service Staff identified reconciliation issues between the rate allowance and actual costs of Niagara Mohawk's pension and other post-retirement benefits. These reconciliation issues covered the period before the acquisition by National Grid Group. In November, Niagara Mohawk initially projected that the audit would produce an $80 million adjustment to its deferral account and additional interest expense of approximately $10 million annually during calendar years 2001, 2000 and 1999. The Company has reached a settlement with the Staff that resolves all issues associated with its pension and other post- retirement benefit obligations and certain deferral account adjustments for the period prior to the acquisition. The settlement is subject to public notice and approval by the full New York State Public Service Commission. Under the settlement, the Company has agreed to credit its deferral account by $55 million for a series of issues including pension and other post- retirement benefits, with the offset recorded to goodwill ($37 million net of tax). Of this $55 million, $32 million relates specifically to other post-retirement benefits and will reduce the Company's future funding obligations. In addition, the settlement covers the funding of the Company's pension and post-retirement benefit plans. Under the settlement, the Company has agreed to provide $100 million of tax-deductible funding by April 30, 2003. Of this amount, $32 million is offset by the regulatory deferral above, and the remainder will fund already recorded liabilities. This funding includes $32 million of interest, of which $14 million net of tax has been recorded to goodwill. Finally, the Company has agreed to fund an additional $209 million, on a tax-deductible basis, by December 31, 2011. This amount includes $18 million of interest, all of which will be recorded to goodwill ($11 million net of tax). Prior to the acquisition, the Company had recorded all but the interest portion of the $209 million as a liability on its books. The Company will earn a rate of return of at least 6.60 percent on any portion of the $209 million that it funds before December 31, 2011, plus 80 percent of the amount by which the rate of return on the pension and post-retirement benefit funds exceeds 5.34 percent. At December 31, 2002, Niagara Mohawk reported a working capital deficit of about $655 million. NORTEL: Annual Shareholders Meeting to Convene on April 24, 2003 ---------------------------------------------------------------- Annual and Special Meeting of Shareholders 2003 What: Nortel Networks will host the Annual and Special Meeting of Shareholders 2003 which will be audio/video webcast. Who: -- L. R. Wilson, Chairman of the Board -- F. A. Dunn, President, Chief Executive Officer When: 10:00 AM ET Thursday April 24, 2003 Where: To participate via the audio webcast, please visit the following Web page at least 15 minutes prior to the start of the event: http://www.nortelnetworks.com/agm2003 Replay: One hour after the conference, you can listen to the replay at: -- North America: 1-888-268-8010 Passcode: 79424527# -- International: 1-972-685-0472 Passcode: 79424527# This replay is available until 11:59 pm ET, May 3, 2003. Audio/video webcast replay: http://www.nortelnetworks.com/agm2003 * * * As reported in the Troubled Company Reporter's Nov. 6, 2002, issue, Moody's Investors Service lowered the senior secured and senior implied ratings on the securities of Nortel Networks Corp., and its subsidiaries to B3 and Caa3 from Ba3 and B3 respectively. Outlook is negative. The rating action reflects the lack of Nortel's financial flexibility and the decline of its revenue base. The downgrade also takes into account the company's planned lapse of its $1.5 billion in credit facilities due on December. However the rating action is offset by its substantial cash, modest near-term debt maturities, and the progress the company has made in streamlining its expenses. Nortel Networks Corp.'s 7.400% bonds due 2006 (NT06CAR2) are presently trading at 92 cents-on-the-dollar. See http://www.debttraders.com/price.cfm?dt_sec_ticker=NT06CAR2for real-time bond pricing. NORTEL: Financial Analysts Teleconference Set for April 24, 2003 ---------------------------------------------------------------- Nortel Networks Q1 2003 Earnings Announcement What: Nortel Networks will host a teleconference/audio webcast with the investment community to discuss Q1 2003 Earnings. Who: -- Frank Dunn, President, Chief Executive Officer -- Doug Beatty, Chief Financial Officer -- Angela McMonagle, Vice President, Investor Relations When: 8:15AM ET - 9:15AM ET, Thursday April 24, 2003 Where: To participate via the teleconference, please call the following numbers at least 15 minutes prior to the start of the event: -- North America: 1-888-211-4395 -- International: 1-212-231-6049 To participate via the audio webcast, please visit the following Web page at least 15 minutes prior to the start of the event: http://www.nortelnetworks.com/1q2003 Replay: One hour after the conference, you can listen to the replay at: -- North America: 1-800-383-0935 Passcode: 21107420# -- International: 1-402-530-5545 Passcode: 21107420# This replay is available until 11:59 pm ET, May 7, 2003. Audio webcast replay: http://www.nortelnetworks.com/1q2003 * * * As reported in the Troubled Company Reporter's Nov. 6, 2002, issue, Moody's Investors Service lowered the senior secured and senior implied ratings on the securities of Nortel Networks Corp., and its subsidiaries to B3 and Caa3 from Ba3 and B3 respectively. Outlook is negative. The rating action reflects the lack of Nortel's financial flexibility and the decline of its revenue base. The downgrade also takes into account the company's planned lapse of its $1.5 billion in credit facilities due on December. However the rating action is offset by its substantial cash, modest near-term debt maturities, and the progress the company has made in streamlining its expenses. NORTHWEST AIRLINES: Q1 Net Loss More than Doubles to $396 Mill. --------------------------------------------------------------- Northwest Airlines Corporation (Nasdaq: NWAC), the parent of Northwest Airlines, reported a first quarter net loss of $396 million or $4.62 per common share. This compares to a first quarter 2002 net loss of $171 million or $2.01 per common share. First quarter 2003 results included $78 million in pre-tax charges for severance and pension curtailment expenses associated with workforce reductions, which were driven by capacity reductions resulting from the Iraq War. Excluding these charges, Northwest reported a first quarter 2003 net loss of $318 million or $3.71 per common share. This compares to consensus estimates of a $4.67 loss per share. "While Northwest Airlines continued to manage its costs aggressively during the quarter, the travel downturn that began some two years ago has further deteriorated due to the war, and shows no signs of improving," said Richard Anderson, chief executive officer. The impact of reduced travel demand due to the conflict with Iraq forced Northwest in late March to significantly reduce system-wide ASMs (available seat miles), ground approximately 20 aircraft and reduce its active workforce by 4,900 positions. "Because we believe that revenues will not recover to historical levels, we are continuing to address costs in every area of the operation. As labor is the single biggest expense of running Northwest, we are now conducting discussions with each of our unions concerning cost restructuring." "In light of the cost adjustments made at many of our competitors, it is imperative that we reduce our labor expenses so that we can restore Northwest to profitability," Anderson added. Operating Results First quarter 2003 operating revenues increased 3.2% to $2.25 billion versus the first quarter 2002. Operating expenses increased 8.4%, primarily as a result of higher fuel prices and unusual items. Operating cost per seat mile increased 5.2% compared to the first quarter of 2002. Excluding the unusual items and fuel, unit costs decreased 3.1%. During the quarter, fuel prices averaged 85 cents per gallon, which was 44% higher than in the first quarter of last year. First quarter 2003 fuel expense, which included $49 million in benefits from fuel hedging, was $120 million higher year-over- year. "Northwest remains focused on reducing our cost structure and maintaining the highest liquidity position possible during these uncertain times," said Bernie Han, executive vice president and chief financial officer. "We have now completed six rounds of cost initiatives since the spring of 2001 and are fully utilizing all options to achieve non-labor cost reductions." The quarterly results reflect a tax benefit limited under the provision of SFAS 109, which resulted in a tax rate of 7%. Until it is again profitable, the Company will likely not be in a position to record future tax benefits. Northwest's quarter-end total cash was $2.34 billion, including a $217 million tax refund received in February. Quarter-end unrestricted cash was $2.15 billion. At March 31, 2003, Northwest's balance sheet shows a total shareholders' equity deficit of close to $3 billion. Other Activity On March 31, the U.S. Department of Transportation approved a marketing alliance between Northwest, Delta Air Lines and Continental Airlines, that will permit Northwest to build on its successful marketing agreement with Continental. "We are pleased that the DOT approved the agreement that will allow us to offer increased service levels and broader choices of destinations for our customers," said Doug Steenland, president. "Through codesharing with Delta, service to smaller communities, a hallmark of Northwest's current route network, will be enhanced. Over time, the new partnership with Delta will provide additional revenue opportunities for Northwest," Steenland added. In late February, Northwest celebrated its first year of operation at its new WorldGateway terminal at Detroit Metropolitan Airport. As customer feedback attests, features of the new facility, including nearly 100 E-Service Centers that greatly reduce check-in times, are making the travel experience easy and efficient. "Our customers appreciate that the WorldGateway is one of the few airports in North America, along with our other domestic hubs, where international and domestic gates are located in the same facility, improving efficiencies for both travelers and the airline," Steenland added. Northwest Airlines is the world's fourth largest airline with hubs at Detroit, Minneapolis/St. Paul, Memphis, Tokyo and Amsterdam, and approximately 1,500 daily departures. With its travel partners, Northwest serves nearly 750 cities in almost 120 countries on six continents. In 2002, consumers from throughout the world recognized Northwest's efforts to make travel easier. A 2002 J.D. Power and Associates study ranked airports at Detroit and Minneapolis/St. Paul, home to Northwest's two largest hubs, tied for second place among large domestic airports in overall customer satisfaction. Business travelers who subscribe to OAG print and electronic flight guides rated nwa.com as the best airline Web site. Readers of TTG Asia and TTG China named Northwest "Best North American airline." NORTHWEST AIRLINES: S&P Concerned about Low Q1 2003 Revenues ------------------------------------------------------------ Northwest Airlines Corp. (B+/Watch Neg/--), parent of Northwest Airlines Inc. (B+/Watch Neg/--), reported a substantial first- quarter 2003 pretax loss of $426 million (including $78 million of special charges). Standard & Poor's Ratings Services said that its ratings on both companies remain on CreditWatch with negative implications. The loss, which was expected, reflects damage from depressed passenger revenue leading up to and during the Iraq war, plus high fuel prices prior to the war. More recently, the SARS virus has caused a decline in travel to and within Asia, a major market for Northwest. However, most of Northwest's Asian flights are focused on Japan, which has been less affected than other Asian regions. Northwest, like other large U.S. airlines, is cutting flying and its costs where possible and has opened talks with its unions about potential labor cost concessions. Liquidity remains good, with $2.15 billion of unrestricted cash at March 31, benefiting from a $217 million tax refund and little changed from the total at the end of 2002. NORTHWESTERN CORP: Dec. 31 Balance Sheet Upside-Down by $456MM -------------------------------------------------------------- NorthWestern Corporation (NYSE: NOR), one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, reported its financial results for the year ended Dec. 31, 2002, following the filing with the Securities and Exchange Commission of its Annual Report on Form 10-K and amended Quarterly Reports on Form 10-Q/A which restated prior unaudited results for the first three quarters of 2002. In addition, the Company updated the progress of its turnaround plan. The Company reported a loss on common stock for the year ended Dec. 31, 2002, of $892.9 million, compared with earnings on common stock of $37.5 million in 2001. Full-year 2002 results were negatively impacted by $878.5 million in charges. Consolidated revenues for 2002 were $2.0 billion, a 15.5 percent increase from $1.7 billion in 2001. Revenue increased in 2002 due to the addition of the newly acquired Montana electric and natural gas utility operations as well as increased revenue at Blue Dot, the Company's heating, ventilation and air conditioning business, primarily as the result of several acquisitions. However, consolidated revenues were adversely impacted by a substantial decrease in revenue from Expanets, the Company's communications services business, due primarily to deteriorating telecommunications markets and problems caused by complications with its EXPERT billing and collection system. At December 31, 2002, Northwestern Corp.'s balance sheet shows a total shareholders' equity deficit of about $456 million. 