/raid1/www/Hosts/bankrupt/TCR_Public/030422.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Tuesday, April 22, 2003, Vol. 7, No. 78
Headlines
AAR CORP: Weak Earnings Prompt S&P to Lower Credit Rating to BB-
ADELPHIA COMMS: Names Ellen Filipiak as SVP for Customer Care
ADVANCED ACCESSORY: S&P Keeps B Rating on Watch Developing
ADVANCED ENERGY: 1st Quarter Net Loss Stays Flat at $8.6 Million
ADVANCED GAMING: Needs Additional Capital to Continue Operations
AIR CANADA: Reaches Agreement with CIBC on New Aerogold Contract
ALLIS-CHALMERS: Red Ink Continued to Flow in Full-Year 2002
ALTERRA HEALTHCARE: Mark Ohlendorf Elected as Company President
AMERCO: Brings-In Andrew A. Stevens as New Chief Fin'l Officer
AMERICAN AIRLINES: Sr. Management Cancels Retention Agreements
AMERICAN AIRLINES: ALPA Chief Blasts Airline Executive Perks
AMERICAN AIRLINES: APA Lambastes Exec. Compensation Enhancements
AMERICAN AIRLINES: Ratings Still on Watch after Averting Ch. 11
ANC RENTAL: Judge Walrath Fixes May 9 Rejection Claims Bar Date
ASPECT COMMS: First Quarter 2003 Results Show Marked Improvement
ATMEL CORP: First Quarter 2003 Net Loss Widens to $53 Million
BION ENVIRONMENTAL: Jon Northrop & Mark Smith Appointed to Board
BIONOVA HOLDING: Appoints Jose Manuel Garcia as New Company CEO
BURLINGTON: Wants Court Approval to Extend Hilco's Engagement
CHIQUITA BRANDS: S&P Assigns B- Rating to $250M Sr. Unsec. Notes
COMPACT DISC WORLD: Case Summary & 20 Largest Unsec. Creditors
CONEXANT SYSTEMS: Cuts Convertible Debt Balance by $100 Million
CUMMINS INC: Attributes $34-Mill. Q1 Loss to Global Uncertainty
CYBEX INT'L: Dec. 31 Working Capital Deficit Balloons to $21MM
DECRANE AIRCRAFT: Financial Concerns Spur S&P to Cut Rating to B
DELTA AIR LINES: First Quarter Net Loss Widens to $466 Million
EAGLE FOOD: Wants to Obtain $40 Million Financing from Congress
EATERIES INC: Fails to Maintain Nasdaq Min. Listing Requirements
EDUCATE OPERATING: S&P Assigns B+ Loan & Corp. Credit Ratings
ENCOMPASS SERVICES: Court Approves Amended Disclosure Statement
ENRON CORP: EPMI Sues GPU Service, et al., to Recoup $27 Million
EXIDE: Unsecured Panel & R2 Investments Want to Probe CSFB
FEDERAL-MOGUL: Closes OE Lighting Assembly Asset Sale to Decoma
FLEMING COMPANIES: Will Restate 2001 & 2002 Financial Statements
FLEMING COS.: Continuing Use of Existing Cash Management System
FLEXXTECH CORP: Greg Mardock Steps Down as President & Director
FREEMONT GEN.: S&P Revises Outlook to Stable on Positive Results
GEMSTAR-TV: Terminates Employment of Henry Yuen & Elsie Leung
GENERAL DATACOMM: Files Plan & Disclosure Statement in Delaware
GENTEK INC: Court OKs Deloitte Canada as Noma Company's Auditor
GENUITY INC: ICG Datachoice Seeks Stay Relief to Liquidate Claim
GLOBE METALLURGICAL: UST Appoints Official Creditors' Committee
GROUP MANAGEMENT: Trades Record Volume of 5.5 Million Shares
HALLMARK FINANCIAL: AM Best Ups Insurance Units' Ratings to B-
HAUSER INC: Receives Court Nod to Use Lender's Cash Collateral
HEADLINE MEDIA: February Balance Sheet Upside Down by $11-Mill.
HIGH SPEED ACCESS: Settles Delaware Class Action Lawsuits
HILTON HOTELS: Fitch Rates $500-Mill. Senior Convertibles at BB+
IMAGEMAX INC: Company's Ability to Continue Operations Uncertain
INTEGRATED HEALTH: Obtains 7th Lease Decision Period Extension
JOSTENS INC: S&P Concerned about Potential Recapitalization
KAISER ALUMINUM: Future Rep. Hires PwC Securities as Consultants
KMART CORP: Has Until May 31 to Decide on Closing Store Leases
LAIDLAW GLOBAL: AMEX Seeks Regulatory Approval to Delist Shares
LEAP WIRELESS: Honoring Up to $11M of Prepetition Employee Wages
LERNOUT: Judge Wizmur Approves Committee's Disclosure Statement
LTV CORP: Admin. Committee Hires Baker Hostetler as Lead Counsel
MCSI INC: Nasdaq Intends to Delist Shares Effective April 25
MED-TECH LABS: Voluntary Chapter 11 Case Summary
MISSION RESOURCES: S&P Withdraws Junk-Level Ratings
MSX INT'L: S&P Ratchets Corp. Credit Rating Down to B+ from BB-
NATIONAL CENTURY: Court Clears United Therapy Settlement Pact
NATIONAL STEEL: Court Approves Asset Sale to U.S. Steel Corp.
NAT'L STEEL: US Steel Pleased with Asset Purchase Pact Approval
NATIONAL STEEL: USWA Lauds Selection of US Steel as Best Bidder
NORTHWEST AIRLINES: Names Robert Isom SVP for Customer Service
ORBIMAGE: OrbView-3 Imaging Satellite Arrives at Launch Site
ORBITAL SCIENCES: S&P Ups Rating to B+ over Better Fin'l Profile
PAC-WEST TELECOMM: Will Publish 1st Quarter Results by Month-End
POLYONE: S&P Rates Proposed $250-Million Sr. Unsec. Notes at BB-
RECOTON CORP: Gemini Acquiring Electronics Accessories Business
RECOTON CORP: Taps Stroock & Stroock as Bankruptcy Counsel
SENIOR HOUSING: Selling $150-Million of 7-7/8% Senior Notes
SMITHWAY MOTOR: Lenders Ease Fin'l Covenants Under Credit Pact
SPIEGEL GROUP: Hires Sullivan & Cromwell as Special Counsel
STRUCTURED FINANCE: Fitch Keeps Downgraded Ratings on Watch Neg.
TRANS WORLD GROCERS: Chapter 11 Involuntary Case Summary
TURBOCHEF TECHNOLOGIES: Nasdaq to Delist Shares Effective Today
U.S. HOME & GARDEN: Commences OTCBB Trading Effective April 18
WESTPOINT STEVENS: S&P Lowers & Keeps Junk Ratings on Watch Neg.
WHX CORP: S&P Keeps Ratings Watch Due to Pension Plan Concerns
WORLD WIRELESS: Further Delays Form 10-K Filing to May 5, 2003
WORLDCOM INC: Wants to Pull Plug on 469 Verizon Service Orders
* Miller Buckfire Lewis Adds David Ying as Fourth Partner
* Large Companies with Insolvent Balance Sheets
*********
AAR CORP: Weak Earnings Prompt S&P to Lower Credit Rating to BB-
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Standard & Poor's Ratings Services lowered its ratings,
including lowering the corporate credit rating to 'BB-' from
'BBB-', on aviation support services provider AAR Corp. The
ratings remain on CreditWatch with negative implications, where
they were placed on Feb. 19, 2003. Outstanding debt is about
$250 million.
"The downgrade reflects AAR's weak earnings, with an expectation
of continued pressure on revenues, and reduced financial
flexibility," said Standard & Poor's credit analyst Roman
Szuper. "As a result, most credit protection measures are poor
and likely to remain significantly below those consistent with
the prior rating, given a very challenging operating environment
in the firm's primary market, the airline industry," the analyst
added. Barring any material deterioration in industry
conditions, the ratings are likely to be affirmed and removed
from CreditWatch, if AAR obtains additional financings to fund
$50 million of notes due October 2003 and assure a liquidity
cushion.
The ratings for Wood Dale, Illinois-based AAR Corp. reflect the
risks associated with very difficult conditions in the airline
industry, subpar credit protection measures, and refinancing
risks. Those factors are partly offset by the company's
established business position and moderately leveraged capital
structure. AAR is the largest independent provider of aviation
support services, operating in four groups: inventory and
logistics services (41% of revenues for the nine months ended
Feb. 28, 2003), maintenance, repair, and overhaul (33%),
manufacturing (20%), and finance and advisory services (6%).
North America is the largest market, accounting for 73% of
sales.
The Sept. 11, 2001, events, a sluggish economy, and the Iraq war
have had a severe impact on commercial aviation, leading to
significant reduction in capacity and deep losses by many air
carriers, especially those in the U.S. As a consequence, AAR's
profitability has been materially affected through fewer
aircraft in service, reduced schedules, a large number of
parked or retired planes, and airlines' efforts to conserve
cash. Another risk arises from ongoing efforts by original
equipment manufacturers to increase the aftermarket activities
of their businesses. With the exception of a moderate debt to
capital of about 50%, credit protection measures are well below
average for the rating.
In response to the very tough environment, AAR has initiated
several cost-cutting initiatives by reducing overhead about in
line with lower revenues. Those actions, coupled with strength
in the company's defense-related manufacturing and logistics
business, partly in support of the war in Iraq, helped stabilize
earnings at a low level. Looking ahead, AAR is well positioned
for continued outsourcing by airlines, in view its broad service
capabilities, investment in new businesses, low cost structure,
and good reputation. Still, although a small profit was recorded
in the quarter ended Feb. 28, 2003 (the first since the
Sept. 11, 2001, events), recent declines in air travel and
generally weak demand for AAR's parts and services create
uncertainties regarding material improvement in earnings.
ADELPHIA COMMS: Names Ellen Filipiak as SVP for Customer Care
-------------------------------------------------------------
Adelphia Communications Corporation (OTC: ADELQ) has named Ellen
Filipiak Senior Vice President for Customer Care, it was
announced by Adelphia President and Chief Operating Officer Ron
Cooper.
Ms. Filipiak, formerly Senior Vice President of the Florida
region for AT&T Broadband, will oversee all customer service
initiatives including the operation of Adelphia's national video
call centers and Advanced Product Call Centers. She will work
closely with the Company's newly appointed regional managers.
Ms. Filipiak, who will report directly to Mr. Cooper, has more
than twenty years of experience in the cable industry. Prior to
her role at AT&T Broadband, she held senior operational
positions in the Southeast and Mid-Atlantic regions at MediaOne,
Continental Cablevision and United Cable Television.
In announcing the appointment, Mr. Cooper said, "Ellen is an
exceptionally well-qualified addition to the Adelphia team. She
has a long history of providing first-rate service to customers
and significant experience in all areas of cable system
operations. Ellen is the right person to work with our regional
executives to ensure that Adelphia's customers receive the
exceptional care they deserve."
Ms. Filipiak said, "I'm looking forward to working with Ron and
the regional managers to provide Adelphia customers with the
high level of service they have come to expect."
Ellen Filipiak has extensive leadership experience in the cable
and broadband industries. Prior to her most recent role as
Senior Vice President of the Florida region for AT&T Broadband,
Ms. Filipiak held management positions at Pilot House Ventures,
a Boston-based venture capital firm, and Infinity Broadband.
From 1997 to 2000, Ms. Filipiak worked at MediaOne, most
recently as Senior Vice President of the Atlanta Region, a
position in which she had overall responsibility for the
625,000-customer region and played a key role in the
introduction of new services including digital video, high-speed
data and telephony. Before that, she spent more than six years
as Continental Cablevision's Vice President/District Manager for
Florida's Broward and Miami- Dade Counties. In that role, she
reorganized the company to be more customer- focused, integrated
the operations across two counties, and doubled the operating
income in Broward County from 1990 through 1996.
Adelphia Communications Corporation is the fifth-largest cable
television company in the country. It serves 3,500 communities
in 32 states and Puerto Rico, and offers analog and digital
cable services, high-speed Internet access (Adelphia Power
Link), and other advanced services.
Adelphia Communications' 10.875% bonds due 2010 (ADEL10USR1) are
trading at about 46 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ADEL10USR1
for real-time bond pricing.
ADVANCED ACCESSORY: S&P Keeps B Rating on Watch Developing
----------------------------------------------------------
Standard & Poor's Ratings Services placed its 'B' corporate
credit rating on Sterling Heights, Michigan-based Advanced
Accessory Systems LLC on CreditWatch with developing
implications. At the same time, Standard & Poor's withdrew its
'B' rating on Advanced Accessory's senior secured credit
facility and its 'CCC+' rating on the company's $125 million of
senior subordinated notes.
The rating actions follow the announcement that a private-equity
investment fund managed by Castle Harlan has acquired Advanced
Accessory with management in a transaction valued at about $260
million.
"Standard & Poor's expects to resolve the CreditWatch listing
after discussions with Advanced Accessory's management and
analysis of any changes to the company's business and financial
profiles resulting from the buyout transaction," said Standard &
Poor's credit analyst Nancy C Messer.
As part of the transaction, Advanced Accessory has exercised its
option of early redemption for all the 9.75% senior subordinated
notes due 2007, at the current optional redemption price of 104-
7/8% of principal amount, plus accrued interest, and called all
of the notes for redemption on May 15, 2003. Advanced Accessory
stated that it deposited in an irrevocable trust with the
trustee enough funds for the redemption of the notes. Advanced
Accessory is a global producer of towing and rack systems for
the original equipment and aftermarket segments of the
automotive industry.
ADVANCED ENERGY: 1st Quarter Net Loss Stays Flat at $8.6 Million
----------------------------------------------------------------
Advanced Energy Industries, Inc. (Nasdaq: AEIS) reported
financial results for the first quarter ended March 31, 2003.
Advanced Energy offers a comprehensive suite of process-centered
solutions critical to the production of semiconductors, flat
panel displays, data storage products, architectural glass,
laser, medical and other advanced product applications.
For the 2003 first quarter, revenues were $56.2 million, up 31
percent from $42.9 million for the first quarter of 2002 and
down 2 percent from $57.4 million for the fourth quarter of
2002.
Net loss for the first quarter of 2003 was $8.6 million compared
to a net loss of $8.7 million in the first quarter of 2002. This
compares to fourth quarter 2002 net loss of $22.0 million. Both
the first quarter of 2003 and the fourth quarter of 2002 had
charges associated with the operational changes that the Company
has implemented in response to reduced market demands. In the
first quarter of 2003, these charges, net of tax, totaled $1.1
million, principally attributed to restructuring charges, and
$14.2 million in the fourth quarter of 2002. Excluding these
charges, the 2003 first quarter net loss would have been $7.5
million and the fourth quarter 2002 net loss would have been
$7.8 million.
Doug Schatz, chairman and chief executive officer, said, "As we
expected, the first quarter of 2003 presented continued sluggish
demand in our end markets, especially the semiconductor capital
equipment sector. Our order pattern has remained essentially
linear since late in 2002 and there are no indications that this
will change in the near term. While the industry has remained
suppressed, we continue to find ways to increase our addressable
markets. We have done this by continuing our focus on the
development of products and technologies that leverage the
application value of the plasma for our customers. By focusing
our research and development on our core product groups, we
believe we can realize more high-value revenue possibilities,
continue to develop the most reliable products at the lowest
possible cost and have the quickest time from concept to
commercialization."
"Based on information we have [Thurs]day, we anticipate second
quarter revenue in the $56 to $60 million range and a loss per
share range of $0.18 to $0.21 that reflects continued
improvements from our operational changes," said Mr. Schatz.
Advanced Energy is a global leader in the development and
support of process-centered technologies critical to plasma-
based manufacturing processes used in the production of
semiconductors, flat panel displays, data storage products,
compact discs, digital video discs, architectural glass, laser,
medical and other advanced product applications.
Leveraging a diverse product portfolio and technology
leadership, AE creates solutions that maximize process impact,
improve productivity and lower cost of ownership for its
customers. This portfolio includes a comprehensive line of
technology solutions in power, flow and thermal management,
plasma and ion beam sources, and integrated process monitoring
and control for original equipment manufacturers and end-users
around the world.
AE operates globally from regional centers in North America,
Asia and Europe, offering global sales and support through
direct offices, representatives and distributors. Founded in
1981, AE is a publicly-held company traded on the Nasdaq
National Market under the symbol AEIS. For more information,
visit its corporate Web site at
http://www.advanced-energy.com
* * *
As reported in Troubled Company Reporter's December 20, 2002
edition, Standard & Poor's assigned its 'B+' corporate credit
and 'B-' subordinated debt ratings to Advanced Energy Industries
Inc. The outlook is negative.
The company had total debt outstanding at September 30, 2002, of
$251 million, including capitalized operating leases.
ADVANCED GAMING: Needs Additional Capital to Continue Operations
----------------------------------------------------------------
Advanced Gaming Technology, Inc., a Wyoming corporation, was a
provider of technology to the casino and hospitality industry.
The Company's principal product was an electronic bingo system.
The Company's common stock is traded on the National Association
of Securities Dealers, Inc. OTC Bulletin Board under the symbol
"ADVI."
The Company has the following wholly owned subsidiaries that are
currently inactive: Executive Video Systems, Inc., a Maryland
corporation, Palace Entertainment Limited, a company organized
under the laws of the British Virgin Islands, Prisms, Inc., a
North Carolina corporation, Pleasure World Ltd., and its
subsidiary Prisms (Bahamas) Ltd., both companies organized under
the laws of the Bahamas, and A.G.T. Acceptance Corp., a Nevada
Corporation.
The Company also owned 22% of TravelSwitch, LLC, a Nevada
Limited Liability Company. The Company disposed of this
interest during 2002, with no resulting gain or loss recorded.
Advanced Gaming liquidated the following subsidiaries pursuant
to a plan of reorganization confirmed by the U. S. Bankruptcy
Court in the District of Nevada on June 30, 1999: Branson
Signature Resorts, Inc., a Nevada corporation, River Oaks
Holdings, Inc., a Missouri corporation, Branson Bluffs Resorts,
Inc., a Missouri corporation, Allied Resorts, Inc., a Missouri
corporation, River Oaks Resorts and Country Club, Inc., a Texas
corporation.
Advanced Gaming Technology recorded a net income of $250,648 for
the fiscal year ended December 31, 2002, primarily due to gains
on the forgiveness of debt in the amount of $520,026. The
Company incurred net losses of $411,670, $564,441, $394,895,
$3,628,887, and $9,575,512 for the fiscal years ended December
31, 2001, 2000, 1999, 1998 and 1997, respectively. Substantial
cost reductions were made in conjunction with the plan of
reorganization. However, the Company has generated minimal
revenue from product distribution. The Company's operations are
subject to numerous risks associated with operating any
business, including unforeseen expenses, delays and
complications. There can be no assurance that the Company will
achieve or sustain profitable operations or that it will be able
to remain in business.
Advanced Gaming Technology will require additional financing to
continue operations. There is no assurance that such financing
will be available. Management is considering all options
including sale, merger, reverse merger or dissolution of the
Company. Any such transaction could have a significant impact
on current shareholders.
AIR CANADA: Reaches Agreement with CIBC on New Aerogold Contract
----------------------------------------------------------------
Air Canada has reached an agreement with CIBC on a contract
renewal with respect to the CIBC Aerogold Visa card program.
The new contract is subject to court approval in the CCAA
proceedings. As part of the new contract, CIBC would make a
miles prepayment of $350 million to Air Canada and pay the
airline a higher price per Aeroplan Mile acquired. The terms of
the contract also call for an extension to 2013.
"This agreement reaffirms the value of the longstanding
relationship between Air Canada and CIBC for both parties and
the value of Aeroplan as one of North America's leading loyalty
programs," said Calin Rovinescu, Air Canada's Chief
Restructuring Officer. "The new agreement will provide Air
Canada with additional liquidity during the next phase of our
restructuring process and enhance Aeroplan's revenue base for
the next ten years. The agreement will also enable Aeroplan to
further pursue its retail strategy."
Air Canada's frequent flyer program, Aeroplan, is known as one
of the most rewarding loyalty programs in the industry. Aeroplan
has been voted the world's Best Frequent Flyer Program for the
second consecutive year at the 2003 OAG "Airline of the Year
Awards" on April 10, 2003.
ALLIS-CHALMERS: Red Ink Continued to Flow in Full-Year 2002
-----------------------------------------------------------
Allis-Chalmers sales for the year 2002 totaled $17,990,000,
reflecting the revenue of Jens' and Strata, which were acquired
in February, 2002. In the comparable period of 2001, revenues
were $4,796,000. Revenues for the year ended December 31, 2002
for the Casing Services, Directional Drilling Services, and
Compressed Air Drilling Services segments were $7,796,000,
$6,529,000 and $3,665,000, respectively. Revenues for the
Compressed Air Drilling Services segment decreased from
$4,796,000 for the year ended December 31, 2001 primarily due to
lower revenues resulting from the decline in revenues from
Burlington Resources, from $3,310,788 to $1,827,681. Burlington
Resources represented 49.9% and 62.6% of the Compressed Air
Drilling Services revenues in 2002 and 2001, respectively.
Revenues also declined as a result of an overall downturn in the
petroleum industry. Rig counts in the Southwestern United States
(in which most of the Company's revenues are derived) provide a
measure of oil and natural gas drilling activities. These rig
counts decreased from 1,275 on June 30, 2001 to 840 at June 30,
2002, based upon the Baker Hughes gulf coast region rig count.
Gross margin ratio, as a percentage of sales, was 17.1% for the
year ended December 31, 2002 compared with 30.5% for the year
ended December 31, 2001. The gross margin ratio declined as a
result of the Jens' and Strata acquisitions in 2002 and lower
gross margin ratios at Mountain Air resulting from lower
revenues. Because Allis-Chalmers has made significant
investments in equipment and personnel many of its costs are
fixed, and as a result, its gross profit margins are severely
impacted by decreases in revenues.
General and administrative expense was $3,792,000 in 2002
compared with $2,898,000 in 2001. The general administrative
expenses increased in 2002 compared to 2001 due to the
acquisition of Jens' and Strata. During the third quarter of
2002, in response to the default of its debt covenants, the
Company restructured itself in order to contain costs and
recorded charges related to the reorganization in the amount of
$495,000. These charges consisted of related payroll costs for
terminated employees of $307,000, consulting fees of $113,000,
and costs associated with a terminated rent obligation of
$75,000. The Company also recorded one-time charges for costs
related to abandoned acquisitions and an abandoned private
placement in the amount of $233,000.
Operating loss for the year 2002 totaled $1,440,000, reflecting
the operating loss of Jens' and Strata, which were acquired in
February 2002. In the comparable period of 2001, operating loss
was $1,433,000. Operating income (loss) for the year ended
December 31, 2002 for the Casing Services, Directional Drilling
Services, Compressed Air Drilling Services and General Corporate
segments were income of $2,255,000, a loss of $576,000, a loss
of $945,000 and a loss of $2,174,000, respectively. Operating
income for the Compressed Air Drilling Services segment
decreased from income of $433,000 for the year ended December
31, 2001 primarily due to lower revenues resulting from the
overall downturn in the petroleum industry. Operating loss for
the General Corporate segment increased from $1,866,000 for the
year ended December 31, 2001.
The Company incurred a net loss attributed to common
shareholders of $4,290,000, for the year ended December 31, 2002
compared with a loss of $4,577,000, for the year end December 31
2001. The net loss for 2002 included a discount given to the
holder of the HDS note in the amount of $191,000 as an incentive
to pay-off the note in September 2002.
Cash and cash equivalents totaled $146,000 at December 31, 2002
as compared to $152,000 at December 31, 2001.
Net trade receivables at December 31, 2002 were $4,409,000 as
compared to $973,000 at December 31, 2001, due to the Jens' and
Strata Acquisitions.
Net property, plant and equipment were $17,124,000 at December
31, 2002 as compared to $4,246,000 at December 31, 2001, as a
result of Jens' and Strata Acquisitions. Capital expenditures
for the year 2002 were $518,000. Capital expenditures for the
year 2001 were $402,000. Capital expenditures for 2003 are
projected to be approximately $600,000.
Trade accounts payable at December 31, 2002 were $2,106,000 as
compared to $298,000 at December 31, 2001, primarily due the
Jens' and Strata Acquisitions.
Other current liabilities, excluding the current portion of
long-term debt, at December 31, 2002 were $2,597,000 consisting
of interest in the amount of $811,000, accrued salary and
benefits in the amount of $280,000, income taxes payable of
$45,000, accrued restructuring costs of $606,000, advance from
officers of the Company of $99,000, accrued operating expenses
of $ 543,000, and legal and professional expenses in the amount
of $213,000. Included in accrued restructuring costs was
compensation in the amount of $244,000 due to former employees
of the Company. At December 31, 2001 other current liabilities,
excluding the current portion of long-term debt, were $1,637,000
consisting of interest in the amount of $176,000, accrued salary
and benefits in the amount of $851,000, and legal and
professional expenses in the amount of $610,000. All of these
balance sheet accounts increased significantly from December 31,
2001 balances due to the Jens' and Strata Acquisitions. Included
in salary and benefits payable at December 31, 2001 was deferred
compensation in the amount of $318,000 due the CEO of the
Company.
Long-term debt including current maturities was $21,221,000 at
December 31, 2002 as compared to $7,856,000 at December 31,
2001. The increase in long-term debt was primarily a result of
the cost of the Jens' and Strata Acquisitions in February 2002.
* * *
As reported in Troubled Company Reporter's December 20, 2002,
Allis-Chalmers said its long term capital needs are to provide
funds for existing operations, retire existing debt, the
redemption of the Series A Preferred Stock and to secure funds
for the acquisitions in the oil and gas equipment rental and
services industry. To continue growth through additional
acquisitions the Company will require additional financing,
which may include the issuance of new equity or debt securities,
as well as secured and unsecured loans (substantially all of its
assets are pledged to secure existing financing). Management has
had discussions regarding the issuance of additional equity
securities; however, there can be no assurance that the Company
will be able to consummate any such transaction.
On July 16, 2002, the Company received a letter declaring that
the Company was in default of certain covenants set forth in its
credit agreements with Wells Fargo Bank and its affiliates (the
Bank Lenders). The defaults resulted primarily from failure to
meet financial covenants as a result of decreased revenues at
the Company's subsidiaries. As a result of these defaults the
Company's bank lenders have imposed default interest rates,
resulting in an increase of approximately $15,000 in the monthly
interest payable by the Company. Additionally the Bank Lenders
have suspended interest payments (aggregating $200,000 through
the date of the filing of the Company's latest financial
statements with the SEC) on a $4.0 million subordinated seller
note issued in connection with the Jens acquisition, which puts
the Company in default under the terms of the subordinated
seller note and have suspended interest payments (aggregating
$60,000 through the date of financial filing) on a $2.0 million
subordinated bank note issued in connection with the Jens
acquisition, which puts the Company in default under the terms
of the subordinated bank note. The holders of the subordinated
seller note and subordinated bank are precluded from taking
action to enforce the subordinated seller note without the
consent of the Bank Lenders.
The Company has made all outstanding principal and interest
payments on it's senior term debt to the Bank Lenders and
believes it will be able to continue to make such payments for
the foreseeable future based upon its current revenue and cash
flow forecasts. While there can be no assurances of maintaining
sufficient liquidity into the future, the Company believes it
does have sufficient current liquidity and will make every
effort to remedy the aforementioned defaults in order to comply
with provisions in the credit agreement and subordinated seller
and bank notes.
The Company is currently seeking refinancing and in connection
with any refinancing will seek to obtain a waiver and amendment
of the bank credit agreements which will waive past defaults,
eliminate the default interest rate and remedy other issues, in
order to be in compliance. However, there can be no assurance
that the Company will be able to obtain refinance any of its
debt, that an amendment and waiver will be obtained, or that the
lenders will not exercise their rights under the credit
agreements, including the acceleration of approximately
$18,000,000 million in debt. Accordingly, the bank debt and the
subordinated seller note are recorded as current liabilities on
the Company's financial statements. The acceleration of
outstanding debt or any action to enforce the Company's
obligations with respect to such debt would have a material
adverse effect on the Company.
ALTERRA HEALTHCARE: Mark Ohlendorf Elected as Company President
---------------------------------------------------------------
Alterra Healthcare Corporation (OTC:ATHCQ) announced that Mark
Ohlendorf has been elected to serve as the Company's President.
Mr. Ohlendorf, who has served the Company in various senior
management positions since 1997, will also continue to serve as
the Company's Chief Financial Officer. Patrick Kennedy, who
previously served as Alterra's Chief Executive Officer and
President, will continue to serve as Alterra's CEO.
According to Patrick Kennedy, "The Board's decision to elect
Mark to serve as President is in recognition of the expanded
responsibilities that Mark has assumed during the last year and
will further broaden his duties for management of the overall
affairs of the Company." Kennedy also noted, "Mark Ohlendorf has
demonstrated great leadership in managing our financial
restructuring efforts during the last two years. We are
confident that these skills will enable Mark to be successful in
his expanded role."
The Company also announced that the U.S. Bankruptcy Court for
the District of Delaware has approved the bidding procedures
proposed by the Company in order to establish the process by
which Alterra will be seeking to identify and select a
transaction to address the capital and liquidity needs of
Alterra upon the completion of its bankruptcy reorganization. As
previously reported, the Company believes that an Exit Financing
Transaction, which would be consummated and funded upon or
promptly following confirmation of Alterra's plan of
reorganization, could involve either the sale of equity
securities in the reorganized Alterra or the sale of assets of
Alterra as a going concern. The bidding procedures contemplate
an open marketing process that will culminate in an auction on
July 17, 2003 in which qualified bidders will have the
opportunity to propose an Exit Financing Transaction. The
marketing and auction process is being supervised by a special
independent committee of Alterra's Board of Directors. Pursuant
to the approved bidding procedures, Alterra is currently
providing due diligence information to prospective investors who
may be interested in proposing an Exit Financing Transaction.
Parties interested in evaluating the possibility of proposing an
Exit Financing Transaction should contact the Company's
financial advisor, Cohen & Steers Capital Advisors, LLC, at
(212) 446-9177. Initial bids of parties interested in
participating in the auction should be submitted to the
Company's special independent Board committee on or before
June 23, 2003.
Alterra offers supportive and selected healthcare services to
our nation's frail elderly and is the nation's largest operator
of freestanding Alzheimer's/ memory care residences. Alterra
currently operates in 24 states.
AMERCO: Brings-In Andrew A. Stevens as New Chief Fin'l Officer
--------------------------------------------------------------
AMERCO (Nasdaq: UHAL) announced that Andrew A. Stevens, 45, has
joined the company as its Chief Financial Officer. Stevens
brings 20 years of financial experience to his new post, where
he will oversee all areas of financial management, from
financial accounting to capital markets.
Commenting on the hire, Joe Shoen, Chairman of AMERCO noted, "As
the Company moves forward into its sixth decade, we are very
pleased to add someone of Andy's caliber. He is a highly
qualified professional, with an impressive track record in
finance, accounting, financial reporting and financial systems.
We expect to benefit from the knowledge, experience and
leadership that he brings to this position and to our
organization."
"I am thrilled to be joining the management team at AMERCO and I
look forward to working with them to resolve the issues facing
the company in the present and to working to maximize
shareholder value in the future," said Mr. Stevens.
Stevens comes to AMERCO with significant experience in capital-
markets, accounting and financial systems. As Vice President of
Finance and Controller of CSK Auto Corporation, a $1.5 billion
publicly traded specialty retailer, Stevens played a key role in
that company's initial public offering, its subsequent debt and
equity management and in its recent capital structure
refinancing. Mr. Stevens also made significant contributions to
the operating and financial reorganization of America West
Airlines, where Stevens served as a consultant to the company in
the employ of KPMG. Prior to joining CSK Auto Corporation in
1997, Stevens held various progressively responsible financial
and accounting positions with Amtran, Inc., America West
Airlines and The Circle K Corporation. He began his career in
1983 in the audit practice of KPMG where he rose to the level of
Senior Manager.
Stevens is a Certified Public Accountant. He holds a BS degree
in business administration, with a major in accounting from the
University of Arizona.
AMERCO is the parent company of U-Haul International, Inc.,
Republic Western Insurance Company, Oxford Life Insurance
Company and Amerco Real Estate Company. For more information
about AMERCO, visit http://www.uhaul.com
As reported in Troubled Company Reporter's April 9, 2003
edition, AMERCO and the holders of $100 million in notes issued
by Amerco Real Estate Company and guaranteed by AMERCO, executed
another Standstill Agreement. Terms of the Standstill Agreement
extend through May 30, 2003.
As part of the Standstill Agreement, three affiliates of
Nationwide Mutual Insurance Company (Nationwide Life Insurance
Company, Nationwide Life and Annuity Insurance Company, and
Nationwide Indemnity Company) have agreed to dismiss the lawsuit
they filed against AREC and AMERCO on March 24, 2003 in the
Southern District of New York.
AREC will continue to make all required interest payments owing
under the Note Agreement, and AMERCO will provide the
Noteholders with timely information on the progress of the
Company's recapitalization initiatives. The Standstill also
calls for AREC and AMERCO to use their best efforts to seek
other sources of funds, which will be used to repay all amounts
due under the Note Agreement.
AMERICAN AIRLINES: Sr. Management Cancels Retention Agreements
--------------------------------------------------------------
American Airlines said its senior management has voluntary
cancelled retention plans put in place to retain key executives.
"These retention agreements were created more than a year ago,
immediately after the events of Sept. 11th, when the industry
was struggling and our Board of Directors had serious concerns
about our ability to retain our senior management," said Don
Carty, American's chairman and CEO. "The goal was to give senior
officers an incentive to stay with the company when many were
being offered more generous packages to go elsewhere."
Carty said that during talks on achieving employee cost savings
agreements he held discussions with union leaders about his
concerns on retaining the most effective members of the
management team in light of the number of people who either have
left the company or chose to retire early. However, he did not
explicitly describe what plans were put in place.
"I have apologized to our union leaders for this and for the
concern it has caused our employees," Carty said. "Those
executives who have made the personal commitment to remain with
American during this financial crisis, myself included, are not
here solely for monetary reasons and we have all agreed to give
up these retention payments in order to give our employees
confidence in management's on-going commitment to shared
sacrifice."
Another issue of concern among employees was the company's
Supplemental Executive Retirement Plan or SERP. American said
its SERP was established in 1985 and, unlike its other
employees' retirement plans, was never funded. This past
October, during a cycle in which the company was contributing to
employee pension plans, it made an initial payment -- the first
ever -- to the plan, which remains underfunded.
The SERP is a common tool used in a broad range of industries to
help protect a portion of the pension benefits that executives
have already earned. American did not add benefits or enhance
the program, in contrast to some of its competitors, nor did it
allow funds to be withdrawn except through the normal retirement
process.
"I have always committed to doing our best to fund the pension
plans for our employees and their families, even as we lost
money through difficult financial times," Carty said. "My
ultimate goal is to provide pension security for all employees,
including the management team."
