T R O U B L E D C O M P A N Y R E P O R T E R Wednesday, April 23, 2003, Vol. 7, No. 79 Headlines AGWAY INC: Exploring Potential Sale of Assets and Other Options AIR CANADA: Honoring Up to $25-Mill. of Critical Supplier Claims AMERCO, INC.: Sues PricewaterhouseCoopers for $2.5 Billion AMERICAN AIRLINES: S&P Keeps Watch as Controversy Threatens Plan AMERICAN AIRLINES: Chairman Carty Apologizes for "Big Mistake" AMERIMMUNE PHARMACEUTICALS: Ceases Ops. & Files Ch. 7 Petition AMERIMMUNE PHARMACEUTICALS: Chapter 7 Case Summary & Creditors AMERISERVE FINANCIAL: Fitch Concerned about Weakening Liquidity AMES DEPARTMENT: Selling Mansfield Warehouse Facility for $18MM ANC RENTAL: Gets Nod to Reimburse $1-Million Due Diligence Fees ANNUITY & LIFE: Fails to Meet NYSE Continued Listing Standards AT&T LATIN AMERICA: Consents to Chapter 11 Bankruptcy Proceeding AUSPEX SYSTEMS: Files for Chapter 11 Liquidation in California AUSPEX SYSTEMS: Voluntary Chapter 11 Case Summary B/E AEROSPACE: First Quarter Net Loss Doubles to $11 Million BURLINGTON INDUSTRIES: Court Allows Additional Retention Payment CSAM HIGH YIELD: Fitch Cuts Ratings on 2 Note Classes to B-/CCC- DUN & BRADSTREET: Dec. 31 Net Capital Deficit Stands at $18.8MM EAGLE FOOD: Urges Court to Approve Skadden Arps' Engagement Pact ENCOMPASS SERVICES: Overview of Second Amended Chapter 11 Plan ENRON CORP: EPMI Sues Select Energy for $2.5 Million in Damages ENRON: EFS & Enron Mgt. Creditors' Proofs of Claim Due April 30 EXIDE TECH.: 3 Lead Brands Relisted With London Metal Exchange FEDERAL-MOGUL: Files Disclosure Statement for Chapter 11 Plan FLEMING COS.: Continuing Use of Existing Business Forms & Checks GENSCI REGENERATION: Resolves Various Disputes with Osteotech GENTEK INC: Sunoco Inc. Sues Debtors for Breach of Agreement GENUITY: Court Okays Alvarez & Marsal's Retention as Consultants GLOBE METALLURGICAL: Taps Piper Rudnick as Bankruptcy Counsel GRAPHIC PACKAGING: Will Publish First Quarter Results by Apr. 29 HAAS WOODWORKS: Case Summary & 20 Largest Unsecured Creditors HEXCEL CORP: March 31 Net Capital Deficit Narrows to $102 Mill. INPRIMIS INC: Ability to Continue Operations Remains Uncertain INTEGRATED HEALTH: Brahman Partners Reports Rotech Equity Stake LAIDLAW INC: Discloses Current Board of Directors' Members LEAP WIRELESS: Final Cash Collateral Use Hearing Set for May 7 LERNOUT: Stonington Wants Copies of Fraud-Related Documents LTV CORP: Admin. Committee Signs-Up Reed Smith as Local Counsel MAGELLAN FILMED: Ceases Operations after Unsuccessful Financing MATLACK SYSTEMS: Ch. 7 Trustee Brings-In PENTA as Accountants MCMS INC: Court Extends Plan Filing Exclusivity Until May 12 MGM MIRAGE: Fitch Assigns BB+ Initial Rating to Sr. Secured Debt NATIONAL CENTURY: NCFE Committee Hires Carlile as Local Counsel NATIONAL STEEL: USWA Hails US Steel's Purchase of Company Assets NATIONAL STEEL: Plan Filing Exclusivity Extended Until Month-End NATIONSRENT: Court Adjourns Confirmation Hearing Until May 13 NEBO PRODUCTS: Dec. 31 Balance Sheet Upside-Down by $1.4 Million NEW POWER CO.: Georgia Court Fixes May 30 Admin Claims Bar Date NORTH COAST ENERGY: Taps Robert Baird to Explore Alternatives NORTHFIELD LABS.: Needs Additional Funds to Continue Operations NORTHWESTERN CORP: S&P Cuts Corp. Credit Rating to B from BB+ NUWAY MEDICAL: Fails to Comply with Nasdaq Listing Requirements OGLEBAY NORTON: Based on Bank Talks, Net Worth Exceeds $98 Mill. OSE USA: Will Shut Down US Manufacturing Facilities by June 30 OVERHILL FARMS: Clinches Senior Debt Refinancing Transaction PACIFIC CROSSING: Pivotal Private to Buy Assets for $63 Million PHILIP MORRIS: Files Post-Judgment Motion in Price Lawsuit PICCADILLY CAFETERIAS: Expecting to Close 17 Cafeterias by July POLAROID: Disclosure Statement Hearing to Continue on May 29 PREMCOR INC: Inks Pact to Sell Hartford Refinery Assets for $40M RADIANT ENERGY: Expects to File Late Reports by May 20, 2003 REPUBLIC TECH: Requests for Payment of Admin Claims Due April 29 RESOURCE AMERICA: Recapitalizes Evening Star Building Loan SAGENT TECHNOLOGY: Resolves Events of Default Under $7-Mil. Loan SAMUELS JEWELERS: March 31 Net Capital Deficit Widens to $27MM SIERRA PACIFIC: Sues Natural Gas Suppliers for $600MM in Damages SILICON GRAPHICS: Mar. 28 Balance Sheet Insolvency Tops $142MM SIMULA INC: Independent Auditors Express Going Concern Doubt SMTEK INT'L: Fails to Maintain Nasdaq Min. Listing Requirements SPIEGEL GROUP: Committee Signs-Up Chadbourne & Parke as Counsel TANDYCRAFTS INC: Delaware Court Approves Disclosure Statement TECO ENERGY: Moody's Hatchets Sr. Unsecured Debt Ratings to Ba1 TECO ENERGY: Airs Disappointment with Moody's Ratings Downgrade TELENETICS CORP: Haskell & White Expresses Going Concern Doubt TELSCAPE INT'L: US Trustee Wants to Convert Case to Chapter 7 TESORO PETROLEUM: Closes Sr. Secured Credit Facility Refinancing UNIDIGITAL: Founder & Chairman Ehud Aloni Skipped the Country UNION ACCEPTANCE: Sells Servicing Platform and Servicing Rights UNITED AUSTRALIA: CHAMP Unit Acquires Majority Stake in Austar UNITED STATIONERS: Look for First Quarter 2003 Results by Monday U.S. INDUSTRIES: Takes Initiatives to Refocus Company Operations US MINERAL: Taggart Taps ARPC as Claims Evaluation Consultants US WIRELESS: Committee Turns to Navigant Consulting for Advice VALLEY MEDIA: Secures Plan Exclusivity Extension through May 13 WABASH NATIONAL: Will Publish First Quarter Results by Month-End WESTPOINT STEVENS: Liquidity Concerns Spur Fitch's Downgrades WORLD AIRWAYS: Reports Update on Flight Attendant Negotiations WORLDCOM INC: Court Approves Spaulding's Engagement as Broker W.R. GRACE: Committee Urges Court to Extend Avoidance Period * Meetings, Conferences and Seminars ********* AGWAY INC: Exploring Potential Sale of Assets and Other Options --------------------------------------------------------------- Agway Inc., said it will immediately begin exploring the potential sale of each of its businesses while also exploring other strategic opportunities that could result in greater value for Agway's creditors. "This process continues our efforts to maximize the value of our businesses and generate cash for our unsecured creditors, the majority of whom are investors in Agway securities," said Agway CEO Michael R. Hopsicker. "Agway is in a relatively good financial position as we enter this exploration phase. Today, Agway has a cash surplus and we do not anticipate any immediate need to borrow against our current credit facility. That surplus, which is a significant accomplishment for a company in Chapter 11, is a result of continued strong profitability in our Energy business, better financial performance in our Feed and CPG businesses, and significant cash proceeds received from previous business divestments." Mr. Hopsicker said: "The prospects for maximizing value from our businesses are very encouraging. I am convinced that each of our businesses will continue as ongoing business enterprises providing quality products and services to our customers and continued job opportunities for the thousands of Agway employees that serve our customers in hundreds of communities. These are valuable businesses." The Company will explore potential sale and other strategic opportunities for the following businesses: Agway Energy Products: In business since 1936, Agway Energy Products LLC is an industry leader providing heating oil, propane and energy equipment sales, installation and service in the Northeast, serving nearly 500,000 homes, farms and businesses. Consistent with its "Total Energy Solutions" strategy, natural gas and electricity are sold in selected deregulated markets through subsidiaries Agway Energy Services, Inc. and Agway Energy Services-PA, Inc. Agway's Energy business has a strong history of earnings and is well-positioned for growth and continued profitability. The Energy business was not included in Agway's voluntary Chapter 11 filing last fall. Animal Feed and Nutrition: Agway is the number one supplier of animal feed products in the Northeast, and a long-time leader in technical expertise and product innovation. The Northeast region is a large dairy market that includes the number three and four states nationally in milk production -- New York and Pennsylvania, respectively. Agway's animal feed business consists of Agway Feed and Nutrition, which primarily serves dairy producers in New York and Pennsylvania, Agway's TSPF Heifer farms and Agway dealers, and Feed Commodities International, which serves dairy producers in New England. Fresh Produce: Agway's Country Best Produce business is a leading provider of potatoes, onions and other fresh produce to large chain store customers in the Eastern United States. Through an integrated network of fresh produce operations, Country Best is uniquely positioned to meet the needs of major grocers and foodservice customers. Agricultural Technologies: This segment consists of new technologies that serve the animal feed and fresh produce marketplace. The businesses in this segment include CPG Nutrients, which developed and manufactures Optigen(R) 1200, a concentrated source of controlled release nitrogen for dairy cows; and CPG Technologies, the developer of FreshSeal(TM) food preservation products. The Company has established a timetable that contemplates reaching final decisions about the path it will take for each of its businesses by mid-summer. Those decisions will be incorporated into Agway's Chapter 11 plan of reorganization, which the Company expects to have completed later this summer for submission to the Bankruptcy Court and its creditors. The Company has targeted December 2003 for its emergence from Chapter 11. The investment banking firm Goldsmith-Agio-Helms has been engaged jointly by Agway Inc. and the Official Committee of Unsecured Creditors to assist in finding appropriate potential buyers for each of Agway's businesses. Interested parties may contact Barry Freeman at Goldsmith-Agio-Helms at (312) 928-0760. Agway, Inc., is an agricultural cooperative owned by 69,000 Northeast farmer-members. On October 1, 2002, Agway Inc. and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Agway Energy Products LLC, Agway Energy Services, Inc., and Agway Energy Services-PA, Inc. were not included in the Chapter 11 filings. The Cooperative is headquartered in DeWitt, NY. Visit Agway at http://www.agway.com AIR CANADA: Honoring Up to $25-Mill. of Critical Supplier Claims ---------------------------------------------------------------- To ensure the continuity of operations outside of North America, Mr. Justice Farley approves Air Canada's request to continue paying foreign trade creditors and suppliers in the ordinary course both before and after the CCAA Petition Date. With the Monitor's consent, the Applicants are authorized to pay up to $25,000,000 for the goods and services provided by North American suppliers prepetition that are critical to the Applicants' business and their ongoing operations. The Applicants estimate the universe of prepetition trade claims total $200,000,000. Claims held by non-critical suppliers will be subject to compromise under a Scheme of Arrangement. The critical supplier designation will not apply to ordinary course inter-airline clearing and similar arrangement. (Air Canada Bankruptcy News, Issue No. 3; Bankruptcy Creditors' Service, Inc., 609/392-0900) AMERCO, INC.: Sues PricewaterhouseCoopers for $2.5 Billion ---------------------------------------------------------- Amerco, Inc., filed suit against PricewaterhouseCoopers LLP, the company's former auditors, claiming more than $2.5 billion in damages. The lawsuit was filed on Friday, April 18, 2003, in the United States District Court for the District of Arizona. The Case No. is 03-CV-736. Ronald Jay Cohen, Esq., Daniel G. Dowd, Esq., and Laura A.H. Kennedy, Esq., at Cohen Kennedy Dowd & Quigley PC in Phoenix represent Amerco. The case has been assigned to the Honorable Robert C. Broomfield. A full-text copy of the 69-page Complaint is available at no charge at: http://bankrupt.com/misc/03-CV-736.pdf "They gave us bad advice for seven straight years," Amerco's general counsel, Gary Klinefelter, told a Reuters reporter in an interview Monday. "We're in the business of renting out trucks and trailers, and they're in the business of giving out accounting advice." A spokesman for PricewaterhouseCoopers, David Nestor, told Reuters the lawsuit appeared to be an effort by Amerco's management to shift blame away from itself. "The primary responsibility for the accuracy of financial statements lies with the company," Mr. Nestor said. "Once it became apparent that there was an error in Amerco's, we worked with them to get their financial statements correct, which is, of course, the important thing." The dispute, Reuters relates, centers on financing arrangements known as special purpose entities that Amerco set up in the mid- 1990's. These were created to help expand the company's self- storage business without weighing down its balance sheet with debt. 