2002 Charges As previously announced, NorthWestern reported significant charges in 2002 totaling $878.5 million. The breakdown of the charges are as follows: * Impairment of Blue Dot goodwill and other long-lived assets $301.7 million * Impairment of Expanets goodwill and other long-lived assets $288.7 million * Discontinued operations of CornerStone Propane, net of tax benefits $101.7 million * Valuation allowance for deferred tax asset $71.5 million * Expanets billing adjustments and accounts receivable write- offs and reserves $65.8 million * Impairment of Montana First Megawatts project $35.7 million * Retirement of acquisition term loan, net of tax benefits $13.4 million Restatement of Quarterly Results Immediately prior to filing NorthWestern's 2002 Annual Report on Form 10-K, NorthWestern filed amended Quarterly Reports on Form 10-Q/A for the periods ended March 31, 2002, June 30, 2002, and Sept. 30, 2002. The quarterly reports were restated and include additional disclosures in the appropriate periods related to: * billing adjustments reducing revenues and increases in accounts receivable reserves and write-offs resulting from significant deficiencies in Expanets' EXPERT billing and collection system; * the inadequacy of data to support recording certain revenues on a percentage of completion basis, thereby requiring utilization of completed contract revenue recognition methodology for such revenues and cost recognition; * the impact resulting from the finalization of the purchase accounting for the acquisition of the Montana utility operations; * the reversal of losses previously allocated to minority shareholders of Blue Dot as a result of the finalization of the purchase accounting for acquisitions made in 2002; * the timing, amount and disclosure of adjustment to certain accruals; * the quarterly impact of certain other adjustments. Results from Core Utility Operations for 2002 NorthWestern's core electric and natural gas utility, NorthWestern Energy, reported operating income of $145.0 million, compared with operating income of $45.9 million in 2001. Revenues for 2002 increased to $775.4 million, up substantially from revenues of $251.2 million in 2001. Results for 2002 include 11 months of Montana energy operations, which were acquired in February 2002. In 2002, Montana utility operations contributed $113.1 million in operating income, with revenues of $562.6 million, excluding results from January 2002. South Dakota and Nebraska operations contributed $31.9 million in operating income in 2002, with revenues of $212.7 million. Total sales of electricity increased to approximately 9.4 million megawatt hours in 2002, compared with 1.6 million megawatt hours in 2001. Total sales of natural gas grew to approximately 36.7 million MMBTU, compared with 18.3 million MMBTU in 2001. Energy sales in 2002 reflect 11 months of results from Montana operations. Results from Nonutility Operations for 2002 For 2002, Expanets reported an operating loss of $391.9 million, compared with an operating loss of $102.6 million in 2001. Full-year 2002 results were adversely impacted by goodwill and other long-lived asset impairments in the fourth quarter of 2002 of $288.7 million and a $65.8 million increase in reserves and write-offs for billing adjustments and accounts receivable and ongoing complications with Expanets' EXPERT enterprise billing and collection system. Revenues decreased in 2002 to $710.5 million, compared with $1.0 billion in 2001, due to deteriorating telecommunications markets and ongoing complications with the EXPERT system. Blue Dot reported an operating loss in 2002 of $311.3 million, compared with an operating loss of $13.8 million in 2001. Blue Dot's results were adversely impacted by goodwill and other long-lived asset impairments of $301.7 million and challenging economic conditions. Revenues were $471.8 million in 2002, compared with revenues in 2001 of $423.8 million. The increase in revenues was primarily due to acquisitions made during 2001 and 2002. Turnaround Plan Update As previously announced, NorthWestern is implementing a turnaround plan involving the following actions: * Focusing on the Company's core electric and natural gas utility business. * Reducing debt by applying net proceeds from the sale of noncore assets and businesses, including Blue Dot, Expanets, the Montana First Megawatts generation project and the Colstrip (Montana) transmission line. * Reducing costs and improving cash flow. * Strengthening internal financial controls and procedures. NorthWestern reported that progress has been made on several fronts regarding its turnaround plan, including: * As part of a new agreement, Avaya, Inc. relinquished its equity interest in Expanets and canceled a noninterest bearing subordinated note with Expanets in the face amount of $35 million due in 2005, which had a carrying value of approximately $27 million. In addition, Expanets extended the payment schedule for approximately $27 million of debt owed to Avaya, originally due Dec. 31, 2002, and now due in three equal payments on Jan. 1, April 1 and July 1, 2004. NorthWestern has an obligation to purchase inventory and receivables in an amount equal to the outstanding balance in the event it is not repaid by Expanets. * NorthWestern has engaged an investment advisor to pursue a possible sale or disposition of Blue Dot and Expanets. In addition, the Company does not intend to make additional significant investments in Blue Dot and Expanets and is working to improve their financial independence. * Blue Dot has sold 15 of 16 noncore business locations that it had previously targeted for sale. Selling these underperforming locations, along with reductions in corporate overhead, will help Blue Dot to become more self sufficient. * The Company has hired a chief restructuring officer, reporting directly to the Chief Executive Officer, and retained advisors to assist in developing strategic alternatives to reduce costs, improve cash flow and reduce debt. * The Company has hired a vice president of audit and controls, reporting directly to the Chief Executive Officer, to assess, implement and monitor internal controls. NorthWestern said that based on current plans and business conditions, the Company expects that its cash flows from operations, cash and cash equivalents will be sufficient to meet its cash requirements for the next 12 months. The Company believes that it may need additional funding sources or proceeds from the sale of noncore assets by the end of 2004 or early 2005. In 2005, the Company faces substantial debt maturities. Given the Company's significant debt, the board of directors intends to review the appropriateness of each periodic interest payment of its trust preferred securities in light of, among other things, the progress of its turnaround plan and the Company's liquidity needs. The Company has the right to defer interest payments for up to 20 consecutive quarters. If interest payments are deferred, cash distributions on the trust preferred securities will also be deferred. In each case, interest would accrue on deferred payments. Absent the receipt of significant proceeds from the sale of noncore assets, the raising of additional capital or a restructuring of existing debt, the Company will not be able to meet its substantial debt maturities. The Company is currently working with outside advisors to identify alternatives to restructure its long-term debt. "Recognizing our significant challenges, we are taking steps to try and stabilize NorthWestern's current financial position and ensure that we maintain sufficient funds to support our core utility business and meet our obligations," said Gary G. Drook, NorthWestern's Chief Executive Officer. "In the near term, we are taking actions intended to assist us in reducing debt and returning our focus to our core utility business. In the longer term, we are evaluating our options for restructuring our indebtedness." NorthWestern Corporation is one of the largest providers of electricity and natural gas in the Upper Midwest and Northwest, serving approximately 598,000 customers in Montana, South Dakota and Nebraska. NorthWestern also has investments in Expanets, Inc., a leading nationwide provider of networked communications and data services to small and mid-sized businesses, and Blue Dot Services Inc., a provider of heating, ventilation and air conditioning services to residential and commercial customers. NOVA COMMS: Completes $1-Million Debt-to-Equity Conversion Deal --------------------------------------------------------------- Nova Communications Ltd., (OTCBB:NCVM) has successfully struck approximately $1,000,000 from its balance sheet from one of its creditors. The creditor, Palaut, Inc., was owed approximately $1,000,000 for loans and deferred compensation. Because of the Company's progress in business developments as described in Nova's Stockholder Letter of February 11, 2003, Palaut, Inc., has elected to convert its debt into a Nova equity position. Nova Communications CEO Ken Owen stated, "This debt conversion into equity marks a strong vote of confidence by Palaut, Inc., and yet another dramatic change that we feel will build great value over the long term. Additionally, we previously divested a money-losing entity that relieved the Company of more than $5 million in liabilities. "The combination of our efforts has begun to pay off as we see our balance sheet improve substantially. Concurrently, the Kadfield, Inc. subsidiary's core business continues strong growth, reporting over $6,000,000 in revenue for the nine months ended September 30th," Owen concluded. Nova Communications has and continues to institute changes to its strategies, operations and processes to address these risk factors and to mitigate their impact on Nova Communication's results of operations and financial condition. However, no assurances can be given that Nova Communications will be successful in these efforts. At December 31, 2002, Nova Communications' balance sheet shows a working capital deficit of close to $1 million, and a total shareholders' equity deficit of about $2 million. OBSIDIAN ENTERPRISES: Appoints Rick D. Snow as New EVP and CFO -------------------------------------------------------------- Obsidian Enterprises, Inc., (OTC Bulletin Board: OBSD) has named Rick D. Snow Executive Vice President and Chief Financial Officer. Mr. Snow, a Certified Public Accountant since 1987, brings a wealth of experience to Obsidian, a holding company that invests in small and mid-cap companies in basic industries such as manufacturing and transportation. Mr. Snow will also continue to serve as Chief Financial Officer for Fair Finance, a company located in Akron, Ohio, of which Timothy S. Durham, Chairman and C.E.O. of Obsidian Enterprises, is C.E.O. At Fair Finance, Mr. Snow oversees the financial management of the company, including financial reporting, tax compliance, systems implementation and strategic planning. Mr. Snow came to Fair Finance in 2002 with several years of experience at Grant Thornton, a national accounting firm, and Brockman, Coats, Gedelian & Co., a regional accounting firm, where he worked as Senior Manager to oversee business and assurance services and business advisory services. His background also includes extensive experience in mergers and acquisitions. Mr. Snow earned a Bachelor of Business Administration from Kent State University and is a member of the American Institute of Certified Public Accountants and the Ohio Society of Certified Public Accountants. He has served in several leadership roles for civic and charitable organizations. Timothy Durham stated, "Rick Snow brings extensive financial and auditing experience, and I know that he will be an invaluable asset to Obsidian." Mr. Snow added, "I am pleased to join Obsidian's team and I look forward to contributing to the company's growth and increasing shareholder value." Mr. Snow is replacing the outgoing Barry S. Baer, who completed a yearlong project for Obsidian, related to the 2001 transition of the company from a private sector venture capital group to a public entity. Obsidian, whose January 31, 2003 balance sheet shows a total shareholders' equity deficit of about $1 million, is a holding company headquartered in Indianapolis, Indiana. It conducts business through five subsidiaries: Pyramid Coach, Inc., a leading provider of corporate and celebrity entertainer coach leases; United Trailers, Inc., and its sister company, Southwest Trailers, manufacturers of steel-framed cargo, racing ATV and specialty trailers; U.S. Rubber Reclaiming, Inc., a butyl-rubber reclaiming operation; and Danzer Industries, Inc., a manufacturer of service and utility truck bodies and accessories. More information on each of these companies can be found online at http://www.obsidianenterprises.com PACIFICARE HEALTH: Ups EPS Guidance for First Quarter & FY 2003 --------------------------------------------------------------- PacifiCare Health Systems Inc., (Nasdaq:PHSY) is revising its earnings per share guidance for the 2003 first quarter upward to at least $1.90, significantly above its previous EPS guidance of $0.85 to $0.95. The higher earnings are in part being driven by favorable changes in prior period estimates of health-care costs, which are expected to contribute approximately $0.67 per share. The positive prior period adjustments primarily reflect an improvement in Texas operating results, including lower than anticipated utilization rates prior to the company's exit from the Houston Medicare market on Jan. 1. Gregory W. Scott, executive vice president and chief financial officer, said, "We are also raising our guidance for the full year to a range of $6.00 to $6.10 per share, up from our prior guidance of $4.25 to $4.35. "We are extremely pleased that PacifiCare's run rate in the first quarter will significantly exceed our expectations primarily due to lower cost trends related in part to a light flu season, as well as favorable membership trends in both our commercial and senior businesses. "It's early, but we are encouraged by the potential impact that our prior period changes in estimates may have on our 2003 health-care cost trends. Our balance sheet reserves for medical claims and benefits payable will increase in the first quarter, reflecting the growth of our commercial risk membership." Earnings results for the first quarter will be issued after the market close on Wednesday, April 30. Concurrent with its first quarter results, the company also said it will introduce a new reporting format for its financial statements. The new format will reflect a change in the way the company reports revenue and expenses for all lines of business, providing investors more visibility into the performance of its pharmacy benefit management, behavioral health, and dental and vision subsidiaries. Revenue will comprise four categories: commercial, senior, specialty and other, and net investment income. Health-care services and other expenses will comprise commercial benefits, senior benefits, and specialty and other benefits. The change will not affect the selling, general and administrative expense line. Because the format combines revenue from fully-insured and non- fully-insured businesses, the company will provide additional detail on its medical loss ratios (MLRs) in its supplemental financial tables. This data will allow investors to separately track the private sector MLRs for both the commercial and senior lines of business and the government sector MLR for the company's senior line of business, primarily its Medicare + Choice product. Attached to this news release are pro forma results for the most recent four quarters through the year ended Dec. 31, 2002. These results have been reformatted according to the new reporting presentation being adopted as of the 2003 first quarter. Conference Call Information PacifiCare will host a conference call and webcast on April 30 at 2 p.m. Pacific time, 5 p.m. Eastern time, to discuss the company's earnings for the first quarter of 2003. Interested parties will be able to access the live conference by calling 888/456-0364 (630/395-0252 for international calls), password "PacifiCare." A replay of the call will be available through May 22, 2003, at 800/934-9914. Additionally, the live webcast of the call will be available on PacifiCare's Web site at http://www.pacificare.com Click on Investor Relations and then Conference Calls, to access the link. PacifiCare Health Systems serves more than 3 million health plan members and approximately 9 million specialty plan members nationwide and has annual revenues of about $11 billion. PacifiCare is celebrating its 25th anniversary as one of the nation's largest consumer health organizations, offering individuals, employers and Medicare beneficiaries