Because the SERP represents a benefit already earned, in some
cases over a period of 17 years, American said the initial
payment to the SERP remains in place.
Current AMR Corp. (NYSE: AMR) releases can be found on the
Internet. The address is http://www.amrcorp.com
AMERICAN AIRLINES: ALPA Chief Blasts Airline Executive Perks
------------------------------------------------------------
The following statement was issued by Capt. Duane Woerth,
president of the Air Line Pilots Association, International, the
nation's largest pilots' union, regarding recent airline
executive bonuses, compensation and stock grants in light of the
industry's current financial situation:
"Thousands of airline workers at American and American Eagle
have lost their jobs or given significant wage, benefit and work
rule concessions since September 11 to help save their
companies. The economic downturn and loss of high-yield business
travelers have dramatically impacted airline revenues, and both
business and leisure travel are being negatively impacted by the
Gulf War. Although airline workers have not caused these
problems, they have stepped forward, as always, to be part of
the solution.
"Therefore, it is disconcerting, if not outrageous, that airline
executives at American are lining their pockets while employees
are subsidizing these bonuses and bankruptcy-protected
retirement plan trust funds. These same managers are threatening
to abrogate workers' contracts in bankruptcy court and should
share in the cost cutting. Instead, they are lining their own
pockets, and padding their own pensions with solid gold nest
eggs.
"Make no mistake: airline workers at American and American Eagle
are the reason their companies are the great national assets
they are, not management teams who come and go with multi-
million-dollar severance packages. We will be here when most
executives are long gone, trying to carry on the proud legacy of
this nation's air travel industry."
ALPA represents 66,000 airline pilots at 42 airlines in the U.S.
and Canada, including approximately 2,600 American Eagle pilots.
Its Web site is at http://www.alpa.org
AMERICAN AIRLINES: APA Lambastes Exec. Compensation Enhancements
----------------------------------------------------------------
The Allied Pilots Association (APA), collective bargaining agent
for the 13,500 pilots of American Airlines (NYSE:AMR), released
the following statement by APA President Captain John Darrah
regarding the enhancements to executive compensation that were
revealed in AMR Corp.'s year-end report to shareholders:
"As we emphasized with the announcement of the flight
attendants' approval of their tentative agreement, the
membership of all three unions met the cost-savings targets that
management established at the onset of negotiations. We have
sacrificed deeply to enable American Airlines to avoid an
immediate bankruptcy filing. Unfortunately, it appears that
management is not off to a very promising start at making the
most of the reprieve the unionized employees have provided
through our collective sacrifices.
"As part of its annual report to shareholders, AMR Corp., is
required by the Securities and Exchange Commission to file
additional, more detailed supporting documents. These documents
reveal that the top six executives will be eligible to receive
cash retention bonuses of twice their annual salaries, through a
so-called 'Retention Award Agreement,' if they stay through
January 2005. AMR also established a 'Supplemental Executive
Retirement Program' for its 45 top executives that protects a
portion of their retirement income in the event of a bankruptcy
filing.
"An article in [Thurs]day's edition of The Wall Street Journal
reports that management 'briefed union leaders before the
voting' about these new executive perquisites. That is totally
erroneous. We found out about these enhancements to executive
compensation only after AMR made its year-end financial filing
with the SEC.
"As we seek clarification from management about why we were not
previously informed of these items, our pilots are justifiably
irate at the latest revelations. For that matter, every employee
on this property should rightfully question management's motives
and judgment with regard to enhancing executive compensation.
After all, the members of all three unions have just agreed to
sacrifice a total of $1.62 billion a year for the next six
years.
"From the very beginning of our discussions concerning cost
savings, we stressed to management that both the sacrifices and
the potential future upside must be shared between the employees
and management. In light of the debate we had with management at
the very end of negotiations concerning equity and upside
sharing, we are particularly disturbed to see that both the
sacrifices and upside potential appear utterly lopsided. That is
unacceptable.
"On April 10 at a meeting in Dallas/Fort Worth with a large
group of American Airlines employees, CEO Don Carty stated that
'Shared sacrifice has to lead to shared success...'" Management
would be wise to take this statement to heart and consider the
ramifications of their decisions during this critical time."
Founded in 1963, APA is headquartered in Fort Worth, Texas.
AMERICAN AIRLINES: Ratings Still on Watch after Averting Ch. 11
---------------------------------------------------------------
Flight attendants of AMR Corp. (CCC/Watch Dev./--) unit American
Airlines Inc. (CCC/Watch Dev./--) narrowly approved a
concessionary contract on April 16, 2003, reversing the negative
vote of a day earlier and averting the immediate threat of
bankruptcy filings by both entities. Standard & Poor's Ratings
Services said its ratings on AMR and American remain on
CreditWatch with developing implications, where they were placed
on March 28, 2003.
"The flight attendants' approval completes a package of $1.8
billion in labor concessions that should materially improve
American's operating cost structure, narrowing the airline's
losses and operating cash outflow," said Standard & Poor's
credit analyst Philip Baggaley. "Still, American faces a weak
revenue environment and carries a consolidated total of $22
billion of debt and leases, leaving its financial condition
improving but still fragile," the credit analyst continued.
The labor savings, when fully implemented, imply daily cash
savings of over $5 million, and should become effective fairly
quickly. American's daily cash losses worsened in March and
April from a January, 2003 "burn rate" of about $5 million, but
should narrow going forward with the normal spring seasonal
upturn and as the Iraq war winds down. Expected concessions from
suppliers, lessors, and private lenders should save $175
million-$200 million annually, but do not materially reduce the
overall debt burden. AMR's unrestricted cash is greatly reduced
from the last reported figure of $1.9 billion at Dec. 31, 2002,
but will likely be sufficient to meet near-term needs if airline
industry revenues begin to recover from Iraq war lows. Any
material worsening of the overall airline industry outlook,
however, due to terrorism or other factors, could still endanger
the company's solvency.
ANC RENTAL: Judge Walrath Fixes May 9 Rejection Claims Bar Date
---------------------------------------------------------------
U.S. Bankruptcy Court Judge Walrath orders that any party who
may hold, or who may claim to hold, a claim or claims against
ANC Rental Corporation and its debtor-affiliates arising from
the rejection of leases or contracts will submit a proof of
claim for the rejection damages pursuant to Section 502 (b)(6)
of the Bankruptcy Code on or before May 9, 2003 to the Claims
Agent:
Donlin, Recano & Company, Inc.
as Agent for the United States Bankruptcy Court
Re: ANC Rental Corporation, et.al.,
P.O. Box 2017, Murry Hill Station,
New York, NY 10016
(ANC Rental Bankruptcy News, Issue No. 30; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
ASPECT COMMS: First Quarter 2003 Results Show Marked Improvement
----------------------------------------------------------------
Aspect Communications Corporation (Nasdaq: ASPT), the leading
provider of enterprise customer contact solutions, reported
financial results for the quarter ended March 31, 2003,
consistent with previously released preliminary results.
FIRST QUARTER FINANCIAL RESULTS
Revenues for the first quarter of 2003 totaled $84.4 million
compared to $96.9 million for the fourth quarter of 2002 and
$104.5 million for the first quarter last year. License revenues
in the first quarter of 2003 were $14.9 million compared to
$20.6 million for the fourth quarter of 2002 and $22.9 million
for the first quarter last year. Hardware revenues totaled $9.2
million in the first quarter compared to $14.2 million for the
fourth quarter and $17.7 million for the first quarter last
year. Services revenues in the first quarter were $60.3 million
compared to $62.2 million for the fourth quarter and $63.8
million for the first quarter last year.
Net income attributable to common shareholders for the first
quarter of 2003 was $2.6 million or a profit of $0.05 per share
on a basic and fully diluted basis. This compares with a net
income of $6.7 million or a profit of $0.13 per share for the
fourth quarter of 2002 and a net loss of $40.7 million or a loss
of $0.78 per share for the same period last year.
"Despite the economic environment and the weakness in technology
spending, we remained profitable, reduced our expenses and
strengthened our balance sheet," said Beatriz Infante, Aspect's
Chairman, President, and CEO. "Our results demonstrate that we
have taken steps to right-size our business to ensure our long-
term success."
For the first quarter of 2003, gross margins were 53.0%. This
compares to 55.0% for the fourth quarter of 2002 and 44.4% for
the first quarter of 2002. Operating expenses were $37.7 million
for the first quarter of 2003 compared to $44.4 million in the
fourth quarter of 2002 and $58.3 million for the same period
last year.
Cash, cash equivalents, and short-term investments totaled
$200.6 million as of March 31, 2003, including $43.7 million,
net of expenses, from the closing of the company's private
placement financing in January 2003. This compares to $146.1
million as of December 31, 2002. During the quarter, the company
generated $18.6 million in cash from operations and utilized
approximately $5.6 million to repurchase subordinated
convertible debentures. Accounts receivable at quarter-end
totaled $41.8 million and days sales outstanding were 39 days
compared to 45 days at December 31, 2002. Net inventories at
March 31, 2003 totaled $9.9 million, an increase of $3.1 million
from the prior quarter.
OPERATIONAL HIGHLIGHTS
Aspect's installed base continued to be an important source of
recurring service revenues, as well as product revenues. In
addition, the company added several new customers to its
platinum customer base. The company received product revenues
from these significant new and existing Aspect customers: HSBC,
Washington Mutual, Agilent, Toll Collect GmBH, Royal Bank of
Scotland, Startek, Healthnet, Comcast Cablevision,
Intersections, DaimlerChrysler and Countrywide.
The company's industry-leading product, Aspect eWorkforce
Management, won Communications Solutions Magazine's Product-of-
the-Year Award.
Aspect Communications Corporation is the leading provider of
business communications solutions that help companies improve
customer satisfaction, reduce operating costs, gather market
intelligence and increase revenue. Aspect is a trusted mission-
critical partner with more than two-thirds of the Fortune 50,
daily managing more than 3 million customer sales and service
professionals worldwide. Aspect is the only company that
provides the mission- critical software platform, development
environment and applications that seamlessly integrate voice-
over-IP, traditional telephony, e-mail, voicemail, Web, fax and
wireless business communications, while guaranteeing investment
protection in a company's front-office, back-office, Internet
and telephony infrastructures. Aspect's leadership in business
communications solutions is based on more than 17 years of
experience and more than 8,000 implementations deployed
worldwide. The company is headquartered in San Jose, Calif.,
with offices around the world and an extensive global network of
systems integrators, independent software vendors and
distribution partners. For more information, visit Aspect's Web
site at http://www.aspect.com
As reported in Troubled Company Reporter's January 30, 2003
edition, Standard & Poor's affirmed its 'B' corporate credit
rating and 'CCC+' subordinated debt ratings on Aspect
Communications Corp. At the same time, the ratings were removed
from CreditWatch, where they had been placed on October 25,
2002. The outlook is stable.
San Jose, California-based Aspect Communications is a provider
of software-based call center and customer relationship
management solutions. Total debt outstanding was $173 million as
of December 31, 2002.
ATMEL CORP: First Quarter 2003 Net Loss Widens to $53 Million
-------------------------------------------------------------
Atmel Corporation (Nasdaq: ATML), a worldwide leader in the
development, fabrication and sale of advanced semiconductors,
announced financial results for the first quarter ended
March 31, 2003.
Revenues for the first quarter of 2003 totaled $296,478,000,
versus $304,631,000 in the fourth quarter of 2002 and
$275,773,000 in the first quarter of 2002. This represents a
sequential decline in revenues of 3% and year over year growth
of 8%. Net loss for the first quarter of 2003 totaled
$53,120,000. The net loss for the first quarter included an
expense of $10 million, related to a patent licensing agreement
with IBM. In the fourth quarter of 2002, the Company reported a
net loss of $16,207,000. The net loss for the fourth quarter
2002 included a positive $0.03 per share related to a gain on
early retirement of debt offset by restructuring charges. In the
first quarter of 2002, the Company's net loss was $44,333,000.
Cash and cash equivalents and short term investments as of
March 31, 2003 were approximately $434 million, representing a
decrease of $12.1 million from December 31,2002. During the same
period, total debt was reduced by $25.8 million. The Company
also has $23.5 million in restricted cash. Additionally,
accounts receivable and inventory decreased by $7.3 million and
$8.8 million respectively during the quarter.
"First quarter revenues were slightly lower than expected,
primarily due to pricing pressure in the serial EEPROM market,"
stated George Perlegos, Atmel's President and Chief Executive
Officer. "However, we were very pleased with the performance of
our ASIC business, specifically smart cards, which experienced
healthy growth and received significant design wins, including
the silicon platform for the next generation of chip-based bank
cards."
Perlegos added, "During the quarter, we shipped a record number
of our proprietary AVR microcontrollers and began seeing signs
that this market is improving, as indicated by our current and
potential customers' purchases of in-circuit emulators and
starter kits.
"Additionally, we remain focused on adding to our significant
intellectual property and expertise to help customers offer
smaller, portable, wireless, secure, cost-effective and complete
system solutions. During the quarter, we introduced a single-
chip dual Ethernet 802.11b wireless LAN with advanced security
features, established compliance with the Trusted Computing
Group, a newly formed organization driving the standards of
security, and introduced the ARM-9 microcontroller architecture
geared toward enhanced performance applications in our ASIC
group," concluded Perlegos.
Outlook
The Company believes that in the second quarter of 2003,
revenues should grow 2-4% sequentially, reaching about $302-308
million. Additionally, R&D should be approximately $60-63
million, while SG&A should remain between $30-33 million.
Finally, gross margins should remain approximately 22% in the
second quarter.
Founded in 1984, Atmel Corporation is headquartered in San Jose,
California, with manufacturing facilities in North America and
Europe. Atmel designs, manufactures and markets worldwide,
advanced logic, mixed-signal, nonvolatile memory and RF
semiconductors. Atmel is also a leading provider of system-level
integration semiconductor solutions using CMOS, BiCMOS, SiGe,
and high-voltage BCDMOS process technologies.
* * *
As previously reported, Standard & Poor's assigned its single-
'B' corporate credit rating to Atmel Corp. At the same time,
Standard & Poor's assigned a triple-'C'-plus rating to Atmel's
$512 million zero coupon convertible subordinated debentures due
2021.
The current outlook is negative.
The ratings on San Jose, California-based Atmel reflect weak
market conditions, a high cost structure, and substantial near-
term cash obligations, offset in part by the company's moderate
business diversity and currently good liquidity.
BION ENVIRONMENTAL: Jon Northrop & Mark Smith Appointed to Board
----------------------------------------------------------------
The following changes in management of Bion Environmental
Technologies Inc., occurred at a Board of Directors Meeting,
which was held on March 25, 2003:
* Jon Northrop, one of the founders and a former officer
and Director, and Mark Smith, a former officer and director,
were elected to serve on the Board of Directors to fill
vacancies created by recent resignations.
* Mr. Smith was elected to serve as the President of Bion
Environmental Technologies, Inc. and both of its subsidiaries.
* Jon Northrop was elected to serve as the Secretary of
Bion and its subsidiaries.
* Jere Northrop, also a founder and one of the current
directors, was elected to serve as the Assistant Secretary of
Bion and its subsidiaries. Jere Northrop and Jon Northrop are
brothers.
* David Mitchell resigned as an officer and director of
Bion and of its subsidiaries.
* * *
During the period from January 10, 2003 through April 11, 2003,
Bright Capital LLC, an entity owned and controlled by Dominic
Bassani, a consultant whose services were provided to Bion
Environmental Technologies as part of its management agreement
with D2CO, LLC, advanced Bion $249,500 so that the Company could
pay operating expenses that are critical to its operations,
primarily consisting of salaries paid to retain critical
personnel, which now consists of six employees. Also, as of
April 11, 2003, Bion owes creditors approximately $850,000.
The Company amended its New York City office lease effective
March 1, 2003. Under this amendment the expiration date was
changed to December 31, 2003, from the previous expiration date
of December 31, 2010. The amendment calls for the drawdown of
the letter of credit provided to the landlord for the full
amount of $120,561 to be used to pay arrearages and future rent.
In addition, two of Bion's new subtenants, Mitchell & Co. and
Zizza & Co., which are controlled by David Mitchell and
Salvatore Zizza, respectively, are former officers and directors
of Bion, and have personally guaranteed the lease with the
landlord. Bion will not incur additional cash outflows in
connection with this lease as a result of the drawdown of the
letter of credit, the subrental income and the personal
guarantees.
Bion Environmental Technologies vacated its Buffalo and North
Carolina locations. Employees remaining from those locations
have opened up home offices.
Although Bion is currently seeking other outside sources of
capital, as of this date it has not been able to secure
financing that is necessary for its current and future
operations and there can be no assurance that sufficient funds
will be available from external sources. Further, there can be
no assurance that any such required funds, if available, will be
available on attractive terms or that they will not have a
significantly dilutive effect on Bion's existing shareholders.
Since the Company does not yet have the ability to generate cash
flow from operations, it has substantially curtailed its current
business activities and has indicated that it may need to cease
operations if unable to immediately raise capital from outside
sources. This would have a material adverse effect on its
business and its shareholders.
BIONOVA HOLDING: Appoints Jose Manuel Garcia as New Company CEO
---------------------------------------------------------------
Bionova Holding Corporation (Amex: BVA) announced that at its
Board of Directors meeting on April 10, 2003, Mr. Jose Manuel
Garcia was appointed Chief Executive Officer and Mr. Arthur
Finnel was appointed as the Company's Chief Financial Officer.
Mr. Garcia takes over for Mr. Bernardo Jimenez, who had been the
Chief Executive Officer since 1997. Mr. Garcia's appointment to
this position follows a highly successful career with Bionova
Holding's parent company, Savia. From 1989 to 2001 Mr. Garcia
was the Chief Operating Officer of Savia's Packaging Division,
and most recently he has performed the role of Director of
Special Development for Savia. Mr. Garcia also is a director of
Savia and Seminis.
Mr. Finnel is reassuming the responsibility of Chief Financial
Officer of Bionova Holding, a position he held from September
1996 through January 2002. Mr. Finnel had left for personal
reasons at that time, but agreed recently to re-consider
returning upon the request of the Board of Directors of the
Company.
Bionova Holding also announced it had delayed the filing of its
10-K for the year ended December 31, 2002 because certain
information required to complete the examination of its
financial accounts and presentation in the Form 10-K had to be
re-collected and re-verified due to the departures of its former
Chief Financial Officer and some of the key accounting personnel
in its subsidiaries. This process is taking much longer than
had been expected when the plan for the year-end closing was
developed. The Company now expects to have its 10-K submitted
on or before April 30, 2003. Some minor changes have been made
to the numbers that were presented in the Company's press
release on April 3. The best current estimates are as follows:
Thousand of Dollars
(except per share amounts)
2002 2001
---- ----
Total revenues ............................$129,445 $204,471
Loss from continuing operations ........... (17,558) (31,090)
Loss from discontinued operations of
research and development segment ....... (2,054) (24,371)
Net loss .................................. (20,415) (56,594)
Bionova Holding Corporation is a leading fresh produce grower
and distributor. Its premium Master's Touch(R) and FreshWorld
Farms(R) brands are widely distributed in the NAFTA market.
Bionova Holding Corporation is majority owned by Mexico's SAVIA,
S.A. de C.V. (NYSE: VAI).
As reported in Troubled Company Reporter's April 7, 2003
edition, Bionova Holding Corporation provided an update on the
status of the Company's listing on the American Stock Exchange,
its bank financing, and other matters.
As previously reported, on September 9, 2002, Bionova Holding
was informed of the intention of the American Stock Exchange to
proceed to file an application with the Securities and Exchange
Commission to strike the Company's common stock from listing and
registration on the Exchange. The staff of the American Stock
Exchange stated this action was taken due to the Company's
failure to meet several of the standards for continued listing
on the Exchange (losses in two consecutive years, equity below
$2 million, and a going concern opinion expressed by its
auditors). The Company appealed this determination by requesting
a listing qualification hearing, submitted a plan of compliance
to the Exchange and was subsequently advised that, based on this
submission, the hearing would be delayed for an indeterminate
period. The Company recently provided an update to the AMEX
staff on its plan and activities and was informed that its plan
to regain compliance with the continued listing standards by
June 30, 2003 had been approved. The Company understands that it
has been, and will continue to be subject to periodic review by
the Exchange Staff during the extension period. Failure to make
progress consistent with the plan or to regain compliance with
the continued listing standards could result in the Company
being delisted from the American Stock Exchange.
BURLINGTON: Wants Court Approval to Extend Hilco's Engagement
-------------------------------------------------------------
Pursuant to Section 327(a) of the Bankruptcy Code, Hilco
provides Burlington Industries, Inc., and debtor-affiliates with
real estate consulting and advisory services in these Chapter 11
cases in connection with certain of the Debtors' properties
identified for sale or divesture, until the earlier of:
(a) the effective date of any plan or plans of
reorganization confirmed in the Debtors' Chapter 11
cases, or
(b) April 8, 2003 -- the Termination Deadline.
To date, Daniel J. DeFranceschi, Esq., at Richards, Layton &
Finger, in Wilmington, Delaware, relates, Hilco has assisted the
Debtors in selling five Owned Properties, and a portion of
another Owned Property, for approximately $5,102,840 in the
aggregate. Hilco is continuing to assist the Debtors in the
sale or divestiture of the remaining Owned Properties.
Because of Hilco's past experience with selling the Owned
Properties, and the cost and administrative burden associated
with replacing Hilco, the Debtors ask the Court to extend the
Termination Deadline for the retention and employment of Hilco
in these Chapter 11 cases, on the same terms and subject to the
same conditions set forth in the Retention Documents to the
earlier of the Effective Date, or October 8, 2003.
Mr. DeFranceschi points out that absent the extension of the
Termination Deadline, the Debtors would be forced to:
(a) market the Owned Properties on their own, or
(b) retain another professional unfamiliar with the Owned
Properties to market the properties.
The Debtors believe that this extension will permit them, with
Hilco's assistance, to continue their efforts to sell the
remaining Owned properties to the direct benefit of their
estates. (Burlington Bankruptcy News, Issue No. 31; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
CHIQUITA BRANDS: S&P Assigns B- Rating to $250M Sr. Unsec. Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B-' rating to
fresh fruit and vegetable producer and distributor Chiquita
Brands International's $250 million senior unsecured notes due
2009. Standard & Poor's also assigned its 'B' corporate credit
rating to Chiquita.
The outlook on the Cincinnati, Ohio-based company is positive.
About $582 million of lease-adjusted total debt was outstanding
as of Dec. 31, 2002.
"The rating reflects Chiquita's product concentration in
bananas, a mature industry that faces such uncontrollable
factors as global supply risk, political risk, and risks from
weather and disease," said Standard & Poor's analyst Ronald
Neysmith. "Mitigating these factors are Chiquita's strong market
share in bananas, the good geographical diversification of its
sales, and the company's improving cost and capital structure
following its emergence from bankruptcy."
The senior unsecured notes are rated one notch below the
corporate credit rating, reflecting their junior position to the
large amount of secured debt and priority debt at the operating
subsidiaries.
On March 19, 2002, Chiquita Brands International Inc. completed
its financial restructuring when its prearranged plan of
reorganization under Chapter 11 bankruptcy became effective.
Chiquita Brands International is a leading producer, marketer,
and distributor of bananas and other fresh and processed foods
sold under the brand name Chiquita as well as other brand names.
In addition to bananas, fresh products include tropical fruit
such as mangoes, kiwi, and citrus fruits. Chiquita is now the
largest manufacturer of private-label canned vegetables.
Chiquita's operations are highly concentrated in bananas, which
represent about 87% of sales. The remaining 13% of sales comes
from various other fresh fruit and juice beverages.
Geographically, Chiquita's sales are driven by its operations in
Europe and the United States.
The company's high cost structure has been a major issue for
Chiquita during the past several years. To improve margins,
Chiquita is shifting its mix from company-owned farm production
to third-party providers. In addition, Chiquita is implementing
an overall corporate reorganization to streamline operations and
achieve about $70 million in cost savings during the next couple
of years. At the same time, the company is divesting non-core
assets and is expected to use proceeds to repay debt. Standard &
Poor's expects that these cost savings efforts could result in
improved operating margins in the intermediate term.
COMPACT DISC WORLD: Case Summary & 20 Largest Unsec. Creditors
--------------------------------------------------------------
Debtor: Compact Disc World, Inc.
412 Route 10 West
East Hanover, New Jersey 07936
Bankruptcy Case No.: 03-22638
Type of Business: Retail music chain
Chapter 11 Petition Date: April 16, 2003
Court: District of New Jersey (Newark)
Judge: Novalyn L. Winfield
Debtor's Counsel: Boris I. Mankovetskiy, Esq.
Jack M. Zackin, Esq.
Sills Cummis Radin Tischman Epstein & Gross,
P.A.
One Riverfront Plaza
Newark, NJ 07102
Tel: (973) 643-6391
Fax : (973) 643-6500
Estimated Assets: $10 Million to $50 Million
Estimated Debts: $10 Million to $50 Million
Debtor's 20 Largest Unsecured Creditors:
Entity Nature Of Claim Claim Amount
------ --------------- ------------
Baker & Taylor Trade Debt $191,387
Koch International, LLP Trade Debt $133,606
Wax Work Trade Debt $112,065
AEC One Stop and Trade Debt $99,661
Innovative Dist.
Leslie Dame Enterprises Trade Debt $47,942
Riverfront Times Trade Debt $43,933
The Star Ledger Trade Debt $42,835
Anchin, Block & Anchin Trade Debt $38,500
Image Entertainment, Inc. Trade Debt $36,619
Red Flag Asia Trade Debt $37,740
Big Daddy Trade Debt $33,405
Digital On Demand Trade Debt $29,941
Select-O-Hits Trade Debt $29,379
Shock Export Trade Debt $28,497
Bayside Dist. Trade Debt $26,349
Verizon Trade Debt $24,834
City Hall Trade Debt $23,952
Tee Vee Toons Trade Debt $21,767
Music Video Dist. Trade Debt $18,371
Gotham Distributing Corp. Trade Debt $18,068
CONEXANT SYSTEMS: Cuts Convertible Debt Balance by $100 Million
---------------------------------------------------------------
Conexant Systems, Inc., (Nasdaq:CNXT) announced revenues of
$158.4 million for the second quarter of fiscal 2003, which
ended March 28, 2003, an increase of 7 percent over fiscal 2002
second quarter revenues of $148.7 million. The company also said
that it has reduced the outstanding balance on its convertible
debt due in 2007 by $100 million.
"Conexant's second fiscal quarter revenues of $158.4 million
increased 7 percent from last year's second quarter and were in
line with the expectations we set at the beginning of the
quarter," said Dwight W. Decker, Conexant chairman and chief
executive officer. "The $215 million early debt repayment from
Skyworks Solutions, Inc. during our first fiscal quarter
provided us with sufficient resources to retire a significant
portion of our long-term convertible debt four years before its
maturity. Since the beginning of this past quarter, we have
invested $56 million to retire $100 million of this debt at very
attractive rates, and improved the quality of our balance sheet.
"Our Broadband Communications business delivered second fiscal
quarter revenues of $140 million in a seasonally weak period, an
increase of 8 percent on a year-over-year basis," Decker
continued. "Broadband performance was driven by new product
ramps and continuing market share gains in our growth
initiatives, which include our ADSL modem solutions and our
leadership home network processor and satellite set-top box
families of products.
"Our Mindspeed Technologies segment delivered revenues of $18.3
million, which were in line with our expectations. Mindspeed
continued to benefit from its focus on metropolitan area and
access networks during the quarter, and its diversification into
markets such as storage area networking that are outside
traditional telecommunications applications.
"Mindspeed also lowered operating expenses by $4 million
sequentially, a 9 percent improvement that reflects the
continuing benefit of previously announced cost-reduction
initiatives.
"In terms of operating results, our overall performance improved
8 percent sequentially on a pro forma basis, better than we
expected at the beginning of the quarter and primarily due to
the cost savings generated by Mindspeed's restructuring
program."
The Conexant pro forma operating loss for the second fiscal
quarter was $26.3 million, an improvement of 61 percent, or
$40.5 million, over the pro forma operating loss in the same
period a year ago. These pro forma results are a supplement to
financial statements based on generally accepted accounting
principles. Conexant uses pro forma information to evaluate its
segment operating performance and believes this presentation
provides investors with additional insight into its underlying
operating results. A full reconciliation between the pro forma
and GAAP results from continuing operations is included in the
accompanying financial data.
Presented on a GAAP basis, the Conexant operating loss for the
second quarter of fiscal 2003 was $57.3 million, compared with
operating losses of $174.6 million in the second quarter of
fiscal 2002, and $55.1 million in the first quarter of fiscal
2003. The GAAP net loss for the second quarter of fiscal 2003
was $68.0 million, compared with a net loss of $200.7 million in
the second quarter of fiscal 2002.
Third Quarter Fiscal 2003 Outlook
"We expect Broadband Communications business revenues to be up 3
to 7 percent sequentially as a result of continued traction in
our key growth initiatives, which include ADSL modems, satellite
set-top box solutions and home network processors," Decker said.
"We believe that we will hold both operating expenses and
percent gross margin steady, and as a result, that our Broadband
Communications business will improve its pro forma operating
profitability.
"While visibility in Mindspeed's end markets continues to be
limited, customer order backlog has been improving steadily for
the past few months and is better now than at the same point one
quarter ago, and we accordingly anticipate that Mindspeed's
revenues will be up 5 to 10 percent sequentially. As a result of
this revenue growth and the continuing benefits of our cost-
reduction actions, we expect a further sequential improvement in
the level of Mindspeed's pro forma operating loss of
approximately 10 percent.
"In the aggregate, we anticipate that Conexant's third fiscal
quarter revenues will be up 3 to 7 percent sequentially. We
expect to maintain overall gross margin in the 47 percent range
and, with the reduction in Mindspeed operating expenses, expect
to deliver a further sequential improvement in pro forma
operating loss of approximately 20 percent," Decker concluded.
Conexant Systems, Inc., a worldwide leader in semiconductor
system solutions for communications applications, leverages its
expertise in mixed-signal processing to deliver integrated
systems and semiconductor products through two separate
businesses.
The Broadband Communications business develops and delivers
integrated semiconductor solutions that enable digital
entertainment and information networks for the home and small
office. Its product portfolio includes the building blocks
required for bridging cable, satellite and terrestrial data and
digital video networks.
Mindspeed Technologies(TM), the company's Internet
infrastructure business, designs, develops and sells
semiconductor networking solutions for communications
applications in enterprise, access, metropolitan and wide area
networks. Conexant is headquartered in Newport Beach, Calif. To
learn more, visit http://www.conexant.comor
http://www.mindspeed.com
Conexant Systems' 4.000% bonds due 2007 are currently trading at
about 60 cents-on-the-dollar.
CUMMINS INC: Attributes $34-Mill. Q1 Loss to Global Uncertainty
---------------------------------------------------------------
Cummins Inc. (NYSE:CUM) reported a loss for the first quarter
2003 of $34 million on sales of $1.39 billion. This compares to
a loss of $26 million on sales of $1.33 billion for the first
quarter of 2002. Excluding the cumulative effect of a change in
accounting principle in the first quarter of 2002, the loss was
$29 million.
"These financial results reflect the continued downturn in many
of our markets that began in the second half of 2000. However, I
remain confident that we are providing the products that are
right for our customers and that position us well in the
marketplace," said Tim Solso, Chairman and Chief Executive
Officer. "As we gain production efficiencies with our new
products and as the markets recover, we will see our financial
returns improve."
The Company normally experiences seasonal weakness in the first
quarter, with March being the strongest month. As a result of
global uncertainty, normal gains in March were not realized.
However, the Company expects to see increased earnings
throughout the remainder of the year.
A breakdown of results by business units, as well as a number of
operational successes in the quarter, are detailed below.
Engine Business
Total Sales for the Engine Business in the first quarter were
$816 million, a 5 percent increase from sales of $776 million a
year ago. Revenues in automotive markets were 13 percent higher
than the first quarter last year, primarily due to increases in
light-duty automotive sales. Overall revenue from industrial
markets was down 10 percent year-over-year, with softness across
most segments.
The Engine Business is experiencing a very successful launch of
the Company's new emissions-compliant products. This complete
line of new heavy-duty engines is performing well for our
customers and end users. More than 8,000 engines have been
shipped and order rates continue to improve. The Cummins turbo
diesel engine for the award-winning Dodge Ram pickup is also
performing well and continues to have strong acceptance in the
marketplace. Engine shipments to DaimlerChrysler for the Dodge
Ram were up 12,000 units, an increase of 60 percent from the
first quarter of last year, resulting from the launch of
Chrysler's new model pickup.
Power Generation
Sales in the Power Generation Business for the first quarter
were $267 million, down 6 percent from the first quarter of
2002.
In North America, revenues were down 9 percent compared to a
year ago, with continued weak demand in the commercial generator
set business. This decrease was partially offset by a 4 percent
increase in recreational vehicle and marine business revenue
compared to the first quarter of 2002. Outside North America,
revenues decreased 4 percent in total, with decreases in Latin
America and parts of Asia partially offset by increases in India
and Australia.
Filtration and Other
Revenues for the Filtration and Other segment were $254 million
for the quarter, an 11 percent increase compared to the first
quarter of 2002. This reflects higher Filtration Business sales,
with some improvement in demand as well as increased market
penetration.
The Filtration Business has continued to make progress in
securing long-term supply agreements with major Original
Equipment Manufacturers to achieve future growth. The Fleetguard
Emission Solutions division is also providing profitable growth
as it positions itself as the leader in the growing segment of
aftertreatment technology.
International Distributor
Sales for the International Distributor Business were $136
million in the quarter, an increase of 10 percent compared to
sales of $124 million dollars last year, with modest improvement
across most regions. The International Distributor Business
delivered strong results, despite a seasonally weak quarter.
The Filtration and International Distributor Business Units
continue to generate increasing profits and solid growth in
revenue. These businesses are more stable, less cyclical and
less capital intensive than our other businesses.
Guidance
In light of the current market conditions and first-quarter
performance, guidance is being lowered for the year to $1.20 to
$1.40 per share. Cummins expects second quarter results to be a
profit in the range of $.10 to $.20 cents per share. Cash flow
guidance for 2003 remains at around $70 million dollars aided by
lower capital spending and working capital. The Company expects
to generate sufficient cash to fund the dividend and provide
modest debt reduction in 2003.
"We remain confident that we have taken the right actions to
position us for success going forward. We will continue to
tightly manage spending and take additional actions where
needed," said Solso. "From the depressed market conditions we
are operating in today, the long term outlook remains very
promising. We believe the worst is behind us, and we continue to
be positioned for the upturn as a result of the two and a half
years of relentless cost reduction."
Accounts Payable Adjustment
On April 14th, the Company also announced that it will restate
prior period financial statements. The restatement relates to
the previously announced need for an accounts payable adjustment
primarily associated with the implementation of a new enterprise
resource planning system in one of its plants. This restatement
will require a re-audit of the 2000 and 2001 financial
statements by the Company's new auditors,
PricewaterhouseCoopers, LLP (PwC) since Arthur Andersen, LLP was
Cummins auditors for those periods and is no longer providing
auditing services.