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: S&P Keeps Watch as Controversy Threatens Plan ---------------------------------------------------------------- AMR Corp., (CCC/Watch Dev./--) unit American Airlines Inc.'s (CCC/Watch Dev./--) financial turnaround plan is being threatened by a controversy over executive compensation. Standard & Poor's Ratings Services said its ratings on both entities remain on CreditWatch with developing implications. Disclosure last week of retention bonuses and the creation and funding of a bankruptcy-remote supplemental pension plan trust for AMR and American executives continues to anger employees, who last week narrowly approved deep cuts in their compensation, despite management's cancellation of the retention bonuses and a promise not to make further investments in the supplemental pension plans. The flight attendants' union is threatening to hold a third vote on the concessionary contracts, which would almost certainly reverse the previous narrow approval. It is unclear whether such a vote could overturn the previous ratification. The Transport Workers Union leaders have said that they are studying their legal options, as well, though the pilot union leadership appears more mollified by management's apology and cancellation of bonuses and future funding for the supplemental pension plans (which are similar to plans that the pilots have). Even if the concessionary labor contracts remain in place, the controversy appears to have seriously damaged labor relations at a time when the airline is struggling to avoid bankruptcy. AMERICAN AIRLINES: Chairman Carty Apologizes for "Big Mistake" -------------------------------------------------------------- AMR Chairman Don Carty publicly apologized to American Airlines employees, saying that he had made a "big mistake" in his previous talks about executive compensation with union leaders and launching a new round of briefings to help give unions "complete confidence" as the airline's cost restructuring process goes forward. "You know, the world's largest airline doesn't do things halfway. When we do something, we do it bigger and better than anyone else," Carty said in a statement. "We did what has never before been done . . . we delivered the largest consensual savings in U.S. history. And then I made a mistake and, of course, it was a big one." Last week, Carty announced that he and his senior management team had given up their planned retention payments to further demonstrate their commitment to "shared sacrifice" as the company works to reduce employee costs by $1.8 billion a year. Carty emphasized that there was nothing improper about the retention agreements, only in the way they were communicated. In addition, Carty said the errors were his own, and should not reflect upon the AMR Board of Directors. "Our Board will retain its historical practice of ensuring that American - - and AMR -- are conservative and responsible in all financial matters, including compensation structures," Carty said. Monday, the company began a new round of discussions with labor leaders to answer their questions about executive compensation agreements and help address any misunderstandings about the company's 10-K filing. Carty said union leaders "must have complete confidence in the fact that the sacrifices are indeed shared and that there are no more surprises. They deserve the truth and so do our employees." In the past two years, Carty's total compensation has dropped by more than 80 percent, and he has declined any retention payment or bonus or performance share grant. Of the six major air carriers, Carty is the lowest-paid CEO. "It is important that all the employees who have been asked to share in the sacrifice understand that despite my mishandling of this particular situation, the board has acted responsibly and I have shared in the sacrifice and my commitment is real," Carty said. Carty said that AMR remains on the "precipice of bankruptcy," and urged union leaders and employees to stand by the consensual cost-savings agreements ratified last week. "The precariousness of our financial condition simply can't sustain any action that would delay or prevent the consensual restructuring measures from taking place on schedule," Carty said. With large payments pending and facing "very real deadlines," Carty said that the company must immediately implement these agreements or be forced to file for Chapter 11 protection. Bankruptcy would force more aggressive cost cuts, including an additional 10,000 jobs, further pay reductions and a significant threat to employee pensions. Carty said that employees had worked too hard to stave off bankruptcy to abandon the consensual agreements now, and said that he would work hard to repair any damage he had caused to the spirit of cooperation and collaboration he is trying to build at American. "We've come this far because everyone has pulled together to make the tough choices and do what is necessary to keep this great company of ours out of bankruptcy," Carty said. He vowed to work to "build a bridge back to the path that allowed us to forge these historic agreements in the first place." For more information about the Company, visit http://www.amrcorp.com AMERIMMUNE PHARMACEUTICALS: Ceases Ops. & Files Ch. 7 Petition -------------------------------------------------------------- Amerimmune Pharmaceuticals, Inc., (OTCBB:AMUN) has suspended operations and petitioned for Chapter 7 bankruptcy after being served with two lawsuits. Following months of unsuccessful negotiations, one of the lawsuits was initiated by Los Angeles- based CytoDyn of New Mexico, Inc., the privately-held company from which Amerimmune had licensed its only product Cytolin(R), a promising antibody for treating HIV/AIDS. Rather than treating the HIV infection directly, Cytolin(R), which must be injected in a doctor's office, is designed to make the human immune system more like the immune systems of primates that can carry the AIDS virus without becoming ill. During the height of the AIDS epidemic in the U.S., hundreds of patients were treated with off-label Cytolin(R) with encouraging results. The other lawsuit, alleging nonpayment for services rendered, was filed by Symbion Research International, the Contract Research Organization that supervised Amerimmune's clinical trial of Cytolin(R). The clinical trial, while preliminary, replicated previous studies that had provided early evidence for the safety and efficacy of Cytolin(R), according to an abstract presented by Donald W. Northfelt, M.D., Assistant Clinical Professor of Medicine, University of California, San Diego, at the 9th Conference on Retroviruses and Opportunistic Infections held in Seattle, Feb. 24-28, 2002. Despite the significant economic loss to CytoDyn and some of its officers, CytoDyn welcomes Amerimmune's bankruptcy because there is no longer a need to prove CytoDyn's allegation that Amerimmune had, for unknown reasons, abandoned its patent and manufacturing rights but refused to acknowledge it. This left Cytolinr and the underlying platform technology in a state of limbo. However, CytoDyn will continue to seek indemnification from Amerimmune's officers and directors for abandonment of an FDA-approved manufacturing technology that was developed by Vista Biologicals Corporation of Carlsbad, Calif., and that CytoDyn must now replace. Freed from the problems surrounding Amerimmune, CytoDyn intends to waste no time in getting Cytolin(R) back on development track so it will be available to the patients worldwide who may need it. Toward that end, scientist and CytoDyn cofounder Allen D. Allen has won approval for a European patent that Amerimmune had decided not to pursue. This complements a portfolio of three U.S. patents issued to Allen and licensed to CytoDyn. AMERIMMUNE PHARMACEUTICALS: Chapter 7 Case Summary & Creditors -------------------------------------------------------------- Debtor: Amerimmune Pharmaceuticals, Inc. 920 Hampshire Road, Suite A-40 Westlake Village, California 91361 aka Versailles Capital Corporation Bankruptcy Case No.: 03-13919 Type of Business: Pharmaceutical research company Chapter 7 Petition Date: April 4, 2003 Court: District of Nevada (Las Vegas) Judge: Linda B. Riegle Debtor's Counsel: James D. Greene, Esq. Schreck Brignone 300 South Fourth Street Suite 1200 Las Vegas, NV 89101 Tel: (702) 382-2101 Estimated Assets: $0 to $50,000 Estimated Debts: $1 Million to $10 Million Debtor's 10 Creditors: Entity ------ Allen D. Allen Jersey Transfer & Trust Co. The Berlin Group Inc. Laboratory Corp. of America Minerva Comm. Group Inc. Piercy Bowler Taylor & Kern Pink Sheets LLC Project Amigo Rex H. Lewis Symbion Research Int'l Inc. AMERISERVE FINANCIAL: Fitch Concerned about Weakening Liquidity --------------------------------------------------------------- Fitch Ratings downgraded the ratings for AmeriServ Financial, Inc., as follows: Long-term debt rating to 'B' from 'BB' and Individual rating to 'D' from 'C/D'. Fitch has also lowered the Long-term debt rating and Long-term deposit rating for ASRV's banking subsidiary, AmeriServ Financial Bank, to 'BB-' from 'BB+' and ASRVB's Individual rating to 'D' from 'C/D'. The Rating Outlook for all ratings for ASRV and ASRVB remains Negative. Additionally, Fitch has downgraded the rating for AmeriServ Capital Trust I to 'CCC+' from 'B+'. The rating for ASRVP has been removed from Rating Outlook Negative and placed on Rating Watch Negative. The rating action is driven by the increased uncertainty regarding the company's ability to meet future financial obligations, particularly with respect to its trust preferred debt. Liquidity at the parent company has weakened over the past few periods due to continued lack of earnings momentum and an oversized debt burden as the spin-off of Three Rivers Bank (April 1, 2000) left ASRV with one less subsidiary from which to upstream dividends to service its relatively large $34.5 mln (8.45%) trust preferred issue. The situation has been further exacerbated by a Memorandum of Understanding entered into by ASRV and ASRVB with the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking in 1Q03. Under the terms of the MOU, ASRV and ASRVB cannot declare dividends, the company may not redeem any of its own stock, and ASRV cannot incur any additional debt other than in the ordinary course of business, in each case, without the prior written approval of the regulators (Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking). The Board of Directors of ASRV had suspended the common stock dividend prior to the regulatory action. The downgrade of the Long-term ratings of both ASRV and ASRVB is reflective of heightened constraint on financial flexibility at all levels. The parent company had approximately $694,000 in cash as of YE02. During 1Q03, the company met its quarterly obligations with respect to its outstanding trust preferred issue, thanks primarily to dividends from its non-bank subsidiaries (trust company and life insurance company). Prospectively, ASRV will likely need regulatory approval to upstream dividends from the bank to continue to service the trust preferred debt. Because the bank's financial performance has been weak, Fitch believes there is some uncertainty as to the likelihood that the bank will receive approval, despite current capital levels that are above regulatory well- capitalized thresholds. The 'CCC+' rating on ASRVP reflects the possibility that the company could be in deferral on the trust preferred dividend in the near term. If ASRV were to defer dividend payment on the trust preferred issue, then the rating of ASRVP would be lowered to 'CC'. The downgrade of the Individual rating for ASRV and ASRVB reflects concerns regarding profitability, continued credit quality deterioration, and downward pressure associated with the soft economic environment, particularly in the company's markets. That said, we recognize that the company's strategic initiatives, including the recent reduction in staff, the one- year labor contract extension, the sale of servicing rights on approximately 70% ($450 mln) of mortgage loans serviced by Standard Mortgage Corporation, and recent management, organizational and credit procedure changes are steps in the right direction. However, the Rating Outlook Negative reflects execution risk in improving the company's financial and credit profile heightened by minimal financial flexibility. Ratings AmeriServ Financial, Inc. -- Long-term to 'B' from 'BB'; -- Short-term 'B'; -- Individual to 'D' from 'C/D'; -- Support '5'; -- Rating Outlook Negative AmeriServ Financial Bank. -- Long-term to 'BB-' from 'BB+'; -- Long-term Deposits to 'BB-' from 'BB+'; -- Short-term 'B'; -- Short-term Deposits 'B'; -- Individual to 'D' from 'C/D' ; -- Support '5'; -- Rating Outlook Negative AmeriServ Capital Trust I -- Trust Preferred to 'CCC+' from 'B+'; -- Rating Watch Negative AMES DEPARTMENT: Selling Mansfield Warehouse Facility