a variety of consumer-driven health care and insurance products. Specialty operations include behavioral health, dental and vision, life insurance, and complete pharmacy and medical management through its wholly owned subsidiary, Prescription Solutions. More information on PacifiCare Health Systems is available at http://www.pacificare.com * * * As reported in Troubled Company Reporter's December 4, 2002 edition, Standard & Poor's assigned its 'B' rating to PacifiCare Health Systems Inc.'s $125 million 3% convertible subordinated debentures, which are due in 2032 and are being issued under SEC Rule 144A with registration rights. Standard & Poor's also said that it revised its outlook on PacifiCare to stable from negative. "The rating is based on PacifiCare's good business position as a regional managed care organization and improved earnings performance," said Standard & Poor's credit analyst Phillip C. Tsang. "Offsetting these strengths are PacifiCare's marginal capitalization and high percentage of goodwill in its capital." PacifiCare expects to use the net proceeds from the issue to permanently repay indebtedness under its senior credit facility, with the remainder for general corporate purposes. PHILIP SERVICES: Mulls Chapter 11 Filing to Effect Fin'l Workout ---------------------------------------------------------------- Philip Services Corporation (OTC:PSCD.PK) (TSE:PSC) announced fourth quarter and full year financial results for 2002. Fourth quarter operating results improved from a loss of $33.2 million in 2001 to a loss of $7.4 million in 2002. Operating results for the full year ending December 31, 2002 improved to income of $7.4 million in 2002 compared to a loss of $41.3 million in 2001. For the twelve-month period ending December 31, 2002, net loss was $59.2 million compared with a net loss of $78.1 million for the same period of 2001. "We are continuing to execute our business strategy in the face of challenging economic conditions," said Michael W. Ramirez, chief financial officer for PSC. "While we are reporting a loss for the quarter, we are encouraged by the progress we've made in restructuring our operations." PSC completed the merger of its former Environmental Services and Industrial Cleaning organizations in late 2002 and closed on the sale of five Project Services Division business groups in March 2003. "Our restructuring efforts will now focus more towards PSC's capital structure," added Ramirez. The company has filed a Current Report on Form 8-K with the SEC announcing the extension of its operating credit facility to June 2, 2003. PSC intends to use the extension to prepare to restructure its balance sheet and refinance its debt. It is anticipated that this financial restructuring will be completed through the filing of a proceeding under Chapter 11 of the U.S. Bankruptcy Code. No filing, however, has yet been made. Highlights for the Three- and Twelve-Month Periods Ending December 31, 2002: -- Revenue for the three-month period ending December 31, 2002, was $288.1 million, compared to $251.7 million for the same period in 2001. For the twelve-month period ending December 31, 2002, revenue was $1,118.5 million compared to $1,144.8 million for the same period in 2001. The increase in revenue for the three-month period ending December 31, 2002, is due principally to the increased revenue associated with price increases for ferrous scrap metal and the demand for finished steel products. The decline in revenue for the twelve-month period ending December 31, 2002, is due primarily to PSC's Industrial Services Group experiencing reductions in work scope and postponements of projects and the divestiture in the first quarter of 2002 of certain of its operations. The decline was partially offset by increased revenue from PSC's Metals Services Group associated with price increases for ferrous scrap metal and the demand for finished steel products. -- Loss from operations was $7.4 million or 2.6% of revenue for the three-month period ending December 31, 2002, compared with $33.2 million or 13.2% of revenue for the same period of 2001. Loss from operations for the three-month period ending December 31, 2002, was positively impacted by improved ferrous scrap metal prices and the demand for finished steel products. Also, PSC's waste services business line realized improved operating profit of $7.3 million during the three-month period when compared to 2001 due to higher demand for services in 2002 as compared to depressed levels immediately following the events of September 11, 2001. Additionally, in the three-month period, selling, general and administrative expenses were $19.3 million lower than 2001 due to the recording of $8.1 million of bad debt provisions associated with certain customer bankruptcies in 2001, the recording of $4.7 million in 2001 related to an insurance charge, and cost efficiencies realized in 2002. -- Income from operations was $7.4 million or 0.7% of revenue for the twelve-month period ending December 31, 2002, compared with a loss of $41.3 million or 3.6% of revenue for the same period of 2001. Income from operations for the twelve-month period ending December 31, 2002, was positively impacted by a $19.8 million insurance settlement involving certain environmental sites of the company offset by a $5.0 million charge for incremental environmental liabilities. Income from operations was also positively impacted by higher ferrous scrap metal prices and demand for finished steel products resulting in improved operating results of approximately $12 million and increased demand in the waste services business line resulting in improved operating results of approximately $7 million. Additionally, bad debt expense declined $16 million in 2002 compared with 2001. -- Net loss was $30.7 million for the three-month period ending December 31, 2002, compared with $50.8 million for the same period of 2001. For the twelve-month period ending December 31, 2002, net loss was $59.2 million compared with a net loss of $78.1 million for the same period of 2001. The decrease in the net loss for the twelve-month period ending December 31, 2002, was principally due to the factors noted above partially offset by interest expense which was $11.5 million higher in 2002 than in 2001 and operations that were divested during 2002 and the first quarter of 2003, which have been recorded as discontinued operations. The discontinued operations reported a loss of $11.5 million in 2002 compared to income of $4.6 million in 2001. Headquartered in Houston, Philip Services Corporation (PSC)(OTC:PSCD.PK)(TSE:PSC) is an industrial and metals services company with two operating groups: PSC Industrial Services provides industrial cleaning and environmental services; and PSC Metals Services delivers scrap charge optimization, inventory management, remote scrap sourcing, by-products services and industrial scrap removal to major industry sectors throughout North America. With over 6,500 experienced professionals, PSC is geographically positioned to meet the needs of its clients in Mexico, Canada and the United States. For more information about PSC, visit http://www.contactpsc.com/ PHOTRONICS INC: Closes Private Placement of $150MM Conv. Notes -------------------------------------------------------------- Photronics, Inc., (Nasdaq: PLAB) has completed its offering of $150 million 2-1/4% Convertible Subordinated Notes due 2008 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933. This amount includes $25 million principal amount of Notes issued pursuant to an option granted to the initial purchasers of the notes. The Notes are convertible, at the option of the holders, into shares of 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 conversion premium of 42.5% based on the closing price of $11.15 for the common stock on April 9, 2003. Photronics may not redeem these Notes prior to their final maturity on April 15, 2008. 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, unless so registered, 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 previously reported in Troubled Company Reporter, 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. POLYONE CORP: Intends to Complete Debt Workout Early Next Month --------------------------------------------------------------- PolyOne Corporation (NYSE:POL), a leading global polymer services company, plans to complete a debt refinancing early in May 2003. The refinancing is expected to provide the necessary liquidity to repay $87.8 million of senior debt that matures in September 2003, as well as to support normal operations and fund previously announced restructuring initiatives intended to improve earnings. The refinancing anticipates the issuance of $250 million in new long-term debt; a revised, three-year, $50 million secured revolving credit facility; and a new, three-year, $225 million accounts receivable sale facility. These new facilities will be used to retire the September 2003 maturity along with PolyOne's existing revolver and receivables sale facility. The new receivables sale facility will exclude any debt ratings trigger, which exists in the current facility. PolyOne Corporation, with 2002 revenues of $2.5 billion, is an international polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounding and thermoplastic resin distribution. Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites in North America, Europe, Asia, and Australia, and joint ventures in North America, South America, Europe, Asia and Australia. Information on the Company's products and services can be found at http://www.polyone.com As reported in Troubled Company Reporter's April 9, 2003 edition, Fitch Ratings downgraded PolyOne Corporation's senior unsecured debt rating to 'B' from 'BB' and its senior secured credit facility to 'B' from 'BB'. The ratings have been placed on Rating Watch Negative. The downgrade reflects the significant credit risk associated with liquidity deterioration, pending covenant tightening, pending termination of the company's accounts receivable (A/R) securitization program, and refinancing risk. POLYONE CORP: Offering $250-Million of Senior Unsecured Notes ------------------------------------------------------------- PolyOne Corporation (NYSE:POL), a leading global polymer services company, plans to offer $250 million of senior unsecured notes to certain institutional investors in an offering exempt from the registration requirements of the Securities Act of 1933. The Company intends to use proceeds from the offering to repay $87.8 million of senior debt maturing in September 2003; to repay amounts outstanding, under its existing revolving bank credit facility; to reduce a portion of the amount sold under its accounts receivable sale facility; and to pay related fees and expenses. The notes will rank equally with all of PolyOne's other senior indebtedness. The notes to be offered will not be and have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor will there be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state, and is issued pursuant to Rule 135c under the Securities Act of 1933. PolyOne Corporation, with 2002 revenues of $2.5 billion, is an international polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounding and thermoplastic resin distribution. Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites in North America, Europe, Asia, and Australia, and joint ventures in North America, South America, Europe, Asia and Australia. Information on the Company's products and services can be found at http://www.polyone.com POLYONE CORP: Anticipates Net Loss of Up to $20-Mil. for Q1 2003 ---------------------------------------------------------------- PolyOne Corporation (NYSE:POL), a leading global polymer services company, expects to report a net loss of approximately $19 million to $20 million for first-quarter 2003. The estimate equates to a net loss of approximately $0.21 to $0.22 per share. These results include estimated special charges totaling approximately $16.2 million after tax, or $0.18 per share. Sales are estimated to be approximately $645 million, an increase of 8 percent over first-quarter 2002 and 11 percent compared with fourth-quarter 2002. "These results before special items are better than current consensus street estimates," said Thomas A. Waltermire, chairman and chief executive officer. "The first quarter's solid sales growth and higher operating income before special items compared with both the first quarter of 2002 and the fourth quarter of 2002 are the result of our efforts to improve PolyOne's financial performance, despite continuing economic weakness and the run-up in energy costs." Special items in the first quarter of 2003 are associated largely with previously announced restructuring initiatives, including those disclosed during the quarter. On January 14, 2003, PolyOne announced it would eliminate approximately 400 staff positions. On March 26, 2003, the Company announced that it planned to close its Yerington, Nevada, engineered films plant. PolyOne Corporation, with 2002 revenues of $2.5 billion, is an international polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounding and thermoplastic resin distribution. Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites in North America, Europe, Asia and Australia, and joint ventures in North America, South America, Europe, Asia and Australia. Information on the Company's products and services can be found at http://www.polyone.com RACE POINT II: S&P Rates Class D-1, D-2 & D-3 Notes at BB --------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Race Point II CLO Ltd./Race Point II CLO Inc.'s $497.5 million fixed- and floating-rate notes. Race Point II CLO is a CLO primarily backed by high-yield loans and structured as a cash flow transaction. The transaction is a revolving pool purchased by Sankaty Advisors LLC, and has a 270-day ramp-up period and a six-year reinvestment period ending May 15, 2009. The ratings are based on the following: -- Adequate credit support provided by subordination; -- Characteristics of the underlying collateral pool, consisting primarily of high-yield loans; -- Additional structural enhancements to divert excess interest; -- Hedge agreements entered into with an appropriately rated counterparty to mitigate the interest rate risk created by having certain fixed-rate assets in the collateral pool and having floating-rate liabilities; -- A scenario default rate of 32.94% for the class A-1 notes, 30.85% for the class A-2 notes, 25.60% for the class B notes, 21.87% for the class C notes, and 16.34% for the class D notes; -- A break-even loss rate of 45.56% for the class A-1 notes, providing 12.62% of cushion; 43.09% for the class A-2 notes, providing 12.24% of cushion; 31.3% for the class B notes, providing 5.70% of cushion; 24.09% for the class C notes, providing 2.22% of cushion; and 18.31% for the class D notes, providing 1.97% of cushion; -- Weighted average maturity of 5.51 years for the portfolio; -- Default measure of 3.00% (annualized); -- Variability measure of 1.69% (annualized); -- Correlation measure of 1.30 for the portfolio; and -- Interest on the class B, C, and D notes may be deferred up until the legal final maturity of May 15, 2015, without causing a default under these obligations. The ratings on the class B, C, and D notes thus address the ultimate payment of interest and principal. RATINGS ASSIGNED Race Point II CLO Ltd./Race Point II CLO Inc. Class Rating Amount (mil. $) A-1 AAA 402.0 A-2 AA+ 15.0 B-1 A 15.0 B-2 A 38.0 C-1 BBB 12.0 C-2 BBB 5.0 D-1 BB 3.5 D-2 BB 3.0 D-3 BB 4.0 RYLAND GROUP: S&P Revises Outlook on Low-B Ratings to Positive -------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the 'BB+' corporate credit rating assigned to The Ryland Group Inc., to positive from stable. At the same time, the corporate credit rating and ratings on roughly $247 million of senior unsecured notes, $243.5 million senior subordinated notes are affirmed. The outlook revision acknowledges this well-diversified homebuilder's more cautious organic growth strategy and disciplined focus on affordably priced homes, which has resulted in steady revenue increases during the past five years, while consistently high inventory turnover and improved efficiencies have significantly bolstered profitability. These factors should continue to support further improvements in profit margins, which have historically been below average relative to like-positioned peers. Southern California-based Ryland ranks among the top homebuilders in the nation, having sold 13,145 homes in 2002. The company's revenues have grown at a consistent 13% annual rate during the past five years, topping $2.8 billion last year without the benefit of, or risks associated with, the aggressive merger and acquisition activity that has been pursued by many industry participants in recent years. Ryland's home sales are relatively evenly distributed across 18 divisions (25 markets), with no single division accounting for more than 11% of homebuilding revenues. This geographic diversity should insulate the overall earnings stream from potential swings in demand in individual markets. Ryland Mortgage Co., a wholly owned mortgage-banking subsidiary that originated loans for approximately 82.4% of homes sold by Ryland in 2002, supports Ryland's homebuilding operations and contributed 2.6% and 15.5% of the company's revenues and operating earnings, respectively. While revenues have grown at a moderate and consistent pace during the past five years, net earnings have expanded at a more robust rate of nearly 50% - as homebuilding operating margins have doubled to 10.7% due to growing unit sales and prices combined with tighter cost controls and increased operating efficiencies. It is important to note that these margin improvements have not been inflated by aggressive price increases, with the average home price rising at an annual rate of only 3%, as Ryland has kept a disciplined focus on affordable first-time and move-up homes. The homebuilder's average inventory turnover during this time period (2.2 x) remains among the best in the sector, which, when combined with improved margins, contributed to last year's impressive three-fold rise in return on capital to 30.0%. Ryland has a conservative capital structure with modest debt levels and a largely tangible and fairly liquid asset base. At Dec. 31, 2002, debt totaled $491 million, or 41.9% of capital, and had a weighted average maturity and cost of about six years and 8.9%, respectively. Ryland also had a $1.7 billion asset base, of which, cash and homebuilding inventories totaled $1.4 billion. Notably, goodwill is negligible at about 1% of total assets. The company does have $14.9 million invested in 10 off- balance sheet land financing joint ventures. However, these ventures are modest in size (aggregating $61.0 million in assets) and leveraged similarly to Ryland (38.2%). In total, the company controls roughly a 3.7-year supply of lots, a little more than half of which (26,113 lots) are controlled through these joint ventures and lot option contracts (very few of which carry specific performance commitments). The company's financial services segment has $43.1 million of non-recourse debt outstanding. These obligations are collateralized by mortgage loans and mortgage-backed securities and are not guaranteed by Ryland or any of its subsidiaries. LIQUIDITY Ryland has ample liquidity and manageable capital needs with no debt maturities until 2006, at which time $100 million of 8% senior notes mature. The company's solid cash flow produced homebuilding EBITDA/interest coverage of 8.2x and homebuilding debt-to-homebuilding EBITDA of 1.3x despite the higher cost of Ryland's debt and a $200 million increase in inventories in 2002. These figures are well above average and are supported by the previously noted fixed-rate debt structure. Additionally, at fiscal year end 2002 Ryland had $269 million of cash, full availability under its $300 million unsecured line of credit (which matures in August 2005) and a $1.2 billion contract backlog. The value of the lots controlled by Ryland via option contracts is $775 million, which would imply potential future takedown commitments in the range of roughly $50 million per quarter, a level that is very manageable given the company's current liquidity position. OUTLOOK: POSITIVE Ryland has grown its homebuilding operations in a comparatively conservative and disciplined manner, which limits the amount of downside risk to the credit profile. At the same time, the company has been able to control land costs, lower construction expenses, and improve operating efficiencies, resulting in dramatically improved profitability measures. Though the pace of these improvements is likely to decelerate in a less robust housing environment, continued incremental progress over the next year would warrant a one-notch upgrade. OUTLOOK REVISED; RATINGS AFFIRMED Rating The Ryland Group Inc. To From Corporate Credit Rating/Outlook BB+/Positive BB+/Stable $100 mil 8.0% sr unsecd nts due 2006 BB+ BB+ $147 mil 9.75% sr unsecd nts due 2010 BB+ BB+ $100 mil 8.25% sr sub nts due 2008 BB- BB- $143.5 mil 9.125% sr sub nts due 2011 BB- BB- SAGENT TECHNOLOGY: Group 1 to Acquire Assets for Up to $17 Mill. ---------------------------------------------------------------- Group 1 Software (Nasdaq: GSOF) and Sagent Technology, Inc. (Nasdaq: SGNT) have entered into an agreement under which Group 1 will acquire the key assets of Sagent for up to $17 million, payable in cash and debt forgiveness. Concurrent with the signing of the purchase agreement, Group 1 provided Sagent with $5 million in bridge financing, secured by all of Sagent's assets. Under the terms of the bridge financing, Group 1 has agreed to lend Sagent an additional $2 million upon approval of the purchase agreement by Group 1's board of directors. The Sagent acquisition will add significant enterprise information integration and customer data integration technologies to Group 1's core data quality and data enrichment solutions. Group 1 will add to its product offerings Sagent's extract, transformation and load technology, which is planned to be marketed as a stand-alone offering and integrated with Group 1's data quality solutions. Additionally, Group 1's geospatial analysis capabilities will be enhanced with the technology of Sagent's Centrus division. "The acquisition will enable Group 1 to provide an even more comprehensive array of data quality, integration and enrichment technologies that support enterprise operating systems, such as customer relationship management and enterprise resource planning systems," said Bob Bowen, CEO of Group 1 Software. "Furthermore, Sagent has sales and distribution operations in twenty countries worldwide, which can enable Group 1 to gain additional product distribution capabilities in a number of growing markets including Japan, China, South Africa, and others." "We are very excited about the Sagent transaction, which will provide us with advanced and powerful technology to complement our own, plus a number of highly talented individuals and an enhanced global presence," continued Mr. Bowen. "Both Group 1 and Sagent help businesses harness the power of their most strategic competitive asset -- customer information. We intend to utilize Group 1's strengths to build on the base of more than 1,500 global customers that have turned to Sagent to transform their corporate data into actionable information." "I am pleased to have found such a great fit for Sagent's technology and customers," said Andre Boisvert, Sagent's Chairman and CEO. "With over 2,000 customers worldwide, powerful technology of its own and a stellar management team, Group 1 will be able to maximize and enhance Sagent's technology to further meet the needs of both companies' customers and the marketplace." "The combined resources of Group 1 Software and Sagent bring together data quality, geospatial analysis and data integration technologies," said Henry Morris, vice president, applications and information access at IDC. "Sagent's technology offers the ability to integrate multiple sources of customer information with precise handling of geospatial data, extending the capabilities of Group 1 Software's data quality offerings and enhancing the value of a business's customer information. This acquisition also delivers improved reporting functionality, enabling businesses to receive critical feedback on their enterprise data quality processes." The closing of the transaction is subject to satisfactory completion by Group 1 of its due diligence review, approval by Group 1's board of directors, and customary closing conditions, including approval by Sagent's stockholders. The $17 million purchase price will be paid through the cancellation of the bridge loans referred to above, with the remainder paid in cash. The purchase price is subject to reduction based on changes in the value of the acquired assets and assumed liabilities prior to closing. Subject to the approval of its stockholders, Sagent intends to wind up its business in accordance with applicable law following the closing of the asset sale, and thereafter effect a complete liquidation and dissolution. Group 1 Software (Nasdaq: GSOF) is a leading provider of software solutions for data quality, marketing automation, customer communications management and direct marketing applications. Group 1's software systems and services enable over 2,000 customers worldwide to market smarter by helping them find, reach and keep customers. Founded in 1982 and headquartered in Lanham, Maryland, Group 1's solutions are utilized by leaders in the financial services, banking, retail, telecommunications, utilities, e-commerce, and insurance industries. The company's customer base includes such recognized names as Charles Schwab, Entergy, GEICO, L.L. Bean, Wal-Mart and Wells Fargo. For more information about Group 1, visit the company's Web site at http://www.g1.com Sagent's patented technology fundamentally changes the way that data warehouses are built and accessed. Sagent's unique data flow server enables business users to easily extend the structure of a data warehouse with new analytics that support immediate business needs. This technology is at the core of Sagent's ETL, EII and business intelligence solutions, as well as multiple partner solutions that address the needs of specific vertical and functional application areas. Sagent has more than 1,500 customers worldwide, including: AT&T, Boeing Employees Credit Union, BP Amoco, Carrefour, Citibank, Diageo, Heineken, Kawasaki, Kemper National Insurance, La Poste, NTT-DoCoMo, Siemens, and Singapore Telecom. Key partners include Advent Software, Cap Gemini Ernst & Young, HAHT Commerce, Hyperion, Microsoft, Satyam, Sun Microsystems, and Unisys. Sagent is headquartered in Mountain View, California. For more information about Sagent, please visit http://www.sagent.com * * * As reported in Troubled Company Reporter's March 25, 2003 edition, Sagent Technology received notice from CDC Software Corporation, a wholly owned subsidiary of chinadotcom corporation (Nasdaq:CHINA), declaring that an event of default has occurred under the secured loans totaling $7 million made by CDC to Sagent in the fourth quarter of 2002. CDC has declared the entire principal amount under the loans to be immediately due and payable, and has asserted control over the Company's bank deposit accounts. On March 20, 2003, CDC caused approximately $4 million that was in Sagent's deposit accounts to be transferred to a bank account in Hong Kong. Sagent said it did not believe that an event of default exists under the loans. In addition, Sagent is evaluating several strategic alternatives, including refinancing its existing debt or selling all or a portion of its assets or business to a third party. SEALY CORP: Narrows Net Capital Deficit to $101-Mill. at March 2 ---------------------------------------------------------------- Sealy Corporation, the world's largest manufacturer of bedding products, announced results for the fiscal first quarter ending March 2, 2003. For the quarter, Sealy reported net sales of $288.3 million, a decrease of 1.2% from $291.8 million for the same period a year ago. Net income was up 7.7% to $9.1 million, compared with $8.4 million a year earlier. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $38.2 million, compared with $39.0 million a year earlier. Reported net sales reflect Sealy's adoption of Financial Accounting Standards Board Emerging Issues Task Force 01-09, "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Product." Under EITF 01-09, cash consideration is a reduction of revenue, unless specific criteria are met regarding goods or services that the vendor may receive in return for this consideration. Historically, Sealy classified costs such as volume rebates and promotional money as marketing and selling expenses. These costs are now classified as a reduction of revenue. This had the effect of reducing net sales and selling, general and administrative expenses each by $11.6 million for quarter the ended March 2, 2003 and by $9.1 million for the quarter ended March 3, 2002. These changes did not affect the Company's financial position or results of operations. At March 2, 2003, Sealy's balance sheet shows total shareholders' equity deficit dwindled to about $101 million, as compared to a deficit of about $116 million recorded at December 31, 2002. "In spite of the challenging economic environment and the restructuring of Mattress Discounters, we are pleased with our operating results in the first quarter," said David J. McIlquham, Sealy's president and chief executive officer. "In addition to a solid first three months, since the end of the first quarter, Mattress Discounters emerged from bankruptcy and the Company subsequently sold its interests in Mattress Discounters to an affiliate of Bain Capital for approximately $13.6 million, which represented a slight gain," said McIlquham. The other week at the April High Point Furniture Market, the Company launched its new Sealy Posturepedic line, this represents Sealy's first branded offering with a one-sided design. The new design features an industry-first UniCased(TM) Construction that optimizes the performance of the Posturepedic innerspring by creating a stable feel and providing uniform comfort across the entire mattress. "The new Sealy Posturepedic was developed after extensive product development and consumer research, and we are extremely excited about this great new line," said Dave McIlquham. "The UniCased Construction, exclusive to Sealy, resembles the unibody construction found in most automobiles today. Sealy has thermo-bonded our internal edge support and base to create a stable, integrated unit around the innerspring. The end result is a new design that creates the most