Cummins will file its 2002 Form 10-K as soon as practicable
following the finalization of the re-audit. The Company also
intends to release unaudited financial statements for 2002. The
2000 and 2001 financial statements, as previously reported, are
subject to change as a result of the re-audit.
Cummins Inc., a global power leader, is a corporation of
complementary business units that design, manufacture,
distribute and service engines and related technologies,
including fuel systems, controls, air handling, filtration,
emission solutions and electrical power generation systems.
Headquartered in Columbus, Indiana, (USA) Cummins serves its
customers through more than 500 company-owned and independent
distributor locations in 131 countries and territories. With
23,700 employees worldwide, Cummins reported sales of $5.9
billion in 2002. Visit http://www.cummins.comfor more
information on the Company.
* * *
As previously reported in the November 11, 2002 issue of the
Troubled Company Reporter, Fitch Ratings downgraded the senior
unsecured notes of Cummins Inc., to 'BB-' from 'BB+', assigned a
rating of 'BB-' to the $200 million in new senior unsecured
notes being issued, and assigned a rating of 'BB+' to the newly
established $385 million secured revolving credit agreement. The
company's mandatorily redeemable convertible preferred
securities have also been downgraded to 'B+' from 'BB-'. The
downgrades reflect persistently weak end markets, longer term
concerns related to the company's competitive position and
profitability, weak credit measures, increasing pension
obligations and the granting of security to the company's
revolving credit lenders (resulting in the subordination of the
unsecured notes and preferred securities). The Rating Outlook
remains Negative.
CYBEX INT'L: Dec. 31 Working Capital Deficit Balloons to $21MM
--------------------------------------------------------------
Cybex International, Inc., a New York corporation, is a leading
manufacturer of exercise equipment which develops, manufactures
and markets premium performance, professional quality strength
and cardiovascular fitness equipment products for the commercial
and consumer markets. Cybex is comprised of three formerly
independent companies, Cybex, Trotter Inc., and Tectrix Fitness
Equipment, Inc. The Company also has a wholly-owned finance
subsidiary, Cybex Capital Corp., which arranges equipment leases
and other financings for the Company's products, primarily to
its commercial domestic customer base. The Company operates in
one business segment.
In December 2000, Cybex announced a restructuring plan designed
to streamline operations, improve efficiency and reduce costs.
This restructuring plan included eliminating about 26% of Cybex'
workforce; a realignment (in combination with the resignation of
senior executives in the fourth quarter 2000) in management
responsibilities; changes in Cybex' dealer standards; changes in
Cybex' service, credit and warranty policies; and a reassessment
of the carrying value of certain of its assets.
Cybex' net sales decreased $3,695,000, or 4%, to $81,527,000 in
2002 compared with a $40,071,000, or 32% decrease in 2001. The
decrease in 2002 was attributable to a decrease in sales of the
Company's strength training products of $5,244,000, or 12%, to
$40,054,000, partially offset by increased sales of
cardiovascular products of $835,000, or 3%, to $30,719,000,
increased parts sales of $603,000, or 10%, to $6,296,000 and
increased freight revenue of $111,000, or 3%, to $4,458,000. The
decline in strength
training product sales in 2002 was partially due to a transition
from an old line of equipment to a new line which was not
completed until 2003. The increase in sales of cardiovascular
products is due to the introduction of the ArcTrainer, a new
product category with 2002 sales of $5,887,000.
The decrease in net sales in 2001 was attributable to a decrease
in demand of the Company's cardiovascular products of
$21,700,000, or 39%, to $33,800,000, a decrease in the sales of
strength training products of $16,300,000, or 26%, to
$47,100,000 and decreased freight revenue of $2,100,000, or 33%,
to $4,300,000. The decrease in sales in 2001 was primarily
related to a stricter credit policy, reduced warranty and
discount policies adopted in the fourth quarter of 2000 and
economic conditions, in general and in the fitness industry.
Sales outside the U.S. and Canada represented 26%, 27% and 21%
of consolidated net sales in 2002, 2001 and 2000, respectively.
Gross margin was 36% in 2002, compared with 36% in 2001 and 34%
in 2000. Gross margin in 2002 was comparable to 2001. Gross
margin in 2001 increased by 2% when compared to 2000. Strength
products margins increased by .4% due to lower steel costs and
by .4% for labor efficiences. These increases were offset by
lower cardiovascular product margins due primarily to higher
material costs of .3% and higher discounts on discontinued
treadmills of .4% in preparation for the newer treadmill models.
Margins for both product lines were increased by reduced freight
of $1,800,000, which improved margins by 1.2%, and warranty
costs of $2,606,000, which improved margins by 1.5%, because of
changes in Company policies.
Selling, general and administrative expenses, including bad debt
expense increased by $1,201,000, or 5%, in 2002 to $26,435,000
compared with a decrease of $21,136,000, or 46%, in 2001. As a
percentage of net sales, these expenses were 32%, 30% and 37% in
2002, 2001 and 2000, respectively. The 2002 increase in selling,
general and administrative expenses is predominantly due to a
$854,000 increase in marketing and selling costs including a
full year of costs associated with the establishment of a direct
sales organization in the United Kingdom. In addition, product
development costs increased $159,000 and the net cost of
employee benefits increased $440,000. Goodwill amortization of
$496,000 was included in the 2001 selling, general and
administrative expenses. Amortization of goodwill was
discontinued effective January 1, 2002 upon the adoption of SFAS
No. 142.
Salaries and employee costs were reduced in 2001 by $7,300,000
as a result of the December 2000 restructuring plan. Marketing
and selling costs were reduced by $5,400,000 due to reduced
advertising and promotion costs in 2001. In 2001, the provision
for doubtful accounts decreased by $4,750,000 due to a tighter
credit policy, improved collection efforts and two unusual
charges in 2000 relating to the termination of distributors.
Other administrative costs decreased by $1,700,000 in 2001 in
the areas of depreciation, amortization, telephone and IT
consulting. Research and development costs decreased by
$1,200,000 primarily due to the closing of the Irvine California
operations. Selling, general and administrative expenses in 2001
were also positively impacted by a reversal of a $450,000
reserve established in 2000 related to a product issue that was
ultimately resolved favorably. In December 2001, the Company
recorded litigation charges of $2,200,000 for a legal reserve
primarily related to the jury award in the Kirila litigation,
which the Company intends to appeal.
Net interest and other expense decreased by $400,000, or 11%, in
2002 to $3,393,000 compared to an increase of $970,000, or 34%,
in 2001. The decrease in 2002 was due to lower borrowing levels
and the positive change in the market value of an interest rate
swap. The increase in 2001 was primarily due to increased
amortization of deferred financing costs associated with the
Credit Agreement and interest on a settlement of a dispute
related to a licensing agreement. In 2001, the Company reported
other expense relating to the negative impact of the market
value of an interest rate swap agreement.
The Company's tax provision for 2002 includes a charge of
$20,773,000 to establish a valuation reserve for deferred income
taxes in accordance with SFAS No. 109. Deferred tax assets of
$20,773,000 are available to the Company to offset future tax
liabilities. Management will re-evaluate the need for the
valuation reserve in future periods. The Company is not expected
to recognize a significant tax provision until after a
substantial portion of the net operating losses are utilized.
The effective tax rates were 7% and 36% for 2001 and 2000,
respectively. The tax rates differ from statutory rates due to
the impact of permanent differences primarily related to non-
deductible goodwill amortization.
As of December 31, 2002, the Company had negative working
capital of $21,439,000, compared to $3,735,000 of negative
working capital at December 31, 2001. Working capital is
negatively impacted by the classification as a current liability
of all amounts due under the Company's Credit Agreement due to
the maturity date of December 31, 2003 (resulting in a working
capital decrease of $13,542,000 from 2001 to 2002). The
remaining change in working capital from 2001 to 2002 is
primarily due to establishing a valuation allowance for
deferred income taxes resulting in a working capital decrease of
$5,269,000. Accrued expenses decreased by $2,928,000 offset by
an increase in accounts payable of $2,342,000, reflecting slower
payments to vendors. As indicated above, the Company's debt-to-
equity ratio was negatively impacted by the establishment of a
$20,773,000 valuation allowance for deferred income taxes during
the second quarter of 2002 which had the effect of significantly
reducing equity.
For the year ended December 31, 2002, cash provided by operating
activities was $1,935,000 compared to cash provided by operating
activities of $7,145,000 for the year ended December 31, 2001.
The decrease in cash provided by operating activities from 2001
to 2002 was primarily due to decreases of accounts receivable
and inventory of $8,211,000 in 2001 compared to 2000. Accounts
receivable and inventory increased a total of $598,000 in 2002,
although receivable days sales outstanding decreased and
inventory turns increased from 2001. The total of accounts
payable and accrued expenses decreased $1,854,000 in 2002 from
2001 and $4,210,000 in 2001 from 2000. In summary, the net
change in accounts receivable, inventory, accounts payable and
accrued expenses resulted in a use of cash of $2,452,000 in 2002
compared to a $4,001,000 source of cash in 2001.
Cash used in investing activities of $1,290,000 in 2002 consists
primarily of purchases of manufacturing tooling and equipment of
$624,000 and computer hardware and infrastructure of $498,000.
Cash used in investing activities of $2,176,000 in 2001
primarily consists of purchases of manufacturing tooling and
equipment of $1,200,000 and computer hardware and infrastructure
of $575,000 relating to the Company's ERP System. Projected
capital expenditures for 2003 relate mostly to manufacturing
equipment and computer hardware and infrastructure and are
expected to be comparable to 2001 levels.
For the year ended December 31, 2002, cash used in financing
activities of $1,744,000 consists primarily of term debt
payments of $4,063,000, offset by borrowings of $1,583,000 under
the revolver and $1,000,000 under a subordinated loan from a
related party. For the year ended December 31, 2001, cash used
in financing activities of $7,008,000 consists primarily of
payments on the revolver debt of $3,882,000, and payments of
$2,870,000 under term debt arrangements.
At December 31, 2002, there was outstanding under the Credit
Agreement in the amount of $17,159,000 in term loans, $8,951,000
in revolving loans and $1,947,000 in letters of credit. On
December 21, 2001, the Credit Agreement was amended and restated
in full. The Restated Credit Agreement, among other things,
extended the maturity date of the facility to December 31, 2003,
restructured the indebtedness, reduced the monthly principal
payments, amended the financial covenants, and waived all then
existing defaults. The Restated Credit Agreement provided for
term loans with an initial balance of $19,167,000, a revolving
loan availability equal to the lesser of $11,000,000 or an
amount determined by reference to a borrowing base, and a letter
of credit facility of up to $4,459,000. In February 2002, a
letter of credit under the letter of credit facility was
utilized to retire an outstanding promissory note of $2,006,000.
Pursuant to the terms of the Restated Credit Agreement, the
letter of credit facility was reduced by $2,006,000 and replaced
by an additional term loan in the same amount. After the end of
the second quarter of 2002, the Company and the banks entered
into the First Amendment to the Amended and Restated Credit
Agreement), which amends the Restated Credit Agreement in
certain respects, including revising the financial covenants,
waiving any then outstanding defaults and deferring principal
payments otherwise due July 1, 2002. In connection with the
First Amendment, UM Holdings, Ltd., a principal stockholder of
the Company, lent $1,000,000 on a subordinated basis that
matures on January 1, 2004, or earlier if the Credit Agreement
is repaid. During the first quarter of 2003, UM Holdings, Ltd.
provided an additional $2,400,000 in subordinated loans. On
September 30, 2002, the Company and the banks entered into the
Second Amendment, which amends the Restated Agreement in certain
respects, including revising the financial covenants through
December 31, 2002 and increasing the borrowing base under the
revolver, from the date of the Second Amendment until December
31, 2002, by an overadvance of $1,100,000, which was guaranteed
by UM Holdings, Ltd. During the fourth quarter of 2002, the
banks provided a waiver of a financial covenant default as of
September 30, 2002. While at December 31, 2002, the Company was
in compliance with all terms of the Credit Agreement, it may not
have complied with all financial covenants as of the end of the
first quarter of 2003.
DECRANE AIRCRAFT: Financial Concerns Spur S&P to Cut Rating to B
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings,
including lowering the corporate credit rating to 'B' from 'B+',
on DeCrane Aircraft Holdings Inc. The ratings on the El Segundo,
California-based commercial and corporate aircraft supplier
remain on CreditWatch with negative implications, where they
were placed on Dec. 10, 2002.
"The downgrade reflects DeCrane's deteriorating financial
profile due to the weak commercial aerospace and corporate jet
markets and tight financial covenants in its amended credit
facility," said Standard & Poor's credit analyst Christopher
DeNicolo.
DeCrane is the largest independent provider of a full line of
interior cabin products for high-end business jets. In the wake
of the events of Sept. 11, 2001, civil aviation's intermediate-
term business prospects deteriorated significantly in terms of
orders for new planes and aftermarket demand for products and
services. Initially, sales and deliveries of corporate jets held
up relatively well, but have since declined significantly. A
number of major business jet manufacturers have slowed or even
stopped production of certain models. Recovery is not expected
until 2005. Cost-reduction efforts enabled DeCrane to improve
operating margins in 2002 despite an almost 20% decline in
revenue. However, high interest payments and restructuring
charges resulted in a net loss for the year.
Expected weak results in 2003 would have likely resulted in
violation of then existing financial covenants in the company's
secured credit facility. In order to improve its capital
structure and bolster near-term liquidity, DeCrane received an
amendment to the covenants from its lenders and has signed a
definitive agreement to sell its Specialty Avionics Group to
Odyssey Investment Partners LLC, a private equity firm, for $140
million cash. The estimated $132 million proceeds are to be used
to pay down the company's secured credit facility. Although
DeCrane's absolute level of debt will decline significantly, the
loss of earnings and cash flow from SAG, in combination with
expected weak performance at the remaining businesses, will
likely result in weaker credit protection measures in 2003. The
sale of SAG will reduce both the size and diversity of DeCrane's
revenues base, but will eliminate most exposure to the very
depressed commercial aircraft market and allow the company to
focus on its core corporate aircraft related operations.
The SAG sale is expected to close by mid-May, but a failure to
close it before June 30, 2003, will constitute an event of
default under the amended credit facility. At the time of the
closing, if no material adverse change in the remaining business
occurs, ratings will likely be affirmed, removed from
CreditWatch, and assigned a negative outlook.
DELTA AIR LINES: First Quarter Net Loss Widens to $466 Million
--------------------------------------------------------------
Delta Air Lines (NYSE: DAL) reported a net loss of $466 million
and a loss per share of $3.81 for the March 2003 quarter. This
is compared to a net loss of $397 million and loss per share of
$3.25 for the March 2002 quarter. Excluding unusual items
described below, the March 2003 quarter net loss and loss per
share were $426 million and $3.49, respectively. The First Call
consensus estimate for the quarter was a loss per share of
$3.51, excluding unusual items. In the March 2002 quarter, Delta
had a net loss of $354 million and loss per share of $2.90,
excluding unusual items described below.
Financial Performance
"Even as we face the greatest financial crisis in Delta's
history, which is deepened by the impact of military action in
Iraq, Delta continues to successfully reduce costs, preserve
liquidity, and implement the strategic elements of our long term
plan for survival," said Leo F. Mullin, chairman and chief
executive officer. "This plan has allowed us to end the March
quarter with $2.5 billion in cash and short-term liquidity. I
remain confident that we are taking the right steps to stabilize
and strengthen our company while meeting the needs of our
customers."
First quarter operating revenues increased 1.7 percent and
passenger unit revenues increased 3.5 percent, compared to the
March 2002 quarter. However, Delta estimates that the negative
impact of the military action in Iraq and the period leading up
to it was approximately $125 million in operating revenue for
the March 2003 quarter.
Operating expenses for the March 2003 quarter increased 4.3
percent, primarily as a result of higher fuel costs and pension
expenses. Unit costs increased 5.9 percent as compared to the
March 2002 quarter and on a fuel price neutralized basis(1),
unit costs increased 0.9 percent. The increase in total unit
costs was primarily driven by both higher fuel prices and short-
term capacity reductions resulting from the Iraq conflict.
Increases in fuel costs drove unit costs up 5.0 percent, while
the war related capacity reductions caused an additional 1.4
percent year-over-year increase. Absent these items, unit costs
would have improved from the prior year.
Delta had negative cash flow from operations for the March 2003
quarter of $165 million. Cash flow from operations includes net
tax refunds of $388 million received during the quarter, as well
as a $76 million contribution to its broad-based employee
pension plan, the Delta Family-Care Retirement Plan. Delta chose
to pre-fund and increase its 2003 contribution. As a result, the
Plan now exceeds certain ERISA funding criteria.
The load factor for the March 2003 quarter was 68.9 percent,
which was flat as compared to the March 2002 quarter. System
capacity was down 1.6 percent and mainline capacity was down 4.1
percent on a year-over-year basis.
"Delta's ability to respond rapidly to changes in the
marketplace is critical as we manage through these difficult
times," said M. Michele Burns, executive vice president and
chief financial officer. "Most recently, we took quick action to
reduce capacity, increase our fuel hedging, and preserve our
liquidity position in order to mitigate the negative impact of
military action in Iraq. In the face of the current economic and
geopolitical environments, Delta has recognized potential risks
to our operational and financial stability and continues to make
the right decisions necessary to reduce the impact of these
risks."
Delta responded to worsening industry-wide passenger demand
resulting from the military action in Iraq by reducing capacity.
Delta reduced transatlantic capacity beginning in February and
fully implemented a mainline system-wide 12 percent reduction
from planned capacity in April 2003. Delta reduced frequencies
but did not discontinue service to any domestic cities. Delta
has the ability to coordinate its schedule with those of its
SkyTeam partners through anti-trust immunity. As such, Delta was
able to preserve cash flow by suspending some transatlantic
flights, while continuing to provide customers with service to
those destinations via SkyTeam and its other codeshare partners.
In the March 2003 quarter, Delta's fuel hedging program reduced
costs by $69 million, pretax. Delta hedged 80 percent of its jet
fuel requirements in the quarter at an average price of $0.79
per gallon, excluding fuel taxes. Delta's total fuel price for
the March 2003 quarter was $0.87 per gallon, a savings of
approximately $0.10 per gallon below spot prices. For the June
2003 quarter, Delta has hedged 88 percent of its expected jet
fuel requirements at an average price of $0.78 per gallon. For
the September 2003 quarter, Delta has hedged 54 percent of its
expected jet fuel requirements at an average price of $0.79 per
gallon. For the full year 2003, Delta has hedged 65 percent of
its expected jet fuel requirements at an average price of $0.78
per gallon. All hedged prices outlined above exclude fuel taxes.
Delta preserved its liquidity and financial flexibility in the
March 2003 quarter. As of March 31, 2003, Delta had cash and
short-term liquidity totaling $2.5 billion, of which $1.9
billion is unrestricted cash and cash equivalents, $153 million
is restricted cash and $500 million is short-term liquidity
available under an existing credit agreement. Delta's cash
balance reflects $392 million in proceeds from the sale of
insured enhanced equipment trust certificates in January. On
March 31, 2003, Delta had unencumbered aircraft with an
estimated base value of approximately $3.1 billion of which $800
million is eligible under Section 1110 of the U.S. Bankruptcy
Code.
Financing and Liquidity Subsequent to March 31, 2003
Delta continues to aggressively pursue opportunities to protect
its liquidity position. Since March 31, Delta has arranged $900
million in incremental financing to replace facilities that
expire this year. Delta has entered into a series of
transactions with third parties that includes approximately $350
million of new long-term debt and a commitment relating to a
five-year $409 million letter of credit facility to replace the
existing facility due to expire in June 2003. These transactions
are collateralized with a large portion of Delta's mainline
spare parts and spare engine inventory, as well as Section 1110
eligible aircraft, most of which were previously backing Delta's
$500 million undrawn credit facility due to expire in August
2003. As a result of these transactions, that facility was
terminated in April, reducing Delta's short-term liquidity by
$500 million. These transactions will significantly reduce
maturities for the remainder of 2003. In addition, Delta has
entered into a separate commitment for $140 million in
financing, subject to the completion of definitive documents.
Delta also had a $250 million receivables securitization
agreement that terminated at the end of March. Because of this,
Delta repurchased the funded receivables totaling $250 million
on April 2.
In the June quarter, Delta expects to receive reimbursements of
approximately $400 million for security fees and cockpit door
reinforcement as part of the aviation reimbursement package of
the War Supplemental Bill. The Bill also suspends the previously
mandated passenger and security segment fees from June through
September 2003.
In March, Delta entered into an agreement to sell its interest
in Worldspan. The transaction is expected to close in mid-2003,
subject to financing, government and regulatory approvals and
other conditions.
"It is clear that, in spite of the airline industry's current
economic crisis, Delta has the ability to meet its financial
obligations," said Burns. "Although the collective benefits of
recent financings, government reimbursements, and the pending
sale of Worldspan are yet to be fully realized, they do provide
Delta with the momentum we need to navigate through this
challenging environment."
Delta Moves Forward with Cost Saving
and Revenue Enhancing Initiatives
Delta continues to fundamentally transform the company. As part
of its plan, Delta announced a broad-based profit improvement
program in 2002 that will reduce non-fuel unit costs by 15
percent by the end of 2005.
With this week's maiden flight of Song, Delta renewed its stake
in the low-fare marketplace by launching a wholly owned
subsidiary with operational and financial efficiencies designed
to effectively compete with other low-cost carriers. By focusing
on increased productivity and the efficient use of Delta's
existing assets, Song's unit costs are expected to be
approximately 20 percent below the unit costs of Delta's
mainline Boeing 757s. Additionally, Delta will study the
efficiencies produced through Song to determine their viability
for incorporation into Delta's mainline operations.
In addition to cost savings measures, Delta's profit improvement
initiatives also are driving revenue enhancements. Most
significant is the recently announced 10-year marketing
agreement between Delta, Northwest Airlines and Continental
Airlines. When fully implemented, Delta expects this agreement
to provide revenue benefits of approximately $150 million to
$200 million per year. The codeshare will provide customers with
seamless service to thousands of new markets, increased
frequency, and broader access to low- priced seat inventory.
Delta's customers already benefit from the airport
transformation initiatives, designed to reduce the airport
hassle factor and enhance customer service across the Delta
system. More than 10 million customers have used Delta's self-
service kiosks to check in at airports since January 2002. In
2003, Delta will increase the number of kiosks to more than 800
in 81 airports. Additionally, more than 440 Delta Direct phones
will be installed at ticket counters and gates this year,
providing customers another resource for quick and timely
support while traveling.
Delta continues efforts this year to streamline and standardize
its fleet in order to drive both cost and operational
efficiencies. On April 8, Delta retired its last B727 aircraft.
In 2003, Delta will remove 12 MD-11 aircraft from service and
defer all mainline aircraft deliveries. With the introduction of
the 2003 spring schedule, Delta is optimizing its Dallas/Fort
Worth hub operation to better match capacity with demand. By
down-gauging the aircraft that fly from DFW, Delta is reducing
capacity by 10 percent, while achieving cost efficiencies and
increasing the number of flights in certain markets.
Since September 2001, Delta has reduced its mainline workforce
by 18 percent. This includes a 17 percent reduction in
management and administrative positions, including officers and
directors. During the March 2003 quarter, the company also
announced that more than 1,000 employees accepted 60-day,
voluntary, unpaid leaves of absence. Additionally, the drop in
demand for travel caused by military action in Iraq will require
Delta to furlough a total of 200 pilots during April and May
2003.
Explanation of Unusual Items
March 2003 Quarter
In the March 2003 quarter, Delta recorded charges for pension
benefits related to workforce reductions, a loss on an
extinguishment of debt and derivative and hedging activities
accounted for under Statement of Financial Accounting Standard
133. These items totaled $40 million, net of tax, and are
further described below. In addition to net loss as reported
under Generally Accepted Accounting Principles in the United
States, net loss excluding these items is included on the face
of the attached Consolidated Statements of Operations. Delta
believes this is helpful to investors to evaluate recurring
operational performance because (1) the pension benefits charge
is related to last year's early retirement program; (2) the
charge related to the extinguishment of the Employee Stock
Ownership Plan Notes is not representative of normal operations;
and (3) the SFAS 133 charge reflects volatility in earnings
driven by changes in the market which are beyond the control of
management.
Items excluded are:
* A $27 million charge, net of tax, for the cost of pension
benefits related to the workforce reduction programs announced
in October 2002.
* A $9 million charge, net of tax, related to the purchase of a
portion of outstanding ESOP Notes.
* A $4 million charge, net of tax, for fair value adjustments of
fuel derivative instruments in accordance with SFAS 133.
March 2002 Quarter
In the March 2002 quarter, Delta recorded charges related to
surplus pilots and grounded aircraft and SFAS 133 derivatives.
These items totaled $43 million, net of tax, and are further
described below. In addition to net loss as reported under GAAP,
Delta also discloses net loss excluding these items because it
believes this information is helpful to investors to evaluate
recurring operational performance.
Items excluded are:
* A $25 million charge, net of tax, related to the temporary
carrying costs of surplus pilots and grounded aircraft as well
as re-qualification training and relocation costs for pilots
resulting from capacity reductions implemented in November
2001.
* An $18 million charge, net of tax, for fair value adjustments
of certain equity rights in other companies and fuel
derivative instruments in accordance with SFAS 133.
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, go to http://www.delta.com
EAGLE FOOD: Wants to Obtain $40 Million Financing from Congress
---------------------------------------------------------------
Eagle Food Centers, Inc., and its debtor-affiliates ask for
authority from the U.S. Bankruptcy Court for the Northern
District of Illinois to enter into a DIP Financing Arrangement
with Congress Financial Corporation. Congress will continue to
financing post-petition operations and its loans, in turn, will
be secured by additional security interests and liens.
As of the Petition Date, the Debtors owed up to an aggregate $26
million under a Prepetition Credit Agreement with Congress.
The Debtors have determined that the DIP Credit Agreement and
continued use of the Cash Collateral are necessary for the
Company to operate in chapter 11 and to achieve a successful
reorganization. The Debtors' business depends on maintaining
vendor and customer confidence. To maintain that confidence,
the Debtors must be in a position to purchase products and keep
their stores well maintained and stocked. By having immediate
access to additional financing in the form of the Postpetition
Financing Facility, the Debtors will be able to maintain these
critical relationships and respond to any changes in trade terms
and cash receipts.
The Debtors desire to borrow from Congress up to an aggregate
amount of $40 million for working capital and general corporate
purposes of the Debtors. Congress and the Debtors agree that
the loan will mature on January 4, 2004 or 270 days from the
Petition Date. The Debtors further asked the court to afford
superpriority status under Bankruptcy Code section 364(c)(1). To
secure payment and performance of all obligations, the Debtors
grant Congress a continuing security interest in, a lien upon,
and a right of set off against all estate assets.
The Debtors will pay to Congress:
i) a monthly servicing fee of $5,000
ii) a monthly unused line fee of 0.25% per annum calculated
upon the amount by which the Maximum Credit exceeds the
average daily principal balance of the Outstanding
Revolving Loans and Letter of Credit Accommodation; and
iii) a commitment/closing fee of $225,000.
Eagle Food Centers Inc., a leading regional supermarket chain
headquartered in Milan, Illinois, filed for chapter 11
protection on April 7, 2003 (Bankr. N.D. Ill. Case No.
03-15299). George N. Panagakis Esq., at Skadden Arps Slate
Meagher & Flom represents the Debtors in their restructuring
efforts. As of November 2, 2002, the Debtors listed
$180,208,000 in assets and $177,440,000 in debts.
EATERIES INC: Fails to Maintain Nasdaq Min. Listing Requirements
----------------------------------------------------------------
As a result of its decisions to dispose of its Garcia's Mexican
Restaurants and write off nearly $1,800,000 in goodwill and
$3,800,000 in deferred tax assets, Eateries, Inc.,(Nasdaq: EATS)
does not meet the current requirements for The Nasdaq SmallCap
Market listing. Eateries, Inc. received notification from Nasdaq
that it is not in compliance with Marketplace Rule 4310(C)(B),
which requires the Company to have a minimum of $2,500,000 in
stockholders' equity, $35,000,000 market value of listed
securities or $500,000 of net income from continuing operations
for the most recently completed fiscal year or two of the three
most recently completed fiscal years. Nasdaq Staff is reviewing
the Company's eligibility for continued listing on The Nasdaq
SmallCap Market.
"Ironically, the Garcia's sale has put the Company in its
strongest financial position since 1997. Proceeds of the sale
were used to reduce short and long term debt. We are focused on
the expansion of Company and franchised Garfield's Restaurants.
Eateries has provided a specific plan to Nasdaq under which it
could achieve and sustain compliance with all The Nasdaq
SmallCap Market listing requirements. However, given the very
volatile condition of the stock market, management is discussing
all of its options," said Eateries, Inc. CEO Vincent F. Orza,
Jr.
Eateries, Inc. owns, operates, franchises and licenses 63
restaurants under the names of Garfield's Restaurant and Pub,
Garcia's Mexican Restaurants and Pepperoni Grill and Italian
Bistro Restaurants in 20 states. For additional information,
contact Vincent F. Orza, Jr. or Bradley L. Grow at 1220 S. Santa
Fe Ave., Edmond, Oklahoma, 73003 or call 405.705.5000 or FAX:
405.705.5001.
Eateries Inc.'s Year-End 2002 balance sheet shows a working
capital deficit of about $2.7 million, while its total
shareholders' equity further dwindled to about $960,000 from
about $7 million recorded a year ago.
EDUCATE OPERATING: S&P Assigns B+ Loan & Corp. Credit Ratings
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'B+' rating to
Educate Operating Company LLC's $130 million senior secured
credit facility. The facility is guaranteed by EOC's parent
company, Educate Inc.
At the same time, Standard & Poor's assigned its 'B+' corporate
credit rating to Educate. The outlook is stable. Baltimore, Md.-
based Educate had pro forma total debt of $165 million as of
Dec. 31, 2002. Educate is a newly formed entity that will
acquire Sylvan Learning Systems Inc.'s retail and institutional
K-12 tutoring businesses.
The ratings reflect the financial risk resulting from the
pending $284 million leveraged purchase of Sylvan's K-12
operations by Apollo Management L.P. and Sylvan management. "The
ratings are also based on Educate's competitive position in the
supplemental educational service niche and fairly stable
operating performance," said Standard & Poor's credit analyst
Hal Diamond.
Educate will retain the rights to the Sylvan brand name. The
Sylvan learning center business, accounting for 73% of EBITDA,
provides individualized after-school instruction to grade school
through high school students. Sylvan is the largest company and
has the best-known brand within this fragmented sector, with an
estimated market share of 13%.
ENCOMPASS SERVICES: Court Approves Amended Disclosure Statement
---------------------------------------------------------------
Encompass Services Corporation and its debtor-affiliates filed
their First Amended Plan and Disclosure Statement on April 5,
2003. At the April 9, 2003 hearing, several objections and
arguments were raised by various parties-in-interest. Thus, the
Debtors, on April 11, 2003, filed their Second Amended Plan and
Disclosure Statement to reflect the conforming additions,
changes, corrections and deletions necessary to comport with the
record of the April 9 Hearing and the agreements reached with
certain parties.
Upon review, Judge Greendyke finds that Encompass' Second
Amended Disclosure Statement contains adequate information
within the meaning of Section 1125 of the Bankruptcy Code.
Accordingly, the Court approved the Debtors' Second Amended
Disclosure Statement.
Objections to the Disclosure Statement were withdrawn,
overruled, or cured.
The Court will consider confirmation of the Debtors' Second
Amended Plan on May 21, 2003. (Encompass Bankruptcy News, Issue
No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900)
ENRON CORP: EPMI Sues GPU Service, et al., to Recoup $27 Million
----------------------------------------------------------------
On September 15, 1994, Enron Power Marketing Inc. entered into a
base agreement in the form of a letter agreement with GPU
Service Corporation, on behalf of and as agent for Pennsylvania
Electric Company, Metropolitan Edison Company and Jersey Central
Power and Light Company. The Letter Agreement established that
GPU had an option to purchase electric power or capacity from
EPMI throughout the term of the agreement.
Melanie Gray, Esq., at Weil, Gotshal & Manges LLP, in New York,
relates that the Letter Agreement provided that EPMI could
notify GPU that certain amounts of electric energy or capacity
were available for purchase and delivery on future dates. Upon
notification, EPMI would provide GPU with proposed terms and
conditions governing the sale of electric energy or capacity,
which included, among other things, price, quantity and delivery
dated. In the event GPU agreed to purchase under EPMI's
proposed terms and conditions, a separate writing signed by both
parties would memorialize the agreement.
According to Ms. Gray, the Letter Agreement remained in full
force and effect for over seven years until GPU sent a letter to
EPMI purporting to terminate the Letter Agreement upon 30 days
notice. The termination date of the Letter Agreement was
January 21, 2002. Without legal or factual justification, GPU's
December 21, 2001 letter also purported, postpetition, to
immediately terminate numerous Transactions entered into
pursuant to the terms of the Letter Agreement, almost all of
which were pending future delivery at the time of the purported
termination.
Ms. Gray points out that the Letter Agreement contains no
provision that would allow either party to terminate the Letter
Agreement or the attendant Transactions in the event of
bankruptcy. However, GPU's December 21, 2001 letter alleged
these reasons in support of its purported termination of the
Letter Agreement, which included EPMI's bankruptcy filing:
(1) Enron appears to have been the victim of massive fraud
and mismanagement;
(2) Enron is insolvent and unable to pay its debts as they
become due in the ordinary course of business;
(3) Enron filed for Chapter 11 bankruptcy protection;
(4) Enron's financial condition changed dramatically for the
worse in the weeks preceding the bankruptcy filing;
(5) Enron failed to deliver power to GPU during the week of
December 17, 2001;
(6) Many counterparties in other transactions have
terminated contracts with Enron recently;
(7) GPU believes that Enron will be unable to deliver power
in the future; and
(8) GPU believes that Enron will not continue in business as
a going concern.
The duration of the Letter Agreement was indefinite and could be
terminated by either party upon 30 days advance written notice.
However, "the express language of the Letter Agreement provides
that in the event the agreement itself is terminated, any
Transaction entered into prior to the termination would
survive," Ms. Gray emphasizes. Thus, Ms. Gray concludes that
GPU acted in direct contravention of the Parties' contract and
wrongfully attempted to terminate, postpetition, the
Transactions entered into under the Letter Agreement. Along
with the wrongful termination of the Transactions, GPU is
currently withholding monies totaling $21,518,442, exclusive of
interest, due to EPMI, which is property belonging exclusively
to EPMI's estate.
At the time of GPU's purported termination of the Transactions,
EPMI stood ready, willing and able to perform. In fact,
subsequent to GPU's purported termination, EPMI scheduled
electric energy for delivery pursuant to these Transactions: GPU
Contract Nos. P001753, P002369, P002376, P001678, P001907,
P001908 and P001917. But GPU refused to confirm and accept
these deliveries per the terms of each Transaction. Despite
EPMI's repeated attempts to obtain GPU's confirmation of
schedules relating to the deliveries, GPU was unwilling to live
up to the terms of the Letter Agreement and the Transactions.