for $18MM --------------------------------------------------------------- Ames Department Stores, Inc., and its debtor-affiliates own a distribution center located at 305 Forbes Boulevard in Mansfield, Massachusetts. The Property consists of 47 acres of land and contains 275,000 square feet of rentable space, including loading bays and all of the equipment at the Property. In accordance with their decision to wind down their business, Ames Senior Vice President and General Counsel David H. Lissy, Esq., informs the Court that the Debtors have actively sought a purchaser for the Property and that the offer made by AMB Institutional Alliance Fund II, L.P. is the best offer thus far. For this reason, the Debtors intend to sell its interest in the Distribution Center. In connection with the proposed sale, the Debtors entered into a purchase agreement wherein AMB has agreed to pay $18,000,000 for the transfer of the Property free and clear of all liens. To the Debtors' knowledge, the only recorded lien against the Property is a lien in favor of Kimco Funding LLC under a DIP Financing agreement with the Debtors. In view of that, Kimco has consented to the sale of the Property. Mr. Lissy assures the Court that to the extent the Property is subject to any other duly perfected, valid liens, the liens will either be satisfied by the Debtors or will transfer to the proceeds of the sale pending entry of a Court order fixing and allowing the validity, priority and amount of the lien. The Purchase Agreement The substantive terms and conditions of the Purchase Agreement are: A. Assets To Be Sold The Debtors will sell: (a) The Land and the Improvements and all easements, tenements, rights, licenses, privileges and appurtenances associated with the Distribution Center; (b) All equipment and furnishings and all other tangible personal property they own and located on the Premises on the Closing Date. B. Purchase Price $18,000,000, which will be payable in cash through: (a) a $1,800,000 deposit that AMB delivered to the Debtors' co-counsel after executing the Purchase Agreement; and (b) a $16,200,000 balance that will be paid in cash at the Closing, subject to prorations and adjustments. C. Closing Closing on the sale of the Property to AMB is to occur on the fifth business day after all conditions precedent in the Purchase Agreement have been satisfied or waived, but no event later than June 9, 2003. Mr. Lissy asserts that AMB's offer is by far the best. Mr. Lissy notes that the Debtors have considered that: (a) the sale of the Property will enable the Debtors to realize $18,000,000; (b) the Property has been actively marketed and the Purchase Agreement represents the best firm offer that the Debtors have been able to obtain so far; and (c) the Property is no longer needed for the Debtors' operations and consequently, its continued maintenance requires the payment of continuing cots without any corresponding benefit to the Debtors. The Proposed Bidding Procedures To maximize the value of the assets, the Debtors will utilize the standard bidding procedures approved by the Court. The Debtors will require any competing offer to be on substantially the same terms of the Purchase Agreement except for the Purchase Price, which must exceed AMB's bid by at least $900,000. All bidding at the Auction will be in increments of at lease $25,000. All bids will remain open and irrevocable until 11 days after the Sale Hearing. The second best bid, as determined by the Debtors, will remain open and irrevocable until a Closing on the Sale, so that they may be accepted and consummated subject to an appropriate order of the Court, if the bid selected at the Auction and approved by the Court is not consummated at the closing. AMB's Break-Up Fee The Debtors propose to pay a break-up fee to AMB in the event a higher and better offer is approved and consummated. Competing bidders for the Property will be required to make an initial minimum topping offer of not less than $18,900,000, which includes a break-up fee of $360,000. The Break-Up Fee is payable to AMB from the proceeds of the sale. The Debtors maintain that the Break-Up Fee is fair and reasonable in light of the time and effort expended by AMB Institutional in concluding the Purchase Agreement. (AMES Bankruptcy News, Issue No. 36; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANC RENTAL: Gets Nod to Reimburse $1-Million Due Diligence Fees --------------------------------------------------------------- ANC Rental Corporation and its debtor-affiliates obtained the Court's authority, pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code, to reimburse, in their sole and exclusive discretion, the Prospective Purchasers for Due Diligence Fees, in relation to a proposed asset sale, prior to and in connection with the submission of an Agreement up to $1,000,000. The Debtors also obtained the Court approval to pay the fees to the four Prospective Purchasers identified to date but reserve the right to substitute any of the Prospective Purchasers for a different entity. Backgrounder As previously reported, ANC Rental Corporation and its debtor- affiliates retained Lazard Freres & Co. LLC as their investment banker in these Chapter 11 cases, nunc pro tunc to January 10, 2003. The Debtors retained Lazard to evaluate and pursue a potential sale transaction involving all or a substantial portion of the assets, equity securities or other interests of the Debtors either through a Section 363 sale or pursuant to a plan of reorganization as permitted by Section 1123(a)(5). Lazard engaged in the process of identifying and contacting persons and entities that may be interested in pursuing and consummating a Potential Sale Transaction. Through these efforts, Lazard identified numerous persons and entities that indicated a willingness to enter into a Potential Sale Transaction, 12 of which signed confidentiality agreements with the Debtors and conducted various levels of initial due diligence. The Debtors subsequently established a deadline for interested parties to submit a letter of interest in connection with a Potential Sale Transaction. The Debtors received letters of intent from eight prospective purchasers. The Debtors and Lazard reviewed and evaluated these LOIs and selected four prospective purchasers that they believe capable of consummating a Potential Sale Transaction on terms and conditions acceptable to the Debtors. The Debtors have requested that the Prospective Purchasers each submit an agreement containing the terms and conditions of a Proposed Sale Transaction. The Prospective Purchasers have each indicated a need to conduct further due diligence into the Debtors' businesses, assets, financial projections and management personnel over at least the next 30 days prior to submitting a binding Agreement. To induce the Prospective Purchasers to continue their final due diligence and submit a binding Agreement, the Debtors agreed to obtain Court authorization to reimburse the Prospective Purchasers for their Due Diligence Fees. (ANC Rental Bankruptcy News, Issue No. 30; Bankruptcy Creditors' Service, Inc., 609/392-0900) ANNUITY & LIFE: Fails to Meet NYSE Continued Listing Standards -------------------------------------------------------------- Annuity and Life Re (Holdings), Ltd., (NYSE: ANR) announced that, as previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2002, it has received a notice from the New York Stock Exchange dated April 8, 2003, stating that the Company did not satisfy the NYSE's continued listing standards as of that date because the average closing price of the Company's common shares had been below $1.00 for a 30 consecutive trading day period. If the Company cannot achieve a $1.00 average share price for 30 consecutive trading days within six months of the receipt of this notification, the NYSE has indicated that it will commence suspension and delisting procedures with respect to the Company's common shares. In addition, the Company announced that the NYSE has informed the Company that it is considering whether the Company continues to meet certain of the NYSE's qualitative continued listing standards due to concerns over the Company's financial condition. * * * As reported in Troubled Company Reporter's March 25, 2003 edition, Fitch Ratings lowered the insurer financial strength rating of Annuity & Life Reassurance, Ltd., to 'C' from 'CC'. The Rating Watch remains Negative. This rating action reflects additional disclosures in an amended third quarter 2002 10-Q. In particular, the company added a Going Concern and Subsequent Events statement disclosing that the company has been served with a statutory demand under Bermuda law, which if deemed valid, could lead to liquidation if the company is unable to satisfy the obligations claimed by the filing party. On February 26, 2003, Fitch downgraded ANR's insurer financial strength rating from 'CCC' to 'CC', following the company's public disclosure on February 24th of a number of adverse developments related to its operating performance and financial position. Of particular concern to Fitch were the company's announcements that it had ceased writing new business and had notified its existing reinsurance clients that it cannot accept additional cessions under previously established treaties, as well as disclosure of continued adverse mortality and a large number of open claim submissions. These disclosures, combined with other negative developments, led the company to announce that a significant loss will be reported in the fourth quarter of 2002, and for the year, although the company has not yet disclosed the severity of those losses. AT&T LATIN AMERICA: Consents to Chapter 11 Bankruptcy Proceeding ---------------------------------------------------------------- AT&T Latin America Corp. (OTC Bulletin Board: ATTL.OB), has converted the Chapter 11 process for its U.S. entities to a voluntary Chapter 11 process initiated by the company. The voluntary filing includes the company's U.S. entities. As announced on Monday, April 14, Matlin Patterson, one of the company's secured creditors, filed a petition to reorganize ATTL under Chapter 11 in the Southern District of Florida, Miami Division. Matlin Patterson's petition applied to AT&T Latin America Corp., as well as its Argentine subsidiary. ATTL had indicated on Monday that the company would move quickly to convert Matlin Patterson's filing to a voluntary filing initiated by the company. "Converting our U.S. entities to a voluntary Chapter 11 process is consistent with our strategy to protect the interests of all creditors and stakeholders of ATTL," said Lawrence Young, ATTL Chief Financial Officer. Mr. Young indicated that the company is currently assessing various options for the Argentine subsidiary. Additionally, ATTL released preliminary numbers regarding its first quarter performance. The company generated revenue of approximately $39mm in the first quarter. For Q1, the company expects to generate an EBITDA margin (before restructuring charges) of 8-12%, a dramatic improvement over the company's Q4 performance, and $4-6mm above the company's Q1 forecast. ATTL also ended the first quarter in a stronger cash position than previously expected. "We exceeded our Q1 budget in all areas and in all countries," said Patricio Northland, CEO, President and Chairman of the Board of ATTL. Added Mr. Northland, "We continue to sign up new customers, as well as expand our business within our existing customer base. Our performance in the first quarter is a testament to the incredible accomplishments of our employees in each country. We are exceeding the objectives we set forth in December as part of our restructuring plan. As we move into the second quarter, we continue to see strong, positive momentum in the marketplace with our customers, and within our operations." ATTL is continuing to pursue a potential new owner or investor for the company, and does not anticipate the timing of the sale process to be affected by these actions. AT&T Latin America Corp., headquartered in Washington, D.C., is a facilities-based provider of integrated business communications services in five countries: Argentina, Brazil, Chile, Colombia and Peru. The company offers data, Internet, voice, video-conferencing and e-business services. AUSPEX SYSTEMS: Files for Chapter 11 Liquidation in California -------------------------------------------------------------- Auspex Systems Inc., (Nasdaq: ASPX) ("Auspex") has filed a voluntary petition for Chapter 11 liquidation with the U.S. Bankruptcy Court for the Northern District of California, San Jose Division. Auspex intends to continue the customer services operations by retaining certain employees in the Auspex customer service support center, parts logistics and field support operations, and to retain certain employees to facilitate the sale and liquidation of substantially all or part of its assets. This includes the sale of Auspex intellectual property including the