comfortable bed available. You can see and feel the difference as soon as you lie down on it." Sealy is the largest bedding manufacturer in the world with net sales of $1.2 billion in 2002. The Company manufactures and markets a broad range of mattresses and foundations under the Sealy(R), Sealy Posturepedic(R), Sealy Posturepedic Crown Jewel(R), Stearns & Foster(R), and Bassett(R) brands. Sealy employs more than 6,000 individuals, has 30 plants, and sells its products to 3,200 customers with more than 7,400 retail outlets worldwide. Sealy is also a leading supplier to the hospitality industry. For more information, please visit http://www.sealy.com SHEFFIELD PHARMACEUTICALS: Ability to Continue Ops. Uncertain ------------------------------------------------------------- Sheffield Pharmaceuticals, Inc., (Amex: SHM) reported its financial results for the fourth quarter and year ended December 31, 2002. The Company reported a net loss of $1.0 million for the fourth quarter of 2002 compared to a net loss of $3.0 million for the same period last year. The net loss for the year ended December 31, 2002 was $8.6 million on $0.01 million of revenue, compared to a net loss of $9.5 million on $0.9 million of revenue for 2001. The net loss per share amounts for both the fourth quarter and year ended December 31, 2001 have been restated to reflect in-kind preferred stock dividends in the calculation of net loss available to common shareholders, as previously disclosed. At December 31, 2002, total assets were $1.5 million, of which $0.3 million were cash and cash equivalents. The items of expense for the year ended December 31, 2002 resulted primarily from: (1) the unit dose budesonide clinical trail, which was completed in the first quarter of 2002; (2) feasibility studies on novel respiratory therapies with the Tempo delivery system; (3) work on industrialization of the final Tempo design and the to-be-marketed Premaire device; (4) initiation of formulation work for the Tempo dihydroergotamine product; and (5) expanded business development and corporate development activities in the areas of licensing and partnering the Company's products as well as potential complementary pulmonary delivery technologies. During the year the Company also negotiated the termination of Elan Corporation's ownership interest in systemic rights to both the Premaire and Tempo delivery systems, restructured the management team, significantly reduced the cost of operations for the base business and added an additional non-executive Director to the Board of Directors. Thomas M. Fitzgerald, President and Chief Executive Officer, commented, "Management continues to address the Company's financial condition and are particularly focused on the potential out-licensing of unit dose budesonide developed in the Respiratory Steroid Delivery joint venture with Elan together with the ongoing feasibility studies for novel respiratory compounds. The Company continues to explore a range of strategic alternatives." As of December 31, 2002, the Company had cash and equivalents of approximately $.3 million and accounts payable and accrued liabilities of $3.0 million. As of April 10, 2002, the Company had cash and cash equivalents of $0.1 million. Unless the Company is able to raise significant capital ($1 million to $2.5 million) within the next 30-60 days, management believes that it is unlikely that the Company will be able to meet its obligations as they become due and to continue as a going concern. To meet this capital requirement, the Company is evaluating various financing alternatives including private offerings of the Company's securities, other debt financings, collaboration and licensing arrangements with other companies, and the sale of non-strategic assets and/or technologies to third parties. Should the Company be unable to meet its capital requirement through one or more of the above-mentioned financing alternatives, the Company may file for bankruptcy or seek similar protection. Sheffield Pharmaceuticals, Inc., provides innovative, cost- effective pharmaceutical therapies by combining state-of-the-art pulmonary drug delivery technologies with existing and emerging therapeutic agents. Sheffield is developing a range of products to treat respiratory and systemic diseases using pressurized metered dose, solution-based and dry powder inhaler and formulation technologies, including its proprietary Premaire(R) Delivery System and Tempo(TM) Inhaler. Sheffield focuses on improving clinical outcomes with patient-friendly alternatives to inconvenient or sub-optimal methods of drug administration. Investors can learn more about Sheffield Pharmaceuticals on its Web site at http://www.sheffieldpharm.com SONICBLUE INC: D&M Pitches Best Bid for ReplayTV and Rio Assets --------------------------------------------------------------- SONICblue(TM) Incorporated announced that D&M Holdings Inc. (TSE II: 6735) was the successful bidder in bankruptcy court auctions for SONICblue's ReplayTV(R) and Rio(R) business units, with a combined purchase price for both units of $36.2 million. "We believe that ReplayTV and Rio are the perfect complement to our existing product line," said Tatsuo Kabumoto, chief executive officer and president, D&M Holdings. "Not only will we leverage the technology to enhance our existing products, we plan to grow and extend our customer base by adding the ReplayTV and Rio lines to our product portfolio." "With this sale, we finish a difficult chapter in our history and begin a new phase that we believe will be more conducive to the success of these businesses," said Gregory Ballard, chief executive officer, SONICblue. "We have done all that we can for our creditors, and our product lines will continue to compete successfully in the marketplace. Many if not most of our employees will continue their work, and our customers will continue to enjoy Rio and ReplayTV in their homes." SONICblue holds a focused technology portfolio that includes Rio(R) digital audio players; ReplayTV(R) personal television technology and software solutions; and GoVideo(R) integrated DVD+VCRs, Dual-Deck(TM) VCRs, and digital home theater systems. D&M Holdings is based in Tokyo and is the parent company of Denon and Marantz, the global industry leaders in the specialist home theater, audio/video consumer electronics and professional audio markets, with a strong and long-standing heritage of manufacturing and marketing high-performance audio and video components. SONICBLUE INC: D&M Expects to Close Acquisition Deal in 10 Days --------------------------------------------------------------- D&M Holdings Inc. (TSE II: 6735), parent company of Denon, Ltd. and Marantz Japan, Inc., was successful in a bid to acquire certain assets comprising the digital video recorder and MP3 business units of SONICblue Incorporated, a U.S. company. D&M Holdings will purchase those assets, which include the ReplayTV(R) and Rio(R) brands, for $36.2 million. The bidding process occurred Tuesday last week during an auction of SONICblue's assets in the U.S. Bankruptcy court in San Jose, California. The transaction is expected to close in approximately 10 days. D&M Holdings is purchasing inventory, receivables, intellectual property and capital equipment. The company will also take over selected contractual relationships and liabilities. D&M Holdings intends to keep all ReplayTV customers and will design, manufacture and distribute a line of ReplayTV and Rio products. For the last 12-month period, ReplayTV had revenue of approximately $22 million and Rio had revenue of approximately $62 million. The impact to D&M Holdings' earnings in fiscal year 2003 is not fully determined at this time. Given the nature of these assets, the reduction of certain expenses and liabilities as a result of the bankruptcy process and identified restructuring activities, D&M Holdings expects this purchase to be slightly dilutive to earnings in fiscal year 2003 but accretive thereafter. Despite this dilution and with the effects of the new businesses in fiscal year 2003, D&M Holdings remains comfortable with the consensus market analyst earnings per share estimates for fiscal year 2003. D&M Holdings also announced plans to establish a new digital development group under D&M Holdings U.S., Inc. The business assets purchased from SONICblue will be merged into this new digital development group. The new subsidiary, Digital Networks North America, Inc., will drive the strategy and develop the core technologies that will enable the brands within D&M Holdings to become the leaders in the emerging entertainment- based home networking market. "Both the ReplayTV personal video recorders and Rio portable compressed audio players are innovative products that have won numerous coveted industry awards," said Tatsuo Kabumoto, chief executive officer and president of D&M Holdings. "We will leverage the intellectual property and the excellent engineering talent from the ReplayTV and Rio businesses across our D&M brands while positioning these businesses to be more profitable." The agreement to purchase assets of ReplayTV and Rio represents D&M Holdings' second investment in technology to create entertainment-based digital home networking solutions. D&M Holdings made an investment in 2002 in Mediabolic, a San Francisco-based company that provides an embedded software platform for entertainment devices. Denon will use the Mediabolic platform in new products that will be launched later this year. D&M Holdings Inc., (TSE II: 6735) is based in Tokyo and is the parent company of wholly owned subsidiaries Denon Ltd. and Marantz Japan, Inc. Denon and Marantz are global industry leaders in the specialist home theater, audio/video consumer electronics and professional audio markets, with a strong and long-standing heritage of manufacturing and marketing high- performance audio and video components. Additional information is available at http://www.dm-holdings.com SPIEGEL: Intends to Close 21 Retail Stores ------------------------------------------ The Spiegel Group (Spiegel, Inc.) intends to close all of its Spiegel outlet and clearance stores and Newport News outlet stores as part of its reorganization efforts to streamline operations and improve financial performance. These stores will remain open for business pending approval of the store-closing plan by the Bankruptcy Court and thereafter, on a store-by- store basis, until the related store-closing inventory sales are completed. The company intends to close: 12 Spiegel outlet stores, 4 Spiegel clearance stores 5 Newport News outlet stores. These stores primarily provide a means to liquidate overstock and end-of-season merchandise. The company intends to continue moving its inventory through all the other clearance channels, including the Internet and catalogs. The company may consider reopening some of its stores in the future to support the inventory liquidation needs of both Spiegel Catalog and Newport News. Spiegel, Inc. expects that closing these stores and realigning its inventory clearance process towards Internet and catalog channels will improve its inventory recovery rate (operating income as a percentage of costs of sales) and enhance earnings. The company anticipates that the store closures and its modified inventory clearance process will improve operating income by about $11 million, on an annualized basis. The company is unable at this time to determine the magnitude of inventory writedowns, if any, and will assess such writedowns on a going forward basis. Bill Kosturos, interim chief executive officer and chief restructuring officer of The Spiegel Group said, "The decision to close these stores, which do not meet our financial requirements going forward, is an integral part of the company's reorganization effort. We are confident that doing so will improve the company's financial and operating strength. While the business rationale supporting this action is compelling, we deeply regret the impact these store closings will have on our associates and our customers. As always, we continue to be grateful to our associates for their excellent dedication to serving our customers." The company plans to appoint an independent liquidator to handle all aspects of the store closings. The company expects this process to begin in May. 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. Investor relations information is available on The Spiegel Group Web site at http://www.thespiegelgroup.com SPIEGEL: Seeks Nod for Proposed Interim Compensation Procedures --------------------------------------------------------------- The Spiegel Group and its debtor-affiliates have employed different professional firms to prosecute their interest or assist them in their bankruptcy cases. The Official Committee of Unsecured Creditors as well as other statutory committees that may be appointed in these cases is also likely to retain its own counsel and other professionals. To provide for an orderly compensation and reimbursement of professional expenses, at the Debtors' behest, the Court established these interim compensation procedures: A. On or before the 20th day of each month following the month for which compensation is sought, each professional will submit a monthly statement to: (a) Robert Sorensen, the officer designated by the Debtors to be responsible for these matters; (b) Shearman & Sterling, Attn: James L. Garrity, Jr.; (c) the Office of the U.S. Trustee; (d) the Unsecured Creditors' Committee's counsel as well as to the counsel of any other official committee that may be appointed in these cases; (e) Kaye Scholer LLP, the counsel to Bank of America, N.A., Agent for the Debtors' postpetition lenders, Attn: Marc D. Rosenberg, Esq. and Benjamin Mintz, Esq.; (f) White & Case, LLP, counsel to Otto (GmbH & Co KG), Attn: Howard Beltzer, Esq.; and (c) other persons as the Court may designate; B. Each Mailing Party will have 35 days to review the Monthly Statement. After the 35th day, the Debtors will pay 80% of the Fees and disburse 100% of the expenses as requested in the Statement, except for those fees or disbursements as to which an objection will be timely filed and served by any of the Mailing Parties; C. Each Monthly Statement must contain: (a) a list of the individuals and their titles, who provided services during the statement period; (b) each individual's billing rates in the case of attorneys; (c) their years of graduation from law school, and to the extent applicable, their years of partnership; (d) the aggregate hours spent by each individual; (e) a reasonably detailed breakdown of the disbursements incurred; and (f) contemporaneously maintained time entries for each individual in increments of one-tenths of an hour; D. In the event that any of the Mailing Parties determines that the compensation or reimbursement sought in a particular Statement is inappropriate or unreasonable, or that the numbers and calculations are incorrect, that Party must meet with or contact the professional person whose Statement is at issue and attempt to reach an agreement regarding the correct payment to be made. If an agreement cannot be reached or if no discussion takes place, the Objecting Party will, before the 35th day after receiving the statement, serve on (i) the professional whose statement is being disputed, and (ii) the other Mailing Parties, a written "Notice of Objection To Fee Statement," stating the precise nature of the objection and the