After numerous attempts to contact the principal that executed
the "termination notice" on GPU's behalf to determine the
appropriate disposition of the Transactions, EPMI informed GPU
in writing on July 18, 2002 that 10 Transactions were still
pending and subject to the Parties' continued performance. In
response, GPU confirmed in a letter dated September 24, 2002,
that ". . . due to the prior termination of the Letter
Agreement, GPU therefore has not and will no longer purchase any
power from Enron."
Notwithstanding GPU's failure to confirm the scheduled
deliveries and representations, Ms. Gray informs the Court that
EPMI scheduled and delivered power to Jersey Central Power and
Light Company on January 15 to 16, 2002, which was confirmed by
GPU. Hence, GPU is indebted to EPMI for receivables totaling
$77,200 for the power delivered to Jersey Central postpetition
under GPU Contract No. P001814.
By this complaint, EPMI asks the Court to:
(a) compel GPU to turnover the proceeds in its possession,
of at least $21,595,642, that stem from the conduct
described in the Complaint, pursuant to Section 542 of
the Bankruptcy Code;
(b) declare that GPU violated the automatic stay provided
for by Section 362 of the Bankruptcy Code by wrongfully
suspending performance postpetition;
(c) award judgment based on breach of contract resulting
from GPU's failure to pay the $77,200, plus allowable
interest, for the value of accounts receivable to EPMI
for postpetition delivery of power during January 2002
under the Letter Agreement;
(d) declare that GPU's purported termination of the
Transactions is invalid;
(e) award judgment based on breach of contract resulting
from GPU's wrongful termination and failure to pay
$21,518,442 plus allowable interest due for the pending
energy Transactions; and
(f) award EPMI its attorneys' fees and other expenses
incurred in this action. (Enron Bankruptcy News, Issue
No. 62; Bankruptcy Creditors' Service, Inc., 609/392-
0900)
DebtTraders reports that Enron Corp.'s 9.875% bonds due 2003
(ENRN03USR3) are trading at about 18 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=ENRN03USR3
for real-time bond pricing.
EXIDE: Unsecured Panel & R2 Investments Want to Probe CSFB
----------------------------------------------------------
The Official Committee of Unsecured Creditors and R2
Investments, LDC -- the holder of $127,292,000 or 42.4% of the
10% Senior Notes and $20,277,000 or 5% of the 2.9% Convertible
Senior Subordinated Notes issued by Exide Technologies and the
Debtors' largest single unsecured creditor -- seeks the Court's
authority to obtain selected documents, deposition testimony,
and other information from the Prepetition Administrative Agent,
Credit Suisse First Boston, concerning the value of the Debtors'
foreign subsidiaries, which are perhaps the Debtors' most
valuable assets, for plan purposes; and to analyze whether
substantive consolidation of these subsidiaries is warranted
under existing law.
David Stratton, Esq., at Pepper Hamilton LLP, in Wilmington,
Delaware, informs the Court that Exide Technologies' non-debtor
foreign subsidiaries accounted for more than half of the Exide
Group's net sales in the fiscal year immediately prior to its
bankruptcy filing and constitute, perhaps, the Debtors' most
significant asset. However, the Debtors have not made them the
subject of these insolvency proceedings and maintain that those
assets and liabilities should be dealt with outside of these
proceedings. By this motion, the Committee and R2 seek narrowly
tailored discovery to determine the value of the foreign
subsidiaries and ascertain whether the unsecured creditors can
equitably be afforded a fair share of that value.
Since the Petition Date, Mr. Stratton relates that the
Committee's professional advisors have attempted to obtain
necessary due diligence regarding the foreign non-debtor
subsidiaries' business operations, capital structure and
corporate structure through informal means. Recently, after
notifying the Debtors that they wish to conduct an examination
pursuant to Rule 2004 of the Federal Rules of Bankruptcy
Procedure in respect to the foreign subsidiaries, the Debtors
agreed to provide this information consensually. R2, the
Committee and the Debtors are presently working out the details
of this consensual production and R2 and the Committee reserve
their rights to file a Rule 2004 examination request in respect
to the Debtors if a consensual arrangement cannot ultimately be
reached. However, the Committee and R2 believe that CSFB may
have additional information relevant to the foreign
subsidiaries. Prior to filing this request, the Committee
attempted to obtain many of the relevant documents from CSFB
consensually but CSFB refused to provide them voluntarily.
Accordingly, the Committee and R2 have no choice but to request
a Court order compelling CSFB's cooperation now -- before plan
negotiations reach a more critical phase.
The Committee and R2 also seek discovery focusing on the
specific issue of whether the non-debtor foreign subsidiaries
should be made parties to the Debtors' Chapter 11 case through
substantive consolidation or otherwise. Since these
subsidiaries and the Debtors appear to have been operated as a
single, financially and operationally integrated enterprise,
many of the factors justifying consolidation exist here.
As detailed in the Claims and Defenses Reports submitted to the
Court in November 2002 by R2 and the Committee, Mr. Stratton
believes that the guarantees, stock pledges and liens granted by
the non-debtor foreign subsidiaries in favor of CSFB and the
Prepetition Banks in the months leading up to the Petition Date
could potentially be avoided if the non-debtor foreign
subsidiaries are consolidated into the Debtors' estates.
Obviously, if these liens or indebtedness were avoided, more
value would be available to the Debtors' estates, and the
general unsecured creditors of Exide Technologies. Similarly,
creditors of the existing Debtors might receive more value under
any plan if the assets and liabilities of the Debtors and the
Foreign Subsidiaries were pooled.
Mr. Stratton tells the Court that the discovery sought focuses
on issues independent from those asserted in the Complaint
brought by R2 and the Committee against CSFB and the Prepetition
Banks. The Complaint focuses on the Prepetition Bank's
inequitable and wrongful conduct, beginning with the risk
investment they made to finance Exide Technologies' ill-fated
acquisition of Pacific Dunlop's GNB Corporation in the fall of
2000 and continuing through their manipulation of the timing of
the Debtors' bankruptcy filing, and their self-interested
efforts to dictate which of Exide Technologies' subsidiaries
were to be made Debtors. The relief sought is the disallowance
or equitable subordination of the Debtors' obligations to CSFB
and the Prepetition Banks and the avoidance of their liens on
the Debtor's assets. However, because the Debtors' foreign
subsidiaries are not parties to these bankruptcy cases, the
Complaint did not challenge either the $261,900,000 owed
directly by the Foreign Subsidiaries to the Prepetition Banks or
the guarantees, stock pledges and liens granted by the non-
debtor foreign subsidiaries securing that indebtedness. (Exide
Bankruptcy News, Issue No. 21; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FEDERAL-MOGUL: Closes OE Lighting Assembly Asset Sale to Decoma
---------------------------------------------------------------
Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ) has
completed the sale of certain original equipment lighting
assembly operations to Decoma International Inc., based in
Concord, Ontario, Canada.
The sale was completed April 14, following approval by the U.S.
Bankruptcy Court on April 2. Federal-Mogul will realize
approximately US$19 million, including the value of inventory
sold to Decoma International and assets retained by Federal-
Mogul.
Decoma International acquired Federal-Mogul's original equipment
lighting manufacturing facility in Matamoros, Mexico; a
distribution center in Brownsville, Texas; and an assembly
operation in Toledo, Ohio. As part of the transaction, Decoma
International will also acquire customer contracts and
supporting manufacturing equipment at the Federal-Mogul lighting
facility in Hampton, Virginia, which will transition to Decoma
International over the next several months. The facilities
produce mainly forward lighting modules for cars and trucks.
Federal-Mogul is a global supplier of automotive components and
sub- systems serving the world's original equipment
manufacturers and the aftermarket. The company utilizes its
engineering and materials expertise, proprietary technology,
manufacturing skill, distribution flexibility and marketing
power to deliver products, brands and services of value to its
customers. Federal-Mogul is focused on the globalization of its
teams, products and processes to bring greater opportunities for
its customers and employees, and value to its constituents.
Headquartered in Southfield, Michigan, Federal-Mogul was founded
in Detroit in 1899 and today employs 47,000 people in 24
countries. For more information on Federal-Mogul, visit the
company's Web site at http://www.federal-mogul.com
FLEMING COMPANIES: Will Restate 2001 & 2002 Financial Statements
----------------------------------------------------------------
Fleming Companies, Inc., will restate its 2001 annual and
quarterly financial statements and 2002 quarterly financial
statements previously filed with the Securities and Exchange
Commission. The Company also will revise its previously
announced 2002 fourth quarter and annual financial results.
The restatements and revisions reflect significant business
issues and developments affecting the Company, including the
recent termination of the Company's supply agreement with Kmart
and events leading to Fleming's voluntary Chapter 11 bankruptcy
filing on April 1, 2003, as well as adjustments identified in
connection with the continuing independent investigation by the
Company's Audit and Compliance Committee into certain accounting
and disclosure issues.
Restatements
Although the findings from the independent investigation by the
Audit and Compliance Committee have not been finalized, the
Company expects that the related restatements of the results for
the full-year 2001 and the first three quarters of 2002 will
reduce the pre-tax financial results from continuing operations
for such periods by an aggregate amount of not more than $85
million. These restatements mainly correct the timing of when
certain vendor transactions are recognized and the balance of
certain reserve accounts.
Revisions
The Company will revise its previously announced 2002 fourth
quarter and annual financial results to reflect a loss from
continuing operations. In accordance with SFAS 142, the Company
expects to record a non-cash adjustment to continuing operations
for a full impairment of goodwill currently valued at
approximately $645 million, due to an overall decrease in the
value of the Company. In accordance with SFAS 144, the Company
will also record an additional impairment charge to discontinued
operations of approximately $90 million related to retail store
operations held for sale, due to a reduction in the net
realizable value of such operations. In accordance with SFAS
109, the Company has determined that it will record a non-cash
charge against continuing operations in the fourth quarter of
2002 relating to its deferred tax assets in the range of $275-
325 million, due to uncertainties as to when net operating
losses will be utilized against future tax payments.
The Company also expects that its fourth quarter 2002 pre-tax
loss from continuing operations will be increased by expenses
totaling not more than $80 million as a result of a number of
factors, including increased vendor payback rates, the Kmart
contract cancellation and corrections identified as a result of
the Audit and Compliance Committee's independent investigation.
Early Adoption of Accounting Rule
The Company will early adopt EITF 02-16, Accounting by a
Reseller for Cash Consideration Received from a Vendor,
retroactive to the beginning of fiscal year 2002. This new
accounting rule requires cash consideration received from a
vendor to be recorded as an adjustment to the prices for the
vendor's products and therefore characterized as a reduction of
cost of sales when recognized in the customer's income
statement. The 2002 effect of adopting EITF 02-16 is expected to
reduce the pre-tax loss from 2002 annual results in the range of
$5-15 million, although the cumulative effect that will be
recorded as of the beginning of 2002 is expected to be an
expense of not more than $45 million.
The Company expects to finalize the details of the 2001 and 2002
restatements and revisions in connection with the filing of its
Annual Report on Form 10-K for the fiscal year ended
December 28, 2002. As previously announced, the Company has not
determined the date it will file its 2002 Form 10-K.
Fleming (OTC Pink Sheets: FLMIQ) 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 its Web site at
http://www.fleming.com
FLEMING COS.: Continuing Use of Existing Cash Management System
---------------------------------------------------------------
To minimize unnecessary costs and disruption of their
businesses, Fleming Companies, Inc., and debtor-affiliates
sought and obtained the Court's authority to continue utilizing
their existing cash management systems for operations conducted
between and among themselves, their affiliates and third
parties.
Given the complexity of their business, as well as the need to
preserve and enhance their going concern value, Laura Davis
Jones, Esq. at Pachulski, Stang, Ziehl, Young, Jones &
Weintraub, P.C., explains that a successful reorganization of
the Debtors' business simply cannot be accomplished if there is
substantial disruption in their cash management procedures. It
is essential that the Debtors continue consolidating the
management of cash and transfer of funds from entity to entity
as needed and in the amounts necessary to continue their
business operations.
Ms. Jones relates that the basic structure of the Debtors' cash
management system has been utilized since 1997 and constitutes
the Debtors' ordinary, usual, and essential business practices.
The widespread use of the system is attributable to the numerous
benefits it provides, including the ability to:
-- tightly control corporate funds;
-- ensure cash availability; and
-- reduce administrative expenses by facilitating the
movement of funds and the development of timely and
accurate account balance and presentment information.
These controls are particularly important, Ms. Jones notes,
given the significant amount of cash that flows through the
Debtors' integrated cash management system on an annual basis.
In addition, given their corporate and financial structure, Ms.
Jones says, it would be difficult for the Debtors to establish
an entirely new system of accounts and a new cash management
system for each separate legal entity. If the Debtors were
required to open separate accounts as debtors-in-possession and
rearrange their cash management system, it would necessitate
opening numerous bank accounts with attendant delays in their
ability to operate their businesses while pursuing these
arrangements. Ms. Jones asserts that preserving the "business
as usual" atmosphere and avoiding the unnecessary distractions
that would inevitably be associated with any substantial
disruption in the Debtors' cash management system will obviously
facilitate the Debtors' reorganization efforts.
Ms. Jones maintains that the Debtors will continue keeping
strict records with respect to all cash transfers, so that all
transactions can readily be ascertained, traced and recorded
properly on applicable intercompany accounts.
In the ordinary course of business, Fleming operates under three
distinct areas of cash management aligned under the Company's
operational units:
(i) retail stores,
(ii) convenience store distribution, and
(iii) traditional distribution.
The retail and traditional distribution segments consolidate
into a main cash management system at the corporate level where
all wires and disbursements related to those segments are
handled. The convenience store distribution segment operates as
its own cash management system handling all wires and
disbursements related to that segment.
Aside from these three distinct cash management systems for
operations, Fleming also employs a central accounts payable
system based out of Oklahoma City, Oklahoma, which handles the
vast majority of disbursements for the traditional distribution
and retail operations. The convenience store distribution
operation also has its own accounts payable system that handles
disbursements for those operations. These systems act as a
central processing system of invoices and accounts payable on
behalf of Fleming's subsidiaries. Fleming is also in the midst
of a SAP consolidation that will consolidate the separate
accounts payable systems into one consolidated system. Fleming
estimates the process to be completed over the next 12 months.
Fleming processes $270,000,000 in invoices every week on account
of its operations as well as those of its subsidiaries. Fleming
also processes payroll and health benefits obligations for the
company and its subsidiaries, including payroll.
Retail Stores
The Debtors maintain these accounts under their retail store
operations:
1. The Concentration Account
The central bank account for the Debtors' retail activity is at
JPMorgan Chase. The Concentration Account provides funds for
all disbursements from the three retail divisions. Funds from
the Concentration Account are directly disbursed from the
Oklahoma City office for purposes of funding payroll and other
payables.
2. Rainbow Foods
Each of the 44 Rainbow Foods locations maintain daily deposit
accounts at Wells Fargo, which accounts are swept daily into a
master account at Wells Fargo. This master account is wire
transferred each morning to the Concentration Account.
3. FRG Food4Less
Forty FRG locations maintain daily deposit accounts at BankOne,
Marshall & Ilsley and Bank of America. The accounts are swept
daily into master accounts at the stores' banks. As with the
Rainbow Foods locations, each of the three master accounts are
wire transferred each morning to the Concentration Account.
4. Yes!Less
The 17 Yes!Less locations also maintain daily deposit accounts
at Bank of America, BankOne and two other small banks. The
Yes!Less master accounts are also wire transferred each morning
to the Concentration Account.
5. Customer Accounts
Occasionally, the Debtors take control of customers' stores due
to various defaults. Mostly for convenience purposes, accounts
for these stores remain open with the original lender --
typically small local banks -- following default.
Convenience Store Distribution
The Debtors also keep accounts for their convenience store
distribution units:
1. Consolidated Accounting Platforms
Eighteen of the Debtors' 24 convenience divisions have been
consolidated into one accounting platform. Receipts are
collected in local bank accounts and in lockboxes, all of which
are swept daily into the Concentration Account. Customer
accounts are debited on a daily basis, and the money is credited
to the Wells Fargo account and swept daily into the
Concentration Account. Check and automated clearing house
disbursements, along with payroll, are managed, processed, and
issued centrally in San Francisco, California.
2. Canadian Locations
The four Canadian locations, all divisions of the U.S.
subsidiary, Core-Mark International, Inc., maintain their daily
receivables at Bank of Montreal. These funds are swept nearly
daily into the Concentration Account via foreign currency swaps.
Traditional Distribution
Currently, each of Fleming's existing 28 divisions is
established with its own disbursement account, depository
account and wire receipt account. The divisions primarily
deposit receivables at Bank of America, Wells Fargo, First Union
and a handful of local banks. The payroll is managed out of the
Oklahoma City office and checks are issued out of the
Concentration Account. Similarly, 95% of the aggregate dollar
value of all disbursement checks and vendor electronic fund
transfers are issued out of the Oklahoma City office from the
Concentration Account. The remaining 5% are issued out of
accounts with Bank of America.
However, the Debtors are in the process of consolidating these
accounts by the end of 2003. Presently, half of the divisions'
disbursement and deposit accounts have been successfully
consolidated.
Depository Bank Accounts
The Debtors' Concentration Account at JPMorgan Chase serves as
the primary account to receive funds from the three operating
segments. The retail segment has its depository accounts at
Wells Fargo, Bank One, Bank of America and a few other regional
banks depending on location. Each retail store makes a daily
deposit into its local bank and fiends are swept daily via wire
into the Concentration Account.
The traditional distribution segment has depository accounts at
Bank of America, Wells Fargo, First Union and a few other
regional banks depending on location. Traditional distribution
segment customers who submit payment by check are deposited at
the various banks -- amounting to less than 25% of collections.
Meanwhile, ACH payments account for 50% of customer receipts.
The 25% of customer receipts are received electronically. All
of these accounts send their funds on a daily basis by wire to
the Concentration Account.
On the other hand, the convenience store distribution segment
has depository accounts at JPMorgan Chase, Wells Fargo and a few
other regional banks depending on location. For those
facilities west of the Mississippi, checks are deposited into a
lockbox. Deposits are made at local banks for facilities east of
the Mississippi. All funds are swept to the Concentration
Account on a daily basis.
Disbursement Bank Accounts
The Debtors relate that the disbursements for the retail
operating segment are processed centrally in Oklahoma City.
Payroll and all other disbursements for the retail segment are
managed out of Oklahoma City and are issued from the
Concentration Account.
For the traditional distribution segment, 95% of the aggregate
dollar value of all disbursement checks and vendor electronic
fund transfers are issued out of Oklahoma City from the
Concentration Account. The checks are issued at four sites
around the United States to optimize cash management. Ninety-
five percent of the aggregate dollar value of all traditional
distribution disbursement accounts and check volume also flow
through the Concentration Account and the remaining 5% flow
through accounts with Bank of America. Payroll for the
traditional distribution segment is managed out of Oklahoma City
through the Concentration Account.
For the convenience store distribution segment, checks and ACH
payments are processed centrally in San Francisco. Seventy
percent of these accounts payable are tobacco related. There
are no terms extended on tobacco products and these vendors are
paid electronically.
Payroll for the convenience store distribution segment is
managed centrally in San Francisco and is handled through a
single Wells Fargo account.
Investment Accounts
The Debtors maintain a single short-term investment account with
Bank of Montreal. The Bank of Montreal Account principally
serves as an overnight sweep account for funds received from the
Canadian Debtor entities. Typically, no more than CND2,000,000
to CND3,000,000 are held in this account at any time. To the
extent applicable, the Debtors also want to continue using the
Bank of Montreal Account after the Petition Date. (Fleming
Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
FLEXXTECH CORP: Greg Mardock Steps Down as President & Director
---------------------------------------------------------------
Flexxtech Corporation (OTC Bulletin Board: FLXE) announced the
resignation of Greg Mardock as President and Director effective
immediately. Michael A. Novielli, Douglas H. Leighton and
Theodore J. Smith have been named to the Flexxtech Board of
Directors.
"We are excited about entering a new phase in the development of
Flexxtech. For the past several years, shareholders and
investors have been met with disappointment, and we now look
forward to building value under new leadership," stated new
Flexxtech Chairman Mr. Novielli. Mssrs. Novielli and Leighton
also serve as Managing Members of Dutchess Capital Management
LLC, General Partner to Boston-based Dutchess Private Equities
Fund, LP a long time Flexxtech investor and lead investor in the
new restructuring effort.
Flexxtech also announced the execution of a Letter of Intent to
merge with Irvine, CA-based Network Installation Corporation.
Network Installation is one of southern California's leading
designers and installers of data, voice, and video networks.
Closing of the transaction is expected on or about May 16, 2003.
In addition, Flexxtech's previously announced merger with W3M,
Inc. d/b/a Paradigm Cabling Systems has been rescinded.
Flexxtech Corporation's objective is to build shareholder value
by developing and acquiring businesses primarily in the
information technology sector. This strategy promotes
opportunities for investment in companies that are
synergistically aligned to allow for expansion and bottom-line
returns. Additional information on Flexxtech can be viewed at
http://www.sec.gov
As reported in Troubled Company Reporter's January 8, 2003
edition, Kabani & Company, Inc., Certified Public Accountants of
Fountain Valley, California said in its audit report:
"[Flexxtech Corp.] has accumulated deficit of $14,235,009
including net losses of $12,392,858 and $1,814,953 for the years
ended December 31, 2001 and 2000, respectively. The Company has
a shareholders deficit of $2,416,423 on December 31, 2001. These
factors as discussed in Note 4 to the consolidated financial
statements, raises substantial doubt about the Company's ability
to continue as a going concern." These statements were dated
March 14, 2002 and November 14, 2002.
FREEMONT GEN.: S&P Revises Outlook to Stable on Positive Results
----------------------------------------------------------------
Standard & Poor's Ratings Services revised its outlook on
Fremont General Corp., to stable from negative and affirmed its
ratings on the Santa Monica, California-based company, including
Fremont's 'CCC+' long-term counterparty credit rating. At
Dec. 31, 2002, Fremont had total assets of $6.7 billion.
"The change in outlook reflects Fremont's positive momentum in
earnings from continuing operations as well as the reduced
exposure to its discontinued insurance operations," said credit
analyst Steven Picarillo.
In addition, the stable outlook is based on the expectation that
the company will be able to maintain this improved earnings
trend with improving asset quality measures.
GEMSTAR-TV: Terminates Employment of Henry Yuen & Elsie Leung
-------------------------------------------------------------
Gemstar-TV Guide International, Inc. (Nasdaq:GMST) terminated
the employment of Dr. Henry C. Yuen and Ms. Elsie Ma Leung for
cause, in accordance with the terms of each of their employment
agreements.
The Company entered into the employment agreements with Dr. Yuen
and Ms. Leung in connection with the November 2002 management
and corporate governance restructuring. As part of the
restructuring, Dr. Yuen resigned as the Company's Chief
Executive Officer and Ms. Leung resigned as the Company's Chief
Financial Officer but both remained as employees of the Company
until today. Dr. Yuen and Ms. Leung have the right to dispute
their terminations as provided in their respective employment
agreements.
As a result of the termination, Dr. Yuen no longer serves as a
member of the Board of Directors of the Company. Ms. Leung's
Board term will expire at the Company's annual meeting, which
has been scheduled for May 20, 2003. The initial cash payment
due to Dr. Yuen and Ms. Leung under the 2002 restructuring
agreements continues to be held by the Company in a segregated
account. A Form 8-K is being filed by the Company that describes
in more detail the effect of the Company's decision to terminate
the employment of Dr. Yuen and Ms. Leung on various agreements
with each of them.
Gemstar-TV Guide International, Inc., is a leading media and
technology company that develops, licenses, markets and
distributes technologies, products and services targeted at the
television guidance and home entertainment needs of consumers
worldwide. The Company's businesses include: television media
and publishing properties; interactive program guide services
and products; and technology and intellectual property
licensing. Additional information about the Company can be found
at http://www.gemstartvguide.com
* * *
As previously reported in Troubled Company Reporter, Standard &
Poor's lowered its corporate credit and bank loan ratings on
Gemstar-TV Guide International Inc., to double-'B' from double-
'B'-plus.
Standard & Poor's said that all of the ratings remain on
CreditWatch with negative implications, where they were placed
on August 15, 2002.
GENERAL DATACOMM: Files Plan & Disclosure Statement in Delaware
---------------------------------------------------------------
General DataComm Industries, Inc., and its debtor-affiliates
filed a Disclosure Statement to explain their Joint Plan of
Reorganization with the U.S. Bankruptcy Court for the District
of Delaware. The Debtors' Disclosure Statement is available for
a fee at:
http://www.ResearchArchives.com/bin/download?id=030415204210
A summary of the Classification and Treatment of Claims and
Interests under the Plan are:
Claims and Proposed Estimated
Interests Distribution Recovery
---------- ------------ ---------
Allowed Administrative -Not classified 100%
Claims under the Plan
-Will be paid in
full, in cash as soon
as practicable.
Allowed Priority -Not classified
Tax Claims under the Plan 100%
-Except as otherwise
agreed, holders will
receive cash equal to
the Allowed Claim.
Class 1 (Allowed Other -Not impaired under 100%
Priority Claims the Plan and not per-
mitted to vote.
-Will be paid in
full in cash on the
later of the Effective
Date and the date such
Claim is allowed.
Class 2 (Allowed -Impaired and enti- 100%
Lender Secured Claim) tled to vote.
-Will receive the
New Lender Term Note,
the New Lender PIK
Note, the Lender
Warrants and the Lender
Release.
Class 3 (Other Secured -May be impaired 100%
Claims) under the Plan and
entitled to vote.
-At the option of
the Debtors, will
receive either:
i) payment in full in
Cash;
ii) the collateral
securing claim; or
iii) other treatment
as may be agreed to.
Class 4 (Allowed Gene- -Impaired under the 100%
ral Unsecured Claims) Plan and is entitled
to vote.
-Will receive a
Debenture in the full
amount of such Allowed
Claim, subject to the
terms of the Indenture.
Class 5 (Convenience -Impaired under the 100%
Class Claims) Plan and is entitled
to vote.
-Will be paid in full
in cash within 60 days
after the Effective
Date of the Plan.
Class 6 (Preferred -Not impaired under 100%
Interests in GDC) the Plan and is not
entitled to vote.
-The legal, equitable
and contractual rights
of the holders of
Allowed Preferred
Interests in GDC will
remain unaltered
by the Plan.
Class 7 (Equity Inte- -Not impaired under 100%
rests in Subsidiary the Plan and is not
Debtors) entitled to vote.
-The Equity Interests
in Subsidiary Debtors
shall be retained by
the respective parent
Debtor without
alteration.
Class 8 (GDC Common -Impaired under the greater than
Stock Interests) Plan and entitled to zero
vote on the Plan.
-Will be retained by
the holders without
alteration except:
a) subject to dilution
as the result of the
Employee Stock Plan;
b) subject to dilution
in the event of the
exercise of the Lender
Warrants;
c) subject to the Lender
Director Selection
Right and Unsecured
Creditors Selection
Right, and
d) subject to the
ammendments to the GDC
Articles of Incorpora-
tions and Bylaws.
The Debtors maintain that the reorganization of the Debtors'
business under the Plan rather that a liquidation under chapter
7 of the Bankruptcy Code is preferable because it will ensure a
greater return to unsecured creditors and equity holders that
they would receive if the Debtors were liquidated. Additionally,
preservation of the Debtors' businesses as going concern will
preserve many ongoing beneficial business relationships between
the Debtors and their creditors and enhance the value of the
Debtors' assets.
General DataComm Industries, Inc., a worldwide provider of wide
area networking and telecommunications products and services,
filed for Chapter 11 protection on November 2, 2001 (Bankr. Del.
Case No. 01-11101). James L. Patton, Esq., Joel A. Walte, Esq.
and Michael R. Nestor, Esq., represent the Debtors in their
restructuring efforts. In their July 2002 monthly report on form
8-K filed with SEC, the Debtors account $19,996,000 in assets
and $77,445,000 in liabilities.
GENTEK INC: Court OKs Deloitte Canada as Noma Company's Auditor
---------------------------------------------------------------
Noma Company obtained the Court's authority to employ Deloitte &
Touche LLP-Canada for auditing services.
As previously reported, Deloitte & Touche LLP--USA has used the
services of certain of its affiliated foreign firms to provide
professional services to Gentek Inc., and its debtor-affiliates.
Among its affiliates, Deloitte & Touche LLP-Canada provides
auditing services to Noma.
Noma has selected Deloitte Canada because of its extensive
experience with and knowledge of Noma's business and finances
necessary to provide auditing services in a most efficient and
timely manner. Deloitte Canada may also be needed to provide
accounting tax-related and bankruptcy reorganization services.
Noma will compensate Deloitte Canada for its services in
accordance with the firm's regular hourly Canadian dollar rates.
Noma will also reimburse Deloitte Canada for any reasonable
expenses. Deloitte Canada's hourly rates are:
Staff Classification Hourly Rate
-------------------- -------------
Partner/Director CND500 - 700
Senior Manager & Manager 300 - 575
Senior Staff 200 - 420
(GenTek Bankruptcy News, Issue No. 12; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
GENUITY INC: ICG Datachoice Seeks Stay Relief to Liquidate Claim
----------------------------------------------------------------
Thomas A. Guida, Esq., at Baker & Hostetler LLP, in New York,
informs the Court that ICG Datachoice Network Services LLC and
Genuity Inc., entered into a "Network Services Agreement",
effective September 13, 2000, wherein the Debtors agreed to
purchase certain "bundled" dial-up computer modem services on a
minimum purchase commitment basis over a five-year period. ICG
has performed or was ready, willing and able to perform all
material obligations pursuant to the Agreement. The Agreement
provided for a preliminary "beta test" to be conducted with
respect to Genuity's technical and equipment specifications for
purposes of demonstrating that the services to be provided by
ICG met Genuity's acceptance criteria.
At all material times, ICG was ready, willing and able to
conduct the "beta test" and satisfy the acceptance criteria.
However, Genuity failed and refused to provide the technical
specifications, and equipment specifications to allow Genuity to
adequately perform the beta testing, thus breaching the
Agreement.
Mr. Guida recounts that on November 14, 2000, ICG filed a
Voluntary Petition for relief under the Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware,
Bankruptcy Case No. 00-4238(PJW). On June 1, 2001, Genuity
filed in the ICG Bankruptcy Case a motion seeking relief from
the automatic stay to terminate its executory contract with ICG.
By its Lift Stay Motion, Genuity asserted that, "determining the
damages that are owed on account of the breach or termination of
a prepetition contract is a non-core matter . . . As such, and
given this Court's calendar, any legal action regarding damages
that either party wishes to bring is best left to a non-
bankruptcy tribunal . . . Accordingly, a ruling on this Motion
should not address damages under the Network Services
Agreement." The Genuity Lift Stay Motion was resolved through a
stipulation and agreed order between Genuity Solutions and the
ICG Debtors dated July 5, 2001, which was approved Judge Walsh
on July 13, 2001.
Pursuant to the Agreed Order, Mr. Guida relates that ICG and
Genuity agreed on the termination of the Agreement and the
parties reserved their rights. The Agreed Order adopts
Genuity's position regarding the proper forum to liquidate the
claims under the Network Services Agreement.
ICG filed a suit on January 10, 2002 in the United States
District Court for the District of Colorado seeking monetary
damages believed to be over $35,000,000 against Genuity under
theories of breach of contract, anticipatory breach of contract
and breach of good faith and fair dealing. United States
District Court Judge John L. Kane has been presiding over the
Colorado Litigation since its commencement.
As evidenced by the averments contained in the Genuity Lift Stay
Motion and the significant fact-discovery conducted in the
Colorado Litigation, the Colorado Litigation involves a series
of complicated factual issues. Lead counsel for ICG in the
Colorado Litigation estimates that the trial in that matter will
take six days.
During the one year that the Colorado Litigation has been
pending, Mr. Guida tells the Court that significant fact-
discovery required to proceed to trial has been completed. The
only material discovery necessary to proceed to trial relates to
the extent of ICG's damage and several additional fact-
depositions and expert discovery. On December 9, 2002, ICG
received the Notice of Bankruptcy Filing and imposition of the
Automatic Stay filed by Genuity in the Colorado Litigation.
Mr. Guida points out that the largest number of witnesses
necessary to litigate the Colorado litigation are located within
the District of Colorado, and non-Colorado witnesses are located
in Maryland, Massachusetts and Ohio. Thus, the witnesses are
not within the subpoena power of the Bankruptcy Court for the
Southern District of New York. To proceed to trial in the
Southern District of New York, it may be necessary to take the
unnecessary and wasteful step of retaking numerous depositions
so that the Court can evaluate the candor of the witnesses on
video, rather than relying solely upon deposition transcripts.
The discovery deadline in place on the Petition Date was
January 15, 2003.
"To litigate the claim asserted by ICG in the Colorado
Litigation in the Bankruptcy Court for the Southern District of
New York would result in the unnecessary waste of resources, as
many witnesses and counsel will have to travel to the Southern
District of New York," Mr. Guida states. "In addition, there is
cause because there would be a waste of judicial resources in
requiring that the bankruptcy court begin the action anew when
the District Court in the Colorado Litigation has already passed
beyond the pleading stage and has presided over the case for one
year."
Moreover, Mr. Guida assures the Court that there will be no
prejudice to the bankruptcy estate by allowing ICG's claim to be
liquidated in the Colorado Litigation. The Southern District of
New York has no nexus to the Colorado Litigation. Through the
Genuity Sale Order, the Debtors have obtained the Court's
authority to sell substantially all of their assets.
Presumably, the transactions contemplated by the Genuity Sale
Order have been or are in the process of being consummated.
Accordingly, Genuity is not in the process of reorganizing its
business or financial affairs, but is merely liquidating under
Chapter 11 of the Bankruptcy Code. At this time, there is no
justification to delay the quantification of ICG's claims.
Finally, Genuity took the position in the ICG Bankruptcy Case
that the issues involved in the Colorado Litigation should be
determined by the Federal District Court in Colorado and was not
a "core" proceeding. Consequently, it would be inequitable for
the Debtors to take an inconsistent position and now argue that
this case should be tried in the bankruptcy court. (Genuity
Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
GLOBE METALLURGICAL: UST Appoints Official Creditors' Committee
---------------------------------------------------------------
The United States Trustee for Region 2 appointed a 9-member
Official Committee of Unsecured Creditors in Globe
Metallurgical, Inc.'s Chapter 11 case:
1. Niagara Mohawk Power Corporation
535 Washington Street
Buffalo, NY 14203
Attn: Kenneth M. Kujawa
Tel. No. (716) 857-4332
2. Primet LLC
1450 N.E. American Lane
Suite 1220
Schaumburg, IL 60173
Attn: Mr. Xuesong Yu, Sales Manager
Tel. No. (847) 517-8620
3. Ohio Valley Alloy Services, Inc.
100 Westview Avenue
Marietta, OH 45750
Atn: Randall J. Henthorn
Tel. No. (740) 373-1900
4. Kingfisher, Inc.
Seaman Timber Company, Inc.
P.O. Box 372
Montevallo, AL 35115
Attn: James D. Seaman, President
Tel. No. (205) 665-2536
5. TVS, Inc.
d/b/a Deep South Freight
2221 17th Street N.