Network Attached Storage operating system and NAS applications, features and functions and the assignment of certain vendors and other constituents. In conjunction with the filing, Auspex has terminated all but approximately 27 people. The majority of the remaining employees will be engaged in the ongoing customer support operations. Other retained employees will facilitate the sale of substantially all of the assets, insure an orderly conclusion to operations and maintain cash management programs. In accordance with applicable law and court orders, vendors and suppliers who provided goods and services before today's filing may have pre-petition claims, which will be frozen pending court authorization of payment. Auspex introduced the world's first Network Attached Storage (NAS) server shortly after its founding in 1987, creating a new breed of storage appliance offering significant performance and administrative benefits over general-purpose file servers. Auspex's enterprise-class network servers are used worldwide for consolidated information storage and delivery. Auspex also is leading the convergence of NAS with Storage Area Networks (SANs) with the NSc3000 Network Storage Controller, the first multivendor SAN-to-NAS gateway. The company is headquartered in Santa Clara, California. Its shares are traded on the NASDAQ under the symbol ASPX. For more information, visit http://www.auspex.com AUSPEX SYSTEMS: Voluntary Chapter 11 Case Summary ------------------------------------------------- Debtor: Auspex Systems, Inc. 2800 Scott Blvd. Santa Clara, California 95050 Bankruptcy Case No.: 03-52596 Type of Business: Auspex provides software and hardware infrastructure to support enterprise environments. Chapter 11 Petition Date: April 22, 2003 Court: Northern District of California (San Jose) Judge: Marilyn Morgan Debtor's Counsel: J. Michael Kelly, Esq. Law Offices of Cooley Godward 1 Maritime Plaza 20th Floor San Francisco, CA 94111-3580 Tel: (415) 693-2000 Total Assets: $26,087,000 (as of Dec. 31, 2002) Total Debts: $15,554,000 (as of Dec. 31, 2002) B/E AEROSPACE: First Quarter Net Loss Doubles to $11 Million ------------------------------------------------------------ B/E Aerospace, Inc., (Nasdaq:BEAV) announced financial results for the three months ended March 31, 2003. The company also commented on recent developments, including the war in Iraq and Severe Acute Respiratory Syndrome (SARS). B/E expects these developments' impact on the airlines to adversely affect the company's financial results for at least the next 6 to 12 months. HIGHLIGHTS -- Reported net loss of $0.31 per share for three months ended March 31, 2003. Excluding consolidation costs, net loss was $0.11 per share. -- Maintained adequate liquidity. Cash and available bank credit totaled $126.2 million at quarter-end. -- On track to close Dafen (Wales) facility and achieve planned reductions in workforce during second quarter. Planning further cost reduction initiatives. -- Financial results for calendar 2003 expected to be below prior guidance due to industry developments. "As anticipated, demand for our products remains depressed due to the continuing downturn in the airline and business jet industries," said Mr. Robert J. Khoury, President and Chief Executive Officer of B/E Aerospace. "Airline industry conditions are unusually volatile, with the war in Iraq and concern over SARS affecting international air travel. In addition, business jet industry conditions have deteriorated further, as airframe manufacturers have again significantly cut production forecasts. In this demanding operating environment, financial forecasting is difficult both for our customers and for B/E Aerospace. We remain focused on conserving cash and reducing costs." FINANCIAL RESULTS: AS REPORTED For the three months ended March 31, 2003, B/E reported a net loss of $10.8 million, or $0.31 per share. By comparison, for the three-month period ended March 31, 2002 the company reported a net loss of $5.9 million, or $0.17 per share. Both periods include transition costs related to B/E's facility and workforce consolidation program. Transition costs totaled $6.8 million for the period ended March 2003 and $5.6 million for the period ended March 2002. Transition costs are the expenses of operating facilities scheduled for closure and integrating transferred operations into the remaining facilities. Under GAAP, such costs are expensed as incurred until plant shutdown is complete. FINANCIAL RESULTS: AS ADJUSTED Excluding transition costs, B/E would have reported a net loss of $4.0 million, or $0.11 per share for the period ended March 31, 2003, as compared to $0.3 million, or $0.01 per share for the period ended March 31, 2002. "The first quarter results we report [Mon]day fell short of our expectations," Mr. Khoury said. "We incurred start-up costs to begin manufacturing plastic components in our seating spares business. This occurred because our principal supplier of plastic parts ceased operations. We have purchased certain of the supplier's manufacturing assets and have begun to establish in-house production of plastic seating components. The start-up resulted in higher manufacturing costs and lower sales of seating spares. "Poor operating performance at our Dafen galley manufacturing facility also adversely impacted margins as we moved towards the wind-up of operations there," Mr. Khoury continued. "In addition, we experienced somewhat greater unabsorbed overhead costs due to the mix of products manufactured during the quarter. "We expect that these factors will continue to affect our results for another quarter, as we complete the shutdown of the Dafen plant and finish integrating plastics manufacturing into our operations," he said. Net sales were $154.7 million for the period ended March 2003, up 6 percent compared to the three-month period ended March 2002. Sales for both periods were negatively impacted by the airline industry crisis. B/E estimates that its sales are down approximately 30 percent compared to annualized pre-September 2001 levels, adjusted for acquisitions. SEGMENT RESULTS AND BACKLOG Sales in B/E's largest segment, commercial aircraft products, increased 7 percent compared to the quarter ended March 2002. The business jet segment experienced a significant reduction in demand, with sales down 10 percent compared to the same period a year ago. Fastener distribution sales increased 14 percent compared to the prior period. B/E has been successful in expanding its market share in fastener distribution, and the company expects continued revenue growth in this segment. Total backlog as of March 31, 2003 was $435 million, down from approximately $450 million at December 31, 2002, reflecting the continued difficult conditions in the airline and business jet sectors. LIQUIDITY REMAINS ADEQUATE B/E's cash and available bank credit was $126.2 million as of March 31, 2003, down $31.1 million compared to December 2002 balances. The decrease is in line with management's expectations and was largely due to: -- a previously-announced $15.0 million payment due to a reduction in commitments under B/E's bank credit facility, and -- a net $12.0 million increase in accounts receivable, inventories and other assets. "We are comfortable with our liquidity position. Cash and available bank credit of nearly $130 million should be adequate to meet operating needs and service our debt obligations," Mr. Khoury stated. "Our December 2002 cash position was higher than usual, enabling us to reduce bank borrowings by $50 million in the first quarter. The voluntary $50 million payment, made after we amended our bank credit facility, will reduce interest expense and assist in returning B/E to profitability. Our amended bank credit facility gives us the flexibility to borrow the funds again should we need to do so." Net debt (total debt less cash and cash equivalents) was $712.1 million at March 31, 2003, as compared to $696.0 million at December 31, 2002. EBITDA was $95.9 million on an "as adjusted" basis for the twelve months ended March 31, 2003, excluding consolidation costs and the legal settlement. UPDATE ON AIRLINE INDUSTRY CONDITIONS The airline industry downturn, now well into its second year, will likely go on record as the most severe ever experienced. U.S. airlines have lost over $18 billion in the past two years. A sluggish economy, the September 2001 terrorist attacks and high fuel and labor costs all contributed to the losses. In response, carriers worldwide have limited discretionary spending and reduced fleet sizes. These austerity measures have adversely affected demand for B/E's cabin interior products since late 2001. To re-position B/E for profitability at the lower demand levels, management launched a cost reduction program soon after the 2001 terrorist attacks. By mid-2003, B/E expects to achieve its goal of closing five factories and eliminating about 1,400 positions. "The plight of the worldwide airline industry worsened during the first quarter of 2003," Mr. Khoury said. "With war in Iraq and the SARS outbreak in Asia, most major carriers have experienced sharply lower air travel in recent weeks, compared to prior-year figures which were already depressed by the industry downturn. The duration of these trends is hard to predict at the moment, but it is clear that they have exacerbated a situation which was already difficult for our airline customers." U.S. airlines reported trans-Atlantic and trans-Pacific traffic down 20 percent in late March and April. The reduced air travel is forcing carriers worldwide to make further cuts in capacity and workforce. 10,000 airline jobs were eliminated in the first week of the war alone. Air Canada (the world's 11th largest carrier) and Hawaiian Air sought Chapter 11 bankruptcy protection in the past month. Estimates indicate that U.S. airlines could lose nearly $11 billion this year. Carriers serving the Pacific Rim are experiencing substantially lower traffic and advance bookings. In response, airlines such as Northwest Airlines, Cathay Pacific, Qantas, Singapore Airlines and Japan Airlines have cut flights by as much as 25 percent on certain routes in Asia. "We continue to monitor industry conditions very closely," Mr. Khoury said. "We now expect to implement further cost reduction initiatives in the commercial aircraft products segment. In this regard, we are fortunate to have a flexible cost structure. Over two-thirds of our costs are variable." COST REDUCTION INITIATIVES ALSO PLANNED IN BUSINESS JET SEGMENT "The downturn in the business jet industry continues to unfold," Mr. Khoury stated. "In recent weeks, several aircraft manufacturers have notified us of plans to further reduce production of new business jets." B/E expects new business jet deliveries to be at least 20 percent lower for calendar 2003 as compared to calendar 2002, and about 35 percent lower compared to 2001. In the second half of the current year, B/E expects about 250 new business jet deliveries, an annualized decrease of about 45 percent compared to the 900 new aircraft delivered in 2001, and about 33 percent lower than last year. "Regrettably, these developments necessitate further cost reduction initiatives, including workforce reductions, in our business jet operations," Mr. Khoury said. Implementation of the new initiatives will begin in the second quarter. CONSOLIDATION COSTS Prior to the actions announced today, B/E's consolidation effort - closing five facilities and eliminating 1,400 positions - was projected to cost nearly $155 million, including cash costs of approximately $65 million. New actions announced today in the commercial aircraft products and business jet products groups are expected to add $3 - $5 million to the consolidation costs. Consolidation costs already incurred since inception of the program total about $150 million, including approximately $60 million of cash costs. OUTLOOK "It is clear that recent trends in the airline and business jet industries will adversely affect B/E's performance. We expect financial results for calendar 2003 to be below prior guidance," said Mr. Khoury. "We are managing through unusually volatile industry conditions. Forecasting is particularly difficult in this demanding environment, both for our customers and for B/E Aerospace. Accordingly, for the time being we have elected not to give specific guidance on sales and earnings." Financial guidance for calendar 2003 is now as follows: -- For the second quarter ending June 2003, profit margins and bottom-line results will reflect continued impact from the manufacturing start-up of the plastics operations mentioned herein and continued excess manufacturing costs at the Dafen galley facility until its closure at the end of the second quarter. -- For the third quarter and beyond, improvements in margins and bottom-line results will be driven largely by the previously announced closure of the Dafen facility, integration of the plastics operations and achievement