amount at issue. At the expiration of the 35-day period, the Debtors will pay promptly 80% of the fees and 100% of the expenses identified in each Monthly Statement that are not the subject of a Notice of Objection; E. If they receive an objection to a particular Monthly Statement, the Debtors will withhold payment of the disputed portion and promptly pay the remainder of the fees and disbursements; F. All Objections that are not resolved by the parties will be preserved and presented before the Court at the next omnibus, interim or final fee application hearings; G. The service of an objection will not prejudice the Objecting Party's right to object to any fee application made with the Court in accordance with the Bankruptcy Code. Furthermore, the decision by any party not to object to a fee statement will not be a waiver of any kind or prejudice that party's right to object to any fee application; H. The first Statement will be submitted by each of the professionals by May 20, 2003 and will cover the period beginning on the date of the professional's retention or the filing date, whichever is earlier, and ending on April 30, 2003; I. Every 120 to 150 days, each of the professionals will file with the Court an application for interim Court approval and allowance of the compensation and reimbursement of expenses requested for the prior 120 days. The first Application will be filed on or about August 20, 2003 and will cover the period from the Petition Date through July 31, 2003. Any professional who fails to file an Application when due: (a) will be ineligible to receive further monthly payments of fees or expenses until further Court order; and (b) may be required to disgorge any fees paid since the retention or the last fee Application, whichever is later. J. The pendency of an application for a Court order that the compensation payment or expense reimbursement was improper with respect to a particular Statement will not disqualify a professional from future compensation payment or reimbursement, unless otherwise ordered by the Court; K. Neither the payment of, nor the failure to pay, in whole or in part, monthly interim compensation and reimbursement will bind any party-in-interest or the Court with respect to the allowance of applications for compensation and reimbursement of professionals; and L. The Counsel for each official committee may collect and submit statements of expenses, with supporting vouchers, from members of the committee he or she represents. (Spiegel Bankruptcy News, Issue No. 4; Bankruptcy Creditors' Service, Inc., 609/392-0900) STELCO INC: Anticipates $44 Million First Quarter 2003 Net Loss --------------------------------------------------------------- Stelco Inc., estimates a net loss for the first quarter 2003 of $44 million ($0.45 per common share). This loss compares with a fourth quarter 2002 profit of $22 million or $0.18 per common share (including a one-time fourth quarter non-cash tax credit to earnings of $0.08 per common share) and a first quarter 2002 loss of $32 million ($0.33 per common share). The major factors contributing to the reduced first quarter 2003 results compared with fourth quarter 2002 are lower average revenue per ton, increased energy and operating costs, and costs related to the closure of Welland Pipe Ltd. The net short-term bank debt position of $102 million at March 31, 2003, increased $24 million from December 31, 2002. Stelco's first quarter results will be released the morning of Wednesday, April 23, 2003, with a conference call to be held at 11:00 a.m. on that day. No further comment on the Corporation's results will be made until that time. Stelco Inc. is Canada's largest and most diversified steel producer. Stelco is involved in all major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses. Stelco has a presence in six Canadian provinces and two states of the United States. Consolidated net sales in 2002 were $2.8 billion. * * * As reported in the Troubled Company Reporter's January 15, 2002 edition, Standard & Poor's assigned its single-'B' subordinated debt rating to Stelco Inc.'s CDN$90 million convertible subordinated debt issue due February 1, 2007. At the same time, Standard & Poor's assigned its preliminary double-'B'-minus senior unsecured debt rating and preliminary single-'B' subordinated debt rating to the company's CDN$300 million shelf. In addition, the ratings outstanding on the company, including the double-'B'-minus corporate credit rating, were affirmed. The outlook is negative. The ratings on Stelco reflect a weakened financial profile due to the effect of the ongoing economic downturn and the prevailing difficult steel industry conditions on its financial results, offset by the company's fair business position. TCENET INC: Brian McGill Steps Down as Chief Financial Officer -------------------------------------------------------------- TCEnet Inc., announced that Brian D. McGill CA has resigned his position as Chief Financial Officer of the company effective April 2, 2003. Mr. McGill will continue to provide consulting services to the company on a somewhat more limited basis as he attempts to expand his business development practice. Mr. McGill could no longer assume the full responsibilities of the CFO position as a result of this reduced time commitment to TCEnet Inc. * * * As previously reported, TCEnet had a loss for the year ended December 31 2002 of $1,104,853 as compared to a profit of $536,500 in 2001 and negative cash flow from operations of $1,485,787. While the company had positive working capital at December 31, 2002, its ability to continue as a going concern is dependant upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing and ultimately to generate profitable operations. The company has restructured its operations during the current year in an effort to reduce cash out-flow and obtain profitability. The restructuring included the sale of certain assets and liabilities associated with its Datap division. TRANSWITCH CORP: Reports $17 Million in Net Loss for Q1 2003 ------------------------------------------------------------ TranSwitch Corporation (NASDAQ: TXCC) posted first quarter 2003 net revenues of $4.1 million and a net loss according to Generally Accepted Accounting Principles of $17.4 million. The net loss includes the following extraordinary items: -- a charge representing the cumulative effect of a change in the Company's depreciation method from the half-year convention method to the straight-line method, as of January 1, 2003, totaling $0.8 million; and -- an extraordinary loss of approximately $0.1 million upon the initial consolidation of TeraOp (USA), Inc., a variable interest entity which resulted from the adoption of Financial Accounting Standards Board Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46). The Company began consolidating the results and balances of TeraOp (USA), Inc. as of January 31, 2003. The Company is no longer reporting results on a pro-forma or other non-GAAP financial basis in response to recent Securities and Exchange Commission rulings and guidance. Results for the first quarter also reflect the impact of the previously announced restructuring plan. This plan, with charges totaling approximately $3.8 million for the first quarter of 2003, resulted in a further workforce reduction in January 2003, the continued consolidation of facilities, and asset impairment charges. For comparison purposes, the net loss on a GAAP basis (as restated due to a change from the cost to the equity method of accounting for the Company's investment in OptiX Networks, Inc.) for the relevant 2002 quarters was: -- for the first quarter of 2002, the net income was $18.6 million. The Company has reclassified a previously reported extraordinary gain on the repurchase of convertible debt to continuing operations in accordance with SFAS No. 145; and -- for the fourth quarter of 2002, net loss was $17.6 million. "Although the conditions in the wireline telecom marketplace continue to be challenging, the enthusiasm for the next generation of TranSwitch products is very encouraging," stated Dr. Santanu Das, Chairman of the Board, Chief Executive Officer and the President of TranSwitch Corporation. "In the first quarter, we secured 50 design wins at 30 customers and our Ethernet-over-SONET (EoS) product, EtherMap-3, continues to have the highest level of interest we have seen in any new product in TranSwitch's history." "Our objective is to be a company that is a specialist in the SONET/Ethernet-over-SONET area. The service providers look at ethernet service as enhancing their revenues immediately, and EoS products work seamlessly with the current SONET/SDH infrastructure. We have had considerable interaction with service providers to validate this market. We see across-the- board momentum behind the ethernet service, not only in North America, but also in Europe and Asia," commented Dr. Das. "Our confidence in TranSwitch's focus on the SONET/EoS segment is based on: a) validation through design wins that EoS represents a growth segment in the wireline market; b) our considerable intellectual property in the EoS area; and c) the endorsement of our EoS products by all the major systems vendors. Based on these facts, we believe that we are ahead of our competition in this critical marketplace," stated Dr. Das. "We are anticipating that second quarter 2003 product revenue will be approximately $4.5 - $5.0 million. We are estimating that our second quarter 2003 GAAP net loss will be in the range of $0.18 to $0.19 per basic and diluted share," concluded Dr. Das. TranSwitch Corporation, headquartered in Shelton, Connecticut, is a leading developer and global supplier of innovative high- speed VLSI semiconductor solutions - Connectivity Engines(TM)- to original equipment manufacturers who serve three end-markets: the Worldwide Public Network Infrastructure, the Internet Infrastructure, and corporate Wide Area Networks. Combining its in-depth understanding of applicable global communication standards and its world-class expertise in semiconductor design, TranSwitch Corporation implements communications standards in VLSI solutions that deliver high levels of performance. Committed to providing high-quality products and service, TranSwitch is ISO 9001 registered. Detailed information on TranSwitch products, news announcements, seminars, service and support is available on TranSwitch's home page at the World Wide Web site - http://www.transwitch.com As reported in Troubled Company Reporter's December 10, 2002 edition, Standard & Poor's affirmed its 'B-' corporate credit and senior unsecured debt ratings on Traswitch Corp. At the same time, Standard & Poor's revised the company's outlook to negative from stable. The outlook revision reflects diminished liquidity and ongoing cash usage, stemming from a severe decline in the company's markets. Transwitch's quarterly revenue run rate has been below $5 million and negative free cash flow has been about $20 million per quarter since June of 2001. The company may face difficulties increasing revenues from a very low base, given substantial competition and a rapidly evolving technology environment in the communications equipment market. TRITON PCS: December 31 Balance Sheet Upside-Down by $36 Million ---------------------------------------------------------------- Triton PCS (NYSE: TPC) announced that its quarterly conference call will take place on Wednesday, May 7 at 4:30 pm EDT. During this call Triton PCS will review the Company's financial and operating results for the quarter ending March 31, 2003. Financial results relating to the call will be released the afternoon of May 7th, after the market closes. A live, listen only broadcast of the Triton PCS conference will be available online at http://www.tritonpcs.com The online replay will follow shortly after the call and continue through May 13, 2003. To listen to the live conference, please go to the Web site at least fifteen minutes early to register, download, and install any necessary audio software. Triton PCS, based in Berwyn, Pennsylvania, is an award-winning wireless carrier providing service in the Southeast. The company markets its service under the brand SunCom, a member of the AT&T Wireless Network. Triton PCS is licensed to operate a digital wireless network in a contiguous area covering 13.6 million people in Virginia, North Carolina, South Carolina, northern Georgia, northeastern Tennessee and southeastern Kentucky. At December 31, 2002, Triton PCS' balance sheet shows a total shareholders' equity deficit of about $36 million. For more information on Triton PCS and its products and services, visit the company's Web sites at: http://www.tritonpcs.com and http://www.suncom.com UNILINK TELE.COM: Two Units Filing Proposals to Restructure Ops. ---------------------------------------------------------------- UniLink Tele.Com (TSX-V: UTI) announces that its wholly owned subsidiary companies, UTI-UniLink Telecommunications Inc. and 1285103 Ontario Inc., operating as UniLink Gateway Exchange, have filed a Notice of Intention to make a Proposal to restructure their operations. UTI and UGE will each file a Proposal within 30 days after filing the Notice of Intention. UniLink has accepted the resignation of Mr. Timo Vainionpaa from the Board of Directors. UniLink thanks Mr. Vainionpaa for his immense contribution to the Company and wishes him well in his future business endeavours. UniLink, a global facilities telecommunications provider with offices in Vancouver and Toronto, is publicly traded on the TSX Venture Exchange (under the symbol UTI). Additional information can be found on UniLink's Web site at http://www.unilink-tel.net VALENTIS INC: Continues Listing on Nasdaq SmallCap Market --------------------------------------------------------- Valentis, Inc., (Nasdaq: VLTS) received notification from the Nasdaq Listing Qualifications Panel on April 15, 2003 that its common stock will continue to be listed on The Nasdaq SmallCap Market via an exception from the independent director and audit committee composition requirements of Nasdaq Marketplace Rules 4350(c) and 4350(d)(2). The Nasdaq Panel decided that one of the Company's directors is not independent because his previous employer became an affiliate of the Company within three years of the director leaving his position with that employer. The Company believes it can resolve this issue readily. The Panel also notified the Company that it had not violated the shareholder approval requirements of Nasdaq Marketplace Rule 4350(i)(1)(A). The Company had previously received a Nasdaq Staff Determination Letter on March 28, 2002 stating that the Company had not complied with Nasdaq's independent directors, audit committee composition and shareholder approval requirements. While the Company failed to meet Nasdaq's independent director and audit committee composition requirements as of April 15, 2003, the Company was granted a temporary exception from these requirements subject to the Company meeting certain conditions. The exception will expire on May 30, 2003. In the event the Company is deemed to have met the terms of the exception, it will continue to be listed on The Nasdaq SmallCap Market. The Company believes that it can meet these conditions; however, there can be no absolute assurance that it will do so. If at some future date the Company's securities should cease to be listed on The Nasdaq SmallCap