Brimingham, AL 35204
Attn: Edmund Doss
Tel. No. (205) 326-0490
6. Pechiney World Trade (U.S.A.), Inc.
Stamford Harbor Park
333 Ludlow Street
Stamford, CT 06902
Attn: Jeffrey A. Jankowski, Treasurer & Credit Manager
Tel. No. (203) 541-9070
7. B.A.G. Corp.
11510 Data Drive
Dallas, TX 75218
Attn: Karl W. Reimers
Tel. No. (212) 841-5031
8. Struemph Charcoal Works
P.O. Box 69
Belle, Missouri 65013-0089
Attn: Jeanette Struemph
Tel. No. (573) 859-6447
9. American Compressed Steel Corporation
P.O. Box 1817
Cincinnati, Ohio 45201
Attn: Bruce Post
Tel. No. (513) 679-7080
Official creditors' committees have the right to employ legal
and accounting professionals and financial advisors, at the
Debtors' expense. They may investigate the Debtors' business and
financial affairs. Importantly, official committees serve as
fiduciaries to the general population of creditors they
represent. Those committees will also attempt to negotiate the
terms of a consensual chapter 11 plan -- almost always subject
to the terms of strict confidentiality agreements with the
Debtors and other core parties-in-interest. If negotiations
break down, the Committee may ask the Bankruptcy Court to
replace management with an independent trustee. If the Committee
concludes reorganization of the Debtors is impossible, the
Committee will urge the Bankruptcy Court to convert the Chapter
11 cases to a liquidation proceeding.
Globe Metallurgical Inc., the largest domestic producer of
silicon-based foundry alloys and one of the largest domestic
producers of silicon metal, files for chapter 11 protection on
April 2, 2003 (Bankr. S.D.N.Y. Case No. 03-12006). Timothy W.
Walsh, Esq., at Piper Rudnick, LLP represents the Debtors in
their restructuring efforts. When the Company filed for
protection from its creditors, it listed $50 million both in
assets and liabilities.
GROUP MANAGEMENT: Trades Record Volume of 5.5 Million Shares
------------------------------------------------------------
Group Management Corp., (OTC BB: GPMT) announced that Wednesday
last week the Company traded a record number of shares. More
than 5.5 million shares changed hands. "We feel this level of
volume is a positive indicator of the potential of GPMT's
business plan," the Company said.
Business Plan Development
GPMT is moving forward on developing its business plan and to
develop a plan to exit the Chapter 11 case. We are actively
seeking acquisitions for mergers and for companies to enter our
dividend spinout program.
Dividend Spin-out Program
Due to what the company feels is the short selling of its
shares, we intend to address this issue by the installation of a
program to adversely affect those who will short the stock of
GPMT. Specifically, we have developed a method whereby those who
have shorted the stock of GPMT, will be forced to either cover
the short sale or be in a position where being short the stock
of GPMT will adversely affect their finances.
The first company that will be spun out to shareholders on the
effectiveness of its registration statement is Kadalak
Entertainment Group, Inc. The shares in the registration
statement are priced at $0.30 per share. Kadalak will have a
market capitalization of $9.5 million after the effectiveness of
the registration statement.
Kadalak is in discussions with several persons and entities
concerning acquisitions and movie projects.
Aperson or entity who is short the shares of GPMT upon the
effectiveness of the registration of Kadalak, or any other
entity that will be spun-out will have to come to GPMT to
purchase a special component that will be included to the
shareholders of record of GPMT's shares. This special component
cannot be purchased in the open market and will be priced such
that GPMT shares have an implied market price in excess of the
registration price of Kadalak shares of $0.30 per share.
Business Development Company
"We recently filed the Form N-54-A converting our primary
purpose to a business development company. This primary focus
will foster our desire to be a creator of innovative businesses
and strategies. Specifically, we have created an investment
banking division that will focus its attention on mergers and
acquisition, IPOs, and taking small businesses public through
reverse mergers utilizing the shareholder base of GPMT."
HALLMARK FINANCIAL: AM Best Ups Insurance Units' Ratings to B-
--------------------------------------------------------------
Hallmark Financial Services, Inc. (Amex: HAF.EC), announced that
A.M. Best has upgraded the financial strength ratings of its two
insurance subsidiaries. American Hallmark Insurance Company of
Texas was upgraded from "C+" to "B-" and Phoenix Indemnity
Insurance Company was upgraded from "D" to "B-".
Hallmark Financial Services, Inc. engages primarily in sale of
property and casualty insurance products. The Company's
business involves marketing, underwriting and premium financing
of non-standard personal automobile insurance primarily in
Texas, Arizona and New Mexico, marketing of commercial insurance
in Texas, New Mexico, Idaho, Oregon and Washington, third party
claims administration, and other insurance related services.
The Company is headquartered in Dallas, Texas and its common
stock is listed on the American Stock Exchange under the symbol
"HAF.EC".
HAUSER INC: Receives Court Nod to Use Lender's Cash Collateral
--------------------------------------------------------------
Hauser, Inc. (OTCBB:HAUS) and its wholly owned subsidiaries,
Botanicals International Extracts, Inc., Hauser Technical
Services, Inc. and ZetaPharm, Inc., have arranged a cash
collateral stipulation with its bank, Wells Fargo Bank, N.A.
The use of cash pursuant to the cash collateral stipulation has
been approved by the U.S. Bankruptcy Court for a 60-day period.
At the end of the 60-day period, Hauser will need to seek court
approval to continue to use cash collateral. This cash will help
the company fulfill employee payroll, payments to vendors for
goods and services and other obligations associated with
operating their businesses after filing voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code with
the U.S. Bankruptcy Court for the Central District of
California. Access to cash pursuant to this stipulation is
subject to compliance by Hauser and its subsidiaries with
certain conditions.
"With this cash, Hauser will continue to do business and move
forward to implement our reorganization plan. We appreciate the
support of our lender and look forward to working with our
creditors to achieve a successful reorganization process," said
Kenneth Cleveland, president and chief executive officer. "We
continue to evaluate a number of alternatives that would permit
the company to satisfy its cash needs and emerge from
bankruptcy."
Hauser, headquartered in El Segundo, California and Longmont,
Colorado, is a leading supplier of herbal extracts and
nutritional supplements. Hauser also provides chemical
engineering services and contract research and development.
Hauser's products and services are principally marketed to the
pharmaceutical, dietary supplement and food ingredient
businesses. Hauser's business units include: Botanicals
International Extracts and Hauser Contract Research
Organization. Hauser also does business using the dba BI
Nutraceuticals.
HEADLINE MEDIA: February Balance Sheet Upside Down by $11-Mill.
---------------------------------------------------------------
Headline Media Group announced its results for the three and six
months ended February 28, 2003.
HIGHLIGHTS
- Operating results and net loss for the three months ended
February 28, 2003 showed significant improvement over the
prior year. Loss before interest, income taxes,
depreciation and amortization was $1.5 million, an
improvement of $1.7 million from a loss of $3.2 million in
the same period last year. For the six months ended
February 28, 2003, loss before interest, income taxes,
depreciation and amortization was $3.5 million, an
improvement of $5.4 million from a loss of $8.9 million in
the same period last year.
- Consolidated revenue for the second quarter decreased by
$1.8 million to $7.8 million compared to $9.6 million in
the prior year. This decrease was due to significantly
lower revenue in the Sports and Entertainment Marketing
group. Revenue in the Sports and Entertainment Marketing
group declined from $5.8 million for the second quarter
ended February 28, 2002 to $3.5 million for the second
quarter ended February 28, 2003 due to lower advertising
revenues. Increased revenue in the Broadcasting group
offset some of this decline, as revenue increased by
$0.6 million, or 14.5%, from $3.7 million for the second
quarter ended February 28, 2002 to $4.3 million for the
second quarter ended February 28, 2003.
- The Company secured $500,000 in additional funding during
the quarter to assist with working capital requirements.
On January 15, 2003, the Company completed a non-brokered
private placement of 1,428,571 Class A Subordinate Voting
shares with Levfam Holdings Inc., the Company's
controlling shareholder, at a price of $0.35 per share.
The gross proceeds of the private placement were $500,000.
Proceeds from the private placement are being used
primarily to fund the operations of PrideVision Inc.
and for general corporate purposes.
- On December 20, 2002, the Company announced a
restructuring of its subsidiary, PrideVision TV, including
a reduction in its work force and ongoing operational
expenses. In addition, the Company continues to have
discussions with a third party regarding a strategic
investment in PrideVision TV.
The Company has three business units "Broadcasting", "Sports and
Entertainment Marketing" and "Corporate". The Broadcasting group
consists of the Company's specialty television networks, The
Score Television Network Ltd. and PrideVision TV. The Sports and
Entertainment Marketing group consists of St. Clair Group
Investments Inc.
Three Months Ended February 28, 2003
Revenue for the second quarter decreased by $1.8 million to $7.8
million compared to $9.6 million in the prior year. The decrease
in revenue reflects a decline of $2.4 million in revenue for the
Sports and Entertainment Marketing group due to lower
advertising revenues. This advertising revenue decline was
due to the loss of the Canadian Hockey League property. That
decrease was partially offset by an increase in the revenue for
Broadcasting group of $0.6 million due to a higher average
subscriber rate at The Score and higher advertising revenues.
Operating expenses excluding rights fees were $7.2 million
during the quarter, compared to $9.3 million in the prior year,
representing a decrease of $2.1 million. Operating expenses in
the Broadcasting group were $0.9 million lower in the quarter,
reflecting cost reduction initiatives implemented in PrideVision
TV. Operating expenses for the Sports and Entertainment
Marketing group were $1.3 million less than the prior year,
mitigating some of the decline in revenues. Operating expenses
for the Corporate group were comparable to the prior year.
Program rights were $2.1 million during the quarter, compared to
$3.5 million in the prior year. Program rights for the quarter
were $1.1 million in the Broadcasting group and $1.0 million in
the Sports Entertainment and Marketing Group versus $2.1 million
and $1.4 million respectively in the prior year. The reduction
in program rights for the Broadcasting group reflects lower
program rights fees for Major League Baseball, as a result of
the previously announced termination agreement, as well as lower
program rights costs for PrideVision TV as a result of the
implementation of cost containment initiatives.
Loss before interest ,income taxes, depreciation and
amortization was $1.5 million for the second quarter of 2003
compared with $3.2 million in the same quarter last year,
representing an improvement of $1.7 million over the prior year.
Interest income for the first quarter was negligible compared to
$0.2 million in the prior year. The decrease in interest income
resulted from a reduction in the cash, cash equivalents and
short-term investments held by the Company during the period.
Interest expense for the first quarter was $0.5 million compared
to $0.3 million in the prior year. The increase of $0.2 million
reflects a higher average loan balance outstanding for the
period at the Score due to the termination agreement of the
Major League Baseball contract.
Depreciation expense was $0.2 million in the first quarter
compared to $0.4 million in the prior year. The decrease in
depreciation expense is due to lower fixed asset additions in
the current year. Fixed assets additions were negligible
compared to $44,000 in the prior year.
Amortization expense was $46,000 in the quarter, compared to
$0.3 million in the prior year. The decrease in amortization
reflects a reduction in the amortization of goodwill compared to
the prior year as a result of a change in accounting policy. The
Company has adopted the provisions of The Canadian Institute of
Chartered Accountants' Handbook Section 3062 "Goodwill and Other
Intangible Assets", effective September 1, 2002. Section 3062
requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead be tested for
impairment at least annually by comparing the carrying value to
the respective fair value.
During the second quarter, the Company completed its
transitional goodwill impairment test relating to goodwill
allocated to the Sports and Entertainment Marketing reporting
unit, and determined that unamortized goodwill of $3.5 million
as at September 1, 2002 was impaired under the new fair value
based methodology. This amount was charged to opening deficit
with a corresponding reduction in goodwill.
Net loss for the first quarter was $2.3 million or $0.03 per
share based on a weighted average 65.6 million Class A
Subordinate Voting Shares and Special Voting Shares outstanding,
compared to a net loss of $4.0 million or $0.06 per share based
on a weighted average 64.9 million Class A Subordinate Voting
Shares and Special Voting Shares outstanding in the prior year.
Broadcasting Group
Revenues for the Broadcasting group increased $0.6 million, or
14.5% for the quarter, from $3.7 million for the three months
ended February 28, 2002 to $4.3 million for the three months
ended February 28, 2003. Advertising revenue increased $0.2
million or 9.9% during the quarter compared to the prior year
primarily reflecting an increase in advertising revenue for The
Score as a result of continued audience growth and improved
ratings. Subscriber revenue increased by $0.3 million or 21.5%
over the same quarter last year. The $0.3 million increase
primarily reflects increased subscriber rates for The Score
on renewed distribution contracts. In addition, the number of
subscribers to The Score continues to grow. As at February 28,
2003, The Score had 5.3 million paying subscribers. PrideVision
TV generated $0.2 million in subscriber revenue during the
quarter, compared to $0.1 million in the previous year. As at
February 28, 2003 PrideVision TV had approximately 21,000
paying subscribers.
Operating expenses were $5.1 million in the quarter, compared to
$6.9 million in the prior year, representing a decrease in
operating expenses of $1.8 million. The Score's operating
expenses decreased by $0.1 million to $4.5 million in the
quarter compared to $4.6 million in the prior year reflecting
lower program rights fees for Major League Baseball, as a result
of the previously announced termination agreement. Operating
expenses for PrideVision TV were $0.6 million in the quarter,
compared to $2.3 million in the prior year due to lower program
rights and other operating costs due to the implementation of
cost reduction initiatives.
Loss before interest, income taxes, depreciation and
amortization for the first quarter was $0.8 million versus $3.2
million in the prior year, resulting in an improvement in
operating performance of $2.4 million.
Sports and Entertainment Marketing Group
Revenue for St. Clair was $3.5 million in the second quarter
compared to $5.8 million in the prior year. The decrease in
revenue of $2.3 million reflects a decline in print advertising
sales, specifically within sports programming publications. St.
Clair did not renew its broadcasting and sponsorship rights for
the 2003 Canadian Hockey League season and as a result certain
sales contracts that included packaged advertising did not
renew.
Operating expenses were $3.6 million in the quarter, compared to
$5.2 million in the prior year, representing a decrease in
operating expenses of $1.6 million. The decrease in expenses
primarily reflects lower printing and production costs,
consistent with the lower television advertising sales, as
well as reduced promotional and selling expenses as compared to
the prior year.
St. Clair's operating loss before interest, income taxes,
depreciation and amortization for the second quarter was $53,000
compared to a profit of $0.6 million in the prior year.
Corporate
Operating expenses and the loss before interest, income taxes,
depreciation and amortization for the Corporate group were $0.6
million in both the second quarter of 2003 and 2002.
Six Months Ended February 28, 2003
Revenues for the six months ended February 28, 2003 decreased by
9.2% to $16.0 million from $17.6 million for the same period
last year. Advertising revenues decreased by $2.4 million or
16.5%. This decrease was primarily due to the reduction in
advertising revenue at St. Clair specifically within sports
programming. Subscriber fee revenue increased by $0.8 million or
28.6%, reflecting an increase in the number of subscribers for
The Score, as well as increased subscriber rates on renewed
distribution contracts.
In addition, subscriber fee revenue for PrideVision TV was $0.5
million for the six months ended February 28, 2003 compared to
$0.1 million in the prior year. At the end of February 2003,
PrideVision TV had approximately 21,000 paying subscribers
compared to 16,000 paying subscribers in the prior year.
Operating expenses excluding rights fees were $14.5 million for
the six months ended February 28, 2003 compared to $17.4 million
in the prior year, representing a decrease of $2.9 million
during the six month period. Operating expenses in the
broadcasting group were $1.1 million lower in the six month
period, reflecting cost reduction initiatives implemented in
PrideVision TV. Operating expenses for the Sports and
Entertainment Marketing group were $1.7 million less than the
prior year, mitigating some of the decline in revenues.
Operating expenses for the Corporate group were approximately
$75,000 less than the prior year.
Program rights were $5.3 million during the six month period
ended February 28, 2003, compared to $9.1 million in the prior
year. Program rights for the six month period were $3.9 million
in the Broadcasting group and $1.4 million in the Sports
Entertainment and Marketing Group versus $7.2 million and $1.9
million respectively in the prior year. The reduction in program
rights for the Broadcasting group reflects lower program rights
fees for Major League Baseball as well as lower program rights
costs for PrideVision TV as a result of the implementation of
cost containment initiatives.
Gain on sale of investment - during the six month period ended
February 28, 2003, the Company sold an investment in a private
company for cash proceeds of $0.4 million ($0.3 million U.S.).
The carrying value of the investment at August 31, 2002 was nil,
resulting in a gain on sale of $0.4 million.
Loss before interest, income taxes, depreciation and
amortization for the six months ended February 28, 2003 was $3.5
million, compared with $8.9 million for the same period last
year.
Interest income for the period decreased by $0.6 million to
$27,000 in the current year from $0.6 million in the prior year,
reflecting a decrease in the average cash, cash equivalents and
short-term investments outstanding during the period.
Interest expense for the period was $0.8 million, comparable to
the $0.8 million interest expense in the prior year. The
stability in interest expense reflects an increase in the
average outstanding bank indebtedness during the period offset
by lower interest rates.
Net loss for the six months ended February 28, 2003 was $4.9
million or $0.07 per share based on a weighted average 65.2
million Class A Subordinate Voting Shares and Special Voting
Shares outstanding, compared to a net loss of $10.5 million or
$0.16 per share based on a weighted average 64.9 million Class A
Subordinate Voting Shares and Special Voting Shares outstanding
in the prior year.
Liquidity and Capital Resources
Cash flow used in operations for the three months ended
February 28, 2003 was $0.8 million compared to $5.7 million in
the prior year, reflecting significantly lower operating losses
in the current year combined with positive non-cash operating
working capital movements. Cash flow used in operations for the
six months ended February 28, 2003 was $3.4 million compared to
$13.0 million in the prior year, again reflecting significantly
lower operating losses and positive non-cash operating working
capital movements.
Cash flow from financing activities was $1.2 million for the
three months ended February 28, 2003 compared to cash flow used
in financing activities of $12.9 million in the prior year.
During the three months ended February 28, 2003, the Company
secured $0.5 million from a non-brokered private placement
of 1,428,571 Class A Subordinate Voting shares with Levfam
Holdings Inc., the Company's controlling shareholder, at a price
of $0.35 per share. In addition, the Company drew down $0.7
million from a credit facility provided by Levfam Finance Inc.
In December 2001, the Company completed a credit facility for
its subsidiary, The Score with its current lender and as part of
the terms of the new credit facility, the Company loaned The
Score $17 million and the balance of $12.9 million on the
existing credit facility was repaid.
Cash flow from financing activities for the six months ended
February 28, 2003 was $1.2 million, as discussed above, compared
to cash flow used in financing activities of $11.5 million in
the prior year.
Cash flow from investment activities for the three months ended
February 28, 2003 was approximately $28,000 compared to $9.5
million in the prior year. The decrease in cash flow from
investment activities reflects lower fixed asset additions,
lower proceeds from the sale of short-term investments, and
reduced deferred charges compared to the prior year. Fixed asset
additions and deferred charges in the prior year include costs
associated with the launch of PrideVision TV.
With the credit facilities and financing currently in place and,
assuming the successful execution of its revised business plan,
management believes there are sufficient resources to fund
operations until October 2003. During 2002 and continuing into
fiscal 2003, the Company has introduced significant cost cutting
measures to preserve cash and to strategically realign the
Company's resources. Beyond fiscal 2003, the Company will
require additional funding in order to continue operations and
service the commitments under significant agreements.
As of Feb. 28, 2003, Headline Media's working capital deficit
tops $12 million while its total shareholders equity deficit is
disclosed at $11 million.
The Company is actively pursuing alternative financing with
potential lenders and investors, which if successful, will, in
management's view, enable the Company to achieve its business
plans in the long-term. No agreements with potential lenders or
investors have been reached yet and there can be no assurance
that such agreements will be reached. In addition, the Company
continues to review other alternatives, which could involve
renegotiating existing cash commitments, further reducing its
work force, a further restructuring of the business units which
may include the divestiture of certain assets of the Company, or
attracting a strategic investor that would assist in developing
the business of the Company.
The Company's successful execution of its business plan is
dependant upon a number of factors that involve risks and
uncertainty. In particular, revenues in the specialty television
industry, including subscription and advertising revenues are
dependant upon audience acceptance, which cannot be accurately
predicted. In addition, the distribution of the Company's
specialty television channel, PrideVision TV, is limited to
digital subscribers. While Management expects the digital
television market will continue to grow and that the number of
subscribers to the service will increase, the rate and extent to
which this subscriber base will grow is uncertain. Initial
consumer acceptance is encouraging, however, it remains
uncertain that the penetration rates required to ensure
profitability will be achieved.
Headline Media Group Inc. (TSX: HMG) is a media company focused
on the specialty television sector through its three assets: The
Score Television Network, PrideVision and The St. Clair Group.
The Score is a national specialty television service providing
sports, news, information, highlights and live event
programming. PrideVision offers programming which focuses on
issues specifically involving the gay community which was
launched in September 2001. The St. Clair Group is a recognized
leader in the Canadian sports marketing and specialty publishing
arena.
HIGH SPEED ACCESS: Settles Delaware Class Action Lawsuits
---------------------------------------------------------
High Speed Access Corp., (OTC Bulletin Board: HSAC) announces
that the Delaware Chancery Court approved the settlement of the
Delaware Class Action lawsuits at a hearing on April 16, 2003.
No objections to the settlement were filed, and any appeals must
be filed by May 16, 2003. As previously announced, HSA intends
to make an initial cash distribution of $1.40 per share to its
stockholders in late May 2003, but will not make any liquidation
distributions until the court's approval of the settlement
(including any appeals) is final in all respects. HSA will
announce the record date for the determination of stockholders
entitled to the initial May 2003 liquidating distribution at a
later date. The amount of the intended initial distribution is
based upon the current estimates of management and may be higher
or lower, and the date of the intended initial distribution may
be delayed, due to various risks and uncertainties previously
disclosed in HSA's most recent 10-K and other public filings on
record with the Securities and Exchange Commission.
HILTON HOTELS: Fitch Rates $500-Mill. Senior Convertibles at BB+
----------------------------------------------------------------
Fitch Ratings has assigned a rating of 'BB+' to the $500 million
in senior unsecured convertible notes being issued by Hilton
Hotels Corporation. The proceeds, which could include an add-on
of $75 million, will be used to redeem approximately $500
million in convertible subordinated notes due 2006 that are
callable on May 15 with any remainder applied to outstandings
under Hilton's bank agreement.
The Rating Outlook remains Negative due to persistent industry
weakness, reflected in depressed revenue per available room
(REVPAR), and the low probability of a meaningful reversal
through the next several quarters. Hilton's credit statistics
remain weak for the rating.
The rating incorporates Hilton's strong asset base, premier
brand name, product line diversity within the lodging sector,
and benefits of the company's loyalty program. However, a severe
economic and travel environment has led to steadily declining
EBITDA, producing cash leverage and interest coverage statistics
that are weak for the rating. Nevertheless, the company has
retained clear control of its balance sheet, produced consistent
free cash flow and has steadily reduced debt levels. Free cash
flow has been maintained through a rapid adjustment to the
company's variable cost structure following Sept. 11, 2001 and
reductions in capital expenditures, which fell to $245 million
in 2002, from $370 million in 2001 and $458 million in 2000.
Hilton reduced debt by approximately $455 million in 2002, aided
by the sale of $119 million in time-share receivables and $50
million from the sale of the Harrison Conference Centers.
Incorporating the $300 million allocated to Park Place
Entertainment (that was guaranteed by Hilton), balance sheet
debt was reduced by more than $700 million in 2002.
Looking forward, Hilton will be pressured to retain existing
margins due to the difficult pricing environment, reflective of
the economic and travel environment, as well as greater pricing
transparency produced by internet distribution channels. For the
industry, 2003 could represent a third consecutive year of
declining REVPAR. Also pressuring margins will be cost
escalations in insurance, health care and real estate taxes.
However, even in the event of further declines in revenue per
available room (REVPAR), Hilton should have the flexibility to
maintain positive cash flow. Hilton has displayed steady debt
reduction, but EBITDA has declined at a faster pace,
exacerbating declining cash leverage measures. Over the
intermediate term, Hilton's continued growth in managed rooms
(expected to be achieved with low capital outlays) and the slow
growth in industry room supply should provide meaningful upside
leverage upon any improvement in economic conditions.
Unused bank capacity at year-end 2002 was approximately $960
million under Hilton's committed credit facilities. Bank
facilities include a $150 million 364-day facility and a $1.2
billion revolving credit that matures in 2004. The company's
bank facilities contain a maximum total debt/EBITDA covenant of
5.50 times for the rolling 12 moths ended Dec. 31, 2002,
tightening to 5.25x at March 31, 2003, 4.75x at June 30, 2003,
and 4.50x at Sept. 30, 2003. The potential exists for the
company to violate this covenant at the Sept. 30 quarter-end if
current travel trends persist. However, Hilton's assets and
operating profile remain sound, and frequent access to external
capital has continued to be readily available. Other near-term
maturities include a $425 million revolving credit facility
($375 million outstanding) associated with the company's Hilton
Hawaiian Village that matures in June 2003, and the $325 million
Park Place issuance that will be removed from Hilton's balance
sheet in 2004. Hilton issued a 10-year bond in November 2002 in
the amount of $375 million to refinance the Hawaiian Village
debt. Proceeds were used to pay off the company's $1.2 million
credit facility until the maturity off the HHV revolver. Off-
balance-sheet obligations are not significant, with Hilton
guarantees of third-party debt (excluding Park Place) totaling
approximately $112 million at year-end 2002.
IMAGEMAX INC: Company's Ability to Continue Operations Uncertain
----------------------------------------------------------------
ImageMax, Inc. was founded in November 1996. The Company is a
single-source provider of outsourced document management
solutions to U.S. companies and concentrated primarily in the
health care, financial services, engineering and legal services
industries. The Company's services include electronic (digital)
and micrographic media conversion, data entry and indexing,
Internet retrieval and hosting services, document storage
(including Internet "web-enabled" document storage and
retrieval) and system integration. The Company also sells and
supports document management equipment and proprietary, as well
as third party open architecture imaging and indexing software.
The Company has one reportable segment.
For the year ended December 31, 2002, the Company reported a net
loss of $14.9 million. The loss includes a one-time, non-cash
charge as a result of the adoption of SFAS 142, "Goodwill and
Other Intangibles". This charge reduced the carrying value of
the Company's goodwill by approximately $15.1 million. Income
before the cumulative effect of the accounting change was $0.2
million.
For the year ended December 31, 2001, the Company reported a net
loss of $9.4 million. The loss includes a restructuring charge
of $5.9 million. In addition, the Company recorded an operating
charge of $1.1 million in 2001, primarily related to closed
production facilities; asset write-offs and development costs
related to its ScanTrax(TM) capture software. In 2001, the net
loss excluding the restructuring and operating charges was $2.4
million.
As of April 10, 2003, the Company operated from 26 facilities
covering 15 states, employed approximately 600 people and
provided services and products to several thousand clients from
15 production facilities that provide full-scale operational
capabilities.
The Company has incurred significant operating losses since its
inception and has accumulated a deficit of approximately $40.6
million as of December 31, 2002. There can be no assurance the
Company will be able to operate profitably in the near future.
The common stock currently trades on the OTC Bulletin Board. In
1999, the common stock was delisted from the Nasdaq National
Market because of the Company's inability to remain in
compliance with certain financial and per share market price
requirements. The common stock does not now, and may never; meet
the requirements for re-listing on the Nasdaq National Market.
The inability to list the common stock on the Nasdaq National
Market substantially reduces the liquidity of, and market for,
the common stock.
INTEGRATED HEALTH: Obtains 7th Lease Decision Period Extension
--------------------------------------------------------------
Integrated Health Services, Inc., and its debtor-affiliates
obtained the Court's approval extending their lease decision
deadline through and including June 30, 2003.
Over the course of these Chapter 11 cases, the Debtors have
obtained Court approval to:
-- reject certain of the Unexpired Leases;
-- assume certain of the Unexpired Leases; and
-- assume and assign certain other Unexpired Leases to third
parties.
Consequently, at the present time, the Debtors are lessees or
sub-lessees to 201 Unexpired Leases, including:
-- Unexpired Leases relating to 101 long-term care
facilities, 45 of which have been assumed, and 56 of
which have not yet been assumed or rejected; and
-- 100 other unassumed Unexpired Leases, which are utilized
in connection with Symphony division, the Long Term Care
division and certain other ancillary divisions.
(Integrated Health Bankruptcy News, Issue No. 55;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
JOSTENS INC: S&P Concerned about Potential Recapitalization
-----------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-' corporate
credit and senior secured debt ratings and its 'B' subordinated
debt rating on Jostens Inc., on CreditWatch with negative
implications.
Approximately $589.4 million of total debt was outstanding at
the company as of Dec. 28, 2002.
The CreditWatch placement follows Jostens' statement on its Form
8-K filing that it has engaged investment banking advisers to
assist in the possible sale or recapitalization of the company.
"Standard & Poor's believes that the company will likely
continue to be highly leveraged and that a potential sale or
recapitalization transaction could result in a weaker financial
profile for the company," said Standard & Poor's credit analyst
David Kang. Before resolving the CreditWatch listing, Standard &
Poor's will continue to monitor developments and will meet with
management to discuss the company's business strategy, future
capital structure, and financial policy.
Minneapolis, Minnesota-based Jostens is a leading supplier of
class rings, yearbooks, graduation products, and photography
services.
KAISER ALUMINUM: Future Rep. Hires PwC Securities as Consultants
----------------------------------------------------------------
Martin J. Murphy, the proposed legal representative for future
asbestos claimants, wants to retain PricewaterhouseCoopers
Securities, LLC as bankruptcy consultants and special financial
advisors nunc pro tunc to March 3, 2003.
Mr. Murphy selected PwCS because of PwCS' experience at a
national level in matters related to Kaiser Aluminum Debtors'
cases and its exemplary qualifications to perform the services
required in these cases. Specifically, Mr. Murphy needs PwCS to
provide these services:
(a) Review and consultation on the Debtors' operating and
business plans, including analysis of the Debtors'
competitive environment and long-term capital needs;
(b) Evaluating the Debtors' assets, liabilities and structure;
(c) Valuation of the Debtors as a going concern, in whole and
in part, and assuming a liquidation of some or all of the
business;
(d) Review of and consultation on divestitures, and merger and
acquisition alternatives for the Debtors;
(e) Review of and consultation on the Debtors' debt capacity
and the capital structure for the reorganized Kaiser;
(f) Evaluating debtor-in-possession financing and exit
financing in connection with any reorganization plan;
(g) Review and consultation on the financial issues and
options concerning potential reorganization plans and
coordinating negotiations with respect to the Plan;
(h) Advice and consultation regarding the adequacy and
appropriateness of the funding of any trust contemplated
by Section 524(g) of the U.S. Bankruptcy Code;
(i) In-court testimony, if necessary; and
(j) Any other necessary services in connection with the
financial, business and economic issues that may arise.
PwCS is an affiliate of PricewaterhouseCoopers LLP, an
international accounting and financial advisory adversary firm.
PwCS specializes in assisting and advising debtors, creditors,
investors and court-appointed officials in bankruptcy
proceedings and out-of-court workouts. PwCS' services have
included assistance in developing, analyzing and evaluating,
negotiating and confirming plans of reorganization and
testifying regarding debt restructuring, feasibility and other
relevant issues. PwCS has been retained in numerous nationally
prominent bankruptcy proceedings, including Beaulieu of America,
Harnischfeger Industries Inc., Fruehauf Trailer Corporation,
Wheeling-Pittsburgh Steel Corporation, Network Plus Corporation,
Trans World Airlines, Jamesway Corporation, SLI, Inc. and Jitney
Jungle Stores of America.
For its services, Mr. Murphy tells the Court that PwCS will
receive a $105,000 monthly non-refundable retainer for the first
six months of its engagement. Thereafter, the monthly retainer
will be reduced to $80,000 per month.
PwCS may also be given a success or restructuring fee. The
Restructuring Fee, if any, would be determined by Mr. Murphy
taking into consideration these factors:
(i) the complexity of the transaction and the services
provided;
(ii) the creativity and quality of advice provided by PwCS;
(iii) the efficiency with which PwCS rendered professional
services;
(iv) the value added to the engagement by PwCS;
(v) the current market compensation for the type of services
PwCS will provide; and
(vi) any other factors the Futures Representative deems
relevant.
PwCS will also be reimbursed for reasonable and necessary
expenses.
David L. Eaton, PwCS managing director, assures the Court that
except for the indirect, dormant relationship with parent
company, PricewaterhouseCoopers, PwCS is not related to or
connected with and neither holds nor represents any interest
adverse to the Debtors, their estates, their creditors or any
other parties-in-interest. Consequently, PwCS is a
"disinterested person," within the meaning of Section 101(14) of
the Bankruptcy Code and as required by Section 1103(b).
However, Mr. Eaton discloses that PwC has been engaged by the
"Hylebos Cleanup Committee", which is comprised of potentially
responsible parties for the Hylebos site within the Commencement
Bay Superfund site. Kaiser Aluminum is one of the potentially
responsible parties which make-up the Hylebos Cleanup Committee.
Historically, Mr. Eaton relates that PwC reviews the annual bill
from the Environmental Protection Agency and recommends to the
Hylebos Cleanup Committee ways to potentially reduce the bill.
But recently, PwC's involvement has been dormant and no work has
been performed since December 2001. (Kaiser Bankruptcy News,
Issue No. 25; Bankruptcy Creditors' Service, Inc., 609/392-0900)
KMART CORP: Has Until May 31 to Decide on Closing Store Leases
--------------------------------------------------------------
At least 25 landlords object to Kmart Corporation and its
debtor-affiliates' request to extend the lease disposition
deadline for closing store leases:
1. Denton (TX) QRS 10-2, Inc.,
2. Susan Sandelman, as Trustee for the Alisan Trust.
3. Lend Lease Real Estate Investments Inc.,
4. General Growth Management Inc.,
5. Benderson Development Company, Inc.,
6. First Berkshire Business Trust,
7. Lany AJ, LLC,
8. Cres Development Company Inc.,
9. KC-1998, LLC,
10. Lend Lease Asset Management LP,
11. Bridgewood Associates LP,
12. Grove Square Limited Partnership,
13. RMEC LLC,
14. ACP Monroe Associates LLC,
15. GMAC Commercial Mortgage Corporation,
16. Durango Mall LLC,
17. Fuqua Knoxville Realty LLC,
18. CBL & Associates Management, Inc.
19. Developers Diversified Realty Corporation,
20. Ft. Meyers United L.P.,
21. Columbia United, L.P.,
22. Evansville United L.P.,
23. Tampa Caroline, L.P.,
24. Eastland Derby Realty Trust, and
25. Daniel G. Kamin Desoto LLC
The Objecting Landlords argue that the Debtors' deadline to
assume or reject the leases cannot be extended post-
confirmation. The Objecting Landlords also contend that, even
assuming that such an extension were possible, it would be
ineffective, because there would be no estate or at lease no
estate representative appointed to administer that estate during
the post-confirmation period.