of B/E's original headcount reduction goal (originally a 1,400-position reduction, excluding planned actions announced today). -- Calendar 2003 consolidation costs will be $3 - $5 million greater than prior guidance of $10 million due to the new cost reduction actions announced today in the commercial aircraft products and business jet segments. Essentially all of such costs will have been incurred by the end of the third quarter of 2003. -- Despite the deterioration in industry conditions during the past quarter, B/E's goal is to achieve profitable operations on a quarterly basis by the end of this calendar year. "Looking ahead, B/E Aerospace has a number of attributes that should enable us to maintain adequate liquidity during the downturn," Mr. Khoury said. "Our $135 million bank credit facility, which will decrease by $15 million in December 2004, requires no further principal payments until maturity in August 2006. All other long-term debt requires no additional principal payments until 2008 through 2011. "Our customer base is truly global," he continued. "Over 45 percent of last year's sales came from outside the U.S. Our competitive position is very strong, with leading worldwide market shares in many product lines. "With our aftermarket focus, we should be an early beneficiary of the industry recovery," he said. "Aftermarket demand should lead the recovery, because refurbishing existing aircraft is much less expensive than buying new aircraft. "When demand improves, the cost reductions we have already achieved should give us substantial operating leverage and enhanced earnings power. We believe that our factories have the capacity to generate revenues of up to $1 billion without significant additional capital investment. In the meantime, we have a seasoned executive team which has navigated prior downturns," Mr. Khoury concluded. B/E Aerospace, Inc., is the world's leading manufacturer of aircraft cabin interior products, and a leading aftermarket distributor of aerospace fasteners. With a global organization selling directly to the world's airlines, B/E designs, develops and manufactures a broad product line for both commercial aircraft and business jets and provides cabin interior design, reconfiguration and conversion services. Products for the existing aircraft fleet -- the aftermarket -- provide about 60 percent of sales. For more information, visit B/E's Web site at http://www.beaerospace.com As reported in Troubled Company Reporter's March 13, 2003 edition, Standard & Poor's Ratings Services lowered its ratings, including lowering the corporate credit rating to 'B+' from 'BB-', on BE Aerospace Inc. The ratings remain on CreditWatch with negative implications, where they were placed on February 11, 2003. Rated debt is about $850 million. "The downgrade reflects BE Aerospace's continued weak financial results, which, coupled with high debt levels, translate into subpar credit protection measures," said Standard & Poor's credit analyst Roman Szuper. "Furthermore, the operating environment of the firm's primary market--the airline industry-- is very challenging, especially in the U.S, and it is likely to deteriorate further if there is a war with Iraq," the analyst added. The ratings for Wellington, Fla.-based BE Aerospace reflect risks associated with very difficult conditions in the airline industry, high debt levels, and poor credit protection measures. Those factors are partly offset by the company's position as the largest participant in the commercial aircraft cabin interior products market, a leading share of that business on corporate jets, fairly efficient operations, and adequate liquidity. The firm's large installed base typically generates demand for generally higher-margin recurring retrofit, refurbishment, and spare parts (60%-65% of revenues), with the balance from products installed on new jetliner deliveries. BURLINGTON INDUSTRIES: Court Allows Additional Retention Payment ---------------------------------------------------------------- Burlington Industries, Inc., and its debtor-affiliates obtained the Court's authority, pursuant to Section 363(b) of the Bankruptcy Code, to supplement and extend the Retention Program by providing KERP Participants with an additional installment payment equal to 25% of their Retention Incentive Payments payable on Emergence for KERP Participants in Tiers I and II and on October 1, 2003 for KERP Participants in Tiers III through VI, if, and only if, Emergence has not occurred on or before October 1, 2003. The estimated total cost of the proposed Additional Retention Payment is $1,468,000. The existing Retention Program focuses on a small, core group of the Debtors' management employees -- only 71 employees -- who possess the experience, skills and knowledge necessary to facilitate the Debtors' successful reorganization. Of those original 71 employees, 64 continue to be employed by the Debtors. Thus, in large part due to the Retention Program, the Debtors have successfully retained more than 90% of their key employees during the first 15 months of these Chapter 11 cases. In addition, since the entry of the KERP Order, the Debtors have offered nine employees retention incentives under the Retention Program through the $1,000,000 KERP Reserve established under the Retention Program for that purposes. The Retention Program itself consists of two separate components: (a) a retention incentive plan, designed to provide retention incentives to key management employees; and (b) a severance plan, designed to ensure basic job protection for key management employees. Under the Retention Incentive Plan approved by the Court, Ms. Booth relates, the Original Participants were classified into six "tiers" based on each employee's responsibilities, role in the reorganization process and anticipated contribution to the Debtors' restructuring efforts. Each of the Original Participants was eligible for a retention payment equal to a percentage of his then-current base salary paid in installments over time. Each of the Reserve Participants was entitled to a similar Retention Incentive Payment to be paid from the KERP Reserve. Retention Incentive Payments for KERP Participants were paid in installments on March 15, 2002, July 15, 2002 and November 15, 2002. Because the effective date of a plan of reorganization in these cases has not yet occurred, all KERP Participants received an additional payment equal to 25% of the KERP Participants' Retention Incentive Payment on February 15, 2003. Furthermore, KERP Participants in Tiers IV through VI -- covering certain vice president and other management positions -- will be entitled to an additional payment equal to 25% of the KERP Participants' Retention Incentive Payment, payable on May 15, 2003. (Burlington Bankruptcy News, Issue No. 31; Bankruptcy Creditors' Service, Inc., 609/392-0900) Burlington Industries' 7.250% bonds due 2005 (BRLG05USR1) are trading at about 37 cents-on-the-dollar, says DebtTraders. See http://www.debttraders.com/price.cfm?dt_sec_ticker=BRLG05USR1 for real-time bond pricing. CSAM HIGH YIELD: Fitch Cuts Ratings on 2 Note Classes to B-/CCC- ---------------------------------------------------------------- Fitch Ratings has downgraded the following classes of notes issued by CSAM High Yield Focus, Ltd.: -- $246,390,876 class A-1 notes to 'B-' from 'BB+'; -- $9,000,000 class A-2 notes to 'CCC-' from 'BB-'. CSAM High Yield Focus, Ltd. is a collateralized bond obligation managed by Credit Suisse Asset Management. The CBO was established in June 1999 to issue debt and equity securities and to use the proceeds to purchase high yield bond collateral. The ratings of the class B-1 and class B-2 notes from this transaction are affirmed at 'CC'. According to its April 1, 2003 trustee report, CSAM High Yield Focus, Ltd.'s collateral includes a par amount of $63.95 million (19.65%) defaulted assets and the transactions only OC test is failing at 88.62% with a trigger of 115%. In reaching its rating actions, Fitch reviewed the results of its cash flow model runs after running several different stress scenarios. Fitch will continue to monitor this transaction. DUN & BRADSTREET: Dec. 31 Net Capital Deficit Stands at $18.8MM --------------------------------------------------------------- D&B (NYSE: DNB), the leading provider of global business information and technology solutions, reported diluted earnings per share for the quarter ended March 31, 2003, of 51 cents, up 19 percent from 43 cents in the prior year quarter, before previously-announced net charges totaling 3 cents per share. On a GAAP basis, D&B reported diluted earnings per share of 48 cents, up 12 percent. The net charges are described below. See Schedule 1 for results as reported in accordance with generally accepted accounting principles, Schedule 2 for results before non-core gains and charges, and Schedule 3 for a reconciliation of GAAP results to results before non-core gains and charges. Also see below for a discussion of the Company's use of non-GAAP financial measures. "As we said when we announced our preliminary results on April 9th, we are pleased that our flexible business model and focused implementation of our Blueprint for Growth strategy enabled us to deliver strong EPS growth," said Allan Z. Loren, chairman and chief executive officer of D&B. "Our North America segment's profitability improved slightly, despite a revenue decline and dilution from our acquisition of Hoover's. In addition, our International segment reported a profitable first quarter for the first time in over 6 years. These profitability improvements are a testament to the success of our financial flexibility initiatives." D&B's First Quarter 2003 Results Total revenue for the quarter was $314.7 million, flat compared with the prior year quarter, including 4 percentage points of favorable impact from foreign exchange rate movements and 2 percentage points of favorable impact from the Company's acquisitions of Data House in the fourth quarter of 2002 and Hoover's, Inc. in March 2003. These revenue results reflect the following by product line: -- Risk Management Solutions revenue of $224.1 million, up $9.0 million or 4 percent (including 5 percentage points of favorable impact from foreign exchange, and 2 percentage points of favorable impact from the Data House acquisition); -- Sales & Marketing Solutions revenue of $80.6 million, down $11.6 million or 13 percent (including 2 percentage points of favorable impact from foreign exchange); -- Supply Management Solutions revenue of $7.5 million, up $0.3 million or 6 percent (including 4 percentage points of favorable impact from foreign exchange); and -- E-Business Solutions revenue of $2.5 million, representing the results of Hoover's, Inc. since March 3, 2003. This E- Business Solutions product line is being reported separately for the first time this quarter. "We are disappointed with our revenue results, which reflect cautious customer investment behavior in the current economic environment," said Loren. D&B continued to make progress in migrating its product delivery to the Web, a more efficient delivery channel. In the first quarter of 2003, D&B delivered 68 percent of its revenue over the Web, up from 65 percent in the 2002 fourth quarter, and from 42 percent in the first quarter of 2002. Operating income for the first quarter was $55.6 million, down $3.4 million or 6 percent from the year-ago period. Operating income grew in each of the Company's geographic segments, and Corporate and other expense declined, all reflecting the benefits of the Company's ongoing financial flexibility initiatives. However, these improvements were offset by a previously-announced $10.9 million restructuring charge, described below. Before this charge, operating income was up $7.5 million or 13 percent. D&B had $3.1 million of non-operating income - net for the first quarter of 2003, compared with $4.6 million of non-operating expense - net in the prior-year period. The 2003 amount included a previously-announced insurance recovery of $7.0 million, described below. Before this non-core gain, D&B would have had Non-operating expense - net of $3.9 million, an improvement of 14 percent over the prior-year period, primarily due to lower interest expense. Net income for the quarter was $37.1 million, up $3.6 million or 11 percent from the prior-year period, including the restructuring charge and insurance recovery. Before these non- core gains and charges, net income was up $5.9 million or 18 percent. Cash provided by operating activities during the quarter was $60.7 million, including $7.0 million from the insurance recovery, compared to $7.5 million in the prior year quarter. This improved result includes the benefit of working capital management, another area of focus of the Company's financial flexibility initiatives. The Company ended the quarter with $149.3 million of cash and cash equivalents. At December 31, 2002, the Company's balance sheet