Market, they may continue to be listed in the OTC-Bulletin Board. Effective April 17, 2003, and for the duration of the exception, the Company's Nasdaq symbol will be VLTSC. The "C" will be removed from the symbol when the Panel has confirmed compliance with the terms of the exception and all other criteria for continued listing. Valentis is converting biologic discoveries into innovative products. The Company's lead product in human testing is the del-1 angiogenesis gene formulated with one of the Company's proprietary polymer delivery systems. The Company is developing its other technologies, the GeneSwitch(R) and DNA vaccine delivery technologies, through partnerships with pharmaceutical and biotechnology companies. Additional information is available at http://www.valentis.com As reported in Troubled Company Reporter's January 28, 2003 edition, Valentis, Inc., (Nasdaq: VLTS) which has a total shareholders' equity deficit of about $14 million at Sept. 30, 2002, received stockholder approval for its proposed capital restructuring and that the restructuring activities have been completed. WESTPOINT STEVENS: Sr. Lenders Agree to Waive Potential Defaults ---------------------------------------------------------------- WestPoint Stevens Inc. (OTC Bulletin Board: WSPT) -- http://www.westpointstevens.com-- is continuing negotiations on a new agreement with its lenders under the Company's Senior Credit and Second-Lien Facilities. The outcome of these negotiations is material to certain of the information required to be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. The Company anticipates that if these negotiations were not successful, its auditor would issue a going concern qualification in its audit report. As a result, WestPoint Stevens will delay filing its Annual Report on Form 10-K until the conclusion of these negotiations. The Company has received an interim waiver through June 10, 2003, under its Senior Credit and Second-Lien Facilities of any default that might result from its failure to make a timely filing of its Annual Report on Form 10-K and to comply with certain financial covenants and is hopeful that its continuing negotiations will result in a longer-term resolution of these matters. The Company stated that its results of operations for 2002, which it announced on February 11, 2003, would not be affected by the negotiations or the results thereof. Holcombe T. Green, Jr. Chairman and CEO of WestPoint Stevens, commented, "Our business in the latter part of the first quarter of this year was negatively impacted by the onslaught of war and harsh weather conditions resulting in a sharp decline in retail demand. As a result, for the first quarter of 2003 we expect to report a 13% decline in sales and EBITDA* of approximately $31 million. This waiver was needed to allow us adequate time to work out issues relating to resetting certain financial covenant requirements to reflect the current challenging retail environment. However, we recently concluded an excellent Spring Home Fashions Market Week with significant new business coming from our targeted key retail accounts all of which should contribute to a stronger second half of 2003." WestPoint Stevens Inc., is the nation's premier home fashions consumer products marketing company, with a wide range of bed linens, towels, blankets, comforters and accessories marketed under the well-known brand names GRAND PATRICIAN, PATRICIAN, MARTEX, ATELIER MARTEX, BABY MARTEX, UTICA, STEVENS, LADY PEPPERELL, SEDUCTION, VELLUX and CHATHAM -- all registered trademarks owned by WestPoint Stevens Inc. and its subsidiaries -- and under licensed brands including RALPH LAUREN HOME, DISNEY HOME, GLYNDA TURLEY and SIMMONS BEAUTYREST. WestPoint Stevens is also a manufacturer of the MARTHA STEWART and JOE BOXER bed and bath lines. WestPoint Stevens can be found on the World Wide Web at http://www.westpointstevens.com Westpoint Stevens Inc.'s 7.875% bonds due 2005 (WSPT05USR1) are trading at about 26 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=WSPT05USR1 for real-time bond pricing. WHX CORP: 2002 Year-End Results Swing-Down to Net Loss of $33MM --------------------------------------------------------------- WHX Corporation (NYSE: WHX) reported a net loss of $20.7 million, on sales of $79.2 million, for the fourth quarter of 2002 compared to net income of $108.0 million, on sales of $87.2 million, in the same period in 2001. The 2001 results included a gain on the sale of WHX's interest in Wheeling Downs Racing Association, Inc. of $88.5 million and a tax benefit of $25.6 million. After deducting accruals for preferred dividends, basic and diluted loss per common share was $4.79 for the fourth quarter of 2002 compared with diluted income per common share of $10.26 for the fourth quarter of 2001. Income from continuing operations was a loss of $20.8 million or $4.81 per share after deducting preferred dividends, for the fourth quarter of 2002, compared to income of $106.9 million or $10.16 per share after deducting preferred dividends, for the fourth quarter of 2001. As previously announced, the Company sold all of its shares of capital stock of Unimast, Inc. on July 31, 2002 for $95 million. Accordingly, the results of operations of Unimast have been classified as discontinued operations for the periods presented. Full year earnings for 2002 were a loss of $33.5 million, compared to net income of $101.1 million in 2001. After deducting accruals for preferred dividends, basic and diluted loss per common share was $9.90 compared with $9.62 income per diluted common share in 2001. Income from continuing operations was a loss of $12.0 million, or $5.86 per share after deducting preferred dividends, for the year 2002, compared to income of $95.7 million, or $9.11 per share after deducting preferred dividends, for the year 2001. Income from discontinued operations, including a gain on the sale of Unimast of $11.9 million, was $22.5 million, or $4.22 per share, for the year 2002, compared to income of $5.4 million, or $.51 per diluted share, for the year 2001. Sales for 2002 were $386.4 million compared to $388.1 million for 2001. In the first quarter of 2002 the Company adopted Statement of Financial Accounting Statement No. 142 as of January 1, 2002. These new rules require, among other things, that goodwill and other intangible assets with indefinite useful lives no longer be amortized, and that they be tested for impairment at least annually. The adoption of the non-amortization provision of SFAS No. 142 resulted in a full year 2002 earnings improvement from continuing operations of $7.4 million over the year 2001. In addition, WHX recorded a $44 million non-cash charge ($8.26 per basic and diluted common share), for goodwill impairment related to the Handy & Harman Wire Group in the first quarter of 2002. This charge is shown as the cumulative effect of an accounting change. On November 16, 2000, one of the Company's wholly owned subsidiaries, Wheeling-Pittsburgh Corporation, and its subsidiaries, filed petitions seeking reorganization under Chapter 11 of the United States Bankruptcy Code. As a result of the Bankruptcy Filing, the Company has, as of November 16, 2000, deconsolidated the balance sheet of WPC and its subsidiaries. As a result of the deconsolidation, the consolidated balance sheets at December 31, 2002 and 2001 do not include any of the assets or liabilities of WPC and its subsidiaries, and the accompanying December 31, 2002 and 2001 consolidated statement of operations excludes the operating results of WPC. As part of the WPC's amended Plan of Reorganization, WHX has agreed (subject to certain conditions) to provide additional funds to WPC amounting to $20.0 million. As a result of its probable obligation, WHX has recorded a $20.0 million charge as equity in loss of WPC in the fourth quarter of 2002. PBGC Notice On March 6, 2003, the Pension Benefit Guaranty Corporation issued its Notice of Determination and on March 7, 2003 the PBGC published its Notice and filed a Summons and Complaint in United States District Court for the Southern District of New York seeking the involuntary termination of the WHX Pension Plan. The PBGC stated in its Notice that it took this action because of its concern that "PBGC's possible long-run loss with respect to the WHX Pension Plan may reasonably be expected to increase unreasonably if the Plan is not terminated." WHX filed an answer to this complaint on March 25, 2003, contesting the PBGC's action. The PBGC has announced in a press release that it contends that the WHX Pension Plan has roughly $300 million in assets to cover more than $443 million in benefit liabilities, resulting in a funding shortfall of roughly $143 million (without accounting for plant shutdown benefits). Furthermore, the PBGC contends in a press release that plant shutdown liabilities of the WHX Pension Plan, if they were to occur, would exceed $378 million. WHX disputes the PBGC's calculation of liabilities and shutdown claims since the actual amount of these liabilities may be substantially less, based on alternative actuarial assumptions. Furthermore, WHX disputes the PBGC's assumption regarding the likelihood of large-scale shutdowns at WPC. However, there can be no assurance that WHX's assertions will be accepted and that plant shutdowns would not occur. Wheeling-Pittsburgh Steel Corporation Loan Guarantee On March 26, 2003, Wheeling-Pittsburgh Steel Corporation, an indirect subsidiary of WHX, issued a press release announcing that its revised $250 million loan guarantee application was approved by the Emergency Steel Loan Guarantee Board. The approval of the guaranty is subject to the satisfaction of various conditions including, without limitation, confirmation of a plan of reorganization for WPSC and resolution of the treatment of the WHX Pension Plan acceptable to the Pension Benefit Guaranty Corporation. The loan will be used to finance WPSC's emergence from bankruptcy protection and to fund its strategic plan, which calls for investments in state-of-the-art technology that will improve manufacturing efficiency. Fourth Quarter Operating Results and Other Income/Expense Sales in the fourth quarter of 2002 were $79.3 million compared with $87.2 million in 2001. Sales decreased by $14.5 million at the Precious Metal Segment. Sales increased $1.7 million at the Wire & Tubing Segment and $4.8 million at the Engineered Materials Segment. For the fourth quarter of 2002, operating income was a loss of $9.8 million, compared to an operating loss of $2.2 million in the fourth quarter of 2001. Operating income from the Precious Metal segment declined by $1.2 million from income of $1.7 million in the fourth quarter of 2001 to income of $.5 million in the 2002 quarter. Operating income at the Wire & Tubing segment declined by $5.3 million from a $.5 million operating loss in the fourth quarter of 2001 to a $5.8 million loss in the fourth quarter of 2002. The Engineered Materials segment reported an operating loss of $.3 million in the fourth quarter of 2002 compared to $1.4 million of operating income in the fourth quarter of 2001. Unallocated corporate expenses increased from $2.9 million in the fourth quarter of 2001 to $4.2 million in the fourth quarter of 2002. This increase is primarily related to increased pension expense of $.9 million. In the fourth quarter of 2002, the Company recognized gains of $2.0 million from the early retirement of debt. Other income was $.7 million for the fourth quarter 2002 compared to $5.2 million in the fourth quarter of 2001. The 2001 fourth quarter includes income from WHX Entertainment of $2.9 million. Full Year Operating Results and Other Income/Expense Sales in 2002 were $386.4 million compared with $388.1 million in 2001. Sales decreased by $26.0 million at the Precious Metal Segment and $1.4 million at the Wire & Tubing Segment. Sales increased by $25.7 million at the Engineered Materials Segment. In 2002, operating income was a loss of $25.4 million, compared to an operating loss of $4.8 million in 2001. Operating loss at the segment level was $8.0 million in 2002 compared to operating income of $19.3 million in 2001. Operating results for the Precious Metal Segment declined by $11.5 million, primarily as a result of a restructuring charge of $12.0 million. Operating results for the Wire & Tubing Segment declined by $17.5 million. The 2002 results for this segment include an $8.0 million restructuring charge. Operating income for the Engineered Materials Segment improved by $1.7 million in 2002. Unallocated corporate expenses increased from $16.7 million in 2001 to $17.4 million in 2002. This resulted from an increase in unallocated pension expense of $3.1 million offset by non-recurring costs and expenses incurred in 2001. In 2002, the Company recognized gains of $42.5 million from the early retirement of debt. Other income was an expense of $6.0 million for 2002 compared to $11.1 million of income for 2001. The income in 2001 was primarily related to income from WHX Entertainment of $15.0 million and net investment losses of $4.4 million. The 2002 period loss included a $4.8 million loss on an interest rate swap, other expenses of $3.7 million, losses of $2.6 million on the disposal of fixed assets, partially offset by investment earnings of $5.1 million. Liquidity and Capital At December 31, 2002, total liquidity, comprising cash, short- term investments (net of related investment borrowings) and funds available under bank credit arrangements, totaled $139.3 million. At December 31, 2002, funds available under credit arrangements totaled $23.5 million. An unfavorable resolution of the PGBC action, discussed above would have a material adverse effect on the liquidity, capital resources and results of operations and financial position of the WHX Group. Such PBGC action may result in one or more events of default under various WHX financial agreements, any one of which would have a material adverse effect on the liquidity, capital resources and results of operations and financial position of the WHX Group. * * * As previously reported, WHX was notified by the New York Stock Exchange that its share price had fallen below the continued listing criteria requiring an average closing price of not less than $1.00 over a consecutive 30 trading-day period. Following notification by the NYSE, WHX has up to six months by which time WHX's share price and average share price over a consecutive 30 trading-day period may not be less than $1.00. In the event these requirements are not met by the end of the six-month period, WHX would be subject to NYSE trading suspension and delisting and, in such event, WHX believes that an alternative trading venue would be available. WHX is currently evaluating alternatives to bring its average share price back into compliance with NYSE requirements, including a potential reverse stock split which is one of the proposals to be acted upon at the 2002 Annual Meeting of Stockholders. Also, Standard & Poor's revised its outlook on WHX Corp., to stable from negative. All ratings on the company are affirmed. The outlook revision reflects the improvement in WHX Corp.'s (B/Stable/--) financial flexibility following the sale of its interest in Wheeling Downs Racetrack for $105 million. Proceeds from the transaction are expected to be used for either debt reduction or to service its future cash obligations related to its Wheeling-Pittsburgh