The Objecting Landlords also allege that Section 1123(b) of the
Bankruptcy Code actually restricts the Debtors' flexibility in
drafting their Chapter 11 plan. Section 1123(b)(2), the
Landlords explain, provides that the assumption or rejection of
leases under a Plan must comply with Bankruptcy Code Section
365. Section 1123(b)(3) also restricts the Debtors' ability to
transfer certain rights and powers to the Debtors' successor
under the Plan.
However, the Debtors assert that nothing in the Bankruptcy Code
constrains the Court's ability to extend the lease disposition
deadline once cause is found. If confirmation were truly an
outside deadline for the assumption or rejection of all forms of
executory contracts and unexpired leases, the Debtors argue,
that Congress would certainly have codified a clear deadline.
But Congress did not establish such deadline, the Debtors say.
For instance, the Debtors point out that there is no deadline
for the disposition of nonresidential real property leases where
the debtor is the lessor. It simply does not exist. Likewise,
the Debtors contend, once the Court has made a finding of cause,
there is no outside limit on the deadline for assumption or
rejection of leases where the debtor is the lessee.
So long as they can establish cause for the requested extension,
the Debtors maintain that they have complied with the
requirements of Section 365(d)(4) of the Bankruptcy Code and the
legislative history's endorsement of the notion that landlords
should have additional protection.
The Debtors also argue that the commencement of a Chapter 11
case creates an estate that is not extinguished until the case
is closed. To this end, the Debtors note that the structure and
express language of the Bankruptcy Code confirms the
continuation of the bankruptcy estate post-confirmation. The
Debtors tell Judge Sonderby that the Bankruptcy Court for the
Eastern District of Texas has noted the Fifth Circuit's analysis
of the administration of an estate post-confirmation. The Texas
Bankruptcy Court has held that unless a Chapter 11 plan leaves a
reorganized debtor free to deal with its property and the world
as though it had never been subject to the bankruptcy court's
jurisdiction, the administration of the estate continues in the
post-confirmation period.
The Debtors also note that the estate's representative -- the
Responsible Officer -- will administer the Qualifying Real
Estate and seek to realize the value, if any, of the Closing
Store Leases by assuming or rejecting those leases for the
Reorganized Kmart's benefit. Kmart's creditors, who will hold
shares of common stock in the Reorganized Kmart will receive the
benefit of those recoveries.
The Objecting Landlords' Section 1123 arguments are also flawed.
The Debtors explain that Congress drafted Section 1123 to
expressly differentiate between the mandatory and the permissive
contents of a reorganization plan. Section 1123(a) lists the
mandatory requirements of every plan while Section 1123(b)
contains a non-exclusive list of what a plan may provide. The
suggestion that Section 1123(b) limits the contents of a plan is
inconsistent with its permissive purpose and language, the
Debtors say.
The Debtors also clarify that they are not seeking to dispose
off the Closing Store Leases under the Plan. Rather, the Plan
provides that the Closing Store Leases will not revest in the
Reorganized Kmart, but will remain in the estate post-
confirmation in accordance with the express language of Section
1141(b). The Debtors' estate, acting through a representative
appointed under a Chapter 11 Plan, will act to assume or reject
those Leases, consistent with its fiduciary duties, by separate
motions filed under Section 365.
Debtors Suggest New Lease Decision Date
The Debtors further amend their request for extension in view of
the Objections. The Debtors now propose that the deadline to
dispose off Closing Store Leases be extended to November 25,
2003, instead of 270 days after the effective date of a
reorganization plan. To the extent that they confirm a
Reorganization Plan during this Extension Period, and the Plan
becomes effective, the Debtors intend that the Extension Period
will continue to the extent that their Chapter 11 estates also
continue, through and until November 25, 2003.
* * *
Judge Sonderby is not convinced with the Debtors' arguments.
Accordingly, Judge Sonderby denies the Motion and orders the
Debtors to decide and act on the 304 Closing Store Leases by the
earlier of the plan confirmation and May 31, 2003. (Kmart
Bankruptcy News, Issue No. 53; Bankruptcy Creditors' Service,
Inc., 609/392-0900)
DebtTraders reports that Kmart Corp.'s 9.000% bonds due 2003
(KM03USR6) are trading at about 15 cents-on-the-dollar. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=KM03USR6for
real-time bond pricing.
LAIDLAW GLOBAL: AMEX Seeks Regulatory Approval to Delist Shares
---------------------------------------------------------------
Laidlaw Global Corporation (AMEX: GLL) received a letter from
The American Stock Exchange the other week that the AMEX was
going to proceed with filing an application with the Securities
and Exchange Commission to delist the Company's shares.
AMEX had earlier advised Laidlaw Global Corporation in April
2002 that Laidlaw was in breach of two continuing listing
requirements of the Exchange, namely, its equity was below the
required minimum and that it had reported losses two of the
previous three years. Laidlaw submitted a business plan to AMEX
outlining its strategy to cure the defaults over the next three
to four quarters and requested AMEX to maintain the listing as
long as Laidlaw continued to meet the goals set out in the
business plan.
Given the continuing difficult markets, Laidlaw has ascertained
that it will be unable to meet the deadline set forth in the
business plan to comply with the AMEX listing standards.
Moreover, the AMEX has notified Laidlaw in its most recent
communication that the Company presently is in breach of
additional listing requirements, including its failure to hold a
shareholders' meeting in a timely manner.
The Company does not agree with all of the issues in the AMEX
notification and has the right to appeal the AMEX notification.
Laidlaw's Board of Directors reviewed the merits of appealing
the notification but has decided that it will not be in
compliance with AMEX's listing requirements, given the Company's
financial performance in the latest fiscal year. Consequently,
Laidlaw will file a notice on April 21, 2003 with the Securities
and Exchange Commission for a voluntary delisting of its shares
from the American Exchange. The Company is making all efforts to
facilitate the trading of its shares on the OTC Bulletin Board.
Laidlaw also is trying to ensure that there is no gap in trading
for the Company's shares in its transition from the AMEX.
Laidlaw Global Corporation's December 31, 2002 balance sheet
shows a total shareholders' equity deficit of about $3 million.
LEAP WIRELESS: Honoring Up to $11M of Prepetition Employee Wages
----------------------------------------------------------------
As of February 28, 2003, Cricket employed 1,415 persons. In
order to maintain operations, and to preserve the value of the
Debtors' estates, it is essential that Cricket retain the
uninterrupted service of these Employees.
As of the Petition Date, most of Cricket's Employees were owed
or had accrued various sums for wages, salaries, bonuses, auto
allowances, paid time off, and other accrued compensation and
benefits. In addition, Cricket had accrued deductions from
Employees' paychecks to make payments on the Employees' behalf
for insurance programs, a medical reimbursement plan, a
dependent care reimbursement plan, a 401(k) retirement program
and other similar programs on account of which Cricket deducts a
sum of money from an Employee's paycheck and transfers that
amount to a third party or retains this amount on the Employee's
behalf. Cricket also remains obligated to pay federal, state and
local withholding taxes due on prepetition employee wages and
salaries.
Michael S. Lurey, Esq., at Latham & Watkins, in Los Angeles,
California, informs the Court that Employee Compensation and
Deductions were due and owing as of the Petition Date because:
A. Some payroll checks issued to Employees prior to the
Petition Date have not yet been presented for payment or
have not yet cleared the bank and, accordingly, were not
honored and paid as of the Petition Date;
B. Employees have not yet been paid certain of their wages,
salaries, and bonuses for services previously rendered to
the Debtors; and
C. Certain other forms of Employee compensation related to
prepetition services, including paid time off, bonuses and
withholdings for benefit plan contributions, accrued prior
to the Petition Date but are not yet payable under their
terms. For example, most employees have accrued paid time
off that they have not yet used.
Thus, the Debtors seek the Court's authority to pay all Employee
Compensation and Deductions that remained unpaid as of the
Petition Date. The estimated total unpaid or outstanding
prepetition obligations to Employees for wages, salaries,
bonuses, other compensation, overtime, and withholding taxes
that are covered by the Employee Compensation, Deductions and
Benefits Motion is $10,850,000.
Specific elements of this amount are:
A. Wages and Salaries: On April 4, 2003, all of the Employees
were paid wages, salaries and overtime for services they
provided to the Debtors through March 28, 2003. The
Employees have not been paid for wages, salaries, overtime
or other compensation that have accrued from March 29, 2003
through the Petition Date. Cricket estimates that, as of
the Petition Date, it owes Employees $3,317,000 in
prepetition wages, and salaries and overtime.
B. Bonus Structure: Cricket has established variable
compensation plans including the Quarterly Team (Non-Sales)
Bonus Plan, the Quarterly Sales Bonus Plan and the monthly
Local Business Sales Bonus Plan to assist Cricket in
achieving its performance goals. Each plan is designed to
motivate and reward the participants for the achievement of
objective, year-to-date performance metrics. The few sales
employees eligible for monthly bonuses have been paid
bonuses earned through January 31, 2003. Cricket estimates
that the total variable compensation plan payments that had
accrued, but were unpaid, as of the Petition Date is
$6,000,000.
Cricket's Rewards and Recognition Program was designed to
recognize Employees who exhibit exceptional performance
beyond the requirements of their job as evidenced by
measurable achievement. The program provides relatively
small monthly, quarterly and annual awards to these
Employees when their achievements are announced at Employee
group gatherings. The aggregate monthly amount allocated
to this program is $31,000.
C. Employee Expenses: Many of Cricket's Employees regularly
incur certain out-of-pocket, business-related expenses,
including necessary and authorized travel expenses. After
completion of the travel, the Employee is required to
submit an expense report with appropriate supporting
documentation. The expense report serves as the mechanism
for the Employee to receive reimbursement for out-of-pocket
travel-related expenses within the Debtors' travel policy.
Expense reports are also submitted for other business
related activities, including technical and professional
fees and supplies. Expense reports are processed in due
course and reimbursement for Employee out-of-pocket
business related expenses are forwarded to Employees in a
separate check. Based on the average weekly Employee
expense reimbursement in the fourth quarter of 2002,
Cricket estimates that it has $175,000 of accrued
prepetition Employee expenses that were incurred but not
reimbursed prior to the Petition Date.
D. Withholding Taxes: Attendant to the payment of employee
wages, salaries, bonuses, commissions and expenses are
Cricket's obligations to pay federal, state and, in some
instances, city withholding taxes. Cricket submits that
with respect to that portion of the payroll obligations
that constitutes "trust fund" taxes, the payment of these
taxes will not prejudice other creditors of Cricket's
estate, given that the relevant taxing authorities would
hold a priority claim under Section 507(a)(8) of the
Bankruptcy Code with respect to these obligations.
Moreover, the amounts payable for trust fund taxes are not
property of Cricket's estate. Thus, these funds are not
required to be counted against the $4,650 per employee cap
contained in Section 507(a)(3). Cricket believes that its
Employees will be immediately adversely affected by any
delay in the payment of these prepetition amounts.
Cricket, too, will be adversely affected by the attendant
loss of employee morale and loyalty.
Mr. Lurey informs the Court that Cricket provides Employees who
work at least 30 hours per week with certain benefits, either
directly or through third-party providers, including:
-- medical, executive supplemental medical, vision and dental
insurance;
-- business travel, life and accidental death and
dismemberment insurance;
-- short-term and long-term disability insurance;
-- a 401(k) retirement savings plan;
-- certain reimbursement policies;
-- a supplemental benefits program; and
-- a severance plan.
Cricket funds or subsidizes some of these benefits, which are an
integral and important part of each Employee's total
compensation package. Interruption of these benefits caused by
Cricket's bankruptcy filing would create a hardship for affected
Employees, adversely affect the morale of the Employees and
undermine Cricket's efforts to retain Employees, and undermine
the Debtors' efforts to reorganize their business and maximize
value for the estates.
Cricket seeks the Court's authority to pay the prepetition
amounts attributable to these benefits as and when these amounts
come due in the ordinary course of business. The prepetition
benefits that Cricket seeks authority to pay include Benefits
under insured benefit programs under which Cricket, the
Employees or both contribute to the payment of premiums for
insurance coverage and administration costs. Cricket estimates
that the total of these Benefits that were accrued, but unpaid,
as of the Petition Date is $1,253,000.
Specific elements of this amount are:
A. Medical, Vision and Dental Insurance: Cricket offers
medical, vision and dental benefits to eligible employees
and their dependents. The medical, supplemental executive
medical, vision and dental benefits are fully-insured
plans. Under the terms of these plans, Cricket pays
full-insured premiums to the carriers for the Employees and
Employees' dependents if dependent coverage is selected.
The combined monthly cost of these benefits arrangement is
$830,000, $81,000 of which represents withholdings from
employee wages to cover the cost of the Employees' portion
of the program.
B. Life and Accidental Death and Dismemberment Insurance:
Cricket provides basic and supplemental life and accidental
death and dismemberment insurance for all Employees
underwritten by Metropolitan Life Insurance Company. Under
these policies, Cricket pays premiums for the basic life
and AD&D insurance of its Employees. Benefits under the
basic life and AD&D policies equal three times an
Employee's annual salary, but may not exceed $1,000,000
without evidence of good health or $1,500,000 with evidence
of good health. Benefits under the supplemental life
insurance policy may equal up to the lesser of five times
an Employees' annual salary or $500,000, but may not exceed
$100,000 without evidence of good health or $500,000 with
evidence of good health. The combined monthly premium is
$34,000, of which $10,000 represents withholdings from
Employee wages to cover the cost of each Employee's portion
of the premium. Cricket also provides business travel
insurance to its Employees through ReliaStar Life Insurance
Company. Benefits under this policy equal three times an
Employee's annual salary but may not exceed $500,000. The
monthly premium of business travel insurance is $200.
C. Short and Long-Term Disability Insurance: Cricket provides
its Employees with Short-Term Disability and Long-Term
Disability Insurance under fully-insured plans by
Prudential Insurance Company of America. Under these
policies, Cricket pays all expenses associated with the LTD
and STD, for an aggregate $29,000 monthly payment.
D. Supplemental Benefits for Executives: Cricket provides its
Employees who are Vice Presidents or above with
Supplemental Life Insurance, Supplemental Long-Term
Disability Insurance and Financial Estate Planning
Assistance. Benefits under the Supplemental Life Insurance
policy equal $750,000 for Senior Vice Presidents and above
and $250,000 for Vice Presidents. The Supplemental Long-
Term Disability provides an additional monthly benefit of
$10,000 for the Chairman and Chief Executive Officer and
$5,000 for all other Executives. The Financial Estate
Planning Benefit provides up to $5,000 in annual
reimbursement to the eligible employees who are Vice
Presidents, $10,000 for Senior Vice Presidents and $25,000
for the President and Chief Operating Officer and the
Chairman and Chief Executive Officer. The combined monthly
cost for all Supplemental Benefits for Executives is
$25,000.
E. Flexible Spending Account: Cricket offers all Employees a
flexible spending account. At the beginning of each plan
year, Employees may elect to deposit a portion of their
pre-tax wages into the accounts, which may be used to pay
for out-of-pocket medical and dependent care expenses not
otherwise covered under other benefit plans. The accounts
are completely funded by the Employees. However, Cricket
incurs the costs associated with the administration of the
plan by Barney and Barney of San Diego, which is $1,000 per
month.
F. Reimbursement Policies: Cricket also intends to continue
its current practice of reimbursing employees for company-
initiated relocations; approved educational courses at
accredited educational institutions; and fitness
memberships. Cricket estimates that the aggregate monthly
amount payable for the Reimbursement Practices is $67,000.
G. 401(k) Retirement Savings Plan: Leap sponsors a qualified
401(k) retirement savings plan for eligible Employees of
Leap and all of its subsidiaries. Leap and Cricket are in
the process of making Cricket the sponsor of this plan.
The program permits eligible Employees to defer a portion
of their wages into the plan. There are 1,450 participants
in the 401(k) savings plan. The 401(k) plan is funded by
Employees, and Cricket provides a company match equal to
50% of the Employees' contributions, but subject to a
maximum of 6% of the Employees' salary. Under this plan,
Cricket estimates that $232,000 is unpaid as of the
Petition Date and that the aggregate monthly amount payable
is $440,000. Cricket also pays Fidelity Investments, the
company that administers the 401(k) plan, a $5,000
administrative fee per quarter. This fee is typically paid
through a deduction from the 401(k) forfeiture account.
H. Severance: Cricket also intends to continue its current
practice of paying severance benefits to terminated
Employees. While Cricket's Employees are employed as "at-
will" employees, Cricket has generally provided terminated
Employees with severance equal to two weeks salary, plus
one week for every year worked at the company. In
addition, Cricket pays terminated Employees all of their
accrued and unused scheduled paid time off, any
reimbursable expenses outstanding as of the date of
termination, and health-care related reimbursements or
expenses. Cricket is requesting authority, in its
discretion, to continue these practices for Employees
terminated after the commencement of these Cases.
I. Employee Assistance Program: Cricket's Employee Assistance
Program, provided through Integrate Insights, offers
employees confidential counseling and referrals to help
with problems that interfere with an Employee's job or
personal life. The program includes a toll-free number to
access assistance which is staffed 24 hours per day,
confidential counseling sessions, and a web site that
offers information on a variety of health and wellness
topics. The aggregate monthly amount paid by Cricket for
the Employee Assistance Program is $3,000.
J. Vacation and Personal/Sick Leave Policies: Cricket's paid
time off policy applies to all qualifying regular full-time
and part-time Employees who are working at least 20 hours
per week. Paid time off consists of scheduled time off and
unscheduled time off. Regular, full-time Employees are
eligible for 120 to 200 hours of scheduled paid time off
per year, while regular part-time employees are eligible
for 60 to 175 hours of scheduled paid time off per year.
Employees are also allotted unscheduled paid time off at
the beginning of each calendar year or the date of hire.
Unscheduled paid time off does not roll-over from year to
year. The maximum annual allotment of unscheduled paid
time off is 40 hours. The majority of Employees accrue
scheduled paid time off at a rate of 10 hours per month.
An Employee may only carry a maximum of 720 hours of
accrued scheduled paid time off and 40 hours of unscheduled
paid time off at the end of any year. As of the Petition
Date, accrued and unused paid time off was valued at
$5,216,000 or $3,673 per Employee.
Cricket also asks the Court to authorize and direct all
applicable banks and other financial institutions to receive,
process, honor and pay any and all checks drawn on Cricket's
accounts related to Employee Compensation, Deductions and
Benefits, whether presented prior to or after the Petition Date,
after the receipt by each bank and institution of notice of this
authorization, provided only that sufficient funds are on
deposit in the applicable accounts to cover these payments. In
addition, Cricket seeks permission to pay all costs incident to
Employee Compensation and Deductions, including employer
payroll-related taxes and processing costs. Cricket estimates
that the aggregate cost of payment of Employee Compensation,
Deductions and Benefits, and all costs incident thereto, will be
$6,564,000. Cricket further represents that they expect to have
available cash sufficient to pay all Employee Compensation,
Deductions and Benefits, and all costs incident thereto, as
these amounts become due.
Mr. Lurey explains that any delay in paying Employee
Compensation, Deductions or Benefits will destroy Cricket's
relationships with the Employees and irreparably impair employee
morale at the very time when the dedication, confidence and
cooperation of these Employees is most critical. The Debtors
face the imminent risk that their operations may be severely
impaired if Cricket is not immediately granted authority to make
the payments. Employee support for the Debtors' reorganization
efforts is crucial to the success of those efforts, particularly
given the unique knowledge the Employees have of Cricket's
differentiated wireless service and the importance of employee
morale and initiative in meeting strict operating standards and
schedules. At this critical early stage of these Cases, the
Debtors simply cannot risk the substantial disruption to their
business operations that would inevitably attend any decline in
work force morale attributable to Cricket's failure to pay
Employee Compensation, Deductions and Benefits in the ordinary
course.
Mr. Lurey points out that the average cash payout per Employee
of prepetition Employee Compensation, Deductions and Benefits is
less than the $4,650 limit for administrative claims under
Section 507 of the Bankruptcy Code. In certain instances,
however, aggregate Employee Compensation, Deductions, and
Benefits due and owing by Cricket to a particular Employee may
exceed the $4,650 allowable as a priority claim under Section
507(a)(3) or Section 507(a)(4). All but 85 of the Employees are
owed less than $4,650 in wages, salaries, bonuses that are
currently payable and severance. Notwithstanding the $4,650
limitation placed on these claims, for these reasons and in
light of the possibility that certain Benefits including paid
time off may, in fact, constitute administrative claims of these
estates, Cricket should be permitted to pay the Employee
Compensation, Deductions and Benefits.
Mr. Lurey asserts that the Deductions and certain of the
Benefits represent funds that Cricket is not entitled to hold
for any protracted period, since Cricket effectively holds these
amounts in trust and the Employees themselves hold a direct
claim against these funds. Because it is likely that, whatever
the outcome of these Chapter 11 cases, Cricket will ultimately
be required to disgorge funds equivalent to the amount of the
Trust Funds, there is ample justification for the payment of the
Trust Funds to or on the Employees' behalf in the ordinary
course of Cricket's business.
To ensure the Debtors' continued operations, Judge Adler permits
the Debtors to pay the prepetition employee compensation,
deductions, and benefits. (Leap Wireless Bankruptcy News, Issue
No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900)
Leap Wireless' 14.500% bonds due 2010 (LWIN10USR2) are trading
at about 10 cents-on-the-dollar, DebtTraders reports. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=LWIN10USR2
for real-time bond pricing.
LERNOUT: Judge Wizmur Approves Committee's Disclosure Statement
---------------------------------------------------------------
After continuing the hearing on the Disclosure Statement
presented by the Official Unsecured Creditors' Committee (in the
bankruptcy cases involving Lernout & Hauspie Speech Products
N.V.) to give the parties an opportunity to confer, Judge Wizmur
resumed the hearing on April 10 and issued her ruling approving
the Committee's Disclosure Statement and setting the
confirmation process in motion.
To the extent there were objections to the adequacy of the
information in the Disclosure Statement remaining after
announcements of withdrawal made on the record, Judge Wizmur
overrules them.
Judge Wizmur sets the hearing on confirmation of the Committee's
Plan for May 29, 2003 and the deadline for objections to
confirmation of the Plan for May 19, 2003.
Judge Wizmur directs that the holder of any proof of claim to
which there is a pending objection filed on or before April 21,
2003, must file a motion under Rule 3018 of the Federal Rules of
Bankruptcy Procedure on or before May 5, 2003, to have the claim
temporarily allowed for voting purposes. The hearing for
consideration of any Rule 3018 motions is set for May 9, 2003.
The Committee notifies all parties through service of notice of
the entry of the order approving the Disclosure Statement that
it objects, solely for voting purposes, to any Class 3 Claim
that is:
(1) in an unliquidated amount; and
(2) purports to be disputed or contingent and
(3) that has not been previously the subject of an
objection.
In the event that any holder of an objectionable claim brings a
motion seeking temporary allowance Rule 3018, the ballot cast
with respect to that claim will be counted in determining
whether the numerosity requirement of the Bankruptcy Code has
been satisfied, but will not be counted in determining whether
the aggregate dollar amount requirement of the Code has been
satisfied.
Judge Wizmur accepts the Committee's recommendation of a record
date of March 14, 2003, for determining those holders of Claims
entitled to receive a Solicitation Package and which are
entitled to vote on the acceptance or rejection of the Plan.
(L&H/Dictaphone Bankruptcy News, Issue No. 40; Bankruptcy
Creditors' Service, Inc., 609/392-0900)
LTV CORP: Admin. Committee Hires Baker Hostetler as Lead Counsel
----------------------------------------------------------------
The Committee of Administrative Creditors of LTV Steel Company,
Inc., held a meeting and elected William R. Calfee, Executive
Vice President of Cleveland-Cliffs, Inc., as chairperson. In
March, the Committee held a second meeting and elected Lynne
Richardson, Credit Manager-Bankruptcy Group, Air Products &
Chemicals, Inc., as co-chairperson.
Mr. Calfee relates that Baker & Hostetler LLP began providing
services to the Committee on March 5, 2003. Now, the Admin
Committee seeks Judge Bodoh's permission to retain Baker &
Hostetler as its lead counsel. The firm agrees to serve, "in
good faith reliance on its fees and expenses being treated as
wind down claims."
The Baker Hostetler firm will:
(1) prepare applications, motions and other required
filings;
(2) participate as bankruptcy counsel on the Admin
Committee's behalf whenever necessary;
(3) advise, inform and represent the Admin Committee
on all aspects of the bankruptcy process in
connection with the wind down process; and
(4) provide additional tasks as mutually agreed upon
by the Admin Committee and the Firm.
Baker Hostetler advises Judge Bodoh that it was necessary for it
to begin providing services to the Committee before it could
complete the "voluminous conflicts review required by an
engagement of this magnitude." In light of that, the Firm and
the Admin Committee ask Judge Bodoh to approve this Application
now, with a verified statement and disclosure to follow.
Prior to the Petition Date, the Firm discloses that it was
retained by LTV Steel as an ordinary course counsel with regard
to "various matters." No further work was performed by the Firm
after the Petition Date. Jeffrey Baddeley, a partner at Baker &
Hostetler, performed prepetition services for LTV Steel as an
ordinary-course counsel before he joined the Firm. The Firm has
no outstanding receivables owed by LTV Steel.
Before serving as the Admin Committee's counsel, the Firm
provided legal services to Duraloy Technologies, Inc., Park
Corporation doing business as WHEMCO, Nordic Air, Inc., The
Summers Rubber Company, Hanna Steel Corporation, and Anstrom
Cartage Co., regarding preference demands from LTV Steel.
However, the Firm made no appearances on these entities' behalf,
is not handling, and will not be handling the defense of these
preference and avoidance matters.
Furthermore, LTV Steel or a related entity has been listed as a
potentially responsible party regarding the CRS Superfund site
at which Baker & Hostetler represents another potentially
responsible party, Dorn Color, Inc. Dorn has accepted a
settlement offered to de minimis potentially responsible
parties. The settlement awaits court approval. The Firm also
represented a second potentially responsible party -- Ashland
Inc. -- at the same Superfund site, but the primary partner
involved in that representation has left the Firm and, at that
point, Baker & Hostetler ceased that representation.
Baker & Hostetler currently represent two members of the Admin
Committee in matters unrelated to these Chapter 11 cases. These
are GATX Capital Corporation and Bearing Service Co. of
Pennsylvania. The Firm does not and will not represent either
of these parties in connection with these Chapter 11 cases.
Baker & Hostetler also represents a number of entities
affiliated with General Electric. The Firm will not represent
any of those entities in connection with these Chapter 11 cases
or any litigated matters involving General Electric.
However, Baker says that if it becomes necessary for the Admin
Committee to bring a suit against any of the Firm's current
clients, or to contest their claims, it will be necessary for
the Committee to employ a separate counsel to handle that
litigation. In that event, there should be no unnecessary costs
to the estate.
Baker & Hostetler further reports that they have not received a
retainer for this engagement. Matthew R. Goldman, a partner at
Baker & Hostetler, tells Judge Bodoh that the Firm's standard
hourly rates range in the Cleveland office from $125 to $550 for
attorneys, and from $90 to $170 dollars for paraprofessionals.
The principal lawyers working on this matter and their hourly
rates for 2003 are:
Brian A. Bash Partner $410
Matthew R. Goldman Partner $450
Jeffrey A. Baddeley Partner $375
Wendy J. Gibson Partner $315
Shari Heyen Partner $320
Michael A. VanNiel Associate $165
Kelly Burgan Associate $165
Judge Bodoh promptly approves the Admin Committee's request.
(LTV Bankruptcy News, Issue No. 47; Bankruptcy Creditors'
Service, Inc., 609/392-00900)
MCSI INC: Nasdaq Intends to Delist Shares Effective April 25
------------------------------------------------------------
MCSi, Inc., (Nasdaq:MCSI) announced that The Nasdaq Stock Market
has furnished it with a notice of intent to delist its Common
Stock. The notice indicated that the Common Stock was being
delisted due to the Company's failure to comply with certain
Nasdaq Marketplace Rules, including Rules requiring the timely
filing of the Company's annual report on Form 10-K for the year
ended December 31, 2002, the maintenance of a $1 price for its
Common Stock and the payment of Nasdaq's annual fees. The Board
of Directors has determined not to appeal Nasdaq's
determination. The Company expects that the Common Stock will be
delisted from Nasdaq no later than the opening of business on
April 25, 2003. As a result, Nasdaq will change the Company's
trading symbol from "MCSI" to "MCSIE" to reflect the Company's
filing delinquency.
When the Common Stock is delisted, the shares will not be
immediately eligible to trade on the OTC Bulletin Board since,
as noted above, the Company is not current in all of its
periodic reporting requirements pursuant to the Securities
Exchange Act of 1934, as amended. The Common Stock may become
eligible for quotation on the OTC Bulletin Board if a market
maker makes application to register in and quote the security in
accordance with applicable SEC rules, and such application is
cleared. The application cannot be cleared if the Company is not
current in its filing obligations.
Separately, the Company announced that it was not scheduling its
2003 annual shareholders meeting, as it continues to work with
the lenders under its secured credit facility to develop a
restructuring plan. As previously reported, the lenders have
agreed to forbear until May 2, 2003 from exercising certain
remedies available to them as a result of certain defaults under
the credit agreement.
MCSi cannot assure that it will be successful in developing such
a restructuring plan on acceptable terms. If unsuccessful,
following expiration of the forbearance period, the lenders will
be entitled to exercise certain remedies, including an
acceleration of all amounts due under the credit facility.
Gordon Strickland, the Company's President and Chief Executive
Officer, stated: "We were not surprised to receive this notice
of delisting from Nasdaq. However, we are focusing our efforts
developing a long-term restructuring plan with our lenders and
rebuilding the confidence of our customers and suppliers."
MCSi has emerged as the nation's leading systems integrator of
state-of-the-art presentation and broadcast facilities. MCSi's
foresight and ability to converge three key industries: audio-
visual systems, broadcast media and computer technology,
combined with design-build and engineering expertise, computer
networking and configuration services, an extensive product
line, and quality technical support services, has given MCSi a
distinct advantage in the systems integration marketplace and
has contributed to the dramatic growth of the Company.
MCSi's scalable solutions address clients at every level of the
business transaction continuum. Products and services are
available directly through the Company and its sales
specialists, many of whom provide enterprise-wide solutions
and/or work exclusively with clients on strategic and strong
relationships maintained with manufacturers and technology
leaders. With the largest selection of audio-
visual/presentation, computer, and office automation products
and the legacy of technical support and field service at various
locations across the U.S.A. and Canada, MCSi's customers are
provided with a unique value that extends beyond the product.
MCSi's products are also provided over a robust business-to-
business e-commerce platform. Additional information regarding
MCSi can be obtained at http://www.mcsinet.com
MED-TECH LABS: Voluntary Chapter 11 Case Summary
------------------------------------------------
Debtor: Med-Tech Labs, Inc.
1375 S. Fort Harrison Avenue
Clearwater, Florida 33772
Bankruptcy Case No.: 03-07225
Chapter 11 Petition Date: April 9, 2003
Court: Middle District of Florida (Tampa)
Judge: Paul M. Glenn
Debtor's Counsel: David W. Stern, Esq.
David W. Stern, P.A.
602 South Boulevard
Tampa, Florida 33606
Estimated Assets: $1 Million to $10 Million
Estimated Debts: $1 Million to $10 Million
Description of the Business:
Med Tech Labs, Inc. d/b/a Med Services of America (MSA), is
a full-service independent clinical laboratory servicing
the West Coast of Florida from Dunnellon to Fort Myers.
The history of the current operation dates back to 1957.
Med Tech Labs, Inc. is licensed by the State of Florida and
is a certified Medicare and Medicaid provider. The main
laboratory and home office is located at 1375 South Fort
Harrison Avenue in Clearwater, Florida. The facilities are
housed in a 19,668 square-foot building. Housed within the
facility is the main reference laboratory, which comprises
approximately 14535 square feet, materials management,
client services, accounting, billing, administration, and
the central courier station. Within the laboratory testing
area resides an additional 2000 square feet of expansion
area which can accommodate growth of testing to over three
times the current volume. MSA operates 21 Patient Service
Centers on the West Coast of Florida. These are all leased
premises serving as both specimen drop-off points and
patient walk-in centers. The business maintains 26
vehicles and a staff of couriers that pick up specimens and
in some cases hand deliver results when requested by the
physicians.
MISSION RESOURCES: S&P Withdraws Junk-Level Ratings
---------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on oil
exploration and production company Mission Resources Corp. In
addition, the ratings on Mission's senior subordinated notes due
2007 were also withdrawn.
Standard & Poor's most recent corporate credit and subordinate
ratings were 'CCC+' and 'CCC-', respectively, reflecting the
ratings downgrade on April 1, 2003. The ratings prior to
withdrawal reflected Mission's limited liquidity, diminished
financial flexibility, and weak asset coverage.
MSX INT'L: S&P Ratchets Corp. Credit Rating Down to B+ from BB-
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on MSX International Inc. to 'B+' from 'BB-'.
At the same time, the rating on MSX's senior secured bank credit
facility was lowered to 'B+' from 'BB-' and the rating on the
company's $130 million senior subordinated notes was lowered to
'B-' from 'B'. The outlook is negative.
"The downgrade reflects credit protection measures that continue
to be weak for the rating category as a result of depressed end
market conditions for the past two years. Standard & Poor's does
not see favorable prospects for significantly improved credit
measures over the near term, given expected soft demand in the
markets combined with the company's high leverage," stated
Standard & Poor's credit analyst Nancy Messer.
Southfield, Michigan-based MSX is a significant provider of
engineering services, human capital management services, and
other collaborative services, principally to the automotive
industry in the U.S. and Europe. The company expanded rapidly
after its inception in 1996, through a combination of
acquisitions and internal growth. MSX is owned by Citigroup
Inc. and affiliates, and certain members of management;
Citigroup invested $15 million in the company in the form of a
second secured term loan in July 2002.
MSX derives about two-thirds of its revenues from the automotive
industry. The company's plans to penetrate non-automotive
industries, including the telecommunications and computer
industries, have been stymied by weak demand in those markets.
Despite MSX's focus on the design and product development stage
of automotive production, it is, nonetheless, subject to the
cyclical and competitive pressures of the industry.
Market weakness in 2002, which was geographically widespread,
was attributed to postponement of auto product development
efforts and to price pressures on customers, which implemented
severe spending control measures. Revenues for 2002 declined 13%
from 2001 levels, and 2001 revenue fell 10% from 2000, because
of weak demand and pricing pressures in both the automotive and
non-automotive markets and unfavorable sales mix.
Should continuing market pressures prevent an improvement in
credit protection measures, or lead to liquidity or covenant
compliance concerns, the ratings could be lowered.