shows a total shareholders' equity deficit of about $18.8 million. First Quarter 2003 Segment Results North America North America's first-quarter revenue was $226.5 million, down $13.2 million or 6 percent from $239.7 million in the prior year period. This decline is primarily due to lower Sales & Marketing Solutions revenue reflecting the effect of cautious customer investment behavior in the current economic environment. North America's revenue results include: -- $151.7 million from Risk Management Solutions, down $3.2 million or 2 percent; -- $66.9 million from Sales & Marketing Solutions, down $12.1 million or 15 percent; -- $5.4 million from Supply Management Solutions, down $0.4 million or 6 percent; and -- a $2.5 million contribution from E-Business Solutions, which represents the results of Hoover's Inc. since its acquisition on March 3, 2003. North America's operating income for the quarter was $80.3 million, compared to $80.2 million in the prior year quarter. Profitability in the quarter was impacted by an increase in non- cash pension costs resulting from previously-disclosed changes in the U.S. Retirement Plan's actuarial assumptions, and $1.2 million of dilution from the Hoover's acquisition, offset by benefits from the Company's financial flexibility initiatives. International D&B began reporting its Europe segment (including Europe, Middle East and Africa) and its Asia Pacific / Latin America segment as a single, new International segment effective January 1, 2003. The International segment's first-quarter revenue was $88.2 million, up $13.2 million from $75.0 million in the prior year quarter. The 18 percent increase in International revenue was primarily due to the favorable effect of foreign exchange rate movements, which contributed 17 percentage points of growth. Before the effect of foreign exchange, revenue grew 1 percent, including the acquisition of Data House, which contributed $5.4 million or 6 percentage points of growth. These International revenue results reflect: -- $72.4 million from Risk Management Solutions, up $12.2 million or 20 percent, including 17 percentage points of favorable impact from foreign exchange and 8 percentage points of growth from the acquisition of Data House; -- $13.7 million from Sales & Marketing Solutions, up $0.5 million or 4 percent, including 14 percentage points of favorable impact from foreign exchange, and; -- $2.1 million from Supply Management Solutions, up $0.7 million or 55 percent, including 25 percentage points of favorable impact from foreign exchange. The International segment's operating income for the quarter was $1.3 million, compared with an operating loss of $4.0 million in the prior year quarter. This improvement in profitability was primarily due to the lower expense base associated with the Company's financial flexibility program. Operating income growth also benefited from the favorable impact of foreign exchange. Non-Core Gains and Charges In its January 13, 2003 press release, the Company announced that it had received cash of $7.0 million pre-tax ($4.3 million after-tax or 6 cents per diluted share) in settlement of its insurance claim to recover losses related to the events of September 11, 2001. In the first quarter of 2003, this non-core gain was recorded within Non-operating income - net. On January 13, 2003, the Company also announced a series of financial flexibility initiatives which is expected to initially reduce D&B's 2003 expense base by $75 million on an annualized basis, before any restructuring charges and transition costs, and before any reallocation of spending. In the announcement, D&B said it expected this series of actions to result in restructuring charges totaling $16 million, primarily for severance and termination costs, which would be recognized during 2003. In accordance with a new accounting rule, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," restructuring charges must now be recognized when the liability is incurred, rather than at the date the company commits to an exit plan. The adoption of this rule will result in the restructuring expenses being recognized over a period of time, rather than at one time. In the first quarter of 2003, the Company recorded $10.9 million pre-tax ($6.6 million after-tax or 9 cents per diluted share) of the expected $16 million charge within Operating income as Corporate and other expense. D&B's restructuring charges may be viewed as recurring as they are incurred as part of each phase of its financial flexibility initiatives. However, in addition to reporting GAAP results, the Company reports results before restructuring charges and other non-core gains and charges because it does not consider these charges and other items to reflect its underlying business performance. 2003 Outlook Earnings Per Share and Operating Cash Flow The Company is confirming its previous full-year diluted earnings per share guidance of between $2.25 and $2.29 on a GAAP basis. This range of EPS represents between 20 and 22 percent growth, compared to $1.87 reported on a GAAP basis for 2002. This EPS guidance includes the previously-announced 8 cent per share dilutive impact of the Hoover's acquisition, and certain non-core gains and charges totaling a net charge of 25 cents per share. Before non-core gains and charges, D&B expects full-year diluted earnings per share to be between $2.50 and $2.54, representing between 16 and 18 percent growth, compared to $2.15 of diluted earnings per share before a restructuring charge of 28 cents per share in 2002. This range of guidance for 2003 is also unchanged from what was communicated previously. D&B expects to record in 2003 the following non-core gains and charges which were announced in the company's January 13th, 2003, press release: -- an insurance recovery of $7 million pre-tax ($4.3 million after-tax or 6 cents per share), recognized in the first quarter; -- restructuring charges totaling approximately $16 million pre- tax ($11 million after tax, or 14 cents per share), of which $10.9 million pre-tax ($6.6 million after-tax or 9 cents per share) was recognized in the first quarter, and the balance is expected to be recognized primarily in the second quarter; and -- a loss on monetization of real estate of approximately $13 million pre-tax ($13 million after-tax or 17 cents per share), expected in the third quarter. "As a result of the financial flexibility program we initiated over 2 years ago, we now have a significantly lower operating cost base," said Loren. "We manage our business by continually seeking opportunities to reallocate our spending to activities that drive revenue growth while, at the same time, improving our profitability. Our business is not capital-intensive, and it generates strong operating cash flows. As a result," Loren concluded, "we believe we can continue to deliver solid earnings and operating cash flow growth in 2003, despite the current lackluster business environment." The Company expects operating cash flow for 2003 to be between $232 million and $272 million, before any payments to the IRS in settlement of tax and legal matters described in D&B's 2002 Annual Report on Form 10-K. Because D&B is unable to predict the amount or timing of any such future payments, the Company is unable to provide an outlook for 2003 operating cash flow on a GAAP basis. Operating cash flow was $213.1 million in 2002. Revenue D&B believes full-year core revenue growth will be in the range of 1 to 4 percent before the effects of foreign exchange. D&B previously expected core revenue growth in the range of 4 to 5 percent before these effects. Because D&B is unable to predict the future movements of foreign exchange rates or potential business model changes, the Company is unable to provide an outlook for 2003 revenue on a GAAP basis. "We believe that, with superb leadership by our team members and the investments we are making to drive growth in our business, we will achieve our aspiration to become a growth company," said Loren. "However, we expect it will take some time before customer investment behavior changes in a meaningful way. As a result, we are lowering our revenue growth outlook for 2003 to reflect a continuation of current business conditions," Loren said. Management will provide further information about its growth plans for 2003 and beyond at an investor meeting scheduled for May 16, 2003. Details about the meeting will be provided in the coming weeks. Other Metrics Further with respect to guidance for full year 2003, the Company expects that: -- It will deliver 70+ percent of its revenue over the Web by the end of the year, compared with 65 percent at the end of 2002; -- Capital expenditures and capitalized software costs will be between $40 and $50 million, compared with $53.5 million in 2002; and -- Depreciation and amortization expense will be between $75 and $80 million, compared with $84.2 million in 2002. This guidance is also unchanged from previous expectations. Use of Non-GAAP Financial Measures D&B reports non-GAAP financial measures in this press release and the schedules attached. Specifically, D&B reports core revenue, revenue growth before the effects of foreign exchange, and operating income, net income and diluted earnings per share before non-core gains and charges. Please see D&B's Form 10-K for the fiscal year ended December 31, 2002 under the section entitled "Item 1. Business - How We Evaluate Our Performance" for a discussion of how the Company defines these measures, why it uses them and why it believes they provide useful information to investors. D&B (NYSE: DNB) provides the information, tools and expertise to help customers Decide with Confidence. D&B enables customers quick access to objective, global information whenever and wherever they need it. Customers use D&B Risk Management Solutions to manage credit exposure, D&B Sales & Marketing Solutions to find profitable customers and D&B Supply Management Solutions to manage suppliers efficiently. D&B's E-Business Solutions are also used to provide Web-based access to trusted business information for traditional customers as well as new small business and other non-traditional customers. Over 90 percent of the Business Week Global 1000 rely on D&B as a trusted partner to make confident business decisions. For more information, please visit http://www.dnb.com EAGLE FOOD: Urges Court to Approve Skadden Arps' Engagement Pact ---------------------------------------------------------------- Eagle Food Centers, Inc., and its debtor-affiliates want to retain and employ Skadden, Arps, Slate, Meagher & Flom as their attorneys. The Debtors tell the U.S. Bankruptcy Court for the Northern District of Illinois that Skadden Arps has performed legal work for them since 1999 in connection with certain corporate, restructuring and tax matters, including their prior chapter 11 case filed in February 2000 in the District of Delaware. Skadden Arps is expected to: a) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their business and properties; b) attend meetings and negotiate with representatives of creditors and other parties-in-interest and advise and consult on the conduct of the cases, including all of the legal and administrative requirements of operating in chapter 11; c) take all necessary action to protect and preserve the Debtors' estates, including the prosecution of actions on their behalf, the defense of any actions commenced against the estates, negotiations concerning all litigation in which the Debtors may be involved and objections to claims filed against the estates; d) prepare on behalf of the Debtors all motions, applications, answers, orders, reports and papers necessary to the administration of the estates; e) negotiate and prepare on the Debtors' behalf plan(s) of reorganization, disclosure statements) and all related agreements and/or documents and take any necessary action on behalf of the Debtors to obtain confirmation of such plan(s); f) advise the Debtors in connection with any sale of assets; g) appear before this Court, any appellate courts, and the United States Trustee, and protect the interests of the Debtors' estates before such courts and the United States Trustee; and h) perform all other necessary legal services and provide all other necessary legal advice to the Debtors in connection with the chapter 11 cases. Skadden Arps will bill the Debtors at current hourly rates, which are: Partners $495 to $735 per hour Counsel and $485 per hour Special Counsel Associates $240 to $475 per hour Legal Assistants and $ 80 to $195 per hour Support Staff 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. ENCOMPASS SERVICES: Overview of Second Amended Chapter 11 Plan -------------------------------------------------------------- Pursuant to their Second Amended Plan of Reorganization, Encompass Services Corporation and its debtor-affiliates will be separated into two groups: (i) the Non-Residential Debtors; and (ii) the Residential