Corp., subsidiary, which filed for Chapter 11 bankruptcy protection on November 16, 2000. WINSTAR COMMS: Seeks to Recover $36-Mil. Preferential Transfers --------------------------------------------------------------- The Chapter 7 Trustee, Christine C. Shubert, of Winstar Communications, Inc. and its debtor-affiliates' cases seeks relief pursuant to Sections 547, 548 and 550 of the Bankruptcy Code to recover preferential transfers made to 146 vendors totaling $36,001,956.94 Sheldon K. Rennie, Esq., at Fox Rothschild O'Brien & Frankel LLP, in Wilmington, Delaware, informs the Court that during the period on or within 90 days before the Petition Date, the Debtors operated their businesses, including issuing and authorizing payment to certain of their creditors by check, wire transfer or otherwise. During this Preference Period, the Debtors made transfers of property to or for the benefit of these vendors: Entities Transfer Amount -------- --------------- @Link Networks, Inc $17,054,047.00 Abuck, Inc. 232,906.50 Ace Communications, Corp. 639,640.60 Adam's Mark Hotel 1,214,751.31 ADC Telecommunications Sales, Inc. 206,952.50 Advanced Fibre Communications 1,265,075.82 Advantage LP 163,675.06 Advantis Real Estate Services 21,902.13 Agilant Technologies, Inc. 113,490.39 Airtite Contractors, Inc. 18,158.00 Alliance Technology 23,084.00 Allied Group, Inc. 376,963.45 Ameriwave Technologies 146,209.38 Arden Realty, Inc. 45,000.00 Assemblies, Inc. 24,177.44 Atlantic Coast Towers, Inc. 73,476.00 Avion Systems, Inc. 121,088.94 Baird Satellite Supporting Systems 38,567.45 Bully & Andrews/Buchanan, LLC 551,541.00 Cambridge Strategic Management Group 301,098.12 Capitol Sign Systems 56,330.00 Carrier Access 411,958.30 Centra Software 128,650.00 Century Planning Associates, Inc. 183,513.75 Communications Data Group, Inc. 377,278.51 Conway Transportation Services, Inc. 233,348.39 CPI Communication Services, Inc. 150,186.90 Creative Design 55,104.80 DBH, Inc. 199,882.50 DBI, Architects, PC 469,160.18 DC Connections 21,689.89 Dell Receivables LP 52,724.00 Digital Communications Group, Inc. 552,289.00 Dimension Enterprises, Inc. 323,378.64 Don Thinschmidt 24,815.98 Donovan & Yee LLP 33,231.97 Dorf Construction Co., Inc. 147,140.00 E & Y Capital 250,000.00 E. Stone, Inc. 16,024.00 EDD Helms Data Comm Group 210,118.10 EE Linden Associates, Inc. 637,094.94 Electric Lightwave, Inc. 235,601.72 Electro Rent Corporation 29,174.46 Energy Mgt. Systems 95,400.00 EU Services, Inc. 116,280.00 Fidelity Engineering Corp. 228,972.07 Formerly Template Software Now 156,543.75 G F Morin Company 15,296.71 Galleria Equities 27,389.22 Gianni Electric Inc. 82,823.00 Gilbert Creative Services, Inc. 110,622.75 Global Support Systems, Inc. 23,500.00 GMAC Payment 83,700.06 GN NetText, Inc. 16,417.00 Grau & Bassett PC 54,535.60 Guild Technologies Colorado LLC 90,001.25 Harris, Wiltshire & Grannis LLP 115,316.20 Hewlett-Packard Company 279,638.76 Higgins Network Services 88,660.03 HL Group International, Inc. 212,910.74 Hogantec, Inc. 185,353.80 Hughes Network Systems 1,497,475.00 Hummingbird Communications, Inc. 44,121.01 ICG Telecom Group, Inc. 208,913.76 IMCI Technologies 3,347,800.04 Insight 162,915.37 Integrated Communications Services 384,823.45 Internet Security Systems 66,885.00 Intervise Consultants, Inc. 686,643.95 Intra-Dimension Consulting, Inc. 208,920.00 Jaco Horse Pen LLC 1,184,689.68 Jensen Associates Executive 16,250.00 Julius Kraft Company, Inc. 46,906.38 Kaufman Patee Branstad 56,234.13 LAFP Denver, Inc. 42,933.22 Leading Edge Systems 24,272.01 Lease Crutcher Lewis 61,780.71 Lee Rowe & Associates 66,770.00 Legg Mason Estate 52,560.00 Lexington Charles LTD 30,339.85 Liberty Property Limited Partnership 22,951.99 Linderlake Corporation 23,223.74 Logisticall 34,891.81 Lowe Northwest Investor Properties 69,739.52 Mastec Technologies 231,250.26 Mastec Wireless Services 463,781.70 Maximum Technology Solutions 19,000.00 McFadden, Shoreman & Tsimpedes PC 15,741.00 Metastorm, Inc. 140,237.67 Metropolitan Construction Co. 46,661.00 Millenium Utility 117,818.51 Naturasound Research 180,000.00 NEC Business Network Solution 217,866.34 Network Communications of Indiana 164,724.00 New Resolutions, Inc. 232,870.00 Nixon Peabody LLP 90,294.90 Noriden Corporation 439,225.58 Northco Corporation 16,225.00 OSP Consultants, Inc. 1,117,352.18 Paganini Electric Corporation 31,455.00 Patton Boggs LLP 33,022.41 Plaza Construction 500,151.22 Pond & Company 123,280.90 Power and Telephone Supply 1,747,961.64 Preferred Placement 30,000 PRH Management, Inc. 428,854.41 Project Interface Connections 41,161.00 Prolink Services LLC 366,217.50 PSI Net Inc. 166,175.00 Qserve Communications 108,804.75 Queen Engineering, Inc. 186,688.00 Quest Enterprises, LTD 23,000.00 Radware 19,053.40 Redline Communications, Inc. 1,147,523.60 RGE Jobnet, Inc. 117,892.92 Sachs Systems, Inc. 170,166.36 Salem Search Associates 22,000.00 Savio Pinhero 15,559.90 SBA Network Services 131,486.17 Shimizu Development New York 57,363.32 Sitesafe, Inc. 376,538.04 Software Resources of New Jersey 254,014.39 Software.com, Inc. 472,191.06 Southwestern Bell 1,365,182.31 Spar Performance Group 848,986.88 Specialty Construction, Inc. 221,435.87 Steplin Construction, Corp. 70,300.00 Sun Microsystems, Inc. 139,125.07 Superior Transportation Services 884,133.52 Systems Manufacturing Corporation 61,394.25 Taylor Communications 179,388.84 Teknion, Inc. 1,000,914.34 Telcordia Technologies 156,897.79 Telecom Network Design & Cabling 191,402.31 Telecom Professional Services, Inc. 139,146.36 Telecommunications Solutions LLC 248,866.69 Tellabs Operations, Inc. 371,055.24 Telsource Corporation 343,140.96 Testpros 473,277.83 The Liberty Consulting 129,500.00 The Q7 Group 263,967.00 The Schofield Group 168,348.79 Tower Perrin Financial Solutions 51,000.00 Triangle Services, Inc. 67,383.81 Tri-Tech Electric Contractors, Inc. 215,273.34 TTC, Inc. 1,019,912.66 Each of the Transfers was made on account of an antecedent debt or debts owed by one of the Debtors to these vendors before each Transfer was made. The Debtors made each of the Transfers while they were insolvent. The Transfers enabled the vendors to receive more than it would have received: 1. if the Debtors' cases were a cases under Chapter 7 of the Bankruptcy Code; 2. if the Transfers to the Vendors had not been made; and 3. if these vendors had received payment of the debts as provided by the provisions of the Bankruptcy Code. Pursuant to Sections 547 and 550 of the Bankruptcy Code, the Trustee may avoid and recover the full value of the Transfers from the Vendors. Accordingly, the Trustee demands judgment: 1. declaring that the Transfers to these vendors constitute voidable preferential transfers pursuant to Section 547 of the Bankruptcy Code; 2. avoiding the Transfers and directing and ordering that these vendors return to the Debtors' estates, pursuant to Section 550 of the Bankruptcy Code, the full value of the Transfers plus interest thereon from and after the date of the Transfers were made at the highest legally permissible rate; and 3. awarding the Debtors their costs and reasonable attorneys' fees. (Winstar Bankruptcy News, Issue No. 41; Bankruptcy Creditors' Service, Inc., 609/392-0900) YUM! BRANDS: S&P Ups Ratings to BB+ after Improved Performance -------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit and senior unsecured debt ratings on quick-service restaurant operator Yum! Brands Inc. to 'BB+' from 'BB' because of the significant improvement in the company's operating performance and debt reduction since its spin-off from PepsiCo in 1997. The current outlook is positive. "Significant improvements in operational performance since 1997 has helped strengthen the company's financial condition, and gains from refranchised stores and internally generated cash flow have allowed Yum! to repay about $2.3 billion of debt since 1998," said credit analyst Diane Shand. The ratings on Louisville, Kentucky-based Yum! Brands reflect the risks associated with operating in the intensely competitive quick-service segment of the restaurant industry and the complexity of operating multiple brands. These weaknesses partially are offset by the leading market positions held by its three core brands, KFC, Pizza Hut, and Taco Bell, and by Yum!'s significant progress in cutting costs and improving store productivity. The company had $2.3 billion of debt outstanding as of Dec. 28, 2002. Yum!'s credit profile has improved during the past five years. Still, the company's multibranding strategy is evolving, adding to the organization's complexity. Modest improvement in its financial measures, along with demonstration of an ability to maintain positive momentum in earnings and success with its multibrand strategy, could lead to a higher rating in about one year. KFC, Pizza Hut, and Taco Bell have experienced unique operating and competitive problems--and have reported inconsistent sales performances, especially on a quarter-to-quarter basis--but the company has generated positive blended same-store sales in each year since 1997, with the exception of 2000, when both KFC and Taco Bell underperformed. Operating margins have expanded as a result of a rationalized store base, increased operating efficiency and staff training, and an improved relationship with franchisees. The company should also benefit from its multibranding strategy. * Dewey Ballantine Adds David J. Grais to New York Office --------------------------------------------------------- Dewey Ballantine LLP, a leading international law firm, announced that David J. Grais has joined as partner in the Firm's Litigation Practice in its New York office. Mr. Grais joins Dewey Ballantine from Gibson, Dunn & Crutcher LLP where he was a partner in that Firm's Litigation Department and co-head of its Insurance and Reinsurance Litigation Practice Group. He focused primarily on insurance and reinsurance, information technology litigation and general commercial litigation. "As we expand into both new business sectors and geographic regions, Dewey Ballantine continues to attract talented, experienced lawyers from a range of disciplines," said Everett L. Jassy, chairman of Dewey Ballantine's Management Committee. "David brings a wealth of knowledge in reinsurance and IT litigation matters and will provide strong synergies with our existing litigation, technology and insurance practices." Prior to joining Gibson, Dunn & Crutcher in 1998, Mr. Grais was a partner in Grais & Phillips LLP in New York. He is a member of the American Law Institute, AIDA Reinsurance and Insurance Arbitration Society, and the Computer Law Association. A graduate of Yale Law School, Mr. Grais holds a master's degree in philosophy from Balliol College at the University of Oxford, England and an A.B. degree magna cum laude from Princeton University. Dewey Ballantine LLP, founded in 1909, is an international law firm with more than 600 attorneys located in New York, Washington, D.C., Los Angeles, Palo Alto, Houston, Austin, London, Warsaw, Budapest, Prague and Frankfurt. Through its network of offices, the firm handles some of the largest, most complex corporate transactions and litigation in areas such as M&A, bankruptcy, capital markets, private equity, antitrust, intellectual property, structured finance, project finance, international trade and international tax. Industry specializations include banking, healthcare, insurance, energy and utilities, media, consumer and industrial goods, technology, telecommunications and transportation. * BOND PRICING: For the week of April 21 - 25, 2003 --------------------------------------------------- Issuer Coupon Maturity Price ------ ------ -------- ----- Abgenix Inc. 3.500% 03/15/07 74 Adelphia Communications 3.250% 05/01/21 8 Adelphia Communications 6.000% 02/15/06 8 Adelphia Communications 10.875% 10/01/10 46 Advanced Micro Devices Inc. 4.750% 02/01/22 73 Alamosa Delaware 12.500% 02/01/11 49 Alamosa Delaware 13.625% 08/15/11 51 Alexion Pharmaceuticals 5.750% 03/15/07 71 American & Foreign Power 5.000% 03/01/30 67 Amkor Technology Inc. 5.000% 03/15/07 68 AMR Corp. 9.000% 09/15/16 32 AnnTaylor Stores 0.550% 06/18/19 64 Aquila Inc. 6.625% 07/01/11 70 Axcelis Technologies 4.250% 01/15/07 75 BE Aerospace Inc. 8.000% 03/01/08 66 Best Buy Co. Inc. 0.684% 06/27/21 72 Burlington Northern 3.200% 01/01/45 53 Burlington Northern 3.800% 01/01/20 74 Calpine Corp. 4.000% 12/26/06 75 Calpine Corp. 8.500% 02/15/11 65 Calpine Corp. 8.625% 08/15/10 63 Capstar Hotel 8.750% 08/15/07 70 Charter Communications, Inc. 4.750% 06/01/06 32 Charter Communications Holdings 8.250% 04/01/07 59 Charter Communications Holdings 8.625% 04/01/09 60 Charter Communications Holdings 9.625% 11/15/09 62 Charter Communications Holdings 10.000% 04/01/09 62 Charter Communications Holdings 10.000% 05/15/11 57 Charter Communications Holdings 10.250% 01/15/10 57 Charter Communications Holdings 10.750% 10/01/09 61 Charter Communications Holdings 11.125% 01/15/11 60 Cincinnati Bell Telephone (Broadwing) 6.300% 12/01/28 73 Comcast Corp. 2.000% 10/15/29 25 Conexant Systems 4.000% 02/01/07 60 Conexant Systems 4.250% 05/01/06 67 Conseco Inc. 8.750% 02/09/04 17 Continental Airlines 4.500% 02/01/07 45 Cox Communications Inc. 0.348% 02/23/21 72 Cox Communications Inc. 2.000% 11/15/29 32 Cox Communications Inc. 3.000% 03/14/30 47 Crown Cork & Seal 7.375% 12/15/26 72 Crown Cork & Seal 8.000% 04/15/23 71 Cummins Engine 5.650% 03/01/98 65 Delta Air Lines 7.700% 12/15/05 62 Delta Air Lines 9.250% 03/15/22 46 Delta Air Lines 10.375% 02/01/11 52 Dynegy Holdings Inc. 6.875% 04/01/11 74 Dynex Capital 9.500% 02/28/05 2 Elwood Energy 8.159% 07/05/26 66 Finova Group 7.500% 11/15/09 37 Fleming Companies Inc. 10.125% 04/01/08 14 Ford Motor Co. 6.625% 02/15/28 72 Gulf Mobile Ohio 5.000% 12/01/56 66 Health Management Associates Inc. 0.250% 08/16/20 64 HealthSouth Corp. 3.250% 04/01/49 22 HealthSouth Corp. 7.375% 10/01/06 59 HealthSouth Corp. 8.375% 10/01/11 56 HealthSouth Corp. 8.500% 02/01/08 57 I2 Technologies 5.250% 12/15/06 54 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 62 Inland Steel Co. 7.900% 01/15/07 68 Internet Capital 5.500% 12/21/04 36 Isis Pharmaceutical 5.500% 05/01/09 65 Kmart Corporation 9.375% 02/01/06 14 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 60 Level 3 Communications 6.000% 03/15/10 59 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 74 Lucent Technologies 6.450% 03/15/29 66 Lucent Technologies 6.500% 01/15/28 66 Magellan Health 9.000% 02/15/08 25 Manugistics Group Inc. 5.000% 11/01/07 55 Mirant Corp. 5.750% 07/15/07 55 Missouri Pacific Railroad 4.750% 01/01/20 74 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 50 Northwest Airlines 7.625% 03/15/05 56 Northwest Airlines 7.875% 03/15/08 47 Northwest Airlines 8.875% 06/01/06 52 Northwest Airlines 9.875% 03/15/07 50 Quanta Services 4.000% 07/01/07 71 Regeneron Pharmaceuticals 5.500% 10/17/08 68 Ryder System Inc. 5.000% 02/25/21 72 SBA Communications 10.250% 02/01/09 74 SCG Holding Corp. 12.000% 08/01/09 69 Tenneco Inc. 10.000% 03/15/08 70 Tenneco Inc. 10.200% 03/15/08 70 Transwitch Corp. 4.500% 09/12/05 59 United Airlines 10.670% 05/01/04 5 Universal Health Services 0.426% 06/23/20 57 US Timberlands 9.625% 11/15/07 73 Weirton Steel 10.750% 06/01/05 46 Weirton Steel 11.375% 07/01/04 58 Westpoint Stevens 7.875% 06/15/08 26 Xerox Corp. 0.570% 04/21/18 65 ********* 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 ***