NATIONAL CENTURY: Court Clears United Therapy Settlement Pact
-------------------------------------------------------------
Prior to the Petition Date, National Century Financial
Enterprises, Inc., and debtor-affiliates loaned money to United
Therapy Network, Inc. pursuant to a Loan Agreement and an
associated Cognovit Promissory Note. The Debtors also provided
financing to United Therapy pursuant to a Sales and Subservicing
Agreement under the NPF XII accounts receivable financing
program. The Debtors have asserted that United Therapy owe them
$1,035,321 under the Sale Agreements.
United Therapy recently approached the Debtors about "buying
out," that is, paying off and settling, United Therapy's
obligations under the Sale Agreements. Furthermore, United
Therapy advised the Debtors that entry into, and consummation of
a settlement agreement, will facilitate United Therapy's entry
into a replacement accounts receivable funding arrangement and
allow United Therapy to continue its business operations.
After arm's-length negotiations, the Debtors and United Therapy
have agreed to a settlement agreement. The principal terms
include:
(a) Settlement Amount
United Therapy must pay to the Debtors $950,000, based on
the amount in the lockbox accounts on February 28, 2003.
Of the Settlement Amount, $893,968 will be paid to
NPF XII, and $56,031 will be paid to NPF Capital, Inc.
(b) Release of Security Interests
Upon payment, the Debtors will release their ownership
interest and security interest in United Therapy's assets.
The Debtors will also transfer their ownership interest in
the accounts receivable to United Therapy.
(c) Mail Forwarding Instructions
United Therapy will inform the Debtors where to send any
payments or correspondence that the Debtors receive in
their lockboxes related to United Therapy's accounts
receivable. United Therapy will be responsible for
informing all third party payors as to where incoming
payments should be redirected.
(d) Transfer of Liens to Proceeds
The conclusion of the relationship between the Debtors and
United Therapy, and the release of the Debtors' security
interests under the Sale Agreements in United Therapy's
assets, bind any and all parties that may assert a lien,
claim or interest in or to the Sale Agreements or any
prior agreements, with any liens transferring to the
proceeds.
(e) Mutual Releases
The Settlement Agreement also provides for an exchange of
mutual releases by the Debtors and United Therapy.
(f) Termination of Bank Agreements
The Debtors and United Therapy must direct the Huntington
National Bank to:
(1) terminate the lockbox agreements related to the Sale
Agreements,
(2) remit all funds in the account on or before Feb. 28,
2003 to the account specified by the Debtors,
(3) remit all post-February 28, 2003 received funds
subject to the lockbox agreements to the credit and
direction of United Therapy,
(4) terminate the zero balance agreement relating to the
Sale Agreements, and
(5) use reasonable efforts to provide United Therapy with
documents relating to account activity in these
accounts.
United Therapy will be responsible for all bank fees and
charges related to the lockbox accounts after February 28,
2003.
(g) Dismissal of Actions
On the Closing Date, the Debtors will execute and
deliver to United Therapy stipulations of dismissal, with
prejudice, of the adversary proceedings pending against
United Therapy in this Court, and any Ohio state court
Action and an Acknowledgment of Satisfaction of Judgment
of the judgment entered in NPF Capital, Inc.'s favor and
against United Therapy in the Superior Court for the State
of California, County of San Bernardino.
Accordingly, the Debtors ask the Court to:
-- approve the Settlement Agreement with United Therapy, and
-- authorize the Debtors to implement the Settlement
Agreement.
If the settlement is not consummated, United Therapy will be
unable to obtain replacement financing on a timely basis and
likely will not be able to continue normal business operations.
United Therapy's Chapter 11 case could be converted to a case
under Chapter 7 as a result. If that were to occur, the
Debtors' prospects for recovery of their claims against United
Therapy would be diminished substantially. Under these
circumstances, the Debtors assert that the Settlement Agreement
represents the most favorable possible outcome regarding their
claims against United Therapy. Moreover, the relevant creditor
constituencies have advised the Debtors that they support the
proposed settlement.
In addition, the Debtors submit that the proposed transfer of
ownership and security interests under the Settlement Agreement
satisfies the requirements of Section 363 of the Bankruptcy
Code.
The Debtors propose to transfer the Purchased Receivables free
and clear of any and all liens, claims, encumbrances or other
interests therein, pursuant to Section 363(f) of the Bankruptcy
Code.
* * *
After due deliberation, Judge Calhoun authorizes the Debtors to
enter into the Proposed Settlement Agreement with United Therapy
Network, Inc. (National Century Bankruptcy News, Issue No. 14;
Bankruptcy Creditors' Service, Inc., 609/392-0900)
NATIONAL STEEL: Court Approves Asset Sale to U.S. Steel Corp.
-------------------------------------------------------------
National Steel Corp., announced that the United States
Bankruptcy Court for the Northern District of Illinois has
approved the sale to United States Steel Corporation of
substantially all of National Steel's principal steelmaking and
finishing assets and iron ore pellet operations pursuant to the
terms of the asset purchase agreement between the parties. The
asset purchase agreement with U.S. Steel provides for the
payment of $850 million in cash at closing and the assumption of
certain liabilities of approximately $200 million.
As previously announced, U.S. Steel emerged as the highest and
best bidder in a competitive auction held on April 16 and 17 for
substantially all of National Steel's principal steelmaking and
finishing assets and iron ore pellet operations, subject to
bankruptcy court approval.
Completion of the transaction remains subject to certain
conditions with a final closing expected by the end of May.
National Steel filed voluntary petitions for reorganization
under Chapter 11 in the U.S. Bankruptcy Court for the Northern
District of Illinois in Chicago on March 6, 2002.
Headquartered in Mishawaka, Indiana, National Steel Corporation
is one of the nation's largest producers of carbon flat-rolled
steel products, with annual shipments of approximately six
million tons. National Steel employs approximately 8,200
employees. For more information about the company, its products
and its facilities, please visit National Steel's Web site at
http://www.nationalsteel.com
NAT'L STEEL: US Steel Pleased with Asset Purchase Pact Approval
---------------------------------------------------------------
United States Steel Corporation (NYSE: X) confirmed that U.S.
Bankruptcy Court in Chicago has approved its purchase of
National Steel Corporation's integrated steel assets. U. S.
Steel also announced that it has signed a definitive Asset
Purchase Agreement with National, which was approved by the
bankruptcy court earlier today.
"We are extremely pleased that we have emerged as the successful
bidder for National's world-class assets," said U. S. Steel
Chairman and Chief Executive Officer Thomas J. Usher. "The
acquisition of these assets will be a significant step forward
in our strategy to grow profitably and to strengthen our
position as a leading global provider of high value-added steel
products. The Bush Administration's steel trade program has been
key in allowing the American industry to consolidate.
"Having bankruptcy court approval, we can now direct our full
attention toward closing the transaction as soon as possible and
ensuring a seamless integration of our domestic businesses. We
look forward to welcoming the skilled workforce of National as
we begin this new era in our company's history. We also thank
the many customers, suppliers, employees and community leaders
who supported our acquisition."
Under the terms of the agreement, U. S. Steel will purchase
substantially all of National's steelmaking and steel finishing
assets and the assets of National Steel Pellet Company for $1.05
billion, including $850 million in cash and the assumption of
$200 million of National's lease and contractual obligations.
The agreement provides that net working capital will be at least
$450 million on the closing date. U. S. Steel intends to fund
the cash component of the acquisition through a combination of
existing cash balances, credit facilities, and the issuance of
debt securities. U. S. Steel will not assume any liabilities
related to National's pension plans, which have been terminated
by the Pension Benefit Guaranty Corporation, nor will it assume
National's defined benefit retiree medical and life insurance
plans and, consistent with the U. S. Bankruptcy Code, the
transaction will exclude all liabilities except as have been
agreed to by U. S. Steel. The transaction is expected to close
later in the second quarter and is subject to customary closing
conditions.
"Our new groundbreaking agreement with the Steelworkers union
sets the framework for U. S. Steel to operate the combined
facilities with a more variable and world competitive cost
structure, while allowing for the humane consolidation of the
domestic steel industry, which is necessary for its survival,"
Usher added. The new labor agreement provides for a workforce
restructuring through which U. S. Steel expects to achieve
productivity improvements of at least 20 percent at both U. S.
Steel and National facilities.
U. S. Steel will record liabilities related to current active
National employees primarily for future retiree medical costs,
subject to certain eligibility requirements. These liabilities
are broadly estimated at $290 million and include at least $35
million for early retirement incentives and lump sum payments to
the Steelworkers Pension Trust, which will have a cash impact in
2003. The Steelworkers Pension Trust is a multi-employer pension
plan to which U. S. Steel will make defined contributions per
hour worked for all National union employees who join U. S.
Steel.
Based on a preliminary assessment, the company expects annual
acquisition synergies of at least $200 million within two years
of completing the transaction, plus the elimination of costs
related to National's pension and retiree medical and life
insurance plans, which have not been assumed by U. S. Steel.
These savings are expected to result from a number of actions
including increased scheduling and operating efficiencies, the
elimination of redundant overhead costs, the reduction of
freight costs and the effects of the new labor contract as it
relates to active employees at the acquired National facilities.
Savings related to application of the new labor contract to
existing U. S. Steel facilities are in addition to this synergy
amount. In total, the transaction is expected to be accretive to
U. S. Steel's earnings and cash flow within the first year.
Implementation of the new labor agreement and related actions
for U. S. Steel employees and retirees will result in charges of
at least $400 million, of which approximately $115 million for
early retirement incentives will have a cash impact in 2003. The
balance mainly relates to the recognition of deferred actuarial
losses as a result of an expected 2003 pension plan curtailment
triggered by the anticipated early retirements. The agreement
also enables U. S. Steel to significantly reduce its employee
and retiree healthcare expenses through the introduction of
variable cost sharing mechanisms. U. S. Steel also anticipates
realigning its non-represented staff in the near-term so as to
achieve significant productivity gains, the effects of which are
not reflected in the foregoing amounts.
In its order approving the sale, the Court found, among other
things: that the U. S. Steel offer is the highest and otherwise
best offer, that U. S. Steel will acquire the assets free and
clear of all mortgages, liens, and charges, that U. S. Steel
will provide a greater recovery for National's creditors than
would be provided by any other practical available alternative,
and that the sale must be approved and consummated promptly in
order to preserve the viability of National's business as a
going concern.
Under the Asset Purchase Agreement with National, U. S. Steel
will acquire facilities at National's two integrated steel
plants, Great Lakes Steel, in Ecorse and River Rouge, Mich., and
the Granite City Division in Granite City, Ill.; the Midwest
finishing facility in Portage, Ind., near Gary, Ind.; ProCoil
Corporation in Canton, Mich.; National Steel Pellet Company's
iron ore pellet operations in Keewatin, Minn., and various other
subsidiaries; and joint-venture interests, including National's
share of Double G Coatings, L.P. in Jackson, Miss.
For more information about U. S. Steel visit its Web site at
http://www.ussteel.com
NATIONAL STEEL: USWA Lauds Selection of US Steel as Best Bidder
---------------------------------------------------------------
The United Steelworkers of America (USWA) praised the decision
of National Steel's Board of Directors in selecting US Steel as
the highest and best bidder for purchase of National's assets.
"We believe this decision presents the Bankruptcy Court with the
opportunity to advance the humane consolidation of the American
steel industry that our Union has been working toward for more
than two years," said USWA president Leo W. Gerard.
"Obviously the fact that US Steel proved successful in
negotiating an innovative and enlightened labor agreement with
us helped make this decision possible.
"We've managed to put behind us many contentious issues that
have plagued us for years," Gerard added, "and look forward to
the possibility of moving into a new era of mutual respect for
the contributions our members can make toward increased output
and productivity at US Steel, as we have with International
Steel Group."
Gerard reiterated the importance the Union placed in securing
defined benefit pensions and health care benefits for retirees
of both US Steel and National Steel as part of the tentative
agreement that the Union has reached.
NORTHWEST AIRLINES: Names Robert Isom SVP for Customer Service
--------------------------------------------------------------
Northwest Airlines (Nasdaq: NWAC) announced that Robert Isom has
been named senior vice president-customer service, replacing
Dirk McMahon.
Fred Deschamps, currently managing director-finance and
administration-Pacific, will be promoted to vice president and
replace Isom as vice president-international. The appointments
are effective April 25.
"We are very disappointed that Dirk has decided to leave
Northwest Airlines. He has been an important member of the
senior management team and led the airline's drive to deploy
technology and improve customer service at all locations," said
Richard Anderson, chief executive officer.
"Dirk's operations knowledge and leadership skills were key
drivers of our success in two major initiatives: managing the
airline's ground operations after September 11 and operating our
new WorldGateway terminal at Detroit. During his 18 years of
service to Northwest, Dirk's contributions have been
extraordinary. He has been a great colleague and friend to all
of us and to me personally. We wish him every success,"
Anderson added.
"A continuing Northwest hallmark is its executive bench strength
as evidenced by Robert Isom, whose strong operational experience
both at Northwest and America West make him a logical successor
to Dirk McMahon. Robert returns to the U.S. after overseeing our
international operations in the Pacific."
"Robert inherits a great customer service team that is focused
on making our customers' travel experiences as hassle-free and
efficient as possible," Anderson added.
Since August 2001, Isom has been vice president-international,
responsible for the company's Pacific Division administrative,
financial and operations functions. He also had commercial
responsibility for Pacific operations outside of Japan.
Isom rejoined Northwest in 2000 from America West Airlines where
he held executive positions in operations, finance and revenue
management.
Before America West, he worked for Northwest from 1991 through
1995 in positions of increasing responsibility in strategy and
finance. From 1987 through 1989, Isom held customer service and
logistics management positions at Procter & Gamble.
Fred Deschamps has been managing director-finance and
administration for Northwest's Pacific Division in Tokyo since
2000. Since joining Northwest in 1992, Deschamps has served as
director-international pricing & revenue management and held
positions in international yield management and revenue
planning. Prior to joining Northwest, he was a computer systems
consultant for Computer Science Corporation.
Commenting on Deschamps' promotion, Phil Haan, executive vice
president of international, sales and information services,
said, "Fred's eleven years of international experience with our
airline will be invaluable as Northwest continues to execute its
strategic long-term growth plan in the Asia/Pacific region."
Isom has undergraduate degrees in mechanical engineering and
english from the University of Notre Dame, and a master's in
business administration degree from the University of Michigan.
Deschamps holds a master's in business administration degree
from The Kellogg School at Northwestern University, and a
bachelor of arts degree in mathematics and economics from
Macalester College.
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' 10.150% bonds due 2005 (NWAC05USR2) are
trading at about 85 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=NWAC05USR2
for real-time bond pricing.
ORBIMAGE: OrbView-3 Imaging Satellite Arrives at Launch Site
------------------------------------------------------------
ORBIMAGE announced that OrbView-3, its 1-meter resolution
imaging satellite, has arrived at the mission launch site at
Vandenberg Air Force Base, California. OrbView-3 is scheduled
for launch aboard Orbital Sciences' Pegasus rocket into
low-Earth orbit within the next 45 days.
OrbView-3 will soon undergo a series of post-shipment tests and
will then be integrated with the Pegasus rocket at Orbital's
VAFB facilities. A team of Orbital Sciences and ORBIMAGE
engineers will then perform a series of pre-launch combined
systems tests to ensure that the systems of OrbView-3 and
Pegasus are functioning together as planned.
"We are now poised to begin a new chapter at ORBIMAGE with the
successful launch of OrbView-3," said Matt O'Connell, ORBIMAGE's
CEO. "This long awaited milestone is a critical element to our
total reorganization plan. Following the successful launch of
OrbView-3, ORBIMAGE will then emerge from Chapter 11 with the
industry's best balance sheet and over $300 million in contract
backlog to fulfill."
The spacecraft was developed and built for ORBIMAGE by Orbital
Sciences Corporation (NYSE: ORB) at its satellite manufacturing
facility in Dulles, Virginia. OrbView-3 will be one of the
world's first commercial satellites to provide high-resolution
imagery from space. OrbView-3's high-resolution camera will
acquire one-meter resolution panchromatic (black and white) and
four-meter resolution multispectral (color) imagery. This
imagery will be valuable to customers around the world for a
wide-range of commercial, government and consumer applications.
With the ability to image virtually anywhere in the world within
three days, ORBIMAGE has established a global distribution
network to produce and deliver basic imagery as well as high-
resolution value-added products.
ORBIMAGE is a leading global provider of Earth imagery products
and services, with a planned constellation of four digital
remote sensing satellites. The company currently operates the
OrbView-1 atmospheric imaging satellite launched in 1995, the
OrbView-2 ocean and land multispectral imaging satellite
launched in 1997, and a worldwide integrated image receiving,
processing and distribution network. OrbView-3 is currently
scheduled for launch in early June. ORBIMAGE is also the
exclusive U.S. distributor of worldwide imagery from the
Canadian RADARSAT-2 satellite, planned for launch in 2004.
ORBIMAGE also offers the SeaStar Fisheries Information Service,
which provides fish finding maps derived from OrbView-2
satellite imagery of the world's oceans to fishing customers
worldwide.
More information about ORBIMAGE including details about the
OrbView-3 satellite can be found at http://www.orbimage.com
ORBITAL SCIENCES: S&P Ups Rating to B+ over Better Fin'l Profile
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its corporate credit
rating on Orbital Sciences Corp., to 'B+' from 'B'. The outlook
is stable.
"The upgrade reflects the company's improved financial profile
and the settlement agreement with bankrupt subsidiary ORBIMAGE,"
said Standard & Poor's credit analyst Christopher DeNicolo. The
ORBIMAGE settlement requires a $2.5 million payment by Orbital
to ORBIMAGE upon the launch of the OrbView-3 satellite. In
addition, daily penalties (up to a total of $5 million in
aggregate) will apply if the satellite is not launched by
April 30, 2003, or checked out by Aug. 1, 2003. Orbital has $174
million in debt and leases.
The ratings on Dulles, Virginia-based Orbital reflect the
company's modest size and somewhat high debt leverage, offset by
leading positions in market niches and increased military
spending, especially for National Missile Defense.
Orbital is a leading provider of small launch vehicles and small
geostationary communications satellites, as well as boost
vehicles and targets for the U.S. NMD program. The company has
divested a number of units over the past two years to focus on
its core launch vehicle and satellite operations. The launch
vehicle segment has been bolstered by a contract with Boeing
Co., valued at almost $1 billion over the next seven years, to
develop the booster for one segment of the U.S. NMD program.
Orbital's Pegasus and Taurus small launch vehicles have been
affected by weakness in the overall launch services market. The
GEO satellite program had been operating at a loss due to
development costs, but is now profitable. Demand for
communications satellites has been weak due to overcapacity, but
the company's small GEO satellites could benefit from their
lower capital costs and ability to add incremental capacity.
Orbital's near-term liquidity has improved due to successful
refinancing of its $100 million subordinated notes in August
2002, and now has no significant debt maturities until 2006.
Orbital remains somewhat highly leveraged, with total debt to
capital around 55%. Profitability improved significantly in
2002, reversing net losses the past two years, due to the
turnaround in the company's satellite operations and the
elimination of the exposure to bankrupt subsidiary ORBIMAGE.
Operating margins were over 11% in 2002. Cash generation also
improved in 2002, with funds from operations to debt a
respectable 27%. However, free cash flow was negative, due
largely to the payment of around $50 million in vendor
financing, as well as modest capital expenditures. Further
increases in profitability and positive free cash flow are
expected in 2003.
Revenues, profitability, and cash flows are expected to benefit
from the NMD contract, improved satellite operations, and the
settlement of the ORBIMAGE contingency, resulting in modest
improvement to the company's overall financial profile over the
intermediate term.
PAC-WEST TELECOMM: Will Publish 1st Quarter Results by Month-End
----------------------------------------------------------------
Pac-West Telecomm, Inc. (Nasdaq: PACW), a provider of integrated
communications services to service providers and business
customers in the western U.S., announced the date for its first
quarter 2003 earnings release and conference call.
Pac-West plans to announce its financial and operating results
for the first quarter 2003 on Wednesday, April 30, 2003, after
market close. An investor conference call will be held on
Thursday, May 1, 2003 at 8:30 a.m. Pacific Time/11:30 a.m.
Eastern Time. Investors are invited to participate by dialing 1-
888-291-0829 or 706-679-7923. The call will be simultaneously
webcast on Pac-West's Web site at
http://www.pacwest.com/investor An audio replay will be
available through May 8, 2003 by dialing 1-800-642-1687 or 706-
645-9291 (passcode #9855623).
Founded in 1980, Pac-West Telecomm, Inc., is one of the largest
competitive local exchange carriers headquartered in California.
Pac-West's network carries over 100 million minutes of voice and
data traffic per day, and an estimated 20% of the dial-up
Internet traffic in California. In addition to California, Pac-
West has operations in Nevada, Washington, Arizona, and Oregon.
For more information, please visit Pac-West's Web site at
http://www.pacwest.com
* * *
As reported in Troubled Company Reporter's November 20, 2002
edition, Standard & Poor's lowered its corporate credit
rating on competitive local exchange carrier Pac-West Telecomm
Inc., to 'CC' from 'CCC-'.
The senior unsecured debt rating on the company remains at 'C'.
The ratings were removed from CreditWatch with negative
implications. The outlook is negative. At the end of September
2002, Stockton, California-based Pac-West had total debt of more
than $106 million.
POLYONE: S&P Rates Proposed $250-Million Sr. Unsec. Notes at BB-
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB-' rating to
PolyOne Corp.'s proposed $250 million senior unsecured notes due
2010.
In addition, the 'BB-' corporate credit and senior unsecured
debt ratings on the company remain on CreditWatch with negative
implications, where they were placed on March 23, 2003, due to
elevated refinancing risk. Cleveland, Ohio-based PolyOne, with
$2.5 billion of annual sales and approximately $584 million of
outstanding debt, is a global polymer services company.
Proceeds of the notes will be used to make an $88 million debt
payment coming due in September 2003 and to refinance other
existing financial obligations. As part of the refinancing,
PolyOne will enter into a revised three-year, $50 million
revolving bank credit facility and a new three-year, $225
million accounts receivables sale facility.
"The proposed debt issue is part of a refinancing plan that will
improve the company's liquidity and financial profile," said
Standard & Poor's credit analyst Peter Kelly. The ratings were
lowered on March 23, 2003, to reflect the ongoing challenging
industry fundamentals that have weakened the financial profile
and to reflect increasing pressure on the company's liquidity
and financial profile.
Standard & Poor's said that the CreditWatch placement indicates
that ratings could be lowered again if the refinancing is
unsuccessful. Consequently, Standard & Poor's will monitor the
progress of the refinancing. Nevertheless, the ratings
incorporate the expectation that the refinancing effort will be
successful. If completed, the ratings will be affirmed and
removed from CreditWatch.
RECOTON CORP: Gemini Acquiring Electronics Accessories Business
---------------------------------------------------------------
Gemini Industries, Inc., reached an agreement with Recoton
Corporation (Nasdaq: RCOTQ) to acquire its consumer electronics
accessories business. As part of this agreement, Gemini and
Recoton have also entered into a transition agreement which,
among other things, will provide Recoton's customer base with a
continuity of timely delivery of products and the essential
service they have received for over 60 years.
The proposed transaction, which follows Gemini's acquisition of
Zenith's accessories business in July 2001, will create one of
the largest manufacturers and distributors of consumer
electronics accessories in the world, with an unparalleled
portfolio of strong consumer brand names including Gemini's
Philips(R), Zenith(R), Magnavox(R), Southwestern Bell(R) and For
Dummies(R) brands, as well as Recoton's Jensen(R), Acoustic
Research(R), Advent(R), Discwasher(R) and Ambico(R) brands for
accessory products. With its increased size and scale, Gemini
will be positioned to serve the needs of the large national and
international retail chains that comprise the largest and
fastest growing channel for distribution of consumer electronics
accessories.
Recoton is a global leader in the development and marketing of
consumer electronics accessories, audio products, automotive
electronics and camcorder products.
Recoton filed a voluntary petition to reorganize under Chapter
11 of the U.S. Bankruptcy Code on April 8, 2003 in the Southern
District of New York. The acquisition and transition agreements
are subject to Bankruptcy Court approval as well as customary
closing conditions.
In support of the transaction and Gemini's growth plan, Gemini
has raised new funding from Boston-based Parthenon Capital LLC.
Michael O'Neal, Chief Executive Officer, of Gemini, commented,
"We highly value the Recoton accessories business because it is
so complementary to our current business, enhancing Gemini's
existing business in a number of key areas. In particular, the
acquisition will establish Gemini as a global leader in its
market, provide access to new customers to diversify our retail
distribution and expand our product portfolio through the
addition of new brands, categories and technologies. This will
enhance our competitiveness and put us in a stronger position to
serve the large, in many cases global, retailers that have
emerged as the marketplace has consolidated."
Mr. O'Neal continued, "This acquisition is a significant next
step in Gemini's long-term growth strategy. Over the past two
years, we have leveraged Gemini's historic service strengths and
introduced new merchandising strategies, brands and product
offerings to expand our business base and increase revenue and
profitability. We now look forward to serving the needs of
Recoton's existing customers and to building on our momentum
through a number of attractive growth opportunities, including
further development of our premium cable and wireless
businesses."
Founded in 1964, Gemini Industries, Inc., is a leading retail
distributor of accessory products that connect and integrate
consumer electronic and communications components/devices.
Headquartered in Clifton, New Jersey, Gemini sells over 1,800
products comprising a full assortment of consumer electronics
accessories including headphones, antennas, audio/video cables,
surge protectors, telephone accessories and CD media products.
Gemini's primary customers include mass merchant, discount and
specialty retailers such as Wal-Mart, Kmart, Target, Sears, Best
Buy, Circuit City, Menards, Lowes, TruServ and CVS.
York Management Services, Inc., a private investment and
management advisory services company headquartered in Somerset,
New Jersey, acquired Gemini Industries in June 2000. York's
principal activity is the acquisition of platform companies, as
well as troubled or under-performing companies. For more
information, visit http://www.yorkmanagementservices.com
Parthenon Capital LLC, with offices in Boston and San Francisco,
is a $1.1 billion private equity firm focused on providing
capital and strategic resources to enable middle-market
companies to achieve their Full Potential(TM). For more
information, visit http://www.parthenoncapital.com
RECOTON CORP: Taps Stroock & Stroock as Bankruptcy Counsel
----------------------------------------------------------
Recoton Corporation and its debtor-affiliates ask for permission
from the U.S. Bankruptcy Court for the Southern District of New
York to retain and employ Stroock & Stroock & Lavan LLP as their
Bankruptcy Counsel.
Recoton says that it needs Stroock to:
a) advise the Debtors with respect to their powers and
duties as debtors-in-possession;
b) assist the Debtors in negotiating and formulating and
taking the necessary legal steps to confirm a chapter 11
plan of reorganization or liquidation;
c) prepare and file all necessary all necessary
applications, motions, orders, reports, adversary
proceedings, responses, pleadings and documents;
d) represent the Debtors at hearings and proceedings;
e) prosecute and defend all actions and proceedings by or
against the Debtors;
f) represent and negotiate on behalf of the Debtors
regarding any sale of assets;
g) counsel and represent the Debtors regarding the
assumption and rejection of executory contracts and
unexpired leases and analyze claims and negotiate all
matters with creditors on behalf of the Debtors; and
h) perform all other legal services for the Debtors which
may be desirable and necessary for the efficient and
economic administration of these chapter 11 cases.
The Debtors argue that Stroock is well suited to represent the
Debtors during these cases. Stroock has the requisite expertise
on matters that are likely to arise on these cases including
handling bankruptcy and debt reorganization problems and
procedures arising in the reorganization framework.
Additionally, attorneys at Stroock have a unique understanding
of the Debtors' complex business operations, having represented
the Debtors in numerous corporate matters since 1991.
The attorneys who will primarily work on these matter and their
billing hourly rates are:
Lawrence M. Handelsman Partner $725 per hour
Theodore S. Lynn Partner $650 per hour
David W. Lowden Counsel $440 per hour
Kristopher M. Hansen Associate $495 per hour
Eric M. Kay Associate $465 per hour
A. Victor Glaser Associate $310 per hour
Erynne Dowe Associate $255 per hour
Peter Lee Associate $255 per hour
Recoton Corporation, together with its subsidiaries, is engaged
in the development, manufacturing and marketing of consumer
electronics accessories and home and mobile audio products. The
Company filed for chapter 11 protection on April 8, 2003 (Bank.
S.D.N.Y. Case No. 03-12180). Kristopher M. Hansen, Esq., and
Lawrence M. Handelsman, Esq., at Stroock & Stroock & Lavan LLP
represents the Debtors in their restructuring efforts. When the
Company filed for protection from its creditors, it listed
$233,649,054 in total assets and $234,605,283 in total debts.
SENIOR HOUSING: Selling $150-Million of 7-7/8% Senior Notes
-----------------------------------------------------------
Senior Housing Properties Trust is a real estate investment
trust, or REIT, which invests in senior housing properties,
including apartment buildings for aged residents, independent
living properties, assisted living facilities and nursing homes.
The Housing Trust is offering $150,000,000 aggregate principal
amount of its 7-7/8% senior notes due 2015. Interest on the
notes will be payable semi-annually on April 15 and October 15
each year, beginning October 15, 2003. The Housing Trust expects
to apply the net proceeds from this offering to repay amounts
outstanding under its revolving bank credit facility and the
remainder for general business purposes.
The Company may redeem the notes, in whole or in part, at any
time on or after April 15, 2008, at a redemption price equal to
100% of the principal amount thereof plus any premium, plus
accrued and unpaid interest. In addition, the Company may redeem
up to 35% of the notes prior to April 15, 2006, with the net
cash proceeds from qualified equity offerings.
There is no sinking fund. The notes are Senior Housing
Properties Trust's senior unsecured obligations and will rank
equally with all of its other existing and future unsecured
senior indebtedness. The notes will be effectively subordinated
to all liabilities of its subsidiaries and to its secured
indebtedness.
The notes will not be listed on any national securities exchange
or traded on the Nasdaq system.
The underwriter has agreed to purchase the notes from Senior
Housing Properties Trust at 97.621% of their principal amount
for total net proceeds to Senior Housing Properties Trust of
approximately $146.4 million, before deducting expenses. The
underwriter proposes to offer the notes from time to time for
sale in one or more negotiated transactions, or otherwise, at
varying prices to be determined at the time of each sale.
The notes will be ready for delivery in book-entry form only
through The Depository Trust Company on or about April 21, 2003.
As reported in Troubled Company Reporter's July 12, 2002
edition, Standard & Poor's raised its senior unsecured debt
rating on Senior Housing Properties Trust to double-'B'-plus
from double-'B'. The double-'B'- plus corporate credit rating
was also affirmed. Additionally, the double-'B'-minus rating on
SNH Capital Trust I's trust preferred securities was affirmed.
The outlook is stable.
The raising of the senior unsecured debt rating is driven by the
company's reduced encumbrance level, following transactions that
have grown the asset base and reduced the level of secured debt.
Most recently, the company negotiated a new unsecured line of
credit that replaced a previous secured line of credit that was
collateralized by the company's most productive assets.
SMITHWAY MOTOR: Lenders Ease Fin'l Covenants Under Credit Pact
--------------------------------------------------------------
Smithway Motor Xpress Corp., (Nasdaq: SMXC) announced financial
and operating results for the fourth quarter and year ended
December 31, 2002. The Company also announced that it has
negotiated amendments to its primary credit facilities and has
filed its annual report on Form 10-K with the SEC. Finally, the
Company commented on its expectations concerning financial
results for the first quarter of 2003.
For the quarter, operating revenue decreased approximately 7.9%
to $39.7 million from $43.1 million for the corresponding
quarter in 2001. Smithway's net loss was $4.7 million compared
with net loss of $2.3 million for the same quarter in 2001.
For the year, operating revenue decreased approximately 11.2% to
$169.5 million from $190.8 million in 2001. The Company's net
loss in 2002 was $8.7 million compared with net loss of $5.2
million for 2001.
The fourth quarter results included pre-tax adjustments of $5.1
million, comprised of a $3.3 million write-off of goodwill
associated with prior acquisitions and a $1.8 million increase
in auto liability and workers' compensation loss reserves. The
fourth quarter of 2001 included $1.1 million in pre-tax
adjustments, including a $707,000 write-off of the carrying
value of its proprietary computer operating system and a
$332,000 increase in its reserve for bad debts. The Company's
net loss prior to these adjustments would have been $1.6 million
for the fourth quarter and $5.6 million for the year ended
December 31, 2002. This compares to a net loss before
adjustments of $1.7 million for the fourth quarter of 2001 and
$4.6 million for the year 2001. The main contributors to the
loss before adjustments in 2002 were decreased revenue
production of the tractor fleet, decreased brokerage revenue,
and increased parts and maintenance expense. Management believes
that presentation of earnings calculated to exclude the impact
of the adjustments is useful to investors in comparing of the
Company's results of operations from period to period.
Chairman, President, and Chief Executive Officer William G.
Smith stated, "During the fourth quarter we continued to pursue
our previously announced core goals of improving revenue per
seated tractor, improving our van operation's performance,
decreasing our number of tractors without drivers, and
continuing our commitment to safe operations. For the quarter,
average revenue per seated tractor per week decreased by
approximately 1.0% versus the fourth quarter of 2001 as a one
cent increase in revenue per loaded mile was more than offset by
fewer revenue miles per tractor. During the quarter, our number
of seated tractors remained essentially constant.
Finally, we continue to be very pleased with our safety record.
In 2002 the Company had its best safety year, in terms of
accidents per million miles, since going public in 1996. The
increase in auto liability reserves during the fourth quarter
related to a change in estimating the ultimate cost of claims
that occurred in prior years."
The Company also announced that it filed its annual report on
Form 10-K for the year ended December 31, 2002, with the
Securities and Exchange Commission on April 15, 2003. The
Company previously had filed for an extension of the filing date
from March 31 to April 15. The Company filed for the extension
because, in connection with the amendments to the Company's
financing arrangements discussed below, the Company and its
outside auditors required additional time to review the impact
of the amendments on the Company's financial statements and to
finalize the audit report.
Between late March and mid April, the Company negotiated
amendments to its financing arrangement with LaSalle Bank as
well as its equipment financing arrangement with a manufacturer.
The Company had been in violation of certain financial covenants
under the LaSalle facility at December 31 and expected to be in
violation under both the LaSalle Agreement and the equipment
financing with the manufacturer at March 31. The Company
obtained waivers of all violations and negotiated amendments to
the financial covenants under both arrangements going forward.
Under the LaSalle amendments the interest rate was raised by 200
basis points and the facility's maturity is now April 1, 2004.
Commenting on the amendments to the Company's financing
arrangements, Mr. Smith stated: "We are pleased that our lenders
have agreed to modify our financial covenants to better align
them with management's expectations regarding the Company's near
term financial performance. For the first quarter of 2003, the
Company expects to report operating revenue of approximately $40
million, and a net loss of approximately $1.6 to $1.7 million.
The net loss is expected to be less than the net loss in the
first quarter of 2002, on a revenue base of approximately $1.3
million less. Based upon anticipated results, we believe that
continued compliance with the revised covenants is reasonably
achievable."