Debtors. Alfredo R. Perez, Esq., at Weil, Gotshal & Manges LLP, in Houston, Texas, points out that the assets of the Non- Residential Debtors will be largely sold before the Confirmation Date. The assets of the Residential Debtors, on the other hand, will be transferred to Newco Holding, on and after the Effective Date. Thus, the Purchased Assets will be owned, directly or indirectly, by Newco Holding. A free copy of Encompass' Second Amended Plan of Reorganization is available at: http://bankrupt.com/misc/Encompass2d.pdf Both the Reorganized Residential Debtors and Reorganized Non- Residential Debtors will continue to exist after the Effective Date for the limited purpose of winding up their affairs and assisting the Disbursing Agent in carrying out the duties and responsibilities set forth in the Plan. Acquisition of Purchased Assets Under the Amended Plan and the Purchase Agreement, the Debtors will sell, transfer and convey all right, title and interest in and to each of the Purchased Assets to Newco Holding, and, in exchange, Newco will pay the Purchase Price in accordance with the terms of the Purchase Agreement. The transfer of the Purchased Assets to Newco Holding does not include the transfer of the Debtors' fraudulent conveyance or other avoidance actions. Newco Holding will be an entity formed by Wellspring and the Management Group for the purpose of effecting the acquisition of the Purchased Assets pursuant to the Purchase Agreement. The Purchase Price will comprise a portion of the Asset Sale Proceeds and will be distributed in accordance with the terms of the Plan. Confirmation of the Plan by the Bankruptcy Court will constitute approval of the proposed sale of the Purchased Assets pursuant to the Purchase Agreement and, on and after the Effective Date, the Purchased Assets, other than as specifically set forth in the Purchase Agreement, will be vested in Newco Holding. Newco Holding will not: (a) be deemed to (i) be the successor of any Debtor, (ii) have, de facto or otherwise, merged with or into any Debtor or (iii) be a mere or substantial continuation of any Debtor or the enterprise of any Debtor; and (b) assume or have any liability or obligation for any Claim against any Debtor except for those liabilities specifically assumed pursuant to the terms of the Purchase Agreement. The Plan assumes after-tax net proceeds from the Newco Holding's purchase of the Residential Debtors' assets, the divestiture of the Non-Residential Debtors and tax refunds available to the Debtors of $352,600,000. Cancellation of Securities On the Effective Date, all existing Equity Interests and Subsidiary Interests, including, without limitation, all Extinguished Securities, to the extent not already cancelled, will be deemed cancelled and of no further force or effect without any further action on the part of the Bankruptcy Court or any other Person. The Debtors' obligations under the Extinguished Securities and under the Debtors' certificate of incorporation, any agreements, indentures, or certificates of designations governing the Extinguished Securities will be terminated and discharged. However, this is provided that each indenture or other agreement that governs the rights of the Claim holder based on the Extinguished Securities and that is administered by an indenture trustee, agent, or servicer will continue in effect solely for the purposes of permitting the indenture trustee, agent, or servicer to maintain any rights it may have for fees, costs, and expenses under the indenture or other agreement. Additionally, the cancellation of any indenture will not impair the rights and duties under the indenture as between the indenture trustee and the beneficiaries of the trust created. Thus, no new securities will be issued under the Amended Plan. Directors & Executive Officers The term of each member of Encompass' current board of directors and each other director of the Debtors will automatically expire on the Effective Date. The initial board of directors of the Reorganized Encompass and each of the other Reorganized Debtors on and after the Effective Date will consist of one member, who will be designated by the Disbursing Agent. The Reorganized Encompass Board will have the responsibility for the management, control, and operation of the Reorganized Encompass on and after the Effective Date. The officers of the Reorganized Residential Debtors will be designated by Newco Holding and identified in subsequent supplements to the Plan. Mr. Perez relates that Todd A. Mathernen, Encompass' current Vice President and Treasurer will be appointed as the Disbursing Agent under the Plan on the Effective Date. In assessing the merits of Claims, Mr. Mathernen will be guided by the business judgment rule and will consider the best interests of the Reorganized Debtors and creditors of the Estates. As is consistent with the previous representations regarding the Avoidance Action Analysis, Mr. Mathernen does not intend to pursue avoidance actions. Mr. Mathernen and those employees retained by the Reorganized Debtors to complete the wind up process will be compensated in accordance with a wind up budget. The Wind Up Budget contains salary, payroll and benefit information for the wind up employees. Mr. Mathernen will continue to exist until entry of a Final Order by the Bankruptcy Court closing the Chapter 11 Cases pursuant to Section 350(a) of the Bankruptcy Code. With the consent of the holders of Existing Credit Agreement Claims, Mr. Mathernen may appoint any successor or successors to serve as Disbursing Agent. Feasibility of the Plan The Debtors have negotiated the Purchase Agreement with Newco Holding and the Purchase Agreement requires, and the Debtors expect, Newco to pay cash in immediately available funds as consideration for the purchase of the Residential Debtors' assets. For this reason, the Debtors are satisfied that they will be able to consummate the Plan and the liquidation analyses show that the Reorganized Debtors would have sufficient cash flow to make the payments required under the Plan on the Effective Date. Accordingly, Confirmation of the Plan is not likely to be followed by the need for further reorganization and, indeed, once the Disbursing Agent and the Reorganized Debtors fulfill their limited post-Confirmation roles, the Plan contemplates that the Reorganized Debtors will dissolve. The Debtors assert that the Joint Plan meets the "feasibility requirements" under Section 1129(a)(11) of the Bankruptcy Code. Restructuring Transactions The Residential Debtors, the Non-Residential Debtors, the Reorganized Residential Debtors and the Reorganized Non-Residential Debtors may enter into any transactions or take any actions appropriate or necessary to effect a corporate restructuring of their businesses, including, one or more mergers, consolidations, dispositions, liquidations or dissolutions, as may be determined to be necessary or appropriate. In each case in which the surviving, resulting, or acquiring corporation in any transaction is a successor to a Reorganized Debtor, the surviving, resulting, or acquiring corporation will perform the obligations of the applicable Reorganized Debtor pursuant to the Plan and, if applicable, the Purchase Agreement to pay or otherwise satisfy the Allowed Claims against the Reorganized Debtor specifically identified in the Plan and Purchase Agreement, except as provided in any contract, instrument or other agreement or document effecting a disposition to the surviving, resulting, or acquiring corporation, which may provide that another Reorganized Debtor will perform the obligations. (Encompass Bankruptcy News, Issue No. 11; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON CORP: EPMI Sues Select Energy for $2.5 Million in Damages --------------------------------------------------------------- Enron Power Marketing, Inc. accuses Select Energy, Inc. of violating the Bankruptcy Code and refusing to honor its contractual obligations under a Master Power Purchase and Sale Agreement. According to Jonathan D. Polkes, Esq., at Cadwalader, Wickersham & Taft, in New York, EPMI also objects to the proof of claim Select filed pursuant to Rule 3007 of the Federal Rules of Bankruptcy Procedure. The parties entered into the MPPSA on June 10, 2001. They entered into transactions, under which EPMI agreed to sell, and Select agreed to buy, wholesale electricity at a specified price and for a fixed period of time. Mr. Polkes relates that the MPPSA provides a list of Events of Default, which includes, inter alia: (1) the failure to make, when due, any payment required pursuant to the MPPSA if the failure is not remedied within three business days after written notice of the failure; (2) any representation or warranty made by a Party will at any time prove to be false or misleading in any material respects; (3) the failure to perform the failure to perform any covenant set forth in the MPPSA; (4) the bankruptcy of a Party; and (5) the failure of a Party to satisfy the credit worthiness and collateral requirements pursuant to Article 8 of the MPPSA. If an Event of Default occurs at any time during the term of the Agreement, the Non-Defaulting Party may, for so long as the Event of Default is continuing, designate an Early Termination Date on which all Transactions will terminate. In accordance with the MPPSA and the Transactions, during the months of March, April, and part of May 2002, EPMI delivered power to Select at the agreed upon price and location. In effect, Select owed EPMI $3,218,602. However, ignoring its obligation under the MPPSA, Select refused to pay EPMI. Mr. Polkes affirms that EPMI sent several letters to Select concerning its failure to pay and demanding payment for the power delivered to Select. However, the demands were ignored by Select. Instead of paying EPMI for the power delivered during these months, Select terminated the MPPSA and sent EPMI $679,366, an amount reflecting a set-off against amounts EPMI allegedly owed Select as a result of the termination. Mr. Polkes asserts that under the MPPSA, when an Early Termination Date has been noticed, it is the Non-Defaulting Party who calculates a Termination Payment. Mr. Polkes argues that Select's set-off was improper because it violates Section 553 of the Bankruptcy Code. Section 553 permits set-off only of prepetition transactions against prepetition transactions. Mr. Polkes explains that the amount owed by EPMI to Select on account of the termination of the MPPSA is a prepetition debt, but the amount owed by Select for postpetition deliveries of power by EPMI is a postpetition debt. By attempting to set off the prepetition amount against the postpetition amount, Select has attempted to unlawfully circumvent the bankruptcy process for collection of debt from EPMI and to move ahead of other creditors. Thus, EPMI asks the Court to: (1) declare that Select had no right to set off the Termination Payment against the amount it owed EPMI for power EPMI delivered to Select postpetition pursuant to Section 553(a) of the Bankruptcy Code; (2) declare that the arbitration provision within the MPPSA should not be enforced since the dispute implicates numerous substantive core Bankruptcy Code issues; (3) order Select to turnover property belonging exclusively to EMPI estate pursuant to Section 542 of the Bankruptcy Code; (4) award damages, in an amount to be determined at trial, resulting from Select's violation of the automatic stay provided for by Section 362 of the Bankruptcy Code when it exercised control over property of the estate by wrongfully suspending performance under the MPPSA; (5) award damages, in an amount to be determined at trial, resulting from Select's failure to pay EPMI for power delivered during the months of March, April and part of May 2002. (6) award damages, in an amount to be determined at trial, resulting from Select's unjust enrichment when it withholding at least $2,539,235, plus interest at the contract rate, which belongs exclusively to the estate; (7) award EPMI interest; and (8) award EPMI its attorneys' fees and other expenses incurred in the action. (Enron Bankruptcy News, Issue No. 62; Bankruptcy Creditors' Service, Inc., 609/392-0900) ENRON: EFS & Enron Mgt. Creditors' Proofs of Claim Due April 30 --------------------------------------------------------------- The U.S. Bankruptcy Court for the Southern District of New York sets April 30, 2003, as the Claims Bar Date with respect to EFS Construction Services, Inc., and Enron Management, Inc. Creditors are directed to file their proofs of claims against the two Enron Debtors before 5:00 p.m. New York Time on April 30 or be forever barred from asserting their claims. If sent by mail, Proofs of claim must be submitted to: United States Bankruptcy Court -- S.D.N.Y. Enron Claims Docketing Center PO Box 5104 Bowling Green Station New York, NY 10274-5104 If by overnight courier, to: United States Bankruptcy Court -- S.D.N.Y. Enron Claims Docketing Center Mega Case