Smithway is a truckload carrier that hauls diversified freight
nationwide, concentrating primarily on the flatbed segment of
the truckload market. Its Class A Common Stock is traded on the
Nasdaq National Market under the symbol "SMXC."
Smithway Motor Xpress' December 31, 2002 balance sheet shows
that its working capital deficiency has widened to about $4
million, while its net capital has dwindled to about $23 million
from about $32 million a year ago.
SPIEGEL GROUP: Hires Sullivan & Cromwell as Special Counsel
-----------------------------------------------------------
The Spiegel Inc., and its debtor-affiliates are undergoing
investigation by the U.S. Securities and Exchange Commission
concerning their compliance with their disclosure obligations
under the United States securities laws. The SEC Investigations
address a number of issues including:
(a) those issues concerning the Debtors' failure to file
reports under the Securities and Exchange Act of 1934 when
due;
(b) the accuracy of statements Spiegel made in its notices
that the 1934 Act reports would be filed late; and
(c) allegations that Spiegel's reports omitted material
information, including the alleged belief of the Debtors'
auditors that their report on the Debtors' 2001 financial
statements would include a "going concern" qualification.
The SEC Investigation has resulted in the entry of a Partial
Final Judgment and Order of Permanent Injunction and Other
Ancillary Relief on March 11, 2003 in United States Securities
and Exchange Comm'n v. Spiegel, Inc., 03 C 1685.
In connection with the SEC Investigations, a special committee
of the Spiegel Board of Directors engaged Sullivan & Cromwell
LLP on February 13, 2003 to represent Spiegel. Since that time,
Sullivan & Cromwell has become highly knowledgeable concerning
the subjects of the investigation and concerning the Partial
Final Judgment.
In view of their Chapter 11 filing, the Debtors sought and
obtained the Court's authority to continue Sullivan & Cromwell's
employment as special counsel. Spiegel Vice President and
General Counsel Robert Sorenson, Esq., informs the Court that
Sullivan & Cromwell will:
-- continue representing the Debtors in the ongoing SEC
Investigation, in cooperation with and assisting the
independent examiner appointed under the Partial Final
Judgment; and
-- represent them in several federal securities class actions
pending in the Northern District of Illinois;
The Debtors will compensate Sullivan & Cromwell in accordance
with the firm's hourly rates:
Partners $575 - 725
Associates 225 - 485
Legal Assistants 95 - 180
The Debtors will also reimburse the firm's actual necessary
expenses.
Mr. Sorenson discloses that, in 2002, the Debtors advanced
$959,000 to Sullivan & Cromwell on account of the services the
firm performed and to be performed and expenses incurred and to
be incurred in connection with the firm's representation of the
Debtors. As of the Petition Date, the fees and expenses
incurred by Sullivan & Cromwell and debited against the amounts
advanced to it reached $809,000 for the work the firm performed
until March 12, 2003 plus an estimate of $150,000 in fees and
expenses for the period from March 13, 2003 through March 16,
2003.
Michael M. Wiseman, Esq., a member of the firm, assures the
Court that Sullivan & Cromwell does not represent any adverse
interest to the Debtors or to their estates. Sullivan &
Cromwell has no connection with any of the Debtors' creditors or
any other parties-in-interest or their attorneys.
Mr. Wiseman, however, admits that Sullivan & Cromwell currently
represents or has recently represented within the past two years
interested parties in matters unrelated to the Debtors'
bankruptcy cases and the firm's representation of the Debtors in
the SEC Investigation. These interested parties include:
Entity Relationship to Debtor
------ ----------------------
ABN Amro Bank N.V. Unsecured Lender
AT&T Vendor
Bank of America, N.A. Bank Lender/DIP Lender
Bank of America Securities LLC DIP Arranger
Bank of America National Trust Bank Lender
Bank of New York Unsecured Lender
Bayerische Hypo Und Vereinsbank AG Unsecured Lender
Cadillac Fairview Corp. LTD Lessor
CBL & Assoc. Management Inc. Lessor
CIT Group/Business Credit Inc. DIP Lender
Commerzbank AG New York Unsecured Lender
Cosco, Inc. Strategic Partner
Credit Lyonnais Americas Unsecured Lender
Credit Suisse First Boston Unsecured Lender
Deutsche Bank AG New York Branch Unsecured Lender
Dresdner Bank AG New York Unsecured Lender
Fleet Retail Finance Inc. DIP Lender
Ford Motor Co. Strategic Partner
General Growth Properties Lessor
GGP Homart II LLC Lessor
GGP Homart Inc. Lessor
HSBC Bank USA Unsecured Lender
Intesabci New York Branch Unsecured Lender
J.P. Morgan Chase Bank Unsecured Lender
Morgan Guaranty Trust Co. of NY Unsecured Lender
KPMG LLP Professional
Landesbank Hessen-Thuringen Unsecured Lender
Mayfair Property Inc. Lessor
MBIA Insurance Corp. Third Party Beneficiary
Suprema Lessor
Westdeutsche Landesbank Girozentrale New York Branch
(Spiegel Bankruptcy News, Issue No. 4; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
STRUCTURED FINANCE: Fitch Keeps Downgraded Ratings on Watch Neg.
----------------------------------------------------------------
On March 28, 2003, Fitch Ratings downgraded the following
classes of notes issued by Structured Finance Asset Ltd., a
synthetic CDO referencing asset-backed securities:
-- JPY15,000,000,000 class A floating-rate notes due
2008 to 'BB' from 'AAA';
-- JPY430,000,000 class B floating-rate notes due 2008
to 'B' from 'AA';
-- JPY260,000,000 class C floating-rate notes due 2008
to 'CCC' from 'A';
-- JPY690,000,000 class D floating-rate notes due 2008
to 'CC' from 'BBB';
-- JPY350,000,000 class E floating-rate notes due 2008
to 'CC' from 'BB'.
In conjunction with the above downgrades, all classes remained
on Rating Watch Negative due to the uncertainty of the timing
and ultimate resolution of current impaired assets as well as
the continuing risk of deterioration in the portfolio.
Though having experienced no events of default to date,
Structured Finance Asset Ltd. has exposure to numerous
distressed credits. In aggregate, 30.75% of the portfolio has
experienced significant (one full rating category or more)
rating deterioration as of March 28, 2003. These include
exposures to collateralized debt obligations, manufactured
housing, aircraft and mutual fund fee securitizations. Among the
CDOs referenced by SFAL, three are Barclays-arranged CDOs,
which, together, represent 8.75% of the total portfolio. The
aforementioned obligations, as well as several obligations from
the sectors discussed above, have experienced negative credit
migration, which is evidenced in their respective ratings.
Reflecting this migration, the Fitch weighted average rating
factor for the portfolio has deteriorated from 16.75 ('BBB/BBB-
') at SFAL's inception to 28.00 ('BBB-/BB+') as of
March 28, 2003. Listed below are the obligations with the most
significant credit deterioration.
Reference Obligation:
Oakwood Mortgage Investors Trust 2000-B class M-1
-- Rating upon entrance: 'AA';
-- Most recent action: Downgraded to 'BBB-' from 'AA';
-- % of SFAL: 3%.
Oakwood Mortgage Investors Trust 2000-A class B-1
-- Rating upon entrance: 'BBB'
-- Most recent action: Downgraded to 'B' from 'BBB-';
-- % of SFAL: 1%.
Embarcadero Aircraft Securitization Trust 2000-1 class C
-- Rating upon entrance: 'BBB';
-- Most recent action: Downgraded to 'CCC' from 'B';
-- % of SFAL: 3%.
South Street CBO 2000-1 class B-1
-- Rating upon entrance: 'BBB-';
-- Most recent action: Downgraded to 'C' from 'CCC';
-- % of SFAL: 3%.
Corvus Investments class E
-- Rating upon entrance: 'BB';
-- Most recent action: Downgraded to 'C' from 'BB';
-- % of SFAL: 1.25%.
Taunton CDO class C
-- Rating upon entrance: 'A';
-- Most recent action: placed on Rating Watch Negative
('BB+');
-- % of SFAL: 3.75%.
FEP Receivables Trust 2001-1 class A3-L
-- Rating upon entrance: 'BBB';
-- Most recent action: Downgraded to 'CCC' from 'BB';
-- % of SFAL: 3%.
R.F. ALTS Finance I series 1 class A
-- Rating upon entrance: 'AA-';
-- Most recent action: Downgraded to 'BB-' from 'AA-';
-- % of SFAL: 3.75%.
Diversified Asset Securitization Holdings I class B
-- Rating upon entrance: 'BBB';
-- Most recent action: Downgraded to 'B' from 'BBB';
-- % of SFAL: 3%.
Conseco Finance Securitizations 2000-6 class B-1
-- Rating upon entrance: 'BBB';
-- Most recent action: Downgraded to 'BB' from 'BBB';
-- % of SFAL: 3%.
Pegasus Aviation Lease Securitization I class C-1
-- Rating upon entrance: 'BBB';
-- Most recent action: Downgraded to 'B' from 'BB',
remains on Rating Watch Negative;
-- % of SFAL: 3%.
Aggregate exposure: 30.75%.
Per the March 28, 2003 rating action, SFAL remains on Rating
Watch Negative due to the uncertainty of (i) the timing of
obligations becoming subjects of credit events; and, (ii) the
ultimate settlement amounts for these credit events. Fitch will
continue to monitor this transaction and may take additional
action if SFAL experiences further credit deterioration within
its reference portfolio and/or if realized settlements are less
than recoveries estimated by Fitch. Fitch considered 13.25% of
the total reference pool to imminently become subject of credit
events. Fitch's weighted average recovery estimate for this
portion of the portfolio was approximately 15% of par, which is
lower than Fitch's original modeling assumptions. In addition,
Fitch notes that the transaction receives credit enhancement
solely through subordination and does not receive any benefit
from excess spread.
Barclays is the arranger of Structure Finance Asset Ltd.
Barclays is also the Risk Participation Transaction Counterparty
for the transaction. As such, Barclays can replace reference
obligations in accordance to guidelines set forth in the
transaction's governing documents.
In order to provide additional information to investors in this
transaction as well as other Barclays arranged CDOs, Fitch has
listed on its web site the collateral or reference pool for the
substantial majority of Barclays arranged CDOs as well as
whether any such collateral/reference obligations have defaulted
or are the subject of credit/trigger events.
TRANS WORLD GROCERS: Chapter 11 Involuntary Case Summary
--------------------------------------------------------
Alleged Debtors: Trans World Grocers Inc.
Rona Beauty Supplies Inc
Allou Healthcare, Inc
fka Allou Health & Beauty Care Inc
50 Emjay Boulevard
Brentwood, New York 11717
Involuntary Petition Date: April 18, 2003
Case Numbers: 03-82660, 03-82661 and 03-82662
Chapter: 11
Court: Eastern District of Judge: Melanie L. Cyganowski
New York (Central Islip)
Petitioners' Counsel: Otterbourg Steindler Houston & Rosen
230 Park Avenue
New York, NY 10169-0007
Tel: (212) 661-9100
Petitioners: Congress Financial Corporation
1133 Avenue of the Americas
New York, NY 10036
Citibank, N.A.
388 Greenwich Street
New York, NY 10013
LaSalle Business Credit, Inc.
1735 Market Street
Suite 660
Philadelphia, PA
Amount of Claim: $77,152,957
TURBOCHEF TECHNOLOGIES: Nasdaq to Delist Shares Effective Today
---------------------------------------------------------------
TurboChef Technologies, Inc., (Nasdaq: TRBOC) has been notified
by the Nasdaq Stock Market, Inc., that its common stock will be
delisted from the Nasdaq Stock Market, effective with the open
of business today. The delisting was a result of the Company's
inability to meet Nasdaq's continued listing requirements.
TurboChef's common stock will trade on the Over-the-Counter
Bulletin Board.
The OTC Bulletin Board is a regulated quotation service that
displays real-time quotes, last sale price, and volume
information in over-the-counter equity securities. OTC Bulletin
Board securities are traded by a community of market makers that
enter quotes and trade reports through a highly sophisticated
computer network. Investors work through a broker/dealer to
trade OTC Bulletin Board securities. Information regarding the
OTC Bulletin Board, including stock quotations, can be found on
the internet at http://www.otcbb.com
The Company's ticker symbol will be "TRBO" on the OTC Bulletin
Board. However, some internet quotation services add an "OB" to
the end of the symbol and will use "TRBO.OB" for the purpose of
providing stock quotes.
TurboChef is the world's leader in rapid cook solutions. The
TurboChef oven provides a solution, which delivers a variety of
cooked food products. The proprietary rapid cook system, which
requires no ventilation, employs a combination of high speed
forced air and microwave energy to "cook to order" menu items
with restaurant quality at speeds 7-10 times faster than
conventional methods of cooking. TurboChef markets to both
traditional establishments such as quick service and
conventional restaurants and non- traditional foodservice
locations such as petrol station convenience stores, cinemas, C-
stores, sports arenas and stadiums and airport concessions.
* * *
Liquidity
TurboChef's capital requirements in connection with its product
and technology development and marketing efforts have been and
will continue to be significant. Additional capital will be
required to fund current operations. Since its inception, the
Company has not generated significant revenue from operations
and has been substantially dependent on loans and capital
contributions from its principal stockholders and proceeds from
the sale of its securities. Furthermore, the Company will
continue to be dependent on outside sources of financing for the
foreseeable future to fund its working capital needs. The
Company anticipates that it will need to raise this additional
capital as early as the fourth quarter of 2002, but no later
than the end of the first quarter of 2003. No assurances can be
made that the Company will generate the necessary sales from its
rapid cook ovens or from the proceeds from the sales of its
securities or other financing sources to generate the necessary
working capital. As a result of these conditions, the
independent certified public accountant's report on the
Company's financial statements for the year ended December 31,
2001 contains an explanatory paragraph regarding the Company's
ability to continue as a going concern.
The Company has, and will continue to hold inventory, due to its
long manufacturing cycle. As of September 30, 2002, the Company
held $1,444,000 of finished goods inventory (ovens), $76,000 of
demonstration inventory (ovens used for customer demonstrations,
tests and pilot programs) and $1,113,000 of parts inventory
(used for manufacturing and service). The Company may offer
demonstration inventory free of charge or at reduced prices to
certain potentially large customers, who wish to test and
evaluate an oven prior to purchase. Should sales fail to
materialize, or materialize at slower rates than currently
anticipated by the Company, additional working capital will be
required to cover the carrying costs of component parts and
purchase completed ovens. No assurances can be made that the
Company will generate the necessary sales of its ovens or from
the proceeds from the sales of its securities or other financing
sources to generate the necessary working capital.
In February 2002, the Company and Whitbread Group PLC entered
into an agreement to terminate an extended warranty originally
purchased by Whitbread, from the Company, in September 1999.
Under the new agreement, TurboChef is required to pay Whitbread
o460,000 (approximately $670,000) plus Value Added Tax over a 24
month period, beginning in March 2002. In return, Whitbread has
released TurboChef from its obligation to continue its warranty
on 260 older model ovens. On signing the agreement, TurboChef
made an initial payment to Whitbread of o50,000 (approximately
$72,000) plus VAT and thereafter has agreed to pay o15,000
(approximately $22,000) plus VAT a month for the next 24 months,
with a final payment of o50,000 plus VAT due the final month.
The Company did not make the required payments for the months of
September, October and November 2002 on a timely basis.
Although, the Company believes it is now current in its
obligations under this agreement, there can be no assurance that
Whitbread will not allege a breach of contract and seek a legal
remedy under the law due to Company's failure to make the
required payments on a timely basis.
In March 2002, the Company agreed to purchase from the Shandong
Xiaoya Group approximately $14 million of C-3 ovens over a
seventeen month period. In addition, in connection with the
manufacturing agreement the Company will be required to use
working capital to purchase certain component parts that will be
supplied to Xiaoya for use in the ovens. Although the Company
entered into the agreement with Xiaoya in anticipation that its
sales of C-3 ovens will increase from current levels, there can
be no such assurance that any sales will materialize. Through
the end of October 2002, the Company has been purchasing at a
rate of approximately 51% ($2.4 million of ovens as compared to
$4.7 million of ovens) of what was required under the terms of
the agreement. The slower rate of oven purchases is a result of
sales by the Company materializing at a lower rate than
anticipated. The Company does not currently have a significant
number of purchase orders or firm commitments from customers to
purchase its C-3 ovens in 2003. It is the Company's belief that
the reduced levels of oven purchases by the Company are
currently acceptable to Xiaoya. However, there can be no
assurance that Xiaoya will not take action against the Company
for failure to make the required oven purchases. Such action
could include, among others, a decision by Xiaoya to cease
production of C-3 ovens. Currently, Xiaoya is the Company's sole
supplier of C-3 ovens.
In the first quarter of 2002, the Company expanded its direct
sales and marketing efforts. As a result of slower than
anticipated sales of ovens the Company has taken actions to
reduce the level of fixed overhead. In the second quarter of
2002, the Company closed its United Kingdom office and reduced
its sales personnel. Subsequently, the Company recorded a charge
to earnings associated with the closing of this office and
reduction in staff. During the third quarter of 2002, the
Company made the decision to close its New York office upon the
expiration of the current lease and consolidate all activities
into the Company's Dallas office. Subsequently, the Company
recorded a charge to earnings associated with the closing of
this office and reduction in staff. These changes will result in
monthly cost savings which may be offset in part by the
Company's increased use of outsourced support services and
possible new employees. The Company does not currently
anticipate any significant increases in lease payments or any
other long-term fixed obligations from current levels during the
remainder of fiscal 2002.
In July 2002, the Company issued a promissory note in the amount
of $1,000,000 to Grand Cheer Company LTD, a principal
stockholder of the Company, which is secured by 350 C-3 ovens.
The Company was to pay approximately $2,800 per oven within five
days of receipt of cash from the sale of the ovens.
Approximately 150 ovens were sold and cash was received but no
payment was made to Grand Cheer. The note was due on October 15,
2002. The note also provided that if the Company did not repay
the note in full by October 15th, 2002, all remaining unvested
warrants (666,667 warrants) previously granted to Grand Cheer
would immediately vest. The Company incurred a non-cash finance
charge of $200,000 which was payable upon the maturity of the
note as a result of a reduction in the exercise price from $1.20
to $1.00 for 1,000,000 warrants previously issued to Grand Cheer
upon its purchase of the Company's Series B Convertible
Preferred Stock. The $200,000 finance charge was recorded as
interest expense during the third quarter of 2002. The Company
is currently in default of this promissory note and is
negotiating the restructuring of the loan, which is currently
due and payable. The Company believes that it will be able to
restructure the terms of this loan, however, there are no
assurances that this will occur or that the terms of the
restructured loan will be beneficial to the Company. Failure to
restructure the loan would have a material adverse effect on the
Company, which could include, among other things, repossession
by Grand Cheer of the unsold ovens, which were pledged as
collateral for the loan.
The Company anticipates the need currently to obtain additional
sources of funding in order to continue its ongoing operations.
However, no assurances can be made that the Company will
actually obtain the necessary funding to finance its operations.
A failure to obtain additional funding would have significant
adverse effects on the Company. All of the above factors raise
substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
U.S. HOME & GARDEN: Commences OTCBB Trading Effective April 18
--------------------------------------------------------------
U.S. Home & Garden Inc.'s (Nasdaq: USHG) common stock was
delisted from the Nasdaq Stock Market, effective with the open
of business on April 18, 2003. The delisting was a result of the
Company's inability to meet Nasdaq's continued listing
requirements. U.S. Home & Garden's common stock immediately
commenced trading on the Over-the-Counter Bulletin Board.
Robert Kassel, Chairman & CEO of U.S. Home & Garden, commented,
"The delisting of our common stock from Nasdaq will not
interfere with our previously announced proposed sale of
substantially all of the Company's assets of its lawn and garden
product operating subsidiaries to a new entity formed by certain
members of current management. We currently expect the proposed
sale to close by June 30, 2003. Our common stock will continue
to trade in the over-the-counter market via the Electronic
Bulletin Board."
The Company is evaluating post asset sale strategic
alternatives, including potential merger opportunities. The
Company currently intends to seek alliances or mergers with
entities that would meet the Nasdaq listing standards.
The OTC Bulletin Board is a regulated quotation service that
displays real-time quotes, last sale price, and volume
information in over-the-counter equity securities. OTC Bulletin
Board securities are traded by a community of market makers that
enter quotes and trade reports through a highly sophisticated
computer network. Investors work through a broker/dealer to
trade OTC Bulletin Board securities. Information regarding the
OTC Bulletin Board, including stock quotations, can be found on
the internet at http://www.otcbb.com
The Company's ticker symbol will remain "USHG" on the OTC
Bulletin Board. However, some internet quotation services add an
"OB" to the end of the symbol and will use "USHG.OB" for the
purpose of providing stock quotes.
U.S. Home & Garden Inc., is a leading manufacturer and marketer
of a broad range of consumer lawn and garden products including
weed preventative landscape fabrics, fertilizer spikes,
decorative landscape edging, shade cloth and root feeders which
are sold under various recognized brand names including Weed
Block(R) , Jobe's(R), Emerald Edge(R), Shade Fabric(TM) Ross(R),
and Tensar(R). The Company markets its products through most
large national home improvement and mass merchant retailers.
At December 31, 2002, the Company's balance sheet shows a total
shareholders' equity deficit of about $4.3 million.
To learn more about U.S. Home & Garden Inc., visit its Web site
at http://www.ushg.com
WESTPOINT STEVENS: S&P Lowers & Keeps Junk Ratings on Watch Neg.
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered the corporate credit
rating on WestPoint Stevens Inc. to 'CCC' from 'B'. At the same
time, the senior unsecured debt rating on the Atlanta, Georgia-
based consumer products company was lowered to 'CC' from 'CCC+'.
The ratings remain on CreditWatch with negative implications,
where they were placed April 4, 2003.
Total debt outstanding at Dec. 31, 2002, was about $1.6 billion.
The rating actions follow WestPoint Stevens' recent statement
that its Form 10-K filing would be further delayed. According to
the statement, made on its Form 8-K filing, the delay is due to
"continuing negotiations on a new agreement with its lenders
under the Company's Senior Credit and Second-Lien Facilities."
The filing also stated that 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,
the company will delay its 10-K filing until the conclusion of
the negotiations.
The Form 8-K filing also disclosed that the company has received
interim covenant waivers through June 10, 2003.
"Standard & Poor's will continue to monitor and evaluate the
situation as additional information becomes available," said
Standard & Poor's credit analyst Susan Ding. In its discussions,
Standard & Poor's will also review the company's business
strategy and financial policies.
WestPoint Stevens is a home fashions consumer products company
with a line of company-owned and licensed brands for the bedroom
and bathroom. The company is a vertically integrated
manufacturer of bed linens, towels, and other accessories sold
in retail outlets. WestPoint Stevens' products are marketed
under the well-known brand names of Martex, Grand Patrician,
Vellux, Stevens, and Lady Pepperell, and under licensed brands
that include the Ralph Lauren Home Collection.
Westpoint Stevens Inc.'s 7.875% bonds due 2005 (WSPT05USR1) are
trading at about 23 cents-on-the-dollar, says DebtTraders. See
http://www.debttraders.com/price.cfm?dt_sec_ticker=WSPT05USR1
for real-time bond pricing.
WHX CORP: S&P Keeps Ratings Watch Due to Pension Plan Concerns
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its corporate credit
rating on WHX Corp., to 'B-' from 'B'. At the same time,
Standard & Poor's placed the rating on CreditWatch with
developing implications. WHX's operations are limited to its
Handy & Harman subsidiary, a seller and manufacturer of precious
metals, plating and fabricated products, and electrogalvinized
products. The company has $358 million in debt.
"These actions reflect the heightened concerns regarding WHX's
pending resolution of the Pension Benefit Guaranty Corporation's
(PBGC) attempt to involuntarily terminate the WHX pension plan,
and the potential negative impact to the company's liquidity
should the PBGC prevail in its termination plan," said Standard
& Poor's credit analyst Paul Vastola.
The PBGC recently announced that it is seeking to involuntary
terminate the WHX pension plan because of its concern that WHX's
plan could increase significantly if it is not terminated. WHX's
subsidiary, Wheeling-Pittsburgh Corp. filed for bankruptcy Nov.
16, 2000. WPC has continued to operate since that time and
recently obtained approval of a $250 million loan guarantee that
would help it to emerge from Chapter 11 bankruptcy protection.
The approval of the guaranty is subject to the satisfaction of
various conditions including a resolution of the treatment of
the WHX pension plan acceptable to the PBGC.
The PBGC estimates that the WHX pension plan has $300 million in
assets to cover more than $443 million in benefit liabilities,
resulting in a funding shortfall of roughly $143 million. The
PBGC also contends that plant shutdown liabilities of the WHX
pension plan, if a shutdown were to occur, would exceed $378
million. WHX is contesting the PBGC's termination plan and
disputes the PBGC's calculation of liabilities and shutdown
claims, estimating that the actual amount of these liabilities
may be substantially less. Furthermore, WHX disputes the PBGC's
assumption regarding the likelihood of large-scale shutdowns at
WPC.
Should WHX be able to negotiate a lower and more manageable
payment plan with the PBGC, and otherwise limit its exposure to
WPC, ratings on WHX could be restored to their former level
because WHX's total liquidity (comprising cash, short-term
investments, net of related investment borrowings and funds
available under bank credit arrangements), totaling $139.3
million at Dec. 31, 2002, could be sufficient in this case to
meet its obligations. However, at the extreme, WHX could be
forced into bankruptcy if the PBGC were to prevail and WPC fail
to reorganize, as WHX is unlikely to be able to fund WPC's
shutdown liabilities at the value placed on these by the PBGC.
Moreover, an unfavorable resolution of the PGBC action may
result in one or more events of default under various WHX
financial agreements. Standard & Poor's will continue to monitor
the progress of the dispute, which is expected to be resolved by
June 30, 2003.
WORLD WIRELESS: Further Delays Form 10-K Filing to May 5, 2003
--------------------------------------------------------------
World Wireless Communications, Inc. (Amex: XWC), a developer of
wireless and internet based telemetry systems, announced that
the filing of its Form 10-K for the year ended December 31, 2002
will be further delayed to approximately May 5, 2003. The
Company's senior lenders have agreed to restructure the
Company's senior secured debt conditional upon and subject to
the Company's obtaining certain additional financing. The
Company is currently engaged in discussions to seek such
financing, although the results thereof are not assured.
The Company is in the process of determining what impact, if
any, such restructuring would have on the results of operations
for the period ended December 31, 2002.
As of this date the Company has not yet engaged its independent
accountant for the purposes of auditing the December 31, 2002
financial statements. As a result, the filing on May 5, 2003 is
expected to be incomplete pending engagement, review, and audit
by the independent accountants. It is expected that the Company
will file an amended report by approximately May 26, 2003 to
include the independent accountants' opinion.
World Wireless' December 31, 2002 balance sheet shows a working
capital deficit of about $9 million, and a total shareholders'
equity deficit of close to $9 million.
WORLDCOM INC: Wants to Pull Plug on 469 Verizon Service Orders
--------------------------------------------------------------
According to Lori R. Fife, Esq., at Weil Gotshal & Manges LLP,
in New York, WorldCom purchases certain telecommunications
services pursuant to tariffs filed by incumbent and competitive
local exchange carriers in accordance with the
Telecommunications Act of 1996. Tariffs are schedules of rates,
terms, and conditions by which the LECs agree to provide
services to their customers. Tariff services are purchased by
submitting a contract known as an access service order to the
LEC.
Since the Petition Date, Ms. Fife contends that WorldCom has
reviewed the operating capacity of its network. This network
rationalization process is an ongoing, integral component of
WorldCom's long-range business plan. WorldCom determined that
it does not require the capacity relating to 469 circuits
purchased through service orders under tariffs with Verizon or
its affiliates. In determining to reject the Service Orders,
WorldCom considered network overcapacity, costs, overlap, and
other inefficiencies, as well as WorldCom's ability to move
traffic to alternative circuits in a more cost-effective manner.
Accordingly, pursuant to Section 365(a) of the Bankruptcy Code
and Rule 6006 of the Federal Rules of Bankruptcy Procedure, the
Debtors seek the Court's authority to reject the Service Orders
associated with the Circuits.
Ms. Fife tells Judge Gonzalez that the Debtors currently have no
traffic on the Circuits purchased under the Service Orders,
which have monthly charges totaling $289,271. Thus, the
Circuits provided under the Service Orders are unnecessary and
costly to the Debtors' estates. By rejecting the Service
Orders, the Debtors save the estates an administrative expense
totaling $3,471,252 per annum, or $4,443,424 for the remainder
of the terms of the Service Orders for capacity that they do not
need or use. For these reasons, the Service Orders for the
Circuits should be rejected effective as of the disconnection
date set forth in the disconnection notice for each Circuit.
(Worldcom Bankruptcy News, Issue No. 24; Bankruptcy Creditors'
Service, Inc., 609/392-0900)
* Miller Buckfire Lewis Adds David Ying as Fourth Partner
---------------------------------------------------------
Miller Buckfire Lewis & Co., LLC announced that David Y. Ying
has joined the firm as a managing director and that the firm
will change its name to Miller Buckfire Lewis Ying & Co., LLC.
With managing directors Henry S. Miller, Kenneth A. Buckfire and
Martin F. Lewis, Mr. Ying will assist in leading the firm's
business of providing financial advisory and investment banking
services in large-scale corporate restructuring transactions.
Mr. Ying was previously a senior managing director with JLL
Partners, a private equity firm investing in distressed
companies. Prior to joining JLL Partners in 1997, Mr. Ying led
financial restructuring groups at Donaldson Lufkin & Jenrette,
Smith Barney and Drexel Burnham Lambert. As one of the
industry's most experienced restructuring professionals, Mr.
Ying has played a role in many of the nation's major
restructurings in the last 15 years, including Advantica
Restaurant Group, Grand Union, GPA Leasing, Kendall
International, ICH, Interco, Memorex Telex, Merisel, Morrison
Knudsen, Republic Health and U.S. Gypsum.
"David is truly one of the leading figures in financial
restructuring, and we are delighted that he is returning to the
advisory business as part of our team," said Mr. Miller,
chairman of Miller Buckfire Lewis. "Early in his career, David
pioneered the out-of-court restructuring practice, and he has
been one of the industry's leading advisors in this area. His
expertise will enhance our firm's leadership in out-of-court
restructurings, giving us a competitive advantage in today's
environment in which distressed companies increasingly seek
solutions to their financial difficulties while avoiding a
bankruptcy filing.
"Moreover, David's distressed investing experience supplements
our existing strength in negotiating mergers and sale
transactions that are vital to the reorganization efforts of
many of our clients. We are pleased with his decision to join
the firm and look forward to expanding our business and
delivering our clients the senior level experience that they
require."
"I am pleased to be joining one of the preeminent restructuring
advisory firms in the U.S.," said Mr. Ying. "It was a hard
decision to leave JLL, where we accomplished a great deal over
the last six years, building a great team of professionals and
raising significant capital. But joining MBL presents a unique
opportunity for me to use my considerable experience in
restructuring, M&A, capital raising and private equity investing
to help the firm grow and expand the range of its advisory
services."
Mr. Ying began his career as a restructuring advisor at Drexel
Burnham Lambert in 1985, after spending seven years as a
generalist investment banker at Shearson Lehman Brothers. In
1988, he became the leader of Drexel's New York-based
restructuring group. In 1990, Mr. Ying moved the majority of his
restructuring team to Smith Barney. In 1993, he was recruited by
Donaldson Lufkin & Jenrette to head the firm's restructuring
practice. In 1997, he joined JLL Partners. Mr. Ying received a
B.S. degree from the Massachusetts Institute of Technology and a
M.B.A. degree from the Wharton School.
Miller Buckfire Lewis is a leading independent investment
banking boutique providing strategic and financial advisory
services in large-scale corporate restructuring transactions,
with a key focus on developing out-of-court solutions to capital
structure problems. Miller Buckfire Lewis was formed in July
2002 when the financial restructuring group at Dresdner
Kleinwort Wasserstein was spun off as an independent firm in
order to be able to serve a broader array of clients. The firm's
current and recent engagements include: Kmart Corporation,
Huntsman, Level (3) Communications, Centerpoint Energy, Laidlaw,
Spiegel, and Vulcan Inc. concerning its investment in Charter
Communications. The firm's professionals have successfully
restructured more than $120 billion in debt. Services provided
by Miller Buckfire Lewis include valuation and debt capacity
analysis, business plan development, capital structure design,
plan formulation and negotiation, and private equity and debt
placement services to financially troubled companies and their
constituents. The 40-member firm is based in New York.
Additional information about Miller Buckfire Lewis can be found
at http://www.mblco.com
* Large Companies with Insolvent Balance Sheets
-----------------------------------------------
Total
Shareholders Total Working
Equity Assets Capital
Company Ticker ($MM) ($MM) ($MM)
------- ------ ------------ ------- --------
Advisory Board ABCO (16) 48 (20)
Alaris Medical AMI (32) 586 173
Amazon.com AMZN (1,353) 1,990 550
Arbitron Inc. ARB (100) 156 (2)
Alliance Resource ARLP (46) 288 (16)
Actuant Corp ATU (44) 295 18
Avon Products AVP (91) 3,327 73
Saul Centers Inc. BFS (13) 388 N.A.
Blount International BLT (369) 428 91
Broadwing Inc. BRW (2,104) 1,468 327
Cubist Pharmaceuticals CBST (7) 221 131
Choice Hotels CHH (114) 314 (37)
Campbell Soup Co. CPB (114) 5,721 (1,479)
Echostar Comm DISH (1,205) 6,260 1,674
Dun & Brad DNB (19) 1,528 (104)
Epix Medical EPIX (3) 27 8
Graftech International GTI (307) 797 112
Hollywood Casino HWD (92) 553 89
Imax Corporation IMAX (104) 243 40
Imclone Systems IMCL (5) 474 295
Gartner Inc IT (5) 825 18
Jostens JOSEA (540) 375 (40)
Journal Register JRC (4) 701 (20)
Kos Pharmaceuticals KOSP (75) 70 (55)
Level 3 Comm Inc. LVLT (240) 8,963 581
Memberworks Inc. MBRS (21) 281 (100)
Moody's Corp. MCO (327) 630 (190)
McMoRan Exploration MMR (30) 73 5
MicroStrategy MSTR (34) 80 7
Northwest Airlines NWAC (1,483) 13,289 (762)
Petco Animal PETC (11) 555 113
Per-Se Tech Inc. PSTI (50) 203 24
Qwest Communications Q (1,094) 31,228 (1,167)
Rite Aid Corp. RAD (93) 6,133 1,676
Ribapharm Inc. RNA (363) 199 92
Sepracor Inc. SEPR (392) 727 413
St. John Knits Int'l SJKI (76) 236 86
UnitedGlobalCom UCOMA (3,040) 5,931 (6,287)
United Defense I UDI (30) 1,454 (27)
UST Inc. UST (47) 2,765 829
Valassis Comm. VCI (33) 386 80
Ventas Inc. VTR (54) 895 N.A.
MEMC Electronic WFR (25) 238 13
Western Wireless WWCA (463) 2,398 (119)
Xoma Ltd. XOMA (11) 72 30
*********
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.
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