Unit One Bowling Green New York, NY 1004-1408 Claims need not be filed if they are on account of: 1. Claims already properly filed with the Clerk of the Bankruptcy Court; 2. Claims not listed as contingent, unliquidated or disputed; 3. Administrative expense claims under Sec. 507(a) of the Bankruptcy Code; 4. Claims already paid by the Debtors; 5. Claims based exclusively upon the ownership of shares or interests of any of the two Debtors; 6. Claims previously allowed by Order of the Court; 7. Claims held against any of the Debtor's non-debtor- affiliates; 8. Claims of one Debtor against another Debtor; or 9. Claims limited exclusively to the repayment by the applicable Debtor of principal and interests under notes or other debt instruments issued by the Debtor pursuant to an indenture. EFS Construction Services, Inc., and Enron Management, Inc., are debtor-affiliates of Enron Corp. Enron is the #1 buyer and seller of natural gas and the top wholesale power marketer in the US. The company also markets and trades other commodities, including metals, paper, coal, chemicals, and fiber-optic bandwidth. Enron Corp filed for Chapter 11 relief on December 2, 2001 (Bankr. S.D.N.Y. Case No. 01-16033). Brian S. Rosen, Esq., and Melanie Gray, Esq., at Weil, Gotshal & Manges LLP represent the Debtors in their restructuring efforts. EXIDE TECH.: 3 Lead Brands Relisted With London Metal Exchange -------------------------------------------------------------- Exide Technologies (OTCBB: EXDTQ), a global leader in stored electrical energy solutions, announced that its three lead brands have been relisted by the London Metal Exchange, effective April 7, 2003. The lifting of the suspension is a result of the LME's review of Exide's improving financial condition resulting from its restructuring efforts in North America. "We are pleased with the decision of the London Metal Exchange," stated Craig H. Muhlhauser, Exide's Chairman and Chief Executive Officer. "Exide's reorganization process, including implementation of its EXCELL lean supply chain initiatives, has succeeded in improving productivity, quality and reducing working capital at our six secondary lead smelting facilities." The Company said that these initiatives allow Exide to meet its internal lead requirements, provide a reliable, high quality lead supply to external customers and provide the Company with a strategic advantage for global spot market selling through the LME in Europe and North America. A number of Exide's secondary lead production facilities are strategically located within close proximity to LME warehousing facilities. Exide is the largest secondary lead producer and recycler of lead acid batteries in North America. Exide Technologies, with operations in 89 countries and fiscal 2002 net sales of approximately $2.4 billion, is one of the world's largest producers and recyclers of lead-acid batteries. The company's three global business groups -- motive power, network power and transportation -- provide a comprehensive range of stored electrical energy products and services for industrial and transportation applications. Industrial uses include network power applications such as telecommunications systems, electric utilities, railroads, photovoltaic (solar-power related) and uninterruptible power supply (UPS); and motive-power applications for a broad range of equipment uses, including lift trucks, mining vehicles and commercial vehicles. Transportation applications include automotive, heavy-duty truck, agricultural and marine, as well as new technologies being developed for hybrid vehicles and new 42-volt automotive applications. The company supplies both aftermarket and original-equipment transportation customers. Further information about Exide, its financial results and other information is available at http://www.exide.com The London Metal Exchange is the world's premier non-ferrous metals market, with highly liquid contracts. The LME trades futures and options contracts in primary aluminum, aluminum alloy, copper grade A, special high grade zinc, tin, primary nickel and standard lead. It also trades traded average price contracts for primary aluminum and copper grade A, aluminum alloy, standard lead, primary nickel, tin and special high grade zinc. As a result, it is highly successful, with a turnover value of some US$2,000 billion per annum. It is a major contributor to the UK's invisible earnings, responsible for more than GBP 250 million in overseas earnings each year. The London Metal Exchange Limited, which owns and operates the Exchange, is a wholly owned subsidiary of LME Holdings Limited. FLAGSTONE CAPITAL: Fitch Further Junks Cl. B-1 Note Rating to C --------------------------------------------------------------- Fitch Ratings downgraded the B-1 class and affirmed the A-1 class issued by Flagstone Capital Fund I Limited as follows: -- $7,400,000 class B-1 notes downgraded to 'C' from 'CCC+'; -- $256,439,810 class A-1 notes affirmed at 'AAA'. Flagstone Capital Fund I Limited is a collateralized bond obligation managed by Pareto Partners. The CBO was established in October 1999 to issue debt and equity securities and to use the proceeds to purchase high yield bond collateral. The ratings on the class A-1 notes have been affirmed based upon the insurance policy guaranteeing the notes' interest and principal payments. According to the trustee report as of April 5, 2003, Flagstone Capital Fund I Limited's collateral includes a par amount of $64.3 million (24%) of defaulted assets. The class A overcollateralization test is failing at 81.2% with a trigger of 104% and the class A/B OC test is failing at 78.38% with a trigger of 120%. In reaching its rating actions, Fitch reviewed the results of its cash flow model runs after running several different stress scenarios. Fitch will continue to monitor this transaction. FEDERAL-MOGUL: Files Disclosure Statement for Chapter 11 Plan ------------------------------------------------------------- Federal-Mogul Corporation (OTC Bulletin Board: FDMLQ) has filed a proposed Disclosure Statement with the U.S. Bankruptcy Court in Wilmington, Delaware in its Chapter 11 reorganization case. The Court must approve the proposed Disclosure Statement, which provides additional details to the Plan of Reorganization, before Federal-Mogul can solicit votes on the Plan. The Plan of Reorganization was filed with the Court on March 6, 2003. An official hearing date on the proposed Disclosure Statement has not yet been announced by the Court. The Plan will only become effective after a vote of various classes of creditors with the approval of the Court. Key elements of the Plan provide for: -- Creation of a 524(g) trust for the benefit of present and future asbestos personal injury claimants, which will assume all of the company's obligations to those claimants; -- The creation of new common shares for the reorganized company that will be distributed to the trust (50.1%) and to the noteholders (49.9%); -- The access by the trust to insurance coverage of the company; -- One or more distributions to U.S. and U.K. trade creditors of which the percentage ratio has not been determined; -- The restructuring of approximately $1.6 billion in claims of the Pre-Petition Senior Secured Lenders into a combination of 6.5-year maturity Senior Secured Term Loans and 11-year maturity Junior Secured PIK Notes. Federal-Mogul will also be filing a United Kingdom Scheme of Arrangements to keep the U.K. Administration process in parallel with the U.S. Bankruptcy process. 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 COS.: Continuing Use of Existing Business Forms & Checks ---------------------------------------------------------------- As part of their transition to Chapter 11, Fleming Companies, Inc., and its debtor-affiliates sought and obtained the Court's permission to continue using all correspondence and business forms, including, but not limited to, letterhead, purchase orders, invoices, etc., as well as checks existing immediately before the Petition Date, without reference to their status as "debtors-in-possession." The Debtors can use their checks and business forms without placing the label "Debtor-In-Possession " on each check or form. Scotta E. McFarland, Esq. at Pachulski, Stang, Ziehl, Young, Jones & Weintraub, P.C., explains that changing the Debtors' correspondence and business forms would be unnecessary and burdensome to the estate. It is also expensive and disruptive to the Debtors' business operations. "[The] parties doing business with the Debtors undoubtedly will be aware, as a result of the size of these case, of the Debtors' status as Chapter 11 debtors-in-possession," Ms. McFarland says. (Fleming Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., 609/392-0900) Fleming Companies Inc.'s 10.625% bonds due 2007 (FLM07USR1) are trading at about penny on the dollar, DebtTraders reports. See http://www.debttraders.com/price.cfm?dt_sec_ticker=FLM07USR1for real-time bond pricing. GENSCI REGENERATION: Resolves Various Disputes with Osteotech ------------------------------------------------------------- GenSci Regeneration Sciences Inc. (Toronto: GNS), The OrthoBiologics Technology Company(TM), announced that Osteotech Inc., and GenSci have agreed to settle the various disputes between them subject to certain significant conditions. The conditions are that: (i) Osteotech receives a letter of credit or other security satisfactory to Osteotech of certain payments over time and (ii) GenSci receives a covenant from Osteotech not to sue GenSci in connection with its newly introduced products. With respect to the letter of credit or other security, GenSci will seek to obtain the security sought by Osteotech. However, there can be no assurance that GenSci will be able to obtain an appropriate security acceptable to Osteotech. There can also be no assurance that the two sides can reach a settlement if GenSci is unable to obtain the security required. With respect to the covenant not to sue, Osteotech is in the process of evaluating GenSci's position that its new products do not infringe Osteotech's patents. There is no assurance that Osteotech will agree with GenSci's position. There can also be no assurance that, if a difference of opinion exists, the two sides can reach a settlement. In addition, there can be no assurance of the time frame required for the two sides to satisfy the conditions detailed above. If the above two conditions are satisfactorily resolved, terms of settlement include payment of $7.5 million by GenSci to Osteotech. GenSci would recognize the validity of the Osteotech patents at issue in the trial completed in December 2001. GenSci would not be permitted to re-introduce products that are the subject of the pending litigation, which have been withdrawn from the market, and all other litigation between the two parties would be dismissed. Payments to Osteotech include $1 million to be paid on the effective date of GenSci's plan of reorganization followed by payments of $325,000 per quarter with interest payable at the federal judgment rate, currently 1.3% capped for purposes of future interest payments at 3% per annum. GenSci is seeking a method to secure payment of $5 million of the settlement amount and will provide a subordinated lien on assets to guarantee the remaining $1.5 million in payments. Finally, the settlement is contingent upon bankruptcy court approval. Terms of the settlement will be incorporated into the terms of a Chapter 11 Plan of Reorganization, which must be confirmed by the bankruptcy court. GenSci Regeneration Sciences Inc., has established itself as a leader in the rapidly growing orthobiologics market, providing surgeons with biologically based products for bone repair and regeneration. Use of GenSci's technologies permits less invasive procedures, reduces hospital stays, and improves patient recovery. Through its subsidiary, the Company designs, manufactures and markets biotechnology-based surgical products for orthopedics, neurosurgery and oral maxillofacial surgery. These products can either replace or augment traditional autograft as used in surgical procedures. GenSci is focused on increasing the safety, efficacy, and handling of orthobiologic materials and improving the use of biotechnology combined with materials science in developing products to promote the body's natural ability to repair and regenerate musculoskeletal tissue. GENTEK INC: Sunoco Inc. Sues Debtors for Breach of Agreement ------------------------------------------------------------ Sunoco Inc. operates the Marcus Hook Refinery, a facility that processes crude oil into, among other things, gasoline, jet fuel and heating oil that is shipped throughout the Northeastern United States. As part of its operation, the Marcus Hook Refinery uses liquid sulfuric acid to process crude oil into refined petroleum products. A natural by-product of using sulfuric acid in the refining processes is